>> holding back the tide. europe's parties failed to cause an upset in elections. angela merkel's alliance is set to remain the largest bloc. fiat-chrysler proposes a tie up with renault. the deal would create the world's third biggest carmaker. and huawei's billionaire founder stands --

he stands defiant in the face of u.s. sanctions. markets closed. cashyou -- also u.s. markets closed. the actual cash markets have been open at least an hour. an hour into the session we are seeing gains. you have seen that across the regional benchmarks. we were on the front foot earlier on u.s. futures. the euro goes nowhere but it is holding onto gains for the past two days as a populist backlash expected in the european elections have fallen short despite gains in france and italy. of course the u.k. is a separate story in terms of the brexit party. outperformingos for european equities. in terms of front with individual stocks you have .enault and fiat-chrysler

renault forward will meet to discuss the proposal today. let's get the first word news now. >> president trump says the u.s. will have a trade deal with japan and china but he was vague on the timeframe of an agreement of the world's second-biggest economy. at a summit in tokyo he highlighted his opposition for the tpp, but lauded the ties between the u.s. and japan. isthe u.s. japan alliance steadfast and ironclad. we want peace and we want stability. advised traders against shorting the yuan after a you recent slide took it to the brink of the critical level -- bets against the currency will suffer from a huge loss. comments come as bearish sentiment on the yuan ratcheted

up in recent weeks. bitcoin has soared to the highest level in a year. prices have more than doubled since march. crypto proponents are taking encouragement from a string of headlines showing greater interest from mainstream firms. follows fantastic rise a pitiful 2018. global news 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. let's turn back to the european story. mainstream political parties in the you have held their ground against an assault from populist movements. they saw the highest turnout in a decade. the greens and pro-eu liberals. a couple notable exceptions with the far right winning in france and italy. we have coverage from major capitals across europe. in westminster,

paris, brussels, and italy. thank you all must -- thank you all for joining. bring us up to speed on the picture from brussels. what all this means on an eu-wide level. >> good morning. the big take away from the elections is political fragmentation. the pro-european majority is holding in the european parliament. but there has been a reshuffle. social democrats were particularly bad yesterday. christian democrats of angela merkel all -- also lost seats but greens and liberals gain some. when it comes to the populace, the concern was we could see a surge. that did not fully materialize. the conversation now shifts into who gets what job. angela merkel, all of the e.u. 27 leaders will meet here. emmanuel macron already meeting with the spanish premise there's.

, let us segue to you and talk about the french president. the head of the eu from the national rally was ining that this is a lesson humility for the french president. bey say the results could much worse for the president. it is not as bad as expected for them. it is still a setback in terms of the future. the french president also has to deal with the greens who took

13% of the vote last night. have todefinitely refocus a little bit on the climate change issue as well. nejra: thank you. anne-marie outside of westminster. for the majorw parties of the u.k. killingt seems to be the major parties in the u.k. they were able to take votes from labour and conservative. the parties were unambiguous about what they were standing for. remain or leave. bank holiday today in the u.k. but the local press -- the daily express says as tory leadership takes off, give us the brexit we voted for. the next question is what does this mean for the next prime minister who will succeed theresa may?

some say this will galvanize boris johnson. this could really galvanize him given the fact that so many votes went to the brexit party. nejra: and finally to john in rome, how well did the lead party do in italy? is the biggest political force. this populist movement has surged in the election changing the situation with the five start. five star has happened as many votes. nejra: great to have you with us. anne-marie, caroline, and john. giving us the roundup from all across europe. marie owens thompson joins us. marie, great to have you with us this morning.

thank you for joining. even the results we have so far can we breathe a sigh of relief that the populist backlash has been stymied? marie: they have increased their bye to share but arguably less than our worst fears and to the extent that the european elementary elections tend to be protest votes, where people take the opportunity to express their most perhaps extreme positions then indeed, the result is better than expected. nejra: better than expected. of aat case, how much more risk is political risk to the eurozone growth picture for the rest of the year? u.k.: we still have the and its issue of how to exit the european union to contend with, that is for sure.

and of course, the strong support for the liga in italy. europeantors will cap market performance. the more positive basis from this to rebound thanks to somewhat less than extreme -- of results that these these european parliamentary elections then feared. nejra: speaking of rebound, one thing that is failing to rebound is the euro. we had two days of strength last week. have we reduced the political risk significantly to see the euro move higher from here or does it need more from the economic backdrop? economist, one of the indicators that i look at the most for current account. any currency with a large

a fundamentally depreciating currency and countries or regions with large current account surpluses, would have the opposite. support for those currencies. it is interesting to note that the u.s. runs the largest current account deficit in dollar terms. and the eurozone has the largest surplus. the fundamental trend i would argue is in favor of the euro. growthe have the gdp differential which remains in favor of the dollar and the interest rate differential which also remains in favor of the dollar. perhaps we need to wait until the second half of the year when the euro can make a more decisive of appreciating move. explain thewould range bound trade of late. fromesults still coming in europe. what implications can you draw

from these for the future of the ecb? marie: clearly, the parliament will have to ratify these new nominations. also to the commission. and of course, the ecb. this and i amy in not going to minimize that say but given the fact that we still have the more centrist parties still in the majority in the european parliament, i would not expect any sudden earthquake in emerging from these nominations. will: marie owens thompson stay with us as our guest toes for the hour. founderp, the huawei will give us an exclusive interview later. this is bloomberg. ♪

nejra: economic finance politics. this is bloomberg surveillance. china has advised traders again shorting the yuan. the head of the nation's banking regulations says bets against the currency will suffer from a huge loss. still with us, marie owens thompson. marie, given these latest comments from china's banking suggest china is far more concerned about you on stability than using the currency as a weapon in the trade war. marie: i would take that as a piece of truth. tois true that they tried

make their currency more like a western-style currency come up more market determinant. at the same time, it is obvious that too much volatility will not be tolerated. and i do think this is where the priority lies for the stability of the chinese financial system rather than trying to use it in a different way which would induce more volatility and arguably make it harder for the chinese authorities to keep control over the balance of payments. nejra: in terms of where we have gotten to on the offshore yuan, towards seven. a fair reflection of china's economic performance at the moment? yes, i mentioned that current accounts earlier and the current accounts of china have diminished in terms of gdp to something quite close to zero. 1.10% oft used to be

chinese gdp. the fundamental slows into the yuan are now somewhat less supportive or have gone into neutral after having been massively supportive. although we do not expect any current it -- current account deficits at this stage, it has definitely weekend the fundamental support in this currency which is something the chinese authorities now have to manage in a slightly different way compared to the past. data pointsatest today show a broad decline in industrial profits. you talk about their support for the economy. if we do get more stimulus from china, how effective will it be compared to stimulus in the past? marie: it is always a question of size, right? ,ith enough ammunition, i think the large affects could be

expected. now, it is obviously a stimulus package that is much smaller than what occurred in the wake of the 2008 crisis. but i believe still greater than the u.s. fiscal stimulus. it is clearly non-negligible and i think it will help set to a floor under china's gdp growth for sure. gdp, backward looking, are they causing you any concern? , the sizel, i think of the economy has to be factored in when we look at these growth figures. if you just look at the growth figure come you are only looking at this speed and not taking the force or mask into account when you're trying to calculate the economic force. , thepeed has been halved

math has more than doubled in this is how china can contribute about a third to global gdp today despite having more than half the growth rate from its peak of something in the vicinity of 15% at some point. briefly, but nevertheless. the size of the economy is something that offsets the slower growth rate. nejra: marie owens thompson will stay with us. coming up, merger monday. fiat-chrysler and renault merger. we have more on that next. headlines coming in from the last human its. renaultsaying the merger could take more than a year. more next. this is bloomberg. ♪

nejra: this is bloomberg surveillance. fiat chrysler has announced a merger proposal deal with renault which may lead to the creation of the third biggest automaker. the combination of the companies will not result in plant closures. is the global head of research at ever quarter. great to have you with us this

morning. who stands to gain the most in ?his, fiat-chrysler or renault both. overall, they could both really benefit. seen how theybe come into play but theoretically, they can all win. the problem is execution as we have seen so many times in the auto industry. nejra: we are seeing the shares pop higher for fiat chrysler this morning. headlines coming through from the ceo for fiat chrysler saying he hopes to involve nissan in the partnership. how will shareholders react in the longer term to this tie up? shareholders will

question the valuation. the core business is valued at almost nothing. is antire market reflection of the 40% stake the company owns in nissan. when it comes to valuation, that is what shareholders will discuss the most leaving a side the feasibility of this multicultural merger. nejra: they both have talked about joint annual synergies --unting to more than five five billion euros. synergy cost-saving is one thing but will a merger solve the problem of declining car sales globally? no,now, it is a typical -- it is a typical merger attempt. they are asking for some valuation. we are at the peak of the cycle

in each region of the world. we are facing huge compliance costs from stricter emission standard. there are huge challenges in the industry. we need to stress that we have of equals merger successfully executed ever in the auto industry. think it is going to be extremely difficult. nejra: right, is there anyway that they can successfully execute this particularly with the fact that these companies are also dealing with management transition? but usually never coming you would need a very strong lead in these situations because ultimately we do talk about jobs and companies that are very important in each of their regions. involved.s getting

without a clear and strong leader, i think there is very little chance that this might proceed. nejra: thank you very much. great to have you with us. stay with us surveillance as we have plenty coming up including a snap election in greece and greens gaining in germany. we are live in athens and berlin. the euro not reacting much holding gains from the last couple of days. european equities on the front foot. the u.s. closed for holiday. this is bloomberg. ♪

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nejra: europe's radical party inls to cause an upset european elections. theresa may's party stays in power. and the world's third carmaker has shares surging. s ceo stands in the face of u.s. sanctions. >> i will not negotiate with trump. with whom shall he negotiate? i may not answer. terms of cash equity trading, europe is certainly trading. let's get to stock movers with sebastian. >> that the corporate story of the day, knocking and looking for a merger. and what a giant it could be. the world's third biggest carmaker if this deal does come apart. applying a premium of 10% for the big mover. it looks like it is more than priced in, rising 13%, the most

-- rising 13%. that's the most in over a decade. the average is 86.60 that comes on the backdrop of trade concerns as well play into country which supplies to a lot of asian chipmakers. be new.'t expect it to even more painful, it's just how profitable this contract is. 5.4%, the most since december. stocksstaying in europe, are climbing in the country's tenure yield is falling to a record low after prime minister elect calls for a snap election following a crushing defeat in

the european elections. in germany, chancellor angela merkel emerged as a clear winner with 29% of the vote. the social democrats suffered a large drop in support. now is our reporter in athens and matt miller in berlin. let's kick it off with you. what are the implications of the snap elections? >> the market that gives the thumbs up to the outcome theerday, they are seen as progrowth party. the company needs to go ahead with reform. people we spoke to last week, as to coming back and investing,

this is what we're seeing this morning. most in nearly three years. so basically we have the most market friendly outcome that investors can hope for. what do the losses for merkel's junior coalition partner mean for the coalition? matt: huge losses for sure. they fell from 27% in the last elections to just 15% in the selection. wereost of those losses taken by the green. spurred really by student rallies that have been going on here every friday for months. , according to some commentators, that you may see a cdu csu green coalition.

will be speaking in berlin in just a couple of hours now. so it will see what she says and how much longer she stays in that position. it is likely the party won't be happy. nejra: that is our reporter in athens and matt miller in berlin. thank you both so much. let's keep it on europe. brussels, them populist threat has been stymied somewhat. what do you make of the latest developments from greece? that indeed, as stated, probably good news for the markets. and clearly a bit of a departure from the height of the populism

in greece. definitely if we can have a government that looks at more pro-european and pro-economic reforms for greece, i think that should be welcomed by the financial markets. nejra: you taken me right to my next question. let me ask you, what do these results from the european elections say to you about the prospect for economic reform in europe? >> think that we have good results from yesterday. the most important is that the populist have been contained. this is important to avoid a polarization of the european parliament. what is interesting and quite unique is that we have more split of the vote. we need to have a grand coalition, grander than we've had up till now.

there are difficult times ahead in order to form the coalition. but this will be good for reforms. if they manage to get the agreement, they will be importing things from europe. overall, this is good news. mean for theoes it long-term issue of productivity growth in the eurozone? >> that is an important question. it is a development in europe and development -- and a development across the world. digitization of the economy. we have the threat of war that is unique in the last 20 to 25 years. all of these affect the growth. but they are also true for all the countries of the world. but seeing europe, in particular, we have stability in europe.

and indeed, if you look at the initiatives of the european , these are all pro-productivity. we need to attack the challenges as they come in the next five years. how important a piece of the puzzle's fiscal reform? and what are the prospects for it? meager in they are terms of european collaboration on that score. course, a battle horse. something that everybody puts forward as a weakness of the european monetary union. hard to disagree with in the absolute. 70 years ifu.s. we're are counting the dollar from the end the civil war until the post great depression era

when the fiscal transfers were finally approved in the u.s.. yearsk the americans 70 to get fiscal transfers and the euro is only 20 years into existence. we live in hope. nejra: it gives us size and scope. you mentioned industrial policy earlier. should europe approach industrial policy in order to boost productivity? >> these are early days. but the competition policy is one of the big prides of eu politicians. they have been the correct decision. it implies that we need to do something different elsewhere. and there is a lot of discussion about how to address this. can we do this at the europe isnal level?

fighting on those to try to maintain open trade. to maintain a good multilateral system that provides space for all countries big and small. we will see what the new commission will look like. beyond that, we need to see. the u.s. does not invest as much as it should. to invest more and we need to innovate more. the next commission i hope was the emphasis on this point to bettergenerate industrial production in the future. that these are early days. -- but these are early days. coming, our you for

guest stays with us. i standsof huawe defiant in the face of u.s. sanctions that threaten its survival. coming up next. this is bloomberg. ♪

nejra: this is bloomberg surveillance. the founder and ceo of huawei has struck a defiant tone in the face of u.s. sanctions in an exclusive interview with lumber television. he conceded the trump administration's actions will hurt. prepared to keep their edge and smart and five ge without american suppliers. 5g withoutphones and

american suppliers. the u.s. is not the international police. they can't manage the whole world. the rest of the world should decide if they want to work with us based on their interests and positions. if some companies don't want to work with us, it's like a hole in the airplane. we are working to fix the hole, but the airplane is willing to fly. half are from u.s. companies and half we produce ourselves. and posing for the restrictions on us. if american companies have permission from washington to sell to us, we will continue to buy from them.

>> what exactly have you put in place in terms of contingencies? >> we might have contingency plans for the core of the airplane, the engine, and fuel tank. but we may not have a plan for the wings. we need to review the situation all over again and fix those problems. come back to interview two or three years to see if you still exist. or three years, please remember to bring a flower and put it on our graves. >> how much damage to you expect to be felt in the consumer vision of the business? smartphones and laptops that depend on u.s. chips and software. >> we might miss are expected growth target, but we are still growing. eating able to grow in the toughest battle environment just reflects how great we are.

in theg able to grow toughest battle environment just reflects how great we are. >> you talk about a two-year lead on 5g with your competitors. is that lead eroded? >> definitely. if we slow down, the wing of the airplane has lots of holes. others can fly faster in catch up with us. but we will fly fast again once the holes are fixed. nejra: that was the founder and speaking toi bloomberg's tom mackenzie. after a weekend of gold and sumo wrestling, president trump says he and japan are on the verge of making a trade pact. but when it comes to china, he's not ready to do a deal just yet. president trump: they probably wish they had made the deal that they had on the table before they try to renegotiate it. -- tried to renegotiate it.

we are not ready to make a deal. and we are taking in tens of in tariffs.dollars sometime in the future, china and the united states will have a great trade deal. marie.still with us is we did get comments from the boj governor saying that a widening range of trade tariffs could hit the global economy by pushing up trade costs, subduing corporate activity, and prompting a resize of supply chains and tensions. effectiveness the of chinese stimulus measures. we were talking about that ourselves earlier. as we head toward the g20 meeting next month in japan, how hopeful are you that the tariff portion of trade wars will get resolved? actually, not very

optimistic on that score, i'm afraid. and i think it is a tremendously political issue. fundamentally so on the rather than the economic side from the president's point of view. it has been curtailed in the house of representatives. trade in foreign policy are the two areas where the president has a substantial room to maneuver. the battle forces of this administration from the duration of its time in the white house. some people say that the slowdown we are seeing globally is due to factors independent of trade and tariffs. how much risk is there to the global economy, downside risk from this latest escalation in

the trade war on the tariff front? right, so this is obviously hugely difficult to quantify. , if we have enough detail and information to be able to understand how demand and supply will shift with the price shifts that the tariffs induce. but what is difficult to know is how people will emotionally respond to this. in terms of global trade volumes, we have had three negative months out of the thecast published figures drops in trade volumes between november and february, that is extremely perturbing in my book. and even should we get a tensions,in trade unless we think that this comes to an end, the volatility and

the policy, the tweets that go hot and cold, i think it is something that will dampen people's confidence in how to invest in the future. investors and investors in the real economy. nejra: on the question of huawei as well and the global tech war, do investors fully understand the implication of a global tech war and the impact that that might or might not --e on global growth in a co global growth? all struggling to understand. the numbers are sometimes hard to assert. at the best of times, it is difficult. in this new tech economy, it is even more difficult to know if we're measuring than accurately or not.

the premise that somehow we need to address bilateral trade balances for the good of the economy, i think it is an area where it economists have the same vision that this is not the way to do it. if mr. trump and the u.s. administration wants to affect the trade deficit, they need to have u.s. consumers consume less . they can do that by increasing taxes on u.s. consumers. instead, they have done the complete opposite. the aim will not be fulfilled. kuroda wouldor agree with you. it that it would help solve imbalances among economies. stays with us. up next, we talk about the u.k. conventional list of about british -- dimensional wisdom

about british politics. that discussion, next. this is bloomberg. ♪

nejra: economics, finance, and politics.

this is bloomberg surveillance. i'm nejra cehic in london. , theing of the elections party did well in those elections. so he is just speaking. one of the things he is saying is that he will try to renegotiate fiscal rules. let's turn to u.k. scoring the worst results in decades, voters instead opted for politicians with clear pro-or anti-eu messages. brexit party is set to take first place with over 30% of the vote. but the other big winners of the pro-european liberal democrats. this following theresa may announcing her resignation on friday that she will resign, does this increase the risk of a no deal brexit? or a second referendum for you?

of the options seem to be firmly on the table. of aefinitely the risks more outlying solution being the domineering one after these outcomes. it is, indeed, greater. nejra: in that case, do you expect the pound to remain range bound or is the downside risk greater from here? marie: again, i would argue a favorite indicator of mine, the current account of the fed, that the pound is already sort of a trend depreciating currency in terms of the and the tradete which is obviously in deficit for the u.k. as well for the u.s. , in my opinion, is down in any case. uncertainty --

the longer this uncertainty continues in the u.k., the more that they are fraught with negotiations. happensy step, whatever between now and when the u.k. does exit the eu, i think that definitely capping the evolution of any u.k. assets at this point in time. politics,pite all the i cannot shake you from the connection between the current account and currencies. great to have you with me today. marie owens thompson, chief economist from indo swiss wealth management. coming up in the next hour, we have more on the european elections and italy. we will speak to an italian economist. this is bloomberg. ♪

nejra: mainstream parties hold

their ground against an assault from populists in the european elections. but brexit wreaks more havoc on the uk's main players. auto's alliance, fiat chrysler proposes a merger with france's renault. it would make the world biggest carmaker. stands defianto in the face of u.s. sanctions. >> if trump calls me, i may not answer. with whom will he negotiate? cehic and forra francine lacqua and tom keene. we have u.k. equity markets closed for the bank holiday here. u.s. stock markets closed as well as cash trading. at the memorial day in the u.s. on theeeing a lot screen. this populist backlash was stymied somewhat. positivity in the equity markets. now,tly on the back foot

we drop below 112 after two days of gains. giving him the gains we saw on friday when theresa may announced that she would resign. that covering we hold above 127. but brexit risk very much at the for with nigel farage's brexit party doing particularly well. olivia in london. olivia: mainstream parties mostly hold their ground against the nationally supported. we saw the highest turnout in -- resident to macron's party is headed for defeat. the nationalist leak one -- league won 1/3 of the vote. the vote was for politicians with clear pro-or anti-brexit

images. , and theof the vote other big winners the pro-european liberal democrats coming in second. a government that tries to force a no deal brexit risks being brought down. colleagues are looking to take over as prime minister. he says the party strongly opposes leaving without a deal. greece is heading to a snap election after prime minister has a crushings defeat in eu elections. the mainmore than party. this likely postpones a clash with predecessors. 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. let's dig deeper into the election results. joining us from brussels is

bloomberg's maria and bloomberg's annmarie. europewide take away from these elections so far? maria: good morning. we did see political fragmentation that was always going to be the case. but the highlight is that the pro-european majority is still holding in the european parliament. the christian democrats won the election but lost seats. the balance of power was shifted when we did see gains from the liberals and the greens. when it comes to the populists, the concern is that we could see search and support that was not really the case. it seems to be more of an individual country story. the story now shifts to who gets what in terms of those big jobs

that will become available at the end of the month. european leaders will talk about that. we will -- nejra: we will come back to that in just a second. the populists causing exceptions, but also the u.k. with an exception to the rule. here is brexit with a big part of the story. brexit was the entire story. even that this vote happened come it happened because the u.k. had yet to figure out the brexit situation with the european union. they were never supposed to be in the selection. main party says brexit divide widens. this is for the take away from this story. the british main parties really lost their share of the voters here. go to these votes brexit party and the liberal democrats. both parties were very clear about where they stood on

brexit. and those are the ones that did the best. next big question is, what does this mean for who is going to succeed theresa may? it will likely galvanize a hard-line brexiteers like for who is already the favorite boris johnson. >> the u.k. tory party leadership, you have trump that will hammer and warning over a no deal brexit. what do we expect in terms of the approach from wanting a no deal brexit. you can expect that they will use this vote. the fact that they lost so much market share, these tory voters really went to the brexit party. conservatives came in fifth place. they're the one leading the government. use that as they

launch their bids to succeed prime minister theresa may. today.already seeing it the daily telegraph, it has a boris johnson written piece out. he is already outlining his case but you make a really good point. the fact that many of these candidates say that they will even october 31 without a deal, that is not going to go through parliament. if anyone is going to come forward with that deal, we will be risking a no-confidence vote because parliament has made clear they don't want to leave the eu without a deal. what are the implications of the results for the leadership roles and the ecb? this is the big story and brussels. the german candidate for the

christian democrats should take the lead to become commission president. it was not a good night for the center-right. it is difficult to see them get the majority needs to become commission president. it is not clear that he will. there is hype already billed -- built. just give in mind that emmanuel macron has said at the very least that the u.k. brexit negotiators should be a list of potential presidents. then once we get the name, it is up to the european. it will be a balance of power tween the french and the germans. is whoever gets the european commission will have to be counterbalanced by a perhapst nationality, the most hawkish voice by the european central bank. great work. thank you so much to both of you. joining us is head of equity strategy out of copenhagen.

political commentator, welcome to the show. thank you for joining. sigh of reliefa that the populist backlash has been successfully stymied? willthink a lot of people be doing just that across european capitals this morning. there is a big narrative that the populist revolt will show that people want a democracy closer to home. it is worse than four years ago. they have 25% of the parliament. four years ago, they had 33%. they have done worse. in the unitedty kingdom has done very well. angela merkel has the biggest party in the european parliament. the overall trend, the fear that many commentators and politicians have is proving this is allowed. it may not be as dramatic as

some people might be. nejra: we're seeing a lot of in the markets today. is this a short-term relief rally? >> i think it is a short-term relief rally. i think it is too early to say that we can turn to rising nationalism. it takes another economic recession within the next year potentialand another refugee crisis coming out of the middle east and africa. you can see a surge in the populist movement again because unusually high income inequality in the world. both in europe and in the u.s. nejra: are european equity markets price for political risk and the prospect of recession in -- of recession?

equity markets are priced for political risk, more so than the most complacent asset class out there. if you look at fx markets, the fixed income is rising in a higher probability of global recession. this is the complacency that we see in equities being down only 4% to 4.5% from the peak. it is not a major move given the confrontation between the u.s. and china. obviously a slowing down macroeconomy. decline since 2008, and i think there is a lot of complacency out there driven by a lot of negative yield. is rate difficult allocating that cap all at -- capital adequately. what are the implications

of fragmentation in the european political space for economic reform? >> the keyword that you mentioned is fragmentation. you see the entire political spectrum. it was a terrible night for the traditional center-right and centerleft parties. you have to look in the various groupings of parliament. the centerleft party, the liberals, and the greens are a pro-euiously on agenda. but will they be able to work like the contentious questions of the eurozone parliament? we will do a lot to throw a spanner in the works. particularly on things like the eurozone budget. fractured politics to represent the fractured parliament. we see much fragmentation european indices, peter? a preference for

specific countries within europe? face is thent economic slowdown and we have grown below trend. there is elevated risk of a global recession. it can take us into an upswing. typically what we see, a cyclical economy in europe underperforming. it is specifically european equities in general. this is because of the global economy. so in particular, it is france, germany, the netherlands, sweden , and to some extent, the united kingdom. those tend to be extremely cyclical in nature. they tend to underperform in this market. market,he nordic equity you can find more high quality.

you can also find quality and some other areas of the european market. you have to be less about countries and more about sectors at this point in time. we do think that you should be underweight european equity markets. thank you for staying with us for the hour, and we speak at the elections in malan. mandate isn result to oppose austerity, saying that loyalty to the government was never in question. and also saying he has a mandate to review the eu limits, presumably on the deficit. some are saying, of course he was to change angela merkel and macron. eu -- and macron's eu. andng up, conservatives labor scoring their worst result in decades. we discuss the future of u.k. leadership, next. this is bloomberg.

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>> i believe i am the candidate that can bring the optimism and change that this country needs moving forward. the deal in brussels, we negotiated a change of backstop arrangements. and we will leave on terms in october. that was formed the brexit secretary dominic rap turning his name into the leadership bring. he spoke to bbc marshall on sunday. a political commentator and head are with us.

is boris johnson the clear favorite? >> he is the clear favorite now, but if you look at history and the tory leadership race, the clear favorite does not always win. let's not forget that the conservative party is brutal when it comes to choosing a new leader. there are many people that don't want boris to become the pm -- the pm. when the new leader is anointed, it might not will be boris. were saying you that cyclical equity markets, the u.k. be in one of them, they tend to underperform at this point in the cycle. is it time to buy equities based on valuation versus u.k. gilt? >> you have to be extremely careful using the valuation argument because this part of the cycle, the value stocks are the ones are the -- are the ones that tend to underperform significantly. should wait and be on the

sidelines. i think the you should go for a rough time for the u.k. economy as a whole. the u.k. economy is quite fragile. shock could come from the no deal. and there is a crackdown and the eu against offshore capital flows which is ray much benefiting from a more broader scene. conflictiven by this the 20 u.s. and china. countries like the u.k. and germany, they are one of the casualties in that rollback of globalization or reconfiguration of globalization. nejra: what is more likely for the u.k.? no deal or second referendum? >> those are the options. what we have seen with the rejection of theresa may deal that she negotiated over two compromiseat the options do not seem viable.

the country has polarized. it will end up in a revoke or a no deal brexit. the government will probably collapse if it goes to no deal brexit so there is a lot of political turmoil coming in the next few months. nejra: coming up in the next hour, a dutch member of parliament, and a green candidate to become the next european commission president talks about the rising support for the greens. that is coming up. this is bloomberg. ♪

nejra: here in the u.k., both conservatives and labor scoring their first -- worst results in decades. opted for politicians with clear pro-or anti-eu messages. joining us is richard bergin, member of parliament representing the labour party. great to have you with us on the show. thank you for joining us this morning. do the elections so far tell us that voters need a clear stance on labor on brexit? >> i think that was always going to be the case that the european union elections, people would be parties that say yes, let's remain in the european union, or let's lead on the basis of hard brexit or no deal brexit. it became a bit of a proxy

referendum albeit at a much than a general election or referendum. to backoes labor need the people's vote? >> we have to understand the increased likelihood and threat of a disastrous no deal breath bounce theould living standard. like borisng people johnson, people like to be the prime minister of this country, very shortly. so labor is clear that we need a general election or a public vote to stop and no deal brexit. the votees to it, then will be necessary to stop a no deal brexit or a disastrous and pushback by people like boris johnson. and we will, of course, support that. nejra: are you concerned that nigel farage's exit party will eat into the labor vote at the

next general election? >> i am concerned and disappointed in the results. last night, the conservatives had their worst in many years. and we're back to where we were in 2009. extrapolate the eu general election. in the 2014 european election, up.l farage's party came but a year after the general toction, the u.k. elected work on the general election. they are pushing a new deal brexit and they have done so well. that it does not necessarily reflect in the next general election. and 20 seconds, is brexit an existential threat to labor?

brexit is a no deal an existential threat to jobs and coming to the economy. this poses an existential threat to all political parties. i believe that the next general election, the election that we had in the general opinion polls, the general election could come sooner rather than later. labor can win the general election on the basis of transformation. nejra: richard bergin, member of parliament representing the labour party. thank you so much for joining us. this is bloomberg. ♪ the latest innovation from xfinity

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it's a now there's one store that connects your life like never before store. the xfinity store is here. and it's simple, easy, awesome. nejra: this is bloomberg surveillance. i'm in for friends between dr. francine lacqua and tom keene.

in for francine lacqua and tom keene. >> the political order in brexit is -- in britain is turned on its head, the labour party and the upper -- according to provisional results, the brexit party is set to get 30% of the pro-liberalhe european democrats coming in second. but the mainstream parties mostly held their ground against national forces, the big winners were the green e.u. liberals. president micron's party is heading for defeat -- president macron's party is heading for defeat. greece is heading to a snap election after there was a crushing defeat in the e.u. election. democracy,ion, new scored 10 percentage points more. the vote could come as early as june 30. and in austria, the chancellors

under pressure, he faces a motion of no-confidence and has support from his former coalition partner. is ahead of snap parliamentary elections plan. global news, 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists in more than 120 countries. i'm olivia hows, this is bloomberg. nejra: thank you. joining us is patrick donahue rome, andn, john from carlene from paris. it's great to have you with us. patrick,k off with what's the take away from the results we got overnight? total key takeaway is the devastation of the social democrats, that's the jr. party with angela merkel's grand coalition. they lost more than 10% from five years ago, and they are

picking up the pieces this morning. the next thing to look out for is any sort of revolts in the party base among those who never wanted to be in the coalition with merkel. it looks like nothing will happen immediately, but it's going to play out for the rest of the year. nejra: yes, there's lots to play for. john, let me turn to you in rome. did well, whatty party did-- salvini's well, what are the implications? moment, he is playing it soft and sober. he just gave a news conference and he's laying out his priorities. as expected, one is going to be the tax cuts. he wants a flat tax, he promised a 15% rate, which is going to likely cause a new conflict and will scare invective --

investors and cause conflict with the investors in brussels. not changing the government contract, but he is going to call the shots from now on, especially as he has roughly twice as many votes as his ally in the coalition. france is the two exceptions -- one of the two populists to the backlash being stymied. let me ask you about france and le pen being set for a second straight win in the european election. how much of a setback is this? setback for him at home and europe, we were expecting a much worse result, and the margin is actually smaller than some had feared in macron's camp. but it will undermine his ability to carry on with the jobless benefits reform, which

includes the yellow vests movement which has been paralyzing france every saturday for the past six months. and of course, it will make it harder for emmanuel macron to be the champion of deeper integration. ago he arrived at the louvre, celebrating his victory and he sang the ode to joy. nejra: thank you. berlin, john and rome, and carlene in paris. and still with us is our gaffe -- are our guests. nina, let me ask you about france and the setback from micron. how much of a setback is this for the question of european integration? hasuropean contention always been contentious,

regardless of what's happened in this election, that's largely to do with germany and france's position as to whether this should be a euro zone or a transfer union. micron -- defeat for macron, but he had made a personal battle, but compared to le pen's performance five years ago she would have been disappointed by the results yesterday. she did were since she was and five years ago they said they were going to storm the european parliament and destroy from within. what has happened is that they have actually temperature it -- tempered their message. they no longer want to leave the euro or the european union. of destroyge instead the european union re--- from within is to reform. so it's a blow for micron, but not as bad as it could've been. nejra: peter, were talking about

a relief rally in european equities with the euro very -- barely budging. reaction? muted because a more important things in this world than the e.u. elections. and that's the trajectory of the global economy and of the u.s.-china relationship. in the the elections e.u. and the elections we will have in denmark has us all talking about national things when what's really mattering is what's happening outside of europe, and that's really dictating the direction for europe, it's an export driven continent and we are relying on a strong asia and u.s. economy to bolster our domestic economy. interesting thing that happened in the parliamentary elections, which will have an influence on companies going forward is

looking how young people below 30 voting in favor of the green parties. i think we are looking at the beginning of a two to three issue.long trade and this will be moving away from immigration. you, bother, thank are staying with us. and coming up, we will talk trade, and also always billionaire founder tells us billionaireuawei's founder tells us he will fight to maintain his edge. this is bloomberg. ♪

nejra: this is bloomberg: surveillance. i am in for francine lacqua and

tom keene. the founder and ceo of huawei has struck a defiant tone in the face of sanctions. in an interview he conceded the trump administration's action will hurt but they are prepared to keep their edge, even without american suppliers. the u.s. manages its own companies, but it is not the international police. they can't manage the whole world. the rest of the world decides that they should work with us, based on their own interests and positions. if some companies do not want to work with us, it's like a hole in the airplane. we will work to fix the hole but the airplane is still able to fly. been using, we have half are from u.s. companies and half we produce ourselves.

if the u.s. imposes further restrictions on us, we will reduce our purchases from the u.s. and use more of our own ships. -- chips.ps if american companies have permission from washington to sell to us we will continue to buy from them. what exactly have you put in place in terms of committee -- contingencies? >> we might have contingency plans for the core of the airplane, the engine and fuel tank, but maybe not for the wings. we need to review the situation again and fix those problems. you can come back to interview us into our three years to see if we still exist. if we are gone, please remmert to bring a flower and put on our grave. extent of damage, how

much to expect to feel in consumer business? smart phones and laptops which depend on u.s. chips and u.s. software? we might miss our expected target, but we are still growing. being able to grow in the toughest battle environment reflects how great we are. you talked about having a two ,ear lead on your competitors does it get eroded? downfinitely, if we slow because the wing of the airplane has lots of holes. if we fly slowly but others fly fast of course they can catch us up but we will keep fixing the holes and we will fly fast again once the holes are fixed. the founder and ceo of huawei speaking to tom mackenzie. you can catch more of our exclusive interview this saturday in huawei: connected

uncontested. still with us is nina and peter, peter, you have been recommending that investors stay underweight in semiconductors and the tax base. is there any opportunity to be found within the semiconductor space in certain regions or's urban -- or certain companies? semiconductors across different geographies, there is a slight outperformance for chinese, taiwanese, and japanese semiconductors, and some extent to south korea. but in the u.s. and the european union, not good. has,view this as the u.s. with their complex with china, it's not a trade war, it's a cold war within technology and that means a lot of global supply chains will have to be they haveed, because

affected the trajectory of the political situation and to not be dependent upon the other country you have to maintain his global supply chains. veryonductors sit at the core of technologies for the 21st century. and it's likely that there will be a lot of reshuffling and it will cause issues because you need semiconductor manufacturing plants outside of china. so we think you should stay underweight in semiconductors. this is not over. nejra: in the whole discourse around trade wars, do we overstate the impact of a tariff war and understate the impact of a tech war? >> absolutely. and i think this is going to be the defining issue of our time, which is why the story between huawei and what's happening in and whatd states

happens with the united kingdom is fascinating, going forward these of the assets that will matter, who will have the power? who will have the data? that's who you keep your eye on. us,a: thank you for joining nina joined us from london, and peter is staying with us. up next we have some headlines between fiat and renault saying there will be further munication with a board meeting happening today. looking the board is with interest at the opportunity with fiat chrysler, they say they will study the merger offer and you can see the reaction in fiathares, it's higher in chrysler and renault shares in today's session. more on that up next, this is bloomberg. ♪

fiat chrysler says it is

proposing a transformative merger with right now. it would create the world's first largest car maker. renault just responded, saying there was study the proposal with interest in the opportunity. you can see the share price reaction. lee -- is now is dan dan, thank you for joining us. there have been a few numbers coming out from fiat chrysler and renault, update us on what we have so far. >> the latest munication is from the border for now -- of renault -- the board of renault, saying that they will look at the date. fiat saying they want to merger of equals, this would create the world's number three automaker, coming in at a time when car shape. are not in great

it's at bit of a surprise -- it is a bit of a surprise that it came so quickly from fiat standpoint. standpoint, but it's no secret they've been looking to do a deal for some time. the fiat chrysler ceo also commented this morning, in a letter to employees saying that the merger could take more than a year. talk us through what we know about what the merger could look like in terms of the distribution and facilities? about 5 billion it's a complexy, equation with the few details that given. they will set up a new parent company that will hold the stake in the two carmakers. the longtime owners that fiat would have the largest single

stake in that new combined entity based out of the netherlands. nissan,has ties with and the ceo of fiat said without expanding very much that the synergies he hoped would be extended to that partner. but we just don't know exactly what he might have in mind. nejra: and just a couple of headlines coming through, the renault board considering the fiat chrysler proposal to be friendly. of course one of the upsides, if this goes through successfully are the synergies we talked about, but would a merger like this actually do much about the issue of declining sales? car sales globally? >> one of the things they emphasized in the statement was

that obviously fiat chrysler is strong in the u.s. markets and this would be an advantage for the french side. reynaud is much stronger in russia for example, and that could be a bonus to fiat. event -- essentially putting together two nascar producers. tworeaction so far from -- mass corporate issues. both she -- car producers. both shares have surged this morning. nejra: thank you, peter is still inh us, we are seeing a bump the shares of fiat chrysler and renault, would you recommend investors by carmakers at this point in the cycle? our clientscommend to underweight carmakers. we have seen a sharp decline in auto sales in china, the worst

in 40 years. local sales are down as well in europe and north america as well. i think the car industry is facing a headwind with margins, investmentales, and interest moving away from internal combustion engines to electric vehicles. which are not as comfortable. and i think they are overstating the synergies. it might be the case for these two companies to merge on a company level, but if i were to look at this from a systemic perspective we have too much industry concentration in general across a lot of industries, not just in the u.s. but in europe. this makes the economy more fragile as we allow these major corporations to merge. i think from a systemic perspective it's not a good deal for the two companies it might make sense. but we still under way to the car industry.

--underweight the car industry. nejra: and it's an industry that's vulnerable about head -- to headlines about trade. to come back to that conversation, how would you actually play the trade war to the downside? are carmakers a part of that or is it a broader picture? >> i think some of the best ways haveay the trade war -- we something we call the trade war baskets, which is essentially long u.s. equities in places that have a trade surplus against the u.s.. if you look across the past 100 years, u.s. equities in this past can -- this basket have outperformed. you can avoid exposure by being underweight. koreane and south

acquisitions are at a much better weight. exposure for china given itsl solution, a much more managed financial market and what you get in indirect markets to china. nejra: that's how you would trade downside risk with trade, but what about volatility trade? how would you expect investors to play those? as i've said in the beginning of this interview, the --placency in in equities is the complacency in equities is extraordinary. this is typically a recipe for disaster. this to be popular and their equities staff it in the s&p 500 from 2009. and that combination with what we see in combination with computerized trading sets the market up for more -- more

frequent sharp declines. this is something that worries us, the market is becoming extremely binary, so to speak. but if you wanted to play volatility at this point in the cycle, if we get a policy panic i think there are some options across the asset class -- classes. but i think equities is the best way to play a rise in volatilities. nejra: it's good to have you with us this hour. thank you. coming up, the dutch member of parliament and the green candidate becoming the next european president. a lot more to come. this is bloomberg. ♪

nejra: mainstream parties hold their ground against an assault

from populist and the european elections, but brexit wreaks havoc on the main players in the u.k.. fiat chrysler proposes a merger with renault, it would create the world's third biggest carmaker. way --le way -- while huawei's founder stands defined. >> i will ignore trump. if he calls me i may not answer. nejra: this is bloomberg surveillance. straight to the markets, we have seen european equities on the front, we are three hours into the trading stocks in europe, u.k. have closed, happy memorial day. there's a lot of green on the screen when it comes to the european equities, perhaps a relief rally following the election. carmakers are front and enter leading those gains. s&p futures are in the green and

up 10%. they are heading for -- global equities are heading for their first monthly loss. and the poundeady is on the front front but it's giving up some -- front foot, but it's giving up some of its gains. olivia hows in london. >> mainstream parties mostly held their ground against nationalist forces, but it's the highest turnout in two decades. pro e.u. liberals and the greens made danes, with exceptions in france and italy. heading forty is defeat against le pen's party. in the u.k., conservative and labor scored their risk -- their worst results in decades. voters were looking for pro or anti-e.u. messages, and the brexit party is set to take the first chair with 30% of the vote

but other big winners include the pro-liberal european democrats coming second. a movement trying to force a no beal -- no deal brexit has been brought down. he says parliament strongly opposes leaving without a deal. but he did not rule out the possibility that he could vote against the government on such a confidence motion. election -- in the greek election, the opposition parties scored more than 10% of points than the parliament some party. global news, 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists in more than 120 countries. , this isa hows bloomberg. nejra: thank you. of course, we had the meeting between president trump of the u.s. and the japanese prime .inister, shinzo abe

you can see them greeting each other as president trump gets to the motorcade. very warm words with president trump still eyeing august for a u.s.-japan deal on trade. let's turn back to europe, joining us from brussels is maria, from westminster is anne-marie. maria, let me start with you, what was the key takeaway europewide from these election results? >> good morning. more politicalt fragmentation in the european parliament elections but the key takeaway is the pro-european majority is still holding, the christian democrats of angela merkel won the election but lost these, the social democrats had a bad night in germany, but that was almost balanced by a surge of liberal democrats and greens, which are now the kingmakers in the parliament. this really explains the market did see some

containment and those populist and nationalist groups, we could see this is not really fully materialized, we take away yes political fragmentation, but the pro-european majority is holding the line. and anne-marie outside westminster, for the u.k. it was about brexit. wholet's right, and this process is just a reminder that they have failed to reach an agreement and get brexit done, which is why they had to be a part of these european union elections. just a little color of what the local press is saying, as tory leadership takes off, a loud and clear air a, give us the brexit we voted for. this comes down to the big take away, labor and conservatives lost market share when it came to the vote. party,went to the brexit they went to the liberal democrats, both parties had

clear and unambiguous messages to their voters, we want to leave even if there is no deal, or we want to remain. this is setting up to be a tense succession for prime minister theresa may's spot. this will galvanize brexiteers like boris johnson. topic,and on the no deal the chancellor has been warning hopefuls over a no deal brexit. how can we expect that discussion to evolve? interesting, he spoke saying doesn't matter who gets into number 10, if it's a hardliner brexiteer? when they go to parliament with a no deal brexit, he said there will be risks of a no consonant -- confident vote -- no-confidence vote. this will be an interesting next

few months. there are many who want to go back and negotiate things with the european union, like the irish backstop, they are saying they could but they are leaving on the table that they will leave without a deal. but fillon -- but philip hammond says that parliament will not support that. nejra: and what are the implications of these election results for the leadership of the e.u. connection -- commission and even the ecb? >> big implications, this is where european leaders -- what european leaders will talk about in brussels, the fallout of the election. the christian democrats in germany should take the lead, but given that result from yesterday, it's no plate -- by no means clear that he can lead the european commission and emmanuel macron suffered a defeat but he does not think this should, in any way, tame

his ambitions. we are hearing that he will meet with the spanish prime minister today, perhaps seeking support for a new candidate. he said at the last week that for brexit should be included in the list. and the commission has victim locations for the central european bank. european --nother southern european name at the commission the ideas you should have a more hawkish voice. nejra: thank you to maria and annamarie in westminster. ,oining us is stefan schneider tom.om keene burke -- with you,et me start what are the results we have seen so far, what do they tell you about the prospects of economic reform and the euro zone? >> i think one has to become

even more downbeat on that point. not seeorehand, we did any sort of pro-market forces, it was more managing the status quo. now with a strong focus on more environmental friendly policy, being shown by the strong wind of the green, i think it's unlikely that we will see reforms. not seeing ae are lot of reaction in fixed income markets or in the euro. the 10 year deal is ticking down. are there any implications from these results and the political future of europe for the credit space? >> i suppose essentially the two big takeaways, first we have italy, a big anti-establishment win for the u.k.. they could potentially be

looking at the elections. in the credit side, we see the premium increase over the last six to seven weeks. a premierly have around 20 basis points and they can go to 60 basis points. and in italy as well, the situation will take many years to reform. there's populism over there and there could be some real spikes in the credit markets. today we have not seen a big selloff, we see u.k. banks consistently outperform along with italian banks. can we sayn, political risk is behind us after these european elections? >> now, not really. the elections in europe were just one ella political rest, the other is brexit which has taken a turn for the worse. ,nd the trade tensions uncertainty has increased, but even if we look at the et

say that, one can there is not a rise in populist parties, but we have a fragmented party and it's not clear who will be the next commission president. i think on the institutional side, we are at a longer period least, and this could well be the takeover the new commission, which is penciled in for the first of november. it has to be delayed, because no new commission has been agreed on. nejra: i know there is a lot of nuance in this debate but i keep hearing the word fragmentation. do you draw any implications for the banking sector of the fragmentation of the political landscape in europe as a result

of these elections? itself istation by not the end of the world, as long as europe continues to stay away from recession, even with low growth and inflation it's conducive for credit, which has done well this year, predominantly because counter assets have returned at below zero. we have the sovereign market up to five years apart with greece and italy offering positive hasrns, and a lot of money come into credit. as long as we can keep this scenario where there is low growth and a little bit of inflation but no recession, then credit markets can perform. the problem we have is that there's a lot of black clouds on the horizon with no real solutions. we have the trade war discussion with the u.s. and china, possibly in the e.u., italy's looking for a solution, the u.k. is up in the air. the fragmentation of the system whichlarge-scale changes,

is generally negative for credit. because we will not have huge changes in political agendas that should not be too bad. but in the long-term it impacts growth and recession scenarios which are priced in and credit underperforms. us, these areth great thoughts so far. we have some headlines coming through, the u.k. opposition leader, jeremy corbyn speaking on the bbc, saying there has to be a brexit deal and a public vote. this is an important line because after the defeat of labor in the result in the european elections, there has been calls for it to come out and give a craters -- clear stance on brexit. the key line saying that there has to be a brexit vote, and then -- a brexit deal, and than a public vote. coming up, a snap election in

greece and green gains in germany. we speak to a dutch member of parliament and the green cabinet to become the next european commission president. this is bloomberg. ♪

we are facing a shrinking center of pro--- of parliament. the center of the two parties who believe in the future of europe, who want to have an ambitious approach for the future is what we are facing,

shrinking center. >> that's the european people's party chairman and candidate for commission president, this comes as alternatives are benefiting from record voter turnout in the e.u. parliamentary elections. maria, liveow is from brussels, who was joined by a guest. -- two is joined by a guest. take it away. of the big winners of the night was the green party. were you surprised? >> it was more than we expected. you hope you can beat the polls, but that we did strongly was a great result. >> at this point it has become clear that you will be kingmaker in the new parliament, my can one is simple, candidate become the -- >> we have not really able to

form a majority and have a progressive message. we've been clear from the start, we are willing to negotiate, but we are only going to negotiate for our program. we want green policies, social policies, more democracy, anyone who can deliver that then we can speak with. but until now it has not been that big. you're not very optimistic on that. what if you set i will look at that agenda, what does a compromise look like to you? is there budgetary climate change? important it will be to negotiate on behalf of our programs. we want change, a different europe, we want to resolve climate action and we really want to fight for social justice. these topics will be at the table, and then we can negotiate.

we will not negotiate with the far right, but we will negotiate with anyone could deliver on our program. and on the basis of that, we can see we can have a progressive majority. >> we hear from someone who says maybe i can lead this, do you think she would be a good commission president? see, this could be of ask andt months, people and this isr change what we are hoping to deliver. looking at support from other prime ministers, to see whether or not if there is is thist of election --

possible in your eyes, given that he did not run in the election? it's very clear that the different political parties have put their candidate up, i think on the basis of that, this is due to negotiation. to go backdon't want -- the greens do not want to go back to the day where the heads of state go into a room and come up with a candidate, that's not democracy. and emmanuel macron is backing an old system which will meet a lot of resistance within the parliament. >> how worried are you, nationalism was contained to some extent, but how much trouble do you think they can create? >> the total numbers go up slightly, i think what we will see is that they will be fragmented into three political groups. complaining about the current direction of europe. the populace you only

hear complaints and then they say they don't want europe. that's not the solution. and that's not what the voters ask for. i think that the populace will be big in the parliament but it ill be a fragmented know -- no fraction and i think that we can build a more progressive than future oriented majority. was bas, and as you have heard, he is still not made up his mind as to who should become commissioner president. it will depend on whether they get this concessions they want on climate change. nejra: and that will be a big question for europe this week in russell's. let's take a look at the -- in brussels. let's take a look at the pound, we are below 127. we have heard from jeremy corbyn saying that any final brexit deal has to be put to a public vote. he commented and interviews

following labor coming third place in the results so far, behind the brexit party and the list and. this is bloomberg. ♪

nejra: let's get a view of the state dinner between president trump and shinzo abe in japan, just getting ready to sit down for dinner they are following their meeting a news conference earlier. still with us is stephan schneider and tom. we heard friendly words from both of the leaders, and

president trump eyeing august freight u.s.-japan deal on trade. how crucial is a trade deal for global growth? >> i think it's more of a side issue. the conflict with china is on a much bigger scale. and we have seen in the past, there has always been an agreement between japan and the u.s.. the are allies and situation is completely different if you look at the u.s.-china complex. -- conflict. i think that is where the heat is on. nejra: tom, would you be a purchaser of a japanese -- of japanese bank from a credit perspective? >> it's tough, japan is the --itted me -- is the pit ami itome of lower for longer.

we are looking at strong and stable banks, quite extensive on the euro side. nejra: thank you. our guests are staying with us. and coming up, while way -- foundery -- huawei's stands defiant. this is bloomberg. ♪

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♪ ♪ every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. take your business beyond. ♪ nejra: this is "bloomberg surveillance. " i am nejra cehic in london, infra from the in lacqua. let's get the. first word news with olivia

howe. >> the u.s. isn't ready for a deal with china, according to president trump, who made the comments in tokyo. he said tariffs on chinese goods could go up very, very substantially and very easily. >> they probably wish they made the deal that they had on the table, before they try to renegotiate. they would like to make a deal. we are now ready to make a deal. >> china has advised traders against shorting the yuan, after a slide to the critical level of seven cents dollar. they say bets against the currency will suffer from a huge loss. these comments come as bearish sentiment against a value on has ratcheted up in recent weeks. bitcoin has hit the highest level in the year. crypto proponents have taken encouragement from a string of headlines showing greater interest from mainstream firms. bitcoins fantastic ride follows

a 2018 it was distasteful. the currency had tumbled more than 70%. warren buffett has race close to $30 million for a san francisco opened,, bidding on ebay for a chance to pick the billionaires bring over lunch. it raised nearly $3.5 million, to beat the record set by an anonymous editors that in 2012. global news, 24 hours a day, on air and at tic-toc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i am olivia howe. this is bloomberg. nejra: olivia, thank you so much. the founder and ceo of how a struck a defiant tone in the face of u.s. actions. in an exclusive interview, he considered that the actions of the united states will hurt. but he is committed to going ahead even without american suppliers. translator: the u.s. manages its

own companies. it is not the international police they can't manage the whole world. the rest of the world. decides whether to work with us best on the own business interests and positions. translator: if some companies don't want to work with us, it is like a hole in the airplane. we work to fix the whole, by the airplane is still able to fly. nationalwill mischief we have been using, half are from u.s. companies and have we produce ourselves. if the u.s. imposes for the restrictions on us, we will reduce our purchases from the u.s. and use more of our own chips. translator: if american companies have permission from washington to sell to us, we will continue to buy from them.

? what exactly have you put in place in terms of contingency?? >> we might have continued their plans for the core of the airplane, the engine, and the fuel tank but we might not have a plan for the wings. we need to review the situation and fix those problems. come back to interview us into a three years to see if for still exist. if we have gone in two or three years, is remember to bring a flower and put it on our .rave >> how much damage you expect to be felt in the consumer division of the business, smartphones, which depend on u.s. chips and u.s. software? >> we might be summer expected growth target, but we are still growing. being about a grow in the toughest battle environment reflects how great we are. tom: you don't about having a

two-year lead in terms of 5g on your competitors, does that lead get eroded? >> definitely. if we slow down, it is because the wing of the airplane has a whole. if we slide. fly slowly and others fly fast of course, they can catch us up, . but we will fly faster then, once all the holes are fixed. nejra: that was the founder in ceo of come begin sibley to bloomberg's tom mackenzie. even catch more -- speaking exclusively to bloomberg's tom mackenzie. let's talk more on trade and president trump's visit to japan. still with us are stefan schneider of deutsche bank and our guest from abn amro. -- him him him stephan, them he ask you, what is more of a risk for the global

economy, it tariff war or a tech war? stephan: i think you can't really separate the two, you can see the strength has already started to push the tariff war into a tech war. i think ultimately, in my view, the ultimate aim of trump is not 2% or three percentage points of the u.s. current account deficit, it is more about the long-term technologic leadership worldwide. i think that is highlighted by this recent shift. interview, it the is a double-edged sword. on the one hand, there is some dependency in china for u.s. but u.s. restrictions cause a greater need in china to develop on their own. so this causes the

disintegration of global trade, and that hampers growth overall. nejra: tom, would you be anyways to trade the trade war in fixed-income? tom: i suppose they generally dominates sentiment. everything have seen with the discussions in the u.s. has been negative for credit. a lot of bad things have been priced in the last few weeks, but there are a lot of clouds in the horizon. as long as these discussions stay elevated, especially with china. the worry is that it comes across to the e.u.. spreads could widen even further. so there isn't much outside risk, it is more of a downside risk on the trade discussions. . nejra: on the yuan, we had the insuranceing and regulators warning traders of a huge loss if they short the yuan. how preoccupied are they in china with the yuan stability?

stephan: i think stability is the main motivation. i don't think china will ultimately have a problem with the slight devaluation of the yuan, especially if it compensates the cost of higher tariffs, but it has to happen in an orderly fashion. i think that is where china is concerned about, and that is why china is sending such a strong message. nejra: tom, another question we have been debating over and over with our guests is what the outlook for stimulus is in china whether it will be as effective as previous rounds if we get more stimulus from china what focus of opportunity would you see in credit either in china or elsewhere in the asian market? tom: china is dominant for e.u. growth, it is a huge portion. i suppose the worry is that markets have been very dovish recently, whether it is the federal the ecb, and a lot of people have moved to go long

dated. lots of people jumping on 20-year paper, 30-year paper from italy, changing sentiment from last year. so if we have a stimulus program could, get an upside surprising growth in europe which would then negatively impact all the people who have began to price in the longer scenario. if you buy 20-year or 30-year paper, it only takes an upside surprise to have significant losses. nejra: interesting. stay with us. my guests will stay with us. populist teams fall short, but eurosceptics make strides in italy and france. we speak to carlo cottarelli from milan. this is bloomberg. ♪

♪ mary: this is bloomberg surveillance." i am nejra cehic in for francine lacqua and tom keene. joining us from athens is bloomberg's call to have you with us. you have seen the 10 year yield increase. low. record why our markets reacted like this? tom: basically because whilst false shown a few -- whilst poolls had shown that he was set to losels the election, we didn't expect the loss to be as big as it was. by 10 percentage point difference with t on democracyt

was reduced and reduce gradually to around 2% in five percentage points. the loss was bigger than expected and markets feel that it will be hard for him to make up the loss in the international elections. leader for the democracy party looks like it will be the next prime minister. nejra: tell us a bit of work to actually expect out of the snap election. you hinted at some of the outcomes there. datewe don't know yet, the that the election will take place. cipras said he will ask the president about the elections next sunday, which is the second round of voting in regional elections which are going on in greece. a majory also had threshing commotion is another

reason why he decided to go for snap elections. we can expect investors to come more,nto greece more and as we knew that many of them were waiting to see what would happen in the european elections, and what the margin of loss would be. it is greater than expected, but they are very happy. nejra: and we are certainly seeing that today. thank you very much, paul top athens.in the far lori. wright league party surged ahead italy, and the deputy premier pledged he would not seek a government reshuffle. joining us is carlo cottarelli, former executive director at the imf, and current director of the italian public finance monitor at university do katona got the second core -- universita cattolica del sacro cuore.

thank you for joining us. carlo: thank you. nejra: what does this result mean for the government? will salvini make the collapse? carlo: i don't think the government will collapse, at least not immediately. the issue will be the turning point, it will be in the fall, when the budget for 2020 news to be prepared, that is when tensions will rise, including market tensions. but for the moment, i expect the government to continue. there are a the budget, what do you expect salvini to do with literally 20 budget. we had comments from him already today, where he is talking about e.u. limits. it was a review he had put forward in the past that he doesn't care about the european fiscal rules he thinks they are too tight.

i want point he said the most important european rules, the 3% deficit ceiling, would be violated. he did not say this today explicitly, but he said the thernment will not increase vat. increasing the vat was necessary because parliament had already approved an increase for next year. , the deficitasing will rise at 3.3% of gdp this year, a guest the target of 2.3%. so the gap is very large. yet, salvini has reiterated that not only will the vat not be increased, but that he wants to introduce a cut on taxes on income. so, how to bridge this huge gap? i have no idea. [chuckles]

nejra: will there be in you clash, in your expectation, with brussels? theo: first, next week, european commission will have to express a view on the medium-term budget put forward a month ago by any. the one that was targeted for a deficit of next year of 2.1% gdp. even that target may not be regarded as being in line with european rules. oft week, we have a taste what the attitude will be of the commission. of course, we have to take into account that this commission is on its way out. we don't know what the views of the next commission will be, a will probably be known in november. so there will be a gap. but given the outcome of the thepean elections, parliament is not going to be dominated by the sovereign

ist, which was the hope that something is had. the fiscal rules will change because those who don't like europe will increase their size in the european parliament. , this will not happen in any element way so that hope is salvini does point but stretch option of in front of the european commission and try to see how much room he can get to raise the deficit beyond 3%. but at that point it will not just be the european commission such a reaction that matters, it will be the markets reaction. financial markets have remained quiet so far, but we are still far away from the fall. nejra: on the financial markets in recent days, we have seen a widening out of the btp bund spread. should investors be more worried about italy as a risk-point in

europe now after the european elections? carlo: the market reaction so ed, spreads have remained about 270, the level they were on friday. i think over the summer and in the fall, as it becomes clear, the position that they time in government wants to take in