manus: i am anna edwards. >> i am manus cranny in dubai. this is your all new bloomberg daybreak: europe. these are our top stories. >> steven mnuchin and is hopeful a deal can be reached with china as investors continue to assess the terror of impact. friday selloff continues into asian trading, but u.s. futures push higher. manus: tightening the screws on putin. president trump is expected to take his most aggressive actions yet against russia in response to the nerve gas attack in the u.k.. beijing's oil push.

china launches its first-ever crude futures contract as it is more power over pricing and challenges benchmarks in the united states and europe. good morning, everybody. this is "bloomberg daybreak europe." manus is with us in dubai. i am in london. let's put the overnight trading picture together. let's start with the asian session. asian-pacific down. the market is struggling to get the size and scope of what the u.s. administration wants to do with china on trade. we don't know the details. mnuchin says he is hopeful. last week, the worst week for u.s. equities. we put the copper price in there for you as well, down by 1.2%. talking about how maybe this will be something that sets the tone for global markets this

monday rather than the strength we are seeing in the future story. this is the dollar index for you as well. we are pretty flat. not so much risk aversion in ethics markets. markets. in terms of big items on the agenda, pce inflation out of the united states. inflation numbers out of various markets. manus, what have you got? anna: a very good day -- manus: a very good day to you. 6%.u.s. lost where do you want to go? this is the sixth time we have seen a serious hit to markets in a decade. protection, optionality. by the reaction. when i got for you here is a very interesting moment in the

market. we have a huge issuance of bonds. what you got in your white lined is six month t-bills delivering more than the s&p 500. this is the first time we have 2008.his since is that the torch paper of a bigger rebasing for risk? partners say cash is the alternative. bond traders, $300 billion worth of auctions coming to the market this week. the largest two-year paper since 2014. we should not have that much indigestion. the question for markets in a short week was is it 10 halftime or -- tin-hat time? anna: many cliches. we heard both of those views at the end of last week. those are the views we get from our guests. we'll see what chinese appetite we can get given recent developments. are we going to draw a line in

the sand or are we going to start diverging? within the agent story, -- asian story, we see different trends that are really strong domestically with those economies that rely on export engine. great stories coming up today. inare going to be speaking an exclusive interview to the ceo of the bank. this is a big bank over in israel. a lot of commentary no doubt. joins us forarde an exclusive interview after 11:00 a.m. u.k. time. we will be speaking with the ceo of aramco. surrounding the timing of any saudi aramco ipo, for example, and the price of oil. here is juliette saly. juliette: donald trump is poised to take his most aggressive actions yet against russia today. he is likely to announce the expulsion of dozens of diplomats in response to the nerve gas

attack on a former russian spy living in the u.k.. the move, all but certain to provide retaliation comes as trump tried to maintain a semblance of a constructive relationship with the russian leader. the u.s. treasury secretary says he is optimistic of a deal with china that would avoid the imposition of tariffs ordered by donald trump. news mnuchin told trum that the two sides are engaged in conversation. in chinaand -- worth $50 billion. are simultaneously having negotiations with the chinese to see if we can reach an agreement. as the president said, we want to cut the trade deficit $100 billion over the next year. we want to eliminate forced technology. we are having very productive conversations with them. i am cautiously hopeful. we are proceeding with

the tariffs. juliette: in barcelona, protesters clashed with police after the arrest of wisdom on the -- the former president. he was arrested in germany and may be sent back to spain to face trial. he has been traveling around europe. oil climbed to a two-month high as saudi arabia intercepted ballistic missiles. the missiles were intercepted and other cities. if you would concerns that rising geopolitical risks could lead to supply disruptions in the oil-rich middle east. in russia, at least 37 people have died in a fire at a shopping center. the news agency quoted firefighters as saying 40 of the missing our children.

the fire reportedly started on the top floor of the building and consumed an area of about 1500 square meters. local news, 24 hours a day, powered by more than 2700 and analyst in more than 120 countries. you can find more stories on the bloomberg at top . checking in on the markets in asia, we are down for a second consecutive session. .5%regional index off by after erasing all of 2018's gains. the nikkei closing lower by .4%. off session lows, but we have seen japan fit to close out its worst month. weakness coming through in the chinese players in late trade, particularly in shanghai. you can see the csi 300 down. the shanghai composite at a nine-month low. the resource of the australian .5%.t down point -- a deal struck between south korea and president trump over bilateral talks. you have seen the kospi entire. we are seeing a lot of these

potential trade tariffs, companies likely to come under most pressure, selling pressure. kong, downd in hong 7%. it supplies the likes of nike. as i mentioned, south korean stocks looking quite good. president trump and south korea, set to have a revision on some of the producers. due toabout 5%, partly its numbers, but the chairman saying that these tariffs could impact and heard its plans to expand into the u.s.. the chairman did say they plan to be in the u.s. by 2021. manus. manus: thank you very much. juliette saly in singapore. the treasury secretary steven mnuchin is optimistic that are trade war can be averted with china. he said that he is "cautiously hopeful that discussions will be

