>> good morning from the city of london. manus cranny is live from dubai. this is bloomberg daybreak: europe. reigniting the trade war. china could travel to washington on thursday after president trump threatened beijing with steeper tariffs. chinese exports are slumping and steep futures point to declines. a step closer to ceiling it still after a sweetened bid.

manus: a warm welcome to daybreak europe. a couple of markets. tariff man is back. the 10 year government bond yields, money is flowing. we saw some comments about the nature of inflation. on yields, when will we make it to 2.45%? these are the elements we are referring to. the odds of a december rate cut ratcheting to 64%. yuan ismmodities, the tumbling. 6.98 is one level in line for the yuan. a double whammy for oil.

what did you do when you are away? trade talks, a five-week low. saudi arabia is cutting prices. you take a week off and it goes to hell in a hand card. welcome back. >> good morning. i was on a yoga retreat in turkey. i come back and look what is happening in these markets. we saw equities close higher on friday following the jobs report. u.s. futures down 1.6%. the dow and nasdaq futures lower as well. you see these markets roiled with this news and the threat of tariffs. the dollar-yen has roque and through. hitting a five-week high against the dollar. you see the aussie come under pressure. as you will see commodity thosere with some of

medals showing declines. copper in shanghai. we do get the rba as well. at the moment the aussie swept up in the general risk off sentiment in markets today. to talk about that, let's check in with david inglis. great to see you. what can you tell us? asset carnage today. the shade of black you get when you get a z score. that is not normal. coming back online from the morning session. the damage was severe. you talked about u.s. futures. the yen and dollar. we are getting a lot of the currencies, the chinese well.cies, offered up as money moving into havens. have a look at volumes. very quickly.

essentially we are getting a lot of volume through today. as china comes back online, japan is still closed. 1%.fth of 20% heavier than the 30 day average. the shanghai composite, watch this closely. if you have seen the avengers, you understand this title. i love you the 3000. that is the psychological level on this massive selloff. 160 points right now. for thehological level shanghai composite. in the options market, the price of options, some of them are out of money and in some cases, like the hang seng, bid up substantially. multiples from last week. a lot of insurance is getting big because of the uncertainty. one headline, the bottom of your screen, we might not get the deal by friday. manus: yep. three -- game theory, or

something more substantial? let's stick with the headlines. trade is the byword. on0% of higher tariffs friday. scenario,ost likely an economist andrew tilton outlined the bank's call. >> based on what has come out from the u.s. commentary and comments from the chinese side that negotiations could be off, we think in the short-term, the go tois due negotiators washington, d.c. is planned? or u.s. stocksna suffer more this week? join the debate. we are on plus tv . let's bring in an investment

advisor. welcome to the show. tweetsdifference two make. is it game theory, or a risk i need to reassess? overe market was optimistic about the trade talks to begin with. i agree it is a risk we need to monitor. tweets yesterday have shaken up things significantly, whether thee the yuan falling, or trade down 5%. futures were jones down 500 points. to speak to you. hello from london. a pullback this week, for which it looks like we are going to get in the u.s. and then actually by the end of back on tracke with trade talks. would equity valuations look more attractive because of the

pullback? >> good morning. i agree with you. for a very long time they have been looking highly overpriced and overvalued. we were actually waiting for a better entry point. we've had occasional liens. google was something we were looking into. this is weighing heavy in the stock market. they have rallied so much with the nasdaq up 20%. you've got the dow jones up 13% year to date. it will have to be more than selling tos worth of bring us the levels. remind viewers we were initially overweight on u.s. equities. neutral downgraded to because the sectors were overpriced. manus: the earnings on tech have been interesting.

stay there. breaking news on telenor. in talks to do a deal to merge their operations, the asian operations with a company called axiata. they are saying is there is no certainty it will result in a transaction. for this company? operate in nine countries. 300 million customers. one of the largest telco operators. to become one of asia's largest companies with approximately 60,000 towers. we will keep an eye on telenor as it opens today. back to our guest host and the trade, the one thing that is most interesting is the pboc

came out with a reserve requirement for the smaller banks. headlinesse silent out of the middle of all of this. we thought the pboc was done with stimulus. a i think it is definitely tactic. if you look at the last two p.m. .'s, they were about 50. we were of the view they are going to pull back on stimulus. this is a signal to the u.s. and they have tools are not going to negotiate with a gun to their head. >> would you be thinking about preparing a portfolio more if you are for increase volatility given what we have seen? >> absolutely, 100%. volatility would not last. we had the vix close to its 12 months low.

