Passes the italys president to decide whether new elections need to be called. Donald trump says he has been looking for a possible tax cut for a long time as he kicks back against the threat of a u. S. Recession. Think the word recession is a word that is an appropriate, because it is just a word that certain people im going to be kind certain people and the media are trying to build up, because they would love to see a recession. We are far from a recession. Matt Boris Johnson comes to berlin to meet Angela Merkel. Germany prepares a 30 year bond sale with a 30 coupon. I will speak later with the German Economy minister this afternoon. I will ride my motorcycle to leipzig and try to get a question in. We are less than a halfhour away from the european open. U. S. Treasury yields bouncing back up. This is a threeday chart into yesterdays trade. Hit a low of 1. 54 , and are now backup at 1. 58 . The worry seems to slip away to some extent. You also see futures rallying across the board in europe. We see gains in german futures. We see gains in i set across the board, so german futures are up to tens of 1 . Two tens of 1 . 2 10 of 1 . Lets get with our strategist in singapore. Let me ask you why it seems we are shifting to a riskon feeling today. Is it just that we were oversold . Mark yes, you are probably right. This is what traders would describe as an inside day. We are seeing modest position adjustments going on in treasuries, in the yen, in equity markets. What we are seeing is not really a message of great conviction in any direction today. Volumes are relatively light and people are just playing around with a few things before we get big events like jackson hole and g7 later in the week. It does not give us a clear signal as to what to expect in the weeks ahead. People are just making adjustments. Of course, we have the excitement of a 30 year 30year bund auction. Maybe people are looking for that as well. Matt what do you think about jackson hole . I have heard some investors say they will not make moves until they hear what jay powell has to say. Mark that is a fair thing to say. Every time powell speaks, it is significant. A bit of a double whammy because we have fomc minutes coming before he speaks. It is a combination of the two. When we look at what recent fed speakers have been saying, they have all been saying the same thing, that they dont see any grave crisis on the horizon, except that the fed made the right decision to do an insurance cut. But they do not see a panicky need to do deep cuts in the near future. Powell will probably give a similar message and the fomc minutes will Say Something along those lines as well. We are not going to get a dramatic event when powell just speak at jackson hole. For some people, that could be disappointing. You look at the rates curve in the united states, they are looking for a lot of rate cuts over the next year, and he may dampen the enthusiasm a bit for that. It is possible that by the time people have had the chance to digest this, things wont look so exciting. But there is a lot to play out between now and then. In the meantime, we are bound to have a few tweaks from donald trump as well. There is a lot to digest in the next few days. Matt in the next few hours, there is a lot for bond buyers to digest. There are many is going to be the worlds first to sell 30 year debt at 0 , the First Sovereign to do that since the iron bank. What do you expect . And a lot of times when we have seen negative yields in the cash trade, these auctions dont go swimmingly. We are hearing from the gray market is that we expect the yield to come out negative, maybe as much as 15 basis points below zero. There are some obvious people who would probably have done much choice by this thing, people like the ecb and probably the Swiss National bank. They are the kind of people who almost forced the buyer bond like this. Naturalerms of buyers, there are probably not many. The sale might go off, and it could be reasonably successful. I suspect it will have Trouble Holding negative yields for too long. People might think it is a step too far, the world gone crazy, being able to issue 30 year yields in a negative environment. Initially it may look ok, but i couple days later, people may say it is too much. People going to be spreading this 30 year bond against the swat curve and possibly even spreading it against other markets as well. There will be a lot of interaction between other rate instruments happening as well. For it to end up in negative territory for an extended period, the world would have to look ready bad. Is risk of the environment probably not that serious at the moment to justify 30 year yields in negative territory. Matt let me ask you about the loan prime rate in china. We may not have talked enough about what the pboc and the party are doing there. Your question of the day is what assets will benefit the most. What are you hearing . Mark matt it is a fixed income world in china. The bond market is unrepresented, so it is probably a good idea to get more people in chinese bonds. Matt mark, thank you for joining us. A bloombergld is strategist out of singapore. Lets go to the first world news with annabelle drillers in hong kong. Volcker to point out is here, and it is looking more like 8 0 is here, and it looks more like a tweak than an overhaul. The eu poured cold water on Prime MinisterBoris Johnsons attempts to renegotiate the brexit deal. It says the socalled backstop to prevent a hard border on the island of island is a vital part of the agreement. It would mean we would just have two months until britain crashes out of the bloc with or without a deal. The two sides are deadlocked. China has named a employee of the u. K. Concert in hong kong during its trip to the mainland, according to his girlfriend who says he has been missing since august 8. Hong kong police have launched