anna: good morning from london. i'm anna edwards. manus: and i'm manus cranny live from dubai. these are today's top stories. anna: mexico turns left. the peso gives a early gains as exit polls show a line fled -- a landslide victory. we are live in mexico city. bmw's trade warning, the carmaker joins gm in a lobby against auto tariffs, while chinese pmi's signal weaker exports. and judgment day, the german chancellor holds migration talks with her coalition partner. can't she swerved a government crisis? -- can she swerved government crisis?

anna: good morning. 9:00 6:00 here in london, if you are in dubai with manus. let's talk about asian equities. it has been a fairly negative one. we have hong kong out of action, but generally we are weaker, down 0.3 percent. this has been the story of the second quarter. we have voices joining the trade conversation, it in particular from the very networked car industry. we have the g.m. ceo speaking out, bmw, plenty of voices. mean rise, the chinese currency continues to weaken. the dollar is stronger. we are seeing asian fx

weakening, in general it many voices say they are not seeing signs of the chinese weakening their currency. %,at euro is weaker, down 0.3 dealing with the headline around angela merkel. the csu leader threatens to resign. where do these conversations go throughout the morning? we have the dollar against the mexican peso for you. we did see the peso on the rise and giving up the gains as amlo won as expected. the big question still for him in terms of fiscal policy and what he intends to do with the energy markets. energy, oil, all the commodities will play into the sentiment threat the day. you talked about the yuan. stocks dropped by 16%. where do you hide in a global trade war? the s&p 500 dropped last

week, we are a little lower of the start of trade. but if you want protection, perhaps you want to think big. relative.toned 4.7% the rest of the world that is the most since 2014. it is the global stock markets that will have a much harder time if a trade war escalates. in terms of global moves, you see $29 billion in global equity funds, and $27 billion in cash. you are seeing significant movements of money around the markets as we start this second half. it will come down to whether you believe, and you will see an estimation. you have to go on the bloomberg. we have run the four scenarios on an escalating trade war. scenariose four

really fascinating in terms of tariffs we have seen from the u.s., the retaliation from china, and the feedback of tightening financial conditions. with that in mind, this is the picture for the futures. it is not a story of the u.s. going one way and china going the other. we see weaker markets in asia, and we are expecting some of that to dip into the u.s. trading day. we will put all of this in perspective with a great guest later on. we will also focus on with the greek story and pick up with it later today. we will also ask about germany and migration. and what that means for the eurozone story shortly after 6:30 london time. what's get a first word news update with juliette saly. anna, angela merkel and cdu are expected to hold

joint talks in berlin later today, in an attempt to broker a compromise in the migration policies. parts of the parties broke up last night with no resolution to the standoff. in syria, ahead of the bavarian csu said he propose resigning from merkel's cabinet, but put the threat on hold and allows talks to continue. that i wouldnows like the christian democratic party and the christian socialist party to work together. together, we are very strong. it is in this spirit i will be holding discussions today. for me, it is also important not unilateral, net cord made it, and not at the expense of the third parties. is to be theador

first leftist president of mexico in decades. a survey by a newspaper gave vowed to end violence, 49% of the vote. resultsugh no official have been published yet, the numbers were decisive enough for the main challengers to concede. president trump has attacked opec, accusing the cartel of manipulating oil prices.his comments came after confusion over whether or not saudi arabia will increase crude output by the maximum amount possible. the president said the kingdom had promised to pop 2 million extra barrels a day. >> opec is manipulating. they allowed less than we thought last week. they have to put up another 200 barrels, because we don't want that happening. juliette: global news 24 hours a

day on air and tictoc on twitter, and powered by 2700 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top . the first trading day of the new week, month, quarter, but it is not a very good one. picking up where we left off at the end of the last quarter, which was the worst for asian equities in three years. you see the nikkei down by 1.5%. don't pay attention to the green in the hang seng, because it is a public holiday today so out of action. essentially the markets we are tracking are in the red. with disappointed a little the csi 300 down 1.5% today. stocks we are watching, chinese developers sticking to a 20 month -- sinking to a 20 month low. this is on housing concerns we are seeing and a lot of cities. it is down 6.3%. sigma health falling the most in

eight years after it cut its earnings guidance due to the fact it lost a pretty important contract. upthe upside, tci in taipei by about 10%. this is a company that develops and produces healthy food and skincare products.it is at a record high. traditional drugmakers falling and alternative medicines rallying today. manus: thank you very much. and theiro companies urging mr. donald trump and the administration to not impose tariffs on imported cars. hyundai and general motors have joined in. they would jeopardize investment plans in the united states, unless the president asked down on the sixth of july when the u.s. would post tariffs on chinese imports. in response, china says it will in post levies on the same day. breaking this down is our news

desk editor m o'brien. emma o'brien.d mar is there any chance the carmakers will be heated and the tariffs will be avoided? toyota has gone up by $1800. hyundai is talking about it. is trump going to listen? hitting atare really his core argument. thisu go back to the next and what the start of this whole trade war was based on, it was that he was concerned that u.s. manufacturers were getting a raw deal, that it was in decline. they are trying to pitch to that. they have a lot of manufacturing, so bmw, tesla, and hyundai coming out with their own warnings. and the world's biggest car market at the moment is china. but china does slapped with 25%

tariff on car imports, it will hit their business. it may see them as having to reassess their operations in the u.s. we have one week to go before these tariffs come into force, and it does not look like there are any talks going on between the u.s. and china that we can see. as far as we understand it, donald trump would have to reverses decision to put these on chinese goods. it is not looking very perspective at this stage. anna: what is the sentiment there in china? as we look ahead to the 25% tariffs hit at the end of the week, china has already said they will retaliate. emma: that's right. that has been their line all along. they try to put themselves in the defensive position, that they do not want the trade war, but they will hit back tit-for-tat if the u.s. does.

they will not sit idly by and be attacked is the line they are going with. it is fair to say the feeling here is quite -- you see it in the markets. the stock markets have taken a big hit over the past two weeks. and of course the yuan, a really good gauge of sentiment, falling despite being a managed currency thatespite their not being big of losses in other emerging-market currencies leading those declines. i think it is fair to say there is anxiety here, not just among officials who are trying to work out what trump will do next, but also in market players and investors. anna: thank you very much for that. o'brien joining us with the latest on what is going on with the china-u.s. trade. elections, we will get further analysis later this hour. we have plenty of headlines

coming through. appointingng about carlos ozua to be his finance minister. he is proposing stability for mexico. mexican surge in the currency, although there were plenty of things to work in -- to worry about. that was in the early response. in the last hour and a half we have seen a retreat in the peso. let's get to the guest. shall we talk about trade? it would be remiss not to. i have a chart that shows pmi data and components being broken down, some weakening. is this when we start to see the data reflecting the trade? >> it was very slight. i think the fears will have a bigger mess, with the big misses

we have seen. you are right, we have been talking for a long time about how china is leading to more consumption, so the fact that seems to hold up the services side is good news. i think it is only a moderate miss. it is a risk off day today as you can see, but it is not a huge risk off day. it is interesting in terms of trade. if we look at the u.s. deficits, there are three areas. china, mexico, and the euro area. all of those currencies are very weak. you have to think especially with china, there is a deal to be done there in terms of helping stabilize the currency. anna: we will see whether any talks materialize. manus? manus: allen, good morning to you. heard a great deal over

the weekend about mr. trump wanting to put out the wto, feeling he is not being treated fairly. is the root cause that the wto makes the address on the global level with china, and the united states? wto might not be fully fit. alan: it is a fair point. there seems to be a point going back to cars. it seems these very old-fashioned u.s. cars, especially in europe, and she does have a point. i think wto are very silent about why there are higher tariffs. it breaks the common sense test. like a lot of things that trump does, there is some hidden points amongst the rhetoric. .nna: lots of fruity

rhetoric we have talked about speculation in the yuan. what are your thoughts on the currency? a lot of currency people we speak to say the chinese are not actively manipulating currencies, there is weakness in the data. alan: it is outperforming other emerging-market currencies. they have this basket approach, and i don't know if you have it on the bloomberg. it looks more stable. nevertheless, if you look from a china perspective, they have inir -- had their deep scare 2014-2015. they don't want that again. in contrast, what does america first mean from trump's perspective? for us, it means a weaker dollar. they have gone very quiet on the policy. manus: what does that mean for stocks? saying youhe show by want to hide out.if you want to hide anywhere, hide in u.s. stocks.

bank of america is saying the economy is going down, and you want to buy the dollar. would you buy american stocks relative to global stocks? alan: yes, i think you are right, u.s. stocks are the right place to hide. it always is in risk off environment. u.s. stocks are subordinate. i am less sure about the dollar. we think the mood is off, because currencies are not about interest rate differentials. if currencies are just about that, the turkish lira would be the world's strongest currency and the swiss franc would be the weakest. the euro area has a big surplus, even italy. for currencies, the key rate is euro-dollar. we have a bit more positivity on the euro down here. anna: allen higgins stays with us. coming up, mixed messages.

oil drops as the president called on opec to stop and it relating prices. we will talk about that. manus? have: and the mexicans elected their first left-wing president in decades. we will bring you the very latest from mexico city. the mexican peso was the strongest performing emerging market currency of the day. this is bloomberg. ♪

manus: it has gone 9:20 in dubai, 1:20 in singapore. you are looking at stocks under pressure. exports in china are negative. the yuan continues to retreat. oil is under pressure. global trade wars are expected to go live at the end of the week. will there be a retreat?

what are the consequences for global growth? those are the questions for markets. juliette saly has your business flash. are steppingivists up pressure on nestle, or getting in its -- arguing and needs to do more to improve its performance. they disclosed a $3.5 billion investment a year ago. they are pressing the company to divest its stake in l'oreal and reform its government structure. describing their strategic approach as muddled, they are also calling for the company to be split into three divisions. elon musk says tesla just became a real car company after hitting its model three production target. in an email, the ceo says the company produced 5000 last week, a goal of initially set for the end of last year. to meet the target, tesla built a third production line under its fremont plant, the move described by analysts as quite in sanity.

airbus will miss its delivery year. for the a320 this that is according to people familiar with the matter. ,roblems with the engines caused problems in shipments with the automaker -- the air fewerexpected to deliver than. the original plan manus: president trump has accused opec of manipulating prices. his comments came after he caused confusion over whether or not saudi arabia will increase at the maximum amount possible. the president said the kingdom agreed to pop an extra 2 million barrels a day and then had to roll back. >> opec is manipulating. they allowed less than we thought last week. they have to put out another two million barrels, in my opinion, because we don't want that happening.

higgins is with us. apparently, opec manipulates oil, not that the americans of ever manipulated the oil market around texas at any juncture. the point is this, he is calling for 2 million barrels. he called for it again on fox. this is what the market is concerned with. delivercieties will more than they promised at opec? extraordinary to see that statement over the weekend. first thing he says, the prices are too low. create bloomberg should a bloomberg machine to put on his phone. prices are up $100. he needs to get another perspective. that is a tough call. he seems to be the oil macroeconomists all of a sudden. two, it goes against everything

about opec. i am sure opec members must have looked at this in horror. .hey backed away from it they seem to have backed away from the exact agreement to go to 2 million barrels more. , and find it extraordinary i thought a deal would be done in terms of opec, but the fact is there is good demand for oil. anna: indeed, that goes to that point. you talk about a long-term perspective, and maybe trump can find a bloomberg in the white house. you through this to our attention in your note. the fact that we have seen such a wrapup in chinese demand year after year. alan: people talk a lot about the supply, but they don't talk about the hidden demands. you get the same in terms of oil demand essentially.

unlike many other commodities, it is relentless. china and india, india has a similar perspective. the world economy is in good shape, but you have this structural move to more oil into the economies in terms of china that is supporting oil. ourfundamentals for us, prices too low? not necessarily. what is the reference point? $100 back in 2015? thing that has happened is the short-sellers have abandoned the market. they cut the short positions by 60%. this market is out of kilter for this next move. hedges have flashed -- have flashed it. prices are under pressure. how do you look at this oil market in terms of the next material leg? unlike trump, we try not

to be pure macroeconomists forecasting the oil priced, more like investors in that we have stocks in the likes of shell or russian stocks that are correlated with oil. news has been a lot of bad priced into the price of oil. if you like stocks in markets correlating, or in the oil business. that is how we express it. looking at chinese oil demand, that gives us a full positive on oil. notin our portfolios, we do go along oil specifically. we go oil related because it is pretty hard to call as a pew are spot price -- as a pure spot price. recall investors that make sense. anna: alan higgins stays with us. mexico has elected andres manuel lopez obrador as the first

left-wing president in decades. what does it mean for the mexican economy? that is next. this is bloomberg. ♪ what's a gig of data?

well, it's a whole day's worth of love songs. 300 minutes of baby videos. or, it's a million chat messages. a gig goes a long way. that's why xfinity mobile lets you pay for data one gig at a time. and with millions of wifi hotspots included, you'll pay less for data. it's a new kind of network designed to save you money. click, call or visit a store today.

6:30 in london, 2:30 in tokyo. -- 2%.down by two p the topics falling to below -- topix falling. japanese stocks, the nikkei also sliding just over 2% right now. the car sector, weighing in on trumps trade policies. -- gm, hyundai, many voices on that front. now the picture across the

equity markets for you right now. let's check in on the market action with nejra cehic. whatw bank what --nejra: will the trade war look like with the deadline looming? the big question over markets, meeting asian equities are trading lower. we just showed the japanese markets. they seem to be leading the losses, but also china and the cost be lower -- the kospi lower. in the fx space, we see dollar strength, and also some yen strength. those currencies, in terms of what is weakening. we saw that equities have their worst quarter in the quarter just gone. i want to focus on the u.n., because that is resuming following its biggest loss in 2015. if you look at the yuan, it begs the question as to whether what we are seeing is a bit of catch-up. we had weaker data over the weekend as well, but this chart

normalizes the start of the year. the yuan against the dollar, we switched across to do it yuan-dollar, does not go quite as much. it has not actually weekend at all -- weakened at all. the mexicancused on peso, we saw a jump early in the asian section. it is not only more, it is weakening. andid see it weaken might see some volatility here as traders digest what policies might calm from that amlo win and the outlook for congress. and a check on oil, we saw a jump on friday. wti gains last week. it has weakened with trump pressuring the saudi's. it is according from its highest level since 2014. wti at $73 per barrel.

anna: let's talk about one of our biggest political stories, the mexican elections. the mexicans have elected andres manuel lopez obrador their first left-wing president -- left-wing president in decades. that is according to exit polls showing him heading to a landslide victory. him --ction shoaaw let's get analysis to mexico city. our bureau chief joins us now. good to have you on the program. how significant is this victory? reporter: this is very significant. this is the first time a leftist leader would take control of mexico in four decades. a lot bigger than anyone expected according to the official count. he is 30 points ahead of any of his rivals.

they were so overwhelmed by the lead that they conceded just hours after the polls closed. this is a historic event for mexico. manus: we have a tliv on the go covering it. it will be about the appointment of the finance minister, whether he gets control of congress, and his plans for the economy. nafta, the critical pillars of what markets want to know about. nacha: congress, we are seeing polls showing he could get definitely a majority in the lower house and possibly the senate. this would be one of the reasons we have seen it turned negative. but that came out later after the original numbers. it time to at the same time -- it timed at the same time the polls came through. anna: he has named a finance minister this morning, on the

list of things he has to get done early on. put it in the context of what we are saying globally. this ties into antiestablishment trends to an extent, although he did hold office in mexico city. it also has regional echoes because of the left and that being common across latin america. acha: he is definitely riding wave of antiestablishment fervor in latin america and other parts of the world. thate trump and some of european leaders we are seeing, he is more to the last. today -- more to the left. today he had a fiery speech talking about how he would put the poor first. ideologically, he is different from the populist governments that have swept into power recently. but again, still very

antiestablishment. rhetorict's see what turns into policy. nacha joining us from mexico city. great to have you with us this morning. alan higgins is our closest this morning. i put together a volatility chart on the peso. we are back to the euro. when you look at the peso, is it priced for a win? if he gets control of congress, would you see another attrac on -- attack on the currency? alan: we would be surprised, because it did get priced in. if you look at the chart on the peso, the weakness we saw. now we have the reality that he is left-wing. what is encouraging from a debt holder is he is anti-deficit. unlike other left-wing governments it is spend, spend, spend, he comes from the

background of a shopkeeper and balancing books.anna mentioned the fact that he ran mexico city. he ran that pretty well. we now need to see the reality. weare not experts on mexico, are general fund managers. we do manage in dollar and sterling, and buying em fx generally. it is a very important currency when you go along. -- when you go long. year, been painful this but a lot of it is in the price. anna: we talked about your long mexican the bonds. it is not in pesos, it is and sterling. what is the case for earning or looking at that kind of asset? we talked day today about what the plan is fiscally, is it a worry if you are holding debt. what is the thought process? alan: there are a couple of things.

we own 100 year bonds. you get theity is bond geeks and look at the actual risk, closer to 30 year bonds in terms of risk. there is some added value from the behavioral aspects of shu ddering at 100 year bonds. so you solid country, are already macro spread in dollars and sterling. we very much like that. and earning the additional income over multiple years, so the biggest issue is do you have to much interest rate? we do not believe so. or worst-case, defaults. amlo does not seem to be a default orientated president. manus: he certainly does not. alan, emerging markets. the equity side is worse for

bonds since 2015. we have had a couple of big house calls. you bsa getting involved, pimco's advisor is saying it is the trade in a market -- it is the decade of trade in emerging markets. they say you should want to get involved. this is the chart. they say they have fallen too far, too fast. would you join ubs and affiliates at pimco? alan: pimco, coming from an equity perspective, it is fixed income. we have some hard currency debt, but mainly we are an e.m. local. when you are partly a currency trade and partly earning high real yields in local markets at 37%, it has been very painful this year.

frankly, we are long for this year, off to a very successful -- after a very successful 2016 in this space. you do not get these excess returns without these periods of volatility. it is a good entrance point for more investments. for the equities, the cheapness is all about mainly the likes of chinese banks. where you don't find cheapness is tech. it is quite analogy is to the u.s. -- it is quite analogous to the u.s.. ands in old economy state-controlled banks where you find the cheapness in em.we are more on the bond side than the equity side. anna: in terms of watching the moves in emerging markets, everyone is pinned to the trump administration, but also the fed story and tightening, what that

does to interest rate differentials, and this week we turn our attention back to the fed. thursday we get an update from the fed and their thinking. i pulled across the spread. it shows we are approaching that flatline. they thing to some extent, trade tensions keeping a lid on how high rates can go in the u.s. where does that take us? is a if it does, that dangerous signal. 2017 when the curve last inverted. the yield curve has been the single best predictor of tough times to come of a recession, called every single recession. theticed the atlanta fed, guy running the show down there he said it is their job to avoid yield inversion. they know about these themes.

butu.s. economy is strong, i would not be surprised if they take this chart, this yield curve chart, into account, if they see an inversion, that could give them reason to pause. is the market telling them they have done enough? anna: thank you very much, we appreciate it. apologies to manus for jumping in on you. alan will be joining the radio team as we continue this conversation. 7:30 u.k. time on bloomberg radio. according to the finder of tesla, they just became a real car company. the automaker exceeded a production target for the model 3. he said they produced 5000 of the mass-market sedans last week, originally a goal set for last year -- for next year. dave, thank you for joining us. why is it so important for tesla

that they finally met this target? been set as the benchmark for whether or not tesla can become a real carmaker . by real, we mean mass production. is it a car for the masses? the model 3 has been there a stab at that. it has also been important for them because they have shifted the deadline, the targets, making it more and more conservative. it is really important for them to hit the production target on this one to preserve their general credibility. this is a company with very high valuation. a lot of investors love this company. a lot of investors were starting to question how long they can love it when they keep missing these targets, and can it become a "real carmaker" by producing this model 3 on budget, on time? this is a sign they have at least hit that milestone.

they have hit that target. manus: this is all about sustainability. it is a magical number. it is what the markets want to see. how much of a boost does the company get from actually hitting this milestone? i would say it is hard to underestimate. this is really big. yuan musk has that steve jobs -- yuan musk that steve jobs alternate reality field. he can take a small milestone and spin it out. when you look at how this emerged, this was a masterful play. they are getting a big boost in publicity about this. if you were short, you might be a little sorry. they are able to play these kind of games really big. part of the reason for that is they have such a huge fan base, not just of people who like the company, but people who are

lined up to buy the cars. we are talking hundreds of thousands of buyers that have put down money in said i am willing to pay in advance for it. this is not a world where other carmakers have to give rebates. this is going the other way. you have a lot of people betting on these cars. you mentioned the magical word, sustainability. one of our own reporters has created a tool for this. it is called the tesla 3 protection meter. it is very interesting. there are is all kinds of crowd sourced data to project what these models will make, because there has been a question in the market. as of three or four days ago, it was up to 4500. it was a pretty accurate prediction of what their production is going to be. they pulled out all the stops to

get to that 5000 number. they even put an extra assembly line out in a tent. they may build more. they do intend to keep up with this pace, and they have to keep up with this pace to meet the demand. that ahead, you can expect they will pull out all the stops and produce as many of these as they can because the demand is certainly there. manus: they will go gangbusters on that. combs, with the latest on tesla, 5000 model three sedans. judgment day for angela merkel as the dispute over migration reaches its end game. we will discuss what it means for the chancellor's political future. this is bloomberg. ♪

manus: it is the start of a new week for trade around the world.

.utures down automakers are complaining about trade tariffs and the ramifications. jobs data from the united states, there is a cacophony of economic data that could shift these markets within certain parameters. down 0.5%, not a great story at the start of trade. it is 9:50 in dubai. let's get your business flash. juliette saly is standing by. juliette: thank you. withists are standing up pressure on nestle, arguing it needs to do more to prefer -- to improve its performance. a 3.5 billion dollars investment a year ago and is pressing the world's biggest food company to divest its stake in cosmetics firm

l'oreal and reform is government structure. describing this to tj caput -- opera just muddled, they are calling for the company to be split into three divisions. elon musk says tesla just became a real car company after hitting it model three production target.the ceo says the company produced 5000 of the sedan this week, a goal that was set for the end of last year. they built a third production line under a tent at its fremont plant, a move described by auto analysts as insanity. here is your bloomberg business flash. anna: thank you. the fate of the german chancellor angela merkel's coalition is due to be decided today as migration policy reaches its endgame. several meetings of the cdu and its sister party broke up well after midnight last night with no public resolution to their standoff. knows it is serious.

i would like the democratic party and the social union to continue working together. together, we are very strong and people have expectations from us, and we.will be holding the discussion today for me, it is also important. anna: the german chancellor speaking. -- parties are speaking holding joint talks later today in an attempt to broker a bow of compromise. joining us now danae kyriakopoulou is, the chief economist. we will expand the conversation to the eurozone. in your position as an economist, starting to think about the possibility of europe without markle, what it does for the reform agenda, the coming together of the eurozone if

there were to be no merkel, or is it too soon to have those talks? danae: what a week it has been for angela merkel. the german chancellor had very long meetings with other european leaders to reach an agreement on migration. fromad to face criticism some of the eastern european countries, and now criticism at home from coalition partners. she is no stranger to crisis. she has faced many crises over her career, notably over the financial crisis in the euro area. there are high chances this could be it for merkel. we will see today how the meeting goes with her coalition partners. there are various scenarios. we could see her governing in a minority government, we could see her government falling apart. we shall see that today. manus: it is great to see you this morning, thanks for joining us. it is amazing how we have gone from a black swan to a grey event in a short period of

time. take me through the ramifications of lack to greg to reality -- black to gray to reality. is this the beginning of a long road to the end? danae: there would be huge repercussions. she is not just any chancellor, she is the symbol of the west liberal order. the former chancellor of west germany said it is a weak germany, not a strong germany, that is the most dangerous for the european integration project. if merkel survive this crisis, there will soon be another one. we see donald trump having intentions in terms of pressuring her. we shall see that again. the euro and about the european integration in terms of the european monetary union and the economic and monetary union, it is a political project. so far, it has been held

together because it has been political will to hold it together. now if leaders drift apart because of migration policy, that could have repercussions for the euro. so far in the central bank it has held it together, but this is no longer an option. we saw the central bank earlier this year saying they will now stop there asset purchases. european leaders can no longer rely on this. anna: on that subject, we have a meeting taking place this week, a european council meeting. i remember it was supposed to be talks about on thursday, friday around the brussels summit. there was supposed to be a lot of time to talk about eurozone integration. but migration was on the agenda, so there was no time. is anybody on the same page with anybody else? the french and the germans? it wasmost of the time

migration, and there was a short statement on the monetary reform. macron and merkel are on the same page on most of the points. we also have to remember that a weakmerkel would be a macron. having a weak partner in this would also weaken his plan. we saw some progress on this, but the euro group will take it over in terms of how to move forward. it will be a big challenge for the euro group and its president. anna: thank you for joining us. thank you for your time. up next, is trump driving investors away? we will bring you the latest when we checked the markets. is showing a tough time in regards to the

escalation of the dental trade war's. let's show you how the asian stocks are finishing this particular session. europe will take italy from that as the topix drops over 2%. ♪ manus: good morning from dubai.

i'm manus cranny. anna: i'm anna edwards live from london. these are today's top stories. manus: mexico turns left. the peso gives up its early gains as exit polls show a landslide victory for andres manuel lopez obrador. we are live in mexico city. lobbying against u.s. auto tariffs. the chinese signal is weaker. merkel's. judgment day the german chancellor hold last-ditch migration talks with their coalition partner. can she swerved a government

crisis in europe's biggest economy? manus: a warm welcome. it has gone 7:00 a.m. in london, 10:00 a.m. in dubai. minutes,sions, fed china's slowing down, experts in negative territory. london, paris, frankfurt dipping into the red. oil is under pressure as trump ups the rhetoric in terms of his demand for 2 million barrels of extra oil. this is on tesco. what an alliance. anna: yes indeed. they created a long-term strategic alliance. this is about combining their weight in the market. they are saying this alliance will cover suppliers and join

purchasing. if they come together, what kind of deals can they do with the likes of unilever and the businesses that supply them? there has been regulator to come together in the u.k. market. consolidation, the beefing up of supermarkets, seems to be one of the trends we are watching in the european equity space. we will get more details, but a fascinating story. let's get to the asian equity session. you went through the weakness there. this is from -- we are down by more than 1%. hong kong markets out of market. the yuan continues to go down. they are managing its decline, which is due to weakness in the data. we do see the yuan weaknesses continuing. we see euro weakness, down by 0.3%. we talked about what a tough

time angela merkel is having at the moment, as she tries to hold her coalition government together. markets in asia to be dim view of the news about the lack of decision-making on the migration story. the mexican peso almost flat. we saw a boost to the mexican peso. the markets got excited about the certainty, the size of the victory, for amlo, the leftist candidate we have been talking about. now we are pretty flat on the mexican peso. one of the bull markets. manus: when the bond markets are gearing themselves up and all is theus will be when afternoon, when we will hear what the complexion of the fed is. u.s. treasury futures are just a little bit higher. equity markets are on the dip. you will get the minutes. any hint that the fed could be

on a slightly pulled back or stepping back a little bit, a little more dovish, we could see something of a stoppage in terms of the flattening. inflation when it comes to inflation, we are at 2% inflation goals for three straight months. i like this line. he is hearing for eroded angst from companies in this -- hearing full throated angst from companies in this. a little bit of asset failed ms.. also getting news -- asset failed news. is the technology business. selling a part of its business for $2.5 billion to blitz in germany. suse, there is a cash consideration of $2.35 billion.

one to watch. we will be following that particular industry. let's tell you about what is coming up on the program. to the be speaking london school of economics professor. he will be joining us later on programming, 9:00 a.m. london time. let's get a bloomberg first word news update. here is juliette saly in singapore. cduette: angela merkel's and its bavarian sister party are expected to hold joint talks in berlin today in an attempt to broker a compromise in its dispute over migration policy. separate meetings yesterday broke up well after midnight with no public resolution to this standoff. who headsor minister, the bavarian csu, says he proposed resigning from the market to allow talks to continue. >> everyone knows it is serious. i would like for the christian

democratic party and the christian social union to continue working together. together, we are very strong. it is in this spirit we will be holding discussions today. for me, it is also important, not lynn -- unilateral, not coordinated, and not at the expense of third parties. juliette: andres manuel lopez obrador is poised to become the first left-wing president of mexico in decades. exit polls showing he is heading for a landslide victory. a survey by a newspaper gave vote obrador 49% of the ahead of candidates from two business friendly parties. although no official results have been published, the numbers were decisive enough for the two main challengers to concede. attacked trump has opec, accusing the cartel of manipulating oil prices.

his comments came after he caused confusion over whether or not saudi arabia is going to increase trade output by the maximum amount possible. the president said the kingdom agreed to pump an extra 2 andion barrels a day, claims the white house had to roll back. >> opec is manipulating. they have to put out another 2 million barrels in my opinion, because we don't want that happening. twoette: and the last matches of the world cup decided by shootouts. 1-1ia upset spain after a draw. a penalty shootout saw the goalkeeper trigger wild celebrations in moscow after making two saves. now the host will face croatia in the quarterfinals after their 3-2 shutout defeat of denmark. global news 24 hours a day on air and tictoc on twitter, and powered by 2700 journalists and analysts in more than 120 countries.

you can find more stories on the bloomberg at top . we want to check in on the markets in asia. we are seeing a general weakness coming through. you see these reflected on the world map. it is down by 2.7%, a bit of week momentum coming through from the pmi data. japan's market closing out the session lower by 2%. , australia outperforming only down by a quarter of 1%. and hong kong out of action today for a public holiday. but the trade tension ahead of thefriday deadline for tariffs on chinese goods are weighing on sentiment in this part of the world. in terms of stocks, we were looking at sharp when it rose 15%. coming under selling pressure today, but they are at the one-month high. pressure for chinese real estate stocks, a 20 month low on the housing curve concerns, and to

the downside in australia, sigma health care falling after cutting its profit guidance. that stock down about 40% on the close. anna: thanks very much. juliette saly in singapore. we were talking about the weakness in the asian equity session. msci asia is down by more than 1% as we mentioned when we were looking at the risk radar. let's put up european feature -- european futures. 1.3%, todropping by underline the extent of the negativity that perhaps we will see at the start of the european trading day. manus: just a little more breaking news coming through before we move on to our next major story. this is in regards to the resources. keep an eye on that at the start of trade. lcan agreeing to

buy the rest of vedanta resources. it is an unconditional offer. to fourould be entitled year dividends. we have trade,m, we have a whole host of issues to deal with at the start of trade. at the top of the pile our auto companies. toy are urging donald trump not impose tariffs on cars. hyundai has joined the rollcall, saying import duties would be devastating and jeopardize its investments in the u.s. unless president trump backs down on july 6 and the u.s. will impose tariffs on $34 billion with of chinese imports. in response, china has said it will impose counter levees of the same measures. for the latest, let's get to the news desk editor emma o'brien.

what is the possibility that the auto companies -- you have gm, bmw, hyundai, toyota. these are the beasts of auto. what is the chance their voice is going to be heard? emma: they do seem to be making very high stakes, a last ditch attempt to sway his mind. really hitting him where i guess it could hurt by these threats. thathreats, but warnings these tariffs could have to reduce their manufacturing presence in the u.s.. they just saw a reduction in tariffs from china come a planned cuts below 15%. but if the 25% tariffs come through, if donald trump does not pull back on those, china will retaliate, which means a

25% tariff will go on foreign autos, a lot made in the u.s. and sent to china, the world's largest car market. anna: thank you for the update. a lot to talk about in regards to the auto industry, and other businesses speaking out about trade war's. emma o'brien joining us. us.our next guest is with glad to have you on the program. ef markets are considerable. the chinese yuan, we have seen it weakening. some of the colleagues are pointing out that chinese are likely to manipulate their currency. of you seeing any evidence manipulation of the currency by the chinese, or are they stopping it from falling any further? sure it really matters at this point. the markets have been watching to see where this tariff war,

this trade war could escalate. fx,e it is my background in but it is the movement of the uan.ese yo i am not sure the president is concerned about how they are managing the currency. what you are seeing is a topline three .5% depreciation in the chinese yuan is probably what is signaling him more than anything else. the problem with this from a currency standpoint and a contagion factor is it does affect the other regional economies in asia. with furtherliate currency depreciation, regardless of any type of change in relation between the usa and china. i think it is very important there is stabilization and understanding how the currencies move. manus: good morning to you. it is not just dollar-yuan, it

is also the basket of the currencies. that is the lowest since january at 95.3. what does the pboc need? if you take what anna just showed us, they have not really got this horseback on the bridal. how do they do that? how do they stop it? peter: right. wayeneral, the primary would be to shore up interest rates and raise them, create an attractive environment for investors. they are moving in the opposite direction. while that is very positive for growth, cutting 50 basis points off, it lowers the attractiveness of the chinese yuan and exacerbates that outflow. they are moving in the right direction, but the markets are more focused on interest rates as a core driver for fx.

right now, they are moving against what would be common sense, to help the currency shore up, similar to what we saw in mexico with the central bank of mexico moving aggressively to raise interest rates. china is doing the opposite on their borrow are rates -- on their ror rates. anna: if you are looking at a haven currency, which is it? hsbc says it is not the swiss franc, it is the yen you are going to if you are looking for a haven. the reason is the swiss economy is too open and smaller, and therefore does not provide such a good haven. peter: agreed.i would be less focused on the economic improvements or situation of switzerland and more the role the swiss franc plays on the global marketplace. the depth of the market is not there. it also has negative interest rates. it has proven more of a regional faith haven than a global one we

have seen the last five years. the chinese yuan is the dominant one for global risk, which is what we are seeing right now. dollar.r is the there is the rationale that 70% of gdp growth comes from the consumer, so even if they do go into a trade war, they are much more protected than export driven economies like china. there is also uncertainty in terms of what exactly the prices will look like. will it focus purely on trade? will it be the cause of rising interest rates or oil prices? it tends to be a global safe haven, and that is what people are looking at. not purely the specific trade war concern. manus: i love what bank of america had to say on friday. the american economy is going gang busters. it will force the fed to re

consider its rate hiking path. the other lead story is the peso. we have gone from another big rally on the back of victory for lopez obrador. that has been given back. we are slipping back. we see dollar strength, peso weakness. some people say it is priced in, his victory is priced in, and it is as low as she can go. it does not look like in this morning. it looks like the market wants another slight that it. would you? peter: i would be very concerned about moving into peso at this point. this president is very much untested. 's don't know how trump meeting might actually go. given the volatile nature i have heard from the president's at this point, there is a enormous uncertainty. the market was trading the last few weeks on the uncertainty and

now the certainty of the political situation. after that, we switch back to the nafta negotiation. as we have seen so far, it is extremely volatile. that is the trade i think is say likely to be than to this political situation in mexico is normalized, let's go back into the peso. brave people go back into the peso. there was a market strategy. braver than you, there are not many braver than you. german companies have come to an agreement. this is bloomberg. ♪

anna: this is "bloomberg daybreak: europe." from the start of the first european equity cash trading day of the week. futures suggest they will be considerably weaker. off atng of a global set stake. s&p futures down also, down by 0.5%. we see some weakening in the yields and money going into havens such as the bond market. it really is a trade crisis keeping the lid on it. at 0.48%.0 year we will discuss monetary policy, but not just in the united states. we get a decision from the reserve bank of australia. manus: let's see what that does

to the aussie, along with the trade war. thursday, it is the fed's moment in the sun. they will release the results of their june meeting with policymakers. -- what will they intimate? will they intimate a softer stance? that is what the yield curve will be focused on. anna: on friday, data from the united states will show the economy at an almost -- added almost 200,000 jobs in june. that is what will be really interesting, when we start to see whether this trade war is having an impact on chinese am and e markets. manus: what impact will it have on markets? peter rosenstreich --

peter rosenstreich this still with us. that relationship between the dollar and the rates, tie the two together for us. does that still exist in your mind? what that drive the next leg of the dollar? peter: yes. i think right now it is relatively balanced. on one side of the coin there is the policy divergence trade that most of us started out the year they slowing interest rate policy in the u.s., higher in europe, therefore let's favor the europe. that has not panned out. it is looking to hire interest rates in the u.s. and expecting further higher interest rates. upwill start to vacuum dollars from around the world. it looks like the steepening of the yield curve -- the higher

short-term rates will continue to attract moneys in the uncertain -- monies in the uncertain environment.we will see the dollar continued to improve. anna: you talked about it as a haven. where does the euro stand? because euro weaken of the pressure we see on angela merkel in her coalition? is thei think part of it political situation, but i would not discount a lot of that. there is a lot of political fabrication happening in europe. there's constant fragmentation. it is not just one-off. the markets are relatively used to this type of event, and it is growing more used to it. declinesuse one party in another one rises does not necessarily mean it is the end of the euro. with the ecb strongly behind the european monetary regime, it is

unlikely that one government's fall will fragment the entire experiment. is notat saying growth moving as quick as expected. monetary policy adjustment is less likely to occur anytime before september 2019, and that investors cang, get a nice return. we think we will continue to see the migration out of the eurozone with low interest rates to a higher rate environment, as manus just mentioned. manus: thank you very much. peter rosenstreich with anna and i this morning. anna, let's finish the day with a quick flash of the futures. they are looking fairly punched this morning. that is trade, oil, iron or ore futures,ron and hyundai joining the rollcall.

bmw over thegm, weekend, calling on trump to change his mind, essentially. this is bloomberg. ♪ ♪ retail.

under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver.

guy: welcome to "bloomberg markets: european open." we are live from our european headquarters here in london. the fair values and europe are already sharpening negative. the s&p is looking negative as well. are we in a negative feedback look with asia? they're going to talk about that. the cash trade less than 30 minutes away. ♪ guy: let's start in europe with that resignation threat. the german chancellor prepares a last