bloomberg'sing from middle east headquarters. this is "bloomberg daybreak: europe." -- the u.s.timent president says the united states and china are talking on trade. asiaomments helped lift equities higher. wyoming -- dispelling fears of recession as germany's finance minister says -- all this ahead of a speech from jay powell in jackson hole. marching in the rain. up to 1.7 million people take to

the streets in a peaceful protest in hong kong, one of the biggest since the beginning of the unrest. we're live on the ground. very warm welcome to "daybreak: europe." nejra is on a well-deserved holiday. yield --overnment on bond yields. talk of fiscal response from germany. doing very well. three little words from the white house. and jackson hole. 30-year paperback above 2% -- paper back above 2%. week, thereure last was a demolition of view. mohamed el-erian writes an

op-ed. we will talk about it. the risk is that we have talked ourselves into a negative feedback loop. we're overdone on this bond trade. the oil market is reflective of a slightly better tone to the market. well," that'sery what donald trump has said in regards to trade talks. drone attacks to saudi arabia. -- in saudi arabia. six rigs added to 770. that's your oil market. dollar-yen has risen by 2%. is it a one-way trade? do you want to belong, -- be long yen? goldman sachs says yes. you want to be long yen into jackson hole. positioning is stretched, and they haven't seen at this stretched since 2015, when yen flipped over by 2.5%.

let's talk about the markets. momentum is changing. mr. trump said the u.s. is doing "very well." talking, trump added that it isn't ready to sign a deal. a suggestion comes only hours after his top economic adviser laid out a potential timeline for reviewing discussions with -- renewing discussions with beijing. apple ceo tim have voiced concerns about the main competitor -- tim cook had voiced concerns about their main competitor, samsung, gaining an edge. their product won't become subject to tariffs like apple's. the u.s. may renew while way -- huawei's general temporary license. >> we don't want to do business with huawei for national

security reasons. we will see what happens. i am making a decision tomorrow. manus: joining me is my guest host, chris wiley. good to see you this morning. another day, another slight risk on momentum. i make it 2-0. two on the office side -- he pushed back on doing a deal with huawei, versus the three little words, "doing ery -- very well." being very well" seems to what has moved the market. really? >> unfortunately, what's possibly good for negotiating playbookut of trump's isn't good for markets, in the sense that markets like a clear sense of direction, something that can extrapolate. that's precisely what they are not getting from the white house at the moment.

person ono stress the the other of the table. that's clearly what's going on here. an explanation, a potential explanation for the rally which we are getting now. but i also wonder whether it wasn't due anyway. we did seem to have a mini maelstrom last week in terms of risk-off sentiment. from a short-term trading perspective, i think sentiment had got very negative, so it was probably time for a bounce. was peoplethings beginning to look beyond the negative implications of this collapse in bond yields towards the policy response, and of course that takes us to jackson hole and beyond, which should be coming in the next few weeks. manus: yes. and we will, of course, get to

that. jp morgan popped out a note. they have cut their earning expectations in the u.s., albeit by a dollar, down to $177 from $178. you may want to be more concerned about caterpillar. they see a phased approach to tariffs. how are deconstructing and reconstructing that before you -- the portfolio, if at all, for a world of ongoing tariff angst? chris: it's pretty tough at the moment. the tariff situation, the trade war is making it, as i mentioned earlier -- we all like to extrapolate, to get a clear sense of direction, and this is making it extremely hard. we are global investors. not trying to pick winners and losers at the stock level, but we are trying to

weigh the impacts of this trade uncertainty on the risk environment, and, in particular, the risk and reward. right now our view is that we're in a situation where risk is going to remain elevated and returns are probably going to remain subdued. expect returns from equities on the lower end of the scale. that's tending to lead us to stay underweight equities at the moment. the problem we have is that we just can't identify any real sign that there is deceleration in the global economy over the last year and a half is bottoming out and switching to every acceleration. -- to a re-acceleration. global growth is negative at the moment. outside of the u.s., emphasis on that, valuation is pretty good.

if you squint hard enough, you can find valuation in the u.s. in certain sectors, also factoring in lower interest rates. you could even start to see value in the states, but it takes a little bit of juggling. outside of the u.s., it's not difficult. there's clearly valuation upside. you need sentiment to improve toward growth. manus: i think our bloomberg economist, the phrase i saw over the weekend was that our bloomberg tracker is talking about a crawl. we have slowed to a crawl. we are way lower than the imf view in terms of global growth going into the fourth quarter. you said you want to see something turn. what i want to know from you is there's typically a six-month to seven-month lag between the manifestation of pmi's, of sentiment indicators. what are you going to be watching for a material shift to give you an indicator that growth is on the turn?

