nejra: good morning, from bloomberg's european headquarters. these are today's top stories. watching every syllable. mario draghi's speech will be watched for stimulus. attention then turns to jay powell as the fed begins its two day meeting. slashesa -- beijing

its treasuries. and doing more in china. >> we believe we can take care system --na echo ecosystem. we need to look at the entire picture. nejra: and heightened tensions. president trump sends another 1000 troops to the middle east. nancy pelosi calls the move deeply concerning. ♪ nejra: welcome to daybreak era. it has just gone 6:00 a.m. in london. looks like the equity markets are in weight and see mode. killing time until we hear from jay powell tomorrow.

we closed flat on the s&p 500 yesterday. the 10 year yield goes down to basis points. we are not seeing any curve flattening or steepening. on a back foot. one at the aussie, that is that has been underperforming. as the r.b.i. signals another rate cut. bouncing back after a few days of losses. two weeks of off gains for global stocks and credit suisse says we could see a markup. let us check in on the markets in asia. juliette saly has more from hong kong. we are seeing the msci asia-pacific index in the green

for the first time in five sessions. the nikkei under pressure. the bank of japan and governor kuroda coming through saying the risk for the china trade war rising. hong kong is looking good for a second session. following the protests. china markets are holding up well as well. the weakness in the aussie dollar but australian stocks are at december 2 thousand seven highs. and india has been underperforming in the last few sessions. cicc says we could see some of in thewei supply chain short term being heads. msci is up about 1%. jet airway we are following in the india session after we heard that lenders will file for bankruptcy.

mrr has come through regionally saying it plans to have a billion dollars australian in cost savings. it has a firm to its capex dividend. nejra: juliette saly in singapore. fed officials have their work cut out as they begin a two-day policy meeting. markets will be expecting signals that they are prepared to cut rates at one point -- at some point. acts always, we will appropriately with the strong labor market. attuned to potential risks to the outlook. if we saw a downside risk to the outlook, that would be a factor that could call for more accommodative policy. >> i'm a little nervous about

the low inflation trade -- inflation rate. even though we think it is temporary, it could be a reason for accommodation. >> we are seeing mixed signals around what is happening in china and europe. what is important is to keep an open mind. toi think it is too soon make a judgment as to whether we will or will not make a move. this comes as ecb president mario draghi gives the keynote speaker at the central bank forum. with us now from dubai is kim foxx, group chief economist with emirates. thank you for joining us. let us kick it off with the fed. some say this is jerome powell's most important decision of his tenure.

will we see a powell persuaded by the market or will he be pushed back? important fed meeting for jerome powell but i do not know if the pressure is completely on him at this meeting. ort of the markets are aware are expecting their will not be any change in monetary policy at this meeting itself. preparehas to do is come if he thinks he is going to lower interest rates down the road, he has to prepare the groundwork for that. that might be easier than if you're thinking of making a move at this meeting itself. he will be helping the market to prepare for an adjustment down the road but right now, he probably does not know when that will be so i suspect he will be quite darted in terms of how he projects the future. ok, in terms of preparing the market down the road, what do you think we will see -- will

it be dropping the patient? combination of preparation will we see from jerome powell and his colleagues? approach is to send signals, dropping the tightening already implied ford 2020. that is a pretty straightforward way of doing. it takes away the rather strange hike they had in place previously. in terms of the language and the forward guidance, the reference patience.s, -- and questions regarding the balance sheet. has been effectively tightening the policy. nejra: what would be the worst way for jerome powell to handle the meeting? send more overt

signals without doing anything with that in terms of actual there are also, if risks to the economy which does seem to be the case, to talk about them in rather a dramatic way without taking any measures to guard against them. i think that is why the communication will be quite measured rather than necessarily extreme. nejra: even as yields have been falling precipitously a cross the u.s. curve come if you look at treasury volatility, that has risen significantly suggesting that traders do not expect yields to stay at these levels. the you expect to see much repricing in the u.s. bond market following the meeting? much butably not that i suspect if you do not see any big adjustments in terms of

policy in the wake of the meeting, you could see it drifted higher in yields from the levels you have seen 10 year rate. maybe backing up. something relatively gentle rather than a big reduction. given thee risk is expectations about fed using that has been building for weeks now, the absence of anything communication been a slight tweak to the dots might be perceived as less dovish than what the markets are hoping for. you can see the yield start to back up a little bit. but i would not say aggressively. inflation expectations have been collapsing as well. give me your assessment of the u.s. economy. we heard from a number of fed officials regarding the mixed signals we have been getting.

