anna: good morning from london. i anna edwards. manus: and i'm manus cranny, live in dubai. this is "bloomberg daybreak: europe." rise asobal equities the u.s. and china indicate there willing to negotiate over tariffs. investigators breathe a sigh of relief. the vendors's cuts rating to one level above junk after changing legal structure and says other u.k. banks could be at risk. anna: the facebook ceo says data on most of its 2 billion users could of been accessed improperly, but the stock rises after hours.

good morning, this is "bloomberg daybreak: europe." something changed in the markets psychology in the markets assessment of what's really happening on the trade story. whatever you want to call it, it seems that sentiment change in the middle of the session yesterday in the united states and gradually the markets clawed their way back from losses to end higher, the s&p ending up during the session. how's it translating over into the asian's session? a lot has been written about how this has been a story that's focused on stock markets and has not affected other classes to the same in rent.

were seen a little bit of relief coming through on the currency market. we see the dollar up, the yen a little bit weaker. we've heard from a couple of fed officials who talk about what they've been saying around trade and whether that lee's them -- leads them are not, remains to be seen. u.s. treasury yield at 2.8%. manus: we have more on that later. the specialty crops and chemicals company will raise the money, nearly $5 billion, they've mandated banks for fixed income investor meetings. all on the roster. no small amount of change. back, i loveme that.

etf's have spiked by nearly 85% this year. put it together for you, it's making a comeback, really quite splendid come back. vix, wereittle bit of talking about equity versus bond volatility. the spike you got here is the differential, above .35, it moves the market. it's done so on five occasions in march. what does all that mean? that when you see these kind of move, the s&p typically on average moves by 6.5% in the next three months, and in the next six months, if you thought it was the death of equities, according to this trade, you will see the market move higher by 16%. there's your s&p 500, a little bit of a drop. this is the differential.

who will blink first? xi or trump? anna: up is the short answer. we sell that turnaround in u.s. equities yesterday, perhaps that continues. investors try to work out what the trade story means for them. our interviews at just after 4:00 p.m. u.k. kind. we heard from a couple of fed officials about whether the trait conversation gives them reason to pause and think. let's get the bloomberg first word news update. indicatedd china have they are willing to negotiate on escalating pressure helping to ease fears among investors that it could derail the biggest trade expansion in years.

larry kudlow spent much of yesterday trying to calm markets after the two countries announced tariffs. china's ambassador to the u.s. also said his first choice would be to consult washington over trade. yes president donald trump is sending national guard forces to assist border authorities along the u.s.-mexico border. according to presidential memorandum, the move was due to american security being under threat from drastic illegal activity, including drug smuggling. gains,d the threat of including ms 13. the memorandum did not say have any national guard troops would be sent to the border or for how long. thewhite house has signaled u.s. is committed to keeping troops in syria to fight the so-called islamic. this comes a day after president trump said he wants to get out of the seven-year civil war, very soon and bring the troops back home. a white house spokesperson said america remains committed to eliminating any isis presence in

syria that it forces have not already eradicated. rejectedme court has the plea to remain at liberty while appealing a 12 year prison sentence for corruption. it pays a way for the imprisonment of the front runner in october's election. the judge who prosecuted lula must now decide whether to authorize his detention. he could order him behind bars but it suggests a one or two week delay. the bank of japan is likely to raise its yield target within a year. that's according to the central bank former chief economist whose as inflation is accelerating faster than expected. he left the boj and 2013 after more than three decades and says it will adjust its target for tenure government bond yields after gains in consumer prices

excluding fresh food and energy reach 1%. this gate is now at 0.5%. 's tour ofcrown prince hollywood is starting to pay dividends. announced a deal to bring shows to the kingdom. amc entertainment says it is planning up to 100 new theaters. the model experience will open later this year and national geographic plans a series of events. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top . manus: thank you very much. the u.s. and china have indicated their willing to negotiate on the escalating frictions. american stocks rebounded yesterday as investors reassess the dangers of a trade damaging

tariff increases between the world's two biggest economies. joining us from singapore is mark cranfield. good to see you this morning. anna has called it the kudlow combat. markets seem to step back from the brink. the question is whether you believe a former tv presenter and wilbur ross really do have the view of america's position. mark: at least for today, people want to believe it. it's worth noting that china and hong kong are both closed today on holiday. so were only seeing a partial reaction but what were seeing it is pretty good. of course investors want to believe that the two countries do want to sit down and talk to each other. it's much better than just throwing accusations and different tariffs around. clever to hit at areas where it politically would

really hurt donald trump supporters and would hurt other republican leaders as well. so it's a pretty shrewd, from china and hopefully it will lead to sitting around the negotiating table which would be much better for financial markets. i guess that's the answer to the next question in terms of what happens next. do expect negotiation between china and the u.s. to result here? markets are trying -- trying to adjust to the new paradigm where it might be about the art of the deal, but it's pretty stressful getting there. mark: absolutely. it induces a high amount of short-term volatility, which makes it very hard for fund managers to make decisions. fund managers are supposed to be looking ahead for several months or even several years to try to build the airport folios. when you have markets jumping from one corner to the next, it's becoming hard to make long-term decisions. around a lot of people

the world will be very happy if we get from here on some reasonable voices saying that yes, we want to sort this out and continue trading together and we want to do it on the following terms. and see what happens. but it's early days so far. mark thank you very much, for the latest on the market moves here. joining us is christian schulz at citigroup. very good to have you with us. we talk about the market reaction but let's talk about the economics here. the white house is very reoccupied with the trade deficit. with her donald trump talk about that. i wonder if that will be his measure of success, and that could be interesting if it is, because it takes a lot to shift that. this is a different view of what's going on in the markets at the moment. this is the u.s. cattle account.

writing that you can't just keep trade deficits in isolation. you have to ask why the u.s. is such a haven for chinese and excess savings. christian: because the u.s. is not saving itself. it's living beyond its means and depending on the kindness of strangers which was said by that's about other countries. if american households were to save more, if the american government were to bring down the fiscal deficit, that would automatically reduce the need for foreign savings and that would reduce the imports of foreign goods to balance the current account. it's probably a story of both sides here. the americans need to become more competitive, whether

through trade tariffs or something else. and import less. at the same time, the government has to bring down the deficits and households had to say what is necessary to balance the financial accounts. anna: what is the citigroup assumption here? that we end up around the negotiating table? in a few months this will look old hat because there will be constructive conversations going on about trade. christian: we think that we will probably end up with trade skirmishes instead of trade wars. so far what we are seeing is relatively limited path of trade hit by relatively limited amounts of tariffs. only the u.s. and china effectively.

large trade relationships between the u.s. and europe so far are completely exempt from what we are seeing at the moment. we think it will stay at that level but it's certainly not going to stay where we are now. there's the risk that other countries will be ball -- involved eventually. manus: good morning to you. we heard from mr. bullard over at the federal reserve and he made the point that it's going to be a bumpy ride. there are echoes of the swinging 60's. if we look at the broader story, we get back to basics, things could get better. , they're talking about 1966 to be precise where we saw the unemployment rate fall to 3.6%. 3%n inflation ratcheted to

and the fed had to kick into gear. what's the probability of 1966 being repeated? i was not around in 1966, i should add. christian: nor was i, but we had a different monetary system. i think it's probably quite inferences toraw today's world, i would guess. one thing is pretty clear, if everybody raises their tariffs, that's going to be inflationary at the global level. that doesn't mean that all countries will see higher inflation. some may actually see deflationary tendencies as they produce too much of whatever they are producing, so the chinese and germans may in up having to consume all those computer tricks -- computer chips they are producing. other big pieces

talking about the bond markets. it's turned the bond markets on their head. u.s. treasuries cascading lower. writer says look through the noise, core inflation will wrap higher to 2.5% and bond yields will retest. some saying 3.25%. forhis the next big issue markets, about reassertion of the upside in yield for the bond market? christian: i think generally, no. we're looking in countries not affected by special factors. we look at europe and japan, the inflation trends are week despite strong growth. were seeing in europe at the

moment, it may have to do with the exchange rate. that we to do with still have a lot of slack in the economy and growth is not strong enough apparently to absorb that slack very quickly. in the u.s. you have a slightly different issue. you now have the big fiscal stimulus. in the short run, they can push inflation upwards and push yields upwards. in the long run, which matters for 10 year treasury yields, is far less certain. in may bring forward the next economic downturn. on muchbe skeptical higher treasury yields. i think markets will look beyond what we are currently seeing to what is ahead after that, which is the more long-term view on where it's going to go. manus: let's hope there's not

too many more clouds on that horizon. we have more to get through. with annastays here and myself. if you just starting your trading day, bloomberg radio is live on your mobile device in the london area. anna: coming up, he'll target hike in japan could happen within the next year if inflation and the yen fall in line. that certainly one view we are hearing. we'll discuss that next. and facebook opens up, mark zuckerberg admits at 2 billion users privacy may have been compromised. the latest on that coming up. this is bloomberg. ♪

manus: live shot in dubai. turnedures are up, we've

it around. the 26 time the s&p 500 has moved more than 1%. that's triple the number of times you saw that price action in 2017. deborah standing by with the business flash. it is cut barclays debt rating to one level above junk after the lender separated is investment banking from retail to comply with new rules. bigy says ratings for other u.k. banks could also be affected by the post crisis rules. they must comply by 2019. expected changes to mean bigger earnings swings for barclays. capital markets business. facebook has said data on most of its 2 million users could have been accessed improperly. the emission serves as fresh evidence of the ways the social media giant failed to protect people's privacy what generating

billions of dollars in revenue from the information. the company said it has removed a feature that lets users interphone numbers are email addresses into facebook search tool to find other people. great some the first to admit that we did not take a broad in a few of what our responsibilities were. but i also think it's important to keep in mind that there are billions of people who love the services that we are building because they're getting real value in being able to connect and build relationships on a day-to-day basis. that's something that a really proud of our company for doing and i know we will keep on doing it. sherylthe facebook coo sandberg joins us for her first interview of the day at 8:00 p.m. u.k. time on bloomberg tv and radio. meanwhile, the oracle ceo criticize the bidding process for huge pentagon cloud computing contract in a private dinner with donald trump. familiar, hepeople complained that it seemed designed for amazon to win. they say trump heard her out and he wants to contract competition

to be fair, but made no indication he would interfere in the beating. the president has repeatedly attacked amazon and its ceo. that's your bloomberg business flash. manus: thank you very much. the bank of japan is likely to raise its yield target within the year, according to the former chief economist. he says that the central bank will move once core inflation excluding energy and fresh fruit it's 1%. the president of the united states has criticized the week yen. that can inhibit the adjustment, with trade tensions for new heater, central banks or possibly forced to step in. schulz is still with us. beginning to feel

a paradigm shift in 2018 from where i'm sitting. is the former chief economist at the bank of japan saying they might get ready to raise rates before the end of the year. could they, given that their inflation level is 50% below target? that makes sense to you? in japan, just as in other countries, we've had a relatively long time of the ancient. are economist for japan are quite optimistic that this will continue. it's a good kind of growth because it creates demand and potential growth in the future so the economy can grow faster over a long time. the underlying inflationary pressures in japan to look at wage growth it so on are not particularly worrying. i'm not quite sure on the eminence of rate action from the bank of japan, but at the same time, the direction of japan and

other countries is clear, it's one of less monetary accommodation and rising yields over time. this is the course for going to see from the back from am sure you will disagree with one quote, this is from interview. he said one potential surprise could be the reaction of central banks, the federal reserve is going to change its tune about high interest rates. the boj will continue with its qe program. you get the message suggesting that because of what's going on butrade, we will see loser longer monetary policy. i guess you disagree with that. >> i think i would disagree with in abecause as i mentioned previous conversation, higher trade barriers actually raise inflation and would mean higher

inflation and higher interest rates. wars mayme time, trade dampen demand everywhere as less investment is going on. in the short-term they may have to intervene but in long-term trade wars it means higher inflation and higher interest rates. trait is aular difficult one, not like one where we've seen in the past, uncertainty in the bond market about europe or chinese growth are u.s. growth and therefore central banks have to step up. anna: we've seen commodity prices going up in those trade conversations. christian, thank you very much. he stays with us here on "bloomberg daybreak: europe." a conversation you don't want to miss. up next, barclays debt rating cut by moody's to one level above junk.

we'll discuss what that means for the bank and the rest of the u.k. banking sector. could this be something we see apply to other banks as well? this is bloomberg. ♪

anna: this is "bloomberg daybreak: europe." it's 6:30 here in london. yen, wear against the talked about how a lot of the yesterday was very much confined to stocks or at least elsewhere to such a great degree. how are asian markets holding up? it's all about that contagion. some of the asian markets are on vacation. china and hong kong are closed. this is what is going on in the rest of the markets. -- see what sheryl sandberg

sheryl sandberg has to say on tech later in the day. that's get the inside scoop on markets. nejra: japan providing one of the biggest list, the nikkei up 1.5%. china and hong kong holiday so the impact seems to be coming from japan largely. the msci up about .8 at the moment after the s&p 500 gained 1% yesterday. were seeing the s&p 500 has mored its 26 move of 1% or this year. this year in 2018. that is triple the total in 2017. what's interesting, there's a great chart showing the vix and how much that applies relative to volatility.

basically you're seeing much more volatility in equities and elsewhere. that's also demonstrated by the chart the 10 year treasury yield. were back above 2.8%. the 10 year yield has traded in a bit of a range. we hit the high of 2.95% back in february. it's dropped no more than 20 basis points since then. it seems to be showing that when it comes to trade tensions, bond traders perhaps are not seeing any sizable long-term impact on growth for now. volatility has been subdued in both bonds and fx, dollar-yen not trading anywhere too much today, up about .1%. this chart showing that implied volatility is trading below realized at the moment, and that is a pretty rare occurrence. manus: thank you very much.

