manus: good morning, this is "bloomberg daybreak: europe." nejra: i am in london, these are today's top stories. president trump drags the fed into his trade war. he calls for it to match any action china could take. week industrial data shows china's economy slowed even before the latest hike. and germany under the spotlight. is said to be lining up an advisor to explore a takeover of commerzbank.

we are also awaiting first quarter gdp for europe's biggest economy. ♪ manus: good morning from dubai. credit aggregate numbers crossing the tape, a red headline. first-quarter net income. the markets have penciled in 800 million euros for the banks, subnet income falls by 11%. capital market numbers beat. of course, you saw the fixed income commodities all rising on average by about 5%. so when we look at the various pieces of this business, capital markets revenue is a beat. sorry, relative to last year, it is up. they -- therein lies the point.

nejra, you have got a little bit. nejra: i do. let me recap the numbers. incomeuarter operating comes in at 2.0 8 billion euros, the estimate 2.13, so a bit of a mess. beat estimates. first-quarter profit misses. up, we speak to the chief financial officer of abn amro. don't miss that interview. manus: certainly going to be interesting. let's talk about markets. the s&p 500, are you fully hedged? 34% of bank of america

merrill lynch surveyed that they are fully hedged. they also need to see the market dropped by another 18%. the battleground is 2800. you have got stockpiles versus geopolitics moving the oil markets. and dollar-yeah, a lovely note this morning. 100 .4 could be on the cards, crash test level. trade were still dominates headlines, the question comes whether this was a machiavellian plot to get the fed to cut rates. and if that was the case, how would markets react if we saw what would be called a defensive cut? that is what our guest refers to as. looking at the 10 year yield, we are not moving a lot. the nuclear option has always been that china might sell treasuries. not necessarily as a game plan, it may be a way to cap reserves

and avoid capital flight. the aussie is not stable, hitting a four-month low down .2% following the china data. china's factories are walking wounded into a trade war. stocks on the front foot, we saw them gaining along with u.s. equities. let's check it on the markets in asia. juliette saly has more. interestingly, we are seeing asian markets hold up quite well despite the chinese data. the april numbers really showed that china's economy was hurting even before the tariffs came into play. you have got the cfi 300 brushing them up. hong kong's market also coming back after the hefty selloff. all in all, it is a pretty positive session for asian equities, which were showing

signs they have been the most oversold in about three months. even japan's nikkei index is now turning around up by .3%. it is the first gain for asian equities so far this week. let's have a look at stocks, it has been all about nissan in tokyo. falling to a low after cutting its dividend for the first time in a decade. analysts worry there could be more pain ahead. also sliding in the taipei session. the world's largest assembler of iphones numbers missed and bank of america merrill lynch has no cut its target. seven --ilippines, cebu air under pressure. the company has been ordered to stop canceling flights were no reason. manus: thank you very much.

singapore,ly in let's talk trade. president trump is calling at the fed to get involved. he wants the federal banks to match any moves to offset the impact of a trade war. trump tweeted that it would be quote game over. the new york fed president john williams spoke exclusively to bloomberg and said that tension is already starting to push up the u.s. inflation. tariffsthink of the like a supply shop. -- shock. it will probably boost inflation over the next year. it affects demand and growth in the short run. but there are also negative effects on the value chains. hass: meanwhile, xi jinping pushed back against u.s. trade

demands and denounced foreign efforts to reshape other nations as foolish. let's bring in a man who has to worry about all of these risks. the chief investment officer at emirates nbd. good to see you. >> thank you. manus: just how much angst do you see at the moment? are you hunkering down for a protracted trade war? about there is a great phrase that says that if you want peace, prepare for war. for sure, we are preparing for the worst. we do not think the worst will happen. we think both parties want a deal but it will not happen in the near term because of mr. china's time and we have which is longer cut risks last week -- which is longer. we have cut risks last week.

the markets were not price for this kind of risk. but we are ready to come back and rethink the outcome should be positive. nejra: right to have you with us. if the fed were to do with trump suggests, what trump what would that mean for how you might distribute allocation? would you be tempted to buy china if there was the prospect of stimulus but to sell u.s.? this would be a defensive cut. we think that monetary policy is very serious. we are very happy to see that the fed is data-driven. a defensive cut, it is an issue. if the data shows you have an actual slowdown in the u.s., that is another story and markets are not priced for a

slowdown. for the time being, we do not expect the fed to move. even if there are additional tariffs that would be implemented, we are talking it is inflation rather than something else. we do not expect them to move, with a move without data? if they move because the economy is going down, that is another reason to cut rates. it is good to get a cio and say this is exactly what we did there we are trying to figure out what the response mechanism would be. under,ime the yuan goes the debate is this. could the chinese be forced into selling treasuries? they have done in the past. down go treasury holdings.

this is an unintended consequence, not a forced weaponization. what you make on that argument? maurice: i think the analogy with nuclear is very interesting because it is the kind of thing that you want to have as long as you don't use it. fundamentally, china needs to have some u.s. dollars and they have a long-term plan. they are not looking at next year's election. they want to institutionalize the market and manage it effectively. they want to be a consumer and technological superpower with a large financial basis and military power. would behe treasury inconsistent in that long-term path. nejra: our guest on the store yesterday said that we are not in an environment of more risk, just more uncertainty.

you have talk to us about how you have removed risk and moved to cash. if this all results itself at some point in the near or commit future, where are you looking to redeploy that cash? maurice: an excellent question. your guest was french, he was excellent -- manus: you cannot have a vote on that basis. [laughter] maurice: it is impossible to perfectly timed the market. but the tool that we have is to work on valuations. we reduce risk because we have fair values and have almost reached or exceeded them in some parts. but it does not get materially worse on a fundamental point of view. for us, is a temporary cut.

because we were in the right position, it makes things much easier. as we wrote, it is about being able to adapt to changing conditions. manus: it is. and as we said, geoffrey was a man who needs no introduction. he says the odds of an fx cuts in the next 12 months are at about 70%. that some ofarns his indicators, talking about the atlanta fed, as being a warning signal of recession to come. do you think that is foresight or front running the argument? maurice: for us, it is a little bit early. as you said, he does not need an introduction. a recession will happen, no doubt. it is very difficult to time

when we look at the u.s. and the strength of the job market. anyway we look at it, unit participation or unemployment at a low and you have real wage inflation, in that context, it is difficult to see a recession. we could have a significant shop. -- shock. confidence shock, this could happen, but the odds of a recession in the next 12 months are, for us, maybe 40%. us as maurice stays with our guest post. now let's get first word news in hong kong. >> weakness is showing up in the u.s. economy according to double line capital.

he says a basket of different indicators has fallen to its lowest level since the financial crisis. this is despite lofty predictions of growth. he says the chance of a recession in the next two years is extremely high. in the next 12 months, he says it is 50-50. president trump says he is not reported hundred 20,000 men, if he did. men if he did. he called it fake news. this is after the trump administration revoked iran's oil waivers. theresa may has set the date for her final brexit showdown. she is promising to bring the deal to parliament at the start of june. talks have not yielded an agreement, but she is hoping members of parliament will back her. the press secretary says it is

time to make a decision. a record in the art world. a sundrenched landscape by claude monet has fetched $110 million at an auction. it was painted in 1890 and had a presale estimate of half the final some -- sum. the identity of the winning bidder was not immediately clear. global news, 24 hours a day and on twitter. this is bloomberg. manus: thank you very much. i don't have the wall space or the lighting for that particular peace. 26 countries set to join the em index, we speak to the index ceo. we will ask him about the latest economic flow from china. this is bloomberg. ♪

manus: this is "bloomberg daybreak: europe." i am manus cranny in dubai. nejra: i am in london. let's get a check on the markets , seeing green on the screen today. uan asity in the u.s. -- y we ask ourselves if china may be forced to sell treasuries. the aussie dollar falling under pressure, hitting a four-month low. manus: politics versus inventories, it is the inventories that win, keeping u.s. crude under pressure. benchmark saw its biggest gain in two months yesterday, though it is looking less bullish. 60% of members, less are above the average futures, fully

hedged. let's get your business flash. ing and unicredit are reportedly lining up advisors floor a takeover of commerzbank. this is after talks broke down last month. the two lenders have had on and off talks with the bank but bloomberg has learned no formal negotiations are ongoing. while they already have german businesses, a time would bring them broader access to europe's biggest economy. walmart has confirmed is seriously mulling an ipo. they say preparations could take years. the international chief says they are not rushing into anything. this comes after regulators blocked a planned merger to create britain's largest supermarket.

disney is taking full control of hulu as part of its bid to compete with netflix. it struck a deal with comcast which sees the platform value soaring. even that would only be a fifth of netflix's current market cap. they expect hulu to more than double subscribers by then. nejra: thank you so much. let's stay with china. -- seconds economy largest economy lost steam in april. investment manufacturing lost pace. meanwhile, earnings from the most valuable corporations offer a further glimpse into how it is handling the trade war. we bring you results from alibaba and tencent as soon as they drop. today, we are asking if assets are mispricing china's economic resilience. joy the debate and reach out to us on the mliv team.

-- join the debate and reach out to us on the mliv team. still with us is maurice. if we continue to see signs of slowing in china and we get signs the authorities will step in, would that be the trigger for you to add back in emerging markets? i know you have reduced your positioning recently. maurice: we reduced the position , but we are neutral on emerging markets. frankly, it is interesting. when you start to say that bad news is good for markets, you feel like you are not in an emerging market anymore. having said that, china has a lot of stimulus and deleveraging, which is a long process. deleveraging to go into a sound

economy. would we move our money because of the stimulus, i don't think. we would move as long as the risk is attractive, meaning a cheaper valuation. it is as simple as that. but stimulus is part of our assumption. now, we think china will engineer its gdp growth so as to achieve the tenure target -- 10 year target. when you go to reemploy capital if we see the route -- china.s bigger in when you go to reapply, would you reapply more aggressively relative to the u.s.? equal,: everything being

currently, we are one tweeze away from a new wield -- tweet away from a new world. but our inclusion is to add to a mergener market equities, we like india. emerging market equities, we like india. nejra: they are, in some ways, bellwether as well. you say you like china, you like india. are you favoring asian tech? there he clearly, -- very clearly, we believe in selectivity. up aboutdecade of beat

being in the right sector. any other idea yes, they are fantastic names in asian tech, tencent and alibaba together accumulates one third of capital and msci china. -- in msci china. do we favor it over u.s. tech? it is all company-by company -- company by company. case-by-case analysis. over --ou mentioned uber. did you spend any time looking at that story? disconcertes mayhem

the ultrahigh worth? maurice: of course we look at it. idea and itortant is important in our understanding of markets. we did not recommend it. it does not mean we have a negative accommodation. but yes, we looked at it. it is very important to understand what is going on. when an ipo looks more like the end of the story, something is wrong. i know it is unfair to say when the stock is down, but we said the same thing two weeks ago. we have somebody people who have made lots of money, taken risk, and for them, the ipo is about selling. manus: it could be one of those red flecks. stay with us -- flags. stay with us, more coming from maurice. and coming up, the dutch economy

continues at a strong pace. but what is the view from one of the nations biggest financials? nehrurd abrahams is with and i. nejra this is bloomberg. ♪

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world map, green on the screen in asia with china leading the gains strongly. indices in china up more than 1%. trade war is dominating the headlines. off china is coming as president trump turned his attention to the fed. manus: yes, they have a great conspiracy story that he is turning the screws on trade to affect some response from the fed. more qe and it would be game over. we would get 5% growth. howa: absolutely, then

would markets react? would you see risk taken off the table globally? would there be a preference for china over the u.s.? those are questions to ask, the 10 year yield not moving. manus: let's get to our corporate story, we have the abn amro numbers. worse than expected profit. negative interest rates in europe. bankncome as the dutch fell lower than the average estimate. let's get to amsterdam for our first interview of the day. it is clifford abrahams, cfo, abn amro group. the top lines is profit slumps way on the numbers. take me -- weigh on the numbers. take me behind the numbers. clifford: we are making good progress on our strategy in a more demanding environment. profits down 20% from q1 last year, but q1 was a strong quarter for private equity gains

in our business. we had some costs in q1 relating to liquidity and brexit. if you look through that, income is broadly flat. we are making good progress on costs, costs continuing to come down with our programs. it is pleasing to see impairments down sharply from q4 last year. if you look through all that, and the levees we paid in q1 come out our return on equities are 10%, within our range. bottom end.n the our capital remains strong. largely unchanged from q4. the current rules, 18 percent, quite strong and well-placed within our range. we are feeling solid and executing well that is what we t few quarters. nejra: clifford, great to speak

to you. when we spoke to you last time we talked about dividends, and you said you were making no commitments for 2019. investors were unimpressed last quarter because even though the payout ratio increased, basically the takeaway was they were getting a big slice of a smaller pie with smaller profits. can you give us an update on the dividend? may, and as you know early in the year. i cannot update specifically on the dividend. what i can say, the business is performing reasonably well. our return on equity is solid. the impairments are down, and our capital position is quite strong. we talked last year about the leverage ratio and how that was a constraint. recently we had our legal merger approved by our shareholders, which effectively removes that constraint.

we are working hard to make sure we are well capitalized, and when the time comes to declare a dividend, we are in a good place to do so. goodnessifford, think you answer the dividend question. preparation for growth. that is what the market once to know. you apply for licenses in the u.s. and australia. is this a renaissance? are you reaching for growth and geographies to expand the revenue stream? clifford: we are focused on profitability at abn amro. , but that see growth needs to be profitable. organically, you have seen is inwing in the netherlands our commercial banking business, the economy here is solid in the netherlands. we are pleased to see growth in our private banking business.

we have new money as well as the bounce back in the equity market. we are also looking for modest, butgrowth, you will see this quarter we closed acquisition in belgium for our private banking business . we are pleased to have close to that. modest acquisitions that can strengthen our core businesses. nejra: thank you, you have taken me to my next question on acquisitions in reference to you private buying socgen banking unit. can we expect more private banking acquisitions in western europe? we think over time there will be opportunities to further grow that business. we sold the last of our offshore private banks in q1 in the channel islands. we are very much focused on

onshore private banks. we closed the transaction in belgium. we are working hard to bring the systems of all our private banks together on one platform, and that will give us a good basis to acquire further businesses to grow that business profitably. clifford, we have a number of conversations with cfos and ceos in your sector. cost cuts are the byword. you are restructuring the investment bank. is that done, is there more to come, and if so in which divisions? clifford: we have a corporate bank, not quite an investment bank. thee corporate in netherlands and around the world. last year we announced we were refocusing that business, and we have largely delivered the reduction in the balance sheet we announced last year. we are pleased with that. we need to make further progress

with that business on costs in the operating model to deliver profitability that we would like that business to show, which is on equity.% return we are pleased with that progress and will maintain that progress consistently, and update you each quarter as we go through that. nejra: clifford, i hear what you say about profitability, and appreciate the work you have done on costs. nonetheless, among european banks, abn amro is one of the laggards on growth. what will you do to tackle this problem of revenue growth, which is a problem for many european banks? primary goal is return on equity. you see our performance is good in that category. we do want to grow the bank where we can do that profitably. even this quarter we have announced new propositions in

mortgages to grow our share in our core market the way we are excited about that, sustainable propositions, loans for seniors to enable them to extract equity out of their houses. we are working hard on propositions to grow our share. we are growing in the commercial bank. we need to grow profitably, and the mortgage market in the netherlands is a good example where we have let our share come down to maintain profitability. and more recently we are seeing our share pickup as our discipline has proven itself, and we are able to increase share with my conditions -- where market conditions allow. manus: to close off the conversation, we talk about consolidation across border in the banking industry, everybody is calling for it. which jurisdiction has got the desire to allow that to happen? will we see major consolidation

in 2019, 2020 in the banks? ourselves,ooking at we are notres, interested in bigger consolidation. if i look across europe, i am more familiar with the barriers from regulation around deposits. i think it is possible you will see some consolidation over the next few years, particularly as the environment becomes more demanding. bank banks suffering credibility and looking for solutions to that. we want to safeguard our profitability from our core business. we have the ability to run our business in any scenario. that is what we are trying to do. as we see opportunities we will look at them hard. consolidationut every quarter more or less every

year, and it seems just over the horizon anytime we talk about it. nejra: it is like waiting for godot. thank you to clifford abrahams, cfo, abn amro group. great to have you on the show today. here in london is annmarie hordern. indian equities advancing for a second session along with a lot of asia even though there has been selling by foreigners. what is carrying the market higher today? >> it is interesting you point that out. the month of may a side of what is happening, yesterday was a big cell number. ,n light of what is happening the small change in sentiment has led to pull back over the last couple of days. 600 points down and they pullback. let's see how long it lasts.

the markets are in agreement. bloomberg is carrying a story about the largest low-cost carrier looking to expand to the european region. showing, and the ares for the other category doing well. let's see if it slides into europe that there might be more to this story as well. we will keep you posted. annmarie.'s get to how is your imap looking? annmarie: a lot of green on the screen. many might be questioning because we do not have an indication with the trade war. we did have week timing data. we saw a retails low as well as investment. this means many may expect beijing to boost stimulus.

the chinese up. .9%.kong up their for, australia dollars hit a four-month low earlier in the session. this could be off of week china data. the turkish lira is down as well 0.9%. it has been very volatile. turkey may listen to the u.s. to delay the purchase of russian missile defense system. why does this matter for the lira? it could ease tensions between washington and ankara. we asked the secretary general about this, he said it is a difficult situation. in commodities, slightly higher with the chinese one, but brent crude down 0.2%. increases in the u.s. stockpile, concerning the supply side.

