>> good morning from bloomberg's european headquarters in the city of london. manus: here are today's top stories. anna: a global outlook on escalating trade tensions. turkey will outline its inflation roadmap. halliburton has hit a seven-year high. abandon its call for a flattening of the yield curve. italy is tested. italian debt could be seen as too risky. ♪

manus: welcome to "bloomberg daybreak: europe." cash bond traders are back at their desk. this is how the bond market looks. 250e waiting for over billion dollars worth of supply. worste looking one of the routes in the bond market since 1976. the merrill lynch index. this is ramping and boring throughout the bond market -- rampant throughout the bond market.

will the u.s. go for a currency manipulator on china? you see the strongest running streak since july. anna: good morning. they have just had their lunch break over in the shanghai markets. a little stronger after the lunch break. what a change from yesterday, where we saw a lot of selling by foreign investors in particular. lot k to focus here on -- of focus here on the offshore yuan. we understand treasury secretary mnuchin is under a body of pressure.- lot of 3.5% was breached by the italian

10 year yesterday. that as it to watch opens up today. we will hear from the finance minister later on in italy. manus: pretty outrageous language between japan and slovenia. more exclusive interviews to bring you. trade wars andon a renegotiation from a ceo later on in the program. let's go to the asian market with juliette saly. uliette: japan and bond markets back today. yen is stronger for a fourth session. the nikkei is off by 4.3% in late trade. a little bit of growth from these chinese markets. fell, up bycell --

2/10 of 1%. you are seeing selling across the region. the msci asia-pacific index on trackfor its lowest record in 16 months, down for its seventh session in a row. the chipmakers are coming under pressure amid global tech concerns. down by 8.6%. there have been a rebound in chinese energy stocks. in australia, health care are coming under pressure. stocks are coming under pressure in health care. turning to the bloomberg first has lowered the ims its global forecast for the first time in more than two years.

escalating trade tensions weakening emerging markets. the fund forecasted global growth of 3.7% this year and next, down from the 3.9% it predicted. the ability that china and the u.s. resolve their disagreements would be a significant upside. at some level, it is not we are morehat tentative in our optimism then be were six months ago. will seek akistan bailout from the imf as the government tries to stabilize the economy. the finance ministry said after consulting with leading economists, the country will the imf. the finance minister will hold talks with officials in probably this week.

the government may need more than $12 billion. the deputy prime minister of italy says europe's real enemy is the brussels bureaucracy that imposes budget restrictions. bonds and stocks tumbled as salvini attacked the european union and says next year's beliamentary elections will a showdown between austerity and job creators. the trump administration has saudi arabia to support a thorough investigation into the disappearance of a washington post journalist and hisinent critic of country's royal family in saudi arabia was last seen in istanbul. a turkish official, speaking anonymously and without providing evidence, said he had been murdered inside the saudi consulate. this was a claim the saudi

arabia government had denied. global news on air, 24 hours a day and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. anna: the international monetary has downgraded its growth forecast for the first time in more than two years. pointw forecast is three 7% growth this year and next. it blamed escalating trade tensions and distresses in emerging markets. a global market strategist at jpmorgan asset management. chart that shows the lower in someis, of these numbers they are talking about over at the imf. they are talking about trade tensions and emerging markets. do these trade tensions make you want to turn to your portfolio? we are keeping a more cautious stance in our

portfolio. there could be a degree of risk. the story at this stage of the year is that there could be more risk. lower growth in emerging markets and europe and japan. trade tensions are having a huge impact on global trade volume. when you look at gdp data in the negative impact is there already. if we don't have a revolution -- resolution of the dispute ,etween china and the u.s. there could be a time for more caution. anna: lots to talk about. manus: good morning.

we've another chart about earnings and estimates going into this season. i want to get your take on this citigroup chart. downgraded, the lowest level since 2016. we are expecting and earnings-per-share growth of 19.5% in the united states. are you repositioning at all in terms of these markets? good.nings are to remain this year, due to the fiscal are unlikely to repeat such a strong year next year. 4 may start to reflect decreasing earnings momentum. this could be a sizable upgrade for u.s. earnings.

i am looking at bank earnings and i have nothing to say on jpmorgan earnings. looking at the direction of interest rates, something will support banks. banks were probably the most resilient sector last week. that's a something i expect to see in the coming weeks as well. we have seen higher mortgage states. the united nna: we have a lot of selling in china. trade tensions continue. the yuan has weekend -- weakened against the dollar and bond markets. where does this leave the relationship between the china and -- between china and u.s. -- and the u.s.?

