tom: good morning, this is bloomberg "daybreak: europe", i'm tom mackenzie in london. donald trump takes venture

capitalist and ohio senator j.d. vance as running mate, as investors ramp-up bets on a trump win in november. president biden calls vance a clone of donald trump. the u.s. leader defended his age and track record in an interview with nbc. >> the idea that i'm the old guy, i am old, but i'm only three years older than trump, number one and might number two, my mental acuity is pretty good, i have gotten more done than any president has in a long time in 3.5 years. tom: towel tells us he was inflation is heading in the right direction, reinforcing market bets that rate cuts are coming. >> i would say we didn't gain any additional confidence in the first quarter, but the three readings including one from last week do add to confidence.

tom: good morning, happy tuesday. u.s. politics and powell in focus for markets. u.s. stocks ended the day yesterday just below record gains. you saw again for financials and the energy sector. but markets paring and parsing what we have been hearing from jay powell of the fed speaking to us talking about greater confidence in getting towards that 2% target on inflation. but the 100 futures looking to losses of around 0.2%. european futures by 0.3%. challenging day yesterday, ending lower 1%, luxury was driving the losses yesterday. we have richemont reporting in

30 minutes. we will see if that trend around luxury and the exposure to china continues. we continue to think about the prospects of a rate cut in september. markets now pricing more than two cuts by the end of this time this year, goldman sachs saying you could make a case for a cut in july, they still expect the first one in september but they say the conditions are there for a cut. s&p futures pointing to gains of 0.2%, nasdaq futures up to four points. we will lacrosse asset. the front end more reflective of changes in terms of sentiment around perspective cuts from the fed. 4.44 with yields just down two basis points, euro-dollar 1.08, more strength in the session today, up 0.1% on the bloomer dollar index, $84 a barrel on brent, stabilizing below $85 a barrel and gold getting close to record levels boosted by those rate cut expectations, up 0.3%.

donald trump has been formally nominated as the republican presidential candidate alongside his pick for running mate, ohio senator j.d. vance. the republican national convention was the first public appearance is that assassination attempt at the weekend. president biden addressed concerns about his age and mental acuity in an interview with nbc. >> the idea that i'm the old guy, i am, i'm old but i'm only three years older than trump, number one. number two, my mental acuity has been pretty good, i've gotten more done than any president has in a long, long time in three and a half years, so i'm willing to be judged on that. i understand why people say, god, 81 years old, what is he going to do when he is 83, 84? that is a legitimate question to

ask. tom: u.s. president joe biden speaking. let's bring in bill faries. let's talk about that vp pick. we knew he was part of the group but trump keeping everyone on tenterhooks until the last minute. what does vance bring to the republican ticket? >> one think he clearly brings is youth. to a campaign were both of the major candidates have been criticized for their age. he also brings an aggressiveness. his ability to punch back. that is something american presidential candidates historically looked for in their vice presidential candidate. trump is not afraid to punch back at his opponents but j.d. vance looked will take on some t response ability as trump's vp pick. it is not clear however whether vance brings in a lot of those independent and centrist voters who have remained undecided.

trump has the lead in a lot of swing states. the question we will find in coming days is whether his pick of j.d. vance helped him grow that lead or it stays the same at this point in the race. tom: that is interesting in terms of the independence and whether j.d. vance can play to them or if that is a challenge. what if we good hearing from president joe biden? this is the playbook. they want to get him out to reassure the broader public. what is his standing right now? >> the assassination attempt on former president trump over the weekend pushed a lot of the debate about whether joe biden should remain the candidate for the democratic party off the front pages. that said, it still very much a debate taking place behind the scenes. i think the pick of j.d. vance will only add to that more. in the coming days with a

republican convention well underway, you will see a lot more of joe biden. they will try to get him in front of the camera more often. try to have more unscripted speeches where he is not relying on the teleprompter so much. you will have to make a vigorous appearance over day after day to push back on this argument still taking place within the democratic party about whether he is the best candidate to lead in november. tom: bill faries wrapping up everything across the u.s. with the vp pick and the latest interview from joe biden. let's cross over to singapore to check on asian markets. avril hong standing by, bit of a soggy session so far it seems? >> that is the right word as we see investors bracing for increased chances of a trump presidency. as well as digesting comments from powell. that doesn't seem to be fueling much of the appetite for asia

equities. say perhaps in japan, the nikkei managing slight gains but paring from earlier in the session, maybe helped along by cheapness i am the japanese yen despite powell's comments hitting the 1.752 level, the hang seng is the big drag. it is 1.4% down. an extension of the losses yesterday after that big a mess in china data. rebound the screen on the csi 300. i wanted to highlight another bunch of stocks we have been watching today, the ev ones, as investors seem to be mulling a possible trump presidency along with his pick for running mate might mean for ev subsidies. lng and chem are really negative today. as we look for developments in the u.s., let's look at the u.s. and china tech stocks. because the correlation has just

turned negative. you look at the nasdaq etf versus the green china tech etf, you are seeing those two decoupling. worth keeping in mind as we tracked these developments. let's take a look at em currencies. up until this week, they have been managing gains for this month. expectations of fed easing obviously at work but today another day of declines. the korean won, indonesia among all the currencies on the backfoot today in this part of the world. tom: dollar strength being felt once again. avril hong with a market check across asia joining us out of singapore. fed chair jerome powell says recent data is giving officials confidence that inflation is moving towards that 2% goal. speaking with bloomberg host david rubenstein, powell highlighted the three latest inflation readings, but did not provide clear timing for a

possible cut. >> we didn't gain any additional confidence the first quarter, but the three readings the second quarter including last week, do add somewhat to confidence. on inflation, in the first quarter, we didn't make progress, we have had now three better readings and if you average them, it's a pretty good pace. the u.s. economy has performed for markedly well the last couple of years. today i'm not sending any signals one way or another on any particular meeting just to rowing the fun right at the beginning. we will make these decisions meeting by meeting and will make them on the basis of the evolving data and also the balance of risks. tom: let's bring in mliv strategist mark cranfield for analysis on what we have been hearing. i looked down at my world interest-rate probability screen on the bloomberg and we have close to 67 basis points priced in terms of cuts right now.

not surprising given jay powell didn't give a timeframe of when the first cut comes through but he sounded more confident on the 2% trajectory. our markets pricing two many cuts at this point? >> this seems to be an irony. it was only recently that the federal reserve change their dot plot outlook to just one interest rate cut this year, previously, they had three themselves and now the market is almost where the fed used to be but you see why they are encouraged. it's not just what they are hearing about inflation. what traders also heard from jerome powell was about cooling employment situation. that is the thing the fed over the edge because the employment market has been way too strong to justify an interest rate cut. clearly that is beginning to crack, other fed numbers have noticed, the intention of is going the right direction and we have haired quite a few people saying they are happy with that path, now put the employment

picture in together, you have the two factors the fed needs, they are obviously getting close. powell doesn't want to admit to anything yet because he has informed consensus within the fomc but he is trying to lead them into the position where they can agree to do something. whether goldman sachs is right that they go as early as july or not, traders will keep pricing in that direction, and it wouldn't be surprising if we see a few bets being made for a surprise july move. by the time we get toward september, if there has been no move in july, people might think the fed kicks off with a big interest rate cut, maybe 50 points in september because although jerome powell has said he is not influenced by politics and the election, no fed person ever wants to do anything really close to an election date, so he made prefer to push the fed into earlier bigger rate cuts and then take a break as the election gets nearer, so there is a lot of things up in the

air, the big picture for the bond market is all pretty favorable. tom: as you say, it is not priced in yet for july. goldman sachs has put that on the table in terms of its assessment of the rationale. maybe a number cut in september. -- bumper cut in september. what would that mean for u.s. assets? >> we will continue to see a and move right across asset classes. equities are thoroughly enjoying this, we've got rotation going on as well, some of that influenced by the fact that donald trump is the leader for the presidential vote. plus, there is earnings season going on. you have had to rallies in tech stocks, so that rotation will continue but generally be favorable for u.s. equities. dollar can probably come off further. even though we saw a little bit of dollar strength, that will not last too long because if you look at short-term u.s. yields, they are coming down pretty fast

and that usually undermines the u.s. dollar. that has probably got further to play out and then you think of what bonds mean for gold and commodities, generally, this risk on scenario we have certainly will go through to the july fed meeting, but probably right through the summer unless a surprise comes out from somewhere that says everyone has got this all wrong on inflation. don't forget the european central bank is heading that same way. bank of england may even surprise with a rate cut. we have got australia, new zealand, everybody was to get in on the game great everybody's inflation is going the right way. global rate cuts are coming. the only one who isn't is japan. tom: japan once again the outlier as central banks chomp at the bit to push through with cuts. setting up brilliantly the analysis and adjustments to that. here's what else to think about today. 10:00 a.m. u.k. time, euro area economic growth survey will cross.

we have seen some green shoots across this eurozone economy. we'll see if that survey builds on what is modest but seems to be more persistent turnaround. we will see if that is confirmed with that survey. 1:30 p.m. u.k. time, we get u.s. retail sales, really important gauge on the consumer in the u.s., as we start to see softness in the labor market with unemployment at 4.2%. we will see how that reflects across retail sales numbers. and the wall street bank earnings story continues after decent results from goldman sachs. we will set you up and get a review but you have bank of america reporting later today amongst others. you can get a roundup of stories you need to know in today's edition of daybreak by the way. terminal subscribers can go to dayb . you can see comprehensive

coverage of the rnc in milwaukee. trump making his first appearance leading up to that set piece speech from the former president who has picked his vp. is xi jinping's quest for tech driven growth starting to pay off? we get the details in bloomberg's deep dive on that subject. that is next. this is bloomberg. ♪

tom: welcome back to "bloomberg daybreak europe." to great rewiring of the chinese economy is the focus of today's big take. experts say advances in ev, solar and ships are helping the nation navigate its property slump. spring in our reporter in hong kong with the details. one of these new productive forces the chinese government is trying to unleash that is helping to rewire this economy and make it less dependent on that real estate sector that is facing such a squeeze right now? >> it's a buzz word of the season. it is the central guiding principle for economic activity at both the central and local government levels.

it is beijing relying on his old playbook of using supply-side policies to boost the economy by changing up the ingredients from your traditional manufacturing sector to your ev's, chips, quantum computing, advanced medical equipment and the like rather than relying on the side policies to boost consumption because beijing has been reluctant to rely on the sort of welfarism that president xi said could encourage laziness. we see the pboc funneling more funds into ev's, green energy and tech sectors, and the ministry of finance pouring funds into r&d. we expect that trend to continue the next five to 10 years. the economics team have projected that the new productive forces get makeup a quarter of gdp growth by 2026. making up for the shortfall left behind by the collapse of the

property sector. this comes amid growing need for china to become more self-reliant as the threat of the u.s. and its allies cutting off china's access to technology as we go forward. tom: fascinating, pushing back against that narrative, and bloomberg economics white pull off a great rebalancing. the focus is on the plenum, a big event going on with significant policy implications, what is the focus around that event? >> very little optimism that the government will roll out the big bang stemless markets are looking for. last week you saw record of flow from china etf's in the u.s. capping six straight weeks of outflows. you see growing divergence between u.s. and chinese tech stocks hitting negative correlation the first time in over 10 years.

it is a confluence of many sectors because you have disappointing data, the collapse in imports that turned negative in june, really missing expectations. then you have the activity data yesterday, the eye-popping retail sales number coming in at just 2%, and home prices continuing to decline despite the pboc rolling out the package in may. you have exports continuing to do the heavy lifting for the economy but there is risk for exports with a potential trump presidency slapping 60% tariffs on chinese goods. ubs publishing a research note that those tariffs could cut china's growth by half. goldman sachs had

tom: welcome back to "bloomberg daybreak europe." south africa's newly formed government is the use an upcoming forum on u.s. trade access to push back against a

senate review into ties between the countries. let's get the details from africa correspondent jennifer zabasajja who joins me from johannesburg. what are they hoping to achieve at this upcoming summit? what are the potential consequences, what is at play for this country? >> is important to consider the relations between these two countries. the u.s. is south africa's second biggest trading partner behind china. earlier this year, when we did here the u.s. house passed a bill to review bilateral relations, business groups were concerned about how this could impact trade. and how this could impact the economic revival this country needs. now is on the u.s. senate approve this. at this agoa forum which is next week, south african lawmakers will speak with u.s. lawmakers

about the importance of this for both countries if you consider trade surpassed 20 $3 billion in 20 33. the importance of this and why this is something that is not only good for the south african economy but also good to stick to the promises in the agoa act made over two decades ago from the u.s. to support sub-saharan africa. tom: one wonders how u.s. politics plays into this given that focus on protectionism, given the bp pic of j.d. vance, how does that tie into this? >> i was looking at project on 25, which is in some sense, potentially if we see this new administration from trump, their approach to foreign policy and what it would look like in africa. they say it would be a shift away from the waste and misuse

of aid funds and focusing more on strategic and security pursuits. really, time is of the essence for south african lawmakers considering what we saw over the weekend in the u.s. and what that could mean if we see a new administration with policies. tom: jen zabasajja in johannesburg on that mission by south africa to assuage or at least pressure u.s. lawmakers into rethinking some of that trading relationship. donald trump makes his first public appearance since the weekend shooting, unveiling his running mate for the november

the moment i met him i knew he was my soulmate. "soulmates." soulmate! [giggles] why do you need me? [laughs sarcastically] but then we switched to t-mobile 5g home internet. and now his attention is spent elsewhere. but i'm thinking of her the whole time. that's so much worse. why is that thing in bed with you? this is where it gets the best signal from the cell tower! i've tried everywhere else in the house! there's always a new excuse. well if we got xfinity you wouldn't have to mess around with the connection. therapy's tough, huh? -mmm. it's like a lot about me. [laughs] a home router should never be a home wrecker. oo this is a good book title.

tom: good morning. this is "bloomberg daybreak europe." i'm tom mackenzie in london. donald trump picks former venture capitalist and ohio sender j.d. vance as running mate, as investors ramp up that's on a trump -- bets on a trump win in november. president biden calls vance a clone of donald trump and defended his age and track record with nbc. >> the idea that i'm the old guy, i am, i'm old, but i'm only three years older than trump. and my mental acuity has been pretty good. i have gotten more done than any president has in three and a half years. tom: jerome powell tells us he was inflation is heading in the right direction, reinforcing

market bets that rate cuts are coming. >> i would say we didn't gain additional confidence in the first quarter but the three readings including the one from last week do add somewhat to confidence. >> the owner of brands including cartier, their earnings coming through from a number of companies including swatch which took a big hit. first-quarter sales below estimates, 5.2 7 billion euros, from 5.2 8 billion euros so a modest mess in terms of first-quarter sales. the focus will be on the asian part of the market. the exposure to china and the comparables would be a challenge. the sales came through relatively strong in 2023.

first-quarter sales, the estimates had been for an increase of 1.3%. in terms of the breakdown, american revenue coming in with an increase of 10%. it was a beat coming through from japan and it was a positive picture as well in europe. asia-pacific, they felt the squeeze. you see revenue at a constant fx rate contracting at 18%. the estimates had been for a drop of 15%. we will get analysis and give you a wrap of what this means for the luxury sector in the next few minutes. currently year to date, the stock up 18%. the broader markets, investors adjust to the prospects. this is a take from some of the potential trump victory in

november, the pic of j.d. vance as vice president. jay powell is getting more confident. the neutral rate in terms of interest >> european stocks fell more than 1%. we've seen, european futures pointing to games and a focus on the u.s. 10 year, more than two cuts with yields down.

108 on the euro-dollar. brent at 3/10 of 1% and closing in on record levels, tied into expectations. donald trump picked j.d. vance as his vice presidential nominee after deliberation and thought. we report from milwaukee. >> we are in milwaukee where president trump announced his pick, j.d. vance from ohio and our audience might know him as a member of the banking committee. if we look at legislation a gives you a sense of the type of

politician he has been. he focused on workers rights and vance is 39 years old. he aligns with former president trump. here in milwaukee delegates voted to make trump the republican nominee. and we know whether trump will take over. tom: this signals a break with the republican party old guard. speaking in milwaukee, the u.s.

is stressed -- stretched too thin. >> we should negotiate and bring this thing to a close so that americans can focus on china. tom: i noticed in terms of what was happening that one of the senators was booed when he went on stage, a protectionist stance and focus on a was articulated by j.d. vance. you will be concerns so what do we know about foreign policy views and how they align?

kriti: this is a carbon copy. this is one reason trump chose him. mike pence openly disagreed with president trump on how the electoral process and out -- panda out. we know president trump will be aggressively tough on china. we needed someone who would echo those voices and back it up with money and campaign financing. . tom: has joe biden been making a

case that age is not an issue? what is your take? kriti: host assassination attempt, a dark moment. a lot of tough rhetoric because of other contenders. we see a shift in focus. another aspect is he is making an effort appealing to the policy side, saying you are still trying to focus on president trump or not helping enough with nato allies. here are some of the arguments. to take the pressure off when it comes to gun control, we are

seeing rental caps. some things he would see and what that does, although it helped for 72 days it created inflationary errors. >> really interesting given that nixon was a republican. thank you very much indeed. we appreciate the analysis. elon musk with a update, pledging to pull 45 million dollars into a pro donald trump political group. the cash infusion could build

after joe biden suffered with some calling for him to step aside. the billionaire endorsed trump after that attempt on his life. fed chair jerome powell says week data is giving confidence that inflation is moving toward the 2% goal. he spoke to david rubenstein. >> the labor market remain strong, inflation came down at a sharp case in the second half charge by a large amount charge or. from this that was unheard of. we expected the economy to slow and cool off after being overheated and inflation continued to make progress.

the economy is growing. 1.5%, most have a 2% growth rate. labor market has moved and you can save it is no tighter than 2019. remember the labor market was very strong. we are back to that place. on inflation we did not make progress. second quarter, we did. three better readings and a big pace so your question, what we said was loosening policy, waiting on that. we did not gain confidence but

we've also said we are a dual mandate bank. now that inflation has come down we are looking at both mandates. they are in better balance. if we saw weakening then that might be a reason for reaction. >> so to put it in terms i can understand there is a 90% chance that the fed will lower its discount rate. do you think the markets know what they are talking about? >> just to ruin the fun at the

beginning we are going to make these decisions on the data and the evolving outlook. tom: speaking to bloomberg's david rubenstein in washington. goldman sachs is the latest driving better than expected results. david solomon says they remain constructive. >> there is stability and applications -- the expected

trajectory improved and equity markets remained their all-time high. tom: charlie, talk about what we saw, goldman tends to leave, -- lead but as far as and were

looking for boost from the market and healthy wealth management. >> thank you indeed with a breakdown across yesterday. charlie, thank you. coming up, the luxury sector in focus. it has something of a china problem. we will break that down and give you the context. that is next. this is bloomberg. ♪

tom: the swiss luxury company saw continued weakness in asia. let's bring in our bloomberg opinion columnist andrew. challenging day in europe in

terms of losses. it seems like in terms of the number the exposure to europe is ok but asia and china is a challenge. >> for the last few months we have been up against this time when we were in a hopeful time that china had reopened, it was going to continue. it did not continue. it weakened onward but we are up against that time when things were reopening. that is. tom: swatch took a double-digit hit. is it all china or something else going on? >> the market is polarized so if

you have a really in demand brand like rta you are insulated. burberry does not have the cool factor. there is a question of who you are selling to. the wealthy are still spending on handbags, but someone who is comfortable but not wealthy, affected by inflation and everyone pulling back. tom: that is really interesting. if you are premium you are holding on to customers. any sense as to when the picture

in china turns around? >> not a lot at the moment. that is the big worry, how long china continues and it's not just at home, what everyone is waiting for is the chinese traveler and that is not happening to the extent expected. abroad they spend more with some hope it might happen this year, now recovery is looking much more like 2025. tom: a bit of a burn, it does not have the cool factor. what happens with burberry? >> good chance it moves down.

they've worked hard and the product was good. a lot of criticism, it just never seemed to get buzz. what it really needed was you to inject the buzz. they raise the price to quickly. that was a red herring. i cannot see how it gets that. he was gucci. tom: i was wrong. guest: in the early days you had a floral suit, fiance head to toe, but we just saw them get that. tom: thank you indeed, bloomberg opinion columnist on the luxury space, andrea, thank you.

this is bloomberg. ♪

♪ >> on inflation we did not make progress. second quarter we did. we have had three better readings and a good pace. >> jerome powell sees more confidence toward the 2% target. this is the adjustment for the markets. white ryan -- line is representing september. 25 basis point cut, november pricing a second cut in market starting to think you get three

cuts. the last time i checked it was closer to 67 basis points. the rationale is there and not their base case, they can make the case for july cuts not yet. let's have a look at what this is all doing and the yellow metal is close to record highs. hedging effect and arguably expectations of rate cuts so watch the yellow metal and flipped the board because data later in the u.s., an important gauge. wages coming in softer. to what extent will that drag on sales? traction of zero point 3%, building out the picture in

terms of a more constrained consumer. we will break that data later today. the opening trade is next and we will talk about market reaction. j.d. vance is the vice president picked by trump. texan is to tilt from the nominee. opening trade is next, stay with us, this is bloomberg. ♪

the moment i met him i knew he was my soulmate. "soulmates." soulmate! [giggles] why do you need me? [laughs sarcastically] but then we switched to t-mobile 5g home internet. and now his attention is spent elsewhere. but i'm thinking of her the whole time. that's so much worse. why is that thing in bed with you? this is where it gets the best signal from the cell tower! i've tried everywhere else in the house! there's always a new excuse. well if we got xfinity you wouldn't have to mess around with the connection. therapy's tough, huh? -mmm. it's like a lot about me. [laughs] a home router should never be a home wrecker. oo this is a good book title.

guy: welcome. i'm guy johnson. what do you need to