China. Xi jinping ahead of talks with President Trump before the g20. Bayer shares jump as the German Chemicals group bolsters its legal team to address a multibillion dollar litigation challenge around its roundup we weed killer. And h m reports sales of its summer collection are off to a strong start with the firms shares on course for their best day in three months. Good morning a bit of italian data this morning. Italy june Consumer Confidence numbers are just out theyve fallen to 109. 6 verses a consensus of 111. 3 this is the lowest italian Consumer Confidence number since july 2017. Overall Business Confidence has also fallen to 99. 3 versus 102 in may Manufacturing Confidence has also fallen to 100. 8, slightly below consensus of 101 also lower than in may that will paint a picture of slowing confidence in italy. That is the picture for euro, returning flattish around 1. 1370 there hasnt been Much Movement in the euro. The story has been one of dollar weakness rather than Euro Weakness lets bring in our guest good morning. Good morning. Weak Consumer Confidence in italy. You look at fixed income youre a fixed income expert italian bond yields keep going from strength to strength. Certainly Central Banks are back in the driving seat mr. Draghi at sintra did another semi whatever it takes, if you want. If you look inside the government, theres two souls, two areas within the government. One that wants to look for compromise, look for a budget deficit, on the other hand you have other members of the government that are a little bit more prone to spending so theyve postponed the Budget Planning for later on. You know, were still looking to see whether there is going to be an excessive deficit procedure ultimately what the Sticking Point is going to be is the yield turn you will have automatic stabilizers with an increase coming up. For people watching this closely, you dont think watching the new set of numbers, the halfyear budget from the Italian Government will be that significant. You dont think the next European Commission meeting where they might decide to pursue an edp is the issue, its more the latter half of the year the latter half of the year will be more in focus. So just talking about we were talking about what fixed income has been doing. The politics are important on the sidelines of g20 theres a meeting between juncker and the italian Prime Minister, conte. Thats another meeting happening on the sidelines, not just trump xi isnt the more important driver what the ecb decides to do at the next meeting or in september . Theres been a lot of talk among the fixed Income Community that they may be looking to change technical constraints. Isnt it a blank signal to buy any fixed income asset in europe we have seen the return of the carry trade. Anything thats got a positive yield and there are not that many assets out there left with a positive yield, so we have seen that carry trade. It does feel like theres a lot priced in already. Its not obvious that qe is going to be restarted tomorrow, which in some areas of the market, thats priced in already. So theres a higher chance that perhaps they cut rates first, or even if they do corporate qe rather than sovereign qe is there a simple way that the ecb can try to provide the support through easing that were talking about and that draghi hinted at while limiting that support and cutting out italy so that italy and the Italian Government are not encouraged to go ahead with the lower taxes, higher spending is there a mechanism for that . Is it politically impossible nothing is impossible as long as theres a will, but its a challenging political decision its difficult for the ecb they dont want to put themselves in a tough political spot there are constraints. There are constraints that have to be dealt with based on the latest discretions and rumors they are looking into that they dont want to give a free ride or perceived to be giving a free ride he to certain countries who are keen insurers. Again, its difficult to say its more a Political Choice than anything else dont go anywhere well bring some market numbers to our viewers lets talk about some Market Movers yesterday we had a moderately better session for u. S. Equities with the major indices posting a little retreat but positive end for nasdaq a big bounce in semiconductors up 3 . That was the story we were watching yesterday chipmakers had a good session on the New York Times report that some of them are still selling to huawei. That helped boost the chipmaker not just in the u. S. But in europe as well overnight, asian equities are trading positive on expectations of the trade truce all eyes on that saturday morning meeting between president s trump and xi. Thats happening at 11 30 a. M. Japanese time. This is the picture for europe this morning about 60 in the green 40 in the red, trading slightly more positive for stoxx 600, up about a quarter percent. A bit more positive. Switching to european markets, lets break it down. The relative underperformer today is the cac 40. Trading around the flat line ftse 100 above 7,400 Boris Johnson, the prime candidate to be the next party leader and Prime Minister said there is a million to one possibility of a Nodeal Brexit. So at least a bit of optimism from the leading contender there. The market doesnt quite believe him. Xetra dax up 0. 7 . One name in particular were focused on is bayer. The German Chemicals company hired a group of legal experts to look into the cases being pursued against them in the u. S. That is perceived as positive from it the market ftse mib, we were just talking about italy, up about 0. 60 . No Real Progress when it comes to edp, so no gonews is good ne. We can see the breakdown of underperformer and outperformers defense and utility down retail having a good day h m a real outperformer here. That stock up 10 on positive sales numbers. Autos 1. 4 firmer. We had that more positive risk tone out of asia. Cyclicals in the driving seat today. Asian equities rallied after a report that the United States and china agreed to a tentative truce ahead of the g20 meeting in japan sources have been quoted that the meeting between president xi jinping and donald trump would not go ahead if washington were to proceed with additional tariffs. The two leaders are provisionally scheduled to sit down on saturday morning the chinese newspaper said details of the truce deal are expected to be released in two separate press releases. Trump told reporters a broader trade deal with china is possible this weekend. But he also said the u. S. Could impose additional tariffs if he cannot reach an agreement with xi weve been ripped off by everybody over the years theyre not ripping us off anymore. A big difference right now were meeting with china, just so you know china has been paying us billions and billions of dollars. Until i got here they never paid he this country ten cents. Well see what happens with china, with russia, with japan, with many countries. We still have andrea with us. I want to ask you about this meeting. Does it really mat nter in terms of the way the fed will prepare for this or investors are positioning, how significant will this meeting be its important to see how the Market Sentiment will evolve a lot of the turnaround in Market Sentiment that has favored treasuries in may came as a result of an escalation of the trade war tensions so any easing of those tensions could have an impact onbroader Market Sentiment given that you have more than 100 basis points of cuts priced in for the fed. Theres quite a bit of bad news already in the price ultimately what will matter for the treasury market is going to be really about u. S. Growth. The big picture, geopolitical tensions do matter but the fact of the matter is u. S. Growth is slowing were seeing you were mentioning earlier italian Consumer Confidence. U. S. Consumer confidence has also come down sharply you dont have the luxury of being able to use the fiscal lever like you had last year so in this environment, assuming that the fed is one of the few Central Banks who still has room to cut rates, which is a luxury that not a lot of Central Banks do have, theres still room for treasury he yields to be well supported. Lets pick up on that so much about Financial Markets is about whats priced in. So i read many previews as im sure you all have into this g20. It seems like the expectation is that they will agree to continue negotiations, not apply extra tariffs, but then not repeal existing tariffs what type of reaction do you think we would see in markets if we get that baseline scenario . Both for the u. S. Dollar and for fixed income and does it matter if negotiations are continuing and if the more imminent data is pointing to the down side . The more recently weve seen markets reacting less around the geopolitical u. S. Geopolitical headlines and much more to data it is more about whats going on in the u. S. Particularly around the consumer and the job market. Thats the one pillar doing okay until recently weve seen the latest nfp numbers coming in weaker so anything that indicates that weakness is continuing will be of focus everything else, politics, whats going on at the g20 will matter but address weve seen in the past, people already have or investors are expecting this is not the end of it. There will be a back and forth that will likely continue with ongoing escalation, slowdown, things Getting Better and then worse. All right well continued the c the conve shortly. In the last hour Chinas Commerce Ministry urged the u. S. To cancel sanctions on chinese firms like huawei. They announced they are in talks with verizon about payments of their use for the firms patented technology. Arjun kharpal joins us on his way back from china where he has been talking from various huawei executives do you get the sense that huawei is initiating these conversations as a way to hit back at the u. S. Its certainly the right question to ask. I want to answer that by telling you the context. A few days ago we had a report that suggested huawei was seeking around 1 billion in royalties from verizon on over 230 patents that verizon uses of huaweis i spoke to the chief legal officer of huawei, he told me that he confirmed that huawei is talking with verizon over patents. He stressed these talks are in the early phases he told me that huawei licenses hundreds of patents to verizon covering end to end operations of the company so very significant. No word how much huawei is seeking from verizon and those terms are still being worked out. The timing is interesting just given the fact that huawei is facing Slower Growth this year and next as a result of that