nejra: good morning from bloomberg's european headquarters in london. i'm nejra cehic with matt miller live from berlin. this is "bloomberg daybreak: europe." the federal reserve is expected to lower interest rates by .25%. president trump demands a large cut. we have full coverage of the fomc decision and how a's conference. looking for a breakthrough in president trump tweets beijing continues to "rip off the u.s." in extended jump trading as revenue projection

topped estimates signaling optimism around new iphone models. it is different for samsung. shares drop after reporting sharply lower profits amid global trade tensions. matt: welcome to "bloomberg daybreak: europe." we are getting figures from credit suisse in switzerland, -- second-quarter net income was 937 million swiss francs compared to the estimate for 788 million swiss francs. really beating the estimate on the bottom line. as far as revenue, credit suisse says second quarter net revenue was 4.5% above the street estimate. total revenue was 5.50 8 billion

swiss francs. the estimate was for 5.34 billion francs. leading on the top and bottom line, second-quarter wealth 9.5gement net new assets at billion swiss francs. credit suisse, doing quite well in terms of the streets estimates. a beatit comes in as it for bnp paribas, second-quarter net income, 2.40 7 billion euros. euros. 7 billion looking through the details, bnp paribas second quarter revenue rising 8.8% to 793 million euros. focusing on what we will see in the trading out of the french banks. second quarter global markets revenue falling 2.7% to 1.40 one billion euros. in at auarter comes

beat of the estimate of 11 billion. the main numbers out of bnp paribas at the moment. second quarter equity and prime services revenue falling 14% to 615 million euros. the cfo spoke to bloomberg in paris. listen in. lars: when you look at equities, equities -- the market in the andnd quarter, lackluster we had a strong quarter a year ago. that is the dynamic.

we feel the acceleration of our transformation plan is very inferred. >> do you believe the environment inequities will remain in the second half? lars: it is difficult to foresee but typically what you see in this kind of activity with low interest rates, you would assume bigger inactivity inequities but we will see in the third quarter. -- bnp paribas preliminary agreement to take control of the electronic equities trading and prime services for hedge funds. on how give an update you are planning to integrate those businesses? lars: it is a preliminary bp bear about being the bank of referral for clients to continue services. this is just still to be validated by many things but if we look at how that is going,

the interaction between deutsche bank and bnp paribas is going very well. moreover, the speed at which this is progression is faster than expected. from that view, we are pleased with discussions we are having. >> when would you like to complete a deal? lars: it will be kleins coming over. that takes time. one could assume the transfer of clients will be done by december of 2020. that is the horizon i would expect that transferred to be finalized. matt: that was bnp paribas's cfo speaking with caroline in paris. we will bring you more from that interview through the day. buyinging deal, at th grand vision for $28 a share. andlans to refinance debt

equity for up to 2 billion euros. aregrand vision ceo and cfo committed to remaining in function but it looks like essilorluxottica is making a purchase. also coming out with first-half earnings revenue of 8.7 billion euros versus the street estimate for 8.8. generally in line with estimates. first half adjusted operating profit was 1.51 billion euros. we've got members from swiss re-, $953 million. 697 million.was that is a strong beat on the first-half net income for swiss re incomes up to net $18.2 billion and the first-half return on equity is up 6.6%. coming up, we speak to the ceo of swiss re.

it is a massive day for markets with the fed coming out with an expected rate cut this afternoon. look at the s&p futures. we are looking at gains on futures in europe, gains on s&p futures regardless of banks coming out and saying the trade is overcrowded right now. as suppliesaining look short and the tensions in ormuz are not h calming down. to 58.46 dollars a barrel. if anyone thought the rate cut would weaken the dollar, it has not happened yet. nejra: in yesterday's session, you sawtek stocks underperform out of the s&p. nasdaq futures, pointing higher than s&p. futures. we've seen apple rise in late trading. its fiscal fourth-quarter sales

beating estimates suggesting apple is optimistic about potential sales of the new iphone model set to launch late in the period. that is how nasdaq futures are set up and a bit of optimism about trade given conversations are continuing, even if president trump had negative comments about china. the two-year yield on a 1.84 handle. curve steepening on the two's tens. outperforming out of g10 after cpi data. let's check on markets in asia with juliette saly in singapore. is risk off despite the data. the us trillion cpi was a beat and we had manufacturing pmi out of china better than expected but below the level of 50, separating expansion from contraction. we are seeing a bit of cautious trade ahead of the fed and perhaps on the comments we heard

from president trump, still no clear signs about how trade talks are faring. the nikkei off .6%. the yen at 108. by've got the kospi off quarter of 1%. stocks are retreating from the record we saw yesterday on the asx 200 and hong kong facing headwinds. it has a bad weather situation there and we had more protests overnight. the hang seng, off 1.1%. becauseok at my chart we are awaiting hong kong gdp and this is expected to slow from the prior quarter the .9% for the second quarter, although it should increase year on year to a reading of 1.5%, up from .6% in the first quarter. tom from bloomberg intelligence is a little worried in his piece on the overall outlook for the hong kong gdp read because we've

got protests happening, slowing toryism, all these factors that weigh into hong kong economy including in the finance and property market for you are seeing a sluggish read. chief executive terry lamb saying there is no optimism for the gdp read ahead of later afternoon. juliette saly in singapore with a look at your asian markets. is expectedreserve to cut interest rates by 25 basis points at today's meeting. that would be the first cut since 2008. robert burgess says expectations aren't for a one and then move. the markets are expecting the fed to signal lower rates in the months ahead. adding to this, president trump has started attacks on the fed calling for a larger cut. today on mliv, willie rate cut drive-up volatility -- will a rate cut drive-up volatility?

