nejra: good morning from bloomberg's european headquarters. this is "bloomberg daybreak: europe" and these are today's top stories. the r.b.i. is set to cap -- set to cut rates. meeting.ve at the ecb tumbles as currency president trump says not enough progress was made in talks on immigration. tariffs are set to hit monday. and no to renault. fiat pulled its offer to combine after the board postponed a decision for the second time. oil entering a bear market. the goldman sachs european

financials conference in paris. interviewsxclusive are the ceo of goldman sachs international. do not miss it. matt: warm welcome to daybreak europe. fiat has walked away from talks with renault. it effectively ends a deal that would create the world's third-largest automaker. our global business editor joins us from tokyo. quite shocking in terms of the laying taking, but fiat the blame squarely at the french political door. >> they certainly did. if you had any questions about why renault is controlled by the french government so difficult, this is an example. a complex deal like this has a

lot of moving parts and you need someone who can control the parties completely. that has not been the case with renault. the french government still has a very strong voice. the voice would actually be diluted by this deal. to reluctanceted on the japanese side. nissan, wasrtner, somewhat reluctant to support this deal. this is a very complex undertaking to arrange these. when you do a deal like this, you need someone in the room who can exercise complete control over the party that is negotiating. for joining us. our global business editor in tokyo. more corporate news to break. lines coming through from credit agricole. year-endgeting a 2022 ct ratio of 11%. targeting a 2022 return on

tangible equity of more than 11%. that is just the main headline there. also targeting a 2022 net income of more than 5 billion euros. look, this is just another institution which joins the rollcall of institutions, french banks and other banks around europe, that are in the process of change. commerzbank, deutsche bank, socgen all under a process of change. , part of theitions business confirming strategic ambitions as part of credit agricole. it is all about the debate between what happens with the equity market. this is a five-year. they are not waiting for the fed. the yield curve shows the market is in a hurry. this is the widest we have seen

it since 2017. the market has priced in 90 basis points. we have heard from axel weber. he said the fed is overpricing. the goldman sachs president saying he is concerned about the fed inference on the market. are also saying get ready for more. the extra kicker yesterday was the line from trump on iran and the risk of war for that possibility. combined with the adp data, which sets us up with a nervy kind of edge going into the job data tomorrow. yen is in an interesting space. the market is pricing a potential rate cut from the boj. is that stretching too far too fast? breaking the 108 level in japan. nymex crude bounces from the bear market, down 22% originally from the start of the talks about the ability to take the economic bearishness into context.

it is all about the demand side. morgan stanley flashes their global demand. -- slashes their global demand. nejra: seven days of steepening. the question for the bond market, if we get the fed capitulating to the markets, cut orat be an assurance something more sinister around the risk of global recession? on s&p futures. we look ahead to the ecb. what will mario draghi give a market that is pricing rate cuts? let's check on the markets in asia. juliette saly has more. we are indeed speaking of markets expect great cuts, we are expecting one from the r.b.i.. you can see india down 0.5 percent. markets out of action for eid, south korea also closed, but japan's market looking ok along with a smaller yen.

there has been fluctuation in hong kong and china markets today, but tech stocks under pressure. that is weighing on the shenzhen , setting the csi 300 lower and you can see the taiex, one of the worst performers today. thesee seen a lot of telco stocks in china in focus. china telecom confirming it actually has been granted a 5g operation permit from the government. coming out of the lunch break on a very strong note up by 2.5%. mitsubishi also was in that fiat renault merger tied up with nissan shares earlier. mitsubishi motors having a very big plunge on the news. mitsubishi heavy also coming under pressure. analysts confused by its plan to buy see r.j. regional jets program. one of the companies coming through saying, why would they be doing that? that would mean they would have

to handle two businesses. weakness coming through today as well. manus: thank. -- thank you very much. the yield curve is steepening. bond traders are expecting rate cuts by the fed. policymakers signal they are not ready to act yet. the dallas fed president says it is too early to make a rate decision. >> we are going to be very vigilant about understanding these heightened trade teijin's -- trade tensions if they feed through to the economy, more portly, see if they persist. it is too soon to make a judgment if we might or might not take action. i would rather be patient and let events unfold. the u.s.-mexico --

mexico's outlook cut from stable and the sovereign rate lowered to triple be from triple be plus. of rate global head strategy at merrill lynch is with us. a bloomberg equity reporter joins us as well. let me kick it off because you were talking about the curve steepening. the three month tenure still inverted. you say the next question for the market is whether the pebble put his first or the trump put. what will these mean for the curve yak of the powell put is the one where the fed follows through on the rate cuts, and the general expectation is that should steepen the curve, so the curve would continue to steepen as rates move lower. it is not that obvious because of how aggressively the fed is priced in. that would have been the

historical precedent. the trump put would be if we get more positive news on trade and we get to price out that negativity. that should be more of a bear steepener than a bull steepener. manus: we had a guest yesterday who made the point that was the fed, in other words, the powell put being activated emboldens trump doubling down on his tariff war. would you agree with that? >> i'm not sure whether i necessarily want to go down that route. it is clear that if you know there is room on the monetary policy front to support the economy, you might be able to view onore strategic

the other objectives you might want to achieve, in this case on trade. that is certainly true. the fed would be happy with that interpretation of trump essentially willing on his cooperate fully other policy goals is quite the different question that ultimately only the fed can decide for themselves. nejra: how problematic will it be for equity markets if the fed does not follow through with what bond markets are pricing in terms of a cut? >> that could be catastrophic for the stock market. at the moment, investors are pricing in a cut by the fed. i interviewed a numerous strategist and he says the stock market could plunge as the level of the fourth quarter selloff -- there could be a major selloff if investors are disappointed in their posts. is the yield curve

in the equity market combined and it goes back over a number of periods of time. when the steepening of the curve actually occurs, we get this knocked to the equity market. is it the yield curve's trade to lose? from are overpricing cuts the fed, is it that on rallies in the curve, these bull steepeners, perhaps we sell into the rally if the fed is not going to deliver as aggressively as the market presumes? >> we still have a bearish bias on rates. i would have to agree with you. it really is very contingent on the trade scenarios you are willing to make your base case. when we started writing about the different outcomes the market was being forced to price, we had at the up end, full resolution beyond 270,

continued brinkmanship, the current forwards of 240, and the escalation into trade war with 10 year yields below 2.25. the market is pricing in that escalation. do you want to fade that at this point and if so how? i think being a white short is not the best bet. wide short is not the best bet. the steepener should provide protection against the selloff. there are scenarios where the curve steepen's in a higher rate in an -- rate environment. the payoff profile rates still offer, because if things go bad, there is room for rates to fall a lot. even in best case scenario, they

are not going to be turning around and hiking anytime soon. there is a case to be made for the treasury market as well. there's a lot of equity investors who are hedging their discount exposure by being long fixed income. nejra: it is a difficult market to trade right now. what is your advice to investors? >> keep an eye on trump because that is a driver of the market. ask yourself the question of which markets are pricing in asymmetric distribution and see if you agree or disagree. is essentially the market putting a high probability on the scenario where we have to be at the zero lower bound. personally i think that is exaggerated.

from that perspective, i think there is still value on the curve. from my perspective it is more likely to be a bear steepener rather than a bull steepener from here. we still like breakevens. manus: let's close off with volatility. the s&pinated, you say 500 managed to hang onto the 2800. my question to you is, we are in a state of flux for the bond market, but is the equity market underpricing downside risk given drift on theous vix? >> ultimately that is equity investors from our work in the work i have seen my colleagues in equities positioning within

the equity market, i think part of the reason why we are not seeing the same risk-off reaction we would have seen in q4 on some of these headlines coming out of the u.s. administration is because people are better positioned within equities. they are longer bonds. partare going to be have of their risk exposure through treasuries. that is why we have not yet seen the reaction in equity markets. much more to get. more to come from both, they stay with us. let's get your first word news. >> italy's government has come together to defy the european union's budget rules. this comes as the block starts disciplinary proceedings.

west texas crude is holding its loss after slumping into a bear market. this is ballooning interest rates raise fears of a supply glut. u.s. stockpiles group in the biggest amount since 1990. opec says it will take economic bearishness into account in the coming weeks. president trump says not nearly enough progress has been made in trade talks with mexico. this raises the likelihood washington will follow through with tariffs next week. could's foreign minister said they did not talk about tariffs, but focused on migration. members of trump's own party have warned against tariffs and are calling for a deal. 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: thank you so much. we are live from st. petersburg, where we will be speaking to the ceos of socgen and total as well as the russian central bank governor. also paris for the goldman sachs conference where we have a number of interviews, including vice chairman of goldman sachs. do not miss any of that. this is bloomberg.

later today the ecb will decide whether the euro zone needs more stimulus. that is as other central banks turn toward looser policy. investors and economists are looking for a signal mario draghi will deliver a last burst of monetary support for his -- before his term ends. joining us is maria tadeo.

great to have you with us. just how dovish is draghi likely to sound to? the question is whether he's going to amp up the market. >> exactly. given all the tensions we are seeing play out from trade, mario draghi will likely say the risks are to the downside. that warrants a dovish tone. the question is how and by how much. we will get a forecast for inflation and gdp. the market is not expecting big changes. i'm sure you remember the european central bank cut its productions at the start of the year. -- projections at the start of the year. when it comes to the technical cheap loansround of for banks. the market wants to see the pricing.

the question is whether draghi will feel he has to be as generous this time. the forward guidance, the european central banks says we will not hike rates until the could that, but change until 2020? the market is already pricing that there will be no hike until 2021. manus: a fascinating day covering the ecb. tadeo indayo -- maria lithuania. rates and equities. what a feast. first of all, the market is already pricing in a rate cut for 2020. the first quarter of 2020. will the pressure build for a deeper cut? you say you do not want to phase out. how are you playing that prospect?

speaking, that is one way of profiting from an inversion at the front end of the curve. ultimately the big challenge we have got for the ecb is that, yes, it would be nice if they could provide stimulus. every additional measure we are now looking at that has a meaningful impact, we need to start crossing redlines. the ecb has previously promised us they would never cut rates again. deeply unpopular in certain parts of the european population. qe would come with its own problems. you abandoned the 33% limit? to you abandon the q? -- the capital key? the question really is whether or not the news as it stands today is bad enough to warrant such an aggressive move.

i do not think we are there yet. part of that is also the issue that the leadership of the ecb is going to change materially over the next six months. nejra: when we were talking about u.s. rates you were saying they should be drifting higher. i know fundamentals are not what is driving the market right now. ds?t about buns -- bun >> i find it easy to be constructive bunds. it is much longer in europe than the u.s.. are we affected by everything we have talked about. our own trade issues with the u.s. over autos in the way we are impacted by the policy decision on ireland -- on iran, italy, you name it. even if you put a very small probability on anyone, we can

construct the distribution of forecast relative to forwards that is much more constructive. maybe 10 years in the bond market causes you to be self-deprecating. you focus on the most hated asset around the world, which is european equities. if there is a more benevolent ecb, do they still retain that moniker? >> you are absolutely right. it is the most hated asset globally. is investors are really pricing in a very soft ecb. that has not changed. in other issue is investors european stocks are simply too optimistic. you have difficult and challenging moving parts, right? german automakers potentially being hit by tariffs. then we've got the italian debt issues yesterday.

italian stocks immediately dropped against the market. there is just too many of these uncertainties. that will send european stocks down as much as 20% over the next 12 months according to socgen. assets really an investors are staying away from because there are so many of these moving parts and they do not know what's going to happen. nejra: what are you expecting to hear on tltros? >> it will have to be generous. the upper bound of rates most likely resting flat. nejra: thank you so much. bloomberg's equity reporter stays with us for the hour. india stocks falling as investors wait for the outcome of the central bank policy

review. the latest on that next. ♪

manus: it is daybreak europe. holding after slipping into a bear market on wti. this will be one of the key talking points from st. petersburg where world leaders and industry chiefs are meeting for the international economic forum. let's go there live with annmarie hordern. great to see you. >> good morning. thank you for joining me. i am joined by the russian economy minister. thank you fourth -- thank you. president xi jinping is here. of tremendous

uncertainty with the trade war with washington. are you concerned about the global trade war? indicators are all going like this, they are going down. of theantial slowdown global economy is painful. >> we see a profound slowdown in china. what is the impact on the --sian economy the echo economy? -- are already lower. there will be in effect on russia but it will not be very much. >> well beijing is in a standoff with washington, there must be an opportunity for moscow. signeday president putin 30 documents. you also signed 30 document with the chinese? >> we have a limit in terms of development relations with china.

we are working step-by-step. trade wars come and go, but we are working for longer-term prosperity. >> commodities are the big story. it is not only commodities. you are right. there is agriculture, the soybeans. >> that is partly because they are trying to diversify outside washington. >> china wants to diversify and russia as a neighboring country, it can be source -- one of the reliable suppliers. >> also huawei. you are not worried while any government is looking into whether they could provide a backdoor to the government? >> we are working with them in joint of element of the product.

with the u.s. partners. >> the latest trade data shows the u.s. dollar still dominates transactions for russia. has the dollarization of the russian economy failed? >> it has not failed. trade with china, with turkey, with a letter -- with other major partners in trade is increasing. the dollar is losing its market share. you think it is moving fast enough? >> we should not be in a rush. noshould be a process with effect on the real economy. >> do you think relations with russia will improve? donald trump campaigned on this. it has not actually happened. , internalse stories

stories of u.s. politics, because you mentioned the trump butcampaigning for russia, ,hat we are witnessing additional pressure, so on and so forth. the internal political problems russia has nothing to do with it. >> washington is considering more sanctions, also harsh measures to prevent dollar transactions by russian banks. how are you preparing? >> u.s. politics as we see is painful not only for russia, but for global growth story. stuff is, all this actually hurting the united states, not only the global economy as a whole, but the united states.

we just wait to see what will happen there. we have to wait on that. >> one important issue domestically as oil. >> it is not that important anymore. was huge foro it the russian economy. we have a deep set of structural reforms and now we are much less dependent. $70 to price went from less than $60. lower,with oil prices there is less revenue for growth. do you think this deal needs to end?

themselves. they target volatility. you have a more stable environment for longer-term. >> yesterday it was said that russia needs to defend its market share. do you agree? >> the oil industry is not a key. it is very important for russia historically, but it is not a key in russia's future. manufacturing and services are much more important. forum is abouts investment into russia. a famous foreign investor is under house arrest. do you worry that sends the wrong message to investors? i hope this will be behind us. time.nk you for your that was russia's economy minister. $40 for the price of oil. great interview there.

for coverage with anne-marie and the team during the next 24 hours. let's check on markets around the world. the team is standing by. waiting for the r.b.i., niraj shah and in hong kong, david ingles. primed, bloomberg economics say this is just the start of a feast of more stimulus. >> good morning. you could not have explained it better. the one thing i would probably add is that for the first time it is in the country will not be in measures of 25 basis points. minister, r.b.i. chief in the previous policy, the markets bracing themselves.

store? there is more in what to markets -- what the markets do will be interesting. 25 minutes from now you will hear from the reserve bank of india about its decision. all eyes glued on that. you also have your eyes on other markets in asia and the rest of the world. we are really grappling with what the fed does next. also where we go on trade. >> absolutely. you take those things we just mentioned and you look at where the two-year is right now, in asia, we are now back at 2017 levels here on the two-year. the fact this has been japanese yen, also bid in the asia-pacific, perhaps signaling this rally we are seeing overnight in the u.s. into asia might not be as solid. when you look at u.s. futures, down as much as 1% at one point. a lot of the weakness we saw was

because of the lack of a deal -- were for progress on the mexico deal. the level of 20 bodes well that markets are still hoping to get a deal. bearr india, this one in a market. they are entering a bear market. it might be a blessing not just for india but for the rest of the area as well. we are talking about 108 on dollar-yen. just watch for the support levels here. the fact we are back above this redline you see here, i guess it's well -- bodes well. this one towards the weaker side of one away on dollar-yen. there might be more runway. as you can see, we are very close to support levels at this point. . nejra: keeping a close eye on technicals. thank you both so much. david did mention this.

wti falling into a bear market. u.s. oil jumped the most in data going back to 1990. the ballooning stockpiles are raising fears of a glut as trade disputes threaten demand. opec's secretary said oil producers are committed to keeping levels balanced. you were listening to that interview. with where the oil prices are going, how much of this is based on fundamentals and how much of it is being swept up in the trade war angst we are seeing? >> you are absolutely right. oil has become swept up in geopolitics. constraints have been present for the past few years. at the same time we have this trade boost. they are affecting global demands. oil is becoming a derivative of these concerns. now it is much harder to track the oil price. we have seen a collapse of 20% since the april high.

it is a lot. at the same time, oil producers, especially big oil companies, have become well-adjusted to these fluctuations in oil prices since 2014 when oil started collapsing. they have done a great job cutting costs and diversifying. oil is diversifying toward gas, natural gas. i expect them to be quite well protected despite the 20% downturn. manus: we have this note from morgan stanley, they downgrade their price target on brent at $70. what shocked me the most was they survey a number of countries, eight of which demand was stagnant in april and may. they downgrade the global growth outlook by 20% this morning. it is the demand side which is also under pressure. >> absolutely. we saw the world bank downgrade global growth this week, citing the slowdown in trade because of the tariff rules.

u.s.,ade spat between the china, now mexico is involved as well. oil is getting hit by major geopolitical factors. it is not just about supply and watching u.s. stockpiles anymore. it is not about opec anymore. it is a very difficult oil market to predict. isgan stanley's forecast bearish. at the same time, you are seeing a downgraded forecast of $70 a barrel. oil is also -- is already below that. back at levels in december when we had that extension of the opec plus cuts. we are back at those levels. a lot of pressure coming to bear on the market. thank you. don't miss the energy panel. we are going to deep dive into oil in a very hard way. annmarie hordern is on the ground hearing from foreign ministers and executives.

all in st. petersburg. this fridayh that on bloomberg tv.

nejra: this is "bloomberg daybreak: europe." manus: let's turn our attention to the fed. the dallas fed president says it is too early to make a right decision. we are going to be vigilant about understanding trade tensions. most importantly, see if they persist. to's -- too soon to make a judgment as to whether we might or might not take action. i would rather be patient. manus: kaplan suggesting it can

all turn on a dime. let's get to our bloomberg surveillance anchor. francine lacqua at the goldman sachs financial conference in paris. a very good day to you. >> good morning. our next guest is the chief executive of goldman sachs international and vice chair of goldman sachs group. he was also one of the business leaders who sat down for breakfast with president trump this week. welcome to bloomberg and thank you for giving us access. it seems more and more chief executives have to run businesses looking at geopolitics. he met with the president and the prime minister. how does this affect your business? >> it was a highly constructive meeting. looking at this opportunity between the u.k. and the u.s. we are obviously a u.s. company highly invested across europe.

just looking at ways we could do more business. >> how do trade tensions affect your business? does it affect clients, markets, and operationally, does it change anything? the 4, 6 weeksat ago, the expectation was that a trade deal was going to happen. the presidents are going to be meeting at the g20 meetings. as quickly as sentiment can shift one way, it can shift the other. interest rates, interest rate , obviously in a very different position. geopolitics impact markets in a significant way.

do you worry about the environment coupled with banks that don't have the tools to deal with it? quick that is the big talk right now. >> that is the big talk right now. , you prettyphasize much always get rapid action from the fed and shortly thereafter there is a rate cut. more inmaneuver is europe than the u.s.. there is monetary flicks ability. flexibility. >> what is it like doing business in a negative rate environment? when will that change? >> when that will change i don't know, but it is obviously very tough for the big retail banks across europe. it is one of the issues impacting their earnings power

and making it difficult for them to get there returns they would like to get. it will be interesting to see what happens at the ecb today. mario draghi is coming to the end of his turn. everyone is looking to the future and who will be next. ,verything else being equal given where we are in that cycle. >> from the insurance world, the banking world, what to they tell you they are worried about? >> it is really growth and earnings power. on the one hand, the revenue line is challenged. make it interest rates difficult. on the other hand, the costs are rising. you have to adapt your business model. you have to adapt your business model in a significant way. there is one solution to this. that is consolidation.

we obviously had an example of potentially two banks in a domestic market here getting together. that did not happen. if you cannot get it done domestically, across borders is more difficult. i think there will be growing pressure for consolidation across the banking space. one of the requirements would be cross-border discussions for banking unions to be completed, if there is one message to brussels, get on with it. let's get that done. >> i was going to ask you. commerzbank, which everyone was going to see as a catalyst, that did not happen. what is the next catalyst? doesn't have to be the banking union or something else? >> domestic consolidation does not need the banking union. seeill be interesting to how investors react. i start to see investor pressure

on institutions to move forward. you start to see consolidation in the u.s.. there are strong institutions. the skill required to invest, to transform your business platforms, adapt to the new world world, is significant. to you itime i speak ask you about brexit. always something about brexit. given that banks had to prepare for any brexit scenario, does it it could be easier if jeremy corbyn came into power for the banking? >> it is a good question. a lot of our preparations run brexit were positioning the institution goldman sachs, we made those adjustments and we

are ready to go. we made a lot of moves. any change in government, that would depend, what is the impact on the u.k.? if the clients started to move, we would have to move more. clients move to europe. clients move to europe. we are positioned there. it will be client reaction we are looking at. >> what our clients asking about brexit right now? >> we do not know more than we knew three years ago. the focus of client discussion now, i think brexit is -- people have adjusted. ofre are obviously lots small companies across the u.k. that made the preparations and there will be challenges there. there are bigger issues than brexit. how do you grow your businesses?

what are you doing on the technology front? what is happening in global trade? the u.s.-china question. , as theome of that trading blocks start to separate, the imperative will be for the u.s. and europe to come close together. >> so will be the u.s. and europe instead of the u.s. and china? the trumpet ministries and goes after china, it is going after germany and europe next -- the while --dministration the trump administration goes after china, it is going after germany and europe next. it will be a very -- effort

with geopolitics. >> i was going to ask you where you see that will be repriced. are you looking at currencies or to give us volatility this year? >> volatility will be good. we have been living in a low volatility environment for a long period of time. looking at the market supposition, we are sitting in a throughout the year, they have been very significant. it has really been the corporate spine backstock. -- corporate's buying back stock. there is an obvious reason why the cycle should end.

employment is good. there is going to be more support. people are cautious. >> do you worry about china? is that the canary in the coal mine? >> the trade pressure? >> the trade? alco >>amentals the these tariffs, the base case scenario is you are going to get 10%. that has an impact. 300 billion is a big number. the 10% we can adjust around. >> that was the chief executive of goldman sachs international joining us for exclusive interview at their conference in paris. youa: really great to have with us. lots more coming up from that goldman sachs conference. we will have more interviews

including the cfo of goldman sachs at 11:30 a.m. london time. the preoccupation is the curve steepening on the treasuries. this is bloomberg. ♪

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manus: good morning from dubai. this is "bloomberg daybreak: europe" and these are today's top stories. ratesb.i. is set to cut in just a few minutes. will mario draghi promise a last burst of support before his term ends? we are live at the meeting. mexican currency tumbles as the president of the united states says not nearly enough progress was made in talks on immigration. and north to renault. to combines effort groups after the carmaker board

postpones a decision for the third time. nejra: later today the ecb will decide whether the euro zone needs more stimulus. arestors and economists looking for a signal mario draghi will deliver a last burst of monetary support before his term ends. joining me now is bloomberg's maria tadeo. draghi outout -- can dove the markets? >> that is the question. he will sound dovish. the question is how much? the risks facing the european economy are very much tilted to the downside. we will get new projections for

inflation and gdp. they were already cut at the start of the year. the market is not expecting a lot of movement. about to leave. there are two things. whether we get any surprises before he leaves or the timing --this, the fact that every in europe will change mean he is very constrained in decision-making. manus: it may mean he gets to offer the banks some cheap money, paying the banks to lend. -- what doect from 3?expect from tltro >> this is cheap money for european lenders. whether or not we see a european central bank is equally as generous as it was in 2016, last time it was priced at 0.4%.

whether we get that is a question. another thing the market is paying attention to is that forward guidance. until now the european central bank has said we will keep rates low until the end of the year, the conversation has now moved on. many say that could change to 2020. the global conversation if anything on interest rates is that everyone will have to eat further. nejra: thank you so much. let's see how the futures market are set up here. we are just under a half hour -- under an hour from the start of cash equity trading in europe. a gain of 0.3%, no gain was expected. in terms of the year on year, although we did see a drop, it was not as bad as the market had been penciling in. ftse 100 futures dead flat. dax futures turning negative. same for cac 40 futures. turningures also

negative. with the curve steepening we are seeing on treasuries, the question for the equity market becomes, if the fed does do what the market is pricing, what is the reasoning? that could signal the next direction as well as any more updates we get on tariffs. manus: the voices from axel weber and others or that we priced in too much to aggressively from the fed. they are more worried about the fed not being able to control. read headlines aplenty. they are going to split up the business. the new ceo just in the job three months, numbers come out in just a second. life in general insurance business is to be split in the u.k.. pretty much broadly consistent with 2018. in terms of the move, this guts 1800 rules. -- 1800 jobs.

they intend to cut expenses by 300 million pounds per annum through 2022. they are also naming the people that are going to run the businesses. colin holmes is going to become the ceo of the general insurance business. angela darlington is going to become the interim ceo of the life business. there has been so much news flow . yesterday we broke the news that the cfo was leaving. this is after the departure of their ceo last year. a new man at the helm. nejra: more breaking news. we are keeping an eye on renault fca. french finance minister is saying they requested a delay to seek nissan approval on the deal. we are seeing renault shares falling 8.7% on trade gains. that is what we are looking at in terms of renault and fiat chrysler as we continue to get updates.

we have the bond markets to look at as well. we were talking about the curve steepening. juliette saly is standing by in asia. big question as to whether steve -- curve steepening continues. how are the asian markets taking all this? juliette: certainly watching that in the jgb's. in terms of equities, you can see it is risk-off. things have started to peter off as the u.s.-mexico concerns ramp up. china's market down by 0.7%. you have seen some of the tech stocks, telecom stocks i should say, doing ok with the government announcing new 5g licenses. also worth noting there was a $72 billion cash injection from the pboc today. japan closing fairly flat. australia was higher. we are awaiting a right decision from india. let's look at those japanese assets. there has certainly been money

going into the yen and japanese bonds today. yields lower, although virtually unchanged on the 10 year. we are also closely watching what has been happening with the rupee. it is down by 0.1%. we are expecting the r.b.i. to cut interest rates. manus: they had better deliver that. let's have a quick sweep of those bond boards. you mentioned what is happening with the curves. we just had a conversation with goldman sachs talking about swift action, but not always a recession after the curve inverts. bonds are rallying this morning. there are a couple different protagonists. failing talks between mexico, the talk from trump yesterday about iran. were appalling.

27,000. the month -- the market penciled in -- that is horrible for the jobs data tomorrow. axel weber says we have gotten too far ahead of ourselves. the goldman sachs president says it worries me how much influence the fed has on market sentiment, which takes us to a very important point. who is in control of these markets? has the fed lost the messaging bullet train? bunds areup, bones -- bid. is it the jgb driving force? beginning in japan is to price in 10 basis points up from the boj. let's talk about the yield curve and the steepening. an indication bond traders are expecting rate cuts by the fed. top policymakers suggesting they are not ready to act yet. dallas fed president robert kaplan joined us and said, look, it is too early to make a right decision.

to be veryoing vigilant about understanding heightened trade tensions. most importantly, see if they persist. i think it is too soon to make a judgment as to whether we might or might not take action. i would rather be patient and let events unfold a little bit more. let's bring in our guest host. good to have you with us. what happens in the bond market has an implicit implication for the equity markets. we have got the steepeners going. you traditionally have seen these, i take you back to 1995, the equity market sort of rolled over. what does a steepener in the curb -- the curve say to you? >> it just says there is a lot of events that are facing the markets at the moment.

call becauseot they are not dependent on any particular direction. it is actually about negotiations between the united states, also other countries resolvehe world to trade talks. that means markets are worried shavinge potential for 0.5 percent off global gdp and what that means for corporate earnings. at the moment, the markets are much more worried about really when we would see the turnaround back up to corporate earnings as close to when the bottoming out of that will happen. is that going to be the next quarter? global economy is slowing. other central banks are talking about potentially -- nejra: when we were talking to

our guest last hour, we were talking about the steepening of the yield curve and he said for the bond market, the next question is whether we get a fed put or a trump put. that has different applications for the equity market. what if we get a fed put but not a trump put? aret the moment, markets expecting if there is going to be a trade deal between china and the united states, it is not going to be imminent. the markets have already started pricing that in. chineseseen that in the market, for example. the we are trying to see is news flow is when we get stimulus, from which central markets tolow those do better than they would have done otherwise. climbing a wall of worry. what about positioning?

we just had a conversation with richard from goldman sachs and he said equity markets were not euphoric. if anything, it was the by backstory that emboldened the -- the buyback story that emboldened the market. there is not a huge exposure to this equity market at the moment. on the sidelines waiting for a drawdown. >> i think it is always going to be a tug-of-war between riskier assets and other assets when it comes to how do you take advantage of your -- what is the best place to put your money. while we are getting worries about what is happening with the economy and the potential for, if you like, seeing the risk-off, we are seeing a loss in they not playing equity market. the same time, we are actually

companies, also seeing corporate earnings are not badly hit. in particular, the technology sector, because of worries that were happening with china tech stocks, but actually, it is fine. valuations, therefore, look attractive to us. for us, what you do when you worrying -- climbing the wall of worry as i said, you look for those companies that have strong and secular growth trends that you are likely to get a bargain. i was talking to geraldine of pimco yesterday and she brought out the reasoning of a rate cut, whether it is insurance or whether it is based on worries about global recession. she said equity markets right now are praising the former and insurance cuts from the fed.

what you agree? if we do not get a fed rate cut, how much higher can we go on equity markets? >> what is really important is to realize that actually we are not going into recession. we are going into slower economic growth. problem with the markets when they don't know how much slower is you get that volatility we are seeing in markets. thinks why actually we there are some hurdles in the road to global economic growth. these are on calculable. we have to see what happens with negotiations. that is why we have -- we are signaling we are willing to be -- to have this kind of stimulus. going forward. equity markets are not seeing recession. manus: we are waiting for one of

those central banks to deliver their decision. the r.b.i.. that is going to come through. you talk about china and you talk about the millennium. this is where you see the opportunity. consumer with a skew to the millennial side. a slowdown, but not a recession in the united states of america. is that a slowdown in china? or is there more to come in china? actually it has just broken. the r.b.i. has actually left -- sorry. the r.b.i. has cut rates to 5.75% from 6%. this is the data we have been waiting for. have cut rates by 0.25%. slowing growth is one thing they want to protect against. they have said expect a little bit more to come. nejra: as well as the cut, which was expected by many, is the

guidance. they are changing their monetary policy stands to accommodative. we begin to ask herself, how much further can the rate cycle go? they have cut their gdp growth forecast as well to 7% from 7.2%. we are getting guidance, forward guidance which seems to be coming through as dovish as well as the decision. just to get your initial reaction if we are talking about global central banks and how you have been positioning, how are you positioning in indian equities? >> we still like indian equities after the elections. there have been -- the expectation was that we are going to get the government we have at the moment. we think the economy will still do well. we are talking about 7% gdp growth. when we look at the reactions, as a reaction, this is what we are seeing from central banks globally now. we are going to see central

banks doing this kind of insurance -- nejra: insurance cuts. >> because we do not know when it will come out and whether we are going to see expansion, global expansion in 2020. 2020.19, but maybe acceleration again in growth. to do that, they have to be doing what they are meant to be doing which means ensure we do not get an accident while that is happening. is what central bank's are doing at the moment. lots more to discuss. coming up on bloomberg tv, we are in paris for the goldman sachs conference where we have high-profile interviews. that includes executives from goldman sachs as well as santander and standard charter. this is bloomberg. ♪

nejra: 39 minutes away from the

cash equity market open in europe and this is bloomberg daybreak: europe." recap.a quick r.b.i. cut the rates. have a look at the bond market. there is quite a repricing going on. the r.b.i. cuts its full-year 2020 growth forecast to 7% from 7.2%. that is more aggressive than i had seen before we went into this. they also set a 4% leverage ratio for some of their domestic banks. talk about an aggressive repricing. sentiments to be this coming through from some of our editors in asia. the central bank seems concerned about growth. the stanzas now accommodative from neutral.

all six members of the panel voted for these policy moves. nejra: we have seen the rupee weaken. we did touch on india earlier. for globalove central bank's becoming more accommodative. less talk about another central bank, the ecb. big questions over whether mario draghi can out of the market. dove the market. >> sentiment has been going around the market for a long time. not only do we have the changes markets,eing in global actually changes into much more of a -- economy.

the european economy is china facing. the more china worries are out there the more europe seems to be getting the backlash from that. on top of that, we have got brexit. effect this incalculable on sentiment. when you think about innovation, when youth think about the economy itself, it will bottom out and you will be able to find companies you really like, particularly in the smaller companies space. manus: i am just noticing the story from barclays this morning. the most despised market in the world, that is the u.k. ftse, they are overweight versus european equities. so long as you hedge the currency, brexit uncertainty caps the pound for now. do you think that is a similar story?

>> european markets are outward looking, but there is a lot of exposure in the european markets. two thirds of the earnings come from earnings being made outside the united kingdom. we have had a lot of worries about domestic u.k. companies. they don't really move the neil -- move the needle when it comes to ftse. it is a one-off event. whether we go out without a deal , it is postponed, there is a solution, for that reason it is really difficult to work out what to do with u.k. markets. so you go and look for the companies you like. that's how you focus your attention. nejra: do those companies include banks? people say they like u.k. domestic banks. we are looking at banks today because of more details on tltros.

>> what drives banks? two or three things. whether there is long growth, and therefore you raise your income, what happens to your net interest margin, and what happens to innovation and the ability to assess cheaper and deliver services that are wanted. if you backtrack from all of that, you will find demand for loans will be dependent on global demand, net interest margins can be helped with obviously weaker central banks, but it is all about demand. manus: we are going to have to ended there. -- draw line there. let's get a quick snapshot of renault. our reporter on the ground. we heard from bruno le maire in france. --have the very latest on

>> good morning. i do not think it is a matter of price that the merger proposal has collapsed. i read the report yesterday highlighting the stakeholders that need to be satisfied, not least the french government, who are requiring guarantees over jobs and corporate governments -- governance. aso nissan would have been junior partner in this relationship. they needed to be reassured. overall i do not think this is a major surprise. surprised. looking forward to see what comes next. don't miss our coverage of the conference, including this energy panel moderated by annmarie hordern. we will be hearing from oil ministers and executives. catch that on bloomberg tv this friday. wti in a bear market and bonds in focus. manus: and we have bounced from that bear market. the question is what will happen next. -- what doeslieve

that really mean for the equity markets? i will see you next week. this is bloomberg. ♪

anna: good morning, welcome to "bloomberg markets: european open." we are live in our european headquarters in london. i am anna edwards alongside matt miller in berlin. matt: stocks trades mixed in asia, and in european futures. u.s.-mexico tensions but a dampener on sentiment. the cash trade is less than 30 minutes away. anna: merger talks stalled. renaul