>> good morning from bloomberg's european headquarters. i'm a rich a hitch with manus live from dubai. this is bloomberg daybreak: europe and these are today's top stories. fed officials say patience is the key to fight investor expectations for 2019 cuts. trade war rhetoric continues. feeling the heat. deutsche bank executives faced questions. we aremnuchin and -- live in frankfurt. hanging by a thread. amid a growing revolt over brexit that looks set to force her from power. ♪

manus: the indian rupee has been strengthening as the prime minister signals a single party majority. we are on the ground in new delhi. it looks like victory. good morning. it looks and feels like that but it still inconclusive. leading indicators are inconclusive. like the coalition is leading by more than 300 seats. it does feel like it's a clean sweep. in terms of the party alone, it is 282, way beyond the majority. it is important. modi will have a landslide victory.

it is important because he can pay -- campaigned on nationalistic fervor. using pakistan to rally the people behind him. in 2014, he talked about how he was a redeemer of india. it was about creating jobs. it was about fighting corruption. this time around, it was different. it was about nationalistic sentiment within the country. to actuary, modi decided aggressively against iran, drop -- dropping those bombs. allies say that is what swung the vote. his popularity was dwindling. what is to come if he wins? it would be a legacy. he would be on par with the likes of few prime ministers.

few have reached the 10 year mark. what he needs to do to ensure he fulfills his pledges which he has failed to do in the first five years. taking a look at growth. 7% is not enough to pull the poor out of poverty and create what he needs to do. manus: thank you very much. 40,000 ring a bell has just traded on the indian, a newly minted record. we will see you very shortly. we go to tliv on the go. you can track every single counted vote. blog on your top live your bloomberg. from india to u.s. treasury, the movement in the yield on u.s. treasuries. have they regret the bullet train that is an expectation of a rate cut? america throwing in the

towel. they aresaying reducing their level of yield to 2.6 from 3%. let's have a look at some of the markets. eurosterling. what an amazing run. down 13 days in a row. the longest run of losses in history. there are big issues. the market may not be ready for a new leader of the tory party. there can morning. >> good morning. the fed is patient. no sign of an insurance cuts. how deep does this trade don't -- more have to get? we saw losses in the u.s. yesterday. another day of declines in the u.s. and european markets today. steady yuan. rupee outperforming, underperforming to the downside is the turkish lira. lower for a third day as though stocks have entered a bear market.

let's check on the markets in asia. juliette saly in singapore has more. risk off across equities. trade angst still front and center. big moves and bond markets. >> you said it all. we are seeing these trade woes impact the market. let's focus on the indian market which is up by 2%. that 40,000 point level. record highs as we start to see these poll results come through. elsewhere, this trade war front. the csi 300, down 1.3% in late trade. you have money going into the yen. the nikkei has lose -- lost ground. it certainly is a sense of risk off and really being hit hard in the tech center as well. let's have a look at some of those stocks. ist they call china siri being hit are today. fly tech down by 6%.

it has been down by as much as 8%. we've been hearing from tsmc. it said it is in compliance with the national trade laws. it doesn't need to change its exports after this assessment. by 3%, seeing it off weighing on the overall taiex. we are talking about this movement indian equities. one bright spot today, that is being led by the banks and construction stocks. one of the biggest banks in india, up i 8% as we see this euphoria takeover indian markets with the likelihood modi will be returned for a second term. india definitely the outlier in those asian equity markets today. thank you so much. treasuries rally. the 10 year yield dropping for basis points after the fed's loss policy meeting. officials feel their patient approach is best. we have the details. what did we hear? >> we saw that fed officials are in no hurry to move interest

rates. you can see from the minutes that inflationary pressures are transitory. that's what they thought. the possibility of a cut wasn't even mentioned in the minutes. the markets really are not buying what the fed is selling. let me take you into my terminal. is chance of a rate cut about 50-50. if we look at the december meeting, it is less convinced that the fed patience will last till 2019. markets are skating to where they think the puck is going. that could be risk from u.s.-china trade or late cycle worries. we do see stock markets increasingly reflect those worries. there's a believe that there will be continued accommodative policy. i don't have a chart up for you. growth stocks versus value stocks has hit a new high. this is typical late cycle behavior. now surpassing the level of the dot-com bubble.

