anna: good morning from london. manus: i live in dubai. this is "bloomberg: daybreak europe." these are today's top stories. anna: treasury secretary steven mnuchin begins to days of trading gauche asian with china's new head. and donald trump signals flexibility on the north korea summit after threatened to abandon talks. the st. louis fed president tells bloomberg it could be time rate hikehe projections. >> the whole ideas at your aiming the number great heights man in the future when you don't know what the data is going to

be is something we should get out of the business of doing. and it won'ta: risk investing more in iran unless it secures an it waiver. trying to salvage the nuclear accord. we are live in sofia. anna: good morning, this is "bloomberg: daybreak europe." through the risk radar and see where we are on assets this morning. drifting upwards in the asia concern about the treasury yield, 3.1% is where we are on u.s. treasury spirit what will that do to to the u.s. economy? though seems to be some of the concerns in the market. getting some comments from the chinese delegation in washington

, talking about increase contact with united states, just a early signs of those talks that we will focus on over the next couple of days. the u.s. 10-year at 3.1%, decoupling that from the dollar as we see the dollar heading lower as you go a little higher in the last 24 hours or so. we put in the pound as well because the pound is doing nicely, up on around .5% this morning. we seen various reports and the brexit kevin has agreed to some kind of path on the customs union or has thrown another option into the ring. whether it gets e.u. approval is another option. manus, what have you got? bomb --'ll take the bond team and carry it further forward. three point -- 30 of paper is driving high. 1% overasury bonds are

the rest of the world. is that enough to bring in the global buyers and cap out the bond yield moves? it could bring us into a much bigger and more progressive downtrend in terms of the bond market. , if this is what the treasuries are offering over the rest of the government bond yields out there around the world, having broken a bigger trend? 1987, "is coming the trendline was 2.94%. we have broken above that level. bonds are breaking out. the next resistance comes from the year 2000. the momentum in this bond market, are reset to take off, or are we set to's for thought? the conclusive answer to that question.

anna: that's talk about the u.s. futures, in mind of the conversation around with going on in bond markets. where little range bound at the start of trade seems to be the message. how much appetite for risk to those in the property sector have right now with the brexit timetable very much in focus? will speak to the british land ceo and have an exclusive conversation with ian sutcliffe. what is access to the right kind of talent look like operating in the housing sector? and the iran deal could be back on the table. that's get the bloomberg first word news update from juliette saly in singapore. u.s. lawmakers have press president xi as they try to fool back from a trade

conflict. talks with treasury secretary steve mnuchin. it's a second visit after an earlier round of meetings this month in beijing ended in discord. the white house has distanced itself from the hard-line north korean stance of donald trump's top security advisor. the comments press secretary sarah huckerby centers -- sanders, trying to force unilateral nuclear abandonment and threatening to walk away from next month summit. the president said north korea is not directly raised concerns about his plans meeting with kim jong-un. president trump: we haven't seen or heard anything. we will see what happens. juliette: rex tillerson has taken avail shot at president trump, warning that a grown crisis of ethics and integrity has put american democracy at risk. -- saying only

society able to pursue the truth and challenges. rex tillersonired by tweet in mid-march. but if early leaders seek to conceal the truth or we as people become accepting of alternative realities that are no longer grounded in fact, then we as american citizens are on the pathway to relinquishing our freedom. hong kong intervene to defend its currency peeper a second day after the city's dollar fell to the week end of band.ading the hong kong monetary authority bought the equivalent of 1.2 billion u.s. dollars of the local currency overnight. it is the third biggest intervention since the defense began last month, a lower rate since the u.s. has made the hong kong a target. powered by more than 2700 journalists at -- dallas an analyst more than 120 countries.

find more stories on the bloomberg at top . here in asia, stocks mostly how are -- mostly higher, propelling the i.t. space. the nikkei up by .7%, hong kong looking flat despite the fact that we've seen since it doing quite well. go straight in market is down by .5%. elsewhere were seeing the taiex a little bit weaker but overall a bit of a rally coming through in the regional index today. looking at the stocks in detail, credit suisse bucking the trend on tencent, cutting its price the report saying higher marketing costs will continue to eat into earnings. that maintain their outperform rating on the stock which is up by 5%. driving on the asx 200 as it pays out the dividend to shareholders.

taipei the worst performer when it looks at member rank returns, down around 10%, taking the two-day drop to around 7% on reports that one of its japanese competitors will start to supply some of its other major clients. a little bit of downturn coming through in that stock today. manus: thank you very much. over a billion users, a pretty staggering number to the tencent story. to u.s. lawmakers, they press 'se chinese president topographic to stop unfair trading practices. he's in washington to continue discussions between the two countries. good to see this morning. you are chief asia economics correspondent. this is one of those pivotal moments in the run up to discussions. where are we with the trade talks? who are the key players involved here? we understand bavaro is going to be involved again and from where i sit, that's a hawkish bid.

grexit certainly is hawkish. he's back in the room according to our colleagues in d.c.. remember the clock is ticking now for the imposition of those plant tariffs, both by the u.s. under retaliatory measures. will see if some headway can be made, some common ground can be staked out, some kind of deal can be reached whereby the trade war is headed all. analysts look to some kind of measure on the good side of things. china might make pledges to buy more u.s. made stuff and make pledges to open up the markets expect a't think they resolution to the broader structural concerns the u.s. has about china's economic development in a model for state sponsorship to promote a high-tech state-of-the-art leading economy. no one expects the issues to

resolve over the coming days. and they should be treated on an equal basis. we will watch how the conversation evolves. let's talk about something outs as been very dominant to u.s. happen asia relations and that's the north korean question. how has the u.s. responded since it got that threat to walk away from the talks? questionnorth korean is worth remembering that all caps himself once tweeted out, why would he punish china on trade when he needs them for north korea? it's a delicate time when you have this pushback on north trump that perhaps mr. doesn't want to go too hard on the china side and risk unsettling the progress that has been made so far. nonetheless, the message from the white house seems to be that the're not promoting

solution. the talks are expected to continue in singapore on june 12. the north korean nuclear story a vocald of itself issue but also a huge part of the broader trade story. that's why so interesting, you have the north korean tensions happening when china's top economic emissary is in washington for trade talks this week. anna: thank you very much, joining us there from hong kong. scott, very good to have you with us. good morning. i'm thinking big picture because a lot of details get lost in the trade conversation, negotiations row north korea. the big picture story for you, how optimistic are you about the growth story at the moment? we've showed universal expansion across expanding and developed markets.

how optimistic are you about this? scott: the consensus has caught up with the actual numbers and there have been some forward-looking forecasting your that have benefit dr. privet if you look at economic growth in growth., we see economic through 2019. it still strong, given the labor market and inflationary market that we have. still a level of growth consistent with the fed withdrawal at a measured pace. manus: scott, a very good morning to you. we've used a couple of different charts to show market risk quite low, and there's no real sense of asked. i just wonder from your perspective, are we too optimistic about trade with china, peace with north korea? our markets just a little bit too complacent? interesting, it's

particularly which market you're talking about. the fixed income market has not been that complacent over the last several months. to look at total returns across the fixed income space, they're quite negative broad market returns. the u.s. market down more than 2% in terms of total return and emerging markets in particular under some weakness. what i would say is there are some signs that the state of economic growth, the state of monetary policy withdrawal is a concern. concern toeen a equity investors because as we just discussed, it's primarily based on firm economic growth. for fixed income investors that are much more tied to the level of growth, the level of inflation and particular, monetary policy response, those markets of shown some weakness. so i would say there are signs of volatility, just not necessarily in some of the broader equities. little deeper into the fixed income world.

the deputy cio for fixed income it like rock stays with us. coming up on the show, it's getting old. so says the st. louis fed president. we'll bring you our exclusive conversation with him right here, that is next. our guest joins us at the: 30 p.m. u.k. time. it's been quite vocal, celebrating peripheral country achievements reform. this is bloomberg. ♪

>> you could easily go with 4% bonds. >> were growing 11% under the adidas brand. --s a very time for important time for the adidas brand. was a strong presence around the world. manus: a live shot of singapore, stocks up .25%. asian stocks are climbing because you have solid u.s. economic data.

tencent is absolutely on a tear, up 7%. for the moment, the equity markets remain unsettled by senior government bond yields reaching important levels. of above 3.11%. juliette saly is standing by with all the latest. totale is that it will not risk investing in iran unless they can secure a waiver. saying continuing to do business in the islamic republic would be too great a risk at the government has large operations in america and depends on the countries thanks for finance its operations. as result, it won't commit anywhere funds to advance project in which it took a controlling stake last year. it has emerged that u.s. regulators gave a senior executive at deutsche bank astern morning in march,

according to people with direct knowledge of the situation, they ,ere told to act more urgently described in his series of settlements over the past years. the revelations underscore the daunting behind the scene challenge facing the new ceo. representatives for deutsche bank and the new york fed declined to comment. tencent has jumped after delivering effort -- record project the top analyst estimates. china's largest social media and gaming company posted a faster than expected 61% jump in net income last quarter as growth on mobile bounced back. his latest result soon fears that outside spending would hammer its profitability. that's the bloomberg business flash. anna: thank you, juliette saly there in singapore. the st. louis fed presidents at the central banks got it should be more like that of former chairman alan greenspan, famous

for his deliberately opaque remarks. speaking in an exclusive invert -- excuse interview with bloomberg. >> you don't what the data is going to be. it something we should get out of the business of doing. close to neutral today, it we start going up from here, we will get into restrictive territory which will put down the pressure on inflation. do we really want to do that when inflation expectations are hovering below the target for the next five years? a bearishke it as signal for the u.s. economy because it means the market has a different view of the future and what the fed has. they think where any danger right now sitting here, the yield curve has a nice, a part slope, and that's fine. it's not too far off the average slope over the last 30 years or something, but i would be concerned that we not march into an inversion without our eyes

being wide-open. manus: conversation there with the st. louis fed president, james bullard, speaking exclusively to kathleen hays. when it comes to it, the world has changed, and it's about forward guidance. we should be more like greenspan in our policy, relishing the delivered ok city. scott, have we been over for guidance? towe need a greenspanian era emerge? i think it's an important part of the communication strategy the fed has with the markets, as witnessed by their ability to raise rates over the last two years. it suggests that the good model going forward. i do think the terminal rate is a relevant part of the

conversation for bond investors and equity investors. the terminal rate now sits just below 3%. what we suggest is as we move through time and as the economic picture continues to develop, the terminal rate could move .igher, above 3% as much as 50-75 basis points over time and that will be relative input for investors as we go through the next couple of quarters. anna: so when we look at the replicating what the fed is forecasting, do you think this is just a distraction from where you think we should be focused, which is the terminal rate? we should be focused further along the curve. i think it's less wereant in terms of where going in the longer run. what is the terminal rate going to be and how is the market going to adjust? comments about the yield curve

inversion i think are important but also because you have to realize the dynamic here. if get a number of rate hikes to flatten, that's normal for this monetary policy withdrawal. it could suggest economic activity will fall all. for us, it's really about looking forward to where the terminal rate goes, the implications for the dollar and emerging markets, that stuff is incredibly important. manus: you said you need to review where the terminal rate might be. where do you see that potentially being now, given that boston doesn't want the curve to invert? what does that mean for you for the terminal rate? would suggest the terminal rate should be higher than where it is now. higherest it should be as it moved to stronger economic

development. we will not get that much of a change in the near term. obviously the market has been reacting to a series of fed rate hikes, with front in rates around 2.5% in the u.s. investors every considered what the hurdle rate is, so what is the return they need on other types of assets given that rates have moved up so much? that's why we've seen weakness in emerging markets, for example. investors are expecting a higher return. factors into our view because as the terminal rate increases, investors will onand higher returns non-risk-free assets as we go through time. that's why the u.s. has had a negative return, it's a pretty big move considering the recent history of fixed income returns. mind, and you did flight that earlier before we went to the break.

this, this is ten-year rates relative to their peers around the world. you're getting 1% extra at the moment. will that spread continue to widen? do you think we still have mileage in the divergence at play here? i think for international investors looking at that chart, the cost of currency hedge back to your home currency, euro investors, for example, you have to take that into consideration. as a sign of interest rate differentials, the u.s. has sold off much more than european counterpart, particularly the eurozone and the u.k. market. opportunity, ian believe that european rates, pan-european rates, u.k. rates, eastern europe rates, will start to converge toward treasury rates as the economic activity in europe or outside of the u.s.

gets more focused on investors. so you see the rest of the world catching up with the u.s.. where does that leave you in the fx market? we saw the dollar recovering to the fed rate hike story. where do you see the dollar from here? dollarwe've had a strong over the last few quarters, most recently against the british pound. i would look for emerging markets to be an interesting opportunity. a weaker dollar relative to emerging markets because of the thetility we've had and valuations and also the economic growth story continues to be positive. scott.hank you so much, lots more to talk about, including e.u. leaders buying into the fear in bulgaria. will your be able to come up

with a way to salvage the iran nuclear deal? also on the table, conversations around tariffs with the united states or applied by the united states. this is bloomberg. ♪

manus: a live shot of the emperor's palace in tokyo. if seen a small rate from the yen, it snapped a three-game losing streak as investors become a little more cautious over the u.s. talks with china. you would hardly call that a dramatic move in dollar yen. this is what we should be watching for, the day will be interesting from a european perspective, isn't it? anna: leaders are meeting in sofia, bulgaria, to discuss security, migration, and we will be live there shortly. and the iran accord, can they salvage it?

does it matter what the european union says on this stuff or is it being set by the united states on that one? totale would stop there iranian investment if they came in to be too high. data,lly understand the we've had walmart earnings come in before the bell. how robust are those earnings? we will pick up on what some of our guests a little bit later on. anna: and will continue to talk central banking of course. mexico central bank, coming up later on during the trading day. here is an marine. grexit positive momentum from the u.s. session is only being carried through some markets this morning. the japanese nikkei up .7% but markets down in china and you can see the hang seng in

australia, still some concerns about global trade, mixed signals from the trump administration on what's going to happen on the chinese trade talks and the market keep in a close eye on sudden uncertainty about the u.s.-north korea summit. one of the most read stories on the terminal, a harvard professor saying she's concerned about emerging markets right now. rising global interest rates as well as stalling growth. brazil toarket force ignore its own guidance yesterday. unchanged at 6.5%. move only forecast by two economist out of 39. so what a surprise yesterday, the bank broke there has been a change in the rise of inflation. i want to take a look at what's happening with brazilian riau. the lowest in two years, but analysts saying the currency is set to strengthen after that

decision. we are keeping a close eye on that emerging market as well as indonesia. on the rise ahead of the central bank policy decision that's due out later. the majority of economists are expecting high, the first in 3.5 years for indonesia. credit agricole put that as a 70% chance saying the bank needs to hike due to slow down in capital outflows. there are doubts as to whether the rate increase will be rupee rout.halt the it's really a story this morning. e.u. leaders are presenting a united front after the united states threatened to scuttle the iran nuclear deal. leaders are meeting at a summit. joining us is richard bravo, good to have you with us. options does the e.u.

