Record. Manus it is daybreak europe. The words of the Vice President of the United States of america now open up a new salvo in the trade wars. Those words are the president has made it clear it is going to be very hard for us to do a deal with china. Geopolitics and human rights is the new escalation in trade wars. Nejra it is interesting, the timing of these two stories coming through both having an impact on the markets in terms of the hong kong bill and how that could have an impact on the negotiations. They are going to go back to that may template in terms of rolling back tariffs. We know how much hope there was ahead of that only to be thwarted later on. Highrises of the beijing. We have come here specifically to host some pretty good interviews. The roster is pretty high quality. It is the Bloomberg NewsEconomy Forum. We will speak to the Standard Chartered ceo and the ubs group ceo. We are going to catch up with the Goldman Sachs chairman and ceo david solomon. The former white house chief advisor gary cohn. It is going to be a busy day. Im going to show you something. It was not supposed to go this way. The fed was supposed to have saved the day. The yield curve is back in a flattening trajectory. They have narrowed for the fifth day in a row. Dropping by nine basis points. We are back at 18 basis points. The phase one trade deal was so much in the price, but we reverse pretty much all of that with the Vice President s words this morning. To the oil market, lets have a look at the oil and the gold market. I call it the doubting thomas of the market. It is concerned about trade, resolution, a huge glut of oil and a lack of conviction from the russians. Gold. Giant risk event for 2020 according to td. One of the hedges is gold. Good morning. Nejra good morning. What ive noticed is that a lot of the flattening was driven by the yield dropping more on the 10year then on the front end. 1 10 year yield now below a 75 1. 75 handle. We are seeing the selloff in hong kong in particular. U. S. Futures also on the back foot. Yesterday, we saw the nasdaq. We saw some concerns about some of the retail earnings. We had the debate between Jeremy Corbyn. Afterward, the margin of error between the two was not as big as expected. Have been saying, global stocks have taken a hit after the u. S. Senate unanimously passed a bill aimed at supporting protesters in hong kong and warning china against a violent suppression of the demonstrations. Beijing has warned of retaliation. Lets get to hong kong and bloombergs asia government managing editor. What is the reaction in hong kong to this latest news . Reaction by hong kongs government has been to express extreme regret. Telling the linux sensually from beijing towing the line he sensually from beijing. Essentiallyg from beijing. The Hong Kong Government said this is the place where the u. S. Has the largest surplus in any jurisdiction. Beijing has summoned u. S. Embassy officials in beijing to express their strong reservations. They have threatened unspecified retaliation. Most people are concerned this would impact the ongoing trade talks between the u. S. And china trip change the special trading status for hong kong anytime soon. That is way down the road and quite unlikely. Manus ok. Our thanks to our government editor in hong kong on the political side. It marks aed challenge to the government in beijing. Just as the u. S. And china seek to close a preliminary agreement in the trade war. Joining me now in beijing, is our guest. We have our guest host for the moment in london. Let me bring it to you, first of all. What impact will this have on the trade talks . The chinese have said be prepared, we are not going to roll over on this. [indiscernible] these are some of the absolutely key issues for chinese leadership. The risk is that the senate bill redline. Crosses a it indicates that the u. S. Is trying to interfere in chinese internal affairs. Of course, china wants to get a trade deal done. The economic incentives are lined up behind a phase one deal for both sides. Beijing,me time, for some things are more important than economics. The one china policy is more important than economics. The risk here is that those political concerns now intrude on the economic logic and a phase one deal gets harder to do. Nejra speaking of whether it is hard to do or not, i do feel that what markets have been pricing in leaves a lot of room for disappointment. Now we understand going back to the may agreement and looking back at that, should markets take that negatively because we know what happened six months after . If you could get back to the may agreement, you get it done. It would have been in the best place in terms of market sentiment. Bond yields might be higher. Things would have been more optimistic. I think the danger this morning s they could not get that done because the two sides viewed things differently. Proper sortrow some of bits and bobs of machinery into that conversation and make it even harder. I think the markets are priced for most of the more recent tariff and being reversed. We have a certain amount of unwinding of tariffs priced into the price at the moment. I think people need to start thinking over the next few days of maybe there was a real danger that nothing gets unwired. Manus ok, hold that thought. If we take this as a bit of a spanner in the proverbial phase , they are talking about 5. 