a missing persons investigation and are keeping close contact with chinese authorities. The u. K. May delay naming the next bank of england governor until after brexit. We have learned the chancellor may also postpone the budget until 2020, even if the Government Forces it to a general election next month. Governor mark carney steps down at the end of january. He has twice extended his tenure. And President Trump is canceling his meeting with denmarks leader because she does not want to talk about selling greenland. He said that copenhagen has saved a lot of effort by being so direct. Trump described it as a large real estate deal. Denmarks Prime Minister has ruled out the sale, saying she hopes he is not serious. Global news 24 hours a day, powered by journalists and analysts in more than 120 countries. This is bloomberg. Matt annabelle, thanks. Coming up on bloomberg, i will be speaking to the German Economy minister peter all meyer , or at least i am going to try to. He is talking at an aircraft conference in leipzig. I will ride down there and lobby and a couple of questions as germany prepares for the possibility of a stimulus package in a slowing economy. Dont miss that, around 3 00 p. M. London time. Remember, when you are driving into the work at into work in the morning, bloomberg is available on your radio device if you are in the london area. This is bloomberg. Matt welcome back to bloomberg markets. We are 17 minutes away from the cash trade, looking at gains across European EquityIndex Futures. Of 1 . E, but about 2 10 lets get to the story of italy, a dramatic saga. The government is in the midst of another political crisis after the resignation of the Prime Minister. He blames his deputy for the governments fall, saying matteo sell feeneys demand for an election was irresponsible. Consultations will begin with Party Leaders later to find a way forward. Maybe they can put together a coalition, maybe a new vote. For more, lets go to ferdinando. He joins us out of milan. You have a great piece on opi opin. Our europeanshape politics in right now . Because a bit confused, this was going to be a straightforward government crisis in the leader of in the mind of sell feeney, a leader who is very popular at the moment in the country. Had fantastic success in the european elections and decided to pull the plug on the government. But things are not going according to his plans. And the opposition Democratic Party, the centerleft, are now thinking of forming another alliance. That is totally fine, according to italys constitution which says parliament is sovereign. If these two parties defy the movement, the democrats will form a new government and matteo would beey salvini regulated to opposition. Matt what are the implications for the economy. We are focused on the budget. That is what brussels is focused on. What happens in terms of the huge debt . Budget is the real issue here. Salvini waited for a bit too long. Vat could increase automatically because of past decisions by a previous government. Politicians are trying to avoid that, which means that there needs to be a government in place quite quickly. This means that italy would have theind other ways to fund consolation of this vat closes. Juncture ford italy, in a way, because we know the European Central bank has promised more stimulus in september. Yields are higher in italy than in spain or portugal, but they are very low by recent standards. I think there is an immediate issue of debt sustainability at the moment, but there is clearly an issue with the economy. The economy is stagnating. It is linked to the German Economy, which is in trouble, and italy does not really have the space to stimulate the economy that germany might be doing in the coming months. But we are looking at is yet another period of stagnation. This stagnation has been going on for over a decade. I do not think there is an immediate issue for debt sustainability, but the economy will not get growing anytime soon. Matt thanks for joining us. Ferdinando juliano, Bloomberg Opinion editor in milan. You can check out his work by pin on the terminal. Let go to Annabelle Droulers in hong kong. Annabelle thanks, matt. The eu is already probing Facebooks Libra cryptocurrency project, according to a document seen by bloomberg. The antitrust probe is looking at concerns that the Payment System could shut out rivals. Facebook and the European Commission both declined to comment. A breakdown in communications. Thats what a review of boeings is expected to cite, alleging designers did not understand key elements of the plane. It is said the approval with a key safety board highlights the need for improvement. Mans place in the marvel universe looks to be facing a bigger threat than thanos. The dispute between sony and disney is threatening to end coproduction of the superheroe films. Sony wants to keep the current arrangement where disney gets 5 in box office revenue. Thats your Bloomberg Business flash. Matt Annabelle Droulers there in hong kong with your business flash. Putting money into assets guaranteed to return less than their face value seems counterproductive at the very least, but there are ways that they can be traded for a profit. Annmarie hordern is here with the trades that pay for negative rates. Annmarie we have 17 trillion of negative yielding debt. The question becomes, how do you make money from it . You have to get creative. Two trends i am looking at, first is fx hedging. Rising demand means those with a greenback can generate positive returns in japan. It earns an annual yield of almost 2. 