u. S. Pressure. I asked if this was a way to put pressure back on the u. S. Firms. He made this clear he said huawei is not trying to weaponize patents. He said they should not be used for political means. Huawei has over 87,000 patents globally over 11,000 of those in the u. S. They own a lot of critical technology, these are piece of Technology Critical in making mobile Networks Like 3g, 4g, and now 5g work. There seems to be some awareness from the u. S. On how strong huawei could be on the patent issue. Just a few days ago there was a piece of legislation filed by marco rubio that would stop huawei from fighting patent disputes in american courts. In a press Conference Today it was said that would be a catastrophe for Global Innovation the key message here, the key point to make here as much as huawei says this patent action is not political, theres many experts who i spoke to over the past few days who say the timing of this ramp up in searching for royalties from huawei is no coincidence. Its more than coincidence just because of the ongoing tensions between the u. S. And huawei, huawei is putting pressure back on the u. S. Firms. Coming up, elliott unveils a stake in bayer as the Pharma Company begins to fight tens of thousands of lawsuits over a controversial weed killer. Well have more details after the break. You need to buy a car and you want to get an excellent price youd think with all these options it would be easy. 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Ive got their app right here, i can troubleshoot. I can schedule a time for them to call me back, its great you have our number programmed in . Ya i dont even know your phone anymore. Excuse me . what . I dont know your phone number. Aw well. He doesnt know our phone number you have our fax number, obviously. Todays xfinity service. Simple. Easy. Awesome. Ill pass. Bayer shares are trading higher after the company said it appointed an external lawyer to help with its u. S. Legal issues and Elliott Advisers confirmed a holding in the group bayer formed a special committee to deal with the 13,400 u. S. Lawsuits which claims its roundup weed killer caused cancer the activist investor welcomed the legal appoint. Annette weisbach joins us. Bayer stock is performing well on the back of this news i think its a twofold explanation here one, clearly that the Supervisory Board also takes part of the responsibility for the monsanto takeover, and the ongoing problems theyre having in the United States and that theyre creating a task force to tackle the issue. Clearly thats a shift in strategy before bayer was more or less having a hard line approach when it comes to the issue in the states. They said theres no clear evidence that it is causing cancer but i think this strategy didnt work out theyve lost three court cases in a row now with also the u. S. Law firms getting on board, it more or less looks like theyre aiming for an outside Court Settlement, which would be a good sign for shareholders and that is also where elliott comes in its interesting that they are stepping out just a half hour after the official statement a, confirming that they have a stake, quite a substantial stake in bayer and b saying its a good idea to be proactive and try to find a settlement outside court so the estimates are running that it could cost bayer as much as 10 billion u. S. Dollars to settle out of court but thats nothing compared to the potential litigation costs they could face if they had to settle each and every single court case, which is threatening bayer. I guess what elliott is saying in that statement is also pushing shares and a good sign that theyre changing track, aiming for an outside Court Settlement in order to get that out of the way and elliott being an activist investor, they like to free structure companies. Thats something that bayer is probably now pushed into as well perhaps well see a splitting up of certain business areas. With that, back to you annette, thank you. H m shares surged after the swedish retailer said sales of its new summer collection had started strongly and that key markets including the u. S. , mexico and india were performing well the Company Also Announced its expanding its partnership with u. S. Bank clarna h m reported a dip in second half profit, in line with expectations. President trump continued his criticism of fed chair jerome powell. During an interfew with fox trump said the fed should have mario draghi instead of powell because of draghis willingness to stimulate europes economy. He is stepping down in november. Could be looking for a job that would be something jokes apart, lets talk about the fed here the market is pricing in more than 100 probability of a cut in july. 100 certainty more than two cuts by the end of this year. So far the fed have not pushed back yes they had every opportunity to tell the market, guys, really, this is a little too much. And now we have 35 basis point priced in for july 70 chance of a 50 basis point cut. Thats quite a lot arguably data has been in line with this view we have seen a slowdown. Certainly the geopolitical tensions do not help we do think that theres a chance of two cuts this year over the next six months or so the front end looks a little bit stretched. Again we will see. The thing about the fed, mentioned earlier, they do have the luxury to cut,