7 . If there is no phase one deal and tariffs to get impacted in december, how much more real is the sub 6 growth . Tom we think we are going below 6 with her without a trade deal. Dealiew is that the trade affects the composition of growth not the level of growth. If we get a trade deal, we go below 6 , but it looks a bit healthier. We have more exports, more private sector investment. If we get the tariffs rolling in, we still go below 6 . It is more supported by unhealthy stimulus mix of state driven investment. Nejra what does this mean for the global picture . Over the past few weeks, there has been a lot of talk about the bottoming of the Global Manufacturing cycle. How optimistic are you about a intoming and a bounce back 2020 . The imf managing director was fairly optimistic yesterday. A coupleink there is of things which have happened in the past few weeks. It has made Global Markets a bit more optimistic about the 2020 outlook. There is the hope of that phase one trade deal. Secondly, fears of a hard brexit have receded a little bit. Now, if we take the phase one trade deal out of the picture or even worse if we actually get those december tariffs rolling on, not air base case, but certainly a possibility of talks unravel, i think some of that optimism of stabilization is going to start coming out in the markets. Manus can i bring it back to you in terms of the currency exposures . We are seeing a little bit of yuan. In the one we have seen incremental policy responses, that you have been referring to. What about the yuan . If the u. S. Is prepared to go for the political jugular, what next for the pboc . In terms of policy overall, they have resumed easing. It is a change of direction. Hadimpression that we have rate hashe dollaryuan risen from the perspective of domestic exporters. Back on the assumption of some of the tariffs being reversed, being taken off again. , we are full swing going to be back above 7. 20 sooner than we have thought and we will be pity bearish. Bearing in mind how important the yuan is to the entire planet as far as a currency, it is more than 20 of lots of other peoples tradeweighted bias, that is going to be a real nuisance for president trump. It strengthens the dollar. It strengthens the euro. It strengthens the yen in tradeweighted terms. It is not at all helpful for those people hoping for calm currencies and especially the one in washington who holds the softer currency. Nejra the importance of the yuan highlighted this week in terms of dollar offshore and the 10year yield. To get the 10year back above 2 , the yuan would have to strengthen. 7. 20, how low could we see the treasury yield dropped . Kit i kind of think that that is a correlation rather than causation. Nejra ok. Kit in a world where im seeing yuan, im seeing the bottom of this range, even before i start having the more meaningful conversations about there is a bigger risk than the markets pricing of a recession at some point in the next 18 months in the states. Nejra our thanks to tom. Kit stays with us for the hour. Lets have the bloomberg first word news in hong kong. Thanks. A former u. S. Envoy says he did not initially realize the white house was putting unacceptable pressure on ukraine. He only later saw the connection of investigating former Vice President joe biden. Of fourker was one witnesses yesterday. The key testimony today will be from u. S. Envoy to the eu gordon sondland. Fed minutes would likely reinforce the message that rates are on hold. Chairman Jerome Powell was at congress twice last week, signaling policy is in a good place, saying there is not a material reassessment of the outlook. The key thing from the minutes will be what that phrase really means. Protests in iran have left at least 100 six people dead according to amnesty international. Thousands took to the streets after authorities increased gasoline prices by as much as 300 . Security forces launched a crackdown. , Prime MinisterBenjamin Netanyahu is calling on his rival to form a unity government. He is hoping for a deal with his main opponent benny gantz. This comes on the news of a possible powersharing structure between the two rivals. News powereds by more than 2700 journalists and analysts. This is bloomberg. Manus thank you for the rundown. We have a whole host of great interviews. The Bloomberg NewEconomy Forum. Tomorrow, we speak to the Standard Charter ceo, the Goldman Sachs ceo, the former white house chief Economic Advisor gary cohn. There is a host of voices. Good morning. Nejra good morning. Coming up, no clear winners. The first debate between Boris Johnson and Jeremy Corbyn ends in a tide. We will discuss the u. K. Election next. This is bloomberg. Manus it is bloomberg. Bloomberg daybreak europe. Nejra lets check in on the markets in asia. More. Has a lot of red on the screen today. Absolutely. The u. S. Senate passing the bill in favor of the hong kong protesters saying china saying that it will retaliate. Asian stocks down 0. 5 . Hong kong back in the red to the tune of 0. 7 . Moversrise with these out of risky assets. Yuan leading declines today. There is a big story happening in australia and the Banking Sector today. The Australian Financial crime agency accusing the asx 200 index of the biggest Financial Crime in australian history, up to 23 million cases in terms of what they have been looking at in terms of Money Laundering including the fact that they said do diligence in transactions to the philippine that have nonfinancial indicators related to potential Child Exploitation risks. Really weighing into the financial sector. Falling to may lows today. This is going to have huge ramifications for an industry that has already had a royal commission. Manus thank you very much latest. 