>> good morning from bloomberg's european headquarters. this is "bloomberg daybreak: europe." trade talks at risk. asian stocks slide after president trump issues fresh terror threats to china. china.ff threats to goldman sachs warns india's stock value may be coming to an end. preparing for the worst. deals preparing for a no brexit has chosen the location for its new eu have. yes, we have an existing operation in frankfurt.

location whereti frankfurt is going to be the base. good morning, everyone, and welcome to daybreak europe. if you're just waking up, let's get you up on the markets. after two days of gains we are seeing asian stocks excluding japan opening lower. japanese markets are closed. a lot of asia and terms of the equity market is being hit as concerns around trade tension are resurfacing. if you look at the london metal exchange, the industrial metals declining. most by more than 1%. nickel leading. copper down by 1.5%. treasuries not trading right now, with japan's markets closed.

you can look at the futures of you want to see where the action is. that 10 year yield to showing 3%, but friday a close below that -- it closed below that. this is the fifth time this year we have seen that treasury yields go above 3% and pullback. some say we are going to see adrift higher in yields. the buyers came back when we cross that 3% level. that is something we are keeping in mind. the ceo of thyssenkrupp joins us for exclusive interview at 7:30 a.m. u.k. time. for now let's get the bloomberg first word news. more on the typhoon and the rest of these stories. kong and in hong china, the cleanup is underway dead,the storm left two damaged buildings, and disrupted flights. caused state tv said it

more than $21.9 million in damage. it killed dozens when it hit the philippines. u.s., regulators and environmental groups are waiting for floods to recede so they can make a copper of assessment of damage from hurricane florence. the national weather service has warned rivers are still days from cresting as the deadly storm moves northeast. the atlantic season's first hurricane killed 15 people and more than 700,000 homes are still without power. opec secretary-general says demand for oil is still robust enough to bring stockpiles below their five-year average. however, he also told bloomberg about headwinds brought on by unrelated factors over which the energy market has little control. he rejected criticism of the cartel and its allies saying the oil sector needs strong management.

>> there is no viable alternative on the table. to make this corporation which is ourselves and our partners, permanent. the world needs it, the industry needs it. juliette: the uk's prime minister has left no doubt she was prepared to defend her brexit plains amid growing signs a deal with the european union has been reached. theresa may has made it clear she has no intention of wavering , telling the bbc she was irritated at the talk of a leadership contest and ready for a fight. meanwhile, the london mayor has added his voice to calls for british voters to have assailed the final deal -- have a say on the final deal. >> what i am saying is for the first time ever -- the british public should have a say on the

outcome of the negotiations, including with the prime minister negotiated with the eu, plus the option of staying. juliette: 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 . it is not a great start to the trading week here in asia. ignore that green coming through from japan. they are out of action for a public holiday. you are seeing hong kong and china lead the losses, hit by the fact it looks like the escalation between the u.s. and china trade relationship has stepped up a notch. also that typhoon very much hitting hong kong stocks. australia, one bright spot in the banking sector. we are seeing the regional index off after a couple sections of gains. that typhoon having

an impact on hong kong stocks. the first time since the new gaming licenses came through in macau, trading or gambling was suspended during the typhoon. the has got morgan stanley, jpmorgan, and union gaming to lower their forecast. galaxy down by 2.8%. pressure, some disruption to subway lines during the storm. australia, and inquiry has been announced by the prime minister. you're seeing weakness coming from health care providers. sydney.wn by 17.5% in nejra: thank you so much. asian equities kicking off the week under pressure. the latest u.s. moved to place tariffs on chinese goods comes as the ubs ceo said the trade tensions are largely to create opportunities in the market.

, geoeconomicions tensions, are likely to create some kind of corrections or opportunities for markets and investors to take advantage. one cannot underestimate the issue. latest on trade, we are joined by our senior international editor, jodi schneider. us on what has happened and what the actual prospect is of that extra tariffs on $200 billion worth chinese goods. >> president trump has told his aides to start preparing the agreement with the amount of tariffs and what they would hit in chinese goods. it could come as soon as today. has been taking longer than anticipated because of that public comment.

there were public hearings and a lot of opposition from consumer groups as well as big companies that said, there is no way to hundred billion dollars of escape goods is going to hurting consumers now. it may not come today. it does look like it is coming soon. they may be phased in. we do not have a lot of details. at the same time the u.s. has gone ahead and made an overture to the chinese officials, saying they are invited to continue to have trade talks. as you just noted, the wall street journal is reporting china saying if there is more tariffs, there will be talks. -- will not be talks. there does not seem to be an opening at this point for an agreement anytime soon. it seems like there will be more tariffs before there will be more talks. nejra: what does that mean for

the extra $267 billion of tariffs? -- a: >> that's another question, how this would be phased in. president trump has said he could go ahead and put tariffs on all chinese imports to the u.s.. at some point he will run out of products. we do not know how this will work. there is some thinking that -- they have said the very beginning, trade officials in the u.s., they want to avoid hurting consumers. there is some thinking these would not be targeted to consumer goods. when hard to escape that you're talking about tariffs on potentially all chinese imports. apple has said they are concerned the costs of popular items like apple watches could be increased if this was to take effect. china has vowed to retaliate. thank you so much to our

senior international editor in hong kong, giving us the latest on the trade war escalation. now, the chief fx strategist at societe generale. great to have you with us. think for joining us early this monday morning. is this tariff escalation going to come to a head in the midterms and then subside? or critic at worst? >> i think is going to subside after the midterms. after the midterms the u.s. proceeds to a counteroffensive in currency war against europe, japan, and probably china. the reason why the u.s. is not having a currency offensive at this point against currency manipulators in europe and japan crisis, then from a reason is that any sort of attack on monetary minute relation could sink the u.s. stock market.

big pointspresident for the midterms of the stock market. they do not want to risk that. >> u.s. stocks outperforming the rest of the world. interesting, the possibility of a trade were becoming a currency war. could the yuan be used as a weapon again? be. think -- i think it can clearly the weakness we saw a earlier this year was to some degree a trial run. for the last couple years there has been a consensual view that have weakened the currency, they caused the loss of unrest, they lost control, their reserves fell sharply, so they stopped doing it. they put increased capital controls back on, and the result is we cannot see any adverse

effects from the weakness we saw this year. that period has ended. anybody will say we are now in for a sideways range training for the yuan. the decision gets made in beijing. you have to think if this escalates, another shift in policies is possible. nejra: how much is the direction of the yuan the kidding what opportunities you take in other currency profits? >> it is the most important currency at the moment because the policy is least understood. the fed's forward guidance is clear. the ecb's guidance is clear. chinese policy is very opaque. big asr, it is twice as anybody's trade basket for their currency. it is hugely important. , if the yuanally is weakening, the dollar is

strengthening, if the yuan is strengthening, the dollar is weakening. you shed any light on where chinese policy might go yet come -- go? >> it seems like from the point of view of the chinese communist party, they are making progress and having a fight on this issue with the united states. taking the anti-imperialist . the amount of resistance we are getting from china on the whole trade confrontation is probably more than anybody in washington expected. suit the coming as party quite well to have this conflict with the united states. nejra: in terms of the market action, we have seen -- i wanted to show you a chart of the 10 year yields. it is not trading right now. meant -- went above 3% for the first time and pulled back.

it seems to be the psychological level. there are technicals like the 10 day moving average going above the 30 day. do we see yield strip tire from here? -- do we seeired yields drift higher from here? the speech last week, where reynard started warning, we're going to have things go higher than our estimates of mutual , we price everything, the one-year rate, the one your forwards, any number of years forward, where the fed tells us their mutual rate is. -- note.he 10 year yet i think that is almost inevitable that it happens. i do not think he can stay there in the long run unless you can get significant inflation. >> i agree with that.

the u.s. bond yield, what happens is very crucial here. we are having these long-term bonds constantly supported by fears as to what is the next step in the global economic cycle. that is going to remain and anchor. nejra: i have just gotten of ,our question coming through saying with talks of more tariffs being put in place, do you see apple repatriating some of its cash or making an acquisition move? i would have thought they had repatriated cash already. had been given the tax incentive. i know nothing about apple as an individual company. the repatriation story has resulted more than anything else in a complete and utter collapse of bond issuance by the large u.s. corporate.

they put money overseas because they had a tax advantage. you see less corporate bond issuance to these companies. i think that gives a clue that -- it is tax more than anything which determines how these cash-rich companies -- apple i do not know. that would be my overall picture. nejra: the story has been impacting the dollar of course. thank you, guys. at mufgresearch securities, stay with us. templeton certainly thinks -- bottoming out in emerging markets. later on, more of our interview with ubs ceo sergio ermotti. this is bloomberg. ♪

nejra: 6:19 a.m. in london. that get the bloomberg business flash. juliette: ubs group has picked frankfurt as its post-brexit european union hub and made preparations for the worst-case scenario. germany's financial center will be the base, but the bank will have a multi-location strategy in the region with offices in madrid, paris, and milan. ceo sergio ermotti said the decision was made a few weeks ago. >> yes, confirmed. we have an existing operation in frankfurt. we have a multilocation strategy where frankfurt is going to be the-based. -- the base. juliette: fiat chrysler world --

will -- of buyers. kkr offered less than the 6 billion euro minimum valuation, which ended the exclusive it he of the talks -- exclusivity of the talks. the unit prepares to separate them a land-based company and distribute shares to investors andhe melania-based company distribute shares to investors. sanctions have frozen a russian aluminum giant out of annual contract negotiations. that could disrupt supply chains critical to the industries. the global aluminum industry has been bracing for further turmoil ahead of an october 23 deadline. says he ceo jamie dimon is done with politics and blames much easement for his claim --

machisimo for his claim he is smarter than donald trump. he says the current administration is handling the economy well. last week he boasted he could beat the president in an election. >> i should not have said it. more out of frustration and my mo. much you simao -- machisi it proves i would not be a good politician. nejra: thank you. let's take a look at live pictures. it is 1:22 p.m. in the philippines. rescue efforts are underway where a building collapsed due to a landslide, the result of the typhoon. tens of thousands of people have evacuated. 50 people have died. those are live pictures of the rescue effort. turning to emerging markets is the end of the route insight?

it could be nearing a bottom according to franklin templeton investments. the firm believes countries will suffer like the philippines. a market looking less favorable is india, goldman sachs downgraded the nation's stocks. the risk reward looks less favorable. for more, let's get to our guest, the chief fx strategist at societe generale and the head of economic research at mufg securities. emerging-market central banks hiking rates to protect the rout in their currencies. is that going to help or dampen growth? >> it is going to help in the immediate. in the medium-term, it is very unhelpful. these countries are probably

maybe going into recession. the companies which have been very highly leveraged are very exposed in one way or other to rising interest costs. high interest rates do not produce a solution to what was essentially over leverage. >> how you distinguish in the fx space among the emerging markets in terms of where you would see opportunities in rates? >> you have individual countries , not bad or good or less bad, but you have these -- i guess a couple of common threads coming through. the 10 year yet, your global monetary policy is normalizing, we had 10 years were people were not affected by the crisis directly and have benefited from the policy we have had. the places where the has been too much borrowing are the most vulnerable. generally, all of asia is going to remain vulnerable.

the states that benefited the most from easy money. the second problem is the trade wars, which is really the sort of headwind we face. -- countries, which do not have current-account deficits, which have independent central banks, you mentioned russia, but sanctions. it is hard to differentiate. the key piece is most of them are going to remain vulnerable. the ones which are less exposed to national capital flow, maybe south korea would be a good example, they are the ones that will outperform. nejra: you mentioned trade wars as one of the issues weighing on emerging markets. the other is the dollar. do we continue to see dollar strength this year? >> we see a generally stronger dollar as u.s. interest rates

rise in line with what seems to be a continuing strength in the economy. the next big question is, do we get any contagion from the emerging-market to the other credit markets in particular, u.s. high-yield. happen,expect that to although timing is uncertain. if and when we get that spread more generally to other highly leveraged areas in the global credit markets, that maybe the end of the u.s. yield rise. it may hold the dollar back. you could get a second round on the emerging markets if we get a more generalized global credit pullback. >> thank you. head of economics research at mufg securities. we will bring you more of our exclusive interview with the ubs

ceo sergio ermotti next. this is bloomberg. ♪

nejra: is 6:30 in london. 7:30 in berlin. the euro trading on a 1.16 handle. >> trade concerns are back on the map. we can see china down more than 1%. hong kong falling more than 1.5% after donald trump asked aides for another $200 billion round of tariffs on chinese goods. japan green it, this is actually an off day for japan. australia trading higher. the week market today is indonesia down 1.8% after trade deficit numbers came higher than analysts expected.

i want to take you into the charts to show you what the yuan has been doing. we can see volume in the currency has spiked. this is the highest turnover since december 2016. this is a sign of the lack of conviction as banks start to trade with each other. i want to show you what copper has been doing. investors have cut their bullish positions for the seventh consecutive week. this is the longest losing streak for these positions since 2012. this is a sign traders are concerned over trade. they think the showdown might crimp global growth. this is causing them to take off copper positions. we are seeing industrial metals fall. nejra: thank you so much. now let's get the bloomberg first word news. >> asian stocks have started the week under pressure after the latest u.s. move to place a further charge of tariffs on chinese goods.

shares in hong kong and china are leading the decline, while japanese markets have closed for a holiday. president donald trump has instructed aides to proceed with tariffs on $200 billion more in chinese products. copper and nickel have dragged industrial metals lower. the dollar is maintaining gains. u.s., two key republicans have joined democrats in demanding investigation of a woman's allegation that brett kavanaugh sexually assaulted her decades ago before a crucial judiciary committee vote to move the nomination forward. one committee republican jeff "must bed the accuser, heard" before the vote. a white house official said donald will not withdraw the nomination. in the philippines, hong kong, in southern china, the cleanup from typhoon mangkhut is

underway after the storm left two dead, damaged buildings, and disrupted flights throughout the region. chinese state tv said mangkhut cause more than 21.1 million u.s. dollars worth of damage. it killed more than 50 people when it hit the philippines. the uk's prime minister has left no doubt she was prepared to defend her brexit plans amid growing signs a deal with the european union is to -- isn't being reached. she has made it clear she has no intention of wavering, telling the bbc she was irritated at the idea of a leadership contest. . the london mayor has added his voice to the call for british voters to have a say. >> this is important. i'm not advocating a rerun. what i'm saying for the first time ever, the british public should have a say on the outcome of the negotiations, including what the prime minister

negotiated, plus the option of staying in the eu. 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. this is bloomberg. nejra: thank you so much. ubs has picked frankfurt as its post-brexit hub. sergio ermotti says the financial system is operating under the assumption there will not be a deal. he spoke exclusively with bloomberg. >> we are preparing ourselves, look at our plans, the fact of theever solution is coming, facts are no longer relevant for us. a few weeks ago we had to make a decision to execute for worst-case scenario. system is already operating under the assumption there is no agreement and so

whatever is going to happen from now on is not going to make the exercise less expensive. it is not going to make the feeling about the disconnect and the result in resolving this kind of issues not very high. we go back to what we started at the beginning. it is a complication that is undermined the willingness to make investments. if you do not know what is going to happen, how can you start to invest? i would say in the u.k. and in has preventedope, people to take action and invest. >> are you confirming frankfurt will be the choice? >> yes, confirmed. we have an existing operation in frankfurt. , at is where our choices multi-location strategy where

frankfurt is going to be the --e, branching out so we some people are going to be , alsod in paris, in milan a good chunk is going to go to frankfurt. >> the expectation is a hard brexit could lead to the next banking crisis. what is your take? >> i do not -- i think the system is well prepared. i do not believe the next crisis will be a banking crisis. if you look at the banking system, it is resilient. you may have some banks here and there. in the past we had the insurance sector was also part of the problem. i understand the financial system is much more resilient and ready to absorb any trouble. i do not think brexit can be a triggering for financial crisis or banking crisis. but it could undermine

investments and trigger a slowdown in the economy. that is clear. >> how soon do you see that consolidation in europe? we have lots of reports linking just about everybody. unicredit has been mentioned. when do you see consolidation? how soon? what impact will that have? >> in the next couple of years you will see some form of consolidation happening. in some cases to consummate business models. in some cases to create new champions. in the next couple years i would say. >> how many will their end up being? think it is difficult to assess the situation right now. if you look at the reality of the european landscape, you need to have, probably the ecb

deciding their regulatory power to allow those kinds of m&a consolidations to happen. there are still country specific regulations that in some cases prevent consolidation in europe, which is necessary in the euro area. it is very important. nejra: that was sergio ermotti speaking with bloomberg. as the britishes chamber of commerce lowered its forecast for the u.k. economy. it expects growth of 1.1% this year, citing a weaker outlook for trade and investment on brexit uncertainty. the chief fx strategy at societe generale and the head of economic research at mufg securities are still with us. despite the uncertainty, you have ing getting bullish on the pound against the euro. is this the time to take that

opportunity when we have seen a slightly stronger sterling? think what is happening is the other way around. people who are long dollars short pound, our thinking maybe they should be hedging their dollars. the world is bearish, gloomy, miserable about the u.s. -- about the pound in short. the balance of probabilities is going to be slightly away. the worst form of no deal brexit as possible. --are more likely casino -- more likely to see -- we've only been lower than this three times. just after the referendum, the end of 2008 the middle of the financial crisis, and 1976 when the imf bailed us out in the u.k.. brexit is dreadful, but not as dreadful as the imf. nejra: i have a chart for you

showing the u.k. economy grad -- gathering pace through july. is the outlook two gloomy? >> i think so. we'll have to see where the u.k. economy is. it is very advanced in a cycle. it is bizarre interest rates are so low. that has played a major part in the weakness of the pound. i was discussing currency manipulation earlier. a large currency manipulator is the u.k. in keeping rates so low. at this point in the cycle. nejra: i'm going to switch the charts around. you write a lot about the euro talking about getting euro-dollar right. if you can get that right it bleeds through two other correlations. i have shown your regression chart, saying that if we get the 10 year bund yields at 50 basis

points, the euro-dollar can move to 120. >> if you look at what the german ten-year yield has done, you have the federal -- moving forward and it failed. it is making ago. that needs to do better than 45 basis points. a high correlation between germany and where the euro is going at the moment. higher than there has been in a while. there is a very high correlation between euro-dollar and nearly every other currency. >> you see the euro strengthening. where are you taking it to? if we get there, what does it mean? >> 119 by the end of this year. this is all happening down the track as the u.s. economy slows. what it means for other currencies, it means generally a weaker dollar.

coming back a little bit to brendan, if the u.s. economy slows slowly, which i think is the most likely outcome, if the cycle ends, the fed stops tightening at the back end of next year and things are slowing down, we are looking at a mild cycle, that could revive global emerging markets. it could see a softer dollar in a benign way. if the u.s. economy finishes its fiscal sugar rush, forces the fed to over tighten and continues down the path of uncomfortable trade war and then slows more sharply into a recession, the world is a much more complicate it place -- complicated place. nejra: is the euro undervalued? >> i do not see the euro as undervalued. you compare the euro now to what it looked like years ago and realizes all the same. in thet see any change

nature of european monetary policy. it is going to remain dovish. becomeit difficult to too bullish about the euro. nejra: bullish on the euro for kit, not so much for brendan, head of economic research at mufg securities. coming up, we bring you our interview with the opec secretary, on why the world needs opec. later, an exclusive interview at 7:30 a.m. u.k. time. this is bloomberg. ♪

nejra: 6:46 in london.

let's get the bloomberg business flash. juliette: fiat chrysler will evaluate other potential buyers, because the company views a bid made by kkr as too low. kkr offered less than the minimum valuation fiat sought, which ended the exclusivity of the talks. the italian carmaker can now evaluate other inquiries received for the unit while it prepares to eventually separate milan basedan -- company. the u.s. treasury has soften the impact of sanctions by allowing customers to negotiate new contracts with result -- rusal. that could disrupt supply chains critical to the automotive and aerospace industry. the global aluminum industry has been bracing for further turmoil ahead of the deadline.

saysgan's ceo jamie dimon he is done with politics and machisimo fores his claims he is smarter than trump. he has no intention of making a run for the white house, saying the administration is handling the economy well. last week jamie dimon boasted he could beat the president in an election before backing away from that claim. that is your bloomberg business flash. nejra: thank you so much. the opec secretary-general said oil demand is robust despite headwinds. he told bloomberg middle east energy markets reporter what impact lower investment may have on the cartel's ability to meet requirements. >> it is no secret that as a consequence of this downturn, we have seen the sharpest contraction in investments across the supply chain for two consecutive years.

more than 25 percentage. -- percent each. -- inil of terms cumulative terms. has its impact not only in our ability as an industry to meet current demand, which at the moment is robust despite some of the headwinds, but in be long-term. to demand itself is beginning to feel some of the headwinds as a result of extraneous factors that we have little or no control over. but we are looking forward to continuing to work together with

to strive to only maintain balance between supply and demand, and ensure this equation remains favorable, not only for producers, but also for consumers. are ultimate objective as a producer group is to see that diversification of the sources of energy, of which are member countries also play a role, we would like to see oil continue to be the energy source of choice for the foreseeable future. >> are you discussing the continuation of that agreement at the meeting? >> there is no viable alternative on the table. institutionalize

and make this corporation between ourselves and our fashion.in a permanent the world needs it. the industry needs it. we are beginning to see this returning. the opecat was secretary-general speaking to bloomberg in dubai. joining us now is our middle east energy markets reporter who did that interview. good to have you with us and great job on the interview. the opec secretary-general saying the industry downturn -- tell us what he is worried about. >> good morning. you see that opec secretary-general very deliberate and thoughtful in his comments. he was letting on to the fact they are concerned about a couple different things. the investment has pulled money out of the industry. that has stopped the industry

from being able to invest in the need to bring more oil out of the ground, replace the oil that is produced, but also make sure we have enough in the market as demand will increase. that is really what opec can impact. on the demand side they are concerned about factors outside the group. he did not give many specifics. they are watching things like iran, which is facing u.s. mark -- sections. venezuela has political turmoil. their production is half what it was in 2016. that is taking barrels out of the market and might make it difficult for opec to meet that demand. that is why this corporation between opec and non-opec countries is very important so they can manage that supply. nejra: somewhat separately, abu dhabi's investment fund is said to be planning an ipo for the

refining unit sector. what is at stake for the opec producer and how does this fit with the emirates strategy? >> this is a strategy abu dhabi has been pursuing common to invest outside the country in energy while they invest in their field. have merged two investment funds. they brought a lot of assets together. one was heavy and production, things like natural gas and oil in thailand, while the other was big in petrochemicals and refining. for more than a year now they have been deciding which they are going to keep in which they are not. part of that is monetizing assets for the emirates. they have brought in millions of euros from the sale. and this will continue as they decide which assets and which of that capital to bring back into the emirates. nejra: thank you so much.

bloomberg middle east energy markets reporter, thank you for joining us. now the head of economic research at mufg securities is still with us. we see different dynamics happening with u.s. soil and opec. is the spread going to continue this way? while,ou continue for a because the problem with wti is getting into the right place. i am no expert. but we need to put some pipelines in and move the stuff around north america. one of the biggest oil -- stories in oil has been the revolution in shale. a revolution in shale means a revolution in moving product. when that happens we will see these spreads sort themselves out. when that happens we will see it sort itself out with pressure on global oil prices. the lags are longer than lags in

front of other industries we look at. nejra: possible downward pressure in global oil prices. have been inflation chart. you have a new book out, the case against 2% inflation. this is showing expectations in line with the market. expected change in prices versus the five-year. are we going to seeing subdued inflation? the wage growth exceeding expectations. >> i think that is the likely hood. it is the key difference from the last cycle, which everyone has been writing about with the lehman brothers anniversary. if you go back to 2006, at that time you had a jump in u.s. inflation from 2% to 4% led by a quadrupling of oil prices. that lead to tightening of the u.s. monetary policy which helped bring on the credit problems. probably over tightening.

in this cycle we have not had that tightening. we have had the reverse. we have a sort of controlled experiment here where monetary inflation goes on and on. it is held back in the goods and services markets by globalization. the only thing that is going to bring this to an end is -- inflation. >> we have seen the highest core inflation in the united states this year. it is something that is going to and may allows the fed to continue this slow-motion tightening. i think that is sort of the main take away from that. minoroping that allows economic downturn in the u.s.. rather than a financial sector-led crash down the path. that is this cycles hope. nejra: thank you so much, chief

fx strategist at societe generale and chief economic research at mufg securities. this is bloomberg. ♪

>> good morning from london, i'm nejra cehic. this is "bloomberg daybreak: europe," and these are the days top stories. asia stocks slide after president trump reportedly issues first terrorist threats to china. beijing may reject further negotiations. franklin templeton says the e.m. rout may be nearing the bottom, and goldman sachs warns that india's rally could be coming to an end. and sergio ermotti says ubs is planning for a no deal brexit, and has chosen the location of his new eu help. he spoke exclusively to bloomberg. >> yes, confirmed. we have existing operations in forkfurt and our choice is

multilocation strategy, where frankfurt will be the base. ♪ >> good morning, everyone. 7:00 a.m. in london. we are an hour away from the european equity market open. we've seen losses in the asian session, excluding japan, the msci asia-pacific has seen losses of more than 1%. if we look at how europe might open, the stoxx 600 closed earlier before we got the news flow through about president trump potentially preparing more tariffs. we are seeing futures point , jack, and cace 40. let's see what's crossing the bloomberg.

h&m third-quarter sales coming in at $55.82 billion. the estimate was for $54.03 billion. we are seeing a beat their for h&m. in terms of commentary coming through, they increased their market share in many markets in the third quarter and also third-quarter sales crossed in some markets as affected by logistics issues. to transition contributed gradually improved sales development. a few headlines coming through from h&m and the key number is the third quarter sales coming in o a beat. 10 year treasury yields went above 3% on friday and then pulled back, the fifth time this year we have seen that cross the threshold and pullback. we are just seeing the treasury market open up because it was closed in japan trading.

andre still just shy of 3% that is where it is unchanged. the future is pretty much unchanged. and taking a look at the cash market, if we look at futures, not a lot going on. it is overall trading sideways in fixed income markets. let's get the first word news with juliette saly in singapore. u.s., republicans have joined democrats and amending further investigation of a woman's allegations that supreme court now many brett kavanaugh i folded her decades ago in high school before a crucial judiciary committee vote to move it forward. one republican, jeff flake, said the accuser "must be heard" before the panel votes on the nomination. a white house official said yesterday that donald trump won't withdraw the nomination. in hong kong in southern china, the cleanup from the typhoon is

underway after the storm left at least two dead, damaged buildings, and ruptured sites throughout the region. the cheat tv says it caused more than $29 million usd in damage and killed more than 15 people when it hit the philippines. in the u.s., companies, regulators, and environmental groups are waiting for record slumps to reseed to make a comprehensive assessment of hurricane florence. the national weather service has warned rivers through north and south carolina are still days from cresting as the deadly storm moves northeast. this hurricane killed at least 15 people in more than 700,000 homes are still without power. franklin templeton investments says the rush in emerging markets may be nearing the bottom. they say they were still countries that will suffer like the philippines.

given the uncertainty they are keeping a net neutral dollar position, shorting the philippine peso against the new zealand dollar. goldman sachs has called time on the surge in indian stocks. opec secretary-general says demand for oil is still robust enough to bring stockpiles below their five-year average. he also told bloomberg about headwinds brought on by unrelated factors, over which the energy market has little control. he rejected criticism of the cartel and the independent allies, saying the oil sector needs strong management. >> there is no viable alternative on the table. other than institutionalized and with goodncorporation partners in a permanent fashion. the world needs it.

>> global news, 24 hours a day and at @tictoc on twitter, powered by over 2700 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top . it impact of the typhoon, looks like they are at loggerheads according to the "wall street journal" report that china may decline talks over trade, seeing asian markets back in the red today. we have taken japan off the map, which closed for a public holiday. banking stocks lifted the asx 200 higher, but generally you are seeing weakness, and a lot of it is happening in hong kong where the typhoon really hit. let's switch it out and have a look at the factors moving the markets. hong kong stocks were some of the worst hit, particularly the casino sector. jpmorgan, all,

lowering monthly revenue for the world's largest gaming, after we saw grambling suspended due to the typhoon. elsewhere we are seeing a stronger dollar impact on currencies in asia. the rupee in india hit a fresh low with measures falling short of expectations to boost the the u.s.will stop dollar against the peso was at a 12 year high. by theuntry was hit typhoon and also its own s.onomic problem >> asian stocks have kicked off the week of the pressure after the latest move to pace further tariffs on chinese goods, as sergio ermotti says trade tension allows you to create opportunities in the market. >> trade tensions, that geopolitical tensions, we are seeing are likely to create some

kind of correction, opportunities for markets and investors to step in and take advantage. i think one cannot underestimate. >> joining us now, the senior portfolio manager. good to have you with us. the first question -- what opportunities? are there any opportunities they are taking as a trade tensions ramp-up? >> there has been a lot of volatility, and i think a lot of the asian markets look very chic. it is hard to say if today the bottom or is it next week because you don't know what politicians will do, but they look quite expensive when you consider the revenues -- they look cheap, excuse me. >> interesting. it does bring us under the topic of emerging markets because trade tensions are one of the things that have been weighing with theng markets

idiosyncratic stories we've talked about before. franklin templeton says markets are approaching a turning point. are we at that turning point yet? >> i think we could be. what the fed does will be quite important. we have very high expectations for interest rate rises and more fed year, so i think if the were to miss one of those rate rises or say the economy is slowing, that would probably be quite positive for emerging markets. we also have places like turkey finally raising interest rates, caving to pressure from the markets. but i think those are steps in the right direction. i know that they are generally very positive on russia, which is surprising -- does that change at all? >> with russia, we like it because it has a big current-account surplus.

we want to be in the m with strong fundamentals. they have a credible central bank, and a lot of it is energy exposure. that is a market that is about 60%, 70% energy materials, which i think is a good place to be given where oil prices are. and also given the tensions in the world geopolitically and the risk we have. >> yeah. what is it that makes you so positive on india, then? you were talking about the current account surplus in russia, india has a deficit. goldman is saying india's world beating stock market run is over. strategists are saying indian valuations are to turning. >> india has historically always have slightly higher valuation, and there are different qualities about the market. it has a lot less state owned companies than a lot of emerging markets, a lot more things genuinely owned by independent shareholders. it is a market that has tended to be less exposed because it is

more closed. now, andhanging a bit they have a deficit dependent on oil. but it is also growing at 7%, 8% per year. we have discounted -- even china growth is falling but if it falls from 7% to 6% that is still much better than what we are doing in europe were the u.k. we can't forget about the economic fundamentals in those countries because they will ultimately drive equities. >> absolutely. another thing that could drive equities if it manages to stay above 3% is the 10 year treasury yield -- we saw it briefly on friday in the has pulled back. it could be the trade tensions that cause the money to come in, it could be a psychological barrier. can you drift higher from here? >> we see it being fairly range

bound because long-term yields tend to be equal to what economic growth is doing, and economic growth in the u.s. is hovering around 3%, inflation is lower than 3%, and it is rare to see long-term interest rates vary. >> the senior portfolio manager at coutts stays with us. bloomberg users can interact with the chart. i showed a 10 year treasury chart earlier in the year that you might want to pull up. lots more covering all the stories we have been talking about. you can browse the charts, click on them, download them, take them to your morning meeting, send them to your friends and colleagues, even send them back to us, improved. fiat is calling for an offer that is higher -- more on that next. the ceo joins us for an exclusive interview after

7:30 a.m. u.k. time. this is bloomberg. ♪

♪ 7:16 a.m. in london. under 45 minutes away from the european equity market open. we saw weakness in the asian session excluding japan, down more than 1% with those trade concerns resurfacing which is partly why we have seen money move back into 10 year treasuries. it has pulled back for the fifth and the euror, stoxx 50 pointing low as well with europe closing higher on friday and it looks like we could see risk off today. let's get the bloomberg business flash with juliette saly in singapore. has pickedp

frankfurt as its post-brexit european union hub and has made preparations for the worst-case scenario of britain crashing out of the bloc without a deal. while the german financial center will be the bank this was bank will have a multi-region center with offices in madrid, paris, and no one. sergio ermotti said the decision was made a few weeks ago. .> yes, confirmed we have existing operations in our choice is for a multilocation strategy where frankfurt will be the base. >> the u.s. treasury has softened the impact of sanctions by allowing customers to negotiate with new contracts. russian aluminum giant annual contract negotiations could disrupt supply chains for parts critical to the automotive and aerospace industries.

the global aluminum industry has been bracing for further turmoil ahead of the deadline. says he is done with politics and blames others for his claim that he's smarter than president trump. he says he has no intention for running, saying the current administration is handling the economy well. last week he boasted he could be the president in an election before rapidly backing away from the claim. ,> i shouldn't have said it more out of frustration and my own which is no, but i shouldn't have said it. it also proves i wouldn't be a good politician. >> and that is your bloomberg business flash. >> juliette saly, thank you so much. fiat will evaluate other potential buyers for its parts unit because it views one bid as too low. for more, our managing editor

for global business joins us. great to have you with us. good morning. what are the different options available to fiat? >> good morning. we broke the story over the weekend, my colleagues down in italy, and at this point it looks as though they have dropped the exclusivity negotiation and the reason for that is about price. kkr wants to pay less, fiat has a floor of an unacceptable price, and right now kkr is about $1 billion below that. what they are doing now is returning to the negotiation with with others readers the kind of asset that principally attracts private equity. they could have several other negotiators, they do want to sell this business and would like to do it sooner, they have looked at a stock

market, a clean sale is probably what they would like more. snag now it is a bit of a but the price is the sticking point. >> right. what does this mean for the new ceo? fiat's new ceo guide rather , andnly a couple weeks ago mike manley is the new man in charge. this is his first big transaction and he has to prove he can handle it, he needs to get it strategically right, putting it on the back burner might be an option. this is a difficult market with the trade wars going on. generally the market for car parts suppliers are difficult, so they might be well advised that they can to get the current price, to wait, and the question

is will he have this kind of patience? we will watch closely to see what he does, filling very big shoes from his predecessor. to ourk you so much managing editor for global business. meanwhile, in the u.k., the british chamber of commerce has lowered its forecast for the economy. it expects growth of 1.1% this a weaker outlook for trade and brexit uncertainty. sergio ermotti told bloomberg he is planning for an no deal brexit. let's discuss all this further -- good to talk to you. in terms of u.k. equities, they are looking attractive. >> yeah. and you have to remember, large-cap u.k. -- we are trading on price-earnings of about 13 times, and historically when you get to those levels you tend to see the index snap back.

>> you point out you have to have a view on e.m. >> yeah. if you look at currency exposure, it is about 40% emerging markets from rio tinto, unilever, d'angelo. i think some of the weakness we have seen recently has been that currency exposure and the worry about e.m. which is driving weakness rather than brexit, which is often given as a reason for anything. >> when you look at the u.k. you would be more looking to get exposure rather than in any way getting into currency exposure. >> i think u.k. large caps are attractive specifically because a lot of folks dismiss them. they are more global in nature. you can make an argument on the basis that growth is at 1%, not

projected to rise much further. if you have low growth, low-inflation, it is hard to see yields rising substantially. >> i just want to quickly break some news. the turkish lira plunging as much as 3.5% against the dollar. i think we can show a chart of this. we were talking about emerging markets earlier, i'm wondering if you have any view on turkey, it has gone out of the headlines slightly with that russia rate and we are looking into why we are seeing such a move. let me ask you a question on europe. as what has happened in turkey changed your view on europe in any way, specifically european banks? >> i think it does affect the banking sector because a lot of the european banks do have substantial lending portfolios where they have exposure to the

turkish banking sector. you have to think about it. the exposure is fairly small in and i think for them it is more loss of growth because turkey was a market where they expected it to be growth, and they are probably taking that out of their revenue forecasts. >> you own bonds in unicredit. and their capital structure, the risk of default, is still fairly well. it is certainly possible -- the benefits for the italian banks, their nonperforming loans are still among the highest but they are stalling, and once they get those nonperforming loans it usually takes a big day to stop that trend and see a reversal.

>> this takes us on to credit. i want to show you a chart which is showing euro junk bonds cheapening relative to u.s. peers. this really goes against what has been happening for a long, long time. is this an opportunity to get into european high yields? factors,are a couple one is that we are more worried about the european economies and bonds are the hig first thing yu see go. a trade like equities and they fall. but we also have things like the end of the ecb bond buying which is a huge win for higher yield, because it has pushed investors and high-yield. at this point it is not something we are jumping into. we like certain areas of high-yield, thanks we think are quite attractive, but generic

high yields we don't see a great risk/reward. >> and bank debt, would you be looking at the u.k. as well? >> i think u.k. is fine. if you look at the big banks in the u.k., equity returns have not been great, but is there a meaningful risk of bankruptcy? we don't see it in the short-term. >> briefly, quite a few central-bank meetings. anywhere you are looking to take opportunity? >> the most interesting stuff will do in emerging markets. unlikely either of them will do anything with the election, but given emerging markets have been in the spotlight i think that's the most interesting news. >> thank you so much, senior portfolio manager. let's take a look at what you should be watching. later today, the unease of netflix, the most nomination of any contact provider. the policy decision from the bank of japan. then we round the week off with the crew drupal witching day for u.s. markets. that's it for "daybreak:

europe." the european open is up next. we see european futures pointing lower. tune into bloomberg radio. this is bloomberg. ♪

♪ >> good morning. welcome to the european open. we are live in london. i'm anna edwards alongside matt miller in berlin. >> stock in asia starts the week in the red, dropping along with emerging-market currencies. here in europe, futures point to a negative open, less than 30 minutes away. ♪ >> stocks and base metals selloff after president trump