from bloomberg's hurricane headquarters in london, i am nejra to pitch -- nejra cehic. powered by powell, global stocks rally and treasury yields climb from multitier lows as the fed chairman opens the door to a rate cut. we will hear from robert kaplan and charles evans. joint venturerd's as tensions continue to mount. is as president trump tweets the mexico tariff that is real. italy braces for the eu's commissions reports on its sets as as salvini deadline for action on his

priorities. manus: welcome to "bloomberg daybreak: europe." china has fined ford's joint venture for antitrust violations. this marks the latest action against a u.s. company. tensions escalate. ours get straight to james, beijing deputy bureau chief. here we are. this is not so much about the size of the monetary fine, but the principle of it. what does it say to you? : we seen a number of actions recently -- veiled threats against u.s. companies , anfedex is undergoing it investigation for rerouting packages. how links this is.

an isolated case, but when it comes after these warnings the chinese government has put out, this list of ,ompanies that are unreliable the idea that these are all part of a concerted effort to push back on the u.s. because of huawei but also more broadly in the trade war. nejra: good to see you. what is the effect going to be on the trade dispute if that is the case and more broadly, china-u.s. relations? james: the big problem now is the result a lot of uncertainty for foreign investment companies in china. we don't know whether this is part of a broad campaign against american companies. i don't think they know, either. go to aine if you factory in china or are investing, you would be

concerned. americant just affect companies, but european or japanese and south korean companies invested here if china decides -- because of what the u.s. is doing, they -- if you are a foreign investing company, there is uncertainty and that affects your investment decision and more broadly, this doesn't bode well for any presumption to go well with the u.s.. china iss. decides taking retaliatory step, they could feel justified in doing something else and you could have tit-for-tat. you have seen finger-pointing about who is responsible for the breakdown in negotiations so all these actions by both sides if a help reach resolution resolution is possible in the trade war and will also hurt the chinese economy more generally as companies pull back on investment. manus: as you say, nitpicking.

u.s. orompanies in the indeed, investing and building more labs so if you can't agree on an agreement, building factory there. james mayger in beijing. let's talk about these markets because it has been splendid for the s&p. is what you really see. we saw the biggest one-day rally since january. the banks lit up like a torch paper over 3%. ratchetingrica, citi higher. andates were to be cut -- this is the point -- if rates were to be cut, banks are set to party like it is 1995. the fed will act as appropriate to maintain expansion but when? that is the question market has. let's look at the dollar because the dollar index is the longest losing streak, down five days in a row. the longest losing streak since august of last year.

the collapse in yield, is that a reason to check out of hotel california? the risk is the most bearish. tell thesays rate cuts dollar know because other central banks will have to do the same. oil is lower, inventories are rising. what will opec plus due to stop it? nejra: did powell nail the communication this time? as the question this morning. he opens the door but never says rate cut. if the 10 year was getting overbought by some technical indicators since 1998. today we are down again on yields across the curve. 2.11, 2.07 earlier this week. global central banks looking at weing the global economy but jumped to a one-month high on the new zealand dollars and global equities, getting a bid. european futures higher and green for emerging-market equities. let's check on the markets in

asia with juliette saly in singapore. good day. juliette: a lot of green on the screen here, albeit a lot of markets in asia are closed today to mark the end of ramadan, including in singapore and india, indonesia, the philippines. let's look at open markets and you see jay powell's commentary lift the nikkei and begin on the 108 handle, japanese bond getting bid. the nikkei group 2% in late buying. buying in china and hong kong, and the kospi ending the session .2%. won despite the fact that south korea posted its first current account deficit since april. bad data out of china, the manufacturing -- services pmi coming in work -- weaker than expected for me.

for individual stocks we are watching, chinese drugmakers are under pressure. we could see bulk buying from the government. on aast time this happened drug prices fell by an average of 52% in china. provider, the payment after pay is up 6% on news it signed international agreements including big brands like levi's in the u.s. i want to end on hello kitty because mattel has signed an agreement with japan to push out its toys in latin america, australia, and new zealand from 2020. the financial details of the deal have not been discussed by mattel. manus: you lave a big open field for me. hello kitty and another host of toys. i don't know where to go with that so i'll park it. the federal reserve is a much safer territory for me. chairman jerome powell signals

openness to cutting interest rates if necessary. keeping a close eye on the fallout from trade disputes between the u.s. and its largest trading partners. know how theseot issues will be resolved. we are monitoring the implications of these developments for the u.s. economic outlook and as always, we will act as appropriate to sustain expansion with a strong labor market and inflation near our metric 2% objective. nejra: treasury yields climbed from multiyear lows following powell's comments. rallies with the s&p rising over 2%. joining us, the head of multi-asset funds at legal. great to have you with us. did powell get this communication right? >> if anything, he got a stronger reaction than he really wanted or expected. he'll most emboldens trump to accelerate the tariffs, knowing

he will get a fast reaction from the fed. definitely, they wanted to underpin the fact they would be late to the party. if they needed to cut, they would. do you want to boost markets, it is only 5% off the highs after the rally so probably not as much -- you got more a -- then bargained for. part of that was the reference in the clip to the symmetric inflation target. that semester -- symmetric target, you are targeting more in the good times to allow for an undershoot in the bad times and that gives about 75 basis points forward expectations and the target and almost an excuse to cut because he can highlight on one of two measures, he is away from target. wordinged like specific . manus: the chicago fed conference, you mentioned a couple of things.

this is the fed funds rate and the inflation expectation. there was a note overnight that said the trading market is simulating real-time average inflation and inflation targeting and forecast inflation targeting. market is aggressively pricing excessive cuts and that is stabilizing the five-year five-your forwards. is this live and real forecast targeting and average inflation targeting at play? expectingink hold a better if this forward inflation targeting was at play is that would push bythe fed's inflation target 25 basis points. on the five-year five-year come we're nearly a levels -- at levels of december. markets are not buying into the credibility the fed will target this 25 basis points higher and

powell's comments yesterday were explicitly a reference to the fact of a symmetric target, don't think we will start -- stop when we hit the target. it needs to be symmetric and that means and overshoot in the times. nejra: you weren't neutral equities on the 21st of may. what would be an attractive entry point? john: probably 5% to 10% lower with negative sentiment. when we were looking at the sentiment of the spread, they were showing negative. not extreme but if you got another 5% to 10% drop, you get extreme levels that tend to be a contrarian indicator because we do have the belief in the powell put. the is perhaps difficult on entry-level now is powell has come in so early it will be harder to get to the level. the powell put would need to be proven to be ineffective or they do end up slow or you get a rapid escalation before we can get for the drop. we would be looking for that further level of fall coupled by

negative sentiment. to break that down more, i started the show with the s&p 500 and it was the banks that got gassed yesterday. i love what wells fargo said. partying like 1995. twitch industry group do you want to be more exposed to if we are in a new cycle? would it be the banks? the banks partly got the relief rally because they are a cyclical sector and there is concern of a slowdown. how much support with they get from the fed in a situation they got slowing in the u.s. economy that is probably coming. if you -- what was a surprise yesterday was how bad the font proxies did. if we entered a lower interest

rate environment, you would expect bond proxies to do well in that environment. i think with so much excessive positioning in them as mentioned on the 10 year that they struggled a bit to the news that the fed was prepared to go early. what howled in yesterday was awered the central case by move early. he arguably reduced the tail of it going horribly wrong and it favored stocks rather than bond proxies but if you get lower for longer, that tends to be positive for things like infrastructure, utility. manus: lovely encapsulation. detail tail risk of it going wrong aggressively. we have much more to get through. john roe, head of multi-asset funds from legal & general investment. let's get your first word news. theresa may has

spoken of substantial risks between the u.k. and u.s. since president trump took office. she says london and washington are at odds over issues like china, iran, and climate change. the president was asked about the possibility of jeremy corbyn becoming prime minister and if he would do a trade deal with the left-wing leader. i certainly would. i think it is a long shot when you say that. i don't think it will happen. president says he hopes the country can reach a deal to escape u.s. tariffs. he believes they can find a way to stop the 5% duties being imposed before next week's deadline. this as the president says he will probably bring in levies on mexican products as planned. democratic presidential candidate elizabeth warren has called for actively managing the

dollar to bolster u.s. jobs and growth. this would break from long-standing currency policy agreement among the world's major economies. she says the move would help promote exports and domestic manufacturing. from presidentry trump's view that the -- that the dollar has her u.s. exports. global news 24 hours a day, on-air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪ in hongnnabelle drulers kong, thank you. newsmakers ontop bloomberg tv that you do not want to miss. the chairman, the chief of the ftc -- the dallas and chicago. this is bloomberg. ♪

nejra: this is "bloomberg daybreak: europe." i'm nejra cehic in london. manus: i am manus cranny in dubai. let's get your first word business needs with -- news with annabelle drulers. the u.s. economy is on solid footing, except for one thing. leveraged loans, according to the bank of america chief executive. his bank has dominated the sector for a decade. things that generally sold -- solid but leveraged loans could be a stumbling block. >> it will be ugly for those economies.

they have to be restructured and the usual carnage that goes on. , havesue that is there the terms gone too favorable to the borrower? renault's board has postponed a decision on chrysler's merger. it is extending discussions for another day after distance to the deal. the draft agreement reportedly takes into account -- the french state. terms ofortunity in jobs in corporate governance. the board will meet later today. venezuela has reportedly defaulted on in agreement with deutsche bank. it has prompted the lender to take control of the present -- precious metal use as collateral. bloomberg has learned a deal in 2016 and settled early due to

missed interest payments. that is your bloomberg business flash. nejra: annabelle droulers in hong kong. the european commission is scheduled to publish its support on italy's finances today amid a dispute between brussels and rome over the country's debt. matteo southey me has stressed -- salvini has stressed it is in the interest of all states. conti has threatened to resign if the populist coalition doesn't stop squabbling. its go to maria tadeo in brussels for the latest. what are we expecting to hear from the european commission? the recommendation of the start of a disciplinary procedure? of a disciplinary procedure? maria: the european commission will likely say they do not anticipate the debt to gdp ratio will decline. if anything, it will increase and that is a breach and that

could turn into a financial penalty. it is worth noting and is important that this is a long process and could take weeks to months and the italians would try to avoid this. it is likely this will have to be agreed by european area finance minister. it doesn't mean italy will eventually be fined or get fined today. manus: this isn't the first time really we are discussing a fine? i have this bubbling in my mind a couple of times. why is it different this time? that tension play out at the end of last year and there was speculation there could be a fine. two things have changed and that is the timing of it. european elections have happened and it was clear the european commission did not want to get into a confrontation before the european elections.