hat in the face of u.s. sanctions on iran? i'm interested to know -- what bible options do the e.u. have? knowing any european companies will just make up their own mind anyway. the e.u. atgoal of the summit will be to maintain unity and show project unity to the u.s. and the rest of the world in these talks. one of the options being discussed for the so-called blocking statutes which would shield european companies from any secondary sanctions the u.s. might impose on them. the last time the e.u. imposed these kinds of blocking statutes was back in 1996. it is not something that is used very frequently, but it's on the table for discussion and it will come up today with the leaders. manus: in terms of the company

names, the news has been about totale, and the french major oil innt plans to seek a waiver regard to one of its big projects down there. they will stop investing in iran if they see that the sanctions risks are too high for them. , one oft of says it all those veterans ceos that lifted sanctions, if he is faltering, that really does shake the foundation of anybody else pushing along with it, doesn't it? >> that's really where the rubber meets the road here. if you have a company who has the majority of their financial transactions carried out by u.s. banks, and they will be loath to put that at risk, just to keep operations going with iran. but the e.u. has said it will do everything they can to shield

european companies from any secondary sanctions being imposed on them. whether that will make a difference to companies like totale remains to be seen. it's something that's at the forefront of the leaders mainz today and something they will discuss. manus: let's see what kind of response we get. richard bravo joining us from sofia, bulgaria. scott, when we look at the european story, all eyes are squarely on italy to see what happens, yesterday the news was about them asking for quarter trillion euros of debt relief. overnight were stepping to the middle ground, not asking for that, talking less about equity for europe. suddenly it's back. how do you look at the italian

job at the moment? the things that surprised us was how muted the reaction was to result of the italian election, which we've ingested put populists charge in italy, working toward that. obviously a manifesto that was leaked over the course of last night has some pretty radical stuff which has been walked back by the parties to some degree. it has welcomed investors to the sensitivity around markets that are more fragile than others. we look at emerging markets, for example. we seen the most this location in countries like argentina and turkey, where the fundamental situation is more tenuous. they obviously have a big debt burden which they need investors to continue to roll over. the level of interest rates a fiscalpart of the

situation of the country. when you get political parties that suggest more spending, tax cuts, thatrsal tax awakens investors attention. interestingly, if we look at the chart you have on italian spreads, they have widened about 40 basis points since the lows, but they are still tighter on the year. so we have to take a deep breath and realize stake still outperformed over the course of a year. if there is investor concern about italy, we could see spreads go even wider. anna: you see that spike up at the far side of that chart and i want to ask what dictates that now. there has been some nervousness building with these negotiations ongoing. yesterday we saw a new dynamic and it all seems to be around they could ask for debt to be written off.

is it all about that, or if we see them with ambitious spending plans are an unknown choice the prime minister, does any of that get into the mix, or is it just yesterday story about the role of the ecb? scott: a couple of things are going on. ,ersus the italian story there's an idiosyncratic story that the government has changed and the policies are more radical. bus,like waiting for the the longer you wait, the closer it comes. we are waiting for the ecb policy to shift, and that is getting closer. he comes back to the conversation about the movement in the u.s. market. investors are demanding more from their investments. when you get an issue that surprises investors, that's more fundamental in nature, and it's a pretty big field for italy. they are less forgiving and they demand a higher rate of return. in the situation where supply dynamics in italy, there's a lot

of bonds coming to the market. the ecb is buying less than the ball last year in aggregate. all of a sudden that can awaken investors that they should get more of a return. it's hard to say what was a tipping point at which factor is important, but the confluence of all those factors came together yesterday. the kind of market you saw -- movie saw yesterday, earlier you said the rising tide lifts all boats. you're talking about the u.s. market moving higher in terms of yield and that would drive it. this is still in the periphery, where is the biggest movement going to be to meet the u.s. mood? scott: that's a very good

question. in terms of peripheral markets, becauseittle tricky there has been widening of peripheral spreads. because rates really are not going to rise until 2019 is the earliest. i think the answer is the u.k. gilt market. we have an added kicker their of the brexit negotiations which are ongoing. plus relatively strong economic fundamentals and monetary policy that has yet to adjust. look at u.k. gilt spreads which are substantially under treasuries, i would suggest that of the european interest of the major markets, the u.k. gilt market is most susceptible to yield rises into treasury yields. we will talk more about the u.k. shortly. finishing our conversation around the euros, some of the data of late has been on the weak side.

