question good morning from the city of london, i'm nejra cehic. these are today's top stories. >> the fence as inflation is close to its target but signals note shift in his taste of monetary tightening. a mega offering, the smartphone maker filed for an ipo expected to raise at least $10 billion. paring up with hardliners to reject the president's plan and demand a -- cleanak from the break from the e.u. customs union. ♪

welcome to "bloomberg daybreak: europe." and welcome to our audience a warm welcome to all of you. let's look at the breaking news first on the bloomberg. we got something coming through, second-quarter profits, missing estimates and also will sell its u.s. service business. these lines just crossing the bloomberg. second-quarter adjusted ebitda missing the estimate. it confirms the forecast from april 24th. that's something we will want to discuss with the cfo we talked to him later. it warmed of a slowdown -- warned of a slowdown back in april. also advances to become the digitalsoup flyer for farming. those are the key lines. let's get to the risk radar as well and take a look at what's

happening in these markets. following that happen in the u.s. session following the fed remember that japan is closed for a holiday today so we're not in debt reflected at the msci asia-pacific index. a balance message from the fed is what a lot of people seem to take away from the spirit something slightly on the dovish side. we did see the curve steepening and it looks like the dollar is tracking what happened in the two-year yield yesterday. it is retreating from that january high. we seen the bloomberg dollar index push-up over a key technical of the 200 day moving average. a little bit of softness in the dollar and a touch of softness coming through in crude oil, down .10%. it seems the fundamentals are dominating rather than geopolitics. we got the stockpile data with stockpiles gaining by the most since january. that seems to be white wti is

holding below $68 a barrel. thes: a quick line on oh in , a millionng numbers is the topline number. production costs decreased by 70%, this is a critically important part in the oil industry. so we will keep an eye on that through the day. let's take a look at how the u.s. market might open up a little later. we saw some losses in the s&p 500 in yesterday's session. today we're looking pretty much flat at the moment, struggling for a bit of direction there. let's talk about what's coming up on today's program. we will break down earnings with the company cfo at 6:30 a.m. u.k. time. later we will speak to the

osram cfo. cmo -- let's get the bloomberg first word news. >> china has said it will not succumb to what it calls threats from the u.s. on trade. that comment coming from a senior government official just hours before talks begin with the delegation from the trump administration. the chinese official said beijing won't accept any preconditions such as abandoning its long-term advanced manufacturing ambitions or now ring the trade gap by $100 billion. u.s. president donald trump has hinted that three americans held in north korea may win the release. the u.s. citizens have been held for years by the reclusive nation. all caps we did this, as everybody is aware, the past administration has long been asking for three hostages to be released from north korean labor

camp, but to no avail. stay tuned. washington, mike pompeo has been sworn in as u.s. secretary of state. the former cia director says america has an unprecedented opportunity to change the course of history on the korean peninsula. tillerson, whox was fired by president trump in march. president trump repaid his lawyer michael: four $130,000 ice payment to actor stormy daniels, according to rudy giuliani, contradicting previous statements made by the president. giuliani told sean hannity on en funneled itcoh through the law firm and in the president repaid it. the u.k. prime ministers facing a crisis after pre-brexit breakers demand a clean from the e.u. customs systems. teresa maims outnumbered at a meeting of her inner cabinet who

was unable to agree with either of the middle-of-the-roader options she had proposed. she may have as little as a week staying choice between in the custom union or leaving without a deal. news on air 24 hours a day. find more stories on the bloomberg at top . take a look at how markets are trading in here in asia. >> just past midday across the major markets here. long story short, equities down, the dollar being offered up. a slightly at the gross commodity prices. sovereignsok at across asia as well. overall japan as we mentioned earlier is close for a public holiday. the main story across the equity markets is a 500 point drop we are seeing here within the market. we talked about the chinese smart phone maker, making it

official, filing for an ipo in what will likely be the largest listing bubbly since alibaba back in 24 -- the largest listing since alibaba. do we have enough liquidity to keep that listing supported, and also the overall market. not sounding too optimistic over the short-term prospect of the equity market. thinking will only retest the recent highs in the second half. a few names were following across the region, airlines in india, were getting a massive sell down when it comes to consequently, and earnings miss across indian airlines. and when you have a lot of these infrastructure industrial related companies in south korea also seeing a fair amount of selling following the rally earlier in the become

essentially the -- people taking their money off the table following the north and south korean trade. a lot of the companies were up 19 or 20% in recent days. traders are quick to pull the trigger here on the slightest hint of negative or bad news. it does not exactly bode well for market sentiment. it explains why we haven't really seen equities built very much. back to you guys. manus: david, thanks for the roundup from hong kong on the markets. to officials were said convey a sense of continuity in their latest statement. the u.s. central bank also made sure not to signal any intentions to accelerate policy tightening. here's a taste of what the investors made in a statement. >> i think the statement is loud and clear. mission accomplished. we have reached full employment, inflation has hit 2%.

we are safe to continue moving with our plan rate increases, and let me set you up a little bit, inflation is going to run hot in a few months. >> if the fed move significantly higher, and i don't expect a june rate hike, i don't expect five or six going forward. i simply don't think they can do that. >> they are willing to overshoot on inflation even as they are raising rates and allowing unemployment to continue to fall. i think we will get to for rate hikes this year. >> if anything, the market reaction is very tepid. this is pretty much what the market expected. an upgrade to inflation, characterization, this metric as i mentioned to self to clarify two, youou're right at can go a bit higher. >> the economy seems to be on the track that they thought it would be on. a very tight labor market, pretty good growth, and

inflation coming up a little bit. but they are going to watch it and that will certainly keep on their schedule of raising unless something terrible happened. joining the rollcall, our guest host for the next hour. the head of u.k. proration strategy at ubs. i knew that would make you smile. very good morning and welcome to the show. the word symmetric used twice. this is what bloomberg is focused on. you there isst to a tolerance, a proclivity to running hot? iti don't think i would put quite that strongly. i think it means there's a tolerance if inflation does rise above that target to allow it to treadand to continue to cautiously on rate hikes and not rush into it.

in our view, it's more likely to me that they do raise rates possible times over the coming period. there is a bit of finessing around the language to do with inflation which, for us, makes it more rather than less likely that they will continue to tighten policy. nejra: this is a target, not a feeling. so theoretically the fed should be fine with inflation running above 2%. the question is, how long could it sustain above 2%? is it just transitory, the rising inflation we have seen? john: you are right, it is a symmetric target and therefore they should have a similar sort of policy response we do slightly above to the way they do when it is slightly below. as i say, the fact that they are prepared to be patient and cautious and not overreact to the fact that inflation may go about their target, it's

something the markets are taking some reassurance from. manus: what do you make of bill gross? it will meander higher. the bear market is awake, but it is not growling. we certainly don't see a significant further upside from those yields a little bit further down the curve. clearly as policy evolves, it's possible the front in rates could go a bit higher. we certainly think there are another three has to come this year and the meeting forecast still only for two so there's a little upside argue before shorter yields and further down the curb because investors will take comfort from the fact that the fed has got inflation well under control. we think you'll's should be anchored around these sorts of levels so the curve goes on flattening but not in a worrying way for us in a very gradual process. nejra: the reaction we saw

yesterday, this is the reaction over one date. unusual, given that there wasn't a huge amount of news out of this meeting, what will you be looking for in the minutes to give you any indication of how to continue trading long-term? john: we are pretty committed to making ago . is more of a steer as to how they see policy evolving later this year and where they see the terminal rate and how open are they to the idea they might go at thehat terminal rate late part of this cycle, and we do that think that might be. they're not going to give us all that in explicit terms in the minutes, but anything that guides in that direction could have an influence on the curve. at what juncture does the world waking up to higher oil and potentially the impact of that have on markets? i'm trying to do two things at

once while in talking to you. crude,tions of tracking and what juncture do we begin to have that conversation, or is it already having that conversation? is that a conversation you're having in terms of inflation correlated to five-year money? john: the key, as ever, is to what extent it's about supply and to what extent it is about demand. at the moment, the supply side of it is more perfect or so it it's something to be careful of, i guess. obviously if it isn't being driven by stronger demand, it does risk squeezing consumers at some point. i think the extent to which the prices written so far is not something to cause any alarm. that will feed through to headline inflation if the oil price stays here. in my be one reason the fed has introduces line with that suggests there is a willingness to tolerate slightly above

target inflation in the short term. oil pricewhich the has risen is not something that's causing us to lose any sleep. nejra: he talked about the fact that the yield curve looking flattening. the dollar is a little weaker in this session. this war longer-term chart shows the bloomberg dollar index approaching is 2018 high. we've seen it go above key technicals as well. it must be painful, the market has been very short the dollar. is it time for that trade to change for 2018? not fundamentally, no. we think the dollar will weaken modestly over the balance of this year. inevitably when you get these long trends you do get periods where there is a correction in somewhat of a setback. as the fed continues down this path and assuming we don't get any shots in other areas, the is the oil price or trade tears and so on, we think the path is

toward a weaker dollar. our guest stays with us. coming up, china says it won't submit to u.s. threats, just hours before trade talks are set to begin with the trump administration's trade delegation. later, thettle bit cabinet colleagues reject her customs proposals. we'll discuss the implications for brexit. this is bloomberg. ♪

shot: welcome back, a live of singapore. a great day there and at great day for markets. the msci excluding japan i'm a down .6%. construction materials are on the league of the drop.

finding the direction posts fed. one lady always knows the ,haidi.n, good morning >> good morning and thank you for that. kicking off her process expected to raise at least 10 billion u.s. dollars. the ipo could be the largest since 2014. the chinese mark warner maker said revenue surged 67.5% in 2017 at a blistering pace of growth that will help it take on apple and samsung. tesla shares reversed in late trading after ceo elon musk cut off analyst pressing him about ending the companies before his cash burn. he earlier said tesla would generate money in the second half as it ramped up production of the mass-market model three, but on the post earnings conference call, he dismissed questions about capital climbing.

>> am sorry, his questions are .o dry, they are killing me >> the political consulting firm at the heart of the facebook data manipulation scandal is shutting down. ite gentle it is said beginning insolvency proceedings in the u k, citing what it calls numerous unfounded accusations as a major reason for seizing operations. that your bloomberg business flash. thank you so much. china says it won't succumb to threats from the u.s. with regard to trade, according to a senior beijing official. this comes just hours before u.s. trade delegation arrives in chinese capital to negotiate a potential into the trade dispute. let's get the latest from beijing with our reporter, tom mackenzie. it's a fairly large u.s. delegation going to china. do have a clear sense of what they are trying to get out of the visit?

tom: that's right, treasury secretary mint you leading this visit along with the likes of commerce secretary ross and others. currently meeting with the u.s. ambassador terry branstad before moving on to those talks with the chinese counterparts. there's a whole smorgasbord of issues when it comes to the trade relationship with china. we know they're likely to be pushing their chinese counterparts around some of the terror issues and the deficit the u.s. has with china. president trump tweeted out a couple of hours ago that he was hoping the team would address some of the market access, saying it's about fair play, a fair playing field for u.s. companies operating in china and vice versa. these are some of the issues, the chinese appointed out there not going to be bullied, as they've said, by the u.s. and they will not succumb to u.s.

threats, but we are waiting to see if they will offer anything to these u.s. delegation. talks are expected to start in earnest in beijing this afternoon. manus: tom, good morning to you, good to see you again. there's a british book written for children about adventures into secret places. they always come up with something very surprising. what could be the surprise proposition put on the table for the chinese? john: it's interesting that light heiser and navarro have taken a pretty tough view on china for a number of years. it's been the primary focus of navarro's career, in fact. we believe this is his first visit to china, despite writing a book criticizing the chinese system. it will be interesting to see how much the dynamic plays between mnuchin on one side and to borrow on the other side.

we may get some concessions from the chinese. it's likely they were just re-articulate some of the policies they've already laid out around opening up the auto sector and reducing some of the tariffs on imports from the u.s.. mackenzie, our bloomberg reporter, joining us from beijing. wraith is still with us. there's so much unknown here and we've seen equity market swing back and forth quite a few headlines coming out around trade tensions, not so much in the bond market. our bond markets largely ignoring this at the moment are just finding it difficult to price? both, about the uncertainty on how it's going to play out in the potential significance of the impact of overall macroeconomic growth and activity. it isn't something the bond market can really get a handle on at the moment. it's trading or in equity markets.

the bond market will watch this overview of what's moving in any signs that it's starting to think more fractious relationships that might impact on the macroeconomy factor into bond prices, but we are not there yet. manus: from a bond point of view haveckrock says china will weaker bond spreads. we're looking at the blowout in spread for corporate in china with a few more defaults in the first quarter. is this something that could grow, could spark a bond market reaction? again, that is not a to similar situation to the equity market and you talk about corporate bonds and individual borrowers and sectors that people can express a view on as it becomes clear how these terrorists are going to be applied in which sectors will suffer the most potentially. as it becomes comprehensive and serious enough to have a knock

on impact in the macroeconomy, and that even spreads and potential volatility and spread into government bond markets and expectations and so on. at this point there's not enough clarity and concerned that it will become a problem of that sort of magnitude, but that can certainly change. it trade war,get is that stagflation? will spill over of course, the direct issue seems to be between the u.s. and china for now but it will spill over to other economies weather in asia or elsewhere in the global economy. it is a watching game for the moment at the bond market. us, john.y with we've got another half hour.

we're going to talk about the filing of what's expected to be the world's biggest ipo. they are close to listing in hong kong. this is bloomberg. ♪

in london,s 6:30 am 2:30 p.m. in tokyo. pretty quite given that japanese equity markets are closed. dollar-yen is showing some direction, a bit of a weaker dollar all across the board following the fed decision. down .2% on dollar-yen. manus, you have some breaking news. manus: it's all about the chip market. pmi has rolled over but it's about the chip business. for the second quarter they're saying they seek full-year sales, 4%-7%.

that's the first guidance line they give. margins, and by the way, the adjusted earnings per share beat the highest of street.mates on the second quarter adjusted earnings came in at $.26 per share. the market had penciled in $.21 per share. there is the performance in the past three months. 70.1%, but it's all about the guidance. , theyo a certain extent both come in with good numbers. those are the top lines there. let's move seamlessly from semiconductors to coming in with adidas with 5.50 5 billion euros, a miss on the estimate of 5.60 2 billion euros.

we've also got the first quarter operating profit coming through and that is beating at 746 million euros, beating the street estimate of 710.7 million euros. adidas still sees 2018 sales up about 10% in the growth margin its -- it's 2018 outlook is confirmed as well. and we'll see news coming through on the continued u.s. share gain. the ceo of adidas joins bloomberg tv after 7:30 a.m. u.k. time. coming from they are. they started to do this deal in 2016. .- coming from bayer they're saying they made major progress in regard to the

monsanto acquisition. the market will focus on that, the cutoff time for doing that deal will be june 14. the phraseology that is used, age of progress on the monsanto acquisition. just think of everything that , they sold part of their business to basf. a comfortable be there and in ,erms of the adjusted ebitda 2.9 billion versus an estimate of two point seven 9 billion. of bayer joins the bloomberg team a little later on , just after 8:00 a.m.. the guidance will be down to low single-digit percentage in absolute terms.

let's get to the markets in focus. of what isick it off happening in asia. we did have china just turned positive in the green. australia also positive. for the most part, asian equities at the retreat, following the u.s. lower after the fed struck a less hawkish tone and many expected. the big takeaway was the word symmetric. ready tognaling their tolerate inflation at or below the 2% target. we also have those trade talks today that could possibly be weighing on the markets. michael jones telling bloomberg tv earlier the potential for trade war still weighs heavily on the market. following the fed meeting, the 10-year note was that unchanged, about 2.97%. bill gross saying this excitement of the treasury market having at or above yields at 3% level is behind us. of course we thought that

piercing to that level last week. us andng that's behind this is a great quote, he said it is hibernating bear market, which means the bear is awake, but it's not really growling. we had stockpile data out of the u.s. yesterday. at the start, u.s. stockpiles of the west coast are surging, the biggest jump since 1999, but don't expect this to weigh on the market. the west coast accounted for 80% of its increase and a report yesterday, so you expect to see some moves on the prices but where the west coast is geographically, there's no pipeline, no connection to the rest of the country. the market is unfazed by this massive data out of the united states. iran waivers deadline heading up on may 12. thes: let's talk about german real estate company, it

it's made an offer to buy the swedish property management company the tory apart. this while reporting a first-quarter profit of just under 130 million euros. ust's get to the cfo joins to discuss this. you are making a higher bid for victoria park, are you ready to go to battle for these assets? you're offering $1.1 billion. is that your top offer? stefan: yes, that will be our top offer. area vocally7% down to us. i'm sure this will not be a battle, it will be a discussion among professionals. nejra: good morning, what is the rationale behind making this offer?

is it because you're looking to expand more beyond germany? yes, we have expanded our territory to a more european context in one year. looking more detail at 3-4 markets which is sweden, the netherlands, france, and spain. this is from north to south, it's not an expression of appreciation for a single country. the market looks good, the regulatory environment, the building substance, it's all what we know from our core market as an opportunity. it was the first opportunity way arose in a palatable from a production point. manus: if we look at the german market itself, we are seeing yields getting compressed and pushed a little bit lower. it is still an attractive market to investors?

there is no bubble there, would you agree with that? is there a bubble in german property prices? stefan: there will always be pockets where you have small bubbles, whether in downtown munich. in principle, i totally agree with my colleague, there is no bubble. ,e are catching up in germany we have a supply and demand imbalance. inventories are still very solid. i would like to add one additional aspect to it companies like us are more than just bricks. we have a platform, a complete business concept behind it which of course enhances the value because we create superior castro there. manus: can i ask you to what extent grexit is something that market in germany? in other words, that potential movement of human capital and resource capital from the square-mile into germany.

is it anecdotal, or can you put reality behind it for us? us, it is anecdotal, for three reasons. his, france was already a tight market. the second aspect is that the capital that comes from london is normally not are target group , and that third aspect is we are german wide and we see this only as a spot. for us, brexit has no meaningful impact because we are a very domestic late. nejra: speaking of the domestic play, are there any german cities where you feel you should own more apartments, cities in germany? stefan: the top 30 high influx cities, so actually everywhere. it is a scalable business so we .ould love to have more assets

that's the pricing issue at the moment, how does it fit, because we're not writing the cycle, and therefore the 30th of cities in germany will grow over the next 25-40 years, and that's the investments we have to have. you concerned about the prospect for higher rates globally and in europe and what impact that might have on the property market? stefan: you will always see a short-term impact if you have something that is asset intensive and low yielding like real estate, even if it's very low risk. yes, we will have a normalization of the interest landscape. no, i'm not concerned, but i'm expecting that we will have temporary setbacks and maybe volatility in the stock, but companies will prepare for that and the market is getting more sophisticated. much, thenk you very