what are the forward indicators telling you about the u.s. economy? signals is the right way to put it. mixed data. generally, there has been a slight deterioration in the trend of the u.s. economy. a sharp adjustment in the payroll figures last month. i am not taking too much notice of one-month stay done. we have to wait for any revisions to that and also the next data point on jobs. the unemployment rate remains historically low. payroll figure does moving into are sharply weaker jobs market just yet. in thes softness consumer sentiment. inflation expectations are coming lower as well as the headline inflation rate.

look at the fed will and the price performance and the jobs market. the combination. taking signals from global event says well. and perhaps paying more attention to those global to how theytive were looking at things earlier this year. nejra: exactly. and the globe paying attention to the fed as well. i want to ask you about emerging markets. today, we are asking a question on markets live on whether fed rate cuts would be enough to revive 2019's e.m. rally? what is your view? rate hikenot sure one

would be enough. i think the signals regarding how far the fed is prepared to go is more important in terms of continuity rather than an abrupt adjustment on one occasion. i think it is more the messaging about the future and about how far the fed or other central banks are prepared to go. other central banks have been easing policy. we have seen that in india and australia as well. around the world, i think other economies and central banks have been ahead of this a little bit. the fed, to that it -- to some extent, coming to the situation a little later. nejra: will we get multiple cuts from the fed in the next year? tim: this is what we do not know. from our point of view, we think the fed will rate -- will wait through the summer and watch the

performance of the u.s. economy. i think a lot of people expect them to move in july. our sense would be that they wait until september to make their first adjustment if they are going to do one. nejra: kim foxx will stay with us for the hour. as we have been saying, mario draghi gives his keynote speak -- speech and we will have full coverage as well as have comments from former ecb chief economist from peter praet. the trump administration will send about 1000 more american troops to the middle east. there are not yet any details on where the troops will be deployed or what their mission might be. continue toions rise between the u.s. and iran. any involvement in the tanker attack.

jp morgan asset management is looking to sell corporate credit and purchase government debt instead. the had ofording to global fixed income. it is a sharp turnaround from a bullish position from a week ago. credit spreads are rallying again. >> i think credit will continue to do well because earnings are still looking pretty good. you're still having the flow through of the fiscal stimulus through corporate earnings. i want to start selling corporate rallies. the first freely elected president of egypt has died suddenly. egyptian state media says he suffered a heart attack and collapsed while attending a court hearing. he was elected president in 2012 but was toppled later.

he has languished in prison since 2013. global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. nerjjra? nejra: coming up on bloomberg, we ring you live coverage of mario draghi's keynote speech at 9:00 a.m. london time. when you are traveling to work, tune into bloomberg radio. this is bloomberg. ♪

nejra: this is bloomberg

daybreak: europe. let us get the bloomberg business flash with debra mao in hong kong. losses as is holding opec and its allies struggle to set a date for the next meeting. the key issue is discussing the future of supply cuts due to expire at the end of the month. prices have been hit by growing u.s. inventory. our intent is to make sure that we continue to work together closely. not just bilaterally but with all other members of the opec plus coalition. work we have done over the last two and a half years continues in the second half of 2019. debra: telecom titan patrick sotheby's purchased

for $2.7 billion. auction companies are both owned by frenchman. -- is projected to have an enterprise value of nearly $21 billion when it goes public this week. this is according to equity research firm mkm partners. it is a big year for attack. shares closed at their highest ever price. this adds to a rally that is added almost 600% to the stock prices. of real meat are also getting burned as barbecue season gets underway. the company is kicking off sales of the on to meet that is meant to look like ground me.

that is your bloomberg business flash. tensions dragging on and winners and losers are emerging in the aviation industry. boeing has seen sales dry up airbus received a large order. >> we have a historically long relationship with china. in china, we have produced more than 400 planes. this is a strong commitment to china and the chinese market. we continue to grow and serve the needs of china. i think we are perceived as a strong and loyal partner. do you see yourself as having an advantage.

is president trump giving you an advantage in china? >> we have a strong product advantage. the 321, it has been a game changer. this is fulfilling market demand. guy: politics plays no part? >> politics is always in the background. guy: you bring up the issue of the plant you have there. you are currently conducting a review of the way airbus makes aircraft. could you do more in china? would that lead to greater orders? look to have more activity in china because we think we can work well with the ecosystem in china.

we need to look at the entire picture though and make sure that we can be competitive overall. we are seeing consolidation in other parts of the industry at the moment. scaleon is betting the will bring huge advantages. will airbus be paying a little bit of the bill for some of those advantages they gain? they are talking about a billion cost savings over four years. will airbus be paying part of that? >> that will lead to more competitive prices. had our first discussions with the leadership. that we wantclear them to continue to perform. staying focused on existing

business and if there are benefits or synergies and the long-term, we would like to benefit from those. nejra: that was the airbus ceo speaking to bloomberg's guy johnson at the paris air show. the trade war drags on. they have dropped to $1.1 trillion in april. china's share of government debt is at the lowest they have been since 2005. still with us from dubai is kim foxx. careful with be the data because some of the treasury buying is routed through belgium and we are seeing increases there. nevertheless, market watchers see china holding firm on the yuan. the daily fixing has been set stronger than 6.90.

what are you expecting from china regarding the one ahead of the g20? yuani suspect that the will remain pretty stable. ahead of these events, chinese policymakers tend to want to promote the image that china is a global player. it does not want to rock the boat. yuanll aim to maintain the at a stable condition. once the g20 is out of the way is probably the bigger question. whether or not you will see a deal struck in the u.s. and china at that event and if so, what kind of deal that would be. or alternatively, if there is no deal and no signals about improvement in the negotiations, then perhaps there is a scope for some reaction and secondary effects which might have an

impact on currency markets. kind off we do get any the g20, how quickly could we see a recovery in global growth? we have seen it impact everywhere. i think that would take more than just a benign outcome. i think it would take quite a constructive outcome to engender greater confidence about global growth. there would need to be some firmness about a deal being struck between the u.s. and china. simply pushing things into the future and promising more talks which might seem benign, from a markets point of view, would still be a little unsettled. the nature of the trade dispute so far at least has been the unpredictability of it and the randomness of the measures taken. not only in relation to the u.s. and china but also globally as well with occasional forays

towards mexico and india and other countries as well. the nature of the dispute has become more complicated than just a bladder all 1 -- than just a bilateral one. nejra: we speak to peter praet coming up, the former ecb chief economist. when you are traveling to work, tune to bloomberg radio. in the london area. this is bloomberg. ♪

nejra: this is bloomberg daybreak: europe. policymakers and economists are convening in sintra. they are wondering what tools they have left to defend the economy from a barrage of u.s. trade threats and political stripes such as brexit. matt miller is there for us. great to see you. matt: good to see you and be

here. really exciting meeting. it is not an official ecb meeting. it is more of a colloquium if you will that mario draghi holds here. has had aly come he real effect on markets. a couple of years ago he heralded re-inflation. we can definitely see that bonds are priced for a selloff if mario draghi really starts to the the tools out of basket. commerzbank says draghi needs to act. a rate cut would be the best thing to do in response to a fed rate cut if it puts upward pressure on the euro according to commerzbank. from anht, we heard

analyst from the peterson institute and he says the ecb does not have any more room to act in case of a run-of-the-mill recession. he says what europe needs it fiscal policy and even maybe concerted action among all of the different european governments. he also talked about high in the sky things like a european budget financed by european bonds. a long way offe but will be discussed here. nejra: while they fight the challenge of the collapsing inflation expectations as well. great to have you with us. let us check in on the markets around the world. great to have you with us. let us kick it off with you. indian equities look like they could snap their longest losing streak and more than a month. is this a turnaround or are we

in wait and see mode ahead of the fed? reckon the ladder. there is no specific reason as to why the markets did what they did. they were so badly sold. we were discussing this yesterday. restricted. there is a large friday of stocks under pressure in the session today. reoccurring. be for now.een we will see how long it lasts. nejra: thank you so much. at asian equities, i could put the same question to you about whether markets are in

wait and see mode or killing time ahead of the fed? >> i think that is what they are doing. looking at gmm across equities, green on the screen. is this a rally? companieslot more trading to the downside. you can see we have pressure on , 0.9 percentnikkei which could be why we see the yen up 0.2%. the australian dollar is a weakness today. this as the reserve bank of weakness signsng suggesting it will likely ease again. looking at commodities -- copper, higher in shanghai. net bearish shorts on the position of copper. brent crude trading at $60.91

even though we do not have an opec meeting. my chart today, i will be discussing china's u.s. treasury holdings. it has trimmed its holdings to the lowest in 10 years. -- in two years. these numbers were collected before tensions really as collated in may when the talks collapsed between trump and xi. buchina doing this to ouy the yuan? much to you you so both. the trump administration is americanbout 1000 more troops to the middle east as tensions between the u.s. and iran rise. as the pentagon released new photos and a timeline supporting evidence that iran was behind

