And fighting on all fronts. The tory rebellion over Boris Johnsons coronavirus powers Gains Momentum as brexit talks enter a crucial week. 6 00 a. M. In london. Annmarie hordern is out for the day. A solo show. Morphing tol risks the center of the barbell. Inmorgan warned very clearly terms of where we are. We are moving toward a point where correction is overdone. Moves from the tail into the middle. It is the size of the risk you have to measure. Lets take a look at what jp morgan has to say. Three quarters of the way done. We have moved straight to the markets. Lets have a little bit of a look. Csi 300 industrial profits up in china. That has bolstered the equity story. Standard chartered shows a moderating in the growth story in china. An eighth of 1 . The s p 500 up 0. 4 . Lets roll it across and have a look at other products on the move. Oil is moving. Its going to be a long road to recovery. The commodities story is reflective of the dollar story, but also this morning in terms of a long road back. Demand will drop by 10 this year. The aussie dollar turns it around. Is that about growth or about retrenching over at westpac . He called for more stimulus. Hes pushing that into the long graph. Finally, go back to jp morgan and the information they gave us in terms of jordan long. Things yen. That is the most important point to take away from that. The euro down and began rallying. Quick price check on hsbc. Two things. Emboldens and that the biggest oneday move since 2009. We will come back to that. Ets talk trump the president paying just 750 in income taxes in 2016 and 2017. He had not paid any taxes for the previous 10 out of 15 years according to the New York Times report. Trump is reportedly losing millions from his golf courses. In debt duemillions in the next few years. The president has called the report for canoes. Fake news. Out at the top of the agenda or not at all really in the president ial race . I think this is going to be a live issue. In 2012, when mitt romney was running, the u. S. Electorate got a few into some of the strategy that most people can only guess at. There are a lot here donald trump is using that people who are who are advanced in tax strategy will say, this is a familiar maneuver. Most voters really do not understand. There is a basic issue of fairness when voters see big people payr rich less in tax then they do as a percentage or here in actual dollars. The Biting Campaign has already got a web ad about this. They have merchandise. I pay more tax than donald trump did. That is the issue. The other thing is the potential liability for the president. What else might come out of this . Are there discrepancies in how much he told the irs is worth versus how much he wrote on loan documents . That is a potential trip hazard. There are plenty of these things you can say if the times does have the amount of data they have, this is a frontpage story. This is a newspaper standing behind this at the highest levels. If they have what they think they have got, you have potentially days worth of other stories that could come out of this. The executive editor was out with a statement that said they have more stories in the works. Mean inhat could it terms of tax life the democrats take control . Is this a bigger risk . That is a really perceptive question. One of the things you have to democrats who wanted a go at the republican tax law anyway, are going to use this as evidenced so to do. Ron wyden who would take over the Senate Committee if democrats win is that with a statement saying hes going to and the rich tax cheats strategies they use to lower their tax bills. This is going to be cited as an object lesson about what democrats want to do. Apply massivean losses over many years, take your corporate losses and throw thatonto your individual, is all fair game. Be the headline under which other democratic proposals are put forward as well. Manus thank you very much. Debate out from the tomorrow evening. Stephen, welcome to the show. Jewel thee word Virtual World brings us closer. You aint seen nothing yet in the election. Good morning. Does tax matter . . Does tax matter it figured into the 2016 election results. We know what happened then. It was brought up in 2016. Drifting over to the macro space, which is critical, the picture really to me would not have changed even with the u. S. Election cycle and even with the covid19 pandemic. The thing to focus on is that we loopn a neverending between reflation and deflation and global asset prices. We are not going to escape that until one or more of the Major Economies escapes from the low growth, low rates inflation trap. The only way you can do this is with some combination of economic and industrial policy. That is new debt creation. Not the case even before covid19. That is where we are. One of the things where it is most evident, other than the ecb particular, has been the em space. In the local market currency space we are seeing carrie absolutely stripped away. That is an indication of the banks going toward repression, manipulating interest rates, shoving liquidity in the banking system, covid19 was a catalyst for this most recent round of