cfo of the know via. .- the cfo of vonovia just to reconfirm the headline is lowering, bayer its 2018 sales, the adjusted ebitda forecast. it was down to low single-digit percentage. that is the red headline coming through on bayer. nejra: let's turn to tech, and the chinese smart phone maker xiaomi will be the first major company to use hong kong's new rules for going public. joining us is alex webb, our bloomberg opinion columnist. let's start with the easy question, why hong kong? clearly plays into the

desires of the local authorities. the owners can retain control without necessarily owning the actual capital itself. between those factors, that's the main thing were looking at. the other consideration is that if they were to come to the u.s. first, it would be hard to get a piece of that high. -- a piece of that pie. ,anus: if we look at xiaomi it's amazing that the time just are ale warns that we services company now, but not so much about the hardware. how much are they looking to raise? i don't suppose there's going to be a heck of an appetite for this kind of offering. >> our sources indicate is going to be a 10 billion valuation. what's interesting is they say they're going to really curtail

their hardware profits and the gross margin will be restricted to 5%. that implies that building their installed base which allows in to push more services and those 40%-60%es are at a gross margin, depending on what they are. the big picture pushes them more toward the percent that samsung is able to do. nejra: let's switch to tesla, it was an interesting analysts call. is the cash burn. let's take a look at the chart as were talking to you. elon musk didn't do much to reassure analysts about this, did he? when can we expect the carmaker to start generating cash again? >> they say the second half of the year, but they've been saying all sorts of things for years. they've been pushing step back and back. , they say the

second half of this year, but you so what happened with the stock. just don't ask any boring questions. manus: just tell them they're asking boring questions is that peevish hater are just a defensive ceo? for, thank you so much being with us. long live the opinion column. you can browse the charts on bloomberg tv and you can use in for analytics yourself. up next, theresa may is outnumbered right brexiteers as cabinet colleagues reject her budget proposals. , our guest joins us to

discuss the company's earnings. this is bloomberg. ♪

it's 1:47 a.m. in new york, 9:48 in downtown to buy. s&p futures with the tiniest of gains. the stock markets are in need of a very good therapist. on .25% come put the smallest gain in either direction sense last august. markets, look at the the bond markets will come back to life later on. the cash markets are closed in asia. nejra: let's take a look at the equities. droppedee the s&p 500 less than 1% yesterday. the asian equities follow the u.s. lower and japan

is of course close. the hang seng seems to be leading their. some gains on the shanghai composite. let's get the business flash h withaidi. -- let's get the business flash with haidi. >> the xiaomi ipo with a value of $100 billion on the chinese company. revenue surge 67.5% in 2017 at a blistering clip of growth that will help it take on apple and samsung. tesla shares reversed in late cuting after ceo elon musk off and less pressing him about any the companies before he is cash burn. he said tesla would generate money in the second half is it wraps up production of the mass model market three. he dismissed questions about

capital assignment. .> were going to go to year 2 i'm sorry, these questions are so dry, they are killing me. firme political consulting at the heart of the facebook data manipulation scandal is shutting down. cambridge analytic a said it felt to begin insolvency proceedings in the u.k. citing numerous with accusations, saying is being vilified for practices that are not illegal ban widely accepted in advertising. a rush by the nation's lenders accelerates and the ceo of australia's fourth-largest lender spoke exclusively to bloomberg. >>'s business still is a good business. it's making well over $200

million annualized profit. ,t has really good platforms it's got 1200 advisers. i think it is still a good business that has good growth prospects. >> that is your bloomberg business flash. thank you so much. the u.k. prime minister is facing a crisis after administers demanded a break from the custom system, rejecting her plea for compromise. theresa may was outnumbered at a meeting of her brexit cabinet yesterday with ministers unable to agree on either of the customs option she had proposed. joining us is that of multi-asset investment at h isoders, and john wrait still with us. welcome to the program. askingd to start by whether you are finding it hard make portfolio decisions based on all these

brexit developments, because they are coming thick and fast. >> obviously we can't. we have to focus on the fundamental story. and to wait for bit more certainty on the outcome of the brexit. so it's important for the wait for ak to decision from the central bank of england. manus: a very good morning to you. i want you to have a look at this chart we are going to bring up. wesounds as if politically are going into a critical moment. theresa may sounds as if she cannot find consensus on the customs union. this has tabled moving over the past two weeks, the biggest drop since the flash crash. john, political risk it would rising, and is critically rising. john: yes, it does seem to be

intensifying. that's because the topics they are addressing are getting more serious. issues are coming to ahead is because were talking about the long-term relationship between the u.k. and the e.u., it's not just about the transitional period. the majority of the so-called brexit war cabinet want to move in the direction of a harder brexit option, essentially. and uncertained all of this is, if you had the same debate a week ago, it probably would have gone in the other direction on the basis she was more in favor of the customs partnership. this is a rapidly evolving situation. political risk is climbing. that's run that's one reason why sterling is coming off and one reason why the economy struggling in the u.k.. nejra: and expectations are

coming down on that may rate hike from the bank of england. us, the worst quarter gdp numbers are very weak, partly about fundamental weakness. we tied at all to lack of confidence, a lack of clarity, a lack of confidence in investing, and weakness of consumer confidence as well. we think the economy goes on struggling, we think the governor is right to back away from raising rates in may. we think there is more downside andd for economic momentum gilt yields should remain a safe haven. the quid pro quo of everything john has just said is that the equity market may look more appealing relative to the 250. you have to differentiate, were moving above the 200 day moving average.

>> a lot of exporters would benefit from a weaker sterling, and this is what we've seen since 2016. that's what has been happening recently. also let's bear in mind that economic growth has improved, thanks to sterling weakness as well. the ftse has been behind other equity indices in the us government. at a time when exporters are being helped a bit by the weakness of starting. nejra: you wanted to weigh in on what john was saying. >> we've seen a bit of economic weakness in the first quarter, but we've seen it in other places. we've seen it in indicators picking up after very strong

2017. it will be interesting to monetize the evolution of that. we would agree the u.k. is likely to underperform other regions. why would you invest massively until you know what's going to happen in a years time? so that is a bit of a track. pressure inflationary and the central bank has to balance that effectively. so we are probably going to see some reaction from central banks if the weakness is too much. manus: thank you very much, and john wraith. the former u.k. translator -- chancellor joins us at 9:30 u.k. time.

his thoughts on the brexit debate. nejra: and there's a new bloomberg.com. go in check it out online. this is bloomberg. ♪

manus: good morning from dubai. this is "bloomberg daybreak: europe." nejra: these are today's top stories. inflation isd said close to target but signaled no shift in the pace of monetary tightening. the chinese smartphone maker files for a ipo. it is expected to raise 10 billion dollars. reject the prime minister's plan and demand a clean break from the eu's customs union.

welcome to "bloomberg daybreak: europe." offer thethey chinese, what will the chinese offer them? we will discuss the impact on markets. the fed is talking about a symmetric moment for them, not once but twice. how hot will they let it run? we get european inflation data. you are seeing a slip across london, paris, and frankfurt. do not forget that asia -- there is that little bit o of lightness. you have the risk radar. nejra: we saw some losses on the

s&p 500 closing down point seven of 1%. asia followed u.s. equities lower. equity markets are closed but excluding japan we are seeing the msci pacific index. the hang seng is leading losses, down more than 1%. a weaker dollar in the session and a stronger dollar recently. it has gone beyond the 200 day average. tracking what happened at the end of the curve. we saw curve steepening. markets opening up around now. we have not had the treasury trading in japan. softness in crude and the dow is down. the fundamentals are taking over rather than that geopolitical jumped 1%, theti biggest jump in two weeks. we got that stop held -- a

stockpile data. belowis off today trading $68 a barrel. as treasuries start trading in europe, what are we seeing out of the bond futures? manus: we will get the bonds in a second. breaking news coming in from hermes. pencil than 1.3 7 billion. this is on a call with journalists. the ceo at no break in the upward trend for the luxury industry. you have your eye on this. they are $10,000 a bag. i will get you one for christmas. there will be no break in the upward trend of the luxury industry. they cannot keep up with surging that 10,000 dollar bags. this is a line from her mays. this is the aggressive multiple level we are seeing from demand and supply.

these are finite reduction. you have asked number of specialists putting these products together with such precision. that is where the squeeze costs. $10,000 tags, there is a squeeze in the market. we will talk about the bond markets. bond markets are opening up a couple of ticks. for thetrading in asia u.s. treasury market overnight. what you have is you are waiting for the futures. they are better bid in asia. the key part is the federal reserve use the word symmetric twice. that means they normally use it once but using it twice suggests that there is a propensity to allow inflation to run hot. there is the treasury shock in the form of $73 billion being raised. it does not have seen to -- seemed to shaken up the market. i like l grosses line. mild bearish town in

bond markets. 2.15, 3.2. we are meandering higher. there is a bear market. let's bring you one more breaking line. naming the next ceo. that is crossing the bloomberg in the past few minutes. coming up, we will he talking to the cfo after the company missed earnings but put their u.s. services business up for sale. we will be asking about that. let's get the bloomberg first word news. china said it will not succumb to what it calls stretch in the u.s. on trade. the comment from the senior government official coming hours before talks began with a delegation from the trump administration. chinese officials said beijing would not accept preconditions

such as abandoning its manufacturing ambitions or narrowing the trade gap by 100 billion dollars. u.s. president donald trump hinted that three americans held -- northamerican korean labor camps may win release. .hey have been held for years trump tweeted this, mike pompeo has been sworn in as u.s. secretary of state. the former cia director said america has "an unprecedented opportunity to change the course of history on the korean peninsula." he is replacing rex tillerson who was fired by trump in march. president trump has repaid his lawyer for $130,000 cash payment to adult film actress stormy

daniels. that is according to rudy giuliani. contradicting previous statements made by the president. rudy giuliani told sean hannity n fox news that: found -- that cohen [indiscernible] and trump repaid it. outnumberedmay was at a meeting of her inner cabinet. ministers unable to agree on either of the middle of the road options she had proposed. she may have as little as a week to get a compromise or face a choice between staying at the customs union or leaving without a deal. global news 24 hours a day on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. you can find more of the stories at top . let's check in on the markets. david: before i move to the equity markets just to give you

some sense of what is happening, a quick mention of the currencies. statement, andd remaining had been weaker against all of its g20 peers. commodities getting a lift from the weak dollar. that is how australia closed higher and the mining stocks will remain well bid. apart from australia and china, it is still a day of pain across equity markets. improvement in sentiment. we are down 1% in hong kong, that is a 400 or 500 pound -- point drop. indonesia,see in guests were pointing out it will be in the threat for two or three months. some names we have been tracking here. that is an earnings missed story

when you look at the indian airlines. that is a wrap of your markets. back to you. manus: thank you. officials are saying, they made certain to convey a sense of calm and continuity in their statement as they face inflation rising above the target of 2%. the u.s. central bank made sure not to signal any intentions to accelerate policy tightening. >> the statement is loud and clear. mission accomplished. we have reached full employment, inflation has hit 2%, we are safe to continue moving with our planned rate increases, and let me set you up a little bit. inflation is going to run hot in

a few months. , aif the fed moves higher june rate hike my do not expect to or three or four or five or six. i do not think they can do that. >> they are willing to overshoot on inflation even as they are raising rates and allowing unemployment to fall. we will get two for rate hikes this year. >> if anything the market reaction is very tepid. this is what the market expected. an upgrade to inflation characterization. the symmetric is that helps to clarify if you are hitting above or at 2, you can go higher. >> the economy seems to be on the track that they thought it they weren with tight markets, pretty good growth, and inflation coming up a little bit. they are going to watch it and they will keep on their schedule of freezing unless something

terrible happens. assessing the fed's words. there seem to be a benevolence in terms of the interpretation that the fed are going to be prepared to let it run slightly hot. it was not that aggressive in terms of pricing in. your assessment. guest: no big surprise. the most interesting part is the target.c that gives them a bit more flexibility. -- inflation will overshoot. it will not accelerate dramatically as a pace of tightening. it is a matter of credibility. they have a clear strategy. the strategy is paying off.

and they are following it accordingly. it was interesting to mention they removed some wording. fastest pace is slightly behind us and the reaction toward the first quarter data that we are a little bit weaker. nejra: we are familiar with this chart that we have been talking about this week. it took the attention of the meeting in terms of the inflation and the pc specifically. how hot is the fed likely to let inflation run because 2% is a target, not a feeling. guest: they will continue to tighten them a it is the pace that will matter. in line with what they have announced. most economists including ourselves have [indiscernible] on this year and next year the back of the tax deal and the

spending bill. it also means that inflation has been higher. as a result. see would be interesting to or follow is the impact on tariffs. going back on this trade war acause it could have stagflationary impact. it is the fed decision. to get a sense of where you are in the equity exposure. lots of views about this quarter's earnings, the uplift 20% in growth in earnings per share. one of our viewers sent this in. a sense from you in the conversation you're thank you for martin for this. how do you look at tech at the moment? our -- are we at a tipping point for tech? guest: it is interesting because

the tech sector and if you look lastrnings in general year, benefited from the weaker dollar. still very accommodative. -- the rally was justified. the pace may slow down. what would be more critical is if we are on the tech side more issues coming from the regulator , mergers being blocked, or simply a stronger precision of impact. dollar could some margins. something to bear in mind. compared to last year we are

less exposed to the equity market. still preferred to fixed income. nejra: stay with us for now. stay on set but let's -- they said rim it plans to sell its u.s. services business. the ceo is discussing second-quarter earnings. let me ask you about the size of the u.s. service business you are selling. any indication of the size? you for having me. we announced our full quarter results. was clearly a tough quarter. we announced changes to our portfolio which we announced to

acquisitions. and the intended disposal of our business in the u.s. million digit range, what we are looking at. manus: good morning, good to have you on the show. second-quarter profit misses targets, where is that weakness coming through in the business? you blamed fx and weaker business development. explain that to us. put some more meat on the bone on that. happy to., q2 was tough. the geographies were a mixed picture. we had growth with a percent. the euro was week with minus five in the americas. it is moving sideways. two reasons basically. .ne was continued headwinds justin this quarter. a stronger euro took 30 million

in profitability. the other reason was the automotive business was tough in the quarter. stocking -- destocki ng situation. manus: we spent weeks talking about weaker pmi's, soft data rolling over. from orders, back did the sentiment change? what happened? that customers continued to destock. europe was not strong compared to a year ago and we saw a week lighting fixture and controls market. the lighting industry had a tough quarter in europe. said you will make a decision on whether to sell or reform the segment by the

year-end. how are you leaning now, the market seems to be expecting a fail. ingo: if you could remember what we set a year ago that we would consider to take a strategic decision with our lighting fixture business, we have taken a first step in that direction with the announcement of disposing the u.s. assets create we're looking at the rest of that part of our business and we will take a decision as far as the rest is concerned by september. that is still in line with what we said. one year ago. i think the decision today to announce the u.s. business is the first step in that direction. squeeze more cost out of the business? this is what everyone will be talking about in terms of efficiencies. ingo: we can always look into more efficiencies. as part of the announcement of the results for the year, we announced we start discussions here with the labor unions on adjusting our footprint. in the manufacturing side and the overhead side of the

business to align better. manus: do you expect job cuts? we expect we will see still growth. in some areas we will see a reduction in employment and in new areas we are investing and growth. it is more of a transition than just job cuts. it is a transition from old to new technology that we have to navigate through. shares were down over 35%. you have a certain amount of control what they do but what are you hoping is going to turn that around for 2018 the most? we took a fairly big hit indeed. it was related to a weakening dollar which is affecting our numbers in a significant way. overall, we see some weakness in

the lighting markets globally which was echoed by other competitors that we have. we are at a point where we are going into the second half of our fiscal year and we see a better picture, some of our business has been better in the second quarter. we see some positive tail winds coming back to us. with the acquisitions we announced we are strengthening our portfolio and continue to ton of usrkets like a driving and smart desires -- devices. a transition you see in our portfolio but the longer-term growth is intact. we are still a market leader in most of those fields. the market will realize that it is still the case and what we saw in the second quarter is an adjustment largely in the supply chain of automotive and we will have to look the on that. manus: thank you very much. a frank response to the questions. -- let'st to haidi lun

get to haidi lun. haidi: filing for an initial public offering kicking off the process that is expected to raise 10 billion u.s. dollars. the ipo which could be the it twiceince alibaba 14 could confer a value of $100 million. 67.5%aid revenue surged at a blistering pace of growth that will help it take on apple and samsung. tesla shares reversed in late trading after elon musk cut off analysts pressing him about ending the cash [indiscernible] dismissedl, he questions about capital requirements. national australia bank is plenty to sell the unit as a rush by [indiscernible]

>> this business still is a good business. $200 millionover annual least -- annualized profit. it is still a good business. it has good growth prospects. haidi: that is your bloomberg business flash. thank you. let's get some final thoughts our guest. to take you to a charter for u.s. equities. the s&p 500 struggling for direction, trapped between 50 and the 200 day moving average. this despite the fact we had a good earnings season.

take directiones from here? why so range bound? some people say because we are in a cycle. your: it is interesting point on the earnings season. it is a good one. we talk about [indiscernible] year on year. what investors are focusing on is valuation. earnings derating. dollar hastly the strengthened and analysts are revising lower. their projections for exporters. if you believe that inflation is accelerating, it leads investors premium to own equities. at the the debate moment.

growth is fair. are we paying the right price? further precision of the u.s. dollar may also lead to a rotation we have not seen for a while. woulds like last year suffer from further dollar precision in terms of earnings revisions. maybe some european names that suffered last year would benefit. this is going to be interesting to follow, not only the impact of the fed, the impact of conditions, but also the leadership and the impact of change in the coming months. have: the other chart we is, i find this interesting. we spent a lot of time with the last ceo. tortured talking about soft data. this is world pmi. it is charming -- turning a

little bit higher. bet would the impact of that for the equity story, would it be a real engagement with some of those growth stocks again? a blip.t is what is more interesting is there is still an extension. we do not talk about any economic risk. we have seen the best of the extension in terms of marginal rates is probably slightly behind us. we have seen this weaker quarter in the first quarter, we have seen it in europe and with the numbers being announced yesterday. to weather related issues. if you look at initial production in the last quarter, the pace of growth has slightly slowed down. it does not mean that it is not

going to come back. is something to monitor. especially the time when there are talks on global trade that may affect investors' psychology. cycle in the late u.s.? guest: this is one of the longest cycles we have experienced in the last hundred years and that has been helped by central banks. by more recently fiscal policy. we probably close at the end of the cycle. see youteresting to need marginal growth to progress in order to maintain this cycle and investments to continue. about theis all marginal progression. thank you for being with us. we continue the conversation. on bloomberg radio.

guy: welcome to bloomberg markets. this is the european open. we are live in london. i am guy johnson. alongside matt miller in berlin. matt: european futures signaling a lower open after the fed said inflation close to target. the cash trading open is less than 30 minutes away. ♪ guy: lower sales targets for the rest of the fiscal year. we will go live for the ceos first interview of the day.