use whatever word you want to describe it, but there's been a little bit of a tempering up the growth story that perhaps was inevitable. do you think we are back to where we were q4 last year by the time we get through the bad weather and the flu season? scott: much of the slowdown was in projected economic activity. three things were looking at our oil prices that moved higher, the euro-weaker over the last several weeks, but lasix, inflation expectations in europe have also gone up. there has been a rapid rise inflation over the last couple of weeks. in our mind, if you look at the data plus the more fundamental story around germany, we remain relatively positive on european economic growth. anna: scott stays with us on the program. join the conversation on

bloomberg tv. charts browse all the and use them in your own analysis should you wish. coming up -- manus: christian first tells bloomberg she would like to see a quicker path to higher rates. we will bring you that interview. and later we have the numbers, conversation with the ceo joins us at 7:00 a.m.. this is bloomberg. ♪

a.m. in dubai.6 saly int to juliette our singapore studio with the latest business flash. juliette: total has said it will

not risk investing in iran following the return of u.s. sanctions unless it can secure a waiver. the french energy giant said that continuing to do business in the islamic republic be to greater risk that the company has large operations in america and depends on the country's banks financing its operations. as a result, it won't commit any more funds to the project in which it took a controlling stake last year. it has emerged that u.s. regulators gave senior executives at deutsche bank astern morning in march, according to people with direct knowledge of the situation. they were told to act more urgently to fix losses described in a series of settlements with the federal reserve over the past two years. the revelations underscore the daunting behind the scenes challenge facing the new ceo. representatives declined to comment. agreed torberg has negotiate a european parliament

-- to go to do european parliament. a closed-door section could be as early as next week every last month, lawmakers called on zuckerberg to explain how the personal data of millions of facebook users ended up in the hands of british consulting firm cambridge analytical. crowdorsey has told her of cryptocurrency and easiest that he is all on bitcoin as a currency of the future. he made the comments at a conference in new york city. >> the biggest thing i worry about as the company is, there is so much amazingness in the openness of the community and i want to make sure that nothing from a corporate standpoint ever threatens us, and what can we do to help the community, to help the open source nature of the work. and that is your bloomberg business flash. manus: a quick correction, i got

the time zones wrong. i'm way ahead of the curve. take it away. 12 minutes ahead of yourself. let's talk about breaking news in the shipping sector, the revenue number looks to be ahead , they're sticking with their guidance after the comes in atr ebitda just under $669 million, different from the estimate. we would be further into that. $3 reporting a loss of billion. so there's something a little more detail going on there. it doesn't seem the analysts were wrong at the top line, but something happening a little further down. this is a company in transition. the world's largest shipping

in the second year of a historic transformation that saw them divest the energy unit to focus essentially on transport. we will keep a look at that one. tells us something about the global shipping and trade story. economic data towered over the bank of england's latest meeting , leading to a hold an interest rates. one former policymakers that she would have focused differently. current professor of global economics at m.i.t., she joined kathleen hays in st. louis. i left, had been pushing to start the process of removing stimulus, raising rates a bit sooner than the rest of the committee. soon after i left, there was a vote to raise rates. i wouldn't been comfortable with that, i would've accepted the data that came in and likely given what i've seen happen over the last nine months, i probably would've been voting to raise

interest rates at the beginning of this year. before the meeting that just occurred. in the last meeting was difficult, there was a slowdown in economic growth. i understand my people were hesitant to raise rates as many indicated they might. if i had already been voting for higher rates at that time, and something that was necessary to remove monetary stimulus. i probably would've stuck by that vote because it looks like a good part of the slowdown is temporary. it should not persist. i don't believe you should be changing rates month by month based on what can be temporary effects. i would stick by what it been my longer-term consistent message. the deputy cio at black rock is with us. scott, basically, is she right? do we need a rate hike in august

or are these former members utterly divorced from reality? that itut the direction sends the market in and since the consumer in. scott: i think you are exactly right. it's not about the month to month, quarter to quarter move. it's about the overall direction of rates, which will be higher. mark carneyest that and bank reacted to the softer economic news they were presented with an they will be cautious about raising rates. that is what the market expects. they dramatically change the pricing of the rate hike in may from basically 85% to almost zero. the meeting itself was not much of an event. it was really about the markets movement into the meeting. if we take a longer look at the direction of rates in the u.k. of the british pound, the economic fundamentals the nikkei will continue to drive those markets more generally, divorcing ourselves from the

quarter to quarter potential bank policy movement. i would suggest u.k. rates which 1.5% now are about relative to the treasury rate of around 3.1%, those rates should rise into treasury rates over the next several quarters. the u.k. has outperformed the u.s. treasury market terms of the selloff, we've had an increase in u.s. treasuries on the year and a 30 basis point increase over the course of the year. i would suggest the gap will close over the next several orders. the british pound has reacted to a stronger dollar and is not really outperformed or underperformed a basket of other currencies. the brexit situation is incredibly relevant. taking breaks it out for a moment, u.k. rates look the most susceptible. that rate on trajectory, you're confident we will see higher interest rates in the bank of england, because

some have been reevaluating whether we see higher rates this year or even next year. others say we will get a rate hike in august. scott: look at the state of the u.k. economy. the brexit uncertainty is a huge part of that. if you try to take out and assume a path of brexit that is somewhat reliable, the economic situation and inflationary profile would suggest higher rates. i'm not in the camp of lower rates. unreliable.he word at the longo look dated auction that came to the market yesterday and explain this. six times over scribe. you would say it's because institutions are awarded this paper, so i shouldn't read too much into the demand for long

dated paper perhaps underpricing inflation in the u.k.? scott: when you look at long dated gold issuance, given that we've had rates increase over the year in the u.k., there is going to be a lot of demand from long-term institutional investors for an issuance of that maturity. therefore, those investors will happily take down the issuance from the u.k.. that being said, other investors that want to be involved in that realize they will have to put in bigger orders because there allocation process will be rather tough. they will not get their full allocation of what they want to buy. in some respects, there are two things, it signals there was a strong bid for longer dated u.k. rates from institutional long-term pension fund investors. a bid fromlso shorter-term investors looking to capitalize on that demand, which then feeds into itself to

get this gigantic order book. anna: i have this chart that shows, with all that selling off in the end of april because of the data in the policy andements from mark carney that change the market view on rate. but now brexit seems to be joining the pound a little more. pound headed? , poundin the near term specific, i remain relatively positive on the brexit negotiations. i think the political situation is evolving, but at the end of the day, the government realizes how important it is to solve the situation. there are we are positive on the pound. , call we will take that on the pound and a called on the gilt market.

we have a cracking lineup for the next 30 minutes. ♪ retail.

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these are today's top stories. mnuchin signals possibility. .nd the 10 year yield telling bloomberg there is no danger yet. >> we are close to neutral

today. if we go up from here we will it into restrictive territory which pressure onnward inflation. do we want to do that when expectations are hovering below our target for the next five years? karen -- the energy giant [indiscernible] we are live in sofia. a very warm welcome to you. we are live in dubai and london. button.urities hit the their set of numbers, underlying profit 380 million pounds, the underlying earnings per share 37.4 eating the estimate.

the dividend per share of 30.08 and a pretax profit of 501 million pounds for british land. lovely story on the bloomberg. there talking about performance and many would say the british land where raver than their coverts atlantic your days in terms of what they did. we will have a conversation. what is the future outlook for this part of the world in the u.k. terms of property developments. you have yields above 3.1%. that has not eviscerated any of the equity markets yet. 3.1% on 10 year government bond yields. you are seeing sterling has managed to turn itself around. we will talk more about that. the political situation, is there a backstop on the customs union? equities are lower.

is futures are down and that we need to see an opening sweep on that. you have paris just opening now, up by 1/8 of 1%. we have breaking news across the terminal. anna: a couple of sectors, we will start with the gaming sector. the government has cut the state to two pounds. this is something that has been talked about for many years. campaigners have been trying to reduce the stake from 100 pounds. suggest howny will with this hit the treasury because they were making some money out of that machine gaming so it is a substantial reduction. we will see how they open up. this is not great news if you are in the gaming industry, i imagine. let's talk about this business.

refinancing, that is being talked about in the weekend price -- press. mark newton jones has agreed to return as the ceo. a management change at that business. let's talk about the risk radar and bring everybody up to speed with what is going on in the asian session. we are making some small gains, drifting gently higher on the asian equity session. the trade conversation with the chinese delegation over in washington is one of those things. and nowd about 3% through .1%. that is another factor and we put the pound in for you. u.s. of 1% against the dollar. part of the conversation is the u.k. could as it backs off solutions to avoid a hard order.

that could be something of interest. we will keep in eye on the pound and how it trades. yesterday,d story how is it shaking up this morning? manus: let's do a quick line on royal mail. 15.3 pence.f there is a decline in terms of letter volume decline. that is at the higher end of the range. they remain committed to a progressive dividend policy. total net cash investment around half a billion pounds. it is all about the letters. let's have a look at the bond market. 10-year government bonds breaks at 2.1%. this is the critical level for jeffrey gunn lot -- gun like. the deputy cio just with you and i talking about the rise in yields that you will see for the

bonds and the dtp's. what you're seeing here, this is your btp. a little bit of a turnaround this morning as the language overnight seems to have changed coming from the protagonists seeking to lead italy. they are not talking about pulling out of the euro and not asking for forgiveness of a quarter of a billion euros' worth of debt. you're seeing a little bit of relief. those were the two stories that hit the btp. u.s. treasuries, you have seen a drop in futures price, the rising yield. that is the critical issue and here we are, you will see a rising tide in terms of european yields coming closer to the u.s., that is a blackrock call in the past hour on bloomberg. let's get to juliette saly, she has your first word news. juliette: thank you. u.s. lawmakers have pressed the

