>> good morning from dubai. thi s is "bloomberg daybreak: europe." >> these are today's top stories. push china'ss stocks higher. u.k.'s labour party readies no deal brexit. parliament returns tomorrow. rulekong officials don't out an emergency law.

manus: yesterday we broke the news that there was a ratcheting higher in the tariff war's --wars. what are the implications? the economy is stable. they will adjust economic policy as is appropriate. it really is about the next response lever from china for me . nejra: questions are being asked about whether they need to do more to fuel credit and support the property sector, loosen some of the controls. some of the reaction we are seeing is not because of pmi, because they show a little more pressure from trade, but more because of the response and the

words we've had from authorities today. manus: let's talk about the rest of the response mechanism. steven major said, i'm talking about ground zero for trade. the new zealand dollar. a lower move. the market believes you are going to see a much more aggressive repricing. cutprobability of another from the kiwi. the shorts are the highest since november. have a look at the yuan. what is the correlation between the negative yielding bonds and gold? citigroup raised their outlook for gold on a significantly bullish break to the one. is anybody paying attention to what the pboc

said? the market is focused on the data. that is where the yuan is a little bit weaker. do you like the glasses? nejra: they look cool. very millennial indeed. what's not looking so cool is equities in august. it was a volatile month. the msci asia pacific index is down 0.3%. trend a littlehe bit. .owing to keep liquidity ample we come off the lows, but the s&p futures are pointing lower. u.s. markets are closed today for labor day. happy labor day if you are watching in the u.s. the euro is holding five days of losses.

in the latest escalation, the u.s. slapped tariffs on roughly $110 billion of chinese imports ranging from footwear and textiles andme certain technology products like the apple watch. beijing's retaliatory tariffs effect. pres. trump: the meeting is still on. that hasn't changed. we will see what happens. china to take $500 billion a year out of our country. that.'t do nejra: a little bit of a torrid august for equities. are you tempted to add to risk at all given the uncertainty?

>> not at all. it's not only to do with trade really. i'm getting slightly energetic even at 6:00 a.m. in the morning on a monday. if i hear the day-to-day saying about it's all about trade and it's only about trade tensions, only about politics, not really. i think people use that as an excuse to say if that hadn't been the case, the rally could have continued or the economy would still be doing fine. what we seen is fundamentals have deteriorated even before all the politics have happened, even before we had the trade war. we have seen data already deteriorated in emerging market economies. aboutd say it's not only the day-to-day politics, it is something much more structural,

much more fundamental. all the time to add risk. even if we have a deal, even if the day-to-day politics suddenly miraculously vanished from today to tomorrow, we are still left with an array of basically no upside. it's sort of like people are pretending if that is going away, the old world order is suddenly reinstalled again. >> we are underestimating the underlying issues in the global economy. i take it if you are not prepared to buy the dip -- have a look at this. cross assets. to takee you prepared protection? do you buy volatility? do you buy protection? what is the mechanism you employ? >> i think there are a couple of things at the moment you can still do from a rates perspective. we have a huge downside potential for rates. i think we can still go further.

in thetioned china beginning. if you look at the 30-year bond in china, they have lacked the move globally this year. that's still something where i would say, look, if we have a slowdown inlight chinese growth over the next couple of quarters and years, chinese bonds are still hugely attractive at the moment. still protecting you from some of the day-to-day politics, plus the underlying fundamentals -- fundamental slowdown concerns. >> we get the official manufacturing data not looking pretty at all out of china. bloomberg economics says don't be misled. weakness.sks are you expecting more stimulus out of china? would that went -- make you want

to buy more equities? >> i would be both buying chinese bonds and chinese equities, particularly on the theme.d the new china you have seen that underperformance since the start of the year. you have seen that underperformed for quite a while already. shift from old to new china, that still continues. that's still hugely attractive. additionalexpect stimulus measures, particularly from the rates perspective. it wouldn't really make sense to see the yuan and renminbi getting depreciated day after day after day. unnecessary strains for the negotiations on the right side. havese authorities still the huge potential to do a lot more.

>> what more will they do? -- you clarify for us don't need to see the yuan break lower for you to engage in the domestic equity story and the bond story? >> yes. i think the domestic equity story, it's a particularly relative value story at the moment. it's not something i would be saying on emerging market -- market equities -- at the moment i would still very much favor the sort of new china theme against the old china theme. that's a bit independent from the emerging market fx picture where our strategists are still quite cautious on the overall emerging-market fx picture. equities,rging-market i'd still very much lean into the new chinag

theme versus the old china theme . >> stay with us. let's get you up to speed now with the first word news. the first word news. the first word news. landfall in the bahamas. it is the most powerful storm to come ashore in the atlantic. it brought 185 mile-per-hour winds and storm surge that could top 23 feet. it may leave the islands devastated for years. meantain weather patterns dorian could hit florida, georgia, or the carolinas later this week or not make landfall at all. president macri is trying to stem the growing economic crisis. it is eight weeks ahead of the presidential elections. saudi arabia is splitting its vast energy energy -- industry

and mining portfolio into two ministries. the move comes as oil trades below the breakeven level and reflects a sense of urgency in balancing the markets. said he plans to present a new government by wednesday. he will put the slate of ministers to the president as he seeks to hold together a new coalition. italy's markets were unsettled friday when the five-star leader elections ifrly his demands weren't met. ,lobal news, 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. nejra: protesters caused major travel to and

from the airport. fromen engle joins us now the hong kong airport express station. good to have you with us. talk to us about how hong kong is faring after 30 straight protests.f a top official not ruling out an emergency law. . . . >> the top priority is stopping the violence. this is a vicious cycle. the protesters are increasing the violence because they are not getting the government to meet their demands. cycle ofat this violence is going on.

13 consecutived, weekends of demonstrations and it's become increasingly violent with a big bonfire being set at the barricade by protesters. police also discharging at least two rounds of live ammunition into the air because they felt their lives were in danger. it's only a matter of time before this gets more dire and god for bid if there is a fatality. bit of a critical point right now. saysthe chief secretary invokingnot ruling out this emergency regulation ordinance, that would give police and the government more power to crackdown on dissent

and give police more power to .rackdown on the protesters that could