-- discussions could avoid a trade war." chinesesed tariffs on goods, but not everyone is convinced by the rhetoric on either side. tom mackenzie spoke to some of the voices about the potential impact of tariffs on china at the china development forum. this point in time, we don't see financial markets being overly impacted by this protectionism, i do think if it keeps going around, this could be very disturbing. >> we start to have a tit-for-tat war. it could have an issue, an impact on global gdp, and that piece as well. >> i don't think trade sanctions need to have a large impact on the global economy, but the psychological impact could be quite serious for markets. >> the problem is that there is

a large distinction in beliefs beliefs, when in both believe the situation is different, that you get huge mistakes and things like trade war's. >> china has responded very modestly, given the potential weapons it has at its disposal in terms of countervailing tariffs and it's possible shift in purchases of u.s. treasuries. there is plenty more to come if the u.s. chooses to stay with this reckless policy. a host of fascinating voices on the subject of trade, trying to get it into some perspective. let's continue to try and do that. sarah joins us here on set. good morning to you. let's start the program with size and scope on this selloff

we have seen in global equities, and then talk about the real impact you expect to see on the highlighting the selloff we saw in the united states. but you have been doing some work. given we don't know all of the you have been doing some work on what you think these tariffs will do to gdp. give us your thoughts. >> our team in china had a good look at what the impact would be of what has been announced so far, what has been proposed so far. 25% tariffs on $60 billion worth of chinese exports into the u.s. . the impact on the chinese of gdp.is between .2% it does not sound as if it is huge, but nevertheless, it is shaving off gdp to a certain extent. if things escalate, and if we see the u.s. standing all high-tech goods and imports from china, the impact is much

greater. between 1% and 2% of chinese gdp. if we are talking about all of direct and indirect imports from china into the u.s. being banned, then 3% to 4% of gdp. particularly the risks of escalation have to be taken quite seriously in terms of the impact on the chinese economy and others. anna: you wonder whether you need to pay more he'd to the escalations or the escalations. he is telling everybody to calm , saying that days have delayed because we do not know the details of what the treasury ,ants for the tariffs in china and subject to lobbying. plenty of room to maneuver and claim victory. if you want to look on the hopeful side of things, you can say both sides might use these days to try and change the argument, but would that make

you feel any better about the potential for negativity? sarah: absolutely, and in laying out the sort of downside risks, we are not saying that is going to happen. i think our view is that there in the for negotiation time horizon. at thenot be until may earliest, and of course, in that time, intense negotiations to bring the two sides together to escalation, and of course, with happening to the markets, i think, is a sort of warning signal about how confidence can be affected more broadly. there is incentive for both sides to get to the table. anna: manus. manus: anna, sarah, good morning to you. do we have benchmarks or points?e

ubs said they are surprised by the level of angst in the market. i take you back to the 1990's. they never implemented the tariffs. this very much seems to be the playbook of trump, the art of the deal, and that possibly is what markets are hanging their hat on at the moment. sarah: that's true. i mean, we have seen big market moves. there is a lot of anxiety about the implications for trade for these tariffs if this protectionism does go through. what is different now compared to last time -- unpredictability. of course, donald trump, throughout his campaign, talked very clearly at every single rally. he talked about unfair trade from china. he has made a very big deal about the trade in -- trade imbalance, which has widened more recently. we have the midterm elections coming up in november, so for

washington to their constituency ahead of november, i think that is what makes people nervous that there could be followthrough and an escalation of these trade threats. manus: you are a chief economist. have a look at this chart. 6162. political risk. the appointment of bolton. the risk. to listen has left the rising interest rate. this is political risk. said probably the worst single day for geopolitical risk since 1998, i propose the appointment of -- apropos the appointment of mr. bolton. how long is the distance between risk and the reduction in economic growth? sarah: i mean, we tend to see things happening swiftly. in terms of markets, and if markets fall, then there is an impact on wealth.

confidence of course impacts on investment and household spending. it takes longer to feed through. certainly, it is an impact you in the confidence they do and the production data within the period of three must to six months. of course, it is the risks that are dialed back and a lot of those concerns fade. we are in a global economy, european economy, chinese economy, which is doing very well at the moment, and growing at the strongest pace we have seen for several years. i do not think we should be overly anxious about the economic impact, and of course, central banks still do have options to dial back their policy tightening in the event that there is a deterioration in economic activity. anna: thank you very much. sarah hewlin stays with us. coming up, on "bloomberg daybreak europe," president

trump to take's most aggressive actions against russia today, including expelling russian diplomat. manus: later on, talking to the ceo of aramco. he joins the bloomberg team. ♪

anna: this is "bloomberg daybreak europe." the morning. in singapore, 1:20 in the afternoon. what's on the mind of juliette saly with the bloomberg business flash. juliette. of ubs said heeo is considering small acquisitions to complement its focus on organic growth as the company reverses the shrinking of assets following the financial crisis. made the comments during an exclusive interview with bloomberg at the chinese development forum in beijing. >> we want to look at organic

growth. plenty of opportunities at this stage. we have pockets of growth everywhere in the world, and our focusing is on organic growth. we look at small acquisitions here and there to complement our portfolio, but nothing extraordinary compared to the last couple of years. juliette: rio tinto's ceo said the company has yet to be contacted over a bribery investigation. in an exclusive interview, he also said the expansion remains on track. >> we have no contact whatsoever. learning through the press. my understanding of it relates

to what may have happened. we should not forget that it was at a time that rio tinto gave less than 10% equity stake. i do not know much about it at this point. juliette: that is your bloomberg business flash. manus: juliette, thank you very much. president trump will take his most aggressive actions yet against russia, possibly today, when he is likely to announce the expulsion of dozens of the format. this comes as a response to the nerve gas attack on the foreman russian -- former russian spy living in the u.k. jodi schneider joins us now from hong kong. the current state of u.s. russian relationship. trump said he wants to have some sort of decent relationship with russia. thes going to embrace relationship, doesn't he?

jodi: that's right. that is certainly attention for president trump. -- a tension for president trump. saypresident took pains to it was important to have an amicable relationship with russia, saying that is a good thing. it is just a day after he famously called mr. putin to congratulate him on winning the election, which many parts of the west have seen as a fraudulent election. he is taking pains to do that, but there has been a lot of pressure on him to show some solidarity with theresa may in the u.k. over this nerve gas attack. this comes as the investigation by robert mueller into the role russia plays in the 2016 election. that heats up and takes a new turn. the president under pressure to at least make it clear the u.s. is not going to stand by and let

the nerve gas attack happen without some kind of action. anna: i get that gives us some of the context to criticism. the have been criticisms of president trump, too slow to respond. there are some complex relationships going on here. jodi: that's right, and he has been criticized. on capitol hill, some members of his own party said -- he has been criticized by some members of his own party. because of the investigation and because of the extent of this on the world page, and theresa may and the u.k. taking serious actions against russia. it was hard for the president not to react. we will be seeing the announcement of the expulsion of diplomats from washington. dozens, apparently. anna: jodi schneider, bloomberg news, joining us.

that leaves us at the u.s. russia spat. talk more about topical matters. they are closely watching on capitol hill the trajectory for the u.s. economy. i have a chart here that will be very interesting this week. 6032 on the bloomberg. in the united states, and on this, a lot hangs. to what extent are we seeing a rebound in inflation in the united states? sarah: it's very difficult to see any clear signs of a rebound. what we are expecting is a sort of gradual upward told in inflation pressures. 1.7%. still around that is not a level that the fed is going to get concerned about. having said that, it is clear that they feel the phillips curve still does operate, and as we see the unemployment rate continuing to fall, new fed forecasts on the unemployment over the last year or so

suggests wages will start to build up. you, in got a chart for the monitor at the moment. 5781. we have got a huge auction. $300 billion. bills and notes. the largest supply ever. in this kind of risk appetite, do you think that will bolster the auctions this week? sarah: i think it could well. always seek safe havens in u.s. treasuries and u.s. paper when the global environment is somewhat uncertain. going back to the backdrop, where we have relatively weak inflation pressures. we are not expecting to see any sort of particular downward pressure. thank you. on the bond market. manus: ok, sara. lots more to get through. futures a little higher, up

.7%. of next, the protests in barcelona. ♪

>> if we talk about a tit-for-tat war, we could have an issue, and intact, on global gdp. tinto that was the rio ceo at the chinese development form. that's get into these markets. dani burger is standing by. good morning. let's take a look at these markets. risk off is the prevailing sentiment today. 1.5% down. the worst after these tensions really escalating between the u.s. and china. japan coming back a bit. hong kong down as well.

this comes after the worst week for u.s. equities since 2016. at go ahead and take a look at the charts and see what different asset classes are telling us. emerging-market currencies deciding this risk might actually be contained. these are export heavy countries. trading has been in a range. bottom, ten-day volatility. lowest in five months. not much of a reaction from the trade wars. however, if we look at what hedge fund positioning is in futures, the lowest since 2016. global growth is going to be in trouble. copper will be in trouble. we have seen copper prices slide so for this morning. hedge funds taking note. definitely something to keep an eye on if global growth is in trouble from these trade tensions. anna. manus. anna: dani burger on the

markets, our mliv colleague, talking about how the negativity around compromise at the tone for this session, rather than the positives on u.s. futures, but we will see. protests have broken out in the formerfter president was detained by police. he has been living in exile in brussels since last year's aborted declaration of independence, but was arrested in germany and may be sent back to spain for safe trial. the bureau chief joins us now. what are the implications of his arrest? >> yes. good morning. we are still waiting to judge the implications of his arrest. we have seen the first response, expressions of outrage from the separatist camp in catalonia, as you might expect. we saw the speaker of the catalan parliament making a call for a united front, saying that

