Disagrees. As ecb bond buying divides opinion, we will hear from Christine Lagarde, plus how negative yields are impacting the Worlds LargestSovereign Wealth Fund. Matt i know what the big news for you was last night. Number in the u. S. Showing manufacturers in contraction was fascinating. It definitely moved markets. If you are, even sitting in the u. K. , there is no doubt that was one of the biggest market moving things yesterday in terms of increasing fears, changing the price on futures. We will discuss that. Matt we will touch on brexit. We are going to be going down to westminster throughout the morning and following the fall out of last nights vote. Lets take a look at the market numbers right now, starting with asian equity indexes after those big drops in u. S. Stocks. We see asian stocks rising. Yen bouncing back a little bit. Just an hour ago. To sellare more willing safe haven assets in the last 60 minutes. Crude oil i think fascinating. Weakness we have seen in crude oil, the stockpile reserves that are out there and the increase of opec production not helping oil at all. Down toe of nymex wti 54 dollars . 26 per barrel. Bouncewe could see a back from losses in the u. S. Session yesterday. We saw stocks lower after data showed a contraction for august in the u. S. The yield curve went positive after quite a few days of being inverted. That seemed to be more what was going on on the front end of the curve including the two year yield outpacing the 10 year. That says something about expectations of the fed. Cable on a second day of gains, back from its lowest since 2016 yesterday. We have seen a humiliating defeat for Boris Johnson, looking like we could move to an election now. Lets discuss that. Boris johnson says he will bring forward a motion for an early general election after tory rebels and Opposition Mps defeated the government in their attempt to block johnson from pursuing a no deal brexit. The house of commons voted 328 to 301 to take control of the agenda. They can bring forward a bill seeking to delay the exit date. Jeremy corbyn says the bill should be passed before an election is held. Here is what the Prime Minister and labor leader had to say after the vote. I dont want an and election. I dont believe the right honorable gentleman wants an election. He wants to table a motion for a general election, fine. Get the bill through first in order to prevent in order to take no deal off the table. That is legit drama. Joining us from westminster is my coanchor anna edwards. You have been up since dark and early following this. Im sure you are glued to the headlines yesterday as well. In . Much trouble is bojo votes,ainly by the remember, this is the first vote into his premiership. He loses this first vote. It was not even about he brought. Really dramatic scenes in westminster. We seem to be limping closer to a general election. We have to wait for other votes in the days ahead, but we are going to see a vote on this plan by the Rebel Alliance to block no deal through legislation. They want that voted on today. Could we also see votes around the general election . Boris johnson is setting in motion a general election. Arguably he has been planning this for some time in some of the giveaways he has been talking about from a policy perspective. Support. Labour party thats why he needs Jeremy Corbyn to agree to go to the polls. Ase might be spinning this planned, a nice purge for the now see boris losing his majority. That happened before the vote. He now leads a limping minority government. Party 21 mps from his defying the government, voting with that alliance to block no deal, including the former chancellor. No shortage of drama here in westminster. If this bill is passed into law, as far as i understand, if an election goes ahead and Boris Johnson were to win, he could repeal that law. Talk to us about how inevitable a general election actually is, and if we do go to one, how that changes the prospect of hard brexit. Not inevitable, but things seem to be coalescing in that direction. All kinds of paths seem to be leading to some kind of general election. The labour party will not jump in and say a general election, bring it on. They do not trust Boris Johnson to rule out no deal in the short term. They also dont trust him to stick to an agreed date. The labour party does not trust Boris Johnson. ,f there is a general election the legislation could be repealed. Nothat case, we could see deal anyway. Even if we follow the rebels path and no deal is pushed into the future, what happens after january 31 . This alliance is a ragtag bunch. It includes people from across the political spectrum. They probably agree on very little other than stopping no deal. Nejra great to have you with us. Anna will continue coverage all day. Now lets ask the question on mliv, how would hard brexit hit global assets . The pound 6 lower than soon after the 2016 referendum. The chart showing sterling implied volatility extending its climb, making it the highest among developed market currencies. Great to have you with us. You were listening to our conversation. Let me address the issue of a general election. Do you see that as an inevitable outcome . The Current Parliament cannot seemingly produce an outcome, be or deal brexit. Presumably next month. Yesterday, dipping below 120 and bouncing right back up. Markets are saying no deal brexit is less likely. Thats why they are devaluing the currency more. Do you agree . It is a very interesting question. I had a lot of discussions yesterday about what has been driving the pound weaker late last week. Rebound. A couple of explanations. One is the prospect for having Prime Minister