nejra: good morning from the city of london. i'm nejra cehic with matt miller live from berlin. this is "bloomberg daybreak: europe." the fed cuts rates for the first time since 2008 but a jay powell news conference royals markets again. movie midcycle adjustment but adds "i didn't say it is just one kospi or code cut." at the bank of england, the slumping pound and specter of hard exit looms large as mark carney faces a tough news

conference. standard chartered shrugs off trade tensions to surpass expectations with first-half underlying revenue. please speak to the cfo and next. societe generale beats but revenue for fixed income dips in the quarter. we will hear from the ceo imminently. matt: the federal reserve has cut rates for the first time is really, but that only half the story. after the quarter-point cut was announced, the chairman gave investors more than a little food for thought in what is widely described as a muddled press conference. he described the cut as "essentially in the nature of a mid-cycle adjustment."

stocks hit session lows and the closely watched two-year and 10 year spread flattened to the narrowest since march of this year. to say the move had an insurance aspect rather than signaling the start of an extended easing cycle. to thefurther adding confusion it with the comment that said "i didn't say it is just one cut." the president said on twitter "powell let us down." keepovernors voted to rates unchanged. the fed announced the into its balance sheet reduction. the two's tens curve rish deepening a little and u.s. flat. we will talk about the fed this hour the first, the corporate earnings season. was 12.03dollar yesterday. breaking news from siemens,

seeing the fiscal year industrial profit margin at the lower half of the range. siemens, pointing out some issues after missing in the third quarter. business was 1.9 4 billion euros. the street estimate from the survey was 2.19 billion euros. third quarter industrial business adjusted profit missing. yearns still sees fiscal euros -- 6.30 to seven but sees a fiscal year industrial profit margin lower and fiscal year moderate revenue growth becoming more challenging. nejra: let me get to ing. second quarter underlying pretax is at 2.0 one billion euros. the estimate was 1.85. that is a beat on ing.

3.4nd-quarter net interest, 7 billion euros. estimate 3.49. a slight miss on that and those are the two key lines. another think analysts are watching is whether the dutch bank can stick with new clients in italy after client checks. we will have a lot to talk about with the ing ceo who will speak to us later this hour. do not miss that interview shortly. let's get back to another earning story from this morning. standard chartered reported first-half adjusted pretax profit that beat expectations. the bank is also confident of a full year return on tangible equity greater than -- in 2021. standard chartered said it is impacting sentiment, the trade. it makes 40% of its revenue in

china and asia. andy, thank you for joining this morning. lots to discuss in these numbers. one think investors are focusing on a lot is the cost. you've said second half costs may be slightly higher than the first half. can you say to convince investors that you are getting cost under control and moving toward positive? >> the first-half numbers have been encouraging for us on a constant currency basis. the top line is up 5%, operating profit up 13 are sent and we were 8.4% return on tangible equity. all of those moving strongly in the right direction. part of the story was cost control. cost action was lower than last year by 3%. controls are well under and we are reaffirmed that the .ost will be increasing

the important thing for us is cost control enables us to invest more in the business for the future. cost controls, happy with the progress on the front. matt: the first half ratio was 13.5%. the street was looking for 13.8 in our survey. why is is coming in under expectations? andy: i think there are two reasons. 13.5 percent is actually after .4% for thected share buyback program we are undertaking at the moment. even though we are only halfway through that at the end of june, we had taken the whole of the reduction for the 4 billion as the regulators require. a little bit, but nonetheless 13.5%, middle of the range where we had intended to be. risk-weighted assets were higher in the period and that had an effect, but that is good news because it means we are lending and business is good. we were comfortable with 13.5%

after the one billion buyback, which is nearly three quarters complete. you mentioned the buyback, let me ask you whether you expect to announce a further buyback later this year or next. andy: what we have said to shareholders is weak intended to -- we intend to keep the capital ratio in the 13% to 14% range and as we build up enough profit, we will look at what we do next. no promise at this point in time but something we keep an eye on. matt: your return on tangible equity, 10% target. are you on track to hit that goal still in 2021? andy: yes, we are. if you recall four years ago, internal tangible equity had become almost nonexistent and the goal we set then was to get 8% and we updated that to get to 10 percent in 2021. at the half point, we were 8.4%,

a significant increase over a four-year. period. we are comfortable with the progress we are make in and the absolute goal is to get to the 10% number in 2021. nejra: you are confident you will return on tangible equity over 10% in 2021. what makes you so confident? andy: all of the levers we have put in place in the business are really starting to show through. if you look across our businesses, we have had one of the strongest performances we have seen in our corporate business for many quarters. our private bank has done well and the markets in which we operate, a lot of our markets are in asia, a lot of them are some of the fastest-growing markets in the world. a combination of the environment we are in and the actions we have been taking is starting to take traction and we are making good progress, so we are getting more comfortable.

one of your largest most profitable units is in hong kong. protests there have been large and lasted long time. is that affected your business there? andy: it is clearly unfortunate what is happening in hong kong. it hasrall answer is suppressed sentiment a little bit but overall. , how performance there has been good. -- our top line, one of the most profitable first halves we've had in many years. we keep a close eye on what is happening there but the market is still very strong and we are period.this will be a we will move there in the meantime, profitability remains strong and performance remained strong and that is what we are focused upon. nejra: bill winters recently told bloomberg the backdrop of the u.s.-china trade talks was a boost rather than a burden for your business.

we understand the next round of trade talks will happen in september. can you give an update on the impact to your business right now with trade tensions? andy: what bill is talking about is a relatively small part of our overall business directly between china and the u.s. a much bigger part of our business is within asia and particularly within china and within hong kong. while the discussion and the headlines have been on the former, the activity within the asia region has remained strong. our china business on a local currency basis has published double-digit growth for the first six months of the year and last year. we are seeing a lot of activity, a lot of what has happened in cross-border trade playing to our strength. what isncouraged by happening and the fact we cover so many asian markets, if there are trade flow shifts, we are better positioned to benefit from them than most. matt: thanks for joining us. andy halford, group cfo at

standard chartered. socgen's, we have second-quarter results, beating the street as revenue from fixed income dips. we speak with the ceo. don't miss that interview next. this is bloomberg. ♪

matt: "bloomberg daybreak: europe," i'm matt miller in berlin. nejra: i'm nejra cehic in berlin. estimate wasr net 929, so a bead on second-quarter net for socgen. second-quarter revenue 6.8 billion euros, estimate 6.24. a beat on the top and bottom line and the banks, strengthening its cet1 ratio to a target of 12%, ahead of schedule.

the increase might alleviate concerns among analysts who have suggested the bank may need to raise capital and basically the boost of the bank's capital the outperformance of most trading suggests the restructuring is starting to take shape. societe generale ceo frederic oudea spoke exclusively with bloomberg in paris. frederic: we are posting this updating our and projector re-taking into account 2019-2020.io in cash when you look at the figures, there is no reason to cut the dividend. >> is this sustainable beyond 2020? frederic: yes, because we are able to absorb the capital impact. it is the same amount we have communicated to two years ago.

we are confident to be able to do that with this policy. revenues having discipline in monetary policy at the fed and distribution policy. >> your investment bank, revenues fixed-income are down 10%, revenue equities down 7%. do you expect these difficulties to remain in the second half? frederic: first of all, let me say yes. resilience versus the second quarter, we are restructuring so we have the impact on the activities. compared to our peers, it is pretty decent performance and we this capital market activity, we want to focus where we have strong leadership. i see opportunities in this market where some banks are withdrawing from activities. a lot of clients won't pursue

european banks alongside and societe generale is among them. you've achieved 35% of your target by 2020. you are already starting the job cuts in the u.k., for example, and in france. how many already have you done and do you think that will be enough? all, we don'tt of give figures but i can tell you everywhere it is moving smoothly. we are confident in the capacity to meet our objective and we have -- thanks to this, with good franchises, leading worldwide franchises to meet acceptable return on equity is the purpose. caroline: still, given the current district -- interest rate environment, some banks are the hardest hit by this environment. how long can your margins

survive? frederic: i don't buy that. -- it eurozone markets, is not a french factor. presence in france, not in any other country in the eurozone. deposite, on the margin, but the credit margin is doing pretty well currently which means overall, 10% of societe generale revenues which 10%, 90% willted, potentially grow smoothly. does cut if the ecb rates as soon as september, do you think it should also take some additional measures in order to limit the damage? and i wasi think so, encouraged by the recent communication of the ecb saying they are considering something like this.

i think they understand that if it lasts long, it can impact profitability. and belity to invest more efficient. the ecb cannot just look at this very far and should look at something like this, other countries that have taken similar initiatives in similar situations. matt: that was frederic oudea speaking exclusively with caroline in paris. let's get the bloomberg business flash with debra mao in hong kong. beyond me and its inside shareholders have sold $480 million in discount shares. piece,fer them at $106 a around a 19% discount from wednesday's close. the move handed early investors profits.f

u.s. refining and chemicals operation faces disruption after a major complex in houston erected in flames. at least 37 people are injured and the city briefly ordered residents to seek shelter indoors. -- basedcould cripple at the site. slower subscriber growth than investors has hoped for. the streaming company ended the quarter with 108 million subscribers to its service. spotify says the shortfall was related to its failure to market a plan for students. the streaming giant plans to make up for lost ground by year end. that is your bloomberg business flash. matt: debra mao in hong kong. ing has beaten estimates with underlying pretax profit in the second quarter coming in at over 2 billion euros.

the group marginally missed estimates on net interest income. added its italian unit will temporarily refrain from taking new customers after it was told to stop by the nation's capital bank earlier this year after shortcomings found in its money laundering checks at the country's biggest online lender. joining us now is the cfo of ing. you are the biggest online lender there. can you tell us when ing can take on new clients again in italy? morning. nice to be on your show but just to remind you of the results for at quarter, we are pleased adding more than 300,000 primary new customers which takes ing to over 30 million customers worldwide in the retail space and as you mentioned, strong growth in terms of loans, 7.5 billion in loan growth, in terms indeposits -- 11 billion

deposits and 2 billion euros in pretax profit with a return on equity for us of almost 11% so about they pleased solid results we have. addressing your question from italy, we are in constant dialogue with regulators in italy about the remediation we are taking steps in italy and as we go through this process, we hope to begin a better position to guide the market when we can actually start taking on new customers in the latter part of this year or beginning of next year. having said that, we continue to service our customers in italy as normal for now. nejra: great to speak with you this morning. the second quarter underlying pretax came in better than expected but second-quarter net interest income missed the estimates. the you expect net interest income to still keep being under the lower forn

longer rates environment being signaled by central banks globally, including the ecb? pressurendeed we have but you could also call it negative for long interest rate environment given where we are in the cycle and i think we are looking in terms of other strategies beyond what we are doing now to basically mitigate that particular impact, diversifying our business geographically to non-eurozone repricing our assets books in terms of across the board better margins in mortgages, for example, improving our fee income and looking for better operational ,fficiency, more digitization and more pressure from savings margin. it was seemingly leaked that ing was looking into a possibility of acquiring commerzbank.

i wonder if you think national governments are making it more m&a tolt for transborder happen in the banking industry. these are probably rumors from some months ago and i would like to say we don't comment on any specific situation, but i would say that from an ing perspective, some of the principles for any cross-border deal is we must be able to move liquidity, must be about a move capital cross borders and that environment from a banking unit perspective doesn't exist today. what are your strategic plans with the turkey business? do you plan to sell or downsize it? in terms of our franchise in turkey, we have been there for a long time. we have this bank well over 10 years. it is a franchise would be like. -- we like. of our small fraction

overall asset numbers, about 3% of our acid-base so our colleagues there are doing well despite the difficult situation they find themselves in macro economically. we are quite pleased with how things are going in turkey, the managing of downside risks from a credit perspective. matt: one of the ways you have made your money through the years is being on the avant-garde of tech banking, online banking. you've joined a consortium of banks that are using blockchain to offer international currency, of sorts. i wonder what you think about that in light of the criticism facebook has received for libra. in terms of distributed technology, ing is at the forefront of that. what we do as an institution for now is taken observant view. check -- wepate,

participate, check with regulators how they feel about technology but it is one of the many initiatives we do as a bank and there are many others we can talk about but it is one area of interest and we take a watch and see attitude. matt: what are you hearing about usc, the universal standard coin? i'm not so familiar with that topic, sorry. briefly, earlier this year, ing said it was looking for hundreds of extra employees to fight money-laundering. how is that impacting costs? tanate: i think we announced in q2 that we have now over 3000 staff working on our aml programs. we are adding staff and that initiative and it brings additional costs, but we think it is the primary goal for the bank to make sure we keep the so weafe and compliant,

are trying to compensate that with other measures. some of our cost-saving programs us having effect that help cushion the cost increase in some programs. having said that -- the costs are partly structural and partly ongoing. nejra: tanate phutrakul, cfo of ing. ♪

nejra: this is "bloomberg daybreak: europe." i'm nejra cehic in london. matt: i'm matt miller in berlin. let's look at some of the assets making moves coast fed day. the s&p 500 fell more than 1% after the widely described as muddled. press conference. the dow jones industrial average down and the nasdaq, despite the news from apple, dropping 1.2%.

nejra: yesterday we saw the 10 year yield move lower but we are up two basis points today. we didn't get to 2% yesterday on the 10 year yield. the two-year yield sold off yesterday and continues to edge higher today. futures on the s&p 500, dead flat and the dollar at a two-month high. euro-dollar trading at 110.52. overall, the markets gave jerome powell a thumbs down. what he talked about was midcycle easing though he contradicted it by saying i'm not talking about one rate cut. it was such a difficult messaging to get across come i of't know your view if he failed or not. he did givems like into the market in terms of easing in the first place, right? the u.s. economy is still on strong footing, growing more than 2% at a more than 2% pace.

2%, wages are growing at more than 3%, so why cut in the first place is the question. but if you are going to do it, you might as well go with gusto, and it was more of a yawn than an awe. nejra: look at the recent data, the fed should not be cutting in its position. you even had scott minor of guggenheim saying that before the meeting but had he gone bigger than 25 basis points, with that cause more concern? in terms of outlook, the market will always want more and reprice. i wonder if whether what we got yesterday was a little blip and reposition. we are seeing steepening today on the two's, tens after a flattening yesterday. matt: john authors has a great column on the opinion page. onlyints out there has

been one midcycle reversal that has been a one and done and that was widely seen as a large policy blunder. it is unlikely jerome powell wants to follow that. some breaking earnings news. what do you see on infineon? outlook for 2019 full-year is confirmed. third quarter adjusted eps at 23. the estimate was 21. third-quarter revenue, 2.0 2 billion. head that beat on the third-quarter revenue. third quarter segment profit, 317 million euros. estimate was 295.3 million. a significant beat there. purchase of cyprus at 9 billion euros. in the preview, analysts were expecting some resilience and the cyprus deal being in focus. infineon seeing the full-year result margin at 13%.

those are the numbers coming through and we've had a lot of numbers through from the semiconductor space, adding to the feeling of a turnaround in the second half for semiconductors. coming up, we speak to the cfo of infineon. matt: we are getting bmw results, as well. in line with second-quarter expectations. analysts were looking for 2.1 9 billion euros. of publishes before taxes 2.20 euros. in line with estimates. euros in billion sales, 25.2 7 billion. in terms of the numbers, hitting exactly.

they are in the midst of switching out ceos and to some extent, their strategy toward electric cars. let's check on the markets around the world now. joining us from our team in mumbai and here in london. indian equities are tracking their asian counterparts lower. how much is the fed reaction playing into the market slump there? niraj: good morning to you. yesterday, markets were doing ok and we ended in the green yesterday and hoping if the fed would do somatic for the global markets, those calls would have gone ahead but only substantially lower. below that psychologically

important 11,000 mark for the nifty. worse than counterparts last i checked. even the currency is weak. in light of what the dollar strength was, but the rupee 69.58. to about it has not been a pretty morning for those long on indian currency or equity markets. let's see if the afternoon is any different. nejra: thank you. we've gotten the fed decision. what does the global market reaction look like this morning across assets? annmarie: you can see on my gmm screen it is a sea of red. china csi to singapore to this hang seng, under pressure. hasy meeting jerome powell taken, equities have fallen.

andy is no different foreign exchange, the u.s. dollar is up a second day, the yen down 4% and the yen down -- yields picking up higher. thanese two-year up more two basis points and in commodities, it is risk off. iron ore is 1.5% and brent crude -- wti crude retreating from a two-week high, down more than 1% as powell says this is not the start of an extended cycle. i want to focus on today. with the fed out of the way, what will the boe do? mark carney needs to face his reality of a likelihood of a no deal brexit. i am looking at the future outlook for november. the chances of a cut our 40% and at september, it is more than 50%. i looked at the numbers from a month ago. november the market was pricing in 19% and december 20 5%.

you are seeing a jump of a possible cut from the boe increase. today, no change but we could get a roadmap for a more dovish boe. matt: thank you very much. annmarie hordern from london, and nejra shot from mumbai. let's get the first word news with debra mao in hong kong. the trump administration is turning up the heat on iran, imposing sanctions on the foreign minister. the u.s. says he acts on behalf of the ayatollah who is already under u.s. sanctions. the move is seen reducing the chance of an easy solution to tensions in the persian gulf. u.k. government has doubled the spending on preparations for a no deal brexit. it is the latest sign the new prime minister boris johnson a serious about leaving the eu on october 31 with or without a deal.

has set aside over 2 billion pounds of new cash. it includes in immediate 1.1 billion to improve customs infrastructure. u.s. and chinese trade negotiators plan to meet again in early september as the latest round of talks ended with few signs of progress, but the u.s. says they were constructive and in the next meeting will be in washington. white house says the sides discussed forced technology transfer, intellectual property, and agriculture. onslaught oned an the democratic stage last night. him down oncut issues like health care, immigration, and women's rights. in response, the former vice president appeal to his record as president obama's number two. 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. ♪ debra mao in hong kong.

the federal reserve has cut rates for the first time since 2008, but that is only half the story. after the point when i-5 cut was announced -- quarter point cut was announced, there was a muddled news conference. he described the cut as a midcycle adjustment. and theit session lows closely watched two's, tens flattened to the narrowest since march has powell said the move had an insurance aspect to it rather than signaling the start of an extended easing cycle. nejra: further adding to the confusion with later comments that he didn't say it was one cut. president trump took to twitter to criticize the decision, saying powell let us down. cityn fed and kansas governors voted to keep rates unchanged. the fed announced the end of its balance sheet reduction.

today on mliv, will jerome powell's insurance cuts kill off the editing rally? reach out to the mliv team, ib + tv on your bloomberg. joining us, the head of u.k. rate strategy at hsbc. great to have you with us. we are familiar with the reaction yesterday to jerome powell but today, is the bond market going to get on board with this idea of a mini midcycle easing? the 25fed delivered basis point rate cut everyone was expecting, but it is far from clear this is part of an andnent cutting cycle now we are expecting another rate cut to follow in september, but that is far from the series of insurance cuts the market had been anticipating, which is why the weakness in the two-year yields. the 10 year sector on the other hand matters slightly less and i think from here you are likely to see a period of call

consolidation -- consolidation or yields where they are. our two's, tens treasury call for the end of the year looks less out of whack than some had done previously. we've had lots of calls calling for yields to move even lower but we would have to paint gloomy scenarios for the economic outlook to get there and it seems premature to see that. matt: remind us what your call was, what does this mean for dollar at year-end? in terms of the 10 year treasuries, we've still got two's, tens for years and and we have been the -- in bucking the end -- trend, calling for dollar strength. again inthey will cut september but that will be it

and they will stay on hold in 2020. to whats now shifts knock on impact the fed has on other central banks around the various aret seems likely to follow through with easing policy. maybe slightly less aggressive pace than would have been the case if the fed had been more dovish than it was yesterday. nejra: given what you said about expectation for further cuts, another one for september and then the fed to stay on hold, how would you trade the curve? would you put steepeners on or not put the trade on because of what you said? cuts,a: in terms of rate which is already priced into the two-year point. has to even more aggressive for the curve to steepen beyond what has been priced in. i certainly wouldn't be chasing them of.

there is more weakness to come in in your term for the two-year point if the fed doesn't deliver more and more cuts in the next couple of months. matt: what do you think about the idea the market can push the fed around? clearly it was disappointed yesterday when powell started to imply that maybe this was a one and done cut. he then answered and said we could do more than one. i'm not saying this is just one. is that a concern? daniela: for risk assets, they have been torn between this battle between monetary policy taps turned on on one side and fundamentals on the other. the dovish shift from the fed and other central banks, when the music plays, let's dance. andt buoyed risk assets through fundamentals out the window. now it seems the fed is going to

be slightly less aggressive than we were expecting previously, so suddenly you are turning back toward the fundamentals and maybe there are some question marks about the degree of strength there. so far, the fed has been following where the market has got to end it seems perhaps the market has slightly got ahead of itself, expecting so much from the fed. powell hasourse, been criticized for the way he handled yesterday's press conference but on the flipside, why should he allow himself to be bullied by markets? if we look at five-year breakevens, they collapsed. we are around 155 on the breakeven in the u.s. that with what happened in the tenure part of the curve, is that telling you the market doesn't believe the fed is going to be successful in whatever it does in terms of lifting inflation? daniela: i think that is very much the case. there is skepticism across u.s. and other global markets of

central-bank action alone maybe isn't enough to sustain and generate a rising inflation. -- rise in inflation. you've got inflation breakevens in europe, for example, well below the central bank's target. that follows a period of prolonged disappointment on inflation, so markets are saying central banks have the ammunition available to boost inflation and what we are seeing is perhaps increased pressure on the fiscal side to help out monetary policy given across various regions, at the zero lower bound with little ammunition in your toolbox left. matt: daniela russell, we have more to talk about with you today because you are head of u.k. rate strategy and there is going to be a boe decision, as well. daniela russell from hsbc stays with us. all eyes are on the bank of england, post fed.

johnson, doubling the amount of money available for no deal preparations, putting on the pressure. this is bloomberg. ♪

>> we decided today to lower the target for the federal funds rate by a quarter of a percentage point. it is intended to ensure against downside risk from weak global growth and trade tensions that do seem to have a significant effect on financial conditions and the economy. also, inflation. we are running below target. we see those as threats to clearly a favorable outlook. we believe this is the right move for today and we think it will serve the ends i mentioned. jay powell's comments

yesterday after the central bank cut rates for the first time in over a decade. this is "bloomberg daybreak: europe." i'm matt miller in berlin. nejra: i'm nejra cehic in london. let's get the first word business flash with debra mao in hong kong. tensionss.-china trade didn't stop standard chartered from delivering first half role -- result that beat expectations. standard chartered stock has been rising, helped by a one billion buyback program announced in april. on asts were lower reported basis than last year by 3% if you do it on constant currency. costs are definitely well under control. me and its inside shareholders had sold $480 million in discount shares. they offered them at $160

apiece, around a 19% discount from wednesday's close. the move was to hand early investors a slice of profits. it added to the company's coffers as it looks to expand. spotify has reported slower subscriber growth then hoped for. the streaming company ended the quarter with 108 million subscribers to its premium service. spotify says the shortfall was related to its failure to market a plan for students. the streaming giant plans to make up for lost ground by year end. that is your bloomberg business flash. matt: thanks very much, debra mao with your business flash. for the fed's first rate cutting more than a decade yesterday, all eyes swing to the bank of england this afternoon. the central bank is expected to keep rates unchanged at zero point 75% as it grapples with the new realities of brexit, the growing possibility of a no deal and the resulting sinking pound.

the deadlock in the eu continues and boris johnson is doubling the amount of money available to spend on no deal preparations. 2.1 billion additional pounds being set aside. daniela russell, head of u.k. rate strategy at hsbc is still with us. what do you expect from the boe today? mark carney is clearly not ready for a cut yet but is that coming? it is safe to say an awful lot has changed since the may inflation report when we last properly heard from them. domestic growth is slow, the external backdrop is different. markets are pricing in more than and ofe cut in the u.k. course, we've got a new prime minister and it will be exactly what the bank of england's take is on what the new prime minister has been saying and the dialing up of no deal rhetoric which will be the key focus.

clear the bank of england will vote unanimously to keep rates on hold but really, it faces a tough communication because with its growth in inflation forecast, they are assuming a smooth brexit scenario, but those are based upon market rates, sterling rates and cable, which are forecasting and factoring in the risk of a no deal brexit. in some sense, that reduces the information that those forecasts give. it will be very much a focus on the increased downside risk that the market is going to be paying attention to today. nejra: mark carney will have a job to fine-tune his messaging to match with the markets are pricing in. how do you expect mark carney to do that successfully? daniela: they said they are going to be publishing some around thees

forecast and it is what the bank of england would do in a no deal scenario, which will be the most focus. past, they have said rates could go up, they could go down in a no deal brexit and they would weigh up supply-side factors.mand-side what we have heard from various members recently is they would go down on the increased hit to demand. the big thing is the fall in sterling puts upward pressure on inflation. yes, that raises the case for a rate hike but at the same time, that is a hit to consumer income, which we saw in 2016 what the subsequent knock on impact is for consumption. this time around, saving rates are lower so it is not clear that people would be able to continue to spend in the same way they did in 2016. sejra: do you stay long on gilt

? areela: yes and we recommending bullish positions on the front end of the curve. if you do get a no deal brexit, we would expect the bank of england to cut rates to 10 basis points and be doing more qe. the big point is brexit aside, it is not the only driver of gilts at the moment. it is the external backdrop and for me, there is no compelling reason for the bank of england to be raising rates. head ofaniela russell, u.k. rate strategy at hsbc. great to have you with us on the show today. next, shall reports second-quarter profit expected to fall as the oil giants national -- -- natural gas segment feels the strain of supply. you will be breaking those numbers shortly, matt? matt: and looking forward to the interview.

bloomberg users can interact with the charts we show you. go to browse charts used on television to catch up on analysis and save charts for future reference. this is bloomberg. ♪

good morning. top stories.ay's the fed cuts rates for the first time since 2000 made, but a jay powell-- 2008 but a jay news conference royals markets. boris johnson doubled spending on no deal brexit spending preparations. the specter of a hard exit loom large. mark carney faces a tough press

conference. we are live. beating the streets. dard charter, the bank cfo gave his his take on cost controls. >> it is lower on a reported basis if you do it in currency. they were flat with last year. they are under control. revenue did being in the second quarter. >> welcome to "daybreak europe." a lot of numbers coming through on the bloomberg. i'm going through these barclays numbers, trying to find the key numbers.

and investment pretax profit comes in at 886 million pounds. revenue for the second quarter comes in at 2.8 billion pounds. second quarter cibc market billion pounds. this is a red headline. below 13.6 billion pounds. it is rear and aerating -- reiterating capital returns. it continues to target 2019 and 2020 tangible return on equities of more than 9%. let's see what other numbers we have got coming through here. cibc pretax profit and revenue.

if we are looking at second-quarter revenue, the red headlines come. 2.8 billion pounds. that number coming through. pretax, 1.5uarter billion pounds. it is the investment banking revenue that is key here. as we get into the details, we can see how barclays performed in the trading. anyher there were outperformance maps. >> a big miss. adjusted profit, we were looking for $4.94 billion.

it is going to start the next but they are going to want to look at cash flow from operations. 11.03 billion dollars. a big miss. >> coming up on bloomberg, we are going to speak to the ceo. that is after 7:30 a.m. london time. more breaking news first half adjusted operating profit, 533 million pounds. interim dividend per share, 20.1 pence. transaction. the details here, the enterprise u.s. dollars. 27

be clear and buy it $27 billion. -- moreg, the parent, corporate earnings. >> british american tobacco out with the earnings. first half adjusted operating 5.2 one billion pounds. beating the compiled estimate. it is what they earned an operating profit in the first half. closely attch that the market open. a look at european futures. we saw a reaction in the u.s. equity market.

not so much the decision. it was the messaging from jerome powell that the market did not like. the s&p 500 falling 1.8%. futures pretty flat in terms of the u.s.. the european market closed. we are getting a follow on to what we saw yesterday. ftse 100 and futures pointing lower. the losses we might see at the opening, nothing compared to what we saw and the u.s. yesterday. big action in the bond market reaction. >> absolutely. taking a look at what is going on in terms of the futures trade. und futuresd -- b down. the same is true with italian future bond futures. the treasury, dipping almost

down. not quite down to 2%. right after the announcement. bouncing back up. asiancheck in on the markets. for that, we go to juliette saly and singapore. probably not quite the devilish tilt you were hoping for. haven't seen asian stocks badly.health as the asia-pacific index at lows. banking to what a central -- what are central banks going to do? speculation the pboc could follow suit with a cut. by september. the hong kong monetary authority following as well. down by 0.9% rate on track to .he worst weekly loss the u.s. china trade talks.

we did see a slip coming through in south korean exports. the kospi weaker by about 0.25%. the nikkei a little higher, up 0.1%. due to weakness in the yen. we have seen it. the worst-performing currency. more of a dollar strength story. it has fallen by as much as 0.4%. what did help out, japanese stocks, good earnings numbers. to buffet the nikkei. it has been a downbeat day. so much.you let's turn back to the fed. hoping to cut rates. that is only half of the story.

foodowell gave investors for thought. he describes the cut as a midcycle adjustment. stocks hit session lows. flattened to the narrowest since march. the move had an insurance aspect rather than signaling the start of an easing cycle. >> adding to the confusion, his comment i did not say it is just one cut. the u.s. president donald trump took to twitter to criticize the decision saying powell let us down. there were two dissenters. voting to keep rates unchanged. the fed announced the end of its balance sheet reduction a little sooner than anticipated. we are asking will jerome

powell's cut cut off the everything rally? you can join the debate. joining us now, from frankfurt. think ofk you what you the muddled press conference we saw from jerome powell, does it make sense to you? said this ishave the beginning of a cycle. they may have cut by 50 yesterday already. the mixed messages he is sending conveyed the sense if the fed is ready to do more, we need more evidence of a slowdown or risk materializing. in the end, with u.s. growth slowing below 2% later this year

, inflation not picking up, there will be more rate cuts during this cycle. it is not a one-off cut, i think. sayinghe market reaction an insurance cut is not enough? the 10seeing reversal in year yields moving higher. the breakeven, the five-year rake evens dropped. >> the market had gotten ahead of itself. quite aggressive steps. what we are seeing right now, monetary tightening. if you look at what is happening with the dollar, equities. in the end, the market needs more. we are in a world awash with

debt. at a time when earnings are deteriorating. ouronly thing holding up rates, lower rates, a prospect of lower rates across the globe. clearly here in europe as well. the fed will be in a tight spot. growth continues to slow, providing more accommodation. there won't be a weak dollar to help. we saw the dollar index rise from where it was 24 hours ago. fx markets not going to let the fed take it down, are they? it seems like markets are losing a bit of patience right now. main centralll the banks casting their verdict.

of them really surpassed market expectations. we have the summer little upon us. major data releases. probably some of those positions, qe, global easing moreions in general are likely to be squared over the coming weeks. >> in that case, what trades would you be putting on in u.s. rates or credit, given what we have heard? >> near-term, cautious. suggesting tactical shorts. we are in for a bit of a consolation, some of these easing trades. it is probably one sided.

once the market moves to more balanced positioning, we are in for lower rates. u.s. treasury rates are global, u.s. yields, 10 year below 2%. clearly significantly so. arguing for duration. with the near-term likely to flattened further. reese deepening as the fed moves to the next rate cut. >> go ahead. >> i am wondering how you went -- expect the boe to react to boris johnson. ultimately unchanged a rates is to be expected.

some positions could be surprised. thisoe should maintain tightening wise. they are not going to take out any insurance against the brexit. signal higher inflation, even amid higher rates. this could go down a bit negatively. we are in for a hard brexit, it will be a different ballgame. >> more to talk about in relation to the bank of england. great to have you with us, let's get the first word news with debra mao. >> the trump administration turning up the heat on iran, imposing sanctions on the foreign minister. he acts on behalf of the

ayatollah who is under u.s. sanctions. reducing the chance of an easy solution it to tensions in the persian gulf. the u.k. government has suspended preparations for spending on a brexit. -- no deal brexit. asideancellor has set over 2 billion pounds of new cash including a 1.1 billion to improve customs infrastructure. u.s. and chinese trade negotiators plan to meet again in early september as the latest round of talks ended with few signs of progress. the u.s. says they were constructive and the next meeting will be in washington. support technology transfer and agriculture. global news, 24 hours a day, powered by more than 2700

journalists in more than 100 20 countries. this is bloomberg. >> thank you so much. breaking news on the bloomberg from rio tinto. get into these numbers. profitst half underlying , $4.93 billion. for rio tinto. worth $10.2 billion. announcing a special dividend. that is the headline to take note of, $1 billion. overall sain returns to shareholders, 3.5 billion dollars. that special dividend that is catching the attention. in.it coming >> we are going to talk about the boe more when we come back. mark carney grapples with the

sinking pound and the real prospect of a no deal brexit. this is bloomberg. ♪

>> we decided to lower the target federal funds rate by zero 5%. it is intended to ensure against downside risks. with trade tensions that do seem to have a significant effect on market conditions in the economy. running belown target. we see those as threats to what is clearly a favorable outlook. >> we believe this is the right move rate it will serve the enzyme mentioned. comment afters the central bank cut rates for

the first time in over a decade. 8:21 here. seven: 21 in london. we are 38 minutes away from the start of trading. this is bloomberg daybreak europe. >> i am nejra cherish. let's get a reaction. 1.8%.quities dropping we could see a lower open. dollar strength, the other reaction. the dollar holding those gains. euro-dollar, the 10 year yield dropped. bouncing back. curve flattening as well. reversing slightly. u.s.ke a look at the dollar, japanese yen. for an buy 109 and change dollar. stronger against the pound, 121. that will make mark carney's job

more difficult. both wti and brett, coming down after a strong march up. trading for 57 old 81 a barrel. after the first rate cut in more than a decade. focus shifts to the bank of england. grappling with the new realities of brexit. the growing possibility of a no deal exit. the sinking pound. we see a slew of manufacturing pmi data. including german pmi, down for seven months in a row. guest from commerzbank is still with us. mark carney has been doing his best to convince markets he wants to hike rates. can he do that, especially we know boris is doubling provisions for a no deal brexit?

market says no, he cannot and is pricing and a rate cut. the bank of england should maintain its implicit tightening bias. they have big an explicit inflation target. shows, they were probably move even further above the target across the horizon. therefore, even though it does not seem to fit the global picture, for the time being, they will maintain this small implicit bias to raise rates. carney does not successfully acknowledge the difference between the market , it does not come out

with a more neutral or dovish tone, what kind of reaction can we expect? people following the bank of england closely should not be too surprised. some of the market, given what we have seen from the other central banks, are expecting more dovish tones. disappointment in that regard. i don't think it will be that different. >> let's talk about the ecb. how much further can they cut injuring the european banking sector? >> the answer is it depends. how they really implement that rate cut. how they design the mitigation measures.

there are ways to cut rates more aggressively. introduce some exemption thresholds for bank reserves. calling for a 20 basis cut in september. more than the market thinks right now. for joining so much us. from frankfurt. busy day ofa corporate results. let's give you a quick recap. barclays second-quarter revenue surpassed last year's level. the u.k. group reiterated its capital returns policy. insides great alignment the bank where it is going. >> shall missed estimates. saying it has started the next part of the share buyback process.

we will speak with the ceo. don't miss that interview. >> bmw reported seeing profits falling 20% due to an acceleration of its electric vehicle rollout. it did confirm its targets for the year. the market open is next. ♪

>> we are live from our european headquarters in the city of london. i am anna edwards. , now what?say trade less than 30 minutes away. ♪ does it.

the fed cuts rates for the first time