♪ matt: good morning from a very busy berlin. we have a office full of reporters who have been here all night long, like the lionel richie song, because the german climate cabinet has been meeting since yesterday and has not been able to come to a decision on the possibility of a carbon tax or extension of the cap and trade system, and has not come to a conclusion about what environmental -- kinds of environmental package that could be in the tens of billions of euros ity wants to present. nejra: it will be interesting to see what that includes, and if angela merkel disappoints. she was criticized when she was environmental minister. it is the number one concern of german voters, and as far as what we could get, there are questions over some kind of extension of the emissions trading scheme, may be moving that to other sectors, and if there could be a carbon tax. all this could affect a number of companies, including airlines and also a lot of transport companies, matt. so what do you think might be delivered? matt: i am not sure, but keep in mind that german companies are already the highest-taxed in the entire oecd, so a carbon tax would possibly add a burden to some of them. it would help others, like electricity producers who would benefit from more demand. let's look at some market moves here. we have in terms of equity indexes, in asia we have for the most part gains. msci asia pacific index up 0.2%. the s&p futures, u.s. s&p futures are higher right now, and we did see the s&p close little changed at 3007 yesterday. in terms of the dollar index, it's falling a little, so we get a little dollar weakness here. nejra: after the massive jump we saw in 10-year treasury yields last week, 33 basis points, this week drop 12 or 13 basis points, yields continuing to decline today. 1.76% where we are today. a little yuan strength ahead of trade talks we expect. the pboc, some say the market was a little disappointed, and it eggs the question if we -- begs the question if we will see more frequent easing. what a week for oil. geopolitical concerns feeding into that, the latest the potential warnings and the word "war" from iran. a central-bank bonanza this week. a few cuts, notably from the and and holds from the boj boe. global investors are urging central bankers further and further down the stimulus wrote, ecbeasing by the fed and exposed divisions among policymakers that could make further action harder to push through. the milton institute's chief economist said the disagreement in policy at the fed is not a good sign for chairman jerome powell. >> we have three dissenters voting against powell, one of the hardest things to do, to rein back public dissent. powell is probably one of the weakest chairs the fomc has had. nejra: joining us is carl weinberg. great to have you with us. after the bank of canada n analysisthere was a that said neutral is the new hawkish. is that how markets have reacted? carl: the markets were a little ahead of the fed. two weeks ago, 140 basis points, and they obviously didn't get the signal anything near that is coming. i think what we are seeing, a a lot of mixed signals out there. that was chairman powell's line. wavering,mies are but not really turning down or going up, so taking a middle road until they see a clear path. i think that's appropriate for where the world economy is right now. matt: how do you see the u.s. economy? lookse measures, it relatively healthy in terms of 2% growth, 2% inflation, unemployment extremely low. and by some measures we see companies like caterpillar, deer, the latest fedex, saying the trade war is flowing to seriously hurt their ability to make profits. carl: let's put that into two parts. the u.s. economy has more good things than bad right now. there are red flags you have to respect, but at the core the labor market shows no signs of a downturn, and sentiment indices forthe other indicators, the most part the u.s. economy is doing ok. you can distinguish that from the rest of the world, where there are more indicators looking down rather than up. particularly in europe, where industrial recession has already begun, and in japan. the u.s. is doing better, the rest of the world is doing worse. now, the company's crying that china and world trade are killing them. a company that can't make money selling stuff in china right now, despite all the tariffs and everything else, selling to a market growing at 5% at a bad time of the year, 6% to 7%, they're doing something wrong. that's the only way to think about it. the chinese economy might not be growing as fast as we want, but it is growing pretty fast, and while disappointing from the point of view of development, it's still a place where companies that have good products and good marketing out to be able to continue share of growth. nejra: you made a key distinction between the u.s. and europe. explain why you saw the ecb action as more restraint rather than support of the economy? i thought that was interesting, in your outlook. when is a rate cut a rate hike? carl: we have been talking about this around here all week. it's not clear what we got from the ecb was easing of monetary conditions as far as interest rates. they lowered their overnight deposit rate, and that's easing, but at the same time they set up a two-tiered system for interest rates. most banks will be able to avoid that penalty interest rate and deposit money at the ecb at a rate of zero. so thanks with less than six times the required deposits, this will be an increase and should push up their average rates at the bottom. at the margin, a lot of banks will still find themselves, the findst banks will themselves still able to borrow -0.5% and the other banks at the margin, but it isn't clear this is a major change. this is a tweak. quantitative easing that can't possibly be delivered very long, and a mishmash on interest rates. rates were lower on one hand, but the tier system on the other, i caught a b-m -- call ia b-minus. matt: what rate -- what effect do you think negative rates have? we have seen studies from a few universities now, saying negative rates do not increase lending. in fact, they may hinder lending from banks. in fact -- and yet the ecb seems to act on the assumption that it increases lending from banks if rates are negative. have to go you don't to the university. just talk to me. negative interest rates are one of the scariest aspects of the current global economy. if a bank has to loan at a negative rate, the bank is paying people to take loans, the stupidity of that from a common sense point of view. loans to be good made from a bank at a negative interest rate. if a bank is funding at the short end of the yield curve, getting paid to take the positives, they can make a profit by doing nothing. if it loans out at a negative rate, it reduces the profit, increases risk. it will stop lending. that cessation of lending is a known economy killer. we are at a perilous point. negative -- lending rates are not quite negative, although some corporate's are. they won't borrow from the bank at rates worse than they can get from the market. we're at a dangerous point, where banks could stop lending. that would kill any economy. nejra: how soon could that happen? carl: right now it is not happening, to be fair. but one could imagine that over time, i heard in denmark there are negative loans at this point in time. we are on the cusp. if you take what's happening now, the decline of the yield curve, and extrapolate, you eventually get to that. it does not have to be that far down the road. we believe the factors pushing down interest rates in europe, particularly at the longer end of the curve, will continue. why are the yields going down? bunds are the benchmark, and they are subject to a shortage of supply. every six months the germans roll over their mature bund an issue less new bund, because they don't need to lend as much money -- borrow as much money and demand range the same. we have continuing upward pressure on price in an environment with no inflation, where the central bank is trying to ease monetary conditions although it is not clear they are doing that, or if they can. so the continued downward pressure on the bund yield curve is to be expected. as bunds go, so goes everybody else. matt: great to get time with you. you will stick with us. carl weinberg, from high-frequency economics, our guest cohost for the hour. sticking with central banks, the chief of the reserve bank of india is the latest dove to throw his weight behind lower rates, saying there's move -- more room for cuts after the fed delivered. speaking exclusively at the bloomberg india economic forum, he told us the fomc's move will spur investment in his country. greaterterest rates, flows into emerging markets, and india is one of the most attractive destinations for foreign investors and others. this should lead to inflow of funds into india, to some extent by fdi. while we welcome this, and we should welcome it, a mention was made of having a more liberalized regime to facilitate inflow of funds. at the same time, i think as a regulator, we have to be also very careful in monitoring this influence and focusing simultaneously on the possible spillover effects at a later date, to avoid any situation where there's an acid buildup. -- asset buildup. so one focus is to enable funds, but also to keep watch over possible adverse effects during the flow of all this funds >>. flows,talked about the and a possible adverse impact on india, especially when it comes to global oil prices. we saw the spike in oil prices. from where you stand, is the price of crude more of a concern? higher prices would lead to domesic -- domestic higher oil prices. the saudiw, as far as crisis is concerned, at the moment the range that has happened in the last 2-4 days, i not havenk, it will a significant impact on inflation. based on what has happened over the last 2-4 days. now, how it will play out, again time will tell. nejra: that was the r.b.i. das,nor shaktikanta speaking exclusively at the bloomberg forum in mumbai. let's get the first word news. addbelle: the fed will reserves for the fourth straight day, signs of stress from earlier in the week is rebuilding. the new york fed will inject as much as $75 billion through a overnight operation, but others are calling for a more permanent fix. in the u.k. the pound dropped -- jumped to a two month high on positive signals from brussels. the european commission president, jean-claude juncker, said that a brexit deal could be reached by the deadline. hearings concluded over the willfulness -- lawfulness of the suspension of parliament and the sipping court hopes for a decision next week. iran warned that a strike against the country could lead to "all out war," according to the nation's foreign minister speaking to cnn. he denied iran's involvement in attacks against saudi aramco, but added that iran is serious about defending itself. in japan, inflation hit the lowest level in two years as the central bank added to speculation it may up stimulus as early as next month. japan's key inflation gauge hasn't risen above 1% in years, and is expected to remain subdued. benjamin netanyahu's time as israeli prime minister might be coming to an end. a former ally of the embattled leader has told local media he plans to recommend rival bennty gantz as the next premier, after a election that failed to break a clinical deadlock. president trump may be bound then to lose one of his closest foreign allies. global news 24 hours a day, on air and at tictoc on twitter powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. matt: annabelle droulers in hong kong. coming up, it's better to talk than not talk. white house economic advisor larry kudlow sees a softening in the mood over trade, but our guest host carl weinberg sees no deal before the 2020 election. we get into that debate next. nejra: if you are traveling to work, tune into bloomberg radio live on your mobile device or dab digital radio in the london area. matt and i will join you there later. this is bloomberg. ♪ nejra: this is "bloomberg daybreak: europe." matt: -- nejra: we have breaking news from india, a slash of corporate tax rates for domestic companies. that is having a impact on the sensex, gaining over 1% on the news of the corporate tax cut. the effective cat rate -- tax rate for indian local companies, 25.7%. we have talked about potential easing for a while, not just from the central bank but on the physical front. theheadline, slashing corporate tax rate for domestic companies, impacting the market. let's check in on markets in asia. juliette saly in singapore has a lot more for us. juliette: we are running out the asiawith a gain on msci pacific index. but over the week asian stocks are down about 0.5% after four weeks of gains. topix on track for a fit weekly gain, up slightly heading into the close. asx 200 looking good as we see traders increase bets on another rate cut from the rba after the dismal jobs numbers earlier in the week. in terms of rate cuts, it was from the pboc, the loan prime rate barely nudging, but we have seen the offshore currency gaining today, paring weekly losses. the rugby world cup kicks off later today in tokyo, and most fans coming from the rugby nations of australia, new zealand, south africa and england. unfortunately, due to the strength of the yen this year, that means their purchasing power is down