>> good morning from london, i am anna edwards. >> i am manus cranny live in dubai, this is daybreak europe, and here are the top stories makes, anda trading report that the trump administration is preparing new curbs on chinese investments. the turkish president scores a new term with near absolute power and the lira jumps. we are live in his temple today. and bloomberg has learned that some hedge funds used private polling data on the day of the eu referendum. we have more on this exclusive

story this hour. ♪ anna: good morning. have 6:00 in london, we global news around trade, but we are focusing on trade in turkey, it is moving markets and the lira. we have on the ground coverage of the presidential election, yousef is there with us. we had a long, sleepless night here in his temple and around turkey as a results trickled in. the president able to cement another term in power with additional rights as well. the parliamentary front was not as much to yield the shift in power because the party will be able to stay in control to get of a coalition. 99% of the ballots have been counted according to government

agents. a lot of the key voices in turkey and beyond here, it is speared some gains. stocks and bonds have yet to price in this scenario. we will have to see what clarity we get from the government in terms of a potentially new team to lead turkey forward from here. team: let's see what the is in place, and let's see what the markets make of the lira. if you want to protect yourself, it is in the bt the library. the cost of insuring yourself against the volatility in the lira is the highest it has been since 2008. a very different turkish story relative to back then. we have lost the fifth of the value of the currency this year, the worst performance in more than a decade. you have seen this rally for the fourth straight day in a row. if you look at socgen, you will

see 515, 550 by the middle of next year. if you see or believe in tv know, you will see some stability around the 440. it will come down to the rhetoric on inflation and central-bank policy, and that is where the market will be squarely focused, what is the policy agenda for turkey? it is expensive to hedge yourself. anna: we will have plenty of coverage from istanbul and analysis in the studio in london as well. let's talk about the broader market story and are trading still very much the focus of things. this is the picture on the msci asia, down by 4/10 of 1%. iran looking down even though the chinese market is holding its head above water. the japanese market is really to do with the japanese currency, we've had some moves in the yen, the yuan, the chinese currency,

we have seen devaluation of the chinese currency, it is ramping up a little bit. the dollar,ainst the chinese cutting their reserve requirements, the banks trying to boost lending. we have seen some risk off sentiment in the markets to do with the yen and 10 year yield in the u.s. u.s. futures, another reason why the asian equity section is looking to start just -- stodgy. week, we heard that it is not hurting the u.s. economy. a guest will be joining us shortly and we will talk about these big names around trade, where to go from here. we will also talk about what is going on with regard to the turkey story and other emerging market things. manus: lots to consider this morning, autos, trade and the

triple. debra mao has the first word news. in turkey, edrogan has won a sweeping victory after elections. according to government -- the government news agency, he had 53% of the presidential vote, 31% from his closest challenger. more than 90 #of ballots have been counted. the electoral board has not confirmed the results but confirmed the victory. a bloomberg investigation has found that hedge funds hired polling companies who sold them critical advanced information on the eu referendum, including data that would have been illegal for them to give the public. this allowed a some of them to

anna fortunes by selling short the british pound. although confidentiality agreements have made it to the call to discover the identities of many of the hedge funds, bloomberg has found that at least one doesn't were involved -- at least a dozen were involved. an internal eu memo has warned that donald trump's aggressive approach to recasting u.s. partnerships and his direct assault on the wto will unwind decades of progress and return of global commerce to a free-for-all. the memo, prepared for a you governments ahead of a june 28-29 summit where trade will be discussed, says this policy will arce nations to revert to machiavellian system where might will prevent. european leaders have put on a brave face over persisting differences on how to handle migration flows. speaking at an informal states onof 16 sunday, angela merkel said there

was a lot of goodwill and they would continue to work toward a solution. a lack of tangible progress could further escalate a crisis that threatens to on -- unravel the passport free area and risk germany's governing coalition. china's central bank has confirmed the triple are cut it flight last week, blogging about $108 billion in liquidity. the amount of cash some must hold will drop. the aim is to support small and micro enterprises and a further remote -- promote a program. and call it a targeted precise fine-tuning. global news way four hours a day , powered by more than 2700 journalists and analysts in 120 countries. ond more stories bloomberg.com. latestet's check out the

in hong kong. >> mostly a down day across the region, check out japanese stocks, down have a percent while the yen trades at a two-week high. we have had some gains here while the korean yuan has slipped. chinese shares have been fluctuating and investigators -- and investors are weighing the large-cap gauge, a moderate changer as the yuan is trading near a five-month oh. the hensing is about off half a percent. if you look at the movers in the space, chinese developers among kong, littlehong support for the housing market. zte shares have gained as much as 5.9%, the a share is sinking. they have reportedly paid find to the united states. in singapore, a rally. they are getting their -- their

construction plan over -- underway. we saw a record advance in the stock last week. manus: thank you very much. let's get back to our trade story. james is here, our china economy editor joining us from tokyo. the decedent. what can you tell us about the trump administration's new investment reviews? i think it was summed up beautifully, this is not about trade, it is about technology. that is a pretty good summing up. on friday, the treasury department will bring out a report on restricting chinese investment into the u.s., american companies in the u.s. it is unclear what will be included in the report, it was a wall street journal report today that said chinese entities with

about 35% or more of investment from chinese companies -- investment of money 5% on more from chinese companies, will invest in things like new vehicles, energy, these types of things. this is not about stopping trade flows or things donald trump has been talking about with a trade deficit, this is a fight over who is going to be controlling high-technology in the future. it looks like the administration is trying to stop any kind of u.s. technology developments from going to china and helping them in the efforts to bring china of the value chain to develop chinese technology as part of their made in china 2025 program. as well as the investment restrictions on chinese comedies investing on the u.s., there is talk about restricting technology exports to china. on both fronts, you might see a very aggressive effort by the

u.s. government starting possibly this friday to stop the flow of information, the flow of technology from the u.s. to china in an effort to keep america's preeminent position. anna: good to see you. usngst all of that, bring up-to-date with what the chinese are doing. we see the chinese currency weakening against the u.s. dollar, that has been the story of june. this weekend, the reserve requirements, the cut to rrr, they have been hotly anticipated, how to make? -- happened today? james: they have been. it is not a surprise, the rrr cut. the interesting thing, they targeted -- the most effective cut is going to the debt to equity swaps, a program started in 2016, it allowed takes, -- allowed it banks, when they loaned to a company that is not doing so well, they can take

their loans or bonds and swap that for equity in the company. if the company is not doing particularly well, the equity might be worth less than the initial loan, and eventually if a company goes bankrupt, it is worthless. there has been a lot of take-up of these swaps since it started, and the government is looking to provide more cheap money to banks to encourage them to invest in this. it looks like an effort to promote deleveraging, especially the state owned sectors, coal, steel, not precious metals, and push toward the deleveraging process. less impact on the trade questions, although honestly providing more money to the economy will help any kind of trade difficulties. but this is very much an effort to promote deleveraging in china's domestic economy. manus: thank you, james. our china economy editor in tokyo. let's bring in our guest host for the next hour, head of

investment strategy. will run like methuselah's head, but the rrr is in play, the chinese, i would put it to you, have some different drivers, but the rrr are in place, what does that mean for markets? >> a couple of things. james is right, this is targeted at the debt for equity program. it can be seen, interestingly, it will be implement it july 5, ahead of the first role comes in. china sees a key vulnerability in the economy, the high corporate debt. it may be something to try to work that out. other banks have been encouraged to set up asset management companies to house the equity. they are not necessarily moving

the debt around, just shuttling bad exposures around the economy but it will reduce the corporate debt exposure. you see the chinese economy slowing a little bit recently, the april-may data indicated the economy is starting to feel the effects of the various tightening we have seen in the first half. that, throw on top of this trade skirmish, that makes it more likely that in order to hit growth targets, they will have to move to an easing bias for the second half of the year. this might be the first strident step towards that. the economylk about in china slowing, good morning. tightening credit conditions is something you have mentioned previously. is this designed to turn that quarter and stop that -- that corner and stop that? are they -- how much are they about deleveraging the economy? will: it's a tight rope. they don't want to slow the economy too much, the hard landing scenario is one people have talked about.

let's face it, they have walked this tight rope fairly well. but they have got to -- it is a careful process. the try not to slow the economy much, but they are trying to control the financial stability risks. so far, they have managed well, but if you at into all of this complicated tightrope walk, the trade tariffs, the trade skirmish, it will be an extra buffeting and will make things more complicated. the one thing we noted in our market wrap was the yuan, 20 longest streak down since -- since 2008 good the bottom line, it is coming under pressure. are the chinese weaponize and the yuan? will: so far we think not. we think one of the reasons why the reserve requirement ratio is so high is because previous activity with the chinese

authorities trying to keep the yuan where it was. see it come down, you should see the yuan weaken a little bit, but we think that is the last 12 in their kit and they don't necessarily want to go down that route. there are plenty of things they can do in the trade battle before they get to that, that kind of last resort. anna: the battle is a course between china and the united states, a very good reason. at what point do the eu and china -- and try to circumvent the united states and stick to their own path? you heard the chinese five premier -- five premier talking about how the eu is great at this. i have a chart that shows european carmakers last week being hurt by the traits that -- trade spat. to some point, that is

anticipated, but you wonder to what extent of the chinese in the europeans stand apart from the u.s. will: with great difficulty. everyone realizes there are two scenarios, one is that the u.s. administration is playing trade chicken in order to try to fix -- to force better trade out of its partners. in that scenario, you have the midterms in november, the have to escalate the stakes quickly. that's what you are seeing. trump and, president the republican party is not going to want to hit the campaign trail with the damage of tariffs starting to be felt by the economy, particularly with the chinese and europeans targeting the barriers of the economies, soybeans, things like that. blinks extent, it is who first. the europeans and chinese seem to be saying it will not be us. anna: until the midterms. manus: indeed.

nobody really wants to stand up to the united states. will have muche more to come. deal, can they agree on how much to increase production. plusll bring you that,, our interview with the russian energy minister and a sit down with iran's oil minister. this is bloomberg. ♪