johnson for a bit longer in a no deal brexit, which is negative for the pound, but there is also that group of clients arguing that also reflects the prospect of Prime MinisterJeremy Corbyn with a brexit deal, but also less popular economic policies. Sterling lessmake attractive for foreign investors. It is a lose lose situation for the pound. Brexit seem that no deal under Prime Minister johnson may be only part of the story. Does that mean you would not be targeting sterling to have any sort of meaningful bounceback from here . How would you trade around the currency pair or so . The outlook will remain subdued. There are certain Downside Risks on the table. Down the road, depending what the political outcome is going to be, we could experience a cautious rebound. That will depend on the ability of the economy to deal with a no deal brexit or to deal with less supportive labor economic policies. Also, quite important at this stage to highlight the downside for the pound may not be as accentuated as we saw before for a range of reasons. We think in cable we are at a level which is consistent with our longterm fair value for no deal brexit outcome implying that a lot of negatives are already in the price. Markets are pretty sure the currency. Very different from 2016 is that the pound is weakening at a time ann gilt yields are at alltime low and stocks are bellying rallying. Conditions in the u. K. Ultimate should mean the markets are helping the economy deal with the political risks ahead. It is very different from 2016 when the pound was selling off and gilt yields were soaring. People are talking about a balanced payment crisis. As a whole, the combination of those factors limits the downside to a degree. Both sides also mention here the fact that if you want to sell the pound, what exact idea by . A few years back, you would have said the euro, the political drama. The economy was recovering. Eurosterling should go higher. Zone is flirting with recession. The ecb is about to start using again. The fed is cutting rates. The context has shifted as well. Overall, the outlook may not improve materially anytime soon. Be aswnside risk may not significant as we thought before. Anna do you see the matt do you see the same kind of fair value when you look at the pound in yen or euros . Currencyerall, the that may struggle the most against the pound should be the hero the euro. From a relative centralbank policy outlook, fundamental outlook, the euro may struggle the most. It seems like eurosterling might not have as much to gain as cable. The sterling selloff dollar he presumably likes of yen, but also safe havens like the swiss franc maybe the biggest beneficiaries here. Would you also be looking at euro balls because of brexit . Isinvestors see the pound generally oversold which has corrected quite a lot. In contrast, the case of the euro, we are still dealing with multi year lows. Longd see appetite for positions as a proxy hedge for a no deal brexit. Economic links are there. Is, the euro zone where it flirting with recession, it may and thateal brexit could weigh on the euro, fuel euro volatility. Going to stay with us. Valentin marinov is our guest cohost for the hour. Now i want to get the bloomberg first word news. European Central Bank Policymakers are expressing skepticism over the need to resume bond purchases. The latest told french media the ecb does not have to use all its policy instruments at the same time. The central bank faces internal debate over policy easing ahead of its easing next week its meeting next week. Giuseppe conte said to form a government. He is set to bring a Government Program today. 70 underwater after being battered by hurricane dorian. The bahamas are still conducting rescue missions on the island of grand bahama. The Prime Minister said it is not looking good and he expects catastrophic damage. Meanwhile, the u. S. Has declared an emergency in North Carolina as dorian heads to the coast. Global news, 24 hours a day on air and tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Nejra thank you so much. Coming up, interviews galore. You wont want to miss these happening right here on bloomberg tv. We will be speaking with the ceo of the World LargestSovereign Wealth Fund. A little later, we will be talking to the eu trade commissioner and getting her thoughts on the slowdown in europe and the deepening trade impasse. Least, we are not going to speak to the president of Emirates Airlines ahead of the World Aviation festival. Dont miss these exclusive interviews. Work,ou are traveling to cap Bloomberg Radio live on your mobile device or dab digital in the london area. This is bloomberg. Matt this is bloomberg daybreak europe. Lets get a check on the markets in asia. It has been mixed, but as we see that gain in u. S. Equity futures, upside in the afternoon session. Stocks jumping the most in two weeks. A little bit of bargainhunting for the stocks that have been hit the hardest due to the protest. Chinas share market getting a boost on the back of the pmi numbers for august coming in better than expected. Suggesting some expansion. Australian stocks under pressure, off by half of 1 Health Stocks laggard. We have seen the aussie dollar rise after Second Quarter gdp came in line with estimates. 1. 