>> >> good morning.

this is bloomberg daybreak: europe. i am tom mackenzie here in london. these of the stories that set agenda. marty caution as traders in europe right decision from the bank of england, the s&p and deutsche bank, political uncertainty in france weighing on sentiment with e-krona pressured on both the right and left. mixed china activity shows a pickup in retail spending but in up because a new home prices dropped the most in almost a decade. the pboc gives rates unchanged. plus ukraine's bid to garner support from the global south. it is a war as the summit in switzerland fails to whatever india brazil or south africa. let's talk about political caution emanating from the risks around france that remains front and center. trying to assuage the markets. but watch the sovereign debt of

france and the broader patient around the equity movements. the broader european equity space losing more than 2% last week. diverging from the story in the u.s. with the gains around 1.4% for the s&p by the end of that week. european futures pointing to gains. 3100 futures. points to gains around 3000 points. s&p futures pointing lower by just the death of a percent. we look at the euro-dollar and the commodities space. the pressure coming through across the commodities space. iron ore and brent under pressure. iron ore down as you can see a little under 2.4%. the real estate story, the property story into showing us the crisis in that is far from

over. 424 on the u.s. tenure. largely on the back of softer data. 107 on the euro-dollar. given the pressures that come through from the single currency following the most in at least a few months given the palooka pressures out of france. let's get to the story in china than. a big day in terms of the data coming through from the world's second largest economy. the central bank leaving a key interest rate steady for a 10th street month. mixed data out today showing how house prices are falling. retail spending did beat forecasts. it is a challenging set of data. particularly from the property sector. that is despite the push that came through from the government

last month. a big package of support try to put a floor under that sector. >> i think you're right to focus on some of the housing data. i know that those retail sales figures were better than everybody thought. he also have to remember that those came during the month of may when there was a big weeklong holiday. when driving that is really not a sustainable number. so i think that is what brings us right to these property statistics. you see these home prices fall pretty dramatically. the first since 2014 there. despite the fact that the government has actually rolled out what if you important property support measures is in the there has been some relaxation of mortgage rules in certain places, there is also bit a big push to encourage local governments to buy unsold homes and take care of this glut of housing supply that exists in a lot of these areas. steak take and quit a long time

for that to actually transmit through the economy and see -- solve some of the issues here. we've been talking about some of these property crises. despite the fact that we do have this big government support package right here that is started to take effect it feels like it will take a long time before we actually see some kind of a meaningful turnaround there. the pboc, the china central been standing pat. this is from the powers that be in beijing. >> think that what he it tells us about the rates picture in china is that the pboc is still worried about too much downward pressure on the yuan on the currency and what that may mean for the economy and that it is really some of those ethics concerns trumping domestic concerns at this point in time. now about 10 months straight. this stupendous rate.

i think likely officials are looking at what is happening elsewhere in the world. the ecb rate cut wasn't enough to really trigger something from the pboc. what exactly the timeline -- they normally have something that is in the cards yet. maybe this later we will have to see. that is what is pulling her attention to other forms of support by the property package that was revealed last month. i think some of the skepticism around that remains about what additional things may boost that and help the property sector. >> the policy sponsor of beijing and china constrain them by the feds continued of course. rates need to be higher for longer. thank you for the china data.

the geopolitical story of the moment. they are agreeing to strengthen cooperation m&a dialogue as determinations tie on the edges to improve. paul allen joins me from camera. what agreements than have been reached so far? >> there's been a number of agreements that were signed by prime minister anthony albanese. they were strengthening the free-trade agreement on working again with -- working together again on climate change. also strengthening education, research cooperation and australia will now be part of the chinese be waiver program as well. so we've come a long way and over the weekend also, premier

li keqiang gifted to prepend us to australia. the pins that have been here will be taken back having failed briefing. as you would know from your time and china, the sort of thing is usually symbolic. and that diplomacy does mean a lot. you'll get pandas if you have bad relations. also li qiang visited a vineyard in south australia and it was only this year that they would walk back. we've come a very long way in a very short time when it comes to arming relations between the two countries again. quick the significance is certainly there. where does the premier had next? paul: >> they are still there for just a little bit longer. feeding the governor general at the moment and then he will meet the leader of the opposition peter dutton for the first time today who overtook anthony albanese.

the way he has a asia is perth. while there he will visit in that the mine. a hydrogen project. john would like to increase its investment in critical roles here in australia but from this trillion side, that is an area of some sensitivity. challenges still remain between the two countries. there also these military to military needs. both were raised in the meeting this morning and also the fate of the chinese australian do a national, he remains in detention in china within suspended death penalty. there is still a lot of dishes between the two countries to resolve or as anthony albanese said, these issues can't be allowed to fester. it is good they are being of these talked about again.

>> thank you very much indeed on that visit by the chinese premier. the first one by a major leader. the top leader of china. the first since 2017. act of the central bank policy action. projections for rate cuts this year from 3-1 in the dot plots. neil says fed policymakers need more evidence that provided -- that proves stubborn inflation as well on his way to that 2% target. forecasting rates. >> we are in a very good position enough to take our time, get more inflation data, get more data on the economy, on the labor market before we have to make any decisions. there's going to be one kite which is what the meeting indicated that would likely be toward the end of the year. >> for more let's bring in mark cranfield in singapore. there was no significant tickets time. that is upon context as well. he says that i can take its

time. what does that mean in your view for the greenback? >> it must've been like deja vu for foreign exchange traders and bond traders as well. we particular had that soft dish cpi data that was taken very devilishly by the market. we are getting the fed speak is pushing back on the idea that the market has interpreted it in the great way. we can expect pretty much more of the same but generally for the fed you guys to be saying they need more time and of course that will be reasonably positive for the u.s. dollar and of course it comes after the bank of japan largely disappointed the market by not really coming up with anything that supports the japanese yen. the strength we've happen -- the strength we've had for the u.s. dollar does go away. they are helping to fuel more of that. you have two of the most important currencies.

the japanese went -- japanese yen, the chinese yuan. they are not protecting the one as well. so ever you learn from and fx traders point of view, it is a familiar story. on the one and they see something that could weaken can the u.s. dollar. the central bank speaker -- it will be very data dependent. first sovereign debt. lower again. what is your expectation in

terms of potential for the turbulence. how much pricing has come into the french debt market at this point? what's i think very specific french assets -- particularly the bonds and equities. traders are obviously very concerned. we could get a pretty messy french election results. ironically, one of the assets that may change course a little bit is the euros turning exchange rate. a lot of them were selling the euro against the pound on the expectation that the u.k. politics will be much clearer than the french. that's beginning to unravel. some information came out of the weekend. maybe we should be so complacent as nothing for you collection will be one-way betting. that has been the pending for some time. people may need to dial back a bit election that is easy to

call. also levers traders are pretty long on the pound as well. the news has been coming up over the weekend on the polls as well there. maybe it will be quiet as initially thought. there is certainly a chance for euros to start to move this week. immune if the pressure remains on french equities. >> that's fascinating. particularly on the assumption of u.k. politics we keep seeing. thank you for that one. the markets along the political risk. coming up, u.k.'s bid to ghana sport some key nations from the global south. the latest on the summit out of switzerland and the implications for support for the country going forward. that is next. this is bloomberg.

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>> welcome back to bloomberg daybreak: asia euro. ukraine's bid has faltered edits today summit in switzerland. china voted the event altogether and you've got a lack of support ukraine's position. particularly from the likes of south africa, india and brazil. all of the joys be from berlin but the details. walk us through what happened at this was summit. how much of a disappointment what is being were not for zelensky? >> listen, it is sort of odd to even talk about the summit at this stage in the where everything about how deeply entrenched each of the two sides are in their positions and the very little overlap. what the summit is meant to do is begin to devise languages and join communiques about how to

talk about the possible paths for pete -- peace. they put out a communique at the end here. it is really very broad. they were looking at nuclear energy and nuclear installations, making sure they were safe during the war. the third was sort of returning prisoners of war on both sides but also children that have been taken from ukraine into russia. these are very broad principles. this is an even the nitty-gritty, number of countries were not able to center this communique we have in front of us. china was absent from the meeting but we also have china, south africa, brazil also of refusing to sign up for this. the sound is leasing it is going to be an engine is what is going to be a lot of difficult compromise from ukraine and this is also a meeting that was being held in the shadow of these demands made by vladimir putin. his so-called peace conditions

for ukraine which basically amounts to surrendering the east of the country and withdrawing ukraine's desire to join nato in writing which is a nonstarter for zelensky. >> still fast any. the south africans will take israel to the icc but won't call out russia over its bloodletting in ukraine. after the global dialogue, what does it -- where does it leave the war? in terms of what the situation is like on the ground. >> i think it is a really interesting question. >> he to saudi arabia. he ended up at the g7 meetings. now they're gone back to ukraine. the question is where does all this sort of land? the golden sort of prize for ukraine out of all this week and the last couple of months is to get that agreement for the $50 billion on motion assets. he got there from the g7. devon worked at the details but if they are able to and at this point they have them, they need

to get this sort of worked out. you will have that $50 billion. the diplomatic path toward this is as difficult as ever. the venn diagram between whose demands and ukraine's demands, there is your overlap right there. this is the sort of thing we need to pay attention to. it's equally with a shifting political climate. we need to hear from the candidate in the united states, former president trump name that zelensky left four days ago with $60 billion and he announces he needs another $60 billion. he never ends. this is the conversation going and as we had to that election in the united states. >> oliver in berlin, thank you so much indeed. there been more coming up. stay with us. this is bloomberg. ♪