that is ib + tv . max, great to have you with us. notuld argue that necessarily the cuts drive volatility but if we get messaging from jay powell that disappoints markets at all. >> that would have been my answer. look, i think the problem is it is not going to be about the cut. they will be about the language and the problem i see is if we have a 25 basis point cut and then the fed says look, it we are going to continue to watch reference to data dependence, let's call it the normal fed policy of the last decade or so, that would would be read hawkish by the market because it would signal -- the data hasn't been that bad so maybe we have priced into much for 2019 and 2020 and that may be a disappointment. matt: what do you think the fed

-- what do you think the growth in inflation numbers will look like? is this going to change things substantially? max: i don't think so. what the fed has made clear his they are relatively independent from the data and they want to get the insurance cut in. howard economists are looking for two cuts this year but the big problem will be from the communications side. not really from the cutting side, but the actual action. i think the real challenge will be how to communicate with market that it is one cut and we will continue watching the data, but if we do that, we have to wait knowledge there may be some upside risk for the second half of the year not only for u.s. globe -- growth but global growth. in the statement, it says we are watching international developments, as well. if they acknowledge that, there may not be the basis for as much in the curve right now. correlatione done

between risk assets and yields and in particular real yields. talk us through what you observed and how that might change after the fed meeting. max: that is the interesting bit because one of the big challenges since the start of the year is explaining how equities have rallied at the same time with fixed income. if i had come here in january and said i think 10 year treasury yields will trade 70 basis points lower and the s&p will be 20% higher, you would have called me nuts. the problem we have seen so far since the start of the year is whatever happened, whether equities and all risk assets, e.m., external debt, all the risk assets across the board, whether they have risen or fallen, it didn't matter. real yields were plunging and then obviously has to stop at some point. it is very much driven by the fed's dovish shift.

that comes with a challenge, particularly tonight given the fed faces the communication challenge. matt: we are already seeing -- some strategists saying this is affecting the price of oil. which assets do you think it will move the most, max? max: it is the ones where we have looked at on a real yield versus risk asset and sensitivity basis. that would be most em equities and on the local currency debt side, we have seen a rather perverse unsustainable goldilocks pattern building up there and that looks hard to be sustained if we see a little disappointment from the fed. the good thing from a strategy perspective for me is, if you ry, implied tor realized, rate volatility in btp's, is, bund,

very subdued. hedging is very attractive and fixed income. matt: we will keep you with us. max kettner from hsbc bank. we have breaking news from air france. interesting air france has put in an order for 60 airbus jets yesterday. today, it is coming out and saying it will lower its forecast for the full year. it sees a fuel bill rising 550 million euros, less than the prior forecast. next to employees, that is the biggest cost for an airline. a plaintiff build full-year passenger capacity and looking at second-quarter operating income rising 16% with the transit via target lowered. -- the estimate was for 336 million euros. that is a beat.

let's get the first word news with debra mao in hong kong. china and the u.s. kicked off a new round of trade talks in shanghai following a hiatus of almost three months. allegations from president trump that beijing continues to rip off the u.s. expectations for a breakthrough are low. besides seen further apart than three months ago. boris johnson is refusing to back down over his threat to take the u.k. out of the eu without a deal. concernsespite brexit pushing for pound to its lowest level in more than two years. there are hints another round with brussels might not happen at all unless leaders agreed to tear up the divorce agreement. may force hong kong's stock market close early. this is the latest piece of bad news for the city's economy

following a bleak morning on growth from the chief executive. she says there is no room for optimism for the second quarter and the entire year. hong kong's gdp data is due out later today. global news 24 hours a day, on-air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. nejra: debra mao in hong kong, thank you so much. coming up on bloomberg, credit andse beats on the top bottom-line with improved investor sentiment and higher activity during the second quarter. we will speak with the ceo. don't miss that interview at 7:00 a.m. london time. this is bloomberg. ♪

nejra: this is "bloomberg daybreak: europe." i'm nejra cehic in london. matt: i'm matt miller in berlin. let's check on markets moving this morning. asian stocks we saw drop in the

msci asia-pacific and see that continuing down .75%. not a great start to u.s.-chinese discussions with donald trump tweeting the chinese are ripping off the u.s. nasdaq futures are up. it helps when apple forecasts at the high end of what the street was looking for, $64 billion revenue and here you see the aussie dollar gaining about .3% in u.s. dollar terms. the 10 year yield in the u.s. has been drifting lower for four days. oil, extending its longest rally in three weeks. concerns around tensions in iran but the api data giving wti a lift. let's get the bloomberg business flash with debra mao in hong kong. debra: apple is projecting revenue in the current quarter that topped expectations, a sign the company is optimistic about

potential sales of new iphone models launching in the next few months. this comes after apple's best ever second quarter driven by growth in services, wearables and the ipad. since 2012, less than half of the revenue comes from iphone. american sales fell in the u.s. but globally sales in three months rose 8.6%. consumers in china lifted the company to its highest level of first half growth in more than a decade. will buy back and cancel as much as 750 million euros of shares in the second half of the year. police in india say they found the body of founder and chairman, who had gone missing on monday after going on a walk. it prompted the company to release a letter they say was written by him. it outlines multiple financial pressures the chain is under.

