>> good morning from bloomberg's european headquarters in the city of london. i am anna edwards. nejra: and i am nejra cehic. anna: powell makes his jackson hole they view. don't expect him to go too far from his messaging. the kansas city fed chief favors to more hikes this year. nejra: scott morrison will become australia's sixth prime minister in 11 years. stocks in sydney and the aussie dollar gain. fresh tariffs in view. talks set the stage for further explanation of the trade war. -- escalation of the trade war.

good morning, everybody. friday morning, 6:00 in london. let's go to what's on the risk radar. lots to talk about market moves. the asian equity session. no big moves in either direction. nothing achieved from those trade talks between china and the united states. little was expected and fairness as we said many times. china has enacted some of the promised reforms to ownership rules around the financial services sector. we have seen some action. the dollar barely stable, holding onto recent gains. we are waiting for jay powell to speak at jackson hole. there is an added political dimension and flavor to what is going on in wyoming. to flag what is going on in the price of a barrel of crude because we are up by .8% this morning.

, first weekly gain in two weeks. a host of factors suggesting slightly tighter supply, whether it is u.s. sanctions on iran that are pending. all of that adding up to a fairly positive week for the oil price. we are putting in the australian dollar of ours because based on our headlines, we have been vertical shift within the liberal party in australia. the continuity candidate beating off the right-wing challenge. by .5llar bounces up percent or so. it was up by .6% earlier and down by 1.4% in yesterday's session. we are ready for jackson hole. nejra: we are already waiting for that speech from jerome powell. with that in mind, i wanted to show the curve, dead simple. we continue to the relentless flattening. 20 basis points, hitting that for the first time since 2007. those. it in fresh cycle i wanted to bring it up because we have the fed minutes. aboutfficials concerned

your curve flattening, some not so much. we had a blog post from ref i a bostick, who is an fomc voter this year. he talks about the fact that he is not too concerned about the yield curve. he noted his important to the extent that you get rate hike expectations from investors. it might not be sending the signal that investors are actually concerned about the economy. interesting when you bear in mind the eurodollar futures. investors do expect the fed to through 2020. of course, it's that rate hiking path and what jerome powell may or may not say about it that will be very much in focus in jackson hole as well, anna. anna: let's talk about what's going on in the futures. we are seeing a little bit of positivity here. futures pointing just slightly higher. throughout the day, live coverage from the daniel --

annual jackson hole meeting of bankers. our guest will include fed of st. louis, cleveland, dallas, and atlanta. we will bring remarks from australia's new prime minister designate, scott morrison, making remarks in canberra. we will bring you those as he speaks it. you can watch on live at any moment now. by word -- live news update with juliette saly. scott morrison will become the country's prime minister after ruling liberal lawmakers voted to ask tremble. as the government attempts to boost its flagging poll numbers ahead of an election due by may. >> australian still be just dumbstruck and so appalled by

the conduct of the last week. that a government would be brought by this sort of disloyalty and deliver it insurgency is the best way to describe it. u.s. china negotiations have ramped up with no major progress, setting the stage for further escalation of the trade war. conclusion of the talks came hours after beijing and washington rolled out their tit-for-tat tariffs. no further meetings have been scheduled. chinese officials raised the possibility that negotiations could be on hold until after november's midterm elections in the u.s.. china has removed limits on foreign holdings in domestic ranks and asset management companies. overseas financial institutions will now be treated the same as local companies. foreign stakes were previously capped for a single institution.

25% for a group of foreign investors. the move marks the latest step towards the financial sector. south africa's central bank will take a measured approach to monetary policy in the face of heightened currency volatility according to the deputy governor. his comments at the gathering of central bankers came hours after ed intotrump wad the debate, which sent the rand lower. >> if there is a significant depreciation of the currency and it is sustained, and that feeds through, clearly, we will respond to that, but i think take a certainly measured approach. as we always say, panic is part of valid -- of our toolkit. juliette: powered by more than 2700 journalists and analysts in more than 120 countries, you can

find more stories on the bloomberg at top . week trading day of the here in asia, and you are seeing a bit of a pullback come through in chinese and hong kong equities, weighing on the overall regional index, which is being a second session of losses, but you are seeing the good move coming through in japan's market, up by .8%. to aen extending his klein fourth day. as he stops and the dollar very much in focus, and we did see the aussie dollar start to rebound some of its earlier losses as we heard that got morrison will become the country's new prime minister. more relief perhaps that it could not have gone the other way around. australian markets also go higher. must have a look at some of the stocks we are watching. ok gaining the most on the hang seng index. up by .4%. function in the region, the australian diversified company.

the soundseem to like of this. to the downside, we are seeing quite a big fall coming through. it's chairman has gone missing. 48% overmbled a record the last two days as the company tries to reach out to that chairman. anna, nejra. at the federal reserve's annual policy symposium in underway, --gets >> i agree the economy is doing well, and based on what i see today, i think two more rate hikes this year could be appropriate, but i also am mindful. that is not a commitment. meeting, you have to reassess and understand what you are seeing in the data, what are youhearing from your the 20 talked to, and make the decision at that time. that was esther george. investors are waiting for jay powell's maiden speech at

jackson hole later today. for more on this, our global economic and policy editor, kathleen hays, who spoke to esther george, joins us from wyoming. you, and great to see great work with the people you're speaking to win jackson hole, and of course, waiting to hear from jay powell at 10:00 a.m. new york time today. what can we expect from his speech? kathleen: first of all, let's put this in context. every year, the official theions, when the topic of symposium is actually presented, academic papers, all kinds of panelists, it kicks off with the fed chair, and over the years, this speech has been used occasionally as an opportunity to send a signal about policy during the financial crisis. ben bernanke had a couple signaledwhich something about quantitative easing. mario draghi, a couple years ago, he's getting ready to do

more bond purchases and send a signal at jackson hole. bankers know the world is watching, the market is watching, and that is why they do this. they do not always do it though. jay powell of course will probably echo what the minutes said. another rate hike is appropriate soon. hikes arete appropriate, which means a rate hike in december. i do not think that would move markets though. what could surprise markets and the reaction would be somehow showing hesitancy for a variety of reasons. you guys were talking about the yield curve, down to 20 basis points. just when the financial crisis was getting ready to start. jackson hole of course was just weeks before the lehman brothers collapsed. so bottom line, and jay powell of course disregarded the flattening of the gilt curve. maybe it's technical, maybe it's all kinds of things. if he leans toward that, maybe people think there is hesitancy about the end of the year. he echoes the consensus view and

says maybe that's a done deal. the worst case for markets is if he gets a kind of bigger picture of your monetary policy in a changing economy. anna: kathleen, good to see you. one of the best things about jackson hole is of course with you. it's a shame it's dark and we cannot see it. betweenall this tension the official agenda at jackson hole and the unofficial conversations in the corridor. what are we looking out for there? kathleen: number one, the kansas city fed and gets their topic one year in advance, so this year, it is changing market structure and has do with competition, you know, and large firms getting too much power and controlling prices. amazon retailing online, holding down prices, reducing pricing power. about? you talk we will be talking about emerging markets. you certainly will be talking about the trade war. of course, turkey. trump tweets about fed rate

hikes and again, there is so many things that will be a topic. central bankers come from all over the world. emerging markets are well represented, of course. we did speak earlier to the of the southor african reserve bank, so i think those of the discussions that are going to be interesting, model me among the participants, but among -- we fortunate journalists who may be get a chance to glean more information and perspective -- and it will be interesting to see, you know, in a q&a session, if there is anything like that that surfaces from people in the audience is. they asked the panelists and speakers questions about their papers. anna: thanks very much for the update, kathleen. up very late for us, very early, one way or the other in jackson hole. kathleen hays joining us. michael simi,'s as it strategist at bnp paribas. asset strategist at bnp paribas. there will be a lot of focus on the political dimension.

we heard from esther george. the political pressure will have no impact on their decision-making. is that the messaging you were expecting to hear? michael: the markets built up a lot of focus on this after trump tweets earlier in the week. i think what is really important going and it's kind of weather markets expectations have now got to. there is the case that the panel needs to outright dismiss those comments or is it if he says nothing at all, people might view that that he is viewing towards being more dovish? over-interpret the recent news flow. the panel will be optimistic. maybe a little bit cautious on the outlook. probably going to be pointing towards two more rate hikes this year. as esther george said, that is not a commitment. they need to see the data for the rest of this year before they would look to raise rates in december in addition to the one in september. in terms of market

expectations, this chart very simply shows there is more certainty this year than there is in 2019 in terms of the rate hiking past. the two key questions to me -- one is what becomes restricted monetary policy for the fed and will they make it restricted? how many hikes is going to take us to neutral? michael: probably need another four hikes to take you all the way to neutral. nejra: is that three? anna: what is neutral? michael: around about 3%. and that's just looking at potential gdp plus inflation and then taking into account some of the specifics around the economy at the moment. so you know, we are approaching that. >> does that mean that you do think the fed will move on to restrictive monetary policy beyond that? or are we likely to pause and 2019? michael: we do not think we will get that far. the last rate hike from the fed will be in march. our view is we are getting very close to the end of the rate hike cycle. anna: do you think we would hear anything about the balance sheet? didn't jay powell say that in

the fall or autumn we would hear it?thing more about in your notes, you talk about how we might hear about the duration of the balance sheet i.e., a to be reduced, reversal operation. a lot of people say the flat yield curve and the potential for inversion of the yield curve whilst it could portend something negative, it could be engineered by the fed, so we should disregarded therefore. it's interesting that they will talk about the engineering the curve by what -- re-engineering the curve. michael: it's interesting they will take away the cruise control of the balance sheets we have had. i think in terms of the market, perhaps do not read too much into it because this is not a market response. this is not trying to tweak the way monetary policy is being conducted and impacting the yield curve. rather, it's a we normalizing -- of the balanceg

sheets, and on the duration, moving it back towards the kind pre-crisis.t it was this is kind of moving further towards normalization of the balance sheet policy. anna: global head of fx energy stays with us. we will bring you live coverage from the annual jackson hole gathering of central bankers. our top guests will include the louis,sident of st. cleveland, dallas, and atlanta. anna: some of it will be in the data. coming up, no progress. u.s.-china trade talks go nowhere even as the world's second-largest economy -- this is bloomberg. ♪

anna: good morning, everybody. "bloomberg daybreak: europe." it is 6:19 in the morning in

london and 3:19 any afternoon in sydney, where we see the australian dollar is bouncing this morning on the news that scott morrison will become australia's sixth prime minister in 11 years after malcolm turnbull loses control. let's get a bloomberg business flash. juliette saly in singapore. hired -- elon musk bloomberg understands the investment bank is advising evaluating a potential take private proposal. morgan stanley suspended coverage of the stop on tuesday without explanation. meanwhile, a fire yesterday at tesla factory in fremont, california was extinguished, causing no injuries or damage. microsoft said it became aware of the potential wrongdoing in its hungarian unit in 2014 after the software. -- in 2014. they fired for employees and

terminated business with partners. the statement came after the wall street journal reported microsoft is being investigated over potential bribery and corruption related to software sales in hungary. predicts its asia equities business will post its best results since the financial crisis, which could help the global firm sustain flagging momentum. richard haze, the hong kong-based asia-pacific head of equities told bloomberg that revenue increased 33% in the first half of 2018 compared with the previous year and is on track for the biggest annual growth in a decade. he is betting investments in technology made during years of will provide a boost even as markets worldwide get more challenging. a battle in the culture wars with a court ruling that upheld its decision to delete the account of self acclaimed white advocates. they faced mounting criticism from conservatives including

president donald trump that it is biased against them. in it skirmish with jared taylor, a california state appeals court said a lower court note had erred in dismissing the case. that is your bloomberg business flash. anna, nejra. nejra: juliette saly in singapore, thank you so much. trade talks between the u.s. and china have wrapped up with no major progress. it sets the stage for further tension. china this morning removed asset management companies, one more step to opening its financial sector. sneyd at bnp paribas is still with us. i love it when you come on set with us because i can bring up the technical charts. i bring it up because they know you have been writing about the impact of the trade escalation, particularly on japan and the yen, and you started recommending a short dollar-yen position in the dollar

portfolio. it's bouncing off the 200 day moving average and the 110 level. do we break soon and stay there? michael: in terms of the catalyst, the trade war we think is something to really focus on. what is interesting with the trade tensions is that, on some front, de-escalating. in the mexico, in canada, even with the e.u. to some extent, it seems like we are probably passed the worst. however, with china, we are seeing that is not the case. we think the situation is probably still going to get worse before it gets better. i think the outcome of these that theys, the fact come against a backdrop where parents have been increased by the u.s. and china, suggest that >> will getns worse. but it has been dollar positive up until now. what makes it yen positive? michael: what is interesting about the yen is it has not been responding as you would expect to these --

anna: the dollar has been haven. michael: yes. the next front of trade tensions is likely to build is versus japan, and we think that, as you start to get talk towards more of a trade agreement between the u.s. and japan, this is going to lead to the unbecoming in focus, and remember that trump has been very critical of the chinese currency, the european currency. he has so far been very quiet on the yen, and that is one of the reasons we have seen the yen outperform the likes of the euro and the dollar. so we think that there is likely to be much more focus in the next round of trade tensions on the end. anna: the tensions are politics for the yen and japan is in the crosshairs? michael: the yen is the most undervalued, so if you are going to be critical, japan should be on your list. nejra: if you are looking to trade this, then, what is the timing? if you look at hedge fund positioning, they are short the

yen as well, so how would you time the trade, and to what level? michael: one of the issues of going short is it is negative carry. so that is why the technical's you bring up a very important. that is why i think, when you do that'sthat break of 110, going to lead to a lot of investors starting to add the trade. they don't want to put it on until they see the trend start to appear because it will start costing them money. the other thing that's very important about the yen story is the positioning from the japanese institutional investors. we think they are holding very large short yen positions from holding foreign assets, and as you get dollar-yen moving lower, that encourages these investors to increase their hedge ratios is. we saw this back in february. we saw very sharp declines on the yen. anna: just briefly, you saw that you think the tensions with china could get worse still. what does that mean for the yuan? michael: we think the yuan has

taken a little bit out of the picture since china changed some of its policies last week with discouraging local banks from recycling some of their liquidity. and also, you have seen some of shift -- this shift towards the opening up of the financial sector and things like that, so essentially, the chinese want to offand keep the renminbi the table as the potential negotiating to. anna: we will see a president trump agrees to keep that off the table. michael, thank you, michael sneyd, cross-asset strategist at bnp paribas. if you are a bloomberg customer, you can interact with all the charts we are using during the program. gtv . you can save the charts for your own research. up next, australia has a new prime minister after michael turnbull --chael

malcolm turnbull is ousted. this is bloomberg. ♪ this is bloomberg. ♪ xfinity mobile is a new wireless network

designed to save you money. whether you use your phone to get fit. to find meaningful, thoughtful, slightly-weird gifts. or just to know which way you're facing right now. however you use it, your wireless bill is about to cost a whole lot less. ask how you get xfinity mobile included with your xfinity internet. so you just pay for data -- by the gig or unlimited. saving you hundreds of dollars a year. plus, get $300 back when you buy a new smartphone. xfinity mobile. it's simple. easy. awesome. click, call or visit a store today.

nejra: 6:30 a.m. in london, 2:30 p.m. in tokyo. a fourth day of strength for the dollar against again, up .1%. we trade at 111.42. michael sneyd is with us on set. dani burger, hey. at a mixede looking picture so far this morning. so far, japan up. the yen is falling, helping stocks a little bit. kospi up by .5%. china has been mixed. looks waiting between gains and losses. a wait and see mode.

saying it isials constructive, but i want to take a dive into the charts to look and see what's happening across assets. i want to start here with oil poised for its first weekly gain in about two months. if you are a technical water, you would have seen this coming. oil bounced off of it 200 day moving average on thursday. fundamentally, supply consent helping to lift up the price, trading around $68 per barrel. another chart i think is interesting to keep a close eye on is the spread between u.s. and european stocks. in theumbing new lows blue, but it might turnaround if history is any guide, and that is because the economic surprise has been on the upside for europe versus the u.s., and typically, these two track each other very well. so if this trend continues, europe might catch up to its you in his -- its u.s. counterpart. anna: dani burger on the markets. let's get the first word news update with you. juliette saly in singapore. juliette: u.s.-china

negotiations have wrapped up with no major progress, setting the stage for further escalation of the trade war. conclusion of the talks came hours after beijing and washington rolled out their latest round of tit-for-tat tariffs. bloomberg understands that no further meetings have been scheduled, while chinese officials raised the possibility that negotiations could now be on hold until after november's midterm elections in the united rates. -- states. china has removed limits on foreign holdings in domestic banks and asset management companies. under the new rules, overseas financial institutions will be treated the same as local companies. foreign fakes were previously capped at 20% for a single institution and 25% for a group of foreign investors. the move marks the latest step towards opening its $48 trillion financial sector. two key republican senators have signaled to donald trump that he could replace session general just after the midterm elections in

november. lindsey graham and chuck grassley change their positions yesterday after the president launched a fresh attack on sessions. the move would open the way for firing robert mueller or constraining his probe into insian meddling the 2016 election. the u.k. will stop classifying debt issued by companies in the countries inn -- the european union. according to the treasury, the change would automatically require british banks and to commit -- additional capital against the securities. we will bring you our interview with the u.k.'s international fox, latertary, liam today. in australia, scott morrison will become the country's prime minister after ruling liberal lawmakers voted to oust malcolm turnbull. won in a -- morrison closed door meeting. that comes as the government

attempts to boost its flagging poll numbers ahead of an election. south africa's central bank will take a "measured approach to monetary policy" in the face of heightened currency volatility, according to the country's reserve bank deputy governor. his comments at the annual jackson hole meeting came hours after donald trump land into the debate over seizures, which sent the rand lower. global news at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. anna: thank you, juliette saly in singapore. we are focused on political stories in many parts of the world today. two major political dramas shaking the fx market. haidi stroud-watts is in australia, in sydney, and bloomberg's rented in august -- renee is in johannesburg. run us through what has been

happening for the liberal party. haidi:: high drama at high noon. view can think of when it comes to politics in canberra. this has been the second the liberal party -- this one resulted in australia getting a new prime minister . scott morrison all becomes the 30th prime minister, replacing malcolm turnbull. the latest data play we are scott morrison expected to go to government house in canberra shortly, where he will be sworn in. he is expected to address reporters after that. you have seen malcolm turnbull going into government house, presumably delivering his resignation. in terms of how this has been what malcolm turnbull has called a determined insurgency from the right-wing faction of the liberal party. there has been a lot of misinformation and business that partyen that resulting

vote earlier today. it was a pretty narrow vote, too. food for thought -- in terms of the motion going through, there were 40 lawmakers who did not want a change in leadership at all. malcolm turnbull only needed three vote to stay on as liberal party leader and prime minister, but alas, that was not to be. context, put this in you could argue australia has been in political turmoil for something like 11 years. becomes -- what implications does that have for monetary policy? our rda rate hikes most likely now? haidi: our leaders do not tend to last very long here. it is a pretty unenviable position of the think about it. its prime ministers in just about 11 years. it is a bit of a revolving door situation i believe. we have caught up to italy, so that is an interesting company to be keeping. traditionally or historically, australia has been very lucky

and the fact that we have gone 27 years of uninterrupted growth, 27 years without a recession. we were one of the few developed economies to escape this crisis unscathed, but the news -- seems to be to noose seems to be tightening. labor marketight but stagnant inflation. wait growth has been particularly slow. growing discontent from voters not being part of this economic success lori. -- at the same time success story. -- of this economic success story. in terms of the impact on policy, the fact that there has been such policy paralysis suggests that this is really a time that the new prime minister and the liberal party, if they want to stay in government, elections have to be called at the latest by may next year. if they want to keep their jobs, they want to produce a message of internal healing, get over on withtics, and get

the job, essentially. nejra: haidi, stay where you are. we will turn to south africa as well, and the rand led kleins yesterday, rebounding a test today, but declined yesterday after president trump turned his attention to africa, it tweeting about the nation cost rand the break -- nation's rand the great -- rand debate. sometimes, is the case for the markets overreact, and then the markets settle. quite frankly, we have seen a lot of volatility throughout the year am i not only in terms of south africa, but eme's. so i think volatility is just part of our lives. >> how about the potential impact on the economy, which is something you have the water carefully? francois: this particular issue is currently being addressed, and it is underway, and i think

it is very difficult to judge the particular outcome. south africaw from is we have the capacity to deal with fairly complex social issues. case in point is our fairly peaceful political transition in 1994. and i do believe that this particular issue will also be conducive to social harmony and enhance the economic prospects of our country. i am very confident the solution will be found that does not erode the economic progress we have made. our guestet's turn to to joins us from johannesburg. good morning to you. what is the latest on donald trump's tweets about south africa?

give us the south african perspective. we have had some comments this morning, some dissatisfaction with the way the president has waded in. our department putting out a statement this morning saying they have net with a u.s. representatives and asked that representative to please convey to washington that they are disappointed that they were not -- there were not diplomatic channels used to talk about the land reform issue in south africa. nejra: what implications might this have for trade relations between the u.s. and south africa? i ask because i interviewed the trade minister recently and we talked about the fact that these discussions between the u.s. and south africa have been a little bit tense recently. yes, our trade minister had an interview with us heently, and rarely expressed a concern that if trade and sanctions around the

world would impact us even if they were not directed out south -- at south africa. if there were to be sanctions on south africa, that would be very tricky for our economy. we are at a point where growth is low, unemployment is high. we are trying to work with important issues like land reform. some of our state owned institutions my guest on -- institutions are struggling under financial pressure. are climbing. we are an economy that is fragile right now, and then he knocs could -- and any ks could send us in the wrong direction. >> we had a governor saying panic is not part of the central bank's toolkit in south africa. they are ready to act if they do see anything -- any more activity in the rand a result of this. our central bankers alwaysays -- bank is

incredibly measured. it has a target range for inflation in south africa. and the rand has weakened about 14% against the u.s. dollar this year. and if that is starting to have an impact on inflation and pushing it beyond the 6% upper range of the target, then yes, the reserve bank would act on rates in south africa. anna: thank you very much. thanks to both of you. haidi stroud-watts in sydney and renee in johannesburg. analysis on two very different tories, but interesting to see the fx dimension to both of them. michael is still with us on set in london. let's start with the south african story. i have the chart on the bloomberg. it's showing the south african rand and of pressure in recent days. as a result of president

trump's comments. is this another turkey? or is there something more that could happen here? michael: it's very much the market looking for the next e.m. vulnerable.t is when we look at south africa, we do see the fundamentals are not brilliant, so growth is quite low, inflation is quite low, however, we do not think it has the same vulnerabilities as turkey. the amount of dollar-denominated debt is much smaller. inflation is much lower. the central bank would be willing to raise rates if it needed to, which we think it will not need to. so it's a very different situation. anna: is the rand fairly valued now? michael: we think it is about fairly valued. short-term and medium-term models. the weakness we had in the last couple of days, that actually after that conversation with turkey, lots become priced out from the rand. from a more medium-term

perspective, given the weak fundamentals that i mentioned, the rand is about right at this level, so that means, going forward, you probably have a range trade. albeit, if you do not get more concerned than build up a position from investors -- anna: which em currencies have been to be not in the midst -- to beaten up? michael: one that looks particularly beaten up is the colombian one. we think it is not, so as a result, we will like to have a long colombian peso position. when we look at the metrics, the currencies in indonesia and india look to have been oversold on the back of these risks. nejra: i want to ask about the aussie because this is often a proxy for risk as well. could be very volatile. i have got a chart here of the u.s. and australian rate

differentials. does this suggest that we are going to see further aussie weakness as we turn away from the political turmoil? as i said, that has been in a sense going on for 11 years. is something that has been a very key focus. u.s.arted to dip with rates becoming higher than australian rates. what the fx market has found is it has not really been a driver. with the rba having such neutral policy, there has not really been australian fundamental as a driving the aussie. now that we have political risks, it has been a bit more of the aussie driver for the past week. one thing we would like to highlight is the positioning. tensions again to rise at the beginning of the summer. it's really a risk-off position in g10. what we think this means is that markets have been having the

right trade on. it's likely to have made money over the last couple of weeks, and we think that now, actually, that we do have a new prime minister in australia, we could aussie squeeze higher -- squeeze higher. anna: we look ahead to the elections scheduled to take place in may. fxhael sneyd, global head of strategy and cross-asset strategist at bnp paribas stays with us. replacing mario draghi. applications closed today for another top role that the central bank, one which could decide who will take over at -- as president of the ecb. nejra: we will bring you more from our interview with u.k.'s international trade secretary liam fox later in the show. this is bloomberg. ♪

>> 6:49 a.m. in london.

six days of gains for the euro against the dollar. it is not managing to hit the 116 handle. in the session. let's talk about what's going on at the ecb and get the rates. mario draghi is more open than previously thought. a report that germany will not to become the next european central bank president. the ecb's next a big appointment could cast a long shadow over who will get the top job. applications to replace france's daniel closed today. front runners include -- it is the most powerful role whose candidate -- where candidates are selected by the ecb itself. whichever country takes over is probably out of the running for the top job. ours get the latest with financial supervision reporter

who is in frankfurt for us. run us through the frontrunners for us if you could. the name thatnk always comes up is sharon , an irish central bank official, who has built. -- she is a name to watch. then, lisa, a portuguese woman who is a very experienced politician. experienced on the supervisory side. a lot of people skills. three, italian men. and theyand panetta, all have things going for them. pretty experienced guys, but they are guys, and that is a big issue with supervision is whether the ecb will nominate a woman or not. according to our information, the east he be would prefer to have a man. nejra: on that point, out why is

diversity so important to the ecb for this role in particular? michael: beyond the audience groupthink,avoiding and setting an example, it's about the structure of the ecb. few is one of the roles the ecb can nominate itself. otherwise, it nominated by countries, so they have candidate thrust upon them, often men. if the ecb wants to lead by example, saying we want more female leadership, then this is their chance to do so. she is onantly, if her way out now, when she is replaced, she will have to be replaced by a fellow executive board member at the ecb. they are all men, so deputy to whoever replaces sabine will probably be a man. unless you name a woman to the have two men running the place, and that does

not look anna: good for the ecb. anna:what are the wider implications of this role, and turn it back to the ecb presidency. mentioned --ou nick: as you mentioned, it's very unlikely that whoever wins this top role can also win the presidency, so if a german becomes head of banking supervision, then germany can probably forget about any chance of having the presidency role. same applies for any other country. there have a connection and you can see from the short list that the ecb will publish in a couple weeks time, and you can get a feeling of how the different governments are jockeying for this role because it is an individual decision. you have to apply yourself and still can. problem which will be where you really need political backing to do it. on top of that, the banks will be watching very closely because this gives us a better idea of the priorities of the ecb as a whole but also the person can

tell you. in the background, what might be the focus, whether it be more nonperforming loans, what might they take an easier tack on some countries. everyone will be watching very closely. so much to nick comfort, our reporter for us in frankfurt. michael sneyd, global head of fx strategy and cross asset strategist at the end at bnp paribas. does it resume it declines? michael: we think it does to it we think it will probably go back towards the lows we have last week. a lot of this was driven by the dollar weakness from trump comments and some of the optimism around china trade deals as the new flow becomes something of the past. the euro-dollar should be moving lower. the other key focus we have is where we have seen the italian german spreads pricing and a lot aversion in risk the situation. we think that's probably about right, however, it is not really priced into the euro as much as

it should be. anna: tell me about how much relevance you attach to who is the president of the ecb, and listening to that conversation. running?ll in the is that still a crucial question? of thes a changeup ahead ecb, a distant prospect. we do not expect a real rate hike cycle anyway. michael: i think that is an important question, but not on the market is really focusing on at the moment. it is still some time away and the market tends to price in things months ahead of it happening so it will probably be a story for the market at the start of 2019, which is when we might get some interesting dynamics in terms of what growth is doing. shortyou have initiated a call. what is that about? michael: in europe, we are seeing the norwegian central bank seems to be committed to

raising rates when it meets later this month. also, it's partly a dislocation story, so we have seen oil remain stable. we have seen the market price in the rate hikes. we have not seen the norwegian krona response. this is an opportunity for waiting for it to recover. anna: do you expect it to go a lot higher, the krona? nejra: targeting 94. thank you so much to michael sneyd, global head of fx strategy. michael will be continuing the conversation with our colleagues on bloomberg radio and 7:30 a.m. u.k. time, so make sure to stay tuned. up next, the fed's annual symposium gets underway. we are waiting for powell's jackson hole debut later. live coverage from the gathering of central bankers in wyoming. our top guests including the fed president of st. louis,

cleveland, dallas, and atlanta. we have already heard from esther george. she was talking about the number of rate hikes our planned and trying to brush up political pressure and talk of it. this is bloomberg. ♪

nejra: from london. i am nejra cehic. anna: i am anna edwards. here is "bloomberg daybreak: europe." howell makes his jackson hole debut, but don't expect him to be far from messaging. anna: turnbull ousted. will become the sixth prime minister in 11 years. its stocks in sydney and the aussie dollar gain. morrison is set to speak 7:15. processo significant sets the stage for further escalation of the trade war.

good morning, everyone. welcome to "bloomberg daybreak: europe." some headlines on the bloomberg, looking at german gdp for the second quarter. 0.5 is thequarter, number coming through and meanwhile, second-quarter gdp grew 2.3% year on year, in line with estimates. note the prizes in the picture for the german gdp. let's take a look at how european equity markets might open. the equity market is coming in just under an hour's time. we saw a little weakness in yesterday's european session. stocks closed lower, and we could see a mixed picture at the open. ftse 100 futures down a touch. dax futures pointing higher by .1%. cac looking up .02 -- .2%.

anna: click picture for the european start of equity cash trading and with that mixed picture, flat picture coming through from asia. up msci asia-pacific slightly. nothing has been achieved from the trade talks. china has made some changes to the ownership structure of financial services in china. the dollar is fairly stable. it has been for much of this morning as we wait for the jackson hole event. down .2%ittle weaker, right now, but we are waiting to see if we get any guidance on rates from powell or any reference to the political presidentof this that trump has been trying to assert on the path of rate in the u.s. .6% of theare up by oil price. work --oised for the

first weekly gain in two weeks, suggesting supply could be tighter from iran, the north sea, situations with shrinking u.s. crude inventory. we put the australian dollar in, because we are up to 4%. continuity beating off the right-wing challenge is how they are viewing the new prime ministership. nejra: watching for that and to see what the bond markets due. we have the cash market opening. looking at the futures, we had a headline saying president trump is set to offer italy help with buying government bonds. we don't want to read too much into that, but giving you an update. in the futures, it looks like the 10 year bund yield will be -- getshen that dens going. in the btp, we might see a touch of btp-bund spread tightening. the treasury yields not doing much.

buting at 2.83%, interesting looking at what the 2/10 curve is doing. we are now at 20 basis points on the two's, tens curve. in australia, scott morrison will become the country's top -- prime minister after lawmakers ousted malcolm turnbull. he won 45-40 in a closed-door meeting as the government attempts to boost its flagging poll numbers ahead of an election due by may. >> australians will be just dumbstruck and so appalled by the conduct of the last week. to imagine that a government would be rocked by this sort of disloyalty and deliberate

insurgency, is the best way to describe it. juliette: u.s.-china negotiations have wrapped up with no major progress, setting this age for further escalation of the trade war. the conclusion came hours after both parties ruled out their latest tit-for-tat tariffs. bloomberg understands no further meetings have been scheduled while chinese officials raise the possibility negotiations afterbe on until november's midterm elections in the u.s. china has removed limits on foreign holdings in domestic banks and asset management companies. under the new rules, financial in two shins will be treated the same as local companies. foreign stakes were previously cap that 20% for single to sheen and 25% for a group of foreign investors. the group marks the latest step toward opening its $40 trillion financial sector. south africa has said he has told the u.s. embassy it is disappointed with washington's

use of diplomatic channels to discuss land reform in the country. it said donald trump's tweet on the country "served to polarize the debate on the sensitivity -- sensitive and crucial matter." the south african bank said he was taking a measured approach after the u.s. president's intervention hit the rand. >> if there is a significant depreciation of the currency and and that feeds, through two, clearly we will wepond to that, but i think will take a fairly matters -- measured approach. global news 24 hours a day, on-air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top . becausebe friday

chinese markets are turning around, as they tend to do late in trade. speculation ofe state-based buying. the msci up after being in the red for a lot of the session. japan closing higher by .9%. the yen, weaker against the dollar. still we this from e.m.'s and australia's market in focus, getting a little boost on the change of leadership. currencies, that has been driving sentiment today in asia. the aussie dollar in focus. it had quite a fall ahead of the leadership vote, but there has been a relief rebound and analyst are scrambling because there had been many calls the 70% --could bolster fall. moving onaland dollar kathleen hays' comments the new zealand reserve bank governor. he said there could be further rate cuts coming through. it is higher after tracking lower, and we have been watching the movie began.

the u.s. dollar is a touch higher against the japanese yen. falling to the dollar for a fourth session. anna: juliette saly in singapore. symposium gets underway in jackson hole, wyoming. investors are looking to jay powell's maiden speech later today. there will be more attention after president trump's criticism of the rate rises and that has dominated conversation with guests at the event. >> trade is an issue for the world to be concerned about, and is it -- it is extremely important we have good outcomes there. by all means, negotiate, but don't hold the nuclear treasure. it ought not to affect monetary policy settings at all. if it gets to be a really big trade war, bigger than most people think -- and i don't rule that out anymore, because it seems to be getting nastier. if it gets to that kind of

scope, it becomes like a supply shock for the u.s. economy. >> we are ending the era of very cheap global capital flows going to emerging markets. rates are going up in the u.s., many central bankers around the world are tightening monetary policy and that means countries that have been able to finance deficit very cheaply, that is changing. we will see heightened vulnerability in countries that face turkey's challenges. the: we heard from professor at the school of his this. the former board vice chairman and kristin forbes, a member of the white house of economic advisers. joining us on set, the senior economist at hermes. great to have you with us, sylvia. your expectations as we head to jackson hole -- we were talking with kathleen hays earlier on, who suggested some time, --

sometimes, central bankers use these events to make a bigger point. you don't expect this? >> typically, the conference focuses on broad statements relevant for monetary policy in the medium to long-term. at times, central bankers use this occasion to provide a message on developments. to be thepect that case right now. of course, the fed is now facing some big challenges. clearly, the economy is now running close to full capacity, so there is little slack left in the economy. the fed is well advanced in its tightening cycle. the way from here is not really clear. title of hisficial speech "monetary policy in a

changing economy." we talk about a changing economy, but the u.s. looks similar to the way it did in 1998. aware, and economist gave a very similar speech. the conclusion of his speech was as a central banker, when you are unsure whether the economy has changed fundamentally, it tends -- pays to be more aggressive, not less. should the fed move to restrict policy -- a stricter policy? silvia: we are in the new normal wear the neutral interest rate is lower than it used to be. demographics, low productivity lower investment and higher demand for savings for safe assets, especially. this new normal, i think

the fed strategy of normalization and reassessment is probably the winning one. anna: is one of the fundamental changes we are seeing in the economy to do with concentrated power of some businesses? in particular, in the internet sphere? themes.one of the the implications of market concentration and amazon's chief economist has been invited to the event. this has relevance for inflation, doesn't it? silvia: absolutely. as i said, typically this conference focuses on brought and this year is particularly topical. the impact of changing structures in the market and in particular, from lower competition, which has implications for inflation and productivity and monetary policy. other things will be the shift to e-commerce online, which is

kerley -- has clear implications. is the bankingls sector -- competition and implications for spent -- financial stability. fore is a lot on the table central banks to discuss. in this context, short-term monetary policy elements may take the back seat. you said gradual is the winning way for the fed with monetary policy tools. how do rate hikes and the balance sheet fit together for you in that context? silvia: that is a very good point. the fed is normalizing rates, and it has hiked seven times december 2015. time, the balance sheet is correcting in the

background. this process can continue with no disruption but according to our estimates, the forcing shrinkage of the balance sheet, $1 trillion, is the equivalent of tightening. need tog the fed will take into account and that probably would also be a theme for these -- this symposium. demand isormal, the higher than it used to be so maybe the central bank's balance sheet needs to stay higher than it used to be. my expectation is that eventually, the fed balance sheet will stabilize around 3%, -- three, $3.5 trillion in the context of this new normal. nejra: silvia dall'angelo, senior analyst at hermes stays with us. gatheringing you the of central bankers. remember, if you are a

bloomberg customer, you can watch the show using tv as well as the added extras. the charts we use during the program carried you can click on those and message the team. coming up on "bloomberg daybreak: europe." trade talks go nowhere even as china continues to open up to the world. we will discuss that next, but also keep an eye on australia. we will listen for the new prime minister -- or soon to be prime minister to speak. we see little change at the close of business on the 200 in sydney. this is bloomberg. ♪

anna: we are bringing you pictures from the prime minister designate speaking after the ruling liberal party voted to oust malcolm turnbull. populist-40 over the in a closed-door meeting. let's listen. >> or you are just someone parking in the street. we've all got to live by the rules of this country, the law in our land. these are values we uphold and it is important we do that right across our areas of policy. that we we believe should decide our own future as individuals, as families, as communities, and of course as a nation. we all want to be able to make our own choices in life. whether it is about who comes to our country -- as john howard famously said, or what school

you want your kids to go to or what team they want to follow -- i suggest the chart -- sharks. that will not be a matter of national policy, i assure you. and becausen choice of that, we can believe in our future. we are an optimistic, n ambitious and a people, full of aspiration for ourselves, for our families, and our great. -- nation. for all of us. that is what we believe as liberals. my plan for this country is for an even stronger australia. to keep our economy strong, to guarantee essentials that australians rely on. to keep australians safe from terrorism all the way to bullying in our schools. to keep our country together. two not pit one group of

australians against the other. to ensure that one can succeed and all can succeed, that one doesn't have to fail. anna: this is the prime minister designate of australia. malcolm turnbull is out. scott morrison is in. in sydney with analysis. it has been a very busy day so far. and this counts toward elections in may next year. the liberaloks like party may be able to buy themselves some time. populistought if the right-wing candidate had won the party room vote, it would have to go to an election immediately. or scottontender, morrison were the person that

the people voted for. but you hear from scott morrison there, touting the australian theme of being given a fair go. lack of wage growth and housing affordability has been a major issue for voters. also talking about immigration. scott morrison was a foreign immigration minister who was strident in his views on the. we will follow as he sets out his policy agenda. he will be at government house and become the 30th prime minister of australia. in terms of the portfolio allocations, that will probably come next week or even later after that. elected liberal party deputy leader, there are reports he will be getting the treasurer job now that scott morrison will become the new prime minister. nejra: thank you so much. on watch for us in sydney. you can follow scott morrison's

away theline and take news on the leadership change on tliv . let's look at what you should be watching today. applications close for the next head of the ecb's single supervisory mechanism. anna: the annual jackson hole gathering of central bankers continues in wyoming. nejra: saturday marks nafta talks between the u.s. and mexico. sticking with that theme, the closely watched trade talks between the u.s. and china have wrapped up with no major progress. furthers the stage for escalation of the trade war between the largest economies. china this morning removed limits on foreign holdings in domestic banks and asset management companies, one more step toward opening its $40 trillion financial sector. joining us now, silvia: --silvia dall'angelo, senior at -- senior hermes.

are you confident in china's ability to withstand what develops from here? silvia: first of all, it is not a big surprise that this round of talks failed. expectations were quite low on both sides going into the event be a think there will silver lining, a signal there is an open china between the u.s. and china going forward. behind the scene, china will continue to be tough going forward. in the short-term, the situation is to get worse before it gets better. it now looks like a new round of tariffs targeting $200 billion of chinese imports will kick in, possibly as soon as september. suggested toeady

retaliate by targeting $60 billion worth of u.s. imports to china. short-term, it looks like the situation will get worse. i still think the endgame for the u.s. administration is to strike a deal with china. one very closery to the u.s. midterm in november. something president trump can present as a big win. -- is on the rise. anna: what do you expect the trajectory for u.s. and china growth to be? you can see chinese growth has stagnated, u.s. on the rise. china, what you would expect for the stage of development. how do these lines converge? think u.s. growth will continue with positive momentum in the second half of this year. the fiscal stimulus, a new

round. we continue to support u.s. growth and that should continue early next year. as for china, i think official dates, the slowdown in the first quarter of the year. past tightening of conditions by chinese authorities to allow for deleveraging in the economy, and the uncertainty surrounding trade. going forward, i think china will stabilize because authorities have turned more cooperative. nejra: thank you to silvia dall'angelo, senior economist at hermes. that is it for "bloomberg daybreak: europe." the european open is next. anna: we are watching live pictures from australia. astt morrison has been named the new prime minister of australia. this is the new deputy prime minister. he has replaced the foreign minister in a shakeup of the

liberal party. this sets the stage for elections in may of next year. this is bloomberg. ♪ a lot of people are anxious about what will happen. about what will happen. xfinity mobile is a new wireless network

designed to save you money. even when you've got serious binging to do. wherever your phone takes you, your wireless bill is about to cost a whole lot less. use less data with a network that has the most wifi hotspots where you need them and the best 4g lte everywhere else. saving you hundreds of dollars a year. and ask how you get xfinity mobile included with your internet. plus, get $300 back when you buy a new smartphone. xfinity mobile. it's simple. easy. awesome. click, call or visit a store today.

guy: good morning. welcome to bloomberg markets, the european open. we are live from our european headquarters in london. i am guy johnson alongside matt miller in berlin. matt: asian stocks traded mixed as china-u.s. trade negotiations produced no breakthrough and we are not seeing much of a move in other asset classes. we will show you that. the cash trade is less than 30 minutes away. guy: china-u.s.