>> good morning. from bloomberg european headquarters in the city of london, i'm nejra cehic with manus cranny live from dubai. these are today's top stories. ramping up the rhetoric, president trump threatens higher tariffs on china if does not meet at the g-to 20. this is the povc as the u.n. heads toward the key seven level. alarm bells ring. u.s. stocks climb for the fifth day as equities head back toward record highs. but the market's key fear gauge flashes warning signs. and deals, deals, deals. polo global buys online retailer shutter fly for $1.74 billion. this after cloud software giant sails force -- sales force bets on big data with a $15.2

billion swoop for tableau. manus: welcome to "bloomberg daybreak: europe." global stocks have rallied for six days in a row. $2 trillion has been added back in value. the bond market may be screaming recession. the stock market is screaming. we know who the heroes are. they are the world's central bankers. this is what's baked in. the fed, 3 1/2 cuts. the e.c.b. one cut and bank of japan 10 basis points. r.b.a., all the heroes to the rescue of the equity market. six days in a row, the longest winning streak in three months. equity markets will not be barred by the rhetoric from trump and will wait for the action at the g-20. roll it over and have a look at the rest of the markets. you are seeing a couple of individual moves. you got two offers and two bids in the oil market.

on the offer side, trump's warning about escalating tariffs on china and years of global growth and baker hughes data a drop in rigs and opec extension of the opec plus deal looks like a shoo-in. oil is stronger this morning. now, when it comes to dollars, swiss, this is the currency up 2.2% in the past month. j.p. morgan says this is the currency that will rally the most in a new fed cutting cycle. and 1981, 1989, 2001, seven. 1995 -- 95 is the new target. welcome back. good to have you back in the seat. nejra: thanks, manus. great to be back. the trade war uncertainty continues. the fed rate cut pricing gets more aggressive and three days of declines in the dollar and questions over whether we do get a rollover in the dollar if we get the fed rate cut. strengthening today but were testing the 100 and 200-day moving average. 10-year yield steady after jumping seven basis points yesterday. 215 is where we are and five days of gains is with a we've seen in sushes equities and

judging by the futures market we would see a sixth. let's check in on the markets in asia. in singapore, more for us. great to have you with us. take us through the action. reporter: well, nejra, that lift in u.s. futures helping out asian stocks for a third session. we are higher. for a third session in a row and a lot of gains coming true in china up 2. %. construction stocks getting a lift there on hopes of more policy support for the sector. the hang seng is up by about .8%. and the nikkei as we see the yen once again on the back foot. also worth watching what's happening in south korea's market. we had a big drop actually coming through in exports over the weekend. the 10 days to from june 1-10. chip exports in particular down almost 31%. on a year on year basis. but you have actually south korea stocks higher today. foreign inflows going into stocks, bonds and the yuan. let's look at specific companies and we have cicc and hong kong exchange rise as alibaba looks for its hong kong

listing. cicc up by 5.4%. big deal down under with vocus being dealt for, and vocus up almost 8% on the close in sydney. but a.g.l. punished by 7%. this is a $2.1 billion deal. they are offering $4.85 aussie per share. that is a 27% premium to yesterday's closing price. manus. manus: juliet, thank you very much. president trump is ramping up the heat on china. he's threatening to raise tariffs again. if a decline to meet at the g-20 summit after trade talks between the two nations hit an impasse following accusations of backpedaling on promises. >> for investors and includes about how china's notoriously opaque government is handling the trade war, must keep an eye on the twitter feed of the

editor-in-chief of the global times. china's most prominent state run newspaper and who spoke exclusively to bloomberg's tom mckenzie. >> i have access to some accurate information for the nature of my job. but i can't say that i'm authorized by government to release the information. >> it's nair to say that officials will be passing you information that -- will be passing you tips in the knowledge that you are very ikely to tweet about them. >> to be honest, i don't know. the officials and i have a tacit understanding. as i have access to those information, i think some of them know i will publicize the information. >> chinese officials have been talking up the economy. but the data, the economic data, shows pretty clearly that we're facing a continuing slowdown in the chinese economy. so are officials exaggerating the potential for china to weather the trade storm?

>> the loss is bearable for china. people believe that it doesn't matter to have some losses. chinese economy is still growing. we don't have any negative growth. we are still advancing. and in addition, the size of our growth is still remarkable in the world. >> if trump goes ahead with additional tariffs, on all of china's exports to the u.s., what levers, what tools do you think policymakers here are most likely to reach for in terms of retaliation? >> china may target the u.s. services sector operating here. trade in services is not the same as a trade in goods. the u.s. has barely talked about services. but china knows this is a fast-growing area for the american side. manus: that's the man with the information. the global times editor-in-chief hu xijn. our guest host is charles-henry

monchau, chief investment officer at al mai capital. welcome to the show. so look, rhetoric is one thing. but reality is another. and i think it's fascinating that huxijin talked about targeting services. there is still a lot of firepower in the chinese back pocket. to retaliate. are we under assuming the retaliatory power of china? charles-henry: i don't think so. i think what is important for china is that they can indeed retal deteriorate. but they have three leeways to counteract, manipulate monetary policy, a lot of room to cut rates, fiscal stimulus and currency. keep in mind that we are very close to seven. and that the -- the hint that seven is not an issue for them and we can have a weaker -- going forward. so they have a lot of leeway to act on trade war impact going forward. manus: when it comes to global markets, i think you know the market has to digest a lot in terms of trade war bad news

over the last few weeks. and as we get into the g-20, it is key for the markets to get not a perfect trade deal, not get that, but at least a kind of trade war truce. if we don't get that, we might see more negative expectations of global growth, and i doubt that the market could make any further progress without some kind of trade truce discussed during the g-20. nejra: charles henry, good morning. a great point you make and citigroup has said that president trump is likely to put tariffs on all china goods. they've also said citigroup that the s&p 500 is heading for a full-scale bear market. this is if the fed doesn't ride to the rescue. are we at risk of a full-scale bear market in the s&p 500? charles-henry: you mentioned just the two key points. so again, the truce on trade war, that needs to happen.

but also you mention monetary policy. i think what is currently priced in by the markets is kind of aggressive fed easing, going forward. remember, there is 90% chance now of a rate cut being priced for july. the market is -- the bond market has been pricing four rate cuts before the year 2020. so a lot is already discounted and in case of disappointment, we can see the markets pulling back. let's keep in mind that this year, so very rare to not see a lot of action in terms of monetary policy and fiscal policy in the u.s. so i will not buy this bear market argument. but definitely these two things. so trade war plus monetary easing needs to happen. otherwise the market is poised to some disappointment. manus: they do say that bear market is contingent on the fed not acting. we've asked many guests over the past 10 days, the trump put

option, stepping back from tariffs, the fed put option, that you need both of these to be executed. let's assume the paradigm shift is that we get both of these in july. what is the single biggest upside trade that i want exposure to if the trump put is executed and the fed put preventative put is executed? charles-henry: so yeah, this helps the market to look beyond the 2019 earnings. they will be disappointing anyway. the market will start to look at 2020. but what is more interesting in terms of let's say asset allocation or investment opportunities is that if we do see these two key things happening, maybe the best trade is outside the u.s. emerging markets for instance might take advantage of a weaker dollar, fed easing and some good news on the trade war. so this is also something that needs to be traded. so u.s. versus the rest of the world. nejra: that said, charles henry, you're keeping a modest

overweight to u.s. equities. talk us through that. charles-henry: yeah. the first -- let's say the first trade is equities versus bonds. you know, we believe that the bond market is happening and we don't buy this panic at this stage. and this is why we -- do favor equities over bonds. that being said, we don't expect huge gain. we expect moderate gains. we also expect some volatility. but definitely the fact that we are moving from hawkish stance to a dovish stance in the fed is helping the stock market. if you look at history, usually when there is rate cuts, the equity markets rally. don't forget that also, that when you have lower bond yields, this helps share buyback. so we expect more share buyback on the u.s. so yes, a moderate overweight on u.s. equities is something we recommend to a -- our clients. and in terms of using long-term u.s. treasuries, we believe that this trade, at this stage is a risky one and if you want to hedge your portfolio, we

will prefer to use cash which is -- we -- an inversion of the yield curve and provide the same yield without direction risk. nejra: charles henry monday chaw, chief investment officer at al mai capital stays with us for the hour. annabell in hong kong. >> thanks, nevera. president trump has renewed the attack on the federal reserve complaining it doesn't listen to him. he contrasted that lack of obedience with the control that china has over its central bank. this latest salvo comes before the fed meets in washington and expected to discuss if a rate cut is needed to offset an economic slowdown caused by the trade war. nominations in what's going to become the next leader of the conservative party. a record 10 tories are fighting for the role. candidates include favorite boris johnson. his highest profile, environmental secretary michael goes and foreign secretary jeremy hunt.

all the candidates agree that britain has to leave the e.u. but few agree on when and how. the world's most expensive work of art is said to have resurfaced after its whereabouts were unknown for 18 months. it said leonardo today vincecy on a yacht owned by saudi rince alman ben salamant fetched $500 million at christie's. a helicopter crash in manhattan has killed the pilot. reported a problem and wanted to return to the helli pad he had taken over from minutes earlier. crash landed into the roof of the building at 787 seventh avenue into the fog and rain. and mayor bill did he blassio said no indication of terrorism and no other injuries. global news 24 hours a day, on twitter, and more than 2,700 journal scompifts analysts in 120 countries. this is bloomberg. manus?

manus: thank you very much for that, annabell. great round-up. the bet on a big -- on big data. sales force has made its biggest deal ever. $15 billion acquisition of the software maker dablu. it moves the company further away from its central business and this this marks a new era for the top seller of software for managing customer relationships. joining us from hong kong is manuel bajuri. good to see you this morning. so why is sales force doing this deal and the question is it a huge surprise because it moved away from the core? >> exactly. and manus, good morning. i mean, it is the price. and so we had to scramble and try to understand why salesforce is yet doing its biggest deal ever so far as it tries to diversify and try to find new streams of revenue. it's getting more and more competitive in this software

landscape. and salesforce which has a very, very competitive and very challenging revenue target for the next few years is trying to boost growth and trying to do so via acquisitions. remember, last year, they did another big one. and this is just getting another step into their deal making machine. so yes, big surprise. big move. investors didn't react very well. but we need to look at the long term here and what it means for the strategy of salesforce down the road. nejra: great to have you with us, manuel. we've also seen a deal between apollo global and shutterfly. what does apollo global plan to do with shutterfly? >> well, we've seen private equity deals left and right, right? this year, i mean, it's so busy on the buyout front.

and the main reason being they've raised big funds. they have a lot of dry powder and they just need to find ways to deploy that cash. so here we are in a very competitive sales process. and we saw others like cebrus also vying for this asset. and yet again apollo emerged as the beyer for this business. it's a growing segment within the photo frames and trying to reach new customers. so apollo is also betting on growth in this new segment of the market. so buyout firms are trying to deploy capital and then you have a new change in trends between consumers. so this represents an interesting deal down the road as well. nejra: manuel baigorri, great round-up. thank you so much. coming up tug on one side

trade, the federal reserve and the prospect of a rate cut. emerging markets find themselves very much in the middle. it's a big week for e.m. we discuss why next, manus. manus: we do indeed and traveling to work, tune in to bloomberg radio. live on your mobile device. or d.a.b. digital radio in the london area. this is bloomberg. ♪

manus: this is "bloomberg daybreak: europe." i'm manus cranny in dubai. nejra: and i'm nejra cehic and our european headquarters in london. let's get a check in on the markets and a little bit of risk on happening in asian equities. pacific index in the green. trade war uncertainty continues. but the market more aggressively pricing those fed rate cuts. and we've got some strengthening in the offshore yuan with a stronger fixing than expected from the pboc. where is the line in the sand?

