anna:. good morning. i'm anna edwards. these are today's top stories. fears of a full-blown trade war are sending u.s. and european futures lower while markets in china and hong kong are closed. hands thecsu chancellor and ultimatum over her migration policy. can she swing the support from me partners to avoid a government collapsed? as opecextends declines members are set to clash in vienna. iran says it has more support to block the proposal from saudi arabia and russia to increase output.

good morning. just on 6:00 here in london this monday morning. welcome to "bloomberg daybreak: europe." we need to start with what is going on in the asian equity session. themes, intensifying rhetoric and policy implementation between the united states and china is starting to have an impact on markets. we are down by 0.7%. part of that is because we've seen money going into the japanese yen. equities ine see the japanese market coming off a little. the chinese and hong kong stock markets are closed today. the msci asia-pacific is weaker.

risk aversion increased in the asian session after an earthquake in osaka. impactinue to watch what that is having. we put oil prices here as well. nymex crude now down by 1.9%. the saudi's and the russians versus the o that is how things are shaping up. europe atake place in little bit later on. the big question is whether opec is going to increase production, whether the saudi's and the russians are going to hold sway over the others. the markets suspecting they may be successful. futurest up the u.s. and show you what we are expecting to see later. the trade story is starting to get a grip with the market psychology. u.s. futures pointing downwards. nasdaq pointing down by 0.6%. interesting to ask questions

about what kind of feedback loop there could be between trade and u.s. policy. this is the picture we are shaping up wththe futures. beer to talk to you about trade, central-bank policy, where we g more news from that of course, that and german politics, what that does to the strength of the euro and the eurozone growth story. lena joins us for this hour. let's get the bloomberg first word news update. debra mao joins us from hong kong. germany's crisis over migration policy enters a critical phase. with chancellor angela merkel's political future on the line, the ripples are being felt across europe. merkel met with members of her christian democratic union at party headquarters in berlin yesterday to plan the response to an ultimatum set by her

interior minister to order migrants turned away from germany's border, in direct contradiction of the chancellor. iraqsays venezuela will join it in blocking a saudi-russian led proposal to increase oil production. the 24atio pact has succeeded in balancing oil market and lifting crude prices. the two biggest producers want to relax quotas. russia says opec and its allies may consider a production increase of up to 1.5 million barrels a day. the u.k.'s prime minister faces a crunch next week over brexit. some lawmakers are warning privately that they could move to oust her. parliament votes this week to give itself the ability to force her back to the negotiating table rather than allowing britain to leave the e.u. with no deal. she is also under pressure over

how she plans to fund nhs spending with government claims of a brexit dividend being discredited. >> there will be about 600 million pounds a week in cash more going into the nhs. be through the brexit dividend. >> in japan, three people have been confirmed dead and almost 100 injured after a strong earthquake hit osaka. it was the strongest quake to hit osaka since 1923. it struck in one of japan's main manufacturing heartland's. companies including panasonic, nintendo, and others were halted as firms assess the damage. taliban hass rejected an extension to a three-day cease-fire coinciding with the e.u. holiday. the afghan president announced a

nine day extension of the truce after a suicide bombing killed 36 people on saturday. yesterday the talibannned that it cease-fire had ended and it has no intention of extending it. elected ivanve duke a as president in a runoff vote. the 41-year-old lawyer ran on a market friendly campaign of cutting taxes on company profits to stimulate a sluggish economy. he won more than 54% of the vote and will take office in august. 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 . anna: thank you very much. let's check out the market action in the asian session. david ingles joins us with the latest from tokyo.

david: just an update. , that earthquake in osaka, halted their production as well. kilometers, a 500 two hour train ride. have a look at markets and the damage across equities. we have several markets shut. if those markets were also open, they would also be down right now. we are down for a fourth day. the benchmark is back below its 200 day moving average. we are near session lows in u.s. futures. to give you an indication of the worst hit markets, singapore, worst day in june. there's some confusion in the markets. biggest three-day drop for the index going back to .5 years. let's look at the broader read across assets.

the yen is stronger. we are also getting deals pushing slightly lower. that does underscore the risk aversion we are seeing. we talked about opec. just watch oil very closely. the news that has come out so tensions, one of the main themes across markets is really oil negative. let me just wrap things up with a quick look at e.m. currencies. we are down for a fifth day. it takes you all the way back to levels last seen in december of last year. it is fairly risk off in the asia-pacific. anna: david ingles joining us from tokyo. let's talk about trade wars. china and the united states are on the verge of a trade war with beijing retaliating to president trump's announcement of tariffs on chinese imports. kathleen hunter is with us for

more. very good morning to you. the farm and energy tariffs china is imposing do not fall by accident. why are they a danger for trump? >> what we are seeing is the midterms are about five months out and republicans are trying to keep control of the house and senate. congressional majorities are front and center. the coal and agricultural tariffs are in rural states, energy producing states, states where republicans are looking to potentially lose their majority if democrats make gains. china is being strategic in terms of where it is trying to target retaliation to make it hurt for trump and republicans. one of the questions is how much trump is prioritizing that himself versus prioritizing his own reelection. argument thats an

it could be easier for him politically to run against a democratic congress. it is a kind of cynical way of looking at it. anna: so interesting to see which fight he would prefer, who he would prefer as a running mate, and how he would defy his base. where does this trade battle go? who is positioned to outlast? who blinks first? for xi, there's less harm imely. he's able to stay around longer. the midterms are only six months off. trump is going to ca about that. he's under pressure from reelec. -- from republicans. he's thinking about his own reelection. he has these electoral pressures that xi doesn't have to worry about. that would put xi in a more strong position. anna: president trump likes to

take credit when he es stocks go higher. i guess we will look out for any feedback loop that might influence his thinking. see u. futures pointing do interesting to see what impact that might have. he's someone who likes to take credit for things when they are going well, but not when they are not going well. impact,is may have some i would think it would be by trumply minimized blaming others for the downturn in the market. anna: thank you very much. kathleen hunter with the latest on the trade politics. joining us now, lena. great to have you with us.

i was drawn to something interesting in your notes. view of the international trade tariffs would be small and technically accurate but economically incomplete. it is too soon to know the long tail that this type of trade rhetoric is going to have. lena: in the short term, the markets reaction is trying to quiet the immediate effect on corporate balance sheets. yet trading not be in the global climate that we are providing over. this is a route -- what does that mean? it is a route to fragmenting investment,alizing disrupting international capital flows. it is the route to disrupting the contributions of global trade the global growth and global productivity.

, companies will have to anticipate change and will have to manage change, will have to prepare for it. this takes time and is very costly. -- itng tail of tariffs will be a very longime. this year, because of strong global growth and double-digit growth in earnings, it is harder to reach the threshold, although we've already seen the markets graduate. these risks will come to the forefront. na: this is just a near-term snapshot of one area of impact. this is on china. already starting to reduce american shipments. you can pull that up and use it chin already starting to reduce american shipments of soybeans. to your point around what impact

this has, re-nationalizing production chains is one of t things you've pointed to. it might be that proponents of this policy want that to succeed and don'nsumer pay more for it. lena this is such a great point. protectionist sentiment in some of the world's largest economies means that that economics has become good politics. there is no economist out there who would really consider tariffs to be a good strategy in terms of promoting growth. the paradox is there is no economic sense because the white house, while trying to open global access for u.s. businesses, is actually causing the e.u. and china to throw away trade concessions and put up barriers to u.s. business growth. the effect will only be negative. the key worry here is that the white house is pursuing a longer-term gain.

as long as it remai -- thiisly rewarding t really -- it is about the mercantilist, nationalistic view , the zero-sum game of winners and losers rather than the international network of like-minded countries. this is a very different sort of first world paradigm from the one we've had. anna: what does that do to foreign direct investment? what does it do to fdi? or does it increase fdi because businesses want to show they are in it for the long haul? lena: this is protectionism coming at the end of a great era of globalization.

many of the companies operating in the u.s., mexico, and china are now facing those tariffs. u.s. tariffs are hurting those business interests. there will be a redirection of investment. the point that the markets have not woken up to is the long-term political risk. putting tariffs on imports is really taxing production. jobsow-paid manufacturing and creating incentives for u.s. companies to renationalizing supply chains, now this is really a fight for low-paid manufacturing jobs. [indiscernible] anna: perhaps trying to still

work out what happens when national politics comes up against globalization. thank you for your thoughts. lena stays with us. more insights coming up. theresa may faces a crunch week in parliament. clashes could determine how much power legislators get to shape the final brexit deal. coming up on wednesday, president mario draghi, fresh from his market moving comments last week at the ecb. their conversation will be moderated by bloomberg's head of economics, stephanie flanders. you can watch that conversation live on bloomberg tv and radio. this is bloomberg.

anna: this is "bloomberg daybreak: europe."