we will hear from the ministers and learn more from the difficulties on the supply side. moving onto a different topic, my chart focuses on consolidation in the banking industry. after talks broke down with deutsche bank and commerzbank, we learn union credit and ing are lining up advisors for a potential takeover. i am looking at the ratio of nonperforming loans, and as you can see, you need credit, while it is highest in the blue, they have been working to bring it down. if they were too, it would make them more attractive for commerzbank. nejra: thank you so much. hordern,'s annmarie great to have you with us. still with us is maurice gravier . thoseof things covered in markets. let me pick up on the idea of volatility.

you are staying nimble and volatile markets. what is the way you are dealing with that threat of volatility in the portfolio? is it to buy safety in gold? yes, we are in gold and we have some potential, gold is not easy to evaluate because you do not have cash flows. think -- gold is a bunker in your portfolio. , andrms of volatility especially for geopolitical tensions. a high level of stress to see gold reacting. it does not work for small issues. if you have hyperinflation, it works.

it is an insurance and the portfolio, and a valuable one. manus: we are dealing with escalating geopolitical risk from up the road with the sabotage on two saudi tanks. how is that iran story playing into the narrative with the allocation team? maurice: it is something concerning, and not that much about the reason but the global risks. the way we look at it, it is about price and the risk of de-escalation with the u.s. and iran. currently, it is a message saying, should we go into a huge military confrontation?

supply could be at risk. if you read it like that, it is you doo tell mr. trump, not want to see the oil price at 200, so you should stay quiet. that is how you can see it. it is important. it is difficult to have engagement with north korea, iran, everywhere around the world. geopolitical premium and oil does not work out as it used to be, only when supply is at play. manus: and right now the supply is reasonable, and it might be tightening ever so slightly, but not threatened at the moment. thank you for being with us today. maurice gravier. in the midst of the market

rattled by trade bumps, cryptocurrencies are staging a resurgence. bitcoin jumped $8,000. champagne.inking the the longest winning streak since 2013. analysts have credited everything from haven seeking. the new york attorney general has drivers for the search. any birder can take us behind the numbers. burger can take us behind the numbers. are moving into cryptocurrencies like bitcoin as a haven asset. we have seen gold rise, media firming this idea that it is a haven asset. i will show you just that. some analysts have thrown cold water on this idea because at 0.3 that correlation is not that high, and the surge and volumes that came with the rise in prices did not happen a week before the latest trade escalation. what could have caused it? you mentioned the new york

attorney general. moved investors into bitcoin. we also see technicals that have come into play. it is on the verge of reaching a golden cross with a 50 day moving average crosses through the 200 day moving average. you can see it bounced off this level in general, but regardless of what drove it, when bitcoin opens on monday, you can see meaning gap open, prices surged over the weekend and left the future traders unable to trade until markets opened. many are short, so we could have seen a short squeeze drive gains further. nejra: thank you so much to bloomberg's dani burger. coming up we speak to the ceo and chairman of the world's biggest index compiler. that is next. this is bloomberg. ♪

this is "bloomberg daybreak: europe." nejra: let's focus on equities. stocks from china and argentina are being included. our next guest is chairman / ceo, msci inc., henry henry a. fernandez. i talking it off about the saudi inclusion, the market getting too big to ignore. investor concerns, geopolitics is one of them, some investors concern regarding governance within the saudi market. what would you say to address those concerns? henry: at msci we have two

different services. one is our indices that only take into account the invest country, access to buying and selling securities in any country in the world. that defines the total universe of equity securities in the world that you can buy or sell. that is where msci saudi businesses are going into, the emerging market index. there is another part of msci that looks at criteria of companies or bonds that takes ,nto account governance issues political issues, social issues. that is different from the market business. there are indices that weigh securities in a portfolio based on that criteria. manus: good morning to you. here we are, we have got inclusion.

institutional investors, are they concerned about helping hand that people referred to in saudi arabia when the market falls aggressively? there are state institutions that participate. is that an anxious issue for institutional investors? henry: there is always a concern by investors on the , we have seen that in china. it is not new. we saw it in hong kong 20 years ago. we see it in japan right now with the bank of japan buying etf's that are buying equity securities. it is not a new norm, but it is more common than eight used to be, including developed markets. investors have to take that into account in the understanding of supply andvery train demand. how much supply and demand is driven by less economically

driven financial players. nejra: what could the percentage of saudi representation within the index of a ramco ipo? aramco, 1.4, and with the other inclusion it will be 2.8. that will be the pro forma inclusion of both segments of the saudi market. if you think aramco is depending on the ipo, if it is a hundred billion dollars, a number tossed around, you will say the weight of saudi will more than double. it will go to almost 5% or above. manus: i want you to look at this chart. you shocked and rocked our markets yesterday. wasdid not included, it wildly expected to be included. they upped foreign ownership

limit. what did they do wrong? why did they not make the cut? criteriaere are a few in our methodology about inclusion in an index. the float of a company in an index. our indices are flow weighted. only shares freely available for purchase are the ones that get included in our index. two of the criteria are ownership limit, so if there are shares that are blocked from ownership by foreign investors, that needs to be excluded from the index. the second criteria which is one investors do not pay a lot of attention to is strategic holdings of a company that are not up for sale. this time the constraint was there is a series of owners and shares. manus: we have to draw a line under it. we wish you well.

thank you for making the time. henry a. fernandez, chairman / ceo, msci inc.. coming up, trump calls on the central bank to help with the trade war. more on this story, that is next . this is bloomberg. ♪

nejra: good morning from european headquarters in london, i am nejra cehic. manus: i am manus cranny. this is "bloomberg daybreak: europe." president trump drags the fed into his trade war and calls for it to match any action china can take to impact tariffs. weak industry data shows china's economy has slowed, even before the latest tariffs. tencent and alibaba. said toing business ing

be lining up advisors to explore a takeover of commerzbank. in france, they buck the trend with resilient trading revenue. manus: breaking data coming through on the german side, gdp for germany expanded 0.4%. that was in line with estimates. they question the durability of overall european recovery. year on year you are looking at 0.7%. that is as the market assumes we have passed the worst. that is a question we have to ask ourselves in regards to germany. there may be more pressure to bear on institutions.

the bond market, you are seeing more concern over a tie in bonds. the highest level in three months on a warning on the .eficit treasury market, they are talking about recession in the next 24 months. the new york fed is saying we tacitly acknowledge the tariffs may boost our inflation. it run is ready to let hot. the bond market is inching slightly higher in terms of price. in line on the german gdp, that is what we like, germans in line. nejra: from compass group, earnings in the first half adjusted operating profit at 951 million pounds. half adjusted revenue, 12.5 billion pounds. those of the numbers coming

through compass. full-year isthe something to take note of. they expect organic growth similar to 2017. they are mindful of the macro uncertainty in europe. it will be interesting to find out what they mean by that when we talk to the ceo of compass group dominic blakemore, more of that is coming up. u.s.quity markets, both and a european equities gained by more than 1% in yesterday's session. bothstocks leading regions. ftse 100, dax futures in the green. little dip in, a sentiment. president trump is turning his attention away from china and back to the fed. what does it have to do with the outlook on stimulus in asia given the data we had out of china this morning? juliette saly can take us through that in more detail. i think that thought

you had about potential stimulus is boosting chinese markets. with an hour of trade to go. it did miss estimates, retail sales, industrial production all weaker than expected. china's economy was slowing even before the u.s. tariffs. thaty investors shrugging off. a good gain in india, another session of gains. yesterday we saw them snap the nine-day losing streak. butn with a shaky start, finishing higher around 0.6%. every major equity market is higher after that rebound on wall street. in indonesia,ess but it has been a positive session. aussie dollar getting hit by the chinese data, falling to a

four-month low. is falling out of the currency. we stuck to see concerns china will weaponize the currency. and watching the india 10 year yield, it has been unchanged, but we are seeing weakness in yields, and bonds higher for a third session. we are starting to see a move from the central bank, announcing plans to conduct open market operations. juliette saly in singapore, thank you. let's talk trade, president trump is calling on the fed to get involved. he wants the central bank to match any moves by the pboc to offset the impact of the trade war. trump tweeted it would be game over if the fed did so. -- in zurich.rope

s is ahink the tariff negative supply shock. it has various effects on the economy, it affects inflation and will probably boosted. -- will probably boost it. it also has negative effects on the value chains on how our economic system works. nejra: chinese president xi jinping has pushed back on trade demands. today, we are asking the question, are assets mispricing chinese economic resilience to the trade wars? reach out on your bloomberg. joining us now is catherine doyle, investment specialist, real return, newton investment management. great to have you with us. refer back to president trump's comments about the fed, matching

china in terms of stimulus, saying it would be game over. he means for the trade war, and maybe chinese economy, but it would be over for markets if the fed cat on weakening global growth outlook. catherine: these trade wars or intofs are taking markets a dangerous place. this is more about the power struggle between two dominant economies. it could go on for some time. it is difficult to say how bellicose trump will become, or china will become. at some point, they will have to go back to the negotiating table, but it will cause more volatility in the markets. we saw the selloff monday, which was substantial. markets aree the

a correction, and this is the catalyst for the selloff in markets. manus: where do you think that will be most dressing? we saw a bigger drawdown in china relative to the u.s. last week. europe was shaken. where do you shave the back risks if that is your game plan? catherine: i think potentially it will depend on the nature of where it hitsand the most. generally with portfolio construction, we are focusing on having a substantial protective layer within our portfolio. we have a fair amount of duration in the portfolio primarily through government ands or treasuries

australian bonds. and we have indirect protections through futures. it is also about focusing on quality in terms of the companies you have exposure to. this could get quite ugly. about when we talk companies and equity markets, a lot discussion centers on the impact on earnings if the tariff war escalates. in terms of your portfolio, is it better to focus on high dividend paying stocks? catherine: that is an area we are looking at. ares our contention that we in a low nominal gdp growth inironment, so when you are that environment, having a decent dividend is a bit of a cushion against anemic growth. we do focus on that, and we have focused on the more bond proxy carriers within alternatives like renewables and infrastructure.

paymentaving a dividend that is a bit of a cushion. manus: we just had the german gdp data. recoveryility of the that we see in europe has been questioned. would you agree with that, and how do you invest around that in europe? there is the china connection, the tech connection, and fx you have to look out with european companies. what is the dominant force with your exposure to europe? catherine: europe is structurally challenged. european growth has been decelerating over the past few quarters. represent asia do significant component of european growth potential, and demand has been waning in that

area. the automotive sector in germany has been quite challenged. that doesn't have a knock on effect. it is not all bad news. that does not mean you cannot find great investment opportunities. for example, in areas like health care there are good companies that pay good dividend , but are very much playing into the theme of the structural demand for health care as the population ages. in emergingenomenon markets and developed markets. nejra: certainly the defensive sector globally. i want to get your thoughts on the yuan. theas had weakness against dollar. a little stable today. weaknessad yuan against the euro. manus and i have been asking

guests whether china could be forced to sell u.s. treasuries to stabilize the yuan. with that in context, how closely do you watch the yuan and track its movements to impact our portfolio? catherine: it is a factor, part of the macroeconomic picture, and obviously an important part because it indicates where the stresses are. we have a number of stress monitors we look at, the consumer, the corporate, and the macrolevel. it is an important factor, but there are other points we look at. we conduct bottom-up traditional fundamental due diligence on the securities we invest in. it is a mosaic. everything is important to the overall picture. manus: you are right, it is a mosaic.

come back and see us soon. let's see how the hedges play out on the portfolio. guestyou for being our post this morning. let's get your first word news with debra mao in hong kong. as trade moves from china to europe, america's relationship with its traditional allies has been hit. the nato secretary-general said these issues will not split the countries apart. >> despite differences tween nato allies on trade, the climate change, the iran nuclear deal, nato has been keeping each other safe based on the principle one for all and all for one. data is doing more now. -- nato is doing more now. is showing up in the u.s. economy. a basket of different indicators

have fallen to its lowest level since the financial crisis. despite lofty productions of growth, he says the chance of a yearsion in the next two is externally high, and in the next 12 months, 50-50. cutting interest rates could lead to an asset bubble according to the kansas city fed president, esther george. he warns that could lead to an economic downturn. to issses she has spoken not see low inflation is a problem. landscapesun drenched by claude monet has fetched 100 $10 million at a sotheby auction. this set the record for the impressionist painter. haystacks was painted in 1890. they had a presale estimate of $55 million. the identity of the winning bidder was not clear. global news, 24 hours a day on air and at tic-toc on twitter, powered by 2700 journalists and analysts in more than 120

countries. this is bloomberg. nejra: debra mao in hong kong come, thank you. navigating toward growth, compass group increases revenue growth guidance. we speak to the ceo dominic blakemore. that is next. this is bloomberg. ♪

a.m. in london, 40 minutes away from equity opening in europe. i am nejra cehic in london. in ouri am manus cranny dubai studio. we have had a lot of movement in markets, we have a corporate report from the compass group reporting adjusted profits, 951 million pounds. growth will be higher for the year.

let's get the man with the details. dominic blakemore, ceo, compass group, where is strength most pervasive? which country has the most strength coming from? dominic: good morning. 6%are pleased to announce organic revenue growth this toning which is the largest raise our guidance. all of our regions were in growth, with north america growing. the u.k. 11%. we are really pleased with broad-based growth across the group. the north american region, it is significant we are seeing such strong growth from that market. to yougreat to speak this morning. i am hearing you talk about strong growth across the regions, and you are happy with that. after the strong start to the year, the question becomes will it be possible to sustain that level of growth given increasingly tough comparisons

in the second half of the year? not think we will sustain the levels we have seen in the first half because we have had strong contract wins, new great business in the u.k. that we think we will grow well in the second half. we have raised our guidance for the full year. manus: one of the big themes we is abeen covering, there food delivery side of this business that is rampant. competition is huge. how much of a threat if at all to you see? there are retail propositions, at they can grow quickly into sustained attack on your business. how big of a threat are they? dominic: let me take you back to growth in north america. what is pleasing is 40% of our new business. we are in a market where we have

only a 10% share. billion pound marketplace. we think we have a great opportunity to continue to grow. haveple great accounts we won is the new york university where we are feeding 50,000 students. university of chicago medical center, 125,000 patients. there are great new opportunities to continue to grow. with specific reference to tech and digital, we think it is a opportunity to deliver services and get consumers we have not previously targeted. the likes of small businesses, where they do not have on-site catering. that is exciting. there is a challenge, and we need to offer our consumers the best experience. there is a lot of technology helping us do that whether it is

preorder or prepay. information and so on. replicatesing tech to that business can only strengthen us. nejra: tech might be one of the .ays you combat the challenge would you cut prices? dominic: we already trade the benefits of our business model, it allows us an advantage on food. and we have proven processes. we train on our clients premises. we need to maintain our discount to remain attractive to what would be higher-priced options. battle, you have cost price inflation on the left-hand side, and that

challenge of delivering and beating your competition. have you been able to raise prices at all? do you intend to try to eke out a raise in price at all? part of our model, back to the scale of our business, and the focus we place on execution. that allows us to drive aboutencies and that is mitigating cost inflation to reward our clients and consumers . we will take a little bit of pricing, but we like to think our expertise is our ability to offset that cost inflation. the flipside as we go through periods of time where we see higher than average costs, i think that makes it more difficult for clients to manage these themselves. it is a moment where we can accelerate first time outsourcing. that is what we are seeing in

north america. we are talking about 40% of growth coming from first time outsourcing. i think that is excellent. we have talked about north america, but one of the comments coming through is that you are mindful of macro uncertainty in parts of europe. how is that translating to the business? are you having to take steps to deal with that macro uncertainty in europe? dominic: we are certainly seeing political events across the european landscape in recent months and years, not least brexit. those have an impact on our business, and we do see weakness in consumer volumes as a result. in terms of our clients hard onts, we work driving efficiencies across the business to mitigate that. i think we are doing well at the moment. more exciting in europe is the greatest rate we reported a 5.5%

, with the u.k. growing at 11%. there is a great opportunity to continue to grow in this market place from that new business. great to speak to you this morning, dominic blakemore, ceo, compass group. thank you for that exclusive interview. let's get final thoughts from catherine doyle, investment specialist, real return, newton investment management. one of the things i wanted to pick up on, how he talked about using tech to combat the challenge. how is tech changing the way you invest in companies? there is a clear distinction between those companies that are viewing technology as a threat, something a from the outside, and those that are harnessing it as compass was saying to really increase efficiencies embedded within their business.

that is going to be the key to success, and it is not just within a businesslike compass. , likeacross sectors banking, traditional sectors are having to adapt to this new reality. and the expectations that consumers have for swift delivery and greater efficiencies. it is a fast-changing landscape and will determine the winners from the losers. it will distinguish them. fors: thank you so much sharing your thoughts. come back again. that is catherine doyle, investment specialist, real return, newton investment management. these markets are dealing with the rough-and-tumble of what tweetologyt from the from the u.s.. do you want havens? they are hedging their portfolios. nejra: if we look ahead to the

european market open, that is next. in 30 minutes the markets will open in europe. futures are pointing higher in europe and the u.s. when you are traveling to work, tune in to bloomberg radio on your mobile device. ♪

anna: good morning, welcome to "bloomberg markets: european open." we are live from our european headquarters in london. alongside mattds miller in berlin. matt: markets back in business. it wasgdp data shows kick started in the first quarter. the dax leads gains. trade is less than 30 minutes away. anna: losing