>> good morning from bloomberg european headquarters in london. cehic, alongside matt miller in berlin. tech earnings in the u.s. bring mixed results. alphabet and intel jump after positive numbers, and amazon deployed -- disappoints. 's up soon.nestle the european union rejects boris johnson's demands for a better e.u. -- brexit deal, highlighting the challenges for the new prime minister. traveling to iran, mike pompeo says he's willing to talk as the administration applies pressure. >> i would like to have a chance

propaganda,o speak but to talk about their leadership and how it has harmed iran. matt: from the german capital berlin, good morning. nejra i want to quickly go through numbers out of renault, the french carmaker. lin-year revenue, the top e, close to last year's level. previously it saw a rise, so renault joins the slew of carmakers cutting back on the forecast, the outlook for the year, with slowing auto demand in europe, down 1%, down 7% in china last month. we see a global slowdown of autos, and renault is joining.

we will talk to their ceo later on today, just after 9:00 a.m. this morning. nejra? nejra: u.s. equities yesterday fell from record highs. all 11 industry groups fell on the s&p 500. futures are a little higher on the s&p 500, up 0.2%. in europe, the big story was mario draghi, somewhat undoing what the ecb statement said, hinting rate cuts and more stimulus, but mario draghi says there may have been different views on the governing council, and that the risk of recession was low. in euro rose, and a backup yields. 1.1148. dollar has been range bound, but heading for a second weekly gain ahead of u.s. gdp data. big tech earnings overnight as well, matt. nejra: -- matt: tech earnings

and tech misses, really. amazon came out with a forecast for profit, one billion dollars less than the street. as a result, nasdaq futures, this is a look at the last five days. but if you look at nasdaq futures for today's trade, probably the important thing to watch considering the earnings came out after the market yesterday, you still see a little gain. amazon's take on nasdaq you see futures rising. let's check in on the markets in asia, with juliette saly, in singapore. juliette: a bit of a risk off session in asia, ahead of the u.s. gdp later. we got industrial production numbers here in singapore, a beat, rising 1.2% in june, first

is estimated 0.8% drop. about 0.6%, yen steady at 108. indian stocks fluctuating on earnings coming through, but elsewhere it is very risk-off, and australian stocks off near all-time highs. the kospi down a third session in a row. i want to focus on stocks in japan. we heard softbank will launch a second division fund, with -- vision fund, with $108 billion in funding, including with partners, the likes of apple. this investment, daiwa securities, is likely to boost

earnings. bloomberg opinion says masayoshi son has a lot to do with the second fund, because there aren't many didis, grabs, ubers to find with this new investment round. tokyo, on the close in with a 99% plunge in first quarter profit, doubling the jobs it will cut to 12,500. no surprise, investors don't like that. the stock off 3% in the session today. matt: juliette, thank you very much. juliette saly, with a look at earnings markets -- earnings in the asian markets. last night, amazon and alphabet reported second-quarter sales beating estimates. despite that, amazon sales fell after missing on earnings-per-share, and telling investors one-day delivery will be costlier than expected. alphabet shares rose as the

google parent announced a mammoth share buyback. for more, bloomberg's european opinion tech columnist alex webb joins us now. alex, we see futures rising for the nasdaq. looks like -- it in broader terms investors weren't too disappointed yesterday. alex: and good news off the back of facebook, which had been a little disappointing. comments by regulation, when it comes to fines, also has ramifications for google. so google still growing is good news. amazon might have disappointed on some levels. but as they said, a lot of that is to do with investment, to gain new business. the expectation is the return to growth a few quarters down the line. intel, the chipmaker, still doing very good business despite the tribulations. i think net, a lot is quite

positive. nejra: to focus on amazon for a second, the issues around costs are causing concern. will get onink they board with this be on today? alex: who am i to predict what investors do? but -- nejra: is it short-term pain, basically? workedhe way that amazon for a long time, paying attention to the top line and very little to the bottom line, and the rise of the cloud services helped investors get used to the fact that amazon can actually be profitable. what amazon is doing is going back to the old model, on growth. there's a a lot of growth to go with amazon web services, even slightly in the most recent quarter. matt: when we see this quarter in, quarter out, why don't

investors get used to the fact that amazon can just turn on the tap when it wants, and it doesn't often want to? alex: there is always this overhang about regulation. a point of conversation inb the last wee, with the announcements from the doj, ftc. amazon is included in that, in a way that microsoft, the big rival in the cloud space, is not. that remains a reason for concern. i'm of the impression amazon will be less in the fire line than in particular google and facebook, because of how they handle data and the duopoly they have over online advertising. as much as amazon has a dominant position in e-commerce, it is still only 15% of retail in the u.s., and programmatic and digital ads is over 50% of the new advertising spending. that's why that's a business

perhaps more in the eyes of regulators than e-commerce. nejra: talking about advertising spending, one of the highlights in the google ads, alphabet as well. and cloud computing, google's fastest-growing business. a lot of different threads to the alphabet earnings. what would you focus on is most important? alex: they continue to find places to put ads. that's the main thing. even with the pressure they are facing, there's always new nooks and crannies of the internet, and new ways to put ads in their own products, not the least of which google maps. they have done a lot with youtube to squeeze revenue out of that, and maps is an area of great potential. nejra: great to have you with us, alex webb. theng up, we speak to twitter cfo as they report second-quarter innings, later today. joining us for the hour as our chiefhost, the

