anna: good morning from bloomberg's european headquarters in the city of london. manus: i am anna edwards. manus:i am manus cranny live from dubai. trade minister tells bloomberg the u.s. will feel the pain and a trade war. trumps economic adviser blames beijing for holding back. will tariffs hurt the bottom line? alcoa cuts its 2018 forecast million in levees. will other executives be worried about trade as earnings season kicks into high gear? we will be speaking exclusively

with of the unilever ceo. manus: a very warm welcome to "daybreak europe." we are waiting for a number of different companies to come in with their results. let's get straight to anna. anna: let's do that. i have numbers coming through. the nordic region's largest bank. they are talking about signs of improving momentum across various businesses this morning. also talking about the ct one ratio. 19.9%. interest income, 1.70 billion. improving momentum against households.d

this is interesting because we heard similar positive comments from others and the scandinavia week.g sector this this is a business focused on revamping its operations and repairing and investing in the digital age. we talked to the ceo about this in the past and will continue to do so. the ceo joins us exclusively for an interview around 6:30 a.m. u.k. time. stay tuned this hour for that conversation around banking, and around the headquarters movement of that business. we also get numbers from sap this morning. sap reporting non-irs reporting income $6.4 billion. the cloud business key for the company. profitrs operating compared to $7.5 billion. $7.35reviously saw it at

billion. that is the latest. rising global i.t., how much of a benefiting from that? that is part of the conversation. the cloud business and how much is that accelerating and how part ofthe flagship their company managing to stand up to competition? they are actually taking the competition to salesforce at the moment, pushing customer relation management. specifically talked the ceo about that. that is at 7:30 a.m. u.k. time. these are the big themes, earnings and trade. manus: if you look at the alcoa numbers, i think this is a fascinating moment for us to pause and reflect. alcoa made it very clear that terrorists have impacted their business. the product they bring in from canada, but they have lowered their profitability. they have made it very clear that trade and tariffs are going to be one of the headwinds.

debut be about global recovery in europe and the united states. they, too also identify trade is being an issue. let's recap some of the abb numbers. the operational avenue comes in at $1.17 billion. the power grid side of the business which has been one of the major challenges for them. is $9.7ation margin billion we are going to have a conversation with a little bit later on. withe going to be speaking ulrich about his outlook. we will start a conversation about trade. how many ceos we talked to are going to be citing that as the biggest concern? i don't want to downplay the s&p news this morning, they have

raised that bit. edging up to the full-year guidance. let's have a clear at the risk of radar. just .1%.by earnings over in the asian session along with the trade story. we see the chinese currency has been weakening with that. the pboc setting its daily rate for the 6.7 level. for the first time since august. that is interesting. s&p futures pretty flattened at this stage. let's go to bloomberg first word news with juliette saly in sydney. juliette: u.s. president donald trump has continued to send mixed signals over russian meddling. and a news conference, he suggested the kremlin is not currently targeting america. he also told cbs news he believes his director of national intelligence when he said the threat from moscow is ongoing. >> he is an expert.

this is what he does. he has been doing a very good job. i have tremendous faith in dan coats, if he says that i would accept that. i will tell you, though, it better not be. it better not be. topette: president trump's economic adviser has blamed china for delaying talks on the escalating trade war. larry kudlow says the president does not appear to want to make a deal at the moment and has no intention of following through on earlier agreements. the chairman of the u.s. federal reserve has said he sees no sign in the bond market or otherwise that an economic downturn is looming. jerome powell's comments came in his second day of testimony before congress. i don't see any evidence that a recession is eminent. we are not forecasting a recession. i don't really think we see a

recession coming. juliette: the u.k. tumbling out of the european union without a deal could cost a deal he. sterling could flunk as much as 8% against the dollar if burned is not. strike a deal -- britain does not strike a deal. a new deal brexit has still regarded as a low probability. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 120 journalists and analysts in more than 120 countries. you can find more stories at the bloomberg on top . we have started to see a little bit of downward momentum in the lot of part of trade. having a look at hong kong and china coming back online and continuing the selloff there. you have movement in the nikkei. it has also turned to the negative down .1%.

we have seen strong momentum's in indonesian banks. mentioning the aussie dollar resurgence after that very strong jobs number. we have seen quite a bit of move there. the italian market up .4%. australian market up .4%. alibaba media shares of almost 10% in the hong kong session. we are also looking closely at the property sector in singapore. the parent company in hong kong is offering two dollars and 10 each per share and an all-cash deal. that stock has done incredibly well in the singaporean session. manus: thank you very much. to the currency markets now. the yuan has fallen to a one year note as the pboc showed little sign of intervening.

the currency began tumbling last month. this year as the world's second economy showed signs of slowing and the trade work with the u.s. escalated. japan's economy trade and warned of theter dangers that american tariffs on cars could have on both the u.s. and the global economy. he spoke exclusively with bloomberg's emmy in tokyo. japan won't pick the same approach to handling u.s. tariffs on cars and auto parts that it took for steel and aluminum tariffs, but i can't say the damage would be huge to not only the japanese economy, but also to the u.s. and global economy. tristan, good to have you with us.

headwinds. the they moved their probability targets. a moment ofality, reality check in terms of the real risk for the back half? >> it should be. we knew -- when you hear these sorts of things from the business community in america and the beige book, i think various manufacturers were warning about the risks of tariffs. i think the republican business lobby should be thinking about these sort of things. an escalation of the trade war is not good for anybody. in america, they are not going to win this. a trade war not a win-win scenario.anna: let's have a little listen. something we heard from the alcoa ceo in the last 12 hours. >> we are reducing our 2018

outlook two reflect recent outlook prices, tariffs on aluminum out ports, increased energy costs and operational impact. anna: we are not political strategists. we deal with the markets. in terms of the politics, it would be logical to assume that something will develop before the midterm on trade, and perhaps we will see the white house sitting back a little bit on trade, releasing some sort of rally in stocks. that would set things up nicely for the midterms from our appellate -- republican perspective. tristan: you may well see some of that. so far, the numbers, we are talking about tens of billions on tariffs announced. the fear is around hundreds of billions, which may or may not come. i think the business community responding in this way is a reality, but it also makes sense because the republican party and top need to think about the costs that come with this

policy. looking at whirlpool and the tariffs on washing machines would be a great thing to start with. they got hit by the aluminum costs, which then dented their profits. it is not a win-win situation when you escalate the trade war, even if certain areas may be better than others. anna: the complex supply chain we live in. manus: when you talk about who wins here or who is going to defend themselves. this is onshore versus offshore yuan. we saw the pboc not really that resolute today in terms of the fixing. this would indicate a low work you one to come. i put it to you that the pboc is playing a very high-stakes game with the currency. to --isk is a policy not drawing a line in the currency sand. tristan: i don't think they

should be doing anything on the currency. the u.n. is only back to where it was a month ago. yuan is back to where it was a month ago. the american forces are sending the yuan, lower not the chinese authorities. that is the thing to focus on here. china seems to be at risk from this rhetoric. the result is that the yuan has been weakening. that is a market outcome of what has been going on. weakening isy this allowed by the pboc which tells us. they are not defending a specific number i want to say this chart which has to do with japanese exports. seeing auggest we are little bit of weakening around the japanese trade story. the weakest in three months. the fifth month of japanese

exports. where are you hiding from a trade story? is it possible to hide? tristan: i think it is will it knowledge. if you look at the recent bank of maryland survey, it was the number one risk everyone -- the top concern. i think there are a lot of asset prices around the world that is been affected by these trade concerns, certainly emerging markets have suffered substantially. a lot of this is starting to get roped in. a certain survey at a barclays people were asked if they were surprised in terms of global growth. there was a far greater number of people saying the risks would be. downsized i think market expectations are pretty pessimistic right now. manus: hold those thoughts.

tristan hanson stays with anna and myself. in the u.k., there are just six days left until lawmakers leave for the summer recess. has theresa may done enough to secure her leadership until september? we discuss. anna: is that mean we get less exit news for the summer? not sure. up.ings season is ramping we hear from three ceos on the show this morning after their companies release results. this is bloomberg. ♪

anna: good morning, everybody. this is bloomberg "daybreak europe." the asia-pacific fairly flat dealing with earnings news and the latest on the trade story. let's get to business flash with

juliette saly in sydney. juliette: ebay tumbled in late trade after trimming its annual revenue forecast signaling a loss of momentum. the reduced revenue prediction on top of last month's sales revived concerns it is struggling to find its place in the shadow of amazon. it is also facing regular competition from brick-and-mortar stores which are improving their own digital shopping options. express fell in late trading even after saying it still expects to boost profits this year. the credit card lender said revenue will increase more than expected, but full-year and earnings still be at the high end of the previously forecasted range. hna travel has dropped by the 10% daily limit in shenzhen trading after it became the second unit of the indebted chinese conglomerate to resume trading this week.

the unit cited major restructuring, analysts have pointed out there may be other motives given that chinese companies have a history of using trading hold to prevent stock. that is your bloomberg business flash. anna: thank you, juliette saly in our sydney studio. just six days to go until lawmakers leave for the summer. it is a welcome break for the premier who has endured weeks of turmoil over leaving the european union. dominic is in brussels today for his first meeting with michelle barnier. sterling could fall 8% against the dollar if there is no deal by the 29th of march. in a moment, we will talk about u.k. politics and a market here in the u.k.. manus: i have a little bit of breaking news. this is on volvo.

$103.6 billion. on the truck order intake, that is up by 10%. sales, $103.6 billion, the operating profit very comfortable at $11.25 billion.that is for the volvo truck side of the business. taking that clearly moment for the north american operations. no lines from them in terms of the cost this far, supply chain. you can see having a little bit of a troubled session over the past three months. it has gone red. the market pens them at 10.08. we have politics aplenty in the united kingdom.

you have a special reporter with you there. some pretty interesting sterling cause. take it away. anna: charlotte ryan there. is still with us. is manus says, you have done this survey. how week do participants in your survey say the pound could get against the dollar if there is no deal? we have a chart here that shows channels, the downward sloping channels the pound is been in as of late. : two banks had a similar drop after the brexit vote. most serious two banks in the survey dropped even further to 115. levels we have not seen in quite some time. i think around 1985. anna: really interesting that

these were levels we were talking about the night of the vote. manus: that morning we woke up and watched sterling tumble. this?tte, can i ask you when they talk about these hail risks, they are becoming more manifested. yet broken it down. rising in terms of this no deal scenario. give us the numbers. charlotte: we're looking at the moment, a median 20% risk. it is still fairly tale risk their. every bank we spoke to this week said the risk is rising, partly because of the internal party turmoil we are seeing in the conservative party, but also because we know from earlier in the week that the european side is encouraging its members to prepare for that no deal outcome. anna: interesting.

tristan, let's bring you into the conversation. you see weakening do in the pound? not the kinde are of numbers people come out with because the natural inclination is to just sort of look at what happened last time and hook step in my happen again. we have seen sterling down at 120 and 118. that was roughly the low that we saw since the referendum. it is very possible we could go down to those levels with a half brexit scenario. what i would highlight is the ever since the referendum, a hard brexit scenario has been in the probability distribution somewhere. anna: is it rising? is it moving from till risk into the body of the curve? tristan: i think it probably is, but it seems that with polarizing staying in the or perhaps some sort of harder brexit sign

scenario. the check has been on the table and i don't think it is something anybody would have been voting for. it doesn't satisfy anybody. no one is happy with what is on the table, which is why i think some of the probabilities are rising. conversation a major,bc seven -- steven he saw this collapsing to around 1%. i buyms of a hedge, treasuries and buns, would you be drawn to 10 year in the united kingdom trading at 1.2 to at the moment? tristan: not at all. i think gilts are unattractively priced. i think they make a compelling short. that is a 20 basis point rally

roughly from where we are today. that is not a huge move. if you look at the real yield on gilts currently, it is very negative. essentially, the markets pricing interest rates saying around 1% on average over the next 10 years. that is a very pessimistic forecast. what you also have to take into account when looking at guilt is what happens if you have a potential change in government, and you have possibly the labour party come in, who may want to increase borrowing, increase spending, and that potentially could be a toxic scenario for guilt. anna: thank you very much. tristan stays with us, also charlotte joining us as well to talk about currency. coming up, europe's banks have begun reporting upticks with a be in its net income line. us for aneo will join

interview. high capital levels possibly part of the conversation as is the move of their headquarters. . this is bloomberg. ♪ retail.

under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. streaming must see tv has never been easier. paying for things is a breeze. and getting into new places is even simpler. with xfinity mobile, saving money is effortless too. it's the only network that combines america's largest, most reliable 4g lte with the most wi-fi hotspots. and it can be included with your internet.

which could save you hundreds of dollars a year. plus, get $150 dollars when you bring in your own phone. its a new kind of network designed to save you money. click, call or visit a store today. manus: 6:30 in london. 2:30 in tokyo. dollar-yen is one of those haven . currencies it has lost more than 5% of its value since the end of march. you are seeing a huge by an of foreign stocks every week since march by the japanese. dollar-yen not doing as well. let's get to juliette saly who has your first word news. juliette: thank you. u.s. president donald trump has continued to send mixed signals over russian meddling. in a news conference, he suggested the kremlin is

targeting america. he also told cbs news he believes his director of national intelligence when he said the debt from moscow is ongoing. president trump's top economic advisor has blamed china for delaying talks on the escalating trade war. larry cobos says president xi this not appear to want to make a deal at the moment and has no intention of following through on earlier agreements. if the u.s. imposes tariffs on cars, it can expect a strong response from japan. that is the message from an exclusive interview with the country's trade minister. japan's won't take the same approach to handling u.s. tariffs on cars and auto parts that it took for steel and aluminum tariffs. i can say the damage would be huge to not only the japanese economy, but also to the u.s. and global economy.

juliette: u.k. police reportedly believe they have identified the suspected perpetrators of the nova tech attack on the former spies. according to the press association, officers think several russians were involved in the attempted murder, and say they are looking for more than one suspect. they say investigators were sure the suspects were russian. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 120 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top . anna: thank you. let's get some breaking news for you now. semiconductor many fracturing company giving us numbers this morning. second quarter net income exactly in line with estimates. offering half and never looks to be a little bit light of expectations.

the next income line is in line. 48.3%.imate was to bring down their outlook in april because of a sluggishness in smartphone sales. they make processes for the apple iphone. customer.he biggest we are looking for that to be repeated or not this time around. it looks as if we have not gotten any guidance around that. that possibly is a positive. we are possibly looking for them to factor in weaker chip demands from the cryptocurrency mining businesses. we have seen regulatory crackdowns in that area. all of that was expected to be a negative for this company. we await to see if there is any this.ther news on manus: i have a little bit of global advertising for you. they had the razor and they were

the most miserable of federal results. goldman sachs at the worst since the north american recession. we are seeing a dropping organic revenue, a contracts by 2.1%. a growth number of 1.1%. the protagonist was the reason behind us contraction seem to be a slowdown in u.s. health care expanding. new data regulations in europe. both contributing to the sluggish outlook. that comes in as a drop of one part 1%. when i talk about the volatility of the u.s., this is going to be a challenge for the ceo there. knocking the first half numbers particularly at volatile in the first half. of course, they are launching a non-core asset review.

this took over from northeast levy. a whole disruption going on in the advertising world. how you do business, how you get your message to the outside world. from advertising through two heavy engineering and trains, coming out with their merger. we're making good progress, they are confirming their outlook for the first quarter sales. a comfortable be a comfortable beat ahead of the estimates of 1.89. confirming the outlook, they are ahead in sales in terms of numbers and making new progress with siemens on the integration. let's talk about another part that is been reporting this morning. we kick off with european bank warnings season -- earnings see them. -- season. let's talk a little about what the bank is saying this morning. we are joined now by the ceo of madea bank.

great to have you with us as always. your numbers have topped estimates. you say your strategy -- how good could this year be? casper: there are a lot of bright spots here. first of all, we can see underlined income improving, which we have very -- worked very hard on. we continue to deliver on cost. elements ofkey delivering now inflates, and i think we can continue. the environment is always there, which we need to take into account. but i think we are in good shape and we know what we are doing. the de-risking we have done over the past few years, the big products we have done are largely behind us and i think we are in good shape to drive the customer business forward. manus: can we dig a little bit

deeper into the business? g a lot ofseein niche players come into the housing market. how much is that nipping at your business? have you noticed any inroads from competitors into the mortgage side of the business? casper: first of all, i always have to remind when they talk , that is some 7% of our income. even if it is important, it is not detrimental to banks. secondly, i am comfortable with the way we compete in the mortgage market area in sweden. we have actually grown. after a. ,- period where we had flattening by design when the housing market was more heated, there are new players here. i think it is too early to say. argins are under

pressure, but i feel comfortable with the way we can compete. about it manyd times on the run-up to the decision and then the decision was made, your process of moving your head carter's from helsinki -- headquarters from helsinki to stockholm. how is that progressing? casper: the move is progressing according to plan. the plan is that by the first of october, the bank is headquartered in helsinki within the banking union. june, last month, and of we got the banking license from the ecb. that is in place. we have a few regulatory approvals still to be received. we are well heading to be in the banking union are the first of october. i feel very good about that. manus: is that the timeline we should take from you, which is that you look at the regulatory approvals before the end of october? casper: that is correct.

i think all approval should probably be based by early september, so that i first of october, the bank is in the banking union. anna: can i ask you a little bit about your dividend strategy here? you have done a lot of investment in the business. you talked often about investing in digital and other areas, restructuring the company, raising i.t. spending. what kind of payout of dividends, what kind of strategy do you have around? casper: we have and we will continue to have a policy which will pay out a progressive dividend policy. a yearly earning increase. that is something that will we look continue -- we will continue. i see no reason we will change that. we are still in a very heavy investment. -- period of another trend's permission --

transformation to become truly digital. we will have a in place by 2020. at this point, a progressive dividend policy is what we have, and we feel very confident that we can deliver on the. manus: i want to get your take on the landscape for banking. we saw pieces of comments. they fitted very nicely for their ambition and strategy. are you an organic man or are you looking at playing part in the changing landscape of european banking? casper: this quarter, we announced the acquisition of a bank in norway, which is one of our core markets. it will actually strengthened our business in norway. it is a growing, profitable, very digital bank. these types of tactical moves, we are very open. i think the core strategies are

organic, but i would never roll out a move to cut the bank which we have announced this quarter. at the same time, we have also forged a strategic relationship with the insurance company, which is the largest pnt company in norway. i think that part of this will also yield a benefit to us and them. open aboute participating in the changes. we are well-positioned and we have a good platform that we can both grow organically. anna: a bit of both. looking at the statement in a bit more detail, looking for any negatives to pick up here, when you talk about household lending margins to continue to be under pressure, do you see any light, any relief on that front later in the year? casper: i think in norway, we have seen more pressure in

norway on the lending margins. i already see end of this quarter and improvement in actually going into the second quarter. the improvement there in sweden unlikely. again, i emphasize that part of the business, although important is not detrimental. we see margin improvement in many of our other businesses. i feel very good about the way forward. manus: good to hear an update story from you. we wish you well with those banking licenses. let's stick with the overall banking sector. spurred by strong result from morgan stanley, the european banks have yet to give their according.

he has a positive view on the landscape. can europe match america's second quarter? let's bring in tristan. stanleyead those morgan numbers yesterday, there is nowhere else in the world that you probably want to work. it is like a bank that is just cracking on fire. it has been a good quarter for wall street. maybe not the renumeration of goldman sachs, but it is been a for u.s. banks. i think it is a good market to invest in both the u.s. and europe. european bank stocks have been hammered over the last few months or so. expectations are pretty negative. ratcheted down their expectations for ecb rate hikes over the next 18 months or so. that has been negative for the banks are prices. i think with valuations where they are, you can get roughly 10

at what european banks i think rp depressed earnings. european growth still seems pretty reasonably le. those earnings could be potentially higher. i think it is an interesting anna: of market. you like european banks? tristan: i like both. the attire and political crisis, was that a good entry point? did we miss the boat? tristan: no. you can buy a good levels now, i think. an interesting point you make there, because the election was back in march. it wasn't until may we saw any repercussions. the five-star and northern lake try to form a government.

leaving the euro is a whole different ballgame. anna: they keep saying that is not in their plan. think there are a lot of fears reflected in market pricing on the issue, which makes it an interesting time to be having a look at european banks. that theyentioned wanted to take that strategy. do you think there are going to be more m&a? one relief does not make a full recovery. more m&a to come? be.tan: there may well you are hearing rumors about various banks and france and italy. i think consolidation would be a good thing. there has been excess banking capacity in the eurozone for a long time. any signs of consolidation would be very welcome. anna: tristan, thank you very much. tristan stays with us. we have a lot of charts in this

program. good to gtb go on the bloomberg. you will find all of the charts that manus and i bring up during the program. indeed. we are going to bring you some more results. we are going to speak to the executives kind the results. us for anins exclusive interview at 7:30. all the voices in the european earnings season right here on bloomberg. ♪

manus: it is just 9:49 in dubai. it's 1:49 in new york. the city that never sleeps. moment.re flat at the

within 2% of a lifetime high for the s&p 500. ibm got a take in the box. alcoa told it like it was in terms of downgrading the property outlook. guess what, because of tariffs. shock. let's go to maria with the markets. morning.od let's take a look at what the asian market is doing today. we are getting a little bit of last-minute action just before the launch break in asia. china was down to what could have been a four-day decline, now it has snapped out and trading positive. it has slipped the narrative a little bit. staying with china, i want to look at the you one, which just touched a one year low. we continue to see chinese authority still testing weaker levels.we are also hearing from analysts . we going to continue seeing declines. on that note, i want to look at

the relationship between the u.s. and the chinese yuan. you would have thought volatility what a spike in the second corner. this year, it has pretty much been muted. this suggests to things, the markets to believe china's authorities intervene if they need to. secondly, that investors are not uan ready to turn their y assets into dollars. weeks.iten too rough could get worse . i want to point out my blue bar right there. that is open contracts. outstanding gold contracts. you can see the biggest jump since april, funneling out the price of gold has dropped to the lowest in almost a year. the relationship here implies that if future contracts are still widening, there could be more shortening of positions and more bearish news to come. that could be more bad news for gold. i want to go to the business flash with juliette saly in

sydney. juliette: thank you. u.s. aluminum tariffs that were meant to protect the industry competitors are instead taking a bash at of the earnings of the nation's largest producer. alcoa has been hit with $15 million so far on material that is produced mostly in canada and sent to america. >> we are reducing our 2018 outlook to reflect recent market prices, tariffs on aluminum import, increased energy cost, and operational impact. tumbled in late trade after trimming its annual revenue forecast and signaling a loss of momentum. the reduced revenue projection lackluster sales for the second quarter revived concerns it struggled to find its place in the shadow of online retail giant amazon. it is also facing greater competition from brick-and-mortar stores like walmart's are their own digital

shopping options. american express fell in late trading, even after saying it still expects to boost profits this year. the credit card lender said revenue will increase more than inspected -- expected in for your earnings, but would still be at the high end of the previously forecasted range. that is your bloomberg business flash. anna: thank you, juliette saly on tour for us in sydney. said -- hisl comments came during his second day of semiannual testimony before congress. >> we think that risks are at the normal/moderate level. you see high asset prices. you don't see how leverage among households are banks, you do see a little bit of high leverage in nonfinancial corporate. that is something we are watching very carefully. nothing really is flashing red in our observation in the financial markets.

anna: that was jerome powell. . tristan still with us what's talk about inflation in the u.s.. i found this really interesting when i look at this. chart we knowabout how pce, this is a measure of inflation. pce is at a six-year high. the last time, it has overtaken the levels we were at in december and january. we were all talking about how high-yield were going to go, how quickly we get to three put 5% and 4%, how the conversation has changed. we are not all stressing about how high-yield are going to be. tristan: it is amazing how the market can interpret the data in a different way. rising, they are trying to fall over themselves and try to have a higher forecast. that has gone away. there is a lot more skepticism and pessimism around this by

u.s. inflation being on track slightly above target. i think that is very interesting. anna: even as tariffs to the inflationary. tristan: they have suddenly that risk.it seems to be broadly in the global economy , u.s. inflation is getting back toward target. there doesn't you to be any particular program -- problem. it looks fine. the u.s. economy doing well. jerome powell's testimony saying there'll be more rate hikes is pretty accessible. this is the narrowest trading bandwidth we have seen since 1973.if you continue on from anna's when youut inflation, look at this kind of really tight bandwidth, what does it take to shift the dial for the bond market? tristan: i think you need some kind of collective change in the

about eitherefs the u.s. economy is in good shape and can tolerate higher interest rates. u.s. treasuries look reasonably priced. they have some fed rate hikes priced in their. there is not a lot of inflation rice premium.i think that is reasonable . they look neutrally valued. if people shift their beliefs one way or another, you could see quite large moves from these levels. manus: thank you very much for being with us this morning. tristan continues the conversation on bloomberg radio at 7:30 a.m. u.k. time. coming up on the show, we're looking for a little bit of direction in these markets. the london market indicating a little lower. abb u.s. are numbers america to talk about those with the ceo after the company beat estimates for the second quarter. he joins us for an exclusive

interview. his view of the world and what needs to change, if anything at all. this is bloomberg. ♪

>> good morning from dubai. anna: these are today's top stories. manus: trade alarms ring louder. japan's trade minister tells bloomberg the u.s. will get hurt in a trade war. trumps economic advisor blames beijing for holding back talks. more pain for earnings. forecasts its 2018 after reporting $15 million in costs and levees. will other executives fret on earnings as the season kicks off into high gear? abbill be speaking with the

ceo and the unilever ceo later this morning. anna: this is bloomberg daybreak: europe. let's get to the numbers from unilever. the numbers coming through for the second quarter underlying sales up by 1.9% and that is weaker than the estimate. an increase of 2.2%. i have written here on my notes watch brazil. how much damage from the strikes . strikes in brazil adversely aroundng the business by 16 basis points. they are giving us the second quarter underlying volume, pricing up by 0.3. the expectation for the

full-year is unchanged. they had warned the first year would not be as good as the second half. we had been warned about that set of circumstances. their full-year expectations remain unchanged, on track for sales to beexpect in the 3% to 5% change -- range. belowct they have come in the estimate and below the estimate compiled by the company themselves. ofwill talk to the ceo unilever at 7:50 a.m. u.k. time. let's see what he will say about the global consumer and the global spend. it down for you. full-year diamond and copper forecast remain unchanged. they are increasing their full-year platinum guidance at 2.4 million ounces.

taking a pasting in the past number of weeks. but the total production of copper equivalent is up 6% in the current quarter. 2.4, 2.5remains at ounces for platinum. when it comes to iron or, they production of 11.6 million tons in the second quarter. let's -- the equity markets are taking the direction, it depends on what stocks you want to look at. we have equity markets indicating a little bit lower. although delivered an up eight view, profits were up i -- at 37%, they upgraded their truck

outlook and s&p raise their public outlook. a contractiond in terms of advertising spend. that be the canary in the global advertising mind? there is no sign of the chinese debit. given the back grunt -- backdrop to the numbers we have broken there is not a little bit more of until wind in the equity story at the moment. shall we do the bond market? let's have a look at bond markets. range,htest bond market 1973. i cannot remember where i was or what age i was. i was not trading bonds. breakeven, the inflation breakevens are coming down and .hat is an important aspect bunds are down by 17 pips and let's flex back over to equity

futures. i have a feeling that we are low on the equity futures as well. bonds,te of play on the there is our markets, a little bit softer, quite surprising. a lot of it to do with looking for a clear direction. you have more breaking news on fordham. bitda the comparable e cming -- coming in. sales numbers look to be broadly in line. we will be speaking to the ceo and he will be joining us for his first interview of the day a little bit later on in this half hour. retailing in clothing and they decided not to pay a dividend. which is of interest but they save their elevation strategy

continues to exceed views so we will see where that goes at the open. msciely flat on the asia-pacific. earnings reports in asia and europe, the jobs data out of austria misses the aussie dollar. not giving a great deal of guidance. we are flat on s&p futures. trying to find the next footing on the earnings story and trade. let's get a bloomberg first word news update. u.s. president donald trump has continued to send mixed signals over russian meddling. in a news conference, he suggested the kremlin is not currently targeting america but told cbs news that he believes guesttional director director of national intelligence when he said the threat from moscow is ongoing.

president trump: he is a next bird, this is what he does, he has been doing a good job. i have tremendous faith in dan coats and if he says i would that, ihat -- says would accept that. i will tell you, it not -- it better not be. juliette: his top economic advisor blade china for delaying talks on the escalating trade war. has no intention on following through on earlier agreement. u.s. imposes tariffs on cars it can expect a stronger response in the u.s. -- stronger response. japan will not take the same approach to handling u.s. tariffs on cars and auto parts that it took for steel and aluminum tariffs but i can say

the damage will be huge, not only the japanese economy but also to the u.s. and global economy. juliette: the u.k. tumbling out of that eu without a deal could cost the pound dearly. sterling could slump as much as a percent if britain does not clinch a deal with the eu by march 29 when the nation is slated to leave the block according to a survey of analysts. that would narrow the drop the 24 day afterjune britain voted to leave the union. exit is regarded as a low pollbility with a assigning a 29% chance to it. 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 oh. and is a lack of direction these asian markets, particularly in late trade. we're seeing a lot of the key markets turn south and you have against drink the nikkei closed -- .1 of 1%1% lower

lawyer. the asx closing higher by .4 of 1% and india's market at a record high. falling for another consecutive session. lowest has slid to its level since june 2017. having a look at the stocks we region, the in the second-quarter numbers pretty much meeting estimates. you are seeing the stock up i .7 of 1% in taipei. alumina closing after being down as much as 10%. cutting its forecast sending shares tumbling in after-hours trade. in a primary placement in hong kong, shares falling 5% in the hong kong session. manus: thank you, juliette saly

with the latest on the markets. thatas reported net income beat the highest effort -- analyst estimates. it -- it is orders rose in all divisions and regions compared to a year ago. shares are up 2% in premarket trade, that is the indication from the market. let's talk about the results abb joining usf now on the phone. great to have you with us. well done on the numbers. that is going to be the top line that some in the market will look at it i want to talk about the power of grid business. your margins remained flat, they were nearly 10% in the last quarter, they are nowhere new york target. do you need to do more with the power of grid business? ulrich: good morning and thank you for the nice comments on the set of numbers. the results are telling, the

company has grown overall and we have significantly improved the profitability. my me talk about growth, you see in the power grids is this the growth that is building. a massivee through transformation. as you transform you need to invest, that is way see in the results that the margin is close but not yet fully there. , weou exclude investment are there and we will continue to streamline and strengthen, you have seen this investing the cable business some years ago and investing strongly in the digital offering. we are at two times the profitability of the next competitor in the market. we will continue to drive this and ass profitability

growth comes back and the transformation continues i am theident we will be in arjun corridor. -- margin corridor. manus: this is a prime moment for us to understand a global ceos perspective of growth. you seeing any dark clouds on the horizon on global growth? ulrich: if you take the global market at the moment, drivers are intact over the industrial side and even on the utility side. in top line mentum bringing total orders a a percent and driving all business toward a positive. our business is in the right market and the markets are allowing us to [indiscernible]

around thewe see world that are dampening, the overall sentiment and they need to navigate through the waters there in a careful way. but it is clear the world is facing this uncertainty. it is our role as leaders to navigate through that. anna: good morning. in terms of that uncertainty, you talk about topline momentum at the moment, but what are you what to happen with trade war is on the horizon, how does that affect your business? ulrich: good morning to you as well. ofhave six quarters momentum. even in an uncertain world, as a technology leader we can [indiscernible] very well. we are prudent on cost buildup,

we are very much driving our technological differentiation even in times of uncertainty. ofis clear in a world uncertainties as an entrepreneur, you need to navigate with a steady hand on your market and have the thearios in the drawer if world should slow down. the driving growth and we are prepared to mitigate whatever comes as a potential headwind. anna: would you go as far to say that the trade war is having no impact on your business yet? are very would say we cautious on how we run our hedging opportunities. we are optimizing our supply chains, ensuring that we are close to our customers. fuller.n

we are navigating. so far, the team has done a good job, even if the customers are uncertain, our technological innovation still makes customers by us, and that is what we are committed to in the future. manus: you have some experience of [indiscernible] is on yourt investor roster. your stock is down this year. have youmerit or what discussed, is there merit in the breakup story that has proffered from their side, how do you defend yourself against this activist investor, what are you doing to put your house in order to defend against the request? my responsibility as the ceo to have a constructive and open dialogue with all of our shareholders. they have invested in the

open ando i see an active dialogue there. if you look at the past years we are active with our transformation and active portfolio management but i would not say that our portfolio is cast in stone. bb will continue to shape a and shift our center of gravity toward more profitable growth. be guiding principles will always what creates most value long-term for our shareholders and that is the dialogue we are having in a constructive way. you're talking to your shareholders and the portfolio is not set in stone. how does the portfolio evolve, are they having an impact on your thinking about the portfolio? of all the shareholders we listen to their input is appreciated.

one of the most active portfolio thegers today, we have super simple portfolio. any electricity to any block in the automated -- industry. we continue to shape our portfolio. we have a set of investments. made a couple of robotics investments and we are driving the portfolio evolution. we have the discussion with them and direct the portfolio in a way in the future that we continuously shape as we have done in the past. we will continue to shape it i adding and by divesting. the was a great step in right direction.

we wish you well, a good set of results. let's see what happens next with the activists on board. the ceo of abb. the studio. in you have had volvo, sap, we have had abb, all these numbers are higher but markets do not seem to be taking them on board. what do you make of the season? guest: it is kind of fascinating, as ned? you have this pessimism about europe and you are seeing that in terms of the share price movement but when you look at the comments in the earnings numbers, they are quite good and abb is the perfect example. if you look at the business mix, if you look at the comments about growth, the opportunity

within their portfolio, if the company was an american listed primary listed company you would be seeing up this year. you have this macro fear about europe which impacted overall valuations. trade themebout the running through the conversation? maybe it is too early for the ceos to be putting it up there as their top concern. especially with the numbers. i asked the ceo if he would say that trade had no impact. because of the products he is --ling they are conversing convincing nervous custom -- customers to invest anyway. u.s.: if you look at the earnings season, trade is the biggest concerns so far in the numbers even more than other issues, fx or other factors. my observation has been you can

see this in some of the big surveys of recent days, trade is the biggest risk. mixed a consequence markets look forward to six months so the biggest tail risk, what is discussed and worried about is the impact on share prices. my feeling is the next derivative of markets will be people say hang on, is a quite as bad as we thought and that is where looking at companies looking -- he comes interesting. i was intrigued by the comments. it felt as if abb was saying we wew it could be an issue, are still cracking on and investors have not given them the benefit of the doubt yet. one of the most intriguing articles i have read over the past couple of days is stalwart of goal markets. the dollar could hit and he is

mother ande is one father of a holding pattern. stocks are at a multiyear high. there is the dive for you and you can see that explosion. the past 6.5 months will be the biggest consolidation period we have known. that is a heck of a bullish call, isn't it? someonet is and from people view as a contrary and indicator. .s. market is high and that is the good reason that the u.s. has performed better than europe. the dollar is going up and that pushes people toward american investment. my feeling would be to look and think about it in a contrary in way and to jump off this optimism toward the states and think about maybe the dollar has

peaked and maybe over the next six months we will see the dollar fade and if you see that emerging markets in europe and companies that are exposed to those areas will prove to be much more attractive particularly as they have underperformed in recent months. anna: we saw a strike in brazil taking the edge of unilever's sales numbers. the estimate was for an increase of 2.2%. how concerned about -- are you about products this year? it is a concern. you have to look at pricing. that is the key for these businesses. it is whether they can keep on ation trend which proves so remunerative. populations in emerging markets become wealthier overtime. the pricing element was ok, was positive, it was not hike -- quite as positive as you want to see. that is what you have to -- what

you look for. if you have the pricing part you are the king and queen of the markets. chris bailey, reacting on the market flow this morning. we have ahead a slew it -- we have had a slew of earnings. the trucks, not the cars. even missing estimates on s&p, mostly in line. let's discuss the numbers with the ceo, joining us now on the phone. the first interview of the day. great to have you with us. i am interested to get your perspective in terms of the risks for your business, because s&p and movies have cut your credit rating to the second lowest investment grade and that is due to your acquisition of

[indiscernible] how concerned are you that you may make it to junk question -- to junk? pekka: we are not worried. juniperclosed the investment, we are the largest shareholder with a 47% stake and the market fundamentals for our business and juniper look pretty good. we are confident. juniper, the investment there, you have increased your exposure to russia, does that add the fx risk and volatility? pekka: the investment increases our absolute exposure in russia but the share of russia and juniper's portfolio slightly smaller. that is not increasing it, it

goes down a little bit. thes: let's talk about opportunities that there are out there for you, we have the is expectede grid to extend their power grid into europe. is that an opportunity for you? made a strategic decision a few years ago to develop our grid business, we are focusing on power and heat generation and various services for consumer and business customers so we are not in the grid business, you have to make choices and the name of that -- the game is focus, we are seeing a lot of transactions in this --tion -- this section are sector. have decided to stay out of the grid business.

anna: i talking about chinese -- inement in energy and europe? itka: we are not concerned, power and the utility sector will go through a transformation and we believe we will see a lot of m&a activity that we are -- have no reason to be concerned about chinese activity. manus: thank you very much for being with us, that is pekka lun fortnum.o of that is it for this edition. we have a slew of thursday morning earnings. myas trying to find [indiscernible] anna: a little bit of a disappointing one, second quarter number four underlying

sales. tuned for that. the european market open is next. this is bloomberg. ♪

from ourre live european headquarters. i am alongside matt miller in berlin. stocks paring gains today as the u.n. as the yuan declines. even the we had earnings that beat estimates. the cash trade is less than 30 minutes away. ♪ for the skies, sap raises its four-year outlook as its cloud is this