manus: good morning from dubai. i'm manus cranny. nejra: i am nejra take it from london. these are today's top stories. goldman sachs and jp morgan reporting second-quarter results after a difficult time for citigroup. wells fargo numbers are also on the docket. balancing act. steven mnuchin says he could go to beijing if a trade talk goes well, and also criticized facebook's cryptocurrency ahead of a crucial hearing. theset to make history,

german defense minister steps down as defense minister ahead of a secret ballot that could cement her as the first female european commission president. ♪ ♪ manus: warm welcome to your biggest concern -- to "daybreak europe," and what is your biggest concern, a meltdown or a melt-up? this is the msci world index. to bail on stocks. central banks are giving you a gift, that is their message. more of a risk as equity markets go up, and people don't appreciate that. the question is, do you believe that going into earnings season? the least attractive market for them, the usa, their top calls australia and japan. a couple more markets, even i can't make wti more exciting

than it is. downgraded, what will the inventory tell us? and gold, it was red, i do promise you, ahead of retail sales. the point, if you want to protect yourself as yields go back up, do you want a little gold for protection? that is a question for markets. you have the glorious s&p. [laughter] nejra: it wasn't so glorious yesterday. high, to another record but pretty much flat at the close, a reluctant rally. citigroup closed flat yesterday, with trading revenue dropping, top madewas said on them recoup some losses. yield dropped about, three basis points yesterday but a bigger drop in europe, the 10 dropping,yield

prompting credit agricole to see the path of least resistance is for yields to go lower in europe. the new zealand other outperforming a little in terms of the g10, the story of inflation data and expectations of rate differentials. let's check on the markets in asia. juliette saly in asia has more. asia.te: a quiet day in the new zealand story just about the only thing of interest, with numbers bang in line with forecast the nikkei is leading losses here. we saw japan closed yesterday for a public holiday, so some selling in japanese equities. the nikkei down 0.7%. also selling in china, amid very low volumes. a little take -- tick up in hong kong, india and south korea. we heard from the rba, the july minutes meeting, saying it is watching closely and will adjust rates as needed. and watching moves in the

philippines talk, entering -- philippines stocks, entering bull market territory. some stocks in detail, interesting to see south korean samson suppliers doing well today, on a trade spat not between the u.s. and china, but with japan. analysts coming through saying people might come more tow ards domestic buying if japan ups the rhetoric on the suppliers. upsung, a samson supplier, -- samsung supplier, up over 70% in seoul. strengths in the financial sector, analysts saying it remains undervalued, and that you could see the bull market continue in the philippines. downside, looking at financial stocks, perpetual in australia on its worse today loss in -- two-day loss in four years, with net outflows in

june. saly, thank you so much. treasury secretary steven mnuchin says he and trade represent it rob -- representative robert lighthizer my travel to beijing if talks are productive. this comes after china reported the slowest growth on record, which president trump said that his tariffs are having intended impact. manus: and markets are looking for direction this morning. plenty of potential drivers in the hours to come. in europe, we will see how much of an impact weak data in germany has. retail data is expected to show positive momentum for june. banks.-ticket item, the jp morgan, goldman sachs report second-quarter results later in the day. joining us to make sense of it chief economist at

emirates. good morning to you. of economicndulum sentiment, from the sky is falling to we might just get away with it. do you think we might just get away with it? china, some things looking better. what do you think? >> i don't think the data from the united states have ever been as catastrophic as the markets have assumed or suggested. the markets have been swinging down on comments from president trump, and the fed has chimed in with more pessimism and concern about uncertainty. we know that the jobs market is better than expected last month, and also a slightly stronger inflation report last week as well. neverta was nevera -- as bad as had been assumed by

financial markets. however, that's not to say other global data points are not a concern. inve seen more concern indian external trade figures overnight, and the chinese data from last week. the global picture is a concern, which the fed is reflecting in the comments from powell last week, that the global picture is of the most worry to them. nejra: tim, great to see you. on the global picture, we have a chart showing global earnings revisions have been tracking china pmi, more than they have been tracking some data out of the u.s.. does this chart reflect where you feel the risk points are in the global economy? tim: well, i think that the global economy is where the risk probably lies, and it is in those countries that are at the brunt of the trade disputes with the united states. those are the economies that

are probably faring the least well, and in the future the markets are assuming it will probably get worse before getting any better. so yes, the global picture is probably the area that is of most concern. any deterioration in some of those key markets, say china and other emerging markets, will probably get reflected in renewed concerns. billion, the amount of negative-yielding debt in emerging markets. that has doubled in the space of seven days. is that a flashpoint? how much time are you spending on the floor at emirates looking at these real evolutionary moments in markets? tim: i think that these are remarkable times, when you have so much debt price to negatively. theome extent, it reflects changes that have occurred in the markets, since the crisis 10

years ago. the reactions to those became kind of normalized, in terms of monetary policy and the reaction towards negative interest rates. that will become a more normalized sensation. so markets are perhaps, investors are not as surprised as a few years ago. it has become a new normal. nejra: on the policy front, tim. should chinese policymakers be doing more to preemptively offset the impact of a trade war? tim: i think they have been doing quite a lot, with both fiscal and monetary policy, but that's not to say they won't do more. the trade issues have not gone away, despite the resumption of talks announced at the g20 meeting. the existing ties already in place rem -- existing tariffs already in place remain, and the possibility is that new tariffs will be added again if the talks

don't go successfully. as you said, donald trump was tweeting about the success of his trade tariffs, in terms of causing china to weaken. if that is the objective, the possibility is still that you will have to see more policy response from china to offset that kind of aggressive intent from the united states. manus: the policy response, it will be interesting to see how that comes. the consensus seems to be about triple-r cuts, superseding perhaps rate cuts. dollar-yuan, volatility is at the lowest since 2015. i don't need to remind you of that reevaluation. areuest said the chinese getting ready for dollar-yuan to go above 7, with a 60% chance of medium-term trade angst without resolution. what you -- would you agree,

a slow drift? tim: i don't think it will happen quickly, so it is probably a situation that evol ves over time, then pressure on dollar-yuan comes back and you will probably see that level broken in time. ultimately, i think it is doubtful these trade talks are going to be resolved in a satisfactory way for all parties. there may be a trade deal in coming months on parts of the disputes, but the broader tension between u.s. and china will continue probably well into 2020, and that will maintain pressure on the dollar-yuan exchange rate. nejra: tim fox, chief economist at emirates nbd, stays with us for the hour. let's get bloomberg first word news with debra mao, in hong kong. debra: europe is bracing for up to $7 billion of u.s. tariffs. the bloc expects the wto to give the u.s. the green light amid a

14 year dispute over aircraft subsidies. the u.s. says that aid given to airbus caused an economic damage to the u.s.. speaker nancy pelosi says the house will vote on a resolution condemning president trump, for femaleacks on four lawmakers that have been dubbed racist. representative ocasio-cortez it says the tweets will not distract them from their agenda. the tweets have been broadly condemned, including by u.k. leadership contenders. >> if you are the leader of a great multiracial, multicultural society, you simply cannot use that kind of language about sending people back to where they came from. [applause] out decades and decades ago. thank heavens for that. debra: iran says the doors open for talks with u.s., if president trump lifts

sanctions imposed in 2017. the foreign minister told nbc it is america who left the bargaining table, and that they are welcome to return. are becoming more hostile as the divorce looms ever-closer. officials in brussels say a meeting last week was one of the most difficult over three years. the bloc may now consider concessions to avoid a chaotic no-deal, as the pound enters the summer at its weakest ever for this time of year. and the number of people suffering from hunger in 2018 climbed to an eight-year high according to a united nations report, which cites economic turmoil, civil conflict and climate shocks, as a u.n. official says things are not improving at all. global news 24 hours a day, on air and at tictoc on twitter powered by more than 2700 journalists and analysts in over 120 countries.

this is bloomberg. manus: thank. citigroup, banking is in. trading profits, not so much. trading revenue fell more than analysts estimated. moretors brace for disappointment in trading. with details on what to expect, dani burger. dani: citi's trading revenue slumped 5%, but they cut costs more than $100 million than analysts expected. these banks need to look for profit elsewhere if the slump is industrywide. in profits that beat estimates, but the net interest margin was a miss. that bears on the next three, goldman, wells and jp morgan. but it may also lower the bar for reports. options are pricing in some bigger moves. we have other big ones

wednesday and thursday. thursday, morgan stanley, they might need to lean on the money-management business to make up for the trading miss. so as citi ceo michael corbat tradingey have lowered forecasts as far back as may, and other executives said that. citi might be reflecting a broader industry trend. comparedee estimates to last year expect a slump. why? the vix, partially summarizing it. in the second quarter, only one time did the vix close above $20. the average was about $15, making it difficult for traders to jump in and make money. ve index, fixed income volatility spiked, but they still missed on fixed income revenue at citigroup, the cfo

blaming the influence of the trade war and he hit that had an investor sentiment. other majorher banks fell yesterday. citi in white, basically flat. this shows how investor sentiment looks for the banks. investors might be expecting a fourth quarterly decline for the trading business across wall street. nejra: dani burger, you nailed it, why we saw the stoxx underperform -- stocks underperform even as the s&p 500 hit another record. can the u.s. equity rally keep going, even if bank earnings don't impress? you can reach out to us and the mliv team with tv on your bloomberg. coming up, we speak with wells fargo cfo john shrewsberry. it's all about banks! this is bloomberg. ♪

♪ this is- manus: bloomberg daybreak: europe. i am manus cranny in dubai. ehic ini am nejra ch london. japan is weaker, after the holiday. flat, but atlosed another record. the 10 year yield has been falling, but the drop in yields were led by europe, bunds with their biggest rally in four weeks. 2.09 is where we are on the 10-year yield, and a bit of flattening in the last couple days. manus: rate cut, what size with it be? flat dollar, you have had your move. new zealand dollar, we saw the debate in terms of what comes next from china.

but the kiwi rising the fifth straight day in a row. inflation accelerating last quarter. you have crude coming back to flat. more inventory data today, and we are just below the $60 level. let's get your business flash, debra mao is with the team. debra? they have finished the wind down of the scandal hit fund. the swiss asset manager will pay a 50 basis point premium on holdings for the clients of the more than $7 billion absolute return bond fund. this ends the liquidation and draws a line under a year of scandal for gam. --ckstone is reporting reportedly nearing a deal for the distribution arm, of 1.7 billion euros, beating bain

capital and lone star funds. the purchase could be announced as soon as this week. cutting aa ruling, jury verdict to $25 million from over $80 million. this was for the second case to go to trial over claims the roundup weedkiller causes cancer. the judge said the 75 million dollars of punitive damages was twoo hi. bayer has vowed to keep defending its popular weedkiller. nejra: thank you so much. manufacturing has improved, indicating that factory activity might improve. the new york index rose from a june meeting of -8.6 to 4.3. traders will watch out for retail sales data later today. pimm fox from emirates nbd is with us. with all the latest jobs numbers, new york manufacturing, does it mean that beyond july we

could see a one-and-done rate cut from the fed? fed is-- tim: if the about to embark on cutting interest rates, which appeared to be the message from jerome powell, that one cut is unlikely in totality. i suspect if they are about to start cutting rates once, they probably have a plan for future rate cuts beyond whatever they do in july. so i find it hard to believe that the fed is going to be just thinking about cutting rates of 25 basis points in one instance, then just sitting back and waiting. for one thing, the pressure on the fed is only going to increase, i suspect, in the wake of a fed cut, if they were to do that in july, from the white house. it seems the pressure will become more intense. manus: the verbiage continues on a daily basis.

this is bonds versus stocks. the question of one of our opinion writers, you saw the spike in inflation back to 3.2%. last year, there was this move. look at the tails. bond yields are just coming back from the 2% level. is question, if the fed absolutely intent on rekindling anlation, are we atr inflection point? that's the question for markets, really. bent oned is absolutely doing this. tim: we don't know exactly what the fed's approach is. we assume a cut in july, from the powell comments. we have to wait and see what the remarks are regarding the future, but we probably will see rates cut further. i don't know if we will see dramatic cuts, back to zero for

instance, which were previously referenced as a possibility. so yes, i think we've passed the point in bond yield terms where things have turned around sharply, maybe an inflection point. but whether the fed will try to 3%, i inflation back to don't think that's the ultimate necessarily the aim, to dramatically cut in rates to the extent that would imply. nejra: tim, how many rate cuts will it take to get inflation back above target? tim: this is the unknown question. the powelloiior to remarks, we were of a camp that that september was the right time to make a change. and probably after that, not until next year. but everything seems to have altered, in the wake of those comments, and i think there is a

greater assumption powell has flinched when it comes to the pressure being put on him from the white house. it'sn that environment, very hard to anticipate what their next steps are going to be, and similarly how much the rate cuts are going to be effective in pushing up inflation. core inflation at 2.1 percent is in-line with the target at the moment. certaily i'd suspect the fed wants it to rise above that at some point. the economy has been showing a loss in momentum, but more rece ntly the new york index is improving a little bit. so it is a mixed picture. the inflation picture is showing gradual uplift. t rates the fed will cu twice, possibly more, and that might be effective enough. manus: we will see where it goes. tim fox stays with nejra and

myself. coming up, we speak to the active managing director of the imf, at 10:00 u.k. time, right in the middle. this is bloomberg. ♪ hey! i'm bill slowsky jr.,

i live on my own now! i've got xfinity, because i like to live life in the fast lane. unlike my parents. you rambling about xfinity again? you're so cute when you get excited... anyways... i've got their app right here, i can troubleshoot. i can schedule a time for them to call me back, it's great! you have our number programmed in? ya i don't even know your phone anymore... excuse me?! what? i don't know your phone number. aw well. he doesn't know our phone number! you have our fax number, obviously... today's xfinity service. simple. easy. awesome. i'll pass.

daybreak: europe. i am nejra cehic in london. manus: i am manus cranny in dubai. let's get our first word news roundup. debra mao is with us in hong kong. nejra,manus and citigroup has vowed to keep cutting costs, despite managing to save more than analysts expected. it was not all smooth sailing for citi, who saw trading revenue drop about 5% and investment banking slumped 10%. chief executive mike korb at returney still aim to 12% on tangible equity this year. we're likely for more trade

talks between u.s. and china this week, but they will remain by phone for now. treasury secretary steven mnuchin and said that if they are productive, the white house trade team might travel to new beijing. yesterday, president trump said the tariffs were effective in squeezing the chinese economy, saying that is why beijing wants to make a deal. the european union is bracing for $7 billion in u.s. tariffs, over a 14 year dispute over illegal aircraft subsidies. washington says that aid to airbus causes economic damage to the u.s. wto could rely soon as this summer. iran says the door is open to talks with the u.s., if president trump lifts sanctions imposed in 2017. the foreign minister told nbc it is america that left the bargaining table, but they are welcome to return. the u.s. treasury secretary steve mnuchin has expressed

serious concerns about facebook's proposed cryptocurrency. plans for libra have already drawn criticism from president trump and democratic lawmakers. mnuchin said it is a national security issue, saying the potential for illicit activities is high. >> the treasury department has expressed very serious concerns misused bycould be money launderers and terrorist financiers. debra: global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. nejra: debra mao in hong kong. thank you so much. the e.u. parliament will vote on the german defense minister becoming the next member of the european commission president. but some are not backing her because she did not run as an official candidate.

so, how close is this vote? >> good morning, nejra. it is very tight. there was speculation the vote would have to be delayed, but it is going ahead. a senior european parliament official told me yesterday that it would be a mistake to read this as interpreting the vote happening that she has locked this in, all easy and she will get it. we understand she needs around 50% of support from the european parliament, and anything below 400 votes in practical terms would be seen as a bad look. she'd get the nomination, but would have a weak commission. the biggest issue for von der leyen, that she did not run in the european election. we were told for months that the next head of the european commission would be someone who participated in the election. in her case, clearly not the case. another backroom deal, something that has not gone down well with the european social democrats. that's essentially where the

resistance is coming from, from the center-left in the european parliament. manus: maria, good to see you. great work on the european front. what happens if she loses? is thewell, manus, this nightmare scenario. keep in mind, it took three days and a record 19 our summit to get to this point. european leaders in principle would not put this to a vote if they weren't sure she could get it cleared by the european parliament, mostly because it is a bad look, it is an embarrassment, and they would have to go back to square one and come up with new names. they have already burned so many bridges, used political capital. looking at angela merkel, if she lost the commission, that's a decision that has gone to a german in principle. got the macron, who european central bank very happy would becomeleyen the next european commission president, because she would be

in favor of european a gratian, his number one choice would be rejected and that would be a bad look. this is a nightmare scenario that nobody in brussels would want to see. manus: certainly warring in the top jobs is a lasting they need right now with the economic gun to their heads, so to speak. maria, great work. tim fox is our guest host this morning. another reading on germany, about confidence and expectations, which plunged to -21.1. forominous are the signs european growth in a world perspective? tim: europe has issues within itself, and issues outside of itself. within itself, it's dealing with all these localized issues about leadership, not only in the european union scale, but within individual countries.

it also has the brexit issue to deal with as well. is also globally, germany exposed and a lot of european countries are exposed obviously to global trade, particularly to china. ofthe impact on the likes the german economy and confidence in the german economy flowing from those global trends is quite strong. so from that point of view, they are facing quite a significant problem right now. anda: tim, we saw bunds european bond yields leading the drop in yields yesterday. bunds had the biggest rally in four weeks, and people at credit agricole said to buy the dip. ansenting itself as opportunity. is there a lower bound to the bund yields for you? tim: no. i think yields european-wise will remain heavy in the

context of things we just discussed. policymakers are now reacting, wille saw the ecb probably shift in policy, probably not only before the end term, butghi following on with his replacement in christine lagarde. the likelihood is that the drift of monetary policy will become more dovish, keeping yields at relatively heavy levels. and i caught up with the chief economist at ubs, , theyid the assumption do don't consider it renewed bond buying as a done deal, but they do consider a shift in rates in 10y, and later another cut, basis points in september and december. quite dramatic statements. where do you see the ecb going? fed?they be guided by the tim: i suspect they operate on

all fronts. every policy possibility they will look at, and re-examine the, ones they have done before in bond purchases and policy rates. so i suspect that they're looking at it, and they have to look at it exclusively from a european standpoint. clearly there will be pressures emanating from the united states, but the ecb has to get ahead of that and move on its own volition in the context of continually underperforming inflation, and relatively mediocre growth. nejra: tim, we have g7 finance ministers gathering in paris this week. one thing they are likely to talk about, the limits of monetary policy, and how we need fiscal policy to do heavy lifting. i know this has been a theme for years. when do you expect it to happen

in europe, realistically? tim: i suppose when the politicians can operate cohesively and coordinate effectively. right now, that doesn't appear to be the case. you have a leadership contest still ongoing, and within countries there's quite a lot of division about policies that have been recommended, social division as well in parts of europe. france is still experiencing some of that. italy, too. so hard to imagine that government policy is going to be coordinated with easier monetary policy, particularly as the cycle, the situation in europe is challenging. talk about can politicians and i think of the shakespearean claque, clapping at one another in the front row. so what does that mean for bund

yields? goldman sachs had double nickel, -55. btp, the spread over germany. if you throw literally everything at the wall, what does that mean for rates in europe? tim: that they will be negative for a lot longer than assumed. the next a sense that move, earlier this year, would be a tightening from the ecb. that has gone out the window. now the prospect for yields picking up into positive territory, going forward in the meaningful distance, seems pretty limited. italiannd the two-year yield in negative territory ever slightly again. tim fox staying with us the rest of the hour. great to have you. coming up, we speak to former e.u. president jean-claude trichet. 10:30 london time. joining us from bloombergquint,

new russia -- niraj shah. we had data showing that the trade deficit narrowed in june. is sentiment weakening amid the slowing economy, lower oil prices? raj: good morning to you. you echoed the market currently. we had inflation data coming may be marginally higher, but lower than the central bank's comfort zone. the trade numbers coming out last evening pointed to a narrowing, which typically is positive. but i don't think it is positive, because of the indication of how weak the economy is looking, and exports having fallen as well. having said that, the chart tells you how the trade deficit may have marginally come off, but not setting the state aflutter. the markets are a different kettle of fish. marginally higher, but that

could be a day's momentum to be honest. by and large, the sentiment is the economy is weak, and the market may be believes this gives the central bank more ammo to cut rates in a hurry. let's wait and watch. back to you. manus: thank you for that. dani, you are looking at the bull run in asia, in emerging markets? dani: japan is back online, falling today along with china. but looking at more developing nations, i think this underscores the dovish world of central banks we are living in. the filipino market. the philippines, after yesterday's close is now in a bull market. we had cuts from the central bank, a commitment to easing policy, allowing it to take off. you can see the 14 day rsi, surging into overbought territory. typically this means investors say look, this has gone too far, we will sell this market, but

for now shares keep surging. the index is still higher today. we'll see how high that can go. another chart, you got a version of this earlier. sinking yuan volatility. the implied volatility is in the blue. i would argue it looks like we are headed for a period of reversion, because it sunk below realized volatility, in white there, and rarely does the divergence happen. one will correct to the other. when you think about the pboc keeping the daily fixing pretty steady, the trade war, there are things that could upset it and bring implied back to realized. nejra: thank you so much. niraj shah, dani burger, great to have you both with us. here's a look at what you should be watching. other than results for goldman sachs, j.p. morgan, facebook's proposed digital currency libra will be discussed when the

senate banking committee meets. stephen has called it a national security issue. according to a flash on the terminal, germany sees the currency as a risk for the euro. they are writing about it the papers in germany. that's not all. the house financial services committee will convene to grill representatives from facebook, google, amazon and apple as part of the ongoing antitrust investigation in the world's largest technology companies. if you're traveling to work, tune into the team on bloomberg radio live on your mobile device or dab digital radio in the london area. this is bloomberg. ♪

♪ this is bloomberg

daybreak: europe. i'm nejra cehic in london. manus: i am many scrawny -- manus cranny, in dubai. debra mao is in hong kong with the newsflash. debra: blackstone is nearing a deal for crh's european distribution arm. the buyout firm beat other bidders, including bain capital and lone star funds. the purchase could be announced this week. ruling cutting a jury verdict to $25 million, from over $80 million. this for the second case to go to trial over claims that its roundup weedkiller causes cancer. the judge said that $75 million in punitive damages was too high. bayer has vowed to keep defending its popular weedkiller. billionaire investor bill ackman made $730 million betting on burritos.

the value of his take into wholly has surged, since the chain hit a record high on monday, more than three years after a food safety crisis battered the stock. ackman's pershing square says it has returned about 48% on in investment this year through july 9. gam has finished a wind down of tim haywood's scandal hit fund, and will pay investors a premium, paying investors a 50 basis point premium on holdings for clients of the more than $7 billion bond fund. the liquidation helps draw a line under a year of scandal for gam. nejra: debra mao in hong kong, thank you. the e.u. is considering possible concessions to the u.k. to avoid a chaotic no deal brexit. it comes as they brace for more hostile brexit talks under the next british government. e.u. officials say last week's meeting was one of the most

difficult meetings of the last three years, with both boris johnson and jeremy hunt echoing that in a live debate organized by "the sun" newspaper. >> we promised readers, talk radio listeners up and down the country, that we would be out by the end of march. we betrayed that trust when we failed to do that. >> brussels will get at long last from me, they will get somebody who has that clarity of vision. if you get this wrong, you will end up in an election before brexit. the one person who will never deliver brexit is jeremy corbyn, and that will be the most dangerous thing of all. >> i also agree that there is no need whatever do have hard infrastructure, to have physical checks at the border in northern ireland. >> the reason we have not gotten to where we want to get to buy this stage is not because of calm leadership, which i think theresa may did show. it's because she had the wrong deal. debra: also on the agenda, some

key u.k. labor data breaking later. nejra: still with us is tim fox from everett -- emirates abd, and jeannie mary from bloomberg. data going to show you the u.k. shrugging off brexit angst? no-dealhe odds of a brexit skyrocketed, but nobody told u.k. hiring managers. the unemployment rate is holding steady at 3.8%, but how long will it last? nobody really has a clear answer. culling over the next six months, almost inevitable. manus: from one economist to the other, tim fox is our guest. hoovering up --

staff, nobody told hiring managers. candace momentum last? -- can this momentum last? giving the odds of hard brexit rising, are you surprised? tim: the heart brexit rising -- hard brexit rising ahead of the conservative party leadership vote next week. and after that, we will know, so i think the uncertainty gets more pronounced heading toward october. a variety ofget, consumer behavior in the u.k. will likely beholding up well. but the questions will be quite pertinent again. nejra: what does that mean for boe policy, in terms of rate cuts? they recently turned dovish, but what could be the scale of rate cuts that we get from the boe? tim: we aren't sure they are

going to make rate cuts yet. but the bank of think when has become more dovish. i don't think that is a huge surprise, given the brexit possibilities are becoming more complicated. even with the possibility of a general election, still quite likely. but interest rates in the u.k. haven't moved a long way from zero, so it wouldn't take long to get back to the zero bound on u.k. rates. for the time being, i don't think the bank will be thinking that way. probably putting on hold any hikes in rates, until -- maybe a nibble in lower rates depending on how the other global central banks behave, and the global economy and u.k. economy responds. manus: jamie, this set of data takes us right back to where we were originally, strong data, strong wages, employees being

hoovered up. this would traditionally set the bank of in going on a different course, but carney himself offered -- acknowledged a shift lately. how? jamie: domestic outlet seems fairly solid, abstracting from brexit. but the global outlook is souring, somewhat. i feel almost certain that if brexit were to go away over the next six months, then the bank of england would be hiking. especially what happens if a hard brexit hits, and again, i think we are almost certain at bloomberg there would be a cut, with demand falling much faster than supply. we think the bank of england would cut rates in response. nejra: to the point that tim was making, zero, we are far from there. i talked to your colleague the other day, jamie, who said the

lower bound for u.k. rates is zero. what about the prospect for more qe? jamie: reasonably likely. a slowpronounced brexit, down i think qe is a realistic prospect. manus: we are having this debate, tim, what is the zero bound. we have negative rates all over europe. negative rates in japan, something we are very used to. is there a lot of pushback at the bank of england? can you see any situation where will go to negative rates in the united kingdom? tim: i think we are not in that situation. we are not anticipating right now, maybe we would think about hard brexit but that may not necessarily be equivalent to zero, or negative interest rates necessarily. a cut in interest rates, for sure likely after a hard brexit. but further, into negative territory? i think for the time being,

that's probably unlikely until you see the reality of what the hard brexit actually means. it may not be as bad as a lot of the opinion writers have suggested. is a hard, i know it question, but what is the hard lower boundary on sterling for you? the weakest start ever in a summer, and the worst might be coming? tim: i think more uncertainty will produce a lower pound, probably for a short-term period at least. what you have to remember, the lows around the referendum itself, below 1.20. that might be a technical level, you revisit those areas, so i would not be surprised to see a fall to 1.20. but beyond the brexit event itself, you could see the pound recovering. manus: tim, thank you very much for sharing your thoughts.

jamie murray, european economist in bloomberg, london. us, inller will be with regards to brexit, maybe? ♪

♪ >> good morning from bloomberg's european headquarters in the city of london. i'm nejra cehic. >> and i manus cranny, live from dubai. this is "liver daybreak: europe," and these are today's top story. trading revenue will be watched as goldman sachs and jp morgan report second-quarter results. they will look to better a difficult period for citigroup. wells fargo's numbers are also on the docket. we hear from the cfo. balancing act. u.s. treasury secretary steve nguyen says he could had to beijing if the trade calls goes

well. he also criticizes cryptocurrency ahead of a key senate hearing. mounting? risks and sent to make history. the defense minister ahead of the speaker that could cement her european commission's first female president. ♪ >> welcome to "daybreak: europe." let's get to some numbers from burberry just hitting the tape. the first comparison sales up 4%. the estimate was a gain of 2%, quite a strong beat on the first quarter comparable sales. fors also reaffirming the

year 2020 outlook, interesting that this number has come through because what analysts were watching for was the success of the product ranges but also the potential impact of the hong kong protest. numbers coming in with the beat and third-quarter retail sales at 498 million pounds. there's money in cement, did you know that? manifold has been running crh for quite a few years, selling part of the business in the european distribution operations. ins is the latest story terms of private equity maneuvering up assets. at someve a quick look of the information in the release. it is a deal that has been done and we are bringing you some news flow from ryanair.

>> what we are seeing from ryanair is that the be 737 max could slow? 20 growth and also that it will return to flying service before the end of 2019 and it will revise its summer 2020 schedule. let's take a look at have futures are set up because we have another record in u.s. equities talking about the s&p 500. we did see banking stocks underperform on the anticipation that the trading unit could not perform very well and we see a fall and trading revenue but the stocks are flat because of cost. weakness coming through in ftse 100 futures after we saw a second day of gains yesterday. there's a lot of things we have our eye on this week, but hard to find a definitive push for markets at this point ahead of the fed.

backactly, and if you go and look at some of the bond markets, what are the bond markets actually telling you? the biggest backup we saw in a number of weeks -- if you look at the movement, it moved up from the bond market last week, the biggest rally in two years. when you see this kind of a move, that's your opportunity to jump in. the chief economist says that they are going to throw inrything at this project terms of re-inflating europe. that will be interesting. when it comes to janice henderson, they are saying that the central bank is giving you a is lifting the risk of inflationary spikes. the risk is you have a meltdown in the equity markets but it is about the propensity of central

banks giving you a gift. by the way, there is one line in terms of the value. they are selling that distribution business to blackstone. if you want to get a figure on that, the enterprise value is 1.6 4 billion euros in cash. let's get the rest of the markets with juliette saly. >> hi, manus. we are seeing a directionless trade coming through in asia, the s&p 500 on wall street held at that record high, chinese stocks getting dumped, the csi 300 down in late trade. japan came back after the long weekend, closing out the session weaker by .7%. upside in the check makers, india looking ok and we did have the rba july minutes saying they are closely watching the job market and adjustments will be done if needed.

let's have a look at some of the other asset classes we are watching, new zealand coming through with 1.7% year on year for the second quarter. they need to cut just once and then hold, a little bit of pickup in inflation. at a 17 monthng high against the u.s. dollar as we see equity inflows rise, the philippine index in bull market territory, it could get to 8500 points in the near-term. then we have this big surge with iron ore futures up on track for the highest close since december 2013. the singapore iron ore contract also rallying, we had that output number coming through from rio tinto, and also we are ,eeing sign for healthy demand sending iron ore on a pretty solid move.

>> juliette saly in singapore, thank you so much. we want to bring you an update on buyer, we learned it got its roundup verdict cut, so basically it was slashed to about $25 million from 18 million, and buyer shares are up 2.3%. we will be watching that stock at the open in under an hour's time. >> the u.s. treasury secretary says that the u.s. trade representative may travel to beijing for negotiations if talks are productive. this comes after china reported its lowest growth on record, which president trump says shows tariffs are having their intended impact. >> markets are looking for direction this morning, there are plenty of potential drivers in the hours to come. we will see how much of an impact week data is having on sentiment.

stateside u.s. data is expected to show positive events and the big item is the banks reporting second-quarter results. joining us for the rest of the show is the chief economic advisor at alpha book. great to have you with us. we are in a bit of a holding pattern as we look ahead to the fed at the end of july. we do have some data points and we hear there have been calls between the u.s. and china in terms of the trade discussions. what in your mind is going to give markets the impetus this week? what sort of trades would you be wanting to put on this week? >> i think first of all we've had a very strong bond market rally, a strong equity market rally. markets will be quite nervous and sensitive to any type of information issue. all of the central bankers are in europe for the g7 and for the conference with the bunko france . there's a huge amount of focus on central bankers.

equities, there is certainly an earnings season and we will just have to see how those have evolved. the main factor is what the policymakers -- that is central banks. >> one of the things we've been exploring is the potential for currency wars. if you look at the volatility in the yuan, it's the lowest since 2015. a lot of rhetoric from the united states that maybe they won't act on that. war,is the risk of an fx and how vulnerable with you one be if we moved toward that kind of scenario? china is ton for devalue the currency, which we saw in august of 2015, and clearly we would have a risk off scenario if that took place, but the g7 and g20 have always committed to currency stability,

and that would put a negative factor on markets with currency devaluations across the board or any currency war coming from the white house. yieldsave had treasury for two days, steady right now with a handle on the treasury yields, boones had their biggest rally in weeks yesterday, credit agricole are saying the backup provides an opportunity. others say the biggest trade and treasuries is moving higher. are these markets going to move in opposition where bund yields fall and treasury yields move higher, or has what we said about central banks mean yields will keep going lower locally? >> i think we are in a cycle where interest rates could remain low for longer, and it is you couldy because recommend a short position in government bonds today but the problem is we want to see what the european is doing, what the

fed is doing, and they are all in the easing camp. the issue is by how much. without various insights into what the next steps may be, it is going to be a tough decision to put on short positions. >> martin, who is going to be the most aggressive in terms of rates? we were having this debate with a variety of guests, everyone is pooh-poohing the idea -- shock and on in july and then down. others are much more measured, leaving the fed the ability to make decisions, as they are data dependent. where do you see the most substantial move coming from? the fed hashink significantly more perspective, interest rates at 2.5%, the deposit rate -.4%. clearly america has more space. i think that basically we have

to remember that last year the fed hikes by 100 basis points. we have to at least -- that is where some people are getting a 50 basis point cut. we also mention that the fed made the mistake last month, they should have cut. a 50 basis point cut on july 1 is not a surprise to us. we should get 50 basis points this year, but we could get 75, and it will depend on america's negotiations with china. it will depend on how other central banks ease. economic conditions in europe are much more troublesome than what we have in america. >> we love your charts, and you highlighted this one for us -- tell me what this means for you and why it is pushing you toward an led approach to investigating. explain what that is as well. >> i think everybody knows that in europe and japan we have negative interest rates, but on a technical basis we have

negative interest rates in america as well. that negative interest rate comes through the term premium. a very technical instrument, but it basically means that u.s. interest rates of 2% are there because european and japanese investors have flooded the u.s. market after the policies that we've seen by their own central banks. this globalization of policy inflows has really pushed american term premium rates negative territory, to levels that we've never seen before. that is actually pushing u.s. long-term rates lower. is investors have to -- how do they trade these markets? they must lead to the direction of their portfolios, all portfolios such as large pension funds in europe and japan will have probably the most significant duration they've had in their history, and they must build up external positions like the u.s. treasury bond market.

then you have to diversify into emerging markets and the credit space. that is why we have 10% returns and bonds this year. >> can we just pick up on that, martin, which is pushing money out into emerging markets? graphic for other you which is about emerging markets, negative yielding debt within emerging markets. --now you have probably said it's 109 billion dollars, stop getting so excited, but we've seen a momentum, a real momentum move in this em space. how dangerous is this? be, but thisould is sort of a transition issue. the main point of those negative interest rates -- clearly there's costs to negative interest rates, nobody can really understand -- how come you are buying bonds with negative yields? this cost and benefit analysis,

the main reason we have this abnormal interest structure is inause inflation is so low almost every single country and we have seen a very sharp deceleration in inflation across the entire em space, which allows almost over 22 emerging-market central banks to cut interest rates this year, and we haven't seen any major interest-rate cuts until the fed kicks off july 31. >> ok. . very different economist at alphabet, you stay with us. the first word news from debra mao in hong kong. manus, citigroup has vowed to keep cutting costs despite managing to save more than analysts expected. it wasn't all smooth sailing, the trading revenue dropped about 5% and investment banking slumped 10%.

the chief executive says it's still aims to return 12% on tangible equity this year. speaker nancy pelosi says the house will vote on a resolution condemning president trump, this for his attacks on female lawmakers that have been dubbed racist. ocasio-cortezdria says he won't distract them from pursuing their agenda. the attacks have been widely condemned, including by u.k. leadership contenders. >> if you are the leader of a great, multiracial, multicultural society, you simply cannot use that kind of language about sending people back to where they came from. that went out decades and decades ago, thank heavens for that. >> u.s. treasury secretary steven mnuchin has expressed serious concerns about facebook's proposed consumer currency, as it already draws president trump's criticism.

mnuchin says it's a national security issue, adding that the potential for illicit activity is high. >> has expressed very serious concerns that libra could be misused and money launderers and terrorist financiers. >> global news, 24 hours a day, on air and at @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. >> debra mao in hong kong, thank you. coming up, we speak to the acting managing director of the imf. don't miss that exclusive interview at 10:00 a.m. london time. this is bloomberg. ♪

♪ 7:20 am in london, 39 minutes

away from the cash equity market opening in europe. i'm nejra cehic in london. >> i'm manus cranny in a very warm and hot dubai. let's check in on the markets, from abu dhabi to brent. marginally correlated, the there's a big overweight position on uae stocks for the first time since 2016. that iselative play -- certainly one of the calls, abu dhabi down by eight points, but on the oil market it has become lower and we will get inventory data later on. the storm barry has been downgraded. >> we saw quite a dramatic move in bund yields yesterday, the biggest rally in four weeks. risks are tilted toward lower european yields. s&p futures did hit another

record yesterday, looking ahead to more bank earnings -- how much more direction can that give the market as we are in a holding pattern? euro stoxx 50 futures pointing to a weaker opening europe. let's get the bloomberg business with debra mao in hong kong. the european distribution arm values the irish cement maker unit valued at just over 1.6 billion euros. they beat other bidders including bain capital and lone star funds. bayer has won a ruling slashing a jury verdict to $25 million from over $80 million, the second case to go to trial over whether roundup weed killer causes cancer. the $75 million in punitive damages was too high and bayer has vowed to keep defending its popular weedkiller. -- has madeinvestor

about $730 million, betting on burritos. the value of his stake in aaa surged as they hit a record high on monday more than three years after of food safety crisis shattered the stock. they say they have returned about 48% on investment this year through july 9. that's your bloomberg business flash. >> deborah, thank you. the eu is considering possible concessions that it might offer to the u.k. to avoid a no deal exit. this comes as officials brace for brexit talks to become more hostile under the next british government. you officials say last week's meeting was one of the most difficult encounters of the last three years. martin malone is the chief economic advisor at alpha book, and is still with nara and i this morning. let the hurly-burly begin for the next administration. it is looking like it's boris johnson.

you have a cracking line in your notes, the great dropping out of great britain. parity against the dollar is something that you expect. is that predicated on a hard brexit? do we get there immediately if there is a hard brexit? how do you get to that call? the main factor as i said before is the word stability. the u.k. has a difficult position and economic factors, real gdp is close to 1%, it should be closer to 2% or 3%, so that needs to be doubled or tripled. that would mean we need political action and economic policy for the new government. the second factor is financial instability. the housing market is in trouble in the u.k. despite the low interest rate level, and the third factor is political instability, which is clearly the brexit issue, and the political changes taking place

at the moment. >> do you prefer to short the pound against the dollar or against the euro? >> against the dollar, it's the most simple part of the trade. years, the u.k. currency has actually devalued every decade by 25% except the 1950's. we've already seen a very short devaluation immediately after the brexit vote in june, 2016. we have seen a devaluation this year by around 5%. we would need to see significant economic traction or positive economic surprise to take off a negative view on the currency. basically the currency devaluing is one of the things that is needed to fix u.k.'s economic condition. >> fiscal used on the event of a hard brexit -- would you rely upon physical proclivity from government over bank of england moving to negative rates, as a balancer, stabilizer?

goodthink this is a very question for almost every economy. in the u.k., they are quite unique because they have a currency, they have a fiscal policy, there are multiple levers if you need to have a crisis issue or if we have further economic deceleration on whatever type of brexit we get. the fiscal space that is available is quite significant, and all the rules which are self-imposed in the u.k. are basically pushed by the treasury . the amount of fiscal space is actually the first option. rather than cutting interest rates into negative territory, there's costs associated with negative rates as we've seen in many other locations globally. >> martin malone, great to have you with us on the show, thank you so much. we've had a lot of corporate news. burberry confirmed its outlook as it saw first quarter

comparative sales rise, doubling estimates. ryanair says it sees the boeing 737 max 8 back in business next summer. more to come. this is bloomberg. ♪ ♪

♪ >> good morning. welcome to "bloomberg markets: the european open." we are live from the city of london. i'm anna edwards alongside matt miller in berlin. >> today the markets say give us a reason to keep going. european futures are lower after u.s. indices hit fresh record highs on monday. will the rally continue if bank earnings disappoint the cash trade is less than 30 minutes away. ♪ >>