anna: good morning. i'm anna edwards. manus: and i'm manus cranny. this is "bloomberg daybreak: europe" and these are today's top stories. anna: david davis and his deputy resign, throwing theresa may government into crisis. number 10 plans to name a new brexit secretary today. the ecb executive board member tells bloomberg there could be disaster for the world economy. more from that coming up. investorsets soar as look forward to earnings news. the dollar to a three-week low.

good morning. "bloomberg daybreak: europe," just on 6:00 in london, 9:00 in dubai. lots to talk about on the u.k. political front. we need to focus on the broader market picture. it is positive. when you consider the flurry of trade news we saw on writing. we have the asian equity markets up 1.2%. continuing that rally that was put in place in friday's session during an it seems that market want to focus on earnings news rather than the possible implications of a broadening trade war. the yuan going a little higher. dollar weakness one feature of today's session. this is your haven of choice, then it seems that the market is

not focused on those trade troubles. mentioned the jobs report. this is reducing pressure on emerging markets. against the up 0.1% dollar. it had a rally on friday. some of that has been undone a little bit by the news that david davis has resigned, taking at least one minister with him. we will see what further implications that has. she plans to nominate a new brexit secretary. manus: david davis of course is one of the linchpins in that negotiation team. this is cable and euro sterling. i put it the other way to show you the low on the chart. how is sterling priced? i'm seeing the analysts say it could drop to 1.25.

that takes you to this kind of level, but nowhere near the kind of levels you saw later after the brexit vote. will theresa may be challenged? will that take you to 1.25? the current plan is a soft form of brexit. david davis suggested, you could 1.45.is rally to says 1.45. the question is whether they remain in the cabinet, and what damage they do, will they do it from the covenant? we've gone from consensus and unity to the reality, which is

fractured negotiations. michael, one of the brexiteers, saying he is a realist, falling into line and backing the prime minister. let's talk about the united states. 0.3% andres of between 0.5%. the ecb executive board member, exclusiveus for an conversation with caroline connan. we will bring you that later. let's get the first word news update with juliette saly in singapore. the u.k. prime minister plunged into a crisis after cabinet embers quit. bakerdavis and steve resigned in a double blow to

theresa may negotiating strategy. may has set a new brexit secretary would be announced today. ecb executive board member benoit coeure has said the central rank is alert to risks from trade tensions that are escalating. he made the comments in an exclusive interview with bloomberg. >> it would be extremely bad for the world economy. jobs, u.s. workers. juliette: mike pompeo has struggled off north korea's pessimistic appraisal of his talks, saying kim jong-un has not abandoned his commitment to wind up his nuclear program. pyongyang characterized the u.s.

demands as gangster like. the american side said that statement was merely a negotiating tactic. the operation to free the thai soccer players and their coach is expected to resume in the next two hours. four have been successfully brought out of the cave. the rescue will continue after oxygen bottles are replenished. 12 boys and their coach were trapped two weeks ago. global news, 24 hours a day, on-air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top . a broad-based rally in asia. asian stocks rising the most since the beginning of june. the nikkei off 1.2%. msci over 2%. the focus now, less on the trade

war and more on the upcoming earnings season. in terms of stocks we are watching, xiaomi very much in focus in hong kong. it actually fell 2.4% on its debut after raising less than it hoped for. analysts try to work out, is it a smart phone company or a broader tech company? also seeing a rally in construction and engineering stocks in japan. following thekers e.u. her on foreign steel. manus. manus: thank you very much. juliette saly with the latest on the markets. now to the u.k. story, david davis and his deputy, steve baker, have quit over theresa may's plan for a soft split from europe. davis says the general direction

of policy will leave us in, at best, a week negotiating position. may, who secured backing for her plan on friday, said she was sorry davis decided to go, but does not agree with his assessment. her office had a easement would be announced today. anna: jeremy corbyn reacted on twitter, saying david davis resigning shows theresa may has no authority left and is incapable of delivering brexit. it is clear she is more interest in hanging on for her own safety then serving the people. manus: speaking to bloomberg earlier, the former bank of england monetary policy member weight in on what this could mean for theresa may. >> she might not even survive the next week. this is a big piece of evidence.

this is ongoing chaos. the party is tearing it self. formerly of the bank of england. joining us on set in london, alexis gray. very good to see you this morning. when you look at the implications for this brexit news, do you focus on what looks to be a softer deal and what that means for the u.k. economy, or the resignation of brexiteers? alexis: i think what has happened raises the prospect of one of the more extreme outcomes. if you think about what could deal,ut, anything run no down to brexit not happening at all, those possibilities are raised. because of the deal which is being struck, which has led to several resignations, the

prospect of no deal is much more likely than it was. we are still more likely to head to a point where the u.k. has a softer version of brexit, keeping close ties to the e.u. manus: very good morning to you. interesting how on friday we had a pop in asia. here we are waiting to see what boris johnson really will do. have a look at this. this is the longer-term chart. my question to you is this. is the pound just going to tread water until we get more clarity on the resignations? alexis: i think that is right. there's been so much uncertainty. although we've now moved closer to a final deal, it remains to be seen whether the e.u. will

accept what has been proposed by the u.k. there has still been cherry picking on the customs union. anna: and where does this leave the bank of england? one analyst suggesting this is up in the air. if this level of uncertainty were to continue, the bank of england wouldn't be able to make a decision. they've been impressed by the data and they seem as if they are heading in that direction. alexis: mark carney said brexit has been a drag on the economy. the economy is still running strong. the bank of england is ready to raise rates.

provided the data continues to upbeat this month more than it was in the first quarter, the bank of england is still said to hike. reporter wrote this morning from ernst & young about dei into the u.k. the u.k. is the number one destination for foreign direct investment. andose 64% in germany doubled in france. fdi in british financial firms dropped 26%. do you think that is just a one-off, or is there something more telling him that data? alexis: it could be a combination of both. foreign direct investment in the u.k. would fall and the u.k. perhaps would not be as

attractive a place to operate. there's been a lot of pressure. you've seen rents becoming quite vocal. perhaps part of the reason why may has opted for a more soft version of brexit. the impacts on the economy are starting to become clear. anna: they've acknowledged that this plan would reduce their access. they seem to have dropped mutual recognition. i've got here the weaker pound. this is in relation to u.k. assets. u.k. equities already relatively cheap. where do we see the pound heading? alexis: it is going to be a combination of both. generally the pound has been stronger. if we end of heading down that

path, i don't think sterling will be as weak as it was. what matters is where interest rates are assessed. brexit has shifted the path of interest rates. we probably would have had rates much higher. anna: , thank you. coming up, china hits back at what they call u.s. trade bullying. we are back with the latest. this is bloomberg. ♪

9:17 here in dubai. julia sally standing by in our singapore studios. juliette: xiaomi slumped on its first day as a public company, with uncertainty dampening hong kong's biggest coming-out party in years. shares are trading lower, a far

cry from the $100 billion taliban last year. show me is hoping to transform into an internet services layer. >> we are an internet company that can do e-commerce. i don't think there's anything like that in the market before. juliette: french president emmanuel macron's reform is part of the government's plan to attract more investors. that is according to his labor minister, muriel penicaud. think the facts are there. we have higher education . the companies go for competitiveness. it means access to talent. is your: and that

bloomberg business flash. anna: thank you. china says it will stand firm in the face of what it calls trade bullying from washington. business leaders predicting the united states could be the victor. joining us now is tom mackenzie. what has been said so far? >> essentially, hold the line was the messaging we got from beijing. we heard from a vice commerce minister. he called on business leaders to push back against what he described as u.s. protectionism. we also heard from the chairman of sinochem, talking about the fact that it would be the u.s. that loses out, saying chinese businesses can whether the storm. 25% and $50 billion. i don't think the tariffs are

going to have any major impact. it is merely a stance. most of the tariffs are going to be levied on those foreign companies that manufacture products in china and sell them back to the u.s. >> state media also weighing in, saying u.s. companies risk losing out on market share. no sign that the chinese are blinking. evidenceat material have we seen of the trade tensions? bmw said, we can't take all the pain. what is the real manifestation of trade tensions? we are starting to flesh out this picture of the pain that is ,eing felt in shanghai counseling future imports from the u.s. we are hearing from the

automakers, that they are going to have to raise prices. tesla were looking at duties of around 15%. with the trade war, tesla is now looking at duties of 40%. bmw say they are changing their pricing as well. we heard from daimler in the past as well. the soybean importers have been given them subsidies or some help to offset the pain. it is starting to form out. the economists say the overall impact is going to be relatively marginal. manus: thank you very much. tom mackenzie with the latest on trade tariffs. alexis gray is senior economist at vanguard services.

one of the stories that i put to our guest yesterday, donald trump talking about basically tariffs on everything from china , but mohamed el-erian made the point that we are almost facing a ragan era moment. china can't keep up with this level of tariffs and they will go into negotiations. we are near the end of this process. there will be substantive discussions because they just can't make up the good. this is the u.s. imports to china and u.s. exports to china in the white. they can't keep up. think we are still relatively early in the trade story. perhaps the u.s. economy has softened a little bit. when you think about the

strategy of the trump administration, applying tariffs has been to push china to capitulate at some point. whether we are at that point now remains to be seen. anna: there's also a line from a number of u.s. trade representative who said, if we don't find an exit ramp, this will accelerate like a snowball going down a hill. what is the long tail on this story? where is that offramp? alexis: it is anybody's guess. i think there is broad agreement that raising trade barriers is bad for the economy. we've seen examples where it was quite costly. take some time. neither side wants to capitulate. china does not want to be

bullied. manus: the other thing anna and i have managed to ask in 50 different ways, the yuan at its worst quarter since 1994 and goldman sachs made a point this morning, there is a risk of a real miscalculation. got is the scenario you've to run. the real risk of the miscalculation. what would that look like an is that more likely from the u.s. side? alexis: i think raising trade barriers is costly on both sides. gets,ing on how bad this how much further it escalates, at the moment, the tariffs have been relatively small. it actually raises inflation.

the slower this goes, the more likely it becomes that we have a global recession. anna: what does it do to the trajectory? does it raise prices in the united states? would that be the wrong type of inflation? alexis: it depends on how bad it gets. the fed is on track to raise rates three times this year. there's no sign that the trade tensions are having a material impact on gdp. if we see an escalation from the trump administration, that perhaps could get off track. i think we would need to see substantial tariffs. manus: we often don't give a great deal of camera time to what if it all works out. one of our guests said you could get a renegotiation of wto.

it is on the table. it is a substantial piece of work. that could rerelease the synchronized growth story. the upside, how much upside is there? guess there's some upside for both. probably more for the united states. we've seen a lot of volatility this year and equity returns have been muted. anna: thank you very much. alexis gray, senior economist at vanguard. chinese smartphone maker xiaomi has had a less than profitable debut in hong kong. manus: and we will bring you our interview with the ecb executive benoit coeure who says europe should not be afraid in the face

of global trade wars. his view on that and how the ecb may move, that's next on bloomberg. ♪

>> it is pretty flat with the n. we areainst the ye almost flat on the dollar and there are the asian equity iskets going ahead and here emery. ande have the stocks up

china stands out with the hang seng. of earnings season with the equity tension moving away from that with the trade tension in the u.s. and china and more with what would happen with a earnings. i look at the short position and with theee this net short position and the pound will the in focus today. says that they will announce a new secretary today. i want to take a look at the thes franc and that currencies are the ones to own, if a recession is looming.

for the record, they say that the talks of recession are premature and thought it would be sensible to review which currencies to own amid the trade tensions. >> thank you very much. thing tointeresting see the sterling. is the bank and there is growth strong enough to resist the shocks. they are on the sidelines of the economic conference. >> what is important for us is and weiness confidence see the de-escalation process it may turn into a full-fledged war that would be very bad for confidence with the

wekdrop of the eurozone and have seen this. do we see this trade war happening? >> we have to understand what is isng on and we believe this long enough to withstand a shock . >> have you seen companies holding back investments from this? happen and not be complacent and it is bad for the economy. victim is the workers and we hope that this does not happen. plan?t could derail the

we speak and i see no reason with expectations. there is the summer of 2019 and can you explain to us what this means? that it is a guidance and it is a step it gives us the ability to adjust. there is government bonds and corporate bonds or vice versa.

-- that thing that as has been discussed and i do not expect this investment of there ist bonds and the purchase program. >> is this happening? >> it is. something that is discussed -- it is not something that is discussed. >> i don't think it is a major aspect of policy. , d.c. this is good

news or bad news? it is on the european side and we defer to this when it comes to the political direction positive clearly very and authorities are willing to engage in a constructive and practical way and a detailed and practical way to react to the paper and there is the positive and we believe that the private players have responsibility for this outcome. and wehope for the best prepare for the worst.

>> that was speaking to caroline conan in france. alexis, if you look at the trade tensions turning from rhetoric weeks, isto recent there a different path or is there a current trajectory? you heard the same thing and there is the interest rates that rise towards the end of the year. the tariffs that got applied have only done so recently and they direct back. the tariffs are implemented on that and and i doubt

something significant would have to happen. it is about rights. >>'s pickup on that. throughs will remain remain at thatl level. do you think that is ambitious with what the fed is currently minded to do? this took place much later than the united states. it ended in the united states some years ago. the rates remained and you look at the states of the you have the

inflation. it isthat comes through, difficult to justify raising the interest rates. >> there is what they can deliver and they lowered the 2019,tes of growth and, a down at 1.7%. do you recognize the numbers? thatbroadly at three with and the economic growth was above the trend and difficult to sustain. so, there will be moderation and we saw the numbers drop and we will see, in the second quarter, a growth and some improvement. yes. >> thank you.

alexis continues the at 7:30.ion tencent letting american investors bet on the music streaming service. there has been a business played with piracy. disappointingissiden debut and this recovered below the ipo. northo spoke with the asia correspondent and soon ample talked as the stock debuted. better is a provider of experience and we found this as

and there wased the internet service and this has risen. the trend is that this is becoming a bigger part of the revenue going forward all stop do they want to pull out or stay long-term? they have known for 15 years and believe in the vision, even though allow the retail and institutional investors do not necessarily believe in the store they want to pitch and you just heard the internet services will be the ball of the business. revenue is in the lower

margin. confusion on the there is facebook encent ncent and there is dampened enthusiasm with headwinds. there is a surprise at the stock is not going down more and this .5%.wn >> it is a personification of what the west has to deal with. this could be bigger than apple. a shock. and alle the rollcall

of the global investors pumped about this. is a lot of different a valuationthere is that is a concern with the nature of the business and what it will be down the road. will it be an internet service low-margina manufacturer of commoditized components? planned on ainally simultaneous listing with the apostate receipt and the regulator had questions with a list of 84 things with the regulator that did not pass the

smell test and it sent a negative shock in the market. >> they actually defined what this isness is and fascinating. they seem to have a business model. there was lazarus rising from the ashes and the music industry. really rejuvenating the prospects and what better market this and they

wanted to and they went to the new york stock exchange. there is a potential listing and we know that the music platform that they have for streaming in china, they want to go with that business. up being aend competitor. >> the library was there and you can use them at your leisure.

we look at sectors that were today, wet and, later bring you the exclusive interview with the ceo and that u.k. time.

>> everything is really awesome. that is despite the tariffs. got the fact and are we near the end?

that is the question. and willnings week they be good to trump the trade wars? that is the question. >> the reform is on the first step in the plan to attract more investors and that is according to his labor minister. is reflexive and i think andave a higher indication that is the company going for connectedness and productivity. keys.cess is one of the

>> the rolling stones signed a inbal deal to cover them theo video catalogs and details of the agreement have been released. they will reissue some of the , includingcert films bridges to babylon and a bigger bang. >> thank you. while we are on business news, let's get you up to date with what is happening at nissan. there was reporting's that they reporting's and this is down 4.6% at this particular time. nissan dropped after they said they could brief on the exhaust measurement and they conducted vehicle checks and fell in tokyo

the presster time.ence at 5:00 tokyo aheadtalk about the week discussed defense cooperation and burden sharing. he has made it clear he expects other nato members to spend more for contributions to the budget. >> yes. schedule substantive and we are going to the notes. meetinance ministers will to discuss the economic and monetary union and, to what the agreement

the? audience and the trump baby is flying over london. we are here in the studio. a good morning to you. ahead to the geopolitical offense and trump in london. spendingsed defense something we are looking to? >> this is something we have looked at for a long time and the main related toe issues the trade war. the first part of the tariffs and we have a lot of today and wexample

will have the alert meeting the chinese leader and the issues with the interesting points. there are the political issues we have them trying to and there isu.s. this from the u.s.. there is the back of the we are down at

2.9% with the winning streak in quite a while. do you the bond markets take the ?orm of haven bid >> we have seen a decline in treasury yields and there has of this andshooting it is a bit down from what the fed is signaling. view andthe long-term the trajectory and i think we're seeing the it of a correction we haven't reached the peak of the trade war and what it looks like. i continue to think there will

be room for more tightening on the u.s. treasury. if there is a recession, which currencies do you go into? they think the dollar would perform best in that situation. do you still favor the dollar? >> it is positive because the u.s. has been leading, economically, in terms of recovery. the fed is still ahead of other central banks and, secondly, risk in the scenario and there is the short with the rally so far.

>> the sterling is the focus and up next is the cabinets. we discuss. this is bloomberg. bloomberg.

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>> good morning. this is bloomberg daybreak. >> live from the city in london, these are the top north of the he andd davis says that his deputy resigned from the government in crisis and they plan to add a new secretary today. the escalation could be

disastrous for the world economy. will have more from that interview coming up. investor set aside trade concerns and look forward to earnings in the dollar slips to through week low. >> trying to assess trade, exit in the future seem to go with the rumor and let's see what happens next. anda is rising over a bit what will you see their? it bernings story, will enough to jump above the politics of the world?

do you want to see this doing better russian mark >> yes. we see a strong session coming focus on the can earnings story. we know all the facts and we move onwards and upwards and this has to do with the dollar see this and you providing a respite for the emerging markets. this reduces the pressure and the jobs report was pretty strong. arounds the headline david davis and it was the secretary and is not anymore. he has taken some of the will thenwith him and

him it another secretary by the close of business today? now.ound is up right >> there is a rally that we had with the pound and early in asia on a consensus-building. and signed up for a plan davis is not seen doing this leadership challenge. we have the minister kevin and and will they all stay? is the sterling priced for that? markets and ind would give you the drumroll, but they will not let me have the drum. they say they have added to the premium and they want the

and is about 20 basis points here and will that push the bond market, don't isget that the consensus 2.7, in terms of bond yields. what are they pricing? is it a lower yield? it isit is, rallying and all about risk and trade wars. we have the first word news. hashe prime minister plunged into a major crisis. there was a proposal for a plan on a soft exit was a david davis said they resigned yesterday in the negotiating strategy and the said a new secretary

would be announced today all stuck the central bank is alert to trade tensions that are rapidly escalating. he made those comments and interview with bloomberg. it would be extremely bad for the world economy, starting with victim. and the first would be u.s. jobs and workers. is expected ton resume in the next few hours and four boys have been successfully pulled of the cave. the rescue will continue after off vision -- after oxygen is restored to part of the cave. heavy rains push the water levels of. global news is powered by 2700

journalists and analysts. we can find more stories on the bloomberg terminal. last week was not a good one and it looked pretty solid for today. they focus on the upcoming the yuan rising higher and australia close tire. we have seen weakness coming through in tokyo and we're hearing from a newspaper that there was a falsification on ratings and that added to the concern about corporate's and impacty trade with the on the japan auto industry. anddoing well in hong kong

they were at the lower end of the range. there was weakness coming stocks.in the tourism 11% with a positive day, despite the stocks that are in the red. >> thank you very much. david davis and steve baker have quit over a plan for a soft said that thes direction of the policy would negotiationa week position and a possibly inescapable one. said thefice replacement will be announced today. our news director joins us now on the phone.

what happens here and what happens next? >> we expect a lot of action and the replacements for mr. davis will get announced today. there is speculation about who that could be and it could be andngston, a remain person it is see to see the message they want to project on friday holds 48 it only hours. has this press will the back end be convinced by her message?

says isthe proposal she the only one that parliament can support and we know that mr. bid anduld launch a they got enough letters to andger a leadership contest she push for that deal and, there is a high drama in the story of westminster. >> yes. a huge series of known unknowns. thompsons now is cooke. good to see you.

the government is under chaos said they just got m ugged by reality. would you say it is chaos? a propensity and you and she has at this and theresignations and nobody else will vote for it. andlook at where it is nobody has the power to get rid of of theresa may.

,n the grand scheme of things she stays in power. >> maybe she does. get into london hours, we do have these activities with softer around the brexit. are they putting away the david davis resignation? >> we have the news reports with we could seeen and something towards a softer b is able to move his

belief and he was on the sunday shows. need ae you don't comedian. maybe you need somebody with pragmatism. the bank of england, negotiation and disarray on monday. do you think that would shape the bank of england? they have the data they need? is aviously, there leadership challenge and that is

a different matter and to move and nothing happening in they don'tst and want to be seen as politicizing they hope to have more and we get the monthly gdp and the rates go higher. >> thank you. and itwatching the pound is continuing to spike. of any weekundoing guess that we have been seeing.

we will discuss what that means for german manufacturers. >> we will bring you the exclusive interview with martin at 2:00. this is bloomberg.

>> it is 10:17 and we are just under 43 minutes away from the start of the cash trading day. a testing of the highs in xita and there is a soft bre on the table. and weavis has resigned

the theresa may and markets. session, itgh this has been strong and they focus instead on the equity markets. let's go to the bloomberg business flash. xaomi has slumped and dampened the coming out party. cry.is a far they hope to transform from a low margin maker and into an internet services player like

have and tencent plans to shares in the u.s. and it is a sign that the recording industry is making a comeback. music streaming services have brought new life to a music business that has been plagued with piracy. the streaming has helped the music sales grow at the fastest rate since the 1990's. the rolling stones have signed a global deal with global music to cover that and merchandising. the details of the agreement have not been released and the eagles rock unit will reissue some of the classics. that is your bloomberg's newsflash. >> thank you very much.

is, the chinese premier meeting with merkel and there will be a high-level meeting of cabinet members from both countries. from one latest story, let's go to berlin. germany move closer and the tariffs are a coalescing of couple of geographies. and china are the biggest exporters in the world and the most hit by tariffs. said, merkel does not want to do this because she is aware , inhas similar problems terms of market access to the

country. >> yes, indeed. there are lots of things they and held for see all the talk, there were some who were angry about the way trade was in the past. >> the foreign minister outlined theyuture strategy and have a closer corporation and that is a business deal that and the industry will foster this cooperation further. i think we should not put too much hope on this because the economicfforts with is thetion and there

entrance into china. >> thank you very much. we are still here on set. we look at the latest with the trade talks and does it look like it is going higher? asidevestors want to put this right now. does that seem possible? >> we have not seen the shoe there is the businesses in the u.s. with the food and risen overd it has the last couple of months as people get ahead of the tariffs. there is a change of investor sentiment. patch.in a purple

>> as of close to -- as opposed to? andlook at the break even we are in a goldilocks scenario andthe fed and the wages the break evens with a mile away from danger. >> absolutely and it comes into speaking from speeches in the fed. was the press conference statement a bullish there is anomy and broad showing and its russia overheats.

characterized as everything being awesome for the units is the interest rate. >> that was a channeling of the lego movie with everything is awesome. how awesome is the dollar? does thisng this and mean it will get more involved in the dollar? >> it is difficult because of the trade talks and what is put on the back order and everything with thistogether pointing positively towards it.

they would have to bring the u.s. dollar further and we would like the euro-dollar higher stop we don't like the sterling dollar lower and the emerging markets are how the trade war continues to gestate. >> there was some stoicism with repeating the message to the ecb in you look at the rates germany and japan and it really a dollar story. >> it could be the case and the meeting is something they got

everything from mario draghi with and it suggests the underlying bedrock is better in the central bank and they are happy to see the euro remaining weak with little cool risk moving out with the employment rate starting to go higher and wages start to drive fire. >> ok. let us wrap up the markets. we have the sterling going to love a better and stronger. sturgeonion is whether is ifht and the question

it goes back and will this bill go through parliament. >> this is the pledge and they said they will replace david davis today. hire and wefeatures have been following this brexit story here today. this is bloomberg. this is bloomberg. retail.

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markets -- welcome to bloomberg markets. this is the european open. i'm guy johnson. the cash trade less than 30 minutes away. ♪ guy: brexit exit, david davis exits as the pound negotiator, the pound barely moves. have trade fears been sidelined? despite this, and xiaomi struggles. the massive ipo sees stocks slide in hong kong.