strategist for india and asia at northern trust. i want a broad sense of your view around u.s. markets. you have added to u.s. equities this month. why is that, as people start to question if the rally has further to go? >> it is a combination of a relatively modest growth environment, with low inflationary pressures, and what we think will be a global easing cycle in monetary policy. that combination is to us a pretty powerful one, and when we think u.s. equity markets will be particularly good at profiting from. those factors have driven us to increase our risk. at maximum, but it is a way to make sure we have enough risk on our book to profit from what we think will be a good environment. are: how important buybacks? we saw the buyback announcement

from alphabet, but in general they have slowed down in the first half. do you expect them to pick up again? 4 we don't, actually. we have modestly decreased expectations. we think buybacks will appeal to the u.s. equity market, but to a smaller degree than in the last year or two. looking at the general backdrop, it is about valuation levels we think will still be supported by the low inflationary, low interest rate environment. that's really the driver of our positive outlook. nejra: i want to talk about einhorn, who is betting against u.s. high-yield and investment-grade debt. part of this is providing a hedge for the bullish equity position of the firm. you're positive on high-yield. tell me if you are more positive on high-yield against equities, because you have talked before about how high-yield has more on the upside compared to equities. is that your position? wouter: it is.

riskt is sort of a mitigation for us. you have a certain amount of risk to spend, and spending and equities, it goes quickly. so we chose to take some risk and equities, notably u.s. equities, and the rest in high-yield because of the upside, downside benefit it brings. less downside risk. that's one reason. we're not negative on the credit side at all. we think the supply and demand characteristic right now for u.s. credit is very favorable, and we think that will keep spreads type. we're maintaining overweight on high-yield. matt: how important is the gdp number today, and what are you expecting? wouter: it is important, because you want to know if the domestic economy is going the way you wanted to. we know the international part of the economy, and the manufacturing side, is weakish. so it is the domestic side that you want to see resilience. it is a backward looking report, we know that, but you still want

that confirmation. it is important to us. however, in terms of overall expectations, we think modest growth is the overall environment, so we aren't expecting a strong gdp print. it is about modest growth, low inflation, low interest rates. nejra: and that means what for your view of rates? i understand you are tilted towards risk, but what about the rates? are you in duration? wouter: we are still slightly overweight duration. we think rates will be very low. there is a global easing cycle in monetary policy that's coming, and we see the statements from the ecb, fed, and three emerging market central banks last week, turkey has well, which is a different story. we see that global easing cycle developing slowly, and we think that will be positive for duration. we think rates will stay low, the 10-year on the u.s. will go below 2% and state there, and -- stay there, and japan and the bunds will stay in negative territory. matt: what signs do you need to

see, to take profits? what signs to say, i am selling u.s. stocks? wouter: one thing that's really a risk to outlook is inflation. if inflation starts picking up, and therefore the fed can back off the easing cycle, that is something we would take seriously, as a driver of taking some risk off the table. fi -- if we're wrong on inflation, or we see signs inflation, wage growth particularly accelerating, that would be a sign for us to be more careful in our risk position. sturkenboom, from northern trust, will stay with us. we have a lot more to talk about. first, debra mao with bloomberg first word news in chicago. debra: governments need to pitch in with fiscal measures if european conditions keep deteriorating, according to ecb president mario draghi. he signaled more monetary support coming in september, but his comments about the central

bank getting close to the limit of its powers -- >> this outlook is getting worse and worse. and it's getting worse and worse in manufacturing especially, and worse and worse in the countries where manufacturing is very important. but because of value chains, this propagates all over the euro zone. debra: germany is not in crisis, and has no concrete plans to add stimulus to the economy, according to the german finance minister olaf scholz. reduction in global tensions will boost the outlook for 2020. manmade problems which we have, the tensions, are solved, we will have a better an impacte worldwide,

on the european economy, and especially on the economy of germany, which is a really global society. debra: global news, 24 hours a day, on the air and at tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. nejra: debra mao in hong kong. thank you so much. coming up, less than 48 hours into his premiership, prime minister boris johnson's demands for changes to the withdrawal agreement are rejected by the brexit -- by the e.u. we will discuss that next. this is bloomberg. ♪

matt: this is "bloomberg daybreak europe." i am matt miller in berlin. nejra: i am nejra cehic in london. breaking numbers from nestle. organic sales growth, 3.6%, estimated 3.7%, so slightly soft on that number. full-year organic sales growth, around 3.5%. full year guidance for 2019 is confirmed, but that first half organic revenue miss will be in focus. first half sales overall, 45.4 6 a slightwiss francs, miss against the estimate, so a little softness. matt: let's check in on the markets now, ahead of the

european open. we the asian stocks, if you look at the msci asia-pacific index, down about 0.5%, but nasdaq futures higher. this is interesting, because amazon missed, coming out with an outlook that was disappointing to the street. nonetheless, a $25 billion buyback announcement from alphabet seems to be driving nasdaq futures up. littlellar, 1.1145, very changed from 24 hours ago. pound at 1.2545, also little changed. the most interesting story of the day, i think, is the turkish lira. nejra: absolutely. cable a little soft as johnson gets pushback from the e.u. but absolutely stunning move by a ratekish central bank, cut of 400 when he five basis points. the action in the -- 425 basis points. the action in the lira wasn't

