♪ good morning, from bloomberg's european headquarters in the city of london, i am anna edwards. manus: and i am manus cranny in dubai. anna: stocks in asia extend losses, trade tensions and the s&p down the most since april. but there is a signal that stabilized. the treasury curve keeps getting flatter, sand that washington will step up his trade war, are prompting ostrich to reevaluate how high yields will go. meanwhile, white house peter navarro, indicates that restrictions on chinese investment will not be

as bad as the market anticipates. ♪ anna: good morning, everybody. this is "bloomberg daybreak: europe." the msci asia-pacific managing to make it back unchanged from yesterday, even the extent of the selloff we saw yesterday. u.s. stocks down yesterday the april.nce emerging markets continue to be under pressure in the early parts of today's session, the chinese markets still -- the chinese equity market still in negative territory, down .6% right now on the shanghai composite. pressure is coming through on the chinese equity market. risese heard mixed from the trump administration in regards to what the report on

friday will say about investments in the u.s. tech sector. we have heard from navarro and mnuchin, and corporate as well, about the impact that trade tensions are having on their facilities, jobs and pricing. thinking of harley davidson, so there is lots of talk about now. the dollar is on the back foot once again, the yen getting a bit of a safe haven bid. 10 year treasury yields, another asset that is pretty unchanged, 2.88%. it shows how far we have fallen on the u.s. 10 year yields in the last week or so, really focusing in on the trade story, manus. manus: yes, we will get robert wheres's opinion piece, he talks about the banks being loaded up with about $150 billion worth of bonds. happened,hat is what three major industries in the united states, dropping them

with 1%. and doesn't happen very often. . this chart is in the dtv library, the s&p 500 dropping, the dow also down for the night session in the last 10. to a certain extent, maybe yesterday was a crystallization moment of the ability of markets to interpret what could come from $50 billion tariffs, to 200 billion tariffs, thus steel, then banks. that vix, it will appear at the bottom of your screen, it is a part more -- a bit more prescient. july is more expensive in august, you have to go larger go home in july, to protect yourself from future volatility. global stock markets dropped by 1.7%, the biggest drop since march. we have some calmness in the market at the moment, but it reprieve. like a

do you remember dusty been, anna? anna: yes, i was going to say, complete with references from the 1980's, lovely market analysis, manus. you mentioned some calm. we are seeing in u.s. futures, a that of a, situation compared to what we sure.sterday, for coming up in the program, we speak to someone from j.p. morgan asset management, about tensions in trade, and where she sees evidence of this taking hold in the markets. the gcc driving through global recession. let us get our first word news update from juliette saly, joining us from new york. juliette: white house trade advisor, peter navarro, has concerns, ease trade suggesting that a u.s. treasury support later this week will not be sweeping as markets are anticipating.

he said that there are no plans to him -- to increase restrictions. worryors continue to about the prospects of global trade. president trump has accused harley davidson of surrendering with theng trade war eu, after the company said that it would relocate production outside the u.s. in response to european retaliation for the presidents tariffs on steel and aluminum. he said he was surprised the motorcycle maker would be the first to wave the white flag. uber says its move to protect passengers and drivers have appeased landers transport regulator. in september, the regulator said the company was not fit to operate in the city but now by the body says that the issues with uber have been addressed. the judge said she might make a

ruling as early as today on uber. london heathrow airports 16 billion pound expansion plan has won the backing of the ukip parliament as lawmakers voted for the construction of a third runway by a large majority, but with opposition from those representing areas around the airport. heathrow's biggest customer, talksh airways owner, about expanding the airport again. wind driven wildfires have forced thousands of people to leave their homes in california. forestry and fire officials say that raises continue to grow in areas north of san francisco, threatening hundreds of homes and businesses. no injuries or deaths have been reported. global news, 24 hours a day, on air 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 at top . we went to check in on the

markets here in asia, we have seen a bit of a comeback as anna was showing us earlier, in terms of what you are seeing in some of the markets. the topics is starting to come back a little, it was looking at one stage like it was going into a correction mode -- the topix. shanghai composite is also looking like it could enter their market territory, down by about 1%. hong kong stocks are also being sold off today heavily. in jakarta and india, there is some sign that the index is going to flatline. in terms of stocks, chinese airlines are tumbling, leading declines, particularly due to you on weakness. and a bit of m&a activity, this company in hong kong had a record high up 41%, after selling assets worth $160

million. european outdoor group, will weighing 31%, a 4% premium on the shares compared to where we saw yesterday at closing price. manus: juliette, thank you, joining us from singapore. the global trade tension is increasing, and washington and beijing are on a seemingly course.le collision that is get to our chief north asian correspondent, stephen engle. what is the latest in the escalation of the u.s.-china trade fiction? there is a line from the president where he says, the west might be doing one thing, but our chinese inclination is to fight hard? stephen: yes, basically paraphrasing what he said last week to a group of multinational --s, american and european was that in the west, in the west, if you get punched in the face, you turn the cheek.

but in our culture in china, you punch back. that is why we are getting a lot of nervousness on the markets. the shanghai composite index is now in bear market territory, down some 20%, because both sides seem to be digging in their heels. in the u.s., you are getting mixed signals as well. you have threats of tariffs of up to $34 billion of goods due to go into effect next friday, billion 60other $16 days later, another review of some $200 billion worth of chinese imports, and now you have the potential threat of the u.s. and acting the 1977 emergency economic powers act, which would also limit chinese investment in strategic areas such as ever price, robotics and new energy vehicles, if it is deemed a threat to national security. so there is so much rhetoric, and no scheduled negotiations.

that is i think people are getting nervous. anna: yes indeed, wilbur ross suggesting last week that he has been talking, and now, it is time for action. so there was concern that this friction is getting out of hand in beijing? stephen: there are two sides of it, of course. . the outward projection that china, for years, deng xiaoping said, "hide your strengths and by dear time." now with president xi jinping as the leader, it is about showing china's arrival on the global stage and its power. -- "hide your strengths and bide your time here: andnew head europeans the eu, saying that they will jointly oppose protectionism. there has beene, this essay going around by a noted chinese economist that has

also been taken up and noticed by key leaders in the chinese government, that suggests that maybe the leadership in beijing is not quite ready for a protracted fight, that the econis too reliant sti on exports. it will be interesting to see. that essay by the way, has been taken down off the internet by internet censors, but it was widely read. manus: let us see whom next first our chief north asia correspondent, stephen engle, with the various latest on the trade war. global stocks, as we said, have been showing nervousness, as the trade war starts to look like a reality. the international ceo of gloom -- goldman sachs asset management, told bloomberg that there was fear that something has escalated to a near consequence. >> i think investors are more cautious that ok, there may be actually substantial done by the u.s. that generates reaction

eu. china and the that reaction and the potential tit-for-tat that could go on, has people much more nervous. anna: sheila patel of goldman sachs, joinin was joining us th. we welcome our next guest, joining us in the studio. i was fascinated by the list of trade as aciting reason for cutting jobs, moving facilities or change in their pricing structure. this is having an impact quite quickly, harley shifting production to europe, the maker of jack daniels speaking about cutting prices, this is having an impact already? guest: it is, starting to. especially given that we have been seeing corporates really plans, but the fundamentals are pretty strong. that it doneoncern

great the confidence and interferes with the plans happening. but i think we have to remain calm and see how it plays out. a very andof leveotiation process, several months to go with risks in mind, so yes, something to watch. manus: keep calm and clarion, that is what we do every day on daybreak, anna. good morning to you, hani. we haven't really had trade war is coming to the effect yet, but this is what the dutch have put together for us. leave it to them, to tell us what it is all about. they have a monitor on global trade that they keep an eye on, down from a seven-year high at the start of 2018, to negative territory. this is global trade before trade war actually begins, what christine lagarde is warning ?bout

it is very clear what the risks are, and what the downside scenario can be. i think that the u.s. administration is also fully aware of that. but it needs to be put into a context of an $85 trillion global economy that is on a very sound footing, that is exiting a phase of private sector deleveraging and has fiscal support that is able to keep it through this. if it is in fact, something that doesn't end up being protracted. so the length of time that this goes on becomes critical. at this stage though, there has and thist of headwinds type of event in the past, so investors should be cautious about overreacting in the short-term. anna: there were mixed messages now, aren't they, -- there are

mixed messages now about what to expect. sure from entirely where, we are waiting to see what the report will contain on friday. wereo you think, -- we having a conversation with stephen engle in china, about how the chinese might punch back? this is what we have seen in the currency. we spoke to a couple of people in the last couple of days, who say that no, they will not weaponize the currency, but the yuan is weakening, against the dollar, the pboc is leading that happen, aren't they? hani: it is a bit of a catch-up, isn't it? i wouldn't read too much into it in terms of the timing, dollar strength is a broad-based theme in markets. we don't think it will last that long, given the structural weaknesses that would pull the dollar down. but i think the chinese having gone through the experience of with the currency

devaluation as well as a very sharp slowdown, they are unlikely to play with the currency and the capital slowdowns, those are two redlines in our opinion, with regards to what they could do. there are other ways they can fight back, but i doubt they would choose those weapons anytime soon. manus: let us see whether they're all in for the $200 billion worth of supply coming to the market. at the equity markets, hong kong has now erased its loss, and u.s. equities popping into the green. with that in mind, what i would like to know from you, i was looking at the vix futures, they went into a bit of an interesting move yesterday. we had the front months, july trading above august. in other words, the market is concerned about paying for a bit protection.

the dow, s&p and nasdaq all dropping by more than 1%. how do you protect yourself from the potential of a fast and furious equity drawdown? hani: that is a challenge, given that these things are pretty unpredictable, given that there are given by political factors. protectry expensive to against those type of events, particularly for an intermediate type of investor like ourselves. we find that it is actually againstive to protect very short-term effects, and much more important to think about how them fundamentals play out -- how the fundamentals play horizon.he longer term for addiction and that he in terms of the direction of travel. we still think that both sides want to have more trade, not less trade. . the endgame, will the lower tariffs, not higher. anna: thank you very much, multi-asset portfolio manager of

pine ridge investments, he will be staying with us. all street firms cut their end of the 2018 forecast for 10 year yields. i will the fed react, and what does it mean for the global economy? up, robertng schiller, professor of economics at yale university speaks to bloomberg. ♪ this is bloomberg. ♪

♪ manus: it is just 6:21 in the city of london. this. is a live shot of hong kong where it is 1:21 in the afternoon. you see the hang seng turning it around, is a global site gone? -- the global slide gone? juliette saly has your business flash. juliette: manus, irish banks are set to be forced to hold more

capital to cope for the future economic downturn, according to a person familiar with the pattern. the central bank leaning toward buffer from 0% in the coming months, with a possible announcement in the days.0 the buffer is meant to guard against banks tendencies to boost lending in boone times and/it during a bust -- boom times, and reduce spending during a bust. preserves the business model for american express, and deals a blow to retailers looking to reduce the $50 billion in fees that they pay to that occur companies each year. american express shares jumped and in new york while visa and mastercard fell. a pullback in investments to the u.k. is being warned as the final brexit deal does not ensure the free flow of goods eu. the

the german automaker says about ongoing uncertainty over negotiations is not helpful, and customs arrangements remain a concern. bmw's comments echoed those of airbus as the brexit deadline those early next year -- looms early next year. instagram could be. worth more than $100 billion as , standalone company as seen in data compiled by intelligence. the photo sharing platform reached one billion monthly active users early this month, and could account for about 16% of facebook's revenues over the next year. is website of tv network hbo down in china after a committee and, criticized president xi jinping on his show, "last week tonight with john oliver." he criticized him for censoring online dissent about tim including running references to

winnie the pooh. hbo.com sues to have been blocked, but hbo programming license to tencent has not been blocked. anna: that treasury curve keeps getting flatter, the gap between two-year yields and 10 year new loweached a yesterday, and wall street firms are questioning their year and forecast. morgan stanley reckons that for 2018, the peak for 10 year yields is in the rearview mirror. the asset portfolio manager is still with us, hani. we are at 2.88% now? hani: we think that yields will go higher, at a gradual pace, given that there is a global savings glut that is not going away anytime soon. we saw the ecb delaying any kind the fed ises, and

going to continue to be on its path.ization of the other hand, we think of global growth will accelerate in the second half of the year, which will keep yields rising the other gradual pace. bonds have had the worst start of the year on record, is that the end of this? saying that they expect a big rally going into the second half of the year? ani: some pockets of the em really feel overdone, and i think it is a great time for investors to be sharpening their pencils, creating a big shopping list of assets to buy and using this trade risk and all the talk around it as potential buying

opportunity. currencies, hard definitely look to be getting much more attractive than before. anna: and the equity space, and other you like indian equities. is this one other places you will be circling for attention? we put together this chart on your point,at to shows indian equity markets really quite resilient, standing firm in the face of trade tensions? hani: absolutely, and our investors and partners know that india has a high conviction allocation in our portfolio. for some time, it has been istly driven by -- it domestically driven, but it is also an economy that has structurally reformed and is on the right path to creating growth and we think that it is very well-positioned on a standalone basis, and especially, given all of this trade tensions. anna: thank you, for bringing

that to our attention. up next, a tale of two courses. we take a look at the first half of the year, and what is to come -- a tale of two quarters. this is bloomberg. ♪ retail.

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live shot of tokyo. you have dollar-yen on your screen. whatever is going on in the equity markets, you still see yen strengthening to some extent. you see money flow into havens despite yen. that perhaps tells you something much more relevant about what is going on with slight undertones of risk off. annmarie hordern is standing by. it seems like we have just paused for the moment on the sea of red. >> that's right, manus. we have that in japan, slightly coming out of that red.

relatively flat, though. keep an eye on china, they are poised to enter a bear market. in the u.s. come up markets fell the most since april -- in the u.s., markets fell the most since april. yesterday we had harley davidson deciding to move production out of the united states into europe. -- the jack daniels maker says they are going to raise prices for whiskey. let's take a look at what gold is doing. you can see here, gold really falling. the commodity continues its dissent -- descent. with no signs of inflation, little desire for haven, there does not be --. an oil story that has nothing to do with opec. spending a record

premium, shooting up. cushing oil was the -- america's biggest distribution house. yesterday it served an unprecedented $5.75 per barrel. goldman sachs called this the most dramatic event in oil last week, not that massive meeting in the anna opec -- indiana at opec -- in vienna at opec. manus: annmarie hordern with the very latest on the oil markets. the first half of 2018 was rife. geopolitics was the top headline and the u.s. fueled the traded turmoil. the person with the magic crystal ball is our senior european equity strategist. he joins us now in our london studio. no pressure.

we look back at the first half and we try to take ourselves forward. i love what you have written up. you talk about a simple year to date return on the stoxx 600. you say we should focus on the earnings. >> indeed. if you look at the first half, you could think it was a bit of a yawner. we are down a couple of a percent, no big deal, but clearly that is not the story. the first half was a give back of last year's huge run because of trade fears. the second quarter into may was exactly the opposite, trade relief. here in europe had a big move to catch up to the u.s. because we had weakening currency, which was notably positive for european and u.k. earnings, with both the pound and euro weakening a little bit. it is interesting. the sector tilt was not the

typical risk off at risk on in the first quarter, and then into the start of the second quarter it was a case of a mixed bag. it was much more dependent on the dynamics of politics, and what was going on with nationalism in italy, what was going on with currencies. we had both staples and a some cyclicals do poorly, and do well. the key to the whole period was energy. anna: i will go back to my you current -- u.k. football roots. what about the old saying about selling in may and going away? has that cliche stood up to the test? >> you think of it as an old wives tale, but it is not. we have seen it play out again this year. 11, the course of the past

the stoxx 600 is down about 4% between may and early september. you are now down about 4% since the beginning of may, even more from late may, when things really started to roll over. it is just a readmission of reignit readmission -- ion of trade. this is one of those evaluation resets. we are a bit more sanguine on that. manus: let's dig a little bit deeper into that. we created one of these charts but. ts. -- one of these char you are climbing a wall of worry. what are some of the key themes for the second half in european stocks? is --us, the key to this this chart you have pulled up,

the top panel is just simply the stoxx 600. the bottom panel breaks down the forward p.e. and the forward earnings. what you can find over periods of time is that the market is either driven by valuation or driven by earnings. since mid-2016 we have clearly moved into an earnings phase. valuation is relatively extended with rates being only moderately up from here, at least in our fair value model. it all goes back to being dependent on earnings. earnings are about 25 euros on the stoxx 600. our their value assessment is 27-28 but the time we get to next year -- by the time we get to next year. that gives us a fair value on the stoxx 600. anna: thank you very much. bloomberg intelligence senior european equity strategist.

manus: let's bring in our guest to the conversation, hani redha, portfolio manager at enbridge nebridgents -- pi investments. how much of europe do you want to take on forward in the second half of the year? hani: i couldn't agree more with the mainrnings being driver, and i think the back half of the year looks quite positive, in the sense that when you look at the first half, what we see are a few factors which were keeping earnings back after an exceptional europe strength last year. .e have had a bit of a pullback it was really there because of the exceptional strength beforehand. that has normalized now. that is going to become a

tailwind growth to accelerate back. we think it looks quite positive. however, we also think you need to be more selective in the past -- than in the past, and pick your spots. the stocks that are more domestically focused on the ones that are best shielded from the trade issues, but also benefiting from an organic source of growth domestically in europe. so that is where we would focus. anna: given all of the trade tensions, you seem quite positive on a part of the world that is tapped into global trade. you seem quite positive. you said earlier on that you thought we would end up later on this year in a situation where tariffs are lower and not higher. do you think everybody who is working so much has got it all wrong right now -- worrying so much has got it all wrong right now? hani: tariffs will be here for

some time, but the markets will only price them in if they are here for a prolonged period of time. the domestic recovery in europe we think is still very robust. it is driven by an output gap that still needs to close. it avoids the vulnerabilities. should the trade tensions and tit-for-tat extent for longer than expected, it would hurt exporters in europe. that is what people worry about when they think about europe, but europe is a big market, and you can pick your spots, and if you focus more on the domestics you avoid the vulnerabilities to trade tensions, but you also avoided the volatility of the currency. with think the euro is more likely to strengthen and we can kenr that -- than wea over the intermediate-term. manus: thank you, hani redha from pine bridge investments.

juliette: white house trade advisor peter navarro had sought to ease investor concerns about u.s. trade policy, suggesting that a treasury department report later this week will not be as sweeping as markets are anticipated. he says there are no plans to impose restrictions. the dow jones industrial average ended lower yesterday for the ninth time in the past 10 trading sessions. trump hasdonald accused harley davidson of a surrendering in his trade war with eu. that is after the company said it would relocate production outside of the u.s. in response to european retaliation for the presidents tariffs on imported metals. the american president said he was surprised at the motorcycle maker would be the first to wave the white flag. uber says it has moved to protect passengers and a drivers

. in september, transport for london said the company was not fit and proper to operate in the city. now the body says its list of issues have been addressed or relate to a former code of conduct. uber's long-awaited appeal of a license been in the capital -- u.k. capital will be challenged -- u.k. capital -- monday. for thes voted construction of a third runway by a large majority. with opposition from both representing areas around the airport, but he throws -- heathrow airport's biggest customer calls the price of expanding the airport too steep. wind driven wildfires -- driven wildfires in california have caused thousands to leave their homes. fires continue to grow in rural

regions north of san francisco. no injuries or deaths have been reported. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. manus, annna. manus: thank you very much juliette saly. if you are a bloomberg user you can interact with all of the charts that we use. the recent chart features on the choate -- show, and you can catch up on all of the analytics. you can save the charts for future reference. anna: resilience in indian equities. like-minded claims investors are targeting bigger companies in europe. do they have the u.k. in their sights? what does brexit at to their decision-making. we will talk about that next. this is bloomberg. ♪

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this is "bloomberg daybreak: europe." 6:45 in london. there is berlin this morning. the dow futures suggesting will will boot -- we will be lower. the markets fell yesterday the most since april, but there was a bit of a turnaround towards the end of the trading day. in fact, it u.s. futures point higher. german chancellor angela merkel is meeting with leaders of the other parties in her coalition today. this comes as she tries to approve a plan. what can we expect from this meeting today? this is going right to the heart of the way that asylum policy is set up in europe. what is angela merkel and her coalition going to say about it today?

>> good morning. you hit the nail on the head. immigration and the eu is an absolutely -- in the eu is an absolutely intractable problem that has only gone worst these populist governments and -- gotten worse with these populist governments'expansion -- expansion.s' we don't necessarily expect a solution to this internal crisis. it is also unlikely that there will be the final blowup, because the bavarian party that is sort of driving this and is part of angela merkel's coalition, as essentially given her until the eu summit at the end of the week to try and figure out something. when you talk about something it, it is also something that would allow both of them to save the face. manus: a very good day to you.

we have this summit on thursday. what is the probability that the chancellor is going to come up with a viable solution to the problem of migration? the italians are turning boats away. they are demanding change and adherence to european union rules. well one thing that is interesting is if you talk to the new italian prime minister or the new italian government, and angela merkel, they would agree that the key is to defend the european union's outer borders, which is what they always talk about. how do you patrol the italian coastline, or even parts of the italian coastline? so anything that they agree on thursday and friday, and it will be very fraught from the looks of it, surely will not offer a quick fix. how does that square with this intense pressure from the

christian social union party in bavaria to come up with a fix or we start sending back asylum-seekers at the border if they have been registered in other european countries. that is still something that over the next few days, until then, the two parties will surely be trying to work out, which is where tonight's choreography comes in. anna: tony, thank you very much. that was a latest on the german politics story. quick apology. thosetures not open, so numbers we showed you earlier more reflective of yesterday's trading session. the ftse 100 futures pointing higher, nasdaq futures actually flat. other u.s. futures pointing to the upside. it goes back to what we said at the start of the program, it looks as if we are drawing a line over the most recent

selloff we saw in equities. this get a newsflash with juliette saly. juliette: irish banks are said to be forced to hold more capital because of a downturn. the country's central bank is leaning towards increasing the so-called countercyclical capital buffer from 0% in the coming months, with a possible announcement in the next 10 days. the buffer is meant to guide tendency to boost lending in -- times. thenal brexit deal -- german automaker has four plants in the u.k. and so the ongoing uncertainty of brexit negotiations is. not helpful bmw's comments echoed those of airbus. instagram would be worth more than $100 billion if it were a

standalone company. that is according to data compiled by bloomberg intelligence. the estimates suggest facebook has made a 100 fold return since its purchase in 2012. sharing platform reached one billion active monthly users earlier this month, and could account for about 16% of facebook's revenues over the next year. that is your bloomberg business flash. manus: juliette, and you very much. juliette saly with the very latest on the markets. anna as a special guest. anna: yes indeed. it is the u.k. most at risk of intervention, according to alvarez & marsal. a new report from the construction company serves as a reminder of the growing threat of activism. brexit uncertainties have proved no determined to campaigns -- campaigns.wo mauka mackenzie is the head of

european corporate transformation services at alvarez & marsal, and one of the authors of the report. one of the interesting things that you point out is what packs, like mike -- wolf like-minded investors. >> yes. they cannot succeed on their own but what they tend to do is form wolfpacks behind them. these are more passive shareholders who will support the point of view of the activist, and help him get his particular weight. what has happened is that institutional investors use to not follow activist so much. they saw them as a tribe they do not want to associate with. now this is increasingly mainstream so it is easier to form them for an activist to get his way. manus: malcolm, i love what you

wrote about elliott singer in regards to the timeline for him getting involved in wheat bread and actually doing something. you would make the argument that there is more in patients with institutional investors, and the timeline for activism is getting shorter. malcolm: that's right. we have been doing this research for the last 18 months. what we have learned is that the timeline between the company on her -- flashing activist alert tool -- flashing tool, our activist alert the timeline between that and the activist striking is coming down. it is now down to 1.8 years. activists are getting more impatient. there is less time for management to correct underperformance. anna: you have got this tool. activists arehere

going to jump before happens -- it happens? that is the idea. you are looking at wheat bread. can you spot them from a mile off? malcolm: yes, so we can spot two if that is going to happen, so over 50%. anna: is it because a particular business underperforms? malcolm: yes, there are a number of parameters. we look at operational performance, stock market performance, the balance sheet, the board and governance structure. from that there are 42 different valuables -- variables that enable us to predict. manus: why is the u.k. more susceptible perhaps to activism than mainland europe? how do you look at it? what is it about the u.k. that delivers that susceptibility? malcolm: firstly, the u.k. is a

very big and fluid market, a very liquid market. secondly, from a corporate governance point of view, it is quite easy, easier than the u.s. or shareholders to convene in egm or to get action in the business. so it is an open market for shareholders. that is why it is very conducive for activism. we reckon a u.k. based business is 40% more likely to be targeted by an activist that one in france or germany. anna: you mentioned the activists are getting more impatient. is the line blurring at all between activists and institutional investors? institutional investors like to think of themselves as fairly active. malcolm: i think this is one of the things that has changed over the last couple of years. investors, like fidelity, who have taken quite an active point of view.

i think what is more significant is that they will follow the lead when on activist takes position, and they are convinced of the hypothesis that the activist has. anna: thank you very much for joining us. malcolm, thank you. mauka mackenzie, head of mackenzie, malcolm head of european corporate transformation services at alvarez & marsal. ftse 100 futures pointing a little higher come at u.s. futures look calm. those comments from navarro perhaps comforting some people. manus: yeah. that is the debate i am having with the stocks editor at this point. it is a to point -- a debate that is live between editors and ourselves. fascinating coverage there in terms of activism and spotting them a mile off. the week ahead is pretty good coverage.

it is going to be a golden age for chinese venture capital. that is one of the big interviews coming up right here on bloomberg. ♪

manus: good morning from dubai. is bloomberg a break europe. and edwards in the city of london. these are today's top stories. manus: global pot is for thought. stocks in asia pair their losses. down the most april. the market has stabilized for now and getting flatter. worries about level trade send investors into the safety of u.s. government debt. the gap between two-year yields and 10 year yields compresses to the narrowest and more than a decade. white house trade. peter navarro attempts to put investors at ease indicating

restrictions on chinese investment will not be damaging -- not as damaging as the market anticipates. warm welcome to the show. abyssl ourselves from the . msc gettingnd crushed. a small reprieve. 401khite house likes the to be supported and not traumatized. navarro comes out and says the idea we are putting restrictions, [indiscernible] the white house got a little shaky on the 400 pound drop. the stability for now. the question is what actually next?ed

the base case for many analysts out there is that we will see a resolution. overlyt is that we are discounting this kind of damage in the trade market. volatility saw a bit of a turnaround yesterday. you saw a move becoming more expensive. that indicates the markets think morell -- there will be volatility ahead. things have turned a little brighter in the asian session. we are unchanged but that is better than where we were. pairing the losses in the asian equity session, creeping up into the green. feedbacky, what is the question mark if we see equities moving lower in the u.s., what does that do to policy of anything? navarro and mnuchin may not be

giving us the same message. we are hearing from a number of corporate's which is another interesting leg on what trade is doing to businesses. money is going into the yen. we have u.s. 10 year yields at 2.89%. we were over 3% earlier on this year. is bringing back were bringing down its expectations of whether 10 year yields can get to the end of the year. manus: tie this back to the bond auctions that are coming this week. this is what we've got. equities are bouncing. we have pressure on prices and yields are rising. there is a cracking note on the bloomberg opinion section talking about the fact you have jpmorgan, morgan stanley, all the primary dealers, their pockets are full of wants. is that because you have more supply or is it they suspect

something more substantial in the market perhaps than we do? there is an auction this week. .2 is the flattest in a decade. almost more than a decade. are we on the cusp of inversion? you could not like it that. burns are down by 19 pit. you have the classic relationship. go do the option markets this week in the u.s.? those markets, let's talk about our guest. jpmorgan asset manager joins us talking us through the market seems. -- through the market. let's get a bloomberg first word news update. peter navarro has

sought to ease investor concerns about u.s. trade policy suggesting a treasury are part -- department report will not be as sweeping as markets are anticipating. navarro said there are no plans to impose restrictions. the dow jones industrial average ended lower yesterday for the night time in the past 10 trading days as investors continue to worry about the prospects for global trade. president donald trump has accused harley davidson as surrendering. the company said it would thecate reduction outside u.s. in response to european retaliation for the presidents tariffs on imported metals. the american president said in a tweet he was surprised they would he "the first to wave the white flag." r said it's moves to protect drivers and passengers has appeased london. the company was said it was not fit and proper to operate in the

city. appeal beganaited yesterday. the judge said she may make a ruling as early as today. airport'sthrow expensing plan has won the approval of the u.k. parliament. with thosetion representing areas around the airport. -- called the price of expanding to steep. 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 . checking in on the markets in asia, we have been watching hong kong because it turned around but back in the red at .2 of 1%. still quite a bit of selling

coming through, the shanghai composite getting close to bear market territory. japan has close flat, reversing earlier losses and also pretty flat. australia's market closing lower and there has been some good eyeing coming through in india and jakarta. the overall regional index pacing some of the losses we saw in the tuesday session. still a lot of weakness and chinese airline and property developers, a little to do with the yuan weakness. falling by another 5.7%. this is a clothing shop. stockthe worst performer, most down by 16% after a profit warning. accepted and has $831 million revised takeover bid from jcdecaux. you, juliette saly

in singapore. rade tensions between the u.s. and the eu increase, what is the view from brussels, what impact is this having on european business? joining us now, richard bravo. the other tariffs on u.s. products, are they having any effect yet? u.s. corporate seem to suggest they might be. richard: it is interesting to see. the eu imposed its 2.8 billion euros of penalties against u.s. products this friday and you are seeing companies, iconic that thebrands warning tariffs are going to have very large substantial effect on their sales. with harley saying that they are going to begin moving production out of the u.s. to skirt the tariffs.

round performance inc. they will have to increase prices in the eu by 10%. the strategy is paying dividends already. manus: how do you think the escalation between the eu and the u.s. is going to play out? if anything, trump's latest salvo, you look at the bmw production, if you look at the auto production by producers, it is shooting yourself in the foot, isn't it? is the: a really rhetoric tween the eu and the u.s. does not indicate that there is a lot of room for them to de-escalate the situation. where things stand right now once the eu imposed the 2.8 billion euros of tariffs, trump responded if the eu does not act down and the u.s. would impose this broad 20% tariff on all eu autos.

the eu has responded that they would retaliate once again. anseems like there is environment where this could continue escalating if things do not calm down quickly. very much. you this builds to the summit at the end of the week in brussels. i will be with you there. the agenda. interesting as we are talking trade, sometimes you get these nuggets of information that illustrate the broader story. chinese to remove import duties , soybeans at the heart of the tensions as they asked who is going to win. it looks like exporters could be some of those, they say the duty decision is effective july 1. manus: this is the interconnectedness of the supply chain. if those duties come in july 6,

who benefits into gains and many people are saying the whole of the australasian platform or geography could be under more pressure as they lose as a result of tariffs on china. it ties back to global stock markets. the skittishness we have seen that pervades across the global trade war discussion starts to look more like a reality. the international ceo of goldman sachs told bloomberg there is a fear that rhetoric is escalating into something of real consequence. >> i think investors are cautious that there may be something pretty substantial done by the u.s. that generates a reaction from china from the eu. it is that reaction at the tit-for-tat that could go on that has people much more nervous. is fromr guest j.p. morgan asset management.

how are you looking at this potential escalation? droppedkets, s&p, all by 1%. is the distance between rhetoric and reality closing? watch.it is something to the key question is how much do companies take the noise are the discussion from politicians and authorities around the world and weave that into their next three months, next six months, next year business decision. if it turns into a self fulfilling prophecy we should see the results of that being a slower global growth picture or at least in certain pockets of the world. are what wements have been talking about is the nervousness weighing on markets. that cannot be ignored. we think this may not escalate into the extreme bear scenario where all sorts of industries are being seized but it seems quite tactical. the soybeans and production under the u.s. is hit because

how china is reducing tariffs from other parts of the world. it seems to be a strategic way before getting to that trade war which would have more detrimental effect. anna: good morning. of the u.s. companies talking about this and the impact it is having on business, harley davidson shifting some production to -- out of the u.s. president trump surprised, wanting them to buy their time and ride out the storm a little longer. this raises questions as we saw the u.s. equity markets falling, whether there are feedback loops into trump's policies from corporate feedback or equity market feedback. guest: the trump administration and router u.s. companies will have to deal with towing the line. this policy was started to protect those who are making

things in america or those who have not been part of the economic boom story in the u.s., those who thought the trump administration could give them this kind of big boost. in some sense, it is working. certain parts of the u.s. economy and u.s. production will be more protected but in other parts, we see prices might start rising. consumers will have to pay more for what they normally got cheaply from china or the rest of the world. it is a tricky balance with protecting industry in the u.s. but not causing a huge inflation spike that hurts consumers you were initially trying to help. there is a lot the administration will have to wade through especially given the midterm elections coming up later this year. manus: just quickly change perspective to the chinese market, we're looking at the chinese composite. , are theye markets more discounted for a trade then

developed markets? guest: it is a good question. we are positive on the long-term and medium-term china growth story. it iscision is whether something you look through or is it volatility that can pass or is it telling us that china is marketst in a way that have been insulated from. for a few points here, chinese markets are always going to be more volatile than developed markets, the u.s. and europe in particular. we are seeing that companies that have more domestic demand in china are staying a bit more stable or falling less than the others in the chinese index. for the active perspective in emerging markets, china in particular. there is a wide dispersion of the types of companies. you have the classic manufacturers that are exporting to the rest of the world and companies catering to chinese demand.

for them, trade war's are slightly irrelevant. anna: thank you. global market strategist at jpmorgan staying with us. coming up, the treasury curve low.ens to a 2018 wall street is questioning their year-end forecast. where do yields go next? this is bloomberg. ♪

anna: this is bloomberg daybreak: europe. 7:19 a.m. in london. we are 40 minutes away from the start of the trading day in europe. differentked a little . yesterday is where we saw u.s. equities moving. we are expecting to go higher. we have seen through the asian session things are picking up that we are flat on msci pacific. manus: let's see how other car producers perform. keep an eye on the bond market.

have you hit the top of the yield in the bond market? primary dealers, 28 have $150 billion worth of bonds on them. it is all about the earnings rather than trade wars that is driving markets. let's get your business flash with juliette saly in singapore. you.tte: thank irish banks are said to be forced to hold more capital to cope with the future economic downturn according to a person familiar. the central bank is leaning toward increasing the so-called capital buffer from 0% in the coming months with a possible announcement within the next 10 days. introducing -- introduced in 2015, the buffer is guarding against tendencies to boost lending and boom times and cut it in a bust. the u.s. supreme court has thrown out a government lawsuit accusing american competition by

preventing merchants by steering customers to cars with lower fees. it deals a blow to retailers looking to reduce the $50 billion in fees they paid to credit card companies each year. face and mastercard fell. network is down in china after john oliver criticized president xi. chinese authorities appear to have blocked hbo.com and hbo programming license to tencent has not been affected. that is your bloomberg business flash. anna: thank you. the treasury curve keeps getting flatter. reaching a fresh year to date

low. several wall street firms are cutting or questioning their year-end forecast. morgan stanley's rates team recommends the peak for tenure treasury yields is in the rearview mirror. they peak forhat 10 year yields in 2018 even in the rearview mirror? this is the evergreen chart. 2% and only at get look back at 3%? guest: we still have room for the yields 20 rise -- yields to rise. we are seeing a bit of a flight to safety. more volatility and we might see investors thinking and gauging is this something that will be the turn of the economic cycle or is this part of the story for 2018 and 19 and we can move on and get back to the fundamentals for corporate earnings which are

impressive in the u.s., in particular europe and japan companies delivering positive earnings growth. we have to see what investors lead toward. the flattening discussion will get -- ramped up because of how much we expect that to be the case for the next six months, next year and a half where we will accept flattening and when inversion happens, a discussion on how far before the recession or potential s&p 500 will turn. anna: and the message it is giving us. manus: let's say we get past the worst of trade worse. to a full equate hawkish tilt and that i would extrapolate into inversion. is that a correct assumption? going tos, it is happen, in versions do happen toward the end of the cycle. it is something that we can compare ourselves to see. it is thinking about what is

happening in the short and long end. we expect the fed to raise interest rates two more times and two or three times next year. -- the long end is not going to increase in the same way. that gives you a flattening of the yield curve. 2019, if theward fed keeps up that pace, that means somewhat hovering near inversion if not going into inversion. that will be the case going forward. that does not mean that companies cannot operate with this level of interest rates in the u.s. we see that up to three or three and a half where the turning point is for companies and we are still quite a ways from there. if you are positive on equity markets, positive on the earnings story you have time to capture some of that and that is why we remain pro risk with a slight tinge of cautiousness given these global developments. anna: we have seen some houses

raining back expert haitians, moving a little bit more cautiously. resilience inee the em space? guest: we're talking about emerging markets as individual countries. when you split out the em countries or the group of countries and terms of the external debt amount and a much it has improved, use with them their external vulnerabilities, and drank them in order. you see the countries that have had the most bettering this year, the worst performance in terms of currency performance are down in the bottom. that are notones going to do well. you see some of the southeast countries,nies -- china being quite strong having internal demand, having consumption rising, middle-class populations rising, and those are the countries we see more positivity in the end if you

want that additional growth picture. much, thank you very global strategist at jpmorgan asset management. her conversation on bloomberg radio. stay tuned for that. as we wrap up this hour, it has been an interesting hour and a half, we have tim craighead focusing on the earnings, we have this obsession about the inversion. and you have just seen abasing in these equity markets for the moment. anna: for the moment perhaps. let's see how long it lasts. u.s. futures pointing higher but 1%.y .3 of we will wait and see how that stands up in the next half an hour or so. we are minutes away from the start of european equity trading. futures look more positive. that is it for the bloomberg europe team. the market open is next.

bloomberg radio is also available live on your mobile device and in the london area. this is bloomberg. ♪

i: welcome to bloomberg markets. this is the european open. we're live from our european headquarters alongside matt miller in berlin. matt: stocks after yesterday losing across the board. look to the opening this morning, positively in positive territory even with those escalating trade war restrictions. the cash trade is less than 30 minutes away.