23 million in Money Laundering. Lets get your business flash now. Saudi aramco is seeing sufficient early demand from its ipo just three days after launching the deal. The banks behind the offering are signaling that they have enough orders to cover the institutional portion of the sale. Aramco has two weeks of marketing to go. It is declining to comment. Westpac has been accused of breaching Money Laundering laws. It is the biggest breach of the laundering and Terrorism Financing laws in australian history and includes failing to detect payments that may have been used to facilitate Child Exploitation. Westpac says it recognizes the severity of the issue. Investigating sanctions against russia. Includegations transactions after the annexation of crimea. They said they have not found any signs they breached sanctions. That is your Bloomberg Business flash. Thank you so much. The first u. K. Election debate ended in almost a tie, good news for labor leader Jeremy Corbyn, who defied negative Approval Ratings to essentially draw level with Boris Johnson. 51 of people said the Prime Minister won the faceoff. The latest went headtohead on brexit, the nhs, and their spending plans. We have a deal that is oven ready. It is ready to go. By ourpproved not just partners in the European Union, but by everyone of the 600 35 conservative candidates. It delivers everything we wanted from brexit. A crediblenegotiate option with the European Union and within six months put that to a referendum of the british people to decide between that option of leaving while protecting jobs and trade and the good friday agreement with europe, or remaining full members of the European Union. That will be the choice put before the british people. I think it is very important to hear ive been very clear about the deal ive done. There it is, you can read it. We dont know what mr. Corbin he wont come clean with the electorate about what he is proposing. Nor will he allow to come clean about thank you, mr. Johnson. What i would probably leave under the tree for him would be a Christmas Carol by charles dickens. [laughter] he can then understand how nasty scrooge was. If you want a literary effort , a copy of the brexit deal. Jukes ist juiced still with us. What would have to change in the polls for investors to really reassess the likelihood of a conservative majority . What kind of numbers would we need to see . In i guess at the moment any other election before 2012, you would have assumed that this is a big enough lead for an outright majority. You need to start seeing that gap trending down again clearly to think actually they might not get any kind of deal across. Know what would make anybody comfortable with the conservatives because we are too much and the unknown. It reopens questions about what kind of Coalition Government we might end up with. It does not take very much to reignite that. Manus lets extrapolate that forward. ,f you look at the polling Jeremy Corbyn came in at 49 , Boris Johnson came in at 51 . In 1979, the dissatisfaction with Jeremy Corbyn before this event is what shocks me, we have gone from 60 two a 50 50 perception. Maybe we are underpricing the strength and size of labour, which may come in the form of a coalition. Isthat end, maybe sterling underpricing that risk. Kit may be. It is hard to know how to react to a pole. I listen to paul dobson on the radio driving home. Sterling potentially sees a lot of risk here because there was a lot of good news priced in. I thought that was the right call. Johnsont that for boris from his position thinking everyone thinks he is a better debater, his lead in the polls, his personal standing being higher than Jeremy Corbyn, that this was just a potential that he was going to fall over on or miss. The 50 52 my mind is probably he missed the banana skin more than he fell over one. I dont know if it tells me issuesg about the wider in the next two or three poles about who we are going to vote for. I think it probably means that we pay more attention to the next two or three votes in the election as opposed to in the debate itself. Nejra the next debate coming in december 6. Between now and then, would you still be wanting to put in the starling long . How would you trade this . Kit relatively carefully. We havethink that once taken a no deal brexit off the table, there is not that much downside for sterling and the medium term. If you look at a chart of the really Effective Exchange rate back since britain was collapsed , we are bumping along the bottom of a lifetimes range for the currency for most people. Im still tempted to think that we are either bumping around the bottom or something terrible or at some point in five years, there is going to be good news in the u. K. That i cant even dream of at the moment. Manus ok, that is a long way away. Eurosterling seems to be moving a bit more than cable. Paralyzed kit jukes. Youave a raft of guests for in the next 48 hours. This is bloomberg daybreak europe. Im nejra cehic in london. Manus i manus cranny in beijing. Fears of a slowdown in consumer spending. Scrutinizing the industry for signs of weakness. Meanwhile, the new york fed president said he is watching for a Downside Risk despite reinforcing his confidence in a solid outlook. The latest fed minutes are expected to give us further insights into the conviction of a prolonged hold among the policymakers. Morning in ouris london hq. We get minutes tonight. Do you expect a hawkish tone to these minutes . More neutral a tome than we had. There is more of a sense that there are risks, we need to be ready to go again, but we cannot just cut rates 25 basis points at every meeting when the economy was actually in a now cast kind of way has been doing better than expected. That thisve thought would be done until something changes. Nejra do you think they will be on pause through 2020 . Kit no. I think things are already deteriora