dollar-yen on the frerotte foot. we see some dollar strength across the board today manus and the yen retreating. 108.61. manus: yeah. you got oil, where are we there? nymex crude of the number of riggers dropped by 11 last week. so that's helping the market there on nymex crude. 10-year note at lovely line from socgen. more vulnerable than when the fed delivered its insurance cuts in 1998. talking about the u.s. economy. is it really? we'll discuss. s&p futures are up. and if you believe, if you believe that the fed are in play citigroup note saying this morning that you are going to see new highs on the s&p 500. let's get your business flash with annabell. annabell: thanks, manus. well, nokia said it's winning contracts quite hand somely. a new 5-g networks. the company's chief executive, he says it's doing well against rivals such as huawei and

ericsson. nokia is trying to push back against concerns that it's fallen behind its competitors when it comes to the next generation of technology. >> we compete quite favorably with huawei, with or without the current security concerns. we've taken some 23 contracts with -- in the last three years -- we win two thirds of the time against our competitor compared to one third of the time they swap us out. so we win quite handsomely. >> a former goldman sasms banker is being sentenced to three months in prison for insider trading. and abuse of a secret account to reap thousands of dollars in illegal profits. steve young is a south korean citizen who lived in san francisco. he worked as the vice president at goldman and pleaded guilty in december to helping his brother trade with illicit tips. and that's your bloomberg business flash. manus and nejra.

nejra: annabelle, thank you so much of to emerging markets the yuan flies toward the key seven level against the u.s. dollar. the knock-on impact of trade rhetoric continues to take a toll on asset classes. key e.m. economies remain trapped between this downside risk and the respite that a fed rate cut could bring. this week, turkish and russian central bank rate decisions and inflation data from india and argentina will set the tone. the chief investment officer charles-henry monchau is with us. we got this tug of e.m. on the one hand and risks from the yuan and the trade war and on the other the respite of a fed rate cut. what's more likely for you to happen first, the yuan at seven pour a fed rate cut? charles-henry: the yuan at seven is very close. that being said, i don't think that china is -- they want to avoid a situation like 2016 where there was a lot of capital flight.

looking at e.m., definitely the top down picture is better than last year. and some emerging markets are doing ok. fed easing will help. but what is very important when looking at emerging markets, is to -- to which both -- the trade impacts, but also how much leeway they have in terms of monetary and fiscal policy. if you look at china, for instance, they can use a lot of, you know, tools on the policy side. if you look at middle east, for instance, they're not trade dependent. and on top of that, they might benefit from a weaker dollar, lower u.s. bond yields, and they have some fiscal leeway. if you look down at e.m. asia, a lot of countries are too much related to china. and on top of that, their balance sheet is not strong enough. they will struggle. so again, emerging markets is not just one block. it is to be -- dealt in a very

selective way. manus: my guest in the last hour made it clear the current account deficits which will be perhaps most vulnerable if the yuan breaks seven, it is those pan asian currencies that are going to be most exposed. the dollar will rally and those with deficits that will be most exposed. can i ask you about the bond market? let's have a look at it. we got the emerging market chart. this is the bloomberg chart on emerging markets. and we've seen a rip roaring rally. it is coming -- and like waiting -- there you go. love the e.m. -- three weeks of rally. and these are the lowest since july of 2008. is that too far, too fast for you or how discerning do i need to be? charles-henry: fiscal repression situation, let's not forget that there is currently more than $11 trillion of bonds worldwide which do have negative yields. so indeed investors, you know, are looking for yield and emerging markets, currency bonds, is a very attractive segment. so we are bullish on emerging market debts. more -- and it is through that,

some high yielding emerging market currency looks interesting, mexico for instance, look at russian ruble which has been doing decently well since the start of the year. so important on the e.m. local currency side as well. nejra: charles henry, are there any e.m. currencies that you're choosing to short as a hedge against trade war risk? charles-henry: well, you know, e.m. asia is most likely to, you know, to suffer from escalating trade war. you also need to consider countries which, you know, are facing deficits. think about turkey, for instance. so again, you know, there's a lot of -- you know, things happening within emerging markets. i think the key point here is that if you compare it to last year, there was the breadth of -- weakness in the emerging markets was very -- was big. this year, we are seeing a lot

of dichotomy. and that's a rather positive sign for emerging market currencies. manus: charles henry, stay us with. more to get through. charles-henry monchau our guest host this morning. coming up is history on your side? j.p. morgan says watch out for the swiss frank:. we'll discuss. -- swiss franc. we'll discuss. ♪

manus: tchs "bloomberg daybreak: europe." i'm manus cranny in -- this is "bloomberg daybreak: europe" i'm manus cranny. nejra: at 9:30 a.m.u.k. jobless claims and unemployment. this comes a day after the news factory output has fallen the most since 2002. and at 10:00 a.m. the bank of england, testifying to the treasury select committee. watch for any comments as global central banks are turning dovish. manus: you get to lunch time, the finance minister geovany tria will speak in parliament on the bunlt fight with the european union. what will that bring?

