good morning to anna: -- anna: good morning from bloomberg's headquarters in the city of london. manus: this is "bloomberg daybreak: europe." these are today's top stories. anna: angela merkel prevails. the german chancellor strikes a deal with --. how will the markets react? levelan hovers near a key as stocks in china sell off. breaking point. the british chambers of commerce warning u.k. companies -- warns that u.k. companies are slowing down there investments over uncertainties over brexit.

♪ a very good morning to you. it is about 6:00 in london and 9:00 in dubai. let's focus on the asian equity session, negative once again, down by just shy of 1%. down by more than 1% on the shanghai composite. we start to see more movement in the chinese currency. 6.7 is where we are on the u.s. dollar. loire our through that 6.7 uan hasso that y weakened through the level of 6.7. some chinese major banks have been selling dollars. we are down by 4% on the chinese currency since the middle of june.

you see we break through 6.7 on the onshore number as well. the australian economy -- we had a decision from the rba this morning. no change in interest rates on the central bank -- from the central bank in australia. we have got some news out of the banking sector. manus: we have indeed. we talked about a potential cross-border deal. societe generale to buy commerzbank equity markets and commodities business. the geographic spread is that they will buy london, hong kong, paris, and zurich. they do not provide financial terms of the deal. the deal will have a limited impact on their tier one ratio, the buffers of capital. the deal will have a positive return on tangible equity. a great deal of speculation about who barclays might do a

deal with arhus socgen might do do a deal with or who socgen might do a deal with. a pretty big piece of breaking news, one that we will build on the story as we go through. you are talking about flow products, as it management businesses -- asset management businesses. you see a huge competition in this space from goldman sachs. will keep an eye on the story. have a look at cable, have a look at eurosterling. are we up momentum to a whole new paradigm? this is cable volatility, which stands at 8.2%, below this year's average of 8.5%. are we mispricing currency risk? .c.c. warning brexit and

businesses are getting fed up. this is cable volatility on the barney on this slide and barnier says you need to see a huge filling of the gaps. ubs are saying brexit back and forth will keep sterling under pressure. these indicators, there is a downtrend. to me that says there could be just a small window of opportunity volatility test in the volatility -- in volatility. anna: u.s. futures of we will be weaker at the start of trade. let's put up those futures. we are expecting to be a touch weaker at the start of the trading day. later this morning we will be bringing you are exclusive

interview with the riksbank a governor following the central banks decision. we continue our focus on central banking and we will speak to him. the german chancellor angela merkel has said the immediate threat of a -- has halted the immediate threat of a makeup by special breakup -- threat of a breakup. the minister will remain in his position. and importantly, angela merkel remains the chancellor. joining us now is maria in berlin. good morning to you, maria. give us the latest on the overnight developments in german politics. maria: good morning. it was a long night in berlin, but this time we do have a deal. going into this meeting angela merkel had three big challenges. office,to stay in

another was to keep the christian democrats together, and the other was to desert minister -- of these are .inister -- appease the minister they will bring able to determine who will stay in germany. at the german government has also announced a bilateral deal with austria. that theed out minister stays and angela merkel presumably also stays. this is the newspaper in germany and basically the message is clear. seehofer stays. about what does this say merkel's leadership? she might have stymied this particular eruption, but it just does not look that stable, does it?

>> exactly. this is a diminished chancellor. clearly hurt election performance was a sign of that. angela merkel has been able to cut a deal, a migration deal in brussels, and three bilateral deals when it comes to migration with the governments of spain, greece, and austria. this is a government that still yields a lot of power and can get things done. no one to this point is willing to challenge her openly. angela merkel diminished but still powerful in office. manus: thank you very much, maria. she had the latest twist and turns on the german front. joining us now is saker anwar nusseibeh from hermes fund managers.

iset the feeling that there political risk building, and perhaps we are underpricing in germany. would you agree or disagree? saker: there is certainly political risk, i think. that's true, but also, be careful not to underestimate chancellor merkel. she is a very good dealmaker. she is the last great leader -- if you like -- in europe. europe is going through a difficult state because the brexit deal has put us in a difficult place. it is a tough time and i think it is not so much -- it is the aftershock or aftereffect of this decision to withdraw from just one president trump on the other side has decided to bridge reduce -- reintroduce isolation was a -- isolationism. anna: we focus on the politics and the underlying economic