the are of attacks on tankers in the gulf of oman. great to have you with us and thank you for joining us. how serious is this move by the u.s.? >> good morning. is a gradual escalation in the tension between the u.s. and iran. the u.s. announced before gradual buildup including sending more warships to the gulf. just to be mainly reassure allies that there is american presence given what is going on. -- what we are hearing from officials and diplomats is both sides will be very careful not to take it to that level where you see an all-out conflict. we are starting to hear voices saying that the u.s. must go in or at some point, there will be a spark. the danger and fear if you talk to people is what about an

accident that leads to a spark that leads to a conflict? so far, we have not seen any of that yet. nejra: yes, and also the u.s. has responded to iran's announcement that it will exceed uranium stockpiling. how might this issue might evolve? the u.s. pulled out of the nuclear deal. iran is using these steps to pressure the european countries, the signatories to the accord, to take steps to make sure the deal is still in place. what is more alarming for iran is a reaction from some european countries which said -- if iran were to breach the limits set by the nuclear deal, we will look into revamp posing some of the

sanctions. that takes it to a different level of escalation where europe abandons even lip service to stand by the agreement. iran has been given 10 days. iran has said it will not extend the deadline. be crucial tol monitor the european reaction. nejra: yes, and i am sure that you will be all of it. thank you for joining us. still with us is kim foxx. ox.tim uf sense that the global markets are underestimating the potential geopolitical risk in the middle east at the moment? global markets are focused on quite a lot of disparate issues including the geopolitics in the region, the federal reserve, the g20 meetings next week.

a lot of different elements in the mix. well comingting as up. all of these things are making markets uncertain about how to to one of these events individually. there is an escalation in tension regionally but you also have expectations of perhaps dovish monetary policy settings in the united states and may a possibility of a relaxation in global trade tensions. all of these things are to some extent offsetting each other. we need to get through the next few week and through these risky events and then we will have a clearer picture for the markets to know how to respond. nejra: what is the picture though at the moment that you have of global oil demand? you mentioned opec. what is your assessment of global oil demand? the major forecasting

agencies including opec and a few others last week were all consistent in indicating that global oil demand is likely to ease in the second half of 2019. the impression given is a fairly consistent one whereby the big energy institutions are all anticipating that demand will slip. lower. that suggests that the price of oil and the risks in the second half of the year notwithstanding the geopolitical events, the greater risk is probably to the downside. nejra: you are pointed out a chart in your research which we can show our viewers of the great december 2021 spreads. that tells us something about where oil can go from here but how much potential does the opec plus meeting have to put a floor under prices? is what the that

markets are hoping and expecting that there will be a rollover in terms of the production cuts from opec plus. seems to be taking time to get to that point. maybe there is a little bit of frustration with that and the longer it takes to get to the patience withps that without expectation begins to fade and the price begins to a just lower as we don't see any sign of that decision being taken. nejra: do we stay range bound to the end of the year? where do you see us ending 2019 on brent? the price of oil with the ,ownside risk of global demand our sense is that it will be to the downside. yes, there are occasional flareups in tensions that give rise to temporary blips in the

price but the overall picture of slowing demand makes us think that the price at the end of the year will be lower. having said that come of the average price for oil over the course of the year is probably not too far away from where it is now. you say in your research, the pace of u.s. supply growth is slowing but still at exceptionally elevated levels. kutcher airway ceo says the recent tanker attacks and tensions with iran have no direct impact. >> we have no relation with those issues. we are talking about qatar's sovereignty and independence. we have no part in any regional tensions that are being ratcheted up. ,ut actually, our adversaries

there is no clear evidence. i know that you can always thate evidence but is evidence on an international level correct? that are several countries have refused to accept that there is anything pointing at any one country so i do not think it is my business to comment on something that really has nothing to do with qatar airways. is a global economic slowdown at the moment. are you feeling that? every global economic slowdown has opportunities. as a ceo of a major airline in our region, it is my duty to find those opportunities in an economic slowdown. slowdowns many times, airline business is cyclical but it is always a rival of the fittest.

if you really want to ask what is happening in this softening of demand or what is happening to the global economic situation, you should ask our neighbors who are really getting the pinch. you can see they are shrinking and the results show. it does not mean to say that we are not going to be affected. yes, we well but not because of the global slowdown but mostly because of the economic blockade. nejra: that was the ceo of qatar airways speaking to guy johnson at the paris air show. the key event today is the ecb sintra. mario draghi will be giving his keynote speech followed by a panel. what will the policymakers be watching today? there is data out of europe including inflation for the euro

area at 10:00. and the candidates for the u.k. are furtherer whittled it down. if you are traveling to work, tune into bloomberg radio live on your mobile device or on digital in the london area. this is bloomberg. ♪

nejra: this is bloomberg daybreak: europe. that us get a bloomberg business flash from debra mao in hong kong. airbus pulled ahead of its rival on the first day of the paris air show.

locking in $13 billion in orders. bodied jet.a narrow chiefng to airbus's executive, there is still room to run up the score. >> we see sustainable growth. despite the difficulties here and there, we still continue to see a strong demand. we expect a positive airshow. debra: staying with the paris air show, owing is open to brandingthe word "max" for its jet. sentiment has been tarnished by the two fatal crashes. executive say they have no immediate plans to drop the name and any such change would be a retreat for the playmaker. boeing has worked hard to capture the imagination of travelers.

hi isom titan patrick purchasing the auction house. that is your bloomberg business flash. debra mao in hong kong, thank you. futures point to a week open. european equities are still in the green for june but the rally is fragile. and souring consumer sentiment. here is the data. a really clear signal of a lack of conviction for you which is atf -- etf european fund flows. this gives you an idea of what smart money is doing.

this is dominated by institutions. unlike the u.s. which is mostly retail. this month shows a downward trending slope which is more than 5 billion euros of outflows. among those outflows we have ubs whose model recently sold out of equity etf. a lot of nervousness here which leads me to my next chart which is where investors are buying which is defensive funds. which we rarely see when equities are rallying. look at this huge upward slope, nearly $7 billion. in assets. one interesting thing about these etf's is your money is pegged to actual gold kept inside a vault in zurich. considering the current environment, investors are seeking shelter. the content of that vault just got more popular.

nejra: thank you so much. great roundup. european central bank policymakers say the institution will active needed to support the economy. this opens up the positive till quantitativey for easing to be reintroduced. still with us from dubai is kim foxx from emirates. a lot of options being put out there but will any of them actually work? the ecb has to talk up its options and its ability to influence things. the reality may not be as good as that. interest rates or do more qe but already having negative interest rates, what difference will that make? the ecb is in this position because it is making up for the deficiencies of fiscal policy

and the fact that governments in europe are not able to stimulate their economies because they cannot coordinate effectively and efficiently. the ecb falls into the position of having to come up with solutions even though they are probably getting close to running out of them. nejra: and what clearly shows that is the euro inflation swap. they have been crushed. the market sending signals to the ecb, signals that some policymakers are concerned about. can they turn this around given what you just said? lessons of the draghi presidency at the ecb have been the statements where he says he has done everything in his power. in reality come he needs to add to those with content and as we have discussed, the ability to

andore dramatically more that is not really there. he has to emphasize things come up possibilities more than he can really deliver. it is a difficult position for the ecb. i would expect more talking up of the options that the ecb has but at the same time, it is quite stark that the option is to cut rates again when rates are already negative. that does not give you an awful lot of confidence. nejra: how much confidence do you have of the 10 year bund deal coming back into positive territory? i think the global factors are one of the problems the ecb is dealing with. not only problems inherited at home but also the focus internationally which is wearing -- which is weighing down business sentiment in the

eurozone as it is another regions of the world. against that backdrop as well, the upside in yields is probably limited unless they can engender some inflation pressure which has been lacking so far. nejra: what does that mean for the euro? does a dovish fed or a rate cut or more than a rate cut support the euro which as you have pointed out has dropped below the 100 day moving average? tim: the euro remains week in ae short-term regardless, in sense, of what the ecb does. the fed is likely to be unchanged. it is a little more hawkish than expected or less dovish which will keep the dollar supported in the short term. the euro remains where it is in the near term. over time, the big change will be from the u.s. side were interest rates will probably adjust lower and that will start

between thee gap u.s. and eurozone rates. as that starts to weekend, you will see the scope for the euro get a little firmer. for the time being that does not look likely so the euro stays pretty much where it is. nejra: the eurozone's biggest challenge -- are they domestic or external? is both.ink it it is easy to talk about the global trade issues and those are going to be important for the big exporters in germany and others out there in the heart of europe but at the same time, europe is also dealing with its issues,es, political institutional issues, the ability to coordinate between so many countries within the eurozone when you are so many different priorities from one country to the next.

at the same time, you also have another localized problem in terms of brexit and the pressure that is putting on the eurozone also. the problems it faces are international but also domestic and origin as well. nejra: we will bring you live coverage and analysis of the keynote panel of the ecb form in sintra including the keynote speech from mario draghi. this is bloomberg. ♪

nejra: good morning. i am nejra cehic. bloomberg daybreak europe and these are today's top stories. mario draghi's keynote speech will be scanned for any hint on stimulus. bloombergwhat does considerablm mean? treasuries, beijing cuts its debt holdings to the lowest interiors. the trade war drags on. the ceo tells us he is doing more in china. benefit.nk we can and that is the way we are going inbe successful long-term

china. that is our commitment to china. we need to look at the entire picture. president trump sends troops's -- another 1000 . nancy pelosi calls the move deeply concerning. welcome to daybreak europe. we have gone 7 a.m. in london. let's get to some breaking news from nomura. buying back a .6% of shares. that is what we are tracking. other breaking news we're looking at. in mayn car sales rising for the first gain in nine months. that is something to keep an eye on. of a a blip or the start recovery? turning to european equities. we had a recovery over the past

two weeks for global equities. when it comes to equity markets it seems as if these markets are in wait and see mode, killing time ahead of the fed. futures flat on ftse 100 futures and u.s. futures. 600s&p 500 and the stoxx closed flat yesterday. negativity seeping into the next futures down .2 of 1%. cac futures struggling for direction. you will see more movement in the bond 600 market when he como treasuries. 10 year yields down. looking across at the two-year yield as well, that is something we are keeping an eye on on a 185 handle down almost three basis points. 10-year bund yields look to be steady. we are deep in negative territory ahead of the cintra for them. let's check out on the markets in asia.

juliette saly has more. what are you seeing across the asian market? juliette: we are mostly higher. four stocks have had sessions of losses. japan closing of the session weaker by around .7 of 1% on the nikkei as we see a stronger yen. telcos under pressure. australia closing higher by .6 of 1%. india snapping its recent losing streak and hong kong's market continuing to rise by another .8 of 1% as we see offices in the city reopened following the protests and sunday and last week. china's market ready flat. we had some data coming through out of china showing that new home prices accelerated at a faster pace in may than in april, up by .7 of 1%. let's look at the currency market. i mentioned that stronger yen, governor kuroda coming and saying the u.s.-china trade tensions are rising.

the aussie dollar at a five-month low. it has been trading at a 10 year low after the rba signaled in its june meeting minutes that another rate cut is more likely than not. we're watching the korean won which has been asia's worst performing currency. it snapped a five days losing streak against the dollar. that is more dollar weakness ahead of the fed meeting this week. interesting how subdued the movement has been in em fx ahead of the fed. thanks. fed officials have their work cut out as they begin a two-day policy meeting. markets will be expecting signals that they are prepared to cut rates although a move is not expected this month. indications of too much change could raise alarms. >> is always we will act as a two's appropriate to ask --

explain inflation. >> we are attuned to risks to the outlook and if we saw a downside risk to the outlook, that would be a factor that could call for a more accommodative policy. >> i am nervous about the low inflation rate. even though we expect it is temporary, that by itself could be reason for more accommodation. we will have to look at how things are evolving. >> we're seeing mixed signals at what is happening in china and europe. andre keeping an open mind keep being data dependent. >> i would rather be patient -- and let events unfold a little bit more. nejra: this comes as mario draghi gave the speech ahead of the forum. and analysts said words are not enough and rate cuts are the contingency the ecb should have in mind in a scenario where the

fed cuts rates. great to have you with us here on set. can powell, let's talk about the fed, out of this meeting not broken for the on market? >> we are not seeing rate cuts this month. it is not entirely impossible. the probability was somewhere 20%. to the fed is good at giving a strong indication toward the rate move 20%. the fed is good. it is unlikely. the fed is compared to the ecb, the fed is in a comfortable position that they can take a bit of a sit back and wait and see. inflation is pretty much where it should be. the core rate in the u.s. has been dropping but it has been on 2%. there is not an urgent need for the fed to do anything immediately. nejra: surely it needs to signal

something. what should the signal be to avoid any kind of terrible volatility in treasury markets? if you look at the move index, it suggests there could be some volatility ahead. >> for the fed the balancing act is they do not want to spoke markets. they do not want to lose their credibility. dovishde the famous u-turn at the beginning of this year. the will give some signaling to please markets in that sense but having anything meaningful coming out of thisthe will givei would be careful to put expectations too high on that one. nejra: how would you trade this, how would you trade in this is not ahead of the fed, maybe what trade are you waiting to put on? wolfgang: it depends on what you want to achieve. if you see a risk-free asset like treasury as a way to balance her prot folio to take risk off, you can still find

value in the treasury curve. it looks pretty decent in terms of the risk reward profile. the world's benchmark. if you see further escalation in trade wars in the geopolitical tensions in the middle east, you could still benefit. irrespective of what the fed communicates this week. nejra: how about the bund curves question mark we can talk about the ecb and a lot of people saying the ecb has less and its toolkit than the fed does. wolfgang: i have built up some short positions. point, ive-year struggle to see a continuation of further yields drops. the bund curve is steep so i would rather have much opposition then the back end of the curve.

it will be interesting to see what the ecb comes up with. the toolkit is limited. it has -- there has been a lot of talk around quantitative easing. another question, in what shape or form will it come back. the market is still not quite satisfied with the dovishness of the cd. policies have shifted. nejra: my guest yesterday was saying with the limited toolkit he thinks they should be buying in his market. european corporate credit. what is your view given how shielded it has been impaired to other markets with all the risk on that is going on? dichotomythere is a between the rates market and credit market. the risks are between the rates market and credit market.

the risks are to the downside. people are bracing themselves for the worst. if you look at the credit market, there in may. all things being considered, that was not really a big selloff. year to date, credit has been going strong. a lot of it seems to be a counter move toward the selloff you have seen in the last quarter of 2018. there is a strong bid for credit. was a bit of a wobblelots of new issues in theo market, allocations becoming really low. spreads are getting tighter. demand for that kind of asset class, technical fundamentals for credit seem to be robust. wolfgang bauer stays with us. let's get a first word news with debra mao. deborah: china wolfgang bauer sh us. let's has cut its holdings of u.s. treasuries to the lowest in a most two years. the total fell to 1.1 trillion. the latest numbers are flagged as tensions hit a new low in may. speculation has been rife that china may use the nuclear option

of selling off u.s. debt holdings but beijing would struggle to find another spot to carve out cash. jpmorgan asset management is looking to sell the corporate credit and by government debt instead. according to the firm's head of global fixed income. of may.off for most credit spreads are rallying again. >> anything credit will continue because earnings are still looking pretty good. are still having the flow through of stimulus into corporate earnings. the future looks pretty bleak so i want to start selling rallies are still having the flow through are still having the flw

through of stimulus into corporate earnings. the future looks pretty bleak so i want to start selling rallies in here. deborah: australiadeborah: austk is likely to lower interest rates again. boosting confidence that inflation will return to target. this comes from the minutes of its june policy meeting when it eases rates for the first time in almost three years. 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, we will bring you live coverage and analysis of mario draghi's speech from the ecb for them. don't miss that from 9 a.m. london time. if you have to step away, 10 into bloomberg radio live on dab mobile device or digital radio in the london area. this is bloomberg. ♪

nejra: this is bloomberg

daybreak: europe. let's get a check on the markets. a little bit of a holding pattern. we saw the s&p 500 close flat. arrow stoxx 50 futures turning and if. the dollar on the back foot against the yen. a safe haven. the bloomberg dollar index, the dollar has been in a range of ahead of the fed. the yield down by two basis points to a 207 handle. we got to 205 last week area taking look at middle east markets, a little bit of weakness in dubai. abu dhabi struggling for direction. the trump administration is sending 1000 more american troops to the middle east as tensions between the u.s. and the pentagonfter released new photos and a timeline which is says supports evidence that iran was behind a pair of attacks in the gulf of oman last week. good to have you with us.

these trip numbers, what kind of signal is that sending? >> it is not a huge number, but it is a signal highlighting the escalation in the region. one thing we should keep in mind, it does not seem like either party wants escalation. trump had an interview with time magazine and called the attacks the thing that worries analysts is how to -- how the control.piraled out of >> the u.s. releasing new images they further link iran to last week's attack. >> they are trying to bring in the international community. international global communities have shrugged this off. it looked like mike pompeo was

the shipper that cried wolf and that is because the u.s. said iran was behind the attack in kabul. this is their way to provide more evidence to bring the international community on board. saidsecretary-general there needs to be an independent investigation. that got a lot of international praise. nejra: said there needs to be an we are a tn wti and brand. opec needs to set a meeting date. invocations? >> this has nothing to do with the price of oil. the market is focused on the demand side. they are talking about swelling that it and on top of is the hampering of demand and the worrying about trade wars. the second thing that markets are worried about is when will they meet? we have three potential meeting dates. they are floating this second week of july. we have a lot of hotels booked.

wall street -- if they cannot agree when they will meet, can they agree on another production cut? any cuts are expected to expire. leaving the market in an uncertain position. nejra: china has cut its holdings of u.s. treasuries to the lowest in a most two years. the trade on. they dropped to one point $1 trillion in april. the latest numbers were collected before tensions escalated after talks collapsed in may. still with us is wolfgang bauer from energy. careful with treasury data. studies purchases are sent through belgium and those holdings have increased. before the careful with treasury data. studies purchases latest -- we t the trade wars and what it means for your portfolio and how you are trading. any key trade your putting on ahead of the g20? wolfgang: there is a -- supposed

to be a lot of noise coming from trade wars. there might be some opportunities if volatility picks up to buy some credit, potentially a little cheaper than it is currently trading. otherwise, we have to be careful to get carried away and the minute details. we have to get the big picture. it has been a prolonged development. marketmazing how expectations have been moving if you go back to march and april. it seems like a formality that some kind of resolution -- resolution would be structured. we are in limbo now. the market does not expect the resolution to be imminent that the market does not priced in a full-blown escalation as it did in november and december. there could be a bit of complacency. i am keeping some powder dry to enter into risk assets if we should see a further selloff. nejra: through the morning we have been hearing comments from j.p. morgan possible bob

michaels who sees a bleak future on credit so it is a pivot from what he said before and he commented i want to start selling rallies here. would you disagree? wolfgang: not entirely. stepfuture is going one too far for me. i still see value in corporate bonds. i believe that the economic side of the credit cycle is not yet finished. i think that there is still room for credit to perform. before rates are ultralow, refinancing conditions are nice. there are a lot of things to be positive about. the assessment. it is probably time to take some profits 2-d risk a little bit into the strength and the rally. it is not a time to be fully invested in credit. nejra: that makes sense. throughsay high-yield 400 basis points, would you be moving up in quality? wolfgang: it is something that i

would consider. it always has to be the right risk and many investors chase high-quality assets. pricing becomes so unfavorable that trade does not make a lot of sense. quite namebe specific, quite idiosyncratic and where we can expose and where we do not. the fund, your job might he even harder where glow -- funds are globally. allen's: we have to be at this part of the cycle. it is not the time to be overly one directional. there is the, individual issue or the sector in a positive dynamic. in terms of inflation, that is an interesting story. , inflationsentiment is coming down in the u.s. and europe aggressively.

that makes it on the flipside cheap to buy inflation protection. what i have been trying to do recently is scaling into buying some inflation and bonds in the u.s. and europe. you have a breakeven rate of 1.5% or five-year inflation linked treasuries. as long as inflation in the u.s. turns out to be more than 1.5% on average over the next five years, that trade delivers a better result than nominal treasuries and it is a low bar unless we go into a full-blown recession which is not my base case scenario. nejra: it makes sense. even if you look at that five years, it tells the story about how much inflation expectations have been collapsing. do you just looking at the u.s. expect action from the fed to be able to cure inflation or are you looking toward oil prices? philosophicals a

question whether the central banks are able to control inflation. the ecb has been trying not particularly successfully. the u.s. has to consider the oil component. a lot of the tax shield we see from oil prices is not there or to a lesser extent. oil prices feedthrough into u.s. inflation numbers and oil price has been in decline. there is upside potential for the oil price if the opec finally agrees and could see a rebound in oil price which will drive expectations. we have the risks in the middle east that we see some escalation whether it is intentional or unintentional, that could also boost the oil price. there is upside for expectations. nejra: great to have you with us. let's turn to number of -- back its shares

for ¥150 billion. pressure has been building on the ceo. is gareth to discuss allen. tell us what has happened. are two prongs to the announcement. large buyback which is significant and the second element is nomura owns [indiscernible] which is a technology consultancy firm. they are selling 160 billion in -- this is something they have been discussing to try efficiency capital and that holding. 23%.ll drop to

will [indiscernible] nejra: what are the wider implications for the group? water customer is in the recently. and in march.s and the struggle with their overseas business and the struggle over the years since the purchase of lehman. everyone is trying to get the optimal mix of business. they have had the recent problem over leaking some information to shareholders. they leaked a few major deals including the sale of japan [inaudible] this will be positive news.

efficient use of capital and less pressure on the guys to perform. nejra: we'll have to leave it there. that is it for daybreak: europe. the european open is next. this is bloomberg. ♪ the latest innovation from xfinity

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anna: welcome to bloomberg markets: the european open. i am an edwards alongside matt miller who is in the ecb form. ist: the market say the end 94 risk assets, or is it? -- the most bearish in the latest bank of america surveyed. blackrock says the risk rally has room to run. the cash trade is less than 30 minutes away. ♪