>> good morning. this is bloomberg daybreak: europe and these are today's top stories. the fed lead central-bank decisions with a cut expected and what will be its first in over a decade. investors will also brace for friday's jobs report. china is set to make an unprecedented official response to unrest in hong kong has beijing prepares to resume trade talks with washington. speaking of heat, boris johnson's brexit war cabinet meets. ministers will gather every day

to ensure the country leaves the eu by the deadline. it is another huge week for european earnings. oil results coming out as well as automakers and banks. ryanair, heineken kicked things off today. ♪ good morning, let's start off with the earnings rolling across the terminal at this hour. ryanair coming out with first quarter profit after tax that was down 21% to 243 million euros. first quarter revenue actually up 11%. 2.3 one billion euros. the full-year guidance remains unchanged. boeing doesn't see the

737 max related cost savings before the fiscal year of 2021. you can see that we are getting some 737 max headlines. it says it is receiving planes just in time for summer of 2020, about 30 of them. planes by the summer of 2020, but those savings won't be realized until the next year. a big drop in ryanair profit. on the top line, the revenue up again 11%. the important thing probably is that the outlook has been held. we will speak with the cfo of ryanair in just a few minutes. we are also getting heineken headlines. coming out with first quarter adjusted operating profits. the estimate was for 1.9 one

billion euros. missing the estimate on inrating profit net revenue the first half, 11.45 billion euros. the estimate was for 11.50 billion euros. if you look at organic revenue in the first half, it was up 5.6% compared to the estimate of gettingwill be interviewed -- we will be getting an interview with the heineken ceo. heineken also saying that consolidated organic beer volume estimate ofng the 3.6%. let's take a look at some of the key figures in the market for this week, there is a lot going on around the world. -- i'main, you have

concerned about the possibility of a hard brexit. continuing ton weaken. 6.972 is the amount -- six 6.8972 is the amount you can buy offshore with u.s. dollars. wednesday, it would be a fairly decent surprise if they cut more. off -- one person out with a column on the bloomberg saying he doesn't believe a two basis point cut is going to happen. let's check on the markets in asia with juliette saly in singapore.

we have been watching hong kong following the protests. weakness in the hung saying index. index.hang seng luxury retailers, developers, casino stock under pressure today. also down. selling out of the futures market. analysts saying you should be watching the kospi through august because earnings could be an impact of that market going to the downside. we are seeing new zealand stocks higher. yields falling on new zealand bonds to a record. i want to show you some of the data we've been watching out of china, pertinent as we lead into u.s. and china trade talks. industrial profits down 3.1% year on year, reversing a 1.1%

rise in may. industrial profits down -- you can see on the producer price index, also fairly flat for june. this is leading many of the market including our own bloomberg economics team to think it is more likely that we will get more targeted stimulus from the pboc. matt: juliette saly in singapore. the u.s. and china had back to the tray table this week for the first time since may. with little expectation on either side of a breakthrough, looming over the talks are the new geopolitical issues and there's no signs that beijing or washington even want to budge on demands. what do you think about the possibility of any forward progress here? are think the chances

andtively low for any big substantive u.s.-china trade deal. the way i would describe the trump administration's strategy or goal with china is for a big, really good trade deal, or no deal at all. i do not believe that the president is interested in a sort of slapped together deal at the last minute. do a deal even though it might not be as far-reaching as necessary. it is either going to be a great deal which material worries -- which materially shrinks the trade deficit with china and addresses the intellectual property theft issues and other ways china has been using the wto, or there is going to be no

deal at all. if there is no deal at all, i think trump will use the harm -- if you want to call it that -- the harm that china has done to the u.s. economy in the election. matt: we see a little bit of a lift onshore and offshore in the yuan. do you think we will get close to seven or eight that point? -- or hit that went? i don't think it is too far off to call. china is struggling. is caught between a rock and a hard place. it was in the middle of a deleveraging campaign when the 2016 elections in the u.s. happened.

the trade war has put china in a very precarious situation. and doesn't want to put the pedal to the metal in terms of fiscal and monetary stimulus because that creates a bigger mess down the road. at the same time, you have many unprofitable companies in china that are simply being able to rollover debt burdens. the ability to increase productive capacity, that model, that export led model of growth, it is well past its peak. what i don't think china will do is inflame the tension further by instigating a one-off evaluation of the rmb. but also as a mechanical result of the direction i think the trade war will head in, china will have to let it weaken further. i think the odds of a disorderly which stemshe rmb,

outflows from china, a relatively low. they have the currency under wraps and under control. perhaps with that does, a little bit paradoxically, is it gives me more confidence they can let the rmb decline in an orderly fashion once the trade war progresses. matt: there's a lot going on this week, from u.s.-china trade talks, everything boris has boj, theerway, the fed. stephen: the global backdrop, whether from a trade angle, overall growth perspective, or certainly from the issue of structural problems. the euro zone is one giant

structural problem. china and many emerging market economies that heavily trade with china have structural issues that have yet to be addressed. in this america first era we are 2020, thoughntil structural problems aren't going to go away quickly. overall, the backdrop for the dollar still remains quite favorable. i think what we are seeing now ys some federal banks merel asking to slow the appreciation of the u.s. dollar. they will not be able to subvert the dollar rally entirely. matt: all right, we will keep you with us. stephen gallo, our guest host for the hour. ryanair, a drop in earnings amid a slump in fares. ofning us now is the cfo

ryanair. i see that revenue is up. are you gaining market share? seeing oure pass-through numbers increase by 7%. we are targeting a full-year increase, 2 million customers. we continue to grow and clear growing strong. 14% peries are up customer, which kept revenue flat for customer in the quarter. matt: this isn't a move to grab more market share, right? there is concern about the theer travel season is that right way to frame it? neil: there's a lot of overcapacity in the german and austrian market. in the u.k., the uncertainty

around brexit. continuing toare grow strongly. passengere cost per is just under 30 euros compared another company come 80% 120% higher wings, than ourselves. the structural advantage allowing us to grow. short-term pricing weakness but longer-term, there's a cost advantage that we have and the strength of our balance sheet means we are in a strong position to participate in the opportunities that will arrive. the low-fare and high fuel environment we are in at the moment, i think there will be consolidations and airline failures which will allow the

ryanair group to participate. matt: in terms of that consolidation, that plus bankruptcies take over -- take out the overcapacity's in the industry? what role does ryanair play? neil: we will continue to offer the lowest fares at the lowest cost. our goal is to hundred million customers by march of 2024. that would give us a market share of about 20% in europe. standout, low-cost operator within our market, covering all point-to-point operations within europe. matt: how difficult has the boeing issue been for you? the 737 max still grounded. any idea when it will get in the air? neil: we are planning at the moment to take our first max in the january, february of 2020

timeframe. we were supposed to take our first aircraft in the spring of 2019. that has been delayed. a are planning to have it in january-february 2020 timeframe. on when boeing get their application in to the , entry back into service of the max. get: but you want to delivery of the aircraft. are you going to be able to fly them with customers on them by the beginning of 2020? neil: i have every expert nation that -- every expectation that once the aircraft is delivered, it is a phenomenal aircraft. it delivers opportunities in

savings. extra seats, fuel-efficient, noise sufficient. every expectation that the customer will love it once it is delivered. expect to get some sort of compensation from boeing for the delays? neil: yes. boeing is working with the regulators but there is an expectation that the cost of the delays will be covered by boeing. matt: let me ask about the cost of the extreme weather. obviously, it has been with us for a few years but i've never heard of cancellations because of heat. how seriously has that effect ryanair? neil: ryanair has been operating a full schedule. goodd full -- we had very on time performance.

we had very minimal impact. we had more issues with heavy rain and thunderstorms than we had with heat. we've been operating with full schedules, over 90% on-time performance in most of our markets in the last couple of days. matt: thanks for stopping by. neil sorahan, chief financial officer at ryanair. coming up, we will speak with the chief financial officer of heineken. you can catch that at 7:30 a.m. london time to see what the dutch brewer is thinking for the quarter and half ahead. tune into bloomberg radio. area.gital in the london this is bloomberg. ♪

matt: this is "bloomberg a

break: europe." let's check in how the markets are doing. the equity indexes across asia, some drops. some of that for local, regional issues. the kospi showing some earnings disappointment. down, of course there is the unrest. we are awaiting news from beijing about the handover or the changeover in local government. aboutl have that live at 8:00 london time. in terms of currencies right now, take a look at the yen. 108.58 is what a dollar buys. is falling, continuing to come down.

10-year holding, pretty steady right now. it doesn't look like the markets expect much of a surprise from the fed. today, we are asking a question, when will lower yields stop supporting stocks. you can join the debate and reach out with your answer. we would love to get your could peterhow that out. now, ite, now, and till looks like stocks have been supported by looser yields around the world. let's get the business flash with annabelle drillers. >> the london stock exchange is in talks to purchase the online trading platform. the deal is set to be worth $27 billion.

the lsc said it will issue shares in the transaction. bloomberg lp competes with this company to buy data and information. aemical giant starving had rough second quarter. net income tumbling almost 70% as demand for plastics dried up. the world's biggest oil producer is in the process of buying a majority stake. deutsche bank is probing its client -- probing if client data was compromised after the bank failed to -- it reports about 50 traders were able to access the systems after the first round of layoffs, one reportedly sending 450 messages remotely after being let go. combatants to combine -- plans to combine its business

with mylan. mylan investors would get about 40%. the deal could be announced today. that is your bloomberg business flash. matt: thank you very much. prime minister boris johnson's brings war cabinet holds its first meeting today. they say they will meet every day to ensure the company leaves the eu on july 31. michael gove will lead the session. joining us now to talk more about this, stephen gallo. tosee the pound dropping 1.23. how much lower you expect it could go? calling we've been sterling-dollar cable lower for a significant period of time.

we've been worried about the risks of a no deal brexit or a messy scenario, like snap elections that would stink the pound. to six month call, given where we are now, doesn't sound exceedingly bold. what i would say for the time being is that there are downside risks to that call. impossible itually think for the withdrawal agreement to be renegotiated between the eu and the u.k. government. even if that were possible, to get it through and ratified into u.k. law. that means we either are going to have a no deal brexit, or there will be an extension. but if we have extensions, boris

johnson will almost certain they have to call elections. the third option, you might say the eu blinks and we have a bridgingd brexit with arrangements. is probablyenario the most intriguing because what it would require on the eu's part is to demonstrate logic and a degree of attention to commercial interests rather than just pure politics. that really is not in the dna of those in brussels. theof the proofs of this is euros, probably the biggest catastrophe in modern financial history, right up there with subprime. the only difference is that this was a political project.

the outlook for brexit going forward is not good. matt: we will continue talking about it throughout the program. this is bloomberg. ♪

matt: this is "bloomberg daybreak: europe." i am matt miller in berlin. china's top hong kong policy office will give a rare briefing in just over an hour's time, just after the eighth straight weekend of protests. police deployed tear and rubber bullets yesterday to clear thousands of protesters out. a bloomberg senior reporter joins us from hong kong. how bad was it this weekend? >> the thing about this weekend

was that it was unpredictable. protests at the airport, then out in the new territories on saturday. sunday, there was a protest that started right here in front of this central building in hong kong. part of it splintered off to a shopping district to the east and some of it through a residential district at the bottom of which stands the liaison office, the beijing representational office in hong kong that was the office that was defaced by protesters last weekend. this weekend, the protesters surrounded by these big barriers containing water, but there were enough protesters that were in their that police decided they had to disperse them with a lot of teargas. then drifted up the hill into

the residential area. they interrupted my videos. i live up there. i had to deal with teargas myself that said, the thing about what is happening is there are a whole lot of staged events up until october 1, which marks national day, the day that marks the establishment of the people's republic of china. but then there are all these splinter protests taking place. it is difficult for police to contemplate how they will control them. they are unpredictable, yet highly organized. matt: first of all, my apologies for your teargas issues this weekend. what do we expect though from affairs kong and macao office in beijing. they will give the first public comment since the 1997 handover?

what are they going to say? david: there's not a lot they can say. remember, hong kong is supposed to be run by a framework called one country, two systems. it is difficult to see how that office is going to be able to announce something like complete withdrawal of the extradition bill which set these protests off in the first place. i suppose they will have to limit themselves to condemning the protests, saying they undermine the framework, complaining that the protesters are hurting the feelings of the chinese people, an often used phrase. perhaps they will condemn the involvement of what they consider to be outside interests, international interests. they are talking often about the united states.

today, the american chamber of commerce came out with a statement calling for the extradition law to be completely completelynd a credible commission of inquiry into what has been going on with regard to the protest. we will have to see. that press conference takes place in a little under an hour and a half. matt: thank you very much. david tweed in hong kong, given us the important connections. these trade talks are kicking off. bes issue, these two, could tied together. we have results out, just want to quickly break the headlines for you. beating estimates, coming out with the higher outlook as well, which may be more important.

