the u.s. and china announced they will hold trade talks in the coming weeks. to visit washington in october. asiay markets again across with rallies in europe and the u.s.. the yen and gold take a hit. and boris is beaten again. armament rejects a boris johnson's demand for a snap election as a bill to stop no deal brexit gains momentum. the first, tome my knowledge, the first leader of the opposition in the democratic history of our country to refuse the invitation to an election. matt: good morning from berlin to less than a half hour away from the european open. taking a look at treasuries. they can't make up their mind and you see this when you look at other safe haven assets. for example, the yen of lost a lot of ground and is now coming back. we are quite sure what's going on. indexes in hong kong are dropping. .verywhere else, we are seeing gains. -- we are seeing gains. they are all solidly in the green. up .8%.dax futures ftse futures up more than .5% right now. and anna, there is still a lot of drama, ups and downs, twists and turns for you to go through. absolutely. the political theme is keeping us busy. it seems that the prime minister is a little bit trapped, little bit blocked by his lack of control of parliament and a lack of willingness to trust him. what we saw yesterday was once again the government losing about. the rebel alliance brought a bill that would block no deal brexit. it looks as if it could be delayed in the house of lords. with their bedding and changes of clothes and the shaving kits i'm told and their bags, they did not need those necessarily. quitehings moving quickly, the government's clearing the path for passage of the bill. front are moving on that and the direction that is not in the direction the government wants it to go. so that asked for a general election and they're not going to get that. they need to thirds of mps to back them in that call. so that is the story in westminster, we will continue to track that for you. you got banking news. matt: we have only half a year left with the commerzbank cfo stefan ingles. he says he will not renew his contract to run at the finances of the bank. so commerzbank cfo steffen ingles says hen will not renew his contract. frome also getting news the finance office at announced the bank. , so thethere is leaving cfo is leaving while the cfo at commerzbank will not renew his contract. it's a tough job at european banks right now. but it's a risk on mood today in stock markets this morning as china and the u.s. say they will resume talks in october. went tos from beijing travel to washington to meet of their american counterparts and comes after weeks of uncertainty and escalation with the latest round resulting in raised tariffs on september 1. let's get into the markets with mark cudmore. kong,he drops in hong weak german factory orders can't disturb our risk on mood. we have futures up across the board. is that all down to trade? >> it is a very exuberant day. a facet of this is that low liquidity at the moment, the slight confusion, the uncertainty and lack of conviction. we do get these powerful bear rallies. it's not a fundamental shift. yes, it's great, and they have months to have talks. economic damage from the terrace they are just starting to hit and we are seeing that announced in the data. of course, the tariffs that were implanted it were hit around december time. so even if you have another round of talks, even then, it will be too late. sustainablereally a bounce of joy, but there is low liquidity. soon, but whoetty knows? anna: so not a believer in that rally, but what about the pound? is it like a coiled spring ready to bounce on signs that brexit is being kicked even further down the road? >> that's an interesting one. the announced he is similar, but different time spans. the fundamentals have not really shifted and we are back to where we were sometime about six months ago when we are headed through the world. we might be headed towards a no deal brexit or might be headed to can kicking and an extension. that seems to largely be the scenario we are in now with uncertainty around which route whate going down there happens in fundamentals is that the economy has gotten even worse. there headed towards a recession and deals are still very negative. but the fundamentals for sterling remained negative. however, we've got the can kicking for longer and we remove the high probability of a tail risk, meaning there is probabilities of trading. and is the fact that if we have more risk aversion elsewhere, the pound could likely squeeze even more. he could see the pound moves sustained for a little bit longer, even of the fundamentals have not changed. looks like kathleen hays is up at 1 a.m., posting on the mliv blog. can that be the same for european stocks? would the really weak german factory orders lead to the kind of ecb easing markets want to see? >> i think that easing is largely priced in the year of their psi think that this bad news story in europe, it's not going to help european assets too much, but it does confirm that global picture. especially when it is germany. 10% plus of global trade shows the world is going to a bad place because germany is headed towards recession and that's not a good sign. anna: mark, thanks so much. our mliv editor with a fascinating conversation on the markets. up next, chances of a no deal brexit are diminishing. that's good news for easyjet. we speak exclusively to the ceo. this is bloomberg. ♪ matt: welcome back to "bloomberg markets: european open." we are 18 minutes away from the start of cash trading across europe. let's take a look at futures. we have decent gains, still half a percent up on the ftse. budget air carriers have a lot to lose from a no deal brexit, especially those with bases on the continent. johnsont over to guy who is live at the world aviation conference with the ceo of easyjet. >> good morning. i am here with johan lindgren -- lundgren. i spent my morning in westminster with the brexit story. nobody can quite figure out what is going on. you are the ceo of a major european carrier with the bases all over the place. what does this uncertainty mean to you? johan: first of all, let's just say that we have been preparing for years for any scenario. it was two years ago we said we would start the european basis and can fly in any circumstance. right now, we are operating as though a no deal happened. so we are prepared that. -- for that. of course, we also said that we want certainty. certainty is important for the local economy and for our customers. clearly, that is something we're still looking after. i think theret are still elements of uncertainty. guy: so how does that actually manifest itself? you talk about uncertainty at the moment, we don't have that. and it's possible we want for a very long time. the only certainty at the moment is that we will see political turbulence. from an easyjet point of view, how are you dealing with that? number ofre are a things. if you are looking at the demand environment, you can see in some markets the combination of a softening of the local economies. we can see there has been a tougher year from the demand point of view when it comes to the yield environment. that people are traveling, we have a record number of customers flying as an example, but the external environment is very different. so that leads to a hesitation which is also led to a looking pattern in some of the markets are the have worked on late yield initiatives and a number of other initiatives to mitigate that. of course, everybody would like to have uncertain -- to have certainty. guy: is the pound a factor in all of this? it has certainly been under considerable pressure. how does that affect the demand for the u.k. when comes to going elsewhere? the pound and the exchange rate has a number of effects, one is on the costs we have. ,hat is not an imminent issue we are well hedged this year and next year when it comes to that. havef course, you would seen that it has been slightly more expensive to be out in some of the euro destinations. commented by it is a very attractive market when it comes to the prices airlines are offering. if the european economy is slowing down, is that your feeling right now? johan: there is evidence of that looking at germany and italy and the latest figures in the u.k.. the output, i think that plays a role. but it's difficult to say what's fear frommes out of a any brexit scenario that's out there. is it just a result of trade wars going on, it's a whole bag of things that affect the overall impact. guy: you talked about prices heard one of -- prices. one was the impact of carbon footprints and the impact of people flying less. when it comes to low-cost carriers, there is a story that thatcreasingly being heard is the low-cost sector is encouraging people to fly, not because it is necessary, but because it is cheap. there are offering flights that are so cheap that people say they will just fly. how do you deal with that long-term? do we have to have a regulatory changes to deal with that? i completely disagree with that view. be the problem of low-cost airlines, as an example. that would mean it was much better before when flying was much -- was only for privileged people, for people who could afford it not for everyone. whenever fewer options out there , i completely disagree with that whole sentiment. but what you've got to think about is when it comes to the carbon footprint, the low-cost ,arriers with efficient models high frequencies, modern fleets, have the lowest footprints of the legacyme carriers. so i think people will choose very carefully about what they are going to fly with when they decided to fly. we understand if people want to use different means of transportation. and there's no doubt than in the mid to longer-term, they came to reinvent themselves -- aim to reinvent themselves. thingsse are examples of that will continue to have growing importance. guy: thanks for spending some time with us. ceo of easyjet. anna, matt? matt: guy johnson, speaking with easyjet ceo out of islington. now, we are going to talk to the u.k. shadow chancellor and we come back about brexit. and whatt as well happens at westminster. he's going to give us the lowdown from his point of view. this is bloomberg. ♪ anna: welcome back to "bloomberg markets: european open." 10 minutes to go until the start of cash equities trading. we are live in westminster and i'm here to speak to a key figure in the labour party. i am pleased to be joined by the u.k. shadow chancellor john mcdonnell. of course, your party is in an interesting position because the prime minister needs to thirds of mps to back his request for a general election. jeremy corbyn has said the bill you passed yesterday has to be law before he will consent. what does that mean and how does that look to you? of ourhe whole thrust agenda is to prevent a no deal of brexit. so the legislation going through will help do that. want is that has been received we will consider the date for an election, so discussion now is when that date will be. we work with the opposition parties and consult with our own. , with borising johnson, it's very difficult to trust any deal we arrive at because he is not exactly consistent on maintaining agreements. so should we wait until the next economic council when a deal can be achieved, or should we go until october 31? there is a real issue here for boris johnson. second is the got the brexit party breathing down their neck. said he will only do a deal if he commits to a no deal brexit. so he has got a real legal dilemma. does he split his party? what we are saying is that whatever happens in the national interest, we got do everything we can. anna: but if you wait until after the 31st of october, things could change. are you in danger of missing the boat? john: i don't think so. the public mood is that they've had enough of the public move is that they don't support a no deal brexit is everyone realizes the consequences. the best way to characterize this is that someone has got to be the adult in the room. boris johnson throws these tantrums, uses all sorts of trumpian language. ,ut you can have your tantrums but we have got to do is make sure we have the interest of the country. anna: is there trouble within the rebel alliance? they are suggesting you are maybe afraid of an election. john: what we have been saying is we need to do this together. we want a general election just as much as they do. i want to get rid of this boris johnson government as much -- as fast as we can, but the date is key. a date that secures our own overall policy objectives and then have a general election? anna: so your policy seems clear. the policy of brexit seems pretty mixed, the pulse suggest the public is confused. what will your brexit policy the -- be? john: a second referendum. but a public vote overall is the best way of resolving this matter. there are those who would campaign for remain and there will be others who want to see others but nobody wants a no deal brexit. anna: you could still be out there campaigning for two different things. john: the party will make its mind of and we will have our normal process. but there are always some within different parties who have different views. my view at the moment is to remain, but that's for the future. the key now is blocking oris johnson. -- boris johnson. anna: would you go into collision -- coalition with liberal democrats? the last election, we were 20 points back in the polls. anna: i remember, we had the same conversation at this very place. you did not win. john: we drew level. normally, with a new prime minister, there is a heck of a bounce in the polls, will he got less of a bounceback theresa may. polls, or with a bit of an advantage. i think we could be the majority party. mcdonnell, shadow chancellor, thank you for joining me. plenty to come on the markets as we see the confirmation of trade talks. futures are strongly up on that. this is bloomberg. ♪ devices are like doorways that could allow hackers into your home. and like all doors, they're safer when locked. that's 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 aren't secure. and if someone trys we'll let you know. xfi advanced security. if it's connected, it's protected. call, click, or visit a store today. ♪ >> we are a minute away start cash equity trading. >> is a risk. about percentage point. we don't have a date yet but we have about a month. a firmer dollar again the japanese yen yen. u.s. -- wouldked have talked u.s. and chinese officials. the pound trading around 1.22 for cable. anna edwards across all of this was meant -- in westminster. the dax up 0.7% even though we had perfect out of -- had weaker factory out of germany. up relativelyng flat. theirequities poised for two days biggest again. biggest gain since june. 0.6%.s ibex opening up is the green -- it is a sea of green,. the british pound down 0.2%. let's take a look sectors are doing. very green this morning. risk on entry this morning. some things i will be ee ho wminers and metals do. oriole -- oil hanging onto the of those gains. looks like the u.k. is move to stop no deal brexit. guy: -- >> thanks very much for that. let's take a look at is going on my move screen. showing you the breakdown of the oxen hundred -- of the stoxx 600. 520 are gaining. as far as the gainers, we have a auple trysting story -- couple interesting stories. quuinor. for e someroyal dutch shell, so gainers. x stocks --docs may today -- ex-dividend today. a lot of 17 companies stocks on. today is the earth day about the stoxx without the right to last dividend. continue to focus on the brexit drama, which look like it will be high-energy through tomorrow's session. >> looks as it have got a lot of drama from what does from westminster. boris johnson -- will be later on today -- will be speaking later on today. boris johnson lost his majority this week. or so from21 21 mp's his party. mcdonnell,ke to john the shadow chancellor. they can start to talk about the timing of a general election. there are others who want to wait until after the end of october. they want to lock down that date so it cannot or by the private -- cannot be changed by the mr.ate or others -- crime -- right minute -- prime minister or otheres. on risk onboost mood. joining us now is etsy dwek, atd of global market ready -- market strategy at natixis. etsy: absolute. we have into need to market swift -- expect