huge. that is something to discuss later. silver a little soft as well. let's get the bloomberg business flash. debra mao is in hong kong. nejra, alphabet reported revenue beating expectations, calming concerns of slowing growth. second quarter sales came in just under $32 billion. the google parent also announced a plan to repurchase $25 billion of class c stock, the biggest buyback in the internet giant's history. warned investors that one-day delivery has a big price tag. the e-commerce giant's results were marred by a surge in shipping costs, which will strain earnings for the rest of the year, but it is leading to customers buying more, helping revenue growth rebound. softbank announced a second visiting -- vision fund looking to raise $108 billion, even

bigger than the first. investors are expected to include apple, microsoft and foxconn. softbank will invest $38 billion itself. this is part of masayoshi son's bid to extend his reign as the most influential investor in the industry. matt: thank you very much. let's get the latest on brexit and the challenge facing the new u.k. prime minister. according to his office, boris johnson told commission president jean-claude juncker the withdrawal agreement would have to change to pass british parliament, which is clear. will reject any request to do so, saying what he offered is the best end on the deal possible. of northernenboom trust management is still with us. wouter, what do you think about british assets, in light of what we already knew, that this deal

won't change from the e.u. side? wouter: i think caution is warranted. we look at u.k. assets. we think there are cheap. we think there is value there. but with this hanging over them, you want to be cautious. we are remaining neutral in all of the asset classes, standing on the sidelines to see how this plays out. we see here a battle being fought between the preferences of the politician in charge, formerly theresa may, now boris johnson, and the constraints. the constraints are what will push boris away from the course he is now on. but before he does, there's caution, because this will hangover markets and the economy. nejra: does boris johnson increase no-deal risk for you? wouter: it does at the margin, but it is preferences versus constraints. preferences would suggest no-de al risk has gone up tremendously, but that is the wrong approach. we have seen the constraints,

the high-profile resignations of people like philip hammond, and the clear message that they won't countenance a no deal brexit. considering they are a majority in parliament, that means boris johnson faces real constraints to push through a no deal brexit . on the face of it, risk has gone up, and what has marginally because he has packed the cabinet with hardline brexit eers. but when you pull back and look at the constraints, the arithmetic in the house of commons, it is more modest. matt: philip was never going to stay, with boris johnson, right? the chances of him suing the british government rae -- are higher than they were of him staying. what's the risk of an election? is that a bad risk for you? wouter: no. i think it is actually a good risk. the chances of an election are fairly high because of the arithmetic i mentioned. if lauren -- boris johnson wants herule as prime minister,

needs a stable majority. the risk is high, but it is upside risk, because either way it would give clarity on who will rule and in what manner. within the next three months to six months, i would put the risk of a new election at a high level, but i would see it as an upside event potentially, because after that maybe we can get on with things in a proper manner. nejra: interesting. of northernenboom trust stays with us. up next, renault lowers its outlook, grappling with a downturn in the european car market. we break down the good, the bad and ugly from automakers this week. and later we speak to renault's ceo, 9:00 a.m. london time. so much news around carmakers this week. looking forward to that discussion. matt: absolutely. almost everybody cutting forecasts, with the exception of volkswagen yesterday. so interesting to see renault

following along. when you're traveling to work in your car, tune into bloomberg radio on your mobile device or dab digital in the london area. this is bloomberg. ♪

matt: this is "bloomberg daybreak: europe." i am matt miller in berlin. inra: and i am nejra cehic, london. we had a record temperatures yesterday in london, and i was catching up on the ecb. everything i was reading was saying, mario draghi's press conference reversed the market reaction from the statement. but you pointed out it had more to do with the german finance minister. matt: that's right. right before draghi gave his press conference, i was in the studio with olaf scholz, german finance minister. i was asking him why the german government doesn't spend more money. it has a lot of things to spend

on, from infrastructure to the military. it's got negative rates, so it gets paid to borrow. but it doesn't even need to borrow, because they are running a record surplus as far as the budget is concerned. he still said, look, they aren't going to spend more money. they think they are doing enough. he doesn't think there's a crisis, and he's not going to cut corporate tax rates. at that moment, we saw bund yields start to rise. bundbefore draghi spoke, yields went up, and through the press conference hitting highs for the session. nejra: what seemed to show the reversal in the news conference, he was pointing not all the governing council was on board with of you have more stimulus, even though he was giving the warnings, so that could be quite a difficult. meeting in september it is a question now of when, not if.

matt: absolutely. i guess if draghi goes back to the bazooka language, maybe he will see he has to in order to convince markets, because maybe he wasn't dovish enough. let's get to renault. no longer forecasting 2019 revenue growth, but sees the figure yearly little changed from last year. the latest carmaker to struggle. they face falling demand, trade tensions and record spending on electric cars. here to wrap up earnings so far, dani burger. dani: no wonder carmakers are struggling. a more than 7% decline in car sales last month, a historic slump. europe and u.s. demand also falling. let's get into the numbers, because there were actually a few carmakers able to stand out. got, for them it

