to see evidence we are going into something that is more of a slowdown. if i'm growing at 2 percent, i'm not as worried about that. manus: lukewarm reception. china stocks great the one your prime rate with more of a shrug than a had as the pboc missed its goal of repairing the channel. warm welcome to the show this tuesday morning. the bloomberg dollar index, i assure you, was at the highest level of 2019. you can see here, this is real yield matters. is that what is driving the dollar? we will find out from our guest in just a moment. mr. trump calls the fed her and this lack of vision. trade war's anonymous, that is what i'm tagging the last 24 hours. fast and furious cuts from the fed. i thought we would go for a stock. the 10-year yield. 1.59%. goldman says it is overdone and oversold. rbc says you could see a retreat to 1.72%. there is something that of noticed. the three-month call to put ratio is pretty darn expensive in the etf world. that could be a contrarian sentiment. not often do we get to do a stock at the top of the show, bhp group. i think it is important. it is a dividend giver. what caught my eye was an escalation in trade wars takes china growth to 5.75%. we will hear from the ceo shortly. and speaking about politics and imaginations, another day, another rumble from the president of the united states. donald trump has been calling for rate cuts for some time now, but he is now calling to cut at least 100 basis points. he said the full percentage point cut would quickly enhance the global economy, while complaining the dollar is so strong it is helping other parts of the world. economyid that the u.s. is very strong despite the karen this lack of vision by jay powell and the fed. pretty darn, you know, strong language. not everyone agrees with the rate cuts. shock. the boston fed president dissented at the bank meeting in july. after that meeting, he supported his case with a statement and a series of charts, saying that with the unemployment rate at a 50-year low, inflation likely to trend toward 2% target, i do not see a clear, compelling case for additional monetary accommodation at this time. he spoke exclusively to kathleen hays yesterday. fact thattied to the economic conditions are still pretty good. 3.7% unemployment is still a very low rate. inflation is a little bit low. if you look at the core measure, it is 1.6%. if you take out some of the 2%,iers, it is closer to infected is exactly 2% -- in fact, it is exactly 2%. we have to be careful not to ease too much when we don't have significant problems. the focus is to do something that does not affect the exchange rate or takes care of the world economy. we are supposed to focus on unemployment and inflation in the united states. i think we are in a pretty good spot right now and there are costs to easing at times. >> what is the cost? >> there are several. one of the ways that monetary policy works is that you cause people to buy houses and cars earlier than they otherwise would. you choose to make an investment now because interest rates you think are going to be temporarily low, so you make expenditures you might not otherwise make. a second is that when you lower interest rates, would make the cost of that lower. and means that households firms are more likely to be leveraged and that they get leveraged right before they have more significant problems and they are in much worse shape. we have to think about the financial stability characteristics, thinking about how much do we want households and firms to be leveraged going into when we have a significant downturn? >> how concerned are you about a significant downturn? the signs from the global economy, from the bond market in particular, even signs from wall street banks that have cut their gdp forecasts, and indicators suggest a recession risk is rising. is a rising in your eyes? >> many of those indicators are tied to financial markets. let's start with what most economists think is the likely outcome. one way to gauge that is to look at something like the blue-chip forecast. we just came off real gdp being a 2.1%. the blue-chip forecast for august had growth for the third quarter and fourth quarter both that exactly 2%, roughly exactly the same as the second quarter. that is clearly not a recession, it is continued growth at a moderate pace. they also have the unemployment rate basically where we are right now. it is actually 0.1% less. economic forecasters are not seeing a lot of weakness in the data. what i think has people really focused on whether we are going to have a recession is the combination of volatility in the stock market, we obviously had a very big movement a week ago when we lost 800 points on the dow. in subsequent days, we have moved that and if you look at the long bond, it is very low. it is around 1.6%. one of the reason for that is the global weakness. for countries to expand their own monastery policies instead of just -- monetary policies instead of the united states handling the expanding. manus: my guest host is the head of macro strategy at state street global markets. a lot to chew on. i want to focus on one of the phrases which caught my ear. inner temple substitution. should the fed tolerate that concept as a mechanism for protecting and enduring the recovery? for the give up a little and cut a little to protect rather than worrying about my inner level of substitution. tim: your inner level of substitution is probably a very special thing, manus, so i'm not sure about that. for the u.s. economy, i'm not so certain about the risk. the debt ratio is still pretty benign. i'm not thinking this is bubble territory when it comes to housing. risky assets, you could make the case. u.s. households tend not to on those. joe sixpack does not own nose. i'm a little less worried about that. the point that the u.s. economy is not doing so badly and unemployment is near 50-year lows. there is some validity to that. at the same time, core inflation , which you mentioned stripped-down measures, but at its base level, core has not really been a 2% for much of the post crisis period. there is some impetus for easing and finally this has been and is likely to be a very slow and very shallow rate cutting cycle, at least as far as the market is pricing. whether it is another 25 basis points, that basis would still be a very shallow rate cutting cycle given a monetary conditions transmitted to the world through the dollar are tighter, i'm not so certain that there is a huge concern with what is priced into the market right now. tous: ok, we have maybe top ourselves -- talked ourselves into a bit of a frenzy. let's say we have over talked ourselves. i want to do with facts. this is the term premium. tothe way, this is thanks twitter last night. record negative. we just bounced off the lows. what am i prepared to give up now to protect myself for 10 years versus the s&p 500? what does such an aggressively negative premium in the bond market say to you at state street? that there iso me still supply-demand dynamics that are affecting bonds in ways that we have never had to think about prior to the crisis and i'm thinking about aggressive purchases of assets by central banks. not just by the fed, but by other central banks. as was pointed out a little earlier in the previous show, it leads to a demand for yield because the u.s. is one of the only sources of yield, so that compresses term premium further. be,ink that factor needs to as best we can, disaggregated from term premium story. it is in a natural demand for duration. the fundamentals should override things and the reality is that inflation expectations in the u.s. have collapsed. that is going to compress term premium to very low levels on its own. this has happened in past market cycles. you do get dips in term premium as a result of fundamentals, they just never go as negative as what we currently see, and i suspect a lot of that negativity is down to the aggressiveness with which central banks have purchased assets to some degree. manus: and you make that point, that 10 years on, you need to be careful that you are comparing -- we are not comparing like with like in terms of the ownership of the bond market, the liquidity of the bond market. this, trump once qe, he wants 100 basis points off the top rate, and trade weighted dollar is the strongest since 2002. let's just put logic into this. is there any merit in being concerned about the strength of the dollar in terms of its impact on the american growth a bit of as a just banner political flag wave? what do you reckon? of inanity the sort and a lot of the tweets, his point about the dollar is actually pretty well taken, in that the dollar is relatively strong. at the end of the day, the dollar is still the invoicing currency for a lot of global trade. it is still a dominant currency. conditions get transmitted to the rest of the world by those channels. the fact that the fed has actually hikes rates pretty progressively over the last couple years, now it is starting to reverse, but relatively high -- it doeste contribute somewhat. there is a kernel of truth. there is an element of wanting to push on the fed because it is contribute into slower global growth, i believe. manus: tim, hold those thoughts. tim stays with me. state street global markets. let's get to the bloomberg first word. >> thanks. a new effort at dialogue, that is what hong kong is promising to try to bring an end to more than two months of protests. the demonstrations began over opposition to controversial exhibition -- extradition legislation, but has moved into a wider protest. twitter found and delete it hundreds of accounts it says china used to undermine the hong kong protest. the social media company took down 900 accounts that originated within china. they intended to manipulate perspectives on the demonstrations. acting on a tip from twitter, facebook says it found similar china back operations on its network. -- in theto prevent letter to the european council president, boris johnson said he is looking to replace the irish backstop. instead, he says a legally binding commitment not to carry out checks at the border, as long as the block promises the same. global news four hours per day on air and on twitter, powered by more than 2400 journalists and analysts. this is bloomberg. manus: thanks for the roundup. coming up on the show, losing its charms? pandora reported numbers for the second quarter. the world's largest jewelry maker looks to relaunch its brand after suffering a setback in key markets. and falling out of favor among investors. we will speak to the ceo. don't miss the conversation. rsation. manus: this is "bloomberg daybreak: europe." >> we are seeing asian stocks higher for a third session, as we see that move higher in u.s. futures, they are up by 0.5% in late trading. hong kong stocks have been fluctuating. we do have a cut from morgan stanley to the hong kong gdp growth forecast. tensions in the unrest you have seen in hong kong. australian stocks looking pretty good along with stocks in korea, but we have seen a dip out of indian markets. also focusing in on what is happening in the fx space, we have the rba minutes coming through. the rba will ease again if it is warranted. higher anden it tick we have been watching that move in aussie yields after we saw gains in u.s. yields. the korean won is a little stronger -- weaker. it is now tracking higher. course, we have bonds in currencies fairly stable in china after we had the new ltr coming through today. manus? manus: yes, some say it was a little bit more of a whimper than a whopper. we will see you very shortly. to china, they have made borrowing costs a tiny bit cheaper for companies after the pboc induced a new market benchmark rate for the first time. the change is part of beijing's push to connect its rate system to conditions in the market. joining us now to unpack the reform is david, great work on this so far this morning. what does this really mean? mentioned, they are trying to get more in line with where market conditions are very the pboc injects liquidity and the average rates don't seem to be responding, so they are trying to unclog the mechanism. the rate today is 4.25%. a bit of a whimper. it was more or less in line with expectations. only slightly lower and you can see that on your screen, slightly lower than where the benchmark actually is at 4.35%. think about this, this is the rate that risk free, the most credit worthy banking clients, this is a much they pay. then they adjust up depending on your risk. it is based on 18 submissions and unit that with outliers and this is what you get. the headliner for the story today, china has made it a little cheaper for companies to borrow. manus: david, in a word, do you -- is that over egging the move? reform -- easing or simply easing as reforms? very good question which we put to our guests earlier. we said rates would go down. do they go down to the extent that it approximates a rate cut? that might be a little bit too much. you look at the chart and what they are trying to do, what i was alluding to earlier, this green line has been trending higher. the blue line is where the prime rate is and this is essentially the basis of where they try to get those submissions. they try to connect it more to the yellow line, which is a medium-term lending rate in order for them to actually deliver the sort of stimulus that the economy needs at this point in time. manus: david, thank you very much. reporting on the shifts by the pboc. hostf, fromuest state street global markets, let's see what he sees. whopper. more than a what does it mean to you? is it a marketing -- market move stealthg by mellifluous ? to callould be hesitant that. i think if successful and it has only been a day and we have had nine basis points of effective ,asing, if that is to continue it could be a nice effective means of spurring the domestic sector, where a lot of previous policy measures in china have been focused on the external sector. that, some comfort from as someone who has been a bit worried about china for a lot of this year, at the very least, something that is domestically oriented and may be the success is limited and will be slow in coming. reserveouple it with requirement cuts. it could be an effective policy stimulus that is aimed at not so much making china competitive in the world, but for the consumer reorienting to easier conditions. manus: at the margin, if i said ,o you that you've got easing not bad growth, things are not too bad, i know there is a trade war, do you take more china risk from the equity, bond yield? how do you do that best? tim: sure. to the extent that it is possible for an investor, the fixed income circle is probably the more compelling one. equities are still subject to and tech within local indices, how tech supply chains may continue to be affected by ongoing trade dispute, i'm somewhat wary of that. , i justation case wonder if the geopolitical story does contribute. , theu have yields to give fixed income story looks the more compelling to me. manus: in these five days as we run-up to the g7, i found it fascinating. yesterday, it was trump on currency. today, a lower the rba on currency. china on policy. we are going into this g7, we are going into this, i would say, with real torchbearers for ramping up the rates at the bottom and this affects war. what do you think about that? tim: the prospect of intervention is so widely discussed by people like me and my sell side colleagues that are wonder if it is being overplayed a little bit? the notion of intervention and a currency war instigated by the u.s., will it send rates to the bottom? i'm not so certain in that the ecb is not likely to respond. as a consequence of doing it unilaterally, the ammunition that is available to the treasury, selling the dollar by the fed is pretty limited and it does not have that coordinated backing that other past interventions in the dollar have had, so i wonder if all to mentally it might backfire to some degree, in that if you are the u.s. intervening in the dollar, you are buying other currencies. you have to put those currencies in assets and those are typically fixed income assets. you are likely to drive yields even lower and other economies, which underlines -- undermines their currency further, which continues the problem. i'm not sure how successful it will be and i think it is possible it will come week as the fed is probably not going to cut rates fast enough for trump's liking. i'm not so certain the success will be there. manus: ok. we have a little bit more to dig into. morning.host this theng up on the show, italian five-star movement considers forming an unlikely alliance. this is bloomberg. ♪ it is "bloomberg daybreak: europe." i manus cranny in dubai. this get the bloomberg first word news from hong kong. >> thanks, manus. pushing back against further rate cuts. the boston fed president says he wants to see more evidence of a slowdown before cutting even further. convinced that it will dense the u.s. economy. >> if you look at the long bond, it is about 1.6%. the cure for global weaknesses for countries around the world to expand with fiscal or monetary policy in their own countries rather than just the united states doing the easing. isthe world's biggest miner could behat iron ore volatile and pricing ahead as the market continues to adjust to supply disruptions following a brazilian mining disaster in january. bhp also reported higher annual earnings and boosted its dividend payout to a record. >> we are ready for whatever the world might throw at us and we can profit from a downturn, but we can also throw off a lot more cash potentially in an upturn. 24 hours per day on air and on twitter powered by more than 2700 journalists adn analysts, this is bloomberg. manus? manus: thank you for the roundup. some of the world's biggest corporate leaders say that creating value is no longer their main focus. behind theo leave investor centric model, instead they say they will serve all constituents. employees, customers, investors, and society at large. with more on the story is dani burger. this group led by jamie dimon said in a statement yesterday that while it of our individual companies service on corporate purpose, we share a fundamental commitment to all of our stakeholders. let's look in on the state of rewards to shareholders. here i'm focusing on the s&p 500, specifically the second quarter. looking at some of these numbers, you could say the attitude is starting to take effect. corporate buybacks of declines 10% year-over-year. there is much more at play then all truism. last year, we had the tax cuts. that cost corporate's to overspend, so they are having to pull back. there may be some economic weakness that could play in and take the form of pulling back on shareholder rewards. it is likely not to be dividends, but rather buybacks where we see this take effect. 77% more is spent on corporate buybacks then dividends. the dividend number is nothing to sneeze at. on average, corporate spade out $14.24 per share, that is a record. just for more evidence of this taking effect, how shareholder reward is still well and alive, look no further than bhp's record payout. manus: absolutely. $21 billion and keep on turning and turning that stuff out of the ground. lovely jumping off point to bring in our guest host tim graf over at state street. look at those numbers dani put up on the board for us. buybacks down by 10%. dividends did not really suffer. if you look at the payouts, pretty chunky. i focus on the payout at the end as being one of the bolstering factors for maybe looking toward saying is that were u.s. equity exposure reign supreme? tim: yes, we believe that is the case anyway. excuse me. it does not so much about returning money to shareholders, which has been influential certainly. i think with yields so low in fixed income, the big dividend payout will i think come into play very much. were talkinggo, we about equities as the new bonds. looking at the u.s. versus europe, there are strong relative earnings trends that the u.s. does not have to concern itself with in the bank sector, which tends to dominate the indices in europe. buybacks and dividends are convenient things to talk about contributing to relative performance, actually, it is the earnings dynamic which makes it an even simpler case to make for the u.s. versus europe. manus: ok, we will dig a little bit into those earnings expectations and the banks when we talk of a europe. tim thomas stay there, get a coffee. great man coming into the london studio on your own. the plans for a new coalition government, could it be in the making? italy's five-star movement and the democratic party, they are weighing up in alliance to undermine matteo savini's power play. but the long time foes would have to put their animosity behind them. that is as the prime minister is due to address parliament later today. an appearance that may lead to a confidence vote and his potential resignation. let's get to milan. we have our bloomberg opinion editor joining me now. great to see you. the risk is high of this no-confidence vote. is that where i jump off with today's political à la carte menu? >> indeed. the situation is incredibly confused. this is a coalition of two parties which did not run together into the last election in 2018. very high is riding in the polls. matteo savini wants to cash in and he is trying to push for an election by pulling the plug on the government, but because this is italy and maneuvering -- politicians like to do it, the five-star movement is now in talks or flirting really with the democratic party, the opposition centerleft force and they may create a new government , which would really substitute this one, and which would leave matteo savini in opposition. obstacles remain very confused. there is a lot to watch today. manus: i suppose the question that i've got is if you put five-star and the democrats together, do you think it would be an during courtship or would it just be short-lived? their differences are wide, arctic? >> indeed. i think that is the big question. it is a big issue in these coalition talks. do they go for a short-term coalition to get a budget passed budget needs to be passed by the end of the year, so there is some hurry and then there is an election at the start of 2020, or do they try to form something more durable? the issue you raised is absolutely crucial. there are big policy differences. opposed to a lot of major infrastructure projects for environmental reasons. the democrats are in favor. there is also the issue of immigration. five start as been playing along with matteo salvini. the democrats really hated that. then there would be the issue with europe. the democratic party has traditionally been very closed to the european project. five-star has had a very ambivalent line. may surface, so i don't expect the coalition to last very long. matteo salvini could smile at the end of this because there may be an election sooner than expected and he could perhaps triumph, just as he was hoping to triumph in a few months. manus: ok. thank you so much. making sense of a difficult political story. thank you very much, our bloomberg opinion editor. tim graf is my guest host from state street global markets. he is still with us. if we look at europe, that is what we want to focus on, this political dislocation in italy comes at a time when europe, id germany, is preparing this fiscal latitude. it is an interesting inflection point for the european story. hold and if this takes of the numbers in any potential stimulus package for germany start to rise from here, it is ofething along the lines maybe half of germany's fiscal surplus that is being talked about or maybe more than that, but 50 billion euros is the number that is being discussed right now and that is not enough to move the dial. it is not moving anywhere close to deficit territory. there are constitutional limits on that and i acknowledge that come up with those limits, i expect there needs to be some movement around them or some measures to go around those limits in order for meaningful fiscal stimulus to come. that is where we will get moving the dial. that is as a precaution being discussed in advance of a potential recession, but something that is very proactive and of a size that is quite meaningful to stimulate the german economy and focus on improving productivity growth and trend growth in the german economy. quote.there is the the last crisis cost us about 50 billion euros. can i ask you, putting you on the spot, do you have a number, a bandwidth that would reengineer the story for europe? tim: certainly. that 50 billion euros, as they say, the bulk of it is just surplus germany would be taking back to balance. if they were to go another 50 billion or 100 billion euros on top of that, that is meaningful, because it shows intent, it shows the approach they take is changing. when it comes to fiscal stimulus in germany, that is everything. these numbers discussed yesterday, they really did not move the market all that much, so i suspect it is going to take far more multiples of that to potentially get investors in the mindset that this is a game changer. manus: do you think that you should be preparing to get ahead of that? do you believe that that will gather momentum? how do you allocate around that? you may see a backup in italian yields and you may be tempted toward that sovereign, you may be tempted more toward other peripheral sovereigns. how does it play out if there is 50 billion as a starting bid? we don't know where the offer will end. how do you position for that if this is the new paradigm that we are looking at in europe? tim: sure. my mind goes to the currency, in that that has yet to really reflect a lot of the positive -- positivity that could come from such a move. the bond markets are difficult. if this is happening while the ecb is still easing or about to even further, then it strikes me that any backup and yields might will be temporary or quite minimal. what that speaks to, the actual action that that is implying is good for europe in general. that to me gives the euro a bit of a boost that it might not otherwise have had. you probably would not want to be overweight anymore and given how low the yields are, it is very risky to look at the bond markets. that is why i look at the currency. it does look relatively attractively valued against the dollar and a host of other currencies and does not have a positivity priced into it. it does not have that limitation to it. on the currency, i don't think it would be pushing against u.s. strongly. manus: can i push a little bit? we are bloomberg, we want a number. you will get printout of this. where could it squeeze higher to or is that the euroyen? it is ok. what kind of squeeze are you looking at? tim: if that is to happen, i think that is a big if and i'm quite skeptical we get there, 1.14 think that is a 1.13, , 2%, 3%, 4%. manus: we will make sure there is a bloomberg first word around that. tim graf head of macro strategy at state street global markets. stay there. we have more work to do. let's check in on the markets around the world. we go to our mumbai partner. in london, it is annmarie hordern. is 10 year yield in india rising another day. why do we see the global bounce -- the global bond market rally continue to bypass india? why? yes, good morning and a good question. , thely, until recently bonds were doing ok. the last few days, i would refer to a couple of times, the big government stimulus that comes in, the market expects that. if indeed there is a big stimulus coming in, it would probably have the impact. since the time that announcement has come to the fore, they started rising. 6.60,.36 all the way to this is essentially the picture the stimulus does come about. let's wait and watch for that. back to you. manus: thank you very much. annmarie hordern is in london. spooked by this tumbling bond yields? how do you divide the prism this morning? i think the market is not going to take on the fed comments substantially until we hear from jay powell on friday. i think that is a bit of a wait and see moment. i think the markets are pricing in that reprieve. we saw that bounce in u.s. equities. foreign-exchange, looking at aussie dollar, they say they are ready to cut if there is evidence that will boost the economy. yield withan 10 year the bonds coming up. commodities, it is kind of stable across the sector. on trend about are we at the bottom of this commodities market? i'm looking at iron ore. the relativet strength index, we are deep in oversold territory. this should signal it is over. signaling it could still be a wild ride for the prices and they are signaling, possibly warning about more volatility on iron ore prices. manus: yes, indeed. warning of an escalation, you are talking about the ceo saying if there is more escalation, we of 5.7ee china growth percent. great work, everybody. , this is holds its full-year outlook after beating on the top line. we are going to speak to the pandora's ceo alexander lacik. that is next. this is bloomberg. ♪ manus: it is "bloomberg daybreak: europe." i'm manus cranny in dubai. pandoralry brand announced second-quarter results that beat estimates. it sees positive signs for an impact of the revamp, which -- following the tough years for the copenhagen-based jeweler. this get to the ceo, alexander lacik. he joins me now from copenhagen. good to see you this morning. three months, four months in. i want to get a sense from you, alexander, in terms of, have we got to the end of the revamping the product range first of all? good morning and thank you for having me. on ara has actually been decline for a few years. so, we are kind of in the beginning of the turnaround. there is still a lot of work ahead of us. and in terms of the guidance you have given to the market this morning, you are still sticking with the full-year margin. full-year organic revenue will contract by 3%. if i said to you are these conservative estimates or could they potentially flip from these , how confident are you on this guidance to the market? alexander: i mean, we have announced back in q1 that this year was going to be tough up to the point of the brand relaunch, which we are entering now. the first half was negative 10%, which is really the important number here when we think about the offtake we are generating. we are maintaining the guidance as we laid out in the beginning of the year, so there is some believe that the impact of the relaunch is going to have some positive signs to it. early days, though. early days, and you are trying to put euro and stamp on it. you is the biggest thing want to put into play? the biggest piece of transformation if you come back and talk to us at christmas time. alexander: first of all, it is going to be a team effort, but my focus is squarely on driving brand relevance back. i think the company has spent the last few years of trying to become a world-class retailer and is a function of that come all the effort has gone against and that ultimately meant that we slipped a little bit of our closeness to the consumer, so we lost some relevance, we know that, that is a fact. if you speak to me in a few years from now and ask me if i was successful, the answer would be brand relevance. manus: ok, brand relevance. to become more brand relevant, you need to engage with your public. you committed to a significant increase in marketing spending in china, actually. what have you spent this quarter and where does it go going forward? i mean, so if you look at it from a global standpoint, we spend roughly 10% of our revenue back in marketing. thise early days, i think business was very much propelled by the uniqueness of the product platform. that has waned a little bit and we have lost a little bit of the relevance. the likelihood of us having to spend more on marketing going forward is high. i think -- we will be upping our media investment. sorry. manus: ok. by approximately how much? let's get a dollar value. how much? alexander: we are talking in percentage terms, i think that is more realistic, so we will be spending roughly 30%, 40% on the back calf comparison to last year and that is a significant amount. manus: ok, you are the perfect ceo to have. two of your biggest markets are the u.s. and china. and a you talk about the difficulty of turning the product relevance around. what slowdown have you seen in china in discretionary spending? what can you tell me? alexander: we have actually had a quite positive journey in china in the last few years. positive organic growth of 10% this first half. feeling thats are the traffic into stores are declining somewhat, whereas online, our business is on fire. the first six months, we were up 54% in the online business. standpoint, i think we are still a quite young brand in china, so we still have a long way forward, so it is very much contrasted to the u.s., where we are much more of a mature entity. manus: you have used the word relevant twice in this interview to me. i walked past your store in the kings road last week. i just wonder, you have done it with warner bros., you have your deal with disney. let me ask you a little bit, do you damage the brand of pandora, which you're trying to make more relevant and perhaps upscale, by doing these co-brands with warner and disney or is the volume too hard to give up? no, first of all, we have to it in perspective. if our collaborations what amount to more than half the business, these collaborations would of course take over the brand. that is not the case. we look at maybe less than 5% of the total turnover coming out of these collaborations. i would see them as adding spice and interest to the brand, but the core of our business still remains the jewelry that we design and produce ourselves. ok, alexander, we wish you well. come back, join us, talk us through the journey. we are always interested to hear in terms of your perspective on the consumer around the world. alexander lacik, ceo of pandora. thank you for joining us. coming up on the show, a big ask. president trump calls for the fed to cut rates by a full 100 basis points. he also calls for quantitative easing. he lambastes the head of the fed in terms of competency. now on the ballast side of that, of course, you have the fed president, mr. rosengren, on your screen right now, he is pushing back against any potential easing. that emboldened the dollar and moved rates higher. we had an exclusive conversation with him and we will bring that to you. there is one corporate story that is important to have on your agenda today. it is about bhp. if you are a bloomberg user, use destination on tv . this is bloomberg. ♪ at comcast, we didn't build the nation's largest gig-speed network just to make businesses run faster. we built it to help them go beyond. because beyond risk... welcome to the neighborhood, guys. there is reward. ♪ ♪ beyond work and life... who else could he be? there is the moment. beyond technology... there is human ingenuity. ♪ ♪ every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. take your business beyond. manus: good morning from bloomberg's middle east headquarters in dubai. this is "bloomberg daybreak: europe." the united states eases sanctions on huawei for another 90 days as investors look for an excuse to bring back some risk. the group reiterates it has been treated unjustly. staying on message. the u.s. president says the fed should/rates by a full percentage point. >> i'm not saying there are not circumstances under which i would be willing to ease. i just want to see evidence we are going into something of a slowdown. 2%, i am not worried about that. ministeraly's prime will speak amid the specter of a confidence vote. we get the latest data from europe's biggest economy as it reports fiscal stimulus. warm welcome to the show. bund is back. ppi is up higher than the market anticipated. that is on the year on year figure and likewise the month on month. remember we contracted the previous month. we are just slightly up on what the market expected. ,n terms of epi year on year that is the slowest growth year since december 2016. oft just gives you a sense the challenges the ecb and germany are facing. it also in some ways verifies, ratifies, gives veracity to discussion about the need for a fiscal stimulus in germany. you need to jog on if you think 50 billion euros is going to do it. you're going to need upwards of, according to bloomberg first word, somewhere in the region of 100. we will talk about that. a little bit of retail from france. they don't just have the g7. new assets they want to dispose, 2 billion euros of a big retailer in france. this is the second phase of the disposal. they planed to have it done by the first quarter of 2020. it is a new program. they are going to accelerate execution of their plans. french assets. we will dig into that. you what is happening with equities. the biggest back-to-back gains in u.s. equities is the start of june. global equities likewise, best back-to-back since january globally. there was a shift yesterday. 