a swift resolution. we don't expect trump to come to a decision right away. being tough on china has worked quite well. -- we think you will continue to keep that status -- we think you will continue to keep that stance. president trump will have to navigate between being tough on china and trying to hurt a sharp downturn or recession in the u.s. internet steer -- into next year. i think we will see the type of news we have seen recently, escalation, some type of status quo or truce, then talks, then maybe another escalation before we see any kind of agreement. coaster isl roller what she is saying. go on, anna. anna: roller coaster indeed. you don't think that the political calendar in the u.s. is going to push president trump into doing some sort of a deal here? etsy: probably not before next year until you really start to see sustained weakness in the u.s. economy. we had a disappointing manufacturing number for august. whether it's just below 50, so pointing towards contraction, whether that gets confirmed with september number. i think they are waiting for october for the next round of talks. the more we see that type of data, the more pressure there will be to have some better news. i think we are more likely to see a truce or maybe a delay of further tariffs as talks keep going and not any kind of grand a deal, definitely -- grand deal, definitely not before the end of the year. equities, you look at ying the dips was a strategy that played so well for this entire year basically. is that still the case, do you think? cellu have maybe a the spikes strategy? etsy: still relatively constructive on risk assets and equity markets. we don't see a global recession in the short-term or into 2020. given the uncertainty, especially around trade, that it is a lot tougher to have the conviction level much further out into 2020. for now, we don't see a recession. you are going to have a lot of central bank support. i think equity markets are going to grind higher. it might not be stellar. i think you will see the upside. what we have also seen is that the selloffs have somehow become shorter. q4 last year, then you have may and august. you have a lot of investors still on the sidelines whenever you have a dip. flows have not been that supportive, may be a bit better for the u.s. and elsewhere. dip stillt is buy the probably works. we keep that relatively constructive you for the next few months. anna: thank you very much. etsy dwek ♪ matt: welcome back to "bloomberg markets: european open." 12 minutes into the trading day. we do see a red arrow park with the ftse -- red arrow with the ftse trading down. dax and cac up 0.3%. reeling fromtill the fallout of europe's biggest money laundering scandal. they have a new chief financial officer. it will be a name familiar to those who follow european banks. stephan engels has served as cfo of commerzbank since 2012. danske bank's cfo is leaving denmark's biggest bank. aarup-andersen will lead as acting cfo. why the shakeup now? baltzer.ens to >> he has only been a cfo for over a year at danske bank. new ceo that has come in recently, new chairman that you mentioned after the money laundering scandal. frombrian stephan engels cut -- they brought in stephan engels from commerzbank. matt: what -- you know, how far do they still have to go with this money laundering scandal? surely they are not out of the clear yet. >> indeed. they are a long way from being out of the clear. we have not heard the final results of their own internal investigation. faceines the bank will will trickle out sometime this year. what happens to commerzbank now? i mean, losing stephan engels must be a blow for them. >> it is. the whole bank has had a lot of of difficulty in terms of the whole negative rates environment. years,en there seven although from his point of view i can certainly understand that he would want to change, try something new. for commerzbank, it essentially does not make a lot of difference. it is falling into negative interest rates and nothing has changed there. matt: thank you so much for joining us. philip richards talking to us about these personnel moves. stephan engels going from commerzbank to danske bank. anna? anna: boris johnson will address the nation today after suffering a string of heavy defeats in parliament. an attempt by opposition parties and tory rebels to block a no deal brexit easily cleared its second and third readings in the house of commons. he failed in his attempts to force a snap election. calling for an early poll was supported by 298 mp's but that fell well short of the two thirds required. mp's abstained as the party has rejected the idea of another election until the risk of no deal brexit is off the table. >> it is a bit like the offer of an apple ii snow white and the wicked queen. at is -- what they are offering is the poison of a no deal. >> he has become the first leader of the opposition in the democratic history of our country to refuse the invitation to an election, mr. speaker. -- i cany speculate only speculate as to the reasons behind his hesitation. is i'mious conclusion afraid that he does not think he will win. etsy dwek from natixis is still with us. let's talk a bit about the brexit latest. what will it take for the pound or two really respond -- what will it take for the pound to really respond? the pound is hesitant. >> absolutely. -- would think that no deal that parliament is trying to get no deal off the table entirely and does not seem to be getting there 