that spring christian schulz back into the conversation. -- let's bring our guests back. line, talking about europe in terms of its positioning and that it could indeed be one of the benefits, the last laugh could be with your. we have a chart, there's a different story car on with the markets here. investors are putting the most amount of cash in 18 months. what exactly do you mean in terms of a tariff war and europe's position? when trumpa year ago started the whole conversation on trade and he pulled out of tpp, it seemed a question of time that the u.s. would also impose some sort of punitive tariffs or something on europe and the e.u. as well. , that'sthis year

probably something we've seen the market reaction to and perhaps some confidence indicators reacting to. it seemed like he was ratcheting up the rhetoric against german car exports in the context of those steel tariffs, but still nothing has happened. the e.u. was exempted from the steel tariffs. nothing has changed. at the same time, the attention has focused on china. that's where there is potentially opportunity for europe, because on u.s. markets, european companies competing with chinese manufacturers may be benefiting from the new tariffs on chinese exports. european companies competing with american rivals may be benefiting and we know that the competition is very tight on aircraft and so on. in that sense, europe may benefit and if trump is

successful and these trade skirmishes lead to china becoming a bit more open, making it easier for international investors to invest in trading china, then europe may benefit from that as well. me,ow, the way looks to there are not as many risks for europe as we thought there would be a year ago. at the same time, there may be some opportunities. as i mentioned before, we're not at the end of this. it could still broad now to europe, these trade tensions. if that's the case, europe is clearly not in the dry here and still dependent to some degree on international demand and therefore vulnerable. trade wars from potential victim to laughing on the sidelines is the title of what you wrote there. -- bullardf the fed

said it could be a bumpy right. there's less bumping is for europe in a relative sense in trade wars relative to china and the united states. that would be nice takeaway from the back of your notes talking about german growth, germany exposure to china, around 10% of their exports in a relative sense. the risk is not assigned to europe as perhaps to some other economies. christian: europe is a more open economy relative to the u.s. or even to japan. trade is a larger share of the sense it is in that vulnerable. but the latest upturn we've had morerope are since 2013 is domestic demand driven, not driven by exports as it was before the crisis itself. so europe is more resilient to any of these international

developments that it has been in the past. in that sense, you are right. if you look at the latest data, hurt or fourth quarter last year, it seems that top of this solid rock of domestic demand in we've had a bonus from international trade. that could go away if we do get to agile trade tensions. aren't we just one tweet away from president trump deciding he hasn't forgotten about german carmakers, for an example, and then were back to talking about how europe into suffering at the hands of the u.s. administration. christian: yes, but then we would have to look at how europe would respond to this. we've seen the e.u. commission responsible for trade policy in europe react harshly to even the slightest threat of u.s. action when we had the steel tariffs. that may have helped a little

softening of the u.s. stance there. i think europe would respond in kind. within europe you would have countries being affected and quite different ways. some would take a hard line because they are not exposed to u.s. trade that much and others would push for a softer line, like germany. there may be some bilateral issues as well. we wrote that one thing your could do to please the american president is raised defense spending. behind,still very much in order to tell the americans we are ready to talk. it may not be specifically around trade but here's another issue. anna: on the political front, everyone was preoccupied by political risk in the eurozone. that has faded to some degree. should we be prepared for situation where we end up

involved in governing italy, and should it not come as a surprise? this is all very topical this week. christian: the italian situation is still dangerous. we have to highlight this. 55% of these in parliament are running for parties which in the past have been eurosceptic. they will have an enormous public debt. moment with growth being italian debt sustainability does not look too bad. the real test, with growth comes down. that's when the real test will come. you have to be worried because if italy does need support from the rest of of reformingrms the labor market, that's when markets will start to worry about it. anna: thank you, christian

schulz. he will stay with us a little longer on the program. facebook spent much of yesterday outlining ways privacy of its 2 billion users might been compromised. shares in the social network bounceback in after-hours trading after mark zuckerberg expressed optimism that the run of bad news may be coming to an in. our guest has the latest on this. what did he have to say to reporters on the call last night? he certainly gave them some words of comfort about the way out the headlines have impacted facebook business. outline thelot to privacy and how they will make changes there. this is the first time they gave their estimate of the data scandal with cambridge analytica. the number they have now is 87 million affected users. that was one of the biggest takeaways from yesterday's call.

