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tv   Bloomberg Daybreak Europe  Bloomberg  July 11, 2019 1:00am-2:30am EDT

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>> good morning from dubai. this is bloomberg "daybreak: europe." i manus cranny. >> these are today's top stories. no pushback, a fed rate cut looks a sure bet. thomas barkan today. all that is europe awaits the account of the ecb last meeting. oil takes to a seven-week high amid shrinking inventories, storm approaching the gulf of mexico, and high tension over iran. the turnaround plan is barely dry as deutsche bank confronts more potential problems with the
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possible doj probe. besthile had bunch had the -- hedge funds have the best first decades. and paring back growth plans for groundingr with the of the boeing 747 max grounds on into next year. we have aircraft on order for december 2020. if it gets delayed much beyond september, we may have to slow down our growth rate for 2020. manus: a warm welcome to "daybreak: europe." a message to the dollar traders. if you think the fed doesn't want to fight with the market, that's what jay powell wanted to convey, were not going to dislocate your dovish view because we're worried about the world, so the dollar on a
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trade-weighted basis is the strongest since 2002. pushback definitively against the 50 basis point cut which a number of houses would say would send a panic signal to the market. pimco says the fate of the dollar, whether it's ready to roll over is whether it's a sustained cycle. let's look at the bond market, i'm looking at the longer end of the curve. forasis points priced in july. 71 basis point cut is priced in for 2019. stimulatees to read or push up the inflation rate. the question for bond traders, eight basis points, has powell done enough to reseat the curve
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sustainably? they are hunkering down in the permian basin for the potential hurricane as a number of big producers take their staff out of the region. nejra: we went into the powell testimony and now where it 100 81. we did system curve steepening, a little bit of repricing going on around the fed. toppinge the s&p 500 3000 before falling back a little. how fragile is the rental -- rally in equity markets? ofcould see another day gains and perhaps we will top that level again in today's session and the euro up for a second day. you talked about dollar weakness. reaction market positive for some production data from france.
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around -27 and the euro trading at 112.78. manus: a blow to swiss reach shareholders. it looks like they are spending. they're going to suspend the ipo they had planned for the british business. pressure,o market market volatility. market conditions is the phrase postponing is a blow to the shareholders because they were looking for a little bit of windfall from this. value 3.3 billion pounds is what they hoped to get. let's see how that reacts on the open. there are other markets apart from the bond market but the reaches far and plentiful. >> you mentioned about the jay
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powell testimony, it seems like he delivered when it comes to markets. the s&p briefly touched 3000 and were seeing a relief rally in asian markets. the fact that jay powell all but said the july rate cut is a done deal. the kospi is the biggest beneficiary of this, up 1.2%. the hang seng higher by 327 points and the dollar as you mentioned with japanese yen, risk off moves here on a risk on day. a rally of about .5% for the japanese currency at the moment. perhaps there is a silver lining in the traits that. this is pushing the government to help support some of these companies and also when it comes to chip prices, that is pushing prices higher. the likes of samsung rallying and one of the top leaders on the board.
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austrian stocks on the cusp of hitting record highs down under as well. we will show you some movers we are watching. , taiwanelectronics semiconductor, second quarter sales worth a beat. analyst a little more upbeat when it comes to chip cycles. one point -- 1.2% in taipei. air china is golden, more upbeat about the sector. saying there is now a pickup in demand. roundup.anks for the the latest on the reaction to jay powell's testimony, he's made it clear he's preparing to cut rate for the first time in a decade due to slowing global economy. no signs of overheating in the job market at home. he has plenty of data to support
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the news that manufacturing, trade, and investment or weaker around the world and u.s. wages are not stoking inflation. >> the overall economy is performing reasonably well, but what we see, what we call crosscurrents, trade developments and concerns over andal growth, we see those many fomc participants at the last meeting saw those as weighing on the outlook and calling for possibly a more accommodating policy. but a low unemployment rate to call something hot, you need to see some heat. we see odds of reports of companies having a hard time finding qualified labor. we don't see wages really responding so i don't really see that as a current issue. the bottom line for me is that the uncertainties around global growth and trade continue to weigh on the outlook.
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-- inflation continues to be muted and those things are still in place. to say ont i intended the subject and what i've said is that the law clearly gives me a four-year term, and i fully intend to serve it. >> the dovish testimony sent the s&p 500 above 3000 for the first time ever although it retreated to just below that level by the close. great to have you on the show. although we have a rally for the s&p 500, it's only about 4% since january 2018. how dependent is the u.s. equity market rally on lower bond yields right now? >> it seems it is depart -- internally dependent on the yields and direction. i got a sense of relief that powell has remained in dovish mode and will deliver that rate
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cut that market has been crying out for. good morning to you. bloom merck has written a piece, essentially if you think about it, the traditional view is, don't fight the fed. you get a sense that jay powell was trying to not fight with the market. do you think he is ultimately trapped by market sentiment and mood rather than that independence that many people crave? >> i think he may well be at this stage. it seems to me that he is absolutely torn into directions. on one hand he is very keen that rates get pushed down to boost liquidity in the market so as we go into the 2020 u.s. presidential elections that the stock market is at or close to highs. on the other hand, there's no question that he must have the worrying global trade figures on one side, and that must be
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giving him cause for concern and thought. nejra: there has been a lot of commentary about how the fed is turning to risk management rather than being data-dependent. are going to she and insurance put and what that looked like? we gettters on whether sustained dollar weakness. is this an insurance cut coming from the fed, and what does that mean? >> it's difficult to say. formarket is pausing reflection. is it two or three come as the futures market suggests? is in fact perhaps the start of a longer cycle of monetary easing? got a fed board of looks quite split as to whether it will see one or two over the rest of this year. there were a of notes
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this morning about the dollar carrying on from there. you cannot check out of hotel california. is the dollar ready to rollover? that is my question to you. the beginning of a new series of cuts from the federal serve, is the dollar vulnerable even though people are currently positioned perhaps for a fed cutting cycle? how vulnerable is the dollar as you look at it this morning? >> you have to say the dollar does look vulnerable, as we see further rate cuts and global trade, pmi's all disappointing in the recent period. were not going to see strengthen the euro or the yen on the others out of the equation, so i think it is possible the dollar
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stays range bound for the time being in a fairly strong position. what: can i get a sense of your fund managers are one of to do now, given what we heard from the fed? i want to ask about treasuries because goldman says going into the first fed rate cut on a three-month horizon, but over a 12 month horizon, they favor cash and underweight bonds. how does that compare with what you're doing in portfolios around treasuries and maybe equities as well? terms, what i am hearing from managers is that they are underweight equities relative to bonds overall. they are selling underweight commodities relative to cash and probably underweight commodities. they are in late cycle mode. the institutional flows are still distinctly out of equities and into bonds.
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there is still that desperate search for yield and is rates get pushed lower, i only see that increasing. manus: thank you very much. stay with us. theng up, we speak to president of the richmond federal czar. you don't want to miss that interview at 3:00 p.m. london time. nejra: today were asking the question, what will the pboc do if the fed cuts rates this month? reach out to us on your bloomberg remit let's get the bloomberg first word news with debra mao in hong kong. >> hedge funds have seen their best first half of the year in a decade. hedge fund research says the average fun has gained about 6% in the first six months. the one standout is citadel. we learned its flagship find has gained over the period.
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they reportedly return 10%. the u.s. is investigating plans to tap tech giants. robert lighthizer will have as long as a year to to examine if it will -- it's the same tool president trump used to post tariffs on china. the were spatfor between japan and south china for years. the trade conflict escalated last week when tokyo moved to kerr the export of materials bottle to south korea's tech sector. the two sides are planning to meet tomorrow. an extended grounding of the boeing 737 max. the chief executive michael o'leary is set to meet with the manufacturer in the next two weeks. he will push for a specific date for the planes returned to service. he said boeing is indicating the max should fly again by the end
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of september. >> if it gets delayed much beyond september, we may have to slow down our growth rate for september. >> amazon's for earning with a $1 trillion valuation after posting a seven day winning streak. yesterday's close so it's market cap rise to $993 billion. again of less than 1% would push it above the 10 figure mark. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. manus: thank you very much. respite, the ink on the plan is earning. deutsche bank confronts more potential problems. the investigation as part of the u.s. justice department's probe.
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more on the story next. this is bloomberg. ♪
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nejra: this is bloomberg "daybreak: europe." cranny in manus dubai. breaking coming through from our region. according to sky news, you got a verbal warning to three iranian vessels and the u.k. government says the iranian vessels attempted to impede a ship. it comes amid reports of five to boatsrevolutionary guard attempting to seize a british oil tanker in the persian gulf. we also understand there are --e other reports that this
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i ran rejects the claim of an attempted seizure. and has rejected this news i ran warned they could act to seize ships if the order is given. you don't want to fight jay powell, do you? nejra: it seems like jay powell doesn't want to fight the markets. taking a look at asian equities, we are seeing gains there. aboveci asian index is 3000, seeing the dollar weaker for a second day. pimco talking about rolling over the dollar but it depends on even cycle. the 10 year yield down to basis points. a precipitous drop in the two year yield. of repricing in the bond markets around those cuts. manus: a new record, we've
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cracked it above 3000. what does it take to maintain that momentum? the by everything rally, is that going to be challenged? is something more ominous on the global horizon, according to jay powell? they are saying the beneficiary could be the yen. you see the powell testimony as being slightly worrying. deutsche bank, it doesn't end, does it? nejra: exactly. more bad news for deutsche bank. we've learned the u.s. debt -- justice department investigating the lender as part of an expanded probe. joining us is sophie cameroon. great to have you with us. -- sophie, rudin. yearsafter spending
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focusing on goldman, u.s. authorities are widening that net. a former goldman executive who later worked at deutsche bank. it's important to note that they are not accusing deutsche bank or the individual of wrongdoing but the increased trying to determine if they may have violated anti-money laundering laws. it raised 1.2 mu dollars back in 2014. only about 20% of what goldman raised. manus: this isn't the first time deutsche bank has been d, is it?d about1mb >> georgia has come under the radar before. -- deutsche bank has come under the radar before. it's been referred to as being
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misled. the bank has previously seen queries from singapore authorities. on the back of this latest news, intsche bank shares shrank after hours trading in europe. manus: thanks for the latest on the investigation. the european commission cut its area growth and the inflation forecast for next year is the trade tensions and policy uncertainty on the region. mama draghi'sd case, concerned about the economy along with the expectation of the ecb stimulus to come is pushing bund yields lower across the region. some of that was re-rated yesterday. the head of investments at hermes investment management, and economist from the irish
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central bank doesn't see a recession. he sees a call for substantial accommodation. i want to get a sense of what we define financial accommodation in your mind to build the investment case for european equities? >> at this stage, we are assuming that the ecb will uncertaintyurther in the general outlook with additional rate cuts. what is less clear at this stage is how effective those will be and whether it is not of monetary response of the markets but rather a physical one. it will be interesting to see how individual countries respond then the ecb at this stage. nejra: that is interesting. industrialk of production data from italy and france, the teen bund yield jumping the most since april. you can see that on the chart. does that tell you with gone too far, too fast with bullishness
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on bund yields? >> i think there are still plenty of woes in german manufacturing, the second quarterbacking contraction mode for the fourth quarter. that goes to german gdp as a whole. the market is responding appropriately to what is seen as continuing economic uncertainty in germany. manus: is a headwind possibly to calm, at the start of rolling over? want witht what they the chinese-u.s. trade in the background rumbling on. is it an official headwind? >> i think it definitely is, and i would expect to see that reflected in the earnings outlook as we look out across the rest of this year. what is your outlook for
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the euro? a second year of euro strength, partly down to dollar weakness. >> i'm not convinced, i think dollar strength is the story to watch. and that will be maintained for a while yet. i think if anything, after the uncertainty around continue global trade, general economic outlook will continue to undermine the euro. nejra: we have lots more to discuss. world's biggest the upcoming ipo is oversubscribed. tune into bloomberg radio when you're traveling to work. up. more to discuss coming this, wee question is
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bought everything on the way up in expectation of this moderately dovish fed bounce from jay powell. is there something more ominous? we will debate that. this is bloomberg. ♪
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manus: this is bloomberg daybreak: europe. nejra: the asian unit of ab inbev could price its initial offering toward the orange. end.wer that is approximately between five and six dollars. joining us from hong kong is our asia deals reporter. great to have you with us. what would -- do we know about the deal so far? >> the deal is ongoing, very much on track to become the largest ipo this year tapping that of uber.
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a fantastic deal. the orders are coming in. that itearing from -- is oversubscribed. indicates that the pricing might be heading towards the low end of that 42 to 47 hong kong dollars the company offered a few days back. in, it stillcoming is scheduled to price john 11 today and also start trading july 19. very much on track. retailwhat about interest, will it be one of pique the markets
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interest? >> this is a great brand and brands usually attract investors big-time. we have seen investors coming in and also some north american pension funds showing interest in taking orders. but we are pretty sure that given the strong brand, budweiser has in asia, some -- the source will show up. the latest on the .otential for the ipo we have some breaking news coming through, this is on norwegian [inaudible] the ceo is to step down. carlson, he will step in as interim ceo.
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has in their 16.8 years, don't forget the .8 years when it comes to the payoff. he delivered an equity return of 9.4%. norwegian ceo is to step down. so they had their numbers came out as well. there is a print on the bloomberg. the second quarter, you've got it in front of you in terms of the ebit. the estimate was 657 million no agent kronos oms on the second quarter but the second quarter revenue came in at a beat. manus: if you take that and what michael was saying.
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in london, dani burger is standing by. the indian markets are up and running. banks are in your sight line ahead of the earnings. >> good morning. up and running, not quite as much as the rest of the -- as suggested. only because the banking sector does not expected to turn out that well. suggesting that may be the first quarter might be [inaudible] done is thing that is the indian currency. you're not surprised because the other currencies. aty started out strongly 6.30. the indian rupee is strong. the markets are in the green, not quite a strong. back to you. nejra: thank you. the duff track that some are worried about with powell turned
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out to be fairly benign. markets reacting in tandem. >> this is the fascinating thing, when you have such a big macro story, correlations will spy, that is what we are seeing. everything living together. the dovish tract when you would think that is the sms them, the concern over trade and what it is doing to the economy that it would hurt the stock market. that is not what we are saying. if you look at the screen you will see nearly all green. theseeen when it comes to equity markets. we are seeing hong kong, the strongest returns there. the bond screen also all green. everything rallying in tandem. maybe an issue if you're looking for diversification in this market. in currencies, every single g10 currencies rallying against the dollar as the dollar spot loses .3 of 1%. you can see some variation on the commodities side. this is a risk on market fueled by a dovish fed.
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if you look into the yen which is doing strongly, that positioning is very long on the end as well. now at a 15 month high. here is the confirmation, this traders going all in. they tend to use a lot of leverage, traders going all in and we are seeing the young track to the yield. some certainty in the market that we will get these rate cuts. there.nice work treating the pimco note on dollar-yen. great work. london.ger in let's get back to hong kong. the federal reserve is getting ready to cut interest rates for the first time in a decade. it sees a cooling global economy and weaker manufacturing and investment all around the world.
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speaking in testimony to congress, federal reserve chairman jay powell said the june jobs report did not change that view. >> the bottom line for me is that the uncertainties around global growth and trade continue to weigh on the outlook in continues tolation be muted. those things are still in place. >> more badness for deutsche bank. it is being probed by the u.s. justice department as part of an expanded investigation. the u.s. is taking a closer look at a former executive who later worked at the german bank. authorities have not accused deutsche bank or the former employee of wrongdoing. hedge funds have seen their best first half of the year in a decade. hedge funds research says the average fund has gained 6% in the first six months. the one standout is ken griffin senate bill. 13.6%.nd has gained and blackrock reportedly
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returned 10%. amazon is flirting with a $1 trillion valuation again after posting a seven-day winning streak. yesterday's close saw the market cap rise to $993 billion, again of less than 1% would push it above the 10 figure mark. global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. nejra: thank you. let's focus on the trade tensions between south korea, saying they will meet with japan over restrictions on specialty concerninghat -- chipmakers. still with us is the head of investment at hermes. when you focus on the trade
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tensions, this issue is getting quite a lot of attention this week between south korea and japan. are we underestimated how much this could escalate and add to global trade tensions and spillover into markets? >> there is a possibility. this is another trade flashpoint so it adds to the ongoing worries with european autos, japanese autos, and nafta. will it ever happened? this is reaffirming. when i look at gold, gold a stronger this morning. i want to pull back to my chart. have a look at this. this goes back to the data we have just seen. is -- it is the dollar-yen positioning. never hasnse that asked you, there is still a place of merit for protection gold, dollar-yen like
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like swiss, to what extent are you protecting if at all any of your positions through the fx route? >> we are not protective by the fx route, that is by virtue of investment processes that are long-term. we would tend to protect through the underlying assets themselves which would be in higher-quality names on the earnings side. nejra: emerging markets, south korea fits into that bucket, japan does not. i wonder what your view is on taking risk there. you are saying that your fund managers were underweight equities and longer on the bond side in a global perspective. givings powell is maybe emerging central banks leeway to cut from here. does that provide support to emerging markets even with the trade tensions simmering? >> powell's actions give support to markets around the globe in
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their entirety. it may well be that other central banks field they are able to follow the fed's first moves. emerging markets have to some extent distance themselves from the overall power of the dollar. that we should not forget the financial system and the trade system are intricately involved. if we follow manus is thought process, that may have some huge implications for global trade. particularly the emerging markets. manus: you frighten me that anyone would join me on the pathway of my thought assess. i want to pick up on something that you mentioned. we by underlying assets, we do not hedge. vicariously by fx.
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do you look toward bond taxis within the equity space and if is there still value or an appeal in that sense? >> that is a great question. i'm not sure i have a direct answer. i think we will still look for quality growth names, we think you're not going to see a return after the next session when it comes assuming it does not come in the next couple of years. our focus will stay on those earnings, quality earnings type of names in the equity markets and in credit markets. thea: to come back to protection and assets to follow from that theme in bonds, do you still think that treasuries are portfolio hedge? you are not buying treasuries at the moment. what parts of the bond market do you find the most appealing given how low rates are
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globally? >> i think the u.s. treasury is still providing some yield. the vast majority of rate markets elsewhere are in negative yielding territory. that is causing people problems. treasuries will still stay appealing to investors for a while. even though we are in rate cut mode. manus: thank you. show, on thethe boil, oil takes, combination of the stormtories and of growth -- approaching the gulf of mexico adding to this week's gains. with growing tensions around iran. we discussed. this is bloomberg.
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manus: this is "bloomberg
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daybreak: europe pick on ellen nejra: let's get the bloomberg business flash. an extendedrning grounding of the boeing 737 max might hit its growth plans. the chief executive is set to meet with the u.s. jet manufacturer in the next two weeks. he will push for a specific date for the planes returned to service. he says boeing is indicating the max should fly again by the end of september. 50 aircraft on order for summer 2020. if it gets delayed the on september we may have to slow down our growth rate. >> more news about potentially ipo of the ipm -- year. pricing its hong kong offering at the low end of the market range. is offering 1.6 billion shares at between 40 and 47 hong kong dollars. $5.126 apace.
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that is your bloomberg business flash. manus: thank you. another story we have been tracking is right here in the region. news on iran. we had reports that five armed revolutionary guard boats attempted to seize the british tanker in the persian gulf. we had sky news reporting that the u.k. was forced to issue a verbal warning to three iranian vessels. there are reports saying the vessels attempted to impede one of the ships. agencysemi official news , says the guard rejects that. we have claims and counterclaims. executive editor. good to have you with me. this is another moment of
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incidents, this time the u.k. and iran. how clear is this story? brexit is not totally clear exactly what happened. cnn cited american officials saying irradiance tried to seize a british vessel. this would be seen as retaliation for the british marines seizing and iranian tanker in gibraltar recently. and now the british government has come out and it statement said these boats tried to impede the ship and an accompanying worship issued a verbal warning. i think the bigger picture here the tensions into over the nuclear agreement. iran is trying to ratchet up pressure on the europeans to counter what trump is doing. at the same time there is anger in iran over the tanker that the
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british seized into realtor. nejra: good to see you. we have more coming through. the u.k. government spokesman is concerned -- confirming the incident in the strait of hormuz saying that three iranian vessels tried to impede the passage of the tanker. and the u.k. navy intervened to stop the rent blocking the passage. a little bit of update. you were referring to the wider context this fits into. talk to us a little bit about how any escalation in this issue we are discussing today could feed into the wider nuclear context if at all. if this is an attempt by iran to indicate to people they have the ability to try and block certain ships from passing the strait of hormuz, that could have implications. elementse the british statement and assume that is what happened.
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that the u.k., the u.s., and other forces have the gift will it he to keep the oil coming through. i believe my college mentioned earlier the oil market has not really reacted yet. ishink the wider issue here either shots across the bow by iran in response to what happened in gibraltar in the context, the bigger context of u.s. pressure on iran and iran's response to this, iran breaking certain agreements in terms of the nuclear agreement. pleadingthe same time almost with the europeans, demanding the do something to keep the nuclear agreement alive. heart of what the iranians want and need, need being the more important words to mud they need to export oil. and their angst with the european opposition or offer of
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help of skirting the sanctions is you still are not doing anything to help us export our oil. or stick toe stay these agreements? >> the problem is even if the government -- governments find a mechanism which would help the iranians, it is not clear that other governments are going to buy the oil, we have been buyers of iranian oil will follow suit and risk your sanctions, the same thing with european companies. the governments cannot order european companies to do business or banks to do business with iran. if they have a choice between risking u.s. sanctions and u.s. fines on them, or doing business with iran, it is not a hard choice, they will say, we will stay away from iran. we don't want the trouble with americans. even if the governments are saying please go ahead and do business. you.: thank
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we are seeing oil higher near a two-month high. the impact of iran hasn't been too great but add to that the fact that almost one third of gulf of mexico output has been halted ahead of a potential hurricane and also caused u.s. stockpiles. if you look at the option market it is the least bearish since april but still bearish. do these factors mean that you could be getting less bearish on oil but not necessarily a bull, what is your view? >> oil is fairly range bound over the median term. we will see quite a few of these , becausethe short-term of the storm, increasing tensions in iran to my as the nuclear treaty unravels. we have seen iran at the beginning of july break their in reaching goals and they will do the same with heavy water at the beginning of august.
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they are desperate for europe to stave off the sanctions that the u.s. has put in place and the government is under huge domestic political pressure, hence you are seeing this military action. we are at the halfway mark in the year, we just had an mmc plus, we will have a j meeting in september. they have extended their deal up to nine months, something we did not expect. we see that kind of extension. what is the biggest risk to the oil market, is it on the demand ,ide as jay powell hinted versus the oversupply? >> i think it is on the demand side. that comes down to the theme we have been talking about this morning which is global trade and where that takes us. if global trade continues to come off, that will have downward pressure on the oil
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price, no question. brings us back to the global growth issue. we have seen that weighing on the price even with geopolitical risks and we know that after the opec meeting it was the worst reaction in terms of the price gain not sustaining. are you concerned that everything we have talked about with central banks, a dovish fed, etc., the central banks are not going to be able to save the global economy this time around? >> yes, i think it is very possible that we are into lower for longer. the one market that gave us hope that it would reach escape velocity, the u.s., they have had their run, they made a u-turn and we back into easing across the globe. does that mean we have another extended time of low growth, low interest rates might low productivity you and the dampening effect of global trade that will have. back, ift's circle
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that is the backdrop, where do you want to beat most invested? never started to show his u.s. equity trade versus the body trade. rolling it up with dividends. exposed you want to be in terms of equities? we are seeing morgan stanley, goingock, all caution into the second half. have you up to her cash amount, have you taken any money off american equities, and if so, where have you reallocated those into or is it cash? >> in the short-term term i can continuinginvestors to chase yields and risk assets will be a short-term beneficiary. in the longer term, markets will be more challenged. investors, institutional investors are shifting to bonds as you said and they will likely increase their hat -- and their cash holdings.
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thank you. eoin is joining the radio team to carry on that conversation. ♪
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nejra: good morning. i am nejra cehic. cranny livemanus from dubai. this is "bloomberg daybreak: europe." no pushback, a fed rate cut this powell sitessh jay risks to the global outlook and low inflation. we would hear from the richmond fed president today. all that as europe awaits the account of the ecb's last meeting. on the boil, the u.k. government says that navy and to reigned as three iranian vessels try to him paid the passage of an oil tanker in the strait of hormuz. reports from an iranian news
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agency denied the claims. stormcks higher as a approaches the gulf of mexico. no respite. the turnaround plan is barely dry as deutsche bank confronts more potential problems with a oneible doj probe of the mvp. seeing their best spread in a decade. norwegian ceo and founder steps down as the discount carrier struggles. admit a rapid expansion. michael o'leary tells bloomberg it would need to pare back maxth plans if boeing 737 grounding drags on. >> we had 50 on order for summer 2020 and if it gets delayed much beyond september we may have to slow down our growth rate for summer 2020.
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nejra: good morning and welcome to "bloomberg daybreak: europe." we have some german cpi just breaking right now. month on month we come in at 0.2%, the same as the prior reading and bang in line with estimates and same for the year on year, 1.6%, bang in line with estimates and the same as the prior reading. that is the data on germany. we saw some data in europe yesterday. impact the bond market. how are they looking today? we will get to the bond markets in a moment. we have had breaking news on uniclo.low -- the market penciled in 7.4.
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we were discussing the pressure on the u.k. high street. that is the personification of what fast retailing is. third-quarter operating income misses the lowest of the low estimates and when it comes to that, they are -- and therein lies the essence of slow down on the retailing site. estimates, 79.9. third-quarter net income 34.6 seventhe estimate of point eight. it is a mess on net sales and in terms of japan and the brand, down 19% on the year. internationally not doing so badly. let's talk about the bond market. jay powell, if you don't want to message came, one
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through. i will not fight with you. you have pushed me into this order but i am worried about the global markets and maybe therein lies the bigger assets. he did not pushback on 50 basis points. word,concerned about the you want to be longer bonds, do want to buy bonds again, do you see it pushing? is down to what with the ecb do, will they do a bigger rate cut, more qe? those are the issues at play. the fed, we are pricing 30 basis points for july. 71 for the rest of the year. it was a big switch in the curb yesterday up by eight basis points. has jay powell than enough to -curve aggressively? it is to pay up to $1.4 all probes.esolve it is selling with the ftc and
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programon the suboxone raising the provision to $1.5 billion at first half results. that is what we are hearing here , raising its provision to $1.5 billion as it is to pay 12 -- up to $1.4 billion to resolve all probes by settling with the doj. what was interesting, there was still some chatter about whether the cut in july could be 25 or 50 basis points. the most dovish member yet, he was the one who dissented but he has said before that 50 basis points could be too much and he did reiterate that yesterday. you talked through the market cuts this year. in terms of what that has done to the equity markets, the s&p 500 went above 3000, we did close below it. maybe we will get there again today. we have had four days of declines for european equities. that positive data that lifted
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bond yields did not seem to do the same to the equity market futures. we have seen it come through in the equity market, how fragile our the gains in equity markets and how much are these gains based on lower yields? let's ask that question to yvonne man and asia standing by with all the action in hong kong. great to see you. see you.reat to as markets are trying to way and whether howell will have a 50 basis cut we have seen this rally petering out during the afternoon session. we are seeing the hang seng peter out the initial gains we saw, .8 of 1%. china under pressure, the s&p breaking are hitting above 3000 briefly, this to virgins between u.s. and chinese stocks, bringing back to the gap that we saw last year. chinese stocks in the cold. and seeing a silver lining when it comes to trade but we have confirmation they will start meeting tomorrow on the trade talks.
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the fact that a lot of these chipmakers are asked to forced to move production outside of some importers, that could bode well for the chip prices overall given this trade tension. we are seeing the likes of saint-saens rallying here today. the nikkei up .51%. semsex at a reprieve. bit of kallman mumbai we are on the cusp of hitting those record highs we saw in 2007. we mentioned about the chip up 1.2%. second-quarter sales were upbeat. looking more optimistic about the third quarter when it comes to the chip cycle. you have these apple suppliers also rallying more than 2.5% in
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taiwan and goldman upgrading the airline stocks in china so air china seeing a decent bid up .41%. thank you. we want to quickly bring your headline that south africa's johannesburg saarc -- stock exchange is experiencing system problems per and we will keep an eye on that area and that's get back to our top stories, jerome powell has made it clear he is preparing to cut rates for the first time in a decade due to a slowing economy and no signs of overheating. he told congress that plenty of data support the view that manufacturing, trade, and investment are weaker around the world and u.s. wages are stoking inflation. >> the overall economy is performing reasonably well but we see, what we called cross currents principally trade development and concerns over ,lobal growth and we see those many fomc participants at the last meeting saw those as weighing on the outlook and calling for possibly more
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accommodative policy. 3.7% is the low unemployment rate but to call something hot you need to see some heat. what we -- we hear lots of reports of labor, companies having a hard time finding qualified labor. we do not see wages really responding so i don't really see that as a current issue. the bottom line for me is that the uncertainties around global growth and trade continue to weigh on the outlook. in addition, inflation continues to be muted and those things are still in place. intended to say on the subject and what i have said is the law gives me a four-year term and i intend to serve it. thes: he is therefore long-term. the dovish testimony sent the s&p 500 of above 300 points.
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futures are trading higher on the market. welcome to the show, good to see you. 25 basis points seems to be locked in i the market. bonds are still above 2%. with that rhetoric from powell, he is not going to fight with the market. twice five basis points is a shoe in. how much more aggressively do bonds we price below 2% in the near term? what does it take to shift a substantially below 2% again on the yield? good morning. welcome. >> good morning. -- the moreare the interesting things, he opened the door to a cut. on the back to focusing external data to say it is not about the domestic picture which look strong, it is about the weakness we are seeing in global manufacturing and it is about the uncertainty around trade.
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continue the market to to price even more than the 25 basis points that is priced in at the moment. that would break it through 2% on 10 year rates. and it could be bullish for the fixed income market. nejra: it's interesting you say he left the door open for a 50 point basis cut. they were one of the front runners and thinking we would get 50 basis points. they see 25. what does this all mean for how you would trade the curve? we saw some steepening and we are flattening a bit today. is there more devalue -- more value or would you look at curves steepening elsewhere along the curve? >> trying to call whether the fed will go 25 or 50 is a difficult task. what we have priced is three cuts for this year. and not that much after that. are the -- the story is we
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taking out the hikes that were put in on the back and of 2018. we don't need a cut back down to the lower zero, it is more we are taking policy back to a slightly top -- accommodative setting. we think the markets are underpricing the probability over the next five years. the fed would have cut down to zero when the cycle matures. we think it is right to be positioned in the belly and positioned for that steepening. does it take to change inflation next? we will get cpi today which could be another body blow to the inflation story maybe. i don't know. let's see what the data gives us. what does it take to shift the inflation dial higher, as it three cuts, to cuts in your opinion this year? >> this is more, one of the more interesting aspects of powell's recent to medications shift.
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at the start of the year he was clear to tell us the downside, they were focused on the measure, that takes out the wings of the distribution and shows you what the median outcome is for inflation. that is looking healthy. others leading indicators if you look at the labor market, wages are pointing higher. the picture for inflation does not look too bad. inis one of the difficulties communication the fed has had, do not focus on inflation or the aber market as much as we told you to. we are focused on different factors, external factors and focused on the downside risks. think inflation is higher toward the end of the year but we don't think it will change the fed policy. that, io pick it on know you have got your eye on
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the fact that there are positive real rates in the u.s. where they are not elsewhere. pimco says the dollar will roll over in a fed cutting cycle. given what you said about going to zero, i am guessing you may be expecting that. that poll of juicy rates in the u.s. and you have that cutting cycle, what does it mean for the dollar, does it really roll over? >> on any day and week the fed gives a dovish meshes -- message, the dollar where we can. we need to look at u.s. market them a could weaken their currencies. in europe, we think it is possible for the city to continue cutting interest rates as negative as they are already possibly -60 or -80. they are likely to come to the table with more qe if they need to ease more. we are talking about a negative rate environment. that is not great for the euro. more policyld see exhaustion is in japan where the bank of japan have for years
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pushed the envelope in terms of monetary easing. it is hard to do more from here. we need to look at those other non-u.s. markets to see what the dollar is likely to do and real rates and a global context are high even if the cuts are priced in and delivered. we will pick up on that theme shortly. up, we speak to thomas barkin, president of the richmond federal reserve. don't miss that interview at 3:00 p.m. london time. nejra: it has been the best start to the year in a decade. the everything rally fueled by dovish central banks. is bloomberg's dani
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burger. dani: what an about-face from leicester. they did really well. turning 45%. these are equity fund managers, equities did really well so i don't want to just talk about them, want to talk about some of the winners and the multi-strategy space. if we look at citadel from ken griffin, 13.6% leading all those large rivals he had. there -- they are a market mutual fund which means they take long and short positions hedging out the greater market movement and taking very concentrated that's. they did very well, almost 12%. for them, that is the best start since 2019. not everyone it as well. there is some dispersion and returns. when we look at exit this point, they gained 3.3%. that is behind the rivals. the founder ofs
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millennium capital and have the biggest start up hedge fund ever. so some disappointment there. down fund is also shutting after 20 years. on shortialize in equity managers. this shows you how much decompression has hurt the fund to, especially for fund. speaking of these, we have to talk about performance because you need that good performance to justify your fees. the question becomes is a good enough question marks it will -- good enough? they gained 6%, this is the best return in a decade but still forare that to nearly 20% the s&p 500. it is good but the question still remains is it good enough question mark -- is a good enough? coming up on the show, slowing momentum.
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forecast is cut for the next two years. we watch out for the ecb account of its june meeting. that is next. this is bloomberg. ♪
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nejra: this is "bloomberg daybreak: europe." inus: i am and is cranny dubai. there is one big topic we have not touched on yet, a bp operated oil tank or has been impeded by iranian vessels as it exited the gulf. the statement said it was forced to position herself between the iranian vessels and issued a verbal warning. which then turned away. the iran revolutionary guard corseted did not interfere with the tanker. here in dubai we have our
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bloomberg middle east and north africa executive editor. the nuances of who interfered or who impeded with whom will -- we know it is significant. why want for you is your perception, is it an escalation from the iranian side, if it proves to be correct and what does it signify? >> it is proved to be -- if it is correct, what is signifies if it proves to be correct is the iranians are signaling to the british and to the americans that they do have some capacity, they do have some capability. they are willing to use them. response if the iranians mean to do something to the british, taking the tanker in gibraltar, arresting the tanker, accusing them of tankerng, taking the
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that was heading to syria and that was sanctioned. the bigger picture is u.s. and u.s. trying to prevent iran from exporting oil. wanting iran to stick to the nuclear agreement and iran is telling the european -- europeans, if you want us to stick to the agreement, make it worth their while. thank you. global bonds slumped after factory data sparked optimism yesterday. the region's economy could see a pickup in the second half of the year. the 10 year climbed to the highest level and demand slowed. there studying up a bit in bond markets. you were saying when it comes to the ecb you expect cuts to the deposit rate but also a renewed asset purchase program.
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what do you like to buy in europe at the moment based on that forecast? >> you are running out of bonds with a positive yield, it does lean toward the credit market. the good thing about european credit relative to u.s. and other regions is it is relatively early in the credit cycle. we have not seen a major deleveraging across european corporate's and if we do get more easing from the ecb, it is likely to be in the form of qe. the corporate purchases in the previous program where a small percentage. we think they could play a bigger role this time. that is going to be supportive for the credit market. once valuations are extremely cheap in the credit market they lowest.the we could see some compression from here. with volatility staying low, credit is a -- is any sweet
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spot. manus: impact of that form of qe going to be more beneficial than additional rate cuts. >> i think you could make the argument that they do not need to do a cs pp program. with the burn curve trading through zero there is likely to be a strong crowding out effect into the corporate bond market. we are seeing that in the flow data which has been extremely strong. that being said, we know that they are hitting some of the issuer limits. some of the market cap limits in terms of the bonds they can buy on the bond side. they want to have a higher aggregate purchase little, it is likely they will have to dip into the corporate bond market. nejra: you have a preference from european banks, take us through that. >> the banking sector is
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interesting from the credit perspective, it is one of the sectors you can have a different view on. bank equities have not performed hasngly and bank credit been one of the top performing asset classes. you are more focused on the balance sheet and the balance sheet has gone through a major repair post crisis, a lot of it is regulatory driven. for us on the fixed income side that makes it more safe investments are you couple that with attractive valuations and it is one of our top allocations within the fixed income space. manus: thank you so much. talking us through the implications for the credit and the bond market. that wraps up this week. just a quick recap in terms of where we are. the escalation in tensions between iran and the u.k. if you want to begin to understand where do these moments of come -- moments of
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conflict come, [inaudible] nejra: have a great weekend. bloomberg markets the european open is next. the s&p 500 broke through 5000 -- 3000 yesterday. we will do it again today. this is bloomberg. ♪
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anna: good morning, welcome to "bloomberg markets: european open." i am anna edwards. asian stocks climbed the european equity futures after comments of jerome powell. cash trade is less than 30 minutes away. how low can you go? fed chairman jerome powell suggest the fed cut is certain this month. traders ask, can he stretched to a half point


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