6:20 in the morning in london. markets in hong kong are closed today. markets in china are closed y. the rest of the equity markets in the asian region look pretty ak. let's get a bloomberg business flash. here's debra mao. the british consumer and business lender is said to be near an agreement to buy virgin money u.k. for about 1.6 billion pounds. oomberg derstands that an agreement is likely to be announced today. they declined to comment. former france telecom ceo -- will stand trial for harassment a decade after a wave of employee suicides coincided with the restructuring he led. the one-time monopoly now known as orange and six executives have also been indicted on charges of moral harassment.

that is according to a statement from the company telecommunications workers union. lombard's attorney didn't immediately reply to a request for comment. the bank of international settlements has blasted cryptocurrencies, saying they may never become part of mainstream finance. in its annual report, the bis says bitcoin and other digital currencies are too unstable, consume too much electricity, and suffer too much fraud to ever serve as genuine mediums of exchange. it also says they could break the internet because blockchain requires too much processing power. that is your bloomberg business flash. anna: thank you very much. debra mao in hong kong with the business flash. brexit battles come to a head in the u k parliament with clashes that could decide how much power legislators get to shape the final divorce deal. some lawmakers are warning

privately that they could move to oust her. parliament votes this week to give itself the power to force her back to the negotiating table. she's also under pressure over how she plans to fund nhs spending, claiming yesterday it would be paid for through a brexit dividend. 2023-2024, there will be about 600 million pounds a week in cash more going into the nhs. we've got to find that money. that will be through the brexit dividend. anna: prime minister theresa may speaking. that of the brexit dividend has been questioned. lena is still with us. let's talk about the u.k. i've got a chart that shows the pound. it remains close to this year's lows. we get votes this week.

we get the bank of england on thursday. this could be a big week for the government, depending on how much power parliament gets. lena: it is difficult to overestimate the importance of is week. this is really a fight for the brexit and game. depending on which way the vote goes, it is down to that margin. judging on last week's result, i think this could have significant implications. if the parliament were to prevail and have a final say on the deal, that would gold plate the government's current position, although that has yet to receive agreement from the e.u. and hardliners of brexit on the tory side, of a continued de facto membership after march of 2019 in the customs union and single market, in order to

satisfy the conditions, which would be the best scenario for the markets, but the vote could go another way, and that puts the risk of a hard brexit back on the table. anna: one side saying they could bring down the prime minister. the other side saying they could bring down the government. things look fractious. point to some positives in this. you talk about the checks and balances in the democratic system on show. you point of them working. this is an incredibly stressful process. short-term, the fact that we have this political volatility is not a bad thing. it shows the struggle between parliament and the government is a struggle to avert the most economically damaging of brexit. parliament is saying, we are running out of time. there's a risk that the government has trouble to gain

e.u. agreement. it has struggled to make economic and political success. you just have to look at the irish question. we are still at first base in terms of how to make brexit work e econy and the u.k. the risk here is that it is in the incentive of this government to make brexit happen even if there is no deal, which could be economically devastating. this is why parliament wants to have a say. if it doesn't get a say, there will be a question of parliament haviface a no deal scenario for early elections, and what that will do for u.k. economic stability. anna: indeed. really raises crucial questions about what parliamentary sovereignty means, especially after a popular referendum. thank you. lena stays with us. she will lend her insight next

to a critical test for the german chancellor. angela merkel is facing an ultimatum from her interior minister. we will be live in berlin with the latest. this is bloomberg. ♪

♪ >> good morning. 6:30 p.m. in london. 2:30 p.m. in tokyo. risk aversion is one of the things for the overnight session in asia. this is what you should be watching out for this week. the heads of the world's three biggest central banks gather in portugal. we will bring you that great , the global central bankers speaking to bloomberg. on wednesday, a three-day meeting to discuss on oil.

see the oil priced up by 1.8% this morning. and volatility announcements from the bank of england and the swiss national bank. plenty of gains continue in england. we will see what they can deliver. i read they are unburdened by low expectations. let's check in on the markets. >> a clear risk off tone in the markets when it comes to asian equities. china and hong kong close, but even without the markets in place -- down. losses in japan, down 1.5%. there are concerns china and the united states are on the brink of a trade war. this is where the exodus is from asian emerging markets in context. foreign investors have pulled

out billions of dollars out of asian emerging markets when it comes to equities. this exodus is the worst since 2008. is that previous times when this has approached, we have seen some inflows coming through. at the moment, that is how we are looking at asian emerging markets. taiwan as well. switching to the next chart and continuing with the theme of the koreanons, currency is the worst performing against the greenback. in 2017, what we saw was a turnaround and the bulls t, you saw some resilience in the see of the emerging markets. that might make it more vulnerable this time.

-- $11.05 is where we trade on the korean yuan. finally, ahead of the opec meeting this week, oil is near its lowest in two months. three of the members are not supportive of prices being raised. also the general risk off tone and the looming trade tensions putting pressure in the session. >> thank you. plenty more on the story as we go through the week. let's go to the first word news . venezuela and i rock well join a saudi led proposal to increase oil production. ill join a saudi led

proposal to increase oil production. the two biggest producers want to relax quotas as soon as next month. andgndts allies -- opec its allies may consider a production increase of up to 1.5 million barrels per day. people have been confirmed dead in japan and 100 injured after a strong earthquake hit osaka, the strongest since records began in 1923. it struck in one of the major manufacturing heartland, home to companies including panasonic and nintendo. firms assessed the damage. taliban hass rejected an extension to a three-day cease-fire coinciding with a holiday. the afghan president announced a nine-day extension of the truce after bombs killed 36 people on saturday. yesterday the taliban announced

its cease-fire had ended and it has no that intention of extending. elected a new president in a runoff vote of election since the globalization of the rebel group. the 41-year-old fran on a market friendly campaign of cutting taxes to stimulate a sluggish economy. he won more than 50% -- 54% of offe in and will take august with colombia had its most peaceful in decades. global news on air, 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. you can find more on the @tocgo.g >> thank you. let's get to german politics now, and to the critical phase this week. met yesterday with the christian democratic union to theo plan a response

ultimatum set by her interior minister and coalition partner. merkel will hold talks with the italian prime minister today, migration no doubt on the agenda. jned now our correspondent from berlin. analysis,ing some some are saying the worst crisis of almost are 13 years in office. >> it is serious. for both parties, it is a core issue. kel wants to talk to her political leaders in europe to find a solution. but the leaders of bavaria want a national solution, to take control of the national birders -- borders.

merkel's international pressure, but both sides have a lot to lose. the bavarian regional elections, he may lose. this crisis is a serious issue, but it is manageable. >> is there a chance of a compromise, under pressure, electorally against the afd in a reon where they dominate? what is the chance of a compromise? >> at the moment, they e moving towards giving merkel a european talk to partners, as she is going to do today. at the same time, there will be a decision to set the motion going. they will decide, whether in two

weeks time, the national regime they will send, asylum-seekers to the countries they are coming from. angela merkel has made this clear she wants a european solution, she does not want this to create tensions within the european union. change, butto see the question is whether they want to see the same kind of change? now under pressure from the italian prime minister they are taking back some of the burden, that germany many of take that asylum-seekers as they have taken in the past. the italian prime minister is saying we have to have a radical change. merkel wantshand,

to find a some form of compromise, to go back to germany and say, we have reached something and we can move on. >> thank you very much. the latest on the german political scene. we still have our guest with us on set in london. let's talk about the risk associated with this german story. deals have been done within merkel's party. at a timesting her, when tensions around migration are rising across europe. is thisig picture here correlation between the german and the italian political cycle is very worrying. there are risks of

populism in italy and rising protectionism in the economy. that will ultimately create a real question about the future of the euro. there is an environment where there is no political cohesion, and there cannot be polarization, the twin risks of chronic stagnation, chronic concern about peripheral debt, particularly italian debt in rmany, that will fuel anti-populist rhetoric. fuel anti-euros sentiment in the market,' this is a question about the structural fundamentals, the

ability to find a coherent voice. there is no issue like asylum, a can triggere, that the shift in the relationship, with devastating consequences for the european summit later on this month. >> it is easy to criticize the eurozone and the european union for a lack of structure, a lack of fiscal union in the eurozone. but when you look at the domestic politics, it is easy to see why no greater cohesion has been found. what happened to change that? we had toward the summit in brussels at the end of this month with the domestic politics tense and hungry and germany. and in france, despite macron's successes. how do we square this?