what is critical for you on the counter play of data? chris: we have a dashboard of leading economic indicators that we watch. some of those are pretty well followed by others. they're all in the public domain, so i wouldn't claim to have proprietary kind of insight. the pmi is the key. we look at the economic surprise indices. they ahve -- have remained for an extended period across most regions below zero. still no real signs of an uptick. that's telling us economists are not ahead of the curve in terms of their forecasting, which plays into what you said about bloomberg tracker. i don't think economists have gotten ahead of it. we are looking at diffusion indices across sectors in the u.s. we are looking at the new orders versus inventories. i could go on. it builds up a broad picture,

which is that we are not seeing a re-exhilaration yet and the risks are still somewhat -- re- acceleration yet and the risk still somewhat to the downside. manus: to bank of america ceo brian moynihan says the situation with china will take the longest to resolve, but it isn't the only geopolitical risk. we spoke with -- he spoke with david westin in an exclusive interview at the bank's headquarters in new york. >> four things that would help the world a lot in terms of geopolitical. one was to get the u.s. budget deal done, because people forget that a shutdown in the context of 2018 was off the euphoria around tax reform and stronger growth projection. if you had that now, it would be a much different environment. it was taken off the table for a

couple years. the second question was the usmca. we have to get a trade deal done between these three major trading partners to provide stability to trade around the world and also show that countries can agree on trade. right now, nobody is getting deals done on trade. that would be number two. number three, we've got october, brexit. we have to get through brexit without having a major blowup. we all worry about that. it's not clear how it's going to happen. it hasn't been clear for a couple years, but now we are getting more to the edge. the fourth is the china situation. i personally believe this is the hardest one to solve. when you go around the world and talk to businesses, they believe this situation between china and the rest of the world has to be fair, free, more open access. intellectual property has to be fairly taken care of across the board. but these are very difficult issues. i think that's why it's going to take longer. if we are going to depend on

china being the solution here, i think it could not get worse, and that would be fine. it could bounce around a little bit. there could be ebbs and flows. it's a tough negotiation compared to the other ones, which i think could get done. >> have we added a fifth in recent days? hong kong. is there a threat to hong kong as a financial center? >> i don't think it's outsized. i think it's a serious situation, but it's a geopolitical situation. our teams are going to work every day. we watch out for them. we monitor consistently. they meet at 6:00 a.m. every morning and decide what to do. >> are you cutting back on your footprint? >> we are not doing anything. it's a great group of people. our thoughts are with them because it's a tough environment. those kinds of environments are no fun, and we've had them in different markets when different things happen. end of day, who wants to get up every morning and say do i go to work today, am i going able to

get there. my belief is that situation is a geopolitical situation, not a financial center risk right now. manus: a lot of risk identified by brian moynihan, cnn -- ceo of bank of america, speaking exclusive with david westin. let's get you first word news. >> thanks, manus. the iranian tanker detained on suspicion of falling oil to syria has now set sail -- hauling oil to syria has now set sail from gibraltar. the u.s. had issued a warning -- warrant to seize the vessel, but the court ruled the white house hadn't filed the appropriate action. shortages of fuel, food, and medicine. that's according to a report citing leaked government documents. the dossier prepared by the cabinet office also warned of job losses and disruption to the

u.k.'s ports for as long as three months. the report sets out the most likely aftershocks of a no deal divorce, not worst-case scenarios. oil's rising for a second day after a drone attack on a saudi oil field. yemeni rebels attacked the field. saudi aramco says there was only a small fire and no disruption to production. they produce around one million barrels per day, about 10% of saudi aramco's total capacity. 50 billion euros of extra spending, that's what the german finance minister says the country could muster in an economic crisis. is the first number berlin has put on a possible fiscal stimulus. while action isn't imminent, warning signs are increasing pressure on chancellor angela merkel's government. global news, 24 hours a day, on air and @tictoc on twitter.

this is bloomberg. manus? manus: thank you. bloomberg, we speak exclusively to the boston fed president and voting member ahead of the jackson hole meeting. that conversation is at 6:30 p.m. london time. this is bloomberg. ♪

manus: it's "daybreak: europe." i'm manus cranny in dubai. protesters rally for an 11th straight weekend in hong kong. organizers claim 1.7 million people took to the streets and what was largely a peaceful rally -- in what was largely a peaceful rally. do you think there has been a reset by both sides? do you think there has been a recalibration, a calming, or is that me trying to be optimistic? >> well, at this point, it's

hard to say. we definitely saw a less than confrontational protest here on sunday. it's been 12 hours since the crowds dispersed. you can see crews outworking this morning, cleaning up -- crews out working this morning, cleaning up some of the graffiti. it seemed like a more tame the people. what hasn't changed is the public opinion. 1.7 million people showed up and took to the streets. the government put it at around 128,000, but there was a message of no violence, which perhaps was a reflection of a chance to recalibrate, as you mentioned, after the violent clashes we saw between protesters and police at the airport last week. manus: yvonne, thank you very much. let's see where those protests go. trump drawing the protests in hong kong into the trade discussion. yvonne man, on the ground in hong kong.

let's turn to the asian markets. juliette saly is in singapore. juliette: it's a pretty solid start to the trading week here, led by what you're seeing in hong kong. the hang seng higher for a fourth session in a row. value fellits book to the cheapest since late 2016. japanese stocks doing well despite another contraction in exports. chinese stocks up by almost 2% ahead of the new bond prime rate coming through tomorrow in china. pretty broad-based buying in asia. i want to focus in on hong kong, because we have been looking closely at the impact those protests have been having on companies, none so much as cathay pacific. cathay pacific has actually announced that it is going to stop some of its tickets sales at the hong kong counter, but we heard on friday that the ceo had stepped down. saying hong kong

stocks will recover from these protests. we have seen christ in negatives before. they also -- seen christ in negatives -- seen priced-in negatives before. they really like the casinos. they say mainlanders will continue to go to macau, despite what's happening in hong kong. they say to stay away from the real estate and also retail stocks. you can see a property developer, down by about 2% in today's session. manus: thank you very much. great roundup. jp morgan plan to host a conference call tomorrow to help clients make sense of the markets after a week of wild swings in stocks and bonds. the invitation says, quote, "in the wake of a rather violent decline in yields, inversion of the curve, and volatility in equity markets, we consider the role of -- in exacerbating these

market movements." wild moves is what use had -- you had last week. german,ised down the u.k. yield forecasts. previous. 2% chris wyllie is my guest host this morning. he joins us in our london studio. chris, ok, a conference call makes sense. speak to clients. calm the nerves. keep the fees rolling in. i want to talk about volatility. the team put together a bit of fx vol. use volatilityto products to hedge? chris: no, i don't think it is, if you're that way minded. when you say late, it all

depends on exactly what your timeframe is. short-term, maybe. we saw a little bit of a spike last week, but not much. actually, it's my hunch that we'll probably see a slight swing back to risk on in the next few days, or maybe a week or two. if you roll it into the next few months, actually, we've not had that much volatility. we've not had a big spike in vix. we've had some weak days and markets, but no big deal really. so, if you are willing to pay -- of course, you always have to pay the negative carry if you want to do bold trades. that just goes with the territory. in the next few months, it's quite likely -- my other feeling is that we are yet to see a kind of purging spike. -- purging vol spike. that might come in the autumn

months. manus: we haven't had a vol-m aggedon. let me put this question of the day to you. so, let's have a look at this. which political crisis should investors care about the most? for our viewers who are bloomberg customers, join the debate. the entire team is wide-awake in london, new york, and hong kong. are we wide-awake in london? we are. move the camera. join the debate. what are you most worried about politically? chris: well, as a u.k.-based investor, it's hard to see past brexit. we're london-based. we are global investors. it doesn't factor that much at the moment into our global growth deliberations. that's much more about the trade situation. as sterling reference

currency, there are victim legations from brexit. we see the pound -- there are big implications from brexit. we see the pound fall back. it's more or less midway into the bottom third of the range you might expect, the range of outcomes which i see. probably 1.10 to the downside in a hard brexit, accidental, no deal kind of scenario, probably 1.45 if40, maybe even we get some sort of resolution. you're lucky if you are a dollar reference currency and that you don't have to worry about that. -- in that you don't have to worry about that. that's quite a range. we know it's going to be a binary outcome at the end of the day, so we have to think about that more than we would like to, quite frankly, when it comes to currency. when it comes to the growth outlook, it's still really all about trade.

manus: look, undeniable. we talk about it for one entire section every single day. i want to narrow it down in terms of -- you talked about an accidental hard brexit or a deliberate hard brexit. it doesn't matter whether it is accidental or hard. do you think we will get action before october 31? chris: before october 31, probably not. i'm going on what the government said. is that a wise thing to do right now? a debate. but i think we are going to get the general election by the end of the year. manus: ok. by the end of the year, we get one. an accidental hard brexit or a deliberate one. chris wyllie stays with us. i want to give you a quick flash of the hang seng. 2%.market rising by over these were according to pundits

and commentary more peaceful protests over the weekend. donald trump, however, has clearly tied together doing trade deals with how the chinese handle the discussions in hong kong. this is bloomberg. ♪

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>> the treasury curve is very consistent with what we have been weighing in our economic outlook inconsistent with what the fed has been saying about past rates. >> there is no reason to challenge the yield curve at this time. inflation is low. it is barely up to target. >> there is reason to think it may not be signaling the same as it has in the past and is depressed for other reasons. there is demand for safe assets. quality into the u.s. treasury. >> it is not our objective to manage the yield curve. we use it as a signal. what does it tell us about our policies?

that was last year's jackson hole. the yield curve was on people's mind. the bank was on the path of tightening. her member that? we are building toward coverage this year. the keynote speech, jay powell on friday. midcycle language just last month. although jackson hole symposium has existed since 1978, 1989, it gave the federal reserve chair a formal role at the event for the first time. this was under chairman alan greenspan. greenspan was giving the keynote speech. he witnessed the fallout from the dot-com bubble. critics saying the fed could have done nothing to prevent it. former -- the

future r.b.i. governor gave a speech warning on the risks of the financial system. that will be viewed later as having foreshadowed. in 2007, jackson hole focused on the u.s. housing crisis shortly before the fall of lehman brothers. 2010 ben bernanke used the event .o issue qe2 2014, it was all about the ecb president mario draghi and his own quantitative easing demand. head of that, our exclusive -- shortly after 6:30 p.m. this evening. through theset history lesson with me very patiently. still with us. chris, those were very pressing speeches about what was to come.

how important is this week's speech from powell at jackson hole? bei think it is unlikely to on that banner when you do it in 10 years time, but i would not be surprised to see jay powell take an opportunity to say something about what has happened to the yield curve in the last week or two. it would be hard for him not to say. i wonder whether we are now going to get more signs of the next iteration of policy. there is no doubt the fed do look at the yield curve. i happened to sit at their conference which janet yellen was speaking at last year. she did talk about the way the fed looks at the market and the sort of feedback loop, she called it the looking in the mirror problem, which they have. they will be looking at that and they will be thinking, you know, we don't want unintended

consequences here. therefore, we may need to get a bit more dovish. i would not be surprised to see at least a reminder to markets, what is the motivation of the fed right now? -- it is notn is to induce an end of cycle moment. they will take steps. manus: they don't want to be accused of another policy make -- policy mistake. let's listen to brian moynihan. it's good to talk about your fears. >> we have nothing to fear about a recession except the fear of recession. that's what's going on. if this war continues, does not get solved or that does not get solved, you could see this finally getting to the consumer confidence in the u.s., which is the critical thing to maintain. manus: nothing to fear but fear

itself. therein lies the point. we can almost talk ourselves into this negative feedback loop. in a cracking piece, mohamed talks about why we invert. more importantly, the consequences you could have on the consumer. it is already at a seven month low. is that a big enough risk we are talking about? >> definitely. it is another way of looking at this. this debate around the inversion of the yield curve, whether it is a predictor of a recession. or a cause of processions. mutually reinforcing expectations. observationhwhile to say we have nothing to fear but fear itself, but it is kind of self-evident. markets are always feeding on themselves this way, which takes us back to what i was saying

about the motivation of fed. if they are not the point trying to squeeze inflation out of the system, trying to normalize policy, that is out of the window. forget it. that is yesterday's narrative. if they want to shift the narrative dynamically, what to they need to do? >> they probably need to cut interest rates by half a percent in september. manus: is that radical enough fiasco some people would argue this fed is nowhere near as innovative as bernanke. chris: we don't know yet, do we? the long history of new fed chairs being tested by the market, i see it in that tweet, jay powell is basically still new in the seat. his metal is being tested.

we could assess how innovative it is at the moment. we just have not had the conditions to warrant it, i would say. i have said before i think normalization policy was entirely rational. the slow down, which we have had in the u.s., is modest. the policy made sense as it was. now i think the market narrative has changed and they need to deal with that. forgive my challenge to you. i would argue and i would look at this particular set of curves, japan, the u.k., u.s., have a look. let's have a sparring contest. i put it to you, sir, it is time for a substantial innovation because the social ramifications of the destruction of value in yield curves, japan, u.k., u.s., and germany, demolition of yield has a huge social cost which demands innovation.

chris: i take that point. we have two timescales here. the first we are talking about the fed, the next move, a shorter-term narrative is not extraordinary. don't think it requires extraordinary measures. the fact we have reached for these policies, going back to negative real yields so quickly speaks to the bigger, longer-term narrative. i think we may be approaching thinking, bigger actually the political agenda is changing. i think something will change this equation. helicopter money, these kinds of things. morell start to see way

government spending across the world and the old orthodoxy going out, the easy choice for politicians. eventually, that will have created big inflationary impetus. it certainly shifted the dial. friday, the talk of a fiscal boost from germany. thank you very much, chris wyllie being a good sport. of's check out the rest these markets. the hang seng doing a twirl. dani burger puts it in context for us, looking at the broader market. we had the hang seng turnaround. is this permeating the rest of the markets, or is it the tail wagging the dog? notertainly hang seng is just those equities which are rising, as you pointed to. we are seeing broadly beats across asia for economic data.

is it the hang seng or trade optimism? if it is, look for volatility to continue, because that volatility -- that optimism turns quickly. china leading gains, up more than 1.7%. this is its highest level since the start of the month. if we'll have currencies, the korean won struggling to rebound. tensions with japan continue to hang around. sovereign bonds, that's where the action continues to be. one of the interesting ones here is u.s. 30 year yields moving higher. we did see the u.s. government on friday, the treasury department possibly look at issuing 50 or 100 year bonds. this is an indicator you have been watching this morning, so i wanted to bring it up again. it is citibank's positioning on the end. it is reaching over 63. it suggests a very overbought

level, a bullish level. abovest time it climbed 60, which i should say this indicator rarely does, after that, we see the end build up 2.5% decline over the next two months. history repeats itself, look for gains we have seen in the yen to reverse themselves. world isthing in this a one-way trade. that's the only thing i can tell you. thank you very much. first word news in hong kong. protesters defied heavy rain in hong kong to march for an 11th straight weekend. organizers say more than 1.7 million people to work. police estimate 130,000 initially gathered. the demonstration was largely

peaceful, contrasting with the violence of past weeks. shortages of fuel, food, and medicine in the case of a no deal brexit. a dossier prepared by the cabinet office also warns of job losses and disruption of the u.k.'s ports for three months. the times says the report sets out the most likely aftershocks of no divorce deal, not worst-case scenarios. life is getting tougher for argentine president -- his economy minister court this weekend, saying the country needs significant economic renewal. that came just a day off argentine credit ratings were cut deeper into junk. global news, 24 hours a day on air and @tictoc on twitter powered by more than 2700 journalists and analysts in more .han 120 countries

this is bloomberg. manus: thank you very much. it is going to be a heck of a week for data and sentiment. --sday, giuseppe contact conte will address the country. germany will auction $2 billion of government bonds, and it will be a good gauge of the outside for long dated debt as yields continue to hold near record lows in the euro zone. thursday and friday, jackson hole symposium in wyoming. the team are on the ground. the gathering comes at a critical time. central banks at a crossroads. policy normalization? maybe that is yesterday. new stimulus measures. finally, the british prime minister boris johnson in his the potential7 in to unsettle the international

order with iran, trade war, no deal brexit, all on the agenda. coming up on bloomberg, the exclusive hard and fast. president at -- will be speaking as ahead of jackson hole. this is bloomberg.

manus: to the biggest political story in our region, the iranian oil bankers detained last month on suspicion of illegally left gibraltar. that is according to vessel tracking data we have right here. it is now renamed and it has been released by the british territory after rejecting the u.s. bid to seize them.

annmarie hordern has been tracking the details. what does it mean for the relationship between the u.s. and the united kingdom? this could be something which could come back to literally bite boris on the proverbial. >> the u.s. has made it very clear they are disappointed with the bridge government for allowing the gibraltar court to release the grace 1, now renamed. officials are saying the u.k. needs to think of its broader context. what does this mean as boris johnson to negotiate a leave of the european union and his free-trade agreement with the u.s.? the official to not say this specific incident would mean there would not be a free-trade agreement. it did say if the u.k. wants to do business with the united states, they want to do with this with iran. you don't get a free-trade deal for nothing.

what happens with this vessel now that it has departed and renamed? what is the function you are tracking this on? >> check out this function on the terminal. it is inee international waters after offre heading for -- gibraltar heading for greece. two vessel brokers were saying what could happen is that we have a ship to ship cargo transfer in international waters off that port in greece. you have to imagine the united states is going to be tracking. on that vessel is more than 2 million barrels of iranian crude. yes, it is like a disco. front, we hadal

some drone attacks in saudi arabia. that hit an oil field. what i would like you to do is put that in context. politically and from an oil point of view, what does it mean? >> they, the most remote treasurer in the world. that is what saudi aramco calls it. andas a small drone attack a small fire, aramco said. it was not able to keep production. but it has been called a terrorist attack. it goes to heighten the already tense attack -- the tense atmosphere we are seeing in the persian gulf. everyone is talking about escalation. whether it is the u.s. and saudi or the iranians, neither side wants a war, but it is this miscalculation of a crisis happening that could lead to something more, you know, difficult to manage than many

had expected. this just adds a bit of risk premium. we did see oil bounce a little bit on this. the picture is certainly looking at the demand side of the story, waiting for a china trade deal, waiting for what is going on around the world in terms of gdp market.n the u.s. bond this definitely adds a bit of risk to the market. great round. -- great roundup. let's get the bloomberg business flash with debra mao. applesident trump says has voiced concerns about samsung. he is worried the south korean company will get an edge because its products won't be subject to tariffs imported to the u.s.. products like the apple watch and air pods are set to be hit by tariffs. pres. trump: competing with a

very good company without tariffs. they are a very good competitor. so samsung is not paying tariffs because they are based in a different location, mostly south korea, but they are based in south korea. i thought he made a compelling argument. i am thinking about it. a plan to revive its solar division. rentals. the company is offering no contract packages as part of the relaunch. elon musk tweeted with the new lower pricing, it is like having a money printer on your roof. it comes less than a month after tesla reported its third consecutive quarterly decline in solar installation. low ason risks are consumer spending remains strong. that is the take of brian moynihan. he says the recent bond market turmoil has been given by -- driven by global concern. he cited the slowdown in europe

and businesses having to rework the supply chain to deal with the trade war. nothing to fear about a recession right now except the fear of recession. that's what's going on. you are seeing a lot of people look ahead and say, if trade war continues, if this is not get solved, if that is not get solved, you can see this finally getting to the consumer confidence in the u.s., which is the critical thing to maintain. >> that is your bloomberg business flash. thank you very much. the very latest from hong kong. -- germany could spend extra money if there is an economic crisis. fiscal stimulus for the first time. germany's outlook is 0.1% in the second quarter. fears of a looming recession are pushing them can -- pushing them to consider spending on budget

policy. here we are, this is a shifting dynamic. germany could go after fiscal stimulus. to use one of my favorite phrases, is it a torch paper of what we might see more of? what it work? -- would it work? it is not revolutionary for governments to talk about deficit spending and downturns. the thing which makes this striking is that the germans, of course, have been the champions the point ofto actually putting it into a legal framework. this is just a signal they would be as pragmatic as anyone else. we all get very negative about europe. it is worth reminding ourselves,

thanks to germany, they are one of the few governments which really does have a substantial fiscal latitude to get spending. even those countries that don't by traditional measures have latitude to do that, it probably will not stop them ultimately if that is what is required. we touched on this earlier about that possibility. in the break, i have options -- i have optionality in europe. what did you mean? from an equity point of view, let's go there. what optionality have you got? at europeanok equities in the broadest terms as an asset class, we know what the exposure is within that. they have been rather the sharp end of these warring markets at the moment. it is the hot and of the trade

war and in terms of general concerns about the demand side of the global economy, so they have taken a bit of a beating. the relative fall when compared to the u.s. shows adding the price to a gloomy environment, if do get a reasonable yield you hedge that back into pounds. that is a yield pickup. i would say if the markets are right, if you take the embedded market view at the moment that global growth, we are going to stay in this malaise indefinitely, it might get worse, i would say that's in the price of european equities. if we get some upside to that, you will get more of the upside beater from european equities. that's what i mean about that optionality. much, chris you so wyllie from connor broadly

wealth management. coming up, a tweet from the president of the united states. talks with china are happening, going well. we are going to get the latest from beijing. this is bloomberg. ♪

manus: good morning from orders.g's european had here are your top stories. boosting sentiment. donald trump the united states and china are talking on trade. push stockry yields futures higher. waiting on wyoming. the u.s. administration comes out in force to dispel the fears of recession. germany's finance ministers says -- all this ahead of a keynote speech from jay powell at jackson hole. marching in the rain. people take to the streets in

hong kong. one of the biggest protests since the beginning of unrest. we are live on the ground. why are equities rising? that is a question you need to ask yourself, and will endure? three little words from donald trump. we are doing very well. here?s the momentum who changehinese their interest rates in terms of lending to the real economy? maybe that is a more substantial story we should be talking about rather than a tweet from donald trump, which is where the chinese have gone from a new lending rate to the real economy. easing.a form of

it is manifestation of what the chinese want to do in terms of transmitting lower rates to the real economy. equity rates are higher. was it doing to the bond market? that is the question you need to ask yourself. last week was parabolic moves. this meteoric move below 2% on the 30 year government bond yield. that is how you have a small reprieve on that. have imported this panic from overseas into the bond market in the united states. the risk is we have over-talk this bond inversion story. that could contaminate the consumer. a negative feedback loop. right now at the moment, what you are seeing as german bond futures rising ever so slightly. there is talk of fiscal stimulus. see from germany? when could that take effect the

echo how could that complement what comes from the ecb? does it balance what comes from the ecb? jacksonet is focused on hole. that is the context of your market. ask yourself, because we have a big call from bank of america merrill lynch. they are slashing the bond forecast for the u.s. and germany. they are at 1.25 for the u.s.. -75 for germany. 1.2% for the u.k.. one woman that never loses her notes is juliette saly in singapore. juliette: we are seeing big gains here in asia to kickstart the trading week. the csi 300 up 2%. the hong kong market up by over 2%. hong kong stocks will recover from these losses we have seen

in the wake of protests. india and australia looking good. by 0.7% evengher though we had disappointing data showing exports dropped for an eighth month in july. bonds andk on chinese of course the yuan as well. this is a rebound rate system from tomorrow. the 20th of every month at nine: 30 a.m. beijing time. the pboc will announce its new rate. research said this is going to be an interest rate cut from the pboc. essentially bringing the pboc in line with the fed and the ecb, which already have a set time in terms of their rates. movement on the 10 year yield. the 30 year yield has been moving a little bit.

we have a slightly weaker 7.0559, manus. manus: thank you very much. definitely in dubai. let's talk about the asian markets. the 10 year government bond yields pushing higher. this is a shift in trade sentiment. u.s. president donald trump says it is going very well with china. he added he is not ready to sign a deal, a suggestion that comes only hours after his top economic advisor laid out a timeline for resuming the discussions with aging. let's get more with our beijing correspondent and anchor tom mackenzie. leave the two sides in terms of trade negotiations? >> is interesting.

president trump was offering a morsel of optimism, but with caveats around while way in hong kong. is going to beit difficult to get a deal if there is violence in hong kong. while way suggesting maybe the u.s. is going to ease up ,estrictions -- huawei suggesting maybe the u.s. is going to ease restrictions. president trump pushing back on that. perspective, if you want to trade deal, you have to ease up on restrictions. what we heard, that is important. you have negotiations continuing between china and the u.s. over the telephone. he said that will continue, and he hopes that will lay the groundwork for the sites to meet in washington in early september to continue these talks. the reality is china and the u.s. both want different things at this stage.

china is digging in leading up to this crucial anniversary, celebrating the seven-year anniversary of the people's republic of china. 70th anniversary of the people's republic of china. manus: we could be bid on the back of trade. have adjustment in the loan prime rate from china. how do you look at that? is that a rate cut? how do you read this move? why is it critically important? >> it does seem essentially what we will get tomorrow, is a rate cut. the question is, how much of a rate cut? it's not going to be altogether that significant in terms of the move in rates lower. you don't want to pressure the banking system too much. you could cut reserve ratios to

cushion the impact of lower rates on the financial system. lenderst the commercial to price their loans to ensure there is cheap liquidity going to corporate's and china. it's going to be linked more to the market operations, by the way, currently at 3.3 percent, the benchmark at 4.35. there is the difference. where i come from, i would call that are rate cut. thank you very much. tom mackenzie in beijing. our guest host is a per folio manager for fixed-income. manager for fixed income. rate cut.a what do you call it?

another stage in financial liberalization in china. think it seems unlikely china is trying to encourage easing again. they are focused on re-leveraging. it is a positive move. rip upi'm just going to the script. i'm supposed to talk about trade. but have a look at this. chinese government bond yield. over treasuries. let's join the dots. we have maneuvering by the pboc to bolster the trade tariffs. cut, like signs a rate whatever. in a reach for yield, what do you make of chinese government bonds?

does this premium begin to dissipate? chinese government bonds. we like any duration. stayink authorities will on the easy side in china. they are making it easier for foreign investors to invest in chinese government bonds. we continue to like that. i think there is definitely opportunity there. where are you in the discussion that if i look at -- i took a holiday last week. you cannot get away from the bloomberg mobile every morning. these daily this toots -- visvisit

scitudes. how position for the risk of a good outcome, a structured, measured, some might even say -- how do you position in the medium-term for that? >> we have been on the long trade for a while. people are a lot more negative on the global economy. the market is very susceptible to squeezes on any kind of good news, whether it is from trade -- you can move quite quickly. friday.hat on

i think if you use those opportunities where you get a set up in yields, we remain bearish in the medium-term. to addtrying to use that duration. do is keep trying to our pallor dry. when the rsis are high, we like to reduce into that. you're going to get decent sized squeezes. any good news from powell i jackson hole earth there is good news in this china trade news, we think authorities are going to be easing considering what is going on in the background considering capex and global demand. get longer of the treasuries. calls from bank of america merrill lynch.

shortly as we see parabolic moves across the curve. nick wall stays with the daybreak team. let's bring you a couple of news flashes on the iranian oil tanker situation. the british tanker situation is irrelevant to the grace 1, according to iran. we hope proceedings are carried out soon. this falls back to gibraltar rejecting the u.s. bid seeking to detain the tanker. that has now been released. you can actually track the tanker now that it has been released. annmarie hordern will give you all the. tracks the first word news flow everyday. protesters defied heavy rain in hong kong to march for an 11th straight weekend.

more than 1.7 million people took part, spreading far behind police estimates. one initially gathered. the demonstration was largely peaceful, contrasting with increased violence of recent weeks. shortages of fuel, food, and medicine have put the u.k. in the case of no-show brexit, according to a times report. a dossier prepared by the cabinet office warned of job losses and interruption to the u.k.'s ports for as long as three months. the report sets out the most likely aftershocks of a no deal divorce, not worst-case scenarios. oil is rising for a second day after a drone attack on a saudi oil field. yemeni rebels attacked the facilities in set the southeastern part of the kingdom. says this was only a small fire and no disruption

to production. the field produces just under 10% of aramco's total capacity. thegetting tougher for argentine president. his economy minister quit this country saying the needs significant economic renewal just a day after argentina's credit rating was cut deeper into debt -- into junk. day onnews 24 hours a twitterat tictoc on powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. . manus: thank you very much. coming up on the bloomberg, we will speak exclusively to the boston fed president. that is the head of jackson hole and the fomc this week. mr. rosengrant joins the bloomberg team.

if you are traveling to work, turn into bloomberg radio. the whole team are on their, dab digital radio in the london area. you're watching bloomberg. ♪

manus:manus: 7:19 a.m. in london. 8:19 in paris or berlin. we are 40 minutes away from the start of your trading day. it is daybreak europe. cranny in dubai. markets in dubai just beginning.

and eighth of 1%. the hang seng leading gains in asia. on track for the biggest gain in two months. catharsis.say it was it is still a third week of declines. 10 year government bond yields rising after hitting a three year low last week. what does it take to change the direction of the yield curve? the dollar, we have a little bit of oil there. geopolitics. you have drone attack. well. doing according to the united states of america with regard to discussions china. he is not ready to do a deal. dollar-yen, according to citigroup indicators, overrun.

it is a bit of a one-way trade at the moment. perhaps it is a fallacy. annabelle never full's anybody. she is in hong kong with your first word news. >> president trump says tim cook has voiced concerns about samsung. he is worried the south korean company will get an edge because its product will not be subject to tariffs. products like the apple watch and air pods are set to be hit by tariffs on september 1. they are competing with a very good company. i said, how good a competitor? he said a very good competitor. samsung is not paying tariffs because they are based in a different location, mostly south korea, but they are based in south korea. i thought he made a compelling argument, so i'm thinking about

it. >> tesla has a plan to revive its solar division. rentals. the company is offering no contract packages as part of the relaunch. elon musk tweeted with the new lower pricing, it is like having a money printer on your roof. incomes less than a month after tesla reported its third consecutive quarterly decline in solar installations. that is your blue bric business flash. bloomberg business flash. big event for markets this week. the jackson hole symposium thursday. the forum has existed since the fedt it gave chairman a formal role. alan greenspan was given a carino -- a keynote speech. he witnessed the fallout from

the dot-com bubble, saying the fed could have done nothing to prevent it. two thousand five, the r.b.i.'s future governor gave a speech warning on the risks in the financial system. that would later be viewed as having forsyth road -- foreshadowed the debt crisis. ben bernanke introduced the world to qe2. the fed introduced quantitative easing. 2014, it was all about mario draghi and his own plan for europe. wall.st is nick you maintain that the view for you is we do not get out of a stagnation mindset until the u.s. federal reserve uses. -- the federal

reserve eases. anyou expect him to set aggressive tone at jackson hole? >> that would be quite a switch from the last fomc meeting. hand, the macro looks ok. inflation on target. you have the u.s. consumer doing pretty well. retail sales are high. traditional metrics you look at for the fed. on the flipside, you have to market relative issues in money markets. isld curve inversion boosting the value of the dollar. andou look at the macro they say the economy is doing fine, markets will take it badly.

if you focus more on capital markets and the challenges capital markets are causing the , the strongworld dollar global manufacturing investment seen, the markets will take that very well. we have not seen that from many fed officials. i would say most of the fed president's focus on the macro side. people like your guest today, eric rosengren. there is reluctance to be forced into these cuts for markets. the market will probably be disappointed by what's going to happen at jackson hole. you would also maintain that the fed has been bymaneuvered in some ways

the aussies cutting or intimating cutting way ahead. ,hey are being outmaneuvered and that has the dollar consequence for you. >> jerome powell in his last press conference talked about the easing journey the fed has been on. they are on hold for a bit. now they have cut rates. the biggest transmission mechanism powell could offer would be a weaker dollar. liabilities are in dollars. of -- out dout oved by the rest of the world central banks. if you keep talking like

that, you get a call from the white house. nick wall. there is an interview don't want to miss. it is eric rosengren right here on bloomberg. ♪ ♪

matt: welcome to "bloomberg markets the european open." say, haven'tkets we seen this before a? chinese bank stocks fall as a rate revamp i the pboc is seen cutting into profits. the index looks set to rise on positive signals from the u.s. on trade. cash trade is less than 30 minutes away.