Manus warm welcome to daybreak europe. Erdoganng rebuke for and his party in istanbul. The lira rallied as much as 1. 5 . Weve given a little bit of that back. The second worst emergingmarket currency of 2019. If the politics get a little change in turkey, do you want to be long turkish lira, or do you believe the threat of sanctions will weigh on the currency and put on a cap in . If the market moving story of the morning its the market moving story of the morning. These are the two dominant forces on markets. To the gold market, above 1400. We havent broken this since 2013. Up over 1400. More to come, according to citigroup. Its a portfolio diversifier. The money just flowed in. 3 billion flowed in the etfs last week into etfs last week. Hedge funds are the most bullish since 2018. Crude, the most stunning line in the commentary over the weekend from the president of the United States, who says he doesnt care about the closure of the strait of hormuz, because he has oil. That is feeling. You look at wti, adding to its best weekly move since 2016. The hedge funds, raised their long positions by 13 . Fear and the fed drive these markets. Good morning. Nejra good morning, and welcome back. U. S. Equities came off the record high on friday, but futures are firmer today. Weve seen seven weeks of declines for treasury yields. The question is, do you want to see that rally ahead of the g20 . Bank of america saying that the path of least Service Since for yields is lower of least resistance for yields is lower. Well discuss all these big topics this hour. The dollar stays on the back foot. The aussie outperforms in g10. As well as the lira. On that note, lets check in on the markets in asia. Juliette saly has more. Happy monday. Juliette the aussie is certainly one to watch as we hear the governor saying that the monetary easing may not provide that much support when it comes to aussie stocks. You are seeing a little bit of weakness. Its been a mixed to slightly higher start for asian equities today. We have japanese stocks a little bit firmer on the nikkei. Turning bearish on the overall japanese equity market due to the strength of the yen. Hong kongs Market Holding onto last weeks gains. We are seeing the chip players in taiwan coming under pressure today. The taiex is down by about 0. 3 . President trump signaling more chinese tech firms could be blacklisted. Lets look at some of the specific stocks. Thats hurting some of the japanese chip players as well today. Disco in tokyo trade off by about 2 . Falling the most in more than a year, off by about 9 . A little bit of concern about its return to growth strategy. That probably wont start to 2020. E till four, this company has been halted from trade, but not before that huge plunge, 25 , the biggest on record, after a Research Firm said they are shorting the company and that the shares in the apparel maker are worth zero. Manus lovely roundup. Juliette saly with the latest on the asian markets. President trump says the u. S. Will oppose impose major additional sanctions on iran today, days after abruptly calling off air strikes in retaliation for the downing of a navy drone. The administration has also signaled a willingness to talk with the Islamic Republic. Itsts continued threats continued threats and acts of aggression against israel, our allies in the arabian gulf, and against u. S. Personnel and assets across the middle east are not signs of a nation seeking peace. On monday, there will be a significant set of new sanctions. President trump im not looking for war, and if there is, it will be obliteration like youve never seen before. But im not looking to do that. But you cant have a Nuclear Weapon. You want to talk, good. Otherwise, youre going to have a bad economy for the next three years. No preconditions. Manus lets get to tehran. Good to see you this morning. What is the reaction to this offer of we can talk about anything, but you are just not going to have Nuclear Weapons . Is this new . How has it been received . There hasnt been any direct official reaction yet from the government to this. But im predicting that the reaction will be the same as before. Because weve heard this many times from the u. S. Administration, that they are willing to negotiate, but they say that at the same time as increasing punitive measures on iran. Thats what iran cannot accept. View, itpoint of cannot see itself being dragged the negotiating table that have administration kind of developed itself. So, i think from the iranian point of view, this is not going to modify them or make them think the u. S. Administration has anymore coherent quality policy than it has had before. Nejra golnar, what could these sanctions target . We dont have a lot of detail at the moment. Golnar its a good question. We have no detail whatsoever. I was with friends at a Dinner Party Last Night here in tehran. That was the question everyone was asking. Whats there left for them to sanction . What can they possibly target now that they havent targeted already . One thing they could do is up the sanctions they applied in the petrochemical sector. They could target the entire industry. They could name the big carmakers here, as opposed to sanctioning some other sectors that the car industry is more sensitive to. Someone mentioned the possibility of them sectioning iranian airspace. These are the things that iranians are really worried about, and they are scratching their heads. They are kind of wondering where this will come from, how they got here after being in a position three years ago where they were expecting sanctions relief and a turnaround in their economy. Nejra Bloomberg News reporter golnar in tehran for us. Sticking with the middle east, Oil Extending Gains after its biggest weekly rise since late2016 as geopolitical tensions escalate. Joining us now is a fixed income strategist. Great to have you with us. Lets talk about these risks around iran. We have a great blog on the bloomberg, tracking it, saying the middle east tensions are a dangerous distraction for opec plus. All these tensions are these a distraction or something they need to integrate into their strategy and portfolios . Its the latter. Distraction feels like an understatement when we are considering how many been travel barrels a day through the strait of hormuz. Anything that puts at risk has to be a front and center concern. Step,take one additional we know that spikes in oil prices have been one of the primary causes of volatility. Distraction feels like a lowball to me. Manus it certainly does when you look at the exuberance of, perhaps, equity markets. Christopher, good morning. A 10 rally in the space of five days in wti. This is perhaps about the velocity, rather than the quantum, and thats what markets i think have yet to reconcile. Is that a fair take . Christopher absolutely. The level the oil prices have reached is thus far not particularly troubling. The mood last week is quite big, but we have not seen the move last week is quite big, but we have not seen a reasonably low probability, high risk event, thinking about how to factor that into pricing every day. Theres an option out there that is a long way out for the money, i guess would be the analogy, and in the event of a certain set of risks crystallizing, this become the dominant driver of oil prices. But absent that, we have to go back to worrying about the breadandbutter of supply and demand in the market and the impact of slowing chinese growth in the mainstream is a more important factor than this political concern. There is a button that can be pressed or a flip switch that can be flipped, and the geopolitical risk could be the only thing that matters. Nejra how do you trade a geopolitical risk other than through the goal oil price . Is it through gold, through dialing down equity risk a little bit . Christopher the person you want to do is have a starting point that is extremely well diversified baseline portfolio. Thats how we think about this. Run appropriate scenarios over that portfolio to understand where your vulnerabilities are. When these kind of events happen, you want to have some experts on if not on the ground, then at your disposal to have a deep understanding of the dynamics in that market. What you dont want here, to use a football analogy, is to have everybody chasing the ball in one direction, then the other direction. If we structure our team and structure our approach that way, its about having expert to look at issues on a casebycase basis, rather than trying to keep uptotheminute on each issue. Manus to pick up on that, chris, it is quite a crowded trade. Nejra ask you whether it is gold and that inflation mindset or that protectionist mindset. If you look at the currency moves, thats also going to have a major impact inflow. That flow in currency is into yen, out of dollar at the swiss. Into theres this haven move in the currencies. How does that translate for risk for you . There are two things going on simultaneously. There is an element of that safe haven flow. Element wheren weve seen more than a race to the bottom, its kind of a race through the bottom. Over the course of the last week, we heard from the ecb that their lower bound in Interest Rates is no longer their lowernd bound. In the u. S. , a clear privet pivot towards looser policy. Capital ins of places you get flows of capital where the infrastructure below szero. Relative gainers. That gets you to the swiss yen, the gold momentum that you have spoken about. Gold doesnt pay an interest rate. Rates are negative. That becomes less of a concern. Manus there was a lovely line blog this morning. We will talk more about that in a moment. Thank you. , lets get to first word news. Thanks, manus. Well, a stunning blow for erdogan in turkey. He lost by a landslide to the opposition candidate. Its a stinging indictment of ankaras economic policies after president s refusal to accept an earlier defeat. The news sent the lira rallying. The drumbeat for a fed reserve rate hike is getting louder. Minneapolis fed president Neel Kashkari says he called for a 50 basis point reduction at last weeks meeting. These comments reinforce expectations that the central rates, on pace to cut maybe as soon as next month. Was, i think, broad agreement around the table that the case for providing more accommodation has increased meeting. May clearly, we are going to be very attuned to the incoming data flow. President trump has denied he threatened to demote Jerome Powell, but says he would be able to do it if he wanted. The president reiterated he powellspy with actions. Trump says the u. S. Economy is throughnough to push the headwinds created by the feds rate hike. North korea has released a photo of what it says is kim jongun reading a letter from President Trump. The state media describes the tone of the message as quote ent and says kim will take the content seriously. Nejra coming up, the potential meeting between President Trump and xi at the g20 is the main event this week as it could offer new signals on the direction of the trade war. This is bloomberg. This is bloomberg. Manus this is bloomberg daybreak europe. Im manus cranny in dubai. Nejra lets get a check in on the markets. We start the week with a bit of a risk on flavor, at least in asian equities. Does that last through the g20 . Oil on the front book foot. The lira also spiking today as the opposition backs the landslide victory in istanbul. What does it mean for economic reform in turkey . Manus . Manus aussie dollar is up there this morning. The government says there are limits to what Monetary Policy can do. Day five of the rally in aussie dollar. The dollar itself rolling over for the fifth day of losses. Two things driving the aussie. The biggest loss in six months. Is king dollar dead . Jeffrey says it is a warning sign. U. S. Futures money flowed into equity markets at a vicious rate last week. Stocks are higher by 0. 3 this morning. Lets get your headlines from around the world. Thanks, manus. Daimler has issued its third profit warning in a year, blaming costs related to the deeper scrutiny of its vehicles. Carmaker is facing investigations in europe and the u. S. Over allegedly excessive pollution. It now sees this years profit being at a similar level last year. To last year. A chinese retailer is planning to buy an 80 stake in a chinese unit of the transactions awaiting regulatory approval, but is expected to close by the end of the year. A growing number of european retailers are scaling back their china presence, amid a shift to Online Shopping that favors local operators. Orado reports is reportedly ising stevens resorts reportedly buying stevens entertainment. Is valued atstock about 13 per share buying caesars entertainment. The stock is valued at about 13 per share. Nejra thank you so much. Equities trading mixed this morning as investors await the highstakes g20 meeting between President Donald Trump and xi jinping. Till the event kicks off on friday, traders have though the event kicks off on friday, traders have already begun to position themselves. When we look at what option markets are doing, they are pricing in some pretty major swings around the g20 weekend. Here, this is data courtesy of wells fargo. What weve essentially done is taken forward volatility at the money options for the s p 500. You can see this pretty decent premium being priced into the market. This is traders betting that markets with around the meeting markets will swing more than 1 around the meeting. Investor should take advantage of this. They should be buying puts on volatility etfs. With the vix above 15, its only about this because this chu nky premium at the moment. We got a similar view from an analyst at nomura. Basic position is like, especially with headphones they say positioning is like, especially with hedge funds is light, especially with hedge funds. Compare the two. We see equities hit near a peak here, but they continue to rally for the following month. Nomura says this is likely to happen again once we get the g20 meeting outoftheway. They say any dip we see in stocks is a Good Opportunity to buy this week. Nejra, manus . Manus i will pick it up from here. Dani burger said the context for a momentous week. It takes us to the mliv question today, the stock side of the asset class. Can stocks rally even without a trade deal . Join our debate. Its on your bloomberg. Do you need a trade deal to boost the rally, or is the fed enough to sate the market . Christopher at lgim. We are all gearing towards the g20 this week. Last week it was about powell and the fed. This week it is about g20. Do you even get the sense that markets are perhaps a little prospectoyed up on the of a trade deal between xi and trump . Christopher i dont get that sense, actually. I think wherever we look, you dont see sentiment particularly being stretched in either the equity or the risky corners of the fixed income market. Yes, prices have rallied, but it seems to be one of the most unloved rallies, one of the most unlovable markets in history. If you look unloved bull market in history. If you look at what investors have in their portfolio, if you look at surveys, all of those say this is not an over rally in any way. Nejra we had a number of speakers come out and cement the powellpivot we got from lets listen in. Two vice chair Richard Clarida to vice chair Richard Clarida. The economy is hitting some crosscurrents now. There has been a marking down of Global Growth prospects. Theres uncertainty about international trade. There is some evidence that is weighing on sentiment. We are monitoring that closely and we will act as appropriate to sustain expansion. You kashkari, who of course was saying kashkari he was gunning for a 50 point drop. We talk about the feds dovish pivot being cemented if we dont get a great outcome from the g20. How does that change the way you would trade fixed income . Christopher the inflation is just more lasting than the vagaries that might come out of the g20. We can make assessments about what trump and xi might decide, but none of us know. Its been a significant step down over the course of the last six months. Its a global phenomenon, both europe and the u. S. And Central Banks with an inflation targeting mandate, or in the u. S. Case with the dual mandate, has to Pay Attention to that have to Pay Attention to that. Its both marketbased measures, but consumer servicebased consumer surveybased measures or economist surveybased measures. If they want to reanchor, than they need to do something about it. Thats at least half of whats behind this recent dovish pivot. Manus to reanchor those expectations, would you join the Morgan Stanley house for a 50 basis point cut in july . The validation would be cut, then verify. Does it take Something Like shock and all, 50 basis point shock and awe, 50 basis point, anchor the expectations . Weve seen a bounce of 10 to 15 basis point on the back of the pivot. Youve made additional dovish comments after the meeting. Jerome powells use of the word us was particularly important. Over all used to passing statements from the fed with a fine tooth comb. That us word is very important. Nejra christopher jeffrey, staying with us. Questions of character dog Boris Johnson in the race to become Prime Minister. We will discuss that next. This is bloomberg. Hey im bill slowsky jr. , i live on my own now ive got xfinity, because i like to live life in the fast lane. Unlike my parents. You rambling about xfinity again . Youre so cute when you get excited. Anyways. Ive got their app right here, i can troubleshoot. I can schedule a time for them to call me back, its great you have our number programmed in . Ya i dont even know your phone anymore. Excuse me . what . I dont know your phone number. Aw well. He doesnt know our phone number you have our fax number, obviously. Todays xfinity service. Simple. Easy. Awesome. Ill pass. Nejra this is bloomberg daybreak europe. We are all set for the g20 at the end of the week. Some saying that is the feds opportunity or maybe their offramp to do something aggressive. Has perhapsgu