♪ -- has fallen sharply of the lows of the day, down 1.60% on brent as we speak. this is after friday's deal between opec members pledged a nominal supply increase of one million barrels per day. monitoring committee, dominated by saudi arabia and

russia, will oversee the hike. we spoke to russia's energy minister about the deal. lever istal conformity 150%. the deal has been made to take it back to 100%. we would be adding around one million barrels per day of extra protection -- extra production. those countries with extra capacity will post 100 barrels. is with useporter now. talk us through exactly what came out of this crucial meeting in vienna. >> things really changed on saturday when the oil minister for saudi arabia came out and said it will be one merrill -- one million barrels real hitting the market, not nominal. not all countries can produce, their quotas, they cannot hit their maximum. you think of a range of like a

600,000, some are saying 700,000. the ministers were manipulating the deal to suit their country, but then on saturday, alongside the russian oil minister, he is saying there, it will be one million real barrels hitting the market. since 1990 two, opec is pretty much respected country quotas, and it looks like they are targeting as a group, hitting this target. saudi arabia has warned they basically have oil on the water. they were saying that aramco has ramped up, this deal would happen. oilso spoke to the iranian minister, and this is such a sensitive meeting because by friday, the oil minister had left, but on saturday they were saying, there are no country quotas, but the iranian delegation and venezuela were tweeting about it, saying opec needs to respect country quotas, but the fact is if they don't have the production to increase, they can't decide.

the big takeaway from the iranian oil minister was sanctions. he was naming names, the fact has took tell -- total stopped buying crude. whatis for the oil market, happens when the sanctions really start to hit home? i asked about waivers. take a listen. we will't believe receive a waiver from the united states. we will have to find another way. >> i asked him what the other ways were, what exactly are you doing, and he did not want to give me an answer. he said we do not want to signal anything to the u.s., they will block is. big: this is city with global oil companies, whether they are able to buy the energy from iran or not. but they have already stopped, haven't they? >> yes. it's interesting, in st.

petersburg, i asked total as they are still buying crude, and they said yes. but within a month, they have stopped, along with shell. but the iranian oil minister said a need to find new customers and they don't think they will get waivers. but it is confiscated because of the banking system and financials. fantastic work, you and the entire team on the ground in vienna. the work is quite something, and you did a lot of work. , the market will little bit lower, we are down this morning, the market prevaricate. at the end of the day from an investment perspective, oil cap for the moment in your opinion? will: i have to say, in the we arety complex, holding a little bit of a candle for, that's only because of the

other commodities. precious metals, they should continue to move higher. haven.s of safe industrial metals have slowed down, we talked about the chinese earlier. oil, the curve is telling you supply is still reasonably -- is reasonably tight, the glut is over, and you can take money from the curve, rolling up the curve, which is relatively rare. that's something we are still probably taking advantage of where appropriate and not a strong spot price appreciation story. anna: i think we spent all of last week talking about the supply side of things, and the demand story will no doubt get attention as we move through the summer and digest the trade story. thank you, will. we will go back live to his temple to talk about the turkish president's new,

sweeping power and the elections. yousef will be on them -- on the ground for us. what does this mean for the markets, economy and beyond? this is bloomberg. ♪

manus: you've got the queen of charts, and the queen of maps. good morning. reporter: good morning. a lot going on in the markets today. the turkish lira on the move. let me focus on asian equities. losses on the msci asia-pacific index as trade tensions between the u.s. and china are ramping up. getese equities started to a little bit of a list, but they are still on the downside after the cut from the pboc for some banks. we are seeing the shanghai composite on the cusp of a bear market. equity on offer in asia at the moment. market,itch to the next

i've got each heart of the offshore yuan weakening, longest losing streak since 2016. we can see on the offshore, we are at roughly the same level at x50 three on the onshore. the losses gaining momentum for the yuan after the rrr cut and also perhaps on some of the trade tensions ramping up. chart,ng to the next talking about the general risk of mood and markets. you showed earlier in the show the 10 year treasury yields coming down. dollar-yen.he some have pointed out this line has been key for multi week trends for the dollar-yen. if we break below that average, we could see the risk of mood when it comes to this currency pair. finally, taking a look at the

oil markets, seeing a bit of a divergence between wti and brent. brent loses a lot more, down 1.6%. wti off by just 2/10 of a percent. brent driven by the output -- outcome of opec, meaning the wti brent spread has narrowed by almost five dollars in a week. anna: thank you. let's get the first word news update. plenty to hear about from debra mao. reporter: thank you. tiergarten one has won a mandate to govern with sweeping new powers after a double victory in presidential and parliamentary elections. had 53% of the votes, 31% for his closest challenger of the secular republican people's party. the country's electoral board has not published the official results yet that has confirmed the victory for president or do want. the turkish lira went up for the most in two weeks on.the

news a bloomberg investigation has found that hedge funds hired companies who sold them critical advance information on the eu referendum, including data that would have been illegal for them to give to the public. they sell out some of them to earn fortunes by shelling -- selling shores of british pound. is difficult to discuss the identities of the hedge funds, but bloomberg has found at least a dozen were involved. an internal eu memo has warned that president trump's aggressive approach to recasting u.s. partnerships and his direct assault on the wto will unwind decades of progress. and it willlobal -- return global commerce to a free-for-all. this was the head of a june summit where trade will be discussed. this can return to a machiavellian system.

president trump ratcheting up his demands on immigration policies, saying people who enter the u.s. illegally should be deported immediately without court hearings or other judicial processes. he tweeted "we cannot allow all these people to invade our country. when somebody comes in, we must immediately, with no judges or court cases bring them back to where they came from,. our system is a mockery to good immigration policy and law and order." 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. i'm debra mao. manus: thank you very much. is head of investment strategy at barclays investment solutions. one of the big themes we have touched on his turkey. there has been a reprieve in the currency this morning. if i look at the broader emerging markets space, this is ripping out money, $7 billion

coming out of emerging-market equities at the close of business last year. bank of america have run their bull indicator and this is what they indicated. this is a contrarian indicator hitting a two-year low, hitting closer to a buy signal on some of these risks. i would put it to you that a brave man would buy at the moment. how brave are the boys and girls in en? -- em? >> in our view, it's about taking a slightly longer-term view. the point of the moment with em, as you pointed out, the dust from the trade scuffle a health obscure what remains and improving fundamental backdrop em risk assets. if you look at profit margins, they move in the right direction. the problem is that the dust thrown up by the trade scuffle will obscure the investment case

in the areas you like the most, because that is where the economies are better managed, and generally within our investment term complex we are steering away from latin america. it is a difficult period, but i will bet this will not turn into something more permanent. it means we are just holding on and waiting for the dust to clear and for people to realize this remains an attractive place to do investments because earnings are growing briskly and there is a nice mixture of sectors. anna: you can narrow in on the idiosyncratic aspects of certain places. turkey is very much in the crosshairs over the weekend because of the election. is this an investment opportunity in turkey or not? >> not right now. my colleagues have singled out some senior credits within the banking sector for a short duration. that is not for us right now. i think the interesting point is , some people are looking at e.m. recently with that rising yield backdrop in the u.s. and rising dollars, and that tends to be the tide going out that we

see, and there are number of questions that have. it is not an areawide problem in our opinion. actually in the places where we are focused and dominating the , theseg-market indices economies are well, institutions are not being degraded like in turkey. this is something we think of as a good area for tactical and interest in strategic investments. will hobbs, the head investment strategist. lira is rallying. back on the march again at 1.4%. we are restarting the uptrend for the turkish election. the results are in. you have a guest. the sun has come out

here, and yes, the presidential election clearly decided for president erdogan, but the way it was done in the first run, he was able to seal the deal and it caught people by surprise here at are the conversations i have had. let's get more context about what this means for policy. executivened by the chairman of a think tank in istanbul. great to have you on the program. we will start off with what you think is a risk, the possibility of a coalition that may not necessarily see eye to eye on our issues, that could possibly lead to tension. >> yes, indeed. i think this is worth erdoganting that secured a clear win in the first round of the presidential election, but he failed by the his margin, or at least political party, failed to obtain the majority in parliament. this will have consequences for

policymaking, both at the domestic level, but also for foreign policy and economic policy. reporter: what will that mean for economic policy? we have to remember that now the president has more power. that means the parliament has less powers. does it even matter as much anymore? >> it still does matter. obviously under this new system, need thedent does not authority of parliament to rule, given that he doesn't need a confidence. however, parliament is still important because the government will need to rely on parliament and the control over parliament in order to pass legislation, including the budget. reporter: we were speaking earlier to the chief economist of the industry of business association, and she made the point that it was still too early to make a call on where the president will take the country in terms of the economics. there is potential for upside

and downside. would you agree with that? >> yes. we also don't really know what the setup of the new cabinet will be like. i think that will possibly be the first signal that will let us understand the direction that president erdogan wants to take the country in terms of economic policy. reporter: how much appetite is there from this administration to pursue austerity, pursue reforms, and reestablish credibility, which has been lost in the last six months with foreign investors? that has to be at the top of the agenda. >> normally, yes. at the same time, there is another electoral pressure, the local elections in march 2019. those priorities will clash. the need for an austerity in order to pull down the economy, but at the same time, the political urgency to win local elections in march 2019, it remains to be seen whether the government will come up with a smart policy that will be able to actually have both objectives

on board. reporter: how do you expect the central banks to navigate these difficult scenarios? they have to deal with rising u.s. interest rates, putting a lot of pressure on turkey. they have to deal with pressure from the presidency. you saw the interview with president erdogan on bloomberg tv recently. >> yes, but the central bank has reacted, albeit at the last minute, because when you look at the past two months, turkey has had to raise interest rates by about 500 basis points. that is despite the nonresistance of president erdogan -- known resistance of president are due on to raise rates. the central bank can still act urgency.is a sense of the thing is whether we can rebuild economic policymaking cane the central bank connect that sense of urgency, which is what is needed to reduce the cost of adjustment.

voicesr: some of the key say things have to get back before they get better. i'm thinking along the lines of what happened in argentina, for example. is that the view you share? >> the risk that turkey now has is if the government continues on this path of expansionary policy. then again targeting the march 2019 election. that is going to be a very difficult backdrop for turkey with rising interest rates globally, turkey being a country that has a chronic external financing requirement to the tune of $250 billion a year, and that is going to put a lot of pressure on policymaking. reporter: do you have a particular view or forecast on the turkish lira? is there a knee-jerk reaction, continuing to strengthen, our is it going to get weaker? >> i don't expect any short-term reaction. i think people and markets will adopt an approach of wait and

see. they will lay until the new cabinet is formed, what sort of signaling the new president -- the new cabinet and the president will have. reporter: i appreciate your time this morning. aecutive chairman at edam, think tank. adding some are colored to what has been a vibrant discussion. anna: thank you very much. there on the ground with the chairman of the istanbul bank think tank. good to have you on the program. coming up, brexit big start. thatvestigation found hedge funds used private polling data to make money on the pound move in 2016 on the night of the vote. we will bring you the details. manus: and the stakes rise for angela merkel as the european union domain -- remains divided on migration as an issue. this is bloomberg. ♪

anna: good morning. this is "bloomberg daybreak: europe." hey bloomberg investigation has hiredthat hedge funds polling companies who sold them critical advance information on the eu referendum, including data that would have been illegal for them to give to the wider public. this allowed some of them to earn fortunes by shortselling the british pound on the night of the brexit vote. for more on this exclusive story, our international investigations editor joins us. very good to have you with us. fascinating, comprehensive story. you have been looking into this for seven months. what are the most surprising things you have found? reporter: so many things. probably just on the surface the fact that these relationships existed. there were some generic references in the press that hedge funds were looking at hiring pollsters to do things, but the depth of these relationships in the days before the vote and on the day of the

referendum were pretty shocking to us. we had no idea that the people who were curating the democratic conversation about the vote in those critical final days were on an undisclosed bases working for hedge funds who had major, major stakes in one side or the howr, and were betting on the market was moving based on polling data. public opinion drove the pound throughout and drove pretty key stocks as well ahead of the vote . the secret relationships existed without anybody really knowing specifically where they were or the depths of the relationships. manus: of course, the whole question about conflict of interest is another subject. talk me through this. what exactly were the differences that the services that the pollsters were sold? what did they fell to the hedge funds, and what were the advantages they potentially offered?

reporter: most critically, it was exit polling data on the day. bought exitthat polling data had the posters stream it to them throughout the day at regular intervals, usually every hour. that sometimes was a little longer or shorter, depending on the fund and the pull -- poll. a crime tolaw, it is publish exit poll data before the 10:00 p.m. our to the public public.section of the that is not only critical market moving information that they were being provided that is nonpublic information, but it is criminally defined in the u.k. law as nonpublic information. that is a really interesting predicament. one of the major polling got word fromlved its outside legal counsel that they could sort of probably stay within the bounds of this law if they provided exit polling data to a single hedge fund versus a multi-client hedge fund, but we are not really sure. it will be up to people other

than us to interpret how that shakes out and what it means. it wasly, we got important enough that we spent a lot of time looking into these relationships. anna: the definition of sections of the public, who can provide what and when, really fascinating. thank you very much for bringing it to us. cam simpson, bloomberg's international investigations editor. sticking with european, the stakes are high for angela merkel, the german chancellor. the eu remains divided on the issue of migration flow after an informal summit in brussels. merkel says officials will continue to work toward a solution. this comes ahead of a key eu summit thursday. joining us is our germany bureau chief, chad thomas. we had this informal meeting last night. where does this go from here? hello.r: i'm afraid to say we don't seem to have gotten very far forward.

everyone was quite divided at the end of this meeting as to what we should actually do in terms of the response from the eu. you had southern european countries say they want more of a distribution of the refugees coming into those companies -- countries from africa and the middle east. you had northern european countries say they wanting -- want to return refugees back to their first country of origin, and you had chancellor merkel, she had promised to seek out bilateral agreements, given the fact that the eu is having difficulty reaching agreement on this issue. she was basically flat out turned down by everyone who said an eu wideo have solution. really difficult to see how we move forward on this topic, which has been very difficult for the eu for the last several years to come to any sort of conclusion. manus: good to see you this morning. how critical is this for angela merkel? what happens if she doesn't reach a deal by the end of this

week? reporter: you are right, the clock is ticking. you have the german interior saying that he is ready to take unilateral action at the beginning of july. incident able to come up with a solution, merkel is against any sort of unilateral action. we are facing sort of a showdown here in germany as early as next week, if there isn't some sort of deal at this summit that is coming up at the end of this week in brussels. meanwhile, there are a lot of other major issues that are being ignored. building up to a fascinating summit at the end of this week. reporter: yes. think about issues on the plate just for germany. you had president trump tweeting last friday about slapping a 20% tariff on exports of cars from the european union into the u.s.

when he says europe, he really means germany. we are talking about bmw, daimler, and volkswagen. that would normally be topic number one in germany, but it is not getting the attention it normally would. of course, you have this nato summit coming up in a couple of weeks. germany is under intense pressure from president trump under that issue as well when it comes to funding. as this spat plays out in germany over migrants, a lot of these other huge topics are not getting the attention they normally would. manus: thank you very much. chad thomas, the german bureau chief. will hobbs is with anna this morning, investment strategist at barclays investment solutions. ,e put this in the chart showing migration angst in germany and france. what is fascinating is we are nowhere near the zenith we had in 2015, 2016. , doese markets

profitability of european countries supersede any of the angst within the political realm? >> the interesting thing about investing in europe -- i guess interesting is an interesting word to use in this concept -- the political background is noisy. it is very hard to look at europe and say, let's just focus on the fundamentals, but is it fundamentals you should focus on? finally, the european economy, since the middle of 2016 when it started to accelerate, has provided the cover for the european corporate sector to start catching up profitability relative to the u.s. you are finally getting an investment case everyone has been waiting for, coming to. it is that we are focusing on, relying on compromise being forced by basically long-term self-interest on the part of policymakers to continue to muddle through. there's nothing easier than that. that is the thing with european