economic advisor in china to [indiscernible] vice premier is in washington for talks with secretary steven mnuchin. it is his second visit after an meetings endedf in discord. the white house has distanced itself from the hardliner north korean stance of donald trump's top surgery advisor. -- security advisor. it is written to walk away from next month's summit. the president said north korea has not directly raised concerns d meeting.planne >> we have not seen anything, we will see what happens. rex tillerson has taken a veiled shot at president trump warning that a growing crisis of ethics and integrity

has put american democracy at risk. he criticized assaults on facts that he said would lead to a loss of freedom and added that only society is it will to pursue the truth and challenge alternative realities can truly be free. trump philip -- fired tillerson by tweet in march. italy is waiting for its nest -- next government. theng his party and anti-immigrant league are putting that finishing touches on their policy program. more than two months after italy's inconclusive election on march 4, the two sides have lunch or deadlines set by the president. 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 stories on the bloomberg at top . we are off the highs of the day but the regional index slightly higher up like .1 of 1%.

ed. i.t. space buoy japan closing lower. positive data in evening up used to investor sentiment. we have seen a switch out of chinese stocks in late trade. and westpac going ex dividend weighing on the asx 200. we had a slight pickup in unemployment for the month of april. and terms of stocks we are watching, tencent in focus, it has been up as much as 7% in the hong kong session, up 5%. an earnings report that came through after the bell. and falling in sydney closing 6%. it was down 13% at one point. the ceo defending the business model in china despite reports that there is a glut of wine in china. we have seen a rise in consumer stocks in malaysia as expected after malaysia revised their rate to zero as promised during

the election campaign. anna: thank you. yous so excited to tell about the grocery industry. they have signed a partnership with kroger and technology will be used in the u.s. exclusively. kroger will take 5% stake as a result of this and you are thinking of other things. manus: you love tying it together with those advertising numbers. let's talk about the bond market. you have 30 year paper, i mentioned to you at the top of the screen. has made the point that this is the most important thing. volumes and treasuries [indiscernible]

and the 10 year government bond yield. we have broken the 50 quarter average. you have to go back to 1987 to understand the living averages on bonds. we have broken out of the downtrend. the next is 2.2%. the next stop point for bond markets 3.51% but the steadier ground, we will talk about building. anna: let's talk about investment in property. joining us now, the ceo of british land. ats coming in ahead of estimates. some have contrasted you and your attitude to speculative development with others in the sector, saying that you have taken more risk. are you happy with the risks you have taken and will you continue to assess risk in that way? chris: we were prepared way back in 2010, we took a bold move in

terms of investment. that worked very well for us and this time again, we have seen demand for our buildings where we developed and it felt sensible to us on a controlled risk basis to build new offices and to redevelop offices. what we see is good take up in our space. we do something like one million square feet. am aput it in perspective four times more than we did the previous year. manus: if we look at some of your portfolio, you have got committing to keep stores open and build the brand but if we look at their might be some opportunities in terms of redevelopment stores that closed, it may need to be redevelopment. is this an opportunity, how do you look at this kind of data in terms of your overall portfolio?

years over the last two we have reduced our exposure to stores, we took the view that it would end up -- there were concerns that the supermarkets would not need as much space. position a decent thanks to our actions of having less exposure. there will be some opportunities. .e have sold a few sites those have been related to housing. that has worked well and continues the story about making sure the country has enough housing available. anna: what about department stores and that kind of thing, some seem to be more in trouble than others but this is the sector that is challenged, the department stores and that kind of offering. been reducing our

exposure to standalone stores whether they be supermarkets are things like that. we still have exposure. we start from a position where we are physically full. people wanting to reduce their states we are usually in a good position to put somebody else in that position. isare also recognizing it tough out there for the retailers and we have to work with them to get the optimal results. manus: to what extent if at all around your board is brexit precluding you come a halting you, stopping you, or slowing you down from major investment decisions in the u.k.? chris: the whole conversation about brexit inevitably is taking a lot of time at the board table. it slowed down some of the decisions of people who want to take space with us. what has been consistently the case is there are plenty of businesses in the u.k. who continue to want to be locally

or globally headquartered. that demand for space has worked well for us. in terms of our decision-making, of course exit has been a consideration. we have taken the view that we would be driven by what our customers are saying and our customers have continued to make decisions around wanting high quality space in and around london. anna: you submitted plans, a big new project for you. how optimistic are you around this project and as a gauge of that optimism, are you willing to start work if you do not have tenants in place, for example? chris: it will be a while. while.ecisions take a it can be longer than a year. we would start with the position where we are enthusiastic about the project area we will take a decision at the time when we can go. there is a chance that we would go. the other thing is we have been

