matt: morning from berlin. this is "bloomberg daybreak: europe," and these are today's top stories. the white house holds off on licenses for u.s. companies to work with huawei. on the data front, china's ppi tracks for the first time in three years. italy's deputy premier calls for fresh elections, saying the government no longer has a majority, but the prime minister says he will not let his rival dictate the event. ready and waiting. the philippine central bank of a nerd tells bloomberg he sees further monetary easing happening as early as september.

the r.b.i. says they are ready to slash rates further. and not finding drivers. disappointing sales growth sends uber stocks plunging in after hours trading. they report their biggest net loss ever. ♪ matt: good morning. let's check out some of the data points you want to watch today. first off is the yen, continuing to gain strength against the dollar. the stock traded 106 earlier, now at 105.98. a new handle on the yen as trade tensions simmer and cause investors to reach for safe haven assets. also, euro-pound is headed for its strongest level since the

financial crisis. pence almost there, at 98 for a euro. the pound continues to weaken against the shared currency. the u.s. 10 year yield down two basis points at 1.70. 's had been down in the 1.60 earlier as they reach for safe haven assets. let's check in on the markets in asia. we go to juliette saly in singapore. juliette: mostly positive here. asian stocks higher for a third session. we had a pretty good beat in terms of second quarter japanese gdp, although the bank of japan also changed some of the purchases, which has seen big movement coming through. it is higher by 0.6%. the kospi also looking good, despite the concerns ratcheting up between the u.s. and china trade tensions over huawei and

its supply chain. we did have the rba monetary policy today indicating that governor lowe is ready to ease rates lower. chinese stocks coming under pressure today, along with those in hong kong. some weakness on the csi 300. that is in regards to a divergence to the data we got out of china today. let's take a look at cpi, which 0.28%. up 0.2 8% -- pork cpi is the redline, up far higher than core cpi. we had a big miss coming through in tpi, showing a divergence between consumer inflation and inflation on the factory floor. all these adding to concerns as to how the pboc can address boosting stimulus when you have inflation rising on the consumer front, but the climbing -- declining on the factory floor. matt: juliette saly in

singapore. for investors, august has been all about the trade war and china's currency. it has been anything but a quiet start to the month. after the yuan sailed past seven and china was labeled a currency manipulator, markets have been focused on what is next in the trade dispute. in a bloomberg scoop, we learned the white house is holding off on a decision on licenses for u.s. companies to restart business with huawei after aging says it is halting purchases on u.s. farming goods. what is the corporate view on the trade dispute? we have had a wide speck -- a wide spectrum of commentary. >> any global chief executives that says they are not concerned about a trade war between the u.s. and china is not being honest with you. >> overall, especially in europe and into the u.s., you have this uncertainty. with this uncertainty, you have volatility. regarding the u.s. at this

stage, we don't see any negative impact on the trade war. >> we are not immune to what is happening in the micro and trade war sides. it gets into the resilience of our portfolio. >> we have seen some impacts on the industrial base exports getting slower. it is having its impact. >> we see more uncertainty in the markets, but also in the macroeconomic environment. that is why we are a little more careful, especially in the semiconductor space at the moment, and expect the second half of 2019 with the recovery in the first half of 2020. >> this will hurt all regions in all countries. it is an illusion to think this will be a win-lose scenario. matt: china's price index

contracted for the first time in nearly three years, dimming the outlook many manufacturers. prices fell 0.3% from earlier. joining us is the senior currency strategist at cba europe. what is your take on the trade war and where it is headed? it seems we continually get bad news, and there is very little respite. guest: there is a big downside risk clearly. at this stage, in terms of the trade dispute were trade war, things could -- in terms of the trade dispute or trade war, things could get worse. it is morphing into a currency war with the chinese policymakers now apparently deliberately weakening their currency. that is a dangerous game on the part of the chinese because if the market smells that -- if

toodepreciation becomes severe, it is problematic because the chinese have a current account surplus that has shrunk significantly. it is just under 1% of gdp. the other thing to remember in terms of why it could be dangerous to weaken the bimember the -- remim significantly, we are talking property developers. they do not have the natural u.s. dollar hedge in their balance sheets. the cost of refinancing the u.s. dollar, if it continues to go up go up --ntly would would be expensive. it is a dangerous proposition, but at this stage it is one of

the tools that the chinese have to fight this trade war. saying thel, are you risks of strengthening dollar to companies with so much dollar debt on their books, the risk of currency outflows the likes of which china saw in 2016, and scoop the risks, they far outweigh the benefits of weakening the yuan to boost exports? seems at this stage, it that the policymakers in china want to engineer or contain a weaker yen at a gradual pace. they want to contain any depreciation. they want the yuan to go down the stairs rather than the elevator. if they can engineer this, it is upset somer ways to

of the drive to the export sector from higher u.s. tariffs. but it is a dangerous game because there are less favorable payments backdrops, and because of large exposure from the nonfinancial chinese corporate of the u.s. denominated debt. matt: what is the likelihood of a positive outcome to this currency war, to this trade war? chinese oreither the president trump having any incentive to come to some sort of positive conclusion, or at least a cease-fire? elias: they both have an incentive. they both have an incentive to come up with some kind of trade truce. the problem is we are not at that stage yet where both parties are willing to put more water in their wine, especially on the u.s. front considering they are the ones ratcheting up

the tensions there. that is why i am afraid that before we get to some form of concrete agreement or a material breakthrough on the trade negotiations front, there could be a bit more turbulence ahead. matt: where do you see the best places to put your money? obviously, a lot of the government debt we see is nominally negative. we have been talking about that all week, $15 trillion. much more of it is twice as much showing negative real yields now. gold costs money to store. is the yen the best playwright now contrary to the japanese wishes -- the best play right now contrary to the japanese wishes? outperformedn has in the previous financial crisis, in the 2008 financial

crisis, the yen outperformed even the u.s. dollar. the yen is a good currency to have in a currency portfolio. the yieldso with negative in most major countries, gold is also a pretty interesting asset, a pretty important asset to hold in your portfolio. matt: we will continue talking to you. a lot to go over on this friday in august. good for us. senior currency strategist elias haddad stays with us. we will talk about the final pickup in fx. the trade back and forth and china's growth trajectory are pertinent to the likes of rio tinto, the world's second largest miner, who was on a roll. they were marked by surging prices for iron-or. it all changed in august as they slumped into a bear market, taking shares in the miner down with it.

the ceo defended the group as a cash machine that will keep rewarding shareholders despite the turmoil. >> what we are experiencing is the following. a very strong demand for steel on the back of infrastructure investment and building properties. for the first time ever in the first six months of the year, they crossed the line. that chinaknowledge is managing this pretty well. people do not see clearly is china is launching or forg to launch a program the building because of the rules. they got to rebuild those cities.

as far as our concern today, and we haveh way, we know to introduce it as required. for us, it is pretty good. let me put it this way. at some point in time -- [indiscernible] it will renew some of the cities. the quality for high currencies will be there. the demand will be there. china, which is a reference product. ceo: that was the rio tinto speaking with jonathan ferro yesterday.

let's get the bloomberg first word news. we go to annabelle jewelers -- annabelle drillers. >> the central bank faces further easing. a quarter-point cut could come as early as next month. policymakers could also reduce the ratio that the bank must hold in reserve. what we are contemplating is another rate cut of maybe 25 basis points. it could come as early as set timber or in the fourth quarter. we have another hundred basis points requirement ratio before the end of the year. economy grewpan's more than expected in the second quarter as consumer spending and

business investment offset slumping exports. gross domestic product grew 1.8% from the previous three months. consumer spending was a key driver, raising the most in two years. the reserve bank of australia says it is ready to reduce its record low interest rates even further if the economy needs it. the governor pushed back against expectations for growth and influence -- for growth and inflation. >> inflation will be below the target bench for some time to come, and will remain above the level we kept consistent with employment. lowerssibility of interest rates will remain on the table. india's prime minister is hailing a new era in the disputed region of kashmir. the pakistan counterpoint is

warning of genocide. common sense is what the u.k. prime minister boris johnson is urging as he tries to negotiate a new divorce deal with the eu. bbc he has told the thinks there is still plenty of time to secure a better deal. global news 24 hours a day on air and tic-toc on twitter, and powered by more than 2700 journalists and analysts in 120 countries. this is bloomberg. matt: thanks very much. annabelle with your first word news. italy's deputy premier calls for a snap election as he tries to end the populist coalition, but it may not be quite that easy. more on italy next. this is bloomberg. ♪

matt: this is "bloomberg daybreak: europe." i'm matt miller in berlin. let's check in on the markets. first, a look at what is going on in asia. we have a little bit of mixed trade, but in general we see the msi asia-pacific rising. some chinese indexes are falling on trade war concerns. the japanese 10 year yield down another two basis points, yielding -21 basis points, and the yen making things not so easy for the bank of japan in terms of keeping up inflation. 112erms of the euro-dollar, is the level you are watching. s&p futures are down after a big rally in yesterday's session, and brent crude continues to fall, today another six cents. down $57.ent crude today, we are asking a question on the mliv blog, what impact

would the dollar intervention have across assets? you can join the debate, reach out to us and the mliv team. this is spurred by president trump's continued complaints or renewed complaints about the stronger greenback. let's get the bloomberg business flash. for that we go to annabelle droulers in hong kong. annabelle: hundreds of jobs could be at risk as ubs is considering an overhaul at an investment bank. executives are looking to revamp the division that has posted volatile results in the past year. they are looking to boost collaboration between dealmakers and the wealth management arena. now to a bloomberg scoop, the u.s. is holding off on a decision about u.s. companies wanting to work with huawei. beijing said it is holding purchases of u.s. farm goods. the licenses are required after

the u.s. added the telecom giant to a security last. to assureailed investors of its growth potential or that it could turn a profit anytime soon. second quarter adjustment sales that fell short of estimates and posted a net loss of $5.2 billion. that is the largest ever for the business. an enterprise division is being bought for $10,000. it is expected to close in the fourth quarter, ending in january. it comes less than a month after discussions over a merger fell apart after discussions overpriced. that is the bloomberg business flash. matt: thanks very much. annabelle with your business flash. let's turn to italy. things are heating up again. the deputy premier has called for a snap election. the leader of the nation's far

right league party is demanding lawmakers have a chance to vote out the government as early as next week. he is seeking to capitalize on the relentless advance of his polling numbers over the last year. but the prime minister signaled he will not leave office without a fight and will not let his opponent dictate the timeline of the event. he said, "it is not up to the interior minister to decide the timing of a political crisis when much more important actors are involved." just breaking now, a line from an italian daily newspaper saying salvini favors an october 13 election day. elias haddad is still with us. moveuch does this really fx investors when it comes to the common currency? it seems that italy is always in turmoil. is it really a red flag? elias: it is probably more of a

headwind for the euro than a drag for the italian political uncertainty. we will have to see what new government -- how disciplined in terms of fiscal policy the potential new government will be. the platform of each party. there is a lot of uncertainty. that will probably keep italian bond year -- bond yield spreads low compared to its european counterparts. that is more of a headwind for the euro, because the euro has two important supports here that suggest downside is limited. first of all, you have an important support. they have the natural demand for the euro supportive of the currency. secondly, the euro is undervalued relative to various measures of prices. for instance, consumer pricing, labor costs.

the ecb has a fantastic measure of prices that suggests the euro is 10% undervalued on a trade basis. these are important supporting factors for the euro that should more than upset the drag or the headwinds for the italian political or fiscal uncertainty. matt: in terms of the mliv question of the day, and i am thinking it is because of the euro-dollar rate, it does not seem to change that much. what do you think would be the effects of the dollar intervention? effective, i believe a dollar intervention has to be done in court nation with other sent -- in coordination with other central banks. they need to have a monetary isicy that is looser than currently the case. they need to step up their rate cuts for the u.s. dollar

intervention to be effective. clearly in the near term, the also the intervention, downside risk to global economic activity, which has increased because of this heightening trade tension, has also reduced or weighed on u.s. expectations. that is containing u.s. dollar strength to a certain extent. the is why despite -- dollar does well in an environment when global economic activity is poor and downside risk is high. but in this environment, the implications for the dollar are probably more mixed because the dollar will do well against the commodity sensitive currencies and emerging-market currencies, but because the fed -- one of the reasons the fed is not cutting interest rates or they are cutting interest rates is because of the downside risk of activity. fedimplication is that the

will have to raise their path to lower rates. they will have to step it up. matt: thank you for sticking with us. huawei --elias haddad. this is bloomberg. ♪

matt: this is "bloomberg daybreak: europe." i'm matt miller in berlin. check in on markets around the world. joining us from mumbai is nejra shaw. over in london is annmarie hordern. indian stocks advancing for a second day. syntax headed for its first weekly gain in five. what is the story? good morning to you in berlin. a couple of news channels started reporting there was a possibility that at the behest

of the prime ministers office, they might be thinking about taking a few steps for the stock markets. surcharge, orthe rethinking the long-term capital jane -- capital gains stocks. is nothing that they reported on. we just know that they will meet with the community. it is amongst the best we have seen so far. i think the bulls are very happy. matt: from mumbai to london, annmarie, what are you looking at? annmarie: it seems like overnight, optimism is starting to fade. trade war headlines once again dominating the market. it is fairly green on the screen, but when you look at what is going on in china, the hang seng is lower.

we are not seeing massive moves in either direction in terms of equities. foreign exchange is a mixed picture. i have been looking at the euro this morning after it dropped yesterday as matteo salvini calls for a vote in italy. bonds in asia are rising, as well as u.s. treasury sticking higher. iron ore back under 90 barrels a ton. we have seen it get a breather, but it is down nearly 2.5%. you do not see gold on my screen, but gold as well. that safe haven is trading high. i want to go back to the euro, because while there might be questions as to where the euro might go with instability with the italian elections coming up and lower for longer rates, look at the pound, the euro against the pound. 14 strike -- straight weeks the euro has strengthened against the pound.

it goes to show that the market in this trade of euro-pound, it is clear that brexit is weighing on the currency. matt: absolutely fascinating currency there. annmarie hordern out of london, niraj shah out of mumbai, thank you as well. i want to get to some breaking earnings news. an increased outlook out of the danish pharmaceutical company, raising its four-year outlook after reporting second-quarter net income of 9.6 billion danish krone. that is in line with the second-quarter sales of 50 billion danish krone. nordisk sees sales up 4% to 6%. 4% to 6% as well. they are grazing their outlook

as well. we will speak with the ceo of 9:30 a.m. onafter "bloomberg surveillance." uber slumped in the late trade after second-quarter earnings fell short of estimates. the net loss came in at an eye watering $5.25 billion. that is the largest ever for the ride-hailing company. hethe call of the ceo, addressed how they are handling their competition. a competitive environment and our position in the ridesharing space remains stable to improve. we will take some of that to improve. we will take that into our business where we will see significant capital investments but incredible potential. is matthewng me now block some.

lyft seems to be doing better than uber if you look at its results compared -- also, not a lot of companies lose $5.2 billion in a single three-month period. is lyft gaining on its bigger competitor? matthew: they are certainly doing a better job managing investment expectations, may be partly because there is forward guidance for what they should be looking for. 5.2 billion dollar loss into context, a lot of that was stock-based expense. the underlying loss is still eyety big, but not quite as watering. i think operationally, it is hard to compare them apples to apples.

uber added a 30% increase, which when it is five times the size grew 40%,d lyft that is pretty good. they have a lot of work to do to getting toward a sustainable cost ability level. there are questions about how this will work in the future. matt: to focus on uber, because that is what everybody else around the world uses, you point it outcome of a global business. overhings get better for -- for uber? matthew: i don't think they will get better in the second half of the year. that is what the company was signaling, the kind of revenue that they expect. they expect rates to grow in the second half of the year because pricing in the big markets will go up, there are less competitors, so that will help. as they grow, operational leverage kicks in. lots of shifts start to shrink,

but it will take a while before we hit the. -- before we hit that. matt: how long? are there people out there forecasting a profit for uber in our lifetime? matthew: if you measure our lifetime in terms of what is in the bloomberg estimates, by 2022 people are expecting a small loss. they are moving toward profitability, to do three years isa minimum before the level a poster number. -- is a posted number. it is three or four years away. matt: i hope we both live that long. usthew bloxham talking to about the big earnings story globally, the big loss at uber. volatility is back and set to spread in a week that's trade -- roil thel the

yuan. here is dani burger. dani: it is the month that traders go away. volatility is high. you can see that historically by looking at sag on the terminal on the vix. august traditionally has a pickup of 2.4 percentage points. that has been especially true to start this month when we have trade tensions erupting. because of that, we have this massive flight to tail risk hedges. this is the index looking at hedges for fx and stocks as well. this will pay off in extreme swings. the demand for this kind of option, you can see it spike. that level is about its highest since february 2018. you will call back then, it was the big armageddon.

there are consequences for some of the bigger trades, and it is trades arehat carrie one of them. is remarkable what it has done over the past week. especially as fx volatility picks up, which hurts the carry trade, you see investments falling off a peak. this trade has erased all of its gains for the year. volatility ruining some of the favorite trades of the year. matt: thank you very much. bloomberg's dani burger with a look at return. elias haddad is still with us. marketong time, the fx was simply dormant. what do you think about this return of volatility? is it good for business? elias: from a trading perspective, it certainly is good.

there are a lot of risks out there. there is a lot of risk that could turn ugly on the trade front, the risk of a hard brexit. we have the italian political uncertainty. all of this is generating a lot of volatility in financial markets, especially currency markets, which is the biggest financial market out there. to say this, the biggest beneficiary of this pickup in volatility will be the safe haven currencies, the japanese yen and the swiss franc because of their surplus and the positive net foreign asset acquisition. they are vulnerable to further home,l repatriation back which is fairly supportive of their currencies. matt: can i ask you about the annmarie hordern chart? name, butshed was the from my perspective, it is the