equities. they are top of the tree for us and undeveloped equity exposure. there arestill think fundamentals people should be focusing on. anna: focus on the fundamentals. part of that story is the exit by central banks globally from an extraordinarily loose monetary policy since the financial crisis. warned that markets should not be afraid of shaking markets. europe,nk it is 2018 in a 2019 story. they will continue to try and get the patient off of the emergency management drip. the patient is no longer sick. they don't want to give extreme medicine anymore. i think they will not raise interest rates for at least a year. you could see president draghi leave without heather -- ever

raising rates. when you look at the middle of 2020 before you get to zero on deposit rates, that feels a little shy for us. i think we need to get interest rates up because the financial stability risks should start to emerge, because business confidence is at decent levels. manus: very briefly, we look at inflation data on friday. we expect 2% for the second time since 2013. are we at escape velocity? >> inflationary pressures said be -- should be building around the world. mainly in terms of policymakers throwing the fiscal logs onto the fire that does not need it, and you have wage pressures picking up in the u.s. durably, and more job openings than jobseekers. inflationary should be increasing. hobbs, head of

investment at barclays. investment solutions we will be continuing the conversation here. you can tune in. we will be bringing you special coverage of investment in china. >> there are some of the hottest videos on social media, videos claiming to instantly get rid of -- ♪ >> you will notice the model has bags under his eyes. >> what is the active ingredient? >> these are minerals found in shale rock. what it does is it tightens and

lifts the appearance of bags underneath your eyes. and as little as 10 minutes, no prescriptions and very little effort. s and very little effort.

♪ manus: good morning from dubai. this is "bloomberg daybreak: europe." anna: i am anna edwards from the european headquarters in london. these are today's top stories. manus: asian stocks trade lower. investors with reports that the trump administration is preparing new curbs on chinese investments as china and the eu -- on their commitment to globalization. wins again peran the turkish president scores a new term with near absolute power, and the lira jumps istanbul tear brexit big short. some hedgeas learned funds used private polling data on the day of the eu referendum to short sell the pound.

more details on our exclusive story. welcome to the show. on that their side, oil dropping, more tensions about what donald trump is really up to in regards to not so much a trade spat with the united states, but a technology spat. stocks a little lower. trade?eally all about the question is everything that happens in the u.s. has ramifications in europe. the eu and china are getting together. ? can they stand up to trump on the bull side, you've got the triple are -- can they stand up to trump? on the bullseye, you've got the rrr in china. the banks may come under a little bit of pressure.

another story from the bif talking about the tricks using the repo market to move assets around. auto, trade, and rrr are the three facets of market this morning. in terms of that trade story, lots of threads to pull together from the weekend. this is the effect they are having on asian equity markets. leaker on the msci asia-pacific story. the eu and china doubling down on trade just as it looks as if we will see another leg to the fallout between the u.s. and china. more on that and i'm moment. the yuan weakening. something we talked about. that has been the story of june. it is weakening against the dollar. that cut reserve requirements for the banking sector designed to boost lending in the chinese economy. one of the things moving markets over the weekend. we focus on politics, too. you mentioned turkish elections.

we've got the turkish lira 2% higher against the u.s. dollar, a little more certainty perhaps the markets had anticipated what is going into the first round of elections. this is the dollar against the lira here. just shy of 2%. two point 87 u.s. 10 year yields. in termsns of risk off of the yen activity and u.s. 10 year yields. ofhaps it is the trade story how high they can go. it increases interest in havens like the bond markets. manus: we might be 5267 kilometers apart, but you talk about bonds and yields. here's the stat of the day. yields in the u.s. treasury have been sub 3% for 20 sections in a row. that confirms the trade conversation you put on the map. the range has been around 2.76%.

sub 3%. the average over the 20 sessions in the u.s. is around 2.76%. we can't get above 3%. there is a flood of paper to come to the market this week. $206 billion when the chinese by all the paper the u.s. wants to send? there is one way. the bond market, if the chinese do not fill their buckets with bonds. curve will infer, it will be short-term, and it will be different than the previous technical inversions we have seen before. just waiting for a little bit of a be price. the bonds are big and the btp's are dropping here. we have a big week for data in terms of inflation in europe and inflation in the u.s.. will, the end of the week. anna: we will focus on the data and the big picture stories. we build toward the eu leader

summit in brussels at the end of this week. i will be on the ground covering that. lots to talk about with eric nielsen, the group chief economist. he will join bloomberg to talk trade tensions, angela merkel's future. all those things will be on the agenda into the brussels summit. let's get a first word news update with debra mao. turkey, president erdogan has won eight mandate to govern with sweeping victories in parliament and elections. had 53% of the presidential vote compared to 31% for his closest challenger. that's with more than 99% of ballots counted. the countries of electoral board has not published official but it did confirm her to one's victory. the turkish lira strengthened the most in more than two weeks on the news.

a bloomberg investigation has found that hedge funds hired polling companies, who told them critical advance information on the eu referendum, including data that would have been illegal for them to give to the public. this allowed some of them to earn fortunes by selling short pound.tish although confidentiality agreements have made it difficult to discover the identities of many of the hedge funds, bloomberg has found that at least a dozen were involved. an internal eu member has warned that president trump's aggressive approach to recasting u.s. partnership and has direct assault on the wto will unwind decades of progress, and return global commerce to a free-for-all. the memo, prepared for eu governments ahead of a june 28 summit, where trade will be discussed, said trump policies will force nations to revert to a machiavelli and system where might prevails. china's central bank has

confirmed the rrr cut it flight walking around 108 billion dollars in liquidity. the amount of cash lenders must hold will drop have a percentage point from july 5. to pboc says the aim is support small enterprises and further promote the debt to equity swap program. it calls the move a targeted and precise fine-tuning. 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. thank you very much for that. let's check in on your market moves. sophie kamaruddin standing by. the markets are absorbing this play by the chinese. it is not really doing a great deal for equities, nor for the yuan. reporter: that is the case. large caps under pressure off by 6/10 of a percent. the shanghai composite set for

the week of close in two years as traders weigh the trade risks after the pboc move. let's take a closer look at some of this key segment when it comes to what is falling in hong kong. chinese carriers under pressure breathing -- being dragged by carriers. we can check in on the stock movers across the region. we do have the hang seng under pressure today. i want to highlight the key. -- zte. sinking ine shenzhen. over in singapore, noble group rallying in optimism that there is enough to get restructuring underway. shares jumped as much as 35% earlier, adding to the record 161 surge -- 161% surge last week from the stock. anna: thank you. sophie kamaruddin in hong kong.

let's get back to the trade story. let's talk about the latest developments. we are joined from tokyo by our china economy editor. what can you tell us about the trump administration's new investment reviews? of course, it isn't all about tariffs. there are other threats to this trade spat. reporter: that's right. the trade risks will be bringing out a report on friday looking at had to restrict chinese investment into the u.s. actually, chinese investment to the u.s. has crashed the peak in 2016. was selling off the assets they bought, but the u.s. government is looking to technology companies, and stop what they see as u.s. , whenlogical advantage the chinese companies by a u.s. company and then take the intellectual property. that report is coming out friday.

"the wall street journal" reported that it looks like he will recommend companies with 25% or more chinese investment in their holdings will come under those restrictions, and they are reporting export restrictions may also be imposed. not just chinese companies trying to buy u.s. companies, but american companies trying to sell high-tech products to china try and step in and stop exports of high-technology products in the area china's trying to create for their 2025 program. it looks to be a big week for china u.s. relations. but otherariffs, things the u.s. is trying to do. manus: we just talked about the trip at the top of the show. look at the yuan. down for eight days in a row, longest losing streak since

2016. the rrr is supposed to be supportive, but it looks as if it is almost weapon icing the currency. -- weapon icing the currency. reporter: when the fed raised rates, the chinese did not raise rates. we are looking at a rising interest rate differential. the central bank is stepping in and adding this $108 billion of money that cannot be unleashed into the economy. they are making an effort to support growth, the deleveraging program. that will have an effect on the currency. i guess the hope is that it would have an effect on the stock market, which we are not really seeing today. a lot of the focus for the rrr cut yesterday was for the debt equity swap to help struggling them pay outhelp leverage by going to banks to swap loans and bonds for

liquidity in the company. of the policy changes are focused on this deleveraging campaign domestically in china, but also an effect on what is going to happen -- where the currency is, and it is going to affect the markets. today it is affecting the markets negatively, but that will continue. the rrr cut doesn't even take place until the sixth of july. you will see these effects in the next couple of months. anna: meanwhile, we've seen europe and china doubling down on globalization. thank you very much for joining us. good to have you on the program. james nager, bloomberg's china delete -- let's bring in our guest for this half hour. director of emerging markets strategy. you will focus very much on in the end than phoenix. let's tap into your broad thoughts on emerging markets. point, the on manus'

currency weakening a little bit, applied.being we can see weakening in the currency. we have seen them do the rrr cut. how concerned are you about chinese growth at this time as we see this trade that continuing between china and the united states? >> our view is that chinese growth is likely to still decelerate modestly this year. we are projecting 6.4% gdp growth. just a touchdown from last year. i think overall, the chinese officials have responded proactively around managing the situation. over the past four quarters, we have seen them trying to focus on managing the situation sensitively, protect financial and movingoncerns, to sacrifice a little bit on the growth front to achieve those objectives. the deceleration in china is a concern, especially as it spills over to global growth. and into emerging markets. manus: good to see you this

morning. justtioned it to james now, the triple are cut has really exacerbated the slaughter of the yuan, down for eight days in a row, wrote -- the worst losing streak since 2016. that raises alarm bells to me on capital slight.that is potentially the next risk , or am i too far forward with that? think probably at this point, it is a little bit premature to be concerned about capital flight, but that is a little bit of a legitimate concern in the next several months. anna: your space in the emerging markets arena in europe, do you see europe doing well -- being well insulated from trade spat, or do they go to the heart of the european business model and global exports? how vulnerable is europe to a trade were? we looknk all the parts

at within emerging europe and africa are sensitive to these trade spats, especially in the cee region.- they are linked to the german manufacturing chain. eu trade tensions are still on the ride it -- rise against the trump administration. i think that will impact the financial assets we monitor. anna: a lot of emergency europeans are set up to feed -- they are set to feed the german export machine. >> absolutely. that will feel the impacts from some of these trade threats. manus: phoenix, stay with us. director of emerging markets strategy at societe generale. up next, the lira jumps. how long can that last against the dollar? the turkish president wins again. live in istanbul. why j.p. morgan and ubs are getting bearish on emerging markets. this is bloomberg.

