nejra: good morning from bloomberg's european headquarters in london. i am nejra cehic with matt miller live from berlin. wait and see, the bank of japan keeps rates on hold that will not hesitate to ease if needed. exit as president has an exclusive interview sang interest rates are too high. trade talks resume after a two month pause. little hope for a breakthrough in shanghai. huawei reports its earnings since the u.s. blacklist. the pound falls to a two year low against the dollar. lenderup is the latest

with hundreds of job cuts in its trading division. banks either trading revenue slump. -- banks see they are trading revenue slump. matt: we have breaking news out of the financial industry. profitpany sees pretax materially below 2018. 2019 will be a big drop in pretax profit. the first half net fee and commission income was 171 million francs. pretax profit was 2.1 million swiss francs. just.e money it has named a new ceo, peter

sanderson will be the new ceo of gam. they are also lending a new chairman of the board, david jacob. gam has assets under management 6.1 billion swiss francs. it will have a pretax profit materially below that published in 2018. nejra: i am looking at the i.t. services company gemini seeing in operating margin of 12.3 to 12.6% and the revenue change up 5.5% to 8%. second quarter sales up 5.7%, first half revenue at seven .01 billion euros. cash flow over 1.1 billion euros from cap gemini. , youll speak to the ceo

can catch that interview at 9:30 london time. the big macro themes, the fed and trade talks. matt: just a mention as well, the bank of japan's banding pat trimming inflation. pat, churninging inflation. if the fed does cut, you can see the japanese yen gain strength against the dollar. yen peronly by 108.6 dollar, where you could have per dollar8 yesterday. us stocks in china are gaining is the trade talks kickoff. some optimism coming out of chinese trading. gold in pound terms, interesting nearing- because 1175 the all-time high gold hit in sterling terms.

1195 will be an all-time record. u.s. futures, if you look at the s&p 500, are looking more firm today after we saw a drop from the record high it hit on friday. 170 companies reporting on the s&p 500, including apple. better,set up a little how will equities report if we get the rate cut from the fed? third-quarter guidance is becoming worse since 2011. cable on a two-year low, it dropped more than 1% yesterday. concerns around eight no deal risk as boris johnson has talked about preparations and says he wants to renegotiate the withdrawal agreement the eu has said is nonnegotiable. crude on a front foot for a fourth day.

juliette saly from singapore has more on the asian markets. broadly positive, but awaiting more headlines on the u.s.-china trade talks in shanghai. the nikkei up, no change the boj policy, but they did cut the gdp and inflation forecast. we have seen movement into the yen. the hong kong hang seng index up after yesterday, falling the most in six weeks. insurance stocks today, and good buying in a lot of chipmakers as well. was looking at the australian market, it is getting close to a record high. level wet the highest have seen since the index was created in 1992. just try to work out on the

close if it will be a record, it is looking like it. this is my chart showing we are starting to see a little bit of resilience in terms of the protests in hong kong. this yellow line back in april is only saw record highs on the hang seng. that red dip is when you saw the bulk of the protests in june that got national attention and we saw a quite a bit of selling. yesterday there was quite a bit of selling in hong kong markets as well. investors are not as resilient to the protests. the longer the protests go on, the more likely foreign companies will look to relocate. thank you. all eyes on the fed this week, a rate cut is widely expected on wednesday, the first in more than a decade. guggenheim partners does not think they should cut, and says they should raise rates to keep

the economy from overheating. he believes the current economy will lead to increased financial instability. it is a view that trump does not share. the fed has made all the wrong moves. can the fed sustained everything rally? reach out to us and the mliv team on your bloomberg. joining us now is elias haddad, senior currency strategist, cba europe, our guest host for the hour. before we get into comments from president trump, i want to know how high the risk is this week that we get a disappointment in markets from the fed decision? not in relation to 25 basis point cut but forward guidance? elias: i think it is most likely , to push the u.s. dollar lower see theg, we need to

fed turn more dovish, and that is unlikely considering the u.s. economy is growing at a decent race. last week the, the q2 number exceeded expectation. for this reason, it is unlikely in terms of the probably perspective that we will see the fed turn excessively dovish to justify much lower u.s. dollar. it is important to remember the fed is cutting interest rates, which is baked into the cake, is not because of poor u.s. economic activity but subdued inflation pressure, and as insurance in case of a more aggressive slowdown in u.s. gdp growth. matt: are you not concerned about asset bubbles popping up? there are a number of places bloomberg can point to leverage loans, private credit, zombie firms. aren't these problems going to be exacerbated by a fed cut? elias: i think you are right,

this loose monetary policy from local leaders and central banks issue oferbate this financial instability down the road. that is a risk the imf has highlighted in their world economic outlook update in july. it will not be an immediate concern, but it could generate turbulent down the road. 100a: your base case is for base point total cuts, what does that do? does it do what we did in 1995, an extension of the cycle, or a different reaction? if you get 100 basis points of cuts from the fed? elias: that is what the market is implying, we are not far from market expectations. this will keep the u.s. dollar on downside pressure.

it will trend a little lower over the rest of the year and early next year. keepinancial market will risk relatively supported. it will extend the equity market uptrend, certainly. the looser u.s. monetary policy, but other major central banks have turned more dovish, or started easing cycles themselves. makesare you concerned it the next downturn more dangerous? that is what you hear from a number of people. there is a lot of headwinds to global growth, so it is important for central banks and policymakers to be ahead of the curve, and the big downside risk, we are looking at trade tension worsening. .nd brexit related uncertainty these are the big factors

weighing on the global economy, and it is encouraging to see policymakers, whether central slowdownacting to the in global growth with easier monetary policy. don't they make you feel reassured that consumers are propping up the u.s. economy, because consumers are the last to know when things are going wrong? that is a good question, if you look at the u.s. gdp number for second quarter, one of the big tailwinds behind q2 gdp growth is consumer spending. it is supported by monetary policy.progrowth fiscal it is one of the big reasons why the u.s. economy remains resilient. if you remove the inventory from second quarter gdp growth, it would have been even stronger.

the u.s. economy is holding up relatively well because of the consumer sector. a lot of leading indicators suggest u.s. economic it to the will slow -- u.s. economic activity will slow. you cannot dismiss the yield curve, it has flattened significantly. it has inverted at some points. it suggests u.s. economic activity is not rosy down the road. the preemptive rate cut by the fed will be relatively encouraging. matt: elias haddad, senior ,urrency strategist, cba europe our guest cohost. mexico's interest rates are too high for the slowing economy, according to the president. kept itsal bank has key rate at a decade high of

8.25% making the peso one of the strongest currencies this year. the mexican economy may be in a mild recession. we spoke to john mickelthwait about that in mexico city. desired,ing is to be and what is possible, i would like the central bank to work on androlling inflation, thinking about growth as well. we are talking about what the central bank is doing. they are more cautious about inflation. this is not a bad thing. this is not the wrong thing to do. i am not saying that, but it is important to lower the rate to encourage growth.

this is an issue i am leaving for the central bank to decide. we are nottrust going to just be able to grow, but also to develop. not only growth, but development, because growth, that is what we want to change, and to create new paradigms. growth is creating wealth, but not necessarily distributing wealth. development is growing and distributive wealth. -- and distributing wealth. ist it is now doing , so thening income although growth is scarce, little growth, there is a better distribution of wealth, there is

more well-being. nejra: that was the mexican president speaking exclusively to bloomberg editor-in-chief john micklethwait. now let's get the first word news. prime minister boris johnson has issued an ultimatum to the eu. he wants to start talks -- he won't start talks with russell's -- with brussels. johnson stepped up preparations for no deal. more money is being made available for contingency planning. delayeds in hong kong trains on the subway this morning, the second time in less than a week they have disrupted the railway. beijing warned violence would not be tolerated following clashes with police over the

weekend. the bank of japan is taking a stance, keeping policy unchanged and sitting on asset purchase program. the boj says 2% inflation remains out of sight, trimming its projections this fiscal year to 1%. is supporting the next head of the international monetary fund. the french finance minister is correlating the search on behalf of the eu. president trump has vetoed a block on arms sales to saudi arabia. democrats failed to get the two thirds majority to override the move. saudi arabia must be punished for the war in yemen and the murder of journalist jamal khashoggi.

global news, 24 hours a day on air and at tic-toc on twitter, powered by 2700 journalists and analysts in more than 120 countries. this is bloomberg. coming up, we will talk managing expectations, trade talks restart in shanghai after a three-month stop. will we see any breakthrough at all? no one seems excited to compromise. this is bloomberg. ♪

nejra: this is "bloomberg daybreak: europe." i am nejra cehic in london. matt: i am miller in berlin. some assets moving today, the asian pacific index rising a little bit, optimism as trade talks kickoff in shanghai. the again gaining strength against the dollar. and the feds pat,

is expected to cut. the bloomberg dollar index gaining slightly. the pound fell out of bed yesterday, dropping more than 1%. traders see the no deal risk increasing with boris johnson's rhetoric around wanting to renegotiate the withdrawal agreement. yuan dropped yesterday, more steady today. let's get the bloomberg business flash. citigroup, hundreds of jobs cut in its trading division. that amounts to 10% of the division. have their banks lowest trading revenue in more than a decade.

plummeted, three months after it went public. company battles it out in an increasingly crowded vegan marketplace. south africa's embattled state , this interim appointment comes after the outgoing chief said he was stepping down due to be unimaginable demands of the job. he is the 10th person to vacate the post and as many years. uber is cutting jobs around the world among concerns businesses slowing down. told employees many of uber's teams are too big and creates overlapping work and mediocre result.

that is your bloomberg business flash. matt: thank you. trade talks resume later in shanghai after a three-month pause, expectations for a breakthrough are low. the sides are holding their first face-to-face meeting since may. washington and beijing have moved further apart since then. little sign of compromise from either side. a broad framework is seen as the most likely outcome. elias haddad, senior currency strategist, cba europe is still with us. what is the best case scenario you expect out of these talks? scenarioe best case would be a breakthrough on a trade deal, but that is a minute chance of happening. what is encouraging is that trade tensions are not worsening, they are back at the

negotiating table, that is encouraging and supportive of financial markets. there are a lot of structural differences between the u.s. and china with respect to trade negotiation to expect anything meaningful this week. to theally it boils down u.s. is concerned with the means by which the chinese government is using to achieve their goal of being a dominant player in the manufacturing industry, which is intellectual property rights, the control of key natural resources, state sponsors in foreign investment. these issues will need to be hammered out before we get any meaningful trade agreement. if they do not deteriorate, this is supportive of financial markets. nejra: you expect more currency whatility this week, and

do you expect that to play at the most in? elias: currency volatility will be elevated because of not just the trade talk but the fed and the brexit situation. there are a lot of developments this week. from a trade perspective, if we have anything on the positive we are on the way to a breakthrough on trade negotiation front, the commodity .urrency can do relatively well otherwise, anything that shows the trade tensions will worsen, the yen will be your safe haven currency. matt: do you see the chinese yuan moving closer to seven? forecast isnk our for it to trade close to seven at least in the next couple of months as the chinese volatility

eases further on monetary policy framework. that could undermine the currency, combined with the uncertainty with respect to the itde tension, we could see weaken. beyond the near-term, we look to stay under seven because they will be embarking on easing cycle this week. nejra: elias haddad, senior currency strategist, cba europe stays with us. huawei reports earnings, we will speak with the chairman. to using to work, listen live on your mobile device or dab digital radio in london. a lot more to talk about on the show. we will discuss your next, a lot of data coming out. and the moves in the pound in

the past 24 hours. matt: the pound will be the one to watch over the next few days. this is bloomberg. ♪

matt: this is "bloomberg daybreak: europe." i am matt miller in berlin. nejra cehic i buyerslet me get to numbers here. the second quarter comes in at five euros, the estimate was that 1.68, that is a strong beat on the second quarter. it is confirming its forecast and says it is increasingly ambitious. this is -- a missimate was 11.68,

on the second quarter sales. core eps, the forecast is increasingly ambitious and it is confirming the forecast. it will be interesting to see how the market reacts to that. /a jury verdict -- slash a jury verdict. these latest numbers are interesting. matt: missing on the bottom of the top line, then calling your own forecast ambitious, that has to be worrying for investors. ,econd quarter adjusted profit 82.1 million.

revenue, 482 million. these are not huge numbers, not a massive company. gets about 75% of its total revenue from apple for the iphone. withg up, we will speak the dialog ceo at 11:30 london time. breaking news on the french economy. dani burger is here with the details. dani: we just got the french gdp numbers, and there is a big disappointment. the estimate was 3% growth in the second quarter, this is certainly a miss. the hope was that the consumer would be strong in france after

reforms by the french government. that is not what we have seen. we get gdp numbers from the rest of europe. considering what france did today, we are likely to see slowing growth. we have a chart with the estimates for the second quarter gdp. the blue bar at the end is the current estimate. , andorder we saw 0.4% this quarter it is expected to be 0.2%. economic policy uncertainty very high in europe. here i have bloomberg's 1.6rtainty gauge at standard deviations above the mean, the most uncertain we have been about the euro area economy since the debt crisis. uncertainty and confidence numbers painting a picture of majorb meeting to have

easing actions in september. nejra: let's go back to bayer. outlook isg the 2019 increasingly ambitious, it is interesting because when i read that line my first take was this was a bullish take. you pointed out, and it does make more sense that it is striking a note of caution. comingond quarter sales in as a miss, it sees full-year revenue at about 46 billion euros, a little light, and its , theyear adjustment estimate elias haddad, senior currency strategist, cba europe is still with us. datae looking to get more today. the headline was europe is about to find out how bad the economy has become.

how bad is it in your opinion? elias: it will probably under , theythe ecb projections are expecting gdp growth at roughly 1.2% for this year. the leading indicators, whether manufacturing and recent economic activity, we had the french gdp numbers, it looks like the eurozone gdp growth under shoot consensus tomorrow when they release the number, but it will probably underwhelm and under shoot the ecb projections of 1.2. in terms of the applications, it should not push the euro much lower. headwind for the euro, but no reason to expect it to edge lower despite those numbers.

it is basically discounted at this point. ecb has moved to an easing bias. they are expected to cut interest rates in september. we need to see worsening leading indicators in the eurozone to push the euro much lower. matt: do you expect to see more flows in safe haven assets? inlooks like the ecb may be and easing bias, but their hands are tied in terms of what they can achieve without any fiscal help, and germany has said firmly last week on bloomberg television they are not going to spend any more money regardless of the growth outlook. elias: that is a good point, one of the constraints the ecb has in terms of implement thing more aggressive and looser monetary policy, but from a forward guidance perspective, that should be enough to guide market

for aggressive ecb easing. that is one of the reasons we do not expect much downside for the euro despite expectations for a looser monetary policy in the eurozone. that is because of the eurozone favorable backdrop, it has a large surplus. the euro is undervalued based on relative measures of prices by roughly 10% on a trade weighted basis. act tose factors should underpin the euro despite the prospect of easing from the ecb. nejra: you do not expect much euro downside. what about upside? will euro rallies be contained? come: the trigger will from a better-than-expected eurozone economic activity, and picked up inflation.

at this stage, it does not like look -- it does not look like that will pan out. until we see signs the fiscal to hit thepected euro zone economy in 2019 start to filter through some of the data now, this is not happening. also, the favorable eurozone employment conditions are consumerto support spending in the euro zone. at this stage, it is still -- until then, the euro will trade range bound. with that bad outlook, it does not seem like the ecb will bring about inflation to levels they would like. do you worry about deflation if they continue to cut rates further negative, if they tried to reopen quantitative easing with little to buy anyway?

if they fail in this summation of deflation -- if they fail, is deflation a concern? elias: disinflation is probably more of a concern. still inflation albeit quite low. more protracted disinflation pressure is the main concern. downwardargely because revisions or the continued decline in inflation expectations from a cyclical perspective, and a structural perspective, you have big factors weighing on inflation not just in the eurozone but globally. factors weigh on inflation pressures. from a cyclical perspective, the downtrend in inflation expectations in the eurozone is a concern from a disinflationary perspective. nejra: elias haddad, senior currency strategist, cba europe

stays with us. eps,econd quarter core 1.62 euros, the estimate was 1.68 that as a miss on the second quarter core eps. the 2019 outlook is becoming increasingly ambitious according to bayer. matt: 18,400 lawsuits, interesting stuff. let's watch the shares when they open. the bank of japan is taking a wait-and-see stance and keeping monetary policy unchanged while trimming its inflation forecast, i head of a rate cut at the fed tomorrow. management editor joins us from tokyo. what is the key take away from

the doj today? >> you have to parse the language because there is not much change from that they could unlike the federal reserve and the european central bank. these guys are staying the course for now, but the tweak , maybed, they inserted the best way to characterize it, a more explicit easing bias. they said they will not hesitate to add stimulus if the momentum for inflation to the 2% target is lost. this is language governor kuroda has used many times, that his deputies have used in recent weeks. they have codified that into the policy statement. the other takeaway, you were talking about increasingly ambitious forecast from bayer. the bank of japan's inflation in gdp forecast were barely

trimmed, and they are looking in the view of the vast majority of economists, increasingly ambitious as well. a 1% inflation target for this year, it is currently running a 0.6%. we are still a ways off. the target is 2%. nejra: i love how you tied together bayer and the boj. why hasn't the boj been more aggressive? i think this is something global observers have inerappreciated, the shift the thinking here in japan that really has focused more on the negative side effects of boj policy. you have the bond market telling the bank of japan specifically, you are buying too much interest rates are too low, and it is

distorting pricing in the credit markets. they are specifically calling for the bank of japan to trim bond purchases. that institutional investors taking on increasingly risky investments overseas. regulators are concerned, and for bojthe backdrop policy makers. they understand any additional easing they take will face a lot of domestic opposition. nejra: thank you for joining us, chris anstey, our managing editor from tokyo. let's get to first word news. interest rates are too high for the economy, according to the president. the central bank has cap its key rate at a decade high of 8.25%

making it one of the strongest currencies this year. the mexican economy may be in a mild recession. we are more cautious about inflation, this is not a bad thing. this is not the wrong thing to do. i am not saying that, but it is important to lower the rates to encourage growth. mexico's president speaking to our editor-in-chief john micklethwait. commuters and hong kong faced delays as protesters disrupted services on the subway. it is the second time in less than a week protesters have disrupted the railway. this comes after beijing warned violence would not be tolerated following clashes with police over the weekend. forget rate cuts, the fed should

according to one investor warning about high investor prices that could make the next downturn worse. global news, 24 hours a day on air and at tic-toc on twitter, powered by 2700 journalists and analysts in more than 120 countries. this is bloomberg. matt: thank you. at what youok should be watching today, data out of europe including the euro area, consumer confidence at 10:00 a.m. and german inflation at 1:00 p.m. in europe, a legal challenge against the quantitative easing program begins today. a ruling is not expected for a couple. nejra: we will get a readout on the luxury sector with aftermarket numbers from l'oreal , and in the u.s. apple reports after the bell.

the next round of presidential debates with bernie sanders and bernie sanders. sterling falls to the lowest in more than two years with the prospect of a no deal brexit sinking in. this is bloomberg. ♪

matt: this is "bloomberg daybreak: europe." i am matt miller in berlin. nejra: i am nejra cehic in london. gam named blackrock that are in his chief executive. month, gam completed the wind down of the main fund and is set to repay investors a premium. citigroup is preparing to cut

hundreds of job slumping trading division. it includes 100 positions in the equity unit, that would amount to 10% of the division. wall street banks are facing their lowest trading revenue in more than a decade. w is winding down a credit eads leftafter its co-h the firm. the remaining team will discontinue investing and manage out of the rest of the portfolio. that is your bloomberg business flash. matt: thank you. nejra: let's check in on markets around the world. is annmarie hordern. how are indian markets trading today? >> good morning. started a half percent

higher, this has been a trend. markets are higher even after starting the day in the red. this is a wonderful chart which shows how the indian markets are trading at levels where they have come off rapidly from the past, and if you rate down these moving averages. the finance minister comments that indiashe stated needs lower rates. if that were to happen, it is one more thing to watch out for if you are a market investor or watcher. you arene-marie, looking at the rest of the markets. >> we have msci asia-pacific up 0.3%, and broadly have asian

markets edging higher. the cost be is up. -- the kospi is up. the nikkei up 0.3%. kicking offfed their meeting today, and resuming trade talks between beijing and washington, the market is digesting all of that. , buckingn-exchange concerns about a no deal brexit. yen, slightly higher against the u.s. dollar. iron ore is up more than 2%, a lot of speculation that it remains tight. i am looking at the pound. you can see here hitting a two-year low, post-referendum lows. as borisgo lower

johnson firing a warning shot that he will not start exit talks with -- will not start .rexit talks any concern you see in investors, volatility, these are spiking as we close in on that october 31 deadline. you, annmarie hordern. elias haddad, senior currency strategist, cba europe is still with us. it would not have made much sense boris johnson to go back into talks if the eu was not willing to reopen the agreement. does this mean the pound continues to go lower? elias: all this brexit uncertainty means the british currency will underperform

against most other major currencies. over the next three months, between now and october 31, there are three options with respect to brexit. either we have a new withdrawal agreement, and judging from the comments from boris johnson and the rhetoric from the european union, this seems unlikely given their diversions with the irish border issue. that is a low probability event. the second option is we have a no deal hard brexit, that is a higher probability than a new which raw agreement. there is not much appetite in the parliament for a no deal brexit. still a risk that it could potentially happen. the third scenario is a political twist that includes a new referendum, new general

election, or revocation of article 50. with respect to these political scenarios, a referendum seems unlikely because there have been two indicated votes and no appetite in parliament for a new referendum. with the revocation of article 50, no appetite or majority in parliament for revoking article 50. this leaves us with the most likely scenario, a new general election. seethat, we will need to three quarters of parliament vote in favor of new elections, or a vote of no-confidence. nejra: what does that mean for how you trade the pound? it depends on if a general election, would you buy? elias: if we have an

announcement of a new general election, we could see an upside reaction in the pound following the announcement, but because the polls are tight, it does not show conservatives with a lead over labour. political uncertainty will remain elevated. on thend will remain downside pressure against major currencies. nejra: you do not think no deal is the most likely scenario? elias: at this point, no. nejra: thank you for joining us, elias haddad, senior currency strategist, cba europe. bp reports earnings and cash flow expected to fall on maintenance shutdowns and week prices. we speak to the ceo giant. bloomberg users can interact with charts using gtd go -- gtv go. catch-up on key and analysis.

if you are on the move, tune into bloomberg radio live on your mobile device or dab digital radio in the london area. this is bloomberg. ♪

matt: today's top stories. wait and see. the bank of japan keeps rates on hold. it says it will not hesitate to ease if needed. mexico's president says that the country's interest rates are too high for the slowing economy. trade talks resume after a two-month cause, but there is little hope of a breakthrough in shanghai. reports firstwei earnings since the u.s. blacklist. brexit hardens. sterling softens. investors send the pound on a trip back to 2017 as prime

minister boris johnson demands a new deal from the eu, but plans for none at all. citigroup is the latest lenders set to be readying hundreds of job cuts in its trading division, as global banks see trading revenues slump. ♪ nejra: welcome to "daybreak: europe." numbers coming through. second-quarter net revenue comes in at 3.0 8 billion pounds. it is a little bit of a miss on second-quarter net revenue. the four-your net revenue target is revised. in terms of what it is revised to, it is revised to a gain of 2%-3%, being revised a little bit lower in terms of the full-year net revenue target.

sales, it did see 3%-4%. a little bit of a downgrade in terms of where it sees full-year comparable sales growth. it sees no change to adjusted operating margin view. those are the numbers coming through from the consumer company reckitt benckiser. you have numbers from bp? matt: they are blowing away estimates. they had a second-quarter .81usted net profit of $2 billion, a solid amount better than what the street was looking for. this number beats the highest estimate. bpcoming out with a beat -- coming out with a beat that beat the highest estimate in the survey. $2.81 billion. second-quarter capex, $3.7 billion.

2020.end is down through it will continue to reduce its debt load. second-quarter operating cash flow, $8.2 billion. interesting they still have that number in their. dividend, 10.2 five cents per share. that is the dividend. all in all, expect to bp to move higher on these numbers. beating the street's estimates by quite a bit. coming up, we will speak with the ceo of british petroleum. don't miss that interview with bob dudley at 7:30 a.m. london time. nejra: let me just quickly break a red headline. the net revenue target has been 2%-3% in terms of movement from 3%-4%. 2%-3% is what they are seeing now. they were seeing 3%-4%.

let's move on to sony. ¥230.93 billion operating. operating income, that is a clear beat. they are trimming the full-year sales outlook. 2.3%. ep.ng gains, matt? matt: let's take a look at how bonds futures are trading right now going into some important inflation numbers, coming out by the way just after noon for germany. pay close attention. german bonds rising, futures are indicating that the price will rise. the yield could drop further. italian bond futures are also rising as u.s. 10-year bond futures are falling this morning, indicating the yield could rise. what do you see in terms of the equity index futures? nejra: the big question for u.s. equities is how much more of a

lift could we get if the fed does cut, as is broadly expected? s&p 500 futures flat after we dropped from the record close on friday. futures a little bit mixed in europe. we have seen two days of gains on the stoxx 600. ftse 100 futures set up positively. you wonder how much of that is to do with the weaker pound we have seen. the pound dropping to a two-year low on concerns about no deal brexit risks. 40 not moving much. juliette has more on asia. the other dynamic for the market is the resumption of trade talks. is that why we are seeing green on the screen in asia? juliette: certainly a little bit of cautious optimism here. we are seeing stocks pretty much gain back what they lost yesterday. by 0.5%.00 is up we had the boj meeting.

no change to policy. they did cut inflation forecasts. ine strong buying chipmakers. just waiting for the us trillion market to officially close. it does look like the afx is going to reach the record high. it hit the high intra-day. looking like it is going to close at the highest level since the index was launched in 1992. a little bit of weakness coming through in indian stocks in late trade. let's have a look at some of the other assets. we have seen the aussie dollar fall for an eighth session against the greenback. is by those records on the afx. the japanese yen getting a little bit of ground after the commentary from the boj. up by just over 0.1%. then there has been quite a big surge in iron or futures in here, singapore.

up 2.7%. moody's seeing tight supply behind that surge in iron ore. matt: thanks very much, juliette. some of the asian market moves. and the commodities. all eyes are on the fed. a rate cut is widely expected on wednesday, which would be the first in more than a decade. the cio and guggenheim partners does not think the fed should hike. he said the central bank needs to raise rates -- does not think the fed should cut, i should say -- he said he thinks the central bank needs to raise rates in order to keep the economy from overheating. he added that the current policy will lead to unsustainably high asset prices and increased financial instability, making the next downturn even worse. that is the look to cut. it is a view that u.s. president trump does not share. he tweeted that a small rate cut was not enough and that the fed

had made all of the wrong moves thus far. today, we are asking our question on the mliv blog. can the fed sustain the everything rally? reach out to us. kelly, us now is richard at of global strategy at td securities. what do you think of this debate? leading indicators that suggest the economy is going to slow down. however, the trailing indicators -- we have growth of 2%, wage inflation is at least 50% higher than core cpi, so things don't look so tough. richard: i think you are right. i don't think the sky is falling. i don't think that anything argues for the 50 basis point rate cut. when you look broadly across, there is a loss of confidence of bleeding through into the business sector. we are seeing that broadly on trade flows. while we are not seeing that come through because they are

being supported by stronger job markets, you have to raise the question that if we are seeing the weakness on the business side, how long before that persistence bleeds through into the hiring situation, in which case this becomes a broader issue? this is something where an ounce of prevention is much more useful. nejra: an ounce of prevention could be the 25 basis points that are widely expected tomorrow. in terms of forward guidance, if the market is in any way disappointed, what sort of reaction are you expecting and how would you traded? richard: i think there is going to be a small disappointment. i think something like 3-5 basis points on 10-year treasuries. i think you get more than that on the front end of the curve. think the disappointment comes through in breakevens. given that this is not a fed that is going guns blazing, you will have breakevens, you should see the dollar a little stronger. i think the bigger issue is you get into august, we are still in a market where the ecb is

setting up a massive amount of stimulus, there is very little supply. the expectation will be that the fed delivers more. it is going to be difficult to see that move sustained. i think yields drift lower. matt: yields drift lower. do you still thinks stocks continue to hit new records? does this everything rally continue, as we are calling it? richard: if you look at what an investor has these days, the days are long gone when you can put on real curve trades. this is a market when you are buying equities, buying credit, that is about all you have. if we are into another situation where we are getting a significant stimulus of rate cuts, if we are getting some series of rate cuts from the fed, i don't think july will be the last one, that does continue to sustain equities, that does continue to sustain the credit compression, because that really is the channel for monetary policy these days. it is not as effective as it once was when we had more ammunition, but it is all we

have. nejra: if you thinks that in -- if you think that any moves we see post-press conference in terms of the market being disappointed, what would be your preferred trade around the curve or rates? richard: you are looking at some broad bit of steepening. overall, the market can continue to put some further easing into this curve. over time, that should give you widened breakevens. thatu were looking in fx, is the one where we should be transitioning to a weaker dollar environment. obviously, disappointment is not going to help that. if we get back to a better growth environment, in general, investors are overweight the u.s., underweight everything else, that is where you start to see some of the flows go and that should turnaround fx trades. matt: are you concerned about if the fed follows this more dovish policy -- are you concerned about asset bubbles? are you concerned about asset bubbles already in things like leveraged loans and private credit?

richard: i think that you look at macro prudential policy. that is the preferred tool when dealing with some of the asset price imbalance. i think what you are seeing is a scarcity of safe assets for investors to go into. that has partly been developed by central banks. it is up to regulators to make sure that the risks being taken are appropriate and that gets into some of these issues with leveraged loans. you want to make sure we don't have a replay of 2007 when regulators were not paying attention to a lot of the imbalances building up. the asset price inflation is ok, as long as the due diligence is being done behind the scenes. that is beside to be concerned about. dani: richard kelly stays with us -- nejra: richard kelly stays with us. let's get the bloomberg first word news. >> thanks. mexico's interest rates are too high for the slowing economy, according to the president of the country. 's central bank has kept its key

rate at its decade high, making the peso one of the strongest currencies this year. the mexican economy may already be in a mild recession. more cautious about inflation. this is not a bad thing. no, this is not the wrong thing to do. i'm not saying that. to lower theortant rates to encourage growth. mexico's president speaking to our editor in chief. prime minister boris johnson has issued an ultimatum to the eu. you won't start talks with brussels unless they agree to reopen the divorce deal. so far, eu leaders have refused. johnson stepped up preparations for no deal and more money is being made available for

planning -- contingency planning. the bank of japan is taking a wait and see stance ahead of the fed decision tomorrow. it kept policy unchanged and maintained its asset purchase program. the boj says 2% inflation remains out of sight, trimming its projection for this fiscal year to 1%. global news 24 hours per day on air and on twitter. this is bloomberg. matt? matt: thanks very much. your first word news. citigroup is preparing to add hundreds of jobs in its slumping jobs in itsds of slumping trading division. that includes 100 positions in the equities unit, which would amount to 10% of the division. joining us from rome is our european finance editor. has citigroup been having a rough time getting profit out of

its trading operations? ross: yes, they have. they have had about a 17% decline in revenue just in the first half this year. it has not been very successful for them. this is worrisome because it is an area where they have really tried to build up in recent years. are the main issues? great to have you with us, by the way. what are the main problems affecting earnings in fixed income trading? that thel, i think really interesting read through for this is that the narrative had been that investors have been scared to the guidelines -- sidelines and there is a lot of money out there, but the trade war and the political problems have kept them out. with this implies for citigroup is that they believe the slowdown is here to stay and it comes from hedge funds not investing as much because they are losing investors, it comes from less proprietary trading by

the banks themselves, so these are a lot of longer-term things that are supposed to continue even after the current trade war worries and something in the -- some things in the global economy cool out a bit. matt: a lot of our viewers are wondering what are the implications on wall street be on citigroup? who else has to worry? ross: right. this is also what we are looking at here. citigroup has not been alone in seeing a pretty rough decline during the first half of this year. two quarters in a row, i think it is about 14% loss of equities trading revenue over the first half. herehat we might be seeing is the first of several banks taking a curious look at what they're up -- serious look at what their operations are and whether they are worth the investment. that is what we look ahead to see. nejra: thank you so much to bloomberg's european finance

editor. coming up on bloomberg, huawei reports earnings. we will speak exclusively with the chairman. this is bloomberg. ♪

matt: good morning. 20 past 7:00 in london. 39 minutes away from the start of cash trading across the continent. this is bloomberg daybreak europe, i'm matt miller from berlin. nejra: i'm nejra cehic in london. the equity's closing at a record high in today's session. trade talks get underway. we are looking ahead to the fed. s&p futures pretty much flat. with all the s&p 500 dropped from friday's record yesterday. 170 companies reporting earnings. the 25-basis point rate cut fully priced in by the fed. how much more can a lift to a give to equities?

how will the dollar react if there is disappointment in the forward guidance? matt: check out the pound. watch this one fall. 46.ht now, we are at 1.21 getting closer to the 2017 lows. you have the red arrow, the young getting stronger as the dollar can buy fewer of them. you see crude oil rising in little bit. interesting as bp came out with a profit that beat the street's estimate. be the highest estimate in our survey. nymex crude going through 57.27. let's get the bloomberg business flash. for that, we go to hong kong. >> citigroup is preparing to cut hundreds of jobs in its slumping trading division. at least 100 positions in the equities unit. that would amount to almost 10% of the division. wall street banks are facing their lowest first-half trading revenue in more than a decade.

the embattled state power utility has named a new chairman. the interim appointment comes after the outgoing chief announced he was stepping down due to the "unimaginable demands of the job." he is the 10th to estimate the post in as many years. a black veteran has been named as chief executive to help and asset manager -- an asset past a scandal at gam. that is your bloomberg business flash. nejra: thank you so much. the u.s. trade seen has arrived -- team has arrived in shanghai for trade talks with their chinese counterparts. a are holding their first face-to-face meetings since may. richard kelly is still with us.

we were talking about the fed and you expect 150 basis points of cuts in total from the fed. expect theean you cross currents around the trade war to get worse? >> i do. there does not seem any incentive for the trump administration to finish these negotiations quickly. there does not team any -- seen any incentive for the chinese to given quickly. i think it is one of these difficult things. you cannot sit there and pinpoint exactly what is going to go wrong when, but we have seen evidence that there is more to go wrong. matt: right now, it seems like the pressure really is on china more than the u.s. -- if president trump brings effectively opens a second front against europe, doesn't it start getting difficult for him, especially in light of the 20 20th? -- 2020 aspirations? richard: i think this is the

endpoint. he does need to have all of this wrapped up as we get into the spring next year, so you can have the good news done. if he were to wrap up u.s.-china negotiations right now, i don't see many ways that he would not be attacked on the campaign trail for whatever deal is delivered week as you would start to see the evidence come through, as to whether anything was delivered on new jobs, etc. it seems in his best interest to be seen fighting hard, but i don't know if there is anything coming out of these negotiations that he will be a to hang his hat on in terms of an outcome. europe is already starting to poke and prod. that has been the conventional warom, that a two-front might be a bit much for the u.s., but it seems like he is gaining better with his base by continuing these fights. nejra: does that mean we could see yuan weakness and euro weakness continuing from here? richard: i think so. we will see where the expectations go. i think that one is a question

of how much further can that really go at this point? another 5%n, weakness or move higher in dollar, i think we are beyond the point where chinese authorities were more keyed into psychological levels in the market. they want stability within the economy. they want to help maintain the level of reserves. i don't think they are inclined to be throwing reserves to defend levels on the upside now. matt: and what come you don't think they are willing to weaken the currency if they need to build exports? richard: absolutely do. i think we are beyond the point where they felt they needed to defend the currency -- they are more keen to maintain reserves. i think they want to support by weakening the renminbi. that is a much more tolerable solution given their options today. nejra: where you look for protection? earlier, you were saying when it comes to treasuries, yields in a reaction to the fed if it disappoints, so you buy the

dips, would you also be buying the yen or the dollar is your ultimate safe haven? richard: as you get into any of these trade frictions, you are buying dollars. there is no way around that. if we are getting better stimulus going through the markets, you were getting treasury yields and global fixed income continuing to rally, there should be a point where you continue to have some sort of depreciation in the u.s. dollar. while there are near-term gains for the u.s. out of some of this protectionism, i don't see it as a winner on a long-term basis. matt: just five seconds, richard. do you like gold? richard: it is hard not to like gold. everything argues to be long gold at this point. matt: think is so much for joining us. really appreciate your time. richard kelly, head of global strategies at td strategies. "bloomberg markets: european open" is coming up next. to tune into bloomberg radio on your mobile device or digital in

the london area. you can see our radio anchors hard at work. this is bloomberg. ♪

>> good morning. welcome to "bloomberg markets: european open." i'm and edwards matt miller in berlin. today, the markets say stick to the sideline. trade talks are back in focus. the yen fluctuates after the bank of japan leaves rates unchanged. the cash trade is less than 30 minutes away. ♪ anna: