matt: good morning from berlin. this is bloomberg daybreak: europe. nejra: these are today's top stories. the end of a big month. stocks and august in positive territory as president trump says there will be a trade discussion with beijing. the bank of korea handset rate cuts. the uber ceo tells bloomberg exclusively the ride-hailing giant is ready to take risks and it will be profitable. >> this is not short-term gain, but i believe we can demonstrate progress. legal battles loom over

boris johnson's suspension of parliament. matt: good morning. yesterday i was talking to a market guest and i asked if they could put the trade noise aside and run his portfolio. he said, no way. this market is driven by every tweet from donald trump. it looks like he was right. nejra: it is a very interesting question. what a month we have had. what a week. big moves on brexit. the italian coalition. european politics front and center. now we get the latest trade news, which is giving risk assets a little bit of a lift. matt: we see that across stoxx around the world. this after president trump

yesterday said the u.s. and china were actually talking. said he hopes he will get a good deal. nonetheless, the chinese decided not to retaliate immediately. asian stocks rising. euro stoxx futures rising as well. i put the japanese here is a little bit of a warning sign ahead of today's trade. you have the bloomberg dollar index up. the dollar is holding at a two-year high. traders are buying yen as a safe haven hedge, even after the bank of japan did not change its bond purchases. you saw jgb's fall. you still have the strength of the yen. nejra: often, when you ask people what they're haven of choice is, they go to the yen over the dollar. in terms of u.s. futures, we are seeing a lift, nothing too

aggressive. it looks like we are heading for a weekly gain for u.s. equities. the dow could go above its 100 day moving average. the 10 year yield backs up slightly. the 38 yield has been a big focus as well. we hit a record low of 190 this week. that stays below 2% at the moment. there is the dollar you were talking about. turning to trade, president trump said the u.s. and china are scheduled to talk, but did not give further details. abercrombie & fitch is racing to reduce dependence on chinese suppliers, blaming the trade war, saying it is going to hurt profits. matt: on the other hand, citigroup has taken profit on a short three month offshore yuan position on the basis that china's softer trade stance digests tensions may have peaked for the time being. speaking to another casualty of the trade war, huawei told on u.s.g the ban suppliers selling to the chinese

firm will heavily impact the u.s. economy. >> we are talking about $11 billion spent annually by huawei on goods and services in the u.s. with u.s. companies. that is a significant amount of dollars in the u.s. economy, but it also translates into a large number of jobs. are asking one mliv, how far can stocks rise on trade? joined the debate. reach out to us. ib+tv on your bloomberg. joining us now is a chief investment strategist for aipac northern trust. for the moment, it is looking like conversations rather than peace or a truce. given the left in risk assets, are you tempted to add more to the portfolio? >> not yet. it is a good development. talks are what we need.

a resolution would be good for global growth and for everybody. we do still look at this conflict as one that is going to play out over years. not weeks. for us, the current development are not big or important enough to jump on the bandwagon. positions,taining just not adding to them. matt: a cease-fire is no reason to celebrate. you want to see resolution? >> i think so, yes. in terms of the conflict between china and the u.s., it's going to be long term. in terms of this instance of eventually -- potentially working toward a cease-fire, for us to have a significant risk allocation on that short-term development, knowing full well we are one tweet away from another correction in markets, it is just not quite enough. nejra: which region do you see

as most vulnerable without an actual deal? >> we still think emerging markets are the most vulnerable region. we are underweight for that specific reason. of course, the euro zone with its trade sensitivities is in the firing line. japan is in third place, but close to the eurozone. matt: the s&p is up 15%. the csi 300 is up 26%. not the same kind of blue-chip stocks, big cap stocks. do you think when president trump says the u.s. is winning -- do you think he has a point or is he starting to lose a little as consumers are forced to pay up for tariffs? wouter: i think that is the balance in terms of who is winning, who is losing. those tariffs are being paid by producers in china, partly by consumers in the u.s.. they are introducing a debt

weight loss into the economy. everybody pays for these. in terms of winning, we don't see it as anybody winning or losing. we see everybody losing. trump saying we are winning, we do not see that. what he has done is increased attention and put a damper on global growth, including u.s. growth. when it comes to the long-term trajectory, we think he has a point when he is pointing out technological transfers and the potential of intellectual -- the protection of intellectual property rights. he has put that on the agenda, and we think that is a good thing. talk about a: you global growth pressures base case. how much pressure are we talking about? wouter: global growth is basically on a small downward shift. we will maintain positive growth level. we are not in the doom and gloom camp. we think growth has shifted down by 20 to 50 basis points relative to the trajectory we

were seeing without the trade conflict. that is about the negative impact we are seeing currently. matt: yesterday we saw a percent 2%ding for the u.s. -- reading for the u.s. revision. it could have been worse. it could have been better. wouter: we actually do think 2% is about the growth we can expect. strength is coming from the do mystic side of things. the consumer is doing well. what we are not seeing of courses any strength in manufacturing, any strength in business investment. that is why we are stuck at that 2% level. nejra: i have a chart i cannot show, but it is a great one showing red behind yield and how you saw a widening out preceding the previous recessions, showing we are not there yet even though other indicators like the inversion, a lot of people are pointing to. what is the high-yield market telling you about the potential

recession risk? wouter: we think -- it is actually a really important point for us. we want to see confirmation for credit. we have seen a little bit, but not enough for confirmation. we are seeing that inversion. we take it seriously. we have also been strong on the fact yields should go lower. we think the fed has an opportunity to push yields down and take inversion now. -- inversion out. what we are seeing is not enough to really be worried about recession risk. the probability of recession risk has been on the upside. matt: it is a great chart. the red area there is recession. you can see the spikes into that. u.s.e going to talk about bonds a little bit later on. before we get away from the trade war, i have got to ask you

about the yuan. 7.16. looking at everyone is expecting 7.2. the chinesee do allow their currency to weaken as a release valve for the tariff pressure? wouter: that is a really good question. i wish i had a strong answer. it all depends on how talks are progressing. china is still in control in terms of the exchange rate. they have a choice. there is a bit of give and take. if talks go well, perhaps they will take pressure off the yuan. if they don't, maybe they will allow that exchange rate to slip a little further and put more pressure on trump through that channel. matt: you are going to stick with us. wouter sturkenboom is our guest cohost for the hour from northern trust asset management. coming up, not yet.

ecb hawks warned against resuming quantitative easing just two weeks before the central bank meets to discuss altering the euro zone -- vul turing the euro zone. deutsche bank's chief economist, do not miss that interview at 10:00 a.m. london time. ♪

matt: this is "bloomberg daybreak: europe." let's check on the markets in asia. on final very risk trading day of the week in august. pretty terrible for asian equities, but has a china given a peace offering to the u.s. ahead of the tariffs coming into effect over the weekend? investors are reading it as that.

the nikkei up by 1.2%. a lot of movement in the yen. the boj saying it is going to buy even more bonds. hong kong stocks higher for a second session. australian stocks well supported. we are also seeing good moves in the kospi. samsung shares, which were in focus yesterday, are rebounding. semiconductor inventory rising by 11% month on month. in korea, a rate decision today. the bank of korea did leave rates on hold, but we heard from the governors saying they are so looking at global risk and they will take action if warranted. he said the fx moves are not a direct factor in rate decisions. you are seeing a stronger won today. the bond market at least is indicating we will see cuts coming through from the be ok --

bok. matt: thanks very much. a look at the markets and the bank of korea expectations. as unrest in hong kong continues , authorities are clamping down on demonstrations and have arrested three prominent protest leaders after police banned a rally organized for saturday. the city is still bracing for a weekend of protests. stephen engle joins us from hong kong. what is the latest with these arrests? >> an interesting timing, isn't it? just ahead of a big rally land for tomorrow -- planned for tomorrow. tens of thousands were expected to march between the garden right side are -- outside our building here to the liaison office.

of a the fifth anniversary key moment in the umbrella movement five years ago, when china proposed changes to the electoral process here that really led to that 79-day standoff. what the police are likely doing is they want to defuse this, they want to turn the thermostat down on the protests. they have arrested joshua wong, the key leader of that umbrella movement. only a month or so ago, he was released from jail. was arrested, the leader of the national party here. according to a statement on her website. this comes a day after the civil human rights front leader jimmy cham says he was beaten up, or he was threatened -- friends of his who protected him were beaten up by people who attacked

with weapons. nejra: talk to us a little bit more about whether this indicates authorities are really taking a harder line against the protesters. stephen: it looks that way. it looks like what the mainland chinese authorities often do. there is a saying, killed the chicken to scare the monkey. they want to prevent or plant the seed of fear in the protesters. you take the figureheads out and that could possibly prevent other people from following suit going into the streets. if anything i have seen from these protesters in hong kong is that they don't scare easily. this could backfire. past marches and demonstrations that have been restricted, they have seen more people show up than expected.

it is also expected to rain heavily tomorrow. that could work in favor of the protesters, who like to say teargas does not work as well in the rain. matt: especially considering the umbrellas. just going to point out the umbrellas. [laughter] nejra: thank you for joining us, stephen engle. let's get the bloomberg first word news. >> in argentina, s&p global ratings have cut the country's credit rating to selective default after the nations that it would delay payments on more than $100 million of debt. s&p says this constitutes default under their criteria, but since terms for short-term debt, in immediately, s&p will upgrade its rating today. johnson's suspension of parliament will get an early test today.

two courts are challenging a ruling on opponents who say the decision is an affront to democracy. while these rulings will give a sense of the legal issues involved, they are unlikely to be the last word. the case may end up in front of the u.k. supreme court. the u.s. could face resistance bonds. ultra long steven mnuchin floated the idea, but it probably will not get the backing of the elite group that advises the treasury secretary, who previously recommended not issuing ultra long bonds. ministers will meet in helsinki to keep the iran nuclear deal alive. officials will talk for two days on policy challenges, including protecting commercial shipping in the persian gulf. the group is trying to salvage the deal with iran the u.s. pulled out of. global news, 24 hours a day on air and @tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries.

this is bloomberg. nejra: thank you so much. of policy makers wary stimulus fired the warning shots before they meet to discuss altering the euro zone economy. the dutch governor said the outlook is not weak enough yet to warrant the resumption of purchases after earlier comments by germany. european bond yields jumped. meanwhile, the incoming ecb president offered a clear sign she is ready to fire -- to follow mario draghi's path in her first comments on monetary policy since winning the job. she said the ecb has the tools to tackle downturn and must be ready to use them if needed. she is on board. wouter sturkenboom is still with us. she hasy she has to say the tools and she can use them. many people have been saying it.

ray dalio said he does not think low interest rates are able to tackle the problems. there is a study out of the university of bath that showed negative rates hurt bank lending, reduced bank lending. what do you think about the ecb's plan? rates more negative help spur growth? wouter: first of all, we think they will go back to qe. dalio's views on the mainstream view within the council. he is making the same point he has been making over and over again. he is putting an unreasonably high hurdle in place for new qe to be implement and, saying he wants to see deflation risks before qe should be mandated. that is a very high hurdle. we have seen inflation more than

half. we are very far from the target the eu set itself for meeting its mandate. i'm surprised he said that out loud. i don't think it is reflective of the mainstream view within the council. we think qe is coming. with respect to interest rates in the negative, the impact of negative rates on the actual economy, i agree with you it is highly questionable whether another cut will have a meaningful impact on the economy , unless of course the ecb starts hearing that negative interest rate taking its sting from the interest rate side. if they do that, that problem goes away, especially in combination with tltro. nejra: what is the best way for the ecb to manage all this in terms of offsetting the slow, trying to lift expectations, but being careful about the impact of negative rates on the

economy? you mentioned the functions. how do you think they should distribute each bit? wouter: first of all, forward guidance, then qe to back up that guidance in the region of 400 to 600 billion over a 12 month period. then an interest rate combined with tearing for the banking system such as the negative impact on profitability. i think they are going to keep that in the back pocket and they can utilize it at a later date, rate, pushingo more money into the funding channel for banks. if they lend that money, they will have an immediate spread and positive impacts. matt: the problem is they really don't. the banks are getting crushed here. with negative rates, they don't lend out more money. they lend less money. what if the ecb went the helicopter path and passed out notes to consumers that says

, you know, this money expires on such and such a date? anything close to that would have to spur inflation, wouldn't it? wouter: very much so. that would be inflationary and a very direct way of stimulating the economy. i think we are far away from that. we are not in recession. we are still in positive territory when it comes to inflation. i think that route is far away. i do think the negative tltro rate could be utilized at a later date. if they cut that rate, let us say -1%, they are saying if you take this money from us and you lend it, we will charge you -1% interest rate. even at a zero rate, they are making a positive rate. nejra: how difficult is it given everything we are discussing in conversations we have had for

the ecb to out-dove the market? wouter: it is very hard. let us be very honest. we are talking about monetary policy in a context where the cupboard is bare. the ecb is pushing on a lot of strings and trying to -- what we really need is fiscal stimulus. that is what we need and that is starting to percolate in germany. it is not happening decisively enough to make the difference. that is sort of the situation we are in. nejra: it might not come soon enough at all. wouter sturkenboom staying with us. coming up, a bloomberg exclusive. it sure looked like a former executive took information on self driving cars from google. we will bring you the interview next. matt: when you are traveling to work, tune into bloomberg radio on dab digital radio or

worldwide at bloombergradio.com. tune in. this is bloomberg. ♪

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nejra:nejra: this is "bloomberg daybreak: europe." matt: today marks two years since dara khosrowshahi took the reins at uber. it has gone public and faced criticism on driver and user safety and it has posted billions and billions and billions of dollars in losses. emily chang spoke exclusively to the group's ceo. he says he is happy with the company's evolution. >> we have resolved all governance conflicts the company had. the remaining legal issues the company was involved with as well. we have softbank as a partner.

a big partner and a big investor. we have a great investor base. we have taken the company public. company revenue has grown since i joined. we now have a path to profitability, i believe. while we have had bumps in the road, i like where we are and i especially like the position we are in for the next years. >> despite the negative stories, ridesharing companies have been transformational. as huber the as -- uber be transformational over the next decade? >> i think so. what uber has done is brought transportation and opportunity to what we believe is a small segment of the population. have 4 billion partners, and

that is unparalleled, but we tot uber to be available everybody. what we are doing is introducing other transportation choices. we have always gone with pool. we are testing buses in cairo to even bring the price of uber down to the next level. we are introducing bikes and scooters for personal electric mobility. anyway you want to get around, we are going to be there for you. goods, be mostly uber but we will have third parties such as transit, lime as well. if you want food, you want local commerce, which i think we will power, uber eats, are other services will be there. so -- uber be so transformational and stop losing money? can you create a good business where the rides are a dollar?

yes. we are taking a rideshare business. if you look at our rideshare business, it covered our overhead. is rideshare business itself turning quite profitable. we believe the profits of the rideshare business not only are going to grow top line, but bottom line as well. other businesses, eats, autonomous, et cetera, these are extraordinary opportunities we are funding. i believe we are going to prove to our investors we can take big parts of our business, turned out profitable, use those parts of our business to fund investments. >> there are execution issues. you just had your biggest quarterly loss ever. the stock has been trading below its ipo price more often than not. investors seem to love shorting it. tophave fired some of your

-- at least some of your top hires have left. you have said you believe uber can be profitable. how quickly can uber be profitable? how confident are you, and how quickly? >> i am very confident. , 5 losses we reported billion dollars from an accounting perspective. i live in the real world. in the real world, our ebit losses were lower than q1 and were on a good path in terms of ebit. losses as well. none of this is going to be easy. all of this is going to take execution from all of our teams. we are going to be demanding our with lessdo even more to execute incredibly effectively in order for us to grow the top line in the bottom line as well. nejra: that was dara khosrowshahi speaking exclusively to bloomberg.

joining us from mumbai is niraj shah. in london is annmarie hordern. happy friday. we are seeing a lot of green in asia generally. what is sentiment like in india? >> good morning to you. happy friday. unfortunately, not a happy friday for the indian market. we are down for a third day. this is after last friday's announcement from the government . everything was hunky-dory. we were doing well. the last three days have been deep in the red. i guess this is in part due to the macro indicator, the central bank said there is a slowdown, even though it is cyclical. the indian gdp numbers are going to be announced today. expectation is it is going to be lower. time 6% for the first

since 2014 we have had two quarters lower than 6%. still high. in india, it is being viewed as a low number. back to you. also annmarie hordern standing by. the wider markets are ending the week on a note of optimism. china signals some restraint on retaliatory tariffs. india,ay not see it in but the rest of asian equities certainly have that friday feeling. we are seeing optimism across the region from south korea to australia to japan. jumps of more than 1%. this comes after chinese commerce ministry has been putting out some lines that are really boosting optimism in terms of the rhetoric of the trade war. in foreign exchange, the dollar near a two-year high. some weakness across other fx. the kiwi and the aussie dollar

poised for their sixth week of decline. sovereign bonds, some selling. is thatdities, this trade optimism. china is the number one destination for that. metals, butay in i'm looking at platinum. it is usually playing second fiddle to gold, even palladium. this week alone on wednesday jumped 5%. we are seeing investors start to pick it up as this safe haven as we see trade war escalation and concerns about global growth demand. holde don't want to currency. they are worried about the dollar. they want hard assets. platinum might be one that is a good option for them. great to have you with us. thank you. now let's get the bloomberg first word news. >> thank you.

three leaders of the hong kong protests have been arrested ahead of plan rallies this weekend. the moves are part of broader pushback against the demonstrations. it comes the day after authorities decided to ban a mass protest saturday. the bank of korea hinted at further action to support the economy after leaving its key rate unchanged. two of seven board members dissented, calling for an immediate rate cut. an indication of growing concern that more must be done to prop up growth. will meet ministers in helsinki to keep the iran nuclear deal alive. officials will talk for two days on foreign policy challenges, including protecting commercial shipping in the persian gulf. europe is trying to salvage the deal with tehran that the u.s. pulled out of. the u.s. probe into whether e-cigarettes can cause seizures

was triggered by a handful of juule who reportedly used devices. the fda's head of tobacco products emailed saying no proof of casualty, but an association. abercrombie & fitch is pushing to reduce its dependence on chinese suppliers by more than 40%. it becomes clear the trade war is going to hurt profits. the company is warning that tensions could have a direct adverse impact on the cost of merchandise. abercrombie's chief executive said the move is time consuming but necessary. 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. selena, thanks. we are at the end of another week of news. it has been quite an eventful one. an opinion piece that split people down the middle.

italian political drama and an unprecedented constitutional move at westminster. nejra: let's take a look at the people behind this week's news. bill dudley called for the fed to stop enabling president trump. the peace by the former new york fed president drew a wave of criticism force adjusting the central bank should ditch political neutrality. matt: i have not heard anyone supporting that op-ed. this week, some unlikely winners and losers. a coalition deal at the 11th hour. .he loser was matteo salvini the former prime minister wanted a snap election has ended up in the opposition. boris johnson asked the queen to suspend parliament in an apparent attempt to prevent rebel mps from passing legislation to block a new deal brexit. we are expecting the decision of

the first legal challenges this morning. let's stay with brexit. u.k. officials meet twice a week with eu counterparts in order to break the impasse. we will get into the u.k. site in just a moment. in terms of discussions with the eu, they are going to have more discussions. does that mean they are going to be fruitful? >> it is a high hurdle here. what we are looking for is the eu and the u.k. to come to a withdrawal agreement that boris johnson can prevent -- present the parliament. basically, the last week before brexit. is there any likelihood that happens? we are hopeful. in terms of the probability it happens, we have to be clear. the hurdle is high. the irish question is very difficult to resolve. there are no alternative measures in place that really can replace the backstop. i think that is going to be the tricky one. manus: -- matt: does that mean

we are headed for hard brexit, or do you think parliament can pull you out of that in the few days they have to do that? both.: well, we have increased the probability of a hard, no deal brexit outcome. because we do realize this makes it all the more difficult. at the same time, we are still hopeful parliament will stop this and will find a way to prevent this from happening. whether it is legislation next week -- the start of legislation next week or a vote of no-confidence and rallying around a new government that puts no deal brexit off the table, but we do have to be honest here. this course of action by boris johnson does increase the probability of no deal brexit. nejra: so you think it does increase the probability of no deal brexit. what about the probability of a general election? would you see that as positive or negative?

>> we think a general election is almost guaranteed. the question is is it going to be before or after the 31st of october? that is where we are conflicted. what does boris johnson want to run on? does he want to run on the platform of being the man that is going to deliver brexit and that he needs to coalesce those books together and be the brexit together andotes be the brexit champion? or does he want to run on a plaque from that says, look at me, i have delivered brexit. give me a new mandate. a general election is almost certainly going to happen within the next six months. matt: i think he maybe wants to keep his options open. wouter sturkenboom from northern trust asset management is going to stick with us. coming up, we speak to an incredibly important guest. deutsche bank's chief economist. don't miss that interview at

10:00 a.m., london time. will you be joining them as well? nejra: i will be doing the interview as well. looking forward to it. tune in to bloomberg radio live on your mobile device or dab digital in the london area. this is bloomberg. ♪

matt: this is "bloomberg daybreak: europe." nejra: let's get back to trade. china slapping a 5% tariff on u.s. soil. it is -- u.s. oil. it is already disrupting trade flows. >> i want to start with the numbers between china and america's oil trade. beijing is the ninth largest buyer of u.s. crude. only about 1% of chinese crude came from the u.s. in 2019

according to china's general administration of customs. china does not depend on the u.s. crude oil supply. the u.s. does need to find a buyer. very important to donald trump as well, making the u.s. an exporter of crude. however, the oil china has already purchased is becoming quite the headache. the trading arm of china's state-owned oil giant sinopec is trying to resell u.s. crude that will not arrive before those import tariffs take effect on september 1. or five vessels carrying as much as 10 million barrels of oil are en route to china. the journey takes almost two months. cargoes fromrom the permian basin at three dollars a barrel to those cargoes from china. they are keen to sell it. the problem is finding a buyer. refiners have completed

purchases for delivery in october to november. this race to sell u.s. oil highlights how a trade is disrupting commodity flows. matt: for me, unbelievable. the journey takes two months in this day and age? that seems like a long trip. >> think about it. from the gulf of mexico to china, it is a long way away. matt: i feel like you could sail there much faster. in any case, thanks very much for the run-through of the oil story with china. let's get the bloomberg first word news now. >> uber's chief executive says it looks like anthony levandowski took information from his former employer, google. 33secutors charged him with counts of stealing trade secrets. uber previously settled a civil case.

we spoke to dara khosrowshahi. >> i was not here when we brought anthony on board. what i do know is that we went to incredible depths to make sure any information anthony might have acquired from google, and it sure looked like he did, did not make it to our company. is raising car prices in china in response to trade tensions that have weighed on the currency. the basic price of an imported model three will be more than 2% higher. tesla is among automakers most hit i the dispute between washington and beijing. it has no local production, being directly hit by any increase in tariffs. that is your bloomberg business flash. nejra: thank you so much. ray dalio missing out on the rebound some managers are enjoying this year. bridgewater associates has tumbled through august 23.

a source tells bloomberg the losses were fueled by bearish wages on global interest rates. this is so interesting. so many conversations i have had is whether it is starting to get painful to actually be underway bonds given that gravitational pull we have been seeing on yields this week alone. matt: that is the amazing thing. that such towering giants of these markets made the wrong call. we were watching it happened. now it has unfolded like a slow-motion car accident. he is not alone. pimco has taken a hit. some of the biggest names in the market have really gotten the interest rate story wrong. let's talk to another big-name. wouter sturkenboom is still with us. don't laugh. you are a valued guest here.

you are underway global bonds. -- underweight global bonds. your response? wouter: very important to highlight we are underweight because we are bullish on interest rates. we have a sizable high-yield position which still has duration, although less than government bonds. we are long infrastructure and real estate. again, to pick up interest rate sensitivity. we have a strongly held view that interest rates will move lower and stay low. we think we are on the cusp of a global easing cycle in monetary policy. for us, this is playing out as expected. matt: what are your preferred durations? investors say they would rather own twenty-year debt then 50's or 100's. what do you think? wouter: we are playing the middle to upper part of the

curve. we think that is where the most interesting volumes are. view, it isoverall long-duration view with expectation. once the fed starts to get its act together, the short and will move as well. we need a different tone before we will get confident on the part of the equation. nejra: how much of your portfolio actually holds ultra long bond? 50 years, 100 years. would you be interested if the u.s. got those as well? >> those are very small allocations, if at all. if they were to issue them, it would be a very interesting conversation within the team as to what type of place those assets hold in a multi-asset only portfolio. there will be some place for them. this is a world where duration has value. but how big an allocation? i would first have to have that

conversation with the rest of my team. matt: it looks like they are having to offer higher yields, higher rates than the market is even paying for the one issued or on the run bonds voucher. why do you think the u.s. is having difficulty with auctions , these the cash market things are trading with such low yields? wouter: it seems like there is disruption in the plumbing. we are a little bit surprised about that as well. the u.s. is issuing quite a lot because it is running the sizable budget deficit, but still, you would expect in this world where interest rates are moving lower and there is this fierce demand for bonds that the actual issuance of new bonds would be stronger. but you are right. it has been tough going. we think it is in the plumbing of the system there is talking going on -- clogging going on.

that is the best i can do. nejra: in terms of demand, part of that is the hunt for yields. you can see that in other parts of the market. i want to circle back to this chart. i think it is a great one, showing high-yield bonds yet to signal an economic slump. where would that spread have to it to startfor flashing warning signals? wouter: another 200 to 300 points of -- basis points. that would be a red flag. that would confirm the yield curve is signaling a severe slowdown if not a recession. we are 200 to 300 basis points away from that. that will only happen if powell stays where he is and does not listen to markets. we think he is under a lot of pressure to change. we think he will. if he does not, that would be a risk we are going to be watching very closely. are: on the corporate side,

companies taking advantage of these yields? are they able to go out there and borrow to make investments? we are not seeing the investments. i don't see a lot of issuance. wouter: we are seeing some issuance. in europe, it is picking up. we some -- we see some advantage being taken. the money is not flowing into investments. it is flowing into buybacks and dividends, which is financial engineering. good for markets, not so good for the real economy. it does not do that much for the real economy. companies just want to see that long-term prospect for the investment they have to make. at the moment, with the uncertainty hanging over markets, global growth in general, brexit, they are just not doing that. matt: thanks so much for joining us. wouter sturkenboom is the chief investment strategist for northern trust asset management. a pleasure having you with us.

trump says a conversation with china is happening, but he details.m on the bloomberg users can interact with charts at gtv on the bloomberg terminal. ♪

morning. "daybreak europe. action-packed august as president trump says there will be a trade discussion with beijing. bumps in the road. that uber ceo tells bloomberg exclusively the ride-hailing giant is ready to take risks and it will be profitable. take years. i believe we can demonstrate

progress. showdown. legal battles loom over boris of parliament. 10:00y decision is a.m. london time. >> welcome to "daybreak europe." month it has- been. we have some friday risk on. what did i call it? frisk in? >> it is looking a little frisky in these markets. we had an interview with trump. fox radio had an interview where he said trade talks are happening. were happening. and yet china, not coming back

with retaliatory tariffs. investorsade interested in equities. >> driving the trades again, specifically when it comes to equities. we have had four weeks of declines for u.s. equities. we look like could be in the green. strongly in europe. we did see some gains, ftse futures up 0.1%. there is some green on the screen. we will take any risk on we can get. you are seeing that reflected in bond markets as well. >> take a look at the bond futures. investorso see selling these bonds if they are not worried. you do see a little bit of a bid for the german bond futures. we will see if that translates

ds.o lower yields for bun the same is true for bond futures. the futures are going the other way is the cash trade. the italian bond futures are down. let's check out the markets in asia. for that we go to juliette saly. oute are of course rounding august with a terrible month, a loss of more than 3%. the worst august, the worst month for asian equities since may. weakers, chinese markets . you have been seeing gains in the nikkei. australia, one point 5%. the kospi and focus on the bok decision.

higher by almost 2%. samsung rebounding. it could be headed back for a trial. let's look at what we are seeing in the currency markets. yen has not had a good month. the boj made the biggest cuts to won rising korean but it is the worst performing currency in asia this year. it is not a reason and terms of the board thinking about their next rate move. the offshore currency is losing ground, down 0.2%. thinking tensions could have peaked. they have a forecast, pretty much where it is now. the aussie coming under pressure.

expected increase in tariffs over the weekend. saly and singapore. turning back to trade, president trump said the u.s. and china are scheduled to talk. racing --ly and fish racing toy and fitch reduce dependence. >> citigroup has taken its profits. yuan.t -- the tensions may have peaked. another firm told bloomberg an the ban onnterviews u.s. suppliers will heavily impact the u.s. economy. >> we are talking about 11 million dollars spent on goods

and services in the u.s.. with u.s. companies. that is a significant amount of dollars in the u.s. economy. it translates into a large number of jobs. >> joining us now, the managing director of portfolio strategy and asset allocation. your take on the trade war. would a trade truce be good enough for investors to pile back into the market? so. would say the key thing has been growth. manufacturing recession. growth being in the soft side. reason, trade is the trade relief would be a powerful catalyst. we know the market has been pricing growth pessimistically. the risk premium is high.

in the credit market, you have it seems like if you get growth optimism because of trade, it could be powerful. whether a truce would be enough, why would that be enough? walked back on that. i am trying to figure out what the market is getting so excited about. not ae alone is significant thing. it feels like you had an escalation. there is a positive response. the underlying market rationale is every time you get an escalation, the likelihood of a deal gets higher. recentlly, this escalation is starting to affect u.s. more.

free time there is a de-escalation, there is a hope it pushes you in the right direction. what we have seen so far is light in terms of the relief. >> is the global bond really driven strictly by trade? or are there other aspects that are problematic. h, if you put it next to cn you find a strong relationship. the rallies have been coincidental with escalations in the trade war. we know there is a strong relationship between the bond rally and trade. investors have other reasons as well that have made them bullish related to

structural factors. the central banks potentially stepping up the fight for these types of issues. shift ineen a reacting to economic data. as a result of that, the trade cree -- key trigger. there are a lot of structural drivers. >> what are you learning about the search for yield? >> it is interesting. do you find there is a quality move missing. there is no alternative, people are forced to move up the risk curve. you see markets being supported. uy investment grade.

if you look at the ratio between them, it is one of the widest and record. there is a quality premium. in market has not gone down terms of the quality. could do get growth, it intensify. >> the market has shifted to risk in stance. >> the problem is, we think the search for yield has gone as far as it can go without growth. growthdon't create a classes,, within asset you are stuck in the range.

the s&p has struggled to break out any material way. it comes down to can you thentivize investors to buy cccs? most of the conversations revolve around protecting portfolios. without having too much exposure to growth. >> remain pro risk over a 12 month horizon. the relationship was interesting. inant to dig deeper correlations. what is happening in u.s. bonds. you aboutthat tell what worries investors? many see the markets looking at one thing. of course the two things are linked. big gap.ve a that worries investors.

conflictingbe messages. what we found, if you have such what tends to happen is you build up such a gap. you have a rally of bonds and equities. reflecting the monetary stimulus. they give growth the benefit of the doubt. see the growthy picture being completely derated. eventually, this can switch. what we found in our work, historically, when the yield you findw zero,

eventually lower bond yields are not supported. takes over.arrative --do not see lower markets the s&p has been -- >> may be the odd tweet can give them a lift. let's get the first word news. -- in wong and beijing beijing. >> global ratings have cut the ratings to selected default every this is after the nation said they would delay pavement. this constitutes default under their criteria. in, -- theria came u.k. prime minister boris boss -- johnson possible

suspension of parliament will get a ruling today. they will give a sense of the isal issues involved, there likely to be the last word. three leaders of the hong kong protests have been arrested they are a push back against -- it comes after authorities decided to been a mass protest. the u.s. good faith resistance. it probably will not get the backing of the elite group that advises the treasury secretary. it previously recommended not issuing ultra long bonds. foreign ministers will meet to try to keep the deal alive.

they will talk on policies including protecting commercial shipping in the gulf. global news, 24 hours a day, powered by more than 700,000 journalists and analysts with this is bloomberg. >> thank you very much. selina wang in beijing. the end of august is approaching. historically, the most volatile month stands above. here is dani burger. trading does tend to exacerbate price moves. has seen the biggest spike in august. it was noticeable for price swings. idea the u.s. floated the of long-term bonds, we saw yields tumble to record lows,

giving each asset their biggest move downward. u.s., andand the nearly four decades. they saw their biggest august 1998. since august, currencies, also some major swings compared to the summer months. we saw sterling get pummeled. move, the biggest on record. for fx volatility, we saw major hedging. yuan getting hurt. the biggest spike since 2007. either this was a good month to take off and not pay attention, or you had to return to chaos in the trading floor.

>> thank you so much. i have so often confirmed -- said -- againsts warned qe.uming against cute he -- >> when you are traveling to work, you should tune into bloomberg radio. in dab digital radio. if you are anywhere else in the world, type and bloomberg radio on your mobile device. this is bloomberg. ♪

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in an app. these are technology innovations that allow customers to have a better experience and they bring down cost. speaking exclusively to emily chang. over 25%ve slumped since the ipo. let's go to the first word news with selina wang. >> thank you. a bloomberg scoop, the probe into whether e-cigarettes can cause seizures was triggered by l handful of people who use juu devices. the head of tobacco products said it no proof of casualty. at a minimum, and association the product. amber come by and fitch -- the trade war is going to hurt

profits. the company warning the tensions could have a direct adverse impact on the cost of merchandise. the chief executive says the move is time-consuming but necessary. inla raising car prices china. be 2%sic price will higher. tesla is among automakers most hit by the dispute between washington and beijing. it has no local production being hit by the increase in tariffs. >> selina wang and beijing. ecb policy makers have fired the first warning shots for they meet to discuss bolstering the euro zone economy. the dutch governor said the , not weak weak enough enough to warrant the resumption of bond purchases.

that echoes earlier comments. bond yields jumped and the euro erased its earlier decline in these remarks. >> incoming ecb president christine lagarde said she is willing to follow mario draghi draghi's path. tools tothe eu has the address the downturn. int would you be advising terms of trading expectations? >> they have moved quite a bit. our economists are expecting a comprehensive package. end, 20 basisont points. forward guidance. are of these categories affecting different assets. front end cut seems to be quite well flagged. the things which seem to have a

lot of disagreements and potentially not fully priced, certainly the qt. it depends how aggressive of you you want to take. the narrative is shifting into this meeting. you have had italian political risk come down. need from ais less civility point of view. you are in a tough spot. it is similar to the fed. hard not only driven by data on inflation and growth, but insurance cuts, where central banks have to make forward-looking judgments. that is why it is difficult. >> going more negative, will it possibly spur inflation? there is a study showing banks

and negative rate regions actually lend less money out. help if the ecb lowers the rate even more negative? >> it feels quite weird to positive foro be growth. markets.for the research from our economists shows the reversal rate, at which point they are not supported for lending, is lower than where we are now. 40 basis points. he would argue you could cut further and spur lending. japaneseow the scenario. negative rates don't necessarily have the positive effects we would like. they have a lot of negative side effects.

could argue the actual growth impacts are limited. markets seem to still like it. it can push down the currency. >> i am struck by what you said about the reversal rate. others have been more concerned. i want to finish with a chart i love. high-yield bonds have yet to signal a slump is coming. generally, you are underweight government bonds. do agree? in my opinion, will you get a recessional? indicators flashing red. they have not been perfect. the credits fred had is a good track record. so far, it has been anchored. that is the thing i am watching the most.

>> thank you so much for joining us. managing director of portfolio strategy and asset allocation at goldman sachs. daybreak europe. the european open is next. .

from our alive european headquarters in the city of london. i am anna edwards. >> happy friday morning. the markets say there is hope for a deal. asian stocks trade mixed. the cash trade less than 30 minutes away. >> markets trade mixed as the threat of