from bloomberg's european headquarters in the city of london. i am nejra cehic with manus cranny. this is bloomberg daybreak: europe and these are today's top stories. oil extends its rally. we speak exclusively with saudi arabia and energy minister as aramco prepares to kick off a blockbuster bond. -- topnt trump's talk economic adviser says a deal is close. limbo, prime minister theresa may looks to restart stalled brexit negotiations with rival jeremy corbyn ahead of a crucial summit with the eu this

week. ♪ manus: a warm welcome to the arabia.of saudi we are broadcasting from the first gulf intelligence saudi arabia forum right here in riyadh. at a five-month high, you are looking at the hedge funds coursing higher. we have a conversation that would define the confirmation of this kingdom to a new energy power. and energyrabia minister joined me just after 7:00 a.m. about the transition to a new economy. we will talk about opec, and will he or won't he talk about the size and price of the saudi aramco bond? define globall

risk appetite for this kingdom and the leader of the kingdom and one of those deals that makes bankers salivate globally. the aramco deal. agenda. i hope he is in a talkative mood. good morning. nejra: good morning. cannot wait for that interview, looking forward to it. as money managers have not been this optimistic about u.s. oil since october. meanwhile, talking about global risk, seven straight days of gains for u.s. equities. you could ask if it was a goldilocks report for equities markets. we had gains and payrolls but a little softness coming through in the wage number. 10 year yield lower. foot,-yen on the back 3/10 of 1% lower. the bloomberg dollar index overall is steady. we did not see it react too much on friday either to the jobs report. it was in the equity markets where we saw that reaction. futures in europe pointing a bit

lower right now. cable on the front foot, up to tenths of a percent. theresa may will be asking the eu this week for that extension to june 30. will they want a longer extension and what does that mean? we will discuss later in the show. manus: you touched on the oil market. both wti and on brent. hedge funds are building up their positions. . the question is, is this a supply-side story? that is the debate we will have at part of the forum. libya, sanctions on venezuela, nigeria, and iraq, not necessarily playing the cutting game. saudi arabia is doing the heavy lifting. thispeople would say country is the central bank of oil and the heavy lifting the saudi's have done, the others need to follow behind. we will put those points to his excellency when he arrives.

s&p 500 index the question is this. do you want to be long, high on 500?, or the s&p we are on the longest streak of gain since october 2017, but the hedge funds net exposure to u.s. equity is the lowest level in more than a year. that says to me that there is ample firepower on the side, but the grinch in me says that is prudent at play that they have not played fully in the ballgame of this risk rally in the equity market. that is the agenda. we are in riyadh. we have a great conversation set up. juliette saly is in our singapore studio. good morning. reporter: a bit of a muted start to the trading week here. china hong kong and taiwan markets coming back online after the public holiday friday, but we have seen a little weakness stocks.se the csi 300 down by around one third of 1%. weakness in

japanese equities as you would expect. nejraronger yen at that just alluded to. the asx 200 up by around 6/10 of 1%. msci asia-pacific index overall fairly flat today. let's look at specific stocks in detail. a biotech services company in hong kong surging the most since january 2018 after it got a so-called prime designation, which is a priority medicine designation from the european medicines agency. this only happens to about a quarter of the medicines that are actually put forward for title, up by 19%. a little weakness coming through in the a and h-shares in terms of airlines today. air china downgrading. they are differing from what you hear from cicc and morgan, which have upgraded. australia, resolute mining, the frontrunner.

up by about 8% after it maintained the production forecast. march production up 33% on the previous quarter. gold per80 in terms of ounce. much forank you very the wrap up. juliette saly in singapore. let's kick off the show with the latest in global trade. president trump's top economic advisor says the u.s. and china are closer and closer to a deal. larry kudlow says both sides will keep in contact as they work through the remaining issues after last week's negotiations wrapped up. >> we are closer than we ever have been before. a lot of very difficult topics for the first time are on the table and being resolved. i think that's terribly important. the talks have been productive. i think the president also expressed -- i was in the room thursday -- guarded optimism. maybe more than guarded optimism. manus: president xi jinping is

reported to have cause for early conclusions to negotiations. for all that in mind, the rhetoric is rising. strategist, good to see you this morning. i suppose the question for me is this. if we get so close to a deal and the deal is done, what happens to havens? dollar-yen. i'm looking at the dollar up. we are seeing a significant shift from the haven. does that accelerate? >> a lot of the good news seems to be pressed into the u.s. trend with the trade war. i think italy -- looks like a case of it pulling through. there is some juice left in the risk rally. the real factor in the shift for global markets is in the actual global economics story. that is where we need to start shot -- signs the of the green shoots with the policy in china in particular

taking effect. when it comes down to geopolitical risk, the good news is priced in. the reduction we have seen is good. it is there, but i think it is now a case of a lingering threat of whether it falls flat on its face. nejra: how much does the lingering threat have to actually lift volatility near a five-year low? >> i think when it comes to, we have to have the real scenario back to what we saw last april where u.s. trade takes a negative part with a trade war with the u.s., or with china, but we never see it with a base case. when it comes to dollar-yen, there are two out of three scenarios that takes it lower from here. they are both linked to the economy. one positive, it's back to the synchronized recovery world, or when negative, it has a harder landing. that is where the risks are low right now. we think short dollar-yen.

it is quite neutral at the moment when you have this mixed world. the aussie dollar can't avoid a meltdown. even iron ore hitting the highest level in two years. the path of least read -- resistance. softer or pa, does that play heavier than a trade deal? currencies inith particular, if you look at australia, you've got elections coming up. you've also got the rba suggesting that a cut is likely the same. the local stories really matter here. we do think there are some secrets and trades related to the china stimulus coming through. those most sensitive to the china industrial cycle will be the main winners. i think the ozzie is in the

latter camp where it is one of the last to see those benefits. china, theking of yuan, thursday old drop across the fx spectrum. what is the path of least resistance? we think >> it will partly stay stable. mostnk as we look at the important thing from the fx market perspective, what comes modern-day it a accord where the u.s. officials clamp down on the chinese to keep it stable? if that stays true, that is great news for em risk. last summer, the negative spillover effects from a weaker for --n be effective stability is great and one of the pillars for em. one of the things that is

debated is repressed volatility, whether it is fx, equities, or bonds. in the fx space, where is the most repressed child of volatility? will,t spikes, and it because there will be an event that will affect a spike, where or which would you like to offer the best value at the moment? at the crossok assets, we see a couple of sort of selloffs in risky assets over the past couple years now. the spillover effect has been quite muted to some effect. i larry -- dollar-yen to be skyrocketing. i think partly because of the nature of the selloffs. if it is a selloff not linked to anything fundamental, a technical correction in markets, the reality is the crossover effects are pretty limited. iswe said, dollar-yen's path

--ected by the noble economy global economy. nejra: viraj patel stays with us for the hour as our guest host. let's get first word news with dudley humphrey in dubai. reporter: president trump may get his way when it comes to lower rates. monetary policy makers have been surprised by how tight price pressures have been they cite this as a reason they can afford to wait before deciding a new move. investors seem convinced it is only a matter of time for the fed lowers rates. theresa may has deferred her decision to ask archrival jeremy corbyn to draft a new brexit deal. she warned the u.k. may never leave the u.k. -- eu if they never reach a compromise. they asked for a delay until june 30.

the chief secretary to the treasury says it would be like purgatory. ofhting on the outskirts tripoli as libya's government says it will start a counterattack against the self-styled libyan national army. this escalates a standoff in the opec nation that has the potential to rattled global oil markets. the military operation has been dubbed volcano of anger. at least 35 people have been since in the clash in -- wednesday. benjamin netanyahu has floated the idea of extending israeli sovereignty to areas of the west bank. this comes just days before the national elections. it seems aimed at right wing voters netanyahu needs in order to secure his fifth term in office. a faces a tight race against former army chief. global news 24 hours a day on air and @tictoc on twitter powered by more than 2700 journalists and analysts in over 120 countries. i'm desley humphrey. this is bloomberg. desley humphrey in dubai,

thank you. the fed isn't hiking and now markets have begun to price in cuts. that should have been a good thing for emerging markets fx. instead, em currencies are treading water. with more of the difficult environment, it is dani burger. take us through what you found. reporter:reporter: i found just how difficult it is to get an edge in the general em fx trade. this is a strategy that had worked in the past, essentially betting on the past winners. it has fallen nearly 3% this year compared to the broader 1.2%, which has gained setting us up for the momentum strategy to have its worst run since 2005. points to weaker growth outlook, investors renting emerging-market currencies as they wait for global growth to pick up. at best, the trade will just stall. but there's another headwind, emerging-market bond flows. they might have peaked. we can see the market value of local currency emerging-market

bonds. this is their highest market value on record since the data we have going back to 2008. we might not get that continued affect of investors going into local currency bonds, that sort of appreciation affect allowing fxcm game. that might go a long way to explain why we have not seen as big of a rally from emerging-market currency even though yields in the u.s. continue to stay low. great job, great story this morning. dani burger with the latest. coming up, this year's high -- hottest song by the world's most profitable company. i had our exclusive interview with khalid al-falih. the latest on the saudi aramco megadeal. that's coming from riyadh. nejra: and where would that interview be? on radio as well as tv. when you travel to work, tune into bloomberg radio or on

digital radio in the london area. this is bloomberg. ♪

nejra: this is "bloomberg daybreak: europe." i'm nejra cehic in london. i'm manus cranny in riyadh for the gulf intelligence saudi arabia energy forum, 2019. . a quick look at the markets. nothing huge moving. as larry kudlow says, yes, we are continuing to talk, equity markets are pausing, we want to see the detail on any deal. u.s. equity futures did make an all-time high last week.all three markets in the u.s. rallied. 10 year government bonds, fidelity saying we are underpricing inflation. u.s. 10 year yields back to great2.5% for the third day of declining yield. may be the run has already been

done. nejra: interesting comment from fidelity, especially giving what we call -- saw in the wage numbers. we will talk about oil later, but we are extending gains from last week after the best week in almost two months. escalation of fighting in libya overshadowing the biggest increase in u.s. active rigs since may. dollar-yen on the back foot, rising, a bit of a safe haven as futures point lower. cable on the front foot. extension will theresa may get this weekend how will the talks with jeremy corbyn go? let's go to a bloomberg business flash with desley humphrey in dubai. reporter: warren buffett says wells fargo should look beyond wall street for its new chief executive. that's according to the financial times. the billionaire berkshire hathaway chairman is the bank's largest shareholder. wells fargo ceo tim sloan stepped down in march and -- amid a range of scandals. before the announcement, buffett

said he blacked -- back to sloan 100%. dubai islamic bank is reportedly considering buying smaller rival nor bank. this would create a rival with $75 billion in assets. the middle-aged financial industry is on a wave of consolidation as banks look for ways to boost capital. fiat chrysler is teaming up with tesla to comply with eu emissions rules. the company is using the open pool option. this allows automakers to group fleets together to make -- meet carbon dioxide targets. reports are that the company is paying tesla hundreds of millions of euros for the deal, but fiat has declined to comment. that is your bloomberg business flash. manus: thank you very much. there is a bond sale going around town being watched by investors globally. saudi aramco and its bankers are preparing to kick off what could

be a $10 billion plus offering this week. early indications suggest investors are already pricing in size. we have our middle eastern assets reporter. great breaking news throughout coverage. what will be aramco's main concern in this deal? saying they could see a situation of where aramco could indeed pay less than the sovereign.what do you make of that? reporter: i think in the run-up to this deal, some of the things we were hearing from people close to aramco is that aramco's main concern will be getting a fantastically priced deal, even if they end up at the smaller end of the spectrum, something close to $10 billion, and focusing just on hammering down the pricing. now if you look at the way things have gone so far, they

have gotten around $26 billion already in orders, there is still a day left of the roadshow. i think the dynamics are shifting and aramco could be in a position where it doesn't have to worry too much. problem. not be a it can print a large deal and still get underneath the sovereign. nejra: great to have you with us. thank you to our middle east finance reporter matthew martin in dubai. sticking with emerging markets, the recovery is starting to abate, but bombs are seen as the most resilient asset class. continues its dervish -- dovish turn. that is according to a bloomberg survey of global fund managers. the inflation picture no doubt feeding into that as well. let's get back to viraj patel. we heard what the survey saying, that bonds may be the preferred asset class. what about e.m. fx? we heard about how it has been hard to see big moves

recently.are you bullish ? i think it's probably now over. saying that, it is still possible for e.m. fx and debt to rally in the last part of this global economic cycle, but we can point to continuation and reduction in geopolitical risk, and also policy stimulus in major economies starting to have green shoots in the global economy. the latter is what we are hanging onto. we are looking for china to come through. we are starting to see some bounce in the industrial data. those countries that are most sensitive to that story are probably the early winners here. aside from the asia affect the ramp, linked to the commodity cycle, that could be the winner in the short-term and the hot flavors of the month. there is obviously a new

story for 2019 with the fed on pause and volatility for other central banks. ramifications in terms of the emerging market space. as you look at the em story, you will have those that benefit from the softer dollar, but there is the conflict of rate cuts from within their own territory. who is most at risk in that equation? >> i think when it comes to rate cuts, we are starting to see brazil and inflation dimon alex -- dynamics there. seeing the european growth story facing challenging claims with disinflation and weaker growth. when we look at e.m. and the cycle here, we have had two consecutive months where em cuts have outstripped e.m. hikes. we think that trend will continue for the foreseeable future. thank you very much.

barash patel stays with the team viraj patel stays with our team. we have oil marching higher. here at thering gulf intelligence saudi arabia 2019 forum just outside of riyadh. i will get ready forthis big interview . 's main team has arrived. he is the energy minister for this country. he has to where so many hats. we will talk to him. nejra: cannot wait for that interview. of course, we are seeing oil extend gains today on concerns around libya.money managers bullish on oil , the most since october. we had the best quarter in a decade for american oil. really looking forward to that conversation on the supply and the demand side and the extension of opec plus cuts. coming up next, has a rebound in payroll numbers allayed concerns

that u.s. growth is headed for a ditch? we get into the conversation, next. this is bloomberg. ♪

nejra: let's take a look at asia. msci asia pacific unchanged. a stronger yen. hong kong and china back online. let's check markets around the world. joining us from mumbai is neeraj patel. and here in london is annmarie hordern. i said your surname wrong, so apologies. indian stocks have swung between gains and losses today. what does the setup look like? >> good morning. it's all good. the markets, they are not cracking, but they are not expected to be.

off the highs of the day. we started up a percent. we have been trading absolutely flat. benchmark indexes are trading absolutely flat. the election season gets underway in a couple of days. traders will want to keep positions like. currencies depreciated a little bit today. the crude oil prices we spoke about last week as well. the only thing in focus from our domestic market perspective, a large merger has been announced by a small bank. focus on, our elections coming up a couple days from now. and crude prices have tempered the mood on equities. nejra: you have let us perfectly into anne-marie's hit.

you are looking at oil extending its rally. >> it's going to be a lot of price pressure to the upside this week as you see these escalations in libya continue intensify.o really let's look at how wti did. it is capping off its best week in two months, rising for a fifth week. on the tail end of this chart, it is higher. potentially at the end of the week having a fifth week of winning streaks. what is coming down to this picture is the supply picture. it's not just libya. questions puts surrounding iran and venezuela. this becomes another? on the supply side. i want to look at libya's oil outlook over the past few years. you can see it had been very volatile since the 2011 uprising. the oil output has been very unreliable. i recently spoke to the national

oil company chairman and he was saying he is very optimistic with theirand partners, but things are intensifying on the ground. oil fields are kind of blocked from all this. this is going to put a lot of pressure on the oil markets. very much so watching. it is something manus is going to ask about this afternoon. much. thank you so today we are asking the question mliv centered around trade. we are seeing a touch of risk off in markets. the 10 year yield lower. the yen is bid. the question on mliv is, our markets complacent about a potential eu-china trade war? reach out to us and the mliv team, ib+tv on your

bloomberg. let's get the first word news in dubai. >> theresa may defended her toision to ask jeremy corbyn help draft a new brexit deal. the prime minister has asked the eu for delay until june 30. the eu is mulling a much longer extension. u.k. is set to crack down on social media companies like facebook. could face a statutory duty to protect users against harmful content or face heavy fines. the government is making a push for an industry funded regulator. it would enforce rules on removing images that encourage terrorism and abuse. saudi aramco is preparing a $10 billion plus bond offering this week. interest is reportedly already

more than $26 billion. the success of the sale is hugely important for banks involved such as jp morgan. they are eager to run a potential ipo i aramco. the company is starting to raise cash ahead of its purchase of a majority stake in sabic. london's new altar low emission zone has come into force. drivers of less environmentally friendly vehicles will be charged 12 pounds for entering central london. this is on top of the congestion charge. the move is part of a push to tackle omissions in the capital. 360 areasat least with illegal pollution levels. 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. the rebound in march

payrolls may have played concerns u.s. group is headed for a ditch, but weaker than excepted wage growth reflecting a 70% chance of a quarter-point fed cut. this comes as president trump is continuing to pressure the fed to sustain growth amid weak inflation. it is only a matter of time before the central bank cuts rates. this a fed friendly goldilocks jobs report? >> it kind of was. when we look at the consumer sector in the u.s., we still think the u.s. is stuck in a rut. the fed's dovish advances going to stay there. we are nervous pricing has with a 50%two dovish chance of a cut this year. the reality is until we start to see it short-term bidding, it is going to be sufficient to keep support for risky assets in the short term.

talking about this last week. goldman, jp morgan, morgan stanley all cutting their 10 year yield forecast. would you be in that camp as well downgrading your 10 year yield forecast and 2019? >> we did not think there was much chance of a real break beyond 3% at the start of the year. this of that is linked to the dynamics of the global economy. the phillips curve has pretty much been dead for a while. the reality is we are at neutral. the only thing that could keep yields higher is if we get a sizable reduction in global risk. that comes from good data. nejra: what have we seen for the dollar? >> i think it is time to start turning neutral on dollar. what we are seeing is on the one hand, we don't think the dollar

is going anywhere fast with a protectionist white house and dovish fed. equally, we have the global economy shifting down, the premium kicks in. we started to see safe haven status for the greenback. that means the dollar is trapped for now. even though we think it is around 10% overvalued, it's hard to make a case at this stage in global economic circles. nejra: you have talked about the dollar trap. from here, turning neutral on the dollar, it must have been somehow painful to be bearish. how convinced are you we could see weakness come through even though we have turned neutral? >> it is more idiosyncratic. to -- business resorted take brexit, e.m. stories coming through from rate cuts.

i think that is where we are left. ,hen it comes to the dollar that is probably not going to happen. nejra: let's talk about other asset classes as well. seven days of gains. the best runs is 2017. futures lower today. ,p morgan has come out and said the correlations you want to be watching rather than equities and bonds is equities and credits. if you look at u.s. stocks versus high-yield credit spreads, not surprising credit spreads have been tightening and stocks have been rising. which of these you think will move first? a widening of credit spreads or weakness in u.s. equities? be u.s.atalyst will equities. is 11 of those things where that correlation is important for global markets right now. it is a testament to why the dollar is strong. if you are going to be putting money into safe haven treasuries

, hit his cautious optimism. neutrality is going to be reflected across dollar assets. it's one of the reasons you think equities could be the first to move here. the outlook for the earnings season. ofadding to the sort downswing we are seeing, i think that's going to be a negative. support is across the fed, across the ecb, but that is priced in. the curves are really flat. until we get good data, risky assets is cautious optimism. nejra: we were saying how fidelity says treasuries are going to test on inflation awakening. they are saying investors are too excited about dovish central banks. is it too early to make that call about a revival or the

beginning of a move in inflations higher? >> when we start to see the cyclical cylinders for global seenh, we still do not strong enough. a step down here, we're going to get potential downgrades this week. the reality is inflation is going to stay low for a lot longer. we have a lot more to discuss. breaking news here. euronet has received a recommendation by the norwegian financial supervisory authority recommending euronet should be approved as a suitable owner of up to 100% of the capital of the norway fsa sees it as a super -- suitable owner of oslo bors. these are the headlines coming

through. we will bring you more details as we get them. summit, this week's theresa may calls on lawmakers to get her brexit deal over the line. we will focus on the u.k. next. on bloomberg, we speak to the saudi energy minister. manus cranny will be speaking to him exclusively. do not miss that after 7:00 a.m. london time. when you are traveling to work, turning to bloomberg radio on your mobile device or dab digital radio in the london area. ♪

nejra: here's a look at what you should be watching. the chinese premier travels to brussels for the china-eu summit. the gathering comes amid tensions over china's influence in europe. israel has to the polls.

if benjamin netanyahu wins, he will become the country's longest-serving leader. willergency brexit summit discuss an extension to the article 50 process. the fed releases minutes from its march meeting. vote in seven phages thehases with results do 23rd. we've got the bloomberg business flash. >> warren buffett says wells fargo should look beyond wall street for its future executive. the billionaire berkshire hathaway chairman is the bank's largest shareholder. hours before the announcement, buffett said he backed sloan 100%. fiat chrysler is teaming up with tesla to comply with eu emissions rules. the company is using the option which allows automakers to meet carbon dioxide targets.

the financial times reports the company is paying tesla hundreds of millions of euros for the deal. restructuringsays u.s. investment bank isn't part of merger talks with commerzbank. top executives have told employees the lender is committed to the u.s. outpost. the banks are close to an outline for a potential tie up. the rival german lender started negotiations last month. that's your bloomberg business flash. thank you. now to focus on the u.k. and prime minister theresa may will meet eu leaders to make the case for an extension. a member of may's top team has announced a long but flexible extension as like purgatory. thecomments were made as u.k. pm issued a video statement appealing to lawmakers to get the deal over the line.

neeraj patel is still with us. we are seeing pound is one of the best-performing g10 currencies so far this year. is the market going to be vindicated. to aussiery shifts getting an extension. we think if we can get the flex of extension, the focus on markets is the kind of deal little tumble he gets through. that still seems to be the most likely scenario. weeknk what we saw last where talks of potentially a unity brexit could be sterling's best possible outcome. last week when we were just thinking of shallow sterling recovery, if we get to the eu, tory proof from a u-turn into hard brexit, that could see sterling recouped more than we thought. getting it through is the biggest? global markets have focused on. assuming we do get a flex

extension. i think you still hold the view sterling's games are going to be capped. i what level and why? global economy is the biggest factor here in the prospect of the bank of england doing multiple rate hikes. a one-and-one relief rally. you need to see inward investment coming back stronger. the wider global economy is weaker. that has made an investment case sterling is weaker. unlessore of a 135 story we get a closer alignment with the eu in terms of a national unity bill. that could see gains up to 138. still a long this point. -- a long shot at this point. nejra: theresa may wants this

extension. questions over whether the eu will grant that. what impact does that have on cable? something to work out whether it is actually positive given the uncertainty and the possibility we get a general election. limboess we still say in where the pound is supported by 130, a deal taken off the table, i think it is whether it is a case of 130 or a sizable reduction in sterling's risk premium and actual recovery in cyclical spirit. that seems the longshot way. it is either 130 or stays stuck in the low one 30's or maybe moving up. volatility.k about the market does not think we are going to get this scenario april 12, judging by one week of volatility. a dip in that for cable. if you look against the euro -- example, theor

only place in the market where a significant risk to the currency, a local story, that's where you're going to see panic or see some fears. -- if come friday we are still without a deal, you would not want to think what happens the pound in that case. is going to be a terrible scenario. similar to june 2016. nejra: are moves in eurosterling going to be more subdued? we think the pound has better gains against european currency.. the fact is with eurosterling, a lot of shorts have not unwound since 2016. the market is still long eurosterling. we break 85 significantly. we do get that sooner rather than later. has the euro price in all

of the eu this week? it is a technical adjustment in the euro. ecbs really hard to see the pushing the dovish can down the road and then moving out first quarter 2020, which seems unlikely. you probably want to keep cards close to the chest. of two dovish central banks stuck in this rut. volatility to be low, but that is good news. we think the trade is going to be invoke the summer when you've got a dovish ecb, low inflation euro zone economy, and really limited signs euro rates are going to break. nejra: if you look at those five-year five-year stocks, that tells you everything you need to know about expectation for inflation.

we might not get as much concrete as the last meeting, but mario draghi will no doubt tltro three.ut i was talking to a guest and she said we could see some kind of announcement on the tearing come september, but that would come coupled with the ecb talking about lower for longer on rates. would that be a view that you share? with the impact be stronger on the euro or on the tenure bund yield -- 10 year bund yield? viraj: we want the signal the cavalry is on its way. the reality is i'm hoping the euro zone economy can claw its own way back after the short-term economic slump. a lot of the signals or the policy technical adjustments we have made, they are hoping they won't have to put them into play come summer or later in 2019

unless the euro zone economy stays stuck. there are signs of green shoots that some of the worst case scenarios are pushing back rate hikes even 2020. it is going to be euro zone data. with a 10 year bund yield, where do you see that by year-end? are we going to be back in positive territory? viraj: a lot of the negative is priced in. what we now see his tail risk, the elections for the european parliament, and hoping the data starts to shape. if we see that, the bund yield will take its cue from a recovery in euro zone data. nejra: thank you so much for joining us. viraj patel at arkera. the fed is not hiking and markets have begun to price in cuts. that should have been a good thing for emerging-market fx.

instead, em currencies are trading lower. no longer your friend in emerging-market currencies. this used to be a strategy that worked well in 2018. this is the best performing emerging-market currencies over the past year. that strategy in 2019 has fallen nearly 3%. you can see compared to the broader em index on top, which has gained a bit more than 1%. part of the reason emerging-market currencies are starting to struggle, starting to stall, might be the growth picture. lower yields in the u.s. push investors to those higher-yielding currencies. that might not be the case when we don't have a growth pickup. you talked earlier about the dollar stalling with viraj. you can see not much movement. typically what happens when you get a peek in volatility, that is when the carry trade does really well. volatility peaks.

now there are some signs you can see the blue on the end, volatility does look like it might get awakening again a lot of factors have to come into play before it happens. once it does, volatility rises. threat.a clear just generally, emerging-market currencies. nejra: we are all waiting on the volatility, but get ahead of it. thank you. coming up, we speak to the saudi energy minister. do not miss that exclusive interview with my coanchor manus cranny. that is coming up next. bloomberg users can interact with the charts shown using gtv . we have shown a lot of them this hour covering fx, stocks, credit , browse those charts to catch up on key analysis and save charts for future reference. take them along to your morning meeting. impress your colleagues. tune into bloomberg radio live on your mobile device or dab

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nejra: good morning from bloomberg's european headquarters. this is "bloomberg daybreak: europe and these are today's top stories. fightingds its rally flares in libya. we speak to saudi arabia's energy minister in riyadh. trump'strade, president top economic advisors has a deal is close, but china's state news agency warns there are still issues to overcome. prime minister theresa may looks to restart stalled brexit negotiations with jeremy corbyn head of a crucial summit this week.

good morning, everyone. it is just on 7:00 a.m. in london, under an hour from the start of cash equity trading. it looks like we could start the week in the red. ftse futures off 0.5%. a stronger pound in today's session. dax futures weaker along with cac 40 futures. seeing u.s. futures track lower after we saw seven straight days of u.s. equities hitting a six-month high, the longest run of gains since 2017 for u.s. equities. was it a goldilocks jobs report given that we saw the gain in payroll? meaning a fed friendly report. we saw the 10 year yield dip a little bit down for a third day. we are below 250 on a 249

handle. you see that reflected in the futures. money moving into those 10 year bond futures. if anything, we could open up flat with a bias for yields to move to the downside. we did see the tenure bund yield close above zero on friday edging up a basis point. we dipped below basis -- do we dip below zero today? we have the ecb meeting on wednesday, so that could factor into the bond and btp market. juliette saly is standing by in singapore with markets in asia. great to have you with us. what's going on? a bit of weakness in chinese equities the last hour or so. the csi 300 now off by 0.8% despite a positive start from hong kong and chinese equities, which were close on friday for a public holiday.

things started to turn negative. the airline is under pressure. it stronger yen. the nikkei weaker by 0.2%. weakness in korea. all helping the australian market, which closed higher by 0.6%. flat in india. let's have a look at currency players. we have seen this move going into the yen. detail.aiting for more the yen is up by 0.3%, the front runner among g10 currencies. the aussie dollar the weakest despite that strong move in iron ore. the aussie being hit by rate cut talk. the korean you want is the worst performing asian em currencies, actually at a five month low. withl investors really dividend payments weighing on the currency. nejra: thank you so much.

everything you showed in terms of dollar-yen and action in the equity market, and we talked about the 10 year treasury yield, suggesting a touch of risk off in today's session even as we have heard about progress with those trade talks and we got the strong u.s. jobs report on friday. let's see what's going on. bloomberg's word news is up next. >> president trump may get his way when it comes to lower rates. monetary policy makers have been surprised by how tame price pressures have been. they can afford to wait before deciding their new move. investors became convinced it is only a matter of time before the fed lowers rates. theresa may has suspended her decision -- defended her decision to ask jeremy corbyn to draft a new brexit deal. she warns the eu may never -- the u.k. may never leave the eu if the two do not reach a compromise.

the prime minister has asked for a delay. the eu is mulling a longer extension. secretary to the treasury says that would be -- kirstjen nielsen is leaving her position as secretary of homeland security. she has been a lightning rod for criticism over the trump administration's immigration policies. over asked her to resign frustration border issues are not being solved faster. last week trump threatened to close the border with mexico to stop a spike in migration. fighting on the outskirts of tripoli as libya's government says it will start a counterattack against self-styled libya national army. the military operation -- at least 35 people have been killed in clashes since wednesday. opec adding to instability in oil markets. this all adds to the bullish

sentiment. >> the price for this period of time is 75. that is going to be reached. >> 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. bloomberg. let's get the latest on global trade. president trump's top economic advisor says the u.s. and china are closer to a deal. larry kudlow says both sides will keep in contact as they work through the remaining issues after last week's negotiations wrapped up. >> we are closer than we ever have been before. a lot of very difficult topics. for the first time they are on the table is being resolved. that is incredibly important. the president here expressed doubts thursday, guarded optimism. maybe more than guarded optimism.

reported tonping is have called for an early conclusion to the negotiations. a global macrois strategist at rbc capital markets. great to have you with us today. i know you don't focus on daily moves. it does interest me that today, even with the progress that has been touted in the u.s.-china trade talks and the jobs report out of the u.s., we are seeing futures point lower for u.s. and european equities and we are seeing the 10 year yield lower. it is a little bit of steam coming out of the risk appetite? we made really good progress last week. the equity performance essentially over the last week, we were anticipating to some degree the jobs report already. i am not too worried about this. we will have to see what this week brings. it is a bit of a short week as well. in general, i would not be

worried about today's moves. nejra: what is your take on the jobs report? you have the gains and the payroll, but a little bit of softening in wage growth, meaning the fed can stay on pause. >> absolutely. but if i take a step back, if you look at the jobs report not only for this month, but the past couple months, really painting a strong picture for the u.s. liver market in particular, but more broadly, the u.s. economy. growth thiswage month is not awfully concerning. the key thing is that wages are slightly going up. when the labor market remains strong and wages are slightly on the up, that is very good news for consumption going forward. therefore, for gdp growth. nejra: what does this mean for

10 year yields? we saw goldman, jp morgan, morgan stanley, hsbc, credit suisse, socgen, all of them revised down their 10 year yield forecast for 2019. the average bloomberg has got still sees the 10 year yield ending the year at 2.6%, higher from 249 -- 2.49% now. have you revised down your forecast? >> i'm a little bit offended you have not included us in the list. we just revised our yield forecast down as well. , you have to judge from investors point of view, where are we in the here and now? the forwards are slightly higher but not a lot. our view remains we are going to end the year and the next three months most likely north of the forwards.

yieldsyou do see 10 year staying below the 2.75 handle throughout this year. what about bund yields? we went above zero at the end of last week, taking a check on where we are now. we are still holding above zero on the 10 year bund yield. you have the ecb meeting this week. >> let's get the ecb meeting out of the way. i do not feel this week there's going to be anything in it. we have policy announcements. i do nothing we get any details. i think this one is one that can easily be skipped. having said that, if you take a step back and you take what i just said about the labor market, our general view is going into q2, into q4, into q3, excuse me, we will very likely see a cyclical rebound of economic activity. we think most of the major bond

markets will start seeing a rise in yields again. , the eus -- for bunds has anchored firmly. any rise will probably go above the four. it is difficult to see a substantial rise. nejra: how would you advise to invest around the yield curve in the u.s. and europe? >> first and foremost, in our mind, is whether or not the implied inflation expectations can rise again. if you look anywhere outside of the u.k., the breakevens have been falling quite rapidly. we think there is a rebound do here. that would favor inflation linked bonds. if that is the case, though, if the breakevens can rise again in the front end remains relatively anchored, we are not going to see a quick resumption of fed rate hikes. that probably means the curve

can steepen. we want to be short duration. trades look good for us. how the market has performed recently, we think we are going to see a reversal. we have not seen huge moves into the relative space and we think the reverse is probably going to bring the same kind of thing. not a lot of movements between the markets but a lot of movement in the yield curve. nejra: i will add you to that rollcall of houses that have revised down their forecast. thank you so much. now it's time for the day's big interview. let get back to manus cranny at the first gulf intelligence saudi arabia energy forum, speaking with saudi arabia's energy minister. listen in.

>> thank you for holding this -- fornd of course hosting and organizing. how are we doing for sound out there? give me a thumbs up if it is yes. ok. >> maybe it is just me. [laughter] manus: i am the nervous one, your excellency. go ahead, sir. >> the kingdom is going through a phenomenal transformation. see it in social activities, economic activities, amongst the youth.

[inaudible] nejra: that is saudi energy minister khalid al-falih speaking on stage with manus cranny in an interview. we will get back to that as soon as we get over the audio issues. oil extends gains from last week. concerns around the conflict in libya giving wti a lift. overall, a risk-off tone coming into the markets. the msci asia pacific index flat on the headline level. below the surface, a fair amount of red. china coming back online after

the holiday on friday. the shanghai compass it down. the csi 300 down by the same as well. looking at the nikkei, i already mentioned japan was lower. the 10 year yield edging lower. let's get back to the saudi energy minister, who is joining manus cranny for an exclusive interview. >> sabic of course is the ideal way to do this. there's a lot of overlap. upstream tofrom midstream to downstream. it would have been unthinkable a few years ago. sabic has always seen as the national champion. we have a vision of breaking very years and paradigms which is turning into reality.

manus: will this deal re-energize his excellency in terms of his ability to deliver on vision 2030? >> i think the vision goes way aramco.audi bold.very of course you know the omega theect turbocharged many of -- of our future economy. sabic, i think it was the other assets. sabic is just sort of -- for

doing this. the financial investment with saudi aramco is going to realize opportunities not just for aramco, but for sabic itself and the shareholders. it is value creating all along. , a winch a win for saudi for the minority shareholders. you can't tease me with other asset sales. what kind of assets might they be? premature, buts my point is it is going to be inactive and not a passive investment. they have taken a significant share of uber. lucid will go into

manufacturing. a share in tesla. bold as they were entering some of these investments. they do exit. sorry aboutus: this, your excellency. >> it is ok. the objective is to create value for the kingdom. first and foremost. this will be done through strategic investments, but looking globally. emerging companies and industries to create value for them, but at the same time, to leverage acquisitions and investments for the benefit of their kingdom strategy. i am duty-bound to ask you.

you said we could hope to raise $10 million. did you manage to do that? >> you mean the bond sciacca >> yes. the bonds, of course, are at a very critical stage. onhink the deal will close wednesday. i am advised not to comment on. i think the press report and the analysts have been extremely impressed. this is not a surprise to us. saudi aramco is not only the largest, but the best quality company that exists on the planet. i say that from every angle not in terms of resources the company has access to. but also environmental stewardship. also technological prowess in

terms of the technologies that have provided safety and human resources, the company led by saudi's, operated by saudi's, saudied by predominantly board the has always taken the right decisions for the world to see. we have to think beyond the bonds. they will be, we hope, closing this deal with sabic in the six months to come. manus: if this is successful, and we are all speculating how successful, would it be a curtain raiser to coming back to the bond market? >> i think aramco will establish a permanent presence in the capital markets. you in a couple

years, you are going to have your choice between investing your savings working for formberg in aramco bonds commercial paper. aramco is the world's largest company. is going to have all the tools at its disposal to access capital markets. forerms of paying the price the sabic deal, and again, the prospectus for the investors, it is not the primary reason. and the only reason for accessing the bond markets. it is a tool the company needs to have. manus: that establishes a very clear yield curve, so to speak. let's play a little bit of sport and move on from the bonds.

just how strong is demand? what we really want to know is, where is the bulk of demand? >> the books have not been closed, but it is upwards of both numbers. sciacca --0 billion $30 billion? >> i think so. on wednesday, we will all know. bonds.e question on the did you have to pay a premium to get the issue away? on the bonds. bonds.ave not price the which wee one subject are going to discuss in a lot more detail is about the growth of the circular economy.

the transformation. monopoly, bit of a but what i really want to understand as part of the transformation is what is your ambition and how do you make it work? >> there are two dimensions to gas. one is domestic where gas is the stock of choice for petrochemicals. we have been talking about sabic, and sabic is underpinned by its own internal capabilities from technology to operational excellence to management to governance. it is also supported by access to a gas stock that is fantastic. it is plentiful and reliable.

we need to increase that. there is a second wave of development in the kingdom that over the last few years of developing our own unconventional resources. , but alsoe shale gas other formations that have been used to fuel mining and manufacturing development also, gas is the fuel of choice for a generation of course. natural gas will be used to liquid going mostly in power but some in water desalination. both sectors will be reformed and efficiency will be improved dramatically by changing the generation, to auto

fleet powered by gas and renewables. a great reform and upgrading and efficiency work in kingdom. we realize that oil will continue to grow. i said that yesterday. i have been saying oil will continue to grow, but gas will grow faster. manus: does that mean you will have to buy assets? >> we will do two things. anything in excess of our domestic needs, which i just outlined, will be exported. be,ill be an opportunity to i will not say largest exporter of gas, but a significant

exporter. youink in five to six years will see saudi arabia exporting gas, i hope. 25, 26 is not out of the question. questionseady in about interconnection from sightlines all the way to kuwait and iraq. manus: have you committed a capex number? >> we have not. what will happen is a commercial --mework through which pipelines in the region. this will be a significant move forward because we are the country that interconnects multiple countries and iraq as well.

trade, we knowg growing sizable economies from china to india to other countries in asia, we will need to displace a lot of existing coal generation facilities to meet climate change targets, but also we know there are billions of people that have access to clean energy as well as the population growing by another 2 billion people. all will demand clean energy. we think clean energy is going to be a combination of gas and renewables. ae kingdom is ready to play role in renewables and gas to power these emerging economies. manus: can i challenge you on the gas front? we have heard commitments in the past in regards to gas. what is it that has changed?

i think you can be a net exporter. has there been a significant shift in terms of policy and commitment in delivering on this? >> the resource base has changed for us. we have looked to the limit of resource availability. unconventional resources deep into the kingdom. to access not only natural gas, but what gas is going to power growth for the petrochemical industries as well as give us these resources. manus: let's shift the agenda along.

i have spent the morning talking about oil and your bond offering. fire.l market is on citigroup says 75 miles is attainable. let's do it a week early. support andwing consensus to extend cuts? is premature. our objective of bringing back inventories to a reasonable level remains unchanged. to agreesi talked with the saying that we do want to bring inventories down. we saw how sensitive oil markets are to inventories.

when we increased production in the second half for the reasons we all know, we saw how quickly the markets reacted. therefore, we want to avoid that scenario materializing again. i think the kingdom given our financial position, given our scale, given our volumes, can probably withstand these shocks more than others. we saw how companies have started to change their investment plans. we saw how poor countries heard. we want to stabilize the market and keep them stable. inventories are starting to stabilize and come down, but they are still significantly above normal level. wtolast factor