performance in the euro. ands talk about the pmi's but we see from the factory floors the eurozone. i have this chart that shows the pmi details for the euro area. we are coming off of a strong place come en suite -- place, aren't we? saker: the problem that europe has now is this uncertainty of a trade war which is going to hurt everybody. on my china who is also , whoenced -- unlike china is also influenced by the trade war, it is an open market. you have a trade war looming and an uncertainty of how you will push forward politically. so you are right, there is political uncertainty. manus: with that political uncertainty do you expect more euro weakness? we have dollar strength and we can talk about that, but the

euro is down 3% against the basket of g10 so far this year. 's political instability and infighting between working your -- lead to a weaker europe? the discount is a discount to the future. it is about the performance of european big companies. i used to say this a long time ago, companies now are globalized. typically speaking they are spread around the world in terms of their operations, and the affect on them is not yet clear. some european companies have come through with some very interesting and strong earnings. the announcement about the socgen at a time in which companies will try to redefine

their frontiers and businesses. all of this means after many years of able run, -- a bull run, the investors are tried to work out where it is going to go next. the currency therefore is a little bit weaker, but not weaker in a major weight. the globalized companies try to figure out what happens to the globalized supply chains that you talked about. i was looking at european eps and they have held up well at a time when equities haven't, and at a time when we have heard from a number of european corporate about the damage them by tariffs. is this when we are going to hear corporate i felt on trade -- cry foul on trade or will they be robust? saker: they have done a lot of work in the past.

who are sitting in the same chair about two years ago and said that europe is not doing as well as the u.s. earnings season. companies have put a lot of effort in restructuring their own businesses and you see the effect of that now. the problem you have is future earnings if you are going to have a trade war, and how big that trade war is. the honest answer is, nobody knows. now you have got the chinese in the mix, and it looks like president xi can be as tough as president trump. manus: we broke the news, you've got, is big, socgen -- commerzbank, socgen picking off the bits of commerzbank that they want. is this the start of what we have all been talking about? which is much more considerable cross-border action. or is it a one-off?

the sale for commerzbank will cut the cost base by 200 million by the end of 2020. saker: look, you have been saying this should happen for a long time. that is because it you are a logical and clever men. -- man. there are special issues about this. socgen has tried to consolidate itself. in theory this could be the -- in theory that is the way which the european banking sector can consolidate across borders, which is the way to survive in the future, so it should go that way. whether this is the start or not, i don't know. i have not seen the details yet except for what you announced. let's wait and see. like on the face of it a great deal for both, and you need something like this in the

european market. you, saker anwar nusseibeh ceo of hermes fund managers. let's get the bloomberg first word news with juliette saly from singapore. u.k. prime minister theresa may is said to be holding one-to-one meetings with ministers to win their support for a new proposal for a customs deal with the european union. pro-and anti-eu speakers are split over how closely to split from the eu's trade regime. theresa may has drawn up a third way that combines the best of earlier models. friday sees a crucial meeting at theresa may's country estate, at which ministers need to agree britain's blueprint for its future eu relationship. has a set thep u.s. very badly. the comments came in response to reports that trump is considering withdrawing the u.s.

from the organization. according to bloomberg analysis, 87% of thes won cases it has brought to the wto against other countries since it was founded in 1995. jean-claude juncker says he plans to travel to washington this month to discuss trump trade dispute with the eu. banks areina's major said to have sold the dollar after the the -- the yuan slumped. bloomberg's -- a bloomberg survey. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. of course talking about the fact weekend forn has

the first time -- has weekend to that level for the first time since august. check out the hang seng, which was closed yesterday for a public holiday. hong kong is play catch-up, if that is the right word. large-cap stocks in china also under pressure. the rba leaving rates on hold as expected in australia. you see some positive momentum coming through their but most markets coming under selling pressure. -- iss. is seeking entry seeking to block entry to china mobile. big selling coming through in stocks in hong kong. analysts are saying this is because of world cup wages come up that people were not spending their money in macau last month.

anna? anna: thank you. wonder if some in the united states are rethinking any holiday plans for tomorrow giving what we see in the chinese markets. holdsk. prime minister one-to-one talks with cabinet ministers at friday's meeting. can she sell a new customs proposal to her team? the third way. later today we bring you our exclusive interview with the riksbank governor. this is bloomberg. ♪

♪ live shot of singapore. --.yuan is getting will the pboc intervene? msci asia-pacific stocks really

taking it -- at the second half of the year. acquiringsocgen is the commerzbank business that includes the german lenders exchange rate it products and of market making operations as it seeks expansion in europe's largest economy. it will take over investment products, flow products, and asset management business based in frankfurt, london, hong kong, and zurich. the deal will have a positive impact on returns on tangible equity after integration. facebook is being investigated by more federal agencies over how a political consulting firm obtained personal information from users. the company says it is cooperating with the fcc and fbi of the reviews of the data transfer of cambridge analytic a, which worked on donald trump's presidential campaign.

it is now doubling the amount of staff working on user safety and security. the u.s. has moved to block china mobile from entering its telecommunications market on national security grounds, launching another salvo in the fight between the two worlds -- the world two biggest economies. that is your bloomberg business flash. anna: thank you very much, juliette saly in singapore. with talk about the u.k. beresa may is said to holding one-to-one talks with her cabinet ministers to win their support after surprising them with a new proposal for the customs deal with the eu. this comes i had of a friday's minister meeting. the british chambers of commerce

says the u.k. companies are at a breaking point because of brexit. the ceo of hermes fund managers the still with us. issues that that 23 they need clarity on. 21 out of 23 items still to be achieved. with talk about the u.k. government agreeing what it wants from trade, but this is of course without putting it to europe. we so have a long way to go. saker: with our running out of time -- we are running out of time. the bcc has been unreasonable because the british government does not know what it can agree on. half of the people in the government remain as remainders and the other half are brexiteers. businesses have got to say, we don't care, we just need to know what it looks like so we can plan. you cannot plan until the

government goes forward and actually puts the plan that they propose. anna: business investment is sometimes hard to get a handle on. when i talki hear to businesses is that they are holding back to try to see what it is that they have to do. they are worried about what it means. there is such an interdependency of trade now. it is not that they are saying -- an't want it brexit brexit. what they are saying is we need clarity. if you have a clarity than you can plan, and they are not getting that. can i take it to the point that we start the show with, which is volatility. i was looking at cable volatility, eurosterling volatility. we are sub the average for the

year. this max of mispriced volatility to me. rbc would say that this is action -- actually i think that pricing that brexit by not actually happen -- might not actually happen. saker: there is something going on with the currency market. the second point is that brexit will not happen. i think it is politically impossible for brexit not to happen at some shape at this stage. i really do. they are going to have to push some kind of brexit. the stability that we have got for sterling assumes that things are not going to get worse from here. until we have clarity, i am afraid that is not clear to me at all. manus: what is the worst risk

that you think can come to pass? saker: i think in closure of this government is a bad risk -- implosion of this government is a bad risk. you have another two years of uncertainty. that is in the u.k. market -- i think that is a tale risk which is a bad one. the oppositionee party voting against any type of deal to trigger on a -- an election? saker: i don't know. i read in the news was that mr. corbyn is being pressured by those in his party to stand up against brexit. anna: and unions a big supporter of the labour party busy shaping the policy at the market -- moment. stays with nusseibeh us on the program. president trump lashes out ipo

wto -- out at the wto, saying that they treat america badly. we will talk about what came out of that conversation yesterday. this is bloomberg. ♪

♪ anna: good morning, everybody. this is "bloomberg daybreak: europe." over in japan it is 2:30 in the afternoon. the dollar against the yen is pretty flat. the japanese equity market not flat. if you add the two days together , yesterday and today, this is the biggest two-day loss since the month of march. we see the weakness in the mining sector coming through. we will keep an i on those. the first deputy governor of sweden's riksbank delivers a speech and we will bring you our interview with the governor later on today.

we focus back in on central banking. manus: the european consul president and jean-claude juncker will address european parliament and strasburg later on. in the u.s. we watch out for the data on the factory orders, durable goods as well. let's get to nejra cehic with the very latest on the markets. the question on the markets is the contagion effect from the yuan, isn't it? nejra: yes. it is interesting that anna showed that dollar-yen pretty much unchanged. any a version that we see in the market not been expressed in the dollar-yen. in japan,weakness china, south korea unchanged at the moment. australia actually bucking the trend as it has done on other days when you have seen trade tensions pegida selloffs across asia -- lead to selloffs across

asia. overall we see the msci asia-pacific index down about 7/10 of a percent. is such a that yuan big focus today is it has broken through that key 6.7 level. some people were saying that this is the level at which you might see the pboc come in and intervene. to other parts of the market and speaking of safe havens, we have seen the 10 year treasury yield go lower in the session. what has not been moving quite as much is the 30 year yield. the are some technical to look at. the 30 year yield, despite a number of risk events coming up this week, of course we have got the deadline on july 6 in terms of the tariffs coming from the minutesu also have fomc

