♪ >> good morning from bloomberg's european headquarters in london, i am nejra cehic with manus cranny live in dubai. this is bloomberg daybreak: europe. . these are the top stories. levees on to add chinese goods on friday accusing beijing up backpedaling on commitment. from now, the rba holds steady, citing spare capacity in the economy. we speak exclusively with fed vice chair richard clarida today. lira falls,kish

leading to fresh questions about the democratic process. ♪ manus: it is a red headline of a mess, the early easter in china did nothing to help the growth. that is on the first quarter, growth. ibitda they do see strong growth for the full year and a that they will deliver in terms of full-year revenue and adjusted revenue growth. heineken and carlsberg both have a strong start to the year. analysts are saying -- this is a company that cut its dividend in half in october to pay down debt. s&p global arena says in march, it may cut its credit rating. you have some pretty big global

challenges for big beer within the index. : adjusted if the -- adjustedp to ibitda was a beat. up 65%,r orders are also they are to propose a dividend of 5.50 euros per share . manus: it was/and burn on the equity side in the markets yesterday. trillions, i should have said billions in terms of the wipeout on china. apologist for that. get a grip of your currency, that is a message will here in the yuan. the offshore yuan trading just shy of a two-month low. volatility ratcheted.

. the biggest one-day move since the valuation of the yuan since 2015. the best case scenario is a 30% chance that the u.s.-china trade talks, they say in that case, you could see the yuan trade through 7 quite easy on the dissipation of that. let us have a look at the other markets. copper and the bond markets. copper is in a precarious rebound, up 1%. and thee week in asia, bond market, mr. kaplan says he is not inclined to cut, we are in the right price. of -- tins a bit hat-itis in the market there. nejra fish yes, it was absolute carnage yesterday. u.s. equities finished lower --

open lower but close lower by about .5%. features are on the back foot, down .6%. we saw europe close lower yesterday in terms of global equity markets, also have the softer. in safe havens, if the yen is bid. getting by the dollar is weaker against all. g10 peers today. and then the aussie on the front foot rising after the rba decision, keeping rates unchanged. the governor playing it safe. 70.36.sie trading at let's check in on the markets, yvonne man is in hong kong with more for us. yvonne, great to see you. we are seeing chinese equity markets bouncing back and japan back up after the holidays, and it is lower. yvonne: that's right come of

have seen the global selloff easing but there are still a lot there.rtainties out japan and korea came back from their holiday and we are seeing the brunt of the selloff focused on the nikkei come other kospi done more than 1% and the nikkei down 1.5%. the rest of asia as you see, it is as if monday did not happen. we are seeing quite a bit of green on the screen. the hang seng up about 30 points. csi 300 marginally higher. not a lot of conviction, china has stabilized, but you are seeing the rush to buy on these deps uncertain. they mentioned the aussie dollar, erasing gains since the early part of the session after a bit of disappointment from the traders that the rba did not do anything. the ongoing trade tension is not enough to spurn a rate cut. we mentioned the defensive plays in china, the consumer plays

also getting a bit. the likes of household appliance maker midea group up 4%. ore,lked about iron arging this morning after local court suspended one of this company's decisions to resume operations in its key mines. metals really following the iron price. investors to about weak demand when it came to the forecast for this company, and equipment japan.n and the telecom company in asia, axiato announcing that they are in talks with a company in norway to combine their operation, and now it is one of the big movers, up 15%. nejra: thank you so much. the u.s. says it plans to raise

tariffs on chinese goods this friday after the trump administration accused beijing on going back on commitments made during negotiations. however, the u.s. is not breaking off trade talks yet, and the chinese delegation is set to finish washington desk sets to visit washington on thursday -- is effective visit washington on thursday. the equity markets had the wind knocked out of them but we have seen a pause if not an indiscriminate buying on the dips in the chinese market. one of the optimistic views i have seen is that even if we get tariffs on friday, they might he rolled back. do you think that might happen? >> we would have to wait and see. so far it has just been a tweet, we don't know what the official position is china's visit is still going ahead,, so we need to really see how things evolve.

if tariffs are involved, then the shorter term, the better. if they are long-term, they will have consequences for china's economy and also for the u.s.. be, it it could well sounds like it is a bargaining technique and i think that is probably why markets are not overreacting to these letters developments -- these latest developments. manus: the one market which --haps had a morvillo and more virulent response was the yuan. this is critically important in terms of response mechanisms from the pboc, in terms of trying to regain stability in the currency. is that a starting point for sobriety in this right? sarah: i think markets will certainly take a message from what is happening to the yuan.

the fxse, we don't see as being a major policy tool from beijing. we take the view that beijing has ordered put in place a lot of measures to make sure the economy continues to grow at a reasonable pace the matter what happens to the trade dispute with the u.s.. will be moree yuan upset, and if we look at the u.s. side, that could be one factor that prevents tariffs from having if -- having a substantial impact on u.s. inflation. the yuan weakening would certainly mitigate some of the tariff impacts. francine. >> if we get increased tariffs imposed friday, would you expect a scale back in stimulus from chinese?s

sarah: i think tariffs would have to be upset by the stimulus. we have raised our forecast for china's growth to 6.5%. the outlook is still pretty good, and as i said, chinese has -- theaken substantial chinese have already taken substantial measures of ongoing liquidity to offset any impact from the trade dispute. they will sort of calibrated that according to what measures are imposed by the u.s.. manus: sara, we're constantly trying to discern who has the deeper pockets to whether a walk away. it is probably the chinese who have the. dth of toolkit rather than the u.s., or is that a wrong assumption? sarah: they certainly have the tools they need to sustain growth.

in terms of the economy, china has experienced something of a slowdown. we could argue that the economies perhaps looking better than many expected, although first quarter underlying growth showed some signs of strain. so i would argue that was economies stand to lose if there are tariffs imposed in the way the u.s. has threatened by the end of this week. and both economies have policy , certainly from the monetary policy side, china's fiscal policy has been implemented with good effect. manus: ok, we will dig into the reverberations around the rest of the world throughout the program. sarah hewin stays with us. let's get the first word news with our team in hong kong. >> thanks. occidentalboard says sweetened the $38 billion .akeover plan

it has given chevron four days to either boost its offer or walk away. it has been a rare public fight in an oil industry that has an wars.ny bidding . the chevron chief executive has signaled he is ready to end the deal if the price gets too high. treasury secretary steven mnuchin has refused to release president trump's personal and business tax returns. this could become the biggest legal showdown in the administration. the rejection opens the door for democrats to pursue more forceful means including issuing a subpoena or filing a lawsuit. president trump has awarded tiger woods the presidential medal of freedom. he called the golfer a legend. and one of the greatest athlete in the history of sport. trump announced the plan to award woods after his win at this year's masters tournament, his third major title in more than a decade. global news, 24 hours a day, on air and at tic-toc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i am an about drillers. this is bloomberg. ♪

nejra? nnabell droulers in hong kong, thank you. coming up, more from our interview with the fed president. that's next. this is bloomberg. ♪ erg. ♪

♪ manus: this is bloomberg daybreak: europe. i am manus cranny into by. francine: and i am nejra cehic in london. japan has come back online, the seeing a touch%, of a bounceback in china, but the recovery nowhere near enough

to wipe out the losses in yesterday's sessions, on concern talks.rade the yuan continued to decline, dropping the most in three years yesterday. the aussie leading in the g10, after the rba kept rates on hold. economists are split on whether we would have. a hold or a cut, but it seems like philip lowe did not want to give in on any political pressure ahead of the elections? the have just seen again, a drop in the s&p futures. we were website yesterday. got sunk by the various today, down 1.5% -- --ramento they are goldilocks got sunk by the bears , down 1.5%. iron ore rallying this morning, after new disruptions in mining

china, supply constraints leading the growth. let's get your business flash. annabelle jewelers is in hong kong. drounnabelle lers. luckin coffee is hoping to sell shares in the largest chinese initial public offering of the year so far. it has almost 2500 outlets in 28 cities across the mainland. this company is in talks to avoid -- this man is in talks to america.l in he appeared in court where he fled not guilty. theher 140 million lost in

scandal is making its way. the u.s. is beefing up the ranks of it senior executives at a joint security venture in china, after checking majority control late last year. ubs has hired five managing directors for the investment banking business. some of his biggest competitors are also wrapping up expansion in the region. that is the business flash. manus: the debate which is raging over the fence next move continues. it was added to by commentary in recent days. one president says he continues to forecast one rate hike, and fees inflation running slightly above 2%. the chicago fed president says the risk of inflation may get stuck below the central bank 2% target, raising strategic concerns. nejra: meanwhile from the cleveland fed president, one needs to ask whether it is credible for policymakers to

commit to keeping interest rates low to kee make up for shortfalls. and this morning from bloomberg, the dallas fed president said rates are in the replacement week inflation merits close watching. >> to that the limits of inflation, when is the cyclical element, the items that change every month. in that regard, i do believe some of these recent headlines of inflation measures, some of the drops are transitory. financial prices, some elements. we do a measure of the dallas -out extreme moves to the downside. that measure shows we are running around 1.9% or 2% inflation. the part that is needing inflation is the structural part of inflation, not the cyclical disruption. technology enabled disruption to some extent, globalization, businesses don't have pricing

power. the consumer has it in the palm of his of her hand enormous computing power, more than most companies did 10 or 15 years ago. if business has a cost increase today, it is unlikely that it will erode margins. that is needing inflation. >> but those are not transitory forces, those are permanent forces. buying stuff online is not transitory. when do you get worried about the inflation? i highlight the structural issue and i have been talking about this now for three headwind, structural for me, it means inflation is not running away from us. it also in my view is not as , the structural forces are not as susceptible to monetary policy and we just have to take that into account. we just got done talking about corporate debt. i think we will just have to

monitor this very carefully, but i am not inclined at this point to lower the fed funds rate to address it and i am not sure lowering it, i think that is more effective dealing with the cyclical elements of inflation. i am less. convinced a deals effectively elements.tructural so i am steel of the view, i could change my mind, but for the time being though, i would --. at manus: sarah hewin from standard chartered is with us. you listen to kaplan, he really was very definite, now is not the time to cut rates, that is the understatement of 2019. 1.92% is what they refer to, but we have not broken that ceiling of 2% since 2012 with any comparative velocity. so it is stand firm for the moment. is it in your eyes. , for the fed? sarah: we certainly don't see

them moving anytime soon. . i think the interview said it all. the structural elements are holding inflation low, there is no particular reason to make a move at this point. underlyingat these -- the underlying inflation is around 1.9% to 2%. what is interesting as we haven't seen the higher wage growth that is very evident in the strong labor market data we have seen, it hasn't had much of an impact in pushing core and underlying inflation pressure much higher. so there is no reason for the fed to move. . equally, we don't see the need for the fed to cut rate. a little bitaps more tolerance from policymakers at the moment for inflation to move about 2%, and without them needing to take action to cut back and nevada in the bud.

nejra: been commentary in recent days about whether there is an argument for fed to cut. but there was also some great commentary on the bloomberg that i was reading earlier on about the fact that if we come back to the trade war and what president rationale might be, rather than it being a game of chicken with china, maybe he is a game of chicken with the fed, the onehat tweets like i have weakened might encourage the fed to cut. is that the reason that the fed might cut, the trade war rather n the inflation story? sarah: tariffs have an impact on inflation. we see inflation being offset by the currency potentially, and also by some of the tariffs being cut back on to the supplier. but there would be some -- it would be a couple of tenths of

1% of core pce being threatened. bethe downside, it ought to negative for the u.s. economy. from the fed's point of view, it would be a reason for potential easing. let us see what happens. wouldrse, the impact unfold over many months. say, we don't see them making any moves for the for seeable future. manus: bank of america did a survey. their model which tracks the odds of a recession over the next 12 months, they look at cars, spreads, credit spreads, equity values, does that ring , or is that overly pricing taylor is given to nearly zero -- tale of risk sk events toil ri

nearly zero? good. the data is we continue to see a strong labor market. so it's seems premature to be forecasting a recession for the u.s. economy purely because of the fact that the economy is moving pretty much on its longest upswing on record. some of the signs we would look out for to start to make us nervous about the economy would be debt distress. we don't see that widespread concerns about delinquency's, credit concerns coming through -- -- the delinquencies. nejra: that is interesting, because leverage lending was flat in the financial stability report from the fed. so that is still something on their radar.

sarah hewin from standard chartered stage with us just stays with us. coming up, don't miss exclusive conversations with the fed vice chairman richard clarida. this is bloomberg. ♪

let's get a look at the world map. looking at this map, you would not necessarily know the msci pacific index is lower. japan coming back online, that is firmly in the red. a lot of other markets bounceback, particularly china. they're not back that strongly pretty much unchanged after the carnage in asian markets on concerns about trade. a bit of a bounceback and the u.s. did not close lower, that poses questions as to whether the markets are being too sanguine about a good outcome to the trade talks. news, on have breaking our way to the bmw numbers.

they regarded the market in march when they lowered their annual profit outlook. here we go. second-quarter revenue, 1.9 8 billion, the estimate was 1.96. the second quarter guidance one -- as opposed to 22 cents. those were the second-quarter numbers area the third quarter numbers, sales rising by 1%. a margin of 50% and they still see the full year margins of around 16%. they have a 26% exposure of their is us and china, hence the reason they were so cautious in march. you have automation and electric vehicles as the big themes. full year, they expect revenue -- abillion euros to billion euros. because of the selloff inequity markets from trade, carmakers in europe were the

worst performing industry group x 600. stox first-quarter sales coming at 19.2 one billion euros. estimate was 22.2 6 billion euros so it is a mess on the first quarter sales for bmw. first quarter loss of 110 million euros is what we are seeing. a weaker stock was expected and auto margins under pressure, that is what analysts were expecting ahead of the first-quarter numbers and bmw saying that tailwinds are expected in the second half of the year. manus: let's check in on the rest of the markets around the world. have dani burger with the latest on the market. has -- andeo indigo's ceo had said they are in talks were a large airbus order. just run through the details on that. >> not to many other details.

maybe even spicing up the other private airlines might be doing these things because they observed a lot of glue from the jet airways team. that airline was grounded. which is why i reckon that news flow will the other private airlines might be doing these things because they observed a lot of be [indiscern] it is not necessarily [indiscernible] but the incumbents taking over all that vacated by jet airways. marginally in the green. not a news but and we started off well by half a percent higher but it has cooled off rapidly from the highs of today. as i

out for a level which is 50 points lower for the nifty and corresponding for other markets because markets are sacrosanct, that number for the last three seasons and if they manage to do that the bones are firmly in place. -- the bones are firmly in place. nejra: you're looking at the yuan. while we see some equity markets recover [indiscernible] >> at its lowest level since about february. one of the remarkable things we have seen a cause volatility has gon, we saw yuan volatility higher, at least the one-month volatility area this is the biggest one-day gain for that volatility measure since august. even though the pboc is in favor thetability, fixing currency but still the trade tensions, that is enough to keep the yuan spiking. since we had a trade truce, the yuan has gained 3.6%. we could see that he undone which would cause the currency to trade at nearly a decade low versus the dollar if the trade talks unwind. the other market is japan which

is leading the market lower today. it does follow the u.s. dollar across very closely. you can see it in white, that is the path it sent for the topics -- topix. extremely correlated to the index. that is a perfect correlation but the word -- world indexes morend the topix falling percent. is it the world index or what you saw there with the yen. it is seem -- it is following the currency and the stock is weakening. nejra: the question is whether the selloff we have seen should bring the bulls back in force. let me get back to bmw, we have more lines coming through here, the red headline on the bloomberg is that first-quarter it a 9 million

euros from 2.7 one billion euro a. that is the red headline. another red headline, bmw rio -- revising its provision to 1.4 billion euros. that is a correction on the first-quarter sales number, it came through incorrectly on the bloomberg earlier. first-quarter sales come through at 22.4 6 billion euros which is a slight beat on the extra met -- estimate. it was showing a mess earlier but that first-quarter sales number is a beat. so just need to clarify that, a slight beat, i have to say and thatbit margin, it is antitrust division you want to look at and the first-quarter a bit -- ebit falling. their business comes from silver trinkets and it is amiss on the first quarter

revenue. 4.8 billion danish krone, the met -- market had penciled in 4.88. down by 10% on lower traffic the online offering, they are seeing sales up there by 7%. that is a small miss. we have a conversation now with the cfo joining us. the chief executive officer. he is the cfo, not the chief executive officer. let's get referred were's bashford word news. -- let's get a first word news. >> president donald trump's top trade negotiator said the u.s. plans to [indiscernible] this friday. he accused beijing of backpedaling on commitments it made during negotiations. trade talks are set to continue. a chinese delegation will visit

washington this thursday. issues remain unresolved including whether tariffs will remain in place. the federal reserve has escalated its warnings about the health of boeing. profileshe credit [indiscernible] leveraged lending grew tiny percent last year. while the fed board approved the report, it did not indicate any horse of action to rein in the market. secretary steven mnuchin has refused to relay the personal and business tax information of president trump. this opens the door for more forceful means including issuing a subpoena or filing a lawsuit. turkey has ordered a rerun of merrill elections. alleging widespread ill or --

irregularity. the four that called for the new ballot had, under heavy pressure from her to want. he has -- from erdogan. he has been criticized about undermining mocker see. a new vote will be held june 23. global news 24 hours a day on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. thank you so much. let's focus on global central bank policy. the rba has left australia's key rates unchanged, slightly surprising economists. a small majority had addicted a 25 basis point cut. the ecb's outgoing chief economist has dived into debate over whether the euro area's central bank needs to revisit its interpretation of price stability. he says it is right to permanently think about the lessons of the past but doing so in public can be misread. for global time

central banks. let's talk about the rba first. the way this was written up on some parts of the bloomberg was that philip lowe decided to ignore some of the political rhetoric. was there an economic reason for him to stay on hold today? there are opposing forces which is why economists were split. we expected they would stay on hold, the reason being that we see pretty strong labor markets in australia. and it is clear that although inflation has underperformed in the first quarter, rba governor low is still focused on what is happening to the labor market. we would expect that later in the year, the rba would cut rates so we are expecting a cut in the fourth quarter and probably another one soon after. it is athe time being, strong labor market and the potential for wages to ratchet higher which we think is keeping

them cautious. manus: we have 12 rate decisions. the inflation targets might be moved. with the fed pretty much on hold , that seems to be the consensus, does that mean the rest of them have got to act more aggressively? centrale do not see ranks across the board cutting interest rates. rbnz will cut them from bank negara in malaysia. we also expect to cut there. central banks are on hold. there are concerns about the global economy and that is going to play into the decision. the renewed optimism there have disputeu.s.-china trade

being resolved i think was something policymakers were finding some relief in. i think it is important to see how that evolves. many countries, particularly in asia, the china a look is -- outlook is significant and trade outlook is significant. so is the deterioration there. they will be thinking about whether they need to make policy cuts. certainly for the time being, we think that the majority are going to stay on hold. nejra: can i ask about europe, we did get some pmi that shows the signs of stabilization, a number of people have been calling for after the weakness in the first heart of this year. now that we have had the trade wars reignited, does that make you question whether the stabilization in europe can last till the end of the year? sarah: the data have improved, better than people expected. we are reasonably optimistic that we will see better momentum in the second half of this year.

overhreat for europe is what happens once we get beyond u.s.-china trade negotiations. with the threat hanging over europe about the u.s. imposing tariffs on auto parts imports into the u.s., if that were to go ahead, that would be negative. we take a step back from that. overall, there is a pretty positive story in europe. we have some fiscal stimulus, monetary policy is still extremely easy. a lot of the factors that cause growth to be weak in the second half of last year were down to temporary reasons, and we can see, for example, the auto sector starting to turn around now. ecball, we think that some over the long-term by this time next her will have raced the deposit rate. we know that is not in the market. the -- there is the direction in which they are still moving. manus: one of the things we are

debating is the nature of inflation in the u.s. dug into the bloomberg and popped this into the library. headline inflation and april, the call, 1.2% is the strongest in six months. you from your notes would sign the view that maybe we have passed the worst and does this -- is this rebirth of inflation, slight inflation in europe continue? sarah: yes, it does. it is something which is going to very gradually move stronger and we will give the european central bank this basic needs to move away from such negative interest rates. we're not talking about anything dramatic taking the deposit rate points, but10 basis by this time next year when they are looking at their forecast

for two years hence, we are expecting them to say inflation will be on target. manus: thank you so much. sarah hewitt, our guest post this morning. there is a bidding war in case you had not noticed over anadarko. it favors occidental's sweetened offer. we have been tracking the story and the deal. good morning. >> the ball is in chevron's court. they have four days. technically there is a caveat. they could have longer. anadarko said yesterday chevron did not comment on that. what analysts are saying is chevron is in a good place. there is 1/5 of chevron. they had their biggest cash flow last year so they can boost their comeback, boosted price.

somewhere between 70 and $72 a share. many are saying they do not need to trump all over occidental's bid and come with a knockout because even when the previous deal was done, the cfo of chevron worth saying anadarko wanted 75% stock, 25% cash. they wanted that stock because it is so much more valuable. the question is, how far will the ceo of anadarko be willing to go? he has signaled that he will and his pursuit if the price gets too high and it imperils investors' returns. reports, what can you tell us about that? get --t of investors when occidental made this new deal over the weekend, they did was sothe cash level

high, they did not have to dilute enough shares of they had this rest -- this threshold where they had to go to shareholders and ask for approval. on friday at accidentals meeting, they will vote against the word of directors because they think this is such a transformative deal that they should have given the option. you can see across the timeline and thewhole deal back-and-forth between all of these companies, occidental shares have fared probably the worst. thank you so much for joining us. nejra: we speak to the ceo and of the biggest jewelry maker. that is next. this is bloomberg. ♪

manus: it is "bloomberg daybreak: europe." nejra: let's get a quick check

of the markets, some green coming onto the screen on china after the carnage yesterday, opening lower coming back after the holiday. in terms of futures, we did see u.s. equities close off the loads -- off the lows but futures in the red. manus: let's talk about one of the results we had, pandora said it got off to a weak start. program of launching a meant to make it more efficient. revenue was in line with expectations, 4.8 billion krona. guest.et straight to our it is the cfo, joining us now for his -- for us today. a weaker start to the first quarter. what if any or the bright spots in this, have there been any rejuvenation in core sales, how is the business performing? rs: good morning and thank

you for having me on the program. the first quarter was pretty much in line with our expectations that we set out in the beginning of 2019 when we announced our guidance. we have had a solid progress on our big transformation program now during the first quarter with the first and visible results of the cost reduction initiative that we are embarking on. we also are doing a number of early commercial test of newer types of initiatives, commercial initiatives we are running and we have seen some early and positive indications from those commercial initiatives. nejra: good morning, great to have you with us. some analysts have pointed to concerns about the china market. what can you tell us about that to reassure investors in any way?

anders: china revenue grew 15%. slightlylike sales was negative. china is performing better than the rest of pandora on average but not satisfactory that we are seeing a negative like for like. also revenue is coming out a bit better than what has been expecting in the market with 15% growth compared to last year. have: tell me this, you gone,e -- the chairman is you're settling with a new ceo. do have the sense that we are getting a radical revamp of product or a moderate scaling back of the offering from pandora, what is the feeling in the boardroom in the first 30 days? ceo started 11

days ago. jobs still quite new in the but as you see this morning, he is only supportive of the program, he has through the diagnosis we made during the and is fully019 behind the initiatives that we are embarking on as program now. it is clear it is a big transformation that we are going through. we are coming out of the first quarter on a multiyear journey on a two-year program. a lot of execution ahead of us still. multiyear journey for program now but that is not the first time that pandora has had a reset and you still are expecting negative revenue growth in 20. can you tell us when pandora will become a growth company again in terms of revenue or should investors not expect that during the process of program

now? anders: we clearly expect that we can run this company with positive revenue growth, that is clear. we are in an industry, we have the and viewable position of being in an industry that is growing nicely. that is no reason why we should not be able to return to solid and sustainable and profitable revenue growth again. it would take some time, and when we announce now, we said we could take a couple of years to get this -- through this transmission but on the other side of program, we will be rock at those single-digit like for like growth again. manus: when you broke down the numbers this morning, you told us that lower footfall, where was the hardest hit in terms of the physical shock on the footfall, are you going to e-side of the

business, the e-store? anders: [indiscernible] it is not that one country stands out more but what is interesting, in the u.s., the u.s. market which is our biggest market has been performing headers and the rest of the pandora for some time and q1 is no exception. we are spending much more on marketing in the u.s. an absolute terms and percent of revenue. that is one of the reasons why we have been performing better in the u.s. for a while. you're referring to the growth was growing and that is part of our deliberate commercial [indiscernible] that we have been embarking on early this year. for the market,

whether you have to borrow money to cover the cost of the dividend and share buybacks program. cfo ofou very much, pandora. we talk more tariffs, trade, and markets. this is bloomberg. ♪ this is bloomberg. ♪

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manus: good morning from dubai. this is "bloomberg daybreak: europe" and these are today's top stories. accusing beijing of backpedaling on commitments. the nikkei ticks lower after a long break. for now, the rba holds steady citing spare capacity in the economy over at the fed. robert kaplan tells bloomberg rates are in the right place. we speak exclusively to the fed vice chair richard claritin today. and erdogan gets his way. ae lira falls as a rerun of -- of mayoral elections is

ordered. leaving fresh questions about the democratic process. nejra: good morning, welcome. let's get to some breaking news, factory orders year on year, we are down 6% three of the survey said we would be down by 5.4%, coming and worse than expected if not quite as bad as the prior reading. 0.6%,on month, we are up the prior reading was a drop in factory orders month on month but that reading not as good as the survey of an increase of 1.4%. we will keep an eye on the euro. we are keeping an eye on equity markets. let's take a look at futures. we saw a global -- a global in europe.

carmakers, some of the worst performers along with oil and u.s.,d tech stocks in the semiconductors underperformed as well as some of the industrials but we saw the u.s. market close theits lows as we heard chinese delegation is planning to travel to the u.s.. futures set up like this in europe, ftse back up, a little bit weaker. weaker on the dax and cac 40 futures. you wonder if some of the frost has been taken some of -- out of some of these equity markets. we have seen that in the asian session but not and discriminate buying on the dip. from: some breaking news total. agreeing with occidental to buy anadarko's assets and africa. this tracks the story, the size at a $.8african assets a numbercontingent on

of efforts. this is a little bit of breaking news, this is an additional lie -- line. price is right area that is what robert kaplan says in terms of rates in the u.s. still seeing some buying on the fonts there. a rise in price drop in yields. very well covered, the third most bid auction this year. rates are in the right place, that is the message from robert kaplan. italian government bond yields be down and making the point careful how you review your strategy. let's get into the markets. yvonne man is standing by in hong kong. ivanka: the >> we are struggling to hold onto the gains we saw in the early part of the session and it kospied, the nikkei and

returning from their holiday. with the nikkei, they have been offer tenders -- off for 10 days since golden week. also lower by 1%. you're not seeing a lot of [indiscernible] either. muted gains, not nearly recovering from the 6% drop that we saw yesterday. which wiped out $480 billion of market cap. there is a lot of uncertainty out there when it comes to stocks although we are seeing things stabilize a bit. some sex is up by .1 of 1%. we erased most of the gains this morning after the rba did nothing, a lot of the traders that were pricing in cuts were pretty disappointed as well. we continue to watch pressure on the chinese renminbi, around 679

at the moment. local media in china reporting they are preparing the chinese delegation for any possible outcome including a temporary breakdown in talks. we did see the renminbi resume some of its losses here. ubs among one of those saying if the trade talks break down, we could see seven against the dollar for dollar china. we are seeing the next central bank to decide. prime for a cut as some economists are projecting area the malaysian ringgit steady at 414 at the aussie dollar see the gains after the rba move here. it did not seem like the ongoing trade tensions enough to spur a rate cut from the rba governor, and we are seeing yields taking up higher when it comes to short end of the aussie fixed income. the two-year yield up seven basis points at 136. much, ahank you very great round up there, all the

markets covered, all your bases. let's get more on the trade story. the u.s. plans to raise tariffs on chinese goods this friday. that is after the trump administration accused beijing of going back on its commitments made during the negotiations. the u.s. is not breaking off trade talks just yet. the chinese delegation is set to visit washington on thursday. joining us now is the equity strategist at ubs. great to have you with us this morning. the probability you have assigned is 30%, that it will break down. what do you need to hear and see geteen now and friday to that to zero and be sure that we would get through in the medium-term? >> the market has been rising and so far. [indiscernible] agreement ofe an

60%, 30% is still it for us. what we need to see, there would be a lot of noise after friday. diversification is key. we are saying diversify your portfolio, do not be fully concentrated. bute need to wait and see for the time being, we still have some edge in our asset allocation which are able to reduce volatility which is [indiscernible] around trade comments. speaking of volatility, thank you for joining us, let's talk about asian equity markets excluding japan. what is your tactical approach to those markets in this environment with increasing trade risks, your tactical approach to asian markets x japan? claudia: we have an overweight

position on japan. not in absolute term relative to eurozone stocks. japan is one of the last markets that are cheap and many japan has been discounting a lot of venues, trade talks and negative profit earnings, negative data from asia. why [indiscernible] which are's -- are exposed to trade noise. they performed very well since the beginning of the year. and relative volume, japan offers a lot of value. if we look into asia and japan, our position is still positive. we diversified our cyclical exposure to chinese stocks, being also overweight to the singapore market area and we diversified our exposure with being exposed to large cap

financial and high-quality stocks. as the market has been performing so well in asia and japan, we are getting more [indiscernible] is cheap and discount a lot of venues already. i was looking at emerging markets overall relative to the rout andi suppose this china, $430 billion, but it cheapened a pm and the complex, the cheapest in six and a half months. china is a third of the basket. hence the rating. do you see these kind of rights or many moments at perhaps there has been an opportunity to load up on a rod or complex? complex?r claudia: china has been performing very well. below the previous high.

support, thetary pboc announced they were lowering deposits on the small and medium so there is more to come from china. emerging markets, valuations are cheap. so markets are underperforming. emerging markets remain attractive. i think for the time being, there is the strengthening of the dollar which was not expected at the beginning of the year. we had expected the dollar to weaken but because of the [indiscernible] the dollar has remained strong. we're overweight emerging-market. i ask you a quick question on global tech, you are overweight global tech. but you could say that number one valuations are rich but this is a sector that is very

vulnerable if trade talks ramp-up. why are you holding your overweight on global tech? claudia: because there is -- still delivering growth. valuation is not expensive. four or bang months it has been good. the u.s. has been on of the stronger sectors, even in europe , the size of the european tech sector, performance has been amazing. at the same time, when you look at -- far below what we are observing the previous bubble. we are not in the danger zone. if you want to look for growth in a world where growth is lowering and where the growth come,or years to technical stocks are still delivering high profit revenue growth. if you look to the tech sector, your -- have a different subsector. service ise

delivering growth but high multiples. if you're looking to semiconductors, valuations are low and we expect a recovery in the second part of the year. there is a lot of opportunity within the growth sector. nejra: thank you for joining us. come backus, we will to you in just a moment. thank you so much. let's focus on turkey, the lira plunged after the country's election watchdog ordered a rerun of the mayoral election. hadident erdogan's party alleged irregularities in the election which it lost to the other party. a new vote must be held on june 23. that speak to our middle east managing editor. great to have you with us, thank you for joining us. why is this rerun such a big deal to turkey, we saw the lira react strongly yesterday. >> exactly. on the face of it, it is 150 but

the problem is the opposition, president erdogan's detractors see it as turkey turning on democracy. they see a president who would not accept defeat even at the ballot box. that is why you see the reaction. they recall that a few years ago when the party lost parliamentary budget -- majority and ordered another election. the problem for the president and the ruling party because they say there are irregularities and the election watchdog agrees. the problem for that is the credibility of institutions have eyes of the in the global investment community. very few people believe this and that is why we saw the violent reaction with the turkish lira last night. is the will of the leader versus constitutional

issues versus the market. the currency has taken a real bath yesterday and people are saying there is more pressure to come. that has many ramifications. not least on the economy. put it in perspective them are we at the foothills of a run, a new run on the lira? is the risk in the back of the mind of people because you had a currency crash last year. are we getting into another one? that, the liraof weakened more than 2% yesterday. inflation is over 20%, interest rates are over try percent. the ability to fight that stretched. a lot of turkish companies borrowed a lot of money in dollars and euros. there is, whenever the currency weakens, it raises questions about their ability to service their debt or we have seen a lot

of corporate restructuring. it poses stress on inflation, it puts the central bank on the ?potlight, how will they react it is a domino effect if you want an economy that is already struggling with recession. is whathe big debate happens next with the fx reserves in turkey, whether that takes another pasting. the lira is down another 1% and counting at 614.23. another push on the lira and higher on the dollar. thank you for being with us. coming up, it is a big fed interview day. burke speaks to the dallas fed president robert kaplan. and the fed vice-chairman richard clarida. you do not want to miss either of those. this is bloomberg. ♪

manus: we are global on daybreak. it is daybreak europe, i am manus cranny in dubai. nejra: i am nejra cehic in london. let's get the bloomberg business flash. china's would be starbucks is looking to raise more than a billion dollars in an ipo new york. depositaryo sell shares for 15 to $17 each. that would make the largest initial public offering so far. two and half thousand outlets across the mainland. and in talks to avoid a u.s.

trial on charges he conspired to launder money that was embezzled. the former goldman sachs banker entered a guilty plea in court. over 50 million has been returned and another 140 million is making its way. range ofefing up the senior executives at its securities joint venture in china. this after taking the majority control late last year. it is hiring five managing directors for the investment banking business. the lender and some of its biggest competitors are ramping up expansion in the region. roundup.anks for the a raft of commentary in recent days. patrick harker says he continues to forecast one rate hike at the most this year and he sees inflation running about 2% in

chicago. charles evans says the risk of sucked below get the target raising strategic concerns. nejra: former cleveland fed president loretta mester said one needs to ask whether it is credible for policymakers to commit to keep interest late -- rates low. even when demand is growing strongly. and a final voice, robert kaplan said rates are in the right place but weaker inflation merits close watching. still with us in zurich, claudia panseri. great to have you with us this morning. we did see some reaction in the u.s. equity market to powell last week but since then, it is trade that becomes front and center for the equity markets. targetlling six months on the s&p 500 and 2950. not that much upside.

you still have an allocation to u.s. equities so how are you making that money work for you? claudia: we are bringing a lot of relative trade. valuation -- we are close to value. the way we work and being overweight u.s. is overweight to global stocks and we [indiscernible] other trade around within the global market. we have an overweight japan relative to the eurozone, we haven't overweight emerging-market and overweight canada relative to [indiscernible] and we have some overweight on sector, overweight on tech, overweight on financial. we are trying to diversify our exposure and putting some cyclical trade on in order to get some upside in this market which has been slow since the beginning of the year. manus: it has ended.

-- indeed. of of redlittle bit headline to deal with, this is on trade talks, the vice premier to visit the u.s. for trade talks on may 9 through 10. this is the chinese side of the equation. they are ready for all of into all of the. that is in one of the major press reports this morning. liu will visit may 9 and 10. we are getting more detail on that. soring the loss ever slightly, everyone is talking about seven or eight in the onshore you on. the shanghai composite raises its decline. seeing a bit of a shift. the chinese are ready to talk, the question is what are they prepared to agree to? mark let's go back to the u.s. because some would say that at moments like this, this is the prime opportunity to buy the debt. you talked about some of your positions, you mentioned tech miami wondering has the fresh

quarter been more emboldened in regards to check that we had presumed? claudia: the -- that is interesting. when you look into the earnings companies, really a good set of results so we are not worried about rose in the tech sector. the tech sector is not expensive when you are looking to valuations relative to previous peak below average. software and services are more expected, more expensive than semiconductor but the same time, [indiscernible] profit drop for the rest of the year. growth but zero valuation is cheap and we see a recovery in the semiconductor cycle in the second part of the air and you have hardware which are not expensive and delivering

some growth on the back of this. find growth and some argue expansion and some sector like software and services. in terms of your diversification, you have talked about the fact that you are overweight japan, overweight emerging markets, are underweight europe. as we get more of these trade howlines through, i wonder you see these u.s.-china at negotiations that the u.s. is simultaneously happening -- having with europe particularly on the autos and if that is one of the risks putting you off european equities. claudia: you are right. the reason why we are overweight japan relative to the eurozone finding any good news. if you look at valuation, you are looking at companies which are up 18%. year to date. when you see some political

concerns, when you see noise where growthities has been disappointing the first quarter of the year, if you look weyour on year eps growth are at 5%. it is [indiscernible] some risk of recession in earnings. that -- then you look at valuation. japanese stocks or merging stocks, they are exposed to growth but valuation is less expensive in america than japan. manus: anna: thank you so much for being our guest this morning. panswas claudia ansari -- ari. a quick recap, we have the vice , he is confirmed, going to the u.s. you see a little bit of reprieve what it will come down to discussions of what they are prepared to agree on. nejra: you can see the

sensitivity of chinese stocks and the yuan. they remain lower. the euro stoxx 50's lower. coming off those half an hour from the open. this is bloomberg. ♪

anna: good morning and welcome to bloomberg markets, the european open. we're live in the city of london. i am anna edwards alongside matt miller in berlin. matt: markets say do not overreact, a surprising calm prevails despite resident trump's thread over at further tariffs on china. u.s. and european futures still pointing lower, the cash trade is less than 30 minutes away. anna: