♪ anna: good morning from westminster. i'm anna edwards. manus: this is "bloomberg daybreak: europe." and these are today's top stories. theresa may battles on after top ministers quit. erdogan tightened his grip. turkey's president names his son-in-law as treasurer and fire ants desk finance minister. -- finance minister. the turkish lira pummels.

angela merkel takes a swipe at president trump's trade policy. ♪ good morning, everybody. we are going to talk about the u.k. political scene. can theresa may hang onto power? has she done enough in her cabinet reshuffle? she meets with her cabinet later on today, but those brexiteers who remain unhappy with the plan are still waiting in the wings. can they summon up the support they needed to oust her. at the moment it is not seem like they will be able to summon up that support. good morning, manus. manus: a very good morning to you. in thes a real stoicism pound. what we have put together is volatility, one month volatility

going all the way back to the vote. but -- brexit p-itis ina virtual bli cable and eurosterling. 60% probability that she will survive according to eurasia. the hedge funds are boosting the short positions, but this in no man'ss really land. socgen saying that you want to purchase volatility at these low levels because it will allow you to hedge yourself against the rise of the brexiteers. eurosterling at a 3.5 year low in terms of volatility. let's have a look at the risk radar and the other key stories. the lira is 3.5% lower -- 3.5% lower on the dollar the root --

dollar-lira. 's term will be four years long and he cannot fire the central bank governor. we are expecting a 20% rise in profit. two times earning. brent oil up 0.5%. you have got to go to bloomberg.com, anna. wearing a 10pec gallon hat talking about the oil markets. he says opec is doing what it needs to do -- doing its best to supply the market, but it will not overdo it. anna? maybe he is trying to appeal to president wearing that kind of output. we have some great guests coming

up. secretary. commercial to the treasury joins us at 9:00 a.m. u.k. time. here on daybreak europe we will have plenty of guests as well. let's get a bloomberg first word news update with juliette saly in singapore. juliette: the uk's prime minister appears likely to survive any attempt to oust her over the government's brexit strategy, for now. despite the resignations of two of her ministers and one day, an event without parallel in recent decades, most of her conservatives seemed content last night with a proposal that would keep britain close to the european union on trade. she is trying to counter a mutiny by a group of our own np's. german chancellor angela merkel has praised chana for opening up josh -- praised china for opening up investment and trade.

u.s. president has nominated judge brett kavanaugh for a seat on the supreme court, a choice that could create the most conservative bench in generations. by the senate he will replace retiring justice anthony kennedy. he is 53 years old, a law professor, and a judge on the court of appeals for the district of columbia circuit. >> i believe that an independent judiciary is the crown jewel of our constitutional republic. if confirmed by the senate, i will keep an open mind in every and i will always strive to preserve the constitution of the united states, and the american rule of law. juliette: turkish president

recep tayyip erdogan has named his son-in-law as the finance minister. a former energy minister will be in charge of a new ministry of treasury and finance, combining what used to be the two most powerful economic jobs. he will replace -- as holder of the most senior -- portfolio. the opec president and uae energy minister has told bloomberg that the cartel and its allies are doing all that they can to offset output shortfalls that have kept global supplies tight end prices height. it comes after president trump the group to cut prices immediately, but he says he does not want to overdo it. >> opec is doing its part. the market needs time and we are

monitoring the market, but there are things outside of our hands, the geopolitics, as well as how much production is coming from the shale oil, and the canadian --. this is information that we do not have and cannot predict. the producer price index rose 4.7% from a year earlier. at the same time, the consumer price index climbed 1.9% in june, matching the forecast. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top . checking in on the markets in asia, we see regional stocks higher for a third session. you have got the yen and asian bonds falling. you see that risk aversion fade somewhat. the neck a up by 1%, the hang

--g looking pretty good , and the hang seng looking pretty good. in terms of some of the stocks that we are watching, a big merger in japan amongst the oil refineries. refineries. will merge. tencent coming under pressure despite a fairly bullish morning in hong kong. analysts are cautious about this stock. is $17.ipo price is finally giving a little bit of a return to those early investors. anna: juliette saly in singapore

with the latest on the markets. for the latest on the brexit, we are joined by david merritt. good morning. let's talk about the prospects for theresa may and whether she will survive. it does not look like the back benches have quite the numbers they need. >> that's right. there is a lot speculation swirling. the numbers don't seem to be

there. if you think about the drama yesterday, with such a big resignations, two senior members of her cabinet are gone. it is almost unprecedented in history. than on to the meeting with all of her backbench np's. it does not seem like she was them. received by i think what the brexiteers are realizing is that there are lots her.mbers to unseat why would anyone bring that challenge? anna: and it would take a lot of time, wouldn't it? she was a joking that she might be planning a walking holiday this summer, and they were all laughing, saying do not do that. let's talk about boris johnson and his resignation. he of course has big objections to the policy that was presented to him on friday. the the focus now from brexiteers -- is the focus moved to trying to change that plan? and will they be successful? boris johnson certainly was not

happy. >> yes, there is some more of this process to go. time is running out to make changes on that. she is replacing the people who are not able to get behind it and now it is going back to brussels. we are going to wait and see. i think the next thing to look for is what brussels comes back with. if they come back saying that this is the basis on which we can start negotiations, i think it is highly unlikely we will see any changes to that proposal. if it is rejected outright, this is going to reopen this debate again. much inthe ball is very europe's court right now. johnson to make trouble is borissa may -- johnson going to make trouble -- is -- going

to make trouble for theresa may? you look at the younger ministers who have been mr. johnson remains very popular across the country. inent polls do not show him the lead anymore. some of these newer ministers are more popular amongst the grassroots. mr. johnson would have seen those numbers. he does not necessarily carry the big lead or popularity that has carried himself are. canver, a lot of that change. anna: crunch time. thank you much, david merritt.

great conversation. just how much of trouble will boris johnson be on the back benches? what does it mean for the markets? let's bring in john wraith, the head of u.k. macro rates and strategy at ubs limited. you talked about david davis resigning and in the meantime, boris johnson is gone. transition to the two-year -- for the two-year. .- for the two-year period what does boris johnson's departure mean for the risk factor in the u.k.? john: i think we would say that the most likely outcome over the next 6-9 months is still that the u.k. makes it to the transition period, that parliament approves the withdrawal deal, as is the u.k.

and eu -- as does the u.k. and eu negotiating teams. getting there has become more complicated. the numbers are not there yet to challenge theresa may, but every time the government moves and what is obviously the necessary direction towards what is the softer brexit, so they create more headwind within their own party. that is not clear how far the government will have to go in that softer direction, and with every step they take in that direction, how many of their own np's they alienate in the process. manus: one of the charts that i started off the show with his volatility in sterling. absolutelyity is going nowhere.

is trading sideways is trading sideways -- it is trading sideways. the you expect volatility to go up -- do you expect volatility to go up? over the next one month or so we would say that the risks are reasonably remote. that is why volatility is pretty low. once you look further at it, especially when you see these political dynamics starting to become more intense and potentially heading to the point where things could spin out of , then absolutely there is a chance that volatility picks up later in the year. john, i know that you do

not necessarily share the bank of england's assessment of where inflation goes, where wages go. with are going to get gdp data later on today. for are your expectations how that story develops? john: when you look at the overall forecast, with are actually closely aligned with the bank of england. we share the view that gdp will be somewhere below 1.4%. quite as up the about the way the economy has apparently bounced back, or the lack of a bounceback inure to -- in year two. i think where we differ is that we would say that tinkering with the fine-tuning exercises around whether gdp is 1.4% or 1.5%, which inflation is 2.8% or 2%, -- 3%, when you are in the

context of this enormous risk, since to us to be looking slightly in the wrong direction. we think the chances of inflation to any real degree getting out of control is pretty remote at this point. with think the policy should make -- we think the policy should be kept as accommodative as possible. that is where we differ with the bank of england's apparent opinion, because growth is sort of ok at the moment. manus: the last time that you are -- you were on the work skeptical, in terms of the quarterly data that we saw. the services data perhaps prove you wrong. are you still skeptical about the robustness of growth in the united kingdom, despite the services number that you have just in -- you have just seen? john: yes, the first quarter

does look like a bit of an aberration, but the bounceback is not that pronounced. the pmi's have not suggested that we are at stronger leve ls than we were late last year -- levels than we were late last year. the first quarter, although growth has been revised up, that still is weaker than the bank of england's official view. there is a difference between what the official data is sent and what the bank of england is assuming about the first quarter. and if on top of that the bounce back is potentially a little weaker, it puts us in a slightly different place. we are talking about shades of gray here. we are not vehemently disagreeing with the bank of view.d output -- the --

, the head ofraith u.k. macro rates strategy and economics at ubs limited stays with us. recession risk. one indicator has raised a cautionary signal for the u.s. economy. we bring you the very latest. this is bloomberg. ♪

♪ ♪ good morning, everybody. i am anna edwards live from westminster this morning. a beautiful daybreak over westminster. you see the pound a little weaker. the newspapers and london talk about a government in crisis. can't theresa may face down those challenges from within her own party -- can theresa may

face down those challenges from within her own party? risk a bloomberg business flash from juliette saly. isiette: 20th century fox preparing a higher offer for comcast. themberg understand that move is likely to come around the time of the formal approval fox's bid.oval of elon musk is due to be in shanghai at an event with the government today as the u.s.-china trade were up and -- upends the world's largest market for vehicles. tesla has been working on setting up a production facility in china more than one year. world cup fever is boosting u.k. consumer spending on entertainment, barbecues, and televisions. consumer spending grew 5.1% in june.

a separate report from the british retail consortium showed that sales gained an annual 1.1%. that is your bloomberg business flash. manus: thank you very much. here is an indicator for you that indicates recession risk in the u.s.. it has just raised a cautionary signal. premiums on the lowest rated tranche of investment grade, u.s. corporate bonds have risen to 2% for the first time after being below that level just before 2007-2009. the firm has noted that the 2% spread happened either during or prior to the six or seven previous recessions. john wraith is the head of it u.k. rack rates -- macro rates strategy and economics at ubs limited. this has not happened since 2007-2008. should the fed pay attention to

this spread over treasuries? does it matter? raise a flag for you? john: as far as we can tell it is -- the fed is proceeding with caution. anything that starts to ring alarm bells, to put it that way, is going to get their attention. you don't have to go back very far to see that this spread was wider than this. you have to consider the outright level of the treasury yields. they are back around the percent now. it was not locked -- we percent now -- 3% now. it is not long ago that they were at half of that level. you are all sorts of reasons to treat this with some caution. there are reasons to tread carefully, but the u.s. economy is doing just fine. anna: u.s. economy is doing just fine. if i could take it slightly

further down this line of questioning, john. i was reading the macro view blog on the bloomberg, which talks about the u.s. been closer to a recession them perhaps we realize. the timescale on that saying maybe in the next 12-24 months based on their market recession model. you think this is too far in the future to worry about? john: yes. clearly at some point the economy is going to change trajectory and given what the fed is doing, it is likely that it is going to slow down. we think the rates still have a five or six further hikes to go, as it were, before the fed long ratee end of its hiking path. growth will be starting to level off. we see that happening in the next year or two. the question is whether the fed can time that correctly to slow the economy without -- or stabilize the economy without slowing it materially.

anna: ok. john wraith, head of u.k. macro rates strategy and economics at ubs limited stays with us. this is bloomberg. ♪ 2, down. back up.

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of tokyo.e shot it has just gone 2:30 the afternoon. msci asia-pacific is a rally -- rallying. it is almost as if trade war asked is in the been -- angst is in the bin. you have seen quite a catharsis in terms of short covering, perhaps putting trade wars in the back of our minds for now, in terms of the equity story. nejra cehic is with us. does seem like that it

were narrative has gone a little bit quiet this week. we saw u.s. equities push towards the top end of the range. that msci asia-pacific index up about 0.2%. it is relatively moderate risk on, but risk on nevertheless. some strength coming through on well.st be -- kospi as id.rall asian equities are b let's take a look at one aspect of e.m. that is very much in focus today. yesterday we saw e.m. currencies rally the most in quite a few months. the lira was one of the better performers. so much so that we actually saw it move through its 50 day moving average, then we had erdogan sworn in, naming his son-in-law as the economy chief, kenn we saw the lira wea 3.5%.% -- weaken

it has been an interesting 24 hours for the turkish lira. we see cable decline again today. i know you have shown a chart elsewhere in the show showing hedge funds having the biggest short position this year, but i wanted to take a look at the risk. here we are looking at one year risk reversals in the options market. it is the biggest skew in 2018 when you look at the one week. if you look further out at the one-month, it is the biggest skew since february of 2018. certainly a bearish skew when it comes to the options market and the cable. gold holding onto the gains from what we saw yesterday. a little bit of a divergence between u.s. and european -- or u.k. investors. etc, this is the

blue bar chart, it has reached its highest since 2011. has beenholdings index coming slowly down as investors are losing faith in the gold -- in gold. anna, manus? anna: thank you very much. it is a big week for president trump. it will be a big enough week before we have the latest brexit news. today the u.s. president is off to the nato summit in brussels. on friday he has to the united kingdom to meet with prime minister theresa may. after that he holds a much anticipated with the russian president vladimir putin. bloomberg's have senior reporter for international affairs. this summit is shaping up to be slightly more dramatic than usual, and seems to have a loss of leaders -- a lot leaders

worried. why are they worried about this summit? toeverybody is here just express the fact that they are allies. this is a military alliance that has been there for a better longtime. this time all kinds of concern -- there is a kinds of concern. and is not actually about what is being drawn up in the back rooms. there was the different proposals put in place. those are all pretty straight up, pretty normal. what anyone who supports nato would like to see is more money, more troops, all of these things. there is enormous concern, first of all concerned that he does not really like the alliance, and he will do things to shake its unity. second is that he really sees this as a trade issue, as a theater in his battle over trade with countries like germany, and

is going to leverage the need of european countries for u.s. security guarantees and that battle over trade. finally he will go over to see president vladimir putin of russia, which should be normal for any u.s. president, but again there is great concern him up because they are not quite sure what a -- he is going to do and say. manus: it is the great unknowns. tell me this. has sent letters ahead of this nato summit, and he is target.on the 2% >> the first thing to say is that he is not the first u.s. president to say that there has to be better burden sharing from the allies.

this has been going on for a while and in fact that always began bumping up their spending on defense in the obama years, really after vladimir putin invaded crimea. next -- andlly say crimea, notxed invaded. he has made this in high-level issue. the irony of it is that in terms of defense spending, he can claim a victory. he could say that in the last year since i became president, that europe has really been bumping up defense spending in a big way. you have got romania which has increased spending by almost 40% last year, and some of the baltic states by 20%, and germany even by more than 6% in real terms. he could be claiming a big success, but he is not. and i think again the concern is

that it is not really about the 2%, it is not really about what people are spending in nato, it is that this is a theater in his trade war. manus: thank you so much for being with us. ,ur senior reporter for europe middle east. let's get back to john wraith. and whole host of things in terms of defense spending. we have got mario draghi, the latest comments from him when he was talking to the european parliament, and he basically talks about inflation, and he sees the risk as broadly balanced, and the inflation goal is within reach. we are confident that basically thanks to our monetary policy the inflation coverage will converge to our objective. there is this stoicism in the belief in the real inflation story in europe.

do you share the view of mario draghi? john: yes, by and large we do. their narrative is to continue on this very slow and careful path toward exiting maximum policy accommodation, and in the. time, tried to reverse some of the emergency measures in terms of negative rates that have been in place for it while -- for a while. things are evolving broadly as expected. the first quarter a bit weaker than expected, but things seem to be picking up. as long as activity stays on track, inflation should continue to evolve much in line with ecb's expectation. anna: yes, and the broader growth story for the euro. we saw data around germany coming in above estimates.

clouds things -- dark might be gathering on the trade horizon, at least in the rearview mirror do you see things looking more solid the second quarter -- in the second quarter? john: yes. the concerns about the first quarter have largely been alleviated. clearly the issue around trade tariffs, it all depends how much that escalates. with are still pretty sanguine that what we have seen is about as bad as things are going to get. if a full on trade war were to see more likely, some of the optimism will be dented. we don't think that happens and there are clear request and's about the way that different countries within the eurozone evolve, how government spreads move. generally speaking things look better in the second quarter than the first, and the ecb is reasonably confident at this point. manus: we had a big note from

out west. they say the best risk reward trade out there is on ten-year bonds. in their view, italy has raised the flight equality risk. nobody is long in the markets and everybody is sharp -- is short in the bond market. would you agree or disagree? if you are talking purely about positioning and what would -- wereere things to some of the potential risk to crystallize, then that might make a lot of sense. we think yields are headed higher because things are normalizing in the eurozone. although there are worries about italian politics and other issues which could cost -- cause --, we don't think they will be serious enough to crystallize.

there is a large short base, yes. anna: john, thank you very much. thank you for your time this morning, we really appreciate it. john wraith will be continuing his conversation with us on bloomberg radio at 7:30 u.k. time. you can stay tuned in for that. let's talk about what we are watching for today. we get a london time slew of data out of the u.k., including for the first time monthly gdp. not the quarterly when we are used to, but the monthly gdp figure. mark carney and the bank of england say they will still have whenh data to move forward they have to make a right decision in august -- rate decision in august. londonmike pompeo is in -- brussels.

he is a secretary of state and left pyongyang without any clear achievements. it is going to be a fascinating political second half of the year, with vladimir putin meeting trump, and what will happen with north korea. anna?-- anna: later today we get a rate decision out of argentina. we will watch that one. let's stick with the emerging markets, shall we? manus: will go out to turkey -- we will go out to turkey and is mambo -- istanbul. erdogan has named his son-in-law .s the economies are -- czar what does that mean for markets? the lira plunge the most since the 16 -- 2016. the market really took a hard

yesterday that his son-in-law will be in charge. what is really a powerful ministry -- in what is -- in charge and what is a really powerful ministry. the market reacted very be relatively yesterday -- there virulentely yesterday. what is your take? >> the markets do not know what to expect right now. the president son-in-law was the former energy minister. they don't know what he will be saying about the economy. when he speaks over the next few days regarding his economic policies, we should definitely see the markets move either positively or negatively. and of course, this is a concern because there is no investment friendly name left in the cabinet. -- investor friendly name in the cabinet.

with that, good morning -- with that in mind, is erdogan taking on more responsibility for monetary policy? >> that's right. central role in decision-making, including economic and monetary policy as well. earlier this morning we received a new government degree that says that president erdogan will not have to consult anyone when he picks the central bank governor or his deputies. the degree also says that the new term will be for four years rather than the previous five years. however, one may be bright spot is that president erdogan will not be able to sack any of the governors within that four-year term. but of course, president erdogan will be taking what he wants as his governors and make sure that

they are in line with his economic policies. thank you very much. those were the very latest movements from present erdogan -- president erdogan. a reminder that if you are a bloomberg user you can interact with the charts that we have been using through the show. that you go. . come a full gamut for you --. spectrum forll you. this is bloomberg. ♪

♪ german angela merkel has praised china for its open-door ,olicy on foreign investment drawing a contrast with the u.s. stance on trade. she spoke after talks in berlin. >> i think a reliable corporation is particularly important in times of worldwide insecurity. this is also important to openly

discuss issues that we do not agree on but are achieving success at the same time. manus: our china correspondent, tom mackenzie, joins us from beijing. what does this signal in terms -- left between merkel and --? outt is worth in pointing -- it is worth pointing out that they have had a long-running positive relationship for a number of years. certainly there is now a synergy from the german and chinese inside when it comes to pushing back on trump's attempt to trample on the global trade order. it is not a clear-cut case. there are many issues on which germany and china have problems that they need to overcome, but

to ainly they pointed company as an example of china on its money where its mouth is. there are still issues around the market access and iran german corporates, and what they see as a lack of a level playing field in china. manus: what do you make of it? we have had a global markets rally. we have had this relief in markets, but nothing much has actually physically changed in terms of trade tensions. what do you think the consensus is now? that we are stepping back or it is just a time of calm before the storm? >> a mixed view. may be some relief that there have not been any further trump noets about trade, and moves by china to ratchet things

up. take a listen to this. >> i think that the tension over trade right now is a matter of great concern -- grave concern. i think the challenges facing u.s. economy are not principal right now coming from trade. a lot of the issues addressed in the trade war will hurt the u.s. economy. he said it is the boring drudgery of diplomacy that actually moves the needle on china. surplusesto the around steel. notquestion is whether or we are heading towards talks between the u.s. and china, or whether or not the genie is out of the bottle, and we get a continuing ratcheting up of these trade tensions. manus: can we actually say the

treasury of the promise he is -- drudgery of diplomacy is truly dead? great work from beijing. anna, you have a very special guest with you. anna: absolutely. the big story remains prime minister theresa may's loss of two cabinet members, but she is also bracing for donald trump to visit -- donald trump's visit. our next guest is peter trubowitz. really good to see you, professor. brexit of course is a key focus for the u.k. administration as they welcome president trump. this president has spoken out about brexit in the past. you think he will weigh in this time? peter: i would not be surprised. this is not an ordinary president. american presidents normally do

not get involved in british politics, but i would not be surprised if he tries to move the needle. the question is, which will he? will he say something in support of may? will he signaled that he thinks of boris has the right side of the argument? get here we he have the nato summit coming up. you made the point that there are different types of a trump rhetoric when it comes to nato. woolwich one do you think -- which one do you think shows up in brussels? peter: that is a good question. are hopingo leaders that the donald trump that shows up as the one who is worried about whether they are coughing up enough money for their collective defense. i think they should probably plan against the donald trump who questions the relevance of nato. trump needs bargaining leverage right now.

what i look for him to do is connect what is going on with in the security realm -- going on in the security realm with what he is trying to accomplish on the trade side. what better way to pressure the eu on trade matters than to raise doubt about the level of american commitment to security matters in europe. anna: is that something that presidents have done in the past? is this unusual to make those moves? peter: it is unusual. you would have to go back to president nixon to find a president who really connects those two things. threatening worse action if you let the congress loose on the. pit is not comment -- it is not common to try to connect trade and the security matters in this way. we will just have to wait and see.

anna: you talked about how historians will look back on this time in history. do you think that president trump is going to be trying to press europe in a particular direction? is this more a case of the america first rhetoric, and just looking after american interests? peter: it is unclear. normally with a strategic retreat the idea is to regroup, come back, and regain the initiative. trump has conceded a lot of ground. he has raised doubts about the credibility of america's commitment to nato. this at a time when china is really trying to extend its reach on the eurasian landmass through the belt and road initiative. the question is what is trump hoping to get in return for these types of concessions. they are unilateral concessions.

anna: the big talking point is his approach assumes that americans are going to accept some pain, higher inflation perhaps. what is your sense as to how successful that is going to be? peter: it is a big bet. there is a new study by the brookings institution that shows that most of the americans disproportionately that will be hit by the chinese retaliation are in districts that donald trump won. the pain is going to be felt there. i think the verdict is out on the. anna: professor, thank you for joining us. , professor trubowitz at the london school of economics and political science. manus: i cannot wait to see what donald trump shows up, and what he tweets. we have got another 30 minutes to go.

cable is fairly muted at the moment. theresa may fighting for her political life, some would say. we are live at westminster. anna edwards and manus cranny. this is bloomberg. ♪ retail.

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manus: good morning from dubai. this is "bloomberg daybreak: europe." anna: these are today's top stories. manus: wetherington brexit crisis. theresa may battles on after top ministers quit. erdogan tightens his grip. the turkey president names his son-in-law as treasurer and finance minister. the lira gets pummeled. can he fix the nation's economic woes? berlin and beijing. angela merkel raises china's open-market attitude in a swipe at president trump's protectionist policies.

anna: good morning, everybody. i am live at westminster. on the u.k. political story. may fighting for survival, losing senior cabinet ministers. pretty unprecedented in recent decades. we will get a lot more analysis of what that means for the brexit process. does that mean a change? candy brexiteers who have opposed theresa may's plans gather enough names to challenge her? it does not look like they will be able to just yet. breaking news in the markets. vans are ubiquitous

around london and they are telling us how they are doing. retail sales will be 10 to 15%. this is what this company has done. they did a deal with kroger. the biggest supermarket in the united states is used -- is using ocado technology to deliver. tax numbers, in as a loss of just over 9 billion pounds. the top line earnings growth will be 38.9 million in the first half. in terms of some of the business , it'sthe solution side going to decline because of investment. they will give more details on the signing of that deal. many analysts are saying it was transformational. the value seems to be pretty

much priced in here. 266%.tock so far, short interest has declined. before the kroger deal it was 10%. it now stands just over 5%. for ocado.s, 11.7% they are making a capex investment. global trade war fears, the barometer seems to be dropping marginally. equities are little bit in the green. notes are getting written by emerging markets. emerging market sales fatigue. that is the latest from credit suisse. you also have the chinese ppi. that beat what the market estimated. is withinion goal reach and we are nearly at a self-sustaining level on inflation. the equity backdrop for now seems to be a little bit --

let's have a look at the bond markets. u.s.it came to the auction, things returned to normal. week at thest lowest in 10 years. that has gone back to normal. 2.85.tio can in at equities generally higher. you have this reporting season coming. expecting a 20% uplift in profitability on u.s. equities. we have already heard from bmw and a number of others talking about the initial cost from paris. how does that nip into your margins? 330 seconds. by -- 3-30 seconds. anna: theresa may is fighting for her political life.

continuing attacks from your septic lawmakers. she is now leaning on the opposition party. let's speak now to david merritt, bloomberg's news to rector -- news direct or. can she survive? do they have the numbers to challenge her? >> it does not look like it at the moment. 48, that's the number of letters that need to be sent to grant brady, who runs that branch of mps. so far it does not seem they have enough. if they had the numbers trigger a contest, the problem isn't she would have the numbers to win any challenge to her leadership. for now she seems safe. yesterday she addressed that group of mps. this is a topsy-turvy world we

are living in now. resignations, to have the foreign secretary and the brexit secretary leave within 24 hours, unprecedented, yet the prime minister giving a speech to commons and being cheered from all of her mps. it seems there is no appetite, still, regardless of this chaos, to unseat her. anna: from the timing of what we saw from boris johnson, perhaps up for the front pages of the newspapers to cover the newspapers with photos of him signing his resignation, and they have, they talk about the government in shambles. is this when boris johnson launches his leadership attempt? there was a very staged photograph with the telegraph. very statesmanlike.

the wording of his letter savagely worded, trying to undermine the president, saying the brexit dream is dying. you can i behind me, it is right you should go. it does not command that broad support. grassroots show support for the younger, more up-and-coming members. his opportunity to leave the conservative party -- he has an -- ambitious to do that. maybe he's going to sit on the sidelines and wait for this brexit process to pan out. where going to have to wait and see. anna: it could depend on whether he makes -- she makes any changes to her plan in favor of the brexiteers or the labour

party. they might be pulling her in different directions. interesting, boris johnson, some of the words he uses today. he talked about how he backs the prime minister, but the government had a song to sing. he practiced the song over the weekend, it got stuck in his throat. uses, theresae may not being taken in by any of it, she says her plan is a plan to protect the economy. she is not going anywhere. ofdid johnson have a change heart, or did he see mr. davis handing in his resignation? was that what prompted him to stick his neck out and change his mind? sincea may has said friday, if you do not like the bill, there is the door. two senior members of for cabinet said we have lots of talent rising through the ranks waiting to take those jobs and

that is what she has done. she seems to the fairly on-ruffled. swellingsee a lot more of these numbers of letters to unseat her. we have a very important nato summit coming up on wednesday. we have president trump visiting london at the end of the week. theresa may is going to be getting back to business. we have a cabinet meeting this morning with a cabinet minus boris johnson. we will be getting a readout from that. anna: we will see how the meeting goes. we will see how president trump weighs in on brexit. he has in the past. manus: a whole new tune being played on downing street in room.of the air in the a ceo is out. he is leaving as chief

executive. , he was in the seat for 3.8 years. he has exited. ofreplace him is the ceo global broking. think about brokerage markets in terms of platforms online. he's going to step in. they also give a little bit of guidance. johnrms of performance, delivered 17.29% of until his -- the guidance, 2018 guidance will be below the bottom and of the market these. there are headwinds of around 10 million pounds in operating profits. tpicap reducing the target to 75 billion pounds by the end of 2019. let's get your first word news.

>> german chancellor angela merkel has praised china for opening up to foreign investment , drawing a contrast with trade conflicts with the u.s.. she spoke after holding talks with the chinese premier in berlin. pair now go on to meet other european leaders at the annual eu-china business on it in brussels. u.s. president donald trump has kavanaugh for a seat on the supreme court. is confirmed by the senate, cavanagh will replace anthony kennedy, who sometimes sided with liberal judges. kavanaugh is on the court of appeals for the district of columbia circuit. i believe an independent

judiciary is the crown jewel of our constitutional republic. senate, ied by the will keep an open mind in every case. i will strive to protect the constitution of the united states and the american rule of law. >> the turkish president has named his son-in-law as economy memberd removed the last of an investor friendly financial team that has been pushed to the sidelines. a former energy minister will be --charge of the new minister ministry of energy and finance, combining the most powerful economic judge -- jobs. the lira fell the most since the failed coup in 2016. the opec president has told bloomberg the cartel and its allies are doing all they can to the have keptlls

global supplies tight in prices high. it comes after president trump urged the group to cut prices immediately. they do not want to overdo it. >> opec are doing their part. the market needs time. we are monitoring the market. there are things outside our hands. politics as well as how much production is coming from shale oil and canadian sand. predict. >> in thailand, the third rescue operation has begun. the official overseeing the mission said he hopes they will come out today. for the eight boys rescued after being trapped for more than two weeks were described as being in good health. global news, 24 hours a day on air and @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 . let's check on the markets in asia. a mixed session in asia. slightly tilted upwards. fearse been talking about of an escalation in the trade war, traders focusing on fundamentals. the focus in japan. china is down and we are seeing weakness in the australian market. declinereflected in a of 0.4%. i want to run you through the biggest movers in these markets. this companyld be in japan, a refinery announcing a merger today. shareholders have approved that. it will get to keep its name and carry out the share buyback. the market is up more than 12%.

i also want to look at xiaomi. a disappointing ipo, rebounding above its initial public offering. one of the biggest decliners today, great motor wall. they posted disappointing sales in june. -- cicc has cut its rating to neutral. that were result in a decline of 5%. anna: the latest on the markets. let's talk about the u.k.. brexit is the topic that is being discussed in the houses of parliament. let's get a market perspective on the latest political threat to theresa may. we have the portfolio manager of global equities. great to have you in a winds of change kind of westminster. we need stock about what investors are looking for.

-- to talk about what investors are looking for. how do you greet the political threats? with the uncertainty, that can be good for investors. at the same time, businesses don't enjoy the regulatory upheaval we see. they don't know how to position brexit. the process has moved slower. they are not able to plan and certainly there during to come up with contingency plans where companies have started to exert their influence, making their positions known. it has been more insightful for markets. time, it is maybe not moving as quickly as they would like. we would like to see things move further. manus: good to see you this morning.

, the chart shows the ftse, the momentum there. the currency will carry the political slack. you could almost say, yes, i can have more u.k. equity on my -- political flak and discordance will pick up political risk. >> when looking at u.k. equities at the moment, we are not seeing a huge appetite. ,he companies we are seeing certainly those generating revenues from outside the u.k.. therefore those global companies are the ones we are looking for more. we spoke yesterday to vanguard and they were talking about the danger with these resignations and the political sentiment.

it increases the likelihood of those. even though your central scenario might not change, there is a higher percentage probability of a very hard brexit or no brexit at all. that's the uncertainty investors need to deal with. >> exactly. certainly in the medium-term, the uk's very service-based. it is important employees feel confident in the u.k. economy. certainly in the ability to attract within the u.k.. it companies are not able to see that visibility, it makes it more challenging. ,anus: more challenges to cross not just the crosshairs of the winds of abington green. more with anna and our guest very shortly. germany's merkel praises china

for opening up to foreign investment. a blow to trump. we bring you the very latest on the impending business. ♪

manus: it is 7:22 in london. 38 minutes away from the start of european trade. four -- thethe front. germany has praise china for its open policy on foreign investment in contrast with u.s. stance on trade. she spoke after talks with chinese premier in berlin. >> i think a reliable cooperation is important in times of worldwide and security. is also important to openly

discuss issues we are not agreeing on our achieving success of the same time. manus: joining us now is the portfolio manager a global equities hermes. she is outside westminster. good to see you again. when you see china and europe uniting in this message to donald trump about global trade and openness, does that ballast against the prospect of escalation in trade wars from the united states? >> when it comes to looking at the trade war rhetoric, trump has come out very strong, but we are waiting to see what meaningful impact that will have . the market has not reacted in an extreme way. less than people expected. it is a little bit of a wait and see how much china will

continue. there is a lot of changes that may or may not happen within the eu as well. anna: can you think of a reason why global equity markets rallied on friday? rallied yesterday? furthernot had any reckoning on trade and we can focus on the job story in the u.s.. still continuing to see robust growth within the u.s. certainly with lots of u.s. companies participating in buybacks, continuing to abide -- benefit from tax incentives, actually those growth numbers also lead into that strong growth story. i hear your strong growth story, i respect much greater minds than i. it draws me to the data. global exports, have a look at

, globalt, tv exports are at a two-year low. we have not even begun trade wars. clerks -- growth is nowhere near as robust as the market protagonists would have us believe. louise: certainly we have seen softening. the data seems to be suggesting that. we still see it as positive and on an upward trend. there are pockets where there are opportunities. most likely, companies over the last couple of years have been building up their balance sheet. they are investing in people. thank you very much. portfolio manager of global equities at hermes. time for a look at the sublime

and the ridiculous. how newspapers in the u.k. are covering the brexit story. here is the daily telegraph. the brexit dream is dying, quoting boris johnson in his resignation letter. there he is signing that letter. he knew ahead of time, had time to organize the photographers at least. that was the more traditional approach. here, a more ridiculous one. don't you know there is a game on, on the front page of the sun. we are all of says with the brexit story. we are also obsessed with football, increasingly so. -- with am told that very strong conviction, if it was not so tragic, it would be entertaining.

cable is a stable. sterling is on flinched. will currencies remain so? this is bloomberg. ♪

guy: good morning, welcome to "bloomberg markets." this is "the european open." cash trade less than 30 minutes away. guy: the british prime minister of vows to remain the following the departure of boris johnson. the political turmoil sees sterling volatility jump in the options market. erdogan's summits control. turkey's executive