will we see a market turn as the fed isn't quite reflecting what markets are seeing? we will pick it up from here. our guest host this morning is the head of investment strategy at abu dhabi commercial bank. great to see you this morning. we have laid out the road back for what the market thinks is what is going to happen. where do you stand? one cut, to cuts? the momentum builds. >> i think it's more likely that the fed will remain patient and the market may be slightly disappointed. i think there is a good chance that we will see some pickup in growth globally. that should also put some pressure off of the dollar. in that case, the fed will also debt ininduced to go in that direction of rate cuts. having said so, we live in

unprecedented times. with all the tensions that we have on the trade forms and geopolitically, there is a risk that the dollar actually keeps on strengthening. therefore, the fed could change its mind. perhaps the market is betting on that, too. great is big with you this morning. manus referred to this at the top of the show, bank of america cutting it sealed forecast. you can see that yield seeing a 2.6% by year-end. yieldave cut their forecast in a number of places globally, not just the u.s.. you are underweight bonds. does that include treasuries? what is the reasoning behind that? bondsare underweight because we see more upside in equities. we are not underweight treasuries. specifically we are not underweight long-term treasuries. a believe that there is still

high risk globally. this really, for dollar investors, not much else than treasuries. there is also gold. i see how treasuries have now come down. my guess is that gold is an essential additional complement as a risk catch to treasuries. we definitely will not, we remain with our overweight in long-term treasuries. manus: you are overweight in that. i want to ask you on the dollar theme that you referred to. there's a lovely storing out this morning. bloomberg dollar index, two-year high. consequences for the emerging market. jpmorgan just downgraded their position to underweight in the fx base. -- space. would you share that sentiment?

>> we have already markets. for us, this would not be a change. it would be a confirmation over inflation -- inclination. normally, we would see a weakening of the u.s. dollar because of fiscal stimulus, credit stimulus from china kicking in. the fed be more accommodating and having already crystallized a more accommodating message since december. independently about the recent speculation of the rate cuts that can yesterday. armally, we would see weakening of the dollar. the point is, what is happening now with the trade war, what is china going to do? chinas a minor risk that wants to devalue as a reaction

to its problems. i think that is now where people are getting concerned. even if i'm not 100% convinced that china will go that road. people are getting extra concerned about emerging markets for that reason. thea: just to come back to fomc and fed minutes, of course the discussion was around rates and the possibility of a rate cut. we know that is an insurance cut as the market pauses. the other thing that came up was the bond portfolio and the balance sheet in the discussion over a possible move to a shorter duration portfolio. how much of a risk do you see in this? it could push up yields at the longer and. that is possible. i do not see a massive jump in long-term yields, really. that has beenorld deleveraging, if you look at

u.s. growth. it is sustainable and solid but it is sluggish. it has been so for the past 10 years. it is sustainable but not strong. now china will also continue to be less of a growth factor globally. i don't see, if you look at treasuries like we do as a risk a marginal pickup over the yields -- manus: carrying on that conversation, the point about it is, they have missed on this target so often. this is core pce, headline pc. do you think this missing the as likely to be transitory with this unemployment number at a 49 year low? doubt --lear that there will be risk that some point. if you look at wage growth,

which growth has been stagnant for something like nine years. suddenly, it is picking up. obviously, there is now this about, at some point inflation overshooting and the fed being behind the curve. that concern is legitimate from the labor market point of view. it has been quite remarkable for how long wages remained depressed in spite of the unemployment rate coming down. inin, if i look at spending the u.s., it is not so strong in spite of stronger wages. it is not what it used to be. we could see this moment of truth materializing, this inflation shooting up. maybe in 2021. it is difficult to say. it is unprecedented. that's the way things are going

right now. nejra: how could increasing tariffs feed into that moment of truth? we will discuss more on that less. our guest is with us. coming up, with trump considering further blacklisting of chinese companies, could the trade war become a tech war? we will have the latest, next. manus: if you are traveling to work, tune in to bloomberg radio. we are live in the london area. this is bloomberg. ♪

manus: it's daybreak europe. let's get a check on the markets. trade act weighing on asian equities. the pacific index in the red. india, the outlier. 40,000 with early indication showing no -- prime minister modi headed towards a

second term. we had the highest this year on that index. dollar strength with the other safe haven currencies today. manus: let's roll it over and have a look at the bond market. citigroup says it out of tenure treasuries. 2.6% is your next stock there. nasdaq as the technology hubris continues. tech is under pressure. nymex crude also coming lower. it's all about the u.s. infantry. -- inventory. that is putting pressure on the crude market. let's get into the first word news. andrea has resigned from theresa may's cabinet, saying she no longer believes in the government's approach. pre-brexit ministers are unhappy as the u.k. prime minister's latest proposal includes a temporary customs union.

voting gets underway this morning to elect the next european parliament. the u.k. and netherlands kick off the election. 700 anye more than peas. the remaining 26 countries headed to the polls between tomorrow and sunday. results are expected on sunday evening after the last polling station closes. york has judge in new rejected president trump's request to keep his bank from producing financial records to lawmakers. it upheld on appeal the ruling could allow congress access to trumps tax records and information about the financing of his family businesses along with personal bank records. the ceo of cisco systems has told bloomberg, it's hard to say if while way being sidelined will help his biggest --

business. he said u.s. china tariffs have only had a nominal effect on pricing. it, wee can't mitigate will pass through pricing. our teams did an amazing job over the last eight months and put us in the position where the latest 25% had a pretty nominal effect from the pricing perspective. we did a good job of optimizing our strategy. >> football's governing body has scrapped plans to expand the 2022 world cup to include more teams. the for says growing the tournament would have to much impact on the host qatar. that means the world cup will not be expended until 2026 when the finals will be held jointly by the u.s., canada, and mexico. global news 24 hours a day on air and down twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. nejra: thank you so much.

beijing is denouncing u.s. actions as the trump administration debates whether to blacklist more chinese tech companies. that would widen the crackdown to target seen as world leaders in surveillance tech. giant outlined four possible outcomes, the most probable being little progress before the tweet -- g20 prop -- summit. wouldast likely scenario be that talks resume in the near-term and leaders would lay the groundwork for a formal deal at the g20. still with us is our guest host. let me draw your attention to some other views. is for u.s. case tariffs on china imports. jpmorgan sees current tariffs in place for the long-haul. basically a full-blown trade war is shifting from a risk to a

baseline for many. is it shifting that way for you? risk thats a great the u.s. will put tariffs on all of those imports. china will do some retaliation on the exports that the u.s. exports. it will stop there. this would be a bad result. what i think is more important thatat it will come to because the tech war is permanent. the u.s. doesn't want to give away leverage by accommodating on the trade front. the other problem is, mr. trump is facing elections. he won with very narrow margins

in wisconsin, michigan, and pennsylvania. trailing bothis mr. biden and mr. sanders in those states. , he isly has to consider betting on this not determining a u.s. recession. that is his real bet. this goes-- manus: back to how much pain he's willing to tolerate. 5% drawdown inequities is his pain threshold, we guess. what the u.s. is doing, knee capping huawei. the national security council is led by john bolton. ei soey want to kill huaw they have a huge political 2020 statement? technology america first, we beat the chinese. >> mr. bolton is a believer that

wrecking havoc on other countries is good for the u.s.. now, it's interesting. has always created a multilateral system. the u.s. has benefited more than other countries. if you look historically, world war i and world war ii, the u.s. has always done well when the world went bad. if you look at what happened after the dissolution of the soviet union, u.s. equities underperformed until the run-up to the global financial crisis, the first 10 years of this century. other global equities. if you look at what happened since the global financial crisis,and the eurozone an incredible outperformance of u.s. equities over european equities. mr. bolton had some fruit for his arguments. i do think that this is the reaction.

this is the strategy direction. this is what we have to take into account. nejra: to that point on u.s. equities, you say in your market view that basically, the trade war does not have a binary outcome. that makes it hard to work at investment strategy. is there anything you can throw your weight behind with some conviction i.e. outperformance of u.s. equities in the event of a trade war? listen, i think that under the assumption that the u.s. will not go into a recession which is our assumption, we need to think scenarios of how china reacts to this. if china reacts with the devaluation, that is ok for u.s.. that is not good for japan and europe. it is very bad for emerging markets. if china reacts through stimulus, more physical than credit stimulus, that is still ok for the u.s. and manageable for europe and japan.

still rather bad for emerging markets. manus: hold those thoughts. time is against us. bank.l talk deutsche ♪

manus: this is "bloomberg daybreak: europe." i am manus cranny in our dubai studio. nejra: i am nejra cehic in london. one man is set to feel all the heat. some investors have become this -- dissatisfied with the chairman. great heavy with us. well the chairman keep his job? >> good morning. we are going into a very tense agm as far as agm scope. the chairman has been in the spotlight recently. reporting -- reporting a number of cap shareholders, including the qatari royal family.

they are not satisfied with his performance. according to people familiar. on top of that, regulators also had been making some noise looks like the ecb does not want to be a bystander and they have said to say the bank would be better off in a better position. you don't seem -- you'd don't see regulars get involved like that. this is a man that had been at the helm for seven years. he has been through stream management -- three management committees and the share prices keep tumbling for deutsche bank. whatever comes out of this meeting, if there is a no-confidence vote, does not mean he could step down. it would put pressure on the supervisory board at the least to start talking about planning. manus: this deal with commerzbank fell apart thus far. what are the options post see bk?

k? cb potential takeover merger fell apart. they are working on a plan b. he is an unapologetic cost cutter. fromeven cut things deutsche bank. what is next? many -- the big question is they want to be a big investment banker not? the chair has always wanted and dreamed for the bank to rival the main big u.s. wall street banks. many say they need to

trimming the investment bank. it is a huge behemoth in terms of the bonuses it pays out. the fund is making -- it is not there. this is one of the things it will be talked about here. there are clouds of gas gloomy clouds surrounding deutsche bank. we heard from steve mnuchin. he will be looking into transactions for the bank following the new york times report about the bank dealing with president donald trump's businesses. today what is the next up forward? everyone will be looking to hear what their answers are about strategic planning definitely following that collapse of talks with commerzbank. there is no bound to your expertise. it is much more tranquil there. let's talk markets. we have the team standing by. in london, dani burger. we are smashing record after record. are trading on the smell of victory. >> yes, we are. we did make the record highs before. the nifty cross the 12,000 mark, though their off their highs, off by 200 points. the nifty has given up more

points from the highs but it is a state of exuberance. you have a lot of buying frenzy coming in. a lot of buying activity on good valuations coming in. that is worth trading under over these past two days. talking about tanks coming to the fore. the defensive session has taken havekseat so i.t. stocks gone under in today's session. you had the stocks in the early morning trade. you are watching what happens to the currency. it is in a position of strength and what we're seeing right now translates into what appears to be victory, you could see some more strength coming back into the rupee. the bond yields have seen some softness in the early morning session. we could see some more if all this converts.

nejra: thank you. we are seeing india bucking the trend. the rest of the equity market not quite with so much optimism. the risk assets feeling the pain. if we look at the bloomberg commodity index, prices got smacked falling by more than 1%. that is -- has happened a few other times and they are under pressure again today. we had not seen commodities reflect a shift to global growth but now they are picking up steam. we are seeing them start to price in some of the structural bearishness. speaking of bearishness, we have seen a rally and treasuries, the rally continuing after yesterday's fomc minutes. says it is time to start taking profits. yields are going higher from

here afterwards. they are saying that the rsi momentum slowing down on treasuries as well. even though the fed taking a bit more of a hawkish stance than the markets would like to see. they're still saying it is not time to go in and be buying treasuries. a lovely roundup. great round up on the markets. oil is moving, an extension of the losses. stockpiles reach the highest levels since 2017 and traders will be keeping an eye on the geopolitical tensions as we have referenced. a pentagon reefing, the white house said they had an option to send 5000 american troops to the middle east. , headwith us is our guest of investment strategy at abu dhabi commercial bank. 5000 pales into last week's

story. let's taught about inventories. this is the robe of the issue for opec and opec plus. they made it clear this is the issue. stay the course, the markets are oversupplied from the american side. guest: it is definitely true from a medium and long-term perspective. american production can still increase and we have seen inventories coming up. this is my big concern or the medium to long-term outlook of the oil price. right now, we have had this buildup of geopolitical tensions and i think those tensions are there to stay but these things usually take months. the pace at which they build up these tensions will slow down, if not the tensions themselves. so i think we will get used to that somehow. and the oil price will be

looking for some guidance. the inventory issue is important. to i think that will have test the resolve of opec and russia. isse levels i say the result there to stay because we are not yet at the level where russia would be concerned that others would try to enter the market. in thisnk we will stay side word movement for the moment with no significant drawdowns or movement upward. one thing occupying traders' minds, the return that was done. i want to ask about is their demand-side, how much have oil markets priced in the growth concerns and the demand-side? guest:hat is a good point. i agree.

with u.s. buildup and you is production capacity medium to longhe term concerns. i do think that growth in terms heavy manufacturing growth from china remains on the downward trend that we have seen since 2012. , cyclicallyical speaking, we might, we were expecting an upturned. there is this trade war concerns that could be revised. so of course, the demand aspects have to be taken into consideration, especially if we get some policy mistake i would say on the chinese side rather than the u.s. side at this point. manus: we talk about policy mistakes. to the [indiscernible]

political mistake. we heard from the saudi's in the past 44 hours. our markets sufficiently volatile or reflecting sufficient volatility on the risk of political escalation, geopolitical escalation from saudi and america on iran? guest: of course, if we would see major escalation, that would temporarily push the oil price up. there is no doubt about that. areuld say that the markets probably correctly thinking that --will not go that frost that fast. that is part of the long-term policytation of u.s. after trump came in towards this region. realistically, there were many more troops here in this region

quite some time ago. also compared to the 120,000 that were going to come. for the moment, i think it will not go that fast. you mentioned china a lot to the show still amassed you if you would recommend exposure to industrial metals based on your view of the outlook for china. o: no, if china would do the aggressive way, do fiscal and credit stimulus the way it did in 2008 is unlikely but even in 2015, that would be a good bet. i think they will muddle through. between 2015we saw the upswing in

inufacturing production china and the upswing and commodity prices as a consequence of that. that was the high [inaudible] it will continue to come down. i would bet on that. you and you stay with us. coming up, modi is winning on bjp surging tos the lead in early counting. this is bloomberg. ♪

nejra: this is "bloomberg daybreak: europe."

i am nejra cehic in london. manus: i am manus cranny in dubai. and the team. this is between bonds and equities. the bond market sees a rate cut, that is what they are pricing. maybe the equity market has a different opinion. why are bonds pricing cuts that the fed does not see? they don't want us to see. nothing here, drive-by. let's get the bloomberg business flash. of ciscothe ceo systems has said it is hard to say if huawei inc. sidelined will help his business. u.s.-china tariffs have so far had a nominal effect on pricing. >> if we can't mitigate it, we two pricing.

we are in a position where they 25% had a nominal effect. from a pricing perspective because they did such a good job of optimizing our supply chain. deborah: renault and nissan strengthening ties. calling on the two companies to advance progress, and consolidate their alliance. the partnership has been rocky since the arrest of carlos ghosn for financial misconduct. he denies all charges and pretrial hearings start later thursday. football's governing body has plans to expand more teams. growing the tournament from 32 to 48 countries would have to qatar.pact on the world cup would not be expanded until 2026 when the finals will be held jointly i the u.s., canada, and mexico. that is your bloomberg is this flash.

-- business flash. bjp has extended its lead to 282 seats easily winning the seats needed to form a government. markets have opened strongly with the same-sex. -- the semsex. semsex seen the going higher. if we look at valuations, this is what a lot of investors have questioned. if you look at lender it forward p, 18 times for india versus 11 for the rest of the em spectrum. overweight equity position in india. i'm guessing this is not based so much on short-term valuations

and the election outcome. but is it based on? luciano: we have been more than five years being overweight india. it is not because the government that much. reforms in india over the last tend to 15 years have been an active by the -- enacted. the successes of the first government, perhaps will be able to see what the exit polls say. the success of the first government have been carried by the fiscal reforms and by the banking reforms done by the reserve bank of india and the year before he took power. arehis is one reason why we long-term bullish. the other reason is india is relatively insulated, it is not china-centric. it is not manufacturing sector

centric and there is a commodity in energy so it is unique from that point of view compared to the other emerging markets. and this deserves a higher valuation. we have put the flow of money into the dtv library. indiana story the and china story, funds happened flowing out of china and the record rate in the last couple of weeks. what does it take for modi that he exceed, what does it take to maintain that foreign flow of money? he needs to spur more economic growth and -- this lowest since 2017. what does he need to do? e needs to give more

fiscal stimulus and balance that and not, make sure the stimulus goes to the right places. that is the poor people in india. that is very important that he agriculture, the nonurban part of india. so i think that will be definitely his key challenge. what does that mean for borrowing needs and the risk of a further increased government bond supply? we have seen indian bond yields stabilize the mid-, inflation but i'm wondering whether you think that caldwell last and how you would then invest along the indian bond curve? course athat is of risk. inflation could pick up in india. but for the moment, we think

that the inflation will be relatively contained. we think the central bank will stay put for the moment. my guess is that on the shorter end of the curve, one can still be relatively tranquil and india. there are some risks, short-term risks for the medium and long-term part of the curve but on the short and a look or, the risks are still pretty well contained. manus: we talk about the fiscal the of the conversation and weakest growth since 2017. it is still 6.5%. will there be more rate cuts in india, is that the base case for you? is likely think that to be a few cuts.

safe, i think thatthe assumption is there may be disappointments and therefore it is better to be positioned on the short end of the curve. nejra: you say in some of your research that government bond issuance is a risk and that could add to steepening pressure which makes sense with what you're saying across the curve on the bond markets at the moment. i'm wondering what that pressure means for your view on indian bank. there has been a current as a concern around the indian financial space with the rise of nonperforming loans ford domestic banks. how would you position around indian financials? relative terms, thanks to reforms around 2013, the recognition of loans has actually, that has been an

policyry enactment of measures. in relative terms, the indian banks are better positioned than the chinese bank. general,ious but in they are quite well positioned. with economic growth continuing, there are margins to workaround and to have some consolidation or reorganization or cost-cutting. i don't think the indian banks are that much at risk. i think it is also important to be just been one thing in mind. anda, ownership of stocks bonds by foreigners in india is low compared to all other emerging markets with the exception of china. banks to concerns for yields, you have to put it into perspective when there are

lessl risks, there will be outflows at of india and more margin for the government for the authorities to manage that. said they are protected slightly. seender every time you higher oil prices there is that shakiness. can we talk about the currency? let me do an adjustment on my terminal. what we have is year to date on emerging markets. the ruble is resplendent. up eight on percent against the u.s. dollar. take your eye line to number five, the rupee is barely up .251%. do you think we see continued strength, we might be disappointed on rate cuts, do you think we see a stronger rupee on the back of political victory for modi? i don't see enormous downside treasure on the rupee

right now. we have this long-term perspective and if you look at also indian equities in dollar terms, it is like a tractor, not like a ferrari. it can't -- keeps going up over time and because it is an economy that is gradually emerging from a lower income level to a higher income level and there are structural reforms and it is insulated from many centers that are china-centric. there will be some positive momentum but i don't see in a miss upside for the rupee either, especially if, it is not that india is relatively insulated but currencies, if emerging-market currencies come under pressure, where illusion to think that india is insulated to that extent. manus: thank you.

thank you for being our guest host this morning. patience is the key despite investor expectations. we will talk fed next.

morning fromd dubai. i am manus cranny with nara change it -- with narrative chain pitch from london. patience is the key despite investor expectations for a 2019 cut. banke futures -- deutsche executives faced tough questions out of agm. this is as steven mnuchin prolonging the policies. x touches ane all-time high as they promised her is set to win a majority in india's general election.

nejra: good morning, welcome to daybreak europe, has gone 7 a.m. in london. we have some breaking news on german gdp. the first quarter final rating for the gdp comes in bang in line with estimates. 0.4%, that was basically for the quarter on quarter. the urine year, we're looking bang on line with estimates on the german gdp. let's take a look at the bond markets. talkingingly, you're bank of america earlier, talking about the 10 year yield. they have cut their bund yield forecast to -10 basis points. how are bond markets opening up? little bit shaky

this morning in terms of the equity story. get ready for all-out tariff war's? that seems to be the consensus from goldman and nomura. goldman has had a number of outcomes but nomura getting ready area do your we go, bank of america, they are losing the faith. they are marking their misery. they are cutting their year-end forecast from 3%. you look at the other side on citigroup, what do they say? it will be time to bail on this long run that we have had on treasuries. this is stunning. 20 and 30 year paper in the u.s., new lows for this year as we see bids for their auction ramping up. this is incredible. this tells me something much more malevolent is going on. if you are paying up in quantity for negative yield. how are your futures? nejra: futures are moving to the downside not only in europe but

the u.s. all firmly in the red down by .6 of 1%. after we closed flat in the equity session. we did some -- see some weakness. futures indicated lower in the s&p 500. down .7 of 1%. trading dominating the equity markets. the one place we are seeing it not dominate is equity markets in india. juliette saly can take us through the action in asia. she is standing by. great to see you. what are we seeing? you know i like to focus on the positives so let's start in india where you have high whereat a retain primei will minister. that is in the green but also we are seeing some strong buying coming through in indonesian markets which are head this week

following elections there. credit suisse saying it is the time to buy into those markets. elsewhere the same story. you have seen a lot of weakness coming through into the chinese market which is tracking trade. the nikkei finished lower on a stronger yen and australia's market off by .51%. in the currency markets, the on sure you on weaker, down by .1 of 1%. and a strongan level so showing the markets are pushing back against that. we have seen the yield on australia's 10-year note hit a record low. it is down five basis points. [indiscernible] and the aussie dollar coming under pressure in the wake of trade concerns, although it is not the worst-performing g10 currencies today. that goes to the british pound, that title. thank you very much.

juliette saly in singapore with the markets. the treasury market has rallied after the minutes of the fed last policy meeting were published. officials feel that patient approach is best. dani burger has the details. saw yesterday and the minutes, fed officials are in no hurry to move interest rates and in those notes, they said in inflation pressures are transitory. the possibility of a cut was not mentioned in those meeting notes. the market is not buying what the fed is selling. onwe look at debbie irp go the terminal, the chance of a cut in orange is virtually 50-50 by october. odds.igher than 50% futures are less convinced that patience will last. when we look at the end of 2019, the meeting there. -- marketse skating are skating to where they think the puck is going. that could be risk from

u.s.-china trade uncertainty or late cycle worries which the stock market is increasingly reflecting as interest rates remain depressed. because markets think there will be accommodative policy, yesterday, growth versus value. that ratio has been pushed to a surpassing the dot-com bubble. this is typical late cycle behavior and so this has reignited bubble concerns with the market on an edge of may be turning over especially as we might get a hawkish surprise from the fed. thank you so much. we are asking the question on mliv, wire bonds pricing cuts the fed does not see question like you can join the debate, reach out to us and the mliv team, ib+tv on your bloomberg. isning us to discuss this david page. good to see you, thanks for joining us. i want to ask you how long is it going to take the fed to come around to the markets' point of

view on cuts? david: it tends on what happens in trade policy. if we go into this full beingtion, clearly threatened as people are worried about, the fed has to review its situation depending on how financial markets react. then you could see the fed cutting quite conceivably in september, possibly earlier. if there was a significant tightening and financial conditions. we are not convinced of the outcome. these were against the backdrop where trade wars had not revived their ugly head. stage, the fed- was pushing back against market expectations. it only sees trans translation pressures, it does not see it as driving the cut. the minutes are somewhat historical and development depends on the juncture we get from this trade possibility. of the argument,