. the yield has not managed to break below its today moving average since january. something to keep an eye on. finally taking a check on oil. we have seen wti jump as much as 1.2% in this session. brent at $77 per barrel. this as opec only pumped slightly more in the latest data, despite some ramping up of production by the saudi's. narrow -- nejra cehic with the latest on the markets. president trump has said that the world organization the u.s. unfairly. -- wto treatsd the u.s. unfairly. this comes amid the possibility of a trade war. we are joined from brussels by

richard bravo. what is the eu -- what are the eu's next steps? jean-claude juncker is set to head to washington? >> the eu is desperately lobbying wilbur ross and his commerce department not to impose a new set of tariffs an auto imports. a veryuld potentially be big problem for the eu, because of germany the largest -- is the largest european exporter of automobiles to the united states. this has the potential to create a fault line within the eu. jean-claude juncker as well as the eu's trade chief will be heading to washington later this month to discuss the trade issue with donald trump. whether or not they can come to any kind of agreement is very unlikely.

the eu commission at this moment does not have a mandate from the 28 member states to actually engage in any kind of substantial negotiations, so we expect that there will be more of a broader discussion happening in washington. there is some heavy lobbying going on. the commission sent a letter to the commerce department as part of its effort to avoid those car tariffs. manus: what will the eu do if the u.s. imposes the tariffs on their auto imports? we as the eull, has done all along, and -- as the eu has done all along, and they seem to be good for their word, they will retaliate. in that letter they sent to the commerce department they said their are at least $300 billion of imports into the united

states that they can target with the tariffs. the eu imposed tariffs on 2.8 billion euros of american imports just two weeks ago in response to the u.s. still and aluminum levies. there is definitely an escalation between the u.s. and europe right now, and the escalation seems to be increasing. manus: ok, richard, thank you so much. richard with the very latest on the tit-for-tat auto wars, tariffs and the odd. major banks in china have been said to have sold the dollar after the on short yuan slums to a break at the key level of 6.7. we have got a bloomberg survey from last week which found that observers expected the people's

bank of china would act to slow the currencies at 6.7. that has not been the case. is the ceo nusseibeh for hermes fund managers. 316, 2015-2016 -2016.5 why has the pboc not intervened yet? saker: i think they are sending a message to president trump. one that they can allow the currency to fall even further. one of the demands made of the chinese government at the time is that you should allow your currency to strengthen. they are saying that if you impose tariffs on us, we can control our currency and allow it to decline.

this is part of this trade war that is brewing up between president trump and the rest of the world, as far as i can tell. ,nna: in terms of the yuan where does this lead us? the chinese have ambitions to make it a global currency. how should they behave in that regard during this testing time? what should they be mindful of? geoffrey: it is hard to -- saker: it is hard to say. they arecion is that using this as a way of threatening president trump by saying that if you actually impose more tariffs, we will allow our currency to devalue more, and we can control the speed of the fall. is message from president xi a very strong message.

this is them beginning to show the flex and punch, throwing there are back -- arm back. just before we threw everything, we have seen that the world has gone crazy, there might be a message in president trump's methodology. it seems like he likes to bring things to a crisis point and then renegotiating everything. if china and the eu impose huge tariffs, perhaps that is what he thinks we can come around and reshape a deal that he feels is there to the united states. i don't know. i am speculating. anna: will all have been worth it? fors: i will come see saker some punching and boxing lessons when it comes to negotiation tactics. the shanghai composite is undoing its losses. we have a whole mliv debate

going on. there is this debate about contagion in the market as the yuan's dissent continues -- -- desecentcontinues continues. are you a buyer of yen? this is your protection trade of the day. saker: it looks like a safe haven for the time being. if you pull back one and look at the currencies -- yuan and look at the currencies and cross contagion, the markets understand and realize across the globe there is increased medical risk. that is -- political risk. that is what it is saying to you. we have not got to the point where it is discounting in full out trade war. you mentioned the 10 year

treasury just a minute ago. just watch the inversion of the yield in the u.s. treasury in the short-term and the two-year treasury. isflattening now -- it flattening now. anna: president trump has talked often about the wto and not like a get -- liking it. seeing trump moaning about the wto, our analysis suggests that they win more than half the cases they take, and in general they have a better record of winning than other countries. but the wto needs reform, doesn't it? saker: it does need reform. i think president trump sometimes it says things in his own weight -- way. the language he constantly uses is that the united states

constantly comes out as a loser. you are right, the wto does need some reform. we do have a globalized trade system that seems to work. anna: there have been efforts to reform it before. stays with nusseibeh us, the ceo of hermes fund managers. bloomberg users can interact with all of the charts that we have been using the -- during the program. you can browse all of the recent charts of featured on bloomberg tv and save them for your own analysis as well. can he save the nuclear deal? that is the question. the german chancellor has withstood a key challenge to her leadership, but what is next for the euro's biggest economy? this is bloomberg. ♪

♪ manus: live shot of new york. futures are managing to pick themselves off of their feet. you see s&p futures trade just into the green. the imf manufacturing pmi is on a tear. maybe that could just be the reflective .4 u.s. equity for u.s. equity futures. juliette saly is standing by. juliette: socgen is acquiring the commerzbank business that includes exchange rate it products and market operations as it seeks expansion in europe's largest economy. the french bank says it will take over investment products, flow products, and the asset management business based in frankfurt, hong kong, and is a rick -- zurich.

the deal will have a positive impact on --. facebook is being investigated by more federal agencies over how a political consultant team -- consulting firm obtained information from users. facebook says they are cooperating with the sec and fbi. facebook admits it faces a tough time beginning user trust, and says it is now doubling the number of staff working on user safety and security. -- hutchison has agreed to buy hutchisoning -- ck has agreed to buy out european mobile ventures. that is your bloomberg business flash. anna, manus? manus: thank you very much,

juliette saly in singapore with the latest headlines. the question on everybody's mind is can the iran nuclear deal be saved? president has arrived to europe and his attempt to guarantee that investment and it continue. it is likely his last visit to europe before president trump begins imposing sanctions. we have brought in our reporter. good to see you this morning. when i was at opec last week we saw the oil minister. visitakes this think this is so significant by rouhani? why is it so significant? >> the of visit -- the visit has been planned for months. the u.s. pulled out of the nuclear deal in may.

this will likely be the last chance he has to be in touch with his counterpart in europe ,t a time where for months europe and other parties in the deal, russia, china, and iran have been really trying to save the deal. anna: what are the assurances and measures that rouhani once to get from this european visit? just this. department week said that the u.s. will be trying to cut down to zero revenues from oil that iran will be getting. to first thing is for iran try to ensure that there is a way that not a significant chunk will beil exports o cut -- exports will be cut because of the sanctions exposed -- imposed. even before sanctions were reimposed, some

of the larger banks had issues working with iran because of reputational issues, and they were not very comfortable with that. we have the sanctions coming back and it is very important for the eu to find the mechanism to find independent channels that would allow some financial exchange to happen with iran while banks or those entities will not be subject to sanctions from the u.s. manus: the eu may find channels and opportunities. it is whether the corporate's -- or the banks are brave enough to take those conduits and stand for and square to the white house and say no, we feel protected by europe. for a honey lyrically -- rouhani politically, or if this is not seen as a success, this has got serious ramifications for him in terms of his domestic political standing. >> yes, he was elected last year.

he wanted to create jobs and revive the economy. one year into his second term he dealing with this situation that is out of his hands. it will not be an easy three years ahead if there are no solutions to be found to any of these issues. anna: thanks very much. we look forward to more updates on the visit. --t was bloomberg's a r iran reporter. is stillar nusseibeh with us. do you sense that the deal can still be salvaged? saker: it is very hard. -- or at would find it least western companies would find it difficult to actually brave the possibility of sanctions. it is very clear that the united states is saying to its allies --.

what that will do for iran itself is to force it to rely more heavily on countries that do not rely on u.s. sanctions, which is the -- you up -- russia and china. you know what, to be fair , it is not just the corporate that are finding it difficult to find a roadmap to stand up to the united states of america. they're just does not seem to be any optionality in standing up to trump. trump is getting very clearly involved in the oil market as well, really pushing companies buyto bite iranian oil -- iranian oil, and pushing the saudi's to pump more. what does that say to you? saker: there is a very strong union between -- very strong

overlap between the two policies. the kingdom of saudi arabia is clearly part of a wider policy that president trump is pursuing. the tweet he made the other day about his conversation with king abdullah. they are listening and cooperating. this is not dissimilar to the united states trying to manipulate the oil price to manipulate -- achieve a political end. are going in million miles away from what was the norm for the last 30 or 40 years of open, free markets. that is the key. we are coming back into a world where we do not have this idea of an open market where markets decide the level of thinks, whether it is the level of oil price or currency.

we are having government interfere now for political ends . anna: trumps and goal is to reduce tariffs globally. saker: if you have note tariffs across the whole world, that is an open market. the united states did not from free trade as it should have done, and therefore the levels have to be renegotiated. i think that is a good point. anna: the policy against iran by the trump administration is one thing perhaps a lifting oil prices at the moment. wrote this is bloomberg opinion piece talking about how we are close, but he sees signs of oil price shock. see thislike we could oil price shock, which then would drive down demand, and prices may fall quite fast. so trump should be careful what you wish is for. saker: again, president trump is

banking on the idea that if king abdullah response, and pumps n it will buffer the shock of completely cutting off a raining oil from the markets -- iranian oil from the markets. manus: if we just broaden it out a little bit, emerging markets. they had the toughest quarter in a number of years in the bonds business, the equities space. i'm going to see a whole host of different notes -- when it comes to the emerging markets base, do you think it is a value proposition or a value trap? what does that say to you about e.m. at the moment? saker: it is definitely in our view a value proposition. , whiche the demographics

is there a growing -- there is a growing population that is young and coming into the workplace. you have a growing middle class. the long-term -- of the markets across the world is very much strong. on the other side you have the developing world aging and coming to the end of its lifecycle. that does not change. the fact that it might get buffered by uncertainty winds -- but it is a by not a sell. manus: great to have you with us. good to see you back in the seat, saker anwar nusseibeh. angela merkel's compromise. the parties have reached an agreement on migration.

we have the very latest on that story as u.s. equity markets managed to find themselves in the green as we go to the start of the european trading day. 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. manus: good morning from divide.

i manus cranny. -- i am manus cranny. anna: and i am anna edwards from london. these are today's top stories. manus: expanding in germany. medical travails. the germans chancellor strikes a migration deal with her coalition partners. how will european markets react? the u.n. hovers at a near the level. authorities may be intervening

as stock markets selloff. warm welcome to the show. futures are just trading into the green. you're taking its pricing from the u.s.. you saw asia returned to the green. there is speculation out there about the yuan slide that it could be done. could be a little hint of intervention, so to speak. you have the oil market rising above $74. they are trying to assess what is going on with saudi exports. also, the u.s. manufacturing debt is 60.2 from 58.7. that shows a stronger story in terms of the market. we have this slight reprieve.

when will we get an official stamp? let's look at where we are the asian equity session. things have come back a little bit. an hour ago, we were down by 1% and now it's down by around .5%. in japan, closes up closing down by 0.1%. hong kong looking like an outlier. the shanghai positive -- surgeon with positive territory. shanghai flirted with positive territory. some people agitated in the asian session. 6.7 is the level that some said we may see intervention. some chinese major banks selling

the dollar in the swaps market. as you suggest, very much alive with the conversation. these storm in a teacup, yuan moves. australian dollar against the u.s. dollar, we saw no change in interest rates. just checking on movement in that currency. manus: you have that slight bid from the equity market. havepro-quote is that you bond slightly better off. moment but this is almost a different story. waiting for the minutes. jerome powell could take the hiking error out of the market.

with the curve invert? it's a real risk. i was speaking to various people who believe there's going to be a supply dilution -- supply deluge. that showing up in the key bell auction. 2.45 was the bid to cover ratio. there is a sludge of t-bills to come to the market. another 200 billion are going to come to the market later in the year. that's the state of play on the markets. it seems there is a cap on these yields. hard for thosee 10 year bond yields to spike higher until we know exactly what happening with trade drama.

trade o rama,, i like that. -- trade o rama drama, i like that. more to see on bloomberg television. following the central bank's rate decision, what will he say about the weakness in the currency? let's get a bloomberg first world news update. theresa may is said to be holding 121 meetings with ministers. wants a new proposal for a customs deal with the european union. officials have confirmed that she has drawn up a third way that combines the best of earlier models.

meetingees a crucial where ministers need to agree with britain's reprint for its future relationship. wtoident trump has said the treats the u.s. very badly. the comments came in response to reports trump is considering withdrawing the u.s. from the organization. analysis,to bloomberg the u.s. has 180% of the cases it has brought to the wto that it has brought. china's major banks are said to of sold the dollar at the -- after the onshore you one swamp -- onshore yuan slump . slow theseeking to losses.

they would act to slow the currency dissent when it hit that 6.7 level. global news 24 hours a day on air and at tictoc on twitter. you can find more stories on the bloomberg at top . markets, we will be looking very closely at what is happening in china because it did look like the shanghai composite was going to rebound into positive territory. you have the large-cap stocks still at .6%. hong kong very much playing catch-up after missing yesterday. the selloff across the asian region. leading rates on hold. a fairly flat finish in tokyo. stocks, still seeing

this escalation between u.s. and china head of the trade tariffs expected to come in line on friday. we are hearing news of the u.s. could block entry in china mobile. shares off by about 2%. pay two point four 5 mobile euros in italian operator. that's the 50% stake in doesn't already own. a big selloff in casinos today. you can blame that on the world cup. everybody betting their money on world cup and not the macau casinos. and spending it on beer if you're watching here in this country. we won't talk more about football. let's talk about the german political scene. angela merkel has halted the immediate threat of a government breakup. deal, holding sensors will be set up the german

boarder. the interior minister, who had threatened to it, will remain in his position. angela merkel in her coalition live to fight another day. join us now, live for us in berlin. give us the latest. the overnight news comes from germany. good morning, it was another long night in berlin but this time we have a deal. angela merkel went into this meeting with a triple challenge. wanting to clearly stay in office and make sure her platform stay together. deal thatms she has a gets it done. out, the german government will now set out migrant centers along the border. the goal is to see who can stay and not stay. those who cannot stay will be quickly deported.

bilateralannounced a deal with the austrian government. germany and angela merkel stay put and i want to show you the front page. red paper inost germany. it's reference to the migration crisis. anna: -- manus: what does it mean for her leadership? we are talking black swan events from merkel. she has managed to hold it together in the last 24 hours but it doesn't sound like she is on sure footing. are we misinterpreting something we want to misinterpret? is a chancellor who is

weaker. her election performance was a testament to that. germans have a lot of question when it comes to her open border policy. she is still a woman who can wield a lot of power. she had three bilateral deals. i think the key point we need to remember is that no one yet has challenged her. in the end, they pulled back and that seems to be her biggest strength. manus: thank you very much. the latest from germany. we have a few breaking headlines hear from the pboc. china's financial risks are controllable. you are looking at some of them as well. went off to they say? they are closely monitoring recent affects fluctuations. -- recent fxects

anna: fluctuations. luctuations. anna: the onshore and the offshore both went to 6.7 earlier on. the key is to keep the rate stable. that's where these headlines are coming to. you've been through them, manus. interesting to get these comments from the central bank at this time. joining us is wolfgang. we returned to the subject of china in a moment. let's stick with this. china to keep the yuan stable at its equilibrium level.

verbal intervention in fx markets. wolfgang: we do see that. in many cases, that is all that is needed. the yuan against the dollar, were seeing 6.7 this morning. we can't necessarily interpret all the moves. do you see this as a persistent weakening part that the pboc is allowing to happen? wolfgang: it's a question of how much china would fight against the weakening chinese currency. it's just another iteration of the ongoing trade dispute between china and the u.s.. a weakening currency would strengthen china's exports. it would counter some of the more protectionist measures. -- manus: one of the

things the market has been most worried about is this cascading lowering of the yuan. it takes one of the big issues away from the trade dispute at the moment. of the yuan. in it clearly takes that off the table. wolfgang: it is probably a way of china to show their open for negotiations and are not interested in a further escalation of the trade dispute. they draw a line in that line could potentially be removed in case we see a further escalation from the u.s. side. anna: we are seeing this have an effect on markets. keep flashing up the impact that all of this is having on the currency for you. cross water capital flows are basically stable. this is what they didn't want to

happen. they didn't want to see cross-border outflow biggest that was one of the features of 2015. wolfgang: having outflows coming out of china would counter some of the measures that the chinese government has been pushing lately. fxus: this is what i mean by wars. the recent market volatility is due to dollar strength and dollar uncertainties. this is in the event of a fully blown trade war. china must stick to a managed floating exchange rate. it will deepen its market orientated exchange rate. there are many lines that are playing to the white house. as we look at global markets in global equities, the u.s. has outperformed the rest of the world in the eye of these trade

war propositions. from an asset allocation point of view, where do you want to be? do you buy bonds? are you buying five's, are you buying tens, are you buying 30's? i think we have to be geographyul of which we have to invest and at which part of the curve. haveerman market bonds proven they are efficient hedges against an escalation of political risk. we have seen risks around italy emerging. italian government bonds have performed poorly and german government bonds have rallied but i would argue that the front end of the german bond is very vulnerable. we are 40 basis points inside the value we were in february.

we are close to the all-time lows at -30 basis points. inflation in europe is back. out rateave ruled hikes for the next year but they are tightening monetary policy. they are reducing the quantitative easing amounts. assetre stopping a net purchases next year. i'm not getting too complacent with the ecb not hiking because i have much higher interest rate exposures. more to lose than to gain. i keep my exposure low. credit has cheapened up. values are more attractive now than they have been in the january period. anna: in sense of the chinese

economy, let's go back to that if you will let me, where do you see them having? we see the rising cost of servicing corporate debt. bank, the central yields have been coming down. chinese corporate bond yields on the rise. unlucky in chinese culture. how concerned are you? if they want to stop clamping down on debt levels in china, they can stop. they can add more to the system. wolfgang: it's certainly worrying when debt levels rise. how does china manage a transition from an investment led economy to a consumer led economy? they have a lot of tools at their disposal. identified one of the

key risks they are addressing. if we have this moment of , what othervention instruments are they going to use? people are saying, the pmi's are expanding. the economy is strong. your over blowing this in the equity market. what more do you expect from the pboc? wolfgang: i think the chinese government must find a middle ground. one hand, they want to be as accommodative as they have to be. and also to prevent a hard landing of the chinese economy. they don't want to add too much stimulus and potentially overheat the real estate market. they have to find a very thin line between the two positions.

willwill tell whether they be able to find a middle ground position. much.thank you very we will get thoughts on europe in just a moment. we were lingering on the china story there. china to keep the yuan stable. let's get a check of the markets and see where we are. manus was checking at the start of the hour and a look like they were a little bit positive. the compass it has come back briefly -- the composition -- by shanghai composite up .3%. manus? i love with the mliv team were saying. china did a manly job of

fighting back towards parity ever think of equity markets, they do manly jobs. the details, the price, we haven't got that yet. the deal will have a positive impact on the return and on tangible equity and integration. joining us now is our bloomberg finance editor, russell ward. the terms of this deal, it's global, it's commodities, and it's equities. that's right. the deal involves businesses london, hongkfurt, kong, and others. they are going to be taking over investment products and flow products. commerzbank is one of the biggest banks around. it's quite a lucrative business

force. last year, the business generated about three and 50 revenue --os in your in revenue. it is should a a lot of revenue for commerzbank. suggestingrzbank this is about getting more to germany but as you say, it's all around europe. which of the other players have shown an interest in taking the assets off the hands of the bank? barclays is one of the earlier bidders. goldman sachs is probably the most serious contender. they beat out goldman sachs. a lot of banks are interested. unicredit of italy. they have all reportedly

expressed interest in taking the government's stake. which of course is nearing the end of its multiyear restructuring. a much moreome prospect -- attractive prospect for foreign banks. in many areas including its vast network of small and medium-sized businesses. attractive given the fact that germany is the dominant economy in the eurozone. anna: thank you very much. bloomberg's asia editor. but this recap a we have heard around china since the top of this hour. giving anovernor interview and speaking about currency markets. closely watching recent fluctuations in markets. saying that the effort market

volatility is due to u.s. dollar strength and external uncertainties. it's interesting that we see a little bit of a turn lower in the yuan. nothing prophetic. i think that goes back to the fact that they are talking about keeping rates at a stable monetary policy. it will be capped at a mutual rate. let's bring attention back to trade. threats -- the wto treats the white house unfairly even though they win most of their cases. wolfgang is a fund manager. he is still with us. see how theting to majority of cases that the u.s. brings, they win. 75% of the cases that other

countries bring, they typically lose. taking this whole trade war dispute forward, we are running down to the wire on friday with it. wardo you think that trade can impact jerome powell's minutes tomorrow night? would take a little bit out of the hiking? i think the federal reserve has to be very careful of -- careful to maintain its independence. they can't have the perception that they are depending on what the trump administration does. their job is to look at the u.s. economy and to look how inflation pressures have been building up. looking at a variety of economic indicators and make your decisions based on that analysis. unless the trade war really feeds back into the real economy, there's a certain

tangible impact on the fun mental health of the u.s. economy. happens, they should not look at the trade war dispute in focus really on the fundamentals. the trade war is putting a lid on 10 year yields high do they go for you? we should make note that at the moment, markets are generally nervous. treasuries are one of the safe haven assets. investors have been flocking back into u.s. treasuries, german bund's, and so on. all the develop market government bond yields are going to fight an uphill battle because the economic situation is still robust. manus: thank you so much. absolute return. thank you for sharing your thoughts. there is one market to keep an eye on.

that level was triggered. they came with the verbal intervention. that's it for "d aybreak europe." ♪

guy: tuesday morning, good morning. "european open." cash trade is less than 30 minutes away. crisis averted. the euro rises after angela merkel craft a deal on migration in germany, avoiding a potential split with her sister party. now she turns back to trade which will be easy to fix.