behavior. Even without covid19, that is the unending loop. We need to escape that for the paradigm to shift noticeably. On we will pick [laughter] you know what . It will feature quite highly tomorrow night in the debate. You would imagine is going to take center stage there. One of the narratives you say, and im trying to understand this, is about the volatility that we are going to face between now and the election. This goes back to your point. There is this great debate about what kind of volatility you might want to own. You say you were going to see volatility will climb. You have trouble believing fx investors are looking to buy volatility from here. What is it you think that hold back from buying volatility . Ultimately take the other side of the trade. The time period where you want to be positioning for intense uncertainty, political risk, the time where you want to be positioning for that by buying the, getting exposed to fall fx was three months ago. Finding someone to take the other side is going to be difficult. I think if i could summarize, a lot of what happened in the coming weeks and perhaps months is going to be very much driven by sentiment in equities and fx. Rates will play a long to a degree. Across the coupon bond curve, which is sizable, this is going to be an equity market story for the u. S. Election cycle. Manus we will come back to that in just a moment. A little bit of a news update. Stephen gallo from bmo Capital Markets stays with the crew. Lauren right with your first word news. Donald trump has nominated Amy Coney Barrett to the supreme court. She would be his third appointment to the bench, cementing a shift to the right for a generation. Be a devout to catholic and has described abortion as always immoral. Republicans are planning a confirmation vote in the last week of october. A conservative Party Rebellion against Boris Johnson is rate is giving steam is gaining steam. Labour party is criticizing the chancellor for putting jobs at risk. And says his planes to support the economy do far too little for hardest hit sectors. The lebanon Prime Minister has stepped down after failing to form a government. It leaves the nation rudderless as it struggles to recover from a devastating explosion. French president Emmanuel Macron has dubbed the move collective betrayal. Global news 24 hours a day on air and at Bloomberg Quicktake powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Thank you very much. Coming up on the show, chinas road to economic recovery might belong and uneven. Manus this is bloomberg daybreak europe. Sincerst oneday rally 2009. Hbc hsbc stock has seen a move. , 44 million hong kong dollars. Confidence is the word. Also the dividend story, the delay in the dividend is something shortterm. Narrative they certainly need at the moment. A vote of confidence. That causes the stock to go bid. It hit a 25 year low last week. That was on the back of an article. The narrative different last week, saying it was merely a longterm financial investment. The narrative changes. That is the u. K. Stock price hong kong stock price over the past five days. Tiktoknt trumps ban on locked by a federal judge dealing a blow to the u. S. Government in its showdown. ,n the Economic Data front chinas industrial profits grew in august for a fourth consecutive months. 19 of the countrys factories maintained momentum. The chinese rebound showed signs of plateauing in september. Weighed down by lackluster home and car sales. Stephen gallo from bmo is with us. Stephen, a lot to digest. Hard data, soft data. Leveling out of the ego data. You said before we went to break, the carry trade is being stripped. One yuan suffering from carry as much as being allowed to run naked through the woods by the pboc . Diagnosek whatever you chinese, quote, market variables, you have to think about the degree to which there is some Financial Market and free market involvement in variables, but also perhaps or importantly the degree to which those variables are manipulated by policymakers in china. Nothing happens by accident. At least since the 2015 devaluation of the rmb, which resulted in significant net capital outflows. Particularly since that point. Nothing happens by accident. Has been a feature of the picture for some time now. But china is pulling in capital flow for a reason. One of the reasons is it seems it sees ahead a period of relative instability or uncertainty regarding dollar assets, capital inflows into china, perhaps global trade tostructions and disruption the general reflation team we were talking about. It has been a feature, certainly. Why haveion is policymakers use this opportunity to put flow in . As a final comment, one of the things covid19 has done is it playingled the global field significantly. From the perspective of carry, covid19 has given the chinese a very big opportunity to suck in some of that capital flow. Manus stay with us. Stephen gallo from bmo Capital Markets, my guest host this morning. Jp morgan says cash is likely to remain king. Heres the details right here on bloomberg. Nus it is daybreak europe the unintended consequences of the stimulus could be cash under the bed. Good morning. That is right. Jp morgan chase saying they are expecting cash will remain king in the shortterm. We have not seen other safe havens act as a safe haven as a hedge since the s p 500 fell from record highs on september 2. You are seeing defensive assets delivering their weakest performance and therefore worst hedge protection of any equity selloff in at least a decade. Either doing very little or falling since we saw the s p 500 reach that high. Jp morgan saying they see the equity correction about three quarters done. Aside from cash you should have a number of other hedges including the dollar against em currencies and the yen against all currencies. Week, and in less than a it all changed. Dollarek the aussie crushed the one man west bank. It is no longer team australia. Who is this man . 11s, westpacs chief economist always moves. He is known forgetting these calls right. The fact he was expecting the rba to cut in october, he is now saying that is more liquid to happen in november allowing the government to focus on promoting its budget without the influence or distraction of monetary policy. That has sent the aussie dollar higher today. Meanwhile we have also got a call from Morgan Stanley saying markets are overpriced the lower front end rights in australia and new zealand. They think the rba wont hesitate, but that is more likely to come in increased asset purchases rather than a rate cut. Pushing these expectations back until november. Manus thank you very much. Lets take the conversation to stephen gallo. Last week, aussie dollar, aussie on the cross got crushed on the back of this westpac note. For me, the bigger narrative is this. It is quite a significant call westpac is making to cut yield curve control to 10 basis points and another rate cut. Steven major who i know you talk aussie anduld say kiwi set the precedent for the rest of the world into 2021. What does this narrative say to you from australia . Stephen one of the primary drivers of australia, and being on a Canadian Bank we look at aussie quite a lot, one of the key drivers of relative outperformance of the aussie for at least a portion of this year has been the rise in copper prices. Again, you have to look through some of the noise and try to think about where that strength and compromise has been coming from. It really has been coming from significant increases in chinese imports of copper. That again. 2 to the fact there have been significant state levers pulled in china to reflate asset prices, boost the industrial sector. That is what we have seen in the chinese data. Though the economy has recovered quite significantly if you look at, you go by the official data, what youators and would call the hard data, the economy has improved, but there has been a divergence between the industrial sector of the economy and of course the consumption, the private consumption area of the economy. Going forward, that is what china is going to have more difficulty. It is not impossible they boost the consumption share of gdp. But it is a long road ahead. The rba, the way they fit into this, we are above 70 ever so slightly. Jawboning from a lot of Central Banks has caused the dollar to strengthen from its recent lows. They are satisfied with the currency, but they are very cautious of the fact that a lot of the strength in aussie so far , at least since the depths, has been that global reflation trade, which of course as we know from past cycles is not sustainable. It does not reflect a real strength of the real economy in an organic sense. Manus we know those inflation targets are pretty darn hard to leave. That is the great fed debate. Stephen gallo with bmo Capital Markets, our guest host this morning. A vote of confidence coming from king and on hsbc. Ofy are confidence in terms its overall trajectory. Bumpy brexit week ahead. How will the pound react . Good morning from bloombergs middle east headquarters in dubai. I am manus cranny. It is daybreak europe. These are your top stories. The New York Times says the president lost millions and paid hardly any income tax in recent years. Sbc surges shares climbed the most in over a decade as the bigger shareholder doubles down, raising the stakes to 8 . A tory rebellion over Boris Johnsons emergency coronavirus powers Gains Momentum as brexit talks enter a crucial week. 6 30 am in london. 9 30 a. M. Annmarie hordern is having a wellearned day on the brutal schedule. The brutality of the schedule is never taken for granted. Industrial profits in china rising. That gives the csi 300 and nine slidell pop on the upside. You know you have four weeks of losses . For all risks, theating of tail risks, as i have said, the tail risks of a fiscal cliff, the tail risks of a political narrative, the tail risk of trade, we know what the tail risks are but its the size of the tail risk that matters and the ensuing volatility that will come. Jp morgan say the equity correction is three quarters done. So itsxx 50 up 1. 8 hard data versus the leveling and the soft data. Oil drops. Its a long road. Its a long road to recovery. By 10 . Nd will drop is that on the back of the dollar or is that on the back of that is the question. Does the dollar go big and the dying days of the election . More volatility to come. The aussie dollar rolls over. Bill evans pushes it out into the long graph in terms of a rate cut and yield curve control maneuver. Yourself,t to hedge jp morgan say give me yen, yen, yen. It will deliver a lot better a hedge than bonds, trifling things like gold. Lets talk about hsbc. It was the most in hong kong trading since 2009. The biggest shareholder, ping an , looks large. Dani burger is with the details. Last week, they were of them a bit sanguine i would say in terms of their rhetoric but they have gone in, they have looked march, and everyone else has to go home. Good morning. Dani a little bit sanguine. A 25 yearc trade to low. What a different story we are talking about today with the biggest intraday rally. 10. 8an jumped in buying million shares. Heres the interesting thing. It was barely at a premium from fridays close. They bought it at 28 hong kong 28. 30 hong kong dollars. Quite the big vote of confidence coming from ping an, saying this is a longterm play for the insurance unit. Its also saying that the slump only increases the appeal and this is key, manus. They think the suspension of dividends is only going to be a nearterm thing. They have been in discussion after discussion with management at hsbc and they are confident dividend will come back. This is getting at people to jump into the shares because it is so hard to find yield. If you are confident you can make hsbc into a yield play and it is trading at such evaluation, that certainly might spur a rally of the likes for them, manus. Manus lets pivot to brexit because u. K. Banks as well trying to assume brexit risk as well, pulling back some of the mortgage offers. Thats the discussion in the weekend press. The e. U. Wants some signup of intent from the u. K. What are we seeing in terms of the lenders . Dani manus, it is a big week, but we have not seen many banks really move assets in preparation for this, at least the big u. S. Banks. Last week, we did hear from j. P. Morgan saying they would shift 200 billion dollars from the u. K. Into the e. U. , but beside that, the Big Five Banks have three times the amount of equity in london as they do in europe and four times the amount of risk weighted assets so we will need to see a lot more of these lenders make moves like jp morgan before the squaremile loses its appeal. Bankers speaking privately with bloomberg have told us that there is a key concentration of customers in the u. K. So it does not make sense for them to leave. At the same time, they say regulators are telling them they should keep adequate reserves in london so, yes, we might see more movements after the next couple months, after we pass this key week. Londonit is hard to see completely losing its appeal as the Financial Capital it is. What it comes down to form of equivalence we and up with. Dani burger continuing the conversation about the u. K. We are in the final round of brexit talks for now, that is in terms of schedule discussions between the e. U. And the brexit negotiator, michel barnier. That begins in brussels. Stephen gallo is still with us. We have had a bruising reality in terms of brexit risk and negative rates. How do you assess where we are at the moment . Eurosterling has had a nice run. How do you assess the brexit risk right now . Stephen still quite a bit of uncertainty, but our baseline scenario is they will get a limited deal down by the end of this year, probably by midnovember. They will get most of that into place. Deal isnot having a going to come as a big blow to spanish farmers, french farmers. Its not the optimal scenario for everyone. Inhink any rally you see u. K. Asset prices as a result of that deal, you probably have to look to that. There will be a kneejerk in the pound them a perhaps in u. K. Equities, in the front sectors. Some sectors may outperform other centers. There will be a relief rally when that happens. For that isreason because u. K. Is going to want its currency, which obviously other countries in europe dont have because of the euro area. They want that pound to be pretty competitively priced over the next two years to three years. What you are going to see Going Forward beyond the end of the transition period is they will be generally a lot more volatility in the e. U. U. K. Trading relationship Going Forward. Relief rally. Manus even if there is a deal, thats not the end of the road. What do we do . Coveringp to a short on sterling euro but then we fade that because of our economic position or political dislocation going on 2021 . Stephen let, on the economic position, thats one of the things that has drastically altered the u. K. Governments economic calculus or brexit. Before covid19, brexit would have been the primary thing, focus for the economy this year. Dwarfedd has completely , almost completely dwarfed any impact theres going to be from a Nodeal Brexit. That shifted the governments calculus. The government is going to go skinny,latively relatively simple deal, but beyond the end of this year, theres going to be more volatility in the trading relationship Going Forward because you can see in the nature of what is going what it is going to take to get a handshake deal, a lot of those things will be subject to question like state aid rules and divergence. All sorts of things. Manus yes. Stephen, so more volatility to come on that. You can wrap up the two answers for one. Its a bit like tesco. I was agnostic. Do you by sterling volatility buy sterling volatility . If so, what duration . More importantly, theres been almost full negative rates and the other economies you looked at and encouraging evidence on negative rates. Does this add to the downside narrative . Do we get negative rates . Do you concur about the veracity of negative rates . Do you buy vols . Where idont know dont necessarily agree with that. I dont think negative rates are a idea. I dont think that. I had a feeling some policymakers would like to see the u. K. On an equal footing with its benchmark rate with for example the euro zone, where rates have been negative. The benchmark rate anyway has been negative for a lot longer, so pushing that to one side, i think you said long volatility, but now is not really i think time to be putting on big positions in anything. Worse. Ld do a lot six months, nine months, one year eurosterling calls. That will give you upside potential for profit if the gloves come off in the u. K. E. U. Trading relationship and it hedges you against the possibility of a Nodeal Brexit this year. I think that you could do a lot worse than, for example, by upside in eurosterling calls. As a longterm view, the pound will remain at competitive levels and continue to use exploding Exchange Rate has a competitive advantage versus the largest trading partners. Manus i will give you a call when i go into exchange. Thats a pivot. Thats perfect. The top of the market or the bottom of the run for the downside. Stephen gallo, thank you very much. First word news. A judge has temporarily blocked President Donald Trump span on trumps ban on tiktok. The order was issued with an opinions of the reasons are not available. The move was a pledge to the government and its showdown with tiktok. Pays justdonald trump and in income tax in 2016 2017. Thats due to reporting losses of millions of dollars from his golf courses, according to his returns. He paid no income tax intent of the past 15 years. The paper says he has hundreds of millions in debt coming, due in the next few years. The President Trump says the report is fake news he nominated Amy Coney Barrett to the supreme court. She would be his start apartment to the bench, cementing its shift to the right for a generation. She is known to be a devout catholic and his described has described abortion as always tomorrow. Global news, 24 hours a day, on air and on Bloomberg Quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Manus. Manus laura, thank you very much. Coming up on the show, changes coming at the top. We look at some of the shakeups in germany. Thats next. This is bloomberg. Manus its bloomberg daybreak europe. Annmarie hordern taking the days leave. Its a solo show today. Shes back tomorrow. Lets turn to the executive structures. Commerce bank has passed over internal frontrunners for a ceo in position at Deutsche Bank. Carmaker a new chairman. Lets get to the man who tracks the german narrative. Did i get the name right or badly wrong on Commerce Bank . It was close. It was close. Its an unusual its an unusual name. Couple ofe are a really big personnel changes in germany. One that was very much expected. We knew that Commerce Bank had to name a new ceo, and one not quite as expected, did not really know that he would pass of not be given the job chairman of the supervisory award. Supervisory board. Commerce bank has been a developing story and one that is astounding in terms of share price. And then dropped to 280. Its basically trading at a penny on the dollar and thats one of the reasons two of the biggest shareholders, cerberus and the German Government, really wanted to see a new strategy in place. Of course, Commerce Bank tried and failed to merge with Deutsche Bank. Get bought by Deutsche Bank last year. That strategy did not work out. Now, its expected that this new leader who is coming in from Deutsche Bank has been the leader of their Retail Business and is going to be able to slim down the workforce, cut jobs by about 10,000, and hopefully ring the shares back. Cerberus has to make nine euros and change before it breaks even. The German Government has to be a 24 euros before it breaks even on Commerce Bank. Manus there is a long way to go with that trade. Deal that maybe do a he quite likes around europe. That could change everything. Newss made some good headlines in terms of the market place in china but when it looks like dime where, they have succession issues to deal with. He is in the lineup. Joe kaeser is at the top of the list. Siemens, it ceo of is typical practice in the german Corporate Culture for an outgoing ceo to then become chairman after he takes a little bit of gardening leave of the supervisory board. We had it planned for him to take this position, but shareholders in dime are saying we have to have a clean break. After such a left office, after he put his after he left office, he had to come out with a couple of profit warnings. That made investors unhappy, and of course, they really got to do this electric transition quickly, as everyone has got to. Diamond has really underperformed other german carmakers and carmakers in general. They will not be taking that position. Hit matttt, thank miller and anna edwards will take you through the European Market open very shortly. My colleague in london. The only other Major International car show that is underway this year, so far, its in beijing. Chinas auto market is seeing signs of recovery. It is the one player looking to grow sales in the largest auto market. China ceo and Tom Mackenzie told Tom Mackenzie the order intake has already been better than ever. It is pretty much a divergence because, obviously, china went first into the locked down the pandemic situation starting at the end of january into february and was the first thetry to get out of lockdown situation, pandemic situation. While europe went into the lockdown, china was opened up again and this pretty much explains also how our failed situation was going through a steep vshaped form. Inhad a heavy impact february. Starting from march into june, we had a very good recovery. If we look to the order intake, it is better than ever before. What are sales looking like for the full year 2020 . we are cautiously optimistic that we at least reached the level of 2019, and theres even a potential to have another record year in 2020 for china. Control of the virus is part of the reason for that improvement. What are the other factors driving demand for highend luxury vehicles like porsche in china . In the general tendency, we can see chinese customers are into, right now, buying individual mobility, so instead of going to public transport, they are looking into cars and thats why the car market i think in general is doing pretty good in china. We also see that our customers, who have been traveling a lot, were suspending lots of money and traveling in hotels and a chance of the country. The funds now to invest into consumption. If you put these two things together, the private mobility, private transport becomes something and we have the funds to upgrade consumption. Then potentially your choice are you able to say whether or not you think the kind of momentum you are seeing right now will sustain itself through 2021 . That is the moment we are doing a higher order intake. We are suffering a little bit from the lockdown of determined production which happens between the middle of march and the beginning of may. We are missing a little bit. Spote not able to on the deliver all the cars our customers want to buy. Andre increasing our order you dont know how actually how things are happening. We are going to go into winter and so on. Leastry confident that at for the First Quarter of next year, first half of next year, we will see a continuously Good Business here in china. Manus that was the china ceo of porsche with Tom Mackenzie. Not a bad story to have. 2020 will see the European Union unleash as many green bonds as the world issued in total debt last year. We are in brussels. That is next. This is bloomberg. Manus its bloomberg daybreak europe. I am manus cranny in dubai. It is time for a segment. The brussels edition. Your essential, need to know guide for the week ahead on the european political stage. Lets get to maria tadeo. The brussels edition. Good morning. Maria good morning. This week, we are going to be looking at the green bond market. You know this is creating real talk in the market ever since the European Commission said that they intend on tapping markets. The number is huge, as you mentioned earlier. Globald for the entire issuance for green bonds last year. It is the ratings here. Anything issued by the European Commission takes you to a aaa rating. There is interest in the market. Any question marks as to who is going to buy these. What is the Central Bank Going to do about them . Christine lagarde has repeatedly said the National Government need to do everything they can to tackle the climate crisis. We dont know the structure about these bonds. Will they be potentially longer . Theres a lot of questions here. We are going to be putting these questions to our guests. He leads the Environment Commission at the European Central bank, the European Commission. We will be grilling Christine Lagarde today when she speaks at the parliament at 8 30 u. K. Time. It is certainly a packed week for you. Doubt, the brexit discussion will be front and center in terms of what they have got to sign up. Maria tadeo has your brussels edition. Hsbc rallies by the most since 2009. Where were you . The stock is up 9. 93 . We will discuss the implications. Anna good morning. Welcome to Bloomberg Markets european open. I am anna edwards in london alongside matt miller in berlin. Manus good morning. The markets say stay strong. Asian equities start the week higher as virus cases balloon globally. Futures in europe. 2 gains at the open. The castrated just one hour away. These are your top headlines from the bloomberg terminal. Commerce bank