let's say we go to, may people say it is not going to shave growth that materially in the full onwe go to tariffs. what it might do, good morning, it may spike inflation and give the fed ought -- another problem . it might boost inflation and maybe we will be talking about rate hikes before christmas. david: yeah, i think that is unlikely. that is right. you are seeing the tariff site of things. quite the same as if you are seeing an adjustment and government fiscal policy. has facedcepted temporarily in terms of inflation. we're looking at a shock to our estimates. if you look at the escalation of the trade war, you could be shaving around half a percent

off of u.s. gdp growth. for the fit to -- fed to upset just toere are hikes address the growth issue. i expect there is pushback but if financial markets find this in any way that they did at the last quarter of last year, powell will find it difficult not to react in that situation. nejra: we heard from the minutes and that was before the latest on inflation, the trade war on the on portfolio came up and this was also interesting. discussed twoff approaches to adjusting the maturity composition of the central banks bond portfolio. also approaches. is either likely? we talk about the proportional approach. david: the idea of trying to create some space for future my cherry policy moves is fine but there is a key trade-off.

if we see a shortening of the maturity of the portfolio, that might put pressure. it restricts the amount of fed funds rate increases, conventional policy increases they can put through. there is a trade-off there. one of the lines from the minutes, the short-term costs might be more than you would get from the benefits. when you bear in mind uncertainty about the reaction, notsupply shed -- side is obvious that they will want to push this is a policy and terms of they're going to take significant risks. and gradual mood, -- move, transitional move, they talk about it in 10 or 15 years, [inaudible] if we go to escalated tariffs, let's take the hybrid level and we have this back loop

of money going into the dollar. is that oppressive for you in your mind in terms of the growth story, is it a double punch for the u.s. growth story? david: it absolutely is. if you look at the pressure, they have been trading for a long time with an upper limit and as these stories have come out we have seen the dxy dollar push above that upper limit. trade wars, trade tariffs could push the dollar into a phase. so that provides some offset. it acts as a headwind. it is the key path to tightening financial conditions. what is difficult to assess in terms of the economic outlook is is direct effect of tariffs relatively subdued. the impact of financial conditions is likely to be strong. the dollar's move is key. on theee upward pressure dollar which reflects the

concerns financial markets about what this means for the rest of the world, that is where they headwinds for the u.s. economy comes. both bank of america and citigroup have a similar target. bank of america has downgraded their 10 year forecast and citigroup says the 10 year yield could rise to 2.6%. from citigroup it is a bearish call area they say take profits on the double bottom and the diverting relative strength index. bank of america talk about -- they downgraded yields globally. what is your outlook given what you have said about the possibility of a cut before the end of 2019? david: our base cases we get some sort of deal. this is not a lasting peace but it could be an extended truce and that could be a meaningfully more improved picture than we see at the moment. the deal will start to pick up. it will edge little higher. edging toward to 70 by the end of the year. there is a lot of stimulus in

china that would otherwise come to play. tot should give some lift the economy. you come back to the thing, we have a juncture coming up. if we see extended trade wars and go into a cut environment, that is what markets priced in four. you would not get treasury yields lower than they currently are. manus: you get to the and of the week, sometimes, i would love some good news. we have a little bit of good news act up. david page, axa investment managers on the markets this morning. let's get to your first word news. debra mao from hong kong. debra: voting has begun this elect the next european parliament. the u.k. and the netherlands kick off the election today choosing 99 of the more than 700 mvps who will serve for the next five years. the remaining 2600 heads -- head to the polls between tomorrow

and sunday. results are expected sunday evening after the last polling station closes. s last policye fed' meeting show that a patient approach is best. several members of the fomc sided with jay powell feel that the recent easing in inflation is likely to be transitory. federal judge in new york has rejected president trump's request to keep his banks from records toinancial lawmakers. the ruling could allow congress access to trump's tax records and information about the financing of his family businesses from deutsche bank along with personal bank records. the rupee i hit a five-month low after six people died in the worst political violence in jakarta in 20 years. police fired tear gas and water cannons at supporters of the general. candidate saidl

he will launch a legal challenge to the results. 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. kong, debra mao in hong thank you so much. with trump considering further blacklisting of chinese companies, could the trade war become a tech war? we will have the latest. manus: if you're traveling to work, we are never far from your mindset. bloomberg radio live on your bloomberg device or on dab digital radio in the london area. what a beautiful day. this is bloomberg. ♪

nejra: it is 7:18 a.m. in london. 41 minutes away from the european equity market open. this is "bloomberg daybreak: europe." i am nejra cehic in london.

manus: i am manus cranny in dubai. let's give you a quick snapshot of the indian markets as we go towards the exit polls, a single party victory for modi. these are exit polls. 40.semsex busts move.e seeing a real our last guess since don't expect any cuts from the central bank. countsee what the final brings us. nejra: you're seeing some endocrine -- indiscriminate buying of indian assets. money is moving into bonds, the 10-year dropping to the lowest level since april 2018. the vix is dropping so volatility down as stocks rise. moving into the rupee as well. it is one of the best-performing fx in today'st

session against the dollar. that carry on the conversation in -- on india. briefly touching an all-time high as indian prime minister narendra modi is said to win a majority in the general election. phyllis in on the latest, great to see you again. reporter: strong numbers coming in for the indian equity markets considering the national democratic alliance is leading in 230 seats out of 540 which gives them a majority as far as the lead and seats is concerned and that is the reason why the political stability has led to the prospects of the clinical -- lead to world markets surging. the nifty and the semsex are in uncharted territories. they have briefly had the psychological levels with the nifty at 12,000.

good gains coming in and the gains are on the back of substantial up moves in the banking sector. consumer led sectors such as the auto sector doing well. thank you. the latest on the india elections from mumbai. let's give you a business flash. debra mao is in hong kong. the ceo of cisco systems has told bloomberg it is hard to say if wally being sidelined will help his business. chuck robbins said u.s.-china tariffs have so far only had a nominal effect on pricing. >> if we can mitigate it, we will pass through pricing. our teams did an amazing job over the last eight months and put us in a position where the latest 25% had a nominal effect from a pricing perspective. they did such a good job of

optimizing our supply chain. debra: the french finance minister wants renault and nissan to strengthen their ties. he called on the two companies to advance, progress, and consolidate their alliance. their partnership has been rocky since the arrest of carlos ghosn triednancial misconduct he denies all charges and pretrial hearings start later thursday. football's governing body has scrapped plans to expand the 2022 world cup to include more teams. growing the tournament from 32 to 48 countries would have to much impact on post qatar. the world cup will not be expanded until 2026 when the finals will be held jointly by the u.s., canada, and mexico. that is your bloomberg business flash. thank you. let's get you up to speed with the trade story. the trump administration debates

blacklisting more chinese companies. sounding increasingly pessimistic on trade. they see higher odds of the stalemate continuing. goldman's most probable scenario would see little progress before the g20. the least likely scenario would be the talks resume in the near term and the leaders lay the groundwork for a formal deal at the g20. axad page is from investment managers. it will be a heck of a big g20 meeting day. we will put in store value. number us saying that they are shifting that full-blown trade wars, quickly shifting as a baseline case toward them. the center seems to be moving toward them. are you? way butt is moving that we are not there yet. we think there is room for a deal. the economic costs to both sides

and the global spillovers would be meaningful. and therefore likely to see an avoidance come through. as the rhetoric wraps up it becomes harder to it -- to deescalate. the problem is it is difficult to disentangle what is an actual irrevocable on a negotiation situation. we saw this last year, serious sanctions put on them and then removed at the last minute which look's like it had something to do with the trade negotiations. negotiatingls like rhetoric that could come in and we could see a change come through that the risks that we see of a full blown trade war are rising. deep and protracted does the trade war become and how does that impact the fed? if we getsterday said more stimulus from china it is likely to be less effective than

in the past because they are policyto merge monetary objectives with financial stability and that mitigates the power of the stimulus in the central scenario. would that -- would you agree? measurese chinese gave and as the slowdown in china accelerates, that broadened, if you get into what china is facing persistent increases in tariffs, they will have to increase that stimulus. that means broadening that stimulus. that means bringing though long term financial concerns on the back burner. they pushedis that in broader stimulus but we don't think it would be a real trade war and that is the risk of the chinese economy. it's interesting in how the past 90 minutes neither of us have talked about the

possibility of japan-u.s. angst. that is one of the strings were we could see this escalating. one thing that caught my eye is the jgb market, a 20-year-old auction and it grew record demand and it is plus .36%. that says something screamingly dangerous when i see that kind of bid to cover ratio at jd -- jgb's at that kind of field. david: what you are seeing is tightening or an increase in we focus onic so the u.s. and china but there is this issue with u.s. and japan and u.s. and europe. there are tensions that have been relieved in the last week with mexico and canada. the difference for the world is for the u.s., everything else is a trade issue and it is to do with tariffs that for china, it is more about a strategic issue and the threat is of a spill over which is what we are seeing in japan. nejra: great to have you with us.

investmentrom axa managers. the european open is next. tune in to bloomberg radio live on your bloomberg -- on your mobile device on dab. this is bloomberg. ♪

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>> good morning. welcome to "bloomberg markets: the european open." cash trade is 30 minutes away. stay patient. the fed's april minutes to five market expectations for a rate cut in 2019. treasuries hold steady as the fed says it will keep its wait and see approach for some time. deutsche bank's chairman faces anger.