was about the more lucrative, pricey suv sales. vw did fall yesterday after reporting results, but analysts say the carmaker is on track. and then the bad, renault joining a list of carmakers that cut guidance or flat out mystics dictations, showing how difficult a period we're in for profit, especially when carmakers are spending heavily on electric vehicles. the stand out season has been nissan, and not for good reason. nissan announced job cuts of over 12,000, after a 99% plunge in profit. part of the problems, an aging lineup and falling demands in the u.s. and europe, overshadowing perhaps the carlos ghosn arrest. nejra: dani burger, thank you so much. let's get to bloomberg first word news now, with debra mao in hong kong. iran reportedly

testfired a medium-range ballistic missile that traveled 1000 kilometers, according to official.ited an it's the latest move in escalate intentions with iran. we spoke to secretary of state mike pompeo about relations with tehran. >> i would welcome the chance to speak directly with the iranian people. their leader comes to new york, drives around, speaks to the media, the american public, gets to put iranian propaganda out into the american airwaves. i would like a chance to go, not for propaganda, but to speak truth to the iranian people about what their leadership has done and how it has harmed iran. nejra: -- debra: boeing fell the most in over two months as the 737 max hangover got even worse. southwest has dropped the plane

from its schedule until early 2020. it was the biggest operator of that jet. ining's defense unit also is a dispute over bidding rules. 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. matt: president mario draghi has set the stage for the ecb to deliver new stimulus in september. nejra and i were just talking about that. but he also warned governments, fiscal measures will be needed if the economic slump continues. germany's likely to be the main target of draghi's message, as usual. zut finance minister olaf schol said he has no plans to loosen the purse strings. i spoke to him exclusively this moments before the ecb press conference yesterday. >> we are in a situation where

everyone of us has to deal with the worldwide development of the economy. we know, due to all the tensions between the united states and thea, for instance, and unclear developments in the question of brexit, that has an impact on the economy, mostly in invest,ions who want to waiting for the next month, the next month. so we are waiting for a solution, and that will impact the growth. matt: are you concerned that we might be stuck in almost a japanese, vicious cycle, where low rates beget low inflation and low growth? >> i don't think so. everyone is expecting growth next year, and also at the end of this year already. this is due to what i said already. ese, man-made problems we have all the tensions, are s

we will have a better growth rate worldwide, having an impact on the economy of germany especially, a really global society exporting and importing from all over the world, to all over the world. matt: that was german finance minister olaf scholz, speaking to us exclusively. fromr --wouter sturkenboom northern trust is with us. this was a bit of a debate. nejra pointed out that draghi wasn't dovish enough perhaps in the interview, but for me it seems like my scholz interview moved the market. [laughter] maybe i'm just looking for a gold star from the boss. but what do you think? wouter: i think you are right, in pointing out scholz is not helping here. structurally, germany clearly needs to do more on the fiscal

side. they have room to room and it -- they have room to maneuver. it it would be good for european growth, for german growth, and the balancing act the world faces in terms of trade surpluses, deficits around the world. so i agree with you that scholz is basically not helping. i would say to nejra in terms of the dovishness of mr. draghi, this is where he's hitting his he can bedovish as without saying he will do whatever he can, whenever he needs to. he says dovish as he can be at this stage, but he just needs the extra stimulus on the fiscal side to help deliver the fiscal results. that is unfortunately still not forthcoming, as we heard from scholz. nejra: i suppose my question is, the fact scholz pushed back on the fiscal side, you would think that would keep yields lower, and yields would rise if there was more of a sign of commitment

from germany to actually open the fiscal tap. mind, i am sure it was a combination of both, both -- but to talk about what mario draghi does next. we're set up for september. what are the next steps for you, considering the disagreement on the governing council? wouter: the disagreement has always been there. the german central bank, mr. liked thethey haven't whole stimulus package. they have been standoffish. that will continue, but they are being overruled, rightly so, by the governing council that sees the need to maintain inflation expectations that have been drifting too low for too long. we expect small caps at the most, maybe 10 points, taking the negativity out of the interest rate environment, very important for banks, and the new

q.e. program. we expect 400 to 600 billion , so quite sizable, and we hope they can deliver on that, for everybody's sake, particularly the inflation outlook. matt: will it help, is the question. i think it is so interesting that erdogan wants his central bank to cut rates to fight inflation, but it seems like the lower the ecb goes, the more of a problem they have bringing about inflation and growth. as if itis this vicious cycle where lower rates beget lower inflation and lower growth. it turns everything we think about economics on its head, doesn't it? wouter: i wouldn't follow that logic. i think the counterfactual would be the way to approach it. what if they hadn't lowered rates as much as they did, if they hadn't done q. week -- q.e ., where would inflation

expectations and growth be? we think they are helping, but not enough. that is why the fiscal side is so important. they need monetary policy and fiscal policy to work in unison, when you don't have a growth engine like china firing on all cylinders. that's the problem here, and that's what they need to address. clearly the monetary side is coming through, but the fiscal side isn't yet. nejra: the thing is, the ecb has been asking for more on the fiscal side for decades, and still we aren't getting it. what we heard from olaf scholz confirmed what we heard from angela merkel in a news conference, talking about balancing the budget. we got no signs germany is ready to turn on the fiscal tap, so i guess we will talk about this the next time you are on. great to have you with us. wouter sturkenboom, chief investment strategist for amea and aipac, northern trust. the swiss supreme court will rule whether ubs has to give account data different authorities, set to play a major

role in their appeal against a $5 billion tax penalty. italy will report manufacturing and consumer confidence data, following a slump in eurozone pmi figures. renault lowered sales outlook, and after 9:00 u.k. time we -- a you a ceo with the interview with the ceo, thierry bollore. matt: twitter is reporting results, and at 1:30 u.k. time, all figures will be on u.s. growth figures. gdd comes out for the second quarter. analysts see growth of 1.8%, which would be the slowest since 2017. very interesting, to see what that growth number will hit. it makes a difference between the fed cutting maybe 50 basis points, or not having any reason to cut at all. coming up, mike pompeo tells us he would be happy to travel to tehran to address the iranian people. our interview with the u.s.

secretary of state is next. this is bloomberg. ♪

nejra: this is "bloomberg daybreak: europe." london.a cehic in matt: i am matt miller in berlin. let's get the bloomberg business flash. for that, we go to debra mao in hong kong. debra: alphabet is reporting revenue that beat expectations, combing concerns -- calming

concerns about slowing growth. the google parent announced plans to repurchase $25 billion of the company's class c stock, the biggest buy in the internet giant's history. amazon warns investors one-day delivery has a big price tag. the e-commerce giant's results were marred by a surge in costs tied to shipping. the company's finance chief says that it will put a strain on earnings the rest of the year, but has already led to customers buying more, helping revenue growth rebound. softbank announced a second vision fund, aiming to raise $108 billion, making it even bigger than the first. investors are expected to include apple, microsoft and foxconn. softbank will inject a $38 billion itself, part of masayoshi son's strategy to extend his reign as the most influential investor in that industry. that is your bloomberg business

flash. matt: thanks very much. debra mao with the business flash. mike pompeo told bloomberg he would be willing to travel to an to address the iranian people personally, saying he would happily discuss foreign policy as the trump administration continues to apply maximum pressure on the islamic republic, speaking with bloomberg's kevin cirilli. sec. pompeo: our mission when we came in was to create as much stability in the middle east as we could. we watched tehran engaging in this behavior. we had the terrible deal the previous administration went into, which had a side effect of creating enormous wealth for leadership in the islamic a public of iran. we broke out of the deal, stopped giving the money, put pressure on the regime and we are forcing them to make tough decisions on how to behave. we want change in behavior from the iranian leadership, so the iranian people can get what they deserve. kevin: how do you get that

change of behavior, when foreign minister zarif in new york the other day said the sanctions will backfire? how do you get that change in behavior? sec. pompeo: foreign minister zarif is no more in charge of what goes on in iran than the m an on the moon. isthe end,t he ayatollah the ultimate decision-maker here. they have the ability to do the seizure of ships, the malign activities driven by the igrc, the quds force leader. those are the people on whom we are trying to apply sufficient pressure to show the cost isn't worth it, to convince them that if they seem to behave like a normal nation, the iranian people can live normal lives. kevin: would you go to iran? sec. pompeo: sure, if that is the goal. kevin: would you appear on iran television? sec. pompeo: i would welcome the

chance. inif gets to go drive around the most wonderful city in america and speaks to the media, the american public, puts iranian propaganda out on american airwaves. i would like a chance to go. not to do propaganda, but speak the truth to the iranian people about what it is that their leadership has done and how it has harmed iran. i think the reason they won't permit that to happen is that they know the truth as well. nejra: that was u.s. secretary of state mike pompeo, speaking to bloomberg's kevin cirilli. let's talk about emerging markets, specifically turkey. the new central bank governor yesterday delivered the biggest rate reduction in at least 17 years. basis point cut, more than analysts expected. one money manager said it was "a very risky strategy." joining us is turkey's bureau

-- bloomberg's turkey. chief and a strategist at rabobank. second,t your take in a but i wonder your interpretation, the fact the lir a didn't weaken despite such a big rate cut? >> it was a surprise to many turkey observers. if you asked us before what would happen, i think we would all predict a somewhat downward trend in the lira against the dollar, but that didn't turn out to be the case, showing there were a lot of investors probably angling for a steep cut in the rate so that they can continue trading the lira. matt: what do you think? if these incredibly huge rate cuts lead to a stronger lira, l ower inflation and more growth, would that be a surprise to

economists around the world? >> i think that would be the result of this new era that when theesterday, central bank surprised investors with the rate cut. it signals the recently appointed governor will closely follow instructions from theident erdogan, who wants central bank to cut interest rates as fast as possible. my concern is that we shouldn't read too much into the lira yesterday. i'm afraid over the midterm horizon, what happened yesterday will be followed by most likely more cuts, and negative consequences over the medium-term horizon when investors realize these interbank cut rates too much, to o fast, and the outlook worsened. at the moment the lira is

supported by positive sentiment toward emerging markets. nejra: a positive signal sent, piotr. so what needs to happen for the lira to become more exposed and have more of a downward trend you are pointing to, regardless of what we saw yesterday? piotr: the current period of positive sentiment to emerging concernede remain about the trade conflict between the u.s. and china. in our view, only a matter of time until tensions escalate. again, lots of geopolitical risk, focusing on iran. and if we look at what happened yesterday and have the market responded to question -- comments from president draghi, when he signaled we are ready to announce easing measures, but we are in a hurry. the market expects so much from a risk thats, the the markets are disappointed is

high, and this may unsettle emerging markets if central banks don't deliver the amount of easing already priced in. matt: onur, remind us why, turkey has the most inflation in the developed world, and that has killed growth and weaken the currency, made it difficult for a lot of turkish citizens. remind us why this happened. of course, it is not all about monetary policy? onur: it was partly a result of turkey's monetary policy mismanagement, or the failures of last year. but they also came at a time when turkey and the u.s. were in a row over a u.s. captive held in turkey. this all happened just about a year ago. that resulted in a massive crash in the currency, which fueled inflation and unemployment and tipped the turkish economy into the first recession in a decade. this is what happened last year. be fears were this could

repeated this year, if there was a repeat of central bank mistakes, but the decision yesterday did not seem to trigger the kind of lira reaction we saw last year. matt: piotr, what has to be done to get things under control? rates can't get inflation under control, it seems like other things outside monetary policy need to be taken care of? piotr: absolutely. the central bank cannot do all the hard work. last year in september, the central bank raised interest rates aggressively to stabilize the lira, and that contributed to a slowdown in inflation. at the same time, we haven't seen reports from the administration aside from

short-term solutions. to address structural issues in the ecological sector. turkey imports too much food from the world, and that creates inflationary pressure. matt: very quick -- nejra: very quickly, you said the trade war escalating might weigh on e.m. most. where are you focusing on where you could actually make some money, the second half of the year? piotr: the lira will definitely be on my radar. it will remainced anchored to current levels. there will be pressure on the lira. polish zlotyn, the they could benefit from ecb easing, if growth is

robust. piotr, onur, thank is a much for joining us. this is bloomberg. ♪

>> good morning from bloomberg's european headquarters in the city of london. withnamed h -- nejra cehic matt johnson. these are today's top stories. of tech earnings in the u.s. brings mixed results. often but and intel jump after posting positive numbers while amazon disappoints. in europe, renault warns on revenue and nestle forecasts the in years.les growth the european union immediately rejects boris johnson's demands for a better brexit deal, as it always said it would. that highlights the challenge facing britain's new prime minister. says to iran, mike pompeo

he is willing to travel to tehran as the trump administration ratchets up the pressure on the islamic republic to renegotiate a nuclear accord. >> i would like the chance to go and speak the truth to the iranian people about what it is their leadership has done and how it has harmed iran. nejra: welcome to "bloomberg daybreak: europe." under.m. in london, just the start of trading. earnings coming through. let's get to those first quarter organic service revenue. down 0.2%. vodafone is confident on its guidance and it is also saying european infrastructure is to be separated and that it sees a potential ipo.

it says there are preparations for a variety of monetization, lines comingw through. what analysts were saying ahead of these numbers and they were expecting vodafone to post another decline for its fiscal quarter and that both seem to be what we are seeing. they said this should be consistent with previous periods. the company might only register a slight improvement. will be key for driving ebitda performance according to bloomberg intelligence. the revenue is dropping 0.2%. vodafonetial ipo -- 61,700it will own towers. matt: i am surprised they still own their towers. deutsche telekom sold off its towers 20 years ago and lease them back. 61,700 hours across 10 nations.

take a look at german bund futures this morning, where we are trading after the hectic day yesterday. futures rising a little bit. that means yields will come down if the price rises in the cash trade. italian up bond futures rising a little bit and little change on u.s. bond futures as we get ready for the fed meeting next week. nejra: let's take a look at how all european equity futures looking slightly thoughts, but on the flipside, a little bit of strength coming through on cac 40 futures. the dots is -- dax is subdued. we saw a reversal in the euro and bond market at the press conference. we got the comments through from schulz as well. could we bounceback? falling fors records on the s&p 500 but in terms of the u.s. futures, we

are set up more positively on s&p 500 and nasdaq futures. a mixed picture in terms of tech earnings. juliette saly in singapore has a lot more for us. good to see you. a little bit of cautious trade in asia on the final trading day of the week ahead of the u.s. gdp print. a busy week ahead. the fed meeting but also we've got the talks resuming between the u.s. and china. you are seeing chinese markets start to reverse in late trade and gains coming through. perhaps some speculation of state-based buying ahead of the talks. the csi 300 up .1%. india stocks have been firmer by .25%. saw the nikkei closed weaker along with stocks and korea, down for a third session in a row, and australia's market off i .3%, retreating from the near all-time highs. i want to show you the moves that have been seeing in

currencies in asia. we had singapore industrial or factory output coming through. on year but that was better than estimates. they're really steady against the dollar. the kiwi leading declines that you are seeing amongst g10 of mid more calls. looking at the offshore yuan against the dollar, it is weaker but we have seen the yuan move against a raft of other currencies in that box it. the bloomberg replica of that index rising to the highest level we have seen since february. matt and nejra. matt: juliette saly in singapore. publisher raising its adjusted eps forecast between 57.5 pence and 63 pence, so we

have got more positive earnings news coming out of europe ahead morning.en this it has been a busy earnings week. an avalanche of earnings out of europe with numbers coming from all sectors including banks. on the other side of the pond, tech giants. automakers have been reducing their forecast. reporter joins us now to break down the numbers for us. how is the reporting season going so far? very has been a interesting season because the expectations going into the second quarter earnings went very low. we had the trade wars, political tensions, commodities falling, oil price declining, so there were plenty of concerns out there. analysts were very much prepared for weaker results. companies in europe, about one third have reported, so we do not have a full picture just

yet. companies have been surprising on a positive side. the strategists i talked to are glad they caught their forecast ahead of time. nejra: are there any standout industries? is a standout bestseller the season. astrazeneca, roche, they have been doing really well with new medicine. china is a big driver. tech has been doing surprisingly well despite the trade tensions. nokia, doing really well. we have seen those earnings this week. the sector that is doing not so great is the auto sector, which has been lowering its forecast. we got another one, renault, lowering its forecast because of the troubles at nissan. been an issue globally. automakers are having a tough time, especially because of slowdown in china.

season going to change investors use of european equities, which are the world's most popular short and incredibly undervalued in relation to u.s. equities? ksenia: that is the interesting things. we have seen a rally in european equities this year and even this month. it has been very powerful. still, at the same time, as you mentioned, it is the world's biggest and most popular short, so many investors are staying on the sidelines because of concerns about geopolitics and growth. passive funds have been going into european equities and the positive reporting results from major companies, major international firms in europe, could lure many global investors towards equities. we will just have to see. nejra: was three stocks are you watching ahead of the open? ksenia: renault cutting its outlook and in general the auto sector. missing theing --

lowest estimates. that is a big show for the oil sector, which did really well last year. this year, it is coming down because of the high expectations we had last year. nejra: we saw that. ksenia: we are watching those. and then the third would be nestle. and with nestle, we are seeing that they are expecting sales acceleration. the fastest sales growth in four years. that is quite dramatic. matt: really appreciate your time this morning. ksenia galouchko is our equities reporter and you can get all of the equities news by typing on your terminal. mario draghi set the stage for the ecb to deliver new stimulus in september but he warned government that fiscal measures would be needed if the economic slump continues. joining us now in its calendar during -- is our guest. it is interesting. i talked to olaf schulz yesterday, and he seemed

perfectly happy with the state of the german economy regardless regardless in pmi's, of even if we have a contraction in this quarter, as a lot of economists have forecast. he says no stimulus is coming, no tax cuts. what do you think? always a mixed bag. germany is the healthiest economy. what i would say more generally is the ecb targets inflation for the whole of the eurozone. it has to look at the growth picture for the whole of the eurozone. i find the description a little bit disorientated. the problem is not slow growth. that is the symptom. the problems are in nonmonetary factors. cb can try its best through qe and rate cuts to lift expectations for growth and inflation, but beyond giving markets temporary energy, it will not do much to treat the

core issues. we have known for a long time that when you are close to the low ground, zero low bound, it is very difficult to lift the economy through monetary policy alone. europe needs adjustment on the supply and fiscal side. the members which are in the worst shape, italy, greece, portugal, to a lesser extent, france is getting there with supply-side reform, they need to push harder. the ecb cannot of growth on a permanent basis. nejra: i feel like yesterday, we saw mario draghi's limitation in terms of impacting the markets, because in the end, we all yield back up a little bit in europe and the euro ending flat. from two-year lows. the market now is pricing in a cut in september and another one in january and there are expectations of more on the kiwi side, but actually, is there anything the ecb can do right now to lift those inflation expectations? i know they are talking about symmetric target, but what can they do really? financiale ecb is the

backstop to the eurozone. they can and then -- end a panic. policy which is responsible for that. it is very difficult to see how we get a major shift. find is,ill probably and just to reverse a little bit, equity markets should always reflect expectations for nominal gdp growth. nominal gdp growth is weak in the eurozone. if they no longer believe the ecb can lift expectations for nominal gdp growth, that should define how the markets react. with better news on the fiscal and supply-side, that would be the kicker which lifts european markets. matt: how will we get better news on the fiscal side? good question. a there's lots of politics to get through. i think we probably need a bigger crisis than this in order to trigger a fiscal response,

especially from the core countries. if you listen to the german ministry, they will say we have a little fiscal stimulus. if they can agree on other measures, maybe they can add 0.2% points. what you need to realize, at least in germany, the one country where you might make the case that you can order it, you have record employment, stable gain in wages. the big fiscal stimulus is not a vote winner. there are obstacles to get past first. nejra: kallum pickering states with us. bloomberg first word news with debra mao in hong kong. hasa: the european union immediately rejected u.k. prime minister boris johnson demand for a better brexit deal. johnson seems to be ruling out minor cosmetic changes. he is calling for the irish backstop agreement to be scrapped. side backs down, britain will be on course to drop out of the e.u. without an agreement.

iran reportedly testfired a medium-range ballistic missile that traveled 1000 kilometers according to cnn. it cited an official saying the a threat tot pose shipping or u.s. bases in the region. it is the latest move in escalating tensions with iran. we spoke to mike pompeo about relations with iran. >> we would welcome the chance to speak directly to the iranian people. he comes and drives around in the most wonderful city in america, and he speaks to the media, talks to the american iranianets to put propaganda out into the american airwaves. i would like a chance to speak the truth to the iranian people about what it is their leadership has done and how it has harmed iran. debra: boeing fell the most in more than two months as its 737 max hangover got even worse. southwest airlines have wrapped plane.crapped the

it was the biggest operator of the grounded max jet. boeing's defense unit also withdrew from the race to supply the u.s. with nuclear missiles amid a dispute over eating rules. global news, 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. matt. matt: debra, thanks very much. debra mao and hong kong. coming up on bloomberg television, we speak with the renault ceo, that is after the carmaker lowered its full-year sales outlook as it grapples with the downturn in the european auto market. do not miss that interview at 9:00 a.m. london time. this is bloomberg. ♪

>> it does represent a revenue pressure for us and all of the banks, if rates from here go down further. >> negative rates actually do herd bank business models. ranksis clear negative have an impact on revenues. >> it is not helpful for our business. >> we have to now assume rates will stay lower for a longer period than expected, and that is the reason why we are very focused on mitigating actions. >> in an industry or market like

europe where we have all the capacity, consolion would be natural. >> we have a balance sheet and credit look that will be used. >> we are proving the number of loyal customers. is a is something that it significant risk to us that we are managing wherever we can. >> a negative interest rate environment is not helpful for banks. matt: those were just some of the european bank executives we have spoken with this week on the impact of negative rates. this is "bloomberg daybreak: europe." i am at miller in berlin. nejra: i am nejra cehic in london. a bit of a mixed picture in terms of the tech earnings yesterday. we are seeing nasdaq futures on the front foot, up .4%. matt and i have been having a whathy debate about happened yesterday. matt is arguing that the reversal, the backup we saw in yields, and the euro ending flat, had to do with comments

from his interview with finance minister schulz, saying germany is not -- stimulus. it is a healthy debate. mario draghi conference, the fact that he was saying there was disagreement, and recession risks. maybe the market has no belief that the ecb cost tools will work -- ecb's tools world work. asdid move a little higher mario draghi with speaking. matt: the idea is because they are not mulling stimulus, there are concerns that the german economy, the engine of europe, falls into a recession. when you have got those kind of concerns, it causes a risk-off kind of run to bund yields. nejra: it could be higher, matt. matt: maybe you could be correct

in that thinking. on the other hand, you would think that as well if it is because of draghi, it has the same kind of move. it is definitely an interesting debate. you can see the timing of the schulz interview. i have got it surrounded in red. that is why i think that, you know, markets moved on the schulz interview. we did not speak until right after. nejra: matt and i are going to go for a drink and keep on talking about this. what u.s. second-quarter gdp number would traders need to keep a fed rate cut bet alive? kallum pickering has been patiently listening to me and matt sparring. let's talk about the u.s. we are looking ahead to this gdp number. in the context of everything we have had, which a lot of economists say the fed should

not be cutting, but it will because it has to right now. is that where you stand on the fed next week? kallum: that is canada doublethink in my mind. -- kind of a doublethink in my mind. while itd thinks that does not have an inflation problem to deal with, it can act as the financial backstop. the fed will cut later this year, 50 basis points insurance cut. u.s.take a look at the economy, i do not feel good reason for it. you have an economy that is growing at trend and looks set to do so. it is a mixed picture. the fiscal stimulus is wearing off. it is linked to trade wars and a slowdown in china, but not enough to justify a 50 basis point cut, which is over the course of this year. what the fed is very concerned about is a further loss of momentum, and up against a fairly small margin at which you can cut.

you get quite close to zero very quickly in a proper downturn. the fed things it needs to get in early. without major wage and inflation risks, why not just do it? matt: how many cut do you expect? especially if we see growth at growthe cpi at 2%, wage at, you know, 75% more than inflation, it just does not seem like they need to cut that much. kallum: i completely agree. i think they will probably cut by 25 basis points next week and then 25 later this year, so 50 basis points in total, and then they will probably stop. should be that we are going to raise global industrial recession at the moment that will probably come to an end, and with it, next year will fill a lot -- will feel a lot better. the fed will feel under less

pressure to be the backstop of markets. it will be a 50 basis point cut over the course of this year in the fed will stop there into next year. about if we feel better the world in 2020, what ns?pe kallum: that is where the fed starts to talk about did a dependence and i would look at u.s. wage pressures. see any genuine excesses in the u.s. economy on the inflation side that would worst the fed to start hiking again after cutting this year, so it is very likely that for most of next year, we remain on will see whatwe happens to wages. if they go up, than the fed will start to tighten again. manus: when you look at assets that are affected by this, how far out does it go? you can see a fed effect on emerging markets, but what do you think is the best assets for investors to be looking at beyond just treasuries? kallum: i would actually take a

pretty optimistic view on global equities. for me, this is a kind of goldilocks scenario. for markets, you have a very benign economic outlook if you think that the industrial sector globally will start to recover. we are learning to live with the political risks. eventually, the stimulus in china will work. you have a global central banking community which is ready to pump more liquidity into markets at a time when there is no good reason to expect a genuine downturn and no good reason to expect a quick overheating of global economies. i think we have essentially pressed play on another response cycle in global equities, and we are probably a good two months away from feeling it in earnest. matt: thanks so much for joining us. kallum pickering is a senior economist. that is it for daybreak. it has been a pleasure joining you on this friday. nejra: it has been so much fun.

enjoy the european open. matt continues with "bloomberg markets: european open," up next. we are 30 minutes from the start of cash equity trading in europe here. this is bloomberg. ♪ oomberg. ♪ we're the slowskys.

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anna: welcome to bloomberg markets, the european open. we're live from our european headquarters in london. i'm anna edwards alongside matt miller in berlin. matt: where did the doves go? stocks slide in asia and european futures are flat after they didn't deliver the cut. some expect attention turned to the u.s. gdp number, cash less than 30 minutes away. ♪ anna: partners