for these fans, almost 8%wi is off over this year against the japanese yen. what will they spend most of their money on? apparently beer. let's have a look at some of the pub, beer stocks this week in tokyo. chain,r 16%, a major pub starting to increase supply of a number of beverages, because apparently the fans are going to thek four times more than average japanese drinker. matt, nejra, i'm sure you have your picks. [laughter] a sweepstake and got namibia, so not sure my chances of winning. let's get the bloomberg flas withh annabelle droulers. ergabelle: jp morgan, bloomb sayinginformal memo global hedge fund balances have reached $500 billion, and the next goal is $1 trillion. the biggest u.s. bank spent the last years boosting its brokerage, climbing the ranks in stock trading. u.s. lawpes to undo a prohibiting federal agencies from using its equipment. the chinese telecoms giant is asking a federal judge in texas to rule that the law is unconstitutional, saying the law is designed to drive the company out of the country. the u.s. is asking the judge to throw out the lawsuit. facebook chief mark zuckerberg has met with president trump and congressional leaders, as the social media boss tries to sway policymakers who think critically of the platform. he's trying to head off concerns over handling of user data. facebook said meeting trump was constructive. the president later tweeted it was a nice meeting. and more worries for wework. bloomberg can exclusively report banks providing the company's credit line are looking to revise terms of the deal. go public onled to downs over the value of adam newman's collateral. it is unknown what changes they are seeking. representatives declined to comment. that's your bloomberg business flash. nejra, matt? nejra: thank you so much. in china, analysts are calling for stronger easing signals from beijing after a new gauge of borrowing costs was slightly lower. the reference rate was sent at -- set at 4.2% in september, 4.25% in august. matt: on the trade front, chief white house economic aide larry kudlow sounded an optimistic note on upcoming talks between the u.s. and china, telling fox there is a little softening in the air. blog, asking on the mliv how far could stocks rally if trade progress is made between the u.s. and china? carl, it's an incredibly nuanced question, obviously, and depends on what kind of progress, and the time zone we are talking about. but are you optimistic there could be a positive outcome? carl: no. no. not really at all. i think china has drawn red lines about what it will take to get them back to the table talking about a deal seriously, and those are not goals shared by the trump administration, as far as i can see. china tried for 10 years under president hu jintao to work with the u.s. collaboratively. now under president xi, china has decided to move on its own, and president trump has made it easier for them to do that, setting up barriers to trade and globalization. china is just stepping in and filling the vortex. at this point, i think the chinese have no interest in giving president trump a plank for his reelection platform. they are insisting on the fact they be treated equally at the tole, that they come objectives that are attainable in terms of goals for trade, and most importantly that all tariffs are dropped immediately. we've seen this and that, but they have taken the tariffs on soybeans is a nice gesture, but not a lot of soybeans are yet to be committed in october. most of that has been done already. it looks nice from the outside. but i think, having pray -- paid the price of tariffs already, they are prepared to endure. nejra: china certainly has more room for rate cuts then he a lot of other central banks. carl: i have a noncontentious view on that, but i see china is growing just under 5% in a bad month, and on average 6.5% to 7%. that's not as strong as we would like it to be, but still pretty good economic growth. the way that you grow industrial exhaustingis not by slacking existing factories, but building 4.5% more factories. so they are building factories, expanding. not like people around the streets losing jobs or losing incomes, needing social support. there's no crisis, as you might see say in the downturn in germany in the unit -- or the united states. nejra: carl weinberg stays with us. coming up, light at the end of the tunnel? jean-claude juncker thinks there could still be a brexit deal by october 31. we will discuss. 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. >> if the economy does turn down, a more extensive sequence of rate cuts could be appropriate. >> from the indian point of view, any cut in interest rates would mean better flows into emerging markets. >> we have more space. as soon as possible, 1.7%, 1.75%. >> it is correct to say we are more inclined towards additional easing than the last meeting. >> domestic growth prospects and fiscal risks. >> all central banks realize if it goes on and on, there are negative effects to rates being negative. >> i don't think we would look at negative rates. i don't think those would be at the top of our list. easeoj has more room to than the ecb. >> we have a strategy at the ecb under the presidency of christine lagarde, but personally i see no reason to change our rates. nejra: some of the top central bank governors talking about the outlook on monetary policy. a big week for central banks. the start of the rugby world cup today may offer chances for reflection, but for the game of rugby itself as an allegory for the wider markets? our senior producer thinks so. look what he put together. the federal reserve, bank of for and ecb pushed forward with rate cuts, leading the line. and then, holding their ground, boe, rba, and bank of japan. sugby fans, that came a surprise froma the nordic bank yesterday. matt: the lone hawk. there are risks to navigate, of course. wars,rum has seen trade geopolitical tensions causing problems. how to navigate that? half touad needs a fly open the door, like jeffrey gundlach, and if all else fails, rely on your fullback to hold things together. ecb president mario draghi, this month seeing his last or second to last chance to salvage the eurozone economy by restarting quantitative easing. he only has one meeting left in charge. sticking with central banks, pressure is building on the fed to permanently increase its reserves as it prepares for a fourth straight day of liquidity injection. carl weinberg from high-frequency economics is still with us. i have been seeing so many debates online, iit's seeped ino twitter, reddit now. what caused the credit wrench driving rates to 10% on tuesday? was it really corporate tax payments and too many debt sales? or it the euro carry trade, the saudi attack causing oil to jump $12 a barrel? what was the problem? carl: all of those things. we had incredible demand for cash on monday, and taxes were part of that. you forgot to mention the funding of the u.s. deficit, a huge auction at the same time. all kinds of things going on. this was not a macroeconomic move or anything to do with the economy. this was about technical juju inside the cash market and the financial system, and i would fall asleep talking about it in great detail. you'd need someone who is really into it. but as chairman powell suggested, no cause for alarm here, no reason to adjust macro policy. this is not about the economy, this is just inside the sausage factory. nejra: i'm no expert on this, either. but if it goes unchecked, it could have any impact on wider borrowing costs for consumers and corporates, so some say the fed needs a more permanent fix rather than these cash injections, like it used to do before the financial crisis. then the markets are on tenterhooks of whether they will get enough of a cash injection. so something like for example expanding the balance sheet, it was mentioned in the news conference but they didn't say right there they are doing that. would that be a good option? carl: expanding the balance sheet would be part of being able to flexibly expand. to make up an analogy, like in a motor, you have to pay attention to the amount of oil, keep it appropriate for the conditions in which the vehicle is operating, without which the motor will break. market.he repo and then there is a accelerator that the driver has that makes the motor turn faster or slower. you need to monitor both pieces. uniquely accelerator for the card to move forward, but also the right amount of oil. the oil got a little stuck on sunday, causing the upset. if you don't fix it, the engine will not run, so you have to fix it, but that doesn't change what you want to do with the accelerator. matt: to carry on with that analogy, and i like that, the fed used to continually add oil or take oil out as needed, before the financial crisis. i remember a a lot of ongoing market operations. markets also did that for themselves before the volcker rule and dodd-frank. so, is either one of those going to change? four days in a row, the fed back in the markets. will they be a consistent player there again, or do you think the volcker rule needs to be further softened or changed so markets can try to take care of that themselves? carl: again, i am no expert on the intricate workings of the financial system. but it seems to me the problem is not about changing rules. th problem would bee, if the fed isn't doing what it is doing, is job to assure liquidity adequate for the financial system to continue operating without breaking, regardless of the strains or demands on the system. that's what it is doing. if it were not doing this, i would be worried. they are doing the right thing by addressing the problem, and they have to come up with a more permanent fix. but for the moment, they are doing what has to be done, and i feel good about that. matt: carl weinberg, chief international economics at high frequency economics. it has been a real pleasure talking with you. thanks for spending time with us today. let's get the bloomberg first word news. for that, we go to annabelle droulers in hong kong. annabelle: iran warned a strike against the country could lead to "all-out war," according to the nation's foreign minister speaking to cnn. he denied tehran's involvement in attacks against saudi aramco, saying he hoped to avoid a conflict but adding iran is serious about defending itself. in japan, inflation hit the lowest level in two years as the central bank adds to speculation it may up stimulus as early as next month. core consumer prices rose 0.5% in august from a year earlier. the key inflation gauge hasn't risen above 1% in years, and is expected to remain subdued. benjamin netanyahu's time as israeli prime minister might be coming to an end. a former ally of the embattled leader told local media he plans to recommend rival benny gantz as next premier, following a election rerun that failed to break the political deadlock. for president trump, it might mean he is about to lose one of his closest foreign allies. controversy over president trump's communications with a foreign leader. "washington post" reports an anonymous whistleblower raised concerns over the president's dealings with ukraine, and democratic lawmakers now accuse intelligence officials of stonewalling details of the complaint. president trump dismissed suggestions he did anything inappropriate. ofna's lowered its new gauge borrowing costs, but analysts are calling for stronger easing signals. the reference rate for bank loans was cut five basis points to 4.2%. the pboc has tweaked policy in recent months, but has retrained -- refrained from more aggressive stimulus to support the nation's economic slowdown. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. nejra, matt? nejra: thank you so much. let's get a check on the markets. joining us from bloombergquint andumbai, agam vakil, annmarie hordern. the sensex was heading for the worst week since may, but has popped on news of a cut for corporate tax rates. take us through that move? agam: absolutely. surprising move, from the finance ministry, considering that they are proposing to cut corporate taxes from around 30% to just a little over 25%. for those who don't have any exemptions, around 22%. this is evident from the moves we saw in the markets, advancing strongest inhe the banking index as well. once again, we need to look at the implications, but for now markets are certainly cheering the move. see -- on not we do because foreign portfolio investors have been selling on a consistent basis, and this could be a game-changer. matt: thanks very much. annmarie, you are looking at the markets after a mega-week of central-bank decisions. we are closing out the week after central-bank decisions being the driving force behind the markets, but today modest gains across the major indices. chinalia higher by 0.3%, higher by 0.4%, and japan ekeing out a little gains. the dollar is weaker, with a strong euro and yen. the british pound this morning theing north of $1.25, as european commission president says he believes a brexit deal could be reached by october 31. sovereign bonds, a mixed picture. in commodities, iron ore up this morning by 1%, but don't let that full you -- fool you. it has been a roller coaster for the metal, down 7% on the week as demand softens. crude oil, wti just under $59 a barrel. a little upside there, the geopolitical risks still encountered in the oil market, foreignsterday iran's minister said that any strikes from u.s. or saudi would lead to an "all-out war." we see optimism in the pound about a brexit deal, but different when you look at options. traders had quietly accumulated over one million derivative contracts, which would pay off if the boe cuts rates by 50 basis points next september. the pickup in august, when boris johnson became head of the u.k. leadership, and of course now the bets are at a record. nejra: thank you so much. let's hurry on with brexit, and highound hit a two-month after the european commission told sky news he sees a deal possible before the october deadline, and his latest meeting with prime minister boris johnson was more positive than reported. carl weinberg from high frequency economics is still with us. we saw negatives before, so hard to know what's going on below the surface. are you positive we will avoid a new deal brexit? carl: i am watching with great interest, and it is really impossible to call. i agree with you. there is a lot going on underneath the surface. the europeans have circled their position, that the deal is not going to change. but they have listened to what prime minister johnson has to say, but we don't see him submitting the kind of written proposals and ideas that the european union says that it needs in order to consider a deal. so we step back, look at the big picture, it has gone nowhere and is going nowhere, but we don't know what is going on. matt: this is killing me, because i have been saving up in this new ducati sheffield, and i almost pounced when the euro was trading 93 pence, now back down to 88 and i am not sure i can afford it. why is the euro so weak against the pound, even against the dollar? is the euro area due to lose big if there is a hard brexit? carl: first of all, a matter of simple finance. yields in the united states, the 10 year is 2%, and yields on the bund, -.5%. a pretty widespread, which had to get your attention as a investor. even with the currency risk, you come out of that ahead in the u.s. rather than europe. to my mind, this is the driving force right now. europe is interesting, but not dominant in currencies. right now the u.s. is a magnet for money, and the stock market is performing well. i think the u.s. is the magnet right now. nejra: the pound could get to parity with a hard brexit, bny mellon said today. they said parity with both the dollar and euro. something you foresee? carl: that's a good guess. everyone agrees sterling would be a lot weaker in a hard brexit . how much weaker than now is hard to tell. we have a lot of information already priced in,, and no surprise to everyone that october 31 is the deadline. you look at the calendar and see we are five weeks away. not a lot of time. there is a lot of information in the markets already. i think there's downside to sterling, and i have always been worried about sterling's current account deficit, which is atrocious. now with brexit uncertainty, people willing to finance less, sterling is vulnerable to the downside, both for brexit and non-brexit reasons. matt: carl the chief international economist, at hi frequency economics, we get to keep you a little bit. coming up, discussing germany's dramatic climate proposals next. this could move markets, and, well, it could save the earth. so important to watch. this is bloomberg. ♪ nejra: germany is expected to announced sweeping plans to cut carbon pollution today. angela merkel wants to use wind and solar power to generate 65% of the country's energy, but the cabinet does not agree how to achieve this dramatic change. i leave it to matt to explain more. matt: berlin is stepping up efforts to tackle germany's pollution problem. the government's climate cabinet will draw up plans to meet the 2030 omission goals, to reduce greenhouse gases to less than half of 1990 levels. but not everybody in the grand coalition agrees on how to reduce germany's carbon footprint. two main options up for discussion. one, to expand the carbon credits program known as the emissions trading scheme, or two, an entirely new tax on carbon fuels. chancellor angela merkel's christian democrats are worried a simple tax could spark a popular backlash, like the yellow vests movement in france. instead, they prefer a market-based trading scheme, arguing it would put the burden on large energy consuming companies and only affect consumers indirectly. but critics point out it could place german companies at a competitive disadvantage, and merkel's coalition partners, the social democrats, argue putting the burden on companies will still raise prices for consumers, the poorest of which could be hit the hardest. instead, the spd proposes a simple tax that could be subject to rebates to help the country's working-class. the results of the debate will be released this morning, and germany will decide how to set its industry on track to lower carbon emissions while not weighing down the already sluggish economy. packagewould say that was produced by my crack producer, agatha. i just read the script. but incredibly important issue, and when the market is following closely. joining us to discuss more, anna rosenberg, the head of europe and u.k. at signum global advisors. that's just one of the many decisions that could come out of the so-called climate cabinet today. another one of course is a package that some say could be kind of a fiscal stimulus in disguise. what do you expect the germans to deliver? anna: absolutely. we think it is a fiscal stimulus in disguise. the reason for that, there is a big reluctance in germany to spend beyond your means, and of course germans have been budget policy.e now result, there's something more important psychologically for germans than to adhere to the balanced-budget, to protect from climate change. so we think the package, which could be anything from 12 to 40 billion, even 100 billion i read earlier today. quite substantial. it's not just going to benefit climate change initiatives. we think it will trickle into the wider economy as well. nejra: interesting, in terms of parts of the economy like transport, and infrastructure. anna, what would be enough in terms of a package that delivers? angela merkel has been criticized in the past, when she was environment minister, for not acting quickly enough. o2rmany is the biggest c0 emmitter in germany, the fifth biggest in the world. what would be satisfactory? anna: a lot of things germany needs to address, and climate is one of them. under this climate umbrella, germany has a huge need to invest in infrastructure, especially the railways. it has a huge need to invest in technology, in making companies more competitive, and there is a growing call by companies to ensure the government starts spending money to get the economy going. for me, i am looking for, is the money going to climate change initiatives going to affect wider business environment and if you will future-proof germany? matt: look, i have sampled a lot of the electric products from volkswagen, bmw, daimler. one of the problems is infrastructure. you can't really buy one of those vehicles if you want to travel long distances without freaking out about filling up. if we get the support of the german government, is it a win-win for the companies? ofa: absolutely, because one the big focuses will be on electric vehicles, getting subsidies for electric vehicles. in a way, it will force the companies to innovate more, and invest in alternative mobility. matt: -- nejra: i read an opinion piece that said germans will have to reconcile their love for gas guzzling suv's with the desire to move forward on cutting co2 emissions. in terms of flying, the element of this, and lufthansa could win if we have raised prices? anna: the cheaper flights, competitors being undermined, so lufthansa could benefit. but quite frankly, the air and flight issue in my personal view is one that is more emotional than rational. i think that is something that voters want to hear, but i don't expect those changes to be really significant or affect the industry. matt: somebody sent me a video, morning.thunberg this germany, every friday we have all these schoolkids out around the brandenburg gate protesting. are they going to be able to turn people around from their giant carbon footprints? i am in the air every week, and of course driving around a lot as well. i'd like to not do that, but i can't because of my job. are people going to actually fly less? is that going to happen? anna: that's a good question. hasink that in a way, there been obviously a huge uptick in short-haul flights in germany. i don't think people will fly less anytime soon, and i don't think focusing on flying is necessarily the right thing. in a way, i think germans need to change their attitudes to driving. i think they need to be investing into public needs tocture, which pick up significantly so it is easier and cheaper to travel by train. that is critical. i think people have bought into this, but i don't think the main focus will be on flying, but much more about making sure that your buildings are as possible, making sure the railways carry more effectively, and those measures will be more impactful. nejra: really briefly, public opinion has come around. what about the conservatives and fiscal elites? anna: this is where it is interesting. by now, the climate change issue used to be an issue mainly advertised by the left and the green party, but now it is certainly much more mainstream, and it's not just mainstream among politicians, but among business leaders, economists, et cetera. in a way, they hope this climate change package is to filter into a wider stimulus. nejra: great to have you with us. signum global, advisors. bloomberg users can see all of our charts with g tv . ♪ beyond the routine checkups. beyond the not-so-routine cases. comcast business is helping doctors provide care in whole new ways. all working with a new generation of technologies powered by our gig-speed network. because 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. nejra: good morning from bloomberg's european headquarters. nejraere a chain pitch -- cheic. matt: different strokes. the boj makes a big cut to bond buys. china's stocks shrug after the pboc takes the loan primary. india cut taxes. the nation will lower corporate rates by five percentage points in a bid to spur economic growth. and on the up. sterling jumps after jean-claude juncker says he thinks a brexit deal can be reached by october 31. nejra: welcome to "daybreak europe." i know you are bracing for climate change protests happening in germany, and it is fascinating. angela merkel under a lot of pressure to deliver. if she fails to do enough with this, it could be a stain on her legacy. previously, environment minister, she was criticized for not acting fast enough. what sort of things are being discussed in this package? matt: to be clear, the protests happen every friday outside this office. aey are almost as much celebration as they are protest. these kids are skipping school as well as trying to save the planet. merkel, terms of angela there is a bigger issue for markets. as anna rosenberg told us, a fiscal stimulus package in disguise. we could see tens of billions of euros poured into the green economy. that seems like it could be a win-win. you save the earth and you drive consumption. who would not want to do that? nejra: what you have got to get over is the feeling of not wanting to bend too much in germany. matt: exactly. nejra: the number one concern for the public, and our previous guest said, even some conservatives and political elites are on board with this. the question becoming, how it appears? is it an extension of current emissions trading schemes? do we see a carbon tax having an effect on german companies? some headlines coming through from rbs. big headline. rbs naming allison rose as ceo. there was a lot of speculation this is what could happen. rose has already been in another role at rbs for quite a while. now we have a female ceo and a female cfo at rbs. the cfo being katie murray. this headline crossing the bloomberg, we will get you more details as soon as we can. some data breaking in germany as well. more fantastic that we see women in these roles outside of germany. you don't see that very much, certainly not at the banks or the important carmakers. let's take a look at german -- speaking of this country, the producer prices actually rising from a year ago. 0.3%, still better than a stick in the eye from a year ago. figure,h over month german producer prices falling 0.5% in august from the previous month. asyou are in inflation watch mario draghi is and a lot of germans are, they hate spending money. the germans don't want to seem more inflation, but they would like to see closer to 2%. they are a long way off. that could be a problem for the ecb. nejra: i just want to go back to this rbs statement. ison rose isl going to take over this position as ceo of the overall group on the first of november after an orderly handover has taken place. that is the details we have got through from the statement. howard davis saying, i am confident we have appointed the best person for the job. ison rose brings a track record of success from her previous roles at the bank. let's get to the futures. taking a look across european futures, seeing how they might react, we are a little bit on the downside here. futures off just a little bit. what a big week it has been for central banks. a lot of talk around -- stories on the blue bird talking about the fact neutral might be seen as the new hawkish. take a look at u.s. futures. there we are little bit more steady, not seeing the negativity come through as we , we closed flat yesterday on the s&p 500. more action in the bond markets? matt: let's take a look upon bond futures here. hadr the quiet days we surrounding the big central-bank decisions, when you have those, you tend to see less volume, less -- not less volatility necessarily, but you see people sit on their hands until you get a decision. now we are seeing movement. german bund futures are being bid up, so you could see rates further negative. italian btp futures bid up as well. you could see that start to widen out. you see the 10 year bond future right now trading down. downlso see the cash yield about two basis points. right now, 1.77% is what you get . take a look at the markets in asia. for that, we go to juliette saly. juliette: we are seeing some slight gains on the msci asia index. muted trading for most of the region, except india, where you have seen a big pop coming through in indian equities after we heard the government is planning to slash the corporate tax rate. the biggest jump we have seen since may. the csi 300, pretty muted. not much movement in terms of rate thatan prime happens on the 20th of every month. very minimal. higher. stocks slightly the topics on track for a fifth weekly gain. we have the nikkei closing higher. speaking of japan, some move coming through from the bank of japan. they are trying to steepen this yield curve and they may cut the bond buying purchase program across three sectors simultaneously, this is the first time we have seen that happen since 2016 when they introduced the yield curve control using the regular operation, a lot of buying across those zones by combined ¥50 billion. that is about 400 62 $3 million. -- $463 million. movement after we saw that slide in the long term yield. thanks very much. juliette saly looking at yield compression. a central-bank bonanza this week. a few cuts, most notably from the fed. a host of holds from the likes of the bank of japan and the boe . our global investors are urging central bankers further and further down the monetary stimulus road. they cannot drag them all the way. easing by the fed and the ecb exposed divisions among policymakers, almost even splits , which could make further dovish action harder to push through. joining us to discuss further is the chief strategist at principal global investors, semma shah. what do you think about the increasing amount of dissenters? it seems central banks have gone the way of the voting public and they are split down the middle as to which way to go. been very interesting. we have slightly different situations. for the fed, that split has been down to this difficulty where the u.s. economy is going. is europe, one of the things , i think they acknowledge it. there is need for stimulus. whether or not negative rates are becoming damaging as well. nejra: is this a delaying tactic in a way because eventually these central banks, particularly the fed, are going to have to capitulate to market pricing? a good point. this is one of the things that has become important. they are taking more consideration of bond market pricing than they have previously. it has become more confusing for people to understand what it is they are actually focusing on. as they start to think more about what the bond market is pricing in, held hostage by markets delivering what the market wants them to do, you're going to narrow it down. it does not always function very well. at thehen you look possibility of moving the needle, how much does mario draghi actually get, for example, out of a 10 basis point 20 billion euro monthly bond purchase program that could go on indefinitely? is he going to raise inflation with that? or is it almost a symbolic move for the markets? seema: i don't think it is a symbolic move, but you raise a really good point. the ecb, more than any other central bank, maybe the boj as well, they cannot do very much more. these cuts, qe, can only move the dial slightly in terms of the monthly transition mechanism . what they are able to do, is move the euro. they managed to weaken the euro through monetary transition mechanisms, through policy rate cuts. it can help the german economy especially. you're talking about the ecb moving the euro. one of the things they have to contend with is re-steepening the yield curve. we have flattened this week on the back of the fed. still in positive territory. what is also interesting is that equities did not react negatively to the fed. despite some people coming out and saying it was a hawkish cut. a discussion saying we did not necessarily agree with that. the two year yield has come down, or at least stayed -- well know, it has come down this week. getting word of what powell said? do you think u.s. equities can push higher? seema: it is very interesting. powell gave a clear message that he had previously. they did not have the communication problems he has suffered. the message he managed successfully to get is we don't feel the economy needs bigger cuts, but if there is further weakening, we stand ready to deliver more. there is a dovish bias here. for markets, as long as you don't have any big shocks, deepening of trade tensions, no in oil prices,se equity markets could make a slight rise. you are really looking at range-bound trading from here. matt: do you see a way out of the negative rates trap? three quarters of the world has fallen into it. do you expect it anytime soon? when you sit down at night and think about your long-term strategy, are we stuck in negative rates for the next five to 10 years? seema: we could be. one of the only ways to break free would be fiscal policy. this is why there is so much focus on europe introducing some kind of fiscal package. that is the only way we are going to move away from this. the only way we are going to raise the growth rates and see if those interest rates rise. india has cut its tax rates to one of the lowest in asia as it seeks to resurrect economic growth. the r.b.i. governor welcomed the government announcement, calling it a bold move. joining us now is our new delhi euro chief. -- bureau chief. welcome to the show. so great to have you with us. tell us what the finance ministers announced and why the market is taking the news so favorably. was it very unexpected? >> good morning. there was no inkling such massive step was coming. what effectively have done is injected $20 billion in terms of a tax cut this morning. the effective tax rate for goes down to about 25% from 30%. for new companies in the manufacturing sector, they get to pay 17%. that is one of the lowest in asia. markets are quite obviously thrilled about this. jump.ve a big at the same time, bond yields. next inat might be terms of fiscal changes from the government? >> essentially what they have done so far has been incremental steps. this would be a milestone step. the government has obviously talked about corporate tax, but it always shied away from cutting that tax rate for fear of breaching the target. what the finance ministers said -- thisuld be more would be the biggest step in the coming future in terms of stimulus. , this will lead to -- because if companies pay lower taxes, they are sure to pass it down to consumers in lower prices. from thesebridge steps. matt: thank you for joining us. ,ur new delhi bureau chief giving us the down low on the biggest moves in global markets today. to recap the news out of rbs. they have named a new ceo, alison rose. i have my mbp screen, this shows the most viewed people on the bloomberg. the most viewed. clients are clicking on this. to check out may be their new boss, may new competitor if they work across the street. ceo, a second female big bang ceo in europe. there still are none -- big bank ceo in europe. there still are none in the united states. if you work as a competitor, you better watch out. of course, it's great, because we have a female ceo and cfo at rbs as well. ♪ matt: good morning. it is 20 past eight in berlin. we are 40 minutes away from market open, no matter where you are. this is "bloomberg daybreak: europe." nejra: now, to brexit. the pound rose to a two-month high over the dollar as jean-claude juncker showed optimism. he still sees a deal possible for the october deadline. with oris meeting johnson was more positive than reported. do you buy this optimism about avoiding no deal? in the event of no deal, you could get parity with the pound for both the dollar and the euro. seema: that is very concerning. the idea no deal brexit is not off the table, 25% chance still -- going by that, sterling is far too high. we would have thought going into october we would be about 120 by now. matt: i'm looking at euro pound dropping down to 87 pence now. that weakness is even more pronounced. what do you think happens to the euro in the case of a hard brexit? we focused so much on the problems the brits would have cutting medicine and crossing the border, but what happens to europe trade from the continent would surely suffer as well. seema: it would be a significant hit. if it happened a year and a half ago when the european economy was stronger, we would not be as worried. at this stage, on the cusp of recession, no deal brexit could be very damaging. we would expect considerable weakness in the euro as well. nejra: you have a 25% probability of no deal. how much happens, upside could be see in the pound? are we that level by now? seema: there is prospect for a deal. i don't think we are counting that out. what we are more likely to see is an extension from article 50 for another three months, then you have an election coming up in november. there is so much volatility, so much uncertainty, that is going to be weighing on the pound. if we get a deal and you leave europe on the 31st of october, we are thinking we will see the euro about 130 to 135. it depends what the deal is and what the relationship is with the european union. we were talking earlier on the continent, they have been great. date, the cac is up 20%. the dax is up 18. they are basically doing as well as the s&p 500, almost as well. the ftse has really underperformed by half. it is only up 9% year to date. stocks,pens to u.k. which we have been hearing for three years, brexit does not matter because they are international companies, but clearly it does have an effect. it absolutely does. in august you had a very big jump in the ftse despite sterling weakening. usually you would see that moving the opposite direction. companies -- investors have gone as far as they can, now they are becoming fundamentally worried about what the impact will be on the u.k. economy. no deal brexit, we would expect a significant fall in the u.k.. nejra: thank you for being with us. let's get back to the story that broke at the top of the hour. appointed ceo at rbs. she's going to take the position november 1 according to a statement from rbs that has come out this morning. it will make her the first woman to lead a top u.k. lender within rbs. that means they have a female ceo and cfo. rbs have announced in april they will begin an external and internal search. we have the decision that alison rose is the ceo. joining us from rome's bloomberg's european finance editor. great to have you with us. will the markets seem alison rose as the continuity candidate after all the transformation that happened under mcewan? >> well, she is an outsider. i suppose less so than perhaps if they had had one of the inside candidates. clearly, her experience is with a significant u.k. lender, not as big as rbs, but a u.k. lender. she has been in the mix for a long time. like you said, they are looking internally, externally. this indicates they seem to have picked her some time ago. she has been the leading candidate for some time. this mean for -- it is interesting to see a woman running the bank. they have a female cfo as well. obviously another, suntan there -- santander. you don't have any woman running big banks in the u.s.. are we going to see more of this? do you think it was a consideration? >> i don't know if it really was. this, as i have followed they are looking at her on her qualifications alone. i don't think it is to take a box and say, look, we have a female ceo. there is much too important work to be done at rbs. holes tostill a lot of get out of still. i doubt the motivation was so much because they could have a female candidate, say, look what we are doing here. i think this is more of a qualifications thing. can't really say what it means for the bigger picture of things. thank you so much. speaking of qualifications, al that hasently is the been the ceo of private banking. howard davis said i'm delayed we have appointed alison. she brings a track record of success from her previous roles at rbs. that is all for "daybreak europe." this is bloomberg. ♪ anna: good morning. welcome to bloomberg markets "the european open." edwards alongside matt miller in berlin. neutral the new hawkish? chinese stocks shrugged after the pboc tweak to the country's loan rate. futures point lower ahead of european cash trade, less than 30 minutes away. anna: rbs gets a new boss. alison rose

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