>> south korea says the sharing

of any nuclear technology between russia and north korea is its redline. vladimir putin is set to make its first trip to north korea in 24 years. south korea's defense minister spoke as closely to bloomberg about what he thinks the russian president will get from pyongyang. >> will put wants would be artillery shells. putin is expected to seek closer security operation with north korea. especially military supplies such as artillery shells that are necessary to seize a chance to win. >> we saw them fail and that is despite russia doing this. >> they are exactly russia's biggest engine technologies.

so our assessment is that north korea has admitted to receiving engine technologies from russia. in terms of what they failed, they have yet to secure reliability as they integrate north korean engines and other technologies they have developed with russian technologies. north korea is believed to be continuing engine test at the moment and we believe that they will try another launch in the second half. >> how much do you have the breakdown on? >> rather than speaking of the cost of individual missiles, let me give you an overall figure. according to a thorough estimate for the defense analysis known as keita, we would need some $1

billion in spending. >> that inevitably means greater problems for south korea. so what is your redline. clicks we consider the transfer of key technologies related to nuclear and missile programs as the redline but something that needs to be decided together by south korea and the u.s. -- there is no point in the south korean government setting alone. clicks we are hearing that they could be another three-way summit between south korea, the u.s. and japan.

clicks a priority would be to establish a system to more effectively promptly and coherently responsive north korea's nuclear and missile threats among south korea, the u.s. and japan and to make that irreversible. so during the last shangri-la dialogue we decided to create this amongst the three of us. south korea has drafted a document and proposed to the u.s. and japan. the defense ministers of the three countries will sign it and the second half of this year. chris minister, china has accused the u.s. of trying to build what he calls the asian version of nato. what are your thoughts on that? >> on china's concerns, it really depends on china's behavior.

the idea of an asian version of nato to me seems like a premature concern but at the same time i believe the best way to dispel such concerns is for china to give the in the pacific region and the international community confidence that it will uphold the rules-based international order and there should be no problem. 50 and lawmakers didn't attend the first session of parliament last week. the party is challenging the results.

coming up the uk's leader of the liberal democrats tells bloomberg his party will push for closer ties with the european union. more from the election campaign trail next. this is bloomberg. ♪

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for if this is bloomberg daybreak: europe. i'm tom mackenzie in london. marcus caution as traders in europe -- political uncertainty in france weighing on sentiment with macro pressure on both the right and left. mixed china activity data. plus, ukraine's bid to garner support for the global south hits a wall at its summit in switzerland. but checking on these markets. you have that diversion picture. losses of over 2% for european stocks with gains around 1.4% for the s&p.

futures currently pointed to modest gains in the european session. that is despite some pressure coming through on the commodity space. iron ore taking a on weaker property data out of china. let's go back to the france story where marine le pen says she will not try to push out president emmanuel macron.

let's get more in terms of the details, the consequences and bring in stephen carroll. her significant other comments from marine le pen? >> is currently off is trying joint appeal to centrist voters. would you go for emmanuel macron to resign? she said she would respect institutions. she will call for institutional chaos and she would simply have cohabitation. prime minister from another party. there was in 1997. it is part of the page that marine le pen is making. looking at the idea of what she would do if they did come in first. in a cohabitation situation, what she is referring to, they

took the lead on fiscal matters. they don't have the full economic program from the national rally party in france. they cut the vat rate on certain food products to zero as well. that is something that the finance ministry would cast on 20 billion euros. that is a matter of concern for markets. they simply haven't seen it. when they do see it they will. there were massive protests. tens of thousands of people marching against some of the policies. chris the polarization across france on this issue. that is the cohabitation between marine le pen's national rally. but on the pole and we have seen the left as well to macron. what is the detail there? how is his party adjusting to

the threat from both the left and right? >> the left-wing parties are signing up for the popular front. bringing together both the front of party but also the socialist party. in the former socialist president said he's going to stand in these elections as well so this is pulling together what is already quaint and fragile alliance on the left but they are pulling well. they are pulling second ahead of emmanuel macron's party. we think about the electoral system in france you could end up in a situation where my friends party is not in the second round of constituencies. it could be a chance for voters of the far right work this left-wing alliance as well. they want to do things like fix the price of essential goods. this could account -- this could cost a huge amount of money. there is a threat from the left and from the right saying that

both would make france poor, make france people poor in their pockets as well. he says the victory is still possible. it looks like a fairly uphill battle. still plenty of campaign to go. clicks about three weeks time. that was a fantastic breakdown steve. request to the u.k. and the politics here with the run-up to the election. britain's liberal democrats have set out a path to rejoin the european union's single market. same business needs closer ties to prosper. the conservative government was to blame for poor relations with the black. >> we are the only party talking positively about engaging with our european friends and neighbors. we are talking about rebuilding without trust that has been so poisoned with the conservatives. when i talked to visitors they

are no longer investing and you can because there is no longer people in europe and people are taking it elsewhere. i think that is sad. in the democrats you get a long-term stable policy. so you could tackle these issues , get better trade deals. that is the sort of thing that would attract investment. we saw tens of billions of pounds invested in the u.k. because of liberal democrat policies. we introduced contracts that were transformative in improving our electricity system and making go no carbon. that system was copied the world over. i am proud of our record, proud of our policies. but the sun is shining the liberal democrats. chris and just waiting for this to start.

basically i can say with a degree of certainty that a vote for the liberal democrats is about to rejoin the market. clicks we are realistic about the timescale for that. it can go overnight. we have to rebuild that relationship with our european colleagues. he says it falls a bit short of the single market. i'm afraid european friends don't why trust the u.k.. who could blame them? so we have to build the friendship. we could do that with a good trade deal to start with. we have a full phase process that could get us back in the supermarket but attend meetings for the political parties. >> that was u.k. liberal democrat party leader speaking with guy johnson.

the date for the u.k. election is july the fourth and we keep crossed all the buildup to that. run-up a few central-bank decisions this week. shedding light on who is in the global interest rate cutting cycle. we have a looming u.k. general election. a widespread display of hesitancy then. if you put the central bank of canada to one side for example, when it comes to the boe, is the constraint the dead on inflation or is the constraint the politics? >> i think it is the default. you are in the run-up to the elections. that is not a major surprise. looking beyond the elections and the boe, to be of to cut rates.

it wants to take rates to less restrictive levels but the point is if you look at core inflation and the u.k., they have services inflation at 6%. core inflation is just short of 4%. that means the real policy rate that the boe has at 525 isn't really all that restrictive as they would imagine. i think the markets are thinking to rate droughts are probable this year from the bank of england. i think that if they could cut rates, i think one will be more likely. >> one is more likely but to according to the markets is still possible from this bank of england which comes through on thursday. the political risk out of france, what is your assessment as to whether the markets have overpriced or underpriced the risk in france?

>> i think the markets are correctly pressing the risk in france at the moment. how think it is underpriced. i think it is 75 basis points. if you look at these securities, 75 basis points in the run-up to the french presidential election in 2017, they are reasonably priced. if you look at the 10 year bond, my model says this is undervalued by about 20 basis points. but the undervaluation reflects a premium that investors want to hold print securities additive -- rather than german securities at this point. of course marine le pen of the national rally reached out and said investors need professional national policy. one that is a market deceptive. that means print securities may tread water around here.

but there are still a big risk going into the june 30 and july 7 elections. georgia think investors are going to be around here. they will want to hold transient securities around these levels so they won't be many changes at this level because i like there is no incentive for investors to be by them. especially if you consider what they did at the start of the month. they cut france's debt rating. that means print securities are now a aa minus rating. the s&p expects that france's fiscal deficit will widen much more. they expect the gdp debt to reach 112% of gdp in three years time. that's kind of alarming. if marine le pen party says they're going to cut sales tax, that is going to put more pressure on the front. all of that is not great news for french investors. >> all right.

there was the elimination of the balance sheet in france and the preview at the bank of england decision. thank you very much indeed. coming up we will take a look at what the mx. data out of china reveals about the recovery of the world's second-biggest economy. just how fragile is that? -- the recovery? that is next. this is bloomberg. ♪

welcome back to bloomberg daybreak: europe. happy monday. let's go to china where the previous he has left a key interest rate unchanged. this has dated today shows home prices have dropped the most in over a decade in the most recent months. that is despite government efforts to support the property market.

retail sales came in sight of the stronger than estimates. industrial production came in slightly weaker than estimates. let's talk about global equity fund management. thank you for joining us in the studio. the start on the economic data than out of china. we have a reminder that the housing sector and the crisis around the property sector continues despite the efforts of them to try to support that sector. how fragile is the recovery in china right now? >> the picture shows the recovery remains fragile but not to forget that the policy came in midday. it is probably too early to see those measures, to take impact. they were the right steps in the right direction. whether it was real estate were to fiscal stimulus. so we just need to wait and see

for this policy to take place. clearly there was no turning point. there is no tipping point. that hasn't happened in may. we were looking for is more steady consumption every recovery. that depends on two factors. if we just think of where consumers are in charge there. the balance sheet is impaired so the property equities are probably negative in the wage growth was also impacted because china was the last one to come out of the lockdown. the first thing we need to see is the stabilization of the property market. the property price needs to take up again and we need to see a steady trend. for the balance sheet to be repaired. we also need to see more fiscal stimulus that goes into the private companies, private economies of the wage growth comes as well.

that way they can be confident there will be income growth in the future and income growth is coming on the wayside. before these two things happen, the consumption pattern will remain quaint battery. quick when things taken, when is your best estimate of when that event and when that moment comes to the forefront? you say the policy has been constructive, it has been the correctness. when do you see that showing up in the data? >> we have a sequence of events. the first one is the property market stabilization. the month-to-month prize. the second thing is really the ppi, the industrial profits needs to improve. not only in upstream across the board, only when the company's

are actually making a profit. these are the two factors that need to happen in the secret. they know the city consumption recovery is on the way if the consumer data improves. it is hard to predict because it depends a lot on how the fiscal policy will be implemented and how effective the local government and the banks will be to support the private economy to get them out of that negative equity as well. >> on corporate earnings and the earnest are you talk about structural trends that you need to be thinking about and china to get a gauge as to the health or the direction of china's corporate earnings. one of those key trends? >> mainly two things. one big thing is geopolitics. if we look at the chinese

economic growth in the past 30 to 40 years, that has been the story of participating in the global supply chain and moving up in the value chain. the big question now is china is very willing to continue to participate in the global trade and moving up this value chain but as the rest of the country going to allow china to do that? the other component is if china is going to be able to access chips for example because ai and all this innovation and tech are going to use important factor to drive up growth activity. is china blocked or excluded from this then the productivity improvement in the economy is becoming increasingly harder for china. this is a huge question and this is really important. >> before that you go, just briefly, if i may, what would

you be adding at this point in china? quick surprisingly, -- >> surprisingly, one site we find -- we try to identify long-term cash flow. one of the interesting sectors from china is appliance. so capital cycle is very important. particularly important for china. there is always more on the capital cycle and home appliance is a sector where they have left decades -- probably 10 years ago. the prophet is very stable. they have gone abroad like expanded oversee before the geopolitics happen. said the people think they are very correlated to the sector but actually they are not.

their demand is ran by the humanization so there is an interesting evaluation angle. >> thank you very much indeed. the global equity fund manager. the asset managers on the data out of china and the position on the risks in terms of geopolitics and supply chains. here is what we need to be thinking about this week. i wednesday will get inflation data. cpi data out of the u.k.. then the same week we get the bank of england. it will be consequential. on thursday it is that boe decision. in the markets expected to come through in september, potentially august, august, september, looking through those elections. you get decision from the s&p and then over in norway as well. this is a big week in terms of central-bank decisions. there is plenty more coming up. stay with us. this is bloomberg.

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>> monetary policy right now is well-positioned to ensure that inflation does move back down towards 2% over time and that labor market conditions remain healthy and that is a good position to be in. >> loretta mester speaking to bloomberg's michael mckee on her expectation, or take that we could sit comfortably advanced between 525 and 5.5% fed onto the log when that data confirms they are almost suitably on that 2% track.

particularly versus the chinese rate of 1.5% on the one year. a look at that cap that is leading to the fund flow story, really adjusting markedly. drawing on data from the mif. they are talking about how the third of global funds have moved to the u.s. since the pandemic. the u.s. is once again preeminent in terms of the fund flow story and a big reason for that is the funds moving for china. that is the rate differential story. don't forget the subsidies in place for the chips act, the inflation reduction ff joe biden, president joe biden. the dollar's supremacy of course particularly on the helmet remain consequence. that is the yield gap, that is there a gap between china and the u.s.. let's have a look at the home price story.

part of it is down to the the fed rates remain high. just a reminder of the pressure on the real estate sector in china continuing at pace. prices for new homes falling the most since october of 2014. prices down. that is despite the packages of support coming in for the last month. this poll tells you everything you need to know at least in terms of the pressures of president macron. the squeeze both to the right and left as we look to the outflows on the french market. that is something that will continue to dominate for us. markets are next. is bloomberg. ♪

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>> morning. this is bloomberg markets. i am guy johnson. about one hour