coffee day stock has tumbled this week. that is your bloomberg business flash. matt: debra mao in hong kong. china and the u.s. have kicked off a new round of trade talks in shanghai today following a three-month hiatus and renewed accusations from donald that beijing is trying to rip off america. the u.s. president lashed out on twitter and in an angry tweet said there had been a promise to buy more u.s. farm progress -- produce but they just don't come through. max kettner from hsbc bank is with us. thes almost like what is point of going to shanghai for these talks in the first place? do you expect anything to get done? max: i think politically it is very difficult to say. from a strategist perspective, it is actually -- it makes more sense if you take a step back rather than focus on the day today politics. -- day-to-day politics.

if you are trying to forecast or what will be the next step in something that younherently unpredictable, are basically telling your clients my investment strategy is by that definition also very unpredictable. not sure you want to go down that route. i am not entirely sure if there is something coming out. i expect we hear that kind of news. there will be some positives, some negatives. who knows? will i use that as an investment strategy? not really. i'm stepping back and looking at fundamental. nejra: is chinese data figuring into your fundamentals? max: it is twofold. about china i am more focused on the flow side rather than the data side. the flow side tells me when there is massive outflows from china, such as we've seen at the end of 2015 and 2016, that is

where investors start to get worried, and the market is trying to second-guess can the authorities on the military side and fiscal side -- monetary side and fiscal side steer against a slowdown? we are a very far way off that. i'm not really worried about china. i'm notto-day data, particularly concerned about it. if anything, we expect more easing. from a strategy perspective, that makes chinese equities and given youl attractive still have a strong and positive correlation between the two these days. the second one, on the trade war, if you look at trade data, particularly in em economies, before we had the first trump tweet about trade wars in march 2018, you see trade data from emerging market economies already disappointing for four months. my point is there is something much more structural, something

more fundamental going on other than the trade war. it is not all about politics. it started a long way before that already. goingdo you see the yuan through -- the chinese letting it go? max: i'm not particularly concerned about that. from an investment perspective, it is not something i focus overly on. i think much more from a china perspective, it is more focus on the flow side. it is more focus also on the trade side from the fundamental perspective. on the politics aside, the problem i see from a u.s. perspective, i think the uncertainty is still going to be very high. that will prompt the fed for further cuts. that means uncertainty will stay high but volatility will stay low. nejra: max kettner from hsbc stays with us. jump inple shares

extended trading as it relies less on its iphones, but samsung slides as trade tensions jeopardize profits for the world's largest smartphone maker. whilento bloomberg radio traveling to work. this is bloomberg. ♪

nejra: this is matt: -- matt: this is "bloomberg daybreak: europe." focusing on been the apple story and have seen shares rising after hours with the fiscal forecast beating estimates. we are starting to wonder whether basically apple can transition more away from reliance on the iphone. matt: it is selling more of its services, wearables, and home devices. the key is most of these still use the iphone or work best with the iphone, so even if it boosts sales of the watch or the air

best iney still work conjunction with an iphone. nejra: i think that is the key point. it is interesting apple generated less than half of its total quarterly revenue from sales of the iphone for the first time since 2012. thewonder if that is a sign company is entering life beyond its flagship product. one of the limitations is the different services rely on the infrastructure of the iphone, but the fiscal fourth-quarter forecast suggests at least that apple is basically anticipating its next iphone lineup, which won't be a major change from the 2017 and 2018 models will be strong enough to return the company to growth. matt: it will be a major change? nejra: no, it won't be. see. i see, i the only difference will be in

the camera as far as we know. i remember back in the day when it used to be a surprise what would come out of steve jobs' mouth. he is no longer with us. tim cook hasn't delivered any surprises in terms of product. apple has been working on these moonshot and self driving car software, so it will be interesting to see if they end up coming out with any of that at this presentation in the fall. let's get the u.s. 10 year yields, slumping for the fourth consecutive day. 25 market anticipating a point cut -- .25 point cut. are taking advantage of the roaring appetite for bond proxies. here with more is bloomberg's dani burger. dani: with 10 year yields as low as they are, looking set to get lower if the fed is entering an

easing cycle, equities have gotten competitive when it comes to payouts in the forms of dividends. when we look into the members of the s&p 500, nearly half of them pay out more than the u.s. 10 year yield. in fact, one third of them pay out more than the 30 year, which is pretty remarkable. these high-yielding socks -- stocks might be impressive for any investor trying to augment that portion of their portfolio because they are not getting it from 10 year u.s. yields. these stocks have high yields for a reason. when we look at the highest yielding stocks come you will see macy's, brick-and-mortar retailers. erich, whicht of mac provide to brick-and-mortar stores. there areyielders, companies that will win over the next few years but still, there are companies very likely to either slash dividends or go out

of business. i want to take you to the chart to emphasize how risky some names are. i made a basket in the light of the top five highest dividend names in the s&p 500. year to date, they have slumped 16% compared to the s&p 500 on the top, which has gained 20%. this shows us that you can go to the high dividend names as u.s. 10 year yields are so low but there is certainly a lot more risk than a government bond. nejra: dani burger, thank you. max kettner from hsbc is still with us. our equities in the u.s. attractive, based on dividends or anything else? max: the basic story is whatever you invest in, and let's assume you've got a clean sheet of paper, whatever asset class you invest in, you will feel uncomfortable because everything is overvalued. when you look at the rates bunds, thatin

doesn't seem attractive. and you look at how the s&p global equities have rallied, in an environment where earnings have stalled or detracted since the start of the year, do i really feel comfortable investing in any this from a fundamental perspective? not at all. it boils down to a lack of alternatives. you probably have to slash your valuation argument. that will not give us anything. in in environment where the fed is going to cut, what is benefiting the most from that and that will probably year bond proxies more than your cyclical stocks. havingfo comfortable exposure to fundamentally flawed companies and in structural decline, that is a different story. itm a tactical perspective,

is the only option i have because there is a lack of alternative. if i that would concern me was investing in something because it was the only option left. wouldn't you rather hold cash? max: yes, but let's not forget what you have priced in cash, three months in the u.s., for example, how much is priced into the curve? how much is priced into the front end of the u.s. treasury curve and let's call that cash. you've got four cuts priced from the fed by the end of next year and we've just been discussing about half an hour ago about maybe a little disappointment from the fed. they faced this big communication challenge and if they don't overcome that hurdle, guess what. even cash looks expensive. from a valuation perspective, cash doesn't look like the ultra safe place to be and is extremely non-vulnerable to any

kind of losses. nejra: you were saying in an environment where we had a dovish pivot from the fed, bond proxies are likely to outperform. on the chart, u.s. cyclical stocks have been rallying relative to defensive shares and approaching a record. somethingtell you about the underlying growth picture or is it another sign of things in the market that don't make sense? max: it tells me how i have been wrong so far. that is the first thing. always good to laugh about myself. yes, the problem with what we've seen particularly in europe, you've seen that. you've seen cyclical equities outperforming defensives. i find this perverse. this is a global story, something driven by the dovish pivot from g10 and global central banks. does it really make sense? if you look at pmi's, bring them forward, look at relative performance of equities versus sovereign bonds, in the u.s. or

globally, you see the two going in opposite directions. one of them has to give. we've assumed in various provocations where we've assumed bull and bear scenarios, even in a bear scenario, that would bring us down to where pmi's are trading now in a better scenario. our base case assumes a pickup in activity and assumes a rebound in the data in the second half of the year. a cuttingaw centric its dividend yesterday for the first time since 2015. are you concerned about high dividend payers cutting dividends going forward? because from a, price perspective and relative attractiveness perspective, it will stay so attractive relative to yields, particularly relative to sovereign bond yields that even if they cut from an index perspective, and asset

allocation perspective, it will remain attractive and more attractive against the sovereign bond yields. max, thanks for joining us. max kettner is multi-asset strategist at hsbc bank. here is what you should be watching today. turkey's new central bank governor presents quarterly inflation reports a day after the central bank made its biggest rate cut on record. in europe, growth figures at 10:00 a.m. forecast more in theht -- the weakness eurozone and the federal reserve is expected to cut rates with most bets on 25 basis points. we will hear from jay powell after the decision. a cut is also likely in brazil. nejra: overnight, democratic front-runner joe biden will face off against candidates including kamala harris in the second round of debates. reduces itsmb

full-year forecast and she's output at "slightly below" 500 thousand barrels a day. we will ask about the group -- outlook next. this is bloomberg. ♪

nejra: this is "bloomberg daybreak: europe." i'm nejra cehic in london matt: i'm matt miller in berlin. live pictures of hong kong. this time, it is a typhoon affecting hong kong. you can see barely to the rain covered window of our bloomberg offices there. it is issuing a storm signal eight and the stock exchange trading.el afternoon hopefully our employees will be going home quickly and safely

and everyone remains -- we can't really remain dry but at least safe in the typhoon. let's get back to the program. australian -- austrian oil and omv she's output at slightly below 500,000 barrels a day. the group beat comfortably incomees with a clean coming in at 510 million euros while seeing full-year holding steady at 2.3 billion euros. shares in omv are down 10% over the last three months. let's get to the ceo to discuss further. thanks for joining us this morning. let me ask first why the change in wording? are you more cautious on production this year? >> no, it has to do with the first quarter.

we have seen a shut down in a lowand therefore production rate in the first quarter and now we have to go for some maintenance shutdown in q3. that is the main reason we have to reduce it a little our production forecast but even more than production forecast, i think the profitability we have shown in the second quarter is more impressive and important. i think it is more like a dollar than a barrel, which is more report for us these days. nejra: great to speak with you this morning. can you give us your expectations for the lng market? how far will the oversupply last? are you expecting that to continue and if you could give us your outlook for prices? rainer: we will have a depressive price in the european gas market. this has to do with the pretty -- warm winter we have seen

in the beginning of this year. developmenthe price as well as the situation in the lng markets will heavily depend on are we going to see an early arrival of the winter, which i am asking for. the lng market, i think it has to do with the slowdown, especially in asia. we've seen lots of cargoes landing in europe, creating an oversupply in the market. i think the oversupply will stay in the third-quarter. the fourth quarter, in the forward curve, we will see a recovery of the prices and what is even more important, it is a little dependent on whether or will come on stream at the end of this year. matt: winter is coming, no asbt, but it may not come fast and hard as it typically does.

how does global warming affect your business? rainer: we will switch from oil to gas and we will switch from oil to passive chemicals. we have agreed to change our output. we have partnered with the biggest electricity company in austria, investing in the biggest pv station in austria, so we will invest into renewables. forward to invest into sustainable technologies like hydrogen production, like recycling of plastics into synthetic crude oil. these are the topics of high-priority now in our portfolio. nejra: that is interesting. to build on that and be long-term growth area for oil demand in petrochemicals, will other european refiners have to restructure to focus more on pet chems to survive long-term?

rainer: from my point of view, roughly one third of european toiners have the possibility switch more to better chemicals. you need to run an integrated refinery like omv is doing with all our refineries in europe. you have to invest in additional capacities. you need tont, understand the market, what the customer's base is, and what is typical for omv. the secret of our stability and profitability. chem marketa captive in our portfolio that is very important. trend in our as a industry is we are more moving market, whichean

is heavily saturated toward the asian market where bc hydro -- high growth potential. matt: i wonder about the nordstream 2 reports. the danish permit for construction hasn't been granted yet. delay theing to completion of the pipeline within the timeline you have set forth to begin with? rainer: you are absolutely right. on theing is depending last remaining permit from denmark. the authorities are doing a professional job. i can't see any delay as a the danish authorities. from my point of view, we are still on budget in timing. we have to wait for them to make the decision. , you mentioned you are seeking growth in asia. you plan to invest in a petrochemical plant in indonesia. can you tell us what other m&a

and investment projects you are pursuing in europe, the middle east, and asia? rainer: it is in a very early stage. we have started with an integrated cooperation in upper darby -- abu dabi. we of course would also like to create a captive market behind the refinery and we are a big producer of nafta out of the middle east and are now looking for a captive market in asia. that is one market we have in mind that we are screening the opportunities in indonesia. it is an interesting market in asia. after chinandia, and india, it is the third-largest market you can find in asia and an interesting one. it is too early to give you any numbers. nejra: we will catch up with you next time and try to get those from your. thank you so much. .ainer seele of omv

here is the latest business flash with debra mao. apple is projecting revenue in the current quarter that tops expectations. it is a sign the company is optimistic about potential sales of iphone models launching in the next few months. this comes after apples best ever second quarter driven by growth in services, wearable, and the ipad. time,2012 for the first less than half of revenue comes from the iphone. bnp paribas posting a rebound at its fixed income business. it is shaping up to be the worst first half or securities trading in a decade. improvedees and environment for equities going forward. >> what you see that in typically this kind of activity and with low interest rates, you would assume there would be a pickup in activity in equities.

loreal's sales in the u.s. fell but globally, a raise consumers in china lifted the company to the first ever -- it also says it will buy back and cancel as much as 750 million euros of shares in the second half of the year. the chief executive has opened the door to a settlement over claims its wound up -- roundup weed killer causes cancer. he would consider a reasonable agreement and litigation. this as the number of lawsuits -- 18,400.g thousand air france has posted an increase in earnings. 400 million euros profit beat and it -- estimates and was up 16% from a year earlier. on aarrier has embarked

fleet renewal program, buying 60 airbus a-2 20's. that is your business flash. matt: debra mao with your business flash. i want to give you an update on the hong kong storm signal eight. theing will be canceled as hong stang -- hong kong stock exchange. it will be terminated at 1:55 local time. kettner is still with us from hsbc. in the middle of earnings season in europe, getting toward the end of it in the u.s., how have you been impressed by corporate results thus far? max: it is a double-edged sword. bullssomething for the and the bears. if i want to be utterly bearish, i could say what we have seen is earnings growth by and large is flat, particularly in the u.s.

but also in europe. bearish, to get really in europe, we started at 3.5 to 4% a couple of weeks ago in expectations and were roughly flat right now. that we havecement seen from companies out of the u.s. have been mostly on the negative side and that applies to the second half of the year. if i want to be bullish, expectations have been slashed so much for the fourth quarter and we are by no means expecting double-digit etf growth so maybe not beating in the second half of the year. in the u.s. what we do see in the second half of the year is the annual change in the dollar will become sort of flat. for thoseof a drag companies that are internationally exposed. there was a huge drag in the first quarter. she companies that are more internationally exposed down in earnings 12% to 13% and those

that are more domestically focused up 6% in year-over-year terms. that will pick up in the second half of the year. i will probably give you the boring answer. i'm somewhere in between. somewhere between being a massive bull and a massive bear. it is not as bullish as it seems, particularly in the u.s. there is upside for earnings in the second half of the year but nothing that will spur massive upside for equities in the second half of the year. nejra: we talked about this week, the guidance changing with the u.s. third-quarter guidance is becoming the worst since 2011. you could argue this is companies managing expectations so they can beat, but how concerned are you about earnings on a fundamental level in terms of how company profits are affected by trade war or anything else? slowing growth? max: i'm obviously making the classic mistake of focusing on

the next quarter and forgetting what you are asking about, the fundamental picture. it looks pretty grim. 2018, what fiscal -- in gdp --done gdp terms, half a percent higher than potential growth. nothing to get too excited about. it has done nothing but propping up debt to gdp. in the earnings picture, a fundamentalom picture, there is no basis to say fundamentally, u.s. earnings should be growing by double-digit or high single-digit figures. if anything, below that. most of that is driven by share buybacks. most of that is driven by financials, having expected payout ratio this year of over 100%. nejra: max kettner from hsbc bank, thank you so much. coming up, the ceo of credit suisse.

the bank beat the street on the top and bottom line. bloomberg users can interact with charts using tv . catch up on key analysis and save them for future reference. this is bloomberg. ♪

matt: good morning from berlin, i am matt miller with nejra cehic in london. this is "daybreak europe," and these are your top stories. credit suisse beat the street on the top and bottom line, says it's higher activity in the second quarter. but the ceo, tidjane thiam, strikes a balanced tone. >> every quarter has a mixed first quarter, we saw the second quarter starting negatively, we had very strong growth. contrasted. reserve isederal

what you expected to lower interest rates by a quarter point at today's meeting. u.s. president donald trump demands a large cut. we will have full coverage of the fomc decision and jay conference.s of the united states and china looking for a breakthrough in trade talks. president trump adds to pessimism, tweeting that regime continues to "ripoff" the u.s.. asian equities have a down day. and divergent fortunes -- apple trading,, as in revenue beat estimates signaling optimism about new iphone models. a different story for samsung -- shares dropped after reporting lower profit amid global trade tensions. ♪ ♪ nejra: welcome to daybreak

europe. credit suisse has blushed off the room in european bank earnings, adding revenue in the second quarter. the main trading unit is switzerland's second largest lender. the banks ceo game. gave his first interview of the day to bloomberg's francine lacqua. she started by asking him if credit suisse can compete with other rivals. >> tidjane: i think in our main ,usinesses, which is equities for the second quarter in a row, we came out around the top of the table. fixed income, i think that is a good performance compared to u.s. banks. francine: what is the environment like? still difficult? tidjane: still very difficult. every quarter has been remixed. you are seeing the second quarter starting very negatively. june was the best month in 42 months for us. so it is very contrasting.

you can get in the same quarter the worst and the best moments. so you have to be number. our strategy that you have to be -- you have to be number nimber. our strategy was to reduce costs , so we had to take our costs down severely. reit's.down the in no way, we are lucky because it came out with the new platform at a time when many officers are restructuring and we are benefiting from that. francine: what is the sentiment and what is the competition like in the aipac region? tidjane: we had a really good second quarter. profit is up 30%, 237 million. if you look, the business has done really well. $2.2 billion of m&a, we contract the de-leveraging, we created a number of projects, a bundle of

leveraged products, and we have -- we saw that trend coming and we knew we had to protect revenue. a ultrahigh trading initiative to encourage our network to trade more. our average daily trading has gone from 2 million per day to 2.2 million per day, 11% up. everything is up. income is up. francine: is this a trend? tidjane: i am always very optimistic about the future. , all theuite volatile questions on the trade negotiations are weighing on sentiment. i vcm is doing well for us. we are number one in asia and china for the first time, which we are very pleased about.

11th quarter of above 200 women in revenue. our financing group's lending is very strong. it is the market side that is difficult because equity volumes are down 16%. those trends have continued unfortunately. francine: a number of your competitors in france and cuts.y have done trading does that mean it is an opportunity for credit suisse or do you worry traders? tidjane: we work very hard to have an efficient low risk, platform which we believe is what we have now. would we were under pressure at -- we are last year, done with our restructuring and now, in terms of timing, we are at the right time in the right place, and able to pick up market share. we have been picking up market share in equities for the fourth quarter in a row. same in fixed income. down, ourpreads went

securitized business started doing better. site is good performance. -nna.llion in n. m&a ever, 59ghest billion. francine: anti-movie it would to continue to gain market share? tidjane: we are working hard for that. defending on the times. we spent a lot of time with our clients, we improved our prime business. 30%.ia, prime was up we increased our balances in prime, improved our pricing, and we're also reshaping our platform, the automatic trading platform. we are gaining share there. agos in new york two weeks and the morales very high, completely different. that postpecting

restructuring, they would be a significant upgrade. francine: what about the central banks? tidjane: they don't make life easy for us, particularly negative interest rates, they are a challenge. nejra: that was the credit suisse ceo speaking to bloomberg francine lacqua. let's get to the numbers here. the red headlines are that the second quarter statutory pretax comes in at 1.3 billion pounds. 1.76,mpanies estimate was bit. is missing a little second quarter producer price index provisions, the other red headline, 550 million pounds estimate, the producer price index provision coming in a lot pounds.556 million the interim dividend, 1.12 pence per share, up 5% from a year ago. this is an important story for lloyd's in return capital. it also said it's longer-term

targets remain unchanged? matt: we've got some headlines out of glencore as well just breaking. glencore sees full-year marketing earnings before interest and taxes within 2.2 to $3.2 billion. that is the guidance range. of guidance excludes a cobalt loss. glencore has a non-cash $350 million event marketing lost on cobalt. that is a big headline. ops did notn copper meet expected performance according to glencore. and first half zinc output was 535,900 tons. nejra: some numbers from to takata. -- full-year your operating loss. of ¥193ously saw a loss billion so not quite as big as they previously saw it is.

also raising its full-year guidance to reflect divestitures. that is the main thing here. first-quarter operating income billion, it ¥9.7 estimated a loss of ¥17.95 billion. so those are the numbers coming in from takata. also coming through is its full-year dividend? matt: very interesting, headlines as well. the sneaker maker coming out with second-quarter sales that beat estimates, 1.3 2 billion euros. the estimate was 1.1 9 billion euros. operating profit for the second quarter beat estimates at 18 billion -- 80 billion. its 2018s raising and 2019 forecast, so watch those shares at the open. nejra: we also have numbers coming through from next. i am trying to get them here on

the bloomberg, having a bit of trouble finding these right now? matt: why don't i come in? nejra: yes, go for it? matt: why don't i come in with aston martin numbers. nejra: yes! first quarter adjusted operating loss of 39.2 million pounds. remember, aston martin has had a hard time cutting its workforce and cut it sales outlook as well. second-quarter revenue was 211 million pounds. it had an adjusted first half number, operating loss of 35.2 million pounds. first half revenue by the way, 407 million. it is seeing the launch of the suv that everyone has been waiting for, next year. our own michael dean, auto analyst from bloomberg

intelligence tells us he is very impressed by it. but it will not come out until the second quarter, so they have to wait for the revenue from that product. nejra: let's stick with earnings. lundin petroleum has reiterated its guidance, saying output is above the midpoint guidance for the first half of the year. their ceo says there is to a possibility for an early start project,il discovery the largest ever made on the norwegian continental shelf. joining us now is the ceo, alex schneiter. thank you so much for joining us. you say there is definitely a start.lity for an early how much of your could it be, and what makes you so sure we could get an early start? max: good morning -- alex: good morning. we stated on the november that we are on track to achieve november, which is what we have been guiding for. we have within the guidance a

range between early october and december. so far, the project and execution has been absolutely stellar and done a great job. we have to remember, it is a big and complex project. we feel comfortable within a november. could we do it earlier? it is possible, but i think right now we will stick to the midpoint, which is november of this year? matt: another company has said that the ice shelf drilling investments have reduced earlier. given the company's record of cutting costs, do you think they would do it again in the project 's second phase? alex: it has been a phenomenal story, really the perfect storm. that was built at a time when the industry was in a low cycle. nor did a good job in executing this project. new costeen posting

reduction on the capex on phase one. when it comes to the following phase, phase two, it is early days. but phase two is progressing really well. we will have to wage. certainly, there is no reason why we should csm -- we shouldn't see a similar trend, it is early days, but we are so progress.d with the nejra: the deal with ecuador earlier in july will allow you to deem 60% of your outstanding shares. i understand you are paying for it with a 650 million dollar cash payment. does this hamper your ability to increase dividends next year? alex: not at all. we are now entering a for themational phase company. it was good timing for us to do the deal because we are months away from starting on spa

sverdrup. thisve ample, still after transaction today, we have ample liquidity to do other things. so definitely not, we are on track to continue to do what we promised to do, and when it comes to dividends, as we ourted this morning, policies will remain unchanged. the company will generate close to a billion dollars in cash flow in the next year? matt: why did you not buy back aquinnore's entire stake in in london? >> we thought it was really an industrial deal where we exchanged a 60% shares and sold verdrup.ty part of s we felt it was the best transaction. the company has stated publicly

that they are happy with the 4.9% remaining, so at this point, there are no further considerations. i think both parties are happy with the deal. you for yourhank time this morning. ceo of lundin petroleum. i want to bring breaking news on the u.s.-china trade talks. they are over. u.s.-china trade talks have ended in shanghai. the dollar has now erased its gains for the day as the headline breaks. again, u.s.-chinese trade talks have ended in shanghai. coming up next, boxed in? smurfit kappa posted a strong revenue gain. but is europe's largest cardboard box and packaging maker feeling the heat over brexit? we speak to the ceo anthony smurfit next on bloomberg.

matt: it is 7:18 in london, 41 minutes away from the start of trading across the continent and in the u.k.. this is "bloomberg daybreak: europe." i am matt miller in berlin. nejra: and i am nejra cehic in london. u smurfit cover has posted a strong revenue gain and 10%.d dividend gains earlier this year, the group said it was insulated over brexit. but how is it feeling now? joining us now is the ceo, tony smurfit. sounds like these numbers, you're feeling quite comfortable -- confident about the outlook. with boris johnson as prime minister in the u.k., does that change the outlook? tony: we operate in 35 countries, the uk's one of those countries, but we have been

through many crises over the years. we have been in business over 80 years, and if it there is to be a crisis, which hopefully we hope there will not be, we will come out stronger in the end. we certainly hope there is not in no-deal brexit. it is an important issue for us that there is a deal in the whole brexit situation. that thet the end adults will take over and make sure the deal happens? matt: he hope there is some sort of agreement. you are concerned that an no-deal brexit would be bad for business, anthony? tony: i think it would be very bad for trade come very bad for our customers. we are kind of insulated in the sense that it is really up to our customers who will feel the heat, but at the end of the day for us as a company, we are somewhat insulated. we make our own paper in the

u.k., we make boxes for our customers in the u.k., and if they have a problem exporting or problems with their supply, that will be a problem for us. we are seeing that right now, matt come up demand in the uk's probably one of our weakest countries. that is obvious because running for us. the rest of europe has improved. over the last month or so but we have not seen improvement in the concern.ch is a nejra: as a global business, it is always interesting to get your take on what you feel about the public economy -- about the global economy. what is your take on the prospects of an industrial recession or anything worse? tony: for the most part, we are in an industrial recession. if you look at car manufacturers, chemical manufacturers, there is a problem in demand in that area. for us, though, food and drink businesses continue to do well. we continue to see growth. . we grew to about 2% in the first

half in europe. if you look at latin american business, it grew around 3%. so it is still reasonable. because of our foot injuring sector. but our industrial sector is. suffering. carmakers and chemical makers are difficult for us? matt: you were still able to post a 9% gain in pretax profit in the first half and you are boosting your interim dividend. what gives you that confidence? are central bank policies helping to give you that confidence? tony: i suppose the confidence we have is in our own business model. we are are very resilient business as you have seen through the numbers would have posted. i think the confidence we have in our businesses, we are investing in our medium-term plan which is over 1.6 billion, which is making us more innovative.d we are helping our customers in the marketplace, helping themselves more. the whole blank of our company

is to be an innovative producer for our customers and help them reduce costs. when you look at the development of our business, the whole sustainability agenda is really positive for us. when we look at the confidence we have, we are pretty confident about our future. , becausewonder, tony of that confidence, are you targeting an investment grade rating given your past guidance of being comfortable as a high-yield name? tony: i think we are inevitably moving towards that area. we are effectively priced as an investment grade company. i think we are moving in that direction? matt: tony, thanks so much for coming in. we really appreciate your time with us. tony smurfit, ceo at smurfit kappa group which boosted pre-tax profit been in percent in the first half and raised its interim dividend. we want to bring you some headlines we are getting on

rupert stadler, former ceo of audi. munich prosecutors are bringing charges against him for a legend fraud and false certification. this is all related to the diesel gate scandal. there have been allegations of a leastup as well, or at obstruction, so they are bringing charges on alleged false certification against rupert stadler, former ceo of audi. let's get to the federal reserve. the massive event today, widely expected to cut rates for the, first time in over a decade 25 basis point cut priced in. . here on set with me in berlin, jones,joined by richard he is a bloomberg mliv strategist, fx strategist. richard, what do you expect, and is there a possibility that we get a 50 basis point surprise?

richard: i think the fed will deliver 25. in its statement, which i think is the key part of what happens later today, in their statement, they will probably validate the market pricing for the next 15-20 months. i think they will these cumulatively. i think the fed will be comfortable without anything that is what they will voice in their statement after cutting 25. nejra: richard, how do think they will validate the market pricing? there are some words that jay powell and his statement might disappoint, by for example, saying that the fed is still data dependent. so how will it validate market pricing? max: i think they can actually maintain a level of data dependence while at the same time saying that they believe that this is the first in a series of gradual and slow to take shapecuts over the next 12-18 months. i don't think those two things are incompatible. i think the fed can voice

concerns to justify what they are doing now and say that they are acting preemptively with a view to looking at the data, but that the bias is slowly over the next year and half? , fromwe heard yesterday scott minor that he is concerned this could make the next downturn worse. and of course, asset bubbles have been a concern for a while? richard: i think the fed's thinking is that by getting out in front of this, because they do have limited ammunition to deal with this, by getting out in front of it, they might limit the extent of the downturn so we don't get a total economic wipeout like in 2008. maybe something more gentle like in 2001. i think that is their mo. nejra: richard jones, thank you so much for joining us. credit suisse shares are rising in premarket after they beat both the top and bottom lines. we bring you plenty more from the ceo, tidjane thiam. that is it for "daybreak europe"

from me and matt,. matt continues with the next program, i had off to the radio. and we have also heard that trade talks have ended in shanghai. we have seen a bit of movement on the yuan on the back of that. this is bloomberg. ♪

anna: welcome to "bloomberg markets: the european open." we are live from london, i am anna edwards, with matt miller in berlin? matt: hello. asian stocks dropped and the u.s. equity futures are mixed as trade talks are dropped. the cash trade is less than 20 minutes away. ♪ anna: a war of