nejra: good morning. this is bloomberg daybreak: europe. these are today's top stories. imf chief christine lagarde will be nominated for the ecb's top job. a supporter of qe, what will her era bring? to ease or not to ease. the feds have laid out their case against a rate cut. we will get her views this morning. we will hear from the rich bank as it's expected to refrain from a dovish turn. president picks to fed nominees likely to support easing policy. this is disappointing data. the lowest since november 2016. tesla shares drop after a record quarter of deliveries.

broadcom words -- pushes deeper into software. ♪ nejra: good morning. just on 6:00 in london. welcome to daybreak europe. yields front and center. drop in global yields, the 10-year hitting another 2016 low. below 2%. we had 195 on that treasury 10 year yield. we see u.s. stocks hit another record high in yesterday's session. we have to think about the fact that we will have a holiday and markets closing early. independence day tomorrow. futures on the back foot ahead of that. the yen also bid. concerns around global growth. dollar-yen. let's take a look at the euro. this has been remarkably steady

over the past couple of days. tradingear bund yields -36 yesterday. we saw that btp two-year yields drop into negative territory. how much does that say about italy or the hunt for yield globally? the 10-year btb yield below the 190 and a. the euro spiked briefly in the sense in yesterday as we heard that the ecb may not become sintering -- be considering a rate cut. gold on the front foot again. above $1400 an ounce. wti slightly higher at 56. we have seen the worst reaction since 2014 in the oil market to an opec meeting. let's check in in the markets in asia. good to see you. >> we are certainly seeing that move in the yen. also on the back of the boj seeking to steepen that yield curve. the nikkei off by -- off. topics in the red after the best two-day gain we had seen since

february. it is mostly risk off across asia. that trade truth optimism from the weekend starting to fade. australia is market is an outlier. it is rising after we saw the trade surplus surged to a record thing to the rise you've seen in iron ore prices. cost be down by 1.2%. lower today after south korea's government cut its inflation and gdp forecast. a sign of the trade war. let's have a look at some stocks. this is a fascinating story. newerday, there was this initiative coming through in shanghai in terms of sorting trash. fine if this u.s. $29 you do not sort your trash correctly. down ontrying to crack the massive landfill we are seeing in china. there are reports it could be spread to beijing. no surprise, seeing environmental stocks absolutely rise.

beijing capital hitting the 10% daily limit. could be expanded to beijing and of course you would think it would be expanded nationwide. certainly a very interesting piece on the bloomberg. forget the trade truth, it's all about trash in china. truce, it's all about trash in china. nejra: eu leaders have nominated candidates for the blocks top jobs. women are set to be at the helm of the european central bank and commission. christine lagarde is set to take over for mario draghi as head of the ecb when his term ends in october. germany's defense minister has been put forward to lead the commission. for more, maria in brussels. let's talk about christine lagarde. what type of central banker is she inspected to be -- expected to be? >> she was an unexpected choice. she wasn't even in the short list on monday. it took some people by surprise. there's an idea that she's not a

that,l banker by nature -- nature, that she comes from the world of politics. she is well-known in the international finance community. in thewell-known political world. she is not your typical central banker. the market is reading into this appointment. continuation. if you look at everything she has said about mario draghi and his policies, he did what he had to do to prop up the european recovery. what could be in store for christine lagarde? the market has set out her work for her. everyone is expecting some kind of stimulus coming from the european central bank. it is still to be seen. also, what's worth keeping in mind, it means that this didn't go to five min. we do not get that clean break from mario draghi. it's this theme of continuation. nejra: germany didn't get

vitamin at the top of the ecb. what about the nomination? nomination for the head of the eu's commission? >> you could say angela merkel had to pay a hefty price. she did not that take many questions or seem upbeat. she said the whole package -- they did manage to get to a compromise. that is what matter. this was an appointment that was criticized by her own coalition partner. angela merkel had to abstain in the final vote in brussels to make sure the appointment would go through. she didn't want to a lease tensions within our -- unleash tensions within her own government. it's worth pointing out that angela macgraw -- emmanuel macron was very happy. every single person nominated for one of those big jobs speaks friends.

he got his ally to lead the council. there was a system that is now dead. emmanuel macron who did not like it at all managed to send a shock to the system in brussels. nejra: thank you so much for joining us. joining us now on set is jim mccormick, global head of strategy at matt west market. great to have you with us. what kind of candidate to you expect christine lagarde to be? if she about continuity? should the market be bracing themselves for more stimulus? >> it's a very pragmatic choice. the criticism is that she's not a central banker. you have to remember, she started at the imf in some of the most intense times of the eurozone debt crisis. it is a pragmatic choice. she will be surrounded by lots of central bankers. continuity is the right word. nejra: in terms of what the ecb --s next, we did hear from

here that policy makers see no rush for a july interest rate cut. the question is what they do next. >> july always seemed early. we expect them to move in september. there's this debate about rate cuts versus qe. we think they will do both. we think they will cut 10 basis points and relaunch qe. the interesting question about the ecb is how they can prove that they are not running out of bullets. we think they will increase the issue with issuer limits sometime in the autumn as well. with lagarde at the helm, is there an argument that there will be a lot more for philip lane to do as chief economist? beenf the criticisms has that she comes less from an economic background. she has the strength of being able to find consensus and she's been in policy. >> she will be a consensus builder. she will not be the driver of the economic view. she is surrounded by a lot of people who have that experience.

there could've been worse choices than christine lagarde for ecb. nejra: could there be more of an emphasis on the fiscal side of things as well? this is something that christine lagarde might put emphasis on as well and might have the political not to get governments to agree on. matter who took over the ecb, fiscal policy was going to come center stage. let's be honest. the ecb has been carrying the heavy load for the past 10 years. europe has capacity to ease fiscal policy. that is going to be a big theme for 2020. nejra: euro volatility fell to the lowest level since 2007 on the guard's nomination. what does that tell us? >> it tells us that currency is not moving very much. frankly, i'm skeptical that that can continue. no matter what's happening on the central banking side, the world is moving toward some real recession risks here. that's typically an environment of much higher volatility. nejra: we have seen much more of

a moving yield. to dig more into what you expect from the ecb, you expect qe and rate cuts. is that going to be enough to actually lift inflation expectations? i think the inflation expectations have a lot of things going on. clearly inflation has been low. about inflation expectations is the market concern that the ecb is running out of ammunition. to me, it's not necessarily whether they cut rates 10 basis points, restart to me. i have to convince the market that they have more ammunition. ist's why the issuer limits the most important part of the package. they have to convince the market they have more they can do. right now, they are not doing that. nejra: with lagarde at the helm coming -- helm, is there the potential for more creative produce and -- solutions? >> absolutely. it creates a lot of creativity

in terms of things you can do. nejra: is it a fair interpretation to think that europe is bracing itself for another crisis soon and more political friction with the choice of lagarde? >> it's possible. i think there's always in the back of the mind of european policy makers that the crisis hasn't been entirely solved. when you think about what you see in the eurozone over the next five years, bringing in someone who has run the imf seems like a pragmatic choice just in case. nejra: our guest is with us for the hour. let's get the bloomberg first word news in hong kong. president trump has announced his latest nomination for the federal reserve board. christopher waller's director of research at the st. louis fed. previously a professor of economics at the university of notre dame. judy shelton is an informal adviser to the president. she spent decades outside of

mainstream economics and her unorthodox views could attract opposition. oil is struggling to recover after suffering its worst reaction to an opec meeting in more than four years. concerns about the global economy are overshadowing the decision to extend out the cuts for nine months. tells usergy minister opec and its allies will respond to any disruptions in the market. market can change very quickly as can the situation in shale production. nobody would guarantee to you today that much supply growth will be maintained in the future years because this is a highly uncertain and risky segment. >> the trump administration has abandoned its hard-fought battle to add a citizenship question to the 2020 census. that's after the supreme court challenged its purpose. the reversal by the white house,

trump looking to delay the census. u.s. has beat england to secure a place in the world cup final on sunday. it was a hard-fought victory with the lioness is missing a penalty less than 10 minutes from full-time. the west will play the winners of today's semi finals between the netherlands and sweden. day onnews 24 hours a air and out tictoc, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. nejra: thank you so much. today, we are the question on mliv, why don't stocks care about slumping pmi's? during the debate and reach out to us. coming up, investors assume it's on the way and many fed officials are leading hard towards it. why is cleveland fed president going against the grain and a rate cut this month? blame is our interview at 11 --

don't miss our interview at 11:00. this is bloomberg. ♪

nejra: this is daybreak europe. let's get a check in on the markets. taking a look at asia first. the msci pacific index showing red on this week. nothing dramatic. we have seen a dramatic move in the 10 year yield for treasuries, hitting another 2016 low. is this on bets about global easing? traders trying to get ahead of some of the economic data. we have a holiday coming up for july 4. another record for u.s. stocks yesterday. we are flat on the futures today. stop and bond markets in the u.s. close early today ahead of independence day. crude on the front foot. dropping u.s. stockpiles giving a list of futures. the reaction to opec, global growth weight on opec's parade.

let's get the bloomberg business flash with debra mao. bank is reportedly sounding out potential buyers for a wide range of unwanted assets. this as it lays the groundwork for its most are medical overhaul in recent history. the sale would be part of the german lender's plan to shutter or cut its own -- unprofitable businesses. tesla jumped in late trading after setting a new record for quarterly deliveries. the electric carmaker handed over 95,000 cars to customers in three months. that exceeds the previous best said in the last quarter of 2018. it alleviates the worst fears about demand for tesla's vehicle. broadcommberg scoop, is in advanced talks to buy cyber security firm symantec. they could reach an agreement within weeks. no deal is finalized. this is part of broadcom's expansion into the more profitable software business. shares jumped on the news.

that's your bloomberg business flash. nejra: thank you. let's turn to central banks. sweden may have missed its chance to hike rates. the central bank is fielding criticism for failing to tighten policy earlier. policymakers have signaled more to come. recent dovish signals from the ecb and fed make tightening more challenging. at the fed, the question dominates the run-up to the next quit -- meeting. will it come by quarter-point or twice that? laidleveland fed leader out the argument against rate cut this month. she says that cutting rates could reinforce negative sentiment about the deterioration in the outlook even if this is not the baseline view. james mccormick is still with us. good to have you. not a surprise that she's coming out with this. what was more of a surprise was james bullard saying 50 would be

too much. where do you fit on that spectrometer of what sort of a rate cut we get in july, assuming you expect one in july? >> we do expect one in july. our view all along has been, it's going to be 25 basis points. there's back-and-forth arguments about whether it should be 25 or 50. if you look at the way the data stacks up, 25 seems like a reasonable start. nejra: we got a fair amount of data this week. manufacturing already causing concern at the start of the week. we get the job stated. is there a possibility that if we get a strong jobs number that beats expectation, that could mean the fed holds off in july despite what the market is pricing? >> for any number of reasons, it will be difficult for the fed not to deliver something. they've set the market for it. the market keeps pricing more. you know a central bank should not people around by market placing. not delivering in july would be

very difficult. a strong payroll number would certainly raise a lot of questions about the profile of rates going forward from july. nejra: speaking of the 10 year yield, we've dropped to a 2016 low. below 2% again. this followed a trend of global yields as well. bond yields have been falling across major developed markets. look at the u.s., germany, the u.k. as well. you have comments from the boe governor yesterday, concerns about global growth and protectionism. this drop we have seen a 10 year yield, how much of it is about what's happily globally and how much is about the u.s.? >> is clearly a little bit of both. if you look at the long end of bonkers in recent years, the do trade like one asset. people have demand for them. the reality is, the u.s. is the one place where there's yield. there's no anchored to the lawn and dust long end. nejra: how much further can the

rally go in the u.s.? >> it obviously can go a lot further. i would imagine that when we start seeing something around 180, that might be a point to take pause. there is no anchor in the long end of the curve. there is global demand for the u.s.. there are concerns about global economy. people are getting concerned around risk assets. holding yield seems like a reasonable thing to do. nejra: what is your team saying about how you should trade treasuries? either in an absolute basis or in terms of the curve. >> we prefer curve steepeners all year. it's a trade that has worked reasonably well. it has not been the best trade. the best trade is long u.s. fixed income. being long becomes more difficult at these levels. steepeners look very sensible. people will make more money being long. we are getting close to the bottom of 10-year gilts right now. nejra: are we getting close to

the bottom of the dollar's recent the klein -- the klein -- decline? >> you have long-term overvaluation, large twin deficits. an economy worth outperforming the rest of the world. it's had better yield and asset market performance. i think that tug-of-war goes on for longer. we do think that the second half of the year will be a bit more difficult for the u.s. dollar. nejra: let me bring in another voice from the central bank. the boe governor gave a warning about the effect of a trade shock. take a listen. >> the intensification of these global trade tensions have increased the downside risk to both u.k. and global growth. ,he way we conduct policy today we have to deal with the impact of the uncertainty around those events. and how they influence the behavior of households and businesses and international markets. to say thatnt on

although central bank stimulus might be necessary, it might not be enough. governors must also step up with fiscal measures. this is coming that is becoming a global theme. are the markets going to get a trade resolution and a fed easing cycle? resolution, my view is no. the trade truce is a good thing. we should recognize that the visions between the u.s. and china are very wide. the u.s. has a lot more targets out there. you saw overnight, they are focusing on vietnam. yesterday, they are focusing on the euro area. anxiety around trade is going to be around for a long time. that's one of the reasons you will get a rate cut from the fed. it's why mark carney is right. you will probably get a rate cut from the bank of england. the world is a pretty uncertain place. a lot of this has to do with trade. nejra: can the fed started easing cycle in terms of rates while continuing the balance sheet rolloff? >> there's nothing stopping them

from doing it. it always felt sequentially awkward to do those two things at the same time. nothing stops them from doing that. let's be fair. they were going to stop in september anyway. the difference between july and september is not substantial. it's more of an awkward signaling than anything else. nejra: what does this mean for how you look at emerging markets at the moment? >> emerging markets are interesting. if you go back nine months ago and you saw what happened with risk assets in the fourth quarter, with the global economy, you would be thinking emerging markets would be having a pretty difficult time. the truth is, they're not. local markets em have done pretty well. i think there's a lot of reason for that. buffers, low current account deficits. cheap assets. emerging markets are showing that. it's an environment where they should not be doing well. nejra: are u.s. stocks doing well? >> that's a difficult one in

terms of -- there's a lot of things that go into the u.s. stock market. it's very unusual to have global equity markets, u.s. equity market included, sitting at record highs when the global manufacturing cycle looks like it's in recession. it's an unusual gap. we understand some reasons for it. it doesn't seem to me like it can sustain itself. nejra: we will discuss more about that in just a moment. our guest will stay with us. coming up, we speak to the cleveland fed president. don't miss that interview at 11:00 london time. coming up, most predictions come true. a record for vehicle deliveries. mean concerns of weakening demand is over? when you are traveling to work, tune into bloomberg radio, live on your mobile device. this is bloomberg. ♪

>> i have known madam lagarde for many years, and i am absolutely sure that she will be a very good president of the european central bank. christine lagarde is someone we know very good in ireland who will continue the policies of mario draghi. >> she has all the necessary skills in order to head the european central bank. >> i do not believe that christine lagarde has such a broad experience. she knows how to consciously address issues. she will be very committed. nejra: that was a number of e.u.

leaders commenting on the nomination of christine lagarde asked the next president of the ecb. joining us from our partner in mumbai is -- m dani burger. great to see you -- and dani burger. great to see you. india not moving a whole lot today. what is going on? good day to you. consolidation coming through for the benchmark indices. largelyolidation is because of uncertainty ahead of economic survey as well as the presentation of the union budget which will happen later on in the week. however, if you do see the sensex advancing marginally, it would be the third straight day of gains. should we see the indices close again, aeen, but once lot will depend on what we see in the budget. before that, a lot of analysts

are expecting some sort of consolidation going into it. nejra: thank you so much. and dani, you looking at the global bond market rally. dani: the first thing that happens when you pull of gmm is in the bond market column, you see absolute green. of thee to imagine some personnel changes we are seeing at the ecb with lagarde and the is helpingovishness sustain the bond market rally. when you look at equities, they are off today despite the rally in u.s. equities we have seen over the past couple days. that weak data pricing on markets. that includes the most sensitive metals in the red. the yen hitting highs after the boj tweet. about thisen talking today, rightly so. the 10 year yield falling below 2%. not only is it below 2%, the u.s. 10 year yields u.s. and

consumer inflation so that is the spread i had, falling below the red line. when you buy a u.s. 10 year yield, you are not even getting paid inflation, so it is hard to see how that could be attractive to a lot of investors, especially foreign investors, which is weighing on the dollar. we continue to see yields sinks lower. nejra: dani burger in london. for us in mumbai. to follow off from what she was saying, we are asking the question on mliv -- why don't stocks care about slumping pmi? you can join the debate. tv on your bloomberg. we have a chart showing contractionary territory for pmi's. stocks move higher in higher. why don't equities care? >> i have heard many arguments because it is a question i thought about a lot. the most plausible argument is that market smiles think that central banks will be able to turn things around. what i would say is if you look

evidence, it is really hard to believe central banks will completely immunize asset prices that are supposed to be linked to growth from a very weak global manufacturing cycle. i would be concerned about that gap. nejra: you think the gap has to close. it sounds like maybe it is stocks that are going to move lower rather than the pmi's are going to lift tire? -- lift higher? >> you can get some improvement in growth. policy tends to take 12 months 18 months in between those 12 to 18 months, you have a lot of trade friction, so it is hard to imagine the global many capturing pmi's recovering very quickly. nejra: you have a sophisticated chart which shows a summarizing to what i just showed but it talks about growth assets because it is not just equities you look at, right? james: it looks at fixed income, commodities, currencies, volatility -- volatility being at all-time lows.

it is very interesting at a time on the quote manufacturing cycle looks to be in recession. stays withmccormick us. bloomberg first word news with debra mao in hong kong. lagarde is set to succeed mario draghi as head of the european central bank. she has become the first woman to run the euro area monetary policy. she was nominated by e.u. leaders. one of the highest profile women in the world of finance, her appointment has to be ratified by the european parliament. the's top jobs. european leaders have nominated germany's defense minister to be the next president of the european commission. ursula would be the first german to hold the top job and 50 years and the first woman ever. president trump has announced his latest nomination to the federal reserve board. christopher waller is director of research.

he was previously a professor of economics at the university of notre dame. judy shelton is an informal the president. she spent decades outside mainstream economics and her unorthodox views could attract positions. the trump administration has abandoned its hard-fought battle to add a citizenship question to the 2020 census after the supreme court challenged its purpose. it is a sharp reversal by the white house. trump saying he has looked to delay the census after the court put the plan on world. beat england to secure a place in the world cup final on sunday. it was a hard-fought victory with them at a penalty less than 10 minutes from time. the u.s. will play the winners of today's semifinals between the netherlands and sweden. global news, 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ,ejra: debra mao in hong kong

thank you. italy's populist government is cutting its 2019 deficit goal to 2% in a bid to avoid e.u. sanctions. it pushed yields to the lowest in a year. dropping below 0% in yesterday's session. it is another sign of growing investor confidence in the nation's economic outlook. jim mccormick is still with us. i would question that. how much has this move lower? -- moved lower? is it about italy and how much of it is about a hunt for yield when you have the 10 year bund yield trading at -36? james: i think there has been a little bit of good news around italy. the excessive deficit procedure does not look like it will happen. we always thought that if italy was going to have any fireworks on the political front, it would probably be in the autumn. what the italian bond market is telling you is we are reaching a pretty interesting new for

yield. when i talked to investors three to four months ago, people needed yield, but italy was a no go, and now, the bond market with the best character volatility ratio, and it is hard to avoid when you cannot find yield elsewhere. going into italy, it's a very interesting signal. nejra: when i have spoken to people before, they showed a preference, some of them, for the front end of italy. a little bit less risky. with the two-year, once that was below zero, is that still attractive even with this stretch for yields? james: it's a little bit difficult. we have been long to five years since the start of june, and that still looks ok. i imagine we will get pushed further out the curve if this continues. two-year below zero, i do not know if that is a fixed income instruments i would be buying. nejra: if you look at the bund spread, we are at a 184 handle

right now. are there others that interest you other than italy, perhaps spain, portugal, greece? most interesting thing happening in europe as head of the bund yield being at -35 basis points is that you have had really strong differentiation within the periphery. and the way i described it to investors is italy is your tactical play. recognize there will be some risks around the autumn. spain is your structural play. it is behaving like;. -- like send me -- like semi-crops. the japanese are beginning to look at spain as an investment. nejra: would you be trading all? at even within the negative territory, it is still worth investing in bunds. james: you have to have

something when you look at the curve, it does feel to me like the curve can flatten a lot more. every time the 10 year bond yields have gone below zero and stay there, this is the third time you tended to get a very sharp flattening in the curve and we have room to go there. longer end of germany looks very attractive. nejra: and gilts as well. we did see quite a big drop yesterday. earlier, we showed comments from mark carney. 70 basis points on the gilt yield. do you have any recommendation on this? or is it more around the currency you are willing to make recommendations? james: we lowered our gilt forecast to 65. we were aggressive all meant. i see the most interesting thing happening in the u.k. is that for one year now, most of the focus has been around politics. suddenly, the focus is shifting to the economy. this is an economy that has had three years of uncertainty and pretty much every angle member you are getting out of u.k.

looks very weak. the economy is becoming the big driver. expect yields to be lower. we like steepeners for lots of different reasons as well. nejra: give me one or two of those briefly. the demand that the long end of the curve is starting to slow and i do think, in this discussion of global fiscal policy, the first country that is coming out with fiscal policy will be the u.k.. nejra: interesting. jim mccormick staying with us. tesla shares jumped in late trading as a record quarter of deliveries alleviated the worst fears about demand. the electric carmaker handed over 95,000 cars to customers in the three months to the end of june. for more, dave mccombs joins us from tokyo. great to have you on the show. thanks for joining. what is next? dave: the focus has shifted to margins. to showwhere tesla has not only that it can produce cars but that it can sell them

and of course that it can sell them at a profit. that has been very difficult for them in the past. it is tied up a lot into the actually selly the vehicle at and that has tended to include a subsidy of some sort. investors and analysts are looking very closely at those margins that may not be as large for the companies mass-market thel as it has been for luxury models. so now that the emphasis has been on that model three and producing large quantities of that, there has been will focus on what is the bottom line here and can tesla move ahead and become profitable? nejra: right, exactly. while the results go a long way towards contradicting tesla's downturn, i guess we have to wait and see whether the level of demand is sustainable so what is the outlook for in enters and how does that play into demand? -- for incentives and how does that play into demand? dave: at the same time, they exist in other very important

markets like china. certainly, canada is adding incentives. there are other a markets around where incentives will continue to play a role driving demand. the question is, can this lead demandinue to for electric vehicles not only with incentives coming off that also with the competitors coming in. expected to introduce its luxury ev right around the corner. there is a lot of pressure on tesla to show it can keep up demand and demand for the 3:00 is sustainable. another point is that while they have been making and selling quite a few of the model threes, there is a question, is this cannibalizing demand for its work profitable luxury models? nejra: dave mccombs, thank you so much for joining us. our global business editor in tokyo. here is a look at what else you should be looking at today as positions.s on

the parliament votes for its own president. we will bring you the latest from brussels. riksbank releases its decision. it is a close call whether it will maintain its forecast towards the end of the year as major central banks move in the opposite direction. cleveland fed president loretta mester will be speaking to bloomberg surveillance. she is one of the more hawkish members of the fomc, recently talking against rate cuts. we also expect to wait for pmi data from european countries including spain at it up -- 8:15, followed by france at eight: 50 and germany's just before 9:00. watch out for the new york stock exchange setting early ahead of the july fourth holiday. by markets will also close early in the u.s. this is bloomberg -- bond markets will also close early in the u.s. this is bloomberg. ♪ ♪

nejra: this is "bloomberg daybreak: europe." i am nejra cehic in london. here is debra mao on hong kong. debra: deutsche bank has reportedly sent out potential buyers for a wide range of

unwanted assets as it lays the groundwork for its master medical overhaul you recent history. the sale would be part of the german lenders plans to shutter or cut its unprofitable businesses. script. -- s a bloomberg scoop. no joy finalized. this is not a broadcom's expansion into the more profitable software business. shares jumped on the news. has died at age 94. he first came to prominence in 1960 when he was named general manager of ford and many see his crowning achievement as saving chrysler from going bust in 1980. he arguably ushered in the era of the celebrity auto executive. that is your bloomberg business flash. nejra: debra mao in hong kong. oil is struggling to recover after suffering its worst reaction to an opec meeting in

more than four years. concerns about the global economy overshadowed the decision. agreedtel and its allies to extend cuts but divisions remain over the need for deeper curve -- curbs. >> i see the length of this agreement as nine-month sufficiently long to bring -- long to bring inventories down. i am positive, optimistic, and it think we are in a very good place. >> we will achieve optimal results by avoiding an oversupply of the markets at the beginning of the year. >> hopefully, it will erode some of the volatility and it will clarity andge of removal of some kind of confusion and uncertainty. mccormick is still with us. we just mentioned yesterday we saw a drop of more than 4% in both brent and wti.

we got stockpiles, data, in the past 24 hours, but the worst reaction to opec since 2014, plus if you look at technical fund wti, a bearish signal on the cyclicals. absorbingket quickly what we heard and simply wanting deeper curbs china opec plus? james: it is cut at a set of crosscurrents. clearly, there's concerns around the man. manufacturing ecowas telling you there should be concerns around demand but against that, you have opec supply cuts holding together. you have got the geopolitical risks of what is happening in iran. unappreciated stories is u.s. shale producers are starting to signal that they are running into capacity constraints. i find it hard to get super bearish on oil. i think caught in this course current is what we will see for

the rest of this year so a lot of volatility around probably a price close to where we are today. nejra: interesting. we have a chart as well questioning whether the fact that brand backwardation has been plunging is working fine. you say you are not super bullish on oil but do you get a sense market is extremely focused on the demand concerns at the moment? what is that chart on you? james: the chart -- chart telling you? james: the extreme backwardation, a signal that the market was very short of supply and are starting to ease. the reason it is starting to ease i think that the demand for he is becoming more problematic, inthe fact that we are still backwardation with the global manufacturing pmi below 50 is interesting and that supply is pretty tight partly because opec is keeping a tight, partly because the u.s. is running out of capacity. nejra: do you really expect range bound trade from here? do you have any particular targets? what are your expectations

around the price? james: we thought somewhere in the 65 to 70 range for year-end was reasonable. i think the thing to take away with oil is that, in any other cycle of weeks global manufacturing -- weak global manufacturing, you would have had oil at lower prices. this time around, you will probably not get that because of what is happening on the supply side. there's many reasons to be bearish. i think the bears will be slightly disappointed because one of -- of what is happening with supply. how does oil compared to previous cycles? what does that mean for global growth? is there a link to be made? james: for global growth, it would be much better to have oil prices lower. when you have a site that is so weak, it is basically a tax cut for the global consumer. one of the challenges of this cycle is you are not getting the oil response because of the

supply picture. nejra: let's take a look at commodities. i want to ask you to round things off. he are trading of a $1400 an hour. atthis -- we are trading $1400 an ounce. james: this is an asset for certain types of investors, but frankly, when the percentage of global bonds yielding less than zero is as high as it is, real asset and to perform better and it is not surprising that gold has done very well in this environment and public you to do well as long -- and will probably continue to do well. nejra: this is your choice over certain bonds and maybe over the yen? james: i think gold is a clear safe haven. if bond yields continue to go lower, if the global cycle continues to be the weak, i would have a look at the japanese yen. nejra: swiss franc? james: it will be caught in the

crosscurrents of what is happening with the euro and the ecb. it does not feel like the euro is going to be the real leader in this decline in the u.s. dollar. the japanese yen, you may be happier with the performance. nejra: it has been great to have you in the studio for this hour. what is your key conviction call for the second half? james: that volatility is just far too low. this gap between risk assets and volatility on one side and global manufacturing on the other side, something needs to give. nejra: thank you for joining us, jim mcdermott. great to have you with us. coming up, investors assume it is on the way and many said officials are leaning hard towards it. aboutak to loretta mester why she is arguing against a rate cut this month. you not miss that conversation at 11:00 a.m. london time. bloomberg users can interact with all the charts shown using gtv . andh up on key analysis

save the charts for future reference. if you have got to step away from the tv and you are traveling to work, tune in to bloomberg radio on your london device or dab digital radio. this is bloomberg. ♪

>> good morning. i am nejra cehic. this is "bloomberg daybreak: europe," and these are today's top stories. getting the nod, christine lagarde will swap washington for frankfurt as she is nominated for the ecb's top job. what will the lagarde era bring? the fed loretta mester has laid out her case against a rate cut. we will get her views this morning and we will hear from the riksbank as it is respected to refrain from a dovish term. twoident trump picks nominees. disappointing data sense treasury yields to the lowest since november 2016. the wechat. tesla shares jumped after a record quarter of deliveries in

deals. broadcom looks to buy symantec in an effort to push deeper into software. good morning, everyone. welcome to "bloomberg daybreak: europe." 7:00 a.m. in london. breaking news from the past two minutes. andrea -- this is a report that santander, seeking 100 million euros. just to give you some context, we heard back in march that he hired a law firm after santander told the ceo job offer from him. he was working with the madrid-based law firm to study the legal options after santander reneged on his appointment as chief investment officer. an update about him suing santander. broader equity markets. we have seen a few days of

gains. the s&p 500 had another record yesterday so global stocks seemed to be on the front foot. futures pointing to another day of gains even if they might see seem somewhat modest. green on the screen for ftse 100, dax, and cac 40 futures. we have been seeing yields pledge. the 10 year treasury yields dropping below 2% to the lowest level for the -- since november 2016. we are on a 195 handle, dropping almost three basis points?. how much of it is about the u.s. how much of it -- how much of it is about the u.s.? yesterday, we saw the tenure bund yield get to almost -37, but italy really stole the show. the 10 year yield dropping below the 190 handle. the two-year yields dropping below zero in yesterday's session. how much of that is about italy? how much of it is about the global grab for yield? judging by the futures, it looks

like we could continue to see a decline in bond yields. other safe haven bid theron. we are seeing the yen bid in today's session. gold showing some strong gains. let's check in on the markets in asia. juliette saly in singapore has more. how is it looking? juliette: certainly a little bit more risk off today after we start to see that g20 optimism over the trade truth wayne somewhat. wane somewhat. hong kong coming off strong gains. the hang seng down by .3%. you mentioned the strength in the yen. we have been watching moves in korea, too, which the south korean government is cutting its growth forecast, 2.5%, down from previous estimates. australia's market closing higher for a third session in a row. we had a pretty strong trade andlus thanks to the search iron ore prices and i want to show you some of those assets we have been looking at,

particularly the yen and japanese bond yields. prime minister abe says this unprecedented monetary easing is not a failure. is employmentt and what is important is to improve the real economy. earlier, we had the boj really trying to support the monetary byicy part that they are on the interest in the yield curve. down by one basis point. worth noting the mood coming into the korean won, down by .5%. i mentioned the cut to gdp. we are seeing a cut to inflation forecasts. that is suggesting the bank of korea is set to be on a easing bias. nejra. nejra: thank you so much. finallyders have nominated candidates for the top jobs. for the first time, women are set to be at the helm of the european central bank and commission. christine lagarde is set to take over as head of the ecb when marianne draghi's term ends.

ursula von der leyen has been put forward. , great to have you with us again. what type of central banker is careened -- christine lagarde expected to be? maria: it is difficult to predict what essential banker eill do -- a central bank will do. rshe has always been very supportive and the actions that mario draghi took to protect the euro during the debt crisis. she is also said many times countries that have room for fiscal expansion should do it so clearly that is a reference to germany. she always called for a further push when it comes to european integration, the need to create a real monetary union in the european union. a few eyebrows were raised yesterday by the fact that she

is not your typical central banker. she is not an economist per se. she comes on the world of politics. keep in mind the deputy president of the european central bank is also another politician. a few questions as to whether we are headed toward a more politicized european central bank. nejra: in terms of the head of the e.u. commission as well, nomination of ursula von der leyen, how will that be confirmed? maria: that is another big job that went to a woman and also went to a german, which again, that should be good news for angela merkel. she paid a hefty price to get this nomination on the table yesterday. she had to abstain in the final vote because she was concerned about potential jitters within her own coalition back in germany. we know the relationship has become very tricky. when you look at the european parliament, which is meeting today and prosper, they should be able to make a decision on

this. leaders would not put a nomination like this to a note if they were not 100% sure they get it through. we are going to see a lot of pushback but mostly because this is a woman who not many people know outside of germany. not many people know who she is or what she does. she did not participate in the european elections. the whole point was to get someone who was elected into the commission job. clearly, that has not been the case. nejra: thank you so much for joining us from brussels. great to have you with us. joining us on the inland in is the global macro strategist. great to have you. of course we start speculating over what kind of central banker christine lagarde could be. should the markets be bracing themselves for more stimulus from the ecb with her at the head? >> in short, no. the reality is nothing really changes. in actual fact, ecb policymaking , it will be determined in the next three months to six months, well in advance of the first

meeting, so the reality is when we look at ecb policy, there is limited easing headroom given where we are in the cycle. potentially --a there is potentially a patient approach relative to the fed given the transitory factors weighing on growth. namely trade war risks and uncertainty. when we take those factors into account, for us and markets, and we look at the euro, we do not see rate differentials working against the euro right now in a way that would drag it low. for us, it is sort of looking at the upside risk to the euro stemming from really the fed plus side of the equation and the u.s. growth equation. ecba: if we stick with the for a second, bloomberg is reporting that policymakers see no rush for a july interest rate cut but of course the market have expectations more around september. a heard around goldman seeing

20 basis point cut in september and restarting the asset purchases. how do you think this will play out in terms of more stimulus either by rate cuts, qe, or anything else? viraj: it is probably the limit or the extent to how dovish you can go. it is only upside from here really. starts turning higher and we see a divergence in the eurozone economy from the rest u.s., world, from the mainly because of the factors weighing on the eurozone transitory,y are nondirect. there are no character implications on the european economy -- tariff implications on the european economy. the case for using sms its expect right now, it kind of -- the case for that, it does not work against the euro. cyclical factors could start supporting the euro, and for us, the case of euro-dollar going to 116 this your strengthens based

on that. nejra: euro-dollar moving to 116. volatility on one year implied volatility on euro-dollar has fallen to the lowest level since 2007 perhaps on the garth nomination to the ecb. could this start to pick up? viraj: we think why euro-dollar is so tame is because there is no conviction right now. with anomies are bleak cyclical downturn. it is difficult to take a direction on euro-dollar by the volatility has ramifications for the rest of the world. it starts to push assets into the emerging markets. set is great for those assets but for euro-dollar, until you have some diversions in the cyclical outlook, it is difficult to take any directional views. we see more creative tools being used by the ecb or perhaps the ecb leading

more on government and the fiscal side of things putting more pressure on the fiscal side? may be lagarde achieving what mario draghi did not? viraj: i think we will see a reiteration of that. thepress conferences have iteration. we will see a continuation of that. whether it is successful or not life more in the hands of brussels -- lies more in the hands of brussels. they can only advise and call for that action to be taken. in short, i do not see any changes for the ecb under sort of a mrs. lagarde held. -- helm. we will see these political forces conflicting with the we are with ecb policies and limited firepower qe.erms of easing and it means there's limited headroom. nejra: i was surprised to see futures in the green in europe

given they are flat in the u.s. and we had in some read on the screen in asia. that's an cac 40 future -- dax and cap 40 futures flat. if you look at -- cac 40 futures flat. we are actually seeing the 10 year yield study along with the 10-year bund yields steady in today's session. thedrop we saw in bcp's and two-year yield falling below zero, is that to do with italy and the shift it made on the budget deficit, bringing it down to 2%? is it telling us something about the grab for yield in these global bond markets? viraj: a bit of both. the cause was the fact that we it looks like tensions will be put to one side for now. one of the risk factors for european assets mainly sort of local political risk. it seems to be shelved for now. that is where you are seeing pcp bund spreads-- bcp

fading. there is a push for qe, which is allowing for that compression to happen as we saw in 2017. i think there is a chance we can get tenure threats to 200 but that is -- 10 year threads to 200. nejra: you are expecting the euro to trend a little higher and a turnaround in the european data. do you expect bund yields to move much higher from here? -36? viraj: i think they are stretching as much as possible. based onooking for -- some sort of selloff and where the market is positioning, whether it is data or a less dovish ecb. it is difficult to see that spread given where how extensive bund yields are. nejra: viraj patel staying with us for the rest of the show. first word news with their morale in hong kong.

debra. debra: president trump has announced his latest nominations for the federal reserve board. christopher lawlor is director of research at the st. louis fed and was previously a professor of economics at the university of notre dame. judy shelton is an informal adviser to the president. decades outside of mainstream economics and her unorthodox youth could attract opposition. oil -- views could attract opposition. the worst reaction to an of meeting and more than four years . concerns about the global economy are overshadowing the decision to extend output cuts. russia's ministry investor -- minister says they will respond to any disruptions in the market. >> the market can change very quickly. as can the situation in shale production. no one would guarantee to you today that supply growth rate as we saw in 2017 and 2018 would be maintained in the future years

because this is a highly uncertain and risky segment. debra: the trade war could lead to a widespread slowdown that requires a major policy response according to bank of england governor mark carney. he says the u.k. faces the additional threat of a no-deal brexit but reiterated his view that a smooth divorce could lead to higher interest rates. of thesetensification global trade tensions have increased the downside risk to both u.k. and global growth. the way we conduct policy today is we have to deal with the impact of the uncertainty around those and then -- those events and how they influence the behavior of households, businesses, and financial markets. the u.s. beat england to secure a place in the world cup final. it was a hard-fought victory missing aionesses penalty less than 10 minutes from full-time. they will play the winners of

today's semi finals between the netherlands and sweden. global news, 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. nejra. kong, debra mao in hong thank you. we are asking the question on mliv, why don't stocks globally care about something pmi's? you can join the debate, tv on your bloomberg. deutsche bank is reportedly sounding out potential buyers for a wide range of unwanted assets. this as it lays the groundwork for its most romantic overhaul in recent history. the sales would be part of the plan to cut its unprofitable businesses. joining us now from rome is bloomberg's european finance editor. thank you for joining us. what kind of interest could there be an asset? -- be in these assets? be a lot ofld interest. one of the assets is supposed to

be performing and nonperforming loans, and they have attracted a lot of interest, especially in italy. a lot of big players like , havee capital, apollo been buying a lot of these end line the platforms as well to manage them, so that is one that might do well. assets, wee other cannot be sure exactly what we are looking at, but some of these took him from quality businesses of deutsche bank, so they could he high-quality assets. nejra: -- could be high-quality assets. howa: so talk to us about this latest news, this latest factor, fits into the wider restructuring plan? >> well, it shows that they are getting on with things, and it reinforces the idea that they will be getting out of his misses, and some of those will have asset that need to be distributed to someone. they have indicated that some of the assets they will try to sell

at full value and they are not in any hurry to tell them off so that seems to -- so that officer that seems to indicate that they could get a good price for them. it shows as well, as we have been reporting, that they are certainly going to exit some businesses. we talked about the investment bank and equity trading, and this is an indication that those orinesses that are shuttered reduced radically will have some and deutscheribute bank will try to get as much as they can for them. if they cannot, then they were likely to be wound down. nejra: thank you so much. bloomberg's european finance the latesting us on from deutsche bank. got to break some news in terms of the bond market. belgium's 10 year bond yields dropping below 0%. of yieldstheme dropping. italy's two-year yield went below zero. we rested he on that, holding

just above the zero line. we are continuing to see a lot of yield decline. the 10 year treasury yield hitting a 2016 low, down 2.5 basis points. speaking of treasuries, investors assume that cuts are on the way. many officials leading towards that. but loretta mester is going against the grain and against a rate cut. do not miss our interview at 11:00 a.m. london time. this is bloomberg. ♪

nejra: 7:22 a.m. in london. 37 minutes from the start of cash equity trading. i am irritated hitch in london. global bond -- i am nejra cehic in london. 10-year bcp yield moves lower again. are we going to drop below that 180 handle?

the two-year yield went negative. it is back above zero. futures flat after u.s. stocks hit another record. u.s. stock and bond markets will close early today because of july 4 celebration tomorrow. 107.6 two.at gold above $1400 per ounce. factors feeding into that. president trump looking to reshape the fed board as well with two picks seen as doves. is that feeding into gold? weak data feeding expectations of global easing. oil dropped significantly yesterday but we jumped a little bit today. stockpiles dropped in the last 24 hours in that data. 56.53. debra mao in hong kong. late: tesla jumped in trading after setting a new record for quarterly deliveries. the electric carmaker handed over 95,000 cars to customers in three months.

that exceeds the previous ones set in the last quarter of 2018 and alleviates the worst fears about demand for tesla's vehicles. a bloomberg scoop. broadcom in advanced talks to buy symantec. we learned they could reach an agreement within weeks that no deal is finalized. this is part of broadcom's expansion into more profitable software business. symantec's shares jumped on the news. veteran u.s. auto executive lee age 94.has died at he came into prominence in 1960 when he was named general manager of ward. see his crowning achievement as saving chrysler from going bust in 1980. he ushered in the era of the celebrity auto executive. that is your bloomberg business flash, narrow. -- nejra. nejra: ann-katrin petersen is -- "bloomberg daybreak: europe is still with us -- viraj patel is still with us.

you are seeing this drop in global bond yields. belgian 10 year yield that the zero. how much is the treasury to do with the global falling yields and how much to do with what is going on in the u.s.? viraj: a lot of it is the catalyst from the fed policy and it occasions for the shift towards an easing cycle. , 25ink when we back out basis points for me is what i call an insurance cut against u.s.-china trade tensions, which does not make a lot of sense of being right now. to me, it is the case between one or two rate cuts over the next six months. 25 to 50 basis points. bond yields in the u.s. are probably undershot by 25 basis points because of just the geopolitical uncertainty. nejra: you have loretta mester arguing against a rate cut in july. she is on the more hawkish side of the spectrum. meanwhile, president trump

appointed board nominees that are seen as dovish. what do you expect to come in from the fed? viraj: i have some sympathy for the master -- loretta mester view and the bullard view. what has happened is markets have kind of prices in an easing cycle that is not necessarily inr in the heart -- mirrored the hard data. even if it is 25 to 50 basis points. we'll policy rates in the u.s. have tightened because of falling inflation. that should be the central concern for the federal reserve and that is only one or two rate cuts. do not get this sort of 25 basis point insurance cut that is priced in. for me, that could come out quite quickly. nejra: viraj patel. great to have you with us. that is it for "bloomberg daybreak: europe." "bloomberg markets: european open" is up next. futures looking pretty flat.

the real action is in the bond market. belgian 10 year yields dropping. the 10 year treasury yield at a two-year low. italy in focus as well. when you're traveling to work, tune into bloomberg radio. this is bloomberg. ♪

anna: welcome to "bloomberg markets." is this the end of the everything rally? european futures trade mixed ahead of the open. the cash trade is less than 30 minutes away. ♪ anna: christine lagarde is the surprised nominee for the ecb top job. a supporter of qe with no central bank background.