♪

anna: this is "bloomberg daybreak: europe." 7:18 here in london. more ont a little bit what's going on in turkey and market reactions. the turkish lira appreciating 13 -- 3% against the dollar. when i sat at my desk a few hours ago, we did not see a move of this size. manus: at one stage, we had given back a large portion of the rally. contagion of the menu for this the line on the block. that is a moot point this morning. we have had a sweeping election victory for her to one. -- president erdogan. how is it looking over there this morning? seems to be euphoric pictures we have been broadcasting. reporter: absolutely.

we did have some fireworks in the background over the bridge. president erdogan supporters celebrating. 53% of the vote. a bit of a surprise to quite a few people who have been watching this. the key to remember is that the expectation was that it would be in a runoff. that did not materialize. he was able to seal the deal quite clearly in the first round. a bit of a surprise perhaps on the parliamentary side. you did see the other party get back a little bit, and they should remain in control together with an alliance. again, we were speaking earlier to one of the think tanks here, making thee was argument they could hold the party hostage. that could have serious implications for economic policy. anna: that will be an interesting dynamic to watch. what kind of policy -- speaking of those policies, what kind of policies are we expecting to

focus on for president erdogan? reporter: this is a country that has always fostered aggressive expansionary policy as they put a lot of pressure on the central bank. over 7%.70 -- they have maintained upwards of 6% for a few years, but it is no longer sustainable. going into the vote, the lira was down 20%. the conversations we have had with key people, including the cleareconomist, she made it is too early to make a call on how the government will proceed with economic policy. we were getting reports that he could overhaul people in the economic team and the broader direction of the country. there is potential for upside, but equally potential if he big noise -- ignores the need for sharp austerity.

thank you, from istanbul. market, iok at the put this up in the charts, this is a question against one week volatility. we are back at levels we have not seen since 2008 here do you expect more volatility to come dependent on the rhetoric from erdogan? pointhink really at this in going forward, turkey's whatok really depends on kind of policies the administration comes up with, and whether or not it will be market friendly and pragmatic toward reforms as we've seen over the 10 years of the administration. us.'s a key outlook for we remain concerned some of it in the preliminary indications we have had point toward the wrong directions. from erdogan is geared

toward trying to control monetary independence, even in the lead up to the elections. this is posted a 500 basis points we have seen in hikes from central banks. monetary policy remains at risk, and certainly fiscal pressures are likely to continue ahead of local elections last year. anna: those fiscal pressures, the direction of the economy, you might have thought those things, given his victory, might have caused the turkish currency rallied., but it why is the market prizing certainty over the end result? >> that was our expectation is well, that the lira would weaken after such an outcome. rally is reflecting, to some extent, the improved political certainty that we have as a result of this. we have had the presidential first round's, and there's a sense there are some checks and balance coming from the mhp, the

coalition partner within parliament, to hold back the presidential excesses. manus: one thing that caught my biggestis is one of the turnarounds in dollar positioning on record. we have gone from short to long. it is the biggest transformational move in positioning on record. the market has swung to such an incredibly long position on dollars. that has consequence for the next em leg, doesn't it? >> yes. we write a lot about the thesis around the tide is receding, and the global growth pattern is in a mature phase of the cycle. certainly that lays on the outlook for emerging markets over the next several years. yet, there is this bullish dollar move exacerbating the risk. at the same time, we would point out a means the dollar bullish cycle is further along than perhaps many anticipated.

-- cheaper valuations in emerging markets can at some point trigger renewed inflows into the asset class. anna: which of the fiscal policies research -- concern you with regard to turkey at the moment? >> i think they are spending a lot on pensioners. that is not something that can be sustainable for many years. they've gone from a place where the budget deficit has doubled from 1% to 2%. thatthe stock of debt turkey has, over all that trajectory is quite negative. anna: phoenix, thank you very much. thank you for letting us your expertise. very fascinating. of emergingirector markets strategy at societe generale. manus: it will just depend who is researching.

it will be a big week for markets. this is what we got on the sleep for you -- slate for you. anna: brexit on the horizon through this week. thursday, eu leaders have a two day meeting in brussels with brexit, migration, security, and reforms dominating the agenda. are we -- we will be there on the ground bringing you the latest on those agenda items. it is going to be a really busy day. manus: it is. you have to ask yourself to what extent is this defining two weeks for angela merkel and her tenure? saturday marks the deadline for the u.s. to outline its measures over chinese imports and investments. therein lies the point, is this a dispute about trade, or is this about technology? that is the question for markets. anna: that is it for "bloomberg

daybreak: europe." we will continue coverage from istanbul. this is bloomberg. ♪

guy: welcome to bloomberg markets. this is the european market. i'm guy johnson alongside matt miller in berlin. looking at european equity index futures that are down across the board as the rrr cut by china didn't help to boost asian markets. the cash trade is less than 30 minutes away. ♪ guy: asian stocks sink as reports