pleased by the level of interest with conversations we are having and people saying what we're planning to do. manus: i love the story we wrote about your company and developing on the hipster express. that has gotten many connotations but one of them is the way we work my the way in which we use and share space. you have your business story which is about shared working space. if i survive another five years, if you and i get together in five years' time and i say to you, she is laughing, if we get together and i say what story in your business? developed a story and developing it quite likely. we think people are changing the way they work. we are focusing on small companies as well as big companies and big companies like an extra degree of flexibility. in terms of our business, i

could see it being 10% of our office ace in the next two years. is a structural change and another one is around housing. are the opportunities and what are the threats if we were to see a change in government and the u.k.? chris: there is good structural demand. as housing has got more expensive there are people who will need to rent and a lot of people who will choose to rent for all sorts of reasons. we think that structural increasing demand provided increasingly by professional landlords, should be a good thing and we believe that will be a sector for us. we have opportunities in terms of places like canada water where we have land already. we see that as becoming a bigger part of our business and he comes back to what manus said. the way that people are working and living is changing and that is a sense of commingling so

that mixed-use aspect of our business is very important. manus: can i ask you briefly, anna and i have spent our lives talking about bonds and it is the bloomberg way. we talk about ounce all the time . yours are rising. how much of a challenge is that in terms of the yield proposition you put in front of investors? is a great point. interest rates in the u.k. have been low for a long time. that is unequivocally been a factor in the health of commercial real estate in this country over the last five to seven years. what we still see is quite a big gap between where interest rates are and where yields are. our view is that gives you a big cushion before property yields have to go up and we have seen a lot of international interest in yields and real estate in london in particular but the u.k. more generally and more typically, us witheople comparing

yields around the world and it looks like good value. anna: thank you very much, chris grigg. we continue to focus on properties but of a different kind. we have an exclusive interview coming up next. this is bloomberg. ♪

anna: 7:32 a.m. in london. 27 -- 37 minutes until the start of the cash open. fire under the pound up by .4 of 1%. the customs union story ongoing. that seems to be the latest but on the bond markets? manus: absolutely.

we have arrived. that is the highest level since 2015. as a pivotted this point. do we continue? there is $11 billion worth of inflation. do you want to buy some inflation? they are wrapping by 30 pips and we are getting the opening sweeps here, we have a government formation in italy. stepping back from calling for debt forgiveness. there is still the markets are adjusting to some of the risk in italy. let's talk about countryside. reporting their first half your revenue of under 400 million pounds, this is a property management company. it says it remains confident on delivering expectations for 2018 and the medium term. joining us is the ceo of countryside properties. good to see you this morning. where does the confidence come

from because it depends on what ceo you speak to and frexit is front and center but you remain confident on delivering in your full-year views. what -- why are you so confident? guest: good morning. we are delighted with the results we have put out. there are some conflicting messages coming back from the housebuilding sector. we chose a strategy now that we have been implementing for the past for years which was to focus on next 10 year delivery of properties. that means providing private for and privateies rented properties and providing a affordable homes. that has become the predominant part of our business and that is allowing us to grow quickly, allowing us to develop the sides and importantly, allowing us to generate the profits and cash from our business. anna: have you seen house prices, there is evidence of falling prices in london.

ian: one of the strategic decisions was to price our properties to make sure we are affordable. nearly everything we sell, 97% is to owner occupiers and 63% to first-time buyers. it is essentially make those properties affordable. we have seen an underlying price growth of around 3%. that is stronger in the regional cities. london has slowed somewhat that we do not have a great exposure to central london. manus: i need northern ireland to hold up, i will worry about the rest of the u.k. later. the government is reconsidering, what is your view? ian: they are doing the job it is intended to do my it has in the five years it has been going. it is an essential part of the mix. going back to our strategy,

private sales represent less than half of the completions we make. while it is important for that sector overall, delivering affordable housing and private rent is equally important. ask about access to the labor you need with brexit looming? theern europeans working in u.k., the number has fallen sharply. is that is something that is proving me -- difficult to manage? ian: you are absolutely right. the limiting factor is people. we have been taking steps to mitigate that. first by retaining the people we have got and developing through apprentices and graduates. we are announcing a major investment into modular off-site held and this would allow us to build complete world sections so speeding up delivery and reducing. anna: thank you. we will be speaking to the

outgoing european central bank vice president. that is 2:30 p.m. u.k. time. manus: it is indeed. keep an eye on the 30 year government bond yields right here on bloomberg. ♪ mom you called?

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welcome to bloomberg markets. this is the european open. we are live in london. i am guy johnson. my coanchor matt miller off today. the cash trade less than 30 minutes away. 3.1 and climbing. treasury yields move higher. jim bullard tells bloomberg the fomc does not have the push -- to push so aggressively or the curve will invert. leaders agree to stick with the iran deal.