Matt miller in berlin. Lets check in on whats going on in the market. We do have gains across some european indices, right now you can see the stoxx 600 up. 2 , the broader European Index is gaining. The dollar is also strengthening against the yuan, you can see one dollar now buys 689. 71 offshore, and the pound is weakening. You can see it down 123. 38. As we get closer to the possibility of hard brexit or new elections, investors continue to sell sterling. Now to the first word news with Viviana Hurtado in new york. Chief executive carrie lam has condemned the violence in her first News Conference on the city since the end of british rule. Fresheclaration follows demonstrations with Police Firing tear gas and rubber bullets at protesters. This week, u. S. China trade talks are set to resume in shanghai, the first since discussions broke down almost three months ago two days of talks are scheduled to begin after president s trump and xi reached a troop at the g20 although deep tensions remain. Neither side seems willing to compromise. The u. K. Is deploying destroyers to the strait of hormuz, which will operate alongside another Royal Navy Ship amid heightened tensions in the gulf, this coming as i ran and european powers discuss the 2015 nuclear deal stop you may remember the u. S. Abandoned it last year. Plans toicking to its have big Multinational Tech Companies in defiance of President Trumps suggestion that he may impose retaliatory tariffs on french wine. The french finance minister says they are completely different issues and shouldnt be lumped together. President trump says he plans to nominate a loyalist as director of national intelligence. Texas republican will replace dan coats, who announced he will be leaving the office on august 15. The u. S. Treasury department is expected to hold its Quarterly Sales at record levels again, with washingtons latest bubble deal showing the debt binge will continue. President trump would say he would eliminate the National Debt is now set to have a budget that will usher in a trillion dollar annual deficit. Global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im Viviana Hurtado. This is bloomberg. Thank you very much. In london, Boris Johnson subject that cabinet holds its first saysng, the Prime Minister the u. K. Will gather every day to make sure that the country that the brexit cabinet will gather every day to make sure the u. K. Leaves the eu october 31, but as investors debate the potential fallout once the deadline arrives in less than a hundred days, something of the divide is forming. Dani burger has been taking a look. It is definitely the part where we are seeing the pain, with stocks acting like they are living on a different planet, and usually when we see the pound decline we see the larger stocks do better, because exporters like that weaker currency thats not what we are seeing. Instead we are seeing the ftse 100 decline while more domestically oriented are isperforming, so that falling well the domestically oriented index outperforms that. I know chris really told you that essentially this is because the 250 has a lot of exposure outside the u. K. , but still this picture is still forming in the options market, equity options are not showing any drama, but pound options are. In time forg out how much volatility options traders will think will occur around sterling. This jump is three months out, which is the october 31 deadline. This is what it currently looks like the top line is what the term premium looks like before the brexit referendum they look currently similar stop the fact that these two lines look so similar tells us that right now market following the same playbook as in 2016 where the referendum occurs. The pound continues to sell off while stocks quickly rebound. Burgerks very much, dani looking at some possible implication in the market split on brexit. Guests,scuss with our the em ea affect strategist at mccoury, let me first ask you about the pound, i guess you want to be short the pound, or do you think the move down has been overdone . We are definitely advocating low levels for sterling, and we see this on brexit. If you look clearly, the bank of england has one central bank where the markets have been quite reticent. Inhink the market is pricing 26 basis points of rate cuts in the bank of england. It is pretty much comparable to whats priced in with the Swiss National bank, the sab benchmark rate is at night is. 75 , whereas the bank of england is at. 75 , the bank of england has a lot more policy ammunition, and they are not going to be amused with this global slowdown in demand with whats happening in the Global Manufacturing sector. Will he want to do that . I thought mark carney was trying to steer expectations toward the you are saying we are pricing in cuts . The market currently is pricing in cuts, but i think it is reinforced at the sea change, mark carneys speech puts a lot of emphasis on whats happening globally, the global backdrop in terms of weaker demand seeping through into fixed investments. Really going into the Rate Decision this week, but will be key is how much emphasis carney puts on whats happening with global uncertainty in terms of what has happened domestically. What do you think about the euro . They are obviously already starting to get the ball rolling, although there is not a ton of reason to be gloomy i cant remember how they put it last week, but there is also kind of a split board, a split amongst opinion and the ecb how do you see it . Thatthink the key thing came from the ecb Rate Decision last week was that it was not a unanimous decision, theyre divides, and ecb easing is not guaranteed. They are only just starting to look at policy options we saw a massive rally and bond markets, and we saw that come data little, however the has been awful. Most of it was july pmi figures in germany, and we have key data coming out this week in terms of cpi and q2 gdp and germany unemployment rates. I think the key thing to watch is how and when the labor market and the euro zone really feels that effect from the slow down in manufacturing we see employment gains coming off and the ecb justification for inflation is really rising back up to target. Undermine hat olaf sholes was sitting with us in berlin and said theres no crisis, there is no reason for fiscal stimulus, theres no reason to cut Corporate Tax rate. At what point does berlin start to bend to the economic realities . Data, you havehe to think that point is coming soon. When you have growth at such a low level, and right now it looks like they will stagnate if not contract, you need to do something to pick up that growth you are so exposed to any kind of shock and obviously with brexit uncertainty germany is very vulnerable, the thing about being the next exporter is you are at risk. Knock one are implications into services, it certainly makes you think the point for fiscal support is coming soon. You are going to stick with us. We have more to ask you. Stay with surveillance. Plenty coming up, including the first cuts since 2008. The fed secretly anticipated meeting, and a likely 25 basis point reduction u. S. Target rates. Plus, more or rest . Police the ploy teargas and rubber bullets we bring you the latest hong kong. This is bloomberg. Economics, finance, politics. This is bloomberg surveillance. Lets get the Bloomberg Business flash. For that we go to Viviana Hurtado. The London Stock Exchange is in talks to buy the financial trading plan or more definitive. Worth 27cted to be billion. They say they will issue shares as part of the transaction with holder seeing just over a third. Bloomberg lp is the parent of Bloomberg News and competes with them to provide Financial News, data, and information. Ryanair posting a 21 drop in slumps that the discount carrier says will extend. Net income is low, 250 million euros, as fuel costs rose. It says right know the weakest markets are germany and the u. K. Being tough in the last overcapacity and the german and austrian market. The u. K. Is seeing a lot of price stimulation required due to the uncertainty around what may happen with brexit. Saudi arabian chemicals giants say that they have a tough secondquarter. Profits plunging the most in a decade. Net income tumbled almost 70 . They are said to receive support from saudi aramco, the Worlds Biggest Oil producer in the pockets of the 69 billion majority stake. Thats the Bloomberg Business flash. Thanks very much. Lets take a look at what you should be watching this week. Tomorrow, a bank of japan Rate Decision kicks off a busy few days for the world Central Banks, and u. S. Trade rep Robert Lighthizer will meet his chinese counterpart in shanghai. On wednesday, it is the term of jay powell in the fed, with his fomc and the herald. Thursday sees the policy decision from the bank of england. On friday watch, out for the u. S. Jobs report. Lets focus and a look at be the first cut by the fed this decade. Our guest is still with us. What are you expecting from the fed . And is it justified . 20we are expecting with the point basis point cut. It probably isnt just the usual metrics in terms of what we drew last friday. Testimony was clearly a shift in viewpoint. They are looking at the labor market. Outline isecific that the u. S. Is one of the lowest labor Market Participation rates in its prime. Concern andly a this affects the longterm Growth Prospects of the u. S. Economy. Report what we will keep looking at is if participation is increasing in the u. S. Labor market. Up ans this risk blowing have already we seen alltime highs in u. S. Stocks. Prospect ofhink the Global Central Bank easing and what we are seeing in stock market valuations and bond markets so much of the European Space is now yielding negative and the system is being pushed out with that credit quality, degrading the balance sheet, which is definitely a risk. At the moment everyone is ting that easing pedal what that central bank is protecting and what they can do. For example, we are looking at the japanese yen. We dont have the policy ammunition to ease relative to their other central bank peers. Do you see the dollar . Against the dollar, do you see the larger dxy weakening because the fed moves . Yeah, we do. We think we are approaching the top of the dollar index, and it should weekend. I think the fed has the greatest policy ammunition, and what they are very clearly saying is that they are easing their cycle, the relative frontend pricing should mean a weaker dollar going forward. What about the inflation picture . Ive asked a number of guests today, almost no one sees u. S. Inflation increasing is a risk. What do you think . I think it is almost a global phenomenon, why havent we seen stronger inflation . We have very tight labor markets, why isnt this translating into faster acceleration in average earnings . Why isnt that translating into higher headlines . I think it is a rethink of whats happening structurally in the economy, with those inflation dynamics very much for Central Banks, as we get in front of it to ease policy, so they are becoming the bank of japan, not being able to reach their inflation target. You will see rhetoric from Global Central Banks around the symmetry of their inflation targets, and that is something we will be watching in the u. S. , if they change that inflation strategy, and if they narrow our view to be above target. You mentioned swiss franc and japanese yen, because they dont have a lot of room. What about the pound and the euro . What is your outlook for those currencies in dollar terms . I think the euro is probably the most interesting. We saw the Second Central BankRate Decision with the ecb not delivering on market expectations. Do think the ecb is running out of policy options, and they are kind of dependent on forward and they have this whole sector but can they deliver on the qe . We are forecasting the euro to end the year higher against the dollar. Of policylack ammunition to ease aggressively. For the pound, we are suggesting downward positions. Just a repricing a friend and rate prices. We think theres very little inflation pressure coming through in the pipeline for the u. K. U. K. Cpi is 2 at the moment. It has been on a downward trajectory over the last few years, and that is as the impact of sterling passes evaluation, the cpi calculation. It is a downward decline, and we expect lower inflation for bank of england targets to really trigger repricing. All right, we have a lot more to talk about. You will stick with us. China condemns violent protests in hong kong and an unprecedented News Conference. We will bring you the latest on the unrest, live from hong kong. This is bloomberg. Welcome back to bloomberg surveillance, im matt miller in berlin. After another week and the protests in hong kong, beijing condemns the demonstrators and comes out in full support of carrie lam. It is first news briefing on the city since the end of british rule. Joining us now for more is our Senior International editor, Jody Schneider in hong kong. Were there any surprises in the press conference, other than the fact that they held a press conference in the very first place . Right. Well, yes. In and of itself, this was an important briefing. We usually dont hear from the Chinese Government, and this Office Reports directly to the chinese cabinet about affairs in hong kong. After eight straight weekends of protests, the fact that this was being held was important. No real surprises. The brief basically said that they stood by carrie lam, they thought the police had the tools they needed to do the job. But they were restrained in their approach. They did not, for instance, mention the u. S. Or the critical language of the u. S. In terms of foreign influence, which has been said in some of the Chinese State press before about the protests. They were attempting to be restrained here and to make it clear that they dont want to see this kind of violence in hong kong, but that they think the police and the government can handle it. , all right very important ahead of tomorrows meeting. Jody schneider, thanks very much, joining us from hong kong. This is bloomberg. Matt feeling the heat. Boris Johnsons BrexitCabinet Meeting says the split has to happen by halloween. The pound sinks. Boiling over after a weekend of violent protest in hong kong, beijing condemns the demonstrators in its first news Briefing Since 1997. And some like it hot. The fed leads decisions this week with a cut decision that would be the first in over a decade. Youre watching bloomberg surveillance. Im matt miller in berlin in for france in recall for Francine Lacqua. Morning we have been digesting earnings we have had including m a activity. The London Stock Exchange up more than 14 . Bes is a bid that will valued at 27 billion to really add to the fastestgrowing business at the force of at the force. Takeaway. Com is trying to acquire a bid for the company. If these two were to join together, it would intense the fight of the faster Delivery Companies and would be a big player against uber. And heineken down nearly 5. 5 this morning. That thereeports were higher cost as well as poor weather in europe. The cost is something that you can largely see coming because they keep you hedged. Aluminum is the most important. They knew that the hedges would be less favorable. Heineken cfoas the speaking to us earlier today. Stocks down on that earnings report. Matt thank you very much, andriy annmarie. Lets go to Viviana Hurtado. Viviana Boris Johnsons war cabinet held its first meeting. Lead the session unless the eu agrees to reopen talks. Leaving without a deal is the most likely outcome. Restricts shipping in the strait of hormuz. They will operate alongside a navy ship. The move comes as european powers need to discuss the nuclear deal. Last year, you may remember the u. S. Abandoned this agreement. Multinational Tech Companies acted in defiance of President Trumps suggestion that he may impose retaliatory tariffs on french wine. Two areold that the completely different issues. President trump attacking prominent africanamerican lawmaker Elijah Cummings. This after he opposed the at the new policy mexico border. He calls his district a disgusting rat and rodent infested mess. The saudi arabia chemicals giant had a tough Second Quarter with profits plunging the most in a decade. They are set to receive reports from saudi aramco. The french president emmanuel to vladimir to talk putin before the summit. In what wasticipate known as the group of eight. Global news 24 hours a day onair and tictoc on tw