President trump threatens further tariffs on chinese imports. Pres. Trump we have a long way to go. Another 325 billion we can put a tariff on if we want. China and ang about deal. I wish they did not break the deal we had. Anna ursula von der leyen clinches the eu top job. We have issues, but we should never forget we are allies with the u. S. And we are friends. We sit on the same side of the table. Anna plus, asml forecasts sales trade tensions hammer the but dialogue semibeat expectations. Plenty talk about plenty to talk about. Good morning. Matt u. S. Tenyear debt approaches, once again, dipping down into negative real rate. Andsee that across europe the u. K. Already. Even nominal rates in germany are negative out for 20 years. This is becoming a global issue. Interesting to watch central bankers continue to talk about cuts. Down even drive rates further. Leaving more of the World Holding paper. Governmentsgood for if they would borrow and spend. Take a look at futures this morning as we prepare for the open, 18 minutes away now. Ftse, dax, and cac futures not showing a lot of direction. The market really searching for a narrative, looking for direction. You have red arrows here. Down 0. 3 . E futures what else do you see on the gmm . Anna this is reflecting the treasury markets. An interesting conversation being had about whether lower rates beget lower rates. We will talk about that. Lets show you the gmm. A mixed picture. A fairly unconvincing picture on the overnight session from asia. Markets are confused. A little bit lacking in a definitive narrative. On the one hand, the data picture continues to build. Just yesterday, the retail sales number out of the u. S. That data not looking bad, really. You said that against the ongoing rhetoric around trade, we just heard from President Trump in the headlines, it means investors are in search of narrative. This is the mixed sure on the gmm right now. Lots being said about treasuries. Indeed, the pound does not feature here because we have seen quite a lot of weakness. A 124 handle on sterling as we see the times in london talking about whether we are going to see an early election call by a new leader in the u. K. A lot to talk about in terms of the new deal brexit risk for market participants. Bloomberg mliv managing editor is in singapore for us. Let us start with the question of the day. Comments on trade from President Trump are really putting that back on the agenda once again. The question you have been throwing around is how will markets react to trump announcing increased tariffs on china . It is easy to focus on risk aversion. We have to think about where we are on equities. We have been touching alltime highs of late. Thehat is very important in context of where we are looking. To be away from most of my colleagues. Most of my colleagues think we have gotten used to the trade war yields. The fact is equities being at a alltime high shows they will quickly move on from increased tariffs. They do not think it will be that much of a scare. That is why they think the threat is not that much of a scare. I think more tariffs will be very damaging. I dont think we have seen the economic effect from the last round. That will start to feature. Overall, we have not seen the full impact of the tariffs already in place. I think it would be cataclysmic for asset markets because the consensus narrative is there is this trade truce. Is it china and u. S. Are ultimately going to reach a deal . It is not that trade tensions will escalate. Definitivelyet more tariffs implemented, that would be bad news for assets. Especially with equity that alltime highs and valuations looking expensive. For equities, a correction would not hurt if you have been long all year. On the csi 300, you are up 26 . You are up 20 on the major developed index as well. It would take a bear market to really hurt investors. Is that the damage you think could be done . Does the year to date number that had amassed collapse at the end of last year. It is slightly arbitrary taking from the low point. Some peoplest in benchmarks, but not necessarily weaker in the last couple months. We are just over 2 higher than we were 11 weeks ago. It is not that the s p is higher. We got quite high in september, october of last year. It needs to look for a different window rather than saying 20 would require damage. Can we get a bear market . We get moreill if tariffs. We are already at risk of severe correction. Auger that august, september period onward. We are going to get that slowdown and that will lower economics forecasts, and earnings guidance. We are already due for a pullback later this year. If we get a combination of extra tariffs, markets will start realizing we are not getting a deal before the election next year. If we are getting extra tariffs, we are moving farther from a deal, not closer. That would change the narrative. We could get a bear market quite easily in equities if that happens. What are you making of the better data out of the u. S. The job story is old news. Retail sales, how does that fit into your bearish view of the world . How do you see it impacting treasuries . Going toury market is cut out the extreme scenarios. Mark three points of data are important. I am less worried about the jobs. The jobs data is clearly slowing down. It is clearly slowing down over the last couple months. Jobs really only start going back when the recession is pretty much already here. Im not worried about the jobs thing. The retail sales slightly better than expected, Bloomberg Economics did predict that. It is in line with what Bloomberg Economics productive. It is a volatile series. The one that is most relative most relevant if you are bullish is the new york empire. How will this affect treasuries . Even in my bearish view, the market is overpriced for immediate cuts by the fed in terms of hoping there might be more than 50 more than 25 basis points in july. It is unlikely there is more than 25 basis points. The market is set up for a rate repricing higher, which will make it harder for equities. It is important to emphasize that while i am structurally very bearish on equity markets, it is looking for the Economic Data to feedthrough more like august, september. We may get more forecast down in a couple weeks if there is no sign of any deal on trade. Likely august, september is when we see the data turned down. Matt thanks for joining us this morning. Thember, you can join debate on todays question of the day. How will markets react if trump announces increased tariffs on china . Dont just say they will be selling off. We want to know we want you to quantify it for us. Reach out to was at the mliv team, ib tv on your bloomberg terminal. Lets get the first word news now with debra mao in hong kong. Has been von der leyen confirmed as the new president of the European Commission. She is the job and the first german in over 50 years. She told lawmakers the most pressing issue is Climate Change and that she would seek to bolster relations with the United States. We do have issues. We should never forget that we are allies and we are friends. We sit on the same side of the table if i may put it that way. We have to negotiate hard about the different topics that have to be fought. In the end, we know it is better to be trading with each other. Condemn. S. Has voted to comments from President Trump that have been dubbed racist. He tweeted that four congresswomen should go back to where they came from. Trump says he was not racist and does not have a racist bone in his body. He says of the lawmakers, it is my opinion they hate our country. Likely suffering its worst downturn since the 1990s when it was battling floods, drought, and famine and may have lost as much as 10 of its population. The bank of korea estimates it contracted by 3. 5 in 2017, leaving north koreas economy roughly the same size as the u. S. State of vermont. Rankedtes has never lower than number two in the seven year history of the bloomberg billionaires index until now. He has been overtaken by Bernard Arnault. His companys shares rose to a record pushing his net worth to more than 200 million ahead of gates. Global news, 24 hours a day on air and tictoc on twitter powered by more than 2700 journalists and analysts in more this is countries bloomberg. Anna thanks very much. Next, Goldman Sachs is trading revenue is a bright spot. Bill jp morgans profitability improve . More on wall street next. Bloomberg radio is live on your mobile device or dab Digital Radio in the london area. They will be covering the banking story as well. Matt welcome back to bloomberg markets. This is the european open. We are looking at equity Index Futures pointing lower. Lets take a look at those futures. 0. 2 on the ftse down. A quarter percent on the ftse down. Really, little changed, still pointing lower. Results. To earnings only two major u. S. Banks are left to report this week. For the ones that have, lower Interest Rates and lower trading revenue are starting to bite. Citigroup set the tone with soft trading results. Heavy cost cuts and a booming consumer business helped lift shares. Goldman sachs bucked the trend. It surprised investors, beating expectations thanks to a jump in its Equities Trading business. Wells fargo posted its smallest lending income since 2016. Snapped a three year streak of gains for its net interest income. Still left to report, bank of america, Morgan Stanley on thursday, for now, the question remains. How will they bolster revenue when trade is suffering . Joining us is bloomberg Senior Finance editor. Pleasure to see you so early this morning. Inks for joining us. What have been the consequences . What are we seeing in the results here that suggest a low Interest Rate environment . They will continue to struggle. The margins will be squeezed. They have had certainly nice tailwinds for the past few years as the fed has cranked up Interest Rates. They have kept the deposit rates on hold and increased lending rates. They have had a nice profit bump. Now its going to start going the other way. As we have seen in the u. S. , the u. S. Consumer is doing very well. With Lower Borrowing rates, the theory goes, that will give a little philip to borrowing, to spending on credit. It might make up an revenue what they lose in margin. Matt what is going on that , the tailwind jim they got from rising rates is now starting to stay starting to fade, if the headwind they faced with weak trading revenue would also start to fade a little bit. Why is trading revenue continuing to be a problem for everybody but Goldman Sachs . Trading is a black box. Volatility is up. Volatility is down. Whenrs complain about there is not enough volatility and they complain when it is the wrong kind of volatility, but you have crowded trades. You have very tough environment to make money in bond trading, in equities, you have very crowded trades and very High Compliance costs. You have spending on technology to automate more and more of the trading functions. There is a squeeze on the revenue side, and increase on the cost side, and there you have it. It is an area where you are always rife with surprises. Anna low volatility in fx markets is a feature of certain of recent quarters. Income,net interest cuts and guidance, one of the gloomier ends of the story for the bank. Does that change expectations around the banks that have yet to report . I would have thought so. A lot of this stuff is priced in any way. The markets are anticipating it. Unless you get a massive surprise one way or the other, you are probably not going to see a lot of share reaction. For u. S. Banks, the Silver Lining is they are not in europe. Anna there we are. Matt we seem to be stuck in a negative rates trap. Bloombergs finance editor joining us on u. S. Earnings results, but on the global picture, those negative rates are for many regions outside the u. S. As we heard from jay powell, they may be cutting soon as well. Lets get the Bloomberg Business flash. Fullblown eus a antitrust probe as the competition chief prepares a finale to her fiveyear crackdown on u. S. Tech giants. Activist investor bill ackman has an activist of his own. Owns it investors is now pushing back against the decision to issue 400 million of 20 years at without consulting shareholders. It wants bill ackman to halt the plane and pursue a more active buyback program. Lotus has unveiled its first all electric supercar. It will cost 2. 1 million. It has no handles. It stores are operated by a keep up. Its doors are operated by a key fob. Obviously selling tua limp selling to a limited base. It is illustrated the capability of lotus, investing in a longterm plan. This is the first car of a longterm business plan. That is your Bloomberg Business flash. Minutes away from the European Market open, we will take a look at your stocks to watch for this trading day, including the european automakers after sales fell in june with the biggest drop of the year. More on that next. Anna welcome back to bloomberg open. European swedbank latest, annemarie. We have seen a lot of calls for this to be called down this morning. They beat the highest estimates when it came to earnings. They are slashing dividends. This is a bank dealing with the fallout of a Money Laundering scandal. The ceo spoke to bloomberg daybreak about that. Take a listen. There is a fine, we will pay that. Exactly how that will pan out, it is too early to say. To build atant buffer in the environment we are in. Matt lets get over to jp bernard. What is the story . Asml reported earnings. We have a mixed picture. Third quarter was a little bit weak. Second quarter was ok. Analysts are divided on how you take this number. Another semiconductor processor reported earnings as well, which was dialogue some in germany. Emi in germany. Anna thanks very much to you both. Thanks for joining us with stocks to watch. First to go is the function on your bloomberg. Watch out for the car sector as well. Car registrations pretty sharp. Thats something we are going to be talking about. Erickson in focus. Second quarter operating profits below estimates. Reported a 5 position. Distributionemical company outlook, we will focus on germany and the earnings story shortly. The market open is next. Futures will be weaker at the start of trade. Anna a minute to go until cash Equities Trading on this wednesday. Welcome back to the Europe Market open. The pacific down a touch. Very unconvincing picture. Pulled in two directions. Still the trump trade narrative and power story, well be talking about that again. Look at the pound. This is the pound sterling. London trade is waking up to further headlines around Nodeal Brexit and what would oris johnsons consensus be . Were on 2. 09. The yield a bounce off those lows. What does that mean for the Global Economy and the negative rates narrative. Well talk about that later. The European Equity market a little weaker as well. Lets see how the European Equity markets open up. Were also focusing in on the earnings story of course. We have a number of earnings reports. They will react to their underlying performance. To the extent they are hit by the trade wars, the global slowdown. This is the picture as we get the equity markets opening up. The ftse down 1. 2 . As is the spanish ibex. We wait for the german and French Market to open up. The auto sector also really in focus today. Were talking june e. U. Car registrations. Financials fairly mixed. Healthcare looking overly green. Areas of red, consume discretionary. A very mixed picture going on here, matt. Matt yeah, absolutely. Looking at swedish boosting its fullyear forecast. Up 10. 6 . We talked about asml as well. It is gain lakeeffect less but it is a much bigger company. It is adding more points to the sox 600. You see a number of companies out with earnings today. Swatch. Louis vuitton. Hennessy all on the gaining side of the ledger. Total and shell. The three Oil Companies down on the privers oil. Then you see eriksson falling. More than 2. 5 . We just had an interview with the c. E. O. Of eriksson. Earnings helping and hurting today, depending on where you are. Seemingly difficult to be in scandinavia putting out earnings as long as youre not wedish or finnish. U. S. Futures pointing higher still as the American Consumer proved its resilience or as the American Consumer proved his or her resilience, fed chair Jerome Powell said the fed would continue to monitor Downside Risks to the economy. Outlooks have increased, particularly regarding trade developments and Global Growth. Issues such as the debt ceiling and brexit remain unresolved. Participants have raised concerns about a shortfall inflation below our 2 target. Matt joining us now is the global head of debt strategy at nat west markets. Chicago fed president Charlie Evans said there is an argument if it takes 50 basis points before the end of the year to get inflation up then something right away would make that happen sooner. Here is a direct quote. Maybe shock and awe is the way to go. How likely is that . Were probably going to get 50 basis points this year. I dont know if it is shock and awe. The market is pricing as much as three cuts for the rest of the year. I think the fed is getting closer to where the market is but it is not there. Anna to that point, i have to chart the retail sales. This is the la