>> good morning from dubai. these are today's top stories. deceleration of the economy. slowing to the slowest pace since the early 1990's. del's ceo says there is no impact on the nation. this will allow companies like ours to work in their respective markets. downgrading the threat. the turkish president downplays

the threat of u.s. sanctions. adds that he will reduce rates significantly by year-end. and a different kind of trade war. citigroup kicks off the week with week trading revenue expecting to weigh on the numbers. manus: a warm welcome to a break gear. the world's first largest sovereign wealth fund has delivered its annual report. that theare saying twenty-year year return is forcing a 5.4% -- the majority --the 696 ilya and in at billion in assets. if you are one of the unfortunate people running into

a bumpy time looking for a job, they are looking for if managers. expect to add new managers. in terms of the positioning, of the boarde 55% actively managed, up from 50%. private equity playing a critical role. there are some lines and there about india and china. we will discuss the markets with our guest host. a look at us take some of the markets. a record00 closed at on friday. futures point to a bit of a flat open. the focus turning to fed speakers that we will hear from this week that also earning season. bloomberg intelligence saying this could be the worst of times. that is where people are turning for equities. we have had three days of decline. and copper bouncing on the

london metal exchange. better-than-expected data in terms of retail sales. all of those coming in a little bit better than expected it and showing a bit of a rebound. and the gdp number coming in the worst since the early 1990's. we will digest all of that. consecutiveurse, to quarters of negative earnings. have a look at the yield curve. my last guest said the fed has no clue. this is the yield curve. steepening the most since october. rounding by 10 basis points. is there more to come? what is it that causes this to fell in --fall into check? what affects volatility?

looking shaky. steve mnuchin morning the government could run out of cash as early as september. looking at the other key assets. it was bad in china. seeing a small bounce in the aussie dollar. there is an underbelly of support. giving us aollar small point hired. working.-leveraging is and looking at the oil market -- iran assets rising. stille iaea says there is too much oil. let us head to david ingles. good morning. david: a ton of data out of

china. the market implications -- coming out of the lunch break in hong kong. keep in mind that japan is closed. take my wordse -- for it, it looks much better than how the equity market looked before the china data came out. -- the seconds market in asia post reinstallation in may to enter a bull market after the shanghai composite measured from the last low. have a look of the other things we are tracking in hong kong. also related to the liquidity story and what is happening to the chinese mainland a common a. , for the first time in a month, we are below that. the hong kong dollar is weakening as well. that takes us to the other

corporate story. the pullout of the aba ipl. broader markets are on the way up. hkx is on 1.4%. that takes me to the last bit. 318. first time are seeing yields in china on the way up. forwardll of the activity indicators. on the back of the credit numbers that came out on friday. long story short, they beat estimates in industrial production and retail sales. at higher than the highest estimate on there. almost double-digit growth for the first time since 2017 or 2018. that was enough to pull risk appetite. a: david, thank you from

hong kong. sticking with china. the economy slowed to its weakest pace in three decades. factory output and fixed investment were bright spots. andddition to this, import export figures that came out on friday also shrank. and that as domestic demand weakens. pressure remains on chinese policymakers. joining us now to discuss all of this is arend kapteyn. great to have you with us this morning. markets reacting positively. how optimistic should we be feeling about that data at the moment? arend: the focus is clearly on the sequential improvement in the data. not great but better than it was in q1. one of the most encouraging

aspects of what you just posted on the screen is what is happening in retail sales, particularly auto sales. that seems to be clearly bottoming out. there were some sales promotions related to cars being phased out for emissions. manus: and the morning to you. many will speculate that this is perhaps the consequence of every leveraging by the pboc coming to bear. have a look at this chart. global repercussions. china's trading partners. pmi's up 50. the world is still in a very uneasy's date. will it take more stimulus from the pboc to get us back above the 50 number globally? arend: it does not look like they are doing enough to have

positive spillover on anyone else. you see that in the detail of their own data. the primary sectors are a bit better. manufacturing is still weak. you are still not getting a lot from their own stimulus of spillover into manufacturing. and so, it is a bit missed. the improvement you are seeing in the chinese data is a natural bottoming out. nothing to do really with the stimulus. the stimulus has been quite choppy. where you would expect to see activity in infrastructure, there is still not a clear trend that the credit impulse is improving even though the numbers are improving. anna: it is interesting that you bring -- nejra: it is interesting that you bring up the infrastructure. israstructure development excavating sales. is that an area that we should

still be concerned about? sales and other parts of the domestic economy are improving. arend: it was supposed to be the workforce. the one leverage are -- leverage the control is infrastructure. you have seen an injection of liquidity into that space. though, because the other parts of the economy are getting better at the margin, it is enough to keep you around 6% growth. manus: one of the great debates, there are a number of them, one is about liquidity in markets and another is about foreign exchange. what does an fx war look like in 2019 and 2020? argues that they may not outright intervene in the markets. he talks about a cold currency war round three.

you have tweetology. and you have monetary policy. what is your perspective on the prospect of the chinese in gauging the additional lever of currency? arend: extremely skeptical. they have had a few episodes where they have tried to engineer a weaker currency. there was a sense of a loss of control. pressure on reserves. given the financial system, i think the incentive is to contain any kind of currency weakness. we see currency drifting up towards seven. it could go a little bit higher. i do not think the weakness will be engineered by the chinese. frank, theus be market did get its way with the fed.

they did not have to push very hard. let us get your first word business roundup. companies may be approved to research sales with huawei. the chinese tech giant was blacklisted. the wall street journal reports plans to cut jobs -- the wall street journal reports that huawei plans to cut jobs. president trump has been accused of racism after suggesting four female democratic lawmakers go back to the crime infested places they came from. ofs is aimed at a group first-term representatives. three of the four women were born in the u.s. but none are white. hasey's president downplayed the risk of u.s. sanctions following the purchase of a russian as 400

missile-defense system. president erdogan says the white house does not favor sanctions. the missile system could undermine nato and jeopardize the fighter jet. postponed a mission to the moon halting plans to be the canceledthe lodge was just 56 minutes before liftoff because of a technical snag according to the space agency. the mission will be rescheduled. novak djokovic has beaten roger federer winning his fifth wimbledon title. he won after a five set epic. the winner was just a single point away from victory. and a day earlier, simona halep beat serena williams. preventing the american from winning championship number eight. 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. nejra: debra mao in hong kong, thank you so much. coming up, getting ready to go. jay powell has all but guaranteed a rate cut coming up. how low will it go? we will discuss. this is bloomberg. ♪

manus: this is bloomberg daybreak europe. i am manus cranny in dubai. nejra: let us get a check in on the markets. green on the screen in asia particularly in china. japan is closed. treasuries not trading. positive reaction generally to the data. the dollar hitting a three-month high. index treadingr water after three days of declines. question we have to

ask ourselves is we hit two records thursday and friday sequentially in the s&p 500. has a note out this morning. global equities running 8% higher but their position suggests limited upside to equities. bitcoin of course against the dollar. mr. trump does not like bitcoin. and there is -- and there are 900,000 barrels too much of oil. it shows you the volatility you have in the bitcoin trade. let us get our business flash. debra mao is in hong kong. paya: gilead has agreed to $1.5 million to raise its stake in a belgian biotech firm. onearchers are focusing

inflammatory diseases. ab is suspending its hong kong listing of its asia unit. the share sale would've doubled the amount raised from 79 other listings this year. 2018omentum generated in when more than 200 companies raised more than $37 billion in hong kong. bitcoin humbling after president trump criticized the currency. the president saying he is not a fan of a bit point. they are not money and the value is based on thin air. and that is your bloomberg business flash. nejra: debra mao in hong kong. u.s. banks kick off the earnings season this week. investors will be watching closely to see if falling interest rates hurt the big

things and if trading revenue has improved. here to talk about that is dani burger. >> long-term rates have been following all year. that means banks and investors alike may need to bring down their expectations for profit this quarter. citigroup will set the tone and the bar. investors are warning of a drop in the quarter. investors expect a drop of 3%. a smaller decline than expected. we will get a better idea tomorrow when goldman reports. and management has spent a lot of time looking at trading. ratesn mortgages, low mean homeowners refinancing which could potentially be good news for wells fargo. jpmorgan on tuesday followed by bank of america the next day -- the biggest landers in the

country -- lenders in the country believe that there will be growth. the market is sure to take notice if they trimmed that number significantly. lookings will also be at any deterioration in credit quality. morgan stanley round out the week and focus will be on its large wealth management business. givening a decent quarter the markets and the second quarter ended on a high note. just want to quickly point out that some investors are not waiting to assess the fallout from lower rates. when we look at banks ox -- trading at just about the biggest discount in more than a decade. manus: thank you very much. great scenario there on the banks. back to jay powell. last week he left us all but certain that the fed will reduce interest rates this month for

the first time in a decade. the debate now is how deep will it go. charles evans said a couple of rate cuts may be needed to bring inflation above the 2% goal. this morning, president trump weighed in on his views regarding the monetary policy. he wrote in a tweet that the country is doing great economically despite what the fed says. and isapteyn is from ubs our guest host this morning. participating in the debate about what the fed should do. let us deal with facts. china is slowing by the most in decades. off todata from china on to make us believe that there is one cut in july and a series of cuts to calm? -- to come? has almostink it

nothing to do with the trade in china. i think it is more about the u.s. data. it is actually coming in much stronger than the fed narrative suggests. the inflation data which is running at 2.5% annualized in q2. the economic data is coming in stronger than the narrative suggests. they seem to have made up their mind to cut. we think the cut is coming in july. because of the strength of the data, it could now renegotiate it down to something that is not 50 by 25. our call is 50. given the strength of the data, i think we five is on the table. nejra: i know you said 25 is on the table. but you think 50 is on the table for july. but one and done. why is that enough? arend: you have gone through a normalization cycle. there is a sense that it has

gone too far. you don't know where neutral is. down 50. and then you wait to see how the data behaves. that suggests that is all you need to do. it could get better. and you sit and do nothing. i think the rationale for doing a lot more than that is you are assuming that something else that is going to happen. there are a lot of things you could identify. including trade tensions as collating. tensions deteriorating. manus: global issues around the world. less to do with the domestic situation. but you have just said very differently. it has less to do with trade. less to do with china. and more to do with domestic data. the jobs data did not change the direction of the fed.

why do you think that china and the global issues are not what is driving the fed? arend: the global issues matter. not the data. the uncertainty, the global uncertainty be cited by the fed and central banks is code for terrorists attention. we have had -- tariff tension. morei, mexico threats, china tariff threats -- i think this has all convinced central banks that we are moving into uncertain territory. part of that -- we are seeing reflected in the chinese data but i think the focus on china has much more to do with the negotiations over the tariffs then import or export growth. nejra: i was reading earlier that historically a fed easing cycle usually means a recession follows shortly after. it sounds like you are not

--ecting and easing cycle does that mean you are also not expecting a recession? you get into a fiscal drag. we will see growth at 2% next year for a couple of quarters and then the fiscal drag comes in at the end of the year. it is a typical forecast. everything goes back to an equilibrium and is stable. the thing i would site that is not part of the fed narrative is jort there was a ma distraction. thecan see in the data how information has disappeared. nejra: arend kapteyn will stay with us for the hour. up next, turkey's president promising significantly lower interest rates by the end of the year.

what does that do for the nation's economic policy credibility? we will discuss. this is bloomberg. ♪

nejra: this is bloomberg debris. i am nejra cehic in london. manus: and i am manus cranny in dubai. if thisto ask ourselves is a bond market. negative yielding junk bonds -- can it and well? look at the web around we saw in sovereigns last year -- last week in europe. i think our guest post from last week said it is a interest set of assets to have because when it whips, it really does hurt. nejra: when you look at the

-- iively yielding debt know we have seen a bit of a backup and treasury rate but the gains we have seen in stocks can be seen as a hunt four-year-olds. we did have a gain of more that -- we did not have a gain of 0.5% last week. manus: in terms of market positioning, there is a lovely mork -- there is a lovely story out this morning. -- they talk about positioning. look at the bond market allocations. 20.8%. higher than even the post lehman story. historic numbers. we are positioning to extremes which means the smallest movement can shake down the markets. nejra: and what kind of small movement might we get this week?

equity and markets will take their cue from that but they will also take their cue from earnings season. let us check in on the markets around the world. great to have you with us. we were talking about earnings on friday with you. earnings.f u.s. not that optimistic at all. the worst of times. talk to us about the reported earnings today. is that helping to lift the broader benchmark? good morning to you. it did help to lift the broader benchmark at the start of trading today. we did succumb to some selling pressure. down have decided to go

from the bank index offsetting any gains. exporters, some are doing well. hearing you talk about the ease, world.hotomy in the happens, that may force a trigger but for now, the markets are absolutely flat. manus: great context. thank you. we have had the chinese data. where do you take the curb? focus today. in the trade seems to be beneficial for stocks. much of this has been baked in. see a lotk, you will

of green when it comes to stocks. chinese stocks for example. local stocks getting a boost from the numbers. today butnds falling let us point out the philippines. up by more than 1.5% and set to enter a bull market. a lot of the emerging markets getting a boost today. -- rupee also getting a post a boost. highly correlated with what is happening in china. a high beta asset will also -- will always react to china. i also want to touch on bitcoin. day at it testing that 50 moving average. we had the tweet from donald trump on thursday criticizing the currency. this chart emphasizes how testing 10,000

dollars. if it continues and falls to $8,000 which some analysts say it might, it would erase all of those gains we saw in june. nejra: great to have you both with us. thank you. that is get the bloomberg business news. debra mao has that from hong kong. debra: u.s. companies may be a proved to restart sales to huawei within four weeks. the commercets department is evaluating all licenses after the chinese tech giant was blacklisted over national security concerns. the wall street journal reports it plans to cut jobs at its u.s. subsidiaries. president trump has been accused of racism after suggesting four female democratic lawmakers go back to the crime infested places they came from. the tweet seemed aimed at an informal group of representatives.

three of the four women were born in the u.s. but none are white. tropical storm barry has weakened to a depression as it moves slowly inland across louisiana. the weekend it forced temporary shutdown of more than 70% of u.s. oil production in the gulf of mexico. the system still has winds gusting at over 100 kilometers per hour. beaten rogerc has federer winning his fifth wimbledon title. the defending champion won after a five set at that. at one point, the swiss eight time winner was a single point away from victory. and a day earlier, simona halep beat serena williams in straight sets to win her first wimbledon preventing the american from winning championship number eight. 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. the things one misses from london at this time of the year. wimbledon mania. let us talk about the white house. they reportedly have settled on punishions package to turkey. we have learned that the u.s. is planning to release them later this week. the economic data on the lira would be minimal. promising anogan improved economy later in the year. benjamin harvey is in london and is our managing editor for russia, africa, and the middle east. the risk of sanctions. long is a lovely line --

ally ofkey is an america. what do you reckon? benjamin: i think there will certainly be sanctions. the question is how severe they will be. the turkish side is betting on president trump and that he will impose a light package. indicates reaction the expectation is the same. nejra: the expectation seems to be that the reaction of the lear will not be as strong as it was to the removal of the central bank governor. how do the concerns around central bank independence play here? : as far as the central bank, i think the concern there

is about turkish financial stability. last year we had a lira crisis. the expectation is that the new central bank governor will cut significantly. mr. erdogan is promising rate cuts. that will be interesting. it will reduce inflation the single digits by the end of the year. can i asked you where we are in the political chatter? the us stumble mayor -- the rerun, is itr being overhyped by western media? think there is too much talk about erdogan losing control. hiscan talk about invincibility begin gone. there are influential members of the party that are defecting. you have to remember that erdogan is in power for another four years and in turkish

politics, that is close to an eternity. nejra: thank you for joining us, benjamin harvey. ubs is still from with us. let us get a sense from you on emerging markets right now. said governmental growth has fizzled out. arend: going sideways. not getting better. stuck in between the simultaneous easing by global central banks and growth in the dollar being quite strong. it is not a convincing lay environment for emerging markets. so far, it seems to be helping at the margins the likes of turkey and other vulnerable once. what i think on the global side -- what is interesting to me is that the weakness has been driven by one factor which is the trade cycle. you can show data and decompose it and show that at the trough, the trade cycle was grabbing --

dragging down global growth. in april 2proved about 40 but it is now back to 80. it is worse for developed markets than emerging ones which is very counterintuitive to me. cycle,and on the easing the latitude of the fed going into its mode of cutting rates and what that does for emerging-market central banks. it opens the door for there to be some kind of a floor under those economies. arend: it is not just the fed. what is interesting is the ecb -- we think it will start cutting in september. due to cuts and go to -60. there has been a lot of speculation about quantitative easing. i think the market is being steered in that direction. the bar is lower than had been perceived. if you get the ecb easing and

the fed easing, it provides cover for other central banks to ease so i think there is a ease.rd pull on global nejra: does the dollar offset that? are in theuse we bottom quintile of global growth and the environment tends to do well. risk off. people do not want to have global exposure. be a great not environment for emerging markets but because it is now getting offset by the easing of central banks, i think it will push more money at the margin to the higher-yielding currencies and local bonds. manus: the one thing which has come to my attention is i have looked at inflation data from india and egypt. all of which is improving, quite

dramatically. that tradereasserts with outreach of yield -- how important is that or will it run out of steam in the second half of the year? about i always worry these trades. what is striking is how low volatility is related to growth. it always feels fine as long as there is no volatility spike. the benign behavior of inflation is in large part oil. it is driving the headlines. we get a grind lower in inflation which is fine. i would be aware -- i would beware of volatility spikes. china -- weabout discussed it earlier. does your outlook for china provide a supportive outlook for

emerging markets? arend: asia is looking pretty good. which is surprising in my view because we have not seen much of an acceleration of the chinese data. asia without china is running historical growth. so far, so good. china is going to keep adding to the stimulus. we think they are halfway done in the improvement. sequentially you will see growth getting a little bit better. above six. the stimulus will evaporate later in the year and we will settle back down to slightly lower levels. manus: i want to pick up on the fx game. in terms of volatility. dollar-yen, one year volatility.

this is at a record low. euro yen sub 7%. are we caught in a volatility trap or a liquidity trap? what will it take to change this volatility narrative? arend: i think it is a liquidity trap. we talk about the fed. tightening will stop. we have the ecb potentially coming in and buying paper. that will all depress the volatility as well. also -- we will see. there is a lot of inner shut in these volatility metrics. a combination of liquidity and low volatility trap. see what the will rest of the year brings to us. that is arend kapteyn from ubs.

he will stay with us. if you are traveling to work and listening to bloomberg, it is on the radio in the london area. this is bloomberg. ♪

nejra: this is bloomberg daybreak europe. i am narrative edge in london. -- nejra cehic in london. manus: number three in the world. cvs in. investment as it is officially known plans to add a significant number of new positions. mostly in investment and research roles in its fixed

income and treasury departments. martin is with us. welcome. number three in the world. i want to deal with its returns. first of all. these are reducing. no shock there but this is about active management. the annual report is one of the few times we get a glimpse inside the box of how it viewing and how it is the world and where it is investing its money. to has fallen from 6.5% 5.4%. this is down from some of the great gains they had in the late 1980's, early 1990's. what is interesting is the way they are responding to these falling returns. over the past few years, they have been managing more of their money in-house. they are saying now that they will become more active as opposed to passive investors. nejra: matthew, it is

interesting some of the information after how they have you the world. they see the current growth cycle for example not coming to an end yet. what else did we learn? say, there were comments in there that seemed to suggest the global economy could be more resilient than a lot of people are thinking. that is an interesting line this time as everyone is worried about the threat of recession coming out. moreare also taking a much proactive start in how they think about climate change. it is coming into consideration for all of their investments. they are formally making the impacts on the climate as part of their investment decisions. they have also flagged a concern about the rise in nationalism. and a deglobalization. this kind of for

an investor is a great benefit. leading to asset prices rising around the world. they have benefited from that. if some of this starts to unwind , they say that investors like defend globalization.t more and which would be something of a shift for them which has typically been very quiet and sat on the sidelines a lot and not made its views on the world going forward. it would be nice if i could get in on the ground floor. matthew martin, our bloomberg reporter here on finance in abu dhabi. let us pick up on a couple of themes. more of a glass half-full.

in europe that is debatable. data is better than anticipated. your proposition is that there will be cuts in q3. arend: a little bit like the fed, looking through the good data and expecting to ease any way. i have changed their view on the uncertainty regarding the forecast. they start cutting rates. they start in september with the first 10 basis point cut. -50. and another one later in the year. it willtion is whether be a more comprehensive package where they start with quantitative easing early on. the assumption was that it would be something you reserve for a recession. you have to cross red lines. it turns out they are further from the red lines than most people realized. tothink they could buy up 800 billion over 18 months before you get to the limits and

for you have to deviate substantially. that is twice as much as i have seen out there quoted by bloomberg in terms of the em and the other estimates that people have. nejra: that is interesting because part of the discussion is that they have to tweak these self-imposed red lines based on qe. arend: if you go to big to our early, you big too have to be careful of calibration. you could run the program quite long. if you start twice as big, you cannot run it that long. what is interesting to me is that the ecb itself seems to be spearing market participants towards qe rather than rate cuts. bar cuts are relatively low

, the route of least resistance. not a lot of opposition to that. the assumption was that there was more resistance to qe. that to me is interesting. manus: certainly, we will have a new leader at the helm of ecb and she is known for her engagement with markets in her former role. --t will be interesting is the perversities in markets. greek yields below u.s. treasuries. that is just wrong. and italy versus germany cascading lower. this is your base case scenario. arend: it is inevitable. boons own to buy anything other than a central bank. new qe program in

europe, anything with a coupon or yield will benefit. nejra: i believe your year-end called is -20. i am wondering why it is not lower than that given what you just said about qe rates and the fact that somebody said to me last week that there is no floor. arend: the baseline does not have the qe. qe is something that is possible. if we were just stick it in the baseline, we would have boons substantially lower. great to have you with us. , from ubs.yn thank you's much for joining us. he will continue the conversation on bloomberg radio with our colleagues. coming up, dealing with deceleration. chinese economy flows to the weakest pace since the early 1990's but stocks do not seem to mind. we begin a trade conversation coming up next. we have heard from

ubs, it is the trade debate that is hanging over the world rather than the chinese data which is an interesting perspective. useminder that you can join for live tv and the tricks that we use. ♪

european headquarters in the city of london. >> these are today's top stories. dealing with the deceleration. china's economy slows to the weakest pace since the early 1990's. stocks don't mind us factory output and retail sales peaked. there is no impact on the trade tensions as the business is in the nation. >> the tensions will reside and allow companies like ours to

continue to work in the respective market. manus: the turkish president downplays the risk of u.s. sanctions after receiving first delivery of our russian defense bid. people reduce rates significantly by year-end. citigroup kicks off banks result season today with weak trading revenue expected to weigh on the numbers. j.p. morgan and goldman sachs follow on tuesday. nejra: welcome to "daybreak europe." we are just under an hour from

the start of cash equity trading. s&p 500 hit another record high on friday and we closed above 3000. 3013. for the four days of gains we have had in u.s. equities, we did not get more than 0.5 percent any one day. is that a reluctant rally we have seen? the attention turning to earnings this week. we hear from some fed speakers. how much more juice could u.s. equities get? what is the prospect of fed cuts if we have not so great earnings season? a could be the worst of times. looking at european equities, we closed flat friday we could see green on the screen from the dax and cac 40 futures. ftse 100 futures flat. japan markets have been closed. we have not had treasury trading throughout the asian session. treasuries are just getting underway now. we closed on a 212 handle on friday. look like we are up two basis

points, trading at 215. all up almost three basis points. the 10 year treasury yield is. you see that in futures. btp yields will not be moving a lot and same with 10-year bund yields. we closed at -21 friday. in termsome optimism of industrial production. david ingles has more in hong kong. and of course, a lot of data out of china better than expected with that week gdp number. the gdp number was expected anyway. you had this backdrop of credit on friday adding to speculation we might have bottomed. quarter, china might have. we will have to wait and see. equity markets looking like this

as we approach what should be the japanese close. markets are closed today, of course. setmarket, the philippines to enter a bull market here. the southeast asia dropped overall. let's change things up. have a look at other things we are tracking here as well. the other big corporate story was the asia ipo playing out as far as shares of hk are concerned. 1.5% down. along the lines of that story, it is liquidity. the liquidity angle as well. interesting, might actually help the situation? libor is back above hibor, which is putting -- which is alleviating the upward pressure on the hong kong dollar. to your point earlier, yields across the border up in china, up for the first time in three days. recap the numbers just in case. getting your first glance in

terms of the china data. 56.2% was the growth for the second quarter. in line with estimates. what did surprise a lot of people is this. monthly activity numbers higher than estimates. i should also emphasize industrial production and retail sales are coming in above even the highest estimate there from economists. manus: thank. -- thank you very much. slowed to itss weakest pace in three decades. is that the news flow? it was high for retail sales and investment. they were the bright spots, beating expectations. in addition to the data, the important figures came out and shrank. that is as domestic demand weakens and external demand was hit by tariffs.

figures signal stimulus measures to curb the slowdown coming, pressure remains on chinese policymakers. joining us as the head of fixed-income research and society -- at societe generale. >> thank you for inviting me. be, isthe question would the tax stimulus the chinese have done, the triple our cuts they have done, is this coming to bear? look underneath the other three components and give me your read on the pillars of surprise in the data. >> that is generally what you are seeing, that the domestically focus data is pretty strong. we have seen that with retail sales figures, with industrial production figures. china is getting toward the end of a period where it has been trying to discourage people from doing a lot of investment, largely because there had been an agreement in the top

leadership of china that there has been too much debt finance growth. you are seeing they are beginning to yield back in terms of monetary policy. this is a good set of figures in terms of chinese growth. nejra: great to speak to you this morning. if things are getting better, what is your outlook for the sort of further stimulus we might get from china from here in terms of the amount and whether it is targeted or broad-based? stimulus welikely will see is on monetary policy. it depends on how much wiggle room the u.s. authorities give china. mode, thateasing will allow the chinese monetary authorities to go into easing mode as well. they have been cautious about cutting rates because they have wanted to keep the currency relatively stable, both because they know donald trump cares a lot about the strength of the

dollar and because they are always a little bit worried about the prospect of capital flight out of the country. they want to keep currencies relatively strong and stable. if you have interest rate cuts in the u.s., you get the chinese authorities model as well. there is more room for cuts in the second half of the year for china. manus: translate that, my guest yesterday suggested he would prefer to be longer chinese high-yield. very much predicated around his view that the propensity for china to stimulate is higher. they have more capacity in terms of rate cuts and stimulus. with that ring true for you and societe generale? i would prefer to belong european high-yield because i think there is relatively low leverage and i think there is particularly a lot of scope

everywhere in the world now for people to cut interest rates and ease monetary policy. the advantage of europe into china and the u.s., we have not seen growth in terms of european leverage. the problem for all the high-yield markets is what happens if monetary easing does not work and we end up seeing much weaker growth in 2020 then 2019? in that case, the economies which are seeing the most growth , that is china as well as -- nejra: just to pick up on what you set about preferring to be european high-yield, how do you translate what you see from china's economy into the outlook from europe? last week we saw european industries throwing some signs of life with the industrial output figures, but generally, data out of europe have not been that great. particularly for high-yield markets, what matters the most is not whether growth is slowing

. it is when growth starts slowing from a high base. when you have a high period of growth, you have that creation, and that is when you suffer when growth starts to slow. we have never really had that much high growth since the crisis in europe. we have not had that creation. i think we start off in a somewhat more insulated place in terms of the outlook for default in europe. when you talk about how china impacts europe, it impacts europe through the exports of luxury goods. what matters is not so much chinese growth in and of itself, but rather the value of chinese assets area -- assets. decelerating month on month increases in china's property over the past nine months. we have not seen month on month decline. if we see month on month declines, you have to be worried about the exports to china from german carmakers, french and

italian luxury goods companies, for example. let's get your take. we just finished our conversation with ubs. why not have a ubs societe generale on where we go next? you want to be longer on european high-yield. part of what ubs was saying was they see 10 basis points a rate cut in july. suave -- swathe of bonds that can be bought. would you agree with that level of dovishness they are propagating? guy: i think it is absolutely right. ftp, theok at see number of eligible corporates has risen since the start of the first program. ecb's right to say, look, we have a lot of scope to have an

activist monetary policy in terms of cs bp if you need to. they feel they do need to in terms of very low inflation expectations in europe. what that leads to in terms of where you want to be positioned is i think you need to be positioned in credit markets. my colleagues say there is no alternative. at least in fixed income, it certainly feels that way, because when you look at the market for three quarters of the buns are offering negative yields, you get similar figures relative to those markets. credit looks like a good deal. say it could you be a tina market. fromlso think it might be tina to turner. we will find out what you mean up next. will stay with us. let's get the bloomberg first word news. ebra: u.s. companies may be

approved to restart sales to huawei within four weeks. the commerce department is evaluating all licenses after the chinese tech giant was blacklisted over national security concerns. meanwhile, the wall street journal reports huawei plans to cut jobs at its u.s. subsidiary. an r&d company with 850 staff. turkey's president has downplayed the risk of u.s. sanctions following the purchase of a russian as 400 defense system. the u.s. says deploying the system can undermine nato and jeopardize the f-35 fighter jet. the white house has picked a package of sanctions for turkey and plans to announce it in the coming days. arrested as protests continue in hong kong, including clashes with police in a shopping mall yesterday. demonstrators are demanding the resignation of chief executive carrie lam. the financial times reports

beijing refused lam's offer to step down. it told her to stay and fix the mess she created. barry hastorm weakened into a depression as it moves slowly inland across louisiana. it forced a temporary shutdown of more than 70% of u.s. oil production in the gulf of mexico. the system still has wins that more than 100 kilometers per hour. it is expected to drench louisiana with more than half a meter of rain. india has postponed a mission to the moon, halting plans to be the first to explore the south side of earth's nearest neighbor. the lunch was canceled 56 minutes before liftoff because of what the space agency called a technical snag. the mission will be rescheduled. djokovic has beaten roger federer, winning his fifth wimbledon title. the defending champion won after a five set epic, the longest final in the tournament's history.

eight time winner was just a single point from victory. simona halep beat serena williams to win her first theledon, preventing american from winning championship number eight. global news 24 hours a day on air and on twitter powered by journalists and analysts in more than 120 countries. this is bloomberg. coming up on the show, ready to go. jay powell has all but guaranteed a rate cut in july. the question is, how low can she go? we discussed. to bloomberg in radio live on your mobile device or on dab digital radio in the london radio -- the london area. ♪

manus: 7:18 a.m. in london. 10:18 in dubai. we are 40 minutes away from the start of european trading. we have been up and running for 24 hours. we have the march on the markets. it's bloomberg daybreak: europe." nejra: let's get a check on the markets. the s&p 500 hitting another record above 3000. futures positive. we could go even higher today. the 10 year yield, quite a backup in yields. up another basis point. 19 minutes to go. we look ahead to fed speakers this weekend we look ahead to earnings season, the aussie on the front foot following better-than-expected data out of china in terms of factory output and fixed asset investment. we are up and running. by the way, kuwait has ended the longest winning streak in three years.

the longest winning streak since 2016. we are hardly losing a huge amount of value. in abu dhabi, we have just had the report that the world's number three sovereign wealth fund are not as bleak in their outlook as some of us would have. they are going active. , that is the bottom line, having passed through the iea supply. you have to cut your output. good morning. get ready with the cap on the oil. let's get into your business flash. here is debra mao. debra: gilead has agreed to pay $5.1 billion to raise its stake in a belgian biotech firm, galapagos to deepen its research into inflammatory diseases and other disorders. gilead will pay just under $4

billion upfront and invest over $1 billion to boost its stake. onehe trade war heats up, nike supplier's pivoting away from vietnam. the textile companies as the most important thing is diversification and the clients do not want production in just one country. the chairman says 50% of its garments are made in vietnam. bitcoin tumbling after president trump's criticism of cryptocurrency has put the spotlight back on the tokens jump in prices. the president saying he is not a fan of for wine, that they are -- a fanthin of coin of bitcoin. there is no firm timeline for the return of the 737 max 8. american airlines and united

have removed the max from their schedules through november. that is your business flash. nejra: thank you so much. jay powell left it all but certain that the fed will reduce interest rates for the first time in a decade. the debate is how deep the fed will cut. charles evans said friday a couple of rate cuts may be needed to bring inflation above the 2% goal. president trump weighed in with his views on the monetary policy in a tweet. he wrote, the country is doing great, despite the fed's antiquated policy. stear is still with us. we have u.s. equities closing out and another record. you were saying this is a tina market. how much longer can the prospect of fed rate cuts support risk assets?

>> three or four months. quarter.f the third the key thing is as you mentioned, the fed is going to have to cut interest rates. there is going to be scope for not one, but probably several interest rate cuts. that really is going to follow into the credit markets. we will look for the current spread to be at 100 by the end of september. there is still significant scope to go. the bigger question is, what happens as we get into 2020? we are seeing signs of the u.s. economy slowing. we are seeing signs of u.s. earnings figures looking less good. as we start the second quarter, this is going to be another quarter on quarter contraction in terms of earning. that could lead to a slowdown in terms of the u.s. economy in 2020. the tina market could become more of the turner market in terms of getting bearish as we get late in the year. i'm sorry, that is a dreadful joke for a monday morning.

nejra willare ok and take anything that livens up monday morning. she is just waking up. a little bit of tina turns into turner. do you think -- i was corrected this morning by ubs. china is slowing down globally. i wasre very strict that wrong and it was all to do with global trade, which is grand, that is fine. but do you think from the domestic point of view that is what powell and his cohorts are worried about, which is equity market, capex, and the decelerate or affect? are we looking at the wrong things? he has been clear there are three things he worries about. the first is the fact that u.s. inflation expectations are still incredibly low. if you look at things like five-year inflation expectations

, these are still way below the fed's targets. that is true globally. in europe, we have the same problem. they feel that they have a lot of room to cut interest rates. the second thing he has focused on is the fact that capex in the u.s. and business investment generally has not been strong. recently, he has been looking at figures and saying that whether theredue to the fact that is domestic investment opportunity or the fact we are in trade confusion, they don't know where they should invest. these are things which are also weighing on the investment front. finally, he is looking elsewhere in the world. european growth has been relatively slow. chinese growth has been relatively slow. it is very odd when you see the fed making monetary policy for the rest of the world because they don't do that. i think that is an excuse. what he is really focused on is

those domestic factors. we have seen a backup in 10 year yields. the 10 year yield on a 214 handle right now. given what you said about the earnings season and edit, where do you see the 10 year yield fitting over the next few months, say, by the middle of next year? >> we are definitely going to see lower 10 year yields in the u.s.. we are either going to be worried about growth or we are going to be saying monetary easing, which is aggressive, more aggressive than people are expecting at the moment. probably that means the u.s. 10 year yields will be 150 by the end of next year. manus: there you go. mark you down. the producer will be on the phone. we are not that cruel. stear at societe generale.

monetary policy is next. this is bloomberg. ♪

european open." markets,e to bloomberg "the european open." long before they take hold in the u.s.. european equities point to marginally higher.