we have been cautious. seen the chinese say they are going to delay the trip. what got me confused was the body language and the difference of opinion within the united states last week. everything seemed fine. larry kudlow said things were ok. how things have changed from friday to between time is appalling. a lovely piece this morning reflective of 1999. he was rebuffed at the door in trade negotiations. side, as your prepare to buy volatility. i would say that is repriced aggressively this morning. the futures are up 15%. actually this might be one of those spectacular moments to phase-in.

go up,if these tariffs you're looking at 1% off of china gdp. could be a splendid moment to sell. so, it looks interesting. at this moment, i'm going to play the let the dust settle. it is too soon to react. the direction has been dramatic. i will put no trade at the moment. manus, ali malik, thank you so much. let's get to bloomberg first word news. >> hi. thatight, a new law guarantees no cross-border checks on goods. theresa may is working on the deadlock that has paralyzed the brexit process. in an attempt to win support

from jeremy corbyn. it may push the prime minister further away from her own party. india's ruling party may fall short of a majority. it is far below what other party leaders are claiming. it is the first time the prospect of a coalition has been raised. he says if you include allies, they will get over the line. >> we are very confident. we will get a majority. itself or with partners. we are quite confident. robert mueller should not testify. that is according to president trump comes ahead of a hearing with the special counsel. it has been set for may 15. nothing is confirmed. democrats have been eager for robert mueller to testify.

made an emergency landing in moscow, killing 41 people. the flight suffered an engine was forced to return. the plane sped down the runway with its tail on fire. flames engulfing the rear as it came to a stop on the tarmac. global news 24 hours a day on air and on tictoc on twitter in more than 120 countries. this is bloomberg. coming up on the show, commodity come down. wti grazing $60 a barrel. what does that mean for the commodity complex? this is bloomberg. ♪

manus: i am manus cranny in

dubai. london.in great to be back. let's get a check on the markets. risk off with the threat from president trump on tariffs on china. you can see the reaction. japan is still closed. china seeing a reaction. the biggest daily fall since february 2016. the yuan plunging the most in three years. u.s. equities closed higher on friday following the jobs report. futures pointing to a lower open today. a one monthng at high when all the central banks meeting this week. gst in china prevails across copper is a manifestation of concern as we see small banks come through. should we be worried?

here are your business headlines from hong kong. >> thanks. warren buffett has upped his criticism of private equity. he says returns are not calculated in a way he would describe as honest. the annual meeting, the firm said it used its cash to buy back $1.7 billion of stock. this is the company sweetened its offer to increase the cash portion of its bid to 78% and will cover the $1 billion breakup fee anadarko would incur for abandoning it still was chevron. arethat -- investors weighing going public. it invest in technology companies ranging from uber to

wework. a directconsider listing rather than a traditional ipo. thank you. let's turn to commodities. wti crude has been marching toward $60 a barrel after trade talks were put in jeopardy. we are joined by our energy reporter james thornhill. great to have you. how much of the decline in crude prices is down to crude swept up in the risk off sentiment today? james: you could put a good portion of it down there. this had an excellent run year. 40% on some benchmarks. say, a sell off is being caught up in that. we had some news and friday with

the saudi's cutting the prices for exports to the u.s. which had an impact on the market. it is worth pointing out they raised prices for other jurisdictions. the u.s. is the key market and terms ofhe key in market fundamentals. there are a number of reasons beyond trump why crude might be pulling back. certainly that is the main news today. i ask you, james, getting ready for the jmc. thisdrops like this, does embolden the opec plus consort? an extension in the agreement to cut? >> i am not sure they will be the talks between trump and china. we need to see how this plays out. noise going on. china threatening to pull out.