7:00 a.m. yesterday it was all to do with china. it seems to be today the narrative seems to be around trump calling for more rate cuts , more easing, lambasting the fed. on the counter side, a 90 day extension from huawei. is that protecting your own regional areas? either way, the equity market trending a little bit higher. we are going to go into bond issuing season in germany, and that's going to be a litmus test in terms of where you want to be. probably more bullish on the euro as a consequence of stimulus. a small backup in yield, but nothing momentous. italian risk front and center. te lose?seppe con will salvini take us into the election? you have fiscal issues around that. of theet you to the rest markets. i will handed over to juliette saly in singapore. juliette: asian stocks higher for a third session on those gains you mentioned on wall street. a slight reprieve in the trade dispute. the nikkei closing of the session about 0.6%. we begin studying. the hang seng higher in late trade. we had morgan stanley cut its gdp forecast for hong kong due to the political unrest, and of course the impact of the trade tension. the asx 200 firm or by over 1% on the close. fluctuation coming through in india's market today. you mentioned what we saw with china's new loan prime raise. let have a look at what it actually looks like. we have fixed income at 9:30 a.m. beijing time. it's going to happen that time every 20th of the month. you see the white line where we had the right before that. 4.31%. to significant a move. thatboc has made it clear mortgage rates are to remain stable. lpr also hit a five-year today, trying to bring it in line with other central banks we have seen globally. thank you very much for making three big lines come to life and making a little bit of sense. u.s. president donald trump has been calling for rate cuts for some time, but he is urging the federal reserve to got by a full percentage point. the president has been a critic of jay powell. could more hawkish members of the fomc start to feel the heat? spoke against cutting at the last meeting. exclusively to kathleen hays. >> my own view was that we have to be careful not to ease too much when we don't have significant problems. the focus is not to do something that affects the exchange rate for something that necessarily takes care of the world economy. we are supposed to focus on unemployment and inflation in the united states. i think we are in a good spot right now. there are calls to easing at times when you don't need to ease. kathleen: how concerned are you about significant downturn? the signs from the global economy, the science from the bond market in particular. even science from wall street banks that have cut their gdp forecast. indicators suggest recession risk is rising. is it rising in your eyes? >> many indicators are tied to financial markets. let's start with what most economists think are the likely outcome. one way to gauge that is to look -- we just came off real gdp. the blue-chip forecast for august had growth for the third quarter and fourth quarter at exactly 2%. exactly the same as the second quarter. that is clearly not a recession. it is continued growth at a moderate pace. we also have the unemployment rate exactly where we are right now. economic forecasters are not seeing weakness. what has people focus on whether or not we are going to see recession is volatility in, we had a big movement a week ago when we lost on the dow, but in subsequent days we have moved backup. if you look at the long bond, it is very low. weakness, reasons is but the cure for global weakness is for countries around the world to expand with fiscal policy in their own countries rather than just the united states. manus: that was rosengren speaking with kathleen hays. my guest host, great to have you with me. againstn kicking back concept recession is on the way. many would say we can talk our way there. i want you to look at this. thengren talks about blue-chip index q3, q4, indicators of 2%. indicators inher the u.s., shipments from long beach port, they don't exactly look that low. his rosengren ignoring the reality of that in the figures i'm showing you? extent, hetain probably is. however, he is right, if you look at the state of the u.s. economy, you'd cherry pick the numbers that support your argument. you can find reasons to say inflation is beginning to pick up a little bit. retail sales have remained fairly strong. however, if you are part of the fomc, you need to look at external factors that would have an impact on the u.s. economy. obviously the ongoing trade dispute with china is probably the big one. as long as that goes on, the more the negative impact that would have on the u.s. economy. in terms of what businesses are happy to do in terms of expanding their business, employing more people, but also in terms of the consumer and will they be willing to continue to borrow and continue to -- i think just live as they normally do. we have indication that even though banks are willing to lend, maybe the bio worse -- the borrowers are not keen on taking more debt. excuse me. go ahead. powell hasnk jerome also talked about crosswinds in the past. if you are part of the fomc, you need to look at external factors and not just what is happening domestically. focusedmanus: rosengren on global issues as well. what would be the consequence of less than expected easing from the fed? what it be a correction in equity markets? thed be a final hurrah for dollar? where were to be most manifest? if the fed failed to deliver what the markets expect? eoin: it probably depends on the scale of the underperformance from a market point of view. markets are pricing in three rate cuts this year. whether we get that from the fed remains to be seen. shootwere to under significantly or maybe not have a rate cut next month, that would be a shock to the markets. you will have a big selloff in a quit markets and probably credit markets as well. i think something the fed needs to be very aware of. if you go back to the end of last year, it was a policymaker from the fed that really caused a very big selloff. fierce as the fed were behind the curve. that really caused that aggressive selloff. danger the fed a is behind the curve. it would take quite a big move for the fed to get ahead of where the markets think they should be. in your opinion, would that stop the inversion of the yield curve? rosengren made it clear during that interview their job is not really to look at the yield curve. worry mores not to focused too much on the inversion of the curve. to a certain extent, the market reality, it was our concept, is we do care about the curve. to takethey need to do us back to a more reasonable level? it is an interesting one. it has become a good predictor of recession for the past nine recessions. about 18 ortime is 19 months. it is not the fed's job to keep that steep for to keep that working. i think they would be happy if it did not invert. they can become a self fulfilling prophecy. if the banks and other lenders in the u.s. look at that and and theore cautious lending departments are told to be more careful and stop lending to the weaker parts of the economy, that by itself could cause a recession. do ishe fed could probably stay in line with the markets, keep the markets onside and explained to the markets why a rate cut is not needed. it is a very difficult balance for them to achieve. manus: stay with me. we have more to get through. .oin walsh, my guest host trade tensions are the key risks over the next year. despite this, bhp boosted dividend payout to a record on higher earnings. >> with our strong balance sheet, with a very flexible way in which we are able to use our cash, we are ready for whatever the world might throw at us. we can profit from a downturn. also throw off more cash in an upturn. >> andrew, is the dividend sustainable? >> we don't have a progressive dividend. tenure we in my changed to a flexible dividend 50% onn a ratio of underlying earnings. it will go up and down depending on how markets perform. we have a portfolio that is smooth, our cash flow and earnings. but not completely. if markets turn down, earnings will go down. the dividend we commit to pay will be one of the consequences. one of the many tools we have to sail through chop your waters in the way you describe, that is why we are very comfortable playing this record -- paying this record dividend. andrew mackenzie speaking exclusively to bloomberg. coming up, china moves to push down the cost of borrowing for the rebound system on interest rates. this is bloomberg. ♪ manus: 7:20 a.m. in london. 40 minutes away from the start of european trading day. i am manus cranny dubai. s&p 500 seems to have found its mojo again. the dollar hit a two-year high. that00, you are looking at . the dollar is off a two-year high. the lending rates in china, but no -- there is a slight risk on elements the market. dubai is just coming off on the markets. let's get more on the middle east markets as we set up the trading day. stocks,dent reporter on you have a quick mention on -- because it has broken its losing streak. is theindex worst-performing equity performer globally. it is down 7%. we have on the opposite end of the spectrum, egypt. egypt is the best-performing equity index so far this month. 7%. manus: in both of these stories, you are referencing rate cuts area we have the central bank in egypt as well. >> the central bank in egypt this thursday the 22nd. a survey of analysts estimates 100 basis points. this is supposed to be a good catalyst for the market in egypt. it is a good story for egypt. we had standard chartered in the other day. a quick mention on oil. i put it as a big risk. oil turned around again. do you think that is just a risk on story or something more to it? >> oil is up for a third straight session. $59 a barrel. , the story remains for budgets in the middle east. the gcc primarily. the story is -- the yields on gcc bonds have slumped to near the lowest level in three years this month. we are going to keep track of it. manus: we are going to dig into the gcc bonds. thank you very much. it is your debut on the show. well done. let's get to annabelle. she has land in the show. she is in hong kong. >> should shareholders come first? not according to the latest from some of the world's biggest companies, including jamie dimon. they want to abandon the long-held view among discontent over income inequality. business roundtable released a statement saying the purpose of a corporation is to serve all its constituents. that includes employees, customers, investors, and society at large. now for a bloomberg scoop. it's the saudi aramco ipo. role getkers seeking a an advisory mandate. top dealmakers from around the world have been sent to meetings in the middle east. that is your bloomberg business flash. thank you very much. rates. cut their borrowing costs a tiny bit cheaper after the pboc introduced a new market benchmark rate for the first time. the changes part of the nation's push to connect a rate system to conditions in the market. the change greeted with a chinese equities this morning. eoin walsh is still with us. i'm very excited about this yesterday. i might be proven to be correct. a whimper or a whopper for you? >> somewhere in between. the markets are affected 10 basis points the most. i think they came in at five or six basis points lower. it is not a rate cut. however, the new climb -- prime low rate is connected to the medium-term facility. the central bank still controls that. if there is a rate cut, it drives down the rate. indeed, they are expected to cut rates this year. helpself, it does not borrowers a huge amount. a couple things in my mind about currencies. be rba suggests that could in the market for another rate cut. they have 100 basis points left to cut. the pboc in stimulus mode. already outpacing everybody else. what next in fx wars? it is difficult to say, really. president trump talks about this quite a lot. weakness versus the dollar is something deliberately done by central banks are a natural consequence of central banks trying to stimulate their own economies is difficult to say. looking at what's going on across the world, central bankers kind of feel like they need to add a certain amount of stimulus, whether in china, australia, or europe. that normally manifests itself in weaker currency. i think it is probably that more than anything else. is there a chance we can have currency war? there is. we have to wait and see. manus: thank you very much. eoin walsh, my guest host for the past 30 minutes. europeaneurope, "the market open" continues next. we will do it all again tomorrow morning. ♪ from the couldn't be prouders to the wait did we just win-ners. everyone uses their phone differently. that's why xfinity mobile let's you design your own data. now you can share it between lines. mix with unlimited, and switch it up at anytime so you only pay for what you need. it's a different kind of wireless network designed to save you money. save up to $400 a year on your wireless bill. plus get $250 back when you pre-order a new samsung note. click, call or visit a store today. matt: this is "the european open." the markets say, is 0% the new high yield? germany is set to test 30 year he that yields nothing. european equities set to continue where they left off. expect to see some green at the open. cash trade less than 30 minutes away.

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