anna: good morning from a bloomberg's at in the city of london. i am anna edwards. manus: this is "bloomberg daybreak: europe." and these are today's top stories. anna: em emergency. turkeys a central bank raises rates. near-term hawks. the fed all the confirms a june rate hike. increases would remain steady and treasury yields a retreat. 2.0. tarifs carmakers across asia decline.

anna: good morning, everybody. it is 6:00 here in london. this is "bloomberg daybreak: europe." we have to talk about this car story that we mentioned in our headline. it is certainly something that is weighing on the asian equity market session. sia pacific down .29%. at that to the strength in the end we are seeing a retreat in risk assets. we will watch those european carmakers as they open up in a couple of hours of time. angela merkel, the german chancellor is speaking over in china as we speak. let's have a quick look at the euro because we have a new government in waiting in italy. comte has been confirmed.

we watch crucially for his key appointments. how much room is there for this new administration in italy to continue to sleep the market? comte has been warned about the market reaction. the euro against the dollar is pretty steady. -- on theeld asthm move. we saw a little bit of steepening coming through in the five 30's yesterday. it seems that the fed is not in too much of a rush. manus: of course, the question is is that a dubbish message from the fed? what happened over the summer was a warning. a warning to the markets. kish central tur bank. they have stepped in and raised their basis points.

this is the shape of what is going on. this is the extra spread of turkey over there em cohorts. you have not seen this since 2003. you are looking at emerging markets right now almost as if it was 1997. you have to go all the way back to 2003 when this spread had blown out to that level. the question to yourself is this. whether you want to step into the jaws of this market right now in emerging markets, because back in 2003, the market was applauding erdogan. this was the first year of his premiership sweeping cuts and keeping the ins happy. burn --k, he came to bloomberg and, told the markets i am in charge i am the one that is going to dictate what is happening with monetary policy. he has been superseded. has to been capitulated?

these are the doubting thomas is in the erdogan trade. is ironic that he came to bloomberg and busted his own history and a very different way. you have a reprieve in the market. will it last? who can defy a central bank? that is my question for the market. anna: a lot of people asking just how much of of what happened in tart -- turkey happens in turkey? we will talk about more of that in just a moment. this is what the futures look like right now. yesterday, we side of a rally in u.s. equities toward the latter part of the day because the fed was seen in no hurry to hike interest rates. by coming risk of through a nation. was have a look at what is happening up on the program. we have a busy show for you and busy day. our coverage from st. petersburg economic forum starts in earnest today. xey russian billionaire ale

mordashov joins us. there are lots going on with our russian flavor as we focus in on what is happening in saint petersburg. now let's go to bloomberg first word update. juliette: -- president erdogan has pledged allegiance to global principles on monetary policy. the central bank raised its liquidity rate to 16.5%. it kept other rate unchanged describing the move as a powerful monetary tightening and saying it is ready to continue using all instruments. losses to aersed record low. federal reserve officials have signaled they are fit to raise interest rates in the next meeting next month.

they send no claim message on whether they hike one or two more times this year following that move. the minutes of the may meeting soon bewould appropriate to benchmark the policy rates, confirming expectations. officials expressed a range of views that would likely be required. the u.s. has started an investigation into whether car and truck imports threaten security. according to a person family with the matter, an underigation would unfold the same laws as terrorists under steel and aluminum. under steel and aluminum. shares in asian carmakers have fallen after the announcement. north korea has again threatened to cancel its planned summits with resident donald trump next month. pyongyang hardened its rhetoric by saying it was ready for a nuclear to nuclear showdown if

the u.s. did not change its approach to the disarmament talks. atop north korean diplomat issued a warning in response to suggestions from the trump administration the kim jong-un -- >> it is my view that we have made zero concessions to chairman kim to date and we have no intention of doing so. comte has started a search for a government that will satisfy his responses. the law professor was no x -- political experience is meeting with all political parties in rome today. he has the support of the anti-immigrant league. he has a policy agenda that has already alarmed markets. global news 24 hours a day, on tic toc and 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 . here in asia, we are seeing stocks lower for a fourth consecutive session. we all also just talked about the u.s. potential investigation tariffs.terrorists -- the nikkei off by 2.5%. also worth noting, the move that you are seeing with the jakarta, seeing offshore funds resume. let's have a look at the stocks. we saw some of the carmakers moments ago. tokyo following the most since november 2016. it has been targeted by one of the automakers that would be hit hardest if there would be tariffs on imported cars. alibaba up 36%. in theow more traded

hong kong market been hsbc. manus: thank you very much. juliette saly and our singapore studio. ira raisesh l interest rates. there was an emergency meeting on wednesday. the currency plunged. globalntry will follow principles on monetary policy. the message was slightly different last week when president spoke exclusively to bloomberg. we have to give up the image of a president who is influential in military policies.

6 you will play a role in military policy going forward echoes is that the big change back of -- change? >> this may make some are, but we have to do it. allen, good morning. is this a capitulation moment? have we seen erdogan step back from his verbal moment last week on the lira? >> he flip-flops between the two. it is great to see that bloomberg interview and it looks like he has moved away. the central bank has raised rates. i think you are right. i think if you are looking at long-term, this is a familiar pattern. you have these big selloffs and the long period of stability. done enough for now, but he likes -- to be fair to him, if

you go back 20 years ago, the u.k. government used set rates. it is not that unusual even in developed markets. although, it is a somewhat old-fashioned. i can understand where he is cannotfrom, but he afford a crisis because there is a lot of foreign debt from the corporate sector. that is a key weakness in turkey. interesting comments there in relation to the independence of central banks. we have short memories if we think that they were always and for all time independent of government. this is an interesting graphic. emergency rate hikes that we have seen in emerging markets. it just takes a number of episodes in history where we had to see countries defender currency. 300 basis points compared to what we have seen elsewhere. how this suggest to you

much hasn't taken in the past to convince markets that you are serious? >> i think it is a good grasp. i would say we are at an even lower rate regime than some of them and certainly 2014, generically. again.y have to go rates are pretty high right now in turkey. all, whenremind us ever when talks about interest rates going up in the u.s., there for the u.s. dollar goes up. and currencies are all about interest rates, then the turkish lira would be the world's strongest currency. manus: with that in mind, what better person to do that for us. have a look at the tweet of the day. is question i have for you, it like 1997? are you as worried? are we in the foothills of a full-blown e.m. crisis? >> no.

i think we are far to bearish. for us, we are less exposed to equities, em equities then we were. we do have some positions including in russia. currency em looocal debt. you cannot compare the 1990's and external debt was very high mainly emerging from asia. we also have the issue of russia in 1998. not at all. or ave seen em crisis, crisis for the last four or five years. staying in em local debt. manus: by the way, i should qualify for the rest of the tweet. he says, we are not at another financial crisis. the question is, is this a warning shot that things are not stable? look at trump.

he is talking this morning about looking at japan and the auto industry. is this a warning flare in any way for global market risk? >> there is global market risk, of course, but one we believe you are pretty well compensated. if you step back, why do equities continue to form? we say simply the equity risk is too high? you are overcompensated in equities. put that to one side. at the end of the day, the news coming out of trump is generally positive as we have seen. fundamentally, we get the crazy tweets from side to side -- time to time. if you look at the reality, he tends to be a pro business agenda. with think that is likely to continue on to sector trade. anna: in terms of the emergingmarket story, markets very much hinging on the fed and the dollar. the dollar has been the big story.

as we move on talking about the just how loose our conditions right now? >> you have the bloomberg financial conditions index. they are still pretty loose in the united states even though rates have gone up. a bit of a plug for the goldman's. that is what bill dudley took over for the fed and started talking about that a lot when he was at the fed. basically, they are still extraordinarily loose. weak dollar, generally. easy financing and we are seeing that in terms of mna. financial conditions are very easy. coming back to em, what we are not talking about today is china. china is reasonably robust. krugman, if the em story and global economy is

really in trouble, it is going to emanate from china, not turkey. manus: alan, we are touching on a couple of different corners, all roads somehow lead back to the federal reserve. we had the minutes last night. you see yields coming back, think that is more of a political story. if i look at the recall of voices, we saw a nice little spike last night in the five 30's. -- ofnk that if sessio session, do you think we have passed the worst of that? >> no, i think we are to continue talking about inversion. officials, ord voting members have even said they would not like to change monetary policy. almosto well-known now,

the number one best leading indicator of troubled coming in the recession in the u.s. and falling markets. part of me thinks that this time it won't work. still, it has been a very reliable indicator because the market is basically saying when the curve does invert, the market knows rates are falling in the market knows there is a problem. still unbalanced despite all of the focus worth looking at. the curve has climbed so much. i think the message with what we saw yesterday has moved so far already. anna: it has. let's posit that conversation for just a minute. every time he comes on, we seem to talk about deutsche bank. there a shareholder meeting taking place. we are to see headlines coming out. headcount by about 25%. confirming post-tax return on tangible equity gold.

this follows some reporting that bloomberg yesterday that they were can -- considering 10,000 globe cut. manus: let's put it in context. the headline about 10,000 jobs, previously set a target of 9000 job cuts. this never you are looking at is full-time positions will fall below 90,000. they are affirming a target of about 10 percent posted tax return. they can make a double-digit return on equity. 10% would be the number that was flagged up yesterday. they are going to reduce the cost of the business by 22% -- 22 billion from 2019. to a certain extent, the real issue is the chairman is still there. have had for ceos in six

years and that seems to be the angst at deutsche bank. can the chairman clear the ship and saving the ceo to do that. without have we got? anna: no further significant disposal plan. more development at deutsche bank this morning, but not planning significant disposal. before that, coming up, we are live in st. petersburg. tomorrow, we will bring you the presidential -- minister, china's vice president. all of that will be edited by bloomberg's editor in chief. this is bloomberg. ♪

the costa cuts. that are

being promised from deutsche bank 22 billion euros will be cut in 2019. this goes back to job cuts, segregating the business, moving away from wall street and concentrating on europe. he is the fourth the ceo in a number of years. the real issue is implementation risk. number of jobs to go looks as if it is the post to drop well mark as it0,000 starts this year. 22 billion in cost cuts. someone will speak to later in the program. we will discuss that and how management at deutsche bank works shortly. let's talk about what is going on in st. petersburg. this is the international forum as it gets underway today. annemarie is there for us and is joined by russia's -- >> good morning.

's whichbeing russia is individual, he's determined of the fourth -- he is the chairman of the fourth-largest -- thank you so much for joining us. the theme of this conference is trust. many say the sanctions against power machines, which you own a stake in with a bit unfair. do you still trust doing is this? there's no risk if you think about the business. happened, which was , of course, itir helped to do business in this global compass. >> how are you coping with these sanctions? >> first of all, we should make

sure that our financial flaws are still there. we should preserve the current to flow. plus, we must a think about market textures. what is the biggest problem for us? -- we didn't sell anything to the u.s. yet. of course now is under -- , we have toake sure have access to the market. for theou preparing implications of more sanctions? >> because it is not excluded by nature and because the process of sanctions became very and transparent and very unpredictable, nobody could be safe. it means we have to take some precautions. what kind could be taken? i don't know.

we have to think about inspiration of a level playing field. what other currencies are you looking at? >> could be the euro. all kinds of local. currencies the non-and india. -- vietnam and india. >> on that point, does the threat of trade wars were you? >> yes, because it could undermine global trade growth. that was a major dryer of releasing people from poverty. poverty in china has moved from 60% to 15%. poverty in russia is down

substantially because of global global rates. >> out of all these clouds of worry, geopolitical tensions, sanctions, trade wars, volatility of things like the ruble and other currencies, what worries you the most when you wake up in the morning? cracks i still wake up relatively quietly. most,orries me the geopolitical risk. there is strange dichotomy between economies. we seeal economies, everywhere economy grows, job good.on, everything looks people are making money and companies are making money.

there are so many spots of tension and geopolitics. potential trade were between u.s. and china. north korean stipulation. middle east. iran. many instances which might substantially impede economic growth and create a lot of problems. >> more on the geopolitical front, what about trump's steel tariffs against russia? what impacts have you seen from this? far, our sales to the u.s. last year represented only 3% of total output. is not a problem for us at all. what concerns as is the potential impact on global rates. we will find other places in the

world and it could mean potential destruction. hopefully there are no problems, other countries will seek retaliation. there could be a big trade war. >> russia is preparing a response to sanctions and tariffs, one of them is a possible measure that would mean criminal prosecution for anyone dealing with uprising by u.s. sanctions. you would have to decide if his they want to follow the u.s. sanction or russia sanction. what do you make of it? >> first of all, we do business globally. we have to follow all local legislations and try to be -- potentialbout

itminal penalties, i believe could move us too far. of course, we should also be, when these sanctions will metal in domestic economic regime. all in all, we have to find a way to survive. farrongly oppose moving too in growth of criminal penalties. the public has said that they are against different criminal -- >> you are also the biggest investor in chile. 's it makes sense for russian businesses to invest in the u.s. and europe at all during the current climate? not my pillow -- we are not

driven by political decisions. often morely, quite than we would like. i trust people. i believe that we have much more in common. there's much more in common between you and me, between the u.s. and russia then you might think. that there is a very simple fact which everybody knows very well. hundreds of millions of europeans and americans, --ainians i do believe that we should do business globally. business is becoming everywhere. more transparent has gone so on and so forth. we are part of the story.

i believe that we should invest everywhere. all people in the whole world should invest in europe and russia. i believe it is an inevitable. no one could stop it. >> thank you so much for your time. and also chairman russia's richest individual. manus: thank you very much. great interview and you can really see the residents of their in terms of his concern. for potential for trade war's these are the headlines he said. u.s. measures could lead to a big trade war. the penalties on sanctions compliance are criminal penalties for sanctions compliance. alan, it is fascinating to see how we as market, and

commentators on market almost on a daily basis try to quantify trade wars and then we move on and said that is over, we shouldn't worry too much about it. this man has real skin in the game and he is warning of a real risks to a big trade war. >> he is and he is right in the center of it with the nature of his business. he must focus on the. we do, but nevertheless, if you look at the facts, the facts are that time and time again, the u.s. administration has backed away from a trade war. one thing on russia, as you -- one pointlong the royal bankat is doing business and ranking countries from very practical issues like how quickly can you get electricity? of 190is ranked 35 out and is higher than belgium and

italy-based,. -- ace on that. there are reasons to invest in russia. anna: you have confidence in equities? >> in russian equities, yeah. anna: you're happy to say that? is the oil price hoping? >> it is part of a positive oil be. it is partly going against the trend a bit in terms of geopolitical issues. russia has always been a cheap market. it is right at the cheapest of its history. of course, you can't compare russia even with brazil or china. you have to compare it with its own history. it is a cheap market. anna: thank you very much. alan stays with us. let's check in with the broad market we are seeing overnight. >> good morning.

risk off continues in the asian markets. asia-pacific index weaker for a row.h day in a concerns coming back around potential trade risks with the u.s. said to be looking into auto tariffs. you can see quite a few declines in china. japan declining again. overall, the asian benchmark is declining. strength for aen third day against the dollar. with the moves we have seen over the past few days, dollar-yen is breaking its. support.- its the emerging-market riffs are still out there. we also have the fed minutes yesterday. it seems like markets interpreted them as somewhat dovish because we did see some curves steepening. of course, the 10 year yield back below 3%. it is still near five-year

highs. treasury volatility has been a little bit lower. perhaps a traders and investors getting used to that slightly higher range around the 10 year treasury yield. a want to mention turkey. we did see the lira strengthen yesterday. all it did was reversed the losses from the previous day. it is a little bit stronger today. is the best performing emerging-market against the dollar after that surprise raise hike from the central bank. is it enough and where do we go from here? the currency is still near record lows. turkish bond yields near decade highs as well. some institutions other saying you're going to see rates of 20% before you really see an impact. the italian president has asked the law professor comte to form a government. despite a lack of government experience, he is backed by the

five-star. if i manage to fill the mandate, i will present to the parliament a program based on the understanding of agreed-upon the political forces of the majority. the president and i spoke on the demanding and delicate face the are living through and the challenges we are facing of which i am aware of. manus: his maiden speech to the world and markets. joining us now from rome is kevin. what happens next? i'm fascinated to know who is going to the finance minister. kevin: comte will speak to members of parliament leaders of political parties. then, he puts together his cap list and takes it back to the president.

that that it appears will be a gentleman by the name savona who- paolo has expressed concern about the euro power currency. anna: dissecting was there talking about his concerns. what has been said so far on that subject? kevin: remember that the government plans to confront the eu on a live issues. he wills already said talk about the completion of a banking union, asylum-seekers and issues like that. they will be starting very quickly to make their presence known in brussels. manus: the president has given comte the green light to try to form this government. he is also had some caution on the economy. this goes to the heart of the issue in terms of the political, i suppose mandate that these two parties have.

what they are saying about the economy and eu and european interdict -- integration. kevina: they spoke for almost two hours yesterday. during that meeting, the president emphasized some key issues for italy.market stability , confidence, living within budget rules. those are the same issues that upset the markets over the last few days. anna: thank you very much. kevin joining us live from rome. alan still with us. what worries you. when you look at the latest developments around italy, what worries you most? is of their budget plans, is that what we don't yet have detail on around how they want to change or form an agenda in europe? alan: the budget plans are

concerning. the fundamental thing i worry about is they backed away from their plan to come out of the euro. if they go back to that. any idea to break from the euro -- currency -- then i was just looking at spreads. what price you put at it. right now, you have a 100 basis points more than spanish that. when you start to think about compounding that income over several years, regional compensation. what would worry me is if they move more toward this parallel currency. whye know, unlike greece, eeece pull out of the euro? the euro was popular. they are pushing on open door

there. that would really worry me. manus:. let's take a little bit further 18% for greece at the high of the crisis. 550 basis points for italy. goldman sachs says you have to go back. 2015 is the template. and then offer. italy over germany, where to go to in the near term? alan: the portugal analogy is not a bad one. we have to remember that all of these spreads. you should have bought everything except for greece, including ireland. that was a fantastic trade. these do throw of opportunities for these excess income.

in a low interest rate and negative interest rate environment, i would say 200 over is pretty good compensation for italy in 10 years. we are discounting a lot of bad news.the reality of what the government can do and will do is a lot less fearful. -- i can seeking it holding and turning over. 100 over spain is a lot of compensation versus referral market. mind.this comes into my somebody said they wanted to come back as a bond market. you get to scare everybody. will the bond market scare italy into a change of course? alan: that was president clinton's advisor. the bond market can discipline the italian government.

i think you are quite right. that was a to 7%, wonderful time to come on bloomberg tv. so much going on. it really did discipline. financing starts to become an issue. to plethora percent is no real discipline, but you have to put that in the context of negative rates. ultralow yields worldwide in the eurozone. i'm looking at a spread as 100 over spain. there's a decent risk premium in italy. ands: you have to go back ask mark barton. what was the credit rating of every company around the eurozone? tom keene, i'm going to channel this.ave a look at

creditors say this is what we should do. we should be selling the euro against the yen. would you? the pmis are at their lowest in 18 months. it is all going wrong. alan: right. in some sense, i hope so. off way, there is a risk element to it. going long yen, generally has a hedging element. i would say it is a bit late that euro yen trade. yes, the pmi is set, but it is still positive. there is one to be growth in the eurozone but less than before. part of the related to the euro strength. i would challenge and say isn't that a little bit of a late call? yes, it would work if this risk environment continues. us.a trade for

we are flat euro-yen. anna: you have euro against the dollar here. at euro-dollar here. this is showing the euro under pressure and showing the contrasting trajectory we are seeing in the data. some of the cmi data out of europe a little disappointing. this that mean that you don't like the euro against the dollar? alan: our main trade has been working until now. in terms of euro, we don't have a big view. somewhat towards being more positive of euro over the dollar. it only takes a few tweaks from trump.- tweets for basically what is good for america is a weaker dollar. he focuses on trade, where is that trade deficit? it is basically china. half of it. mexico, a little bit canada.

germany. how far can ago and we have the twin deficits. we talk about turkey in trouble. we have the twin deficits in the u.s. we have a slightly positive euro recognizing interest rate differentials dominating right now. manus: obviously, the cpi, let's take it to the u.k. for now, the gentleman sitting in your seat yesterday did not think that the cpi would undermine the pine. it did. today, we have retail sales in the u.k. there talking about the pine doing 90% undervalued against the dollar. 8% against the euro according to that big mac index. would you agree there? could retail sales undermine the pine again today? alan: today, yes. no doubt about it.

is all about the fact that the u.k. is slow to raise rates. they missed their opportunity when the sun was shining and when we had reasonably strong growth last year at least compared to now. they could have raised rates and now they are a sluggish. -- period. manus: no rate hikes this year? because we are seeing an improvement in business confidence especially in respect to brexit. as we get more confidence in the transition deal coming through, we have this issue on the customs deal that needs to come, which is very difficult. generally, we are seeing what is undermining the k has been a lack of investment from business. we are seeing more confidence. that will come through.we expect the u.k. economy to pull through. we are always interested in any

financial sector that is undervalued and selling as one. we are positive. short-term, it can easily go weaker. generally, you want to use these opportunities. anna: thank you very much. with us this morning on a host of subjects. all of the stocks in between. bloomberg users can interact with any of the charts we have been using. manus: let's get a business flash. juliette: thank you. after the resignation of the ceo and a warning it may not be able to service its debt after october the 23rd unless u.s. sanctions are lifted.

that is the deadline you the u.s. has given companies. a limiteds biggest producer also said the sanctions could prop severe production co -- cuts. u.k. businesses could be left up to 20 billion pounds worse off implementedms plan by exeter's is in limited. a contrast the new customs partnership believed to be that by. prime minister theresa may and cost a maximum of three put 4 billion pounds and could end up having a net cost of zero or less. cambridge analytical whistleblower says facebook ceo mark zuckerberg is refusing to face a u.k. parliamentary committee over the data abuse

scandal because it is the one forum that will actually ask tough questions. he says so far, the social network founder has been evasive. anna: juliette, thank you. but of business news to talk about including in a banking center. bank saying it will be cutting 10,000 jobs. the chairman faces criticism at the annual shareholder meeting today with critics saying he is as much to blame for the problems as the exit ceo. hans.g us is good to have you with us. what to blame the chairman for? i think if you look back over the last six years since he

became chair, we look at three important things. one, we have had a lot of changes in the management, we have a post's ceo now in charge of deutsche bank. that is very much a responsible the of the chair. we haven't seen a strategy that is actually value creating. turnover ona lot of the supervisory board. all of these three things are very important part. in our opinion, he is not done a particularly good job. manus: will you call for his resignation? today, we will give him a last warning saying you need to do better. you are a little bit on the last chance. if you like, it is not the right moment.