let's wait to see how this plays out before we start talking about any action it might provoke or not from the opec plus block. they will be looking at the price as to whether they move forward with those cuts. we have seen signs the likes of russia and the other smaller nations might not be as keen to extend those cuts as the saudi's are. that discussion is yet to be played out. as the price rices, it was rising toward $75. that would raise a question mark. now it is down to 60. probably about the sweet spot. we will have to see. reporteryou to our james thornhill for joining us. bankto ali malik from the of singapore. how does crude and oil fit into your portfolio? we've had an allocation for

crude for a while. we've been trading wti. it is tricky because there's a few ways to go. you could do the futures. it then you stand the risk of physical delivery. you could do the etf or mutual .und the tracking error is significant in those. the correlation is not that great. you would be surprised for a big name etf, you would see a correlation of 60%. what we did last year around november when it had tanked to 42, we did a structured note which was selling options. it was cash settled. manus: looking at premium. ali: they had to buy it at the price it was trading at.

god for bid it fell from those levels. thankfully it tend out well. there was one time it did not when oil fell from $100. manus: a lot of bonds in 1994. it is a risky strategy. breaking news. china down 7.3%. the biggest move in three years. there is a malevolence in terms of risk off as trump has two tweets saying he is ready to ratchet up tariffs. will he or won't he? i want to take you into the -- i like this. this is one of the better finds. i know you said you have the put options on wti. brent is get a sense,

the widest since 2014. that indicates there is perhaps something more dramatic about the underlying demand out there in the world than we have perceived with the higher prices. let me clarify, the option was a small sliver of what you should have in a portfolio. [laughter] sure it is ao make small part of our portfolio. agree, i have not looked at it from this perspective. 40%.d rally about this is definitely something to keep an eye on. whether it is demand related, we see it about six dollars a barrel. keep that in mind. in the rest of the commodity

spectrum, we have been talking about copper, this one day move out of the trade tariffs. what is your allocation to industrial metals and gold as a protection in the portfolio? ali: that is something we have been looking at for a while. it is something we have liked. we like it when it has fallen to around the 1200 levels. withd add some positions cash buys. 1-2%.e seen it rise good for theuld be portfolios. broad you have quite a sliver of commodity views. options, what is the story behind palladium?

one ise most important gold and oil. that is the one -- a lot of our clients are chinese and gold is something that is predominant in the culture. very close to them. we have a lot of transactions for cold. in the middle east, you can't help but be involved in oil. as far as palladium, a small chunk. manus: ok. keeping it close to what the clients understand. ali malik, investment advisor at thetank of singapore with caveat those options are a tiny, tiny portion of any risk strategy might take. who is to blame when things go awry? we will chat about that. it'ster driven investing going to get its day in court. do you trust the computer? what is the risk you are prepared to take?

we will discuss that in the next section. this is bloomberg. ♪

nejra: a lot of red on the screen today. japan markets closed, china bearing the brunt of the sellout -- the selloff following the threat from president trump of more tariffs. so much has been the drop, a lot of these indices down by more than 4%, china's state funds are said to be preparing steps to stabilize equity markets. pboc: you already saw the for the small banks. you can ask about the timing of everything, but if things get worse from here, they want to be

seen to be on the front foot. a wonderful graphic this morning talking about what do tariffs really mean for china? 25% at the moment. it is 1.9% of gdp. is underon is, who more pressure to do this deal? nejra: which equity markets could come under more pressure itour mliv question, whether is u.s. stocks or chinese stocks. u.s. futures are lower. treasury markets not trading with japan being. futures pointing to perhaps a drop of the 10 year yield to a 240 five handle. then you have got to ask yourself whether there will be more aggressive pricing of a fed rate cut based on the development of what is happening with trade and tariffs and these discussions that may or may not yield results this week. gmm and iare on the just popped out the remember. -- the renminbi.

the end is plunging. -- the yen is plunging. bell the base case seems to no weaponization of the yuan in the first instance as we go through what is going to be a bumpy ride for the next four days. i am glad you are back with me. we got a bit lonely last week. nejra: what a bumpy ride it has been. let's check on the markets around the world. joining us from mumbai is niraj shah. and here in london is dani burger. indian equities falling today, but losses less severe than the rest of asia. >> good morning to you. maybe.oo early to say, a lot of people in the run-up to the first inklings of the trade war breaking out mentioned india

might be better off because it does not get hit as badly as other markets. it is too soon to talk about it. this would be any other day, frankly. see, 0.8 percent lower for the key benchmark indices. bond markets have not really reacted much. thatld almost go to saying, steady as she goes. this could almost have been any other day. more than what is happening because of dollar trump. if all the risk assets come off, we might have a problem in india as well. they are all levels we have held for the last series. it is going to be a bumpy ride. down 7.3%, the most in

years. these are verlander moves. -- virulent moves. was two tweets from trump and the historic low in volatility was shattered. chip -- thee the pain is concentrated. the csi 300 dropping. more than 7%. that is a three-month historic volatility. one day was enough to push that 60 day measure to a three year high. this is going to confuse trend followers who also take volatility inputs into their programs. that could exacerbate the selloff even more. i know you love a daily moving average. i wanted to also look at the u.s. dollar yen. aboutnow, the yen trading at a five-week high as risk assets selloff, investors moving into -- the question is now that

it has broken the 100 day moving average and momentum is to the downside, does this mean we are going to get lower on the dollar yen than what we saw in march? that is below 110. that level is something we are certainly looking out for as risk assets continue to selloff area -- selloff. manus: thank you. team.s the let's give you the question of the day. this is what we've got for you. will china or u.s. stocks suffer the most? they one of the right, and right now it is china 1-0 all the way. or was it just a cathartic moment? dudley humphrey is in dubai. she has your first word news headlines. >> china is reportedly considering trade talks after

president trump threatened the country with steeper tariffs over the pace of trade talks. he says he will increase duties by friday and went up the level on $200 billion of chinese goods from 10% to 25%. a new law that guarantees there are no cross-border checks on goods. that is what theresa may's team is reportedly working on. the hope is this could break the deadlock that paralyzed the brexit process. the movie is an attempt to win support from opposition leader jeremy corbyn, but it may push the prime minister further away from his party. the u.s. says it is sending messages to iran, deploying an aircraft carrier to the middle east. is notlton says the u.s.

looking for a war, but will respond to any attack. it is not clear what prom to the move or whether the deployment is actually new. north korea's recent weapons test may have included a ballistic missile. photos were released of kim jong-un's focusing a military exercise that involved sanctioned weapons, but experts say it appeared to be short range, so it was not necessarily breaking his pledge to stop testing long-range weapons that could threaten u.s. territories. 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. nejra: a hong kong tycoon is going after a salesman who persuaded to him to put a portion of his fortune in a supercomputer that lost him millions of dollars.

he was responsible when things go wrong? us. great to have you with well done writing this story. first question, does this show investors should not trust ai to manage their money? >> it shows that sometimes artificial intelligence can be artificial incompetence. that is comforting to some human .oney managers what it also shows formation is that a computer is only as good as the data humans give it. it is only as good as the perceptiveness of the questions humans ask. there may be limited read across between this and more sophisticated ai technology. manus: the limitations of humans. was it only ai technology that went wrong in this case? for might other human errors have added to it?

question thatreat has tended to crop up in the courtroom. aspect, the ai determining whether markets were going to rise or fall that day, but crucially, there was also the trading execution aspect weathered -- aspects, where it is possible the ai had less to do with that. determining whether the execution is critical in determining who is to blame. question is who is held responsible and will we be able to sue robots in the future area >> that is the question which applies in finance, health care, automated vehicles. people want to sue other humans. that is what is happening in this case. they are not suing the computer, they are suing the salesperson who the investors had exaggerated its benefits.

the creators and manufacturers about be very careful what you are claiming your technology can do. otherwise there may be a misrepresentation claim against you. manus: thank you very much. fascinating story. you can find it on the bloomberg. now, friday seems like such a long time ago. it blew past all the estimates for job growth in april. 2.6% on the unemployment rate. wage growth remains muted. speculation the fed will be forced to ease policy. last week's fed decision, jay powell pushed back expectations that the next move would be a rate cut. ,till with us is ali malik investment advisor at the bank of singapore. i'm going to come back to the data in a moment.

64% probability of a rate cut from the united states of america by december. that was 30% last week. trade has trumps powell's conversation. can say that. president trump has been successful in the past as well, when he was calling for the u.s. dollar, when he felt it was strong, we saw the u.s. drop at that time. it has this profound effect. having said that, if you rewind market was, why the open for the insurance, if you look at it, you look at job growth, that's phenomenal. we are talking about the lowest unemployment rate in the last half a century. that is 3.6%. last time we saw those rates was 1916. in the third thing is inflation.

transient factors is what he put it on. there does not seem to be any need for a rate cut. nejra: i understand that at bank of singapore you have downgraded investment grade bonds, but given what we heard from chair powell last weekend also what we heard over the weekend on trade, whether you would be changing your view at all on some parts of u.s. fixed income. judging by futures today, that 10 year treasury yield even today would fall quite significantly to a to a 245 handle. would you be looking to allocate more to treasuries or u.s. fixed income? i would be the first to put my hand and say that is where we have missed the boat, really. it is something we just did not

see coming. we have been always bullish on emerging market high-yield. we are looking at emerging-market investment grade. if you look at the u.s. fixed income market, they have done phenomenally well this year. while we did advocate u.s. high-yield, investment grade bonds, i would be the first to say we missed the boat. manus: it takes a brave man or woman to admit that. ist in all the conversation warren buffett and his dividend. how important is the continuation of buybacks? does it feature -- as you look at what stocks you want in the united states of america, do buybacks plan to that conversation as you debate where you want to be? warren buffett, until lately, always said -- being back in the u.s., i lined up just to get a glum's of him

because you grew up reading his book, or his newsletters. he is a legend. but lately, the things they have been doing, and i know this is not right, but people tend to pick a favorite date from where they plot a chart of where berkshire hathaway has done against the s&p. in the long time they have beaten the s&p copperhead civilly. -- comprehensively. if you look at some of their recent investments, it starts to make you think a little bit. holdings in coca-cola sold out significantly. a lot ofng in buying these levels and personally with a pneed amazon ratio through the roof, it makes you think if what he is saying in line with what he is doing.

with a lot of respect for the legend, i'm having a hard time grasping the direction he is going. also in ation that he recent interview spoke about the way property and said that is appealing to him. the inflation discussion is everywhere as well. we saw u.s. stocks rise. a strong economy, inflation not too much of a risk. we look ahead to cpi data this week, are you putting on any inflation hedges? >> we are not. people who have invested in tips would have done well. but we did not. nejra: great to have you with us today. ali malik at bank of singapore, thank you for joining us. coming up, cyril ramaphosa

enters south africa's election as the front runner. will he be able to bring confidence back to the country? this is bloomberg. ♪

manus: it is "bloomberg daybreak: europe." entered the fifth stage of the world's largest democratic election. short of may fall just a clean majority. it is the first time the prospect of a coalition has been raised. >> we are very confident the or allianceority

partners, we are very confident. >> you have the belt and road initiative coming up. why will india not join that? >> there are two significant reasons. projects passes in pakistan.ritory we cannot support the initiative. , it is supposed to be a project that benefits a number of countries. never any order for the project.

>> can i push you want another issue? many outsiders immediately brought up the issue of the relationship between majority hindus and minority muslim population. reports from human rights watch say 36 muslims were killed by vigilantes. and 2019.y 2015 will you condemn those killings? >> absolutely. it has no place in our system. whenever these incidents have happened, state governments have taken action. yet hasell you, and seen five years of absolute social harmony.

but i would say we should never support any vigilante is a. -- vigilanteism. india's bjpwas national general secretary speaking with our editor-in-chief. let's turn our attention south africa, which is set to go to the polls on wednesday. president cyril ramaphosa looks to be on course to secure a new mandate, but many observers expect his real task will come after the vote. business confidence is at a two-year low with the country battered by lowering -- by power outages. will he be able to push through reform needed to turn the -- the economy around? .e have an exclusive interview

this morning.you let's start off with sentiment. business is your probably the most pressing of all. atyour sentiment of business a two-year low in the mining and minerals business? is cautiouslyt optimistic. hasink president ramaphosa made a lot of very right positive moves to steady the ship, so to speak. we have seen the sort of things we have wanted to see with our government. suddenly with the efforts to tackle corruption underway with inquiries, efforts that the president has put in place to , thesure the institutions

justice institutions have credible leadership. -- those things bowed very well going forward. be a clearre will enough mandate for the president plantforward with reforms -- planned. nejra: great to have you with us. a few days ago, you announced an .cquisition in south africa can you tell us about the rationale behind that deal? is it an expression of confidence in the south african economy, or more about the future? it is both.une: goinge to say if you are to do vanadium as a commodity, you have to go with the best in the biggest in south africa.

we have a large high-grade resources here. we also have fairly well-established our infrastructure. as utilized.t the path to becoming a significant player is a combination of the result space we have developed, but also acquiring existing processing facilities that will allow us to scale up our production. and do that in a short space of time. ago, our position was informed by that strategy. we followed that up with what we announced last week. that acquisition is an existing vanadium plant. what the market really wants to know is, what you do next and whether vanadium

batteries can be traded, part of a bigger solution to perhaps the energy outages. is that part of the ambition? fortune: it is certainly part of the ambition. we believe stationary energy storage has a huge role to play in the broader energy. it is not just a south african solution. it is a global solution. we are seeing great momentum behind the adoption of large-scale utilities and storage systems. with --at technology vanadium,izes batteries which are exceptional for their long-duration capacity and their lifespan. intend to develop a base to support the industry. the company is something we hope to contribute in the solution here.

nejra: thank you so much for joining us. we are just over an hour away from the european equity market open. one color on the screen in asia, and that is read. ♪

manus: good morning from dubai. these are today's top stories. reigniting the trade war. china may delay a d.c. summit after trump threatens to boost tariffs. the yuan stocks and commodities plunge as the spread of red goes global. chinese drops, exporters slump and u.s. equities .2 steep declines. . oil slides as wti had stored 60 dear -- $60. a step closer to a $38 billion deal after a sweetened bid.

nejra: welcome to daybreak europe. we have seen chinese entities drop more than 5% on concerns out of these trade talks could be derailed after tweets from president trump. looking to the european open in just under an hour. u.k. markets close today. comingoxx 50 futures under pressure, down 1.2%. dax and cac 40 futures coming under pressure along with u.s. futures. the u.s. market closed higher on friday following jobs data. that certainly feels like a long time ago now, but u.s. futures also pointing to a lower open. a lot of risk off from markets in today's session. good morning.

welcome back. tariff manus back. -- tariff man is back. you might see slightly less liquidity. look at those u.s. treasuries. they are just blasting away on the upside. the target in the market seems to 245?ould you get how quickly? the odds of a rate cut have faulted to 64% from 30% last week. cpi later this week. italian government bonds dropped by 20 at the moment. you are seeing this protectionist edge come to the market. is perhaps the most prevalent scene. let's get into markets around the world. david ingles is standing by. you have been looking at the derivative market costs of protecting yourself.

>> i think what you are seeing cross asset into the options market is the phrase, that escalated quickly. equity markets, futures soaring. essentially, a lot of the damage csihina, 6.3% down on your 300. off 600 pips on your offshore renminbi. today was a little bit worse earlier on in the session. .he dollar is bid, yen is bid classic case of risk aversion. every single sector is down. financials leading losses, 2.5%. shanghai composite, we showed you this chart early on. if you have seen the avengers, you understand what the title means. we are 100 points below that

with 60 minutes left in trade. look at the large caps as well. you have the shanghai stock exchange a 50 on the back of news china might be looking to activate its plan to stabilize the market. the last time we talked about that was 2015. aree measures of incline shooting higher as well. it is a synchronous cross asset rush to the exits, if you will. nejra: thank you so much. now sticking with trade, goldman sachs see is a 40% chance of higher tariffs on friday narrowly avoided in the most likely scenario. the bank's chief economist outlined the call. on what has come out from the u.s. commentary and more recently comments from the chinese side that perhaps negotiations this week could be

off, we think in the short-term the key issue is, do chinese negotiators go to washington, d.c. as planned? joining us from hong kong is bloomberg's asia equities correspondent. say maybe here and this is part of president trump's art of the deal and it could turn out all right, but a story this morning says china state funds are said to prepare steps to stabilize stocks. with the selloff we have just had today, are we seeing signs the chinese authorities are taking the president's tweet seriously? we get an official sign quite soon, the press conference around 3:00 p.m. local time. that will give an indication whether the chinese trade delegation will proceed to washington, d.c. as expected or if those talks are canceled or if there is some kind of middle

ground. is no doubt,here it puts pressure on china's markets. are making ities clear they are willing to come in. there is a view china's economy is in better order than the start of the year. manus: we saw triple or cut this morning for the smaller banks. is that one of those silent under the radar moves? were you surprised by that? >> certainly the news came fast this morning. it is tough to say whether it is related to the trade announcement or not. shortears to be a move to term i'm those smaller businesses to support them if needed.

todayof them are saying if we resume the trade war, we will need to put more stimulus into the economy to ensure growth above 6%. there is a lot riding on the next two days to play out, whether the u.s. and china can get this trade deal over the line or if we go back to square one. that will put pressure on china's economy. nejra: thank you so much. bloomberg's chief asia economic correspondent in hong kong. will china or u.s. stocks suffer more this week? joined the debate. reach out to the mliv team, ib+tv on your bloomberg. norman, great to have you with us. we can come back to that question in just a minute. i want to get a sense of your first take on what we heard from

president trump and the reaction we have seen in markets. allocation, you have recently added to equities. are you starting to get shaky in that view given what we have heard on the trade front? to equities in february and in april we started pushing protection on equities to protect against these kind of risks. we are a bit nervous about the trade picture, but the construction portfolio, we think we have protected against some of that going forward. who is under more pressure? let our viewers have a look. 1%. nearly you are looking at 1.5% drag on the china market in terms of gdp. do you think this puts more pressure on china than trump?

>> it puts more pressure on china at this point, mainly because of where there economy is beginning. it has just started to re-accelerate, where the u.s. economy at 3.2% in the first quarter is doing quite well. the u.s. economy can take a bit of pressure where the chinese difficultt would be to sustain this for quite a long time. make you see at buying opportunity in chinese equities or other parts of emerging markets or asia just based on a valuation perspective? >> buying in asia based on valuation has never been a winning proposition. you want to have economic momentum. it is unlikely we are going to have that in the near term.

>> maybe i should not be so -- did goldilocks just get punched by a bear? with that in mind, what would be your go to hedge if you needed a hedge and you needed to do something pragmatic right now? fx, bye hedge via equity, or volatility? what do you reckon? how markets given are trading this morning, the cost of hedging today will be quite expensive. what we have been doing in april was actually using the options as protection on going forward. one of the things worth looking is gold. that is a place where positioning looks quite light. that might be an opportunity going forward. when i ask you about

china and emerging markets, you said not necessarily the place you would be look because historically it is not always great if you are buying purely on valuation. where are you looking in the equity markets at the moment to get your best returns? of where we would start putting money to work, what we will try and do is look at asymmetric opportunities using structured opportunities and options. we see opportunities again in some of the growth. we have china exposure, but that is capital protected exposure from here. we think that is the right way to do it. trying to participate on the upside if this trade news starts to fade. we have 12 central bank this week. this is really going to put a cap on the proverbial pigeons. a lot of people projecting rate

cuts from the new zealanders, et cetera. do you think that argument has more validity than before the >> as we goa forward, as we saw last year, a lot of central banks are going to learn from the experience last year. to becomerequire them more proactive. that is what we will see going forward. the fed did not take that opportunity last week, but we will see other central banks take that opportunity to shore up their economy back half of the year. manus: whoever said the power of the old trump tweet was dead were definitely mistaken. norman stays with us. you will get opinions about what to do in the derivatives market. desley humphrey has your first word news.

mueller should not testify. that is according to president trump ahead of a congressional for may tentatively set 15, but nothing is confirmed. democrats have been eager since reports became public last month. iran.istakable message to the u.s. is deploying an aircraft carrier to the middle east. john bolton says the u.s. is not looking for war, but will respond to any attack. it is not clear what prompted the move or whether the deployment is actually new. north korea's recent weapons test may have included a ballistic missile. photos were released of kim jong-un overseeing a military exercise that potentially included the sanctioned weapon, but it appeared to be short, so it would not break his pledge to

stop testing long-range weapons that could threaten u.s. territory. aeroflot plane made an emergency landing, killing 41 people. the flight suffered an engine fire after technical problems forced it to return. the plane sped down the runway with its tail on fire. flames engulfing the rear as it came to a stop on the tarmac. 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. desley humphrey in dubai. let's get a quick check on your markets. a sea of red in asia. chinese equities bearing the brunt. the csi 300 dropping as much as 6%. europe futures on the back foot. , we alsok 50 futures saw gains in u.s. equities on

friday, that's not looking like it's going to last judging by s&p futures. this is bloomberg. ♪

manus: bank holiday monday in london. liquidity will be trim. we are 18 minutes away from the start of your european trading day. there is a lot to contend with. let's get a check on the markets. we are not far away from the european equity market open. let's look at asia, because the moves have been stunning.

down 6%.00 a strong selloff in chinese equities, so much so we are hearing tiny -- chinese state funds are said to prepare moves to stabilize equities. china's foreign ministry is going to hold their regular press briefing. meanwhile, the u.n. has been heading lower, dropping the most in three years. u.s. futures on the back foot after the gains on friday. it is going to be four days of utter angst. if china is busted, what does it mean for european growth? -- and oil isy down. any additional trade angst could undermine the rally we have had along with other things. saudi arabia cutting the price

of oil to the united states. let's get your first word headlines. >> billionaire investor warren criticized private equity, saying returns are not cap elated in a way he would describe as honest. he adds pension funds should be very careful. berkshire hathaway also said it had used its cash pile to buy back $1.7 billion of its own stock. occidental's revised takeover proposal will be reviewed as the 38 billioneezes its dollar offer. increase the cash portion to 70% and says it will cover the $1 billion breakup fee, anadarko would incur for abandoning its deal with chevron. boeing knew months before the deadly 737 max crash that alert

was not working as advertised. the plane did not share the news with airlines or the federal aviation administration. even though it was standard on older models, but only available for a fee on the new craft area this -- the new craft. this raises questions about the company's lack of transparency. the u.s. payroll seems like weeks ago, but we blew past all the estimates for job growth in april with the jobless rate falling. wage growth remained muted, keeping alive speculations the fed will be forced to ease policy. powell pushed back on expectations that the next move would be a rate cut. norman, first of all, sentiment has shifted quite dramatically. if you take your mind back to

the gdp, payrolls number, worried about wages. it is almost like a give and a take. you have had time to digest it. what does it mean to you in terms of the job numbers in terms of lower numbers than estimated? >> the job number was quite strong and the wage growth modestly disappointing. we are starting to see that come through in numbers like retail sales and consumer confidence remains strong. what does that mean for your allocation to fixed income in the u.s., particularly in terms of what we have heard about trade and whether that make shift the pricing of the prospect of fed rate cuts? would you be looking to add to treasuries or other facets of u.s. investment grade? inman: we think the risk

fixed income is asymmetric for investors. when we look at the cyclical backdrop, it suggests the yield should be higher than they are. they are obviously overhung by concerns like we are seeing today on trade. spreads are starting to compress , approaching all-time lows. investors are no longer getting compensated very well for that. in the dollar market, we think it is still adequate. , we thinko market that is overly tight at this point and that is a risk investors should start to be managing proactively. tech? what about i was looking at the numbers. they were poised to fall this quarter, the worst since 2009. velocity inave this tech that seems unabated. the facebook debate will

continue, but what is the story in tech for you? norman: i do think it is this mixed picture we have seen in earnings. earnings growth in absolute terms for the sector is better than we are seeing in other sectors. when you combine that with valuation expansion, you really have to be selective in terms of the stocks you are picking in technology. nejra: bloomberg had a story out saying if this is a tech bubble in stocks, it is the expansionary phase. even the nasdaq market cap versus the -- is approaching highs unlike 2000 stock crisis, more in line with -- prices are more in line with profit. when you talk about being selective, you also think earnings and economic growth expectations are too conservative.

where are you being particularly selective in taking your risk in the u.s. equity market? norman: again, tech is a place we do want to be selective. the overall growth strategy has been very successful in terms of investors in the u.s. for the last few months. we have started shifting to more what we would call defensive growth strategies, maybe not as cyclically oriented within portfolios and stockpicking approaches within the u.s. growth segment at this point. it value overgrowth? what is the debate in your mind to briefly close off? not think the story is value overgrowth. when you look at value, you are buying banks which are not being helped by the yield curve environment at this point or you are buying energy stocks and we don't believe there is a lot more upside in oil prices from

here. that will be at bit of a headwind even though valuations are ok. but we would be very selective in terms of that kind of growth we are buying and the sustainability of the earnings going forward. a pleasure to have you with us this morning on a busy day it in markets. we are getting some of the indication now for european equities. the equity market in europe is going to open in just over 30 minutes. showing semiconductor lower on trade. you are looking at 5% lower on dialogue. keep an eye on the luxury stocks as well. b.i. have run the numbers in the numbers say very clearly if we

go the full monty on these tariffs, you are looking at a 1.5 drop in the chinese gdp numbers. we do it all again tomorrow morning. this is bloomberg. ♪

matt: welcome to "bloomberg markets: european open." today the markets say i hope you sold in may. risk assets tank around the globe as investors fret about the future of u.s.-china trade. equity indexes are set to open deep in the red in less than 30 minutes time. matt: