good morning, i'm anna edwards. this is "bloomberg daybreak: europe." hike coming. the fed signals it's ready to raise rates if the economy stays on track. where live at the jackson hole symposium. talks restart, washington imposes tariffs on $16 billion in chinese goods, even as u.s. and chinese officials meet face-to-face about trade for the first time since june. and ipo unfold, saudi aramco is said to focus on buying safety in the chemical giant, delaying it to your promise of what could still be the world's largest ever offering.

♪ a very good morning everybody, this is "bloomberg daybreak: europe." 6:00 here in london. a couple of hours until equity markets open up. the msci asia-pacific down by .4%. were focused on political risk whether in the united states, australia or south africa. more of that in just a moment. feste also focusing on the messaging from yesterday, ready to hike if the u.s. economy stays on track payment talking about what that means for september, it looks like a rate hike there. the weaker yen in japan a feature, a real feature of markets and that means were seen converges.t of

going into the afternoon session. i mention the strength of the dollar, up by .4%. the first day in six that we seen strength in the dollar. are we back to the trump trade just after we got those headlines surrounding the legal situation around the president? we seek the dollar in strength against the pound and the euro and a host of other currencies. focusing on the australian dollar, the dollar surging against the aussie. das is weaker, down around .8%. he said he wants then again if there's another leadership vote, but he's only said he will call a special meeting tomorrow if his rivals can collect enough signatures to suggest it is necessary. we continue to watch that, and

be aware with going on with the sauerkraut for -- south african rand as well. president trump tweeting that he wants a close study of what south africa is doing. could it mean sanctions conversations move on to talk about south africa? u.s. futures, let show you where we are. on the s&p in% yesterday's session despite all that legal drama unfolding. the s&p future is supposed to be down a little bit at the start of trade. really not big moves foreseen. that's get the bloomberg first word news update from hong kong. >> in the u.s., the minutes of the latest fed meeting show the discussion about how high to lift the target interest rate is intensifying as policymakers plan to raise borrowing costs . it comes even as chairman jay

powell has been attacked from the white house with president trump criticizing rate hikes. will bring you our interview with esther george at 12:30 p.m. u.k. time. donald trump has denied using campaign funds as hush money for women who let past affairs with him. the comments came a day after federal prosecutors claim some campaign officials were aware of the payments. statement contradicts a guilty .lea by michael cohen he said the president directed him to make the payments and that they violated campaign-finance laws. the resumption of u.s.-china trade talks has boosted hopes that and all at trade war between the world's two largest economies can be averted. today the u.s. treasury undersecretary and chinese us commerce minister continued the first face-to-face trade discussions since june. that's even as the next round of tariffs on $16 billion of to effect.

donald trump plans to punish carmakers to produce vehicles outside the u.s. and sell them to americans or hindering his administration's efforts to close the deal on a new nafta this month. bloomberg has learned that among the sticking point emerging during this week's discussion is a proposal to increase caps on cars imported from mexico that don't meet stricter new rules. australia's prime minister is digging in for a white -- for a fight, saying he will only step aside if his chief rival can prove he has enough support to defeat him. malcolm turnbull said he would call a special meeting of the governing liberal party tomorrow , only if the populist challenger peter dutton can gather enough signatures on a petition. said he would not bend. meetingthe party we are is called, i would invite a motion to be moved. if the motion is carried, i will

treat that as a vote of no-confidence and i will not stand as a candidate in the ballot. >> the u.k. will signal today that it wants like to continue as normal in the event of an no deal exit from the european union. individual institutions on both sides need to agree on sensible solutions. that comes as the government publishes the first of around 80 technical notices explaining how businesses should prepare for a class in talks with the e.u.. we'll bring you our interview with the national trade secretary tomorrow. 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. anna: let's focus on the central u.s. central and bankers are ready to raise interest rates again as long as the economy stays healthy,

according to the record of the federal deserve recent meeting. the minutes, ahead of the fed annual policy gathering at jackson hole wyoming which gets underway later today. any -- many fed officials said at the last meeting it would likely seem be appropriate to raise interest rates again and that probably means when they meet again in mid-september. they also mentioned a lot of confidence in the inflation outlook. they're confident it will stay closer to the target over the medium-term and more confidence that wage growth will soon accelerate as well. low unemployment was mentioned as a reason for that and the lacks in the time it takes from low employment to translate into higher wage growth area that is another thing they see as supporting the inflation outlook. trade was mentioned by all participants at the meeting is a downside risk, although they sounded less concerned about that at the most recent meeting than they did at the meeting before. one you downside risk a mention was a possibility that fiscal

stimulus might not have as big a boost to the economy as they previously expected. that was a notable new addition. the chairman specifically set in the minutes that would probably soon be appropriate to resume a discussion about where they are going to take their balance sheets in the longer term. that's something they said to look out for in the fall. the question about what to do with interest rates next year once they reach that sort of neutral level for interest rates was a bit glossed over but it was hinted at that is going to be a bit of a communication challenge what they get that point next year because a lot of different officials a different estimates for where that neutral rate is. so it might be a little difficult for them to describe policy as accommodative or restrictive the way they have been doing. anna: matt reporting on the fed minutes. joining us in london is patrick

armstrong. a very good morning to you, patrick. the fed minutes, several hikes so far we've seen. how strong is the u.s. economy despite those hikes? patrick: there have been hikes that happen and a lot more coming over the next year and a half. the economy is performing very economicong real growth, low unemployment, fiscal stimulus coming through. the only real worry is at trade wars may disrupt that. i think it is the fed themselves in trade, the only two possibilities that you will see an end to this expansion right now. showsi have a chart that the market fairly convinced about september, convinced about the end of this year, but much more uncertain about next. on the risks back from the fed, talking about trade and a host of factors that

could cause downside. patrick: that has been consistent for the last two years, basically. everyone expecting the next height and then doubts about the next one down the line. noah knows what is happening in the long-term. the fed themselves don't know. the fed has invited -- advised that will get to what is normal but we don't know if this is going to continue. this is just a continuation of the market outing but trusting the fed. anna: what do you read into the message that it might soon be appropriate to drop reference to accommodative policy? is that a big signal? patrick: there's a point where it's not accommodative, but getting toward neutral. we think march next year when you get to the point or not really giving a stimulus to the economy anymore, it's very vague point that gets

you to neutral. there's no science behind it really, it is vague. 2.5% versus 1.75%, not a real game changer. anna: when you are looking at the rate hikes you see for this year and next, are you concerned that's one of my guest yesterday was concerned that the fed kills the rally. getick: basically things overheating, they let the economy get a little too hot and then they choke at all and that pushes the economy into recession. that's just the way cycles have gone in the past. the fed has been clear that is going to be gradual but i think it will be consistent quarter after quarter. with the tax cuts, the confidence is still high. wage growth starting to show signs there may be some wage

growth. those are leading indicators that there will be wage growth coming. the fed will be justified to continue hiking. anna: how do the investors want the fed to do with political pressure? patrick: you've seen what happened in turkey, basically. markets don't like that, you want an independent fed. as an investor, you want a cheap money fed. anna: doesn't that require an assertive fed versus a quiet fed? patrick: you don't want someone to be in the back pocket of the administration, basically. in the long-term you need that credibility of the fed. you want the dollar to be reserve currency and long-term, everyone wants a credible fed. credibility is much more

important. anna: we will see what we get from jackson hole over the weekend. patrick armstrong, thank you. we will bring you that interview with the kansas city fed president, esther george. that's at 12:30 p.m. u.k. time today. , new u.s.-china terrace just come into effect this morning, in the last hour, even as trade talks resume in washington. how optimistic or pessimistic should we be about trade? this is bloomberg. ♪

anna: good morning, everybody. this is "bloomberg daybreak: europe." 6:16 here in the british capital. s&p futures suggesting we will be a little weaker at the start of trade. talkingmoves we are

about, given the scale of political drama in the u.s.. the president tweeting this hours saying there no solution -- he's given us that message a number of times. the legal drama surrounding his long-term lawyer, donald trump has denied using campaign funds that hush money for women who allegedly had affairs with him. prosecutors claim some campaign officials were aware. cohen said the president directed him to make the payments and that they violated campaign-finance laws. >> you have to understand what thing, it's a much bigger . did they come out of the campaign? they didn't come from the

campaign. they came from me, and i tweeted about it. >> is conclusive that donald wasp new that michael: going to be advancing money on his behalf to hush up the relationships with these two women, and it had a political purpose to it. n's lawyer is cohe there. the latest on the political drama. good morning to you. what is the latest on the president and michael cohen? we heard the president giving his side. if the president is making the case that he did not -- that no campaign funds were used in paying off this hush money and also that he only knew later on, as he says, about the payments that were made. however, this does directly contradict statements set his former lawyer made in court as

he basically pleads guilty in a plea bargain to illegal campaign-finance charges. his lawyer is saying that these funds were -- payments were made in coordination with and at the direction of the federal isdidate, who of course president trump. he is also trying to distinguish manafort and paul convictions. cohenoments after mr. made his plea bargain and the president is saying that he feels bad for mr. manafort, but it does not prove anything, and that he basically had no knowledge of any of that and it did not involve him and that none of this proves what the

mueller investigation is looking into, which is whether the russian government and russian officials interfered in the 2016 presidential election. anna: president trump consistently trying to take it to the big picture around russia. what is his attorney saying about plans to cooperate with robert mueller's investigation? that is where things can get very interesting. >> they certainly could get interesting. the plea bargain did not come as part of the mueller investigation. this was a separate charge brought by federal prosecutors. mr. davis is making the case has a lot ofn information, that the mueller investigation, it would believe them to listen to and he would be happy to do that. so it sounds like he will be cooperating. they are also making the case that mr. cohen had indications that been candidate trial had some knowledge of russian

hacking of u.s. computers. so they didn't offer more detail on that, but just sort of put that out there. again the president saying strongly he had no knowledge of this and they are not banned to prove collusion. so it's getting very interesting, lots of tweets, trying to shrug off the cohen p anyone needshat if a good lawyer, they should not go to michael cohen, who was his longer for a good long time. slightly,ching gears around trade, we've seen terrace put on china and the u.s. retaliate against each other, we saw that just an hour ago. what is the latest round of this tit-for-tat trade story, what is it mean for u.s.-china relations? grexit comes at a interesting time. $16 billion in tariffs on each

other countries goods are taking effect today, even as both sides are in washington trying to negotiate on the trade matters. so it is interesting timing. this comes after $34 billion in the first round of tariffs started by the u.s. china as they have sent that we do, retaliate in kind. up, even ashas been they talk. these are mid-level talks, it's not a vice premier like we saw in china, it is a vice commerce minister, but they are talking and meeting in the next few days. the thinking is that there really going to try to bring down the temperature and try to get a truce so they might be able to get some agreement in the future. the first time they talked into months, and the president doesn't sound very enthusiastic about the potential for an outcome -- a successful outcome

necessarily from the talks. thanks very much, jodi schneider in hong kong. watchk, is fascinating to the politics, and they could develop significantly from here. i'm sure it is safe to say. terms of political risk and what that does to equity market strategy, this chart shows the correlation or lack of it atween the s&p 500 and political risk score. it's lovely to watch these dramas play out. i mean it is fascinating, but does it really matter for markets if there are other opportunities? patrick: we've not changed any investment decisions on what's happened over the last 24 hours really. is an ongoing concern but is not changing our day-to-day approach. were still looking at the inflation for bond yields. the political backdrop may have

some impact on the midterm elections. people are talking about impeachment and things like that, i don't think that is a high probability at this point. anna: i heard this from a few people over the last 24 hours, why do they feel confident -- confident to put aside the strong dollar, the higher equity market things that many have attributed at least in part to the fiscal package, why do we find it easy to put that aside, because it won't end? patrick: i don't think there is an interest to him at this point. everything is so partisan in you got right now, partisan politics if republicans control the house, the republican agenda gets put through, if democrats take

control of the house and all of a sudden you got gridlocked. that's the issue that may create a bit of tailwind for the democrats. it's hard to get people to change their thoughts on anything right now because everyone is so polarized. anna: that said about whether this matters for president trump, where do these so-called trump trades -- this chart shows the dollar index and that tenure government yield in the united states. the dollar is little challenged but it's back up again today. seem to be aon't solidly make it about 3%. what is that all about? patrick: it's a backdrop of the rest of the world. interstates are still at zero, so that differential is still huge. we think the economy is doing so well, and you have growth and inflation.

if you have 6% nominal growth, you expect 10 year yields to be i. everything is being equal, you have much higher interest rates against the backdrop of the rest of the world. anna: so we see stock markets outperforming in the united states but on the bond market -- patrick: the tenure hasn't had a real impact on equity markets. at some point, it will. no one knows if it's 3%, 3.5%. aroundave a great charts low volatility of 10 year yields. patrick armstrong joining us. up next, the u.k. is set to publish the first of 80 notices for business on how to handle a no deal brexit. the potential impacts of the breakdown in talks and will bring you our interview with the international trade secretary, liam fox.

will focus on the brexit secretary and his plan, he says he wants business as usual for britain and for businesses in the event of a no deal brexit. we will talk further about brexit. this is bloomberg. ♪

anna: good morning, 6:30 here in london. much later in the day over in sydney. is weaker, down by .8%. the prime minister facing an ongoing leadership challenge. he says he'll only call a special meeting if his rivals connecting up signatures to suggest that is the right course of action. he could face a second leadership challenge in just a week. about. to talk we will focus on that as we go through the morning. let's check out what is happening in the market. the rally in u.s.

equities took deposit and yesterday's session, the s&p 500 closing pretty much unchanged. the msci asia-pacific index a little weaker. look below the surface and you send mixed picture. on the left you can see australian stocks weaker. you've seen some strength in the nikkei in china just a little .10%.gher, up the bloomberg dollar index gaining for the first time in six days. it's a story of dollar strength in today's session. you mentioned the aussie dollar, the worst-performing g10 currencies against the greenback largely on that leadership crisis around malcolm turnbull. weaker, all g10 currencies are weaker against the dollar in this session. the pound down .3%.

yields moving lower in australia with the theme in fixed income or looking at and keep an eye on the 10 year treasury yield, not doing much in today's session. weakness across the commodity spectrum. .rent crude a little weaker i'll talk more about oil in just a moment but let's take a look at this chart with the s&p 500. futures bring much unchanged in today's session but the question now becomes how much further does the rally have to go. of thelook at some technicals, the relative strength index, members of the s&p 500 at overbought levels have been rising. the percentage of that has been rising but it is still relatively low, compared to where it was at the january high. on this technical basis, you can argue that the rally still has further to go.

taking a check on oil, i tell you deputy i was close to $68 a barrel. 3%terday we saw a jump of with that pullback in inventories. falling more than expected. anna: let's get up-to-date on the business news from hong kong. next volkswagen's on the hunt for self driving technology and really try to buy aurora innovation, and autonomous driving startup founded by veterans of tesla and at-bat. there were talks to buy aurora which is already a partner, only to be rebuffed because the company want to maintain its independence and work with other carmakers. we will bring you are interview with the head of sales at 10:00 a.m. u.k. time.

concerns that rising fuel prices and costs will erode earnings, even after reporting record annual profits. the australian airline said fuel was the biggest expense is probably jumped 21% this financial year. concern record earnings may falter. hedging is better than a lot of competitors. the currently doesn't hedge at all. are seeing the market being disciplined on people doing what and that gives us the confidence that we can substantially recover the oil price increases going forward. >> jpmorgan is said to be 100 staff after business review. bloomberg understands the cuts are global and range across several businesses in the group. a j.p. morgan spokeswoman said

the reduction will be relatively small and will affect investment in client coverage but declined to provide more detail. that's your bloomberg business flash. saudi aramco has halted work on its potential ipo for now, further delaying the plant share sales that had already been pushed back to 2019. the ceo had told bloomberg back in march that aramco will be ready for listing in the second half of this year, but warned at that time that they would ultimately be dependent on decisions made by the government. >> we should be ready as a company for listing in the second half of 2018. so we are doing a lot of work to prepare the company for listing at the same time there are companies that overlook what were doing to make sure the company is ready for listing. anna: meanwhile the saudi energy

minister said the company remains committed to the share sale at a time of its own choosing. he had worn bloomberg that any publicly known deadline for the ipo was not necessarily shared by the government. >> i don't believe we are getting any deadlines. as far as i'm concerned, between december 31 and january 1, there is no value loss for the kingdom. see that line you referred to as being significant in our decision-making process. from let's get the latest bloomberg's managing editor on energy. i guess you can say we kind of saw things coming, the writing on the wall from those conversations we just play there. why has the ipo gone into the deep freeze? it has been sort of in the

deep freeze for a while. it's been clear for some time itt investors have not seen at that figure, close to $1 trillion. that has been one obstacle. what is happening more recently is that saudi arabia has decided buy thedi aramco should giant chemicals company, a $70 billion deal. the important thing for aramco is to do that deal. it's a huge deal and they need to get that out of the way before they can think about going back to the ipo. anna: it depends on favorable market conditions and the downstream acquisition of the company will pursue next few months. decision come into the strategy?

it's all about diversifying in these economy. toone of the aims was always channel a huge amount of money to redirect the capital toward non-oil things. one ways to do that by different means. saudi aramco will pay $70 billion of sovereign wealth fund givess stake, and that the sovereign wealth fund the money by different means. saudi aramco has to find the money. one waits likely to do that is to do a giant -- organic bond issue. that is a huge piece of work. they need to get that done it for they can think about doing the ipo. one interesting angle to that is doing a massive bond issue will in some ways deliver the transparency that was always one of the aims of the ipo. ony will have to communicate

that. innocence the whole new plan achieves some of the aims of the ipo in terms of transparency and delivering the cash without confronting the valuation issue head-on. anna: i read that one of the other issues holding things up was the decision about where to list. part of that was to do with transparency. suggesting that's not really want they are making this decision because there would still have to be transparency around the bonds sale. >> that's right. trump has said he would love to see the company come to new york but a lot of advisers to aramco have concerns that would be significant legal liabilities by listing the company there. that was deathly one issue. could it come back after the issue is out of the way?

it could. they have done an awful lot of the work. aramco has been saying for some time that they've made the internal changes necessary, they've done the research necessary to put the accounts together to ready to go. they could probably revive a deal relatively quickly later on. patrick, your thoughts not around aramco but around the oil sector at the moment. where do you see opportunity? the european -- they offer good value. all of those are very attractive , even compared against the american integrated. it would be hard for at 2 look at aramco

trillion when the multiples probably would put it at a trillion. anna: so you disagree with the crown prince on the valuation. we have the u.s. inventories up $68 ayesterday, barrel at the moment. >> the oil price through the summer has been fairly flat. it has struggled to get beyond the $70 on brent and saudi arabia has said it wanted to pump a certain amount of crude and then didn't do it. what people are going to be focused on going into the autumn or two things, first, venezuela, the growing crisis there could see oil prices -- oil production fall markedly and then the introduction of iran sanctions. anna: thank you very much for

joining us. patrick armstrong stays with us on the program. let's talk about the politics here in the u k, the -- it will signal it wants life to continue as normal in the event of a no deal exit from the e.u.. institutions need to agree on sensible solutions, as the government publishes the first of 80 technical notices explaining how businesses should prepare for a collapse in talks with the e.u.. patrick armstrong is still with us. that's get your thought on how you would negotiate brexit. but we are negative on u.k. assets and the uncertainty in the headwind are getting from brexit and brexit described -- distractions. multinational

companies don't see it that way. if you going to invest hundreds of millions of pounds are euros coming want to know what the rules are. allocationspital away from the united kingdom. until we get this was all, even with goodwill on both sides, it just continues. anna: you're talking about asking regulators on both sides to come together. there seems to be a lot of news around brexit. some saying even brexit can't hold back the london commercial property market. pound is onein the of the factors there. >> i think that's the big attraction. seen investors

bringing down their expectations of where the pound heads. this is against the dollar in particular. hard brexit get a little higher every day and no deal gets a little higher. i don't think we will get there if the e.u. does everything at the last minute, we will probably get a deal but every day we don't have steps towards it you have to consider those risks. population nowe see a no deal brexit is likely, which is quite revealing in terms of expectations. patrick is staying with us on the program. our interview with liam fox will be tomorrow. xiaomi johnson yesterday's trade and alibaba reports earnings later today. tech,talk about chinese

next. this is bloomberg. ♪

anna: this is "bloomberg daybreak: europe." cloudy skies over london. the pound is weaker but in good company. the dollar strength very much the story this morning. brexit is tricky but if you think you could do any better, bloomberg has put together a pick your own brexit game to see if you could get a good deal for the united kingdom. i warn you, it's very retro. patrick armstrong has been glued to it of late. tracking saudi aramco, said to put its ipo on hold. strategicn buying a stake in a chemicals company with all the bond issue

disclosure that goes along with that. is ready to hike again if the economy stays on track. president trump denies michael and jpmorgan is said to dismiss about 100 workers in its asset management division. find out more about all those stories on the bloomberg. chinese e-commerce giant alibaba delivers earnings midday u.k. time. have an hour later, the latest from the ecb meeting and the jackson hole meeting takes place in wyoming and gets underway later on today and runs into the weekend as well. to focus on that tech story, we mention some of the earnings coming later. alibaba is next to report with first-quarter numbers you before the u.s. open today.

as there been any impact from issues around trade and the yuan on these businesses? tim, good morning to you. what are we expecting to see from the alibaba earnings later today? fix your on your, is the fiscal first-quarter and we expect to see the top line look really good. you're on your growth is very solid. it's a growth rate we tend to expect from alibaba. rise soe starting to profit will look a little bit we. gross margins are around historic lows in this quarter. that's the key thing we need to look out for in going through the operating level as well. a profit according to analyst estimates but it could be weaker

. there's a lot of cost issues that are dragging down the bottom line. eye ono we'll keep an the cost. one of the biggest issues we need to be worried about terms of asian tech right now? tim: the one issue we need to understand is, it's not just one factor we need to be concerned about. you talked about xiaomi, they had good earnings yesterday and revenue rose, but alibaba is an internet play and it is very much a china internet play. or then 95% of their revenue is from china. so issues of going overseas don't really impact them. it's a very domestic china plate. so what's going to hurt alibaba is different from what hurts someone like xiaomi. tencent has just reported and they're looking at similar issues. what is the cost of driving revenue? having to spend more money on promotions and marketing just to get people on their platform and

keep pushing revenue higher. if you keep throwing marketing money at it internet company, you can keep driving the top line but you have issues across the line. that's something we need to look out for for the chinese internet companies such as baidu and others. issue, itt the macro has not pinched yet but if consumers in china are concerned about the future and the macroeconomic environment, maybe they will spend a little less money. those effects can impact companies like alibaba. the issues around concern and sentiment could play out. saying 90% of retail sales will come from the internet.

let's talk with patrick armstrong, i want to get some your thoughts on investment strategies. let's start with the technology stocks.nd the chinese you see some wobbles that you think may foreshadow something similar. they were bulletproof, high-growth stories that just cap beating expectations. we've seen the bad stocks on 20% from where they were a month ago. we just talked about how margins in earnings may be starting to matter for the chinese stocks, companies like netflix and amazon that are growing revenues very quickly. though stocks and been seen as a secular way to get away from cyclical worries. big issue worries about trade are not impacting the bank

stopped -- bank stocks. the russell 1000 and the s&p value index are growing revenues and growing ebitda faster than the gross -- growth industries of the last years. i saw a chart that illustrates what you are talking about. growth exuberance has gone too far, then. when does it correct? started shorting the growth index yesterday. line withindex is in the historic average as well. thate are too exuberant, -- they think they're getting safety growth is going to continue forever.

netflix has a monopoly right now. and is goinging in to have to compete on price. of people heard a lot talk about the low barrier for entry for the next lit guys for the netflix model. when you look at value, you're talking about value as one sector. energy companies have really driven the earnings. you've not seen a big follow through in the stock prices to the same extent you have in the bank stocks. i think cyclical growth is going to continue. the u.s. economy will remain strong. it may fall off a cliff because of political issues are just in of cycle. at ae getting those discount and i think they will

deliver superior growth because that's where they cyclical tailwind is going to help. everything that is looking like it will grow forever always faces some headwind at some point. you don't get record margin after record margin forever. anna: patrick, thank you for joining us this thursday morning. patrick will continue his conversation with bloomberg at 7:30 a.m. u.k. time on bloomberg radio. charts weteract with using during the program. charts browse all the show on bloomberg tv and save it for your own research. next, as jackson hole gets underway later today, we will discuss the fed. and our interview with esther george a jackson hole.

12:30 p.m. u.k. time we will bring you that interview. will talk more about the markets next. this is bloomberg. ♪ xfinity mobile is a new wireless network

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anna: good morning from bloomberg's european headquarters. the fed signals that is ready to raise rates. washington imposes tariffs on $60 billion in chinese goods even as u.s. and chinese officials meet face-to-face about trade for the first time in skin. ipo on hold. saudi arabia is focusing on buying a stake in the chemical giant, delaying it to your promise of what could still be the world's largest ever offering. ♪

welcome to the program. it has gone 7:00 a.m. in london. let's tell you what is breaking across the bloomberg this morning and we start with the construction sector. they have delivered numbers which they say suggest the first half of the year's performance was in line with guidance. were 11.4 billion euros, that is a shade below the 12.12 posted. or a touchine ahead of estimates. departments isr in line with guidance. this is the number five cement maker in the u.s. and pushing

more into the u.s., it is seen by some analysts as a sensible move given the outlook for u.s. construction and the market expansion. other dynamics to watch out for, the gathering pace of growth in europe, stabilization in the philippines and other places were they operate. let's keep an eye on what is going on with crh where we see the start of the trading day. expect to see. the asian equity session is down, no surprise, some weakness coming through. china, and that is wet the risk radar shows, have been weaker there and we are down by .3 of 1%. thinks turning around in the afternoon session. the nikkei is in positive territory, weakness in the

currency helps. dollar strength is back on the radar. first aar is up for the and six in the dollar is strong against a host of currencies, against the euro, the pound, the yen, and others, including yesterday in dollar. we see week us in the aussie this morning, that's weakness in the aussie this morning. the premise are facing an ongoing leadership challenge. could we see another vote as early as tomorrow? next getty bloomberg first word news update. donald trump has denied using campaign funds is has run a for women who alleged past affairs with him. the comments came a day after federal prosecutors claimed some campaign officials were aware of the payments. his statement hundred dukes a guilty plea by michael cohen, his wrong time personal attorney

and fixture -- fixer who said the president directed him to make the payments and that they violated campaign-finance law. clicks you have to understand what he did and they were not taken out of campaign-finance, that is a bigger thing. they did not, out of the campaign. they came for me and i tweeted about it. >> strong evidence, it is conclusive but let's at least strong, that is donald trump new, that michael cohen is going to be advancing upey on his behalf to hush the relationships with these two women. and it had a political purpose to it. austria's prime minister is digging in for a fight saying he would only step aside if his chief rival can prove he has enough support to unseat him. amid a flurry of ministerial resignations michael turnbull said he would call a special meeting of the liberal party

only if enough signatures can be gathered on a competition. this would -- turnbull said he would not stand. >> when the party is called, motion to be a moved, if the motion is carried, i will treat that as a vote of no-confidence and i will not stand as a candidate in the ballot. 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. can find more stories on the berg at cap go. -- on the bloomberg at top . there hearing from newspaper in australia that julie bishop him a the deputy prime minister is considering a run for the prime minister. julie bishoprting

will stand in the event of a ballot so this gets more interesting down under. markets are not liking this political instability. the aussie market closed lower .251%. a bit of a turnaround after we saw ozzy markets, asian markets lower for most of the session but the tariffs came into effect two hours ago and you are seeing more dying relief coming through china's market. let's take a look at what the tariffs made on stocks. the auto sector has been one that we are watching closely. in theep falling by 5% tokyo session but this is on the back of a report coming through from japanese media that it could be ending its china alliance. the front runner out of the region in sydney up i 11%. searching as it returned dividends to shareholders and we have been watching not only the aussie dollar but the aussie bond market on the back of the latest move in politics and you

have seen the aussie bonds the jump, bank features gaining with one trader telling bloomberg that the deputy prime minister could be considering a run for the australian prime minister ship. it is all happening. on thee will keep an eye political developments in australia as well you, we know. let's get up-to-date with what we heard from the ped -- fed last night. ready to raise interest rates again so long as the economy stays healthy according to the record of the federal reserve's most recent meeting. minutes come ahead of the fed annual policy gathering in jackson hole which gets underway later today. said at thefficials last meeting it would be appropriate to raise rates in news when they meet in mid-september. they mention a lot of confidence in the inflation outlook,

confident it will stay closer to the target and more confidence that wage growth will soon accelerate as well. low and implement was mentioned as a reason for that area and the legs in the time it takes from low unemployment to transfer to higher wage growth so that is another thing they see as supporting the inflation outlook. trade was mentioned as the downside risk although they sounded less concerned about that at their most recent meeting than they did at the meeting before. one new downside briskly mentioned was the possibility that fiscal stimulus might not have as big of a boost to the economy as they previously expected. that was a notable new edition. the chairman specifically said in the minutes that it would soon be appropriate to resume a discussion about where they are going to take their balance sheet in the longer term. that is something they said to look out for in the fall. what toquestion about

do with interest rates next year once they reach that neutral level for interest rates, it was a bit glossed over but hinted at that it is going to be a communications challenge wants to the -- once they get to that point. a lot of different officials have different estimates where the rate is so it might a difficult to describe policy as accommodative in the statement. or as restrictive the way they have been doing. london,ining us here in christopher fields. good morning to you. let's look at the fed minutes, that -- there seems to be a lot of debate about 2019 but a rate rise might soon be coming if the economy stays on track. how do you wait the u.s. economy, do you think it can withstand further rate hikes, we have seen seven already. christopher: the fed will continue on the path it started

18 months ago. the minutes last night i take the view that they are not trying to give away too much or too far forward but they have been very transparent. they are trying to go back to a neutral level of interest rate, not only short-term but long-term rates. interest rates are still historically low and the economic data supporting the economy is very robust. , showing aumbers robust employment picture. one of the consequences of the tariffs will be to increase inflation, not decrease it. i am of the view that interest rates could go up further and stay higher for longer than what is being priced in. chart.et's if this -- look at this chart. more uncertainty as we go into 2019.

is to bee extent that expected. do you think the fed will hike too much and will kill the rally in stocks, kill the growth in the u.s.? to moderatey want a, the idea is to have balanced economy, one that can continue to create jobs, that is what they have today. the fed will not want to snuff out growth prematurely. concerned it is possible to get wage push inflation into the economy and once it is in it is difficult to extract. anna: you're looking ahead to jackson hole, you call it a nonevent. the policy symposium will not tell us anything, nothing material about rate strategy, what about pushback against political pressure, will we get that from central bankers? christopher: i would be surprised area the last two years it has been a relatively benign event. central banks in the eval world

have become adept at to medicating the policies to the markets. that is the norm now. i would be surprised if someone goes out on a limb and said we are going to change from our stated policy whether that be from the ecb, the boj, the bank of england, or the fed. and political pressure from trump? a property: he is develop -- developer. if you ask him if he likes high rates he will always say no. anna: thank you. staying with us on the program. we are live today at jackson hole for the symposium with the kansas city fed president, if you are bloomberg customer you can watch the show using the tv function, you get the regular tv but you get the canas as well, and you

interact with the charts we are using during our conversation. the trade war goes up a notch as scrutiny of president trump intensifies. we are live with the latest on trade and politics. this is bloomberg. ♪

anna: good morning, this is bloomberg daybreak: europe. day inm. and the trading australia, they shot -- the live shot of sydney arbor -- harbor. let's check out australian assets because they are taking the headlines. asxaustrian dollar and the 200 falling 0.2% to close weaker. it is in good company in asia but at the lower end of the

performance pile in terms of the asian session. the aussie dollar under pressure down by .7 of 1%. it is volatile. -- this in particular has an extra note because of the political drama facing prime minister turnbull. we also see a strong into year yields on the move a little bit this morning. let's get a bloomberg business flash from a lady who is following the story closely, juliette saly. juliette: thank you. saudi aramco is focusing on buying a strategic stake in saudi-based industries putting work on its initial ipo on hold. while the move will delay the ipo, it does not mean the share sale is canceled. the kingdom's energy minister said the government remains committed to the ipo. volkswagen is on the hunt for self driving technology and try

to buy a innovations, and autonomous driving startup found out -- founded by tesla and death of it. the were rebuffed because company wanted to maintain its independence and work with other carmakers. we will bring you an interview ath the brand head of sales 10:00 a.m. u.k. time. airways car concerns that fuel prices will erode earnings after reported record annual profit. bill among thel biggest expenses of any airline will jump 21% this financial year. wages and aircraft will become more onerous. inoncern of record earnings the forecast. >> our hedging is the better than a lot of competitors so they are seeing a bigger fuel increase.

the u.s. carrier [inaudible] we have seen the market being disciplined and people doing what they can to recover the prices and that gives us the confidence that we could substantially recover on international, the are price increase as going forward. goldman's -- goldman sachs is shutting two [inaudible] it is run by their partners, they say that one is retiring and the other is expected to start his own fund. a spokesman declined to comment. the two names did not respond to messages seeking comment. that is your bloomberg is a/. anna: thank you, juliette saly and singapore. imposed fresh

tariffs on $16 billion of chinese imports. officials from both nations are meeting in washington for the first face-to-face negotiations since june. the talks are not expected to produce a significant breakthrough but may pave the way to higher-level discussions. joining us now, tom mackenzie. good morning. what is the response, what is in the response from china? to it for 10, isn't it? tom cole and it is. they hit back with their own said theyith -- they were forced to retaliate and said they will be taking the u.s. to the wto. in terms of what we are seeing from the business community, i am here in a metropolis in southwest china where there is a meeting of the tech ceos with policymakers also, western u.s. companies are meeting here as well. what we're hearing from the , he wasexecutives

saying that the u.s.-china trade tensions are starting to have an impact negatively on technological innovation. other sentiment we have had talking to business leaders for the few weeks and investors is a concern not just about the thect on exports that sentiment toward chinese investment. whether that is the retooling of [inaudible] telecoms equipment maker and the illustration of how vulnerable some chinese companies are. the concern is that many have seen their stock prices pummeled as a result of the trade tensions. the silver liner -- lining their looking at is additional fiscal and monetary policy. as the trade tensions continue. anna: no doubt key to where you are. has china shown any willingness to walk back from policy?

the u.s. is demanding action on tariffs but the demand goes broader than that. tom: absolutely. the longer-term focus is question -- questioning tension. the strategy is an industrial policy including subsidies for key areas that china things will be future breadwinners for the country including things like 5g, robotics automation. those issues are being discussed here. you have tencent's ceo and alibaba's ceo jack mize here, huawei is here as long as -- as well as they are u.s. counterparts. is little sign that china is prepared to back away from its industrial policy and a policy they think is key to moving up in the food chain. that will be a key sticking point for these two sides. china has shown a willingness to import extra goods from the u.s.

but in terms of this it is showing no signs of backing down. we will have to see what comes out of these talks. this will be on the agenda although talks continue and the threat is you get an additional , if billion worth of goods there is no concrete outcome from these talks. much, ahank you very great primer on what to expect. tom mackenzie in china. christopher peele is still with us. do you see an end in sight for the tensions on trade, you seem to be a believer in the long-term aims of this, you apply the tariffs with the end goals of reducing tariffs, that is part of the u.s. administration argument my is net? christopher: that is the cornerstone of why they are taking this tax it more importantly, they are getting people into the room to discuss issues that would otherwise take months if not years to address.

the fact that washington has simultaneous negotiations on with the chinese, the eu, and half of nafta shows that it has been very effective. there are no results but the fact that the world is talking about trade and reciprocity and open access is something that will benefit global trade whether it either mid term or long term. the system we have today, the system that is propped up by the wto, it is from another world, another legacy time. anna: you believe the tactic is worth it and it is also reshaping geopolitics and leading to a less stable world, is that one of the unintended or perhaps intended consequences? depends on where you're coming from. some days i feel that risk or uncertainty is the lowest in my 30 year career. there is virtually no wars going on around the world.

and there is always debates and disagreements. in reality, the world seems relatively safe compared to the 25 years that predate 2008. stable, theries are most in 40 years. this sets a good backdrop for stocks, stocks in the u.s. near all-time highs, the longest bull run in history. perhaps we will see low volatility like this in treasuries, does that continue? christopher: i would be surprised if we see low volatility in treasuries mainly because the central banks are telling you that we are going to reduce interest rates, reduce balance sheet, and increase short rates back to the normal rate. also that coincides with a huge explosion in the amount of corporate debt and issuance. there will be a digestion or enter-gestion problem coming out of the bond market.

aat will be, put pressure on selloff in the bond market, pressure on risk assets at any point in time. anna: do you see inflation heading higher? are tariffs going to be inflationary? christopher: an appointment is at record -- unemployment is at record lows in the u.s. and the u.k. my and dropping in europe. eventually we will start to see wage push inflation and then the ,ond market will be vulnerable coincides with investment banks not having balance sheet to warehouse client flows. when you see some gap risk to a higher rate environment. us,: thanks for joining the european open is next. we are live at the jackson hole symposium with the fed president. we are keeping an eye on

political risk in all its forms. keep an eye on australia and south africa increasingly as well. this is bloomberg. ♪ retail.

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: good morning. this is the european open. i am guy johnson out of european headquarters in london. matt miller has the day off. the cash trade less than 30 minutes away. ♪ guy: the book bounces. key -- the dollar regains traction. we are live today in wyoming with the kansas city fed president esther