good morning from bloomberg's european headquarters in the city of london. these are today's top stories. asian stocks broadly steady after the worst global selloff since february. u.s. futures just -- suggest a bounceback. is u.s. treasury department said to think china is not a currency manipulator. steve mnuchin could issue a different ruling. jpmorgan and wells fargo kickoff the u.s. earnings season.

good morning, everybody. it is 6:00 here in london. today looks different. this is the picture on asia. up by 0.9%. stocks are up, yields are up. back to where we were on that story. recovery evident in asia. china is under pressure. the shanghai composite up by 0.2%. as we go through the asian session, things recovering. it was in negative territory until 20 minutes ago. we have the chinese currency here at 6.89. a little bit of weakness on the chinese yuan. the bloomberg reporting suggesting u.s. treasury stocks -- staff has been advising steve mnuchin that china is not a currency manipulator. we are waiting to get that report next week. will the politics lead to a

different message given by the treasury? steve mnuchin could choose to go with a different message. things looking more like they have over recent weeks. the nymex is up by 1% or so. we are heading for our biggest weekly drop since july. the bigger picture over the week has been that we have seen weakness in the oil price. let's have a look at the futures. this might make you feel better about your friday. if you are long equity markets. nasdaq futures pointing upward. we are expecting the biggest bounce on nasdaq futures. the selloff in the nasdaq yesterday was not as pronounced as wednesday. maybe we are starting to find bottom. at least adjusting we are up a little bit more this time around. an interesting look at where the s&p shows trading.

we will get to that in just a moment. the biggest selloff in global stocks since february is showing signs of easing. asian markets higher, u.s. futures pointing to positive territory. sent the that spent -- all country world index to a one year low, that is the most since 2016. let's get the latest from bloomberg's reporters around the world. i'm joined by bloomberg's yvonne man. mark cranfield is with us from singapore. let's get to yvonne first. what are we seeing in asia? a little bit of recovery. >> as you mentioned, we have shrugged off the losses we saw in the u.s. overnight. you mentioned china potentially dodging a bullet here of being labeled a currency minute later. also -- currency manipulator. also president trump and xi

jinping may meet at the sidelines of the g20 after those midterm elections. sentiment is turning around. we got solid trade numbers out of china. double-digit growth for exports. that is looking good. perhaps you can say it is frontloading ahead of tariffs. we see the likes of hang seng recovering. of 350 points right now. you mentioned the turnaround in stocks. the csi 300 large-cap is up. these are big when it comes to the kospi. about the currency manipulation thing, but also we did see a weaker than expected fixing from the pboc today, weaker than what analysts were expecting. that is why we are holding around 690 levels. we are losing the gain we saw overnight. this stock plunging from 24%

today. the first time they are reacting to this news that bmw is going to be raising the stake in their -- and city slashing the price target by more than 70%. this unfair deal is actually going to hurt the company. ons stock rebounding by 5.7% reports the government will support the nationwide shantytown redevelopment program. tencent snapping out of that record losing streak of 10 days of losses, up 5.3%. it has wiped out $250 billion of shareholder wealth. by far the most across the globe. we saw dental -- double-digit growth in operating profit. there forward guidance is there over shares -- overseas expansion is going to surpass japan's. the stock not doing well, down 3%. anna: thank you for that.

let's get to mark cranfield, who joins us from singapore. reflect on what we have seen over the last 24 hours. i want to come to our mliv question of the day. haven?l a safe all that turbulence we saw, we did not see the dollar gaining substantially, did we? >> good morning. it has been an interesting week. you would normally think the u.s. dollar would be the biggest of all. the japanese yen is usually close behind it. there has not been a rush into the dollar this week, which might be puzzling. they probably chose the warning signals. it could be related to the u.s. equity market. that market has outperformed most of the other major markets in the world this year. maybe it is time for u.s. equities to come back in relation to european and asian markets. that could be part of the story. it could also be what mr. trump

has been saying about the fed. it has been moving too fast. maybe people are starting to believe that and think this may affect the trajectory of fed rate hikes going into next year. they will be less than expected. less than price into the market at the moment. the weakening could be weighing on the u.s. dollar. there could be technical factors in the way people are positioned. certainly a big takeaway from this week is that we have had huge turbulence and equity markets. and yet we have not had a safe haven for the u.s. dollar. anna: indeed. certainly an interesting feature to keep an eye on. a break from recent episodes of turbulence. mliv strategist mark cranfield joining us from singapore. let's get an update on the first word news. we are joined now from hong kong. >> in the u.s., donald trump has said he will not fire jay powell, but repeated criticism of policy.

president blamed out of control central bank for the stock selloff. he said he knows monetary policy better than powell and he thinks what they are doing is wrong. it is a change from recent white house policy. larry kudlow says trump is just having fun. he has never attacked the fed's plan or strategy. he has never interfered with that. he is giving his opinion. it is an informed opinion, and frankly, i think -- i think people should listen to what the president is saying. but the fed is independent. we have always said that. has nottreasury staff advised steve mnuchin that china is manipulating the yuan. the conclusion, is accepted by mnuchin, would ever an escalation of trade war and

remove the source of anxiety for emerging markets. although he could issue a different finding, it comes as the trump administration prepares to issue a report on foreign currencies. and a is applying quotas 25% tariffs on steel imports from china and elsewhere. that is as it aims to avoid becoming a dumping ground for steel in the face of metal levies imposed by donald trump. the trudeau government faces continuing tensions in washington. it has hit canada, the eu, and others with tariffs earlier this year. u.s. mcatly agreed will not deal with metals. the outcome of a court trauma in dramay could make -- court in turkey could go a long way toward diffusing the worst diplomatic crisis in decades between the u.s. and its nato allies.

for the central bank, an acquittal could bring rest of the lira and reduce chances of another rate hike. england's exit assumptions are looking increasingly doubtful as the clock ticks down. officials work with mark carney on new economic forecasts. theresa may has yet to nail down an agreement in negotiations with the european union. boe has left the boa -- the basing its outlook on -- that will need rewriting. global news, 24 hours a day on air and @tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. anna: thank you very much. asian markets facing a recovery after the biggest selloff in global stocks in february. u.s. and ftse futures pointing to a positive open later today. joining us now, the head of

multi-asset funds at legal and general investment management. good to have you with us. i have a chart here that shows s&p 500 members at oversold levels. ofstorage of -- shortage impressive looking charts around what we have seen over the last couple days. our markets oversold? are you jumping back in? >> we think it is early to be oversold, but we do think it is a technical point. it is more around sentiment. u.s. is a huge outlier in terms of positive sentiment around equities. fright can lead to a lot of movement. anna: the u.s. was an outlier. it would leave one market vulnerable. we saw vulnerability can spread quickly into asia. >> we have, but since the u.s. started this selloff, it has been one of the bigger movers. which is unusual.

it tends to be a safe haven equity market. since that point, we have seen u.s. oil come around five or six. those numbers make it one of the biggest underperformers, which does highlight it was wonderful going into this. anna: talk a little bit about what has been driving this. the president think that is fed policy. in terms of the inflation story, some people blaming higher rates and inflation expectations shifting because of higher data. you make the point that emerging-market held up quite well. actually therefore this is not about an inflationary environment or a higher rate environment. >> when you see that big rates move in the equity move you have to consider. when we look at that white revenue, emerging market fx performing well, emerging market the, then you get on to

recent infrastructure, less performing sectors. they are interest-rate sensitive sectors. rate selloff, that is what you saw. this time around it seems like a flight to quality. more stable equities outperforming the market. tech is doing badly, which tends to be a high-growth name. it is more of a traditional fall back in equity sentiment. we want to see a little more before we have an answer point. 4% and that would be enough to add to our equity positions. you want to be stabilization or a bit more panic. anna: what do you see in financial conditions that inform your thoughts at the moment? i think this was prompted by your notes.

2015 was worse. we have it in white and yellow we have fed conditions from the united states and a global one as well. aboutoes this tell you what has prompted the selloff and where we had next? >> we said it would be a bumpy are year. how has been interesting is un-bumpy the last few years have been. we benefited from these extremely positive financial conditions. and trump's tax stimulus. financial conditions are positive for the u.s.. less for emerging markets as a stronger with -- struggle with a higher dollar. inflation is only picking up gradually. u.s. cpi at 2.2%. not trending higher very quickly. while it is easy to get excited by the average yearly earnings,

they are still well below precrisis levels. there is plenty more slack in the inflation side. it is that inflation side we think you need to be careful about. ,f we see a pickup in inflation you will see a change in tone from the fed and they could ask for more rate hikes. anna: you quite like tips. the has been a standout for the u.s.. >> both in terms of performance and pricing. it looks very cheap. it does make it stand out. it is the only developed market where you get a positive real yield on the inflation government bond. anna: thank you very much. the head of multi-asset funds at legal and general investment management stays with us. coming up, more interviews from the imf annual meeting. that conference continues and we are there on the ground. we will bring you our interview with the u.k. chairman this morning. and the european commission vice president joins us after 12:00 u.k. time.

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>> the escalation of current trade tensions could reduce global gdp by almost 1% over the next two years. deescalateneed to this dispute. war may -- of trade outflows. process, in orderly would be very happy. >> the volatility has increased. this from my point of view is not very surprising because on the monetary policy side, we are

in the course of normalization. that implies the market finds a new equivalent. i'm not going to medical diagnostic, but i can say one thing. number one, the fed is doing the right thing. anna: the fed is doing the right thing he says. good morning, everybody. there were voices coming to us from the imf. this is our mliv question of the day. despite the turbulence on global markets, the greenback is down against almost every g10. since last friday. with its haven bid missing in action, has the dollar peaked? let us know your thoughts by heading to the mliv page on the terminal. i see research from morgan stanley which might be interesting as you are considering your answer.

the next dollar rally according to morgan stanley will be less widespread. it is set for its final rally -- is that dollar strength story coming to an end? let's get a bloomberg business flash. >> china sank by a record as shares traded for the first time since bmw secured control of their joint venture. down gradederages the carmaker. citigroup recommended selling over what it calls an unfair deal. the agreement gives bmw a bigger -- in china and let's and keep it keepnings -- let's more earnings. an inquiry into whether shares of broadcom were the target of stock manipulation. --ording to sources the

lawmakers were given what was reported to be a u.s. defense department assessment of national security concerns over the deal. that memo was falsified, broadcom says. representatives from the justice department and the sec to christ,. comment.clined to a planned $1 billion investment in version space companies following the disappearance of a saudi journalist. a washington post columnist was left in entering the -- last seen entering the consulate on october 2, triggering an allegation he may have been murdered their. officials say he left unharmed the same day. advanced talks to sell its airport services unit. the canadian asset manager broke the deal. it could fetch more than $3 billion as the chinese conglomerate's biggest -- since selling its stake in april.

representatives for agent day declined to comment -- four hna declined to comment. many if china is not plating the you one, that is according to the u.s. currency report -- not manipulating the yuan. the u.s. trade secretary has expressed concern of a competitive devaluation. the u.s. could over an escalation of the trade war. john roe is still with us. mnuchin could make a different call. this is hays advisory group telling him they do not think there is manipulation going on. -- on the subject of whether china manipulated the currency, this is the chinese currency moving in conjunction with chinese-u.s. rate differentials.

if you are looking for an underlying reason we might see chinese weakness, this could play to that. what are your thoughts? >> more recently, probably not. strengtheen dollar smaller anyway. there will naturally be depreciation pressure. we are seeing the slowdown in chinese growth as they try to tackle leverage, that is inevitably slowing growth. on the back of that you see weaken us. that combination explains the weakness. they cannot go too far. againsthave weakened the market, but not as much against the dollar. what about the latest statement we got out of china? described as gratis -- gravity defying by one of my colleagues. you could argue this is exporters trying to get in before tariffs.

it just goes to prove it is harder to address trade imbalances than it might seem. >> it is difficult. you have got to bear in mind single data points have random noise in them and to some degree this was a headline important data, the chinese might have been interested in making it better than the underlying data. sometimes the smoothing we think goes on in the chinese data helps. the thing that will stop them doing competitive devaluation is the concern over the flight of capital. we saw this in 2016. it was one of the biggest market seems. the concern of a continuation of capital flight. clearly if they go back into a mode where this is a concern, they increase capital flow. that is the single biggest risk to the chinese economy, a flight of those $3 trillion they have. anna: what you might want for exporters might not work for the

rest of the economy. let me ask you are mliv question of the day. we are asking whether strength in the dollar is done. it does not seem to be a safe haven this week. -- are was more en vogue we done with the rally story? >> i do not think we are. what has driven the rally has been strong growth. it is pretty impressive it can rally against the backdrop of a current account deficit. it is really that growth and the interest rate expectations. in an risk-off environment, there is a slight fall in bond yields. a lower expectation of growth. against that you get weakening in the currency. in a bad scenario you would still see dollar strength. this is where the nonlinearity becomes so important. in the true risk aversion event, the dollar gives you the latest -- the greatest liquidity. anna: thank you. john roe.

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anna: good morning, everybody. 6:30 in london. a live shot of london, could be many places. it is dark. ftse futures pointing higher. that might make a nice story this morning if you are just waking up wondering what markets are doing. we have seen recovery in the asian session. u.s. futures and ftse futures pointing higher. let's check on the broader markets. annmarie hordern joining me. >> good morning. what a recovery we are seeing in asia. really being led by hong kong and the kospi. -- 1.5%.one point

futures in the u.s. and new york are pointing higher. new york really the focus, now switched to the earnings of big corporations like citigroup. this may be affecting the broader trend for the s&p 500, what happened yesterday. the s&p 500 closed with the biggest gap to this average since 2016. 2% below the key technical threshold. suddenly the s&p 500 moving averages a long way away. not in a sense that would comfort investors. quickly, hurricane michael hitting the united states, i want to look at this spread, basically a rough measure of how much refineries are making from producing crude to motor fuel. what you can see is it has been on the decline. yesterday it had the lowest in more than a year. this is that the u.s. is sitting on the u.s. east coast, sitting

on five-year seasonal average. at the same time michael is hitting the u.s.. could mean $25el billion in losses. anna: thank you very much. let's get some breaking news. we have finance ministers up very early this time of year because they are over in bali at the imf meetings. we go first to the comments coming through from the italian finance minister. he issued a statement after meeting with the u.s. treasury secretary. he told mnuchin italy would keep an active role in a stronger eu. he told mnuchin italy would reduce its debt to gdp ratio. something brussels would also be listening for. let me tell you what the u.k. chairman is saying, including a briefing. he really interesting comment on austerity. theresa may made an end to

austerity part of her conversation at the conservative conference. the u.k. has turned an important corner on austerity, so says hammond. people wondering where he is going to find the money to deliver on the promises theresa may has been making. he says there has been a change of gear on brexit talks. renewed commitment. he has been briefed as part of that war cabinet by the prime minister yesterday. we bring you our interview with the eu prime minister later this morning. let's get a first word news update. >> in the u.s., donald trump has said he will not fire jerome powell, but criticism of policy was repeated. he claimed an out-of-control central bank for the stock selloff. he says he knows monetary policy better than powell and his team and he thinks what they are

doing is wrong. the attacks rha and change from white house policy, but larry kudlow says trump is having fun. attacked theer fed's plan or strategy. he has never interfered with that. he is giving his opinion, and people shouldnk listen to what the president is saying. but the fed is independent. we have always said that. >> treasury department staff has advised steve mnuchin china is not manipulating the you win. -- the yuan. the conclusion whatever an escalation of the trade war and remove a source of anxiety for emerging markets. mnuchin could issue a different finding. it comes as the trump administration prepares to issue a closely watched report on foreign currencies. saudi arabia is facing the prospect of some company leaders

backing away from it's so-called down those in the desert -- davos in the desert. that is after the alleged murder of -- in the consulate. officials say he left the building unharmed. bloomberg media is sponsoring the event and monitoring the situation. the anonymous buyer of a banks the artwork that shredded itself after being sold that sotheby's is said to be keeping the peace. the auction house said the rename the- will painting to reflect its changed state. anksy said he installed a shredder in the frame encased the work ever came up for auction.. global news, 24 hours a day on air and @tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. anna: thank you very much.

who knew a piece of art could be twice as exciting when it was destroyed. let's get to bali now where finance ministers are gathered for the imf meeting. kathy hayes is there with the guest. >> a very interesting lunch panel. , a professor of economics at stanford, a fellow at the hoover institution, former undersecretary of the treasury, the author of the preeminent person in banking circles. let me get to the point. there are a lot of big debates this week. welcome. two big stories were trade war and fed policy. we have to start on donald trump saying he does not like fed rate hikes. put that in perspective. does it worry you?

you were speaking to reporters saying -- >> you always wonder what people doing with monetary policy and the reason, but he also stressed normalization is important. the message here is he is participating comic on the discussion. you have to say, what does that mean for the future? >> i assume you do not share them. >> i think normalization is very important right now. the pace the fed is on is about right. broadlya normalization and that is one of the things being discussed at these meetings. >> what is your position on that? at the beginning of the week, the finance minister of indonesia told me that she doesn't think the fed should be mindful of their impact on the rest of the world. do you agree?

is being mindful enough? >> i think the fed has been more mindful recently than in the past. quantitative easing that many countries objected. interest rates too low for too long, all those things. now the fed is trying to get back to normal. they are doing that at a reasonable pace. they are signaling what it is. emerging-market countries should be able to adopt that. they have to be clear and transparent about what they are doing. this is a process we have to go through. the world will be better off if we do. >> trade battle, skirmish, some call it a war. it feels that way to markets. we saw stock markets this week. where are we in this trade war? is there any legitimate point being made by the trump team? >> there is a lot of uncertainty.

a few things have gone well so far. the nafta turning into an agreement, we will see what that is like. there are discussions with europe. u.s. -- i think the questions are with china, and what is china going to do. issue peopleis an are looking for. they recognize there are restrictions on investment. they recognize tariff issues. how those will be addressed it is not clear right now. >> today on the sidelines of the international monetary fund, there is a report suggesting -- what is the message you are trying to give the world? >> the main message is the world needs reform of its international institutions. it is much larger than it was in 1947 when the world bank and imf for started. reforms are late.

one of the most important to story about capital flows between countries. that was the question about normalization and the questions -- different countries worrying about the flow of capital. we need proposals that proposals to say, let's reform the capital markets. so we have a more open financial market. that should be conducive to more open trade markets. >> i assume everyone in the group thinks emerging markets may not -- they are in a position -- we have seen capital flow, we have seen currency getting really be not. what reforms address that? >> i think we need a lot more reforms. the progress we have made on reforms have been very important in terms of growth in certain

parts of the world. there are still lots of problems. this reform says, let's make things more resilient where they need to be. the capital markets work better as a result. >> what are you hearing from people so far? >> pretty positive. lots of recommendations. so far it has been positive. >> john taylor, thank you so very much. professor of economics at stanford university joining us here at the international institute of finance event. a lot of interesting discussions. i'm going to send it back to you. anna: great to hear from john taylor. joining us from the imf meetings in bali. tayl is the function on the bloomberg that brings up the taylor rule.

2.99 percentage points, this is relative to our next conversation. we are going to talk about the banking sector. over the next week, some of the world's biggest banks will report results. earnings from j.p. morgan and wells fargo on friday. today by european standards. morgan stanley and goldman sachs report next week. the banks fixed income revenue has likely slowed in the last three months. global trade concerns and the effects on economic growth are seen as the biggest risks of global investment banks moving forward. let's bring into the conversation keith campbell. very good to have you with us. part of the conversation with banks is always around the interest rate and how deeply we are going to be able to see interest rates go. tell us your big picture story for the banking season. >> the biggest picture, you wonder if the ceos might secretly agree with the

president that the fed is making things hard for them. in some ways, we are working backwards. an extremely profitable sector by some measures, the most profitable in a long time. jamie dimon has called this a golden era for u.s. banks. amidst the positivity, you have to compare that with plunging stocks and what that tells us about the way investors see things. if this golden period can last. --a: after leap reading after reading all kinds of things about the goldilocks economy, then stocks selling off the way they are, what does that tell us? >> the bank index in the u.s. that we watch is at a one year low. while it is better than european thexes, it does show you outlook for the trading in the last quarter, it was marked by

the lack of volatility we saw most of this week. they were not getting a benefit. that changed in august quite a bit with turkey getting interesting and emerging-market driven volatility. what will be interesting will be mostly looking at the forward-looking comments from the banks ceos this time around. the third quarter looking backwards is a very different environment. anna: let's think about valuation of financial stock. this is kbw price-earnings over s&p 500 price-earnings. you can see bank stocks look cheap. the ratio of financial stocks valuation against the broader market remains below average. i suppose they may be even cheaper since the average of light -- of late. if we are seeing more volatility in markets, do you think

investment banking is to a rebound? >> the m&a will be a little bit of a weak spot for the banks this quarter. fewer deals were completed. that may change. there are still a lot of deals in the pipeline. the training opportunities will be there. one of the interesting things with the analyst report the last few days have been, when you have this kind of selloff the last three days, we had one analysts say this was a great time to get into the shares. you have banks boosted by tax reform in the u.s. long-term. profitability looks great. they are not likely to announce ration in the u.s.. on the other hand, a higher rate environment, will the bank ceos be saying this is chilling the outlook?

are value stocks going to make a resurgence. thank you for joining us. joining us to preview a banking season in the u.s.. earnings season i should say. let's get back to john roe, listening intently to that conversation. let's think about earnings season and talk about banks. this is where we are going to kick things off. the banking sector for you, is this something of interest? >> it is because of the underperformance. as you say, valued stocks have not had a great time of it the last five years. you want something that creates a panic. you have not quite at that panic yet. anna: we have not been panicky enough? >> you need interest rates to fall more. you need people to stop questioning fed rate hikes. everyone is already built into the future earnings the higher

interest rates. if you say a 40% increase year on year earnings per share, and when you look at that, there is only energy that has done better. most of that was expected. they were expected rate hikes. you need some kind of variation from another source of revenue to make it more interesting. anna: sticking with earnings season, the car sector is wrestling with headwinds. one of those is the extent to which they are caught up in global trade disputes. you have been doing some digging into the imf data research and report. it really is interesting when you look at the nuance they put on where the tariffs fall on which sectors and what damage that would be to which economy. >> they were not aiming to give donald trump the playbook of what to do. what have done is outlined if you receive any rationality in what he is doing, putting tariffs on all chinese exports makes sense.

there is a lot of pain on china. 1% impact on gdp. on the u.s. it is only .23%. want to get autos you get this nonlinear impact in the u.s.. it jumps up to 1% for the u.s.. plus it hits the global economy. the game is to put pressure on china without destroying the u.s. economy. they need to keep autos out of the discussion. maybe get a slightly better deal. that is where the impact escalates massively. anna: the sector impact of trade tensions on those individual economies. thank you very much. john roe stays with us. let's get back to bali where central bankers from around the world have been meeting. >> i am being joined by u.k.'s chancellor with me to discuss

the issues being addressed at the imf world bank summit. mayeard from theresa wanting to end austerity. is britain ready for the end of austerity after 10 years? >> we have spent 10 years dealing with a different -- difficult inherited deficit. for the first time in 17 years we will see public stocks follow as a share of gdp. that gives breathing space to support our public services while being very clear we will continue to reduce as a share of gdp. >> is there a risk of miscalculation despite growth over the last eight years? you have a deficit of 2% of gdp. >> we have a deficit below 2% of gdp. we are expecting it to fall further. of course we should aim over time to bring that deficit down to balance. we have other priorities as

well. we need to support public services, to keep taxes low, and invest in britain's future, raising productivity performance. >> talking about the future, how do you intend to increase the competitiveness? the imf has said whether or not there is a deal, the will be cost the u.k.. >> certainly getting a good deal is a vital part of our economic plan for the future. theain's future has to be high wage, high skill economy. that means raising our productivity. the big challenges productivity. that is a challenge, but the good news is we are quite behind our competitors. that is a reserve weekend drawn to fuel economic growth as we find the key to unlock that productivity challenge. >> could you go the u.s. way

where you reduce taxes or increase infrastructure spending? >> the issue for the u.k. economy at the moment is it is operating at effectively. acid he. our problem is not -- effectively full capacity. we have to increase productivity of our economy. demand should take care of itself as wages rise in response to higher productivity performance. we are in a period of uncertainty because of the brexit negotiations. i have said and will maintain that we will keep an appropriate reserve. so that if we need to we can intervene to support demand in the u.k. economy. >> are you comfortable with where the pound is right now? of 17%.d see an upside >> i had huge trust in the market to effectively price all

assets, including currencies. we have an independent central bank that sets monetary policy. as a matter of principle i don't comment on the level of the pound. >> let's talk about the amazon tax. add?uch would that at -- >> we believe there is an issue about fairness. as the digital economy is evolving, there are businesses out there which are generating significant value added from their interaction with consumers , including consumers in the u.k. that do not have a physical presence in the u.k. that delivers tax. there has to be a fair distribution. of the taxation on that value added. what we have said is we would prefer to do that through international agreement. we will be discussing that tomorrow in the imf forum. if we cannot achieve that, i am prepared to look at a u.k. only

solution. colleagues are also looking at ways in which they could institute taxes on the digital economy. the revenue streams and the companies that will be taxed? >> we're focusing on business models that involve exploiting under the personal data of u.k. consumers or exploiting content which is uploaded by u.k. consumers. we are not looking at online sales tax on the sale of goods over the internet. we are looking at digital companies that create value by interacting with consumers. we believe that value adding process takes place in the location where the consumerist. -- consumer is. that is where it should be taxed. -- the u.k. does

does remain within the customs union indefinitely, does that mean businesses will have to go through changes? >> no. we are not going to remain anything indefinitely. but it is true there needs to be a period, probably following the , before weperiod enter into our long-term partnership. just because of the time it takes to implement the system's requirement. that this does not have to mean two sets of changes. there will be continuity through the transition period into any temporary paring and then -- temporary period in been a temporary set of changes when we move into our long-term economic partnership with the european union. >> thank you.

there you have it. we are coming to you live from the imf in bali. anna: fascinating stuff. thank you very much. joining us with the u.k. chancellor. the backstop must be temporary. so says the chancellor philip hammond. that is fascinating because there has been a lot of discussion as to just how much commitment to be temporary that backstop will have attached to it. what kind of language, what truly attach -- what will we attach the backstop to to ensure this is not last forever? let's take a look at what you should be watching out for today. importantly, we need to focus on the turkish story. a dispute between washington and angora could be released today. we will bring you up-to-date on the. -- on that. we are due to get a sovereign

update on south africa. it is america's turn after wall street closes. that could be interesting with increased fiscal deficit and increased treasury issuance very much in mind. let's get a check on the markets for you. this is the picture across the asian equity session. we have seen a rebound in asian equities. if you are just waking up in europe, this may be something that pleases you. we are up by just over 1% on the msci asia-pacific. we see a broad-based rebound. the hong kong market up by 1.7%. the kospi up by 1.5%. you want to participate in our mliv question of the day, please do. we have been asking our guests. the question is all around the dollar. has this dollar peaked? get involved on the mliv blog. coming up, we posed the question to the global head of fixed

income research at hsbc. we will ask him if he thinks rates will go higher from here. that is next. ♪

>> good morning. i am anna edwards. this is bloomberg daybreak. covering note. it's asian -- recovery mode. asian stocks bounce back a rate is china a currency manipulator? the u.s. treasury department said to think not, but steven could rule differently. and wells fargo kicks off u.s. season.

good morning, everybody. 7:00 here in london. let's talk about what is going on in these markets and how the futures are shipping up. ftse futures, open for a while. all to the upside. picking up on the positive fives and u.s. futures pointing higher. setting, we have seen a broad rally taking place. the chinese market a little bit more sluggish in the morning session. the currency also part of the story. i'm reporting around the treasury. tolooks as if advisers steven mnuchin are not manipulating their currency. we expect the report next week. in the u.s.futures indicating a positive start.

let's look at the bond markets. day that features, a looks very different. yields going higher. u.s. bonds falling. that is part of the story. much more to do with his relationship with the u.s.. we will keep an eye on this one. we just heard from philip hammond, declining to comment on the currency. let's put a big picture around this. asian equities. david ingles joins us with the latest. ok.d: we are doing and a lot of ways doesn't mean a lot. pretty low set coming out of the thursday session. china closing up shop right now. massive swings.

down as much as in the morning session. 2.5% into where we are now. overall, up by just over 1%. we clawed back about a third of the losses. we are getting a massive rally. thatd example, south korea market finished 1% -- 1.6% up. give you a quick sense of the movers. large caps, completely hammered yesterday. overall, 30% higher than a 20 day average which i guess is a good sign. example,ive you an tencent over in taiwan. 25% down. down to the story we talked about yesterday with bmw taking

a majority stake. thank you very much. david ingles joining us from the wrap of recession in asia. we are asking about the dollar. the greenback down again. live blog question, missing in action. has the dollar peaked? let us know your thoughts. read the latest from the team and join in on the conversation. let's get a first word update. >> thank you, anna. donald trump has says he will chair but -- he says he knows monetary policy

better than powell and his team and he thinks what they are doing is wrong. these are a change from recent white house policy. the advisor says he is just having fun. he has never, never attacked strategy, hen or has never interfered with it. he is giving his opinion. it is an informed opinion. should listen to what the president is saying. but the fed is independent, we have always said that. advisedury staff have niminution -- steven mnuchi is not manipulating the young one -- yuan. issue a he could different finding, it comes as the trump administration prepares to issue closely

watched report on foreign currencies. canada is applying quotas and a tariff on steel from china and elsewhere. it aims to avoid becoming a dumping ground for steel. the trudeau government faces tensions with washington which hit canada, the eu and others. include duties which will be dealt with separately. in turkey, the outcome of a court drama could make a to letn on -- a decision an american pastor go free could go in long way to diffusing the worst crisis in decades. it could reduce chances of another rate hike.

the turkish lira extending its rally into the six that they. day.xth this is bloomberg. anna: thank you. debra mao with the update. let's bring you up-to-date with inflation story. german cpi. up by 0.4%.] we will keep an eye on the euro. those two numbers, coming in as expected. asian markets staging a recovery after two one to try and dollars trillion was wiped out yesterday. treasury yields higher. u.s. government paper

hitting the market. of theet the thoughts head of global income research. a pleasure to see you. couple ofrough 3% a weeks ago. all of a sudden, better days throughout the u.s. it has you worrying about how high rates would get. >> no. next question. there has been quite a flutter of activity. you are right, the data has emboldened some of the bearish views out there. -- things that concerned me there was a term, premium moves. it was testing the credibility of the fed policy and the longer-term anchoring of rates. weeks.t is a couple of i am much more patient than

that. i would have thought treasuries would have done better during the risk off days. is where will we be after the midterms? bonds need to look through the -- there are people in the fed that say they want to cut four times. to me, that sounds more like -- anna: twice. >> and why don't we have a handle on bond yields? anna: are the midterms relevant? >> the data has gone quite nicely, and running into the election. there may have been a few things including the bringing forward of fiscal loosening.

it comes at the expense of next year's growth. timing of the election, what happens with the results and how future policy on trade and the economy is important. are looking for pivots, catalysts, triggers. boil water it turns into vapor, it takes a while. suddenly stronger data, it seems as if there was some sort of reset. inflation say the data did not say very much. -- used cars was off. the corers were 2% on

numbers. the challenge is, if you think the fed will go faster than they hikently say they are, one per quarter, go ahead and sell. it is difficult to see how you are going to lose a lot of money. you will not lose money. that is being seen in the flows. a lot of money going into short notes. tips, showingu.s. a contrast to france and the u.k.. i am guessing you are not a fan of tips. >> great performance this year. global inflation down 5%. the worstarket one of performers. if you go back to the start of this year, some of my colleagues came back from a trip and said,

everybody wants to talk about inflation. let's get involved. i said, the forward inflation you2.7% 10 year, one were inflation was 2.7%. i would prefer to buy european. it is quite interesting. all this talk about inflation, this bearishness towards treasuries, they have performed so badly. how is that the case? it means people have been bearish. they have probably been right for the wrong reasons. about, sometalking of the risky assets look more vulnerable.

, maturing credit cycle. where do you see vulnerability? >> thank you for pointing it out. there is unambiguous evidence the stock market has gone up several times over. it shall be corporate's, -- triple b brits, -- corporate's, 900. are quite clear, risky assets. changes, thee rates of increase in the global qe slowing down, we have to watch risky assets. if there is a flight from risky assets, where is the money going to go? ofaw, $1.7 trillion annualized increase buying by u.s. domestic's.

that is 1.7 extra on the year before. there is no lack of demand for the treasury market at the right price. all people want to talk about is supply. risky assets, the challenge is key. most people try to guess the economy. i am thinking, maybe you have the process the other way around. if risky assets are going to calm down and we are seeing the early signs of a correction, i don't think this is to be ignored. tell us the credit cycle. we have been looking at corporate debt here in bloomberg. biggest m&abest -- deals funded by debt, where those companies have ended up. suggesting some of them have been rated the lowest investment grade. some of them and other cycles

might have been rated as junk. >> we are bearish on credit, especially in the u.s.. reason is because the credit indices have multiplied. compared to 10 years ago, how is there?debt what is the duration? in europe, seven. big increase in duration. you are quite right. as you look at the credit quality, there is much more triple b. lower quality. low-qualityetting duration. what i am saying is get out of that and by high-quality duration. germany,t into long

these are offering good value. long spain or long germany. dollar, ationed the lovely segue. do you think the dollar has paid -- peaked? >> absolutely not. this is just the start. --y celebrate over cash salivate over cash. 1% real yield. that supports their bullishness. i think they are right for now.

this is just a pause. >> the head of fixed income research. stay with us on the program. remember, users can interact with the charts we are using. it is the place to go to get those. you can save those church for future reference. use them in your morning meetings. coming up, budget is missed. italy -- budget business. a showdown with the eu still looms. and later, joining the bloomberg team. this is bloomberg.

7:20 in london, 8:20 and in paris or rome. at the italian bond

market. 3.5% is where we trade on the italian 10 year. let's talk about the latest promise. a higher deficit target for 2019 has been criticized by the european union. yield spread between italy and germany 10 year bonds widened. joining us now, the executive director of applied research for india. still with us. good morning. let's talk about italy. we have some comments from the italian government, the spread bunds --es -- >> this is something we have been looking at specifically. when you compare this to the height of the european debt

crisis, we were looking at 520. we still have some way to go. what we are seeing is a boring trend in terms of the budget deficit. italy, they are below the 3% threshold. they are way above a sustainable , at least in terms of the debt reduction. we have seen spain going in a similar direction. although contagion has been there is a bit of a worrying trend we have been looking at in terms of the stress testing. eurozoneparing the debt crisis, how wide does it get? know whether we can make historical comparisons. it was pretty qe.

there were various measures that came in. we are threatened here with the government potentially talking about debt. out the debt calculations. is, the investor wants to know he is going to get the coupons and the principal. three cheaps compared to two? we don't know. there is no number. we saw this with greece. the markets fear a restructuring, the problem is not whether or not it happens, it is the fear of it. sterling that is moves up and down. the barometer. in italy, they do not have their own currency. over 400 to roll

billion. means domestics are going to be the main buyer, we are going to have to see how much the banks can take. we are going to have to measure how much money moving out of the country. in if theywill come have the guarantee nothing is going to go wrong. >> is it going to be an issue next year? moree question is how much can banks take? they own a lot of government debt. hold the debt of their own sovereign which is what we saw. >> is it the same? to the same extent

as last year? >> if you look at the ftse thinking index and compare it to the spread of the 10 year spread, they are moving pretty much in lockstep. the value of italian banks stocks is driven by what is happening in terms of the sovereign risk premium. there is a clear link between the two. it is a question of time. >> is it contagious? >> there are signs it might be. >> the people i speak to are always pointing the finger at other countries. if you look at the debt numbers, the private sector is in great shape. people would say, what about france?

typical sort of human psychology, isn't it? did contagion is going to affect those markets that have debt issues and challenges. i don't think we have to worry just yet. plenty of time for things to be done. positive measures could be to incentivize more saving. there are signs that is happening. the governmentt plan will reveal. thank you for joining us. of executive director applied research. day, missing and action. has the dollar now peaked? asked onhe question

the blog all morning. can read the latest thoughts on that subject as well. that is it for daybreak europe. this is bloomberg. ♪

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"all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast. >> welcome to bloomberg markets. i am anna edwards alongside matt miller in berlin. saw asian stocks recover and continue to rise. u.s. futures showing signs of life. treasury yields ticking higher. u.s. markets open in 30 -- european markets open in 30 minutes time.