what will that do to the spreads? and germany and italy? this massive reach for deal that we've talked about in the italian market. but it is trade that tops the agenda overall. so the rhetoric from trump is about a potential ratcheting of tariffs on china. but i look at what the chinese are doing, stronger fixing on the yuan. and might talk a loose game but don't play one. nejra: yeah. absolutely. we heard from e-gong, the governor of the pboc saying no one number was more important than any other. so that's something the market is getting its head around and also for equity markets, the gains that we've seen over the past few days, not least in the u.s., may be more skewed toward the facts -- they're thinking the fed will step in and save us all. manus: we got to look at the c.f.i. 300 and the s&p 500. there's a note out this morning that if the fed comes to the rescue and that's a base indicate assumption, that they -- so you'll see new highs on the s&p 500. and take a look at the c.s.i. 300. it didn't spend any time kissing the 200-day moving

average, nejra. nejra: yeah. absolutely. and while we talk about central banks turning dovish the fed, e.c.b. and b.o.j., you name it the question becomes whether they actually have the tools left. when you talk about these phrases about inflation expectations, deanchored is the one thing that central bankers don't want to hear. let's check in on the markets around the world. joining us from our bloomberg in mumbai, and hong kong, great to have you both. let's kick things off with you. how is the banking sector in india looking today? [no audio] manus: we seem to have a problem there. let's get to evon standing by. good morning to you. let's have a little chat with you. we can fix those tech problems. take it away. >> yeah. -- the oned about the stocks shrugging off the

threats from president trump and the ultimatum for china that he will be raising tariffs if he doesn't get to meet xi compin ping at the g-20. the market seems to think we are getting closer to a deal than we were probably a week ago. because we heard from president trump saying president xi is still my friend. he also avoided tariffs with mexico. you add the whole pboc and -- put and the fed put and we are seeing risk assets outperform here today. and returning from that holiday we're up 1.5%. c.s.i. 300 we're seeing a 2% gain here today. the biggest jump we've seen for the large caps in a month or so. and it's the crurks stocks, the infrastructure stocks that are rallying here today. with stimulus at play. china easing restrictions on spending on proceeds from the special bond sales that we saw earlier this year. and they're also encouraging banks to loan to some of those projects from some of those projects as well. that's certainly helping sentiment here today. and asia, a.s.x. looking mixed

remimby ecommend by -- looking firmer and around the 692 or 693 level after that stronger fixing from the pboc and an act of defense potentially here. but take a look at the terminal chart. we've -- take a look at the options market and what they're pricing in. we actually have the -- inching closer to that seven handle which we briefly hit yesterday here. so it's becoming more of a consensus view that we are going to be breaking above that seven. but hold up. we haven't seen it back -- to those levels since late of 2018. but we're actually inching slightly off that right now. so perhaps in terms of the short-term speculation, we could see a weaker remimby and seems to be running its course and options traders are willing to sell some of those options above seven and start buying the remimby. this is despite the fact we're hearing the likes of dbsa and we could see the remimby weaken

past seven as early as the end of the month, nevera. nejra: indeed. and goldman also expecting the yuan to breech seven within the next three months. great round-up. in hong kong, evon, thank you so much. annabelle droulers in hong kong. annabell. annabelle: thanks. we'll stay on trade and president trump has threatened to raise tariffs on china again. if president xi does not meet with him at the g-20 meeting in japan. and he could impose 25% or much higher on $300 billion worth of chinese goods. the trade war has escalated last month. with the two countries blaming each other for the breakdown in talks. president trump: i think president xi of china, great relationship with him. i think he will be there. we are scheduled to talk and to meet. i think interesting things will happen. let's see what happens. annabelle: the bank of england

doesn't have to wait for brexit to be resolved to hike interest rates. michael saunders saying the economy will move to excess demand if brexit goes smoothly and that means the u.k. will need monetary tightening. and he is known as one of the more hawkish members of the monetary policy committee. nominations to become the next leader of the conservative party. a record 10 tories are fighting for the role. candidates include favorite boris johnson. his highest profile rivals are environment secretary michael gose and foreign secretary jeremy hunt. all the candidates agree that britain has to leave the e. u but few agree on when or how. on twitter, 24 hours a day, journalists in more than 120 countries. this is bloomberg. manus? manus: annabelle, thank you very much. now, president. united states, donald trump, laments his lack of china

control over fed policy. bond traders expect the central bank to start slashing interest rates within months. this is just part of the global tilt toward dovish policy. by the wore's central banks. -- world's central banks. >> central banks have moved to an accommodative stance. >> it's fair enough to say we -- >> this reduction is possible. >> if things do not go how it is predicted, we will certainly act. >> all of you have been talking about rate cuts so much. so rate cut gets into your system. >> several members raise the possibility of further rate cuts. >> like mario draghi, we can do these things -- > the room for adjustment is tremendous. manus: there was a global memo. never mind negative feedback

loops, positive feedback loops. rate cuts. charles-henry monchau is our guest in dubai. i want to show you what the market is presuming for rate cuts. i mean, a roll call. the fed 3 1/2 cuts and e.c.b. 10 basis points and the charts, bank of japan 10 basis points and pretty darn sure of one thing. not only are you going to get rate cuts, but you are probably going to get unconventional policy as well. the leer owes aren't they central banks? charles-henry: yeah. i think the markets got addicted and the central banks now not just looking at inflation. but those asset prices. so now that we have some pressure, as you mentioned we shall never underestimate the ability of central banks to come with new tools. there were some discussions a few weeks ago about modern monetary policy, and there is much more to come. looking at the fed, what is indeed priced bit markets? first a steep decline in rates

this year. looking at the latest number. futures market is pricing in 70% chance of three rate cuts before the end of this year. and an additional one next year and then maybe some recovery. some new rate hikes no later in 2020. so that's the scenario we need to get prepared for. when it comes to fed policy. nejra: charles-henry, the bloomberg dollar index has tested the 100-day and 200-day moving average and bouncing off them slightly today. should we be careful about presuming that we're going to see a weaker dollar along with fed rate cuts? charles-henry: yeah. that's a very interesting point. the dollar has been strong here over the last two years. because it has been a winner by default. it's not that the u.s. economy was doing that well. it was doing better than the others. and obviously in terms of monetary policy, there were some kind of divergence happening.

now that the fed has leeway to cut rates, and the other central banks are close to zero if not negative indeed it's possible to see some weakness in the dollar. there was also some overoptimism going in to may if you look at speculators positioning it was very bullish dollar and might explain why we had such a pullback. but, you know, looking on the more medium term basis, for the dollar to continue depreciating, we need to see more the dollar liquidity being injected and also global growth becoming more robust and more evenly distributed because of different countries. otherwise you might not see sustainable dollar weakness. manus: the message of the g-20, finance ministers at the g-20 perhaps -- and want to pick up one of the themes where we go with the rates and the curve. let's look at the chart. there is this view that the rates market is going to bully the fed into a cut.

and perhaps try and surprise it. but if -- it might take you forward to 2020. 2021 which is what we're looking at here. the euro dollar strength. the market is to me suggesting it's going to be a v-shaped -- i'm not talking about recession. i don't know whether we're going to have a recession in the united states of america any more than anybody else does. but it's going to be a v-shaped moment which is dying to go quite aggressively. and then we reprice to recovery. would you agree with that? charles-henry: you know, everything is possible. i think we mentioned this all the time. late cycle. everything is becoming volatile. not just the markets. macro numbers are becoming volatile. and fed expectations are also becoming very volatile. so these expectations that you just pointed out, might change in a matter of weeks. if by any chance there is no trade stabilization and the fact that the long end of the curve has already been going

down, recently helps the global growth to slightly recover, we might see some changes. and there are the c.p.i. numbers tomorrow. and if we do have week c.p.i. numbers after the weak job numbers we got last week, then i think it's -- the rate cut in july is almost done. nejra: the rate cut in july almost done. if we get weak c.p.i. numbers. ok, then, charles-henry. earlier you were saying that the bond market has gone maybe a little bit too far. you wouldn't necessarily want to be in u.s. government bonds. but if we get the weak c.p.i. and then we do get that fed rate cut in july, how many more cuts are we going to get? because it's not usual that the fed does one cut and then stops. charles-henry: yeah, that's true. and by the way, one thing is interesting to look at is -- is when you look at inflation rates in the u.s., interestingly, despite all of the rate cuts which are are not priced in by the market, we didn't see a spike in

inflation. and 1.7%. o way below the 2% inflation target. by the fed. so that might indicate that there needs to be more rate cuts than just one or two. and -- for inflation to pick up. that's the message at least from the tips market. manus: i want to talk about the swiss franc. do you see any possibility -- and people -- have been lambasting the possibility of a 50 basis point cut in july. if you wanted to shock and awe and get ahead of the curve why not go for 50 basis point cut in july and there you go, we're ahead of this? charles-henry: that might sound -- again, the fed is watching the markets. but they are also, you know, some other, you know, macro indicators to watch. and let's keep in mind that you have wage growth around 3%. you have rents growing at 3%. year on year in -- across the state. so if you look -- rates should

be like 100 to 200 basis points than they are today. so there is no balance to be found. that being said, it's very rare for the fed to disappoint the market. i think the last 13 occasions, where the markets were -- was expecting a rate cut, the fed did cut by exactly the amount the market was expecting. nejra: nejra: charles-henry monchau stays with us. if we did get 50 basis points in july that would be an insurance cut extraordinaire. nokia c.e.o. says the company is still winning contracts to supply 5g telecom networks despite delays to its deliveries in an exclusive interview with bloomberg dismissing the idea the security concerns in europe could delay the rollout of 5g. he says it's too early to tell whether america black listing of huawei is a net positive or negative for nokia. >> early to call it anyway. and yes, there's some uncertainty and some

unpredictability as to how this will unfold. what we have done is on our part we've been very thoughtful about if you are a customer, that wants to swap out your existing 4g how will you play it? we've come up with four alternatives where you don't have to delay your rollout. and so we're focused on just being there for our customers when they need us. security concerns or not. so the argument made by deutsche telekom that they're in bed with huawei and it would delay the rollout of 5g you think is not correct? >> i don't think on a european level that there will be any delays based on the situation with regard to security concerns. i think if any, there might be delays on the count of spectrum not being available or the economics not making sense for a particular operator. but we have four technical solutions should you want to swap out your existing base. and they're all doable and -- they're doable. >> what about the potentially some have paid lip service to that through the u.s.-china trade tensions, we will see

sort of two different technology focuses ending up being built, two ways of delivering 5g? there will be -- they will be incompatible and is that a risk in the way that telecom -- >> no, i don't think that's a risk, no. >> what is the key risk when it comes to security, when it comes to providers -- is really irrelevant -- relevant realistic risk to have huawei as a provider? >> the concern are people are expressing is that it's going to be critical national infrastructure. so the focus on security will be there no matter what. it has to be there. and the second is that where is the intelligence in the network? is it in the cornett work? is it at the edge or throughout the network? and basically it's going to be throughout the network. because there's no one particular place where intelligence fits. manus: nokia c.e.o. rajeev siri speaking to our caroline hyde. charles-henry monchau is our guest host with nevera and i this morning in dubai. and from the viewers, and if

you got your bloomberg, hop on to your i.b. and join. and you can i.b. the question at any juncture. is it right that the fed to assume the politicians will torpedo the global economy and therefore they need to make preemptive cuts? you said july is a shoo-in. what are preemptive cuts? is that a fair assumption? charles-henry: first know that the fed is watching domestic economic conditions. and then they look at financial market conditions. we saw a few months ago what's really moved the needle for the fed is financial conditions starting to worsen. look at the spread market, for instance. manus: yeah. charles-henry: so if we do have global economy weighing on financial conditions, we might see indeed the fed making preemptive cuts. by the way, this is what happened in the late 1980's. and this led the fed to preemptively act -- helps the

domestic markets a lot. and there are some differences and you look at the yield curve, and the yield curve was much steeper than it is currently so not that easy. right now to many -- the yield curve. but again, they are looking at what the market is expecting. they are looking at macro numbers. macro numbers indeed are weakening. if you look at economic surprises, for instance, job market, inflation will be -- needs to be watched tomorrow. so they will act on this. and again they look at financial market conditions. financial market conditions for the time being are not too worrying. but if we do see some spread widening, for instance, they might enconvenient on a larger scale. manus: a correction from nevera, isn't it right as i said to you, will it? big correction there, everybody of the but it was in print on the screen. nevera. nejra: staying with us for the rest of the hour. now, up next, the gloves are off and a record number of tory

hopefuls want to become leader of party and country. more on the conservative race to number 10 next. manus: traveling to work tune in to bloomberg radio. we're live on your mobile device on d.a.b. digital radio in the london area. ♪

manus: this is "bloomberg daybreak: europe." i'm manus cranny in dubai. nejra: and i'm nejra cehic in london. and now the final candidate for the tory leadership race have been confirmed. the record 10 are running to become the next prime minister. conservative lawmakers will now take part in a series of votes to whittle the candidates down to the final two. only four out of the 10 launched their campaign before the nomination deadline. jeremy hunt, matt hancock, michael gove and dominic rob:. -- dominic robb.

>> we can't deliver brecks wit bluff and buster. iseman the brexiteer with the discipline, plan and focus to lead us out by the end of october. >> our failure to deliver brexit has put our country and our party in grave peril. >> we need to deliver brexit but not be defined by brexit and get to the center ground where we can attract people however they voted. >> i will ensure that we negotiate, a free trade agreement with the european union. and new free trade deals across the globe. i will ensure that we are out of the common agricultural policy, out of the parliament, out of the e.u., and want more taking back control of our money, our borders, and our laws. >> i would be prepared to leave without a deal if there was a straight choice tweep no deal and no -- between no deal and no brexit. no brexit there will be no conservative government and maybe no conservative party. nejra: charles-henry monchau is still with us. he's the chief investment officer at alabama.

charles-henry, your bullish g.d. -- you're bullish g.d.p. in the long term, are you looking through the near-term uncertainty? charles-henry: yeah. so g.d.p. is undervalued but the short run is likely to be very volatile. and let me take a bet. we might be there discussing of a brexit after october. i think we're going to get the hard-line brexitter as a prime minister and unlikely to find support with the e.u. and the u.k. parliament and even its own party and this might lead to a general election with the october deadline then being postponed. and then this general election will be transformed into a rerun of the 2016 referendum with a very let's say -- very difficult outcome to predict because as we have seen with the e.u. election, in the u.k.,

ery divided between remain and exit. so it is going to be again, a very bumpy road, a -- very uncertain. the market doesn't like uncertainty and we don't expect the pound to be that strong during this period. but over the long run, we believe the pound is undervalued. manus: ok. so some people would say that we have a rougher road to travel on the pine before we get further. the manufacturing data was the worst since 2002. i know destocking, and also closures. but it was really quite a rotten number in terms of the underbelly of the economy. is this a reality check? charles-henry: that's probably -- brexit is definitely hurting the u.k. and underperforming and the more it goes the more it will weigh on the u.k. economy. i think it's -- this is why, a

general election is deemed to happen. because at the end of the day, people want -- want some sort of decision regarding -- manus: your base case is a general election? charles-henry: yes. manus: ok. charles-henry: i don't see -- may in finding compromise and a new prime minister will be able to get this compromise. manus: nevera, hop in here. nejra: charles-henry, on the euro, were there any reasons to be constructive on the euro other than a potentially weaker dollar? charles-henry: yeah. that's a good point. and as we have seen last week, it was very interesting to see the market reaction after the e.c.b. the e.c.b. came with a message that rate hike will be postponed by six months and that period in the markets, we saw the euro rallying against the dollar. the dollar has been strong over the last two years. because there was this dichotomy between let's say a dovish e.c.b. and hawkish fed. but this is changing. nd this is how we can see some

gain in the euro. manus: tough place for the e.c.b. and charles-henry monchau with my guest with nevera. and a little bit of trump and a little bit of china? ♪ hey! i'm bill slowsky jr.,

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this is "bloomberg daybreak: europe." i am manus cranny in dubai. president trump threatens higher tariffs from china if president xi does not meet him at the g20. the you want has headed toward the key seven level. alarm bells ring, you're stuck climb for the fifth day and equities head back toward record highs. the market chief fear gauge keeps flashing warning signs.

shutterfly sold for $1.74 billion. this is after the software giant [inaudible] nejra: we are under an hour from the start of cash equity trading in europe or in futures look like we could see a third day of gains for european equities. we are on the front foot of the aftercap index futures seeing five days of gains for u.s. equities and a sixth day. we have looked at several days of gains for global equities overall, seven at the moment. we are seeing this risk on an equity markets despite the fact trade tensions continue. perhaps there is speculation the fed might step in and save the

day. manus: yes, and to a certain extent, our last guest, charles-henry monchau -- they are presuming you will see rate hate -- hikes at the back end of 2020. there is your bond market down seconds.le of 30 the fed may want to surprise the market to the upside in the -- and a quarter of a point in july. that will not do. keep an eye on your jgb's, we should have them -- a little bit of italy in their. the market has seen volatility rise in these bond markets. all the central banks are heroes certainly in the mliv blogs. let's get to your asian markets. with juliette saly. we have seen a third session of gains, pretty broad-based buying but particularly in china, the csi

300 up by 2.6%, gain coming through in construction players on hopes of a further policy boost. the nikkei closed by around .3 of 1%, a little on the back foot and south korea having a good session despite the fact we saw some shaky export data came in through. -- coming through. down almost 31%. australia closing higher by 1.5% holding on to its highest levels of the year. rebounding after that public holiday. let's have a look at the currency moves. we have been watching what has been happening and the offshore yuan and rising the most in two weeks. we had a stronger than expected fix coming in from the pboc. the korean won also rebounding from a one-week low despite that choppy export data. a lot of money from foreign funds going into korean stocks and bonds today. the japanese yen as a mentioned, a little weaker but off the lows

not dropping as much as yesterday i should say, down by .1 of 1%. thank you. president trump is ramping up the heat on china threatening to raise tariffs again if president tradelines to meet at the summit. it comes after they hit an impasse following accusations of backpedaling on promises. manus: investors anxious for clues about china's notoriously opaque government. most keeping an eye on the twitter feed of the editor of global times. it is china's most prominent statement is -- newspaper and he spoke exclusively to tom mackenzie. >> i have access to some accurate information for the nature of my job. i cannot say that i am

authorized by government to release the information. >> it is fair to say that officials will be passing you information that they will be passing you tips in the knowledge that you are likely to tweet about them. to be honest, i don't know. the officials and i have a tacit understanding. as i have access to those information, some of them know i will publicize the information. >> chinese officials have been talking up the economy but the clear real youty that we are facing a continuing slowdown in the chinese economy. our -- our officials exaggerating the potential for china to whether the trade storm? >> the loss is bearable for china. people believe that doesn't matter to have some losses. chinese economy is still growing. we don't have any negative growth grade we are still advancing. in addition, the size of our growth is still remarkable in

the world. >> if trump goes ahead with additional tariffs, on all of china's exports to the u.s., what levers, what tools do you think policymakers here are most likely to reach for in terms of retaliation? u.s.ina may target the services sector operating here. trading services is not the same -- trade in services is not the same as trade in goods. the u.s. has barely talk about services but china knows this is a fast-growing area for the american side. us is the uvp private banking cio. great to have you with us. let's talk about trade risks and the equity market. citigroup is saying the s&p 500 is heading for a full-scale bear market. the good news is the fed could still write to the rescue and if it does, we could see new highs.

how asymmetric are the risks in the u.s. equity market at the moment? aret: we think they symmetric. you have valuations especially with the rally on friday now approaching the recent highs. the earnings picture does not look particularly compelling. we think risk reward is high. on the risk side. manus: who is under more pressure to do a deal, you had the question that the data perhaps is a little exaggerated. muchhe chinese under that pressure to do a deal given what you heard? guest: the chinese have the capability to deploy stimulus rather quickly. they have shown that capability. they are believed to wait to cars there. the big level would end up being

fiscal and that would take some time so if a deal is not forthcoming, the americans would take some time to get stimulus into the pipeline. that means growth will suffer in the near term. nejra: goldman says we could go on theseven -- seven yuan, is that your base case? norman: we don't have the moving currency past seven unless the tariffs, and. if you look back to the start of the trade war, china has used the currency in response to the tariffs, and so i think the prospect of the next round of tariffs will be important from here. also from a signaling perspective, chinese are trying not to trigger the americans to impose that so they are staying on the sidelines and will likely react with the currency. manus: i want to take a look at one of the charts that nara and i have been using comparing u.s. equities and chinese equities. it makes for an interesting site line. the moving average in the s&p

500 way above the average and you have the risk of shock and all, higher tariffs but the fed will come to the rescue. 75 basis points. that could take -- if cut that could take you to new records. the csi 300, it did not kiss the 200 day moving average. do you want to load up on china on any drawdown or how do you want to differentiate between the two? norman: if you look at both the u.s. and china, what you tend to see is the u.s. is pricing this as a china centric issue. china has sold off and sold a fairly hard. someone who does not sell to china has held their ground reasonably well. what we see china pricing is probably some sort of moderate slowdown in the economy which means that the market is asuming there will be large-scale stimulus coming in and so you don't have that compelling valuation case yet in the event the trade war escalates. nejra: in the event of the

escalation, you have talked about the asymmetric risks to equities. how would you want to trade specifically that asymmetric risk? norman: one of the things we have been doing when you see volatility start to come in here is starting to put on capital protected exposure in different markets, and we have been able to do that as early as april. not because we were worried about trade war. payss because the market you to take that protection and markets. we don't see those opportunities presenting themselves but where we see opportunities are things like convertible bonds which gives you equity upside but bond like downside and on the flipside, long short equities. contain that can risk and still participate on the upside. uvp privatewith us, banking cio joining us from our zurich bureau. first word news time come a annabelle is in the hot seat in

hong kong. the white house is weighing more sanctions against iran. the focus will be the financial body set up as a go between for humanitarian trade with europe. an economic lifeline that france, germany, and france sought to create for terror and. it could exacerbate the divisions between europe and the u.s. the bank of england does not have to wait until brexit is resolved to hike rates according to policymaker michael saunders. he says the economy would move to significant excess demand over the next three years if brexit goes smoothly. he says that means the u.k. will need monetary tightening. he is known as one of the hawkish members of the monetary policy committee. the roles most expensive work of art is said to have resurfaced after its whereabouts were unknown. is crowned --y

owned by mohammad bin salman. millionting fetched 450 in christie's in october 2017. a helicopter crash on high-rise building in manhattan has killed the pilot. he earlier reported up problem and wanted to return to that helipad. he crash landed into the roof of the building in the fog and rain. is no indication of terrorism and there were no other injuries. global news 24 hours a day on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. nejra: thank you. coming up, history on your side. -- the best performing currency, which assets are best placed this time around. we discuss, next.

this is bloomberg. ♪

nejra: 7:15 a.m. in london, we are 45 minutes away from the cash equity opening day in europe. i am nejra cehic in london. let's get a quick flash of the markets. equities have been rising for six days. $2 trillion have been added to the value. the stock market believe the central banks will come to the rescue. bond marks are -- bond markets are screaming. the longest winning streak in three months. dubai is up and running, off a couple of points. we have arabia barely 3% and if you come to dubai, never miss. you also see the abu dhabi market which is getting liquidity flow through here.

and abu bit later dhabi. good morning from dubai. nejra: good morning from london. the 2/10 steepening. look at the 10 year -- 10 year bund yield. going on the ecb stimulus potential. have bank of america, merrill lynch recommending curved flattening trades. we could see a third day of gains for european equities and u.s. futures pointing to a six day of gains for u.s. equity markets. let's get a bloomberg business flash. annabelle: we start with more allegations of sexual a last-minute -- harassment involving lloyds of london. resigning following accusations of inappropriate behavior. the incident was set -- said to have happened at a party. it came to light after a business week article about

endemic sexual misconduct at lloyds. contract toning handsomely in new five g networks according to the chief executive. he says doing well against rivals such as huawei and ericsson. they are trying to push back against concerns it has fallen behind its competitors when it comes to the next generation of technology. compete quite favorably with huawei, with or without the current security concerns. we have taken some 23 contracts with them in the last two years. we win two thirds of the time against our competitor compared to the time they swap us out. we have enjoyed handsomely. annabelle: apollo global is offering up why out, $51 a share. deal values the retailer at $4.7 million. apollo will assume more than a billion dollars of debt.

merge shutterfly with snap fish. that is your bloomberg business flash. nejra and manus. nejra: thank you. deutsche bank's woes are worsening. downgraded the troubled bank. including a widening german probe on dividend tax payments. we are expecting deutsche bank to open again today after it was closed yesterday. just focus forward after what we learned on friday. jonathan: it is not a surprise. the way you would think about it and the company has been helpful, a downgrade means 700 million of lost interest income which is 3%. it is painful. very painful. -- it at'st muddies to the pressure and you think back to last week and clearly, they have eight or 9 billion of

them will not be featured in finance. possibly was covered bonds. they flagged of this. we now know that rates are going up and they may be going down. it continues to be the perfect storm for them. personi hate to be the that uses the phrase death spiral, but you do get the sense that something has got to given this deutsche bank story. or is that being disingenuous to the capacity? jonathan: domestically it is .ard to move they need to keep working that. we are not sure they have enough capital. it is the size of the hotel book and the investment bank in the u.s. so they do need to shrink. continuing to play around the edges has done nothing for nobody and he needs to do something wholesale or he will not be there. this cannot continue.

revenues are going one way. it is impossible from here to keep cutting costs quickly enough to catch up with a revenues drop. nejra: let's talk about how this fits into the wider story. you have bank of america, merrill lynch recommending curved flattening trade. how much upside is there for banks with that going on? previously we were looking at smaller banks and worrying about liquidity. the biggest problem here could possibly be the bigger banks. bank,ok at deutsche unicredit, they have tens of billions to refinance. is it a problem? no. will they have a liquidity crisis? absolutely. it means it is going one way which is side lies -- sideways or slightly lower. manus: when i said death spiral

it is not exactly in its death throes but from a strategic point of view, what are your -- what would be radical? we have lots of stories that they are downsizing. what is a demonstrable strategic shift from saving that would save saving? dws, it isou have the jewel in the crown but when you have nothing else left, do you want to sell the jewel in the crown? no. he -- why would you buy this? it needs to be something huge. and then it needs to be a proper refocus, we will hold up market share in germany to this, we will become a pan-european wholesale bank, something like that. u.s. andg off it of raising more cash, that does not solve the problem. the black hole that could be their balance sheet. manus: that is true.

that could be perhaps the things down 38%.utsche bank thanks very much. our guess is that guest is -- our guest is still with us. we have italy and conflict. values are challenged to relative to the u.s. peers. if there -- is there anything about banks you would like to buy? ofman: we are steering clear bank equity but what is more interesting is moving up the capital structure and looking at convertibles. we think that is paying equity like returns on the higher quality banks. what: that fits in with you are telling us earlier that you quite like convertible

bonds. with what the market is pricing, particularly with fed rate cuts, where are you searching for yields is to mark norman: where we are searching is we point out contingent convertibles on the continent. looking for a lower risk opportunities on the continent, we like swiss franc-based investors read and stepping out for people who are looking for more risk to my we are looking fund event driven hedge strategy which makes a good surrogate for people who are diversifying away from credit exposure. in their portfolios of it. manus: one of the things that our bloomberg intelligence team is writing about is the weakness in certain currencies. they could mitigate the weakness in some of those economies. as you differentiate where you might want to take more opportunity, does the u.k. feature in that because of the

inherent currency weakness we have at the moment or in the e-krona? -- in the krona. >> in the u.k. from an equity perspective, the weakness of sterling and sterling continues to weaken from here, that plays well to a lot of the exports that are listed in the u.k. if we flip over to the continent, it is a challenge for europe, they have nothing to offset the strengthening of the currency so there is not a lot of easing coming out of the ecb. for them the domestic economies on the continent, remains quite strong. the plays on the continent are attractive. nejra: you say that they don't have a lot to offset the strength of the euro, but a course of houses are calling for curve flattening trades, bank of america merrill lynch recommending those curve flattening trades on the german curve. would you be part of that chorus?

norman: i think the curve can flatten more. the curve is already very flat. we could go the route of japan where they look at some yield curve control from here. so that is a trade but there are better ways if you want to generate the yield in the euro when we talked about some of those ways earlier. nejra: thank you so much. with us today. that is it for daybreak europe. bloomberg markets, the european open is up next. what is catching everyone's attention is the ongoing trade tension and how aggressive the -- the gotten on the fed rate cuts. shoo-in, keep an eye on the vix. the vix is rising. that you areact seeing a rising equities market.

could citi be right? what are you doing if you go to work? radio live onberg your mobile device on d.a.b. digital radio . ♪

charles-henry: good morning. we are live from our european headquarters here in the city of london. i am anna edwards alongside matt miller back in berlin. say, likemarkets stocks, watch rates. keep up the rally as the easing spreads across the world. europe points higher. the cash trade is less than three minutes away. -- 30 minutes away. ♪ president trump threatens

tariffs on china