the balancing power in the italian government has really shifted. he did very well in the italian election and wants a fiscal shock. he needs to bring down taxes and at this point, he has no incentive to backtrack on that. the timing of this but also that salvini is at the forefront of the coalition in italy. manus: politics to the fore. maria tadeo tracking the italian story in brussels. john roe is the head of multi-asset funds in huawe -- legal & general investment. you said there is opportunity. is the fine baking? if i look at the spread -- baked in? if i look at the spread, do i get more bullish because i have an ecb which is going to come to the rescue if not tomorrow, over

the next couple of months? john: i don't think the fine matters that much. we've got about four different measures they can take. they could require italy to deposit money with the ecb which would be non-interest-bearing. interest rates are negative and the italians would get paid because they can borrow below zero and deposit at zero. you could have a position where the way there penalized is by being paid money. i don't think the fine is a big issue. the bigger issue is the fact you can't get through the measures you want. the prime minister is firmly in the camp they need to comply with rules. salvini is frustrated that past transgressions of germany and and ongot away with it

the back of it coming to get an escalation which brings down the government, lead to a new election and the new election is what brings a right-wing government. that would take out a lot of the problems because at the moment, you have the right-wing and what is believed to be somewhat that they don't put themselves on the spectrum. if you get rid of that, longer have the spending increases as the same time as the tax cuts. that might be more manageable for the economy overall. nejra: in terms of your strategy, you are short germany and retain your position in italy? john: that's right. if you allow for the negative interest rate that you pay for buying the future, you are

effectively picking up nearly 3% of kerry on the -- carry and you need 45 basis points widening to not make money. we find that very attractive. if it does escalate, it will lead to a fall in the government and if it does, we will get a but toxiceable coalition. --ra: john: --john roe , head ofhn roe multi-asset funds at legal & general investment stays with us. we will get more into the german story and the ecb as the program continues. the question on mliv, our markets under pricing a hard brexit? team.out to the mliv mexico's peso stumbles as donald trump's says the tariff threat is not a bluff. we will get the latest next on bloomberg. ♪

manus: it is "bloomberg daybreak: europe payor -- europe." we have been talking about the btp spread and the fine from the eu. italy commits to 3.5 billion euros worth of savings. let's see how the markets pick up on that theme as we get the markets up and running later. we are one day away from the european central bank. the markets are in focus. we will get to that any moment. annabelle droulers is your first word news from hong kong -- has your first word news from hong

kong. annabelle: jay powell has signaled openness to cut interest rates if necessary. thattors have increased the fed will loosen policy this year amid ongoing trade tensions. powell pledged to keep an eye on the fallout from the disputes between the u.s. and its large and trading partners -- largest trading partners. >> we do not know how these issues will be resolved. we are closely monitoring the implications of these developments for the u.s. economic outlook and as always, we will act as appropriate to sustain the expansion with a strong labor market and inflation near our symmetric 2% objective. the world bank has cut its 2019 global growth forecast. growth has slowed to the weakest level since the financial crisis. it saw a drop in global investment. the bank sees the world economy expanding only 2.6% this year compared to the 3% forecast last year.

fined for's local unit more than $23 million for sales prices. the charge applies to operations in the southwestern city since 2013. it is equivalent to 4% of its annual sales there. a range of models including the cougar and focus. democratic presidential candidate elizabeth warren has called for actively management of the dollar to bolster jobs and growth. this has braked from a long-standing currency policy agreement among the world's major economies. she says the move would help promote exports and domestic manufacturing. this isn't a far cry from president trump's view that the u.s.g dollar has hurt exports. global news 24 hours a day, on-air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. nejra? manus: i'll pick it up from

here. a terms of rising how much trade were really on the economy, blackstone's president says if the u.s. dispute with china persists, it will lead to slower growth and more uncertainty. he made the comments at the invest conference in new york. obviously if this persists, we are going to see less economic growth. we are going to see more uncertainty. markets have traded off, that makes sense. as investors, you have to be mindful of that and i would say sometimes you don't think through the multiple impacts of these things as they play through a lot of industries. it makes you generally a little more cautious. the bond market has moved more andious with a 10 year european yields quite negative.

u.s. growth is still ok, the we are waiting to see the impact. >> how soon do you think we will see the impact? the next quarter, this year? jonathan: i think it is this year, incrementally. some companies are trying to move their supply chains and you are making companies -- if you think about what drives economic growth, it is one of the challenges about brexit. if people have confidence tomorrow things will be better, they will make capital expenditures or hiring decisions based on the confidence. if they feel uncertain about the future, they tend to pull back. i think the tax cut last year was helpful in building confidence, and i think now, there is more wariness in terms of what is going on. i will say this. i still think as it relates to the u.s. and china on trade, ultimately, i think there should be a resolution because it is in both parties' interest. manus: jonathan gray, blackstone

president speaking at the bloomberg invest conference in new york. donald trump is sticking to his threat to impose 5% tariffs on mexico next week. hit out atesident senate minority leader chuck schumer after suggesting he is bluffing. the tariffs would "likely take effect as talks with mexico on immigration continue." lopez-obrador has expressed hope a compromise can be found. the foreign minister said it is an 80% probability of success. let's bring in our global emerging markets editor. the fed and powell's openness to cutting rates, and the mexican standoff. let's start with the mexican standoff at the moment. trump is not bluffing and he is referring -- reaffirming that message. plenty do you make of the

messaging of 24 hours? >> the best way to look at it is in market reaction and the comments that there is an 80% chance of a deal helped the peso recover significantly from the 2019 low it reached a couple of days ago. today, we seeing it retrace a little bit. partly perhaps on the reaction at thee trump reaction 5% tariff will be slapped on, whatever. all eyes are looking to the mike pompeobetween and his counterpart. that will be the next leg in the peso story. i think it is interesting to see the net long position on pesos. the data that came out last week showed the bullish bets on the peso are still close to the highest ever. off but theyled

are still high. if things go belly up and the mexican story turns really bad, we could see a sharp retracing of the peso. good to see you this morning. you outlined the i have a storm in terms of the mexican peso. you had a great piece a couple of days ago about a trade war and markets escaping the worst of the risk selloff. what will you be focusing on other than the peso in the next couple of days on the story? justin: the overriding story still is trade, and what if anything develops on the china-u.s. front. the key is how the chinese react. to what extent the chinese authorities would try to keep the stimulus efforts on in china to keep levels of demand going that would sustain emerging

markets in general. some data in asian markets, those are particularly exposed to the trade story and of course, we remain focused on idiosyncratic stories in emerging markets. we have been talking about south africa, which came out with dreadful growth numbers yesterday and we saw a big selloff in the rand. talk about that -- let's take this conversation. we've got john roe standing by. we've got the butchers scales of opportunity in emerging markets. we've got the powell put alive and cooking. global growth, which is a huge issue for emerging markets. you can throw in a bit of oil, if you want. how do you look at the current risk and reward in em? will the powell put win out over global trade angst? john: the problem is the powell

put is mainly to deal with the u.s. and of the global trade war angst. normally, the powell put is related to u.s. issues and causes a spillover positive and other countries. in this instance, it would be the problems of other countries and how all helping to insulate the u.s. more than anything else. i don't think the powell put will help emerging markets very much in particular. if you take mexico specifically, mexican exports are about 17% of gdp. there is no way they can afford these tariffs. 50% of mexican imports are imported comment -- content. it is a 10% effective tariff on mexican added value and even if you get to what trump suggested, he has suggested 12 billion for his wall. a 5% tariff on mexican goods for a year pays for it.

he may be right. he may be able to get mexicans to pay for a wall. this plays well for trump. china is in a difficult position. we talked about how the u.s. can when a trade war with china simply because of the relative size of imports and exports and the fact that with the powell put, trump could potentially offset a lot of domestic damage. nejra: you have interesting thoughts on how the trade war could extend the cycle. of you drop a line for me how that happens and what the portfolio implications are for emerging markets? with someone like trump, if you disagree with him it is easy to disregard his views but there is a path is works well. he gets no credit for the feds interest rate level. china and can lower u.s. growth, which reduces the risk of excess in the short to medium term, which pushes out the risk of recession the on the 2020 election. there is actually path where he

works his way through tariffs to extend the cycle to his own benefit. not necessarily to the u.s.'s benefit because you want interest rates higher so you can take more action when there is a and to helps, himself out over the next 12 to 18 months. things around the impact of the u.s. economy assumes the tariffs raised are not spent. like other any -- any other fiscal tightening, a raise on chinese goods could dampen down pressure on the u.s. economy. manus: in a 10 second dancer, has he got the ability to get congress to do that? john: it would be hard for the democrats to deny spending tariffs in a presidential election year. nejra: all right. , we've gotten deep into

the discussion and covered a lot of ground in terms of emerging markets over to trade war. some interesting work on the south african rand where does it go from here? justin: it is in a very difficult place, to be honest. reallyy is the rand reacting to all of the bad data coming out of south africa with ramaphosa euphoria dissipating. have a discussion on what is the focus of the central bank? is it to lift the economy out of this deep contraction or is it to keep the focus on inflation? on the groundse theors at play but also, wider environment for emerging markets is hurting the south african in a different way with the trade war and we have seen

fairly substantial declines in commodities and metals and commodities are the backbone of the south african economy. manus: all caps off because we have lines coming through from donald trump in his interview. the i.t. interview. "i don't want to take military action against iran. there is always a chance we need military action on iran, but i don't want to take military action on iran." john bolton was here over the past couple of days in the uae building the overall coalition of allies between the uae along with saudi arabia in regard to the position on iran. it is a very real position that we take on that. let's have a final thought with you, just in. we didn't get deep into the weeds on iran -- the rand. the deepest slump in gdp since 2005.

this is a huge challenge for ramaphosa. a small reprieve this morning, what happens next in the central bank story with south africa? justin: the central bank has to cut rates. we are seeing the forward rate agreement in market in south africa is pricing in 100 points in cuts in the near future and what is going on with the fed and whichever way you want to read what mr. powell said yesterday, the takeaway is the fed will probably be easing should the trade war prevail and continue, and starts to show up in some of the numbers. we will see the fed cutting and that will allow emerging-market central banks, or give them more cause to do so going forward. south africa is very much at the head of that group. nejra: bloomberg's global emerging markets managing editor justin: carrigan thank you. john roe of legal & general investment stays with us.

joining us in london is dani burger. you are looking at a bounce in u.s. stocks that has continued into the futures. dani: the conversation you just had set me up perfectly because there are catalysts for the orns, whether the powell put the hope that mexico perhaps won't get a new round of tariffs from donald trump i have to give more -- to mark cudmore because he pointed out a path of resistance for futures and it has held up well. futures flirting with the level right there but having a difficult time getting above it. he says if we break above this line, it wouldn't be unusual to get a 2% rally. this gives us a good idea that even in a downward trend, there is the potential for short-lived sharp rallies. another feature of the rally to flag is the move to jgb's. yellow, i have the future

level. a lot of this is playing through the derivative market. future levels, the highest in three years. in the blue is the open interest. if you look at the right side coming you can see a recent spike. open interest for these futures. demand for jgb's has now hit its highest for the year. $18,000 numbern of contracts so we are seeing a lot of demand there. negative yieldon and anemic yield, dani burger with the jgb's. we have a raft of newsmakers. right here on bloomberg tv, ranging from chris giancarlo. , and a couple of fed presidents. dallas and chicago. we're not talking football. we are talking policy. this is bloomberg. ♪

manus: this is "bloomberg daybreak: europe." i'm manus cranny. nejra: i'm nejra cehic. let's have the first word news with annabelle droulers. annabelle: the u.s. economy is on solid footing except for one thing. loans, according to bank of america's chief executives. his bank has dominated for a decade. things are generated -- generally solid but leveraged loans could be a stumbling block. >> it will be ugly for those economies. they can't carry the debt and have to be restructured and the

usual carnage that goes on. the issue that is there, have the terms gotten too favorable to the borrower? annabelle: renault's board has postponed a decision on chrysler's proposed merger. it is extending discussions for another day. the draft agreement reportedly takes into account requests from the french state. equal opportunity in terms of jobs in corporate governance. the board will meet later today. venezuela has reportedly defaulted on an agreement with deutsche bank. it has prompted the lender to take control of precious metal used as collateral. bloomberg has learned a deal in -- the deal was opened in 2016 and settled early due to missed interest payments. that is your bloomberg business flash. manus: thank you very much. annabelle droulers in hong kong.

central banks are resuming their first responder role as the world economy runs into trouble. even if the lack of power they once had at their disposal. ecbntion turns to the decision tomorrow and policymakers are gathering in lit when you. economic projections to be presented by philip lane, and will signal whether the bloc needs another central-bank boost. john roe is head of multi-asset manage funds at legal & general investment. say the fed is trying to get out in front. act now had a 6.5% drawdown before it unfolds at the 10% drawdown. what does the ecb need to signal? something more substantial or deeply discounted target? tltro and they

have been good at managing to surprise at the margin to get more boost out of what they are doing. what they need to do is continue to boost european economy. the unemployment rate in europe is back down to pre-2008, 2009 levels. they are only a couple of years behind the fed and they are hoping if they can keep the economy going, they might be able to raise interest rates. they have underemployment or appear to have gotten rid of underemployment in europe, at least to get back to the 2008 unemployment levels. it will be very tltro. there isn't much else they can do. bund so theyof can't go back to qes in its previous form. nejra: you are finally short germany. is that because you think the market pricing has gone too far in pricing in a rate cut in the

first quarter of 2020? if you do think that, are there not parts of the curve that might be interesting? john: i think on the cuts being aiced in, it is almost like risk premium because in reality, it is hard to imagine them going much further on the negative interest rates because german financials and insurers. problems anduse me we like germany previously because it is a steep curve and historically, steep curves have performed the best but the carry is on from 40 basis points to 20. you are getting a cap but not the same carry and now you are getting close to the zero bound -40. it is better to go from -- to somewhere that is not skewed. i love with citigroup

said about the ecb, to fight back the ecb needs to out-dove the market. what does that do to the german curve? there is a lot of discussion of where the curve goes yet. shiftat curve aggressively on an ecb response? john: i mean, they have already had a big benefit from low yield. you have a flattening from the curve which helps lending. i am not as convinced they need to do as much. they are not in the eye of the storm in the way that china and the u.s. are, and they are almost in a bit of a wait and see mode. obviously, they have had a weak euro so unless they saw a sharp reversal in the euro, they are not worried about the level, although they might be worried about the momentum they might get a bit more positive momentum but it is hard to see the yields looking that attractive in

europe. we are not as convinced they need to take the action the u.s. does because they are not starting from the same position. does the ecb need to worry about a strong euro, weaker dollar? john: you would want to go quite a long way. i didn't think more and's comments made a lot of sense -- elizabeth warren's comments made a lot of sense. they got the lowest rates in the 1960's so the idea they will create american jobs while stopping immigration -- they will have to stop people dying if they are going to make that work. i couldn't quite see where they thought they would manufacture the extra stuff. i think a strong dollar works quite well for the u.s. it means better purchasing power and can enjoy the benefits of a strong economy. that may less sense to me and europe would need to see a movie against the dollar to really be in a position they were worried about levels. nejra: john roe head of multi-asset funds at legal & general investment. he will continue the discussion

at 7:30 u.k. time. next, chris giancarlo. don't miss the exclusive interview on the show next. this is bloomberg. ♪

manus: good morning from dubai. i'm manus cranny with nejra cehic in london. this is "bloomberg daybreak: europe." global stocks rally and the treasury yields climb from the multi-year lows is the fed chairman opens the door for rate cuts. we will hit from the fed's robert kaplan and charles evans. no bluff. es ford as tensions between the countries mount. president tweets mexico terror threat -- tariff threat israel. high noon in rome. italy braces for the eu commission's latest report into

its finances. vini said to 15-day deadline for action on his priorities. nejra: welcome to matt: take -- welcome to "bloomberg daybreak: europe." the s&p 500 jumped more than 2%. we are seeing futures on the front for today in the u.s. still, or at least a little in the green. s&p giving up gains from earlier. soeurope, a mixed picture the greenway sans the screen in europe and the u.s. yesterday did go a little to far. ftse futures flat, dax flat and cac up a little. we are already seeing a reversal in the bond market from

yesterday in reaction to powell. like: it is a bit overtired, overexcited. that is when markets moved. is, who overreached the most? the equity side or the bond market? the phrase that jay powell used opens the door. they will act appropriately to sustain the expansion. we have talk about the positioning. socgen says the market was oversold. you have clarida -- i think trying to regret the nettle -- regraft the nettle. you see a relief rally in the bonds. that has a meaningful opportunity for us. they are open to acting in a way to sustain the expansion, but they are not ready to pull the trigger yet. that seems to be the take on the markets. repricing slightly on that. in the ecb, we are building up to that. bund market rising, the funds

are not doing a great deal to help the italian story. says theyitigroup need to fight back. the ecb needs to outdove the market. she is back, she is stoic. juliette saly has your wrap in singapore. juliette: it is looking pretty good in asia. msci seeing the biggest jump since march but a number of markets out of action for ramadan and indonesia, philippines, japan closing up the session strongly, a gain of 2% with the yen at a 1.08 handle. and very good buying in developer stocks in china today and despite the disappointing read, services pmi and in australia, the market

.4%.d up other assets, we have talk about moves in jgb's. japanese bonds, rallying yields lower. particularly on the 2-year note, yields down three basis points. multiyear highs coming through and we have heard from securities that part of the move into japanese bonds to be because of the yen strength. perhaps signals that authorities are going to step in and try and stem the strengthening yen. the kiwi is at a one-month high after surprising comments from the assistant governor sounding more hawkish than many were expecting and the korean won on the front foot, up .2% despite disappointing data out of south korea today. they posted their first current-account deficit since april 2012. nejra: -- manus: thank you for the roundup. shifting pieces on the check -- chessboard of global players.

aviva, the cfo steps down. he is stepping down as of june 30 and bear this in mind. he is on his way out. you have a new chief executive step in and he came on board three months ago. this takes my mind back to the exit of mark wilson last year. he moved out as chief executive. until the endre of june. this is a rearranging of the positioning of positioning. tom has been a tremendous leader and delivered a financial turnaround, strengthening the positions. said himselfddard while i will miss my friends, it is strong. shifting chairs at aviva. nejra: jerome powell has

signaled openness to cut interest rates if necessary. he said he is keeping an eye on the fallout from trade disputes between the u.s. and its largest trading partners. >> we do not know how or when these issues will be resolved. we are monitoring the implications of these developments for the u.s. economic outlook and as always, we will act as appropriate to sustain the expansion with a strong labor market and inflation near our symmetric 2% objective. lows: from multi-year following the comments. asian equities rallied with the 2%, the biggest one-day rally since january of this year. our guest host is christopher giancarlo, the futures trading commission chairman. .hank you for joining us it is your data we pass every day and week, which gives us the real skew on markets. welcome to the show. what do you make of the hurly-burly?

powell has reinvigorated markets again. what do you make of his delivery to the markets last night? christopher: listening to him, it seemed a pragmatic approach on his part. not surprising, knowing jay powell. -- a signaling achromatic pragmatic response to the global situation whether it, role as respond toseers to global conditions whatever they may be to make sure markets continue to function in a straightforward and quarterly manager. nejra: why are on the markets pricing rate cuts from the fed? christopher: that is the thing about markets. they are taking in factors, as they should and coming up with a market-based approach. as someone who believes in markets, this is a normal approach. manus: one thing we try to get a handle on his liquidity and this

has been the great debate about the changing regulation of banks and markets in the past 10 years. the consequence on liquidity. we had the head of deutsche bank yesterday worried about liquidity. structure, are you hearing any concerns about liquidity? christopher: absolutely. to me as a market regulator, liquidity means trading liquidity in markets. what we had over the last several decades in our global derivative markets largely centered in london in the global swaps market was a global pool of trading liquidity. one of the concerns is as a result of the reforms, whether it be through staggered implementation or different implementation by regulators and worldtory around the which were taking this global pool of trading liquidity and breaking up into smaller pools of regional or national

liquidity that themselves become a potential source of stress -- systemic risk because in a crisis, individual pools of liquidity are shallower and more inordinate to two reactions to market dynamics. the knowledge i use is if you pebble into a shallow pond, it is bigger than if you throw a pebble into an ocean. an oceannotion and -- and now we have ever smaller puddles of liquidity. nejra: with the swaps framework 2.0 that you implemented, you are coming toward the end of your tenure, so what do you hope to see to avoid these implications you are referring to? christopher: last october, i released an extensive white paper pledging my agency to return to an approach of

deference to competent local regulators in their implementation of the swaps reform. b vesely, we had taken american approach that was very territorial. now what we are looking to do is have a deferential approach to authorities around the world and following through with that. syria'--put forward a a series that would embody this approach in our rule sets. to circle back to your point come you talk about goals of liquidity and the risks therein. to me, this business has always been about liquidity and cost. if i get dissipation in liquidity or in the foothills of that, where am i in terms of costs associated with clearing? that is what comes out the other end of the tube. christopher: it is an

interesting question because one of the impacts of the global reforms is to overlay financial markets with an increasing level of capital complexity and operational complexity. the marketplace is struggling with this additional expensive in howplicated overlay they deploy capital and how capital can be used for trading liquidity. that is one of the reasons you are seeing such emphasis right now on financial technology, fin tech. it holds the promise of being able to cut through this added capital and regulatory complexity. nejra: i'm glad you brought up fin tech because you want to make the cftc a regulator for digital markets which moves us onto cryptocurrencies. on twitter, #cryptodad. what do you think of facebook's plans for a digital currency?

what has been fascinating is bitcoin, which has been discussed, really became immature, more mature product when the bitcoin future was launched. that allowed institutional money to come into the marketplace. as we see additional asset classes come on the scene, they are approaching the markets for development of a spot market and also the development of a derivative market, as well. as a derivative market regulator, we are in conversations with major digital asset classes on the horizon right now. joins that code --cojoins with blockchain. those conversations have started. what prison do you look at blockchain at it in the cftc? what role will it play? i believer:

blockchain has tremendous potential in the market. potential for market regulators and the reason i say that is because i was there in 2008 when financial market regulators had no better way of assessing the counterparty credit exposure of one large financial institution to another that by actually calling brokers that were broking credit default swaps to understand where the risk premium was, and in a sense, they were guessing at the global notional amount of exposure carried at the time of the crisis, it was believed that there is 400 billion in credit default swaps protection written against lehman brothers. we now know that the total exposure was less than 8 billion. 2008 -- and we would have known in 2008 if all the spots have been on a blockchain -- that the exposure of lehman brothers was 8 billion, the response of global

regulators and market overseers could have been a very different response than that response that came. to the prospect that someday, we may know with precision exposure of one financial institution to another. we may be able to map the entire financial regulatory system. they call it financial cartography and that is what blockchain gives us. for may regulate her point of view, this is a tool with enormous potential and one we want to be at the forefront of exploring and understanding. nejra: so interesting. credit default swaps, are you satisfied with the way the cdf market has evolved since cftc criticized events of april 20 fake -- 2018. youstopher: what i can tell is the leaders of the industry are taking a very responsible position to this. the association has been working with major participants in the market to develop some new language in their standard protocol in this area.

they have been in dialogue with the cftc and we will remain in dialogue as we go forward. initial steps on this are the right ones that we stay in gauged. -- engaged. manus: can i pick up about the discourse on risk. if we take our minds back to 2008, we didn't know or understand the magnitude of anybody's balance sheet. we have traveled over the past 10 years and gone from otc on exchange. where has been the most successful transition in terms exchangenformation to information and where's the biggest opportunity to come? loans in the 24 hours. do you know the party risk of who has leveraged loans out there? christopher: you are right. the biggest gain has been moving not onto exchange, but moving

into central counterparty clearing. moving derivatives. crisis,ime of the somewhere in the neighborhood of 25%, 30% of interest rate swaps were clear. u.s.t is over 80% for institutions and globally, 70%. in the area of credit default swaps, it was cleared at the time of the crisis. now we are at 85% for the u.s. side of the coin. similar levels around the world. we have successfully moved, which is one of the key g20 initiatives, that marketplace and a central clearing. these are instruments -- you say on exchange and electronic trading. please have different liquidity curves. the more liquid elements trade electronically just like in the bond market carried the less liquid elements of the trade through a mixture of hybrid means of electronic. in terms of leveraged loans, we are following it closely at a

recent meeting of the united states oversight council. there has been a review of leveraged loans. the market is modest by global standards so we don't view it as a systemic risk, but something we follow closely and diligently as you would expect. nejra: i need a brief answer from you. areeed to discuss why you in london. you intend to propose a workable limits rule that would clarify the hedging. this is important for the u.s. market. is the rule coming out? christopher: guess it is. we have had in the united states for decades limits on a range of, mostly in agriculture. those have worked well. the proposal that was put before our commission several years ago was one that was much too expensive -- expansive and banned hedging practices in

agriculture and other commodities production for decades, especially on family farms. we will put forward a proposal that will be more intuitive and participatingrson in these markets. christopher: -- nejra: christopher giancarlo stays with us and we will talk about why you are in london and the relationship between the u.k. and eu. we have top newsmakers today including andrew bailey and the fed presidents from dallas and chicago. stay tuned. this is bloomberg. ♪

manus: 7:21 in london and 8:21 in frankfurt. 38 minutes to go until the start of cash trading. it is daybreak europe. i am manus cranny in dubai. nejra: i am nejra cehic in

london. let's get the first word news with annabelle droulers in hong kong. annabelle: mexican president rador hopes the country can reach a deal to escape tariffs. the minister believes they can stop the tariff before the saysine as president trump he is probably bringing levees as planned. cut its 2019k has global growth forecast. it says trade growth has slowed to the weakest level since the financial crisis. it also saw a drop in global investment. the bank sees the world economy expanding only 2.6% this year compared to the 3% forecast last year. --athan gray says progress sees progress eventually being made on trade. to the u.s. and china on trade come ultimately i think there should be a

resolution because it is in both party's interest. there is a recognition of the rebalancing that is taking place. this is about the extent of that rebalancing. democratic presidential candidate elizabeth moran has called for actively managing the dollar to bolster u.s. jobs and growth. this is a break from a long-standing currency policy agreement among the world's major economies. she says the move would help promote exports and domestic manufacturing. this isn't a far cry from president trump's view that the strong dollar has hurt u.s. exports. boris johnson has warned his colleagues of extinction if brexit passes october 31. party faces a "existential crisis." he said after the conservative party set out an accelerated teacher to choose the next leader. it will see a new prime minister in place by july 26. global news 24 hours a day, on-air and tictoc on twitter,

powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. manus? manus: thank you. president donald trump has thrown his weight behind the you k's political hard-liners -- uk's political hard-liners flagging a substantial deal after brexit. the u.k. makes preparations to exit the european union, the united states is committed to a phenomenal trade deal between the u.s. and the u.k. there is tremendous potential in that trade deal. i say probably two and even three times of what we are doing right now. thes: speaking beside counterpart, key areas included conn's stance toward iran, his intentions for britain's nationalized health service in a

post brexit deal. nejra: implications in the financial sector have shown -- in london. christopher giancarlo called for a bespoke deal that protects the relationship with the eu. christopher giancarlo is still with us. congratulations on the award and welcome to london for collecting that. why do the u k and e u need each other post-brexit? christopher: that is the essential question. the city of london is one of the world's truly global financial centers. it has been ranked number one in the world for a long time. recently, lost number one place to new york city but of the world's global financial centers, london, new york, singapore, hong kong. what do they have in common? -- in norms infrastructure but also english language, english or american common law and enormous

infrastructure and professional services, lawyers, accountants, brokers, investment bankers that else.exist anywhere europe is interesting. the only other european city is number 10 and then other cities like paris and amsterdam are in the 20's and 30's. even if business -- and business is moving from london to the centers, no one of them is going to be in the top two or three anytime soon. europe needs a global financial center. europe needs to have the euro and euro denominated instruments trade alongside the dollar in major centers were capital aggregates and that, with great respect to the other european capitals, will not move to them any time soon. manus:manus: at is the message from the man himself. christopher giancarlo from cftc. thank you for joining us this morning. that is it for "bloomberg daybreak: europe."

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♪ anna: good morning. welcome to "bloomberg markets: european open." we are live from our european headquarters in the city of london. i am anna edwards alongside matt miller in berlin. matt: today the market to say cuts on the cards. stocks take off on perceived dovish comments from jerome powell. japanese stocks leading gains in asia. european futures point to a more mixed picture. cash trade less than 30 minutes away. ♪ anna: