You are welcome to bloomberg daybreak europe, our flagship morning show in london. If you are a business, have you been using Deutsche Post . The numbers are better. Net income 602 Million Euros a beat on estimates of 594 million. 4915, aboveshare, the estimate. They are confirming there for your guidance. Bloomberg intelligence ran the numbers, binder headwinds in this business, train waits might is essentiallyit looking at moving through from last year, a more normal year is what Deutsche Post promises, a tough day on its reporting schedule on the first quarter. Today it looks as if they are beating that momentum. They have a target operating profit of 8 and are sticking to fullyear guidance. We will have a conversation at 8 00 a. M. U. K. Time with the Deutsche Post ceo for our first interview of the day. Just exactly what lamented is there on the ecommerce side . Daye sent to you today is a of binary outcomes. Im talking about president zuma in south africa. It is the eighth time he has been challenged in the eighth year of his tenure on the eighth day of the eighth month. Eight, eight, eight. It has taken volatility bang up. Were rising, and hitting levels we havent seen since may. If this passes, the South African rand is off to the races. What does the market mean about being off to the races . Being off the races would be something sub 13 in terms of its overall trajectory. If it fails and zuma continues in power of course it is a secret ballot, so this is where it gets interesting. A considerable number of his own party would have to revolt and go against the sitting president. That is the risk to the market. If it passes, we are off to the races. If it fails, you could potentially break 13. 66, the other momentum. Volatility is rising. Out of all of this, the fed speak, china, the risks, the polling, it translates into risk radar. We skirmished with the 10 year highs, and we also have the china data this morning, the chinese trade data, july exports missing on estimates. We are still leaking out the smallest of gains. Korea backing the u. S. Proposition for u. N. Style sanctions, the u. S. Seizes hostile policy, that is the call from north korea. Aussie dollar at 79. 16. We are up for the first time in several days, because the dollar is a little bit weaker, really singing warning bells over inflation. Kashkari and bullard signed the warnings that the dollar is lower, and there is basis to support the aussie dollar. You have is this Confidence Index coming in at 12, previously it was eight. The risk is this, that the aussie dollar was indeed a little bent over sorry, the downside of the greenback is a little bit oversold. Thats the risk a lot of commentators are making. We dont often put aluminum in. You have an on track for the highest close in two years in london, and on track for the highest close in five years in shanghai. Cuts, andsupply copper is also romping at home. Well talk to our guest host over the next hour about commodities from j. P. Morgan asset management. Lets get to Sophie Kamaruddin, who has your first word news. Manus, speaking after the china story, the trade surplus expert growth remains solid while imports moderated. Experts rose seven point 2 in u. S. Dollar terms and imports increased 11 , falling short of economists projections in a survey. That means the trade surplus widened. Japan has reported a 36th consecutive current account surplus. June current account surplus was 8. 44 billion, beating estimates. That was reported by returns of overseas investments and trade balance that returned to positive territory. North korea has condemned the latest round of human sanctions and says it wont negotiate until america ceases hostile policies. The regime says the state would pay dearly for what it calls a heinous crime against north korea and its people. Also insisted that its Nuclear Program was necessary to avoid a u. S. Invasion, similar to those in afghanistan, iraq, and libya. Todayis a secret ballot on a motion of noconfidence for president jacob zuma. It increases the odds of him being ousted because members of the ruling party can vote him out without risking their jobs. Hes due to step down as leader in september, and as president has defeated previous attempts to oust him. In kenya, pulling is underway for the president ial election. It pits the current president against his challenger, more than 180,000 police have been deployed across the country amid concerns there could be a repeat of the 2007 vote which led to violence that killed more than 1000 people. In venezuela, all Foreign Workers had been pulled from the oil field amid a deepening political crisis, according to people with knowledge of the matter. Chevron and total have removed a small number of employees. At the same time, another company has withdrawn. Chevron says it doesnt comment on security or personnel issues. Total didnt immediately return comment. Global news, 24 hours a day, powered by over 2700 journalists and analysts in more than 120 countries. You can find more stories on the bloomberg at top. Now lets check in on the markets in asia. Stocks mostly edging lower, just barely hanging on to the near decade highs. Data, chinese managingder pressure, to swing to gains up about a 10th of a percent, the yuan is the clear winner on the back of that data. Aheadere, little changed of inflation data do this afternoon and in tokyo the losses have used in the afternoon session and is set for a third day of losses. And i want to show you one of the reasons for the weakness we are seeing in tokyo softbank shares falling, but the biggest index despite firstquarter earnings beat. Vehicles fell when it comes to retail out of sales they are working for a Third Straight month five and a half months on year. A valley in base metals talking about the prices they are climbing to a sixyear high in hong kong at the strongest level in five years in shanghai. Chart, we want to show you that story, chinas total steel shipment changed by a third in july, falling to a 2013 low. The drop in exports comes as trump rolls tariffs to protect u. S. Steel producers and chinese exports to the United States have been easing as you can see from this chart this only makes up about 2. 5 of chinas total expenditures so it likely wont have much impact. Indeed, great roundup. You say aluminum, i say aluminium. Andident james a learned Neel Kashkari say yes to inflation and the u. S. Is a problem. The two officials comments lineup with investors expectations that it will be kept on hold when officials meet in september. Here are his comments from yesterday. Inflation has been coming up short, a little low relative to our 2 target. That actually matters you think 1. 5 is not a big deal but it matters that investors believe the fed can achieve its goals. Despite this low inflation both fed president s are keen to shrink Balance Sheets, playing down the possibility of market disruption. I think we are able to get going on this process it will be very slow and i dont think we will have a lot of impact on markets but i think it is the right thing to do. Those are the voices. Lets bring in the Global Market strategist at j. P. Morgan. Good to see you. The soft peddling has really picked up in earnings. Balance sheet reduction will not have any material impact. But they are worried about rolling over in inflation. What you want is it necessarily what you get and they are not getting inflation. It is turning into a fundamental miss. I think it has two goals and thatby congress, is the big question if you want to have that fully ticked checklist before changing what has been the longest and lowest Interest Rate policy you want to be equipped to go forward. While it shouldnt cause drastic this is the markets, one of the largest demand for treasuries, reducing how much they are earning. It will not cause a massive structural change in the yield fluctuation but we have to be aware that longerterm treasuries are going to be back out in the market and that might cause impact. Tryt may make some moves to help me with putting a parameter. 10 year benchmark getting back toward 3 , in the process of round down. Does that sound fair . It does. Getting to 3 might be a higher point for the yields that in the next few quarters we could see and we doyou mind expect them to continue hiking a couple times next year. That is definitely in our projection for the next couple quarters. At one juncture does a lower dollar im trying to extrapolate. At what juncture does a lower dollar added to the bottom line is inflation in United States of shift onnd therefore the break even . Should i be even thinking about that . It wouldnt be the top metric for us to gauge inflation. It depends which currency the dollar is weakening, because that trade when the sterling rate weekend after the referendum results we saw inflation spike up because much of the imports were against a much higher currency. In the u. S. They are giving less of their goods in from other places and it is more of an insular economy and it depends on which currencies the dollar is itkening against the euro or is it the yen in which those more important merchandises come in . It really depends on that, not a top factor from inflation. It is more wage growth we are monitoring. Concentration, risk are many of the phrases that have been used in the market. What i have done is pulled together a couple things, the top line is s p, and then the equal weighted s p this is where apple matters just as much so the equal weighted has posted its biggest weekly drop since may. I suppose my question we are up 8. 4 in 2017 on the equal weighted but it is trading the big, broad index. Does that raise the concern about the breath of this rally and the veracity of it . That is one of the biggest conversations we are having. And you have a valuation the stocks that are increasing are giving you those rallies year to date, you can count them on your hand, these large, specific names that have done well wednesday do you think about the downside and what else is in the index that could either rally or not do as well, relying on these sectors. We would say yes, that concern is very much playing forward. We dont like those highly valued sectors at this point. We are looking more at value what theyd showing have to say for us. The rally on the good fundamentals and financials rising where do we see them benefiting from that. Can we chug along at 2 growth, or cannot materially change . It can materially change in the next few years. Is when we start to get concerned about what is naturally supposed to happen there is going to be a slow down at some point. The recession risks are low for this year, manageable for next year, but we would expect a slowdown in u. S. Growth will it be the dramatic contraction of 2008 . No, there will be a softer slow down but that is certainly something to watch for when the s p 500 starts to weaken. Thank you very much. She stays with us. Lets give you a quick line we understand the great, big piece of utilities this is the personification. At willar adjusted bid . 2 billion. Dividends, around a quarter. 2017 dividendros, growth at 25 . That was originally the whole growth for 2016. A nice set of numbers. We have the conversation with the ceo of uniper. His first interview of the day. Coming up on daybreak, chinas trade surplus widens. This is bloomberg. Welcome back to daybreak. Just gone 1 20 in the afternoon in hong kong. You are looking at the hang seng, up a quarter of 1 . Imports rose, but again, that is down from 23. 1 . Global stocks are still ekeing out gains. Lets get to Tom Mackenzie in beijing to break down the china data. Given the block numbers in yuan terms, you have had time to digest these numbers. What does this tell us about chinas Growth Outlook going into the back end of the year . Well, its not good, but equally, these are volatile numbers, and this is of course only one month. To get a read on august and september before we can reassess. The general consensus view is that the second half of the year, chinas growth will be relatively robust, slowing moderately. I will give you the dollar numbers for the exports, 7. 2 up for july, misting estimates of 11 . Wellts came in up 11 , below the estimate of 18 . The trade surplus around 27 billion usd, which has narrowed somewhat we know that the Global Demand picture is going to be strong, whether thats from european households or u. S. Households, so that should shore up exports in the months ahead. Bloomberg intelligence was saying the scope for chinas exports are shrinking, numerous saying there could be currency effects, because the yuan has strengthened a little more than 3 year to date. Indeed. Risk, that thee surplus has narrowed. Trade tensions between the u. S. And china, it seems they are going the geopolitics route in regards to trade. It seems they have taken a moderate backseat for now. It seems to ebb and flow. And post u. N. Sanctions on north korea, it seems like china is whatin u. S. s good books, we know they are considering washington launching an investigation into intellectual property violations, the commerce secretary is investigating steel, although it should be said that chinas steel exports to the u. S. Have fallen quite considerably. Bloomberg intelligence saying it is unlikely to have any material effect if there are targeted sanctions on exports likes deal and aluminum. The other risk factor for the chinese going ahead is the property sector. Economists expect further pressure on the real estate sector. We have seen that play out just in the last few days, share price is coming off. And trade tensions remain, of course, in the background. Going ahead, we have the party congress. A busy man over the next couple months. Tom mackenzie, thank you for breaking the numbers down. Our guest is still with us, j. P. Morgan asset management. Listening to tom, when you look at the import and export data, to what extent do you get irked . Onemonth does not constitute a trend. I not too worried about the individual numbers, you can see how jagged the numbers are. I think the general trend, import growth is growing faster than export growth. It is concerning that rebalancing story that china is starting to consume things, and also just general global trade being on the up and up. Global export growth is higher than it has been and that is something to be positive for, not just focusing on the china shift or slight weakness. And to that extent, you and i were talking about japan. They have seen their sixth consecutive current account surplus. Global trade seems to have funds at a floor, but to grab a cliche, is it at escape velocity . The floor is very low. In terms ofh trend trade was nowhere near what it was pre2008. The volume of imports and exports around the world was nowhere near what it was. Now seeing a bit of growth picking up from low levels, it is positive for various elements, very highly leveraged, height beat on Global Markets, benefiting from high export growth. You are seeing pmis, pushing indices and exports, services in manufacturing. The echoing of the trend of synchronized Global Recovery, based on the survey data and hard data of trade increasing, people buying and selling things. Given what you have just said, there should in theory be a skew in terms of what japan, that, hang seng, whatever, i pick up relative to my european exposure. Its interesting, because there are pockets of asia connected more to each other in terms of exports. Exactly. So when you see the momentum going on, it does look enticing. Valuations are always our first point of interest, and when you think about the u. S. , it doesnt look as attractive or cheap as asia, which is highly leveraged. Hold that thought. We have more to get through. Nandini stays with the daybreak team. Up next, we have a conversation with the australian trade minister, who says the strengthening of the aussie dollar is a concern. We will bring you our interview a just in the next couple minutes. This is bloomberg. Just cant 2 30 in the afternoon, dollaryen, moving 1 . Y by 1 8 of one to we have had great numbers from japan, 36 months in a row. An additional couple lines. Producer, 37. 3 billion euros first half usted, 930 Million Euros those are the numbers coming uniper. Ver guy johnson and matt miller will be introducing the ceo. Lets bring you another story on our Bloomberg Business twitter account. Who is the worlds most feared investor . It is this man. The evolution of who he has taken on board or if he has challenged. He has challenged the Biggest Mining Companies in the world, warren buffett, a whole host of issues. Aen some would say, he had hand in the impeachment of south koreas president. In our guest. The title of this story is the most feared investor. It says he is scorned for employing bullying tactics at times, singer doesnt worry about the tough reputation. He sees it as a selling point for investors act as them. If there was ever a definition of 2017, it is paul singer and act as him. Nandini it equates to a larger theme in investment about investors having a more potent stake in the companies they invest in. Weernments have been a theme are talking about with clients. If you see something wrong, the board is doing something wrong. You have ownership of equity or assets of that company, it is your responsibility to look at what is going on in terms of profitability. Fors an interesting Concept Investors to look into, being more act is in the process. Manus defining line, it doesnt bother me anymore in regards to his reputation. Guy johnson comes will dig into this and have more interviews later. But take it away. In advance ofve the secret vote later. Function, iron ore also a big move down that we have seen. 2 , this has been elevated of like. Late. Barclays says it will come down 50. Decent move on the front end of the u. K. Curve, Pay Attention to that. We will see what the data says later run this week. Yesterday, we did see a decent move there. The dollar is weaker today. The indian market is softer. That is a standout as well. From the european open, the fair value on the bloomberg for the ftse 100 pointing to a change of around. 1 . We will see what happens as iron ore comes off and that affects the miners, they traded stronger yesterday at the get go of trade but the china data is one of the things you need to Pay Attention to as well this morning. You are seeing a big move against the dollar against the china offshore. Of fact the country is one the 25 billion surplus with the United States at the moment, being tapered over because the United States and beijing seem to be on the same page when it comes to north korea. The fact and of surplus and trump poshest we when it comes to talking about this kind of stuff, how long before the surplus becomes a problem . We are seeing that may be reflected in terms of currency this morning. You. guy, thank australias trade minister says he is concerned about the strength ending of the aussie dollar. A good the country does job of rebalancing the economy when necessary. He spoke to bloomberg. Take a listen. I think it is important that we remain focused on what we are actually dealing with rather than getting too concerned about what might be. What we have continued to see under this Trump Administration is a commitment to trade. U. S. Andard from both others that the United States isnt against trade, they just want fair trade, that is trade in their National Interest and that is the same thing i want is australias trade minister. Us to certainly do with ring. To host the tpp negotiations. Through, h withdrew, what are you hoping to achieve with this . Tpp to havelike the come into effect with the United States. We were disappointed but not surprised by the u. S. Decision, President Trump did flag for some time that he would withdraw the United States. That required the remaining 11 to come together to have a chat about what we think the tpp will look like. There are other jurisdictions that have expressed interest in joining a tpp. Just need to work through topically, fundamentally, there are good gains and benefits to come from a tpp 11 and that is what i am trying to implement if we can. Last week we saw renewed tensions with china. They are house saying looking further into abuses of intellectual property and other trade rights or infractions on trading. So i am curious whether the more tense relations between the u. S. And china how you are watching that in australia and how big of an impact it will have on you . Certainly with u. S. And i engagements since he became trade representative. I found him warm, i found his commitment to try to do good deals to be very positive, and from australias perspective, we trade exposed. China is our biggest trading partner. They are australias fifthlargest source of fdi. We want to engage in china with china in a mature way and have a good trading relationship. I have got to say on balance from australias perspective, we will continue to pursue our National Interest with china, japan, korea, with the United States. Serve in a way that serves National Interests but is cognizant of what those countries want to achieve. These things are never one way. Manus wise words there. The australian trade minister. Oil is trading at 49 a dollar and officials from russia and kuwait investigated why some producers are shirking their commitment to reduce output. A number of companies are said to have pulled workers from oil fields in venezuela. Lets get more with yousef kamal. A busy couple of days in abu dhabi. Good you. Compliance is key. It is something the secretarygeneral trumpeted, the russians trumpeted in vienna the last time i was there. What is the latest . Key movingte a few pieces here. They are having deliberations in a bugatti. We dont have anything tangible as of yet in terms of his neck on to lead to improved compliance. They are working on it and trying to work through that. The other part of this puzzle is what is happening in other elements of the equation. Venezuela, Foreign Staff being pulled out by Major Oil Companies and the rebalancing of global inventories, which we will get another indication from the United States on wednesday. Bloomberg service suggests another drawdown last week. Aside a bit from the subsection with the supply side of the equation. Its jump to the demand side of the story because we have some of the chinese data out in terms of what is happening with oil imports, fundamental to projections of opecnonopec for rebalancing. Jump into the bloomberg with me. You can see the Chinese Oil Imports have dropped to the lowest level since at least january. Heavy buying earlier in the year. The growth in fuel demand is slowing. Versus down almost 6. 9 the previous month. That figure then at 8. 2 one Million Barrels a day. The slowest bubble since january. The other side, net exports of oil product of 19 up 19 . One, independent refiners. The demand from the outside of the story is slowing and then you have a broader product consumption growth slowing as well. Manus yousef, thank you very much. Our Bloomberg Markets middle eastern reporter. So listening to the australian trade minister, they are singularly going ahead with the relationship with china regardless of what happens on the u. S. Side of things. They are all inextricably linked, china, australia and the United States of america in terms of the momentum and consequence for markets. What is driving the metals and miners i would say is much more than the china story in chinau. S. Relationship nandini . A is a china story as well as structural story of how much supply can come out in the market versus the demand that is growing, we talked about global trade growth, there is demand for commodities. But since 2012, Global Mining capex, x china is reduced. The producers, the minds that are supposed to be getting out the ground have not have had any improvement in their capacity to get stuff out of the ground. When you see this coming to ahead with the risk still demand growing at a decent pace, perhaps rising in parts of the world, and the capacity to mine, a force for set prices. There are risks to that view. Im not saying we get a vshaped recovering commodities. Manus i get the fact it is not a vshaped. Various pieces written, barclays back to 50. 87. 63 is what ive got here. There is the iron ore at the bottom. Not enoughys it is momentum in china to keep it at the 80 level. It will never back to 50. Revert back to 50. You look at iron ore and get caught up in the this attitudes of iron ore . Global market strategist, it is a bit specific. It is important, though because the china story has china coming out in a market with iron or and not needing as much to build up the cities and structures as in the past 15 years. Thematic a larger issue, but commodities in general, there are different forces at play. Gold, the biggest thing we look at the predict prices is the real yield on treasuries, which is different from what you would look at for iron ore. It is finding what works for each. Talk me through the relationship between tips and gold. Im seeing money flowing out of old. Drop to thest lowest level since 2016. That is probably in part to do with the dollar. It is fundamentally driven a couple of weeks ago, we worried we would come in and it is still there, the very real risk, north korea could affect the become a dramatic geopolitical risk for us. Money is going into gold, that has reverted. This is dollar related, but it is related to the perspective inflation which takes us back to the fair perspective. Nandini you are getting a low yield, real yield from gold looks more attractive as a safe haven because you are not losing any kerry by putting this money into what is considered a safe haven. There are geopolitical stresses, if the dollar doesnt look as possibly good value at the haven,to buy for a safe gold looks more attractive. It seems to be a backandforth between geopolitics, safe haven flows and real yield flows affecting the gold price. The hasnt been a distinctive up and down move for gold in the past two quarters. Hows we were touching on you could reallocate into the u. S. From the block esther named block esther named the index to relative value. If i asked you the same question for metals and minors, mining index is up 33 this year. There is no doubt about the readjustment of that story you mentioned capex story you mentioned. We are seeing levels we havent seen since 2015 on the minors index. Where do metals play into a macro strategist . Nandini the key point is where is the supply and demand rebalancing or matching up . Which cases to the capex investment in these mines not catch up with Global Demand . Whether this china or x china, that is the key issue in finding where the specific i is. On the whole, it is hard to pick one commodity you would expect to should do like how versus another, but finding disruptions for the producer, the commodities market and the equity market, the Companies Invested in making those commodities back on the market. Manus Britney Spears stand on the commodity currency . David bloom was saying in canada, i can understand the aggressive move in the Canadian Dollar because the rates market is an syncopation with the fx ratet, but what the markets and fx markets are telling you. Kiwi and aussie, do they move with the same a correction aggression . Tougher one, is a we wouldnt say the key framework for which we are looking at those assets in those countries, but at some point, the Global Recovery will have to bring along these countries that are producing the commodities and you would see a strengthening of those currencies at play, as well. Manus Nandini Ramakrishnan is a global strategist for j. P. Morgan asset management. She is our guest host. If you are a bloomberg customer, you get to watch tv. Youloomberg. Com, your app, got the charts, the functions. You can influence the conversation and ask the guest a question. There is a chat at the bottom lefthand side of the box. It is ap on the show, huge day for South African democracy. Parliament prepares for a secret noconfidence vote on president jacob zuma. What will it mean for the rand . The latest, this is bloomberg. Manus 1 48 in the afternoon in hong kong. Lets get to Sophie Kamaruddin. Rallying stock markets are helping lift returns at mega hedge funds including bison Global Investors and renaissance to allergy. According to a person with knowledge, and investor documenting, viking and an equity Equity Funding quantitive are up more than 9 through july. Stepackman took the next in his campaign to shakeup outsourcing giant automatic data nominating three directors to the companys board, including himself. Cushing Square Capital management said it owned about 8 of gdp, also nominated veronica hennigan and paul on rock. An employeeired that wrote a memo blasting its diversity policy. The engineer who wrote the note confirms his dismissal, saying he had been fired for perpetuating gender stereotypes. Asked about the dismissal, representative or for doing email that said portions of the memo violated the companys code of conduct that is not safe action was being taken against the employee. On bloomberghat technology, facebook ceo oh coo Discusses Company culture and Global Impact at the headquarters in menlo park. That is your Bloomberg Business flash. Manus south Africas Parliament will vote on a motion of noconfidence in june jacob zuma. It will be later today. The anc later has devised several previous confidence votes. The news boosted overnight volatility in the rand, the highest level since may. We are joined from johannesburg. Always great to see you. And a lot of theater, concerns in the market. What can we expect today from the lawmakers in this vote on zuma. It is in secret, this is going to be interesting. Going to beinitely interesting. It will be a long day, not just for lawmakers, but for the country at large. We will be expecting some Political Party opposition parties to be marching on parliament ahead of the motion in jacob zuma later this day. It is sure to be a lengthy day as we see where the anc mps will defend their resident or whether the oppositions campaign has been Strong Enough to woo enough lawmakers to unseat jacob zuma this afternoon. After himy have gone time and again. The eighth time in the eighth year on the eighth day of the eighth month. They are really building the pressure here. What is the mood on the ground . Friends, business leaders, what are they saying to you . Nandini amogelang the mood on the ground yesterday when the speaker of the National Assembly announced that the vote will be in secret, was definitely of jubilance some pockets of the country. There is also a sense of anxiety, people not knowing what could happen if resident jacob zuma has his last day as the leader of the country today. Will be keeping a close watch on developments. So will ratings agencies as well as the Financial Sector just to see how exactly Political Landscape of south Africa Africa could be changed by this vote. What is significant about this faced twothat he has attempts to oust them has the leader of the ruling party ahead of the sexual this actual bid. Leading to rating agencies downgraded the countrys Credit Rating to junk status. Manus great reporting, lets see what parliament delivers. Amogelang mbatha, joining us from johannesburg. We look for coverage for events on the ground. Nandini ramakrishnan is our global strategist of choice on bloomberg today. She sets the stage for Britains Brexit slump shock. How much risk is there in the South African vote today . He has headed the sulfate times. Nandini a couple things to keep in mind. We know his position as president or leader of the anc will be shifted anyway later this year. Does this change come now or towards later this year is the first question. The first question is what our market taking about this . Phase for the assets in south africa, the general policy and governance in that area . That is why you see paul volatility pickup in the currency. Thess move distinction in african market. There are companies delivering returns, where the current dividends are longerterm growth opportunities. The politics right now is not necessarily affecting the longer term in estimate views we have at j. P. Morgan. Stick witht, lets the other big discussion, which is the bond market in europe. Steven major, good morning. You are written up as one of the big stories. Sounding the alarm bells over credit in europe. Investmentgrade bonds would become a world of pain because default and downgrade risks. You agree . Would you jump join stephen who is a bondable and say liquidity and downgrade risks you get the sense we are in a tight market in credit . Nandini in a spread market, there are so many components of valuation or when you get your turn from return from. Core Government Bond space because of tightening across the world and ecbs tapering next is where we see the most fluctuations or change in mood is in the cours course a core space. In credit, you have a trickier situation in spread. You have got a bit to worry about in terms of the corporate. The ecb will winding down, in europe there are challenges. There is still the sense of equity earnings doing well, companies proving themselves on the upside that in a Corporate Credit space can benefit whereas in the government space, you have got what we would call pretty challenging market. We arent as negative on the Corporate Credit space in europe as the fed. Manus one final question to put to you. 104 for the euro at the start of the year. 118. 07. Is there anyone out there with the nerve to short this . Nandini it is a tough one because the path seems to be only up for the euro. The action of Emmanuel Emmanuel macron was a boost this year. For their Balance Sheet starting in 2018. Does look like will be hovering around this spot for a while. How much further, that has dont thinkm 118, i well will see the same repeat again but for the euro to get weaker is not sarah in our calls. Manus thank you. Nandini ramakrishnan asset enment strategist. This is bloomberg. Manus the feds inflation problem. Soft u. S. Price growth muddies the Interest Rate policy. Policy path. Chinas trade surplus widens in july as President Trump continues his tough talk on trade. South african lawmakers hold a secret noconfidence vote on the there is, meanwhile, tight security in kenya as polling gets underway. Manus you are welcome to bloomberg daybreak europe. Our flagship show in london. 7 00 a. M. In london. Intercontinental hotels first set of numbers. The delivery is first in firsthalf revenue has missed estimates. It hundred 57 million, the market had 873. 8 million. Operating profit, 370 million. The dividend will rise by 10 . It is an miss on the estimates, however, shareholders get a little bump. 10 uplift in your dividend. Adjusted operating profit the dred 70 Million Dollars 370 million. It is all about strategy. Where will the company be taken . At 7 15 this me morning. His first broadcast of the day. Strategy . Lets get you some of the numbers. This is the first set of numbers we are getting from them, interim dividend, 362 million pounds. First half inflows into the , 3. 7 billion. Billion pounds, that is the assets under management. Millionrofit of 362 pounds. Those are the two numbers that have broken. Its show you the futures board. Down by 18. You want to question one set of we are down by 1 . One eight. Exports missed, imports missed the estimates in china, that you would want to save could take the European Market back a little bit. Down by 1 8 of 1 . Paris is down to it of 1 . Skirmishing around their highs for asia. Despite an export import data missing estimates in china. Aussie dollar is up 1 8 of 1 . Bid for the first time in six days. Bullard warning about the inflation problem. The dollar continues its trajectory lower, quid pro quo, the aussie higher. The Business Confidence numbers were 12 from the previous number of eight. You had some data to give support. Dollar index down by 1 8 of 1 . James bullard saying warning about inflation issues. Recent inflation data hubs prized to the downside and called into question the idea that the u. S. Inflation is reliably returning towards target. , youve got a cracking set of moves there. Fiveyear high in shanghai, two year high close in london when it comes to bond board, it is fairly muted open on the bond markets. Lets get to Sophie Kamaruddin with your first word news. Starting with china, trade surplus widens for a fifth month in july as export growth remains solid while imports moderated. 2 in u. S. Seven dollars terms and imports increased 11 , both falling short of rejections. 40 sixde surplus widened point 7 billion. Japan has reported a 36th consecutive current account deficit in june. Being economist estimates. I was supported by returns an overseas investment and a trade balance that returned to positive territory. North korea has condemned the latest round of you went sanctions as it reiterated it wont negotiate over its Nuclear Program until america ceases hostile polities policies. Said the u. S. Ve would pay dearly for crimes against north korea and its people. It insisted its Nuclear Program the threat ofto u. S. Invasion. Th African Parliament will vote by secret ballot on a motion of noconfidence in jacob zuma. A secret vote increases the possibility of being ousted because they can do so without threat to their jobs. In kenya, pulling his underway in the countrys closely fought president ial election. The vote pits the president against challenger odinga. 180,000 police have been deployed across the country in concerns there could be a repeat of the 2007 vote which led to violence, fueled by division. Venezuela, all Foreign Workers have been pulled from oil fields in the country amid a deepening political crisis according to people with knowledge of the companies, chevron and total have also removed remove a small number of employees. Resolved pany has excellent has it does not comment on personnel issues while total didnt return enough to,. Comment. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. You can find more stories on the bloomberg at top. Now what is going on in asian markets. We have the recent push towards a decade high were chinese shares swinging to gains. The hang seng adding about 1 . The recent figures out of china are demand for chinese goods despite exports missing estimates. The asx still down about 68 1 . Dragged most by Commonwealth Bank and in tokyo, the nikkeis for a third day. Lets show you one of the beatns, and earnings followed in tokyo by the most in index points. In hong kong, building on 20 year highs after vehicle sales surged in july. When it comes to chinas total sales for that month, we had a rise of 5. 5 to run your. The rally in alluvium, we have chalco gaining, tracking games in aluminum gains in aluminum prices. Board, we had chinese exports of steel shrieking by one third in july, falling to a 2013 low. This drop comes as trump is mounting tariffs to protect u. S. Producers. Chinese exports have been moving to the United States in recent years and total exports from china only make about 2. 5 percent of their total shipments. It is unclear what impact could be when it comes to potential tariffs from the United States and that drop in chinas exports it down steel over 2. 5 in shanghai today. Manus and to Sophie Kamaruddin in hong kong. Less bullard and many are minneapolis fed have said soft inflation in the u. S. Is a problem. The two comments lineup with speculation that Interest Rates would be cap on hold in september. Here are the comments from yesterday. Inflation has been coming up a little low relative to our 2 target. That actually matters. The think, 1. 5 is not a big deal, it actually matters that investors believe the fed can achieve its goals. Manus despite the low inflation, both president s are keen to shrink the Balance Sheet, playing down the risk of market disruption. Bei think we are going to able to get going on this. It is going to be slow, i dont think there will be impact on markets, but it is the right thing to do and i would support getting going on this process. Manus the right thing to do, but it might be a bumpy ride. The cio of Global Equities at allianz, good to see you. Here we are, lets start it off. They are keen to get going with its sheet reduction. Balance sheet reduction as you look at the outline proposal at the moment, do you think it could affect markets materially . What you want to hear that says i can park at . We have the plan and it looks sensible on the amounts that can be done and gradually rising. However, it is an extremely large operation. Starting with 4. 5 trillion and moving down. Before,ot been done there is a certain amount of risk associated with is however much you model it, you dont know how it will turn out, particularly with other forces at play in markets. Having the plans there, but it is how it is implemented, we dont know. Manus we will get cpi data on friday. Been reading the same consensus estimates as i have for a number of years. Velocity ingained inflation escape velocity in inflation. That is the top of my u. S. Investment strategy, i work on the inception consumption it is going to be hard to get. Nandini lucy it has been a very consistent underachievement of inflation. It came out in yellens speech in july and she targeted that particular issue and said she was concerned there may be more structural downside on inflation. That was the first time that had been set in a while, although it is in the back of peoples minds. The one culprit really looks like it is technology because having nine years of recovery, having unemployment where it is inflation,t no wage why is that . Possibly unemployment is underreported to an extent, but it looks like you have quite a lot of capital for labor being substituted because of the low price of capitals. Manus slightly tongueincheek, but i am curious, if there was a shift at the fed, it might have a consequence for inflation and that could begin recalling gary cohn . Nandini if you have someone from wall street in charge of the fed, you would thought have thought you would had a looser policy. So yes, that seems to me to be could help getting inflation way up. S p,this is the snp urijah a function. He said good numbers, but you are surprised by the lack of umpf in reaction. Nandini lucy we have seen negative skew to these earnings ratings. Sales and earnings, both by the upside accepted oil and gas and discretionary, structural issues within the ongoingector, that is a structural issue. The negative skew and the reaction would suggest there is probably a lot of these good news was priced in already. Theave seen stocks making numbers and may be going up a little bit, stocks not making them really making it badly. Manus the other store we have been running the past couple of days is about looking at the s p and perhaps a more normalized seemsn of the s p, there to be concerned about the breadth of the recovery. At the top andp the normalized s p underneath. America has been generous to you, where are you . Are we at ipods and rethink exposures to u. S. , europe, china . In terms of allocation . Had a decent year because of the starting point of relative valuation and earnings potential. That went relatively well. Seeing where the eurodollar is going, that is probably up on a bit of pause. It tends to mean earnings within europe have low momentum. The momentum in the euro, started the year at 104, now 118. Does it begin to bite at these levels in terms of the european stocks and their ability to move higher . Lucy it is beginning to do so and i think but it is a pause, we have had a strong move, a bit of a correction is healthy. Stay with me. Ou we will move along. That is Lucy Macdonald, she stays with us for further conversation but we will shift gears. Intercontinental hotels group has reported firsthalf revenue estimates thatst the Company Remains confident in outlook for the 2017. Joining us now is the ceo. Welcome to bloomberg. Congratulations on the job. Lots of things for you to do to on, talk uslmark through the set of numbers, keith and it was a miss in the markets, perhaps a little petulant about that. But youre confident about the outlook. We start by saying it is a privilege to become the new chief executive at iht. I think a solid set of results in the first half. Revenue up by about 2. 1 . Our net systems higher about 3. 7 . 7 ,rlying earnings up Strong Performance which enables us to increase interim dividend by 10 yearoveryear. A solid set of results underpinned by a strong strategy. Manus strong strategy, we will get to that. I want to talk about your biggest market, the United States. We run the numbers here and they seem to be worrisome. You say 25 years, give me your take. We have room supply growing in the United States and the longerterm average. You assume youre going to have pricing pressure Going Forward given this kind of growth momentum in the number of rooms . Saw a the entire industry general softening in Second Quarter that had a lot to do with the shift and headwinds from the oil markets. Additionally, we are doing new renovations for some of our Holiday Express hotels, about 300 in the u. S. , that has headwinds over wall. But you are seeing great growth and u. S. And global business. A bit of softness in the u. S. , s up, strongev par performance in china where we saw up 4 . Profit up 15 . In a business like ours that operates in over 100 countries around the world, it is our global revpar we focused on and how that focuses flows into profits. Her good stories about how supply growth draws longterm value for our shareholders. Day,e signing a hotel a opening five hotels a day, up 30 yearoveryear. Those hotels range across brands from 650 room Holiday Express in waikiki in hawaii to a 900room intercontinental in los angeles, the tallest building west of the mississippi. Thet resorts in asia Like Hotel Indigo in bali. Were brought our restaurant brand to amsterdam. Growing portfolio around the world and looking at how existing brands can grow and accelerating by launching new brands. Manus what the market wants to know is the key strategy. Is it more of in terms of growth, is that what you want to pursue . More of the same or what is the barr twist . Nandini keith we have a clear model around our strategy. It is making our winning model work harder and stronger forest. How can growth and drive stronger performance . Andng our existing brands scaling them faster and launching new brands. The most recently announced a new brand coming to the u. S. We have a leading position with holiday inn and holiday inn express, some of the bestknown brands in the world. Another brand underneath that, percent lower than that. Launching a brand against the segment we can scale up quickly and become one of our great scale brands for ihg. Driving twist will be stronger performance against what we have historically done. Windows wind ham, your competition, they are doing what you set the pathway for. The others have perhaps rotter suite of brent broader brands to choose from. This will get harder to deliver the barr twist . And i both travel a lot and we are expecting unique experiences wherever we go. Whether a onceinalifetime holiday in bora bora, staying in an intercontinental or a get away with kids, customers expect consistent brands that mean something. Focus is keeping our brands relevant, innovating, whether new guestrooms, new beverage offers is, new markets and launching new brands. Havingg very focused on brands that really matter to customers, that are consistently delivered, it is how you win in the longterm and not be commoditized. Manus project are rising, i went on the page and it looks lovely, i read the headlines, you have got to get a bit of a razor on this. You tell me i have to wait until 2019, but where you will where you open the first one and what will it look like . Keith he will not have to wait till 2019, we want we launched this brand in june. Thousands of voters to talk about what we were thinking and bring them along in the journey. We know the customer, the segment, the experience we are looking for and gave them a teaser in june to see what their interest was and tease me a little bit. Give up a little more. Lets brexit news with it today on bloomberg. Break some news. Keith early in september kobe will have the name of the brand and how we will launch it and what it will look like. Sent time we launch it with all of our owners. Manus you are the man that ran the china brand. I wonder how you read the story about alibaba coming together with one of your Key Competitors in terms of their partnership. How can you make yourself more unique in china in terms of your delivery there . I am talking about alibaba and marriott, teaming up to steal the march. It is a big threat . Th we are the biggest first in china in the 1980s. I led the business for which he years, living in shanghai. , we had 200, we surpassed the 300 hotel mark, incredible momentum in that business and we have scale. We have scale across brands and we have been on their store, we have longterm relationships that are deeply embedded into our business and making sure we have a business that leverages our global scale but is locally relevant and understands the domestic Digital Space so well. Confident in our direct strategy in china and the strong relationships we have there and accelerating our rose with our Holiday Express platform where we have signed 24 hotels this year. That is one way to win the race, you have been with alibaba for years. We look forward to hearing more about horizon. Sure that with number first. Share that with bloomberg first. Ihgs ceo. Euro stoxx 50 should open a little lower. Down by 18 of 1 . At 36. 59. Anged Lucy Macdonald is the cio at allianz and she was listening to the conversation with keith barr and five weeks in the job, he ran china. Sector, look at this there could be many headwinds depending on what happens in factor, butterror how do you look at this sector . Lucy it is not just the terror factor, i. T. Breakdowns for sure ways, immigration issues around it among the people keep traveling. Very profound need and desire to travel for leisure and also for business. We have a priceline booking. Com figures later this week that are expecting to show europe still strong. Ist has happened with terror people are moving around to different places. We have looked at this postparis to see if people were still moving around and they are. But they go somewhere else within the same region. Manus when you talked about global buying him usa strong and china numbers growing. China is up 4 . Ofgives you insight in terms the consumer in the United States of america. The traveling sales and the consumer in the United States is strong. Yes, however you have to be selected because there are some areas like retail, or you are seeing disappointments. One of the spending seems to be going on the experience, the leisure, the travel and on goods. If you look at areas within retail like clothing, they are week. I think within consumer as a whole, you have to be selective. Manus extremely select. Chinams of we have the data this morning, i dont think anybody wants to get too bogged down in one months piece of china is ana, but incredibly important part of that particular stock story. When you see china, it seems to have been less of an issue in the first eight months for us and what level of exposure are you taking there. What adjustments are you making to say the chinese exposure in the portfolios . Lucy china story we have is very industry select if. Selective. You have policy support and they tend to be ones without overcapacity, not the old economy more than new, but areas like lifesciences where you have good policy support behind, environmental, testing water, that kind of thing where you have good support from the government. Those are the areas we tend to focus because they have better structural and less volatility. Manus we have a story from jeffrey to block and he is saying, he wary of a pricey market and he is saying you can buy anything a few months ago and be grand. This is not the time i can say i can buy anything and not worry about the rest. The risk. Would you share that . Nandini i would. Lucy selectivity is absolutely the case. Particularly where you have valuations quite high, the next few coming into the reaction to the results, you have to be selective. Look and see where there are select valuation opportunities to make sure they are not traps and will deliver. Value traps. Lucy macdonald, cio from Global Equities at allianz. That is it, matt miller and guy johnson are up next as the European Market opens. Track your pack. Set a curfew, or two. Make dinnertime device free. [ music stops ] [ music plays again ] a smarter way to wifi is awesome. Introducing xfinity xfi. Amazing speed, coverage and control. Change the way you wifi. Xfinity. The future of awesome. Guy good morning, you are watching bloomberg its, the european open. Cash opens in 20 minutes time. First trade in the day coming up. Im guy johnson in london, matt miller is in berlin. Unwind and relax, to dovish two dovish fed president s want to continue the shrinking of the Balance Sheet. What does that mean about the possibility of a rate hike in december . That is an open question