♪ anna: good morning from bloomberg's european headquarters in the city of london. escalate. president trump calls into of possible terrorist. asian stocks are mixed as asian futures tumble. the atlanta fed president sees inflations reaching the central bank's 2% goals soon. in thetrend is going right direction. i think we will hit the 2% sometime in the next quarter or two. i'm actually very comfortable going above the 2% to some amount.

i don't think that is a crisis of overheating necessarily. anna: leadership at deutsche bank. ♪ >> good morning everyone, this is "bloomberg daybreak: europe." londonust 6:00 here in during 7:00 if you are in paris or berlin. have heard from the trump administration as we set in the headlines overnight about the possibility of another set of terrorists on $100 billion worth of chinese imports this time around. we have heard from the ministry of commerce over in china. they have put out a statement that they don't want a trade war, confrontation and they say

was started by the united states. they will follow suit from -- till the end, these are words coming through from the minister of china. they are willing to pay any cost and fight back. with that kind of trade skirmish, discuss what kind of reaction are we seeing in markets. perhaps not as strong of reaction. the asian equities section actually manage to eke out a .1%.y trade, up hong kong is playing catch-up. the chinese markets are out of action today. perhaps there are buying into this argument that the u.s. threatens now. the dollar index is pretty flat right now. worth noting that.

importantly, s&p futures down by .9%. even though we are seeing a muted reaction in the asian section, that is not what we are seeing in futures. u.s. futures have more of a handle on the straight story right now. >> they have come up a little bit from the lows earlier and looked like we are not going to see a 27th day of a move of 1% or more in the u.s. market which is what we have seen so far in 2018. that volatility in equities has not been reflected in the bond markets. what we are seeing is the 10 year treasury yield dropping. we have since rebounded a little bit. yesterday, we hit 2.8%. where do we go from here? are we going to see the tenure yield push toward a 3% again?

mark dowding saying a test of frequent 5% is possible. 3.5% is possible. we are above the 50 day moving average. bm oh caps on markets have been fairly bullish. they just did a survey and they said it was overwhelmingly bearish. >> we will focus on the jobs report of course in terms of where the bond markets are going to go to when you get a lot of insight into where the tray conversation goes today. one of my colleagues mentioning that metals are lower. we have a host of great guests to talk us through the latest on trade and beyond this morning on bloomberg television and into the afternoon.

to have the former italian prime minister. francine will bring us up preview of what to expect later in the program aired we are going to speak to larry kudlow at 2:30 p.m. u.k. time. interesting to see the dynamics between trump and kudlow and the different messages we are getting from all of those, with a different emphasis perhaps. >> u.s. president donald trump has set a deal may be recessed soon on a revamped nafta will playing down expectations of the announcement will come next week. reported,viously been trump wanted an outline agreements that he and leaders of canada and mexico could make an announcement at the summit of

the americas which starts next friday. canadian prime minister justin trudeau said that nafta talks have picked up momentum. a brazilian it judge has ordered the arrest of former president a day after the country's top court rejected his appeal against imprisonment. he is been convicted of a corruption and sentenced to 11 years. he argued that he should not be jailed until he had explored every legal appeal. the supreme court denied that. being jailed does not completely overrule him in the election, but it seems unlikely he will return to power. in malaysia, when men announced that parliament has been resolved, paving the way for a vote to be held within two months. the action by the registry of

society in malaysia was triggered when the party failed to meet a deadline. flat rock plans -- they will track investment results of an index that is mostly made up of small cap u.s. companies. the world's largest asset manager also filed an initial registration statement for the u.s. aggregate bond etf was will also include producers and big retailers of civilian firearms. 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 at top . it is by no means comparable

to the markets we have had here in asia. we are not overly shocked with --mp with some investigators investors is saying he is more bark than bite. in mumbai, india and stocks are using their the climb with bonds continuing to rally after the r.b.i. turned dollars. parliament has been resolved. chinese stocks in hong kong, they are the bright spot. adding over 2% in hong kong today. chinese airlines are jumping at the trade war selloff, looks overdone. trying to sell their gaining ground.

anna: sophie, thank you very much. let's talk more about the markets now and that trade story. sell by 1%,utures and fact they are in negative territory right now after president trump ordered his administration to consider a further $100 billion of products to be subject to tariffs. this is just something they are exploring at the moment. and whatscalation investors say could the and all-out trade war between the world's two largest economies. woulde about that beijing -- great to see you, jim. some ofu for giving us your time while you are in london. in terms of the risk around the escalation of a trade war, this is one of the sort of scenarios that you see as more of an

outlier among other things. risk.to 30% >> i think that the market consensus is valid. the administration, president trump come in particular are using the threat of terrorists as a bargaining counter in order to get other things. it was very interesting when the steel and aluminum tariffs or announced three weeks ago. you have the photo op in the with thece steelworkers, you demonstrate to mr. trump -- comments in which he went back on the tariffs immediately saying that canada and mexico are our friends and we want target them. in other words, using the tariffs as a threat to actually get to other agenda items. probability is that others called his bluff and

we end up by default with a rather unintended trade war. i don't think that is the course they think they are on. i think that some of the more free trade or reenter's in government, i think many of them would actually sympathize with the idea of using tariffs as a bargaining counter. >> buying very much into this argument that they say it is posturing and not where we end up. things do seem to be escalating pretty quickly. the market getting its had around the $50 billion, 60 lane dollars, the two countries. then, the announcement overnight that the u.s. ones to investigate a further $100 billion on chinese imports. because of the scale of the imbalance in the deficit, arabic difficult for china to find enough u.s. imports to match this. if then begs the question how china then retaliates, what other tools do they have in

their toolkit dots i wonder whether we need to get to a point where we need to write in a diary and announce some sort of firm commitment. >> think the negotiation is happening behind the scenes anyways. i do think it necessarily needs xi to goy -- president to -- think that is something that the market expects to develop over the next few weeks. you probably will see some sort of head of government type conversation between the u.s. and china, but it needn't be imminent. conversations can happen. concessions can be made at a lower level and get ratified later. the market thinks that is where it is going to it is so

political. if you look at what the chinese retaliation was, aside from the --sembcorp, it seems that it is highly politicized when you look at the specific targeting of tariffs being suggested. i think that is the clue to what is really going on. that there is this 20%-30% possibility that blessed get cold, things degenerate, and that will be very bad for the economy. >> you sort of advised to not really adjust your portfolio based on that 20%-30% probability. before we get to that, you see a lot of equity volatility and another asset classes that we have talked about. i want to take you to a chart that shows the relative performance of stocks versus bonds. that is actually come down recently. in this scenario that we are in

now, before we get to that 20%-30% probability, how would you gravitate? in u.s. equities, you should be keeping up because the u.s. equity market, in terms of betweenrating, is now 16-17 times earnings. that is the bottom line of a long-term average. at a time when the fundamental background is usual. you have the impact of the new tax code coming through, the st stages -- in spite of the possibility of some pretty nasty policy mistakes. >> you don't attach a very high , but do you have a

handle on what the end goal of the trump administration is here? is it about bringing down the deficit as he talks about so often? is it about a decent performance in the midterms? to understand how he will rate his own success. >> he measures it very clearly base.ularity among his what he wants to see, i suspect, is a better job picture for his base, rising wages for the middle of the country, for the people that really elected him. i think that is his ultimate aim. think a lot of the anti-foreigner rhetoric is just of the elements anti-foreigner. think in a sense of the noise around economic again which is to try to take away the declining relatively speaking

living standards among basically the white working class. >> jim and stays with us. when you are traveling to work, tune into bloomberg radio. bloomberg's tech reporter is about to sit down with the team to discuss samsung's strong earnings and its dominance in the chip market. >> more on the u.s. economy. america could keep its lowest unemployment rate in 17 years. we will discuss what that means for the u.s. economy and for the fed. stay with bloomberg throughout the day. this is bloomberg. ♪

>> good morning everybody, it is 6:19 here in london. this is "bloomberg daybreak: europe." former j.p. morgan executives

is said to be among canada's contacted by recruiters in recent weeks to replace deutsche bank's ceo. according to people familiar with the discussions, all typical recruiters did have a formal mandate from the bank at the time of the approach, he was founded out as part of their search. zames did not respond to requests for comment and a deutsche bank official also declined,. he has said previously that he is committed to the role. outlined waysas he is responding to the data breach crisis. speaking to bloomberg, he said for the first time that some advertisers have concealed spending in the wake of the scandal. we also did not build our operations fast enough and that is on me. we had 10,000 people working security at the beginning of the year. at the end of this year alone,

we were more than double to 20,000. we're massively investing in smart technology and we are doing all of this to make sure that we get to a place where we can proactively protect people past data. electronics has reported higher than projected profits. demand for its memory chip remains strong enough to outweigh concerns about ties to apple. trump hisdent donald attack on amazon saying he is taking a serious look at what he calls an uneven playing field. he says he expects amazon's tax situation to be investigated and that there could be a decision from the supreme court. trump ai said earlier in the it was not immediately clear whether the president's comments indicated a

potential shift. >> thank you so much. the next leg up for the greenback could come from tonight's march payroll, which could show the lowest job employment rate in 17 years. president says that he is not concerned about slightly overshooting the 2% inflation target. >> the trend is going in the right direction and i think we are going to hit 2% sometime in the next quarter or two. i'm actually very comfortable going above the 2% to some amount. i don't think that is a crisis of overheating necessarily. was the atlanta fed president speaking exclusively to bloomberg yesterday.

jim is still with us here on set in london. we mentioned the jobs story, what do you expect to see today from the report, more broadly from the report? i got a message overnight that isks about how marketing starting to impact activity. see -- we have a lot of contact with small and midsize businesses all across the u.s. morale is actually quite high. it is a very strong feeling that federal regulation is getting less in the way of all and -sie business. that is away from the political rhetoric and what is happening in small business. i think the momentum is actually leading to a more positive and constructive approach to hiring in small and midsized business. that wageve seen is

rates are actually rising in small and midsize and growing businesses more than they are in big companies and state and local employment. i think you have already got a leading indicator of wage growth here. i think is quite healthy for the underlining tone of the u.s. economy. >> when it comes to wage growth, i read a note that said payrolls are eventually going to pay. meanwhile, yesterday we were talking about the fact that the u.s. jobs picture and implement picture is looking at the 1960's. we all know it happened then, unemployment fell. it is very different globally. >> it is globalized. it is also technology. to me, that is the biggest threats from the 60's -- different from the 60's. the communication, the deflationary impact.

there is an enormous amount of deflation in the economy that is actually not properly recorded in the inflation numbers. for example, more people used to buy stuff from department stores. a big proportion of them now go through e-commerce, primarily amazon. why did they do that? as the prices are may be 20% lower. that is not recorded in the inflation numbers. there is more deflation around them they were ports and inflation numbers suggest. >> a lot of price discovery. on the subject of the u.s. economy more broadly, how did this trade story stick with the fed? argue one hand you could that it gives the fed reason to assess what damage is done or benefits he has achieved. on the other hand, you could say tariffs push of inflation. that is not really inflation, it is simply an extra tax which puts prices up.

tariffs ultimately decrease inflation by decreasing economic activity. i think they'll be making a policy mistake if terrorists come in and they say inflation needs to be choked back to higher interest rates. -- compoundome and the felony and make a policy error on the interest rate front. i suspect if the fed does four rate rises this year, they are probably making a policy mistake to read think they run the risk of getting yields into a tariff that will slow the economy. i don't think that has to happened yet. even though unemployment is very low, the safety valve is increasing weight precipitation -- participation. ceo of principle global investors stays with us. he'll be joined by some big guests.

kudlow, director of the u.s. economic council at 2:30. >> this is bloomberg. ♪

♪ 6:30 a.m. here in london. 2:30 p.m. in tokyo. close say the dollar-yen above is moving average estimate for the first time since january 8. it has been the laggards so far in april dropping about 1% against the greenback. marketse seeing asian take a little bit of a leg down here. we have heard from china, to president trump possibly this comment. let's dip into what is going on

in south korea. we are getting comments coming through, also news coming through to us from the south korean court where the x resident -- x president has been found guilty of abuse of power. let's check out the latest market action. talk is she and cheap tariffs are expensive. it perfectly resembles what is happening right now. u.s. stock futures tumbling the site as trump another possible $100 billion on chinese goods. chinese shares in hong kong are rallying. it will be interesting to see if asia has more resilience when these u.s. stocks open and whether or not these futures continue to tumble. no tit-for-tat here. the big question here is how react? -- will xi

i love this chart. the red line here shows what they would be to match the current u.s. proposal of $100 billion. there just aren't enough american imports to china to max it.the chinese administration may need to get creative. really great chart to watch in terms of what we can expect from xi in retaliation. projections have unemployment dropping .1-4%. this chart here shows the trend of what many are saying the u.s. economy is starting to echoes of the swinging 60's. we are setting the stage of what we saw in the late 1960's. this is an aria -- area that could shop financial market. it looks like we have become accustomed to muted price

pressures and monetary policy. >> let's hope it is not the 1960's on many levels. follows, thet 1970's and flares. that is not a return anybody wants to see. jerome powell speaking later to be the thing that really makes markets. facebook coo reassured investors yesterday the only a few advertisers had positive spending. paused spending. >> facebook's cost leadership takes full responsibility for the problems in the coo still believes deeply in zuckerberg's leadership. >> i feel deeply personally responsible because there are real mistakes that we made and that i made.

i think when you take a step back and think about what is happened here, for a long time, we were really focused on building social experiences. a lot of good happened because of those. when we found problems, we would shut down the problem. of the friendase to friend sharing that happened with cambridge analytica, that specific case was shut down in 2015. what we did not do until recently and what we are doing now is just take a broader view, looking to be more restrictive in ways that could be misused. we also do not build our operations fast enough and that is on me. we had 10,000 people working in security at the beginning of the year. the end of this year alone, we 20,000.e than double to we are massively investing in smart technology and doing all of this to make sure that we get to a place where we can practically protect people's data. you are the chief architect of that.

willing the business model evolve as a result of all of these changes, how will that impact the bottom line? >> we have never run this company for short-term gains. and we've never run this company to maximize profits. we run this company for the long-term health of our company and business. these investments are big and they will impact profitability, and that is ok with us as it is the right thing to do. we will update at the next quarter. youalk a little bit about, mentioned that a few advertisers have paused their spending as a result of this. how big is that pause? >> a few advertisers. what matters is not how big it is, but the questions they are asking. advertisers are people who use facebook and so are our investors. the advertisers and people who use facebook also want to know

that the good things will continue. those are really important. >> mark has been asked if he is the right person to lead facebook, deeply that he is? -- do you believe that he is? >> i believe deeply and mark. he had a vision for what social sharing could be an admission remains very important. ,long with me and all of us mark takes full responsibility for what happened here. sharing is so important to people all over the world. we're going to be much more proactive. i'm not quick to say here and say we won't find more problems, we will. you are going to continue to find problems. we are going to continue to shut down situations when we find them. this is a forever thank because of security is an arms race. this is something that we are signed up for not just now, but on an ongoing basis. >> something that facebook has

signed up for. that was the facebook coo speaking to bloomberg. let's talk about tech. jim is still with us. we often talk about technology and its role on inflation. regulatoryabout risks. types ofthreat to the business is more regulation? >> think the facebook and particular is an existential threat. you mentioned earlier the 10% or 15% in the stock price, that seems to me like a modern setback. >> this could really threaten the business model in its entirety. >> yes, it could. what has happened with facebook,

it has gone from two or three years ago everybody loved them. they were well-intentioned and somebody loved them. now, with the stories around how they shared data with the use of part with the monopoly that comes of being in so many parts of social media, they are moving to be almost as unpopular as banks. i don't know about journalists. i wouldn't go there. whenoint i make here is that sort of political problem hits, regulators come after them, how might that end up? it might end up with regulation and use of data. the u.s. has a track record over the long-term of breaking up companies that become too powerful. i wouldn't rule that out on a three-year view. it is not going to happen under the current administration, but what happens in the midterms? you could well see a political

situation where even a breakup of facebook is on the cards. there is a lot of risk their. i've been saying by the u.s. market on the dips. would go to others that don't have the specific perils that they have. >> tech stocks were a big part of a big part of the selloff and the volatility in the u.s. equity market. you say we are not looking at the situation circa 1998. it is more like early 1998 -- 1999. rating gotk market very high in late 1999. the reason i think we're still situation isilous that the average rating on the fundamentals is a lot lower. at a time when things are really pretty good for particularly american business. what would get me to a feeling

that we were in the late 1999 and a real peril in the market is one of two things. it is either the market going up a long way to get to that 25 times earnings plus or it is something that brings the next recession much closer. that could be tariffs. it could be military hostility and korea. it could be an interruption of oil supplies. it could be credit problems. there are a lot of different things that are in that 20%-30% probability of things going wrong. the main one of the moment his tariffs is not the only one. >> some point to recent appointments in washington. in terms of the debate around the technology -- facebook and business models such as that may be faced regulatory risks. we have numbers out of samsung overnight supported by their took the business. are you more interested in

hardware stories around tech? >> i'm not sure it is really a hardware story because the intrinsic value to the consumer depends on the software and the apps. apple is very modestly rated and a very strong company. even rather have amazon, even of the president appears to want to get his claws into them because i'm not sure there is really much that can be done about that. they are in a more competitive market. >> they don't pose annexes dental threat? >> i don't think they do. companieso look at that have particular dangers of the moment. the two that are being talked about on this show are ready are deutsche bank and facebook. you also have to look at other markets. here is one place i go with the equity market. the rest of the world is more at perils and tariffs than the u.s.

the u.s. is a massively integrated the mexican economy. that is why i'm beginning to say sell the international markets on strength as opposed to continue to buy the dips on the u.s. i think the u.s. will do better even with tariffs than many of the international markets. >> i was going to ask you about evaluationsen the gained at tech are three times the broader markets. the tech violation is that high, but you sort of answered that question with what you said about amazon trade i want to which is the chart vix topping the european volatility gauge as trade issues and the tech of stocks have played out. this is unusual. u.s. stocks being more volatile than their counterparts in europe.

even that, you still think you should be more positive on the u.s. than the rest of the world? >> yes, i do. i don't really buy the vix as a measure of risks. >> these are normal volatility levels historically, right? point. is the fellow tobey levels so far look high -- volatility levels so far look-. 1990's, that and would not have been unusual. i think weent time probably, because of changes in market structure have to get used to a bit more day-to-day volatility. i think that is not really making the market fundamentally more risky. >> jim, thank you very much for your thoughts so far. he stays with us on the program. if you like all of the charts we have been using here, bluebird

users can interact with those charts. librarygo to the chat and browse all of the charts we have been using and catch up with the key analysis. >> coming up, shakeup in europe's largest investment bank. we will speak to larry kudlow, director of the u.s. national .conomic console this is bloomberg. ♪

♪ it is 6:47 your in london and 1:47 and a morning in new york. u.s. futures taking another leg lower down more than 1% right now. if the u.s. market does far more than 1% in today's session that would be the 27th day of a move of more than 1% in either direction. that is more than triple the amount of moves of that

magnitude in 2017. facebook coo has outlined the way she is responding to the social network's data privacy crisis. speaking to bloomberg, she said for the first time that some advertisers have curtail the spending in the wake of the scandal. she also acknowledged that her team has a long way to go to reassure wary customers. >> we also did not build our operations fast enough and that is on me. we had 10,000 people working in security at the beginning of the year. at the end of this year alone, we will more than doubled to 20,000. we're massively investing in smart technology and we are doing all of this to make sure that we get to a place where we can proactively protect people's data. trump. president donald his attack on amazon saying he is taking a serious look at what he calls an uneven playing field. --says he expects tammuz

amazon's tax situation to be investigated and it could be a decision from the supreme court. trump said earlier in the wake that the white house was not planning punitive measures toward amazon, but it was not immediately clear whether the president's comments indicated a potential shift. >> that is your bloomberg business flash. is amongames candidates set to be configured to replace deutsche bank ceo john prior. richey is a two day -- to take a veteran. veteran.ade what does this development mean? morning. it is another name that we can

add to the list of potential candidates since the story broke that he may be replaced a week ago. i think this is another sign that the bank is serious and the germans are serious with replacing him to another -- with another person to bring the bank of forward. on the other hand, we see the biggest issue the bank has right now is in the investment banking unit and the struggle to begin market shares that they have lost over the last couple of years. charge for quite a while and was responsible for the lack of success the bank is experiencing right now. people are telling me it is not coming as a separate -- surprise that he met in the bridge of leaving. >> are the challenges for deutsche bank in finding a new ceo? >> that is a really good question. it is difficult to find a candidate. they're approaching so many

people and no one right now is jumping out of their seats and saying yes, i am coming to frank for. what you really need is a jack of all trades.you have to get along with a lot of different departments in the bank as well as the corporate and retail banking. into german, or spoke german that would narrow down the candidates. you need to find a guy that is really versatile in a lot of things and that is very difficult to read -- difficult. jim is still with us. jim, what is your view on deutsche bank and german bank in general and how they kind of the fit into the broader european banking picture? >> i think the thing i would add to his comments about the succession of deutsche bank would be the ideal new person

would also be some sort of a change agent. why do i say that? if i look at the period when deutsche bank was doing particularly well in market share terms, they were very aggressive. they were aggressive on trading, they were aggressive on the investment banking products they were offering. aggressive quite highly leveraged. secondly, if a look at european banks in general and deutsche bank by extinct -- extension, they are not well capitalized. the low performing loans were not dealt with after the crisis. i would think that the new chief executive, if there is a new one at deutsche bank, will have to look very carefully at how to shrink some activities, notably in the aggressive in. they don't really need to compete with goldman, they need to be much more satisfying their base in germany.

also to look at the capital situation. there is going to be some unpopular things to do. i think that micro-chasm of the european banking picture -- there are strengths and weaknesses in the european economy. one of the weaknesses is how will a create enough credit once growth gets going? i don't see that the moment and i think there is an issue there. if they could speak german that would be an active bonus. what is the overlying picture for the european economy? -- eurozone economy? how concerned are you about data points that disappoint a little bit in coming in below estimates? >> i think they are systematic

of an economy that might not be quite as robust as many people hoped and which may well not be a sort of escape velocity self-sustaining mode. . think europe has done well there has been improved sentiment, particularly in germany. the french elections but the european business sentiment on a much better course. what is happening next? you are seeing resurgence of populism even in germany. you are seeing a very difficult outcome of the italian election. still not clear who will form a government. if you look at the political situation in europe, it is deteriorating. i would suggest that the european recovery is pretty fragile. i go back to the banks as one of the reasons that is the case. >> what does this mean for the bond markets? earlier you are saying that you prefer u.s. equities over european. do treasuries outperform?

>> i think they probably do relative to the bruins -- bunds. i am not one of those that think that eurozone is going up. i think they will be pay and 20 for a while because of this lack of sustainability in the recovery. eventually, there will be a convergence, but it will be very dependent on economic conditions demand for funds. at the moment, i would be more bullish of the dollar and that is one of the reasons why i am favoring u.s. investments rather than international. >> do you think you have a clear idea of how further trade tension, if that is what we are in for, impacts the dollar? >> i think trade tension, if it leads to recession, which eventually it would do, that it will tend to lead to a porsche

-- push for safe harbors which will include the dollar. that may seem a little perverse since the u.s. just started these transformations, but i think they are started on a fairly clear cap collation that if it all goes wrong, it hurts everybody else much more than a hurts the u.s. thist the people asked if started in the us, how can we's -- find safe harbor in u.s. assets? >> it is the reserve currency which is an extraordinary privilege. foreignnk that economies is one of the reasons they have grown. >> thank you so much for spending the last hour with us. she will be joined by guests throughout the day

including the former prime minister. lots more to come from to know be a. this is bloomberg. ♪

president trump calls into an investigation on $100 billion of chinese imports. traders await the latest data out of the world's largest economy. the atlanta fed president sees inflation reaching the 2% goal soon. >> the chairman is going in the right direction. we will hit 2% in the next quarter or two. i am comfortable going above the 2% some amount.

2.2, 2.3. that is not a crisis of overheating necessarily. morganformer jp executive is is among candidates in formally contacted by recruiters to replace ceo john cryan. ♪ anna: let's take a look at the futures and see how the european equity markets might open up in an hour time. we are seeing u.s. futures point -- pointing lower. we could see a lower opening in europe around concerns of trade tensions. 40 futures down, but dax futures leading those losses down 1%. this, after we see a mixed session. session is coming through.

in the latter part of the trading day, the asian equity session was resilient. we were wondering why when tensions around trade, the possibility of further tariffs on $100 billion on imports from china to the united states. i were asian equity markets resilient? we got tough language is saying, we do not want to trade war, this was started by the u.s. they will follow suit to the end. we saw move lower in asian equities. hong kong is playing catch-up. they missed out on yesterday's rally. investors may be taking the view that with these threats around tariffs, they are just threats, not active policy yet. they are preparing policy, that they could implement something lesser later. that seems to be the market thinking. the dollar index is pretty flat. we are finding it hard to know

which direction is ahead. reiterating,worth with a muted reaction in asian session, they are pointing down. showings it seems to be with futures, equity markets around concerns of the trade tensions. the effects and bond markets. the dollar and 10 year treasury yield might take direction from the jobs data we will get later. the treasury yield rebounding we sellow of 2.72% recently. we are off the four-year high of 2.95% we hit in february. if we look at the futures, u.s. bond futures, the price is moving up. the yield coming down. get asection we could

the european cash market is about to open, we are pretty flat looking at bond futures. will those yields take direction from the u.s. and move lower, or will they be unchanged? that is what we will watch for this hour. anna: we got german data on theg this hour industrial side of things. industrial output coming in lower than what was estimated, falling by 4%. industrial production number comes a day after we got factory orders out of germany that were also weaker than expected. it is taking its toll on the euro. we are down a touch on the euro. it is often earlier highs of the session. this is having an impact on the currency markets. it comes after other data points out of germany. perhaps more broadly in other

parts of europe where things are lackluster against estimates. that's tell you about what is coming up on the program. the datae dealing with out of germany, but we will be speaking to the former italian prime minister. beh of those gentlemen will joining francine lacqua in italy. those conversations coming up later this morning. in the afternoon european time we will hear from larry kudlow. with the kudlow come back for equities yesterday. , and how he say today will that turn equity markets around? >> u.s. president has said the deal may be reached on nafta. while playing down expectations the announcement will come next week. trump wanted an outline leaderst so he and the

of canada and mexico could make an announcement at the summit of the americas which starts next friday. justin trudeau said yesterday the nafta talks have picked up momentum. a brazilian judge has ordered the arrested of the former president a day after his appeal against impressment was rejected. he was convicted of corruption and sentenced to 11 years. he argued he should not be jailed until he explored every appeal. the supreme court denied that. it does not rule him out of the running for -- for the election. it is unlikely he can return to power. malaysia's prime minister has dissolved parliament, triggering the election process. the chairman of the election commission said the boat will take place in 10 days. the former premier was banned from competing in 30 days, a move that can dent his chances of winning. o -- blackrocks tw

plans two exchange funds. the optimized etf will start trading on april 12 will track results. this is mostly made of u.s. small caps. bond etf's will exclude retailers. global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top . let's check in on the markets in asia. asian markets are not rattled by trumps latest trade sell though. say he is more bark than bite. asian stocks are headed lower. ending the week down. losses after earnings beat

the first quarter. stocks eased declines and bonds continue to rally after the r.b.i. turned dovish. hong kong investors played catch-up. 1%.hang seng jumped over we did have tencent, the backbone of the rally, climbing over 2%. andese airlines -- brilliance auto is climbing for a second day, as it is benefiting from the tariffs on u.s. car imports. autos are the best performer in asia this friday. you so much. let's talk more on the markets. u.s. stock futures have don't -- have fallen by 1% after trump ordered his administration a in chinese0 alien imports. the move is the latest escalation of what can become an all-out trade war between the worlds largest to come --

largest two economies. us now on set, guy foster, head of research. how do you view the latest , theric around trade suggested policy around trade. do we take it at baseball you? , 611 on a chart here the bloomberg. it shows how much volatility has returned to the s&p. it certainly hit markets. in terms of these latest announcements, you'd -- you should treat them like previous announcements from the u.s.. the first $50 billion worth of goods subject to tariffs have not been implemented yet. perhaps they will not be implement it. the same can be said for the .atest threat of $100 billion

it is something you are announcing as you go into what will be a. of negotiation -- it will as you period ofat will be a negotiations. certain product lines were being targeted. it is to do the maximum possible period for the lobbying affected by u.s. is mrs., and consumer groups to get that impact during what is going to be a long consultation. are you looking to reduce your equity overweight in the coming months? i think we will be looking to reduce risk. it is not so much related to trade. billed as a year

of two halves. halfway through the first half this was supposed to be the easier one. everyone knows the big headwind , from the balance reduction in the u.s.. we are feeling the effects of european tapering of asset purchases. recently, do not attach to credence to it. parts are the , and those are headwindind -- are a to markets. anna: how the central bank unwinding of qe and reduction of balance sheets, how that story withstands the pressure of the trade rhetoric, because i read conflicting thoughts on this. some suggest central banks will have to pull.

others say, this could be inflationary, if we do see tariffs imposed. it could force central banks to hike or exit easing policy more quickly. what is your instinct tell you? it: in a technical sense, will be inflationary for the purchases of goods that are subject to tariffs. that is not a controversial statement. with soybeans, for example, globally the price fell 5% as soon as china announced tariffs. the first round effects for nonaffected countries are deflationary for the vast majority of assets. it depends if it is a commoditized product, or if it is specialized were people have to buy it goes they built their supply chain around it. the things we have been talking about our commodities or end products, aircraft, things like that.

in those instances, you will see market share changes, that you will see in commoditized goods, prices for the vast majority of consumers globally and obviously two specific countries. for the u.s., it is not an issue about inflation. it is in issue about output and corporate activity. nejra: we have seen a lot of equity market volatility. as the chart showed on concerns around trade wars, bond market, fx volatility has remained suppressed. if we look at the dollar-yen, closing above its 55 day moving average for the first time since january 8, the first quarter it was the yen that was back aorming and pulled little bit. what direction does this take from here?

what does that mean more broadly for japanese investors? and how they invest globally? i am a bit candid in saying the major pairs are in equilibrium in terms of valuation wise. the big dispersion is about positioning, so investors extremely short the dollar, extremely long the euro. the yen looks attractive on that basis. it is a cheap currency that people really do not like. we tend to look at things in those metrics rather than getting swayed by which way policy are going to affect currencies, because ultimately those factors get assimilated within the price quickly, whereas valuation and positioning take longer to play out. there is more opportunity there. from that perspective, we tend

to see the yen looking reasonably attractive. together with the dollar over the medium term, and the euro being the more vulnerable currency. anna: this is been a story expressed in stocks so far. a little focus on fx. it is mostly in stocks. whether you reduce exposure to equity, where in equities do you hide out? where do you seek safety in utilities? or are you willing to take the risk? what youepends on count is taking risk. everything in the market is risky. you've got a number of sectors which have become, and a number of regions, which have become cheap. the u.k. is obviously the world's most unloved equity -- it, good value driven think you had four stocks in the top contributors last month. spectacular surge

but looks dreadful on a sarge -- on a chart. utilities look relatively good value. ofer a big period underperformance. you can say the same for technology stocks. there are different types of opportunities, there are different places that you can hide which will be relatively unaffected are the kind of sanctions we have been discussing so far. nejra: you have been saying the euro looks vulnerable out of the major currencies. that would suggest if there is euro weakness you might be positive on euro zone equities. i will find out if you are or not. on the other hand we are seeing softness in a number of pmi's out of the eurozone. how do you weigh up those things? what does that mean for your view on european equities? guy: european equities might outperform on that basis if your

currency hedged. if you are not, you want to be in european equities when the euro does well. you want to be in u.s. equities when the dollar does well. it is as simple as that. equities, we are actually underweight, we are not positive on them. part of the reason is we really like them when they were greatly unloved at the beginning of 2017. and it was a spectacular first half. then it has been disappointment after disappointment. that, at that time when, as you say, the pmi's back then were as good as they could get to read they could not get better. levels close to 60 is as high as they go. the onlyway debt -- way is down from there. anna: you have been writing about global synchronized growth. guy foster, head of research, brewin dolophin, stays with us.

news, francine lacqua joins us live. francine, what can we expect from the workshop today? i am on the river -- and talking about u.s. and china trade tensions. we have a great lineup of guests. we'll talk monetary policy, and what stocks do next, given that tensions are rising between the u.s. and china. we have a chinese regulator who focuses on banks. we will get his take on what it means for financial companies and the financial industry in china, if that is how they retaliate with the u.s. we will speak with the former we will talkr,

about italian politics. the crossover between geopolitics and politics, and the impact it could have under term on the economy. we will be joined by jacob frankel, j.p. morgan's chairman. we will focus on monetary policy, the jay powell speech. we will also talk about u.s. jobs. andill see what mr. gloom doom has to say about trade. i will hand it back to you in london. i will be here throughout the day. lacqua, thank you very much. she will be there throughout the day. she mentioned the jobs report. coming up, the u.s. could hit its lowest unemployment rate in 17 years. we will explain what that means for the greenback and the fed. nejra: we will be joined on bloomberg tv and radio. this is bloomberg. ♪

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anna: good morning. this is "bloomberg daybreak: europe." 37 minutes to go until the cash open and trade here this friday. we are expecting to see weakness as a result of trade tensions on european equity markets. nejra: also in focus, the jobs report to show the lowest jobless rate in the 17 years. strength in implement figures could fuel expectations that the fed could hike rates of four times this year. still with us is guy foster, head of research, brewin dolophin. i want to take you to a chart of the 10 year treasury yield. it moved lower today, but touch 3.8% yesterday. it is still short of the four-year high we saw.

forve got blackrock calling 3.25%. we are above the 50 day moving average. where does this go from here? guy: it is heavily dependent on terms of what we get for payroll growth later today, not payroll growth but wage growth, later today. even where -- given where positioning is, and the bearishness about hans is, -- the bearishness about bond this is. you have to acknowledge the risks are skewed to the upside field here. it is all about inflation much more than any of these other stories. given the amount of volatility you see in equities, you would expect traditional havens like gold, like the dollar, and particularly treasuries to perform better than they actually have done. not a for that, it is

great mystery, we have obviously seen a step up in the balance sheet normalization from the fed. there is a lot of issuance and negative sentiments. it is going to be difficult to overcome that. anna: you think the bond market is focused on issuance story, and equity markets are on the trade skirmish. guy: it is going to take a lot to squeeze out the shorts in the bull markets at the moment. interestingly, trades could do it. you talked about the 50 day moving average going north. what we have started to see is ctas liquidating their position and coming out of equities, moving into bonds, given the moves in markets we have seen. that can easily become a precursor to something more sustained. it is difficult to squeeze out

shorts when everybody is focusing on that issuance angle. nejra: thank you very much. breaking news coming to us this morning. this is in computer software products. they have preliminary talks with fidessa. more broadly, the story remains on trade. we have heard from the white house about the potential for new tariffs, and we have chinese response as well. nejra: let's look at the markets in view of all of that. u.s. futures are lower by more than 1%. they are coming off of those lows a little bit. euro stocks, we could see a negative open in europe. for "bloombergt daybreak: europe."

the european open is next. if you have to switch off television, bloomberg radio is always there for you. i will be there, 8:00 u.k. time. this is bloomberg. ♪

♪ guy: good morning. welcome to "bloomberg markets: european open." johnson in our london headquarters. alongside matt miller in berlin. cash trade less than 30 minutes away. ♪ guy: trade escalation, china vows to fight to the end. president trump proposes an billion tariffs. u.s. and european equities drop on that news. powell, not