reports had said 50 million. saying 37 million. the second big takeaway with them having a slew of data privacy functions being amended. one big one is that now and facebook, you can enter a phonebook -- phone number, email address, and now they're saying malicious users are scraping your information. tv shows, groups you like to join. that could affect 2 billion users, basically anyone who has facebook. but some saying they are not going far enough. one piece saying why is facebook now just doing this, and that worries many people. he will get a grilling many heads to congress to testify. manus: just looking at the market cap of facebook, $450

billion. life is about learning from mistakes and figuring out what you have to do to move forward. hopefully they will be very patient on capitol hill. talk about the international front. >> he has turned down a similar regulators andan u.k. lawmakers to p are as well. they are still asking for him, are this morning they starting a formal investigation in australia into facebook breaching their privacy laws. they are saying more than 300,000 users have been affected there. so he has a lot to answer for terms of the international community. you're looking at the market cap and facebook here, it's been down. the stock has been down 3%.

what investors like is the fact that mark zuckerberg said it has not impacted advertising sales. on the investor front, that is positive, but he will be grilled next week from congress. politicians want to ask him laws and data privacy how they think it may be unfairly communicating what access to.tually has that seems to be where the gap is. manus: and it's an example of capitalism trumping ethics. thank you very much for the roundup. facebook is the story everybody is interested in. tune in for the interview with sheryl sandberg. she will talk about the capitalism of the country and the future of the company. remember, if your bloomberg user

you can interact with anna and myself and the whole team right here. browse all the charts featured on the tv show and catch up on all the analysis and the charts. it seems like the facebook management is going to rack up the air miles. southeast asia ministers and gather atnisters will a summit. will be live at that conference, next. stay tuned to bloomberg throughout the day. the conversation coming up with the atlanta that president. that's just after four clock p.m. u.k. time. this is bloomberg. ♪

9:47 a.m. here in the city of dubai. new york is fast asleep.

when be wednesday is what i call it. wednesday is what i call it. the market is overreacting. that's get your business flash with deborah. >> moody's has cut barclays debt rating to one level above junk after lender separated its investment banking from retail to comply with new rules. be affectedcan also or they must comply by 2019. expect the changes to mean a bigger earnings swing for barclays capital markets business. data on mostsaid of his 2 billion users could of been in -- accessed improperly. it serves that -- as press evidence of ways that social media giant failed to protected

users privacy. the company said it has removed lets users enter phone numbers are email addresses into the search tool to find other people. >> on the first to admit that we didn't take a broad enough you of what our responsibilities were, but it's important to keep in mind that there are billions of people who love the services we are building because they're getting real value in being able to connect and build relationships on a day-to-day basis. that's something i'm really proud of her company producing and i know we keep on doing it. >> sheryl sandberg joins us for her first interview of the day at 8:00 p.m. u.k. time on bloomberg tv and radio. oracles co-ceo criticize the bidding process for a huge pentagon cloud computing contract in a private dinner with donald trump. he complained that it designed for amazon to win.

they say trump hurt her out and said he wants the contract competition to be fair, but made no indication he would interfere in the meeting. the president has repeatedly attacked amazon and its ceo, jeff bezos. the multibillion-dollar contract is a potential opportunity to hurt the country -- to hurt the company. james sawgrass agreed to buy pet nutrition in a deal valued at $1.9 billion, adding that pet food can reinvigorate cells in the industry. will amount to about $1.7 billion when excluding a $200 million tax benefit. the company confirmed its exploring the sale of its u.s. baking unit. that's your bloomberg business flash. anna: thank you very much. southeast asia's most powerful figures in finance are gathering in singapore. those from the 10 nations will

discuss trade and cooperation in the backdrop of growing tensions between key partners including the united states. juliette, good to have you with us again. what has been the reaction at byan to the tariffs imposed the united states and china? it's been the key focus of the trade talks here in singapore. ofve heard a little bit mixed reaction. we've been talking to a lot of the leaders today, but essentially they are concerned that even if it's a game of chicken, who's going to blink first between the u.s. and china? there could be locations for global economic growth. theinda amin spoke to finance minister and she thinks the wto should intervene here and says development between the

u.s. and china aren't fortunate. on to say that essentially trade barriers don't affect or help anybody and they are overall bad for the global economy. this is going to be recovery after the global financial crisis of 2008-2009. it's also creating more optimism of all the global players, whether average or events markets. the difference between the u.s. and china is very unfortunate. areink the two countries enjoying the most benefits of all this global trade. to the managing director and cfo of the world bank. he was a little more sanguine, saying they're still 60 days cut

you could see a lot -- so you and chinae u.s. coming to a little bit more of an agreement. he said ultimately you will see more talks coming to the negotiating table and he thinks eventually those talks will win out. >> trade is very important for growth and stability. we've seen how much trade has helped the whole world. think people see there are many ways to get to a win-win situation. we are confident that this will prevail. anna: are there pressing the panic button just yet? today,e: certainly not and is for to a tennis you have china out of action today. it's a public holiday today and tomorrow.

china won't be presuming -- resuming trade until monday. rebound on the back of what we saw on wall street. and you have the yen lower, suggesting investors have taken a little bit of calm. we know what larry kudlow said and we heard from the china ambassador to the u.s.. he said essentially they really do want to continue consulting with the united states. he did say that it takes two to tango. i guess we still have to watch this space over the next 60 days. china is ready to retaliate. with the latest in singapore. christian schulz, if we take the chinese story, david milhouse has written a piece this morning . the chinese are already taking a little bit of risk off the table t tothemselves, reducing va

16% for some big industries on the manufacturing side. so they are taking a few measures to balance industry and the consumer. the question is, they're taking preemptive action, in case things do get a little bit out the bestwhich is not case scenario at this juncture. christian: chinese authorities have been very good at micromanaging the cycle. if there was a risk, they would boost the economy using regulatory means. i think they've been doing this very effectively. that's always the underlying assumption for the future as well, that they will be ever to continue doing this. all are on the on chinese growth is quite benign, which is reassuring for me as european economist.

we depend so much on chinese growth as well. that also means that if something does go wrong, if for instance the debt problems with clearly having china boil over and growth really does slow down, that worries me a lot more than the trade skirmishes. about chineseorry treasuries? i'm told the soybeans issue is a temporary kind of thing, so they may not be such a big thing overall. interest rates would go through the roof, that would be a risk. at the same time, i don't think that is a real risk. anna: thank you very much, christian schulz. stepping back from the brink, investors reassess the likeliness of a trade war is the world's two largest economies

indicate they are willing to negotiate. when and how those conversations take place? investorsring will find that line of argument? this is bloomberg. ♪

manus: good morning from dubai. this is bloomberg daybreak europe. anna: these are today's top stories. manus: global equities rise as the u.s. and china indicate the are willing to negotiate over tariffs, investors breathe a sigh of relief. anna: barclays downgrade. moody's cuts them to one level above junk and says other u.k. banks could be at risk. the ceo says data on most of its 2 billion users could have been accessed improperly.

the stock rises after hours. ♪ welcome.warm i am in dubai and london. in terms of these markets, wilbur ross says entering world war iii is not the position for them. even shooting wars and with the negotiations according to wilbur ross and that is what gave the bid, taking a breather. the headline this morning on trader notes. take a deep breath. if you do not, you risk choking on a headline quite literally. whoever blinks first between she jim ping and trump will be the important point for the market. rising, and my --

warning it could be a bumpy ride adding to the level of uncertainty. there is a reprieve in the from afrom mr. ross and number of other voices. that's relative or into the bonds. what you are seeing is some big calls coming through. will the fed stay the course? bids down and o.a.t.'s down 24 pips and u.s. treasuries are down but is the trajectory changing for the bond market? this is the big question, top wants, some great names. yields will tester .5 percent and the diamond trajectory is down, to point sent -- 2.5%. market rally,bond you're not going to see 4%. it is a little bit deja vu for me. last time we saw the move. have we peaked in rates? those are the markets and breaking news.

anna: we talked about some changes in management this time yesterday. this is the dutch retailer, the belgian dutch retailer operating in the u.s. as well. they are saying their ceo is going to retire. they have named a successor, friends mueller. this is effective from july 1. he will remain as advisor to the company until mid-2019. the men coming in is already in effectively, he is the deputy ceo. no great surprise the succession plan. also keep an eye on the bund, on the euro, factory orders up by 3.5%. estimate was an increase of 6.5%. that is coming in weaker than estimates. any economist would be telling me to be careful. let's talk about what is going

on in the asian session. we are taking some comfort from what we heard from the u.s. administration. i know you like those phrases, the msci pacific taking some comfort from those words. infiltrated too much into currency markets, we are seeing some yen weakness coming through. back to the yen weakening trend. some risk on evidence in that market. we have been talking about the bond market. 2.81%. we saw a little bit of risk off and then back to risk on in conjunction with what is going on and equity markets. we will see what bostick has to say about the bond market. that interview is at four clock p.m. u.k. time. and a couple of fed officials with their thoughts around trade. we will see what raphael bostic

has to say. let's get the bloomberg first news update. >> the u.s. and china have indicated they are willing to negotiate on escalating friction hoping to ease fears among tradeors that tit-for-tat disputes could derail the strongest global expansion in years. white house counsel director larry kudlow spent yesterday trying to calm markets after the countries announced tariffs. china's ambassador to the u.s. also said his first choice would be to consult washington over trade. president donald trump national guard forces to assist border authorities along the u.s.-mexico border. according to a presidential memorandum. of drastice to activity." the memorandum did not say how many national guard troops would be sent to the border or for how long. activity."the white house has e

u.s. is committed to keeping troops in syria to fight the so-called islamic state coming a day after president donald trump says he wants to get out of the seven-year civil war very soon and bring the troops back home. a white house spokesperson said america remains committed to eliminating any isis presence in forces havee eradicated. brazil's percent -- supreme court has rejected the cleat to remain at liberty while appealing a 12 year prison sentence for corruption. theaves the way for imprisonment of the former front runner in october's election. the judge who prosecuted the let must decide whether to authorize lula's. he could order him behind bars, standard procedures for judges and courts suggested one or two week delay. the bank of japan is likely to raise its yield target within a to the central

bank's former chief economist who said inflation is accelerating faster than expected. the chief economist said it will adjust its target for government bond yields after gains in put prices reach 1%. the court -- core inflation gauges at 0.5%. saudi general and attainment authority is announcing deals to bring's shows -- bring shows such as cirque du soleil and disney on ice to the kingdom. the marvel experience will enter later and a national geographic plant series of events. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg on top . here is sophie kamaruddin. sophie: it is looking like a half glassful.

we have asian stocks are barred -- rebounding. getting the market reaction from china until they come back online on monday. taking a look at the markets that were in play, japanese shares snapped and the kospi is rising. the stocks are rising to a three-week high. to could be a further boost asian equities. let's look at movers in the region we have been watching. korean shipping stocks in the spotlight as the government announce a plan to boost sales by 2022 and that was the worst performer on the topics today, the most since may 2013. the troubled crypto exchange coin check has decided to accept aroundent which could be

several billion yen. and that is causing back losses sparked by china's announcement it could play said -- place tariff. there could be some upside in the short term for stocks. thank you. sophie kamaruddin in hong kong. the u.s. in -- and hong kong -- hong kong [inaudible] investors reassessing the danger. 60 days to run is what the public have to object. great to see you this morning. what are the political risks for trump? gadfly has written a piece but if trump sticks to the tariffs, u.s. manufacturers will suffer, not china. they may as well hand back -- half of the tax cut they just

got. this is a risky trade by trump, isn't it? guest: that is right. the midterms are coming up quicker than any of us have thought about including myself. six months from now that is what will be happening is the midterms. what trump needs to keep in mind is republicans from more world states are going to be the ones that potentially have their contingent suffer if these tariffs do take place. a lot of the things like pork,ns and duties on that sort of thing, all of that could come back to bite republicans especially at a time when republicans are going to want to talk about the benefits to their constituents of the past bill that -- tax bill that congress passed in december. we are talking about a new round of protectionism that could hurt people. that will not help republicans keep the house. anna: how does it so well to his

base? some of the promises he made, even i might damage spending powers for americans and some of the measures have been targeted. with: you have seen this trump on a lot of different issues, he is trying to thread the needle where he is trying to make good on his campaign pledges and throw a bone to his base who really want to see him follow through on the rhetoric he had on the campaign trail where he lambasted a lot of the trade deals that the u.s. had and talked about making things better and rebalancing those deficits. he is trying to throw a bone to his face but on the other hand if the end result ends up being that people are impacted adversely, we will have to see how that shakes out in the election. you for the update.

the latest on how this is going down on capitol hill. investorng us with an perspective. jonathan bell. you saw this coming, i noticed you talked in mid-march about your equity exposure and you took back the lowest exposure. did you feel prepared for what happened this week? jonathan: in that respect we have. you always have too much or too little. we had reduced it. there are a number of things that concern us. the growth in the trade war, the growth in volatility at a time when valuations are high. our main concern is the interest rates are slowly rising and if interest rates are rising, that means the bond yields have to carry on rising. the discount rate for equities goes up which reduces the valuation. all those things coming together with the market beginning to get a bit shaky.

we felt we should reduce equity exposure. manus: a very good morning to you. that is the move you have taken. people are asking where do i run for cover? we put this together, this is about volatility. the equity traders are more frightened than bond traders, three for one, you have the index and the vix, there seems it seems to be contained inside the equity market. are you surprised we have not seen more aggressive contagion across the markets? the trade war it is more of an issue about equities than it is about bonds. is to don about bonds with the gradual rise in interest rates. what you have with the trade war that lowerspens, growth and if that lowers growth that is beneficial for bond markets. it is where equities and bonds can divert.

have talked bonds this morning, rick radar is talking about 3.2%. what caught my eye from the lack rock story is the see core inflation getting to 2.5%. is the other story. is it 1966 where unemployment dropped through the floor and then the fiber comes that is called inflation? jonathan: why is the phillips curve disappearing and disinflation coming back as unemployment falls further. slowed, and the participation rate is increasing. you look at it and think, this should be leading to wage inflation and if you have wage inflation that will lead to inflation. there has been my concern. we have not yet seen it.

is preparingoing to make sure you do not get inflation. that remains a concern. inflation will pick up. it is slipping, not dead. when it happens, we do not know. anna: this is 3650, back to the subject of trade and where you hide from the volatility in markets. what is your recommendation, this is an etf which tries to track trade policies. even the company that runs this say they are struggling to get out of the way. you, do you hide and utilities or what is your advice? jonathan: if you are worried about market setback you stay in cash for the time being. geographically where can you hide, it always used to be that if the u.s. markets fell the rest of the world would fall

more. that is less so today. if you look at growth and areumer spending, they becoming more important and trade is less important than it used to be. valuations are much lower. you can look at those markets, the areas that can perform relatively well in a market setback. to takee have much more up. staying with us on "daybreak europe." china and the u.s. wait to see who blinks first in the tariff war's. and joining the bloomberg team at four clock. what does he have to say about trade skirmishes between china and the u.s.? this is bloomberg. ♪

anna: this is "bloomberg

daybreak: europe." excited to sell. what do we see in the markets? the suitee a look at behind you. kicker. the kudlow trading into thursday with the euro stocks futures, bunds and you have germany -- german manufacturing numbers and s&p futures are up for you this really is this all to do with kudlow and wilbur ross trying to say to the markets that you have overreacted, we are in negotiation mode. that is the key thing. let's get your business flash. edward ludlow is standing by. edward: moody's has cut muddies debt ratings.

complying with new rules. buddies say ratings for other ratings could be affected. they expect to change for bigger earnings swings for capital markets business. facebook has said data on most of its 2 billion users have -- could have been accessed improperly. there is fresh evidence of the way they failed to protect people's privacy and joint -- and generating billions of dollars of revenue. >> i am the first to admit that we did not take a broad enough view of what our responsibilities work. i think it is important to keep in mind that there are billions of people who love the services we are building because they are getting real value in being able to connect and bill relationships on a day-to-day basis and that is what i am

proud of our company to doing at -- it and we will keep on doing it. us onryl sandberg joins bloomberg tv and radio. that is your bloomberg business flash. manus: volatility is something we have talked about a great deal. differential between the bond market and the equity market. when we see this differential and it busted a few moves yesterday, typically equities -- outperform. how do look at volatility? credit suisse lost a few dollars. how do you look at volatility for the rest of the year? would you spend the money on equity volume or fx volume?

or bond volume? jonathan: equity volatility is something you can play for the time being. there is a half-life. ite markets get volatile takes time to calm again. an interestings way of playing volatility. you can look at something like , an area webonds invested in when we reduced our equity exposure. delta lower beta and the was attractive and you got some benefit. often volatility increased and that gives an increase to the convertibility. here, i prefer equities to bonds on a medium-term basis. the 10 year bond yields will carry on rising towards 3.5%

over the next 18 months. i do not want to hold significant exposure to bonds. comparedare expensive to history but they are not that expensive. we do not need that much of a setback to get back to reasonable valuations. i am still holding equities and looking for an opportunity to add that. make the point that over the course of the month the benchmark u.s. index swung up or down by 1%. there were only 10 days when that happened. so highlighting how volatile the start of the year has been. we returned to something which is more akin to the volatility market from the slow time of volatility. anna: growth is still interesting, where do you look for those growth opportunities?

>> i am avoiding the bond because my views are -- growth, if you can find growth that is still interesting. the issue is what you pay for it. be --any like tesla would i would be more concerned about because that is high multiples and it is a great company but there are cash flow problems and the like. those sorts of companies. what we are looking for his company's what we can say this is sustainable quality growth companies. so ivest through manager am going to fund managers and saying can you find companies and that? extent do you -- want to have exposure to asia? there has been a theatrical dumping of japanese stocks, you hear the story that the former chief economic advisor has said -- former chief economist said get ready for higher rates.

how do you look at asia in general? jonathan: japan is a tough market. i have a neutral waiting and it is about finding the stocks that can carry on growing. asia in general i would prefer because of the long-term growth prospects. evende japan as well, japanese valuations are lower than they have been, valuations across asia, you're looking at 13 times earnings and reasonable growth prospects. that is an area where i would carry on favoring. manus: thank you for being with us this morning. the cio at stanhope capital. i am off for my weekend. futures set for a higher opening. anna: futures set for a higher open. when you are traveling do

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guy: good morning. this is the european open. i am alongside matt miller in berlin. cash trade less than 30 minutes away. trumps economic advisers said there is time to negotiate and the market listen. stocks rebound sharply in the u.s., european futures point higher. barclays credit rating is cut to one level above junk and