manus: good morning from dubai. this is "bloomberg daybreak: europe." i am manus cranny. i am nejra cehic. these are today's top stories. trouble of foot. leading a chorus of footwear giants calling trumps tariffs policy catastrophic for consumers. this is as china said it could stiffen up retaliation after huawei was blacklisted. tilted in either direction on that policy in florida. jay powell brings up the inflation range. power down. tesla shares both -- fall below $200 for the first time since

december 2016 and a series of issues stoked analysts caution. manus: let's get straight to the moving markets. the aussie dollar is under aessure as the governor sets fresh blow. it is a killer blow. we will talk about the potential for rate cuts come the june meeting. you have to rephrase the probability of rate cuts. you have a trade war, ground zero is the aussie dollar. look at nymex crude, also dealing and grappling with trade but also responding very much to the language from the past two to three days which is we are going to stay the course. that is the message. bank of maryland merrill lynch says the market is nearly balanced in the oil market for

2019 amid trade wars. then you take a look at the rest of the market and you see dollar on the move as well. that is your aussie dollar and your nymex trued. -- nymex crude. yesterday we saw european equities drop as well and it was those tech companies and thus a my conductor stocks that were driving the index down. judging bounce back -- by your stoxx 50 futures and that s&p 500 futures, the nasdaq futures tracking higher. perhaps something the market is tracking. we could get some reprieve at least for the next three months. the trump administration issuing a license to allow u.s. companies to keep doing business with huawei for the next three months. a caveat, that may be expected to impact some of the smaller telecom companies. a littler-yen here, bit of a retreat in the end. a little bit of risk on coming

back from these markets. the 10 year yield unchanged. we had various residues from fed speakers we will get into. at 240 two handle. let's check the markets in asia. juliette saly has more. good to see you. take us through the action. juliette: we are seeing most markets looking a little bit higher at the moment. with the exception of japan. the nikkei down by .201%. when you strip out japan from the es -- msci index we are up i .31% driven by what you are seeing in china. the csi 300 rebounding strongly from yesterday's losses and the asx 200 hold onto those december 2007 highs in sydney. manus touching on the fact that we heard from the governor philip lowe paving the way for a rate cut in australia. that has seen the aussie dollar that we saw fall and australian stocks rebounded from earlier --ling in the session as we

the rba will follow through with that rate cut next month. let's have a look at stocks and you're seeing most of them in the rare earth vote -- materials. presidentxi making a rare visit to the rarest provider. that could be in the next weapon in the trade war. this is the only major rare earth's producer outside of china and announced a 500 aussie million-dollar expansion. it is up i 14% in sydney. to the downside, a little bit of jitters regarding huawei and this a my conductors and tech stocks as a whole. some of the huawei suppliers in asia have rebounded. you can see sony in the japan session really weighing on the is why topics and that we saw underperformance in the japanese trading session today. a great roundup, juliette saly in our singapore studio. china warns it may step up its retaliation against the u.s. after president trump blacklisted while way.

accusing washington of "bullying and blackmail" and said the chinese government would not just sit by and do nothing. this comes as nike, adidas, and other footwear giants are urging president trump to reconsider his tariffs on shoes made in china. let's get some context. stephenour reporter, engle joining us. we chatted a little bit earlier. this is the gulf between rhetoric from the chinese side but we have yet to see retaliatory action. do we expect an action from the chinese side? steven: yeah, i think we can expect that. that is where the speculation is and the rhetoric is seething into that and into the markets as juliette saly talked about, some of those rare earth 95% ofrs, china provides the rarest to the global economy. the u.s. buys 80% of their rarest needs for small phones -- smartphones and electric vehicles, 80% from china.

there is even speculation that hbo's final episode of "game of thrones" was brought -- blocked hbo's service are provided by tencent because of the trade war. there is so much speculation as to how china will retaliate and the foreign ministry was asked about it at the regular briefing yesterday. they said wait in say about any potential countermeasures. then we did have come as you mentioned, john maine, the chinese ambassador to the eu. he stoked a lot of speculation because he did not pull any punches. trumpd as far as the blacklisting of huawei, he said, this is a wrong behavior so there will be necessary response. company's legitimate's rights and the chinese government will not sit idly by. he went on to say this is politically motivated, it is an abuse of export control managers -- measures. you mentioned it, bullying and

blackmail tactics being used by donald trump's administration. he said the u.s. is seeking illegitimate gains for bullying and blackmail. sounds just like "game of ," doesn't it? nejra: i am sure you're watching as closely as this. there is question over the use of the android platform. the number of chipmakers will keep supplying what way i talked about that reprieve at -- after three months. looking at the broader industry because it is not just about while way and the indications for chipmakers, what our industry groups saying about this escalation? stephen: there is a lot of industry groups that is -- that are weighing in. for google and the ramifications go as far as their android operating system, huawei runs the android system. it is there own magnified

android on the huawei but after this announcement from the white house last friday, google basically had to pull most of its android os and services from future huawei devices. we are hearing various media reports including from the wall street journal that google is halting those plants at least for the time being for cutting its services to huawei. a 90 day reprieve we are hearing from the commerce department and who we also heard through cc tv, the founder of huawei saying 90 day license in essence for android does not make much sense. there is a lot of speculation going on and there's a lot of consternation coming from various industry groups including the shoe industry. nejra: thank you so much to bloomberg's chief north asia cars stephen engle. we are not -- asking the question, will the trade war turn into a currency war?

you can join the debate. reach out to us on tv go on your bloomberg. johnny us to discuss all these things, the chief strategist at carb day a -- [indiscernible] let's pick up on the things that stephen was talking about. i find it interesting that your -- you are tactically cautious --e a strategically tactically cautious. labor long-term they are concerned on risk assets. why do you take this view? guest: we think that in the short term the market has priced a goldilocks deja vu. goldilocks's this asia vu because there are important elements that are missing right now. first and foremost we are seeing shanghair dollar so no accord. also we are seeing him much u

turf. it is more of a driver than a pure signal, sort of signal here. then you have the trade issue. where we have another example of the market just mispricing political ridge or misjudging this. the shortways in term. medium-term and long-term, we sealed -- see some silver linings. actually improving or stabilizing. we are picking up on some of those big themes very shortly throughout the next hour. i want to focus on the trade angst we have at the moment. this is the personification of what my last guest called the nuclear option. going hard on huawei and its supplier. this is the cascade lower in the philly semi's, the blumberg semis, and the tsmc. is this a nuclear option we are seeing from the u.s. and its action against huawei?

guest: there are other options but what this shows us is, what this conflict really is about, namely that trade in a sense is only a proxy war. what it is about is future economic supremacy. who is number one in the global economy in five to 10 years and here it -- tech plays a key role. both the u.s. and china believe that whoever leads the tech race will also maximize its chances of being at the helm of the global economy going forward. other wise, there are options as well. this is an important part of it. nejra: you mentioned the notion that both sides need a deal, misses the point, rather both sides cannot afford to lose the race about economic leadership meeting the trade uncertainty will last for much longer than most market participants thing. yet we talked about the fact that your construction -- constructive risk asset in the medium-term but if you think the

trade war will run on, how do you protect that position and risk assets? that: we focus in areas are maybe not shielded toward the increasing protectionist tendencies but are less hit. we are overweight european equities and because we think the trump administration cannot afford to fight to battles at the same time, now, they are confronting china. they are not confronting europe at the same time and the postponement of the auto issue is a good example of that. at the start of your notes about the letter part of leicester was about the growth cycle and monetary cycle pointed toward a risk on. we are hearing from the rba this morning, they are setting the table for rate cuts in june. ofyou expect a new wave substantial rate cuts globally even though trade asked actor up? fed, the we take the

risk of a rate cut is much higher than the risk of a rate hike like a lot of economists are expecting what we talk about the second half of the year. more generally speaking, given these political shocks, there is marketring risk of the fearing some kind of monetary policy. really banks are not well positioned to deal with these kind of political shocks. the problem that puts central banks in a different -- difficult spot. towardly the tendency is more easing. manus: our guest stays with us from no idea -- nordea. let's get to hong kong. debra mao is with the team. debra: democrats have moved a step closer to reviewing president trump's financial record after a judge ruled that

they can demand the documents through the judge rejected the claim that congress is not seeking them for a legitimacy -- legitimate reason and is not entitled to them. turkey told banks to wait a day before settling some large foreign currency purchases area this is the latest move to defend the lira admitted controversial rerun of local elections in istanbul. president erdogan's family is seeking to keep control of the nation's economic powerhouse after losing it to the opposition. iran has accelerated the rate at which it is enriching low-grade uranium. this comes weeks after threatening to gradually scale back its commitment under the 2015 nuclear deal. have increased in recent weeks and response to your sanctions. donald trump will the u.s. out of the iran deal year ago. -- pulled the u.s. out of the rent deal year ago. passed family said he

away peacefully after having a lung transplant. he won three world divers titles. driving for the f1's most famous constructors, mclaren and ferrari. he survived a near fatal of fire when he'd's -- when he crashed in 1976. his rival we with james hunt -- with james hunt was turned into the movie "rush." global news 24 hours a day on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. nejra: thank you. coming up, is the top from the federal reserve as likely as a hike? that is next. this is bloomberg. ♪

manus: i am manus cranny in dubai. -- i am nejra cehic in london. index lower.fic japan declining, asia digesting the news of the huawei van cash ban. we are seeing of bounce back in futures in european futures and nasdaq futures. the commerce department granting on 90 day release. u.s. broadband companies and customers using that equipment, perhaps the market getting a reprieve. 170 $3 billion got wiped off the nasdaq. a long way to go. can we retest the lower levels of 2019? the aussie dollar ground zero for trade. in setting the table for a rate

cut and dollar will guest dollar yuan, where's the patients in terms of their tolerance for a lower you on? at is the biggest debate and markets. let's get your first word news -- your bloomberg business flash. debra: tesla faced a stock route following this month's $2.4 billion capital rates. shares have dropped in nine of the last 10 trading days lunging as much as 20%. -- plunging as much as 20%. shares also breached a $200 level for the first time since december 2016. the justice department is reportedly leaning against approving t-mobile's proposed takeover of sprint. the concessions do not go far

enough for the doj. opposition deal with mark a rare break with the fcc. are deutsche bank investors growing dissatisfied with the chairman. representatives have discussed pushing for his exit. it is unclear if they will vote for such a move at the annual general meeting this thursday. that is your bloomberg business flash. thank you. let's turn to the fed and jay powell said leveraged lending does not represent a current threat to the financial system. he admits there are similarities to the target industry in the run-up to the subprime crisis but said the economy is better shielded. he discussed the possibility of using an inflation range instead of a single .2% target. the atlanta fed president said the rate outlook is balanced. >> the economy is operating the

way it is operating and it is operating in a sustained way. the growth is robust and it is, it looks like it can go on for quite some time. i think about the cycle and the context of risk taking. are we starting to see signs that businesses and consumers are taking more risks than they might have otherwise and starting to take risks that some might consider to be imprudent. when you see those kinds of risks, that is the equivalent of this late cycle that you would talk about. i am not saying that. businesses are being prudent. debt that consumers are taking on is happening mainly at the higher credit quality levels. along -- among households with credit quality. i am not seeing a tipping point where the economy should or might turn. >> do you think at this point the markets are ahead of themselves and thinking we have to do a rate move, they are betting on rate cuts.

>> i am not in the position right now where i think a move in one direction or other is more likely. there are a lot of risks out there which, if they come to fruition, might have the economy we can and if that happens, a rate cut might be appropriate. there are also a lot of sources of uncertainty that if there -- the economy might get stronger which could suggest that we might want to do a rate hike. right now, there is still uncertainty. it is hard to say what the next move will likely be. i am not in a case where a few ask me how the scales are, i don't feel like for me, they are tilted more to the cut than to the hike. we are ready much in balance. manus: that is a fully hedged member there. speaking with mike mckee. let's get back to the conversation. break-in.he five-year

i correlated it to oil. you can go either direction. break-ins are dropping. the message last night was cleared. there is a lack of inflation despite unemployment at a 49 year low. does that say to you about american inflation? hast: it shows the fed difficulty to reach its inflation target. that is one of the reasons why we currently debate all kinds of alternative policy options, monetary step ups, price level targeting, this is why the mmt crowd is constantly growing bigger. in the short-term from an asset allocation perspective, these falling breakevens are important. they are contributing currently to put a floor on real yields and pushing them higher and one key driver behind the risk rally

your today. that driving force is losing steam as we speak. the current risk off sentiment in our view is not only due to the trade escalation here, but it also must some of the monetary benefits we saw in q1 in particular are fading. real yields are key, i think. nejra: you also believe that we are not an goldilocks and i want to question why you think that about the u.s. because i read a lot of notes where people say in the u.s., it is all deluxe because we have good growth but not a chance of overheating and inflation remains subdued. tell me why it is not goldilocks and what it means for your asset allocations for the u.s. reason me of, for example. guest: goldilocks requires a stable economic outlook and there are forward indicators that points to decelerating growth outlook. the more forward-looking and if you take the differential

between the surprises of those surveys, the more forward-looking indicators, it is actually falling quite a lot currently, indicating an economic slowdown in the months ahead. that is one missing bit. the yield curve, i mentioned that earlier, we think monetary conditions are tight and the yield curve is key as a driver of the credit cycle. manus: we have 40 seconds, you for about the underprepared a spike in volume and you draw our attention to the vix. are you a buyer of equity volume? >> we think equity falla ms. low relative to clinical uncertainty and this has to do with the market is believing in a goldilocks narrative. central banks cannot cope with political risk and therefore we see risk, [indiscernible]

nejra: that is part of the reason your lashawn the dollar. we speak to the former italian prime minister. we get his take on the eu parliament elections that kickoff thursday. this is bloomberg. ♪

nejra: this is "daybreak europe." shouldthis is what you be watching for your day ahead. let's get you sorted out. spanish parliament convening for the first time since last month's election. five of those taking seats -- being released from prison for the day to attend. this will be followed later in the day by bp. it's meeting kicks off in aberdeen at 11:00 a.m. at 10:00 a.m., the oecd is going to release their economic outlook, the impact the trade

war has had on its forecast. later, we get the euro area consumer confidence. it is expected to be slightly higher. weakness andn the i on the weakness. facing shareholder revolutions on climate change. shareholders will vote on a proposal that requires it to report how it aligns with the goals of the paris climate accord. let us speak to our european big oil reporter kelly. great to have you with us. you're joining us on the phone from aberdeen. what are these resolutions seeking to achieve? heree real showstopper even though the second moreution -- resolution is controversial, at the heart of it is a request for more

information. seeing bp'se production expected to rise so much through the middle of the next decade and that is not quite the paris climate accord is asking people to do. it wants bp to basically ensure their disclosing or of this thinking how those things are not in conflict. manus: how are the shareholders expected to react the apco -- react to? >> you have seven of the largest 20 shareholders that have co-filed, meaning they have already declared support. 58 in total representing 10% of the banks said they are going to support it. management also supports it. this has a fair chance of passing. once it does it will be legally binding. see what the day draws out.

now, let us check in on markets around the world. indian equities flying high. new highs yesterday raising questions about valuations. the modi mood is taking this market higher. morning. the modi mood has taken the markets higher. it is starting off very well. just pulled back a little bit, right now trading with a bit of or maybe a flat move if you look at the nifty bank and the nifty 50 as well. this may be presumably because of two factors. , we have gained nifty,00 points on the 600 points on the benchmark

index. the for your average about 21 times. that is one point. the valuations are sky high. us -- the guests told just two days away, why play blind? back to you. nejra: what a way with words you have got. havoc in u.s. market yesterday caused by the ban on huawei particularly on semiconductors and tech stocks. today we are seeing u.s. futures point higher and chinese markets strongly in the green. >> if you look back at these tech players, this story has rattled throughout the supply chain. tose are the u.s. suppliers huawei. 49% of its revenue from the company. 14%. you can see that drop when trump

first moved to curb huawei. they have moved in general lower since. it is a similar story in china. this is the csi china internet fund. this is a 1.8 billion dollar fund. it lost $95 million in the past week, the most in almost a year. there are big players. we have tencent, alibaba, together they make 20% of this index where we are seeing these outflows. >> thank you very much, sebastian, and to our team in mumbai. let's get your first word news. debra mao is in hong kong. againna could retaliate against the u.s. after president trump lack listed huawei according blacklisted huawei. this comes after president trump upped the ante in his trade

dispute with china, announcing -- to the nation's biggest technology company. tariffs against china could be catastrophic for u.s. consumers and the american economy. that is what nike and adidas had to say, urging president trump to reconsider the levies on she made in china. last week the u.s. -- on his shoes made in china. australia's central bank chief says he will consider cutting interest rates at last -- next month's meeting. the governor says the jobless rate needs to move below 5% to drive inflation back to target as evidence mounts households are reining in spending and slowing the economy. one world formula one miki louta has passed

away. he won three world drivers titles in the 1970's and 1980's driving for the f1's most famous constructors. he also survived a near fatal fire when he crashed at the german grand prix in 1976. his long rivalry was turned into the movie rush. 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. elections for the european parliament take place this week. let's take a closer look at france. president emmanuel macron's party already bruised by recent yellow vest protests is facing a tough race with nationalist marine le pen. likelihood macron

will win this battle? collects this is clearly a rematch of the 2017 presidential elections, except course, for emmanuel macron, these elections are held over just one round. the candidate he has put forward, the former european affairs -- is not popular. macron has to get involved himself, appearing on posters. against her you have the very charismatic, young, 23-year-old candidate of the national rally that marine le pen has put forward. -- andties have been can -- neck and neck.

trying very hard to make a comeback. only that 12% in the polls. the socialists, supported by the former president, are struggling to get just 5% of the vote, which is the limit to send any mp to the eu parliament. micron -- ma forc he next economic reformron is trying to put forward. like it was during the last eu elections in 2014. immigration is the main issue for french voters. that is serving the national rally.

serving the candidate of marine le pen. play his trying to int card with this interview all the regional french newspapers. he is saying i am a european aboutts trying to warn the dangers of the russian, u.s., and chinese influences in europe. theresa may faces a showdown with ministers at the cabinet meeting today. last push tog one get her divorce deal over the line. talks are continuing inside the government's. london. with him in >> the prime minister has made that point. she will have a discussion about

the potential for a future timetable. i cannot anticipate that, but say whenaid she will she gets the agreement through. this obscures the issues at stake here. have a duty to deliver on the contract parliament made with the british people. the government said it would honor that referendum. parliament has a duty to do so. this is not about brexit. it is about democracy. week's papers were dominated by one personality. it comes to the question you

raised about the contract. are you convinced if the next prime minister was boris johnson , he would guarantee and deliver upon that contract? 100% deliverohnson upon a clean brexit? a hard brexit? >> i have already made clear i have no intention of indulging this. we face the legislative challenge of getting a second reading of the withdrawal agreement through. it is up to all members of parliament to try to reconcile the duty we have to deliver on referendum results. all mps will make their own judgment. i am sure the mps will have a wide field to choose from. foxa: that was liam speaking to bloomberg. let me get your view on the

pound. you are bullish on sterling but with lower conviction than the dollar. what makes you bullish on sterling given the no deal risk back to the fore as well as political risk around theresa may? >> ultimately we think the u.k. will reach a market friendly solution either in the form of a customs union. maybe a second referendum even. we think the worst case scenario of hard brexit will be avoided. manus: that may well be the case. we will all certainly wait to see what happens. everybody keeps telling me hard brexit is more or less priced on the recent action. i look at sterling against the euro. around,e have turned it but it is the longest run since the inception of the euro.

the risk is material hard brexit could be affected. are the riskkets of hard brexit or hedging enough? we have repeatedly seen the market is very bad at pricing political risk. you cannot say political risks are distributed in a way that would make it applicable to pricing models. i would not go as far as saying the market is pricing this risk, whatever that risk is. my feeling is it is not a one-way path for the pound. there is a pound aside risk. if i hard brexit were to materialize, there would be downside to the pound. when it comes to political issues affecting markets, conviction levels have to be low, because we repeatedly see the market. wera: we discuss this when

were talking about the trade wars earlier. our markets pricing the political risk correctly in europe. early you -- earlier you were saying you were overweight europe. also the threat of italy we have seen in the bond market. >> this is a tactical view. longer term are unreserved issues. we expect the central right to remain the biggest part in they have an important decision to make. they have to make the decision do we want to move to less? to more? they have decided not to decide. risks will stay in place. in an uncertain place. tactically, we see opportunities. manus: we have more data from europe. it seems to be consensusbuilding

we have the worst. this is the citigroup economic surprises for the european union. this is turning back toward zero. have we passed the worst in terms of the economic downside for europe? or is it all utterly contingent on a deal with china and the u.s.? witold: it is very much contingent on that. the european economy is integrated in a way -- it is a price taker when it comes to the global dynamics. if trade negotiations were to deteriorate, but that said, europe was one of the first regions where we can us -- we saw weakness in the leading indicators back in 2018. it is not unreasonable to believe that is the first place in thestabilization short-term economic momentum. conversation.

, chief strategist. has china talks tough on tariffs, we speak to the executive director for international trade sentiment. ♪

nejra: this is "bloomberg daybreak: europe." china is warning it may step up retaliation against the united states after president trump blacklisted while way. beijing's e.u. ambassador accused trump of bullying and blackmail. he says the chinese government will not sit by and do nothing. this comes as nike, adidas, other brands urging trump to reconsider tariffs on shoes made

in china. joining us from geneva is the executive director at the international trade center. fantastic to see you. let's get straight to the rub of today's issue, which is the escalation of -- escalation against while way. one of my guests described the tactic as a nuclear option. what would be your perception? are we at nuclear option in this trade war? looks like an escalation in unilateral trade protection and unilateralism in international trade and investment. indication this trade discussion is moving into geopolitics, technology being the big power of the economy. economy is what gives a specific advantage.

there is a big fight between the u.s. and china at the moment to see who will win this fight for the future. the problem is this is done in all unilateral matter that is not being taken by markets well. it is not being accepted by economic operators. it needs to be done in a cooperative manner rather than manner.conflictual thea: various members of trump administration have said the huawei issue is separate to the tariff discussions. of course, there is a lot of people out there saying while way is being used as a bargaining chip, excuse the pun. is this a huge miscalculation on in part of president trump actually using quite way as a bargaining chip and escalating a trade war with, as bloomberg editorial has said, no obvious and? end? obvious

>> the intention may be different but this is not what markets are pricing. we are seeing a slowdown in international trade. we got a slowdown in investment. a slowdown in the global economy. consistent zeal from all international operators watching analyzing this is that trade protectionism, unilateral measures, or having disproportionate impact and this is bad news. , it is basically slowing down the global economy and introducing uncertainty, hence the need to sit down. manus: the unilateral action having the two is

international reverberation. we talked about international trade organizations being a forum for discussion, but that does not apply to the world of donald trump. how did they move discussions along? >> they were bilateral, but they also start those discussions. way toed to find a discuss and reach an agreement on the grievances. this is not enough. the world economy is highly integrated. what happens in china has ripple effects in geneva. what happens in the u.s. has ripple effects in africa. all of this has to be inputted in a way. there is a table to input this .iscussion at the global level thes important to reopen

channels of communication between the u.s. and china. it is equally important to bring to a global table so we can find global stability. .ejra: let us talk about europe on the huawei issue, european suppliers have said they are going to continue supplying huawei. in the meantime we hear about a delay on a decision for the auto tariffs for europe. with the way the u.s. china discussions are going, do you see more or less likelihood of an escalation of the trade war between the u.s. and europe? >> you see, europe, like any other parts of the world, are caught in the fight between the u.s. and china. the reality is europe, again, like africa, like other asian countries, like latin america, rely on the u.s. and rely on china. they buy from the u.s.. they export to the u.s. and china.

if we talk technology, this is a global market. it is meant to be one market. the risk i see with all these measures being taken is a fragmentation. the fragmentation of the trade, but also a fragmentation of the technological field. the digitaln of state. this would not be good news for the efficiencies that this global market can bring. nejra: thank you so much for joining us. we have lots of great guests for you coming up this morning. in the next hour we are joined by the ceo of ubs. u.k. time we will speak to marco aldara. -- hourarrow later later, look ahead to european

elections. manus: conversations continue at 11:00 a.m.. i will also talk to the oecd chief economist. , the chancellor of oxford university. ♪

nejra: good morning from bloomberg's european headquarters. manus: this is "bloomberg daybreak: europe" and these are today's top stories. lead a chorus of footwear giants calling trump's tariff policy catastrophic for consumers. china says it could step up retaliation after huawei was blacklisted. bloombergtic tells the scales are not tilted in either direction on fed policy. jay powell brings up the

possibility of using an inflation range. power down. fora shares fall below $200 the first time since 2016. saysbullish analyst profitability targets face an uphill climb. nejra: welcome to "daybreak europe we are just under an hour -- daybreak europe." we are just under an hour from the start of cash trading. we saw the stoxx 600 drop more than 1% yesterday, led down by tech stocks. a lot of the semiconductor stocks, even though we have heard european suppliers say they will continue supplying huawei. investors took the pessimistic view in yesterday's session.

we saw the nasdaq heavily hit and the s&p 500. futures went and higher in the u.s. as well. part of the reason is we have heard from the commerce department in the u.s. saying there will be a 90 day reprieve for u.s. companies supplying huawei. that is expected to benefit smaller telecom suppliers. the market taking hope for today. it will take quite a lot to wipe out the losses we saw in yesterday's equity session. how are bond markets looking? manus: we made some hefty new levels on the bond market. -- the bund market. 85% of german yield curves are below zero. let us not be that dramatic this morning. you are seeing this resilience. do you want to yen or do you want gold? swiss franc sciacca -- swiss francs?

yields are rising. they are saying to the europeans, bring it on. we will do whatever we want fiscally. that is until you are slapped across the wrist. supply across the european markets, you going to see supply slowed to about 16 billion euros in terms of net supply. government bond yields in the united states unchanged. let's get to asia. juliette saly has all the details. juliette: we are seeing japanese stocks perform worse today. pressure in tech stocks weighing down what we saw on wall street overnight. huawei concerned hitting tech suppliers. where you are seeing reprieve is south korea. the kospi up 0.5% as samsung to pick upt is going a lot of slack.

chinese stocks doing incredibly well. producers surging on the suggestion that perhaps rare material players could be the next weapon in this trade war. an upside in india, australian markets as well. let's have a look at the aussie dollar. it has fallen substantially after the rba governor philip lowe flagged the likelihood of an interest rate cut. now's adjusting a 71% chance we will see the rba cut rates. the aussie dollar slumps and we are seeing bond yields fall as well, off by three basis points on the 10 year. renminbi the offshore against the dollar. this as nero was talking about that 90 day reprieve to huawei consumers and customers giving upside to this run, which has been battered heavily. manus: thank you very much.

juliette saly with the very latest. china may step up its retaliation against the united states after president trump blacklisted huawei. beijing's e.u. ambassador accused washington of, quote, bullying and blackmail. he said the chinese government will not sit by and do nothing. this as you have nike and adidas urging president trump to reconsider tariffs on shoes made in china. the ceo atnow is ubs. to me it isgoogled, the personification of the escalation in trade war's. huawei. it is a new level of angst for us to deal with. what does it say to you? >> markets have been driven by fundamentals. the change has been about policy. central-bank policy and now trade policy and the trade

war's. clearly this has been a setback with respect to expectation of constructive outcome. people have been adjusting their proportions or probabilities on something constructive happening soon. we have looked at our overall risk positioning. we have taken that back down to neutral in response to escalations. added underweight in the aussie dollar and the risk of hedge in general. specific, china hedge. it is interesting you have made those changes. even though you have to invest over the long term sometimes you have to make those draft -- tactical decisions. i want to ask you about the em bonds. are you concerned you might miss out on any upside if there is a

positive resolution? >> we are moderately overweight global equities. on a six to nine month basis, we expect policy will support markets. we are expecting support from monetary policy. looks like we will see a cut in interest rates. generally across the g10 the only central bank we see putting up interest rates is the -- bank. monetary policy continues to be supportive. we think it is prudent not to be overweight risk. manus: every time i get together with a cio from ubs -- but i love little bit of hedge and. this is the vix. nero brought my attention to

this earlier. our last guest said the markets are too complacent. they have not got enough hedging. there is the short position, short on the vix is really showing a shine of -- a sign of complacency. would you agree? severale running around portfolios using the traditional u.s. equity market. as we know, options in general cost you money over time unless you are perfectly timed in terms of the major market selloff. 500s not just these s&p puts protecting our portfolio. underweight in the aussie dollar, we think it is -- these trade wars for china leading to a lot of the market pressure. another position that we are getting a lot of traction with clients is recommending green bonds. not in this case because it a sustainable investment. -- youen bond indexes

compare with equally matched duration and credit rated investment credit and high-yield. the index is outperforming. we expected to continue outperforming with respect to a specific fall in markets driven by concern of growth into trade war. -- concerns of growth and of trade war. nejra: is that something you plan to keep in place? >> at this point we do. we talked about the defensive side. we have a balanced portfolio. we are long the norwegian krone. short canadian dollar. what we are adding to those that.lios is cetera.a -- is debt, et you actually get a higher coupon along the curve.

it is aaa rated, not aa rated. we think it is a great addition for ultrahigh high net worth clients. sends that certainly opinion in terms of the yield you are going to get with security. what extent, if at all, are you drawn to the safety of sovereign? the bund hitting record lows and tenure paper in the u.s.. have you got a view on duration or on sovereign's? >> we do not have a specific u.s. duration bet. we are underweight high-grade debt. it is relative positioning and relative currency trades. we have a modestly overweight in global equities. we are running that in terms of the s&p 500 put. that being said, one of our risk-off positions is modest underweight in two-year italian debt.

if you count that as sovereign, we are underweight. nejra: your overweight euro investment grade credit. explain that to me given the threat of european elections in any collateral damage to europe from the trade war and slowdown in global growth? monthn we survey every our private entrepreneur clients as part of our industry leaders networks, interestingly on the one hand is our u.s. entrepreneurs are less worried about this trade war than it seems markets are. however, european entrepreneurs are seeing pressure. so much of their growth tends to come from u.s. and also chinese demand. think the current yield spread you earn in european investment grade is still attractive. let's get the bloomberg first word news.

>> australia's central bank chief says he will consider cutting interest rates at next month's meeting in order to serve faster hiring. governor philip lowe says the jobless rate needs to move below 5% to drive inflation that the target. this comes as evidence mounts that households are raining in spending and slowing the economy. easing, and in want to reassure you the inflation target remains central to our monetary policy framework. we will take some time to get inflation above 2%. we think we will get there. it is just going to take some time. -- >> democrats have moved one step closer to reviewing president trump's financial records after a federal judge ruled lawmakers can demand the documents from his accounting firm. the judge reflected -- rejected the president's claim congress is not seeking them for a

legislative reason and therefore cannot request them. iran has accelerated the rate at which it is enriching uranium after threatening to scale back its commitments under the 2015 nuclear deal. tensions have increased in recent weeks in response to u.s. sanctions. donald trump pulled the u.s. out of the iran deal year ago. three-time formula one world died at niki louta has the age of 70. his family says he passed away peacefully. he won three world drivers f1'ss, driving for the most famous constructors. he also survived a near fatal fire when he crashed at the german grand prix in 1976. his long rivalry was turned into the movie rush. global news 24 hours a day on air and at tictoc on twitter powered by more than 2700

journalists and analysts in more than 120 countries. this is bloomberg. manus: thanks for the roundup. coming up on bloomberg, we speak to the chief economist of the oecd. don't miss that interview, 11:30 a.m. london time. this is bloomberg.

manus: just on 10:17 in downtown dubai. 41 minutes until the start of your trading day. nejra: let's get a check on the markets. a bit of a mixed picture in asian equities. the msci asia pacific index ever so slightly in the red. futures pointing to a positive open for europe. a bounce back from the loss of

more than 1% we saw in the stoxx 600 led by tech stocks in particular. u.s. futures again on the front foot. it was those tech stocks heavily hit on the concerns about the huawei ban. blow for is a killer the aussie. the table is being set for a rate cut. what does that mean for the rest of g10? it is the worst performing currency this morning. i wish it would get to seven and we could get it all done with and see what the pboc will do. will the markets challenge the pboc? 10 year yield, is that your haven of choice? that is the question for you. or do you want to put your 10 hat? debra mao joins us with your business flash. rout: tesla faces a stock following this month's capital rate. shares plunging as much as 20%.

the fall has put its market capitalization below that of ford. tesla faces an uphill climb. >> of profitability does not come in the second half, they will have to raise one to $2 billion more in capital. then this starts to take another turn from their. >> the justice department is leaning against approving t-mobile's takeover of sprint even after the company's winning of the backing of the federal communications commission chairman. opposition to the deal would mark a rare break with the fcc. some deutsche bank investors are growing dissatisfied with chairman paul asked langer. they have reportedly discussed pushing for his exit. it is unclear if they will move

at the general meeting this thursday. that is your bloomberg business flash. nejra: thanks so much. monday brought a flood of fed speakers with everything from the rate cuts to leveraged debt. prominent fed officials had this to say. operate atarly can 3.5 percent, roughly 3.5% on -- inflation. >> the economy is showing continued growth, rising wages, all in the context of muted inflation pressures. ofunemployment consists employment does not directly observable and it changes over time. the range of estimates extends as low as 4% or perhaps lower. >> we want to sustain this expansion, keep a job growth strong, keep the unemployment

growth in line with the policy. >> the policy course we have done has been exactly on point. economic performance would bear that out. we have seen growth continue about the long-term trend. not seen very much inflation as well to suggest the economy is overheating. i think we are in a good place. nejra: it is worth noting jay powell brought up an idea that appears to be creeping up more regularly. the possibility of using an inflation range instead of a 2% target. simon smiles is still with us. your esteemed colleague talked about the fact the bond market is telling us more about inflation expectation then the likelihood of a recession. clientserned are your about goldilocks being on shaky ground and whether the cycle has longer to run and how that translates to their appetite for risk asset? that is an aggregate

call. it is turning more cautious. it is very much this trade war. not only the way the trade war is causing greater volatility. also how in many cases impacting their own businesses. you have that double whammy. a potential with respect to the trade deal doing business and portfolio unsurprisingly embraces caution. cash,to allocate one's because cash is in many cases losing you in real terms money. treasuries themselves are very low. markets are conceived by many of our clients is not necessarily cheap. potentially fully valued. there are pockets of interest in terms of the playing cash. one thing we are seeing is a lot of movement into single name multilateral development bank

debt, et cetera. we are also continuing to see a lot of interest in investments. direct investments. technology being a key area people are interested in. health care to a lesser extent. increasingly, a real focus on investment with the potential of making money, but also a positive societal environment allow come. -- environmental outcome. manus: we saw foreigners bailing out of the quoted equity markets in china. we need to see where the trade war goes. seeing acally, are you material shift in allocation? how does it play out? graphically -- too

graphically. there is a lot of demand for chinese opportunities in the tech space. also through europe. there are amazing business is continuing to evolve there. the interest in u.s. tech and tech coming up again from a sector perspective and whether a tech opportunity is an interesting opportunity across europe. there is a lot of interest there. the commonality is tech. ,n addition to that opportunities which not only make money, but have a float of a secondary or tertiary policy or environmental outcome. it plays into this growing interest in impact investing. in this case, it is how you define impact investing. there are lots of different ways of talking about that. consensus, a 60 signatory definition of what impact investing is.

it was the guidelines, the world bank put out. formally toed them the 60 signatories at the washington meeting. her chairman at ubs was one of the initial signatories. to have theou have intention to make the impact. you have to verify the impact is coming from your investment. you have to measure it. having all of that in a really simple framework now allows not just to invest in attractive coinvestment and direct investment, but also to find impact investments, something we have been wanting to do for an extended period. nejra: you talk about opportunities with offer -- which offer yield. your view is we are in a goldilocks situation. i know you have a certain allocation to u.s. treasuries. how much more creative are you having to get with your ultra

high net worth clients in searching yields away from development bonds? then: we are overweight in medium-term that basis in that area. we allocate across assets. the areas we have been changing or increasing our recommendations in the yield space are very much multilateral development bank debt. and still and 90% correlation. all of our recommendations for ultra clients. they are in this selloff as we mentioned before. outperforming traditional duration of credit matched investment grade headed and -- credit and high-yield credit. manus: is all about tech. simon smile, ultra high net worth cio.

thank you for your time this morning. a quick snapshot of what is coming up. a smorgasbord of thinkers. we have the u of p -- the european board commissioner. lawrence boone coming up as well. stay with bloomberg. ♪

anna: i'm anna edwards alongside matt miller in berlin. matt: it is only code red for china -- for tesla. china shakes off trade. tesla trades at the lowest level since 2016. cash trade is less than 30 minutes away.