♪ morning from the city of london. i am nejra cehic. nejra: and i am manus cranny. this is bloomberg daybreak: europe. these are the days top stories. nejra: clearing the deck, president trump turned his attention back to beijing. chinese equity markets are closed. the imf'she alarm, word about the world's economy. christine lagarde says the fund cut -- the final cut its close outlook. ago, i pointed to clouds of risk on the horizon. it is not pouring, but there is a bit of a drizzle.

today, some of the risks have began to materialize. nejra: and decision time for borris johnson. the former united kingdom foreign secretary makes a speech later. will he challenge to resume a for the top job in british politics? ♪ manus: welcome to the show. the top story is the reaction to markets the best the reaction of markets to what trump has done with mexico and canada. does that embolden his war toward china? stephen engle is standing by for a this morning. these asian markets are playing catch-up. as trump emboldened by his went with the new nafta? likely: he sure would say so, because of course he has .evamped nafta under his belt

he has negotiations ongoing with the eu. he had the completion of a agreementree-trade with the south koreans and he .as also convinced the japanese to enter negotiations so as you read fully set at the top of the dax for is clearing the a protracted fight with china, but china is saying that they cannot hold talks with a knife held to our throat. but donald trump today saying, now is not the time. now is not the time to talk, so it looks like donald trump theed is sticking in for long fight. we are hearing from j.p. morgan's david hensley saying that the next step for the united states is to get a coalition, perhaps get others who do not like china's actions on trade over the last few decades to enter into a coalition to perhaps five china on their trade practices.

anna: so we moved from u.s. isolationism to some form of cheney's estimation is so much, bloomberg's chief asia correspondent, stephen engle. welcome everyone to daybreak europe. overnight, the msci asia-pacific index off but went 4%, the nikkei closing by its highest since 1991, the hang seng underperforming, done more than 1% after reopening after the holiday. brent crude is holding above 85 dollars a barrel. above 75, and we have data from bloomberg showing that iran crude exports dropped even before the sanctions. , but witho lifted some dissipation of the trade tensions yesterday, the u.s. mca, you can say that gave it a bit of a lift. the euro is also on a fourth day of declines.

up by a 10th of a percent, starting to get a little touch here, not quite what we have seen in the btp's. we saw the 10 year btp just 15 this is whence yesterday, hitting 3.3 percent. we continue to see some euro weakness and perhaps some risk off and play their. manus: if you could take the italy andiscussing greece best we will get into that debate later on. my colleague in the united states, this is the gtv library. etf, it haskrock's $9.2 billion in it. the biggest one-day redemption is 24 t. is this a shift in duration? billion flowed out of this market, taking the assets of the fund down by nearly 6%. want toat people don't be ultralong on bonds since they see inflation coming.

he pointed out in a backup tweet saying, there is a bunch of indicators pointing to a gradual change in the market. the implications both in terms of yields and the ship of the yield curve, mohamed el-erian beginning to speak about a steeper yield curve also. we will question our guest about that in the next few minutes. we sawmanus, yesterday the s&p 500 gaining over all even though most stocks fell. on initial optimism of the u.s. mca does not look like it will translate. session, futures are pointing lower on the s&p, dow and nasdaq. manus: a little bit of breaking news coming through from akzonobel. let us look at this, akzonobel

is one of those dominant companies in europe. a quick headline for you on this story. akzonobel to distribute additional 5.5 billion euros from the speciality chemical sales to shareholders. a huge boost to shareholders out there on akzonobel. they are to distribute an additional 5.5 billion from this sale of the chemicals business to shareholders. that will certainly be one we are keeping an eye on. on that.ment more on that a little later on. of course, this is a conversation. santander, the lady who runs the institution will joined by bloomberg team a little later botin.s ana let us get to juliette saly standing by with the first word news? jodi: donald trump looks to be preparing for a potentially

protracted economic war with china another few has clear to the depths of dispute with china's other trading competitors. he struck a last-minute deal with canada and mexico, signed a trade agreement with south korea beginnvinced japan economic negotiations all in the last week. >> we are not going to hold back justese tariffs for promises periodic china needs to have real action and the president has said that if china wants to put a proposal on the table, if they are willing to and meaningful differences protect our technology and have fair and balanced trade, we will listen, but we are in no rush. poised to cut its forecast for global growth. speaking in an interview with bloomberg, managing director christine lagarde or and that trade wars are darkening the outlook. u.k. prime minister theresa may is preparing to make a significant new brexit offer to

the eu in an attempt to open the door to a new deal. according to senior government officials, divorce talks are stuck on the question of how to avoid bennies for police and custom checks on the border between the united kingdom and ireland. side now- the british sees a path to reaching an agreement. global news, 24 hours a day, on air and at tic-toc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. you can find more stories on the bloomberg at top . another mostly negative session here in asia. really led by hong kong as it resumes trade after the public holiday yesterday. the hang seng is off by 1.7%. of course, chennai is out of action all this week, that the close.is friday's 27 year highs, that has been all about the currency market today because we are still seeing

weakness in a.m. currencies. the dollarian broke for the first time since 1998. that us look at some of the stocks we are watching. toyota coming through, saying that a hard brexit could force it to halt its factory in the united kingdom. i shares are buoyant on the back of that trade deal between the u.s. and canada, which is being seen as positive for a lot of japanese carmakers. a lot of the chinese guess this to bidders are under pressure today on reports that the fee they charge you customers for connecting their gas maybe cut, which could bring a downside to their profits. we are also hearing that tencent music, which bloomberg reported last month was going to be spun off, according to reports, they could file for a ipo as early as today. back to you. anna: juliette saly, thank you very much. let us get more on the headlines we got at the top of the show on akzonobel. but they will distribute an

additional 5.5 billion euros from the special michael scale to holders, but we also have some lines here on capital repayment -- special chemical sale to shareholders. we also have some lines here on capital repayment. we are hearing that specialty chemical proceeds will be redistributed. and we have lines coming through on a special dividend and share buybacks. it is all about rewarding the shareholders. who hasurse, one man the power to reward a little shareholders is president trump, who is preparing a potentially attracted economic war with china by clearing the dax on disputes with other trading -- by renewing -- by clearing the decks with other u.s. trading partners. jeffrey joins us now from ubs trading partners. written relief rally

that we saw on the currency side. let is dealt a little bit deeper into currencies. the splendid nest of the canadian dollar, how much of a relief is the new nafta to you and the team there in terms of the currency reward board, geoffrey yu. --we were short on the euro it has done quite well are ready is on the equity side, but about tax allocation, which we have been recommended to clients. overweight canadian equities as opposed to european equities. wherewith energy prices they are, could we see an investment lived in canada as well, more so on the equity side, could we see canadian equities outperform? over all, i think relief for

trade exposed currencies, let us see how the renminbi does. nejra: you mentioned that you on their, i want to bring a call from bank of america joining in from the forecast cuts. jp morgan was calling for 719 2019, bank of america also seeing it going beyond seven next year and seeping through into part of the asia fx space. geoffrey: i don't think the chinese are fussing too much about it. it is managed appreciation. they have been tightening controls over the last three years or so and offsetting liquidity contraction with monetary operations. and also, the euro is a big part of the basket. even if they hold steady against the dollar where they are, the euro falling against the dollar,

that is an awful forecast, but it remains to be seen as well. so i don't think this is something that will be additionally destabilizing, which certainly was not the case in 20 14 and 2015. manus: in their world of rising equity markets, is there a probable sense of relief or not from the united states of america? the nikkei goes retro. i am talking about the nikkei back in 1990. i love this charge because it reminds me of the delusional, fantastical markets that came correct quite aggressively. how bullish are you on the nikkei? foreigners have been pulling money out of it, but where do you stand on this market? geoffrey: for the exporters, is that reflecting the u.s. economy or the japanese economy? we are not overweight the nikkei right now, wait -- but we have

been monitoring the market for some time. more importantly, if abenomics is at work, you need to be overweight. there is consensus from the japanese domestic story, from the japanese consumer and rebalancing, and we need to separate what is going on on the ground in japan versus what the reflecting. nejra: i could ask you then whether you would purchase of yen as a safe haven. i feel like it is about picking safe havens, but i think you are recommending long dollar? geoffrey: if you want to be on board the risk trade and you are given the swiss valuations versus the yen, the yen is aggressively short, probably something we want to get on board right now. this is no attempt to revisit the trade where you could actually be long japanese equities and not worry about a rising yen at the same time. i thing that would be the signature move of abenomics working. manus: i think that is nirvana,

geoffrey yu. geoffrey yu from ubs management stays with us. out --peugeoutsh and renault cars might be returning to the u.s. market. what in these to know before making the final decision. our bloomberg correspondent spoke with the carmakers ceo. >> this is a very timely decision because we are now preparing for our u.s. come back and of coarse, this is part of the framework that we need to know before we make the final decision, which we intend to do within the next few months. so, we are eager to listen to president trump on this matter. of course, we are darwinian at the psa group, we add depth to the conditions in which we operate and of course, we will adapt our plans and strategy to the conditions set by the u.s.

administration. of course, we are eager to listen to the president. you said that psa would come back to the north america with the next few years. could this accelerate your plans? willdon't think it accelerate them because we want to do things properly. first of all, we want to learn about u.s. consumer expectations and we are already operating in the united states in terms of mobility services, in order to learn and understand the market as processing as possible. will go step-by-step and we are now preparing our distribution model. we are preparing what needs to be done in terms of manufacturing. we have already started to prepare the engineering profile products to u.s. regulation compliance. all of this is under planning and we just need to synchronize the different parts of this is best model in order to make it happen. that should be done within the next few months.

obviously, this is relief in the short-term, but we have seen new tariffs between the u.s. and china. how will this new volume of tariffs between the u.s. in china -- how is it impacting your production and prices? today, most of our production is in europe for the european market and in china for the chinese market. of course, there is some cross-manufacturing around the world, but it is limited. we think that we need to produce our cars close to the market where they are bought. we believe that manufacturing our cars near the final destination makes sense from a business model and from an environmental standpoint. from a customer expectation adaptations them but as well. for us it is quite natural to do so. of course, for a global company like ours, we are very sensitive to terrorists and we believe that in terms of wealth creation

worldwide, it is better to have lower tariffs than higher tariffs. it creates less tension and better collaboration across different nations and communities. but anyway, as i said, we are darwinian and we will adapt. nejra: that was that psa ceo speaking exclusively with numbers caroline connell. toyotao spoke with the chief financial officer about how the new agreement could company.s >> the u.s. is an extremely important market for our company. from a global perspective, our footprint is i think, excellent. we have our biggest plant in the u.s., in spartanburg, our biggest footprint isn't europe and asia. -- we are extremely well-balanced. we will have to analyze the content in detail once it is definitely signed, in order to exactly calculate what the

impact might be. having said this, we are very plant and weh our will open the second plant in mexico in a couple of months to build the new three series bmws. nejra: and was bmws chief financial officer nicolas peter speaking with us. coming up, more executives from the paris motor show. -- been feel joins us johannes? was manziel joins us next. manus: and we also have the ceo at 9 a.m., joining us to talk more about this. ♪

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manus: it has just gone 6:22 in london. we will bring you our exquisite interview with marcus center -- banco santander's chairman, ana botin. one lady in charge of the business flash is at number is juliette saly. you doing?ow are juliette: well, thank you, manus the riyadh to promote his andrnment fiscal strategy infineon yesterday, as the head of the european commission one of the crisis. italian minister is attempting to reconcile expensive campaign promises made by his coalition government with euro area roles that require member states to adhere to certain deficit targets. standard chartered bank is bracing for a potential penalty of 1.5 billion dollars from u.s. authorities for allowing customers to violate iran sanctions. bloomberg has learned the amount is a preliminary assessment based on some of the communications between the bank

and regulators. the bank says it continues to cooperate fully with the investigation and is an ongoing discussions with the u.s. authorities. that is your bloomberg business flash. nejra: thank you so much, juliette saly. we have seen brand go above $85 a barrel as investors grapple with adults over opec's ability to replace falling exports from iran, which declined to the lowest in two and a half years before the impending return of u.s. sanctions. geoffrey yu is still with us. ubs's best case is we have a tight market and we get brent crude at $85 in the next couple of months. can we get to $100 and stay ?here geoffrey: i think there are two factors to that. one, we will see a pickup in investment. something that has been missing

when you consider how all the oil prices is going, how would you reconcile higher oil prices revising china's growth forecast? these things balance each other out. momentum is right it is. the canada play for example, we are looking for oil prices to go higher. manus: when do we start to talk about the inflation impact from oil? we are talking about $100 oil. affectncture does that the central bank? you will see from the ecb and others, it means conditioning their monetary's -- monetary policy. down thed have to tear inflation forecast. second day, we would go into the headline versus core. headline inflation versus core inflation. they could ride this out, i

think the u.s. will be a good case. for europe, i think that is rather balancing act will come through. even without a high aura prices, you could make the case that the ecb needs to accelerate its gradual exit. so this may actually him -- increase the pressure on them. but i think the focus is on the u.s. at this point. until we see core pressure picking up, i think as her is no. nejra: whether oil and gas companies continue to outperform as they did today in europe? geoffrey: that is the play we have been looking at for sometime. if prices continue to go where they are, i think is going to pick up. manus: thank you very much, geoffrey yu. head of united kingdom investment office for ubs wealth management. a reminder, if you are a bloomberg customer, you can watch the show using tv and also pick up all the jargon nejra and myself and the rest of the team put together throughout

the day. up next, manus, decision time for boris johnson. after years with flirting with british politics, what he plans to say at the conference today. this is bloomberg. ♪

>> we did see the s&p 500 and the session higher despite more stocks falling than gaining, the small caps underperform, and it looks like the risk on that came deal, futures mca lower and we're seeing futures point lower on the now and nasdaq. manus: let's recap very quickly on akzonobel. they are going to distribute 5.5 billion euros to shareholders. there is a share buyback. ofs is completing the sale

the chemicals business and they will pay out 6.5 billion. that was pretty much in line with what was promised to the market. to havesaid they want ther passion for coating as number three in that space. you have a passion for coatings? the special dividends at one billion euros, talking about returning money to shareholders and akzonobel to hold an egm on november 13. we will watch that stock at the european equity market open but let's check in on the markets with dani burger. : it is shaping up to be a risk off day. returning from the long weekend

to 1.7% decline and seeing posting declines coming after the central bank left its benchmark rate unchanged. when we look across assets, some of the these -- biggest is about the account deficit and we see gold and silver up a bit, some of the risk of moves continuing into the metals. when we look at indonesia want to show you what the trend looks like. the rupiah over up -- of over 15,000. this is the highest since the asian financial crisis. to give you an idea how vast this move is, this is one of -- when the central bank started to intervene despite five rate hikes, we have seen the trend go upwards, weakening against the dollar and a move in the bonds. the other big move in markets is oil, we can see brent crude as continuingbie g.i. the trade. nearest the highest level in four years. another trade that is happening,

at the end, the spread between wti is widening. we are continuing to see a chart -- it chart upwards. chart this morning. let's get your first word news, juliette saly standing by with a global outlook. juliette: u.s. president donald trump looks to be preparing for economic war with china. clearing the decks with disputes of other traders. he struck a last-minute deal with canada and mexico, signed a trade agreement with south korea and convinced japan to begin economic negotiations. said they are in no hurry to settle the trade war. forecast forhe

global growth. the managing director warned that trade wars and tighter credit are darkening the outlook. i. lagarde: six months ago pointed to clouds of risk on the horizon. it is not pouring, but there is a bit of a drizzle. because today, some of the risks have began to materialize. indeed, we find that growth has plateaued. juliette: u.s. supreme court nominee brett kavanaugh is facing new questions about drunken behavior after claims from a former fellow yale student. chad ludington told bloomberg about a 1985 bar fight involving brett kavanaugh. he said he was frequently aggressive after drinking.

global news 24 hours a day on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. nejra: thank you. it is decision time for boris johnson after years of flirting with the british challenge what will the former foreign secretary say in his conference speech today? anna edwards is there. great to see you again. what is the buzz around boris's appearance later? anna: it is decision time for him, there is a lot of buzz because he is going to be speaking here but not speaking on the main stage, he has not been given that kind of official platform. he will be speaking around 1:00 p.m. u.k. time. it is a window of opportunity to leave the party closing as we get closer to the brexit date. is his star fading or can he

managed to rally the troops around his vision of brexit which is different from theresa may's vision of brexit. we heard from cabinet ministers who were rallying in support of the prime minister. we had some on the main stage and they prompted rounds of applause when they suggested the party should rally behind theresa may. let's listen to one of those caroline ministers. -- one of those ministers. i spoke to her about boris johnson. >> i served in the cabinet with boris and i am very sad that he chose to leave government, that was his decision and i wish him well in the future. >> do you feel that he is looking with a leadership challenge brewing? >> i do not think we need a leadership challenge, we need to be united, we need a forward-looking approach to brexit and it is important we get on with the job at hand area >> i have heard a lot of ministers saying that there are

strong liveries of speeches and pleasing the people assembled. people say other people here are throwing their hats into the ring as contenders for conversationsese happening behind the seas -- the scenes? >> it is great we have cabinet ministers getting great speeches and getting standing ovations. that is what you want from your conference. they are not saying it to me because the message i am getting across the party it across constituencies, get on with the job of delivering exit and the prime minister is doing a fine .ob >> isn't much like that when it has agreed with the eu, it has been rejected by the eu and by parts of the tory party. >> i think it is important for the u.k. that we get the deal

that is in britain's interest. that is what the prime minister is working toward and what the cabinet is working toward and i am confident we will get there. anna: that was the cabinet of immigration. link betweenut the trade and immigration, a link that the u.k. government seems open to. manus: good day to you, you get the glamorous jobs. backstop,out this what is the scoop that we have? torch under sterling and we have given some of them back this morning. that is the backstop from my home country. anna: this is all about how you avoid a hard order on ireland if there is no deal. the concession that the u.k. government is about to reach out to the eu to give according to our reporting is theresa may is about to offer some more checks

can be done over the north sea. this is something that will not please the dup. we heard from semi-wilson, his dup.mmy wilson of the there any way that this kind of deal, any kind of concession can be tolerated by the dup because it is the dup that props up theresa may's governments right now. that is atlantic lock a.m. manus: that is one that we are not going to miss. later, jeremy hunt joins the bloomberg team at 9:30 a.m. u.k. time. anna is ripping through those ministers and mps. let's get thoughts from our guest.

starting -- if sterling went big on the possibility of a back summit, it is a daily tune on the u.k.. the one thing that caught my eye was the u.k. consumer borrowing was the weakest in three years. that to me suggests that there is -- it is beginning to bite in terms of confidence and rates. how convincing is the consumer side of the story? jeremy: i'm a bit more concerned that we are in an environment where wages are rising and the later -- labor market is tight. there is not enough confidence on the consumer side. far we are seeing this in the u.s. as well. , theyglo-saxon world stopped leveraging and borrowing and spending. that will have implications for trend growth. about higheries interest rate and where we are

in the cycle. that is something that policy on the fiscal monetary side can do with area and we need to secular the from the cyclical. ubs's impacts in the area? jeffrey: our base case is that -- atl be a deal, that is this point there is sterling and it is cheap. rising,w, volatility is it does not mean risk off. it is not just in the u.k. but the u.s. we can find cheap insurance area you can pick some up. i wanted to chat about italy. yesterday we had this explosion into the 10 year yields. usednight, mr. juncker

greece and italy in the same phrase. do you look at italy as having the propensity to infuse that amount of risk that greece did 10 years, eight years ago? a stretch to be frank. the eurozone is much better prepared, the ecb is much better prepared. like the central bank, no matter what the crisis was they are making it up as they go along. now it is completely different. italy has much better funding. and also there is international demand out there as well. we are talking about an economy with the capacity to manage the situation and most important lay, there is enough physical wealth to do with it at that point. aim concerneficit to because they prefer something closer to 1.6% so italy can get its debt load down but how much

of a concern is it for markets? been atial reaction has sharp selloff but will that continue given that some were saying 2.5% was the line? jeremy: there are a few things here. eurozone growthe and what, how does that impact the ecb trajectory? that is where we will see the volatility over the medium term. the short-term will get to see some relief. if the ecb is on course to normalize, higher interest rates and positive interest rates, if you viewed germany of a -- as a spread play, the risk will be in any form of spread products. that is where they will face a lot of challenge but that is a medium to longer term story. the point that this is not greece, we have moved a long way, everything is in better form, better shape

than they were in decision-making. not fully prepared. if you look at financials in u.s.,, relative to the how brave you have to be to pick up financials? jeremy: we do have a lot of clients asking why have financials underperformed in italy or why do they outperform on a relative basis in the u.s., does deregulation have anything to do with that? structural reform, banking week, how far along are wethat reducing momentum, do need to see fiscal credibility or do we need the investment from northern countries to -- strongerruggled growth. that will play out over the coming year. nejra: our guest stays with us and coming up, flashing yellow

lights. both issuing warnings for the u.s. economy days before the latest jobs report. manus: we bring you our oferview with the chairman [indiscernible] at 3 p.m. this is bloomberg. ♪

this is bloomberg daybreak: europe. juliette saly is standing by in our singapore studio. juliette: psa group the merger cars.er of citroen the ceo made the comments in an exclusive interview with bloomberg. >> this is a very timely

decision because we are now preparing for our u.s. come back part of the framework we need to know before we make the final decision which we intend to do within the next few months. we are eager to listen to president trump on this matter area -- matter. juliette: bmw says it is confident it can mean it's position despite the escalating trade war that forced the company to lower profit forecast for the first time in a decade. the cfo said the spat between washington and beijing will cost almost 300 million euros in the second half of this year. m dubya has had to raise prices -- bmw has had to raise prices. >> we can quantify the trade impact, we are shy of 300 million in 2018. this is a half year.

in our [indiscernible] we are confident that thanks to the great quality of the product that we will be able to maintain our strong position in the chinese market. it would toyota said need to temporarily halt u.k. car production in the event of hard brexit. if the company -- country crashes that without a trade deal, the toyota europe president said the resulting logistic disruption would force a shutdown. the world's most profitable carmaker joins a growing list of companies making contingency plans for a no deal brexit. he joins us after 7:00 a.m. u.k. time. from singapore to hong kong, let's check the hang seng,

the markets reopening after a holiday. the hang seng one of the worst performance in today's session. by .6 of 1%.lower let's check in on what is trending across the bloomberg universe. choose storylines and interactive programming. $600 billion, 18 years after the record high, the company has wiped out half $1 trillion in market value. that is the equivalent of wiping out facebook. nejra: our most read stories over the past few hours, oil surges to the highest since 2014. falling exports grow. tesla is planning to build a giant outdoor tent where cars will be wrapped for transit and

talk of the u.s. trade deal prepares ground for a showdown with china. manus: let's talk about the fed, we have to bang officials new warningending signals. the bond market is flashing yellow signs saying, hey, it may not be all roses looking ahead. he said indicators are showing signs of nervousness. coming from eric rosenberg, he said i do not think there is an alarm going off but i do think that there are a bunch of yellow lights. the fixed now is income portfolio manager at .pmorgan asset management great heavy with us. are you seeing any warning lights in the u.s. economy given

that your call for a 10 year treasury yield is between 3.5 24%? corporate earnings remain strong, unemployment levels are at record lows, inflation is well contained. not expect to see the impact of the fiscal boost cap really kicking in. for now, we are not seeing warning signs. what is interesting is this discussion around the yield curve and what that signals. the point that the markets right aw i looking at it in historical context whereas we know that [indiscernible] is heavily distorted by central bank bond buying. the signals that would have been flashing in the past are more distorted and harder to read as warning signs. that in mind, we saw

some significant moves yesterday. have a look at this information. this is redemptions from the altar long end of the fund. this plays into what you are talking about in terms of the curve. this redemptions, the biggest in three years from the blackrock ishares which suggests that duration is being reconsidered create we are saying this move from the altar-long and to the short end. diana: completely and it makes sense when you think about where we are from an issuance point of view, we expect to see [indiscernible] issuance asasury the year progresses. secondly, we have less and less central bank support. this is the month where the ecb has cut the bond buying i half. -- by half. the u.s. economy is growing well. a steeper curve would make sense and perhaps investors would consider without being --

isther being on the long end better. nejra: you say we should get rid of them but wouldn't they be more useful if you had economic forecast tied to each. or even a name? jeremy: yesterday -- you're trying to guide markets with this, we are launching during a time when the market needs a stronger communication. if there is any hint of missed medication you amplify the volatility effect and this is something that [indiscernible] getting rid of his predecessors legacy. if something loses information value to the extent that it will do more damage and volatility markets, it should be questioned. manus: can i get you to respond to this, which is the flatness on the yield curve and whether diana is right in terms of it is different this time and we are

not misreading the situation but if we are reconsider in quantitative easing. we are about to have quantitative tightening next year. jeffrey: we are a bit more conservative on where the yield curve would be but in terms of central bank intervention, when we approach the late cycle, will the fed return to the markets to keep the balance sheet at a steady level and to maintain excess reserves because we think around 2020 there is the possibility they will be in the market. is an interesting play in terms of we think for now the fed will be on autopilot with trying to shrink the balance sheet. but as we approach 2020, given that the fed is not the ecb, they are far from the zero balance so they are more likely to cut rates. much. thank you so

coming up, we will talk more trade and more markets and we will hear from this later -- lady later in the day. this is bloomberg. ♪

manus: good morning from dubai. i am manus cranny. this is "bloomberg a break europe." nejra: these are today's top stories. manus: president trump turned his attention back to beijing with the north american trade agreement hong kong shares suffer. chinese equity markets are closed. decision time for boris johnson. before the u.k. secretary makes his conference speech. will he challenge theresa may for the top job in british politics? distro beating another 5.5 billion euros to investors after its speciality

chemical sale. nejra: 7:01 a.m. in london, let's get more on our top story. president trump looks to be preparing for a protracted trade war with china. we are joined by stephen engle, bloomberg chief north asia correspondent. it was the latest now that u.s. mca is out of the way. stephen: and looks as though he can now focus in or zero in on china. that was the biggest hurdle given the legacy issues. nafta underevamped his belt and undergone negotiations with the eu, it revamped course of free trade agreement with the south koreans, he has convinced the japanese to enter into

negotiations so it looks that he has cleared the decks to .egotiate or take on china negotiations perhaps a little bit further down the line because even donald trump on monday said now is not the time to talk. china has said they do not want to talk either with a knife held to their throat. what is the next step? david hensley said the next step could be with donald trump and these victories on the trade front except for china, perhaps create a: russian of others who want to see rectification of the long-standing trade issues with china over the last few decades. that could be the next step for the white house. thank you, stephen engle with the latest, he is our asian chief correspondent. the reason being the euro is under pressure this morning,

dropping more than .3 of 1%. saying, italye is would have solved its fiscal problems with its own currency. that is not what the market wants to hear which is talking about potentially your own currency, not at all with they want to hear. italy would set a 1.3% budget deficit aimed to confront the eu. an analyst saying the budget would be [indiscernible] and next year's budget would bear fruit and there is a collapse in btp's. are looking at one of the august 31.es since the bones are bid, btp's are offered and money flows into treasuries. every day takes a new battle

royale step. this is an update here, shall approving its investment decision on lng canada. it sees the first lng expected before the middle of the next decade. this is an update coming through shell giving the green light to invest in lng canada. we saw the cad rally. let's get to the risk radar. in europe if you're just getting going, this is what we see in the asian session, we are down .7 of 1%. we see the hang seng underperforming, reopening after a holiday. chinese markets still closed and japanese equities are closed, some weakness in the asian session. u.s. futures pointing lower s&pr we saw gains on the 500 yesterday. the risk off is coming through.

barrel.at $85 a we had data showing the exports from iran dropped even before the sanctions, the supply questions keeping oil bid and of 1%.o off by .3 you showed the btp's, that is the fourth day of a selloff. we will see how the bund spreads reacts and the euro was shielded , not moving so much but now we 1.15.wn for a fifth a, manus: they're talking about their domestic unit close sales uniclo sales rising. seng postn the hang the weekend and the trade deal has not [indiscernible] it is the italian story that is

knocking the european sentiment. do you want to be long these stocks relative to the others. we are seeing a drop. will oil support the u.k. market? not likely. juncker talked about greece and italy in the same breath. we have lots to discuss and we will bring you our exclusive interview with the santander chair. u.s. president donald trump looks to be preparing for a potentially protracted economic war with china. administration has cleared the decks of disputes. in the last few weeks he struck a deal with canada and mexico, signed a trade agreement with south korea, and convinced japan to begin bilateral economic negotiations. steve mnuchin said the white

house is in no hurry to settle the trade war. the international monetary fund is poised to cut its forecast for global growth. speaking in an exclusive interview with bloomberg, christine lagarde warned that trade wars and tighter credit are dousing the outlook. ms. lagarde: six months ago i pointed to clouds of risk on the horizon. -- pouring, but there is a bit of a drizzle because today some of the risks have begun to materialize and indeed, there are signs that growth has plateaued. u.k. prime esther theresa may as per up a to make a significant new brexit offer to the european union in an attempt to open the door to a deal. according to a senior british government official am a they performk on how to customs checks on the border

between the u.k. and ireland. reachingsee a path to an agreement. the brexit secretary said the comments were speculation. global news 24 hours a day on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top . generally negative session for markets in asia but check out the nikkei closing higher by .1 of 1%. holding onto those 27 year highs that were reached yesterday. seng weighing on the overall regional benchmark index. resuming after yesterday's holiday. stocks and gas distributors, australia's market closing lower and some selling coming through in korea. indiaremains closed and is out of action. it is all about the currencies, the indonesian rupiah weakening beyond 15,000 to the dollar for the first time since 1998.

its current account deficit is [indiscernible] the hong kong dollar is weakening extending its weekly loss since 2016 so extending .1% of aing band to decline against the greenback. the aussie dollar falling despite an initial spike after the rba left rates on hold again. you are seeing the aussie being sold off along with some of the communities -- commodities. thank you. it is all about the aussie house prices. but to turn our focus to the trade story. president trump looks to be preparing a protracted economic war with china. -- ofng the deck with disputes with other trading partners. so, when we look at the clearing

of the decks by trump, people are beginning to say this could be more protracted and perhaps a punchier aggressive move against china. when i look at the pmi's, these were rolling over before this extension of trade wars came to bear. how do you look at trade wars in inflation -- inflationary impulse to your fixed income world? diana: as far as inflation goes, there is a lot of different moving parts. you touched on oil which is key for headline inflation and a lot of markets. particularly for emerging markets but you have the trade impact and that manifests itself in a number of ways. exporters, weaker currencies are going to see affects pass through, pushing inflation higher. also the u.s. having higher import prices will ultimately

see some pickup in inflation to the consumer in the coming months. nejra: does the economic emergence story -- divergence stories shift toward the end of this year into 2019? for the moment, it is interesting. we have been talking up about bottoming out in the european data particularly. trade is a new component. the markets are so focused on, we finished nafta, now we are moving on to china. whereas it is important to look at what is happening with the auto sector. there is risk that before we get to that, you had the u.s. administration saying it is not yet time to talk to china. you may have that in between phase where tensions around the auto sector in europe come back in focus because that was one of the big sticking points. manus: are we talking enough

about quantitative tightening? i know that abenomics stands almost in splendid isolation. are we giving that story enough credence at the moment? diana: we have been talking about quantitative tightening for a number of months. it is something that the market has been focused on. the difficulty with qt is it is a slow-moving train. it has been very will flag. the fed has been clear with what they are doing, the ecb has been clear with what they are doing very at it is hard for the market to price them simultaneously. it is going to stop writing where central bankers are no longer net suppliers but net buyers but they are becoming net suppliers of paper in the market. i expect the impact of qt will become more topical. nejra: why is it that you see

the dollar peaking and you think now is the time to get into emerging-market debt? dollar isthink the going to peak in the coming potential catalyst could be the u.s. midterm election. paul's right now paint an uncertain picture. republicanshat the lose congress, that could lead a bit of a challenge on the american first agenda. you might see the u.s. administration's ability to push through fiscal spending and stimulate the economy diminished . in which case you might start to see the growth differential with the rest of the world catching up. manus: thank you so much. sharing your views this morning on the world bond markets. if you are a bloomberg music -- user you can interact with what we do on the show. you can browse the charts that we choose and you can have a

look at the analysis and save the charts and maneuver the data a.ea -- data pol this is bloomberg. ♪

nejra: we will bring you our exclusive interview with the bank of said to hand her's santander'sbank of chairman. manus: we're coming back after a little bit of a holiday so the hang seng is starting with a lower temperament. weaker manufacturing

numbers adding into the pricing in the first instance and u.s. warships sailing close to the island of mainland china so there is some global politics and play. savedance would have been it faced the same debt problem, italy would have solved its fiscal problems with its own currency, a analyst commented. nejra: banks do not like that. the euro is under pressure in bity's session but a little shielded. we have seen it hit its lowest since september 10 on a 115 handle. our guest is still with us. this is our fourth day of a and we saw it's yesterdaybasis points up significantly. does jpmorgan see an opportunity in bcp's?

diana: not yet. on the first day there was a lot of commentary about contagion is muted for now. we were pushing back. when you see how assets were reacting, correlations were there, you saw the euro react on that headline deficit number. not seem to bees darling down. we have quite a ways before this budget is approved or a version of the budget is approved and the negotiation timeline between now and then will be very fraught with headlines. it is going to be fraught with headlines, just the ones i , with anhis morning analyst saying france would happen saved and our problems would have been fixed with our own currency. out the system is much more robust and in better shape than it was at the time of the greek crisis. that will not stop them. where do the yields go where

does before you step in, where does it tempt diana amoa? buy depends onu where you think the story is going. for budget deficit, 2.4% with the best of growth in europe for now seemingly behind us and any ecb that is no longer buying spreads at around 280, 290, not enough to step in. gora: they may have to through the panic level of 300 basis points. thank you to diana amoa. we will be continuing the conversation on bloomberg radio. the world's most profitable carmaker said he would be -- it would halt production in the event of a so-called hard brexit. toyota made 140,000 cars in england but -- last year.

caroline: good morning. i'm joined by the president of tory at her in europe. good morning. we had this new nafta trade deal between the u.s., canada, and mexico. since toyotaved, has as many as 10 factories? pleased that there is an agreement that has been reached. we will have to see the details but we are pleased we could find a solution in north american markets. employee 144,000 people in north america. are you relieved that the new nafta deal, are you concerned

about the impact of the trade war between the u.s. and china and the impact it may have on auto parts, for example? guest: trade wars are never a good thing, it is always deceptive. we would like to see and we hope that this agreement pays -- paves the way so that we could get stability and a clear direction into the future. caroline: could this lead to an increase in prices? guest: what you have protectionism, you find that there will be inefficient investments being made. it can happen. when it comes to the agreement which is being reached between america, mexico, and canada, we are satisfied and -- and that has happened. there is a future that we can all work toward. caroline: brexit is six months away. some brands have decided to move

forward the one-month maintenance of their u.k. chance to [indiscernible] instant of next summer. what are you going to do with toyota in the u.k.? brexit,f there is a bad if the just in time system is selected, it can lead to the stoppage of production. thee are evaluating all [indiscernible] and there is meetings so we have some time to make up our minds of what would happen. if there is another agreement we will have to put some contingency plans in place so we and overcome any disruptions. short-term is the problem. long-term is the bigger problem. if we have disruptions, if it is a bad brexit, it could have a big impact on our competitors

that will have to be taken into account in terms of future investments. caroline: how much could you keep the investment if we have a hard brexit? guest: we have invested 250 million pounds in the u.k. operation and that is to include the efficiencies and improve competitiveness based on the global architecture. made tostment is improve efficiencies. to improve theut competitiveness as much as even theso we can face situation where we have a hard brexit ouray tough brexit. -- or a tough brexit. we will not be able to offset tariffs.

it will be an increase on the wto system. we are confident that the agreement might be reached. we hope so. it is up to the politicians. and then once we know what the agreement is then we will start -- changeback to back. by march of next are we will graceecause we have a time of two years. if that is clear that we can check. caroline: you are showing the corolla hybrid, that is the new toyota. we are seeing the push in europe for electric. there is no all electric here on the toyota 10. but do you believe there is a bigger market with all the difficulties that tesla is encountering at the moment? guest: if you look at the market, toyota believes in electrification. we started 20 years ago. we only show hybrid vehicles, we

have no conventional technology engines on display. we believe the market is there and will develop. we believe that it will be battery electric vehicles, hybrid, plug-in hybrid vehicles and fuel cells in the longer term. we are ready for these technologies. the trend is clear. we see what is happening. cities want cleaner air, they when it comes to lead the way. i cannot comment in terms of their future strategies. going tocation is happen. caroline: thank you so much, paris carrom the show. manus: thank you.

they are targeting 5% growth in european markets. this is the interview you want to stay tuned for. there is one destination, it is bloomberg. ♪

nejra: welcome to bloomberg markets, the european open. we are live from our european headquarters alongside anna edwards at the conservative party conference in birmingham. morning.d stocks in asia are mixed, the euro is dropping on mounting uncertainty about it -- italy's fiscal position and the dollar is higher as emerging-market currencies slide. the cash trade is less than 30 minutes away. ♪ anna: oil at a