calling for more personal change. not least because on the supervisory board, there is not anyone who could really step into his issues at this moment. manus: there's always a somebody who to step into his shoes. you does have to look far and wide for the person. have you spoken to other shareholders about the possibility of calling for his resignation? -- >> a thing for us, this is not about resignation. head. not calling for his some shareholders will vote against the so-called discharged vote of chair. we are saying you have not done a very good job, you just into to do better. we need a clearly value creating strategy. at the moment, we have a in 2015.that was set

the targets very much at aside. , if you look at the cost income ratio and returns of the bank this needs to change. the chair plays a very important role in this. he appointed the ceo, he appoints the management board. he also gets involved in the development and oversight of strategy. anna: talking about that strategy, what do you think about the retreat back to europe? street att from wall least in some parts of the business? as investors, we think it would be full is for us to say to a company we know what he should be doing. what we have observed over the last six years is there hasn't inn enough progress developing a strategy and empathy a strategy that creates value for shareholders and other

stakeholders. -- wecent announcement have had rumors yesterday about significant job cuts. job cuts in itself are not new strategy. they are also not necessarily value creating. course expect in due a much clearer strategy setting howexactly will change and deutsche bank will create value for shareholders in the foreseeable future again. 5 understand you don't want to make the management decision for them. do you see deutsche bank in the future as a big competitor for investment banks on wall street are very much a german story? again, that is something for the management to tell investors

and set a pace and clear steps to achieve a company that creates value for shareholders. i am hesitant to speculate or do the work for companies because people inside the companies, the management in particular, the supervisory board will reelect to the supervisory board and deliver to shareholders. manus: we could talk about but one bank all day, other big bank story that we have covered in the last 24 hours is this speculative story, the standard chartered barclays might well have been talking about a merger. the barclays board was considering a backstop merger with standard chartered. both have big issues to deal with. this that make sense? does that kind of deal makes sense to you?

that the offer strategic value creation in your eyes? think we come to expect almost the same answer in responding.this is really something the management of barclays and standard chartered would need to explain to shareholders. i am very hesitant to comment on rumors in due course. anything to be discussed, i would expect to banks you mentioned to reach out to investors and make the case for a combination. again, it is not really for shareholders or for me to speculate. manus: thank you very much. you're right, they should be reaching the institution how to shareholders. thank you very much for your thoughts. we are focused on one currency and one currency only, the lira. emergency treatment for the lira, is a enough?

turkish central bank raises height. -- hikes. that is the question. ♪ retail.

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i'm manus cranny. and i'm anna edwards. central bank's raises rates and an extraordinary meeting but is that enough to stop the liras freefall. it signals the pace of increase would remain steady. treasury yields retreat. the president orders a probe on auto imports that could lead to u.s. duties on foreign vehicles.

carmakers across asia decline. anna: good morning, everybody. we are getting some confirmation of first-quarter gdp numbers out of germany. first-quarter gdp grew by 1.6%. in the first quarter, exports falling by 1%. that was the story of the first quarter. this fight the weather, despite the flu, there was this sense that a domestic story was driving things a little bit. what are the futures telling us? manus: they have a mixed party going on. angela merkel is in china. the eu to be exempt

from paris. the turkish central blank -- bank is trying to save the lira but perhaps not sure sure that the vision is so assured. on the political side, the u.s. andlooking again at autos the possibility, especially with the japanese, of tariffs coming back to bear. the markets have got to look back to russia in 2014. london is up by a pit. pip. a you will take it.

anna: a couple of headlines to take you through. have announced an ipo. shareholders intending to sell about 15% of their shares. euroexe on the amsterdam. let's talk about the risk radar. worries about emerging markets, we will come into that. around turkey in particular. the trade story coming back to fight again because president trump is considering further tariffs on imported cars. combine that with the strength and things are

negative for asian equities. strong as they dollar right now. we are stable in the euro despite the confirmation that conte had been asked to put together a populist government. the 10 year yield at 2.99. the fed yesterday a little bit on the dovish sign. -- side. i think that permeated through. she dovish till from the fed, might be overstating it. the second point is very clearly about emerging-market contagion. that's capping out the rising yield. you have futures bid on the 10 year. reprieve. some

will the new coalition under onte heed the warnings coming from europe? that's the question for the italian btp market. is down by 12 pips. bithave to come back little lower this morning on these kind of moves. do you expect that spread to blowout? template for looking on the spreads to play. more risk to come according to the chief economist at goldman sachs. juliette saly has everything else going on around the world. turkey's central banks at anaised interest rates emergency meeting.

the central bank raised its liquidity window i 300 basis points to 16.5%. they kept other rates unchanged. stated it's ready to continue using all instruments. federal reserve officials have signaled they are set to raise interest rates at their meeting next month but they said no clear message on whether they would hike one or more to -- one or two more times this year. minutes said it would likely be soon appropriate to increase the benchmark policy rates concerning investor expectations. beyond that, officials expressed a range of views. the u.s. has started an investigation weather car and truck imports threaten national security. an investigation would unfold under the same laws that invoked

global tariffs on imported steel and aluminum. they send additional tariff is under consideration and we have seen shares in major -- major asian carmakers fall. again canceled -- threaten to cancel its summit with donald trump in singapore next month. pyongyang hardened its wrecker by saying it was ready for a iflear to nuclear showdown the u.s. did not change their approach. they issued the warning in that kimto suggestions jong-un we toppled like qaddafi if he did not make a deal. >> we have no intention of making concessions. it's only prime minister conte has made the first steps to forming a

government. professor with no political experience is meeting leaders of all political parties in rome today. he has the support of the five-star movement and the anti-immigrant lead -- leak. it's a policy agenda that has already alarmed markets. than 2700 more journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top . a lot to unpack with all those headlines. we are seeing risk off once again in asia. down for a fourth session. closing out down by 1.1%. have a look at indonesia. the jakarta composite rising for a third session. we see moves going through from offshore. india looking good as well.

we are talking about those car movers in the region. masa one of the companies hit hard. that is the most it has fallen since november 2016. talking about the buying you are seeing. indonesia up by almost 7%. to the downside, samsonite in hong kong fell back almost 10% that a shorts seller questioned their accounting and corporate governments -- governance. thank you very much. the turkish lira reversed after the country's central bank raised interest rates and emergency meeting. the lira is falling again this

morning. point, what we saw was the president formally kicking off his election campaign. turkey goes to the polls on june 24. a whole host of risk coming to bear here. question is this. it were seen a little bit of softening. 300 basis points. the risk is, you have to keep the turks themselves from selling this currency. is that a fair take? >> that's a very serious risk. if the turkish people start to run for the hills, you have a real problem and you have a run on the banks and so on. >> we are not there yet. >> it's difficult to gauge at this stage but we may be at the start of it.

one of the presence officials said yesterday or at least called on your -- on people to be loyal and stick to the lira. it tells you in may be an underlying fear. anna: good morning to you. were trying to get a sense of what is developing next. what other toll could we see the central bank use? are we talking about further hikes? capital controls? further hikes, definitely. if you read reports, the general view was 300 basis points is good for now but probably won't be in the long run and we will need to see something more substantial from the central bank.

probably, it has come a little bit sooner than we expected. you mentioned capital controls. turkey has a historical reluctance to post capital controls. central bankng the could do in this is something that a lot of traders have looked for is the monetary authority simplifying their. they are at three, effectively. none of them are considered the benchmark. it tends to be a somewhat clouded picture. manus: i want to put a tweet to you by paul krugman. he said, were going to party like it's 1997. possible for as self reinforcing crisis. the my question is not are we there yet but is this too

dramatic a call? agree or disagree? justin: i would probably agree. yes, there's a whiff. but a full-blown crisis, i don't think we are near that yet. inhink there are arguments favor of the idea that emerging markets are a lot more a lot different than they were in previous critical cycles. there are some much stronger credits out there in the past. you see a dichotomous approach the emerging markets, the strong and the week. anna: thank you very much. joining manus onset in dubai. joining us in london, tristan. let's talk about emerging markets.

we talked about this in the last hour. a global economy doesn't rise or fall with turkey. but it's in terms of the broad story. i have a chart that showing much happening in emerging markets. there's some evidence that some investors are getting out of p.m. and in two japanese stocks. into japanese stocks. tristan: i completely agree with what just insane. countries that have got external debt, u.s. interest rates rising, the dollar strong, that's a recipe for affordable countries like argentina and turkey to come under pressure which is what we have seen. the interesting thing to me is there are a number of other emerging-market countries caught up to some extent in this.

indonesia for example. this is a country unlike some previous periods where markets have been under pressure. the fundamentals look pretty good. they don't have the same imbalances as turkey or argentina. nervous, might be there can be opportunities in terms of where the contagion is. manus: i just want to take you to this chart. gan'sironic that erdo language that is absolutely obliterate the spreads on 2003,h debt, i go back to and it was his rhetoric that emboldened the turkish story. here we are. two different ironic moments.

in greece. that's when the implosion came. what a stay away from that? justin: the market is pretty fickle -- tristan: the market is pretty fickle. a election,unced the market jumped. the markets are fickle from this respect. in term of capital controls, we haven't seen how things develop. i think it will probably resort to more orthodox prices -- prices. by jacking up greece was in a very severe crisis. turkey is under pressure but not at the same stage.

tristan: -- justin: going back to the emerging-market universe in general, in this kind of episode of worries, what is it that people are looking at mostly we talk of vulnerabilities? current-account deficits, central-bank reserves? how you sort the wheat from the chaff? it's all those things you just mentioned. from a financial markets perspective, and emerging-market, it seems to be countries that when the exchange rate falls it's a tightening rather than a loosening. the countries for which that is a problem are when you have dollar-denominated debt and when you have strong inflation pastor. the currency weakens, inflation rises, they have to jack up

rates and cause a recession. countries that are less vulnerable to inflation pass through don't have to raise rates as aggressively and it's generally a calm her backdrop. backdrop. manus: thank you very much. coming up, the trump administration starts investigation into whether car and truck imports threaten national security. a move that could lead to new tariffs on foreign vehicles. this is bloomberg. and tomorrow, presidential cleaner he takes place. sidential pleinary takes place. watch it live on bloomberg tv.

this is bloomberg. ♪

anna: happy thursday morning. 38 minutes ago into the start of cash trading. trump's administration has started investigation into whether car and truck imports threaten national security. a move that could lead to new u.s. tariffs. familiar to someone with the matter, additional tariff is under consideration. joining us now is jodi schneider. this is having an impact on automakers already. it will look to see if a dozen europe. -- we will look to see if it does in europe. korea aren and south among the countries that have the largest number of passenger

vehicles to the u.s.. also among the countries that are big exporters to the u.s., are mexico and canada. thisf the reasons behind is its expected to be the both canada and mexico are in renegotiations with the u.s. on nafta. the u.s. has been pushing and it has been a contentious issue for them to change the amount of regional content allowed in cars and making it favorable. one thought some analysts are telling us is that this is intended by the trump demonstration to push those talks. the other reason that some are giving is that it is an election year in the u.s.. president trump campaigned heavily on america first and on manufacturing prowess.

it helped him win in states like michigan and ohio. a campaign year for congress, it's a theme he wants to return to. to be known as a president who's trying to keep these jobs in these communities. it's an investigation at this point. they haven't said there will be tariffs but the commerce department is looking at this. anna: thank you. tristan is still with us. we think there could be something aimed at nafta countries. meanwhile, asian carmakers fall. we look to europe to see whether european carmakers could suffer. it's ludicrous, isn't it. i think with all this trump tweeting, many of this gets reverse rolled back.

it's to take a medium, longer-term view because you will tire yourself in knots to try to react to every trump announcement. i'm not an expert on the car industry but it's a generic point. if assets fall the back of a trump tweet, you want to be looking around to see which things you like anyway. pmi's are an 18 month low. our you in any way concerned about your exposure to europe or the european export story? tristan: i'm not sure for the euro but to be honest, quarter to quarter, global economic indicators fluctuate. they were strong at the end of last year and they have been

noticeably weaker through the first quarter in europe. --ther that is rather whether related or strikes and flu, we don't know. the data has been a bit softer. for signs looking over the next three or six months. the numbers are still above 50 so they are still showing growth. manus: thank you very much. there is only one story. they came out gunning to defend the lira. market the dispenser saying you want to see rates at 20%. we have our emerging-market editor on. he said the width of concern is out there. channeling paul krugman. the car story is what's going on in italy.

-- the car story and what is going on in italy but the lira is front and foremost. breakwill do it for "day europe." ♪

guy: welcome. i am guy johnson. my cohost is off today. cash trade is less than 20 minutes away. -- less than 30 minutes away. turkey bows to the market. by 300tral bank hikes basis points in an attempt to stabilize the lira. initially, the currency rose on