6 . Investors then plug that money into safe havens such as the japanese 10 year, which would be , that ofbasis points the u. S. Treasury 10year. If you do this in euros, you could earn 4 with italian debt. The second thing you can do is chase a steeper yield curve. Steeper means you can buy the shorter term and invest in longterm maturities. Is minus the price five basis, where is the 20 year yen swap rate is positive, 11 basis points, a pickup of 16 basis points. Similar scenario would be 40 basis points lower. The flattening of the yield curve may end up sending funds into search of a much steeper alternative. Matt thanks. We are minutes away from the open of stock trading. We will take a look at the issues you want to watch, rs asding european mine iron ore closes in on 80. Matt just about seven minutes until they start of cash trading. Is looking atrn roths nest. Dani burger is focusing in on the european miners for us. Annmarie it is russias biggest oil company, out with secondquarter results. Everyone will be wanting to see what they come out with in terms of these numbers. It was a tough quarter in the sense that they might get hit with opec production cuts. On top of that, they face a contamination crisis. That certainly curtails european exports from the company. Matt the bond markets do not seem to really care much about whats going on in italy. What about equities . Italy will remain on the spotlight today after Prime Minister cant take handed his regular nation. Handed his resignation. The stocks were among the worst performances in europe with some of the largest names leading the drops. We have been speaking with investors, and they are saying the italian situation is a mess. Today, there will be consultations with the largest parties tomorrow. The italian turmoil will continue to be part of the investor product. Matt we will be paying close attention to that. We are looking at green on the screen everywhere else. What about european miners, though . What is the story . Dani they are likely to be under pressure, and this is the continuing saga of iron ore. We see iron ore futures dropped to nearly 90 a ton. At one point, it looked like they might touch 80 a ton. Are concerns that chinese demand is starting to wane. We have chinas anniversary on october 1. Already, and australian trading we have seen bhp, tinto, fortescue all dropped, and these stocks are all on the london exchange, so look out for some weakness on the ftse, matt. Matt we will definitely watch the miners. , thanks for clarifying the italian situation for us as well. Obviously you can never clarify the situation completely, as they go through one government a year. Annmarie as well, talking to us about russian oil. You can get all the latest stories from our stocks team by typing first go. Coming up, Futures Holding up across the board. This is bloomberg. Matt just a minute to go until the open of cash equities trading. Lets take a look at markets with annmarie hordern. Annmarie good morning. In asia, a bit of a mixed session. Regionally down. It of a dull session, some light volume. Yield,lian 10year rallying in that market. We still have a Coalition Possibility on the table or maybe another election. Oil trading above 60 a barrel. We have a drawdown in the u. S. Inventories. On top of that overnight, alberta, canada, extending production cuts, saying there is a glut. It is opec next . The japanese yen exhibit softer today. Stronger dollar. Maybe a bit of changes in position. Here is how we are doing on the futures market. Ahead of the open, risk on. What a change of direction we saw from asia, which was under pressure this morning. And ftse 100 futures higher. We do have the market open now in the city of london. Lets take a look at how we are shaping up. Ftse 100, relatively flat. Not much going on at the moment in the ftse 100. It is a huge week in terms of key events. We have the fed minutes today. That is really retrospective. Looking at the past. The big event is going to be what jay powell says on friday in jackson hole, wyoming. Ibex opening up 0. 3 . Euro stoxx 50 is higher. Day, going to make history with the 30year bond sale a 0 for the first time ever. We have a weaker british pound. A stronger u. S. Dollar. No surprise there. A bit of a weaker franc and euro. A bit of a risk on. What are you seeing across individual movers . Da was talking aboutn miners. And how italian banks look following the Political Drama in rome. Matt it is exciting, and murray annmarie [laughter] matt we do see the balance to the upside. You dont see huge moves in terms of the index, but what you do see a lot of movers. Big, heavy movers to the upside. You have the Oil Producers right up there at the top. Shell, bp, total. You also have Louis Vuitton rising up. You have the Luxury Companies gaining. You have some of the tech stocks up as well. If you look at the losing side, astrazeneca and roche are losers. Pharmaceuticals down, as well as rio tinto and bhp, those are your miners also falling. In general, European Markets are up higher this morning as President Trump reiterates his call for a big fed cut. Investors set their sights on german jay powells speech at the jackson hole symposium. Joining us now out of london, the chief investment strategist at lombard oda Investment Managers. What do you expect from jackson hole and do you think that optimism for what jay powell is going to say, what the fed is going to do is the reason behind the lift we see in the markets . Good morning. Definitely. I think the markets, especially the bond market, the moves have been very aggressive, especially after the reescalation of the trade war. One of the major reasons for that is that the market knows that the fed is developing this reputation for making uturns. We saw a big uturn at the start of the year. It in their change in stance. I think the market is basically forcing the fed to come up and show cuts. We are expecting a cut at the september meeting so that it gives some room to the central bank to get ahead of the market pricing. Matt you have or you have had a positive stance on equities. Do you moderate that if you only get 50 basis points . Do you