100%. the pound wants to bounce a bit. i think the likelihood at the moment or the expectation is that boris johnson would win an election. that would mean that no deal is back on the table. whether they've managed to force him, which is most likely to have a three month delay. it would be the end of january, then you have these conversations that start over. you could see that parliament should still be able to block the no deal. it seems that it is not entirely off the table. until we really eliminate that possibility, sterling is going to remain under pressure. matt: does it change your view at all on u.k. stocks? do you think of the ftse as such an international index that it does not really matter with the exception of -- you know, a pound under pressure is not necessarily bad for someone selling stuff out of britain. etsy: for the ftse, it is not that bad and has not been that bad. typically you see the ftse perform alongside the msci world. see aobably continues to reaction alongside global stocks. it makes a difference for european stocks. flows have continued to be negative. i think we have underestimated how much brexit has actually weighed on sentiment towards european stocks. it has been 3.5 years of uncertainty, delays, extensions. boris johnson did not even managed to get the snap general election yet. sight to thend in saga. i think that is one of the reasons a lot of foreign investors have shied away from european assets. anna: thank you so much. etsy dwek from natixis stays with us on the program. top stockto ourto movers. >> i want to kick it off with saffron, up more than 6.5%. this is the equipment maker for the defense and aerospace industry. they have a first half increased their outlook for the rest of the. quinor up more than 6.5% as well. they announced a $5 billion share buyback program. they say this will go on until 2022. plunging, down more than 19%. when it opened, it lowest level ever on record for the bank -- it hit lowest level ever on record for the bank. it was down from 20% in australia as well. anna, matt> matt: thanks very much. annmarie hordern with a look at some of your stocks on the move. up next, low rates are making trouble again. norway's sovereign wealth fund is having trouble and in search for returns. we will hear from our exclusive interview with its ceo. this is uber. ♪ -- this is bloomberg. ♪ ♪ matt: welcome back to "bloomberg markets: european open." right now we are 22 minutes into the trading day. we are looking at gains in europe, a bit of a drop in the u.k. as the ftse is off 7.5 points. let's turn now to central banks. new york fed president john williams says that although manufacturing is weakening, consumer spending in the u.s. is still robust. they arewarned that now caring much of the weight for growth going forward -- carrying much of the weight for growth going forward. fed officials remain divided on the need for policy intervention. the prospect of further easing and a downward path on rates sent european bond yields below zero. the ceo of norway's $1 trillion wealth fund says it makes it a less attractive prospect for those looking for solid returns. >> 3% real return is kind of what we have as a fiscal rule for the spending on the backbone. that will be challenging. the real return on bonds is negative, right? of the worries we have with regards to markets, this is one thing on top of our agenda. bank that was the nor just investment management -- nor ges bank investment management ceo. still with us is etsy dwek. a lot has been written about the current debt. the hunt for yields that investors are forced to pursue. do you think this situation poses some kind of systemic risk to the financial system, the factor that we have this a lower for longer rate environment and such a large proportion of products with negative interest rates? etsy: it certainly is a question that central bankers are posing and they do have this very sensitive balance trying to support the u.s. economy, avoided some of the uncertainty coming from trade, and at the same time not having these asset bubbles that could lead to another financial crisis or systemic risk. for now, i don't think we are heading in that direction. the fact that rates are low means that everyone's ability to repay the debt is a lot easier. i think it is a trend that will continue. one thing we have been keeping an eye on is germany. have been pulling a lot of the rest of the world down into negative territory with them. if they remain as poor as it has been and the latest figures this morning were pretty disappointing as well, the question of fiscal stimulus in germany to boost growth a little bit could become a bit more central to the conversation and has a chance of actually happening. that is one of the catalyst we think could halt the slide in sovereign bond yields and at least bring some stability, even if we don't expect a sharp backup in yields for some time. matt: we need you to come here and tell that to angela merkel and olaf scholz. let me ask you about u.s. rates. alan greenspan said it would be no big deal if u.s. rates went negative. do you agree with that? do you think that is a possibility? etsy: i don't think it is likely, unless you have a really parable -- terrible growth scenario. it is not likely. where am i agree more and being swift myself -- swiss myself, negative rates are pretty mainstream. it would probably not be the end of the world but it would signal -- so the rates itself would not be the end of the world. it would signal a very dire economic scenario. the starting point is already lower from rates compared to where we were in 2008. i don't think the next slowdown will look like the global financial crisis. we will have some kind of slow down or downturn but i don't think we will have anything like what we saw 10 plus years ago. it would really take a lot to get u.s. rates into negative territory. imagine where the rest of the world would be if you had that scenario. on a purely absolute level, negative rates might not be a disaster. moving from where we are into negative territory for the u.s. would be a a lot more concerning. matt: thank you so much for joining us. etsy dwek, head of global markets strategy at natixis this is bloomberg. ♪ get your top headlines for you off the bloomberg terminal. announcednd china they will hold trade talks in liu he planseks. to visit washington. this embattled danish lender announces stefan ingles as its new chief financial officer. and boris beaten again. the u.k. parliament rejects his demands for a snap election as a bill to stop a no deal brexit gains momentum. >> he has become, to my knowledge, the first leader of the opposition in a democratic history of our country to refuse an invitation to an election. matt: good morning, and welcome to "bloomberg markets: european open." i am in berlin alongside anna edwards in london -- in westminster. anna: let's talk about the latest from brexit. i am here in westminster because we are tracking the brexit story. the latest is that boris johnson is going to be addressing the nation, i suppose. speaking directly to the public, at least. the public cannot give him what he wants right now, he wants an election to unlock the gridlock but opposition parties are not keen to give him that election. he needs two thirds of mps to give him his ok to call an election. it looks like he will not get that just yet, but it is all about timing. things slowly moving in the direction of a general election. we have got breaking news. matt: yeah, from riksbank. sweden's riksbank is leaving its key rate unchanged at 0.25%. the bank is saying that it sees 2020e towards the start of , so it looks like it could go .ack to zero next year as for now, they are leaving the key rate unchanged. thee going to interview riksbank governor at 10:30 a.m. london time. let's get bloomberg first word news in hong kong. >> thanks, matt. says withdrawing the extradition bill is only the first step to address the unrest in the city. she also says the decision was made independently by the hong kong government. protesters have largely dismissed the withdrawal as too little too late and plan to continue demonstrations. the people's government took the position that they understood why we have to do it. they respected my view they supported me all the way. so whether it is in the earlier stages of processing the bill and then suspension or withdrawing yesterday, this is the same position. >> hurricane of making its way up the east coast after sweeping past florida. the storms of sustained winds have strengthened to category three but it has lost a lot of the bahamas where it killed at least 20 people. outer banks in north carolina could suffer in the hurricane. ubs is preparing a shakeup of its investment bank. we have learned it is elevating to executives to overseas dealmaking. they will be put in charge of investment banking, including advising on corporate takeovers and raising funds through stock and bond sales. the appointments are not official yet. global news, 24 hours a day on air, on tictoc, and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. anna, matt? matt: annabelle, thanks very much. is taking tesla in its crosshairs with its first fully electric vehicle. the automaker famous for its a new car just unveiled vehicle, starting around $100,000 with a tom price newly double that. volkswagen is hoping this will help cement its ambition to do the world's leading seller of battery-powered vehicles. i've caught up with porches ceo. >> it's an exciting moment for us, being able to prevent the new car after years of engineering. right, we have a lot of preorders in the last week. raised from 20,000 to nearly 30,000 preorders. because all ofud these have not seen the car with the production. today, we mentioned what will happen in the market and what will be the response. >> they trust the language, the dynamics of porsche. what can you tell us about the financing? i think you are the first carmaker ever to develop a car with a promissory note. have you come up with that idea? when you do the calculations, electro-mobility, you have much higher material cost, you have all of the investment you have to put in. and when we thought to catholic the product, we asked all the people in porsche to help to be able to finance the project. we have a path of increasing salaries to be able to finance the project. beginning with the board members to all of the people working. the automotive industry is doing this and that the end we are successful from being able to produce the car in germany. it will produce the 9/11 as a 718. >> will you always make the car in germany? is that something your customers demand? >> for our brand is very important having the car is designed and engineered in germany. it's a very important argument, and we want to go to a new era with a full quarter. we built the first model, then another, and now the new car. connecting our tradition with our future. they vowed to continue making these cars in germany, it is precisely those vehicles made in europe that president trump has threatened tariffs. we spoke about trumps threat. >> we hope it will be extended, onthink it is not based facts. european union and our exports of car parts to the u.s. are not security threats. it is based on normal trade. so we disagree with the findings of the report and we hope we can instead focus on a common positive agenda to facilitate trade between us and incorporate other trade obstacles. matt: joining us now is robert schiller, a nobel prize-winning economist and sterling professor of economics at yale university. thanks for joining us. i want to ask, first off, about your recent book that talks about narratives the drive market. this trade story seems to be the dominant narrative in these markets. what do you think? talking about economic narratives that have an effect on economic activity. the trade war narrative, it is not eternal, but goes back all the way to the great depression. there was a trade war the great depression in the 1930's and it was widely thought that that it was the cause of the depression. ,hat was an economic narratives because people became conservative in their economic behavior out of fear of the trade war. the same thing can happen right now. anna: good morning to you, robert. will talk a little more about your book. i wanted to dwell on the state of the u.s. and the global economy in this conversation. will get to the details of your fascinating book about narrative economics. in terms of the damage the trade war is doing to the u.s. economy, what is the lens you would use to answer that? how would you assess that damage? robert: i think that recessions are substantially often caused by fears of a repeat of some previous recession. and so this has awakened us. it wasn't a trade war 10 years ago and the global recession, but we still have memories of that. so it has launched a narrative that has brought along with it other narratives. for example, the inverted yield -- is much has stronger than it has ever been before. you have people thinking it has been scientifically proven we will have a recession soon and that causes them, maybe it has caused them it has to cut back on their spending or hiring or new investment. matt: right, and this goes back to animal spirits, really. i wonder what you think of the recent commentary out of some fed speakers regarding the u.s. consumer. the narrative out of the u.s. economy seems to be that although there are a lot of ,edwig and the global economy the consumer is still carrying the weight of keeping the u.s. back from a recession. is, i think bob kaplan said something to this effect, it will be too late for the consumer. what do you think about that? robert: there is a deep question of what drives consumers. consumer confidence is what we talk about, but i think there are other facts and narratives. consumer confidence is a barometer, i suppose, but it does not describe the narrative. there have been narratives that are growing over the years that encourage consumption. the so-called american dream has been growing through time. that is an old phrase that refers to an outlook that it is ok to show off your wealth. in fact, you had better do it. that's the american way. the other thing that is piled onto this narrative is hyeon chung, our president, who has been writing books to explain how to live your life. one of his books is called think like a billionaire. so we have millions of americans trying to learn how to think like a billionaire. that certainly means acting like you are not impoverished. people spend money, they feel it is the time. i don't know how to predict these things, it could last for a long time, but i suspect it might be changing with the story of the world ride -- worldwide recession that is supposedly coming. anna: i know in your book you dwell on that, the battle between frugality and conspicuous consumption. i want to ask you as we got you here, of course, the shiller index. very topical given our are we doon with you a pullback in prices, given what we see on the index? robert: that's a good question. the housing market is much more forecast double then our stock markets. is on a lock,et but the housing market is not a runway. momentum is a much stronger factor in the housing market. ourwe see the bottom of markets since the financial crisis was 2012. at first, when the market went up, it was stunning. over 10% a year appreciation. it has been gradually declining and now it's more like 3%. in real terms, it's getting close to zero. you can extrapolate this and it would suggest declining home prices in the near future. but i think it is hard to really forecast at this present time that the nation is going through a polarization crisis, much like in britain. would not be at all surprised if home prices started falling and credit companies were accompanied by a recession. matt: we could see possibly negative growth there. certainly negative real growth. you will stick with us, we have one more block with you and really appreciate your time. robert, sterling professor of economics from yell university. up next, we'll bring you some of the stock movers, including this british clothing business that has boosted its full-year guidance. yee-haw.ers say this is bloomberg. ♪ matt: welcome back to "bloomberg markets: european open." we are 47 minutes into the trading day and still looking at gains on the continent. you can see vladimir putin, speaking at the eastern economic forum in vladivostok. we will continue to follow that and bring you any developments. right now, he is talking about foreign investors at the russian space center. anna? anna: it has been quite the week in geopolitics . one driving force is social media. robert schiller has written a book on the subject, how stories of either -- as stories go viral and drive major economic events. he is still with us. we mentioned a social media, but it is not just about social media. this phenomenon of spreading narratives about the economy predicts that. i was looking at your book and whethery made me wonder the contagious nature of the stories about the economy mean we can talk ourselves into recession. is that something you believe is possible? i absolutely believe it is possible and it has accounted for many other recessions. this expansion we been through since the crisis it -- is 10 years old. people think it is inevitable. but now that we talk about meeting indicators incessantly like the inverted yield curve, which is thought to be a powerful predictor of recession. it has exactly the wrong affect. it encourages people to curtail their spending. it has not taken hold strongly, we're not in a recession, but it has the potential to. matt: the idea is, well, one idea is that central bank policy , these extraordinary tools they have been using since ben bernanke, have kept this expansion going at the cost of boosting inequality. do you see that as well? robert: i think it has kept the economy going. though there is a little bit of a contradiction there. the lower -- when they cut the lower bound of the federal front , it invitedo comparisons with the narrative so-called lost decade when the bank of japan cut rates to zero. it brought up the whole story of secular stagnation, which was originally introduced in 1938. quiet, but of gone now, that's back as another powerful narrative. so i think people are energy. -- edgy. but they are still in an inspired mood, inspired by our president who advocates big spending and success orientation. robert, you find yourself in the u.k. today where i'm not sure we have described the move as inspired. [laughter] i wonder what your assessment of the narratives around the brexit is. what is your assessment of the they have been spread and reinforce the discussion around brexit. talk about project fear when anybody tries to warn about the negative, economic impacts of brexit. robert: brings it reflects a polarization of british society. much like the british polarization we see the united states. the thing about narrative is they are often geographical, spread by social media but also by direct word of mouth communication, which is the most powerful contagion. so we have seen of the u.s. divide up into coastal and big who are veryons different from the rural and suburban appellations. , i see ain the u.k. split between london and the rest of the country. it is an emotional split, something that relates to a person's sense of identity. so this was an attempt to reestablish identity, ultimately , and it was driven by a narrative that is kind of scary and ultimately could lead to a loss of confidence. we have not seen that yet, but there is potential. matt: i did not even know there was a rest of the country or i thought it was just london, scotland, and ireland. thanks for joining us. sterling professor of economics at yale university. i'm showing off a little bit of my american ignorance and she's joking around. coming up, another defeat for boris johnson. losses are mounting for the new prime minister. we take a look at market reaction with richard jones. this is bloomberg. ♪ matt: welcome back to "bloomberg markets: european open." almost one hour into the trading day, we are still looking at increasing drops in london, now down 26 points but gains across the continent and especially here. want to talki about the week german factory orders numbers with richard jones. , is thisdisappointment going to per -- spur possible fiscal stimulus next thursday? the thing about factory orders is that it is a very volatile data point. it will give up the dots a stronger voice when the ecb meet . it seems to me that fiscal stimulus in germany is something that is going to be slow, however, this kind of data does make the point that something is needed on the fiscal side. matt: it is incredibly volatile. a cyber chart. of ae are hearing kind different message from all of the ecb speakers we are expecting. what happens on thursday? >> it will be quite a lively debate about but i do expect the ecb will lower interest rates. it's too soon for them to bring out the bazooka, if i can turn it that way, but that is coming in a twist the end of the year. i think a rate cut will come and we will get dovish language. matt: the best place to fire from a bazooka would be a helicopter, intent -- hint hint. richard jones, thank you for joining us. up next is surveillance. i'm headed over to radio. this is bloomberg. ♪ francine: boris johnson suffers his third major loss in parliament in two days. the prime minister says he will appeal directly to the public. the u.s. and china say they will hold trade talks in the coming weeks with plans to visit washington in early october. and we speak to the riksbank governor as they say they are still raising banks -- rates at the end of the year. good afternoon, everyone. this is "bloomberg surveillance." we will

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