thatting profits and sales beat estimates, saying growth will be at the top of its forecast range. unexpected $2 an billion charge. the hemophilia medicine acquired last year disappoints. growing by about 5%, net income euros% to 1.6 4 billion last quarter. the estimates were for 1.56. revenue was a clear beat as well. 8.6 3 billion euros. the estimate was for 8.4 3 billion. we will continue to follow these headlines but it looks like a beat and more importantly the outlook raised for sanofi. joining us from mumbai. annmarieondon,

hordern. arefinance industry and -- looking at easing rules for foreign portfolio investors. how is the market reacting? >> good morning. on the face of it, good moves, -- equity markets in india started out well. stocks helping hold the index out except for the banking index on your screen. they have petered out completely. just to make you understand the importance of this, and the budget, the taxes were introduced for all investors above certain threshold. since then, we have seen outflows to the tune of nearly $2 billion. today, speaking of maybe some easing. if that were to happen, that may

just help ease the stress they are feeling right now in india. something all of us are watching out for very closely. matt: thanks. amh, let's get over to you. looking at soybeans. >> it is arguably the most important week since 2013 for the global economy. payrolls on friday and economic data. equities starting this monday off to the downside. get hit this morning, south korea and hong kong. being weighed down by results in their local markets. hong kong, concerns over the protests. this morning, the worst performer among 31 major currencies. someuld be following along really subdued trading.

commodities, brent crude is down half a percent, $63.14 on a barrel of oil. u.k. deployedthe a warship to the strait of hormuz. moving to agriculture, i want to look at soybeans given that we have the restarting of the stocks between the u.s. and china. u.s. soy farmers have been among the biggest victims of the trade war. you can see here that the results have been much lower imports china from the united states. we have not seen these levels in a decade. last week, we did see the chinese government kind of in a good gesture. seeing companies importing soybeans, free of import tariffs. the usda says they won't reach 2027.17 level until

a lot of commodity traders are going to be watching to see if there is any news at all on soybeans or how this can play into the trade war. they are saying a lot of damage has been done. matt: very tough news for u.s. farmers. unless of course the u.s. government just gives them subsidies. thank you very much for that. shah in mumbai. i want to mention what is going on in hong kong. the msci and hong kong dropping more than 2%. 2.1% is the drop, heading for its biggest loss in 11 weeks. of course, the unrest has really hurt stocks, but especially property stocks. turning into one of the biggest casualties of the street

protests. we will get the response in just over an hour. let's get to the first word news. >> thanks. prime minister boris johnson's brexit war cabinet holds its first meeting today. they say they will meet every day to ensure that the country leaves the eu on october 31. he says that leaving without a deal is the most likely outcome. ae u.k. has deployed destroyer to protect shipping in the strait of hormuz. the hms duncan will operate alongside another royal navy ship. this comes as powers met to discuss the nuclear deal. president trump has attacked a prominent black lawmaker, elijah cummings, after the house oversight committee chair

criticized the policy on the border. the president described cummings's district as a infested mass. mess.ested the treasury department is set to hold its quarterly note and bond sales at record levels again. this is as it shows the u.s. debt in making -- u.s. debt binge may continue. global news, 24 hours a day on air and at to talk on twitter, than 1200 more journalists and analysts in over 120 countries. matt: it is a big week for central banks worldwide. the highlight is wednesday's decision by the federal reserve. economists are essentially

united in predicting that jerome powell will cut rates for the first time in a decade. bank of japan policymakers meet on tuesday. that is amid calls to reinforce their commitment to rock autumn interest rates, negative rates. stephen gallo is still with us. let me first to your take on the fed. what are you expecting from jerome powell and company? stephen: our house few is that they will cut by 25. i would not rule out 50 basis points. data,ou look at the u.s. overall, the case for significant monetary easing from the fed is not all that compelling. you are looking at a pretty good growth dynamic overall. investment and trade were a little bit of a drag on q2 gdp. some of the recent orders

suggest investment spending by companies will pick up in the second half of the year from q3 and q 4. i would say the fed is probably in a stance where they will deliver insurance cuts and lean on somewhat weaker or below target inflation. the biggest risks are at the global level. i think once we get through this first phase of monetary easing, the focused among fx traders is going to be to the rest of the global economy. threek one, two, even rate cuts from the fed over the course of the next two to three quarters. given some of the structural

factors faced by many major economies. term, lack of a better the uselessness of these cuts and you are not really concerned about inflation or asset doubles. bubbles? stephen: there is certainly a concern. the central bank in a meaningful way can't take us too far away from stimulus. the chain happened after the global financial crisis and the exigent measures central banks took. yes, that is a risk. one of our preferred trades right now is to be long gold. we think gold will out form on the australian -- out form on the australian dollar terms as opposed to the u.s. dollar terms. andamerican trade policies

economic policies over the long-term, the yield curve. the euro zone is not so fortunate. the banks are struggling much more in the euro zone and that is partially because of the negative rates that are part of .he ecb very much dependent on what happened in 2020. ultimately, that will allow the fed to delay quantitative easing for a long time. i'm looking at a five-year chart of the dollar right now. the bloomberg dollar index. it hasn't changed much in the last four years but we have seen a real pickup from 2014. the dollar strength is one of the things that everybody from donald trump to elizabeth is

complaining about. -- elizabeth warren is complaining about. stephen: you don't want these exchange rate movements to happen rapidly. in thesaid many times past that if the trump administration, the powers that be within the duration -- within the administration. i'm not sure that trump himself. but if they don't realize that the america first agenda is flipping the previous world order upside down on its head and supporting the u.s. dollar, then they are stupid. emily, i don't think they are stupid. that the u.s.now will be a net exporter of prolia products. net exporting -- of petroleum products. net exporting companies are suffering because of global trade tensions.

all of these factors, effectively, we are seeing the paradigm that was simply before and immediately after the financial crisis. that is starting to go into reverse. that paradigm was originally dollar negative. if it is going into reverse, it has to some degree be dollar positive. the question is pace and timing, and how the fed and u.s. authorities manage the dollar. we may very well be in a situation where volatilities continue to get crushed the dollar creeps a little higher over the next 3-6 months it we are really waiting for 2020. the result of the u.s. election in 2020 is going to be a critical moment for the path of the u.s. dollar. matt: fascinating, for sure. it will be interesting if

someone had a take on that, to his or her money down. us a, you will stick with little bit longer. coming up, race against the clock. as a no deal brexit becomes a very real prospect, prime minister boris johnson has formed a war cabinet. this is bloomberg. ♪

matt: this is "bloomberg daybreak: europe." here's a look at what you should be watching this week. japan rate bank of decision kicks off a busy few days. u.s. trade representative robert lighthizer and his team meet their chinese counterparts in shanghai. thursday, a meeting of powell and the fed, expected to cut

rates for the first time since 2008. a policy decision from the bank of england. theriday, watch out for u.s. jobs report. it is expected to show that nonfarm payrolls rose by 169,000 with average early -- average hourly earnings forecasts to rise. exchange isn stock in talks to buy the financial trading platform refinitiv. sharesys it will issue as part of the transaction with refinitiv holders earning about one third. saudi arabia chemical giant had a tough second quarter with profits falling the most in a

decade. net income falling almost 70% as demand for plastic dried up. the company is set to receive support from saudi aramco. they are buying a $69 billion majority stake. that is your bloomberg business flash. matt: thank you very much. u.k. prime minister boris johnson and his brexit cabinet hold their first meeting today. it will gather every day to make sure the company leaves on october 31. but, a divide is forming in markets as they debate the potential fallout. with details, bloomberg's dani burger. dani: it is clear that the pound is pricing a lot of risk around the brexit deadline but it seems like stocks are living on a different planet. let me take you into the chart to show how this divide is

playing out. i want you to look at what has happened recently. this is the ratio of domestic tse 100.o the f normally, those international stocks do better when the pound is underperforming. instead, we are seeing domestic stocks outperform, which usually shouldn't happen. some analysts say this is essentially stocks. -- essentially stocks pricing in brexit. this is the term premium for the pound. this tells us how options are pricing the pound at different times. i want you to concentrate on this line, the current term premium for the pound. two weeks out, one month, three months. at three months, this line jumps up.

that is investors wanting more protection three months out, that brexit deadline. the line at the top of the chart is the same time period before the referendum, saying it is pricing in the same risk as in 2016. matt: stephen gallo is still with us from bmi capital markets. we quickly touched on the euro zone. i wanted to get your take on a chart that shows an interesting reversal in bunds. at the same time we showed mario draghi come out and plead for germanola scholz, the there isinister says no stimulus plan. what do you think about this juxtaposition of the ecb and the

biggest economic engine in europe, germany? stephen: that is a great point we have very limited time so it is tough to go into too much detail but you are right to point to the fact that mario draghi is employing government -- imploring governments to engage in more fiscal policy. there are so many moving parts and political fragmentation in pointed zone as you out. theourse, she is from center-right. be good forgoing to the condition. may go to the

group, which may be a gift, this back room horse trading. i think the outlook for fiscal policy is still relatively low.

lynn.good morning these are today's top stories. raft ofleads a central-bank bank decisions with a cut expected. a would be its first in over decade. investors are going to be bracing for friday's u.s. jobs report. china is set to make an unprecedented official response to unrest in hong kong after a weekend of a violent protest as resume traderes to talks in washington. boris johnson's brexit war cabinet meets for the first time. ministers will meet every day to

ensure the country leaves the eu. it's another huge week for european earnings with results from big oil, automakers, and banks. good morning. we are taking a look at markets right now. futures prepping for the european open. what can you expect to see? ftse futures are actually the only gainers. ftse futures are gaining, but everything else is down in terms of european futures. asian equity indexes fell. in terms of bond futures, let's look at what to expect from the german bund today.

we could see continued to terrier tatian -- continued deterioration in the yield. definitely keep an eye on negative rate. around the world you have really yields in negative territory almost everywhere. let's check on the markets in asia. >> a little bit of a caution decision ahead of u.s.-china trade talks. chinese markets down by 0.2% and the nikkei closing the session weaker on a firmer yen. i want to focus on hong kong. you are seeing hong kong stocks falling the most in six weeks. we are seeing the likes of property stocks, casinos, all coming under pressure. the hang seng off 1.5%. the kospi had a bad session.

futures being sold by foreign investors and analysts morning august could be tough for the kospi do to and earnings. we are seeing australian stocks higher. i want to show you other assets we are watching. i mentioned hong kong. the property index in hong kong having its biggest fall since january. it is off by 2.8%. concernedgetting about the ongoing protest. you have also seen the yield on new zealand's 10-year note, forcting the rbnz will cut the official cash rate. the kiwi coming under a little bit of pressure. one of the worst performers when it comes to g10 currencies today. much.thanks very it has been a big week for central banks, or it is going to be. it is only monday, but it is

going to be, i promise. the highlight is wednesday's decision by the fed. economists are united in producing jerome powell will cut -- predicting jerome powell will cut rates. bank of japan policymakers meet tomorrow limit calls to reinforce their commitment to rock-bottom interest rates. rock-bottom meeting negative. joining us, bloomberg's fx and rates strategist. what do you expect to be the most -- is anything going to be a surprise? thee did start thursday, ecb. that's when the week begins. matt: so it has been and is going to be. >> everything is well priced. the fed is going to deliver the 25 the market expect in the same way i think the ecb set up the market for a september rate cut as a lot of people were expecting. i do not think we are going to get a lot from the boj or the

bank of england. this nonds are tied as deal brexit talk starts to ramp up. think it is a nonstarter. they are going to play it pretty calm. i think the fed is going to deliver what the market wants. the boj is going to play it quiet as well. >> let's talk about the fed. --oticed the concerns are well, inflation getting out of control. it does not seem there is any reason for them to cut. course an asset bubble is always a concern. what do you think about those possibilities? >> if you are going to worry about something, probably you are more worried about an asset bubble. we could already be in an asset bubble and this is going to make it worse. the inflation argument does not

hold any water for me. the fed's best metric for measuring inflation has been -- has not moved for 10 years. i do not think there is going to be any concern about runaway inflation. on the asset side, i get those concerns. at the different conversation to have. on the inflation side, that's not going to be a problem. matt: you have a pretty solid stance there and i get a lot of females from viewers in the u.s. , they are more than zero hedge type of viewer if you know what i'm saying, who think the inflation readings are getting it wrong, that there is inflation we are not seeing in the official data. what do you take from that? >> there is a lot of viability to that argument. all we can do is look at what the fed looks at. when we are looking at that, we are not seeing inflation at all.

if the fed decides to change its metric, fair enough. there is a strong case to be made the piece you measure does not measure a lot of these things appropriately. as long as the fed is looking at that, that is all we can look at as well. currency war a valid phrase? >> it is part and parcel of a trade war. matt: thank you for joining us. you can check out richard jones on the mliv function on your bloomberg terminal. we are getting some breaking news here. takeaway.com offering to buy oft eat at an implied value -- per share. we knew this deal would come out . bloomberg news has been on top of it. -- well,e a stock and at least part of it will be in stuff. -- in stock. takeaway.com offering to buy

just eat. .tarting to see consolidation dipped at thecks start of a big week for the global economy. s&p futures are guiding lower. they did hit a fresh record high on friday, speaking of possible asset bubbles. earnings season continued with an avalanche of companies reporting results across all sectors in europe. we are going to be watching credit suisse, b.n.p. paribas, bp, the oil company, bmw, airbus, and bayer, among many others. anning us from frankfurt is investment strategist at allianz global investors. thanks for joining us. what do you take from earnings season so far? typically, we see a lot of companies beat in the u.s..

76% is the average amount of companies. analysts bring down a lot of times their estimates in earnings season to help them out. how does this season look to you? >> i am actually not surprised wall street has under promised and overdeliver. , you were the quarter expecting negative growth for an earnings depression in the u.s.. where we stand now with one third of the companies having reported earnings of plus 7%. cyclical sectors have fared worse than defensive ones. about is theprised positive delivery across all sectors apart from the exception of energy and utilities. overall, this is a sign that u.s. recession is accelerating,

but not near a recession yet. u.s. economy decelerating, but we are not near recession. i want to get your take on asset bubbles after i give you one headline. australia's benchmark index closing at a record high. add that to the u.s. s&p 500. we see a lot of equity benchmarks around the world closing at record highs. earnings are doing well across all sectors. are you concerned at all about an asset bubble because of accommodative central-bank policies? >> i think it is clear that what has lifted sentiment in the first half of this year has been other central banks. what will be important going forward in order to have an environment that is

fundamentally backed is exactly that stronger earnings. revival of economic growth in the second half. this is something closely to watch for stock investors. this would be one of my concerns. that guidance for the second half is somewhat to rosie. -- too rosy. matt: we saw a number of companies, last week for example, volkswagen, holding its full-year guidance as we see bmw and mercedes, among others, continuing to cut their outlooks. how does the auto industry look to you? >> that is a very interesting and important russian. for europe, the automotive sector is the swing sector. it was interesting to see analysts push back their expectations for a recovery in to sector from third quarter

fourth quarter. in europe, the fourth is a quarter where analysts expect for the stoxx 600 about a 10% year on year growth. this is partly due to the effect because everyone knows the first quarter was week. on the other hand, they are banking on this recovery in the automotive sector. some hurdles here to overcome. a tangiblely need revolution on the trade front or at least not another escalation of the trade war between the u.s. and china. secondly, we need a situation where central banks are able to a --ineer what is already environment. when i looked to europe in particular, major trading partners are china on the one hand and also the u.s.. to lift thed

outlook for the automotive sector in europe. how much of a problem is the banking sector for stocks rising? on the one hand, they've got negative rates that seem about to get more negative to contend with. on the other hand, they have grown risk-averse in terms of lending. is a bignancial sector constituent for the industry. i would be cautious when it comes to european banks. we will see prolonged environment of low-end and negative rates. what could provide similarly for the ecb meeting last week. would benefit in particular are german banks and

french banks. of regions hold two thirds liquidity in the euro zone. matt: you are going to stick with us. we have a lot more to talk about. ubsng up, we speak with america's ceo. that is at 12:00 p.m. london time, 7:00 a.m. in new york. this is bloomberg. ♪

matt: it is 17 minutes past the hour. we are getting ready for the market open. 42 minutes, 31 seconds to go. this is bloomberg daybreak: europe." let's check on the markets. u.s. futures down.

remember, they hit an all-time high in cash trade on friday. the yen, 10863. the offshore yuan right now climbing in terms of how many you can buy for the dollar. getting closer to that seven level. in terms of pound, keep your eye on that. boris johnson kicks off his first of many more cabinet meetings to get ready for the brexit deadline, october 31. the 10 year german bond right now down to -38 basis points. 38 basis points to hold your money for 10 years. u.s. offering a slightly better yield. ,e are asking on the mliv blog when will lower yields stop supporting stocks? joined the debate. reach out to us and team.

yourus your answer on bloomberg terminal. now let's get the business flash. >> a 21% drop in earnings for the order amid a slump. net income fell below 250 million euros. ryanair says it's weakest markets are germany and the u.k.. been tough in the past quarter. in the u.k. we are seeing a lot of price stimulation required due to the uncertainty around what may happen with brexit. >> the london stock exchange is in talks to buy the financial trading platform. the deal is expected to be worth $27 billion. it will issue shares as part of

the transaction with holders receiving just over a third. bloomberg lp is apparent -- re-finitude -- refinitiv. profit plunging the most in a decade. net income toppled -- tumbled almost 70%. the world's biggest oil producer is in the process of buying a ic.ority stake in sab that is your bloomberg business flash. quick correct. earlier we said the asx 200 hit a record high. it was not an all-time record high. the highest since november 2007. well that seems like an intern at some of us, it is not -- an

eternity to some of us, it is not. here's a look at what you should be watching. tomorrow, a bank of japan rate decision kicks off a busy few days for the world central banks. u.s. trade representative robert lighthizer and his team meet their chinese counterparts in shanghai. turn of jayt is the powell and the fed with the fomc expected to cut rates for the first time since 2008. the first time in over a decade. thursday season a policy decision from the boe. the bank of england will publish its final set of forecasts before the brexit deadline. friday, watch out for the u.s. jobs report. it's projected to show nonfarm withins rose by 169,000 average earnings forecast to gain 3.1%. peterson from allianz global investors is still with us. the fed,ou expect from

first of all? how important is that to u.s. stocks? >> wednesday will be important. it might mark the beginning of an insurance easing cycle in the u.s.. insurance easing cycles classified as a rate cut cycle where the u.s. economy is decelerating, but nowhere near recession. what this means for stocks -- so, generally, with rate cycles, since 1981, we have had eight years. one can differentiate two regimes of rate hikes. in a that happen recessionary environment and those that happen in a non-recessionary arm, where we seem -- non-recessionary environment, where we seem to be. both, fixed income assets are faring quite well. when it comes to equities historically, the s&p was down

10% in a recessionary cut environment while it was up one year heading into the easing about 20% in an insurance rate cycle. this means a lot for equity investors. what should be watched once more ableether the fed will be to revive u.s. growth. so equity markets can be lifted higher from here. >> when we talk about the rate , howexpected from the fed much do you see them cutting, and how much do you think this goes forward? do you think inflation could stop them? >> what we expect is cuts to the

tune of 50 basis. one cut is likely starting this week. 80% probability of a 25 basis point cut. a positivere, surprise for markets here. generally, in an insurance cut regime, the fed in the past have cut 75 basis points. ,f we really are in a situation we are decelerating, but not heading toward a recession, this might be it. matt: what about other central banks? do you expect everyone to start cutting to hold currencies down? >> there are very few exceptions. ont central banks seem to be

an easing path. one exception until recently was the bank of england. itsbank of england kept tightening, stating higher rates would be appropriate. however, it is still struggling with brexit related uncertainty, which is a drag on u.k. growth. it could be the case even the bank of england is revisiting its tightening. matt: last week we had all off schulz saying germany is not in a crisis. he was pointing to the tight labor market and also saying he does not see any reason to boost spending, fiscal stimulus is unnecessary, nor to cut corporate tax rates. you?that make sense to berlin has its

head in the sand? >> one interesting observation is that there is the clear dichotomy of the german economy and the european economy in general. what we see is a relatively ,esilient domestic demand particularly the thai labor in at, also reflected sector that is holding up quite well. on the other hand, the german economy and the euro zone and european economy are facing a move in manufacturing. the cyclical parts of the economy, the trade related parts , are weak and continue to be week. on the domestic demand side, from that perspective, we are heading toward economic downturn, i can understand there

is not much inclination to support the domestic at the moment. matt: thank you so much for joining us. that is it for daybreak europe. ♪

anna: good morning. welcome to "bloomberg markets the european open." today, the markets say no rest for the wicked. edition stocks lower. european equity futures point to a negative open. the start of the world economy's biggest week of 2019. cash trade less than 30 minutes away. anna: some like it hot.