spanish legal in aggression need to be confronted and challenged. the question is how exactly they take that forward. we know that the catalan several camp, you know, remains extremely divided within itself. manus: they're a good day to you. what actually happens next? what this country needs more than anything else is a period of stability and continuity. what is the thinking in terms of progress? the parliament needs to find a way to elect a new regional president. we still have the emergency powers imposed by madrid back in october, still in place. catalonia is still being run from madrid. that is a nobody's interest. the spanish government wants -- says it wants things to return to normal in catalonia. and everyone on the catalan --

in the catalan political scene wants to regain control of their institutions, so they have to find a way forward. as a mentioned before, the catalan camp remains extremely divided amongst themselves. they have a majority in the catalan parliament in theory. tofar, they have struggled come up with a candidate they can put forward as a viable president of catalonia. remains to be seen mother events of yesterday act as a catalyst towards making that were possible. manus: -- more possible. manus: thank you very much. to thelitical crisis ratings agency, sarah hewlin is our guest host today in london with anna, our chief economist. s&p, standard & poor's, cites

the highest credit ratings in 2012 or spain. s&p batting away the incident there. they achieved consolidation in public finances. childs the poster for reformation. is this reflective of more to come for the likes of spain? sarah: the spanish economy has done very well. upheavalsthrough big during the euro crisis. they put in place some structural reforms. it's very clear. seen one of the strongest growing economies in the euro , andin terms of growth what we have seen over the past is political upset am turmoil in catalonia has not really had a major impact on activity or sentiment across

spain or indeed across the euro area. so we are still very optimistic on the outlook and spain's growth prospects for this year. traveli know anna was on friday in the debate is to the official exemption europe might get from any potential trade tariffs from the united states of america. how prescient a risk is that? is the biggest risk that the euro becomes the hidden trait of turbulence?rket how do you see it playing out in terms of trade wars versus havens? sarah: i think the e.u. managed remit from they u.s. in terms of trade protectionism. i think, up until the beginning of may, that allows time for further negotiations. the threat from protectionism is a serious one. of course, germany, even if not

directly affected, indirectly would be affected in a trade were between the u.s. and china. there would be a negotiated settlement. we still see the euro strengthening further. central bankers not very happy with the situation. in the past, they tended to hold back from taking any action until the euro gets a lot stronger, the 140 level against the dollar. even moving up towards 130, which would be our own prediction, and we think that policymakers will talk a lot but not actually take action. anna: how concerned are you about underlying data in the eurozone, sarah? the bloomberg. the index turning quite negative, quite considerably negative, compared to where 2017 was. is there something to worry you from the eurozone economy? sarah: i don't think it is

particularly worrisome. going back to the early part of 2017 or even late 2016, there was quite a lot of negativity for markets in terms of expectations of the euro area. what we have seen is very strong growth. no upside surprises from strong demand, consumer spending holding up very well. we think all of these sectors continue. see momentumill easing off slightly, but no real concerns for growth. anna: no real concerns for growth. because of some of the good work being done on reforms around the eurozone and the way unemployment is coming down, labor was being encouraged off the sidelines, and more spare

capacity was being found. it sounds like a great thing. it makes you more and more difficult -- it makes it more and more difficult for mario draghi to meet inflation targets. sarah: i buy into that argument because we have seen it happening in the u.s., in the u.k., where unemployment has gone down to what central banks has said is -- it's often that level. we have not seen signs of wages and -- wages accelerating. reo draghi, expectation is that underlying inflation eventually will kick in. the ecb forecast for wage growth is very subdued over the next couple of years. a very there will be gradual removal of policy accommodation. we are seeing -- manus: are they pushing back when they see the potential to that hike, pushing it for the forward? we had this nice rally in

european papers, $100 billion of redemptions this week. do we expect a further compression, let's say, in these bund yields? there is a healthy redemption and no sign of a rate hike. we all had gotten a little too these yes it. sarah: -- too enthusiastic. sarah: there is no reason for an early rate hike and no reason for bunds to sell off aggressively. of course, to a certain extent, it dependent on what happens to the u.s. treasury market. we are not expecting to see u.s. treasury yields backing up in a hurry. moment, it is a relatively benign period for the bund market, and we think that will stay the case over the coming months. ultimately, of course, we will see inflation feeding through, and the strength of the economy will over time remove the spare capacity.

all of these factors would suggest the yield curve will have to move higher. particularly a bad environment for bunds, even after all this time. even managed to get an output gap into that for you. sarah yuan is the -- sarah hewlin. i think we have got something. we are going to come back to this and a little more detail. more on that story very shortly. ermotti.is sergio he is becoming increasingly concerned about a trade war with china and the u.s.. marketsthe effects on has been minimal so far, but he does fear things could escalate with potentially serious consequences. >> they start to get concerned

for sure. being, the numbers are modest in respect of the impacts. of the tensions on a bilateral basis potentially escalating and futures will be good. it won't be good for growth, geopolitical reasons. this point in time we don't see financial markets being overly impacted by this protectionism, i do think if this keeps going around, this could be very disturbing. >> the market selloff on friday was pretty severe. this has been flagged by the trump administration. >> at the end of the day, it's always difficult to understand this is our corrections coming as a consequence of those announcements or if they are

doing that as the market develops, but for the time constructive on equities, constructive on growth, but as i said before, we have to pay attention that this does not escalate and create retaliation, and particularly if it goes beyond china and the u.s. and starts to attach more other countries in the world, that could become problematic. >> looking ahead, how do you advise the wealth management side? >> for the time being, we believe stocks are still a place to be, although diversification. they diversified it, using the risk. the credit suisse of course, and describe that his firm is

being very strange. i think the first quarter has elements of the usual seasonality. this is what we are seeing in the last couple of years. volatility between quarters. therefore, i would not call this quarter much different than what we have been seeing the last couple of years. >> you have got that less uncertainty. you're better positioned, it seems, to make acquisitions should you choose to. >> i think it would be, you all, first the -- of our central case is to look at all ghetto growth -- organic growth.

when you look at asia, china, in the u.s., we have pockets of ,rowth everywhere in the world and our focusing is on organic growth. of course, we look at small acquisitions here and there to complement our portfolio, but extraordinary compared to what we had in the last couple of years. >> do you expect to see a pickup in the banking sector? >> i have been expecting this consolidation to come, and i think it is time. consolidation will be part of the solution. trying to take out overcapacity in the system. and together, alongside with many banks that need to find their own business model, we need refocusing. there are too many banks were

not able to pay for their cost of capital, and this is not sustainable. anna: that was the ubs ceo, sergio ermotti, speaking to tom mackenzie, speaking about consolidation and the banking sector and the state of global trade. let's talk about concerns about protectionism and what it's doing to global markets right now. this is the picture across the asian equity session, things turning more positive through the day. the msci asia-pacific down .2%. the shanghai competent in negative -- composite in negative territory. they were underperforming. the kospi was always positive. japanese markets are named positive. the nikkei up by .3%. part of that may be driven by the fact that we see u.s. and futures-- u.s. improving. maybe also around the tech selloff we saw last week. markets trying to gauge just how longevity those concerns around data regulation should have. we see the nasdaq futures up by around 1% now.

those futures becoming more positive through the morning. coming up you're on "bloomberg daybreak europe," we have got an theusive interview with banks cfo. the interview of the day this man atbe with aramco. he joins the bloomberg team later on. i'm sure the conversation will be around dividends. this is bloomberg. ♪

manus: israel's largest bank has reported net income for the fourth quarter, 612 million shekels, and increase on last year's numbers. we have the cfo. let's welcome him to daybreak europe. he joins us now. from tel aviv.

give us a flavor. where is the growth, what is the story in israel for banks, where you winning? >> good morning. we are publishing today our annual -- we are very proud with our growth rate. 9.4%. if i put aside the provision, have to put aside the doj investigation. we are continuing to grow within the market. lessarket share is more or one third of every market we operate in. we continue to grow our credit book around .5% if you look at the overall growth, 3.5%. if you look at the local main , the gdp growth

in israel for 2013 was 3.4%. we are going at 3.5%. we are going with it. being such a big financial institution in israel, we are proud of this growth. ask you about that growth story. can i ask you about the growth? we just caught up with sergio ermotti. what is the risk of bank hapoalim to the israeli economy? yadin: i don't see a specific riskier. we have been going for a few years more. mainly because of the population that is increasing. we are enjoying this growth for a few years now, and i think we

will continue to enjoy it in the future as well. the doj.lk to me about everyone has got their issues with the regulator. doj to wrapects the up the tax investigation. can you give us the timing on that for the half year? when do you expect to wrap that up? yadin: it's really hard to say. we are continuing stocks both -- talks with the doj and the fed in new york. the israeli talks are going on for a few years. we have been passing a lot of information that was requested by the doj. we hope that it will be finalized during 2018. manus: ok, so you will clear the deck. which takes me to the next point. can you reassure investors? i get to choose right i put my money if i am an investor. what assurance can you give to the investor that that would be the top of your agenda at bank hapoalim?

yadin: even today, we are announcing a 40% dividend payout. we were the first bank in israel to pay back or start paying back dividends after the financial crisis. we have been gradually increasing our payout ratio since 2013, and since the beginning of 2017, we announced it to go to 40%. each quarter since the beginning of 2017, 40% dividend payout. we have a lot of access of capital, much more capital than we need to support our business and growth rate. 40% as a regular -- on a regular basis. fors: thank you very much joining us right here on daybreak europe. i look forward to the

invitation, coming to tel aviv to have a conversation with you. that is the latest from bank hapoalim. a number of different things happening on the ground. oil climbing to a two-month high after saudi arabia intercepted ballistic missiles flying from yemen. risk in the region could disrupt oil supplies. my coanchor of bloomberg: markets middle east is with me now. yousef gamal el-din. us the very latest in terms of the escalation of risk. nbs is in america. put in context. yousef: there was a fatality, a marked explanation. the second part of this escalation, we have one or two maximum. it is not normal for ballistic missiles to fly over saudi arabia. this comes at a very tricky time, manus. you just mentioned the crown prince is in the united states. he is trying to reaffirm that

alliance with the united states, so this is really challenging ekeing of saudi arabia. it is asking for it, if you will. that remains to be seen. markets take it in stride. anna: good morning. today, china introducing its own yuan-denominated oil futures. what are they trying to achieve here? yousef: this is again a challenge to germany by some of the more established international futures contracts. this is a question also of pricing power, so china really reasserting itself on that front. interesting to point out. you are looking at the question around liquidity. any futures contract would need to have a lot of attention from one -- foreign investors to be interesting. one of the global benchmarks during asian hours. you are looking here at the first ever futures contract, trading at 432 yuan per barrels

of years and setbacks and delays. thank you, yousef gamal el-din. we will be hearing from the cfo of aramco. this is bloomberg. ♪ retail.

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manus: good morning from bloomberg's headquarters in dubai. this is daybreak europe. i am manus cranny. anna: i am anna edwards in the city of london. these are today's top stories. manus: trade truth. steve mnuchin says a deal can be reached with china as investors continue to assess the tariff impact. friday the selloff continues in asia. u.s. futures point to a higher open. ona: tightening screws putin. today, president trump is expected to take his most aggressive actions yet against russia in response to the nerve gas attack in the u.k. beijing's oil push. china launches its first-ever crewed future as it seeks more

power over pricing and challenges benchmarks in the u.s. and europe. from london and dubai. anna, good to see you this morning. futures set for a slight dip here in london. u.s. equity futures played a game. we are hopeful that we could get a decent outcome with china. market conditions look good. they are going back to fundamentals. trump could prepare to expand dozens of russian diplomat. this is the personal consumption expenditure along with -- would callt what you a dramatic selloff.

this is a cessation of the terror at struck markets on friday, a reflection, a reprieve, and a thought process. he said i was actually quite surprised by the terror that had struck the markets. go back to the clinton era. he levels these kinds of charges against japan and they never implemented the tariffs. global markets down 4%. u.s. equity markets down 6%. do you look for value? that is the cliche. do you buy the dip? bills, a combination of notes, the largest on the slate ever. $30 billion worth of two-year paper will come. the short end is a very odd place. you have two-year yields. you have cash surpassing t-bills.

as for as the european complex is concerned, you have redemption's coming into the market this week. 100 billion euros worth of redemptions will far outweigh the bunds. more difference about where the markets are. likewise, with the u.s. treasuries all lower in price, higher in yield. get ready for that absolute delivery and the bond auctions. record after record. anna. anna: we will see what the chinese appetite is for some of that paper being issued this week and into the future, given what we saw last week from washington. breaking news on the corporate side. it is all around m&a, a big theme in 2018. it is rejecting a revised proposal. the packaging business in ireland, of course. they reject the revised proposal for your board unanimously rejecting this proposal.

the revised proposal values it. this is of course in connection with the gkn story. gkn noting various stories were published around the attempt to take over this business in the u.k. in various papers. gkn suggesting some of these stories over the weekend have not been verified. they have been bidding for a part of gkn. this is part of the driveline business. they have raised their cash consideration by $140 million. they will double the size of the to $200purchase program million. interesting moving picture around m&a. let's get back to the risk radar. on asianhe picture equities, flat on the msci asia-pacific. down 1.3%.

this is something we need to keep an eye on. does this tell us something about risk appetite? we are flat on the dollar. we see the yen weaker, offering a little bit of reprieve. the result outperforming. here is juliette saly. trump is poised to take his most aggressive actions yet against russia today. thes likely to announce expulsion of dozens of diplomats in response to the nerve gas attacks on a former russian spy living in the u.k. the move all but certain to -- tried to maintain a semblance of a constructive relationship with the russian leader. they u.s. treasury secretary says he is optimistic of a deal with china that would avoid the implication of tariffs ordered by donald trump.

the two sides are engaged in productive conversation. last week, the president announced measures against china worth $50 billion as punishment for alleged intellectual poverty theft. >> we are simultaneously having negotiations with the chinese to see if we can reach an agreement , as the president said. we want to cut the trade deficit $100 billion over the next year. we want to eliminate forced technology. we are having very productive conversations with them. i am cautiously hopeful we reached an agreement. we are proceeding with these tariffs. juliette: in barcelona, protesters clashed with police after the arrest of catalan -- of puigdemont, who has been living in exile in brussels. he was arrested in germany and may be sent back to spain to face trial. puigdemont had been traveling around europe. highlimbed to a two-month

as saudi arabia intercepted ballistic missiles fired by forces in yemen. the saudi press agency said the missiles were intercepted over riyadh and other cities. the news further fueled concerns that rising geopolitical risk could lead to supply disruptions in the oil-rich middle east. least 48 people have died in a fire at a shopping center in the siberian city. the news agency quoted vladimir as saying 16 people are missing. the fire reportedly started on the top floor of the winter mall. the cause was not immediately known. a criminal investigation was begun. global news, 24 hours a day, powered by more than 2700 journalists as an analysts in more than 121 -- journalists and analysts in one and one hundred 20 countries. as we saw, the msci asia-pacific

index now flat after being down by around .5% earlier in the session. that's because of a huge turnaround coming through in japanese stocks in the final hour of trade. the nikkei closing higher by .7%. of yene a little bit weakness today. south korea boosted by a lot of the steel producers as we sa revise korea likely to those bilateral talks. a lot of weakness coming through in the mainland. the shanghai composite is at a nine-month low. you saw the material heavy asx 200 down by .5%. in terms of some of the stocks we have been watching in the region, i mentioned the korean makers advancing the agreement trumphe u.s. -- president on steel tariffs and the revision of the bilateral pack. the biggest steel producer. some downward pressure rather on chinese property stocks today. a little bit of a revenue fall

coming through in some of these players. properties leading the decline. an interesting story coming through here in singapore. this is a taxi company. this is after moving said -- uber said it is going to be pulling out of south east, a stake in southeast asia's grab. that will consolidate the business. see less pressure, competition pressure, on the traditional taxi maker. anna. you very much. juliette saly in singapore. steven mnuchin is optimistic that a trade war can be averted with china. he says he is cautiously hopeful that discussions will avoid the need for donald trump's proposed tariffs on chinese goods. not everyone is convinced by the rhetoric on either side. tom mackenzie spoke to some of the world's top business voices about the potential impact of tariffs at the chinese development forum. we don't see financial

markets being overly impacted by this protectionism. i do think that if it keeps going, this could be disturbing. >> if we start to have a tit-for-tat war, it could have an impact on global gdp. we are watching it very carefully at this point in time. >> i don't think trade sanctions need to have an impact. the psychological impact of the degree of friction there is right now could be quite serious for markets. >> the problem is that there is this large disjunction in belize, when both sides believe the situation is different that you get huge mistakes and things like trade wars. >> china has responded very modestly given the potential weapons it has at its disposal in terms of countervailing shifts and it's possible

in purchases of u.s. treasuries. comeere is plenty more to if the u.s. chooses to stay with this reckless policy. reason from the global stage. our voice of region in the .ondon's video, richard saldana good to see you this morning with anna and myself. you say this is about trump flexing his muscles. i read interesting stories. the 1990's going head-to-head with japan, but he never affected the tariffs, never put them into play, but he got a better deal. this is the art of the deal. is that a fair take? richard: i think so. back to this point about flexing muscles, one thing you see from the trump administration, they are not afraid of big announcements.

the comments from steve mnuchin for me represent present a more conciliatory tone. what people are asking is is this going to escalate into a full-blown trade war? the response has been measured. the comments show a more reconciliatory tone. we do think this does die down eventually and markets will take comfort from that. manus: i think anna reflected on that when she looked at the risk radar. a machine gives it out. 6699, richard. the biggest advance in nearly two years. that tells me something. that tells me i may be want a little bit of insurance. every fund manager in the world will probably decry me. well you decry me? not decry you.d

having some insurance makes sense to some extent. tradey, this talk of tariffs, etc., you need to build in a risk premium for that. what you saw last week in terms of market reaction, movement, as you are pointing out, is a sign of markets taking this seriously, which i think they should at this stage. from a longer-term, this could be a good buying opportunity. isa: the picture you paint potentially quite positive. it shows the extent of the trading relationship between the united states and other big players. the big deficits involved here on the u.s. part, clearly something that bothers president trump considerably. the problem is, you talk about after the deal. -- the art of the deal. more aggressive than we have seen in the past. maybe that is something we are looking at here. lastny leaders were saying week, they don't necessarily want to have conversations with

guns pointed at their head. some countries may just pushed back. richard: i think you are right. it's instructive to look at what happened with steel and aluminum tariffs. what you have seen since then -- more countries seeing exemptions from this. there is the issue that comes from the administration and you see a scaling back over time from what happens. we will see what happens in this case. said, they areou clearly unhappy with the size of the death of it -- the size of the deficit. the other thing is i think there is an intellectual property argument where they are clearly unhappy about some aspects relating to technology getting into the hands of the chinese. also, don't forget, this is a midterm election. flexingnts to be seen his muscles. don't underestimate all of those things factoring into exactly what is coming out right now. anna: at the moment, in terms of

going up the desk on scale, -- def con scale, do you see any action on their purchase of treasuries? they could stop buying treasuries to the extent that they have, but they would be hurting themselves and their own holdings. what would your thoughts be, richard? richard: they ought to keep that one up their sleeve. there is plenty of options available. as i said, so far, they have been very measured. that is exactly what we need to see. manus: richard, one thing which is there me -- struck me price of cash above the dividend yield in the united states. it is above the dividend yield the the first time since 2008. stopped blowing out. it has paused for thought. you have got a bond auction. you have to look at cash.

those are three big issues. any warningg bells for you in terms of cash over divvy? richard: you have seen cash yields rising steadily. the u.s. market right now, take the s&p. arounde a dividend yield 2%. buybacks have been a major support for equity markets. we expect that to continue on the back of what we have seen in terms of tax reform. i am not sure about the dividend yield. it is the buybacks for the allocation coming through as well. that still remains quite supportive. one thing to keep an eye on is for this trade escalation to die down to some extent. you want to see the macro data coming through. we have seen a slight softening over the last two weeks in terms of the macro data point of view. that is weighing on the markets minds right now. anna: richard saldanha stays

with us on the program carried coming up, the ceo of ubs tells bloomberg he is becoming worried about the trade were between the u.s. and china. that exclusive interview. more thoughts by sergio ermotti in just a moment. manus: later on, the ceo of aramco. this is bloomberg. ♪

anna: this is "bloomberg daybreak europe." 7:20 in london. 8:20 in berlin. let's take a look at where we are. aroundan picture turning quite a bit now. up by .1% on msci asia-pacific. keep that in mind. on futures. let's get a bloomberg business flash. here is juliette saly. juliette: uber has agreed to sell its operations, withdrawing

from yet another fast-growing region. grab will acquire all of uber's operation in a region including food the simile -- including the food delivery service. will take a stake in a combined entity. the ceo will join the board of the singapore-based grab. remington has filed for chapter 11 bankruptcy protection, saying it has liabilities of as much as $.5 billion. a deal had already been negotiated with lenders that inject $145bt and million in new capital to the company. took a took a hit after the election of donald trump as self-proclaimed -- donald trump, a self-proclaimed true ally of the gun industry. ceo, sergiobs

ermotti, says he is becoming increasingly concerned about the trade war -- the possibility of a trade war between china and the u.s.. monti --he said the effect on market has been minimal so far but he fears things could escalate with potentially serious consequences. >> they start to get concerned. know,e time being, you things are modest in the impacts. deliberation of these tensions on a bilateral basis potentially escalating. this will not be good for growth, won't be good for so whilecal reasons, at this point in time we don't see financial markets being overly impacted by this protectionism, i do think that if it keeps going on, this could

be very disturbing. >> the market selloff on friday was pretty severe. why wasn't it priced in? this has been flagged by the trump administration. >> at the end of the day, it's always difficult to understand if those are corrections which are coming as a consequence of those announcements or if they done as the market develops. for the time being, we remain constructive on equities, and we remain constructive on growth. as i was saying before, we have to pay attention that this does not escalate and creates retaliation. particularly, if it goes beyond china and the u.s. and starts to touch on other countries that could become problematic. youooking ahead, how do advise the wealth management side? >> for the time being, we do believe stocks are still a place diversification

is still the name of the game. and looking for this kind of helpsified approach will looking a little bit at the risk going forward. anna: that was sergio ermotti speaking to bloomberg at the chinese development forum in beijing. put some numbers around the market check. futures over in the united states, turning more positive to the asian session. european equity markets on the back foot. m&a gaining momentum. gkn continues to reject offers. the global equity fund manager still with us. you think the selloff may have been overdone or there could be buying opportunities. if so, what are you buying, richard? richard: when you look across centers, things are near to full value. one sector stands up and is

financials. european financials. you look at european banks. that sold off quite aggressively as we have seen the trade war, tariffs, etc., pick up steam. if you look at the banks, they look interesting. earnings season was quite good for them. loan growthng remains relatively strong. we see the banks report pretty good earnings. looking at the multiples, long-term, that is an opportunity right now. manus: what about tech? if i look at the broader context , a client told me to look at the big context. made eight deals, chinese m&a deals. this has much broader ramifications for long-term tech. richard: i think you're absolutely right, manus. you have seen a number of deals. you are thinking of the broadcom/qualcomm one that springs to mind. you're right. that's weighing on the tech sector. for us, we think semiconductor

names, certainly from an income perspective, my bread and butter, if you like, strong cash flow and dividends coming out of these companies. long-term, that is still a good place right now. we think, based on the movements we had last week, that creates the opportunity. anna: more regulation, richard? richard: absolutely. certainly it has been weighing on us. one thing is clear -- regulators are going to start looking more closely at these companies coming forward. manus: richard, thank you very much for sharing your thoughts with anna and i this morning. richard saldanha, global equity of evamanager at investors. he continues the conversation on bloomberg radio. that is where i am off to. we are global these days. with manus from the next hour out from london. mattl be on radio with miller later on this morning. he is up next here on television. that is it for bloomberg markets. -- bloomberg daybreak: europe

bloomberg markets is next. christine lagarde is one of the key interviews, joining us after 11:00 a.m. u.k. time. when you are traveling to work, there is bloomberg radio, available on dab digital in the london area. ♪

matt: welcome to bloomberg markets, i'm matt miller ever wondered headquarters. guy johnson is off this week. they castrated less than 30 minutes away. ♪ matt: trade gains. asia shares recovering, but uncertainty continues to loom over markets. jpmorgan says they still like stocks as long as there isn't a trade war. tightening screws on putin. president trump is expected