nejra: good morning. nejra cehic with manus cranny live in dubai. stocks in asia and u.s. futures slide as china blocks the u.s. from wrecking negotiations and president trump's twitter tirade continues. the turnaround. a formal offer to return -- to merge with their partner. uber stalls. day two of trade after a rocky opening. $9 billion in market value. ♪

manus: welcome to "daybreak europe". the longest losing streak since august of last year. goldman sachs keeps the six-month and 12 month rates unchanged. 695 is attainable. base case, no deal on trade will be done. that's a pretty hard fact to stomach. let's look at the rest of the markets. i thought we'd do a couple indicators. the worst drop is extended. could there be an exuberance? the market could drop over 10%. ubs says it can be that were worse.

they get ready for exuberance. --now you love a coral correlation. commodities got ravaged last week. the commodities index down 1.5%. when you have a correlation of -.8%, copper could come under pressure. happy monday. nejra: happy monday. this is why i love you. you showed the u.s. futures. let me show the 10 year yields. the yield curve threatening to invert and we are hitting the lowest since early april. we have seen those bets increase. the repricing happened on the back of the developments we've seen, resting back the narrative of the fed. dollar-yen is down 2/10 of a percent. interesting,t was

because we saw a similar thing friday when u.s. futures were lower, and we've seen that again. euro stoxx 50 futures in the green, up 3/10 of a percent. european equities closed in the green friday. we saw a weekly loss for european stocks, same as the u.s. manus: let's talk about a deal. renault has had a formal offer to merge with nissan, according to tbs. shares in the carmaker are trading higher, although it declined to comment on the report. joining us now, let's get dave mccombs, our business editor. do you think it's true and it does it make sense in terms of the timing? there are, sure, three things that play into the timing here. one would be the underperformance of nissan, sales expected to be down.

it's a big drop for them. that's their most profitable market, japan. the performance is suffering. you also have a global trend. carmakers are moving as fast as they can toward electric vehicles and autonomous vehicles. to streamline decision-making to pursue that. clearly, you also have consolidation in the industry. carmakers are shopping. you've got other french carmaker preshow, it's looking at possibly buying jaguar land rover. all these things are playing into the timing of this decision. it's complex industry and there's a lot bearing down at this moment. we published a story this morning looking at the pressures now on the ceo of nissan. a lot of under

internal pressure and may be pushed out because of the performance of the carmaker. a lot of time into it. -- timing to it. nejra: thank you very much. as we were showing, according to these reports proposed at the companies merged under a holdings companies structure, it will be in a country other than france or japan. each company would name an equal number of executives. let's check in on the markets in asia. juliette zynga -- juliette saly in singapore has more. that's after we saw what was speculated during friday's session, when you saw the csi 300 ratcheting to a close at more than 3.5%. today, it's off. interestingly, investors aren't

pressing the panic button. if there is no deal, perhaps that leads to more stimulus, and that will put a floor under chinese stocks. that is friday's close, but you are seeing weakness elsewhere, the nikkei down 7/10 of 1%. a little bit of upside in indian markets. that's reflected in the sensex, higher in 2/10 of 1%. indian stocks have been lower for eight sessions in a row. let's look at the stocks in detail. one company in australia has flagged the u.s. trade dispute. reliance worldwide has been down 26% in sydney, closing lower by 50%. softbank under pressure after we saw the dismal debut from uber friday in the u.s., falling 7.6% below its lunch price. been focusing on these on.

looking at all the automakers in japan. suzuki doing well, up 5%. nomura says it looks undervalued. earnings still look ok. bloomberg has 16 buys, six holds, and zero cells on the function for suzuki. nejra? nejra: thank you so muchnejra:. president trump is back at it on twitter, taking more shots at china. he tweeted that america is right where we want it to be an blame to beijing for breaking the deal -- blamed beijing for breaking the deal. the ongoing uncertainty means more turmoil for financial markets. stocks in asia have fallen, along with the u.s. equity futures, the u.n., and treasury -- yuan, and treasury yields. there is suffering on both sides. >> it's interesting that

expected countermeasures have not materialized. we may no more today or even tomorrow. i reckon we'll see what they come up with. so far, we haven't heard on that basis. nejra: joining us is the head of fundamental equities at rebecca. welcome to the show. lots of commentary on what the worst-case scenario could be if the talks break down and with the impacts on markets could be. the worst is a drop of 10-15%. could we see a bear market if these talks break down? guest: if they completely breakdown, yes. trade talks are one of the reasons sentiment improved at the end of last year. you seen the rally and equity markets. trade talks are important for company earnings. earnings are the main driver of equity markets. still not we're seeing markets challenge the lows of last year is because there is an expectation that

there is still a period of transition when the tariffs are in effect. but it will end the end of this month, if it'll lapses and there is no improvement, you could see markets challenging those lows. manus: fabiana, good morning. good to see you. i look at last week's activity, s&p futures, the lows friday evening. as you look at global markets, the dow, the nasdaq, and the dax, is it that we need to look forward and reprice europe? usa is not planning a disaster at the moment. u.s. equity markets are not planning a disaster. is that a fair take? fabiana: u.s. equity markets will be the market to go to when there is height and volatility elsewhere. even if we were to have a breakdown of the talks, you

probably see u.s. equities are performing the rest of the global equity markets. that doesn't mean they wouldn't be weak, but clearly the brunch will be bared by markets and europe and japan. nejra: is that largely to do with sentiment? you said what is going to drive markets is earnings, but a lot of company earnings could be at risk with the increase in tariffs. fabiana: that is true, but you see the economy being solid. there is a part of the company's suffering, but not as much as the disruption you'll see in some of the japanese companies and some of the german carmakers, given what could happen with auto tariffs and what the market could extrapolate. having said that, the chinese government has started to stimulate the economy, and that could buffer if you want impact on the trade issues. manus: today, we possibly will hear how the chinese might react. we'll also hear from the united

states about the additional products they will levy. what is the worst scenario on the chinese side, in your opinion? it's not only about the trade and what products they would levy more tariffs. it's also what they decide to do on the technology transfer front, on opening more of the markets. we know that is a long-term plan of the government, but they might decide, if you want to backtrack, to show they can have the upper hand. there is more to it than simply saying we're going to add tariffs to whatever we import from the u.s. nejra: your base case is the u.s. and china will reach a trade deal. are there areas you see as an opportunity to buy tactically if you think that is the endgame, things that might be cheap that have taken ahead? i was reading some commentary

talking about the fact german equities might be an opportunity. where do you see an opportunity? fabiana: it all depends on how long volatility lasts. i have a feeling it will last longer and i probably wouldn't want to jump in right now. but there will be a point that the deal will happen. you could actually get some of the stocks that have had a nice run. clearly europe is one area that europe is not only suffering from trade woes, but also from brexit. of the is probably one markets more insulated and more exposed just to trade. we would like japan and clearly more open markets in asia, such as the kospi or the taiex. fabiana, one thing i was

looking at is the knights of china, one of the most resplendent rallies in the world. we're seeing foreigners bail at a fast clip. i think 15 billion, 16 billion last week, 18 billion in the month of april. do you see this drawdown and china as an opportunity to buy mainland china, or is it just too early in the proceedings to be that brave? my guest in the last hour or so this as an opportunity. fabiana: i think it is an opportunity but as i was saying, we might have more volatility ahead. we might have to wait for the response of the chinese. it could be now or a couple of weeks. it's always difficult. overall, yes, it is an opportunity to buy in the near term. manus: ok, stay with us. a lot more to get through.

volatility is about. let's get your first word news. annabelle droulers is with the team and hong kong. annabelle: thanks, manus. theresa may is trying to win support of the opposition labor party by reopening brexit talks in brussels. they are trying to rewrite the outline agreement. but labor officials warned of their party won't back a deal without a second referendum. the government is still hoping to take the u.k. out of the block by the summer. uber's ipo flop is claiming other victims, as well. softbank's market value slid $9 billion due to its stake in the ride-hailing giant. the first day of trading opened 7% below the price of $45. it's sliding further. all eyes are on cooper's second day in the stock market. minneapolis fed president neel kashkari is adding another argument to lie central banks should keep rates low.

inequality. he said policymakers need to income in account. kashkari says this is because workers have lost a lot of bargaining power in recent decades. president rep. posey: has succeeded in cutting the anc to a sixth straight victory in africa. it was the worst national result since our apartheid. now he faces the challenge of picking a cabinet. now he revives a flagging economy. global news, 24 hours a day on air and at tictoc on twitter, powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. nejra? nejra: annabelle droulers in hong kong, thank you so much. today we're asking the question ausesiv, what a currency c equity. you can reach out to us on ib+tv

on your bloomberg. maybe it has something to do with earnings. manus: indeed. it goes up because we've got great interviews lined up on the earnings aside. exclusively to bloomberg. we also speak exclusively to the eu trade commissioner's to see the mouse from right here on bloomberg. ♪

nejra: this is bloomberg daybreak: europe. i'm nejra cehic in london. manus: i'm manus cranny in dubai. rewriting risk across u.s. equity futures. msci asia pacific is having a

pretty brutal day at the moment, s&p futures coming off the worst week of 2019. futures are higher than where we finished friday evening. the bandwidth in these trade wars is 240-270. what does it take to break it? nejra: anticipating a rate cut and three-year tenure threatening to revert the u.n.. , thehile, in g10 best-performing currency against the dollar, no surprise what you're seeing with the yuan. you're seeing clear risk off except in euro stoxx 50 futures. barely changed. slightly in the green. let's get a bloomberg business flash with annabelle droulers in hong kong. annabelle: renault has made an offer to merge with nissan according to broadcaster tbs. it intensifies an effort to cement the partnership and

create the number two carmaker. the report says the french company is proposing a tie up under structure. each company would name an equal number of executives. bitcoin has climbed to the highest since september, rising above $7,000. this as the cryptocurrency rally has gathered pace. it has doubled since mid-september and the highest since september. a long way from the 2017 peak that topped $19,000. softbank's vision fund is injecting $800 million into the uk's intact. the company provides supply-chain funding to organizations. it's a valued at $3.5 billion, more than double the level a year ago. the money will help it accelerate its expansion plans and develop new technologies. and that's your bloomberg business flash. manus: annabelle, thank you so much. i will pick it up from here.

euro stocks futures are trading to the downside. the trumprom administration to boost tariffs on u.s. imports from china adds speculation the fed could be more likely to cut rates as it focuses on higher levees on growth. let's talk to our guest host, head of global fundamental equities. fabiana, this debate on whether inflation is low and transitory has been batted away by the market. this is the break evens of two's , tense, and 30 year paper. it has been cascading lower for two straight years. the rights market does not believe this is a transitory story at the moment and is begging for a cut. what do you make of the breakevens coming lower? fabiana: inflation is structurally lower. going forward, we will stay with low inflation. we've talked about it a lot, the new economy, digitization, muted

economy of sharing. there are a lot of factors that create a lower structural inflation. having said that, you expect inflation to come up from here. you've already seen pressure on the wage growth. so, we should see an increase. but overall, we are not going to go back to what it was 10 years ago. nejra: i was talking about the market resting the narrative back from the fed in terms of pricing for a fed rate cut in 2019. futures traders are reinstating they're pricing for a rate cut this year. does that mean that the market expects the fed to act more on concerns around growth if the tariffs escalate, rather than on inflation? tariffs could be inflationary, silla cut wouldn't necessarily follow. a new way of have looking at inflation.

they're a little bit less rigid on it. so yes, we would say that we will have a cut if the trade talks really breakdown and there is an expectation we'll have a significant impact. manus: let's take that forward, extrapolate a little bit. .7%obsessed by 2.4-2 bandwidth for bonds. qw'ew getting closer -- we're getting closer to a break point. what does it take to move tenure paper below 2.4%? ine right about below 2% terms of all-out terror of wars. you have the european tariff issue on may 18. what does it take to break 2.4%? fabiana: a full on trade war will clearly bring us there. nejra: what does that mean for equity markets? does that mean sentiment falls, as well, or are there certain sectors you would look to take opportunities in with yields

moving aggressively lower? fabiana: equity markets will be impacted. mean thatobably more some markets, such as the u.s., will outperform other markets. and in terms of which sectors will do better, it will be the more's defensive sectors across all geographies. manus: what about the dividend place? there is the fed model that showed equities that showed 2.9%. in that respect, does that play into your thinking on the u.s. side, first of all? fabiana: you know, yield place are also defensive plays. it really is going to depend on what will happen with the trade wars, what will happen with yields. we will see a return to dividend plays if the market gets increasingly concerned. nejra: another question, as well. there's been commentary in the bloomberg commentary.

people said the two sides are trying to put forward a front of calm. you could question that with some of the tweets. they don't want markets to take a hit and that could conversely extend the negotiations. would it be better to see a catharsis in equity markets, and then we can move on from there? fabiana: you know, i'm not really sure about that. a catharsis might mean markets, going back to the lows and probably back to the levels we saw last year. i'm not sure that would be good for investors. i think what is happening right now is neither side really wants to lose the deal and both need a deal. but i think mr. trump is overplaying his hand. the risk that china would not want to lose face is increasing. nejra: fabiano stays with us. great to have you with us. both hands on the wheel. shaky day for global equities,

which could mean more troubles for uber's chairs -- uber shares. we discussed next. this is bloomberg. ♪

manus: global markets map as the market perceives a risk. there is no panic yet. is that really the case? do you think the 1.5 percent drop on the csi 300 -- you have the renminbi again. volatility up by 10% on the renminbi. goldman sachs are awaiting their view. the theory would be according to larry kudlow we are not at war. we are at negotiation. nejra: that is a point i brought up earlier in terms of whether the sides are trying to put across some kind of a calm front to stop a pronounced selloff in equity markets. you could ask whether a bigger catharsis is yet to come. we did see the worst week this year for u.s. equities last week . futures pointing lower as well. renminbie run on the

dumped six days in a low -- in a row. that is the longest since last year. you see a whole host of use on whether you want to take haven status or not. amid that uber ipo, how much to do with the first day of trading was to do with the general sentiment? tech stocks got hit hard. how much of it was to do with uber's actual business? let's check on the markets around the world. joining us from mumbai is niraj shah. here in london is dani burger. india's march industrial production figures showed a further slowdown in the sector. our markets reflect in growth concerns on top of the trade angst? morning. the markets are doing something different. a normal compared to cause of reaction to such a

number. in green for the better part of the morning. you hit the nail on the head. while equity markets are not reacting too strongly, money markets are showing concern. you could blame this on what the dollar is doing in the recent past. this whole concern about what is happening to the growth story in india is starting to show. falling. stopped the rupee most importantly has slipped below the 70 mark. it has come off quite strongly from the 68.5 levels all the way to sub 70. that is a concern. i must leave you with this. over the next few days looking at elections, that will take center stage. maybe after may 23, watch out for the currency, watch out for the money markets, and watch for

what the reserve bank does. manus: there is a lot of risk on that. thank you very much. dani burger joins us this one-day morning. haven currencies are bid. few others.a what do you make of it? >> regardless of what i make of it, the currency traders are definitely signaling something is happening with these haven assets. are we going to see consistent slight to the haven currencies? yen we look at the yuan crash, we see volatility getting priced in even though the volatility markets are not showing too much of a reaction. this is the daily change. you can see it jumps past 4.5%. this is the biggest again, ironically almost, since trump was elected. the yuan starts to trade near its lowest level on record.

some frightening price there. you brought up a chart earlier about foreigners pulling out of chinese equities. it is not just foreigners. it is domestic investors as well. accounts.rgin debt investors buying chinese stocks on leverage. that drops for nine consecutive days. the longest streak since august. it was these leverage accounts that supported chinese equity markets. this could be a big loss for china markets if it sees this very key group of buyers leave the market. much forank you very explanation. a little bit of breaking news. this is euronext. they get the clearance to ofuire oslo bors by the end june. the deal is done. they received clearance to acquire 100% of the oslo bors.

let's get your first word news. >> trust is eroding in u.s.-china trade talks. there are reportedly widening differences between the sides as deadlock over how and when to remove existing american tariffs. u.s. officials are convinced chinese hardliners are winning the internal debate in beijing. larry kudlow says he expects retaliation. >> it is interesting. the expected countermeasures have not materialized. we may know more this evening or tomorrow. i reckon we will see what they come up with. so far we have not heard on that basis. >> theresa may is trying to win support of the labour party by reopening brexit talks with brussels. number 10 is trying to rewrite the outline agreement on -- senior labor officials have warned their party want to a

deal without a second referendum. the government is still hoping to take the u.k. out of the block by the summer. manchester city has won the english premier league after a 4-1 win against brighton. they clinched the title after a closely fought race with liverpool. that team won the highest point tally for any team that finished second in premier league history. the teams also have the highest combined point totals ever. global news, 24 hours a day on air and @tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. manus: i will pick it up from here. gerber shares resume trading today. more than 7% below on a disappointing first session on friday. it was a dead. softbank was one of the biggest victims, shedding $9 billion in market value. emily chang spoke to the uber

ceo after shares opened for trade. >> you cannot pick when you go public. you can control how you execute at the company, and are you bringing in happy consumers all over the world? we are going to focus on what we can control. we raised a lot of capital to invest for many years. that is what we are focused on. manus: let's get to peter elstrom, the bloomberg executive editor. he is our asia technology editor. good to see you. we are looking towards day to. -- day two. could it be as brutal as day one? >> it was not supposed to happen this way. uber is not just another technology company going public. it was the most valuable

american company to go public. as they are heading out into the ipo, it is a marquee name. also as they were pricing the ipo, they were very careful with it. we heard demand was strong. they were priced near the upper end of the range. instead, they priced right near the bottom with hope they would get a pop on the first day. it went the opposite way. there were a lot of other things going on with this ipo. you've got this spike in trade tensions happening just as they try to go public. reportingave lyft earnings that are terrible. that dampens the entire mood for uber. nejra: i guess the job for investors is to work out how much of the performance was to do with general concern in the market and how much it is to do with concern around its actual business model. but also, damage from softbank.

walk us through that. >> softbank reported earnings right before uber priced its ipo and they reported a tripling in profit. in tokyo, he came out to his shareholders and said -- came out and said his shareholders your time has finally come. they booked a profit of almost $4 billion from their stake in uber. instead what happened is shares begin trading in tokyo. they slid. it opens the eyes of investors that softbank not only has upside from some of these private companies they invested in, they also have downside risk. these companies stumble like we saw in the case of uber. nejra: thank you to peter elstrom, joining us from hong kong. still what this is the head of global fundamental equities that beco.ca -- ro

talk with me your rationale about technology. you did see tech shares and in particular semiconductors hit on friday, swept up in trade angst. we just heard about the hotly anticipated tech ipo with uber. what makes you like tech with trade tensions increasing? agree with you, some of the areas in tech have had valuations reaching almost all-time highs. other areas, think about hardware. think about semiconductors. think about semiconductor capex that still see reasonable valuations. still like those from a structural viewpoint. ,f the trade talks break down we will see volatility also. here we have two scenarios. tode talks are going

eventually come down to a deal, or there will continue to be volatility. interesting we saw nikki was on the board of facebook defend the changing landscape -- nick, who was on the board of facebook, defend the changing landscape. forward, is the context that is less exposed to softbank the new resident -- regulation? fabiana: i would say so. clearly as a lot of these companies go over also there domestic boundaries who are bound to have more regulatory pressure, and this is something we have to take into account. nejra: looking at earnings more broadly, global earnings provisions are getting close to positive territory. when we talk about earnings, we see a lot of beats, but as you ,ointed out in your notes to us

they were beats on low expectations. what is your outlook for earnings driving equity markets the rest of the year? scenariove a base case with trade talks that finally come to be. we are seeing equities in the u.s. going up by about 3% in terms of earnings. 6%,ging markets probably japan will be an area where you still see decline in earnings. if you look down at the relative valuations, clearly given there is not anymore huge earning differentials between the u.s. and the rest of the world, actually any areas out of the u.s. become attractive if we do not have a breakdown of the trade war. manus: all roads lead back to that sentiment.

earlier in the show we briefly touched on japan. you say as far as you can see it is going to be next on the buy list. see before need to you put your foot to the floor on japan? you need to see the reasons why japanese earnings are week, actually turning around. one of them was the chinese economy being weaker. you started to see stimulus from the government. that should also translate into better earnings for some of the japanese companies that are very much embedded in the supply example,china, for automation equipment. you need to see the trade talks. japan has a very open economy. manus: thank you. that sales tax could definitely

see some confidence. fabiana fedeli, you stay with us. coming up, we are going to hear from the ceo of union credit on the status of the turnaround plan and the struggle to boost revenue later in the day. and our exclusive conversations with the eu trade commissioner right here on bloomberg. ♪

nejra: this is "bloomberg daybreak: europe." get to south africa. president cyril ramaphosa's african national congress has won its sixth straight victory, but with the lowest share of the vote since the end of apartheid. rim oppose a face the task of revitalizing south africa's economy and fighting corruption.

what are the implications for rim oppose a? he did not -- four rim oppose a aphosa? >> we know the african national congress won the election with a national vote of 57.5%. that is a strong indication the anc is given another chance to revive an economy that has been ailing. also to tackle corruption. what will have to see as if he has enough power to put in place the policy reforms promised ahead of this election, including fighting corruption as well as reviving state owned companies as well as reducing his cabinet. we will have to wait to see how much power he will wield within his own party. >> great to see you.

the recent rally we have seen in the rand taking a bit of a pause today. can we read into that investors are getting a reality check on how difficult the road could be from here? >> exactly. we saw the rand up ahead of the weekend. that election news only came through on saturday. even though rand denominated government bonds also were quite firm ahead of the election results, we will now have to see over the course of the next couple days exactly how the market reacts, whether he believes ramaphosa will have enough power to deliver on his promises, we will have to see how that unfolds. johannesburgerg's deputy bureau chief. now let's get a bloomberg business flash. renault has made a former offered to merge with nissan.

tointensifies an effort cement the partnership and create the world's number two carmaker. the french company is proposing a tie up under a holding company structure. each company would name an equal number of executives. bitcoin has climbed to the highest since september, rising above $7,000. this as the cryptocurrency rally has gathered pace. the price has more than doubled since mid-december, and is at its highest since last september. it is a long way off its 2017 peak that tops $19,000. vision fund is injecting $800 million into u.k. fintech greensill. the investment values that 3.5 billion -- values it at 3.5 billion. the money will help it develop new technology.

that is your bloomberg business flash. manus: theresa may is trying to win support of the opposition labor party to reopen brexit talks with brussels. the government is still hoping to take the u.k. out of the block by summer. poll,ing to an opinion nigel farage's brexit party could take over a third of the vote. more than the tories and labor combined. joining us now is a global strategist at allianz global investors. and our other guest host, fabiana fedeli at robeco. a newew poll gives farage whipping stick politically. do we need to pay attention to 34% in this poll for the brexit party?

are there risks associated? >> i think the european election -- parliamentary elections are going to be interesting. i think it is a given that what i would call the brexit protest from conservatism and labor might come through next week as you suggest. from a u.k. political perspective, nigel farage is making it quite plain he would like to get involved in the debate in the government is having with the european union. from a european perspective, everyone will be not nervously but cautiously watching the protest votes that come out of france and italy in particular. clearly as we look into the second half of this year we are looking for europe to start to get its act together to make steps toward the united states, and the more people you have promoting local politics rather than regional politics, it may

disappoint people who want europe to get on with the next step. nejra: how do european equities figure in your global portfolio? do you approach them tactically? structurally? fabiana: tactically. we are concerned about brexit as we go towards that october deadline and then the december deadline. particularly the october deadline, we are concerned. there is just not going to be in agreement. have a look at this chart. this is volatility on the pound. it is drifting along as if nothing bad could happen. are we mispricing volatility risk? do you buy bonds? this point i would.

the chance it would go up higher than the chancellor -- the chance it would come down, but i would not expect any -- nejra: are you buying volatility? >> the way i would look at your question is the u.k. is under owned. it is under loved. when one thinks about the volatility or the difficulty of the u.k. economy in the short-term, i think owning the equity market from here, half of it has nothing to do with the u.k. economy. i think sterling to us looks undervalued. i would be buying through this weakness and this lack of interest. i think it is a real opportunity in a world where -- i think volatility around the world is cheap. america is sleepwalking into a shock if china decides to properly read italian late -- retaliate.

they will retaliate at the u.s. corporate level and that is where u.s. corporations are vulnerable. manus: how vulnerable? you say a huge portion of our market, our ftse 100 et cetera is globally exposed. the ftse 100 in terms of trade war risk, how do you look at that? in terms of the trade autos get hit, a lot of the supply chain into those big industries is still based in the u.k. and that would have some friction. some of the other parts of the global trade war i do not think were affected, whether it is the pharmaceutical companies or the big oil companies. they are not affected by this. already, under owned and looking attractive as far as i can see. n has brought up some of

the sectorseil. what sectors are you liking? more at we look continental europe right now than the u.k.. we think there is so much uncertainty in the u.k. with brexit. we like some of the industrial companies in europe, particularly the ones exposed to renewables. we like consumer staples. we have increased some of our exposure to companies we have seen at the end of last year, particularly hit. we have actually increased our exposure to some of the material companies. nejra: fabiana fedeli, great to have you with us this hour and neil stays with us. as italy's biggest bank looks to grow its top line, we speak exclusively to unicredit ceo. ♪

manus: good morning from dubai.

this is "bloomberg daybreak: europe" and these are today's top stories. stocks in asia and u.s. futures slide as china blasts the u.s. for wrecking negotiations. president trump's twitter tirade continues. day two of trade for uber. -- $9 billion 900 in market value. less money for bad loans. what does it mean for the future? for anit ceo joins us exclusive conversation next. nejra: welcome to "daybreak

europe it is all calm. the s&p 500 and the stoxx 600 in europe both closed in the green on friday. what a week for u.s. stocks, the worst week of 2019, futures really taking a hit. futures down more than 1%. last week you did see the semiconductor index hit harder than the s&p 500. a week of600 did have loss. given whatk out why we have seen in the asian session. dax futures a slightly in the red. cac 40 futures green. manus: it is surprising not to see a more aggressive response in the 10 year in the united states. u.s. bond futures up just a couple of seconds this morning.

momentum is gaining. moment, the bond market suggests it is negotiation, not an all-out war. francine lacqua has an exclusive conversation with unicredit. they reported profit last week. you have the ceo with you. take it away. >> thank you so much. years, unicredit's chief executive has cut costs in efforts to get the bank on more solid footing. now he faces a harder risk. joining me for an exclusive conversation is, as you are saying, the ceo of unicredit. thank you so much. what is your biggest concern? what is going to be the most difficult thing you will have to achieve? costs are down. is that going to be the thing

that will go through? >> we have achieved most of our targets already from 2019. you mentioned costs. the reduction of nonperforming , aets and profitability threshold of 9%. seeing aid, you are boost of the negative interest rate. the topline equation is a key focus. >> how do you grow revenue? you are the end of a turnaround plan which was successful. what would be the pillars of that growth? >> we keep activity with all our clients. anywhere you can

specifically generate growth? >> outside italy we generate growth in germany. we diminished clients with small and midsize companies. italy is a country where our planned activity, we can incorporate. germany?rategic as what are your plans in the country? >> in countries where we are present, we moved with our clients in terms of offering are worth to help them. europe is the larger a very important country for us. >> would you buy anything in germany? >> that is a good try. >> you have sold some assets.

you are in better shape. use that capital to look at m&a -- would you use that capital if you saw anything you liked? >> indeed it is important for us to grow on a purely organic basis. we have been managing to do that very well. i said mergers in europe will be very difficult. a lot of things need to be followed. cost needs to be controlled. governancerisk, and need to be appropriate. will be many measures in the foreseeable future. >> domestically and across borders? >> yes. >> where does it leave the banking landscape if you don't? because of rates, because a lot of the banks do not have a clear plan of what they will be coming

10 years, it will be tough. >> it is interesting to be a european bank. you mentioned negative interest rates, which are a consequence of low goals. growing slightly, controlling activities and networks and managing risk. we have different goals probably lower than what we see in the u.s.. nevertheless, the banking sector in europe is interesting. >> if you tell me m&a is difficult to achieve, how do you match the two up? jean pierre: europe has many small banks in various countries. what we do it unicredit, we have a unique position. truee one of the very few european banks.

midmarket clients need banks to export. that is what we do. we can see growth. >> when you speak to shareholders, how many times to they ask about commerzbank or deutsche bank? in december we will speak about our new plan for the next four years, which is going transform the bank in terms of how we are more efficient with our clients. to make sure we have capital which is in the upper part of our range, which allows to lend more to clients and increase our dividend payout, which is what shareholders are looking at.

we use it more quickly on nonperforming assets, we have reduced by more than 36 billion in the past two years, which is very significant. shock in terms of economic evolution, to optimize customer funding, mergers are to be able to increase our dividend payout. the economic situation in italy mean for unicredit? italy hasean pierre: a lot of strength. midsize companies, large companies as well, so today the situation is fine. growth is not very high, but

companies are still investing. --o not worry and i look for >> would you be interested in rescuing -- jean pierre: we never comment on rumors and speculation. our growth is purely organic. be --ys said it needs to all the banks need to be involved, including unicredit. >> how do you describe the health of the italian banking system? improved.e: it has -- 12.25% and a balance sheet. italian banks, the situation today is good and they can support the economy. this is what is important.

i think international investors start to look at europe -- european banks in general. between our top four investors, three of them are u.s. investors. most investors today look at european banks and italy like unicredit. >> do you think there will be a consolidation? jean pierre: there is consolidation already when you look at the smaller banks, which are being put together. the country needs a lot of banks. italy is fragmented. you need a stronger presence which means we probably will need more banks than countries which are more concentrated. >> do you believe shareholders understand what unicredit is doing? jean pierre: we are european bank headquartered in italy. there is a discount for unicredit, which is why these

financial mergers to improve the profitability of the bank. >> i know you do not speculate on m&a and you don't speculate on rumors. if you look at the european banking sector, how many banks will be left because either they have been taken over or they had to go bust in 10 years? jean pierre: we should look at the situation in a different way. market ofompare the the largest european banks, they are very small compared to the larger u.s. banks. jp morgan is a 360 billion euro market cap. important is to have bigger banks in europe. this is what is needed.

we need a stronger financial market in europe and hopefully the capital market union to one side and the banking union on the other will bring a bigger market if we managed to attract investors to european banks as well as to european markets. , thank pierre mustier you for joining us this morning. jean pierre: thank you. nejra: great interview with unicredit's ceo. still with us, neil duane at allianz global investors. jean pierre mustier saying of their top four investors, three of them are u.s. value investors. i can tell you who they are. you still don't like european banks. why not? >> euro zone banks are trading at record lows. we are back below 2000 relative levels.

you want to be a contrarian and get in when they are cheap. with the central bank, the ecb keeping negative rates, this industry needs a subsidy. therefore it tells me it has not worked out its mpl problems --pite the opportunism of ustier,imism of mr. m european banks have yet to write off years of profitability. there are large private players that have -- that are owned by the government's, which is inhibiting the industry for profit. i agree with him about the need for consolidation, but we also have this new european directive which is going to allow you and me as european citizens to choose who we wish to bank with for the first time in a much more easy -- there is disruption coming.

to sit on the sidelines and watch as well as the sovereign bond loop. manus: there is no doubt about it. just look at italian bonds. they had their worst week since february last week. neil dwane, you stay with us. breaking news from softbank. softbank are pitching in a small check, $100 million to a u.k. company. ll. company's name is greensi it provides additional supply chain funding. they reckon that market will glow -- will grow trillions of dollars. it is an untapped market for capital finance. in the post, $800 million. who said tech could not bring money in quickly? coming up, an erosion of trust.

trade talks have stalled as both sides blame the other for rent nagging on promises. neging on promises. this is bloomberg. ♪

manus: just on 7:18 in london, 41 minutes away -- i have just shaved 30 seconds off your trading day. dubai.nus cranny in nejra: let's take a fast and furious look at the markets. u.s. futures taking a beating after the s&p 500 closed in the green, but it was the worst week for u.s. stocks this year. we saw similar thing friday. european and u.s. equities and in the green. that divergence is something to note. the 10 year yields down three basis points. we had the lowest since early

april. the three month tenure threatens to invert. a little bit of repricing in futures for a rate cut. yuan, you see spikes sachs, volatility by 10%. what will be the response from the chinese? the dollar index also higher. do you want to be longer the dollar? what are the impact of tariffs on inflation? by the way, correlation coefficient between yuan and copper is negative 0.8%. down goes the copper. annabelle brings sophistication to the bloomberg business flash. >> for nagler's struggling to find investors for its london ipo. the financial services firm caught up to restructure or

delay the offering. no final decision has been made. to raise $700 million to give it a value of nearly $2.5 billion. renault has made an effort to merge with nissan according to tbs. it intensifies an effort to cement the partnership and create the world's number two carmaker. the french company is proposing a tie up under a holding company structure. each company would then name an equal number of executives. bitcoin has climbed to the highest since september, rising above $7,000 as the cryptocurrency rally has gathered pace. the price has more than doubled since december. it is at its highest since september, still a long way off its 20 peak that topped $19,000. peak that topped $19,000. nejra: president trump taking

more shots at china over the trade war. he says america is right where we want to be and again blames beijing for breaking the deal. chinese state media is blaming the u.s. because it went back on its word and impose more levees. the uncertainty means more turmoil for financial markets. stocks in asia have fallen along with u.s. equity futures and treasury yields. larry kudlow has told fox news he sees suffering on both sides. the expected countermeasures have not materialized. we may know later this evening or tomorrow. i reckon they will. so far we have not heard. nejra: still with us is neil dwane. talking about suffering, how much suffering could we see in equity markets? what is the chance we erase gains? neil: i think there is a chance.

every day there has been a comment by one of the u.s. administration about whether we are heading toward a deal. the market has priced in a deal even though you and i would say i would like to see the devil in the details. it is interesting that on friday the chinese government clearly supported the markets over the news of the implementation of tariffs did not heard initially. clearly that is unwinding. i would argue markets in the u.s. were very complacent friday, i think because they saw the chinese market go up, thinking this is all counterintuitive. there is an aspect of managing the financial impact as well as the pr, but i think we wait to see what actually happens next. find out more in terms of the chinese response. we will also find out in terms of where the additional tariffs might come.

, theyinese response talked about resistance, distraction, and hiccups. the chinese description does chime with larry kudlow. maybe we have got it wrong. neil: possibly. what i would say is there has been an issue around the chinese would like a deal. they have other pressing issues including rebalancing deleveraging. the u.s. administration would like a deal so you can go out to campaign he has got a deal with china, japan, and europe to come. go 3-0.year he can i have won three trade wars already. look how great i am. the concern i would have is that often when china has been put in a difficult position, particularly with south korea and japan, they have targeted the companies, not the country.

i worry that you have a don't buy apple campaign and apple sells $40 billion worth of products in china every year. there is a profit warning potential there at some point. nejra: i have got to bring up tech. we saw the nasdaq semiconductor index hit on friday. uber's first day of trading tank. i askeless, on tech, people, why would you buy tech with the risks around tariffs and some parts being overvalued? a lot of people say we want to stay in. there are a lot of parts that are selling cheap and worth buying. what is your take? tech about a third of u.s. has nothing to do with -- it is about the software, the cyber, and if you believe in the growth, you will own that piece. is another-- there trade war going on, the text trade war, this buying, the huawei case.

that will undermine the logistics of many of the u.s. companies as they can no longer make it in china. that is another part of the story. that is where i would agree with you. say huge would optimism for the second half of this year in terms of a bounce in the supply chain of technology and increasingly, whether it has been amd or intel , the second half does not look like it's going to happen. that wouldn't be cautious of that side of the cyclical part of the tech industry as well. weus: on emerging markets, are seeing this substantive reset in terms of peoples' perspective. it is the rate argument versus the trade. do you shave back em risk as a cautionary move? neil: i would have been doing so, but i would define em through the political risks you are covering up top of the story. south africa. i would add to that turkey and argentina, whereas arguably we are about to get the clarity we

want in india and indonesia. i would look for emerging markets through the lens of political risks and i would not be looking to bottom fish those areas like south africa where we are not certain what is going to be able to achieve. that is how i'm looking at emerging markets. . manus: thank you so much. neil dwane, global strategist at allianz global investors. some breaking lines from the foreign minister in brussels. says she may speak to pompeo today. mike pompeo, the u.s. foreign secretary has stopped off in europe on his way to speak with vladimir putin. she says she will speak to pompeo today in brussels. this is bloomberg. ♪

at comcast, we didn't build the nation's largest gig-speed network just to make businesses run faster. we built it to help them go beyond. because beyond risk... welcome to the neighborhood, guys.

there is reward. ♪ ♪ beyond work and life... who else could he be? there is the moment. beyond technology... there is human ingenuity. ♪ ♪ every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. take your business beyond.

anna: welcome to "bloomberg markets european open." i'm anna edwards alongside matt miller in berlin. ist: the markets say europe a safe space. european futures point to a flat open as asian stocks tank and u.s. futures are deep in the red. the cash trade is less than 30 minutes away. anna: expect retaliation.