2.3%. the australian market was done as well and the miners. the stick a look at the fair values in europe very briefly. 0.75%. little bit, down you will see negative open as well. the ftse 100 could be affected by the miners. the ibex down 1%. london is actually holding up ok at this time. down .2% is a there to blue -- that is almost a positive performance. 350 on you over to the the imap. a defensive element to it is happening in the health care market and consumer staples are rallying. the are some hotspots in

financials. i think that is the gsk effect. 350 is only the done by 0.6%. talk me through the individual movers. matt: let me look at the market broadly first. the stocks of hundred, 520 stop there down and only 520 gainers. the stoxxghign on 600 the most, novo nordisk, down 2%. the banks are down, including likeand financials perdential. nestle, down today. glencore is off. the miners will have a rough day. rio tinto is also weighing on the stoxx 600.

the winners here, glaxo is rising today, 4.5%, so a big gainer. you see, well, british american tobacco is also a gainer, picking up consumer staples. next, we talked about that earlier, in line with estimates. the next gain almost 2%. winners thatome are pretty big, but most stocks on the stoxx 600 are down today. the big story of the day, which, after european stocks open is trump's decision to slap tariffs on china. still, some take the group that markets are reacting to powell and not to the chinese tariffs.

>> the bond market could be reacting to the potentially slower growth, but not the potentially higher inflation. think theo not situation today in terms of chinese trade is the reason behind the markets. matt: with us now is neil duane, from allianz global investors. bill gross, he's somewhat of an that marketss view are not reacting negatively to the trade war issue, but rather to jay powell. on the other hand, we knew this was coming. this could not have been more telegraphed. why did markets already price in these trade concerns? >> i think you asked a good question because i think the dynamic for the markets was to see if president trump would deliver. yesterday we saw the intent of

launching trade restrictions on china without much of the detail. andflipside was the steel aluminum tariffs were given a pass to the u.k. stocks soldsteel off because they will not be the beneficiary. i think we are in a confused state, but what we know is the goldilocks scenario many people have enjoyed so much during 2017 and the early part of this year has been part of global trade continuing to function and growth trundling along. there were clear signs yesterday brexit,e, the u.k. and that global growth is as good as it is going to get and we have told our clients that for at least the last three or four months. guy: if there was a trade war, how would you reposition? neil: i think you would expect to see the major benefits from trade, maybe you have higher

oil prices, and cars and semis with therefore have lower demand. guy: so it would require a rotation on the back of it? neil: yes. guy: how much of that has started? neil: i think that has a restarted with cars. world,hink for the semi which has gone bananas with m&a we areight, and center, starting to see softening demand within the apple supply chain. i think consumers are going, if i don't have to upgrade, maybe i will not, in which case the chip center loses the benefit they have seen with the rising volumes. and rising pricing power. matt: i'm looking at the breakdown of the industry groups on the stoxx 600 so far this year we are basically one quarter into it now and actually, financial services and auto parts are not, are the biggest winners.

auto parts is the best loser i guess you could say. we do see some of the really defensive stock as some of the big losers this year. telecoms are down and food and beverage are down. health care is down. why are the defensive stocks doing so poorly so far in 2018. what does that say to you? : i think the correlation of many of the defensive sectors are the correlation of the rising bond yields and the european von stocks there is almost a correlation between rising u.s. 10 year yields an evaluation of the market. i think until the shock of february, clients are beginning to look at the nervousness that u.s. treasury was going to break out and therefore, the long-duration stocks as we call them would be impacted. but i think what we are beginning to see even today is when the world becomes a more nervous place, people go back to

those parts of the market which are -- or rely on consumer addiction, like tobacco. the demand is quite consistent, despite the macro uncertainties we see comign out of the u.s. neil, if i start to really freak out and want to run for the trenches, what do you recommend? do you like the yen? i am looking at gold. 2%. has moved over safe do you go for havens? neil: definitely the yen looks a safe place to go and definitely theidering the underlying middle of the nikkei, it looks gold. it does require the dollar weakening from here. ironically, i still granted the 10 year treasury and if everybody feels a bit more risk

off, despite the turbulence in washington and the u.s. treasury, locking in at 0. 8% is a good place to start. guy: neil duane stays with us. -- neil dwane stays with us. yesterday reckitt rallied. 4% and the london market is down by 1.4%. that is a live shot from the frankfurt stock exchange. icing, this is the deutsche bank asset management division. we will bring you an interview later on with dws' ceo. this is bloomberg. ♪

guy: welcome back and you are watching the european open 11 minutes into the trading session and the stoxx 600 is down at levels we have not seen since last august and we see weakness across europe, but it pales in comparison with the weakness we saw in the asian markets overnight. the tokyo market in particular being hit very hard. let's talk about the moves we do see. and let's get the details on the stock story with anne marie. anne marie: let's start with the selloff we have seen because of this threat of a global trade

war. we are looking at the likes of glencore and rio tinto down today. minors are being hit the hardest and investors are worried we could have a tit-for-tat in terms of this trade war and is could stunt global growth. fs, $50ssued fresh tarif billion worth on chinese imports and china retaliated. the stoxx 600 withdraws their bid for the pfizer consumer help your business. while they will still look for a new opportunity, they must meet their material. glaxo was the one to take on pfizer when reckitt benckiser withdrew from the process. they would have made that unit valued at $20 billion, but they withdrew the bed. finally, deutsche bank. that is down 2.2% as we await for the listing of dws, the spinoff of the asset management unit. that is debuting today. deutsche bank raised about $1.7

billion from that sale. we're still waiting for a market price on that, guy. guy: we are just getting it,a ctually. -- actually. matt, it is a busy day on the frankfurt market as we await the shares starting to trend. are we getting a price. we are still waiting for a price, but it is the biggest. i started my career out here, working on the floor of the frankfurt stock exchange. threely there are two or people having a glass of champagne around this time. that is the busiest i have seen it since the infinium ipo. that is a lot of people on the front for stock exchange. dwane is still with us, the strategist from allianz global investors. it is a tough time to ipo. we have a lot of ipo's going out

today, but there does not seem to be a poor appetite for ipo's right now, regardless of the market volatility we've seen. is that a good sign? neil: well, i think it's a sign that markets are becomign more ipo'sd, and therefore, are seen as an opportunity to put money to work in a fairly lumpy fashion. but what i would say, particularly with a u.s. lens is that we think we are beginning to see pretty much the bump of the barrel in terms of quality of ipos coming through. an ipo cycle is led by the quality to start with and you get the rubbish at the end and i would argue that when we look at some of the things being listed in the u.s. today, you in youreep your money checking account because there is no need to purchase some of this stuff. it is overvalued and it needs your capital more than you needed. guy: we are not talking about dws. neil: no, we are not.

guy: does that apply to credit as well? qualityglobally is going down and sizes going up. what does that tell you about where we are? told they areng moving upside, they are taking risk, but in lower and less risky parts of the market. from a credit perspective, i think a lot of high risk stuff was aggressively valued and many people are taking those profits, staying invested, but maybe downsizing the risk by up scaling the quality of the companies they are investing in. i hear the investors have a lot of money to put to work right now. toes have been cut from 8% 6% to 0%. there is a lot of money sloshing around the system and therefore, deals are getting done that they would not have done before.

a know this is the sweet spot right now. can we say the same thing about the equity market? have we had that phase where everybody is in and everybody gets sucked into that area and the euphoria phase happened? is that january? have we seen it yet? is this is selling opportunity or a buying opportunity. neil: i would say some of that euphoria is in. i would differential rate -- i would differentiate is the theyte market stop think are cutting the hurdle rates so the target does not shrink to a number that looks around the number of targets. i think where we have been mismatching the valuations is that pfizer might have been talking about 20 been billion dollars -- talking about $20 billion of the subsidiary the no shareholder has been wanting to

begin number more than $30 billion. if that is the mismatch, both the management of reckitts and glaxo kleinsmith are showing remarkable control, in terms of what would be added to the shareholders in the medium-term. matt: is that what we have for equities right now? do think we have gone as far as we are going to go? or are we nearly there with the bull market? neil: i think what i find frustrating is like a lot of the strategists you interview, we find the value in asia and europe and not in the u.s. every time the u.s. has a wobble, everywhere else has a bigger wobble. that is quite frustrating, but even the dark day we had yesterday in europe was for me because thexing survey data showed what we wanted to see from europe, which was a lead, robust growth. we have not had that a lot in

europe and yet, the markets thought, oh my goodness come we are slowing down a little. there is no sign at a fundamental level that europe is slowing down and therefore, i found the selloff yesterday somewhat perplexing. neil, we will give you with us. neil dwane, global strategist from allianz global investors will stay with us and we check in on the markets and to break. we are down across the board, but it is not as bad as it was yesterday and not nearly as bad as what we saw and asia. marketht, the japanese closed down a .5% and at one point, the nikkei was down more than it has been since the day trump won the u.s. election 16 months ago. int shows you how bad it was asia. here in europe we are down 1% across-the-board and in the u.k., glaxo is holding the ftse

to only 0.6%. we are back in two. ♪

guy: 21 minutes into the equity market session and thus far we do see europe weakening up. funnily enough, the dax is feeling the most pain this morning, down 1.1% to 1.2%. president trump's plan for more

tariffs on china has reverberated through the markets. instocks under pressure asia and treasuries picking a bid. there is a sense of havens attracting money now. now for some markets looking at a much bigger driver to what is going on than inflation. let's talk to dani burger. still with us, neil dwane from allianz global investors. dani, the most obvious and visible reaction, u.s. stocks like get revenue from china, they have tumbled the most since the february selloff. dani: guy, i probably do not need to convince you or anyone that yesterday had to do with china, but just encase so you can see the extent, i have this chart. this is a morgan stanley basket of companies that have at least 10% of the revenue coming from china. so, look all the way back at since.8% dip, the most

february. but i want to point out that these companies have not been reacting much since yesterday. this is boeing and this is china. these are big companies exposed to china, but 2.8%, that is barely more than the u.s. market , which fell 2.5% yesterday. not a hugection, but one. you cannot say that this is pricing in a trade war. thatn stanley said investor expectations might be off a bit and it will be quite a bit painful if we get a trade war. i would highly recommend watching this basket to see if we get more pain from a possible trade were priced in here. dani, commodities had a notable reaction as well in a way that actually may have ndlach'seff goou favorite leading indicator for yields. she'll was the charge for that.

-- show us the chart for that. dani: in the white, we have the ratio for copper to gold and it is a classic safe haven ratio. people like it because people buy gold if you are concerned about the economy. traditionally, this has been tied to u.s. 10 years, which is in the yield and blue. it attracts really well. but check out this year. they have been diverging. that was extremely obvious yesterday. that gap spread even wider because traded tensions already demand from china and copper is waiting. it got even worse yesterday. the ratio there in white is now the lowest since about september. so, matt, i am sorry to say, gundlach's favorite leading indicator for 10 years might be broken. perhaps they will flip around and yields drop if the economy does take a hit from the trade war. it will be indicated, but

for now, it is diverging. guy: dani smiling about that. dani: i would never be happy about somebody's favorite indicator breaking. guy: of course not. dani: if we get a turn on financials, you could easily say they took a hit yesterday because the yield curve was flattening and you can see that right here for financial sold 3.7% in the u.s. and the white line, this is normalized compared to the s&p 500. definitely leading the market down. weisenthal said yesterday that global trade has been good for financials and these companies right here, they will be turned to if you need hedging products for currencies. for a different myriad of things that we need when we trade globally. so if we do get trade war's and demand wanes, these companies might start trading more, based on globalization, global

tensions, more so than the yield curve. and a somewhat famous quote from -- from a goldman sachs manual, german. guy: dani, great charts. thank you. the copper chart, always fun to take a look at. dani burger joining us and neil dwane, joining us from allianz global investors. neil, have got 30 seconds, you have 30% of your portfolio in cash. what do we do? neil: i think we wait. everything dani said to me, i would summarize as profit taking. i do not think people have started to calibrate the numbers are the expectations and we have got a month before we know what will happen with the meters. president trump's next trade. guy: we will make you wait a

little bit longer before we get back into what neil will be doing with that money. we are focusing next on the italian energy market. we have an exclusive interview with the ceo of turner. that is coming up very shortly. bloomberg. ♪

matt: 30 minutes into your trading day. let's take a look at the top headlines. deutsche's division has made its trading debut. atomberg speaks to the ceo 9:20 gmt. europe joins the selloff. mining stocks lead the losses but every single industry group of the stoxx 600 has lower on fears of a global trade war. here you see the red. asia sees really read numbers. stocks tumble on big volume as china hits back. is the market overreacting to what could be seen as a cautious respond -- response from

beijing? i am matt miller alongside guy johnson and european headquarters. guy: 30 minutes into the trading day. one of the most interesting stocks relate to the upside. downside.is on the a lot of stocks are selling off. let me talk you through what is going on. pandora is trading strongly. the market likes what it is hearing from this british retailer. the talking about this early on. itkeeps on rising because walked away from the pfizer and simmer division. -- pfizer consumer division. we are getting discipline come through from the management teams. that tells you a lot about where we are at market and the --uations that are putting being put on some of these

businesses. randgold is bidding. trading -- gold is trading higher. randgold one of the beneficiaries of that. associated reddish foods trading higher. -- associated british foods trading higher. let's show you what is happening on the downside. lufthansa is trading lower. we are going to talk to dws later. the airline stocks feeling it a little bit. down at the bottom, and give your is trading lower -- indiv ior is trading lower. it relates to opioid addiction drugs. it is trading down by 17.95%. argue that there is a

little nuggets of news at the upper end of the market. let's get an update. >> china doesn't fear a trade war with the u.s. in his first response to donald trump's ordering, basing says it u.s. tariffs on imports of corks. ambassador to the u.s. joins us at 2:00 p.m. u.k. time. in washington, the senate has averted a shutdown. it increases military and domestic spending. the bill funding the government through september at checks bipartisan support -- september attracts bipartisan support. donald trump has replaced h.r.

mcmaster with john bolton. the former u.s. ambassador is known for his hawkish views. latest shakeup comes as donald trump reshapes his national security team. he faces a key decision in may on whether to maintain the iran nuclear deal. -- former double agent on british soil. it can find "no plausible excavation for the attack." -- explanation for the attack." global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. this is bloomberg. italy's's focus on energy market. a new strategy and a 5 million -- 5 billion euro investment plan. london is the in

ceo, luigi for us. -- luigi ferraris. is the first question they ask you is about your strategy and what you're going to be doing? or is it concerns about what is happening politically in italy? luigi: it is first about strategy and they are try to understand what our strategy is. we are submitting a plan of five years. 5 billion euro investment in infrastructure. well. been accepted quite what we face is the fight. we would looking for more dividend return. -- we were looking for more dividend return. guy: will come back to the execution risk. aboutu give us detail this switch to cleaner energy

sources? can you give us specifics on how this plan is going to work? ofgi: we are in the middle an energy transformation. give has grown quickly, to you an example, in five years time, we have had more from 700 points of injection to something close to 700,000. numbers ofreased the fields of when power plants. -- wind power plants. we have been investing in in renewables forget to fill the gap when it comes in perception -- that is why we have a 5 billion euro investment to fill the gap and also to face new challenges which are coming out in the coming years.

if you just make reference of an international energy agency, they for see the next eight years on a worldwide basis so the close to 6700 billions of investments in energy, both renewables. investment -- that is why we are there to invest in italy which is been affected. we are the second country in europe in terms of energy producers with renewable sources. matt: luigi, i want to get back to the political issue because some of the investors are concerned that italy's medical landscape -- political landscape is forcing a discount on your stock and stocks of other countries traded their. -- traded there.

are you concerned? luigi: if i look at the fundamentals, italy looks good. we see growth in the gdp. we see growth in the conception. -- in the conception. when it comes to the political side, we need to wait a while before having a government. i am confident that it is going to take place. i don't think italy is the only one facing such a long peel just long ago of negotiating -- facing a long period of negotiating. matt: germany is a very different story than italy. apartn terms of how far people are in the government. the wranglings to elect a new speaker of the house in italy starts today. that could drag on for weeks. there isconclusion,

not a lot of stability in the italian government. that creates uncertainty. how do you deal with that? luigi: if we look at the economy , it is affected by what is going on on the politics side. the economy is getting more stable. used to deal with a certain political instability. end, in the next months, a solution will be found and there will be a balance to have a government. n agenda to fill them. depends at all long it's going to last. as of today, if i look at the spread, it doesn't seem to be too much under pressure, because of mr. draghi's action.

be -- gdp has tightened up. but that could be because of mr. draghi. matt: -- guy: coming back to energies place. are you sitting in a nice geographical position? you have the mediterranean story which is going to bring energy in. how does that develop? you have the option of tapping that energy and and sending it to central eastern europe. how do you link what you're doing in italy into the wider picture? luigi: ice to define italy is a sort of training energy help -- i used to define italy is a sort of energy help. to 25 something close lines already interconnected

either in france, switzerland and germany. we are fully connected with the normal part of europe. montenegroected with and finalizing a project next year. whether a pipeline project to connect -- this is an advantage because you can cross fertilize on a different generation sources. the: if you're looking at way jean-claude juncker could invest money, how high on that list could they be? projects i look at the of common interest. we are talking about something close to 150 billion euro. billion is connected to the interrelation. italy is there with something close to seven or eight projects. there is an interest in the european level for italy to be

one of the key players in the mediterranean area. guy: great to see you this morning. thank you very much indeed. the ouija for iris -- luigi ferraris, ceo. matt: there are a number of things you want to keep an eye on today, even aside from the markets. the italian parliament convenes as political progress -- parties struggle to form progress to -- the bank of russia is due to make its latest policy announcement. then the eu and u.k. hope to sign off a post-brexit transition deal in brussels later today. let's stay with the eu leaders summit. as she arrived a few moments ago, theresa may weighed in on trade and the need to safeguard steel jobs.

towe have been working hard feel the tariffs that americans have announced. what i will be working with with my leaders on is to see how we can secure permanent exemption for the eu for those steel tariffs. we will be talking about what the next steps might be. matt: let's get out to brussels, to anna edwards. what are we expecting from europe? anna: good morning. fairly pragmatic theresa may giving those comments. she started this day of talks on trade. trade is one of the things on the agenda. on the subject of trade, she was diplomatic in her language. the austrians talking about how they want more details. there are those comments coming through. these leaders went to bed not knowing whether the eu would

achieve an exemption. they found out that, yes, there was an extension for european union. -- there was an exemption for european union. we are waiting to see how impressed or disappointed they were with that. the boss of america wants to negotiate with the eu by putting a gun to our head. it is not a loyal way to negotiate. where does this leave trade relationships? we have a few weeks to go before may 1. europeanse what the will achieve. how dominant a feature is this trait story? mario draghi briefed the leaders in trade was at the top of the list. anna: he talked about for threats to european growth. trade was right there -- protectionism. the moving away from the forumsonal international

that we use to discuss these matters. that was the big risk. he went on to discuss others. they wanted to have this conversation yesterday, but they haven't heard from president trump about whether they get an exemption at that point. they moved the trade conversation to this morning. theresa may had to change all of her plans because she was not supposed to be here today. clearly something they are very focused on, just how much anger and resignation and pragmatism we are going to get from them. the eu came with a three-pronged approach to tackling the united states on trade. we will see whether they talk further about those. matt: anna, thank you very much. talking trade. we are going to stick to that subject. juergen hardt joins us. he is the spokesperson for as low merkel's group -- for angela

merkel's group in the parliament. let me ask you about the steel tariffs. we heard from theresa may that this exemption, she is working to make it permanent. peter all meyer said something similar on the radio this morning. that?re the chances on what can you do to make these exams it's permanent? addgen: we don't want to rates to the top concerns. our economies on both sides of the atlantic, this is going to be lose competition. [indiscernible] ant to washington and reached good deal. first, they reached time to talk with u.s. trade officials on what can we do to hinder extra tariffs.

this is postponed until the first of may. the second is we reached a new dialogue on trade questions, so there will be an agenda for the u.s. with critical points. on a list of talk topics from the european side. at the end of the day, we will see. we come to the resolve that we should have more in terms of negotiations. we are back to what we had with obama. matt: i wonder what you can do. peter said this morning that he convinced that there are no unfair tariffs on steel, on aluminum and on autos from the eu side. eu tariffs on u.s. autos are 10%, whereas u.s. tariffs on eu autos are only 2.5%. why this substantial imbalance?

the tariff structure was negotiated several years ago. ,f you look to the picture tariffs we have on both sides, we believe the average is about the same. there's slight difference. therefore picking out some signal aspects is not helpful. buthave the full picture there are other parts. therefore, our goal in the negotiating is to ban all tariffs. tos should be our target take away all things that hinder us from having good trade relationships. guy: juergen hardt, good morning. guy johnson in london.

is germany going to have to pick sides if this trade war escalates? in the past, the biggest trading was with the united states. in the future, it might be with china. if it had to pick sides, which we would germany go? one of our proposals to the u.s. side, is we should go into talks. economies, to our u.s. economy plus european union economy is a double and our leverages doubled. therefore, one part of the talks to u.s. should be what can we do to promote fair trade in the regulation of the btl? -- of wto? what can we do together? this might be the best approach. china is interested in free

trade because they are exporters. exporters in favor of having an easy trade relation. states doesn't want to use the wto. they want to go down bilateral relations, rather than the multilateral story. china is talking about wto options. therefore, do you feel it will be easier to talk to china rather than the united states? juergen: it is a pity that the united states, one of the strongest promoters and other fields of security and other parts of quality is now starting a little behind that. i understand -- volatile relations. therefore the u.s. is in a better position if we do it

bilateral and not multilateral. looking to the global situation, we have, not only in trades but especially also a trade, there is no chance to reach something on the bilateral level. there's only the chance to get a more fair and free trade worldwide by integrating as much as possible. to the senators in the last week say there is a strong support for a bilateral approach that is not -- matt: you were just in the u.s. when you go there, what do you say about the trade surplus? i've got this chart on the bloomberg that shows numbers that you are familiar with. 66 billion euro trade surplus. it remains that high or even higher now. how do you try and explain that away?

juergen: is a sign for the fact that u.s. citizens are richer. they are able to buy used goods that are probably -- that are produced all over the world. [indiscernible] -- or a bmw or cities mercedes, the price in germany is not in a press competition with the u.s. if you look to the price of german products. we see them at the end of the price range. therefore, i think the challenge should be another. comments alsoy say to senators and congressmen, if you always think that the best thing is coming from

outside to the u.s., maybe you take away the spotlight so the u.s. has to change investment in education of employees, infrastructure. i think u.s. should see that they can do a lot at home to balance this trade deficit. otherwise, with tariffs, only seniors only have to pay more. they have to build better cars in case there are tariffs on better cars from outside. they will be angry and not happy. matt: juergen, thank you for your time. juergen hardt is a foreign policy spokesman for angela merkel. we are going to continue covering this all day, because

it has been affecting the markets. we are seeing dow moves, although not as bad as yesterday as far as equities are concerned. guy: we have seen somebody just some pretty big moves in the metals. investors pricing and what is happening with the united states and china on the trade story. asia we found over in which is an interesting place to be. stuart wallace. iron ore getting smashed. not just last night over the last month. this is the trade story being priced in. >> if you look across commodity markets, you're right. the biggest impact is iron ore and the steel market in china. you pointed out that this is been a long time climb -- long-term climb. i think this is a catalyst but i

shouldn't read in today's price, the markets reaction against global trade war. that is not helping matters. if you look at copper, it is hardly down at all. we happened to have that reaction. part of it is, it seems quite low level. impact of howe much stuff is going to be produced, it doesn't change anything. what it might do is to have some care in global trade. people who go into market will have to go into the u.s. exide we will have to redraw -- u.s. .oogle have to redraw guy: this is stage one of the chinese response. >> that is exact the right. we haven't really had a big impact there yet.

we know china, the sobering issue. just the soybean issue. as we step three texas really firmly into the agricultural market, we can see much bigger impact. he other thing to bear in mind, oil is a really trading on the tariffs. it is trading on the john bolton news and worried about the iranian nuclear deal. that is coming off somewhat so i have to be a little bit cautious. there is a long way to go in the trading day. that market is focused on the iran issue. guy: stewart, great stuff. matt: i've got the stock of the hour. dw here. this is the deutsche bank asset management unit that they have ipo's selling 22.5% to the public. it started trading at $32.50.

i've got the gip screen here. this shows you that it is trading at $32.51. it has traded up as much as $32.69.

francine: raging backlash and

global equity slump is china launches $3 billion worth of u.s. imports. more to come as the move follows washington outlining $50 billion worth of chinese goods. and at deutsche bank races around one point $7 billion from the asset management division chief speak to the unit's executive. this is bloomberg surveillance and i am francine lacqua with guy johnson. there is a lot going on in the markets many worrying about the impact of the possible escalating trade war the tariffs have. guy: asia, massive moves and tokyo down really hard. a three standard deviation move on the shanghai composite overnight and iron ore , getting knocked down pretty hard with oil reacting as well.

there are a bunch of factors coming together. we have the replacement for h.r. mcmaster, which means they could take a harder move into north korea. get the bloomberg first word news. taylor: another shakeup in the white house, this one involving the national security advisor. john bolton replaces h.r. mcmaster. he has hawkish views on north korea and iran. china is striking back hours after president trump ordered tariffs. beijing announced its own trade sanctions. china prepares tariffs. they do notsays fear a trade war with the u.s. and are calling on dialogue to resolve the dispute. congress has narrowly avoided another government shutdown as 1.3 trillionssed a

dollars spending bill that raises military and domestic us spending, also strengthening background checks for gun buyers. conservatives complain the bill is too extensive. and in brussels, european leaders are siding with theresa may on russia. i say it is likely that moscow was behind the poisoning of the former double agent in england. some countries to join the u.k. in expelling russian diplomats. global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. i am taylor riggs and this is bloomberg. thecine: this is what markets are doing. guy was talking about this earlier. we've seen less of a move in europe compared with asian stocks. stocks are declining. the selloff is deepening when it comes to futures in the u.s.. i'm looking at the negative news cycle and what that means for risk assets. euro a risk off mood, the

1.2327. guy: the fair value on the s&p down 0.4%. glaxo smith is showing discipline yesterday it was reckitt bank and today it is glaxo withdrawing from the bidding process for the pfizer division. some market discipline is being shown by these management boards as a look at valuations. the miners have been hit in europe, iron ore having a very difficult day in asia. that iron ore move has been going on for a while. i want to talk about next as well, trading higher this isning, despite the fact it talking about a squeezed margin and i want to talk about deutsche bank. we will be talking to the ceo of dws. deutsche bank getting the asset management division of way this morning in a difficult

market. francine: we will be speaking to him in 15 minutes. and now, trade tensions between the u.s. and china. beijing announced retaliation levees after washington unveiled the latest tariffs. china's response is been called measured. >> china cannot be seen to be week. and particularly, when you have a bully like trump. good to respond in a week way because what happens is, we know about the --ment from munich, it appeasement, it could lead to more and more demand. francine: we are now joined by michael mckee, the international policy correspondent and enda curran in hong kong.

enda, let me start off with you. was the retaliation of china pretty much measured because they want to send a strong political message, but now they are the grown-ups in the room, or was it because in case of escalation they get hurt more? good morning. it is a little bit of all of that. there are two things going on. china's response with the tariffs was actually in response to the aluminum and steel tariffs announced some weeks ago. in terms of the response to the latest set of tariffs, china has not actually explained how they d and thatrespons is where people have said they are measured. will they go after sensitive imports in the u.s., like soybeans and are cultural products? then we are going down a more

sensitive road. that is why there is a feeling they are playing the cards close to the chest of the moment. now they will wait and see how they respond to the latest round of tariffs. francine: what will president trump do next? are we expecting more measures against china? not in the short run because there is a timetable to the sanctions he announced yesterday. there are 1300 different items could be sanctioned. then industry gets a chance for 90 days to come and say which should be included. everybody will have their own view on that, depending on their interest and than they will pick and choose exactly what they put on their, but to the tune of about $50 billion. it will be a while before we even see what the u.s. is sanctioning, so it will be longer before we know how china responds to that. guy: it will be interesting to see how the half-life of this story escalates.

and then we come back to you and you talk about what could be on the list here, boeing jets, so he beans -- soybeans. china buys about 1/3 of the u.s. lacrosse. about currency, could that be on the list? >> you are getting the nuclear options. if you're talking about currency, then we are deep into uncharted territory. and that would have ramifications not just for china and the u.s., but the entire world. if they tried to get everybody to devalue to hurt the u.s., then it would reverberate. but i will say, just to your point about this list, we do not know what is on this list yet and we do not know which they will target. interestingly, they seem to be pointing a good higher up the value chain. they are not talking about textiles, trainers, shoes and clothing that comes out of china , but they are talking about going after the china of the future with a mention of aerospace products and

electronic goods. if they start going after that, they are targeting china's future economic model. that is very sensitive indeed and they might be forced to hit back harder. guy: mike, let me come back to you. this is to be some ambiguity about how big the number is. 60 calibrated is the $50 to 6 number? michael: it does seem to be calibrated to the amount of damage they see as being done to the chinese individual property theft. at one point they said it was $30 billion and now it is up to $50 billion. the president at one point was said to have wanted $60 billion because it is a round number. at least from the trade representative's point of view, they have settled on $50 billion right, they are

targeting the items based on the china's 2025. there is a concerted effort to hit china where its future is. the interesting thing about that is a load of those things china produces, they do by adding to the value chain of things that are already being put together or things that have been brought in from different countries. so, the sanctions could spill over beyond china to other countries producing some of the inputs into these chinese rocks. michael, who inside the trump administration is left that could actually kind of temper or be against a lot of these tariffs. . conan is gone. a lot of these people who advised the president against these tariffs is gone. who is left? mike: there is nobody really

left. the free traded visor is against tariffs. he would speak up. there is not much beyond him that you could think of immediately. remember also, the administration is very thinly staffed. there are a huge number of vacancies and positions that deal with foreign relations at the state department. national security council etc.. there is not much to look to hear. who agreemany people with the president. john bolton is very much a hawk and focused on confronting the u.s. enemies in asia. there does not seem to be a moderating force anymore. francine: thank you, michael mckee. and enda curran, the chief asian economics correspondent. thank you both for joining us. chinese ambassador to the u.s. will join bloomberg television live at 10:00 a.m. in new york. he will be quizzed and questioned on tariffs.

this is bloomberg. ♪

taylor: this is bloomberg's -- this is bloomberg surveillance. shares of dropbox begin trading today publicly. dropbox initially targeted a market value of 1/4 less than the $10 billion it was valued at during the 2014 funding round, but strong demand helped close

the gap and dropbox will begin trading at a market value of $9.1 billion. and in a surprise move involving two of the biggest casino operators in macau, galaxy entertainment has agreed to purchase a 5% stake in its rival wynn resorts. the former chairman sold 8 m illion shares in the company. that is your bloomberg business flash. the longu th was it is abated trade war between the u.s. and china begins to break up. the chinese government announced $3 billion worth of import tariffs on the u.s. in response to the donald trump tariffs on steel and aluminum. head ofus now, the

research in the space. soya buys 1/3 of the u.s. crop. is that the next target here? >> i think it is on the agricultural world's radar. prices have started to rally and they are starting to come off. soybeans is the u.s. biggest import -- export to china. it is worth about $40 billion. when you look at what has happened in the wine and the large.oods, that is soy is a big one and the fact it was not put into this measure, maybe it is inside their back pocket and could be used as retaliation. think, if i were to

draw a map of the united states and they were to pull out states that voted for donald trump, do you think i could draw a line between the political voting patterns and how china will target agricultural products and that could give me an idea of where the agricultural product story could go? wine out of california that is not really affect them, but some of the others do. kona: in protecting the steel producers, in effect what might and of being hurt are the core voters in the corn belt. i think, yes, the u.s. soybean relyuan producers that heavily on china as a big export market, they could suffer a lot because right now they are losing market shares. if they see that share diminish even further because of tariffs i don't know where they will sell that soybean to. francine: what does that mean? do they adjust the production. china does buy a lot of

soybeans. but what the usa will do is to export to the other peripheral consumer regions, which will happen but there will be a shock in terms of the prices. francine: in terms of the prices they have, or is it less dramatic than that? how quicklyends they could find alternative markets. that will be the key thing, which after china pales. there will be an adjustment period for sure. francine: what else would be impacted by almost as much? this is one of the things that would actually be huge. kona: yes, china does need prk hog the u.s., but china's industry has been expanding quite a bit. they have become integral. have become efficient. and the reliance on the u.s. is not as big as you would think.

we will also see those 120 a products, they are clever. they are not killers for china. they know they could get away with it. guy: let's look at some of the other effects. iron ore started rolling over a few weeks back. trade is surrounding definitely part of what we are seeing, but could i tease out the trade concerns from maybe what is happening more broadly in the metals market. give us a sense. what is the signal i could take from the iron ore selloff. is it trade related, or something else. kona: to be honest, trade from iron ore is not huge. clearly, a global trade war is bad for global economic growth. relies on global economic growth. this could be an indirect

impact. the steel and iron or trade, that has slowed between the two, but nothing as impactful. guy: let me see if i can generate this chart quick way. my circle is in slightly the wrong place. let's bring this chart up. this shows the divergence between the oil market and the wider commodity space. oil is going up and the rest of the commodities space is going down. cannot sustain itself for -- can that sustain itself for logn ng? kona: oil also relies on global economic growth. that points to the previous point about the risks. guy: is that john bolton trade? kona: for sure. but fundamentally what is happening with crude oil is stocks in the u.s. are coming off the five-year average, which is a huge improvement from the last three years. improving.

and yes, the geopolitical risk. he was a hawk always, john bolton was. that does provide a political fear. i am looking at the statue prices, is there anything we are talking about that will affect the prices during the next coming days? kona: no, i want to see at what point do they take this out of the pocket. ariffs were in response to the metals tariffs. big one could be coming. i don't know if the u.s. wants to start a global war -- a global trade war, sorry. i think this is an opportunity for them to take this stance. francine: kona haque, thank you. next, the deutsche

management chief executive moreau looks at the challenges, risks, and opportunities ahead. this is bloomberg. ♪

francine: good morning, everyone. this is bloomberg surveillance. deutsche bank's restructuring plans are well underway as germany's largest lender raised 1.4 billion euros from the

initial public offering of the dws division. this is part of john cryan's restructuring plan, which he announced almost one year ago. the price values dws at 5 shares began and trading today. nicolas moreau joins us from the stock exchange. congratulations. it has been a hectic and busy day for you. you satisfied with how things are going? the share price did not fall out of bed. nicolas: yeah, it was a .ifficult pricing exercise the last few weeks have been quite volatile. given the outcome, i think it was we did it properly. i am very satisfied. think the price is in line with the issue price. a good day. i am very happy with the outcome. outcomey proud of the

of very hard work. very happy to be where we are today. francine: how will you grow the company now? it is all about growth and giving the proposition to shareholders that they like and are pleased with. what will be your value proposition? how will you grow as opposed to your rivals? nicolas: i think we are very well positioned. net u.s. is growing by 3.5% every year. we're keeping emergent quite healthy for our assets above 30 points. 65%.e increasing to we have a great audit range. we are a leader of the etf market in europe. we are very strong in assets, which is a growing asset.

we have diversification. we have a great partner in asia. we have a very strong subsidiary and i think we are very well positioned with growth now full of we will be looking for growth opportunities to grow our business. broadly speaking, i believe we have a very strong franchise and being listed today will help us to be more attractive to new and to develop the business. guy: good morning, guy johnson. you spent a year getting ready for this ipo. i am sure a great deal of work has gone into this. tomorrow morning, you get to your desk, who is the first person you call? who is your first meeting with? i.e., what are the priorities now that you have got the ipo

job done? what is top of the list for you, first thing tomorrow morning, first call? nicolas: i think we're glad to deliver on the promise to our investors. it is important to build trust with the investor in the first years. so, we will work very hard as a team to deliver on our promises, growing our client base. it will be working with our partners, i will be working with and we have auct very significant order. speak to those who i was not able to talk to before to see if they want to join us. the idea is to strengthen the franchise and deliver on our cost income ratio target and

grow the business. desk, try to develop the business. guy: that is what i should have said, what flight are you taking i and where are you going. you have a 3.5% on annual money. is it going to be difficult to get to the 5% range? nicolas: i think we are still in a transition period as a new company. we had difficult times during 2016 and we have a 2017 that was very satisfactory. we still have a lot of work to reboot with some channels and some clients, some new channels. %'say we will begin in the 3 th the end target will be in

e 5%. there was a fear of uncertainty. these are the types of issues we have been going through. now, i think it is time that will take some time just to reboot. francine: you have actually ruled out any really big acquisitions. a lot of your rivals are going to acquisition route. are you worried that as your rivals get bigger and consolidate that you will feel left out? being bowl andk acquisitions is fine, but big acquisitions in our business is difficult because you are out of the market for some time. inside so you're not with your clients often. it prevents you from innovating and spending more time with clients. yes, there's a side effect could

o. on the other side come there's a lot of destabilization of the unit. if we could add growth that would not disturb the call, if we do, that's what we should do and be focused on it. francine: in terms of growth, where would it be? markete a particular that seems a lot more lucrative where you can get more inflows from? nicolas: we want to grow organically so we will have sales people all over the world . we will also need to strengthen our range. we are very good and focused on core real estate. we need to strengthen our identity franchise. with ourlso build parisrs in china and in in order to strengthen the

.ranchise in asia on one side that's a fascinating sign in front of us. there's a lot of opportunities in this market and we are very extracted in the situation is very good from what i see and from the people i'm meeting that want to join us. i'm very confident that we will be very successful. guy: it sounds like you will be adding to the air miles. nippon was an and th early investor. how did the distribution of the rest of the book go? who bought the ipo? where are the shares going? is there a bias toward asia? i think we may have lost them. francine: nothing like a little bit of technology letting us down on friday. we will get him back in the london studio. guy: one of the flights he is

taking will be here. --has not agreed as us greeted us yet, but i'm sure it will happen. let's get a first word news update. here's taylor. id aor: john bolton sa preemptive u.s. strike on north korea would be preeminent and now he will be at national security advisor. bolton will replace h.r. mcmaster next month. he is known for his hawkish views and had openly campaigned for the job in recent weeks. china says it doesn't want a trade war with the u.s. but is not afraid of one. beijing announced plans on tara's $3 billion of american products. among them are recycled aluminum, steel pipes, fruit, and wine. the move came after president trump impose tariffs on $50 trillion of chinese goods and limited china's ability to invest in the u.s. tax industry. one of president trump's top

fundraisers offered to help a moscow-based lawyer that companies removed from the u.s. sanctions list. the author took place before the inauguration, but they say the lobbying effort never went anywhere. he made it clear that any arrangement would've needed to be legal. presidentla, pram nicolas may do or will use a new tactic to fight hyperinflation. the redenomination effort takes effect in june. the imf protects that inflation in venezuela will hit 13,000% this year and the economy will shrink by 15%. global news 24 hours a day powered by 27 journalists and analysts in more than 120 countries, i'm taylor riggs. this is bloomberg. guy: thank you very much. just chopped three zeros off and it's an interesting strategy when it comes to currency management and inflation management.

let's talk about what's happening in brussels. theresa may has announced that she will prolong her state to discuss trade. it was set to review the next step in brexit and the national security after the former poisoning -- the poisoning of a former spy on british soil. reporter spoke with mrs. may on the way anuin. >> we have been working hard to clear steel tariffs that the americans have announced. what i've been working with my fellow eu later today on st secure permanent exemption for the eu for the steel tariffs. we are talking about what the next steps might be. guy: an edward stuck around in brussels -- anna edwards stuck around in brussels. how the u.s.ew story was going to evolve. we learned overnight there was

an exception, but we still don't know the duration and details of that exemption. anna: we are getting that message from leaders here. the austrian leader talking about one thing to get more detail on this. theresa may being quite diplomatic in her language, but as leaders went to bed last night, they do not know there was an exemption. it was only until may 1. what happens after that is up to president trump. some of the tougher language came from the belgian prime minister and says the bulk of america wants to negotiate with the eu by putting a gun to our heads. it's not a very loyal way to negotiate when you are historically such solid partners. they're been having these conversations around trade this morning. we think they're finished that because theresa may has left the meeting. we have not gotten any conclusions from them yet. how will they respond on the specifics? how will they respond to protect vision more general --

protectionism more generally? it'll be interesting to talk about the countermeasures they are planning. guy: mario draghi did not pull punches when it comes to the risk surrounding the eurozone economies. anna: he was here yesterday talking to the leaders about the four risks and one of them was protectionism. the biggest risk to the euro zone economy right now. you talk about other matters about the lack of use of the international bodies we have previously used to resolve these matters. this clearly is a big concern. theresa may did have something of a victory yesterday in managing to toughen up the language for the eu and some of the measures being used by the eu against russia. there was the movement on that and that was the focus. we just heard in the last few minutes that they have dotted the eyes across the tease on brexit negotiations.

adopted a negotiating start. this is always going to be expected so not a big surprise. more brexit news perhaps to come this morning. francine: i don't know whether it's a concern that you have the trump administration putting tariffs, does the eu coalesce and impact brexit negotiations because they are a little bit softer on the u.k. or is it just wishful thinking? anna: it's interesting to see them all on the same page. some of the leaders all on the same page at least in the terms of the language of solidarity between the u.k. and russia. code theresa may get the europeans on her side on russia at a time when brexit is stretching that relationship across the channel? could president trump be another thing that stretches that relationship? we will look to get further details on the trade conversation. we will look to get further the

details on the brexit negotiations. there are still a few loose ends on brexit to be tied up. guy: thank you very much, and edwards in brussels for us. it will be interesting to see how the brexit story develops. the european response very cautious when it comes to the temporary sort of dropping by the u.s. authorities of this aluminum and steel story. european equities are now trading at special lows. the euro and updating the u.s. as well with the u.s. fair values beginning to fall as well. falling at the beginning of trade. the tariff story is front and center. asia got hit very hard overnight. chief investment officer from ubs management joins us now. was the response overnight an overreaction back of it was a three standard deviation move.

it was a big move. mark: you have to put really this whole week of the art of the deal style geopolitics into perspective when you look at these market reactions. it is not just the tariff announcements from the u.s. side. i think my favorite quote of the week is from the chinese ambassador who said, if somebody imposes a trade war on china, we will fight to the end. not exactly what anybody wants to hear. as you mentioned, we have john bolton's appointment as national to bomb advisor, famous iran and comments on north korea. we had fed chair powell tell us the fed forecasting is not were so much as you get further out into the future.

the u.s. congress passed its $1.3 trillion spending bill. there's a lot of rhetoric that has been put into this market this week. i think that is part of the response we are seeing. for us, it is still too early to give up on this global growth story because we are only in phase one of this protection a story. -- protectionist story. guy: cyclicals have bared the brunt of it. that growth story is being priced out of little bit. you see it in the commodity space as well. you see this sense that had ways to growth are mounting more. do i sit in cash right now and look to whether it that way? how do i make this work from a portfolio point of view? mark: that's a great question. i think we are not sitting in cash. i don't want to minimize the

of atial difficulties wider trade war to create. at 20%the risk of that to 30% right now. what we have done is added some countercyclical positions to our portfolio that would be overweight the 10 year u.s. yensury, overweight the versus the new zealand dollar, and have some put protection and some of the major indexes to kind of balance what we see is a much more volatile year even if our base case, which is a growth story, continues to play out. francine: mark, we are just getting -- first of all, good morning from francine. we got breaking news out of brussels. eu leaders calling for tariff exemptions to be made permanent. what happens if we do have these terrorists in may -- tariffs in

may? some of the industries will be hit if it's the case and there will be tariffs with europe. mark: absolutely. i think you need to think about sectors. again you have to put these moves in context. talking $50 billion or $60 billion of chinese goods that they tariff, that is 2% of u.s. imports. that can be substituted. there is just so much that is not known. when we started on the steel exemptions.was no now we are at exemptions. absolutely we can roll forward to the difficulties if we don't resolve these things. again it's a little early to say. another good point that you raise is this linkage point.

that is that there are other levers. this is not just a tit-for-tat around tariffs. perhaps this tariff discussion does make the eu u.k. negotiations work better. perhaps the tariff negotiation with the united states alludes to the transpacific partnership where tariffs go down elsewhere. from thee seen chinese, they have been willing to come to the table. and we could get a better result because after all the u.s. is facing more tariffs from other countries than the u.s. imposes in aggregate. perhaps we could get to a better place. francine: i'm trying to also find the linkage. anotherets pricing in substitution at the white house. trump administration that does not have a real probe market friendly advisor.

if that is the case, is that speaking investors? -- spooking investors? mark: certainly the turnover that has taken place since gary cohn left has contributed to uncertainty. we all know the market does not like uncertainty. seen what we have not larry kudlow can bring to the table. and inown larry for years think he's very good at articulating the nexus between economics and politics. that has not started yet and it's unclear how much he can ultimately influence the president and what would seem to be a much wider range of advisors influencing him then we perhaps thought a month or two ago. guy: would you be buying puts on the dax right now? if i was to pick a major economy that has exposure to global trade, the german economy is the

one i would take. if you look around the world and look at where the maximum exposure could lie, does it actually lie in europe? mark: i think that's a good point because germany's largest trading partner is china. now again, that's away from our base case that this really escalates and that the china-european trade situation breaks down. that's not our base case. we are overweight in european equities because we continue to see growth developing there. mark, i was great to speak with you -- always great to speak with you talking to us from zurich. coming up, the bank of minneapolis president at 10:30 a.m. in new york. that is 2:30 p.m. here in london. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." i'm taylor riggs. let's give the bloomberg business flash. shares of nike are rising in premarket trading. investors are encouraged by turnaround of the north american business. the ceo says the picture has brightened by the end of the latest period. the ceo of credit suisse saw his paychecks shrink last year in the third year of a major restructuring. the bank says he received $10.2 million for 2017. that is 5% less from the year before. credit suisse says his pay would return to levels in line with the banks expected improvement. j.p. morgan chase is deciding

whether to spin off its project into a separate company. according to a person familiar with the matter, the bank is still in the early stages of decision-making. the goal of the project is to create a digital ledger for banks, and corporations. that is your bloomberg business flash. francine: thank you so much. following china's announcement of reciprocal tariffs against the u.s., the euro rose for the first time since november 16 as investors flocked to haven assets. joining us is john hardy. talk to me about the yen. we do not see an exemption for japan and yet there's havens going on. john: what we are seeing are the ideal ingredients for japanese again rally. the markets are at odds on what to do with foreign exchange on all these announcements and concern about a trade war. one thing clear is that the

japanese yen is undervalued. off and with interest rates heading back lower, this is a national support for an undervalued japanese yen. it is one of the few stick out moves over the last couple of sessions. francine: what comes next? i had a couple of viewers writing in this morning. i will pull up my chart. they say once it touches the 200 day moving average, it could go back up. are you looking at technical levels when it comes to currencies or not? and looking aty technical levels when it comes to risk appetite. what happens when you have these big risk off moves if you get a lot of correlations going to one and certainly into assets that are on the move. another 200 day moving average to look at is the s&p 500 200 day moving average.

this is a level i hold more important than any currency level. i think the next levels for dollar-yen are really down towards 100 if this move continues and the general risk off tone continues. guy: the second derivative -- let's talk about the second derivative. central banks get upset about the rate of change. are we in danger of seeing some of these rates of change accelerate a little too quickly? maybe we start to see the intervention risk start going up. john: i don't think so at these levels. also given what the topic is here, currency manipulation and directly by the whole protectionist trade war ru bric, the japanese side would be very slow to react and would need to see a much larger move. butgs look a bit volatile, they are not that volatile in

the fx space and it would take something a lot more considerable acceleration wise to see remarks from the authorities. guy: one of the things the chinese could do is to use the currency as part of this process. do you anticipate that could happen? we've been talking about currency wars for th as long as i remember. the currency story has not gone away the. ough. john: that's the so-called nuclear option for china and i think there are two ways that china is using its currency -- for a broad. they have decided to keep it at a rather strong level. the stability is the most important signal they want to send for now. to the biggerious arc of all this is how is china going to continue to respond from your? are they going to play a a longer waiting game?

thepolls are not good for 202010. this could be tensions but no threat or huge escalation. i think that's the huge question from the chinese side. guy: one of the things we are seeing at the moment is oil prices going up. part of this is on the global -- reflation trade and part of it on the expectation that we could see issues around the iran deal. if we see a spike in oil prices, how does the gulf use those petrodollars? it has been one of those flows that went into reverse the last few years. if we want to see oil spike higher, how does that change the petrodollar dynamic? john: very good question. if you look at the case of saudi , the higher oil prices are short-term welcome relief for massive deficits. i'm not so sure it alters the

equation in a dramatic way on the petrodollar. it's a tremendous issue for the long-term. also interesting in connection with a trade war's. with this new announcement of a chinese yuan paste oil contrast are -- based oil contractor, you could see the arrival of the petrodollar in the future. i've not given a thought to the immediate effects of the higher oil prices. you need to see more dramatic than oil prices for petrodollar implications here. francine: what is your currency of choice here? are you looking at euro-dollar or dollar room in the -- renminbi to see how the tariffs play out? john: it's interesting to see have the market is confused as to what to do here. we only have the strong yen as the salient theme for the moment. the dollar has been mixed as it's not stronger week. i am more interested in the risk correlated currencies and not

that we have seen more risk in the currencies. if this pressure extends and we see credit spreads and emerging-market credit spreads start to blowout, does the market get a bit unsettled? do we see these emerging-market currencies on the move? that is one of my points of interest here in the coming sessions. francine: thank you so much. john hardy joining us this morning. don't miss our interview with chris hughes, the facebook cofounder. they will talk about the data saiga and mark zuckerberg's comments. as at 5:30 p.m. in new york. this is bloomberg. ♪ mom, dad, can we talk?

sure. what's up, son? i can't be your it guy anymore. what? you guys have xfinity. you can do this. what's a good wifi password, mom? you still have to visit us. i will. no. make that the password: "you_stillóhave_toóvisit_us." that's a good one.

seems a bit long, but okay... set a memorable wifi password with xfinity my account. one more way comcast is working to fit into your life, not the other way around. ♪ francine: beijing backlash. global equity slump as china hits back at present trump's

metal tariffs on $3 billion worth of u.s. imports. the move follows washington outlining the levees on chinese goods. trump says it won't stop there. coming to the market. the first day on of trading and deutsche bank raises around $1.7 billion from the sale of the unit. good morning. this is "bloomberg surveillance." guy and francine from london. the prime minister of the you care just about to depart brussels. i'm not sure if we have live images. they often trying to lobby the trump administration. she is talking, not leaving. she is talking while leaving on the way out. guy: she was to leave earlier, but she didn't. they were waiting to see how the u.s. story developed with the trade exemptions. she stuck around for that. she was already meant to be out

of the door and on her way back to the united kingdom, but that has not happened. two things that she's focused on is the trade story and the other is what has been going on with the russian relationship and the surprised the parts are -- departure of the eu ambassador to russia overnight. guyfrancine: i wonder whether ts has implications for brexit and that the eu has a more united front and a want to keep the u.k. onside or whether they are distracted by what's happening with the tariffs. guy: they may highlight the advantage of staying within the eu although many of you can would argue that the security architecture his nato and does not fall within the eu. and be interesting to see how that debate developed. francine: let's get straight to the bloomberg first word news. taylor: china is striking back after present trump order tariffs on chinese products .

beijing announced its own trade sanctions. it's on part, recycled aluminum, steel pipes, fruit, in line. china does not fear a trade war with the u.s. and is called for dialogue to resolve the dispute. another shakeup of the white house involving the national security advisor. president trump has named john bolton to replace h.r. mcmaster. he is known for his hawkish views on north korea and iran. his appointment comes as the president prepares to meet with north korea's kim jong and. congress has a narrowly averted another government shutdown. the senate passed a 1.3 chilean dollars spending bill that raises military and domestic spending. it also strengthens background checks for gun buyers. conservatives complain the bill is too extensive. the white house says president trump will sign it. global news 24 hours a day powered by 2700 journalists and analysts in more than 120 countries. i'm taylor mays. this is bloomberg.

francine: thank you so much. stock declines are deepening globally. european equities sliding to the lowest and more than a year. areou look at asia, they quite significantly lower. china announcing retaliation against present trump's tariffs. it basically adds a layer of houseainty when the white up to its protectionism on thursday. the stoxx 600 down 1.5%. guy: you don't get many days like today peopl. let's take a look at the dax and markets around europe. you look at the last year and you put a normal distribution of outcomes over the top and look at where we are right now. this is a two standard deviation move. this is a big chunky move, folks. the 200 doing all right.

it's worth paying attention to that. s&p many futures are starting to fade a little bit as well. we are starting to see a translate across the atlantic so pay attention again. asia is down 4% or 5%. europe is down 2%. at the moment, the u.s. is down 1%. the day for the u.s. perspective is still relatively young. let's look at the stocks on the move and i want to highlight one of them. glaxosmithkline is trading higher. it is walking away from the bidding process surrounding pfizer's consumer division. andcord rally yesterday glaxosmithkline doing a similar thing. the miners are trading down. now one bank down 5.3% the day of the ipo. francine: we spoke to the chief executive half an hour ago and

he has interesting story to tell. back to the story that go investors and world leaders are focusing on -- the trade tensions between the u.s. and china. beijing has announced retaliation levees after washington unveiled its latest tariffs. china's response has been called measured by most analysts, but noble lariat -- noble laureate joseph says president xi has a point to prove. >> china cannot be seen to be week. particular when you have a bully goodtrump, it would not be to respond in a week way because what happens is we know about appeasement. ,t's a different kind of a war but in a trade war, appeasement could lead to more and more demands. francine: we are now joined by bloomberg's chief asia economics correspondent. over in new york is michael mckee.

marty, let me start off with you. what will presen president trump do next? marty: my reading of the situation is donald trump is a guy who asked for him that everything is transactional. it should not have been a surprise that he was going to propose these tariffs. he signaled it for years. he wants this to be a transaction. andants china to respond the chinese have taken a very measured response to these tariffs and says it wants to avoid a trade war so there will be talks. the question is what will come out of those talks? francine: what comes out of those talks will exacerbate a response from china. from china iseard not a response to the latest tariffs. >> that's entirely right.

the tariffs that china announced where not in response to the steel and aluminum terrorists. we do not know which gives the u.s. have chosen. until we do know, china cannot respond in any meaningful way. the narrative coming out of beijing has been consistent. the prime minister said they will do all they can to protect an ip cannot force a technology transfer so china is making all the right sounds. the overall response has been relatively subdued. the critical question is what goods are chosen and how does china respond? guy: how should the chinese approach this? i'm not asking you to give the authorities of beijing advice. if you look at how this will work from the chinese perspective, which bits of the u.s. economy are most exposed? michael: there's two ways to look at that.

andis politically exposed the chinese choosing the sanctions that they just put out today for the steel tariffs have apparently tried to go for some political gains in states that were donald trump supporters, especially by the port tariffs, because those are in the midwest. the u.s. is looking at high-tech, high value add areas to sanction them for the intellectual property theft. they may respond by going after companies in that area. you would think of boeing or apple or somebody like that. they have a wide range of possibilities. they talk about everything from soybeans to airliners. it will depend on what the final items that the president chooses to put on the list. foreign policy 101 says that sanctions and tariffs are generally for domestic purposes in terms of the narrative around them.

how will this play in china? what will be on the chinese list of things to respond with? how does that sort of get perceived through a chinese filter? there's a domestic political narratives that must be looked at carefully. enda: they will need to respond. there's no question about that. they have a very vocal domestic press and making clear that china has a big stick to wait if they need to. by all accounts, china can and will respond. the question is the extent of that response. sot is why the mood music far has been that they are willing to fight, but they are also willing to talk about this and see if they can negotiate and put on the table here. we are still flying a little bit blind. it is interesting that the u.s. is targeting higher value-added goods. they're not going after textiles or footwear or the china manufacturing sectors.

that is getting into a sense of parity for china because that is talking about their future economic model. one way or another come i wouldn't to paint some kind of response from china going forward. francine: president trump has just tweeted. this is one of the tweets we know quite well where he is pushing back against the intelligence community. he says these are the finding of the house intelligence committee vote. no evidence of the trump campaign in russia. the postelection response was insufficient. he said inconsistent testimony on media contacts. when you understand the trump administration's nuances, are the tariffs a good distraction from what's going on with the russia probe? donaldi don't think trump is making these comments to distract from anything except his view that the mueller investigation is misguided and should not have happened in the first place. it's interesting john dowd quit

yesterday. he has a new legal team. i personally believe donald trump really wants to testify or give testimony to mueller because he is convinced of his innocence. i would suspect in the not-too-distant future that we are going to either hear about a deposition or some way that donald trump can in fact address the mueller inquiry directly. i think he really wants to go there. , bomb iran stop iran -- john bolton. what happens next with the iran deal? marty: there have been various people who have predicted that donald trump will withdraw from the iran deal. john bolton is a hardliner much further to the right of rex tillerson and others around the president. jim mattis never wanted us to leave the iran deal.

week, this is a presidency of one and that one is donald trump. emotionally and intellectually, he wants to get out of the iran deal. i think that is what is going to happen next month. francine: michael mckee, how will this presidency of one choose who is permanently exempt from these tariffs? the eu's lobbying quite hard not to be put in the basket of going back to tariffs in may when this exemption ends. what will they decide on? michael: it's hard to know because it's that presidency of one and it depends on the transaction here. what does the eu give donald trump in order to keep themselves on the exempt list? he will probably want support from them on the intellectual property theft sanctions that he put out yesterday. get is not impossible to because the rest of the world basically agrees that china does not play by internationally accepted rules in terms of trade.

it's just a question of what those countries are willing to do. they don't like the way donald trump is going about it, but they do believe as he does that something should be done about china. guy: one final quick question to you -- china is making a lot of the use of multilateral organizations at the same time the white house is going down the bilateral route. what is the purpose of that? is that to try and draw others in? i'm just kind of curious as to the objectives of continuing to push this bilateral story. we heard a couple years ago and we heard this pushing of the multilateral rules-based system. what is china trying to achieve here? enda: what they see here is an opportunity that mr. trump has given them on the global stage to portray themselves as a defender of the existing global order, as a defender of these

multilateral institutions that the u.s. set up in the first instance. that is why some people wonder if china will not respond just to prove their point to show how they are the responsible global citizen. it's important to say that there's plenty of grounds for debate around china's ip and technology practices. the great argument of this whole debate is that there's a significant body of opinion as to how china does it. if they had gone down another route, they could o have one. it's an opportunity for china. francine: an all-star panel joining us. marty shanker, michael mckee, and enda curran. coming up, china's ambassador to the u.s. will join bloomberg tv live at 10:00 a.m. in new york. that will be a conversation on tariffs and what president xi can and will do next.

this is bloomberg. ♪

taylor: this is "bloomberg surveillance." i'm taylor riggs. but could the bloomberg business flash. glaxosmithkline has dropped out of the bidding for pfizer's consumer health business. they had made an offer for the over-the-counter unit at up to $20 billion. now the company says any acquisitions must meet its criteria for returns. shares of dropbox begin trading publicly today.

the filesharing companies ipo priced above the market range. dropbox initially targeted a market value about a quarter less than the $10 billion was valued at in a 2014 funding round. strong demand help close the gap. it will begin trading with the valley of $9.1 billion., a surprise mov with the biggest operators in macau. galaxy entertainment has agreed to buy a stake in its rival wynn resorts. that would make galaxy a potential owner if wynn resorts was up for sale. wynn sold his remaining shares in the company. that's your bloomberg business flash. guy: let's talk about the markets. i have to give you some numbers in just a moment and tell you what's going on. joining us around the desk and around the world's bloomberg's cross asset reporter sarah punch at, stephen from jpmorgan.

the dax is trading down by 1.8% in the ftse 100 is trading sub 7000. we futures fading a bit as work toward the start of the session. stephen, your european equities guy. what's the advice to investors? do i keep selling or start buying? stephen: it depends on your time frame. guy: between now and the end of the day? stephen: i can't make that call. guy: are you surprised to see the selling? stephen: in a way no. we were talking about the fact that when it came to the sense that everything was fine and gdp growth again and earnings growth and valuation not demanding, but at the same time you can see there's a certain amount of complacency. you could see that in the core ratio and investor optimism. that initial setback we had was not a surprise. acceleratingps on

at the rate, it would open up 134% and it would not happen. what is interesting about that first correction was that there was great little rotation of the market. defenses continue to underperform. this news about trade we are not quite sure where we are heading. it feels like we are in a risk off move. what you are seeing is some flattening of the curve and that seems to be leading to a small amount of rotation in the stock markets. defenses starting to come back into focus from a relative point of view. i'm surprised actually at how well performing the market has been could there's . this a lot of volatility, but they look quite stable. volatility start to come in as they start to get more nervous. how do i reposition? >> i think you stay calm.

makeld not be looking to major portfolio shifts at this stage. i was talking to one of our traders this morning and one of his counterparts said to him i will sell you anything, including what i don't own fee. you don't really want to be actively participating. when you look at talking to another trader on the em asian credit, there was really no bid at all. it was a very heavy market. i do actually think in this situation where we are getting a lot of selling of growth sensitive risk assets, if you still believe in the underlying investment thesis of global growth, it should come to that a little bit. then actually there's going to be opportunities to add risk. i'm not be adding risk right now because there is still some positions that need to be

fleshed. there are weak hands holding risk that maybe shouldn't be holding. it's been painful out there because if you think of the three most crowded trades, they have been short dollar. it has been short u.s. rates and it's been long fangs. let's get to new york now to our bloomberg cross asset reporter. i've been following our blog with great interest because it seems the market is quite an discriminatory in what is selling off and there was a good point where countries in south east more of a domestic growth focus and benefit from strong consumer basis unlike their north asian neighbors. this could be a haven. have the markets figured out where the real havens are or are they selling an discriminatory? sarah: the markets are trying to figure out where the road real havens are going to be. we need to get more details.

when you think about the s&p 500, 43% of its sales come from foreign countries. that's a lesser 20%. you can see the difference, but you see people flocking to the yen and treasuries as a bid to a risk off tray. they're looking for those safe havens. as we get more details as time goes on, we are really going to see investors figuring out exactly where the safe havens are. francine: what needs to happen for a lot of these assets to trade even lower? could it just be general sentiment or does there need to be another catalyst? sarah: to trade even lower, i'm going to go to a technical side. when i spoke to one of the technical analysts, he says we break below the 100 day moving average with a lot of force. that could mean that even if we get more news, we could continue lower on the day. because we broke below the 100 day moving average, we are going to open earlier today.

we will see what happens, but it's very possible we can test those february lows and get toward the 200 a moving average. guy: talk to me about sector rotation. some people are flooding to the yen and to the treasury market. they're flooding to stocks like andt. as a look for safety try to understand how to reposition. talk to me. do i sell german autos and by what? stephen: when you say flooding to, defense sectors are outperforming a falling market. i'm not sure there's real money. that's relative trade. the second thing is that as i said earlier, the assets or what's going on in the bond market. you've had curve steepening. the third thing you have to think about is the earnings story and potentially the direction of the dollar.

just on the earnings story first, it's in a sector for financial fields and better growth is expected. if we assume that the current trade does not mp that growth story, you would expect that is going to be delivered. in the medium-term come i think people need to think about what david was mentioned. at the moment basically it's not working because it has stalled. the dollar is not weakening or strengthening dramatically. we needed to weaken in order for that trade tort. that, have the reverse of a lot of it has been driven by a weaker dollar. if that turns around, that will drive a bigger sector rotation. francine: there's a fantastic chart that i will show and not ask you about right now. the russell 2000 outperformed the s&p 500. we have of your question. -- a viewer question. should europe negotiate with china and find a way to overcome these sanctions instead of

trying to convince the u.s. basically not to impose the tariffs because they're playing? we are seeing global trade rethought. it's a good question because the issues that the u.s. has raised about intellectual property theft in global trade have merit. in auld be shared an number of other major economies. the problem with europeans is that they are doing it bilaterally. francine: thank you so much, sara, david, and stephen. this is bloomberg. ♪

david: i'm guy johnson in london. i don't know when he's on holiday.

there is some risk in the market. taylor: china is striking back after president trump ordered tariffs on $50 billion worth of chinese products. they plan tariffs on pork, aluminum, steel pipes, wine. they don't fear a trade war, they are calling for dialogue to resolve the dispute. the national security adviser is out. john bolton will replace h.r. mcmaster. his appointment comes as the president prepares to meet with north korea. congress averted another government shutdown. a spendingpassed bill that raises military and domestic spending. it strengthens background checks for gun buyers.

conservatives complain it's too expensive. the white house says the president will sign it. eu leaders are siding with theresa may on russia. moscow was's likely behind the poison of a former double agent in england. russianntries may expel governments. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries, this is bloomberg. i am taylor riggs. thank you so much. more on the brexit summit the taylor was just talking about, they are talking about trade tariffs and brings it. theresa may got support from the eu, they were backing her on the russia stance. leaders also signed off on the next stage of talks and we will talk about the eurozone later. the rates are lower from the russian national bank.

it is stabilizing inflation over the last few years in many respects. believe thereople is upside risk to inflation as a result. they continue to cut rates. it's get back to david riley. the idea that the russian story in the trade story makes the exit story more interesting. there are now reasons to stay or stick with europe and a way that there wasn't before. are we over thinking this now? david: in the world that we are the u.k. is more

exposed by leaving the european union. wet is something that subscribe to. isn't one in which it's going to gain traction and make a meaningful difference in terms of the likelihood of the u.k. leaving the european union? francine: does it change the narrative? guy: you get a softer brexit because the u.k. is realizing the world is a dangerous place. think with some politicians in the u.k. are very parochial. i don't think will make a meaningful difference. the risks are increasing. we seem to have a softening in the eu. out in tangible

proposals. stephen: the deal that has been talked about this week, it sounds transitional. during that transition, very little will change. get a net departure from the european union and trade talks of not yet started. we don't have any clarity about the relationship that is going to be. i'm not privy to the discussions at the high levels in politics. i think was interesting as there seems to be an acknowledgment that there are issues at stake. the issue with that is that might not play well because companies and voters will want what they want.

if they feel countries are standing in the way of it, that might not work on main street. as an economy, those relationships need to be uninterrupted. you likedo think if saw a bouncen, we in sterling because of that. yet to besue has resolved and have some clarity. the issue is one which can break the transition process and lead to a potentially harder brexit. there are going to be some difficult choices sooner or later. the european union and the u.k. are content to keep this down the road it. stephen: one really interesting thing about the irish border, it focuses on the fact that these border issues are about

regulation. i think the irish issue is turning that into sharp focus. francine: what does that mean for your investments in the country? 5100, itok at the could still be attractive. thaten: there is a sense rotationally stock market affects the exchange rate. you saw that bounce in sterling. those are a great deal less. one of the interesting things about the u.k. stock market is a synchronized global growth. with increasing talk of tariffs and trade wars, is going to struggle in the future. , it'sn look on bloomberg

the volume of total global trade. it peaked in 2007. it never advanced. back in 2014, it recently asked up and brought back the previous pace. is unders the trade pressure for 15 years. it's not really a new one. it has been undermining britain in the volume of global trade. david: i think it's more to do with growth and supply chains not being, people not getting the most out of their supply chains. now, the terms of trade are under discussion. for themmes difficult to make big decisions.

i think those trade numbers are a symptom of that. are you investing the u.k.? about credit wary in the u.k.. the secular forces have been there. they have an effect in high-yield and payday loans. some value within sterling and investment-grade credit. there is a premium for brexit and liquidity. it brought exposure to europe and more generally in the u.k.. there is some potential value there. on the credit side, on the banks they did a issue.

much.ne: thank you so they are staying with us. conversation with dick costolo. he was the former chief executive. that conversation is at 2:10 p.m. in new york. don't miss that discussion. revolve around the concerns that facebook has had and how the other tech companies can protect data. this is bloomberg. ♪

taylor: let's get to the business flash.

shares of nike are rising. investors are encouraged by a turnaround in the north american business. sales in the region fell for a third straight corner, but the ceo said the picture had brightened by the latest. the ceo of credits we saw his paycheck shrink. received $10.2 million for 2017. that's 5% less. his pay will return to levels in line with the banks expected improvement. j.p. morgan chase is the site and wanted to spend off its project into a separate company. is still in the early stages of decision-making. the goal is to create a digital ledger for use by clients, banks, and corporations. that is your bloomberg is the/. -- business flash.

guy: they are business -- nervous in united states with think about how many jets he will be selling. he runs boeing. is going going to be on china's list? one person that knows a lot about this is bloomberg's managing editor. good morning. the you think he's nervous? he doesn't seem to be able to hear me. francine: maybe it's the sideshow of brexit. we are losing our election to europe. companies pick up where u.s. companies lose out? whileirbus be making hay there's a problem. they have performed

astonishingly well considering the euro strengthening. that's a surprise. on trade, europe has openness to global trade. that is largely export driven. best not great for the eurozone economy. other things are recovering. particularly in the banking sector. china represents the teacher. guy: how should europe position itself. if you are the ceo of europe, how do you make this work? the first point is the trade policy for europe is not set by europe. there is no european commission dictating what's going to happen. it's national positions.

national politicians are saying. i think that in germany, they would record the fact that there export penetration into the chinese market, they've done pretty well out there. francine: let's go back. he is are managing editor. can you hear us? >> i can hear you loud and clear. francine: connection established. we are trying to figure out how much boeing has the lose of the tariffs with china. how reliant are they on china? >> china is a huge market for boeing. they put out these long-term market updates, 20 your forecast with a look at the market. china figures as the most twortant market, about replace the u.s. is the biggest travel market. they are traveling locally and internationally.

this is a market they can't afford to lose. francine: the population in china was 1.4 billion. how big is the aviation market in china? >> we are expecting china will lead 6000 new aircraft in the next two decades. that's huge outflow from factories in europe and the u.s.. we saw this when trump was in china. he announced a big order for 300 aircraft. smaller aircraft, but also some wide bodies. this is where the growth is coming from. globally, china plays an important role. a lot of areas of growth have dried up. the middle east is not that engine anymore. europe is done with its replacements. growth in the u.s. is not as it used to be. china is where the action is. they produce locally.

they have a leg up on boeing. that is not something they will be keen to monitor. guy: let me ask you a technical question. contracts? work with they will be delivered many years from now. are boeing and you try to understand how these contracts work and there is a problem with trade between china and the united states, i think this 737 is going to be delivered in seven years. are those omens built into the contract? are we dealing with a blank piece of paper? >> it's a very blank piece of paper. this is why they have these long-term forecasts. no other think ministry could look into the future.

we are looking at an industry that has long products. china was a special market and how it buys planes. it's the state that centrally wise aircraft and then distributes them. that's why china is such a difficult market. it's important not to get wrong politically. you are dealing with that one entity. fromu are looking at it chicago where boeing is based, if you're looking for china market, you will be careful that they move positions around a little bit. we are coming into a growth phase. they don't want to over produce. there are a lot of moving pieces. a lot of european companies

are part of the supply chain. it gets very complicated. this is a just a u.s. factor. i imagine the supplied chain story is how this works. that makes it more complicated. >> that's absolutely right. it's not a simple industry. it's a globally integrated industry and components come from all over. they come from europe and japan and china. this will not just hit boeing it. if you could the boeing share price, they almost doubled in 2017. there is a lot of optimism built into what the trump administration will do for boeing. they were the biggest exporter in the u.s. they are the darling of the white house. there a lot of optimism built into the share price.

respondedina has not to the tariffs in the u.s.. this could turn into a flamethrower contest. china has not been that aggressive about it. we will see how it plays out. thank you so much. if you are a bloomberg customer, go on to tv . we have some really cool charts on boeing. you also asked some difficult questions to david and stephen. click underneath the the is green. we last those questions next. this is bloomberg. ♪

francine: this is bloomberg surveillance. tom keene has the morning off. he may be back on monday. he may have found a very good-looking presenter. this is my single best chart. have a 100 day

moving average. this is the back out of your the we see and said i think a rebound in u.s. markets once the dow gets closer to 200. stephen: some traders think about moving averages. the more important issue is once coming. i think corporate america is on a scale this year that other areas. it lookednuary, demanding. are up the 200 day moving average. you are moving into unexpected valuation stories.

that is somewhat when way. guy: if we are talking about averages, europe has gone to 200. look inflated? is that getting done? toy 17 was a great year. -- 2017 was a great year. stephen: in local currency, europe has not looked great. in dollars, it was the second-best area in the world. depends what happens in your. in the middle of leicester, people were concerned about excessive euro strength. it is far as we can tell, that's not happening. we are not seeing upgrades, but we are not seeing downgrades. >> the view should be positive.

i think part of the backdrop we see at the moment is the european data has been coming off. from a high level, it's important for risk asset. it's the momentum, it's the change. it could be more problematic. francine: thank you so much. this was a fun hour. thank you to guy johnson for stepping in for tom keene this week. this is bloomberg. ♪

david: china strikes back. beijing says it doesn't want a

trade war, but isn't afraid of one. safety, stocks fell off and the yen rises as does gold is washington piles on more uncertainty. there will be no government shutdown it, but it took $1.3 trillion for everyone to agree. how on earth are we going to pay for it? welcome to bloomberg daybreak. alix steel is off. you moved away the way from the afternoon to the morning. happy friday. global risk aversion is the theme of the day. weakest spots are the in more than a year. you can see the level. the dax is the real underperformer.