manus: welcome to daybreak europe. 6:00 a.m. in london. pedro sanchez looks set to return as prime minister, but could look to catalan separatist to forge a core luncheon -- coalition. we're live. industrial profits rebound. stabilization in beijing will boost the euro area. another big week for earnings. phillips kicks things off with their numbers, hitting the bloomberg terminal right now. ♪

manus: warm welcome to the show. with have the phillips numbers heading to take at the moment -- tape at the moment. that is just a snip ahead of the estimate of 4.14%. this, in terms of margins. the margins are marginal, beat 8 estimates, and the adjusted comes in through at 364 million. that beats the estimate in terms of the guidance we had, previously for 6%. when we last spoke to the ceo, he really did defy the gloom at christmas time. buyback was announced, upping the dividend, talking about fantastic margins.

those are the numbers as phillips reaffirms its midterms goals. let me take you to the markets because there are a number of huge issues. did mr. trump speak to anybody at opec? that's the question. this is the oil market. we're just seeing a pause for the nymex crude, still the hedge funds the longest sweep of gains in nearly 16 years. fridaymp's vocal less on -- vocalness. i called opec. opec doesn't necessarily control the price of gas. we talked to our chief economy about what the data really means. the bank was in the red. it was very much at treacherous week, the worst week since october. the bloomberg dollar index back, unchanged at the moment. say the global use

is unlikely to be positive enough to dent the dollar, as markets get straight to the story. politics is first and foremost. pedro sanchez set to return as prime minister after the third election in four years. his left-leaning allies, close to a majority. though may still rely on catalan separatists to govern. >> the socialist party has won the general election, and with it, the future has one in the past has lost -- won and the past has lost. [applause] i firstly, from the heart, would like to thank the more than 700 million spaniards that gave us their vote and trusted the socialist party to lead the country for the next four years. manus: joining us now from the

front of the spanish congress is annmarie hordern. great to see you. sanchez comes out on top. now his got to lean into the catalan separatists. he's within smelling distance of forming a substantial government. annmarie: yes, that's right, and that is likely what we're going to be seeing in the next few days and coming of him trying to form this government. he's known as the great survivor in spain over the course of his political career. really, his two options to form a government, one would be clear-cut. many investors say this would be a stable government. as you say, he does a deal with pay most, but they don't have enough numbers. they're going to have to reach of the catalonian's to form a

government. this would be a government he leads, but he has to profit up with other parties. the other things, we have european elections at the end of may. maybe we see negotiations behind closed doors. they're worried that could potentially alienate potential voters and supporters for the european union elections at the end of may. manus: in terms of the ere is the populism that swept us across europe and made it to spain? are investors worried about that? worried about the party? annmarie: it's a really good question because the buzz around the box party was really something. many thought they would gain more seats than they did. one one hand, investors can be worried in the sense right-wing populism has entered spain,

similar to hungary. or italy. but at the same time, it was contained. they getting get the votes many thought they would get. for now, volatility for investors, not as volatile as many were predicted. it is a very good question, considering the fact we've seen this right-wing populism slip across europe, land in spain. i was surprised. they're using trump like slogans, like make spain great again, hanging from their headquarters. manus: for right-wing, i'm tripping over my words. you see, it's just monday morning. great work on the ground. we look forward to your reporting. to asia, juliette saly is standing by in singapore. how is the volumes looking? was scrubbing your attentions? juliette: absolutely, japan out of action until next tuesday.

india also closed, so volume low. we are seeing upside in chinese markets. look at the hang seng and the csi 300. we are still awaiting a ton of earnings from some of the big-name china companies. we've heard from china telecom. trillion, some6 of the companies in total reporting out of hong kong. south korea's index looking higher. we are seeing weakness in the asx 200. that is one downside coming through, off by around .5%. let's have a look at the stocks. we've mentioned the earnings reports out of hong kong and china. bernstein raising casino, china in particular raising target by 22%, saying it is going to be the biggest operator in the market for the next five years. you can see it up in hong kong trade. in singapore, pretty good

numbers, southeast asia's largest bank and the first report first-quarter profits. investors like that. in australia, a lot of upside from childcare providers. there is an election in a couple weeks in australia and the opposition labor party signaling some support to childcare operators, which has seen money into those stocks today. manus? manus: thank you very much. juliette saly with the latest on the markets in singapore. now, chinese equities have fluctuated after the latest industrial profits data showed a rebound. investors will be watching china cmi data due tomorrow. month.y continued this investors are waiting on the trade resolution. both sides still face significant unresolved issues as president trump's top negotiators had to beijing to continue talks according to the senior administration officials.

william porter is my guest host this morning. good to see you. our top line popped into the gtv library is industrial profits. so, from an equity point of view, there's this moment of reprieve in the market. as do you read the signals china putting in a base? william: well, that's a very interesting and timely question. it's interesting. you are talking about friends of phillips piercing the gloom. we happen to be on the same day back in december. this was a theme that the asian economy was going to help the european economy recover, but indeed the european economy didn't need that help on its own. the consumer sector was doing fine and phillips validated that. go back to asia, we've been

getting helpful data in that regard. taiwan is a major leading indicator of asia and the world. and on friday, put together pretty strong leading indicators. definitely the signs are that this industrial pause, globally, that was definitely in asia, is a starting to bottom out. that is encouraging. manus: what a wonderfully rich word, nucleated in asia. let's talk about the bond market, perhaps for the rest of asia. we've seen this route, this doubt in the market might, 34 bits and a month is what the notes are on in china. we've gone from zero to zero quite quickly -- he wrote to zero quite quickly -- hero to zero quite quickly. are we cheapened up efficiently?

do you believe the pboc is really gone, or perhaps taking a pause? william: i think if you look at markets more globally, there does seem to be an excess of enthusiasm for yields falling around the world. i think technicals have been very important in all of this and what's happening and china has as much to do with technicals as anything else. this clear move their that's consistent with the idea the economy is bottoming, whether the pboc goes on to validate that is less important than the technicals that are in place. manus: what did you make of xi jinping's comments when he very expressly talked about the concert that -- the currency at an equilibrium level? do you think that just to get mnuchin and lighthizer over the mental line to do this trade

deal? you're: yes, and i think touching on something -- when i look at markets, i like to look at the things that are catching explanationsg to rather than things you can account for as a result of data. the dollar, generally, falls squarely into that category. one of the biggest, most surprising moves has been the strength of the dollar. people are literally strangling -- scrambling to catch up with that. there are a couple of things going on. there is a current -- turn in the cycle that we touched on. it is our performance of the u.s. economy. i've had it explained to me, explained" in terms of the -- in terms of quotes, the weakness and relatively easier monetary policy. the other thing going on his monetary conditions are

tightening. so yes, i think that feeds back into this overall discussion about currencies and the chinese currency, and i think it helps get us to a trade deal, as you said. but a trade deal has been on the way anyway. i think it's in the interest of both parties to reach one. manus: just depends on who's more desperate. the politics of the note states versus the pragmatism of xi jinping. stay with us. much more debate. head of credit suisse securities stays with us. coming up, goldman says the euro area will benefit from chinese stabilization. we talk europe. that's next. later, this is the conversation. do you really want to understand what's going on in the roof -- in the world? this is bloomberg. ♪

manus: this is a bloomberg daybreak: europe. i'm live from dubai. breaking news on iran, not since 1980 have we seen this kind of inflation. it's the red-hot headline. the imf space the risk of 50% inflation this year. why? because of the u.s. sanctions. this is the reasoning. that could be the highest level since 1980. consumer prices average 50% on the year. you're looking at expected inflation of 37%, even before the waivers, the removal even before the waivers removal, the economy was expected to go into a second year of recession. so, again, this is one of the ramifications of those ravers -- waivers. not just in the oil market, but

down on the ground. that's your read -- red-hot headline. let's get first word headlines with olivia. olivia: pedro sanchez is set to return to six prime minister. you may have to rely on catalan separatists to govern in madrid. sanchez was forced to take the election when he passed his budget. the next round of trade talks gets underway, but bloomberg learned a significant issues remain unresolved. president donald trump may walk away from the table. the u.s. trade team is set to continue discussions tuesday. the chinese premier will lead a delegation to washington. ignored aisory board vote of no-confidence in the leadership. this decision means the chief executive can stay in his position. the key issue is monsanto. they lost 35 billion euros in

market value due to the alleged roundup. endgame" smashed box office records. blowing through the market with infinity war. disney now boasts the top four spots in the box office. global news, 24 hours a day on air and at tictoc on twitter, powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. manus? manus: thank you very much for the roundup. now to italy. it's avoided a downgrade. after the markets closed, s&p left the debt rating at triple be. but also a negative outlook. we get key euro clear data tomorrow with the release of the first order gdp from france and from spain, as well, as from italy. goldman sachs says china

stabilizing the economy will provide a boost for global growth. william porter is here. can we deal with the downgrade? s&p refrained from doing the downgrade. does a lovely line here. give got to wait for the hard data crush the crunchy before it -- to crush the country before you go to the downgrade. do you think they waited for the downgrade? william: we think it's a matter of timing. we had an intense discussion on the back end of last week and my economics colleague and i got this spot on. we circle october, however. the point being that, at the last review, back in october, s&p said a number of criteria on 1.1%ata they had used a gdp forecast.

a better idea was probably 0.1%. we were concerned about that. then they talked about the trajectory of government debt. that is not deteriorated the what you might expect. probation,y much on as to whether they can get out of this growth whole. and italy is a major source of leverage to growth. if italy goes wrong, there are big problems. italy is leveraged to growth. we think it's a problem differed, but if the economy can pick up, obviously the next review will be less intense. so, there was always a chance we thought. we were kind of nervous. that was a chance s&p would anticipate things. the most likely outcome would be what's happened. we're now dependent on growth. manus: so that's delayed.

i want to get a sense. if china stabilizes, would that embolden or perhaps put a four in your italian story -- floor in your italian story? william: it helps, but our big story in europe has been this transition away from dependence, what's going on in asia, to a more domestically driven set of growth. through the growth of the consumer sector, as unemployment has fallen, wages has started to rise. it's very interesting to hear and see phillips putting together numbers consistent with that. what's going on in asia is important to erupt, and europe is exposed to what's going on, but the real story is a transition away from that. we hope we start to see get that supports that. if we do, italy will become less

volatile commodity going forward. we can address other issues in a leisurely frame than if we were looking at a slow down here, which our view is still that we're not. manus: that seems to be gathering census, perhaps we passed of the worst. banks are taking remedial action, going on cause or reversal. i want to talk about convergence trade. this is a chart we put together. suppose,is, i convergence towards the blend on the ecb -- bund on the ecb backstop. is this trade done? or is there more to come? the european economy can grow, then there's more to come. this is a very directional lever

trade that feeds strongly into a correlation we draw between spreads and growth. that is the transition mechanism right there. it's all about growth. our view is that growth is going to recover and those spreads can compress. if we look at the dollar, one of the things that concerns us slightly is you mentioned easier monetary conditions around the world, the ecb. we can talk about that separately. the dollar is perhaps telling us that the main driver of global financial conditions in the u.s., which is the fed, is not as easy as everyone thinks. that's a risk point. everyone is focused on this nice, cuddly fed. manus: why do you think that the fed is not as easy or cuddly as perhaps the market assumes? william: just the data.

we always look at what the fed does a rather than what it's saying, and the recovery that was taking place. they took growth from 8% to 4% and created problems for world markets. that started a recovery. we went into q1 bullish on the fact the recovery was taking place. the recovery has potentially stalled. then we had the spike in the dollar that suggests conditions are tightening. that's what makes us as noticed. time is always the greatest enemy. i want to focus on the u.s. we had the gtv library, below 2%. there's a lovely article on the bloomberg which is said, are we 1995-9096, --d of by6, there was this reversal the federal reserve. you and i were around then.

is this reminiscent? for the bond markets? 1995-next 96 followed -- 1996 follow the worst wipeout and bond market history in 1994. it was a slightly exceptional time automatically. we just haven't had anything quite comparable. so, i hesitate to draw too strong a parallel. although you can never say it's different, you have to take each time on its merits. what have we had? we've had china wto, the biggest event in the world since then. the world has changed dramatically. i'd be hesitant to draw too many lessons from history, but some things don't change. there's possibly a tighter set of conditions. manus: thank you very much.

let's hope we don't get a rerun of 1994. we're going to talk phillips next. ♪

manus: let's check the world map. a lot of data to deal with. china pmi tomorrow. it is golden week in japan. could you have the potential of a flash crash? let's get to a ceo who knows about how to run a company on a global perspective. 364 millionorted euros, above estimates. the ceo joins us now. had theoking back, we

beginning of the year, and you trumped everyone. you defied the gloom. are you still in a position to defy the gloom from what you see inside the business right now? >> yes. i think this was a reasonable start of the year. the first good news was that personal health, which was weak throughout 2000 is now back to a solid 5% growth. sony care power toothbrush business. a second highlight is that emerging markets group grew double -- digits. a lot of people had questions about china. i have maintained optimism the people they are need great health care and phillips is in a position to grow. europe was black.

-- europe was flat. north america had a slow decline. growth inwe had a 10% orders. some of these orders will only make it to revenue in the course of q2, q4. momentum will build as we go through the year. that's why i also look at it as a reasonable start. toough the year, we will get our growth target. let's take some of that conversation. it's i want to focus on europe first of all. have we passed recession risk hallmarks for you? >> i think europe is in a

challenging situation. we have elections coming up. growth across europe is uneven. overall, i see a flat market growth in europe. it is not clear how that will turn out. it is a huge region. it is important, but for growth at this time, phillips has been more successful in emerging markets. what about price increases? where have you had to implement price increases? were -- were you able to make price rises sticky? rises stick? the headwinds were partly

the tariffs. we can pass that to customers in the short term. it is not completely done yet. i always say to our people is through strong innovation. i am very pleased with our therapy business where we have market-leading innovation. doctors can do the procedures faster, treat more patients for less cost, and that is driven by innovation. manus: what about the health care margins? i thought, if you have a choice and you wanted to buy or do an acquisition, will it be health care?

what gets you the most in terms of accelerating the growth story if at all? pivot ofe strategic phillips into a technology -- health technology company is going well for us. we have every year increased margins by 100 basis points and upped our growth trajectory. the future is in health technology, improving people's lives. done over 20 positions in the first quarter. it is an exciting stage. from a market expansion point if you we are on track to improve. a combination of organic growth and selective acquisitions. manus: to go back to your world

map view, let's talk about china. about theot of people pboc. into what kind of an uplift you saw or trickle-down effect you saw from the authority? how did stimulus manifest itself in the phillips business plan in china? the best example i can give is the china strategy for health care 2030. the china government realizes very much there is an aging population. with more chronic disease. the most prevalent issues are cardiovascular disease, copd, and cancer. the country has not yet the infrastructure to deal with that tsunami of disease in asian

populations. within that strategy there is a strong emphasis to expand health care. , artificial intelligence, telehealth.and phillips is well-positioned. we see strong double-digit growth. the china microstrategy in the film's business plan align quite well. macrostrategy and phillips business plan align quite well. manus: who needs the trade deal more at this juncture if you have to put a dollar down on the outcome -- a dollar down on it? we see two very strong

geographies that are not easily going to blink. this is why it phillips we said we should not count on this being resolved quickly. there is more to the eye than the tariffs. there is the geopolitical situation. we as a multinational company stay neutral. we have a strong base in the united states. where a net exporter from the united states. we have a strong presence in china and europe. feet that can navigate the world's storms and still do well. manus: i am off to get one of the electric toothbrushes. let's see how the world map looks. let's check on the markets around the world. standing by his dani burger.

burger.ni he was not blatant in terms of who he thought would win. what are the markets telling you about trade wars? : maybe more definitive depending on where you look. one of the assets that would benefit from a positive conclusion to trade talks are soybeans. even with both sides eager for an agreement, we have seen bats go extremely net short. cropost short on soybean since july 2017. we want more of a confirmation from china, more demand before they cover some of those shorts. one of the big factors here we cannot forget is african swine fever sleeping through asia. talks in that

issue creating this massive short position. u.s.t to turn to the because we have this strange factor of stocks at all-time highs, yet a strengthening dollar. the defining features are increased bets the fed will use policy. what you are looking at is a declining put for september euro-dollar bets. this euro-dollar will increase. they think the fed is going to .ave more of an easing policy this really creates a picture as we get more u.s. data that seems like good news may no longer be good news. manus: great roundup. --'s bring this conversation we are going to go to the first word news. echo -- doing?ng >> thanks. outlook with crisis

hitting sedan. the white house is aiming to curb iran's influence in the middle east by cutting oil experts. later today will be will be -- we will be speaking to the imf director for central asia. southwest airlines found out after a deadly crash from lion air. to anure was connected indicator available for a fee. warren buffett's real estate brokerage is expanding to the middle east. andam of 30 advisors support staff. this comes at a time when the isrates property market extending its slump from 2014. s&p expects prices to fall as much as 10% this year. avengers end game has a box office records.

it's an earned $350 million in u.s. blowing through the record set by infinity war. with marvel and star wars, disney boasts the top four opening weekends in the u.s. and canada. 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. manus: my guest host this morning as the head of european credit strategy at credit suisse securities. , you could berans forgiven for validating the conversation we have just had, which is, stimulus is working in china. he seemed moderately convinced europe has passed the eye of the storm. >> yes. if we see the transition taking place in europe that we think you should see on a macro level,

he should start to surprise on the upside. i did not catch that coming through. definitely fit the story that you have a much healthier consumer. this is showing up in the politics as well. we have always had the economy leads the politics. if you are dealing with precrisis levels now of and wage growth starting to recover, you've just got a happier, healthier consumer. and more electric toothbrushes. manus: my dentist has been at me for that. what does all of that mean for the ecb? there seems to be this narrative being spun out that mario draghi has said he will do whatever it toes, but he is preparing incrementally move. how do you read that tone?

>> i love that you say whatever it takes. thes just musing, that was 26th of july 2012. long time ago. we had thought mario draghi might squeeze in a rate hike to create a trend before he leaves at the end of october. that was sort of in the very strong european growth relatively of 60, 70. that agenda is gone now. the ecb might end up having to ease. if the ecbspective, is, that gets interesting. there is no flow anymore. they have this large stock of its -- of historic purchases in governments. could doe things they is intervene in european credit markets on the basis of buying more. the problem with that is you

need italy to be on its own. for that you need growth. it is such a leverage play on the world economy. now that plays going very well. we now think this has gone through. it is not absolutely certain of course. his new stock phrases to adjust all instruments. >> he is talking to me there. that is how i interpreted that. manus: absolutely. more specifically, if they go after credit, perhaps we see a differential between sovereigns and credit. we debate that over the next couple months. william, come back. on the show, pedro

sanchez looks set to return as spain's prime minister. the very latest live from madrid.

manus: when it comes to european banking, there's a few lenders left to report on the season. hsbc end pair of both do. -- hsbc and bnp paribas. european firms slumping the most in more than a month. traded at a six month high. dani: we have this issue where

european banks are suffering from a toxic brew of structural problems. field ofa clouded smaller institutions. high cost, not to mention a tricky political landscape. i want to take you into my terminal. the struggle is really apparent. when you compare them to their u.s. rivals, when you look at the top five banks in each region, over the past 12 months, 100 millionked in in profit. checkout europe. that's a third of that amount. when we look at monetary stimulus, it is no squeezed margin for eu banks. continuing to widen in the opposite direction. eps estimates for european lenders, the lowest in a year. markets.s., capital

provide the majority of funding, which means banks can concentrate on earnings from trading. in europe, closely tracking the yield curve. that is because 70% of financing comes from vanilla lending. even though we have below zero interest rates, lenders have to pay interest to attract depositors. commerzbank, m&a, that could shape things up. as long as yields remained depressed, so will banking shares. you need a bit of a shift from the fed. great roundup there on the charts. pedro sanchez is said to return therime minister after third election in four years with his left leading ally close to a majority. joining us now from the front of

the spanish congress in madrid is annmarie hordern. good morning. >> one of the biggest stories pt. night was the right-leaning party in spain had a massive upset, leaving half their seats they had in the ballot. i'm joined by their head of economic programs in chief of -- daniel. thank you for joining this morning. let's start with last night. wrist results since 1989. what went wrong? how do you think the party moves forward from this? >> the party has suffered from three factors. lessirst being obviously of the last elections and the reception of austerity policy, et cetera. the second, fragmentation of the vote.

also, the differential of some views in terms of, what were the big policies to defend? the party was starting to rebuild itself after the primaries. to appealthe decision to conservatives and turn more to the right. in hindsight, do you think that was a mistake? turned not think that pp to the right. what the pp did was to turn back to its traditional appeal to voters. however, what i think did happen -- generatedal of a disparity in terms of some voters to go for one party or another. helped massively in terms

of numbers. annmarie: what happens now to the pp leader? >> i believe you will stay as leader. you have to remember the party went through primaries. it was literally at the beginning of the process of rebuilding and renovating itself. the elections caught the party in the middle of that process. that is an ongoing process. i'm sure it will be going from here. annmarie: you are an investor. i know you said you worked in newport. what is the most favorable condition in terms of sanchez forming a coalition? what investors want to see is stability. a return to moderation in terms of budget proposals and deficit spending.

annmarie: what coalition would that do? >> and will make it difficult. it is going to make it very challenging to reach agreement, at least long-term. full-year agreement. it is quite challenging, and we will see. so far it looks like the center-right party is not willing to get into a coalition with the socialist party, which is quite understandable given that there are municipal and european elections, literally. it is going to be very difficult to see that. we need to wait and see. what do you think the main risk would be for the spanish economy? >> i think the worst combination would definitely be to reach ,greement with the separatists

the anti-establishment parties, and the extreme left. that would obviously bring the socialist party to a level of radical policy that it should not defend and would not be the positive ones that investors would be looking for. annmarie: thank you for joining me this morning. that was the chief investment officer at tressis. back to you from madrid. manus: annmarie hordern on the spanish political story throughout the day. throughout the day on bloomberg we have cracking conversations for you. goldman sachs ceo david solomon joins bloomberg along with the blackstone ceo stephen schwarzman. they are both attending a conference today. you do not want to miss those interviews. for bloomberg users, the gtv charts are there. those and use them

for your own throughout the trading day. ♪

manus: good morning from dubai. this is "bloomberg daybreak: europe." spanish socialist leader pedro sanchez looks set to return as prime minister. separatistsn support a coalition? we are live in madrid. rebound.l profits goldman says stabilization in beijing would boost the euro area. foranother big week earnings. philips' first-quarter earnings beat the street, but the ceo has concerns about europe.

>> some countries are doing well. other countries don't. seen a flat to low single-digit market growth in in europe.ome -- manus: pedro sanchez is set to return. the socialist leader is close to a majority, though he may have to rely on catalan separatists to govern. >> the socialist party has won the general election. the future has won, the past has lost.

[applause] >> firstly, from the heart, i would like to think the more 700 million spaniards who entrusted this party to lead them. >> by the way, keep an eye on the spanish banks after the socialist party win. there is a number of different things. socialists have 120 three seats. what does it mean for the left-wing coalition? we are going to keep an eye on banks.we are going to get to madrid to put the politics in context. i want to show you what's going on with the equity markets. we had this route in china last week. quite a pace in terms of the equity market. we are going to get a little

more of a flavor. records abound in the united states of america. what is going to drive the european agenda? results from bp? we just had philips reaffirming their numbers. the dax is up 2%. mark carney is going to speak today. money supply is going to be out later on. let's get to annmarie hordern. she is available in madrid. great night of politics in terms of delivery. pedro sanchez looks like he's going to have to do some political bartering to get his next term in office. it looks like he is back with a little more surety this time. >> exactly. the the spanish call him as great survivor. he is defying his critics here in spain. night innning last

terms of rising to the top of the scene across the spectrum. now the matter is, to have enough votes? where did he turn to form a majority in government. he has two avenues he can take. one would be with podemos and regional parties. that would be reaching across to the catalonian nationalists. -- other potential avenue is while the markets and investors say this is the likely outcome they would want to see, the most stability for the government, the problem is he has campaigned and said they would not do a deal with sanchez. maybe things would change. as of now they said they would not. those are the avenues he has. one thing we should keep in mind is maybe there will be negotiating behind closed doors,

but we will not see a coalition until at least a month. these parties do not want to be out publicly speaking to rivals when they are trying to vie for people's votes. manus: rbc have a note, policies to banks. there is that note from rbc. hasalition on the left ramifications for support for the economy. it's the just of -- the juxtaposition between the two. what are you hearing? annmarie: the economy was not part of the selection. it was really a rarity. many things people are focusing on were domestic issues. women's rights, immigration. maybe labor reforms and wage growth. spain has been doing pretty

well. they had a series of minority governments and the instability in politics has not affected the economy. we still see employment taking higher. -- ticking higher. i was watching the euro overnight when asia opened up. bondill have the 10 year yield trading at a percentage point higher than the german equivalent. much lower than italy. economically, the political story is a spain has really shrugged off the economics. instability, is they have not been affected economically. one thing we should say is due to the fact we have had the succession of minority governments, they have not been able to do any sort of structural reform. that's the kind of thing stable government would bring. that's what investors are looking for. annmarie hordern in

madrid on the politics of spain. a quick snapshot of the bond markets. u.s. bonds have a breather overnight because it is golden week. italy opening up. i want to focus on that italian trade. s&p downgrading. how strong will this rally be? .dp readings s&p benefits from the credit features. we just had a conversation with credit suisse. what happens next from the ecb is critically important to germany, italy, spain, because the ecb moves more toward the credit markets rather than the sovereign markets, that could have an important issue. we are off just zero point 025%.

2.5 percent holds. let's get to asia. juliette saly is with me in singapore on the asian market rout. inwe are seeing a rebound china from that terrible week for chinese stocks. dozens of companies in hong kong and china coming through with earnings after the bell today. we have heard from china telecom. we are awaiting bank of china. the csi 300 doing well over 1%. boosted by that industrial profit data on saturday. pmire awaiting the tomorrow. japan out of action all week for golden week holidays. australia had a little bit of a negative day today. ignore india because india is close as well for a public holiday although it did well on friday. as you have been mentioning, it is a big week in terms of data.

we are seeing a lot of people put data into the aussie. investors awaiting a number of these potential muted risks. the yen is fairly flat, although we have been watching that key support across golden week. we are looking for the next resistance. pesoing the philippines because the economic planning minister has come through saying first quarter gdp is expected around 6%. there could be cuts coming through from the central bank in the philippines. expectrategists saying to see a rebound in philippine stocks. manus: now, let's turn our

attention back to europe. we have politics out of the way. we just looked at the bond markets in italy. s&p leaving the country's debt still the negative outlook. the next key european data tomorrow with the release of first quarter gdp for france, spain, as well as italy. goldman sachs says china stabilization would provide a boost this year. strategist at -- is my guest. let's do first of all spain. we've got this return of sanchez. some of the notes i'm writing this morning suggest there is a risk on the economy side. good morning. >> thanks for having me this morning. speaking of spain, markets might

frown a bit at political uncertainty. spain, it will be difficult stable majority government. on the other side, they may appreciate the fact that, for example, in contrast to italy, the largest parties in spain are pro-euro. that also not forget spanish growth outlook is a positive one and spain has been outperforming other eurozone countries. tomorrow's figures will likely confirm that spain is heading 2019 of aroundin 2% or even higher. the euro zone as a whole will likely grow about 1%. maybe 1.25%.

manus: we are going to get more data tomorrow. we have just had a number of indicators from china. as far as europe is concerned, do you think we have passed the worst? do you think we will get a base in terms of growth? what does that mean for your allocation to europe? >> that's a very interesting question. europe has seen very long strides concerning data and weakness. the first quarter, we have seen data showing an ongoing moderation. we see green shoots in the euro zone economy driven by the chinese stimulus. something the euro zone economy -- let's also not forget in

europe the backdrop for domestic withd remains a resilient labor markets tightening ongoing , their refinancing condition and facing political uncertainty and also last but not least, looking forward what we would look at and what we will likely divergence between the domestically oriented sector which has said quite well on europe on the one hand and the manufacturing sector on the this divergence will likely narrow. interestingly -- sorry. yes. in your notes, you talk about the on employment rate in europe at 7.8%. thisery clearly made point. we are almost back at record

lows of 7.3%. thethat got consequences on consumer side in the portfolio allocation you skew towards? >> that is an interesting point. it relates back to the fact the , consumers are still resilient given the low unemployment rate. now when it comes to sector allocation, it has been the fact, and i think the earnings figures also now for the first quarter will show that the domestically oriented services sector have fared quite well. whether it is kept up potential is in the exporter manufacturing sector. china stimulushe

filters through. you might see potential when it comes to the industry side. you stay with me. take a look at this. a triple b.ve you are seeing the yield dropped, the price rise by nearly 50 pips. we rose as much as 64 on the open. the yield is down. the next big tester will be gdp numbers tomorrow. benefiting from credit futures. or have we just delayed the inevitable downgrade? that seemed to be the intonation from credit suisse, my guest host this morning. in the meantime, first word news.

>> sanctions could push iran's inflation to 50%. this would put the islamic withlic's inflation on par the crisis in sudan. later we will be speaking to the imf director for central asia. don't miss that later today. ignoredisory board has a vote of no-confidence in bayer's leadership. the key issue is the takeover of monsanto last year. bayer has lost 35 billion euros in market value due to lawsuits. 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. manus: thank you very much. talks up, as donald trump

about higher oil prices, crude runs for its longest bull run in years. we bring you the latest. this is bloomberg. ♪

manus: just on 7:20 a.m. in london. 39 minutes before the start of your trading week. the market is going to be deliberating with profits from china. bank of england week. there's a lot to deal with. what does it mean for markets? one market literally is on fire. we are in a bull run.

crude market continues. it is the longest run since 2006. tater u.s. sanctions could see iran facing 50% inflation. good morning to you. run i look at that kind of and the hedge funds are so long, the skew is very heavy for this market to lighten up. what are people saying to you? >> we got a little bit of a reality check on my weekend from president trump. he is making it very clear he is actively lobbying -- he says opec, we think saudi arabia, to increase much faster than the country was planning. pause today, some

but this is a market that is incredibly tight. it is very hard to see how you can make the numbers add up. enoughs not necessarily in the system. it is a very fragile market. this comes down to how quickly we see saudi arabia and the uae turn on the taps. i've got a red headline. anadarko pursuing $38 billion talks. this is going to be one of those upls which is going to fire this morning.

is superior to that of chevron. anadarko prefers to endorse that $55 billion bit from occidental. these are beginning to heat up, aren't they? we have bp, stewart as well. on the shorter side, we should see a nice rally from the oil market. >> it is coming down to something more than price. what is thebout synergy between assets? what to the balance sheets look like? around anadarko, has this synergy project in mozambique. it is not just about the bid. it is about the health of the balance sheet. are they going to have the money and the access? you did not realize you

were going to get that thrown at you. thank you for rolling with it. executive editor for combined energy and commodities. let's get some final thoughts. catherine, how do you look at this in terms of its rally? how does that translate into the dividend theory you have? or indeed the inflation cycle? which side of the argument doesn't matter? >> that is very interesting. when it comes to the oil market move and the upside potential, from marchis is not fundamentally driven. say oilet might continues to exist. the story of geopolitical risk is now pushing higher.

it isms of implications, tempting to see this uptick in oil prices related to energy prices from monetary policy outlook. we find an environment of dovish trends across the board. the bank of canada has been the bank, one apart from the and this is interesting to see as inflation pressure also from alongside price side homemade inflationary pressures, because the labor markets are tight across the place. to see be interesting how markets react in the later part of this year. --manus: this meeting

in theory was mark carney opportunity to eke out a basis point hike. how hawkish could the bank of if at all, would that be risky? >> i think the bank of england will continue to have its hawkish tone so that generally some tightening is warranted. with brexit being extended to halloween, the first rate hike is unlikely to be before november. what the bank of england has to do now is recalibrate its hawkish tilt. recalibration. thank you. europe.t for daybreak

vacation so you have me for the whole week. the market open is up next. anna edwards and matt miller. ♪

anna: good morning. welcome to "bloomberg markets: european open." good morning. ok withets say we are socialists and separatists. sanchez wins the spanish election. investors consider him a known quantity. they consider potential nationalization. the open in 30 minutes time.