>> the key struggle is for europe to try and find s, to try and find the coherent voice with whh it can underpin economic structures, and face threats cing from all warin not least putin's syria, the warn in france, the fact that brexit is creating a potential threat tariffs onet, and international trade. for the markets in the short-term, what we saw from the italian fallout, there was ,ardly any containment political or economic, to

suggest that europe is stronger than it was several years ago and that this is about italian fertility. -- italian fragility. this is about the ital government, nd risk, the european construct, these are not addressed. -- if europe cannot find a way to reform together, there is a risk. trumpleast president -- gives the europeans something to agree on, the fact that they all oppose his tariff regime. were you surprised by any of the messages we got from mario draghi last week? they set the timetable. there was a push back a little bit on whether interest rates would go up. there has been a management

of the transition toward treatment -- transitional rate targets. we are now at the most a sustainable pace of growth, though still above trend. the ecb has cleverly constructed the europosition -- zone economy is slowing down with inflation. assumption of reinvestment, still very much in play. interest rates remaining at record negative rates. with global trade headwinds although the bar is high, the bar to raising rates

is even higher. it lowerghi has left for longer. >> an interesting chart. we were showing a good chart as to the nature of central banking policy. lena, thank you. users can interact with any of the charts we have been using during the program. can browse all of the recent charts featured on bloomberg television and catch up on key analysis associated with them. coming up, a big week for oil. it could be a very intense opec meeting in vienna. this is bloomberg. ♪

anna: good morning, everybody. this is "bloomberg: daybreak europe." s&p future suggesting we will be weaker at the start of trading. trade tensions are easing into market expectations. let's get the bloomberg business flash in hong kong. >> thanks. cybg, the british consumer and business lender, is set to be in an agreement to buy virgin money u.k. for about 1.6 billion pounds. an agreement is likely to be announced today. both companies declined to comment. credit suisse is betting the leverage loan market can continue its explosive growth. ans buyouts are sitting on impressive -- unprecedented level of capital to maximize firepower over the next few years. some are already sounding the

alarm about the credit cycle turning for the worst. interest raced -- rates have been raised for a second time this year, while credit suisse says it intends to stop buying bonds at the end of 2018. top shareholders are said to be skeptical about the plan to combine european steel operations with india's. big of the german firm's stakeholders have suggested voting against the proposal as early as next week. they are pushing for an improved deal after a slump in profits made it less attractive. that is your bloomberg business flash. anna: debra mao there. let's talk about the oil markets. opec representative has said the three members of the cartel will veto any proposal for an oil supply increase, at of key meetings starting this wednesday in vienna.

our guest will be in vienna. annmarie, can iran really do this? can it block or decide where the cartel goes? >> they can veto this proposal. through the looking bylaws of opec to see how it happens. it says that all of this agreement.animous we could see this happen and the meeting gets quite nasty. agreement that saudi arabia issues their own communique along with other members that support them outside of beneficial deal. russia is saying, maybe 1.5 million barrels increased, arabia is a saying one million barrels a day, and iran disagrees completely. arabia is not

pumping out there -- after maximum, there is something in it for them if they are increasing production. has newis after iran sanctions from the united states. we call upon our borthers -- brouthers -- we pull up this quote board a lot of politics with the united states. the united states has been acting -- asking the saudi's and other opec nations to pump more. my father was complaining when pumping gas last week that prices are too high. opec needs higher prices, but are loads to vote for

what is best the united states since they have seen donald trump a threat for the country. >> what are we seeing in the markets? we are seeing oil markets weaker, 1.7% on wti. is there the expectation that russia and their saudi friends well win out -- will win out? saudis you have the saying, increase production, these guys where we get their way. united states has benefited and now they are pushing for them to pump more to lower prices. there is a bit of contrarian happening in the brent net long position. it increased by 4% as of last tuesday.

traders are uncertain about how much production increases will be. it is also hard to trust these members. it is a bit of a contrarianions chart. about with to talk regard to the oil markets this week. marie will be in the yen on wednesday bringing you the latest from the economist meeting. is the conversation around high oil prices getting into the american psyche. there is the flattening of the yield curve. we have talked about this many times. there anything worrying about this, or is it so different? : what the flat yield curve is telling us, even though there

is a fed tightening policy, conditions globally remain extremely accommodative. ten-year yields, we started in 2017 with tenure yields -- ten-year yields, $240. at a $290 even -- two dollars any sense even of the fed is already hydrates twice. -- we are now at 2.90 even though the fed has already hydrates -- hike d rates twice. the --so we don't

get inflation. will there be an exit from an extraordinary accommodative policy? fed: the message from the and other central banks was that the market was too complacent. this resulted -- no real drugs were taken, i am sure. lena: this resulted in the lack of volatility of 2017. with the rise of rate and markets areatility, now pricing into the stimulus. will want to assure the markets they will keep the paddle on the accelerator. -- pedal on the accelerator. anna: thank you very much. sday, at the ecb for him

mario draghi speaks alongside his counterparts at the fed, doj, and stephanie flanders will be moderating. ♪ anna: good morning from

bloomberg's european headquarters. this is "bloomberg: daybreak europe." here are today's top ories. u.s. andown trade war, european futures lower. fate in the balance. an ultimatum overheard migration licy. can she swing support from eu partners to avoid a collapse? and opec partners set to clash in vienna this week.

♪ anna: good morning. this is "bloomberg: daybreak europe." 7:00 in london. talking about the risk off environments over in the asian session. and china, coming had to head on trade policy. coming head china, to head on trade policy. like we are expecting a bit of softness at the start of the trading day. the smaller end of the financial services sector in the u k. offshare.commending cybg shares for each virgin

money share. cybg is a u.k. consumer and business lender. bloomberg reported they were near an agreement to buy virgin money. on june the third, they gave a statement to the market. to be the british australia bank. national they sweetened the offer in june. saying virgin money holder's blood and 8% of the akeholdersirm -- st .ill own a 38% of the combined we look to the future is. we were able to tweak her at the start of the trading day. this is where it is coming from. we are seeing a risk off attitude in markets. we have a few things going on. the trade conversation between

trump and xi, the standoff that exists. that has lent more appetite to the yen. a stronger yen, where the japanese is selling the japanese earthquake, mercif ully, we have not seen hundreds of people killedbut there has been fatalities and damage to an industrial area. a little bit more of version in the session. -- aversion in the session. is the market assuming the saudis will be victorious? one on what is coming up bloomberg television as we go through the day. of former u.s. secretary commerce, a fascinating conversation in the context of all these trade talks, the near trade war we are seeing between 130a and the united states,

p.m., u.k. time. let's get a first word news update. germany's crisis over migration policy enters a critical phase, with chancellor on thes political future line and the rebels are being felt across europe. she meant with senior members of her christian democratic union at party headquarters yesterday, to plan the response to an ultimatum set by the interior minister. that was to order migrants turned away from germany's border, in direct contradiction of the chancellor. faces a prime minister crunch next week over brexit. lawmakers within her own party are warning privately they could move to oust her. there is a parliament vote this week to give itself the ability to force her back to the negotiating table, rather than allow britain to leave the eu with no deal. there is pressure over how she spending, withhs

plans of a brexit dividend being discredited. be about 600 million pounds a week in 2024, in cash, going into the nhs. that will be through the brexit dividend. ebra: in japan, three people have been confirmed dead and 100 injured after a strong earthquake hit osaka, the strongest earthquake since records began in 1923, that struck in one of japan's main manufacturing heartland's, home to companies including and a sonic and nintendo. firms assessed the damage. global news on air, 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. you can find more stories on the bloomberg. anna: thank you.

let's get an update on the markets. david joins us from tokyo. we are inheriting a pretty apologies for the headwinds. i know we talk about asia a lot and the trade tensions, but the tone appears to be worse. you put that together with the tie to monetary policy to make fund managers look the other way. of 1%. the benchmark is below the 200 day moving average. an indication of the worst hit markets in the region. we tala ttle bit already about dollar-yen. are already pushing lower on the 10-year yield with japanese trade.

we are down for a fifth day on the specific basket on msci, take you all the way back to december of last year. ank you, david, in tokyo. the united states and china are on the verge of a trade war, with beijing cooking regarding president trump's announcement on $50 billion worth of chinese imports. tom, good morning to you, good afternoon. what is china hoping to achieve? what is the overall strategy? accident we see the action taken by china set to impact the path of the united states. david: absolutely. these areuld say appropriate measures, given what they describe as an aggressive stance on trade from the trump administration.

these are targeted measures by china and they have had their policy makers through this for a long time. they hope the farm states and the rust belt states in the u.s., the pressure would result in some kind of change from the white house. is 20 5% on about $34 billion worth of goods, focused corn, soybeans, wheat, port, and beef. and there is pressure on companies like tesla, which produces all of its companies -- ars in the united states. china has done its part to revive the coal industry in the united states. and they are the third largest buyer of u.s. crude. are in aieves they better position to weather this storm than the united states.

xi needs to show he is a strong leader and can push back. anna: no midterm uncertainty for the chinese government. how can we expect china to respond as this escalates? david: the big question is whether or not trump goes ahead with this additional $100 billion worth of tariffs. nothat happens, china will be likely able to respond in kind. it only imports about $130 billion worth of u.s. goods. you may see a scenario where china focuses on some of the investment in china, there is $200 billion worth of u.s. investment in the chinese market . they could make life more difficult for u.s. corporations, whether that is slowing down licensing or ports or doing checks of offices, that is a

potential scenario for china. anna: who in the u.s. will be hit the hardest by these terrorists? tarrifs?se iffs? buys a third of all the exported soybeans from the united states. the soybean areas are a massive player of the chinese markets. of airlines in the chinese markets could be impacted. we saw shares dropped marginally on friday. china already has sales that have been notche and -- see airlines messing around with some of their orders to put pressure on companies. you can see some of the german

automakers that produce a block of cars in the united states. they can also be impacted. there are a number of different areas where you can see some fallout. a question surrounding the industrial policy around technology, a long drawn out area of tension between these two countries. anna: tom, thank you. joining us on set, it is the deputy head of european equities. good morning to you, ben. in terms of trade tensions between the united states and china, are you looking at this as an investment scheme to drop up a list of countries you could be invested in? ben: there is this book -- broad macro, these large numbers we hear.

the other sidek to it is looking at the specific impact on companies. it is more about anticiating to some degree, but also trying to understand the dynamics, these things are complex but they are not all negative. tariffs on bmw, etc. there are a number of things here and you have to look at the specifics. do you have conversations with corporate's trying to point out the positives, thing trump ng trump this -- sayi is doing this? you are very stock specific. do companies not understand enough about these policy locations? en: we are educating companies about these issues, particularl

ere they might be most honorable. those areas are a big topic of conversation. anna: where are you looking to invest? high interest rates are one of the areas that interest you. ben: people are anticipating since 2008., where trying to find out they can do well regardless of interest rates going up. back expectations of raising rates in the eurozone. pushed back expectations of raising rates in the eurozone. a free option starts to become even -- attractive. fed tighteninge and the ecb tracking its heels, and the boj, barely starting when it comes to economic

policy. you see investing ihi interest rates as a savory? en: we need to position ourselves to be aware if there is a benefit to extremely low interest rates for a long time. and where can we find those opportunities to benefit from higher rates? this is not necessarily priced into stocks, but how can this give us optionality? nna: pharmaceuticals is what you are looking at. do you think these are undervalued, are there opportunities, or insulated from trade tensions? en: we think this is a classic bottom-up sector, where top-down themes are quite attractive. when you look at the botm-up level, it is a pretty disappointing place to invest. there is pricing pressure and

patents expiring and new technology coming in. interesting, with trends behind it, but you have to look at the details. businesses are benefiting from the trends that are insulated from some of the bigger pressures. they can benefit from the trends not affected by the broader troubles. anna: ben stays with us. coming up on the program, angela merkel faces a crisis over migration policy. is her political future on the line? wednesday, president mario draghi speaks alongside his counterparts from the fed, boj, and rba. we will be discussing the markets and listening to everything these gentlemen have to say.

it will be moderated by stephanie flanders from bloomberg. this is bloomberg. ♪ ♪

anna: good morning. 8:18 in berlin. 7:19 in london. we will talk more about germany. the dollar, under pressure, 11 5.93. germany's crisis over migration policy is at a critical phase. faces a standoff with her interior minister and coalition partner. italy signaled its intentions to refuse to harbor refugee vessels. we are joined by our reporter in berlin. great to have you on our

program. how serious is this for angela merkel, how much pressure is she under? it is serious at the moment. partner, taking control of a national border is they are facing at the moment regional elections in to say tond they want their electorate, we have changed the course in german policy. they were always against angela merkel on this issue and always said germany has to take control of its border. they are really eager to push this conversation with merkel very far. they want to see results in the foreseeable future, before the october elections. anna: what is the compromise?

angela merkel has talked about wanting to find a european solution to this. can she do that before the deadline is set? >> there have been talks open,day, the lines are with the leadership of the cdu. there is now a deadline for two weeks. tokel has been given time talk to her european partners to forge a compromise. merkel is left with the task to demand from her european partners to take back some of the refugees, to reverse what has benen done in the past, germany is taking on refugees. merkelsame time, angela

wants to look for a wider agreement as to how did -- to distribute refugees in the future. anna: she will be meeting with the italian prime minister today. that is not gointo make life easier in terms of her relationship with her coalition partners. what issue looking for from these talks with italy? hand, she is looking for concessions that italy is going to take back refugees. she wilso open the door for talks with the european partners to come to a bigger change of the asylum system in europe. this is what italy is calling for. once the refugees are sniffing at our borders, this is the european issue. this is not just an italian issue.

germany, you have to take responsibility, as does france. she would agree there is a need for border sharing, inch -- and at the same time she will say, you also have to take some of the refugees we have been taking. nna: we will see how that plays out. thank you very much. ben is still with us. test for theatest european infrastructure. can they come to an agreement as to how to deal with the migration crisis? from your perspective, you want to see how well europe can work together? ben: if we look at the tensions at the political level, we look to see whether or not that has implications for the stability of the national government.

this helps to create the uncertainty we have seen in recent times. we are seeing more discussion has been the staple bedrock actors within the european community currently under pressure. these things are creating those tensions and that helps to create a degree of uncertainty around policy. anna: some of your colleagues might find instability could be quite invest-able. we found volatility introduced into european markets from fixed income. that is quite interesting, but maybe that does not apply on the equity side of things. ben: generally speaking, as active investors, we welcome environments of volatility. that gives us the opportunity to stand out against the backdrop. anna: there is a structural growth story. developed markets and the emerging markets are part of the story.

is there still trade tensions round migration? ben: you need to focus on the details against the backdrop of realizing rates. we want to focus on the businesses where we see higher levels of growth, something like heineken which we see well-positioned to grow in its emerging markets. there are other stocks where we don't have that much confidence in delivering on growth and that we are more cautious on. it seems you are having to be quite selective around individual stocks, even in areas where you might like the sector. there are going to be winners and losers. en: we are coming to suspect the last couple of years the

market cycle. this is a time where it pays to be cautious. we found quite a lot of the growth stories in the market have played a long way. there is a final part of market dynamics, and we need to be more selective. anna: there are some technology stocks in europe you like. ben: in technology, there is this fantastic growth opportunity. you need to be specific and focus in that. europe does not quite happy growth opportunities the united states has, but there is still a lot of growth out there. we can see good, long-term growth potential. anna: thank you for your time. n will be continuing the conversation with us on bloomberg. next.l be with the radio, that is it for "daybreak:

europe." next.ropean open is up alex partners will be joining us at 930 u.k. time. ♪

manus: -- guy: welcome to bloomberg markets. this is the european open. tt: asian stocks are down over concern about a full-blown trade war between the united states and china. european trade starts in 30 minutes. ♪ uy: we'll migration bring down angela merkel? the chancellor