4 if we canof have a look at my chart for this gdp read in australia. That is due to the fact we have seen Government Spending coming through. Noting even though it was in line with estimates, it is the weakest pace of growth we have seen since the Third Quarter 2009, which was of course right in the middle of the Global Financial crisis. Markets still suggesting the rba may need to pump more stimulus in by the end of the year. Now lets get the Bloomberg Business flash. Walmart has promised to curtail ammunition sales after deadly source shootings store shootings. Sales oflso stop handguns in alaska, the only te where it is still walmart is also requesting customers refrain from openly carrying firearms in its stores. Samsung is preparing to unveil its second foldable device next year. The new phone will have a 6. 7 inch display that shrinks to a square when it is folded. It will be more affordable and thinner than this year yes yearsfold area this galaxy fold. U. S. Sales of a car will end in 2020, the latest move by the to reduce exposure to the american car market. That is your Bloomberg Business flash. Nejra donald trump is trying to get china to agree to a trade deal before the president ial election next november. He tweeted if he won, a deal would get tougher. U. S. Manufacturing unexpectedly contracted in august, coming in below 50. The week data provided traders with ammunition to pile pressure on the fed. Meanwhile, Eric Rosengren does not see the need for any immediate action. Becomee headwinds could more appreciable. If they start slowing down the economy, we should react once we see it in the data. I dont think we should anticipate necessarily thats going to happen. As long as we are going around 2 , i dont see as much of a need for immediate policy action. Is stillentin marinov with us. We heard Eric Rosengren, but banks are predicting 50 basis point cut at the next meeting, 100 basis point cut through the end of the year. What do you expect from the Federal Reserve . Thistin two rate cuts year in september and december, 25 basis points each. I think what could matter for the markets much more is how preemptive the fed will be down the road. Like the fed will be less proactive, more reacting to the economic development. To me, that is not good news for the market. They are hoping the powell puts will prop up stocks. There will be a time gap between the data deterioration and the fed reaction function, during which risky assets, stock markets, risk related currencies could be exposed to risk aversion. Nejra im guessing you think the fed could disappoint markets somewhat. Does that concern you it could spill over into the dog the job market . Valentin manufacturing is only a small part of the economy. We are talking about where than 10 . The number is smaller than that. That is part of the u. S. Economy that is the most exposed to the global trade. To try to highlight the resilience of the u. S. Consumer,n terms of Market ImpactMarket Participants will be focusing on how the u. S. Consumer sharing under the changing conditions, the service as part of the economy is performing, they feel that is what makes the balance of risk in favor of more aggressive bond practice. Where we spend at the moment, yes, manufacturing is not doing well. The rest of the economy is seemingly ok. I guess the answer is the fed will be in wait and see mode rather than acting proactively. Matt even if they acted proactively and preemptively, do you expect to see weakening impact on the dollar . The dollar index continues to hold up despite expectations of fed cut area fed cuts. Part and parcel. Unwarranted tightening. Financial conditions could come on the back of dollar appreciation. The dollar will be an important driver of what the fed is doing. The reaction function is going to drive the dollar. The dollar is supported by highyielding safe haven currency. It is difficult to imagine a isnario where the dollar under sustained selling pressure unless the fed comes out very aggressively. Stayingalentin marinov with us. Coming up, interviews galore. Do not miss. This is bloomberg. Devices are like doorways that could allow hackers into your home. And like all doors, theyre safer when locked. Thats why you need xfinity xfi. With the xfi gateway, devices connected to your homes wifi are protected. Which helps keep people outside from accessing your passwords, credit cards and cameras. And people inside from accidentally visiting sites that arent secure. And if someone trys well let you know. Xfi advanced security. If its connected, its protected. Call, click, or visit a store today. Nejra this is bloomberg daybreak europe. Morning. D Prime MinisterBoris Johnson said he will bring forward a motion for early general election. He comes after tory rebels and operation Opposition Mps defeated the government in their attempt to block johnson from pursuing a no deal brexit. The house of commons voted 308301 to take control of the agenda which means i can bring forward a bill seeking to delay the u. K. s exit date from october 31. The leader of the opposition, Jeremy Corbyn said the bill should be passed before an election is held. Heres what the Prime Minister and the labor leader had to say on the prospect of a snap poll after the vote. I dont want an election, the public dont want an election. But if the houseboats for this bill tomorrow, the public will have to vote who have to choose. To table a motion for a general election. First inill through no deal off the table. Bloombergss is anchor anna edwards. Great to have you with us again. Talk us through the steps that would take us through general election. How much more likely is it . Seem to be edging in that direction. Another historic defeat for the government, the first time in a few hundred years that a Prime Minister has lost the first vote that has been brought on his agenda in the house of commons. A really Interesting Development and high drama. We are inching toward a general election but it is not at all certain that we get there. Prime minister Boris Johnson said he will start the process