vincent: they are forcing to push the accelerator to stimulate their own economy. seen a need to counterbalance the effect of trade tensions for the chinese economy. they were in the process of deleveraging. offsetting parts of these measures could help the impact of trade tensions in china. china cannot respond dollar for dollar for every increase the united states implements. they are forced to use unconventional tolls. -- tools. currency is one of them. there is no sign of stress and urban china. -- in urban china.

manus: we will keep an eye on this. vincent stays with us. commodities is what we want to garner your thoughts on. the bloomberg commodity index slumped during china's holiday last week. gains yesterday despite china's seloff. -- selloff. this is your mliv question -- give us your view. tv on your bloomberg and hit ask the guest a question. will be covering the commodity story all day on bloomberg television. talking to the iea's executive director. this is bloomberg.

♪ manus: this is a live shot of

london. dawn has yet to hit. 131.01. itching toward the brexit deal is the eququestion. let's have a look at futures. the asian session caring through -- carrying through. on the equity side you are seeing a slightly stronger bid to london this morning. juliette: apple has told u.s. lawmakers its servers were not compromised and assured them the

company global supply chain is a secure. -- is secure. disputed a bloomberg report that chinese spies used a microchip to infiltrate american computer networks. the letter offered additional briefings to assuage members of the community. advisers are being worked on for ivision for a share sale. bmw as well as the banks involved declined to comment. company's controversial founder held recent talks with wendy's about a potential merger. the talks were preliminary and as theefore he resigned

chairman of the board. he was ousted in the wake of coming under fire for the use of a racial slur. superjumbo jet is said to have stalled in a disagreement about engines. is worth the deal is worth $16 billion and has snagged over disagreements with rolls royce. ceous has selected a new will take over in april of next year. found a clutch in its social network in march that could have exposed to the personal data of as many as half a billion users, but decided not to tell the public until now. the company said it plans to shut down the failed social network and introduce new

privacy tools, restricting how developers can use information. that is your bloomberg business flash. >> bank zero. -- thank you. is finance minister in italy second to reveal his government's fiscal plan in parliament later today. his plans have caused a war of words between rome and brussels. 10 year government bond yields jumped as much by 30 basis points -- as 30 basis points. italy'shas said combination of weak growth and unbalanced andoo may be judged too risky for investors. vincent is still with us. bonds toon government

risky for j.p. morgan asset management? we put the spread over bunds. too risky, or does this offer value? incent: this is set to grow the coming weeks, but it is probably not the time yet to invest in this. the budget will be submitted to the european commission on the 15th of october. there will be a credit rating review at the end of the month. this is likely to generate volatility. falling be catching a knife. this has to do with more of the trajectory of the budget going forward, through 2021, which could reassure the market that

the intention is still to lower gdp going forward. reassure european guidelines,garding a three person maximum deficit of gdp. we would probably have an increase of this gdp going forward. whether europe will introduce that kind of procedure. you mentioned the rating agencies and their roles. we have a great chart on italian debt. the italian sovereign bonds are kind of in the wrong cap when it comes to the ratings -- camp when it comes to the ratings

they have from the agency. downgrade is to be expected. is that priced in the market? vincent: this is probably the most likely scenario. the credit rating reflects the sustainability of italian debt. on the verge of a change in the credit-rating. likely,something highly unless things change. unless the budget forecast for 2020 and 2021 are toned down a bit. s: one of the pieces of information we focused in on is germany, and exports from germany dropping for the first time probably since the

financial crisis. excess moneyng into european stocks at the moment? advise investors to take a strong bet on europe at this stage. i am spending most of my time in europe. domestic demand is resilient. jobs are created at the same pace as in the united states. europe is an exporting nation, more than the u.s. rate was nott contributing as much as in the past. european countries have been hit by that. there is a somewhat weaker story from an export perspective. statement will maybe

last for some time, as long as we haven't found the solution between china and the u.s. and the solution between europe and the u.s., because we have a cease-fire at the moment but no real progress. i would put my money where we have a high level of certainty. this is preferring the u.s. versus europe, where we have a higher level of certainty. lot oflearly a uncertainty around the global trade story, and what happens to the bond market next, and how high the yields get. how high do you think yields get? let's go for the ten-year. give me your time horizon. what's the peak for ten year

yield? yields: the direction of makes more sense than what we had over summer. we have a booming u.s. economy, inflation, massive issuance this week, the one trillion dollar deficit. decreasednvestors their holdings of u.s. treasuries. european investors are bitting the carriage rate. it leads to more economic fundamentals pushing higher. manus: let's ask abou tthe rout with have seen.

$900 billion has been routed from global bond markets. there is a milestone of misery. four hikes will come into play next year. market isnk the bond already pricing four rate hikes next year, or is there more pain to come? vincent: they are expecting four at the moment. we are in a late cycle in the united states. rate hikes are not deteriorating financial conditions. an economy which continues to achieve stable results in 2018, four rate hikes are possible. -- pointsoint higher

higher would make sense. anna: thank you very much. vincent stays with us. next, we will talk more about global trade. this is bloomberg. ♪ anna: good morning.

this says "bloomberg daybreak: europe." -- this is "bloomberg daybreak: europe." it is 630 here in london. let's check out the latest market action. annemarie: a bit of a mixed picture in asia. china easing. biggest slump and 3 -- in three months on the stock front yesterday. japan is back from the holiday. the yen ins strengthening. they are saying the global

economic outlook has plateaued. korea, futures in london pushing for a higher start. in new york, a bit lower. since the end of may, there is a correlation -- but when china came back on the market from the bloombergoliday, the commodities index and the chinese stocks diverged. given that china is the world's importer, isdity this divergent sustainable -- divergence sustainable? michael is, storm likely to become a hurricane when it makes landfall. it's already impacting the energy sector. 19% of oil production in

the gulf of mexico and 11% of natural gas already being shut down. cotton it surprising to its highest -- is rising to the highest in a week. up, butbrent are stockpiles and inventories are expected to increase on thursday. manus: that is one of those standard functions that helps you monitor risk live on b loomberg. your mliv question -- will by thecommodities rally cinhina turmoil?

, put guests on the spot! let's get your first word news. imf has lowered its global forecast for the first time in more than two years. escalating trade tensions are weakening emerging markets, from brazil to turkey. the fund forecast global growth at 3.7% this year and next, down from the 3.9% predicted in july. donald trump has apologized to brett kavanaugh for the bitter battle over his confirmation to the supreme court. kavanaugh acknowledged the contentious and emotional fight and said he had no bitterness. >> he is a man of decent courage, who has devoted his life to serving his fellow citizens. from the bench of our nation's highest court, your

the eternaldefend rights and freedoms of all americans. : $2 billion has been allocated to attract multinational companies in an effort to rival dubai. companies will be provided free offices and tax incentives, as well as five years of operating expenses in return for the commitment of at least a decade. >> we are at the ceo of the qatar financial center. the questions as to what these plans are going forward. you want tod provide incentives for companies to come here. how are you doing this? we want to form new

relationships. a lot of these new relationships are showing today at the conference, from two media to present a stand -- tunisia to pakista. when it comes to the kfc, we've been expanding massively during the blockade. we've announced a new vision for the entire country. hasqatar financial center put very aggressive targets. we are creationg tens of thousands of more jobs. we want to create a leading global and financial business capital in the world. global news on air, 24 hours a day and at tictoc on twitter, powered by more than 2700

journalists and analysts in over 120 countries. this is bloomberg. thanks. let's take a look at what you should be watching out for today. the turkey treasury and finance minister is expected to outline plans to tackle the country's rampant inflation. manus: the imf has more on that front. time, the chief brexit negotiator and the dup leader hold a news conference. that will be riveting. anna: indeed. the blood red line gained headlines. then third quarter sales from lvmh. let's pick up on one of those stories.

manus: troubles continue with turkey. has slashed growth estimates. the fund has called for tighter monetary policy to reanchor expectations. finance minister of turkey will announce an inflation roadmap. in our chief middle east economist. year high restrain 15 inflation? what do you think this road map is going to be? >> i can't imagine them doing anything meaningful. we don't expect higher interest rates. spending.ower fiscal ease the try and

supply bottlenecks or increase competition. but the impact on inflation will not be immediate. measureswill get some to ensure this pricing is prevented. but nothing more. manus: anna? wrong-footed been by this bank before. where do you see inflation going from here? do you expect a response from policymakers? >> inflation is likely to go up. it went up more than anyone expected last month. the%, five times central-bank target, the highest number in 15 years. no one expected it to go that high.

it takes time for the currency depreciation to work its way through the economy. surprise we've had, we might get a response from the central-bank meeting at the end of october. manus: they have crashed and burned in terms of growth. 3.5%.f estimates crisis.says, imf -- turkey needs to go all in to fix the economy. it's a juxtaposition between inflation and growth. >> absolutely. the movement in the exchange rates will hurt consumers. people, investors who have areowed in foreign currency likely to be impacted by the sharp depreciation of the currency. to be hurt byund

this. there is a slowdown in growth expected this year. anna: thank you. our chief middle east economist in dubai. vincent, global market strategist at jpmorgan asset management. let's talk about emerging markets and dip into turkey if we could. how do you bring inflation down from those lofty levels? key in restoring confidence to financial markets. this is key to put a halt to the againcy and increase it with trade partners. we need to restore confidence.

there is a certain level of independence from the central-bank. person cpi at this stage and higher interest rates. manus: one of the big stories tracking is volatility in the currency. this has given the brazilian market a huge boost. could winning in the next round bolster one of the pillars of the emerging markets destruction story? e.m. this bolster a bigger story? vincent: the key aspect will be the evolution of trade tensions. forward. be key going we need to have a better momentum in commodities.

his will lead to the improvement of trade tensions. it is hard to see this scenario unfolding. investing more in asia than latin america at this time. some you like china, in sense, despite the negative moves in the selling by foreign shareholders yesterday. explain your enthusiasm. within emerging markets, there are divergences. we see interest for asia and you lookpecially when at the recent stories about the asia markets. this is trading at a distressed level. you can see which better reflects china's new economies. buildes sense to

position for the year to come. jpmorgan invested more in china, but also within asset management. going forward, foir long term investors, china is still a market every investor should have a hand in. still a structural story. week's nasdaq butchering that took place was related to what is happening with china on a bloomberg scoop. this was the beginning of a reconsideration of what happens in tech next. have you ingested any of your --dings in any tech stocks hard tech stocks?

vincent: i saw most of my colleagues reducing their positions in the course of the year. structural story in places like china remains. the tech not reduce theme to big names. it's much broader than that. you can see the story extend to asia and europe. it's been a strong contributor, more so than its u.s. counterparts. tech story is structural by nature and there is more than the big nasdaq names. anna: vincent, thank you for joining us. he will be continuing the conversation with us on bloomberg radio, 7:30 a.m. q k time -- u.k. time.

manus: the trade war continues. guest tooined tell us the impact of the trade tensions between the united states and china. >> we see slow growth. these are reactions to the trade wars. one thing for sure, this will continue. whatever china finds difficult to sell in the u.s., they'll be selling it elsewhere. i don't see a net reduction in trade. you can't really judge what's happening based on these periods. it's a reaction.

analysts will try to explain. manus: as you look at the global stage at the moment, who has the upper hand in this trade war? as alook at it negotiation, two big economies that have potential. what's happening is the u.s. doesn't feel it's being treated fairly. manus: you say a justification for this renegotiation. make trades in the country fair? how can i balance it? negotiation -- the middle east, europe, and

africa accounted for about 70% of your revenues. where is the next opportunity and what are you looking at in terms of expansion? inour strength is experience. trade. invested in we have invested a lot in deepwater. advantage.us an if you tell me what is next, it should be more in africa and latin america. >> a few countries? >> the pacific side of latin america has more opportunities than the atlantic. there is potential in malaysia. growth, despite what is

happened to the rupee. we need to penetrate more in africa. days: we come in day after and talk about emerging markets being under pressure. have you seen that? have you been wrongfooted by the emerging slide in e.m. -- currency slide in e.m.? >> some risks in the market are a plague. africa, for example, huge potential. the largest growth in the world today. if you problem -- look at inter-african trade, 18%.

inter-asian, 16%. 17%.-europe, why can't they trade together? because of a public-private partnership. government is the problem. yousef: that's a clear example. we talk about oil prices. what are you using as an assumption for oil prices over the next year? make a lot ofi'd money. yousef: 80 - 90? >> no idea. manus: you set the numbers with bmi targets. taretwas a $100 million oget of 20 foot containers by

2020. will you make it? >> we have the capacity. manus: are you confident? >> we have the resources. i don't want to have ports empty due to a target. ports!no one wants empty the ceo of dp talking trade wars. it's not a war, anna. it's a discussion about fair trade. anna: a negotiation. he says he doesn't see a net reduction in trade on a trade war. let's remind everyone of the mliv question of the day. ther'es e's a link through the trade conversation.

bcom gained yesterday despite china's selloff. we are asking you -- possiblye man who can answered that question is the portfolio manager of the natural resources team. we look at the bloomberg commodity index. warshina and trade dislocate the many runs be a pattern commodities 0-- we've had in commodities? beingre are concerns seen with the stock market trading into tehe real economy. we have not seen materials softening. there are two sides to every coin.

the supply of commodities is pretty tight at the moment. itctions are being put that's being imposed on -- sanctions are being imposed on iran at the same time that opd has normalized. anna: because of supply constraints around a number of commodities, it's almost like, what trade war? this is when you look at the pricing of commodities. inventory is dropping. when are we going to see the trade war taken impact? -- make an impact? economic look at the deteriorated, but

not indicating any major slowdown. everyone is saying this will take six months to see the impact of the current round of tariffs. you make a point of ca pitapital expenditure. the markets are under appreciating how prudent bob dudley has been, you say. do you think we're under-appreciating that? i think we got the message. >> when we look at the valuation of the energy equities, oil and energyup $80 equities are pricing in $60 long-term. we have record levels of cash flow being generated.

there are relative valuations to broader equity markets. that is why we think the market will appreciate the changes going on. this is similar to what we have seen in mining over the last couple of years. companies are embracing capital discipline and we have seen a greater focus on returns. we think this will create fantastic opportunities for investors. anna: looking at the energy sector more broadly, you spent a lot of time thinking about the future of transport. you don't seem to be talking about investing. of cars, you talk the suppliesout of the value chain. >> we see this as a major shift in what is happening in

massportatin sincon since the market vehicle. becoming more connected will create significant investment opportunities. we are seeing supplies of key technologies that go into those vehicles. electric traction motors -- your internal combustion engine vehilcle doesn't have an electrc traction motor. 30 or 40 years, hundreds of millions will be sold. we see more opportunities in the supllply chain. manus: you talk about perverse risks when it comes to electric vehicles. what are the perverse risks?

toit comes back traditional oil and gas companies. it's the emergence of electric vehicles. we expect that to impact. even on our more bullish expectt, we don't oil demand peaking for the next decade. there's a threat impacting investment decisions, that we destroytory supply -- supply quicker than demand and its setting up for a potential supply crunch in the next decade. anna: thank you for joining us.

we have the natural resources team and the future of transport at blackrock. ♪

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morning dubai and this is "bloomberg daybreak: europe." the: i am an edwards from city of london. these are today's top stories. manus: the imf cuts its outlook turkeyal escalating and will outline its roadmap today. morgan stanley abandons its call for the flattening of the yield curve. italy continues to be tested. italian debt could be seen as too risky. sets targets in

parliament. anna: good morning. this is "bloomberg daybreak: europe."s what we are expecting to see on the futures as we start equity trade, we need to get to breaking news that is coming across the bloomberg with regard him at the insurance business here in the u k, mark wilson steps down as ceo. the search for a successor will start immediately. wilson will remain with the 2019.until april of this is a man who has been with the business long time. he has been a guest on this show many times.

he has been at the business for a long time. for -- a lot of interest from outside on the story, bringing up the various functions on the bloomberg to check out the 10 year. mark wilson has been 5.8 years in the job, he started on the first of the first of 2018. manus: this is a man who transformed, he delivered in data,of the performance 5.8 years in that state, a big believer in digital transformation, it is one of the story she kept telling us. his total return according to the bloomberg thomas a .73% relative to his peers, the peerage has delivered 16.1%. that asianm insurance background and was a real believer in the digital

transformation. successor for his starts in earnest. there is mark wilson, the ceo, he goes out at the beginning of next year. anna: you mentioned the asia side of the business, those of the maritime we talked to him. other areas he has been focused on, getting rid of the assets that did not perform up to standard, that has been something that he has talked about. in terms of the brexit impact we talked about that. his views on brexit more generally and what it does to financial services and the ok concerned int terms of his business. manus: take it away with futures. 2%, daxere up by

futures up, ftse features of a touch. fairly stalled. we had a big selloff in chinese equities, that was not much of a surprise given the markets had missed out on everything the previous week. we saw the drop in equities and that roiled investors over the last 24 hours. a little karma on the chinese front although we understand there are pressures being asked of the treasury to, whether they should label the chinese currency and manipulator. we are keeping an eye on that. manus: the bond markets are in focus, new rhetoric coming from italy going head-to-head with the european in terms of the budget. we are down 11 pips on the bppd;s. let's see if we have cash trading at this stage for italy.

e lambasting of the brussels juncker is the rhetoric coming from italy. jpmorgan asset managers say it is a falling knife, you have seen the euro-dollar trade, excessive deficits, that is the risk that could hit and a downgrade risk from ratings agencies. bond markets, morgan stanley giving up on the flattening trade, we have seen the steepening in the market, u.s. bonds, heavy issuances, $150 billion will come today. slumpedt say treasuries looking slightly cheap. they doubt the longevity of the u.s. growth story. juliette saly is standing by. we have seen the china market turned negative, there

was a rebound in the session but the csi 300 down by .2 of 1% so adding to that for .2% drop from yesterday. south korea out of action for a public holiday. japan resumed trade after its public holiday yesterday. quite significant selling, the nikkei closing down by 1.2%, weakness in australia. a seventh straight session of losses for the msci asia-pacific index which looks at it will close at a 15 month low. we have been watching currency moves closely in the asian session and you have seen that movement in the japanese yen higher for a fourth session contribute to that weakness in japanese stocks. if we can have a look at some of those moves, the end up for a fourth session with a handle of 100 teen -- 113.10. the renminbi was at that low yesterday, more strength coming through in the currency moving toward the 6.29 and we have seen the better performers in asia

trading just slightly high against the dollar but that is a technical show that the seven-week low was perhaps to battered for that emerging-market currency. turning now to the first word news, the imf has lowered its global forecast for the first ite in more than two years, sees escalating trade tensions cutting into growth and weakening emerging markets from brazil to turkey. the forecast global growth at 2.7% this year and next done from 2.9 predicted in july. seek an has said it will bailout from the international monetary fund as the government tries to stabilize the economy and plug dwindling finances. the finance ministry said after consulting with leading economists, the country will approach the imf with support and the finance manager will -- minister will hold talks in bali this week. he told bloomberg in our --

august that the government may need more than $12 billion. has president donald trump -- apologize to brett kavanaugh over the bitter battle for confirmation to the supreme court. andcknowledged the fight said he had no bitterness. >> the is a man of decency, character, kindness, and courage who has devoted his life to serving his fellow citizens. bench of our the nation's highest court, your father will defend the eternal rights and freedoms of all americans. juliette: 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. thank you, juliette saly in singapore. the imf is saying the global economy will expand by 3.7% this

year and next down from 3.9% in the last projection. bond investors are bracing for treasury auctions to a, $230 billion of u.s. government debt is going on offer. joining us is the fixed income manager at aviva investors. are just learning about your boss leaving the business. let's talk about your outlook for the bond market. large amount of issuance, the big question is how to -- the bonds will be taken by the market, they range 3.25%, that ishe when the -- the big question, how will the market observed this paper? >> we are in uncharted territory, the range has been in place since 2014. this is news for bond investors. with the markets coming around

assuming things, the ownership of the fixed income market is shifting away from being in public sector hands where we have been heavily influenced by the buying of central banks. we know now the fed are winding down the balance sheet, the ecb is tapering and the bank of japan are trying to sweep the policy to remove some of their stimulus. reserve managers are not buying. growth is not increasing anymore. the public sector buying is not there so it is relying on private sector buying, for pension funds and asset managers in the u.s. they want high yields to take down the bonds. there was a tax break that ended in september which meant a lot of the buying was frontloaded. where it an air pocket is not clear where the demand for fixed income is coming from. that is the worry when we are taking down this large amount of issuance. replacing --

repricing. will the market jump on this bandwagon, morgan stanley saying mea culpa, we are on the turn, flattening is done, we will see a reappraisal and a repricing, we will start to talk about steepening again, would you throw in the towel there? we have liked curved steepening ideas for quite some time. one thing we have been keen to push back on is the concept that the fed are never going to be able to raise rates past 3%. theyoncept, interest rates to stay low, inflation will stay low forever the cycle and as the fed raised interest rates that curve flattened sent 2% was the focal point partly because that is where the fed happened vocal in terms of saying that is where their long-term neutral rate is. with readings printing in the

60's, the market is starting to evaluate where the fed will need to get to in the cycle. we have seen the two-year yield go from 0.8 two roughly 2.8 and u.s. equities are the highest some have not seen material financial timing in the u.s. the market is saying it needs to get past her percent before we see any turning conditions and the fed will want to move from -- to neutral and that could be a long way from here in some of the yields. , when doingdewey get to it when this starts to hurt the economy, that we see some high-yield companies getting into trouble or investment-grade companies raising the white flag and suggesting rates are getting difficult to manage. guest: things like interest cover we are a ways away from the biting point is for high-yield corporate. it is coming from very low yields globally. that is not the issue. is more if we start

seeing fixed income volatility move higher. the reason i say that is we are looking at template, it is not dissimilar from what we saw in january, a high average earnings number higher than the market expected. movedst rate volatility higher. that is the key thing to watch. that was the leading edge for the selloff in january and it moved higher if you look at the move index, the vix a: for the bond market move tire for the first time in, since january over the last few sessions. more volatility is increasing at we start seeing more of the technical picture degrading for fixed income moves. the index up 60 8% in three or four sessions. everyone got butchered, if you bought volatility, it went nowhere, if you sold volatility you got a bit demolished. the question is do you spend

money buying volatility at the moment or do you agree with unicredit, the market looks cheap, these yields look cheaper, would you spend money on volatility? chart we look at the move over much longer time periods. over longert central banks have been the suppressing influence on different forms of risk premiums. this is an extremely cheap heads to protect against the problem i am talking about, still at low levels versus much longer-term histories. manus: we have more to get through. to our bloomberg users, you can interact with all the charts we you throughout the show and you can look at the

recent charge -- charts featured on bloomberg tv. you can analyze them yourself. anna: let's talk about what is going on in technology, the fangs closed lower in yesterday's session, facebook closing at its lowest in half a year. they unveiled portal which raised concerns about the consumer privacy. fell after waiting several months to disclose it has had a security flaw. facebook, critics say the timing and optics of a home video chat device does not look good coming after the cambridge analytical data scandal earlier this year. the tech reporter says facebook could have waited until 2019. facebook decided now is an ok time and portal itself is facebook's first smart device. up to six people can video chat together, funds cannot be used

with a yet but as you might expect, it does work with facebook messenger. to turn on the video chat you can say, hey, portal but in a interesting partnership portal uses alexa for tasks that go beyond video. two being form factors, one is smaller and one larger so that is a portal and portal plus. portals vice president was on bloomberg technology in my colleague emily chang asked him about the word, privacy. >> privacy is paramount an important and when you -- the fact that we have to build the hardware and the software to change the way people to putcate, allowed us privacy in every layer of the stack. >> the mic and camera can be turned off, the device cannot record any video and if you do not trust that off button, there is a plastic cover you can slide

over the camera. that is from google, that company revealed it found the security flaw in march and its google plus social network and made that public this monday. in a blog post, google said personal data of his many as 500,000 people were exposed including names, emails, ages, and occupations. an internalted that committee decided not to disclose the info then because there was no proof that any data it was galling that there is a fear of regulatory backlash is facebook was being called out over cambridge analytical. google -- google maps said it is shutting down its network for consumers, questions are swirling if u.s. federal authorities could now launch an investigation. that is the latest on

google. the story we have been tracking is mark wilson. he is stepping down, he has been in the job over five years, a search for a successor will come. i was grappling for where he came from. aia, his bigom line was there ever turn of $7 million to investors. we spoke to him a number of paraphrasing, i am here, change the business, sell assets that were underperforming around europe but that was the last time we spoke to him. the one dark spot in our results was canada. the search for his succession starts now in earnest. anna: the search for a successor and we talked to him many times, that has been

completed and they say during the transition that adrian assumee will exhume -- responsibility. more detail on what they will do in the transition and giving lots of reassuring words in regards to the performance of the business. remaining on track to deliver their track of delivering eps growth greater than 5%. operatehey continue to above solvency to ratio. i know it was you who dealt with them more than me. they operate at 180%. we wish you well. if you are tuning in. anna: let's check in what is hasding, donald trump apologized to brett kavanaugh for the "terrible pain and suffering the judge was forced to endure." he made the comments at the swearing-in. manus: manual macron is heaping france in the dark about his

cabinet's plans. a new team is expected to be in place tomorrow morning. at the weekly cabinet meeting. the interior minister quitting and that is leading to a reshuffle and here are the stories that are most read on the bloomberg terminal venezuela's inflation rate will surge by year-end. that is another level of context to the turkey story. lawmakerstold u.s. that its servers were not cover my's and the imf is cutting its global forecast. we are not seeing the vicious attack that we saw yesterday in the bond markets but let's get back to it, we have the finance minister, he is said to defend his government's fiscal plans in parliament later . he is expected to be grilled by

opposition lawmakers on a plan that has caused a word world -- words to between roman brussels. the highest levels since 2014. 10 year government bond yields it is lower, kevin costelloe is standing by, our reporter on the economy where he is the economy editor in rome. what do we expect from mr. tree tria? kevin: the markets have been roiled and it has caused consternation in brussels. the brussels officials are by nextthat budget week. there is a lot of work to be done before it gets there. the war ofve watched words as it continues, less than a week to go before the budget is due to be in brussels. what is the atmosphere like between italy and the eu, still

tense. kevin: it is very tense, the eu commissioners have said they will not accept this budget, the italian government is not backing down. it -- there seems to be a stalemate between the two sides and. -- and perhaps a can be resolved in the coming weeks. manus: thank you very much. the latest on what we can expect from tria. in the last hour we spoke to our called italian government bonds and the spread of falling knife. how do you look at the prism of risk at the moment, 310 on the spread, which or something that can give you indigestion? at 310 btp spreads are

pricing in a significant amount of downside risk. in reference to the credit rating that is pricing something like a double be cut rating. it is difficult to call because the political situation is so fluid. where we think you are better paid to take risk in europe is other peripheral countries, particularly in the banking sector where corporate bonds issued by banks have been beaten up significantly on the back of the volatility we have seen in italy. that is a good value opportunity. the risk that we do see in italy risk, fiscalic risk, what the government is not any europeut is breakup risk. as long as that stays off the table european banks are great buying opportunity. anna: is that because of what happens in italy stays in italy or there is some sort of firewall for investors? guest: we have seen there is not -- political will and italy

in italy to leave the euro. we look at polls in italy. leave thet want to euro. it is difficult for markets to focus on anything ex-italy. we have seen a material selloff in the rest of the banking sector. we see a bit more of a reflationary volume in europe. higher and-- move the ecb is normalizing policy and in 2019 that will be great for the banking sector. they have been hamstrung by this low environment they have been trying to operate in. aggressivemuch more a re-rating will the ecb have in 2019, will it be rhetoric, deposit rates, is there something we are not seeing because we are too perplexed by the italian vortex of noise at the moment? guest: at the moment we have one

hike per year over the next four years priced for the ecb which is a pretty slow rate of hikes by any measure. we do think that is likely to accelerate. the key thing we are watching is the increasing wage growth we are seeing in germany and france which is early signs but positive trends we could see inflation move higher. in europe. the difficult challenge the ecb they withdraw policy, what happens to the euro? any scope for the -- europe to appreciate as we move out of negative rates particularly with the dynamic round fx reserve managers and how they have had to allocate away from europe as rates went negative. if we see that flow we domiciled that will lead to strengthen the euro. they need to rotate -- maintain a slow start. will stick to the part the marking -- market is assuming. if italy gets resolved,

they are on hold until the end of summer next year, if italy is not resolved we will have bigger questions. if italy is resolved there is no reason the ecb could not follow more aggressive hike which is low level coming from low expectations so it does not take a lot to get more optimistic. we are starting to see some early signs of wage growth and inflation come back in the eurozone. anna: thanks for joining us. our questionyou of for the day. has slumped in tandem. the question is if you think china's selloff could upset the relationship in terms of the commodity rally? the team put together every

morning. great to be reunited for a couple of days, we will you -- leave you, the european market is next. ♪

anna: we're live from our european headquarters here in the city of london. i am edwards alongside matt miller in berlin. matt: coming back from vacation bummer sometimes. investors sell japanese stocks, u.s. treasuries as well. pushing the yield to a fresh seven-year high, european next city -- equity indexes are trading water with 30 minutes to go till the start of stocks trading. ♪