euro strength that is so interesting. what do you think of the euro-pound frank? -- strength? we are hitting the all-time high in this crisis for the euro and the pound. elias: the pound is not only underperforming against the euro, but most major currencies. that has been the case for a few months now because the risk of a hard brexit has increased. we are probably going to have new elections in the next month. in september, when the u.k. parliament returns, a vote of no-confidence is expected to take place -- a vote of confidence is expected to take place against prime minister johnson's government. if he wins, clearly the risk of a hard brexit remains. if he loses the vote of confidence, there are 14 days for a new party to form a government. if no party can form a government, then johnson has not

ruled out pushing an election beyond october 31, meaning the risk of a hard brexit is quite high. the upshot, what could be a less dramatic scenario, is the opposition is able to form some kind of caretaker government that would have the aim of avoiding the eu -- the u.k. leaving the eu without any deal. uncertainty, the political uncertainty and the risk of a hard brexit, this will continue to undermine the british currency. matt: pressure there until halloween. elias haddad is going to stick with us. there is more to talk about on this friday, as we reach the end of another week of markets. let's look at the week that was through the numbers. that has moved the

markets this week because of the chinese central bank's daily currency fixing becoming a closely walks -- closely watched event. it triggered the biggest loss in the yuan since 2015 and triggered a tumultuous week in markets. this episode led to the u.s. labeling china a currency manipulator. the latest escalation in the trade war sense investors rushing to haven assets. $15 trillion, another number that is the world's stockpile of bonds. that is nominative negative yields. $1500. gold futures hit a six-year high. the precious metal has been one of the chief beneficiaries of the trade dispute between washington, beijing. another safe haven asset. rather than paying a government, you have to pay to keep it somewhere, or keep it under the bed it. this is bloomberg. ♪

matt: this is "bloomberg daybreak: europe." i'm matt miller in berlin. let's turn our attention south to italy. things are heating up again. matteo salvini has called for a snap election as he seeks to capitalize on the relentless advance of his pulling numbers over the past year. an italian newspaper suggests he favors an october 13 election date. another report says an election might be set for october 23. this comes as the prime minister signals that he will not leave office without a fight and will not let his opponent dictate the timeline of events. for more on this, our rome bureau chief, and our bloomberg opinion editor. they join us now. sondra, what is the likelihood that we see an election in october?

it would seem pretty high. what we do not know is what will be the day. but with salvini throwing the gauntlet and calling for elections, he will get it. we don't know when he will get them. salvini favors a very early election to capitalize on the success he has in the polls. opposition parties might want to delay as they come up with a strategy because they are not prepared. matt: what are the rules? do they have to wait a certain number of days after an election is called? how does it work in terms of the bureaucracy? recess.ro: they are in although lawmakers are on holiday. the governors or lawmakers must reconvene. he will probably make a speech, ask for a confidence vote, most likely will lose, but a new

majority might come up. it is difficult to tell. then it will go to the president . when he sees there is no other majority, it is between 45 and 70 days before an election is called. matt: fernando, what do you make of this? gained a lot of support during the european elections and is trying to capitalize on that. is this a chance he should be taking? can he make a run for it here? fernando: in a way, it is surprising he has not tried to take this chance before. the european elections were a fantastic success for him. he has been riding high in the polls. he only got 17% in the last election. but the movement, the senior coalition partner, has been imploding.

he is trying to seize his chance. there is no particular reason i the government should collapse, like there is no reason this government should have been formed. they want to know what salvini's economic program will be, in the tension is bound to reemerge. matt: what is the biggest risk for investors here? fernando: there are some elements within the league that are calling for italy to leave the euro zone. salvini has squirm down this rhetoric since the formation of his party because italians are becoming supportive of the euro. he does not think this is a winning strategy. this is a prime minister who has said repeatedly that he does not want to respect the european rules. he is in a stronger position

here because government bond yields have been falling throughout europe. the ecb may restart connotative easing. he has to keep a cat -- may restart quantitative easing. he has to keep a cap. we know it is something investors do not like. i suspect this could reemerge. there could be turbulent times ahead. matt: you mentioned the possibility of him getting a majority. what is the likelihood that this technocratic leader could put together a majority and actually beat salvini at the pass here? alessandro: to be honest, pretty lean. the numbers in parliament are just not there. , thereocratic party could be some who want him gone. it would reduce the number of lawmakers, which needs one more vote before it is passed.

they want to pull together a majority to pass this reform to have something to show to their voters. there are some loose people in parliament. most likely, this would not be enough. another option that has been mentioned in the papers is this -- the budget needs to be submitted to brussels by october 15. it will be complicated, as fernando was saying. matt: we will be following closely. thanks for your time this morning. alessandro is our rome bureau chief, and our opinions editor, fernando from milan. you can follow his work. to get his opinions. central banks are cutting rates

to counter growing economic risk. the governor told bloomberg he sees further easing coming as soon as next month. what we are contemplating is another rate cut of 25 basis points. it could come as early as september, or it could be in the fourth quarter. we also intend to cut further our requirements another 100 basis points for the requirement ratio cut before the end of the year. matt: meanwhile, rba governor philip lowe says he is ready to reduce australia's record low interest rates further if needed. the central bank undertook back to back rate cuts in june and july as it tried to revive growth. but not everyone agrees that easing is the best way to go. while investors are expecting says they another

were wrong to cut rates last month. >> the process of lowering the rates causes assets to inflate. so there will be more wealth piled up by the people who have harder and it will be for people who just have a little bit of savings to get a return. matt: elias haddad is still with us. marks makes a point that i think bears repeating. as central banks cut, the wealth piles up. this is what we have seen through the financial crisis with quantitative easing, and probably why we have so much in savings sloshing around. does the negative interest rate picture we have seen make since to you with so many assets searching for a zero risk yield? elias: certainly, that is a

great point. the fed chairman jay powell, he emphasized it following his meeting. are not curtailing investments because of low interest rates. they are not investing because there is too much downside risk for economic activity and demand is not there. they are not borrowing. the current interest rate is not an impediment for them to invest. it is the global environment, and also the weak or soft domestic demand environment. what this means is it puts a lot of the onus on governments, on fiscal policy to take advantage of these negative yields and to stimulus the economic activity even more. i think the key message would be negative yields. pimco.e heard from

scenario about the fed going back to quantitative easing. can you imagine the fed going that far? can you imagine u.s. rates going negative? elias: we need to see inflation slow down even faster than what the current case is. inflation expectations, we need to see it lower. to see the inflation expectations implied from the 10 year government bond yields and the treasury yields in the u.s. is close to 1.6%. it has been trending lower, but we need to see further deterioration. not simply the headline of inflation or core inflation, but inflation expectations. we need to see the expectations priced in even more aggressive rates. matt: it has been a pleasure

having you with us today. thanks for joining us. elias haddad is the currency strategist at cba europe. he will continue the conversation. tune into bloomberg radio at 7:30 undimmed time. this is bloomberg. ♪

matt: good morning from berlin. this is "bloomberg daybreak: europe." the white house holds off on licenses for u.s. companies to work with huawei. china's ppi contracts for the first time in nearly three years. premier calls for fresh elections, saying the government no longer has a majority. just happy content -- just sappy conte says he will

not let him handle events. not finding drivers. public life is proving difficult for uber as disappointing sales growth sent the stock slumping. the group reports the biggest net loss of all time. welcome to "daybreak europe." acrossgetting headlines from wpp with first quarter -- sorry, first half comparable organic sales down 2%. that sounds bad, but it was better than the estimate, which was for a drop of 2.9%. wpp holding up a little better than the street was expecting. 1.6% to 7.6 2 billion

pounds. reiterating its guidance, probably the most important thing in the stock market is the outlook for the company. is retaining its guidance as well as its dividend. let's take a look at markets. first, equity index futures after big gains yesterday around the world, we see a little bit of drop today in terms of equity futures for the u.s. and europe. you see ftse futures, dax futures, dax futures down 0.2%. cac futures down 0.75%. thereretty amazing gains in paris yesterday. in terms of bond futures, take a look at what is expected to

happen with bond prices this morning. german ten-year futures are actually rising right now. you could see the yield, the incredibly negative yield fall even further. you see italian bond futures down. the spread will widen out as investors grow more concerned about the political situation in italy. could seeond futures 10 year treasuries drop below 1.7%. let's check on the markets in asia. juliette: we are seeing positivity in the msci asia-pacific index is up for a third session, but you have the nikkei pairing its gains. second-quarter gdp beating year on year. the cost be doing quite well despite the latest headlines surrounding the u.s. and china

and the effect into the huawei supply chain. we are seeing electronic players do well in korea and taiwan. australia's market closing higher by 0.2 5% after a volatile weekend following the release of the rba statement on monetary policy. we heard once again the central bank is willing to ease rates further. some weakness coming through in china on the back of trade concerns. the csi 300 in leach -- in late trading down. let's have a look at the ppi number, showing this subdued movement on the factory floor. below what the market was looking for and showing the implications of the trade dispute is showing subdued reaction in terms of manufacturing demand. cpi was better than expected. nearing that ceiling of 3%, coming in at 2.8%.

giving a little bit of a headache to the pboc in terms of how it addresses further stimulus. thanks very much. juliette saly with a look at asian markets. for investors, august has been all about the trade war, and of course about china's currency peg, anything but a quiet start to the month. after the yuan sailed past seven and the u.s. labeled china a currency manipulator, markets have been laser focus on what next in the ongoing trade dispute. we have learned the white house is holding off on his decision about licenses for u.s. companies to restart business with huawei after beijing said it was withholding purchases of u.s. farming goods. what's the corporate view? we have had a wide spectrum of commentary this week. executivesal chief that says they are not concerned

about a trade war is not being honest with you. inespecially in europe, and the u.s., you have this uncertainty. with this, you have this volatility. regarding the u.s., we don't see any negative impact of the trade war. >> we are not immune to what is happening on the macro a trade war side. comfortable given the resilience of our portfolio. >> we have seen some impacts on the industrial exports getting a bit slower. it is having its impact. that is clear. >> we see more uncertainty in the market, but also the macroeconomic environment. are more careful, especially in the semiconductor space, at the moment. we expect a flat second half of 2019 with a recovery only in the

first half of 2020. >> the moment we start having a weaker rmb, it is an illusion to think this will be -- matt: we also have data out of beijing. china's producer price index contracted. factory prices fell zero point 3% in july from a year earlier. already looking at razor thin margins. , aning us now at the open ceo. what do you think about the state of the chinese right now? producer prices are falling. they are looking at low margins. seem they have devalued the currency enough to help on that end. i'm not sure it would help anyway since a lot of them invoice in dollars.

iswhat is happening in china interesting in terms of currency devaluation. they don't have much of a choice. area -- they are net exporters. the way we are looking at china at the moment is this is not a great environment. there is a lot of volatility. volatility is overstated. china is still growing 6.6%. domestic economy is growing well. there has been data released today about contraction in terms of economic data coming through. just yesterday, we had export data from china as well. if you go back to the imf and the global growth forecast, at for 2020, forecast

china actually came out with numbers stronger than expected as well. markets have run ahead of themselves. however, we don't think the volatility is warranted. we actually suspect china is in better shape than the market is looking at. likewise for the u.s.. matt: yogi, let me go on a little tangent here. you brought up something i wonder about. you run your company, you started your company. the decisions you make affect your livelihood. put in imfock do you forecasts? >> imf forecasts are a good anchor. you should pay attention to them. i know they change. there was a minor downgrade from april. i do pay attention to them.

i think it is longer-term in nature. wrong.ease don't get me even the imf are cautious about trade wars. brexit. about there is uncertainty in the market. you mentioned august and the news flow that has been going on. august traditionally is a month where you get negative returns on financial markets. you do get lost in liquidity. that is not happening right now. it is not surprising to see this level of volatility. we are comfortable with what the imf are saying. we know they are often behind the curve. they aren't anchor you need to pay attention to. it has not been a fantastic earnings season.

2% growth fora s&p 500 companies. how do you feel about earnings growth? >> earnings were pretty underwhelming. earnings-per-share was around 3.3%. in has not been a great earnings season. earnings drive share price appreciation. markets have been at record highs. you would expect markets to take a breather based on the earnings number we have seen. the u.s. is still growing at 2.9% in terms of gdp growth. we don't see those numbers reducing significantly over the next six to 12 months. remember, the backdrop of all of this is u.s. elections next year. the market seems to be trading around trade war rhetoric.

as soon as you get up meeting respond., markets will you also have the potential of further rate cuts in the u.s.. at the moment, you have a very dovish powell. think trump's rhetoric will change in the first quarter, second quarter of next year and he will become more hawkish. for the time being, that provides some assurance to terminology being used on bloomberg to make sure markets don't fall apart in the way that the volatility we have seen over the past week perhaps suggests. >> it is great to have you. i'm going to keep you little bit longer. i want to get the bloomberg first word news right now. for that, we go to hong kong.

>> japan's economy grew more than expected in the second quarter. group anestic product annualized 1.8%. consumer spending was a key driver rising the most in two years. u.k. prime minister boris johnson is urging common sense as he tries to negotiate a new divorce deal with the eu. there are less than three months until scheduled partner from the block, but there is plenty of time to secure a better deal. indigos prime minister's hailing a new era in the disputed region of kashmir. his pakistan counterpart's warning up violence and genocide. -- warning of violence and genocide. global news, 24 hours a day on

air and @tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. matt: thanks very much. coming up, teetering on the brink. italy's deputy prime minister wants a snap election as he tries to end the populist coion. more on that next. ♪

matt: it is 7:17 in london. we are 42 minutes away from the start of cash trading across europe. this is daybreak europe. let's check on the markets. with futures, we see u.s. futures trading down after big gains yesterday. the japanese yen on a 105 handle.

euro-dollar up a little bit. not a lot of movement, still hanging around 112. five crude gaining now cents a barrel, but still down at 5743. investors are putting money into bunds even though the yield is so negative. i guess they expect appreciation or figure it is a better alternative to gold. you can see yields at -59 basis points. italy's 10 year bond futures down. that means when cash trade opens, you will see the price .all and the yield rise the germany, italy spread will go out a little bit because of these concerns on the election. you can see the 10 year yield at the bottom of your screen. 1.6 8% compared to -59 basis points. let's turn to italy.

the story continues to get more heated. debbie premier matteo salvini has called for a snap election as he seeks to capitalize on growing numbers in the polls. inelection could be held october. the prime minister signals he will not leave office without a fight, will not let his partner or opponent, you could say either one about salvini, dictate the pace of events. her member, they are in the coalition together. and yet we are calling them rivals. i want to say only in italy. in fact, this is very european. in italy, it flares up more often. doesn't concern you when you look at euro assets, the problems that flareup constantly in the boot? yogi: not with respect to

europe. it has been going on such a long time. we are concerned about brexit. the uncertainty that brings. however, the european economies such as germany are still looking robust. markets in europe are still up here today. -- year to date. an election in italy is probably good news if it brings energy to make better decisions. u.k., things are more uncertain with what is going on around brexit and we are assuming no deal brexit on the 31st of october. we are quite positive the u.k. economy. of 1.4%.dp growth we have inflation at 2%. markets are up over 10% year to date.

18 months back we had zero exposure to the u.k.. we increased our exposure in january. thehink once we get through 31st of october, things will be better and more positive granted that there are a lot of issues deal. no there's a lot of uncertainty. the u.k. has a service industry everybody wants exposure to. germany, the u.s., or asia. optimistic. matt: you are going to continue that on the others of this newsbreak. in the meantime, let's get the bloomberg business flash. >> hundreds of jobs could be at

risk. ubs considering an overhaul of its investment bank. executives are looking to revamp the division. the swiss bank is looking to boost collaboration between dealmakers and the wealth management unit. to assureailed investors of its growth atential or ability to turn profit anytime soon. posted a net loss of $5.2 million, the largest ever for the business. broadcom has agreed to buy syman tec's -- division. it comes less than a month after discussions fell apart over disagreements about price. that is your bloomberg business flash. matt: thanks very much.

gdp hits atquarter 9:30 a.m. london time and bloomberg economics thinks britain's economy suffered a mild hangover during this period . hansen says the bigger picture is the economy has lost momentum since start of the year. this is the bank of england -- this gives the bank of england more than enough reason to keep interest rates on hold. hansen joins us now. what is your take for the gdp number? why do you have a more bearish take then yogi? >> for the second quarter, the economy is going to contract very modestly. consensus is stagnation.

isortant points to take away the reason why we have seen the is the contracted hangover from the stock that took place in the first quarter. there were car factory shutdowns. in june.or weather of get a pretty poor quarter gdp. what we don't think is the u.k. economy is heading for recession. returnk we are going to to 0.3% quarter on quarter. given everything that is going made a goodyogi point. it is not barnstorming growth, but it is growth nonetheless. that is where we see things at the moment. matt: what do you think about the hangover concern? yogi: the hangover is real, matt.

to see the u.k. having done as well as it has bearing in mind what we have gone through over the past 18 months. i think investors are fatigued about brexit and its implications longer-term. everyone is trying to forecast what is going to happen. you have to go back to fundamentals. you've got sterling 17% undervalued. you've got reasonable valuations. 10% year-to-date, that is a very strong number by historic standards. it is unlikely to continue going forward. the u.k. economy is in good shape. the real challenge is having exposure. if you take the main constituents, 30% of their revenue stream comes from the u.s.. gettingite hard domestic exposure in the u.k.. you have to go smaller cap. it is more liquid. there is more volatility.

not everybody is on hold waiting to see what happens with brexit. matt: i imagine it makes less difference if you are in the u.k., but then i don't want u.k. exposure because my biggest risk is the pound continues to fall against my euros. >> we have seen that over the past few weeks. it has fallen again, certainly against the dollar. there is a lot of downside risk there. we think on a trade-weighted basis, you could get another 15% fall on a no deal brexit. said, therney secondary is the release valve for the economy. it is how the shock manifests itself. you can interpret the fall in marketg as the way the is giving the economy a release valve. mechanismmpetition

because the u.k. is going to become a less open economy. matt: thanks very much for joining us. this is bloomberg. ♪

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anna: good morning welcome to "the european open." matt: the markets say there is everything to play for. asian stocks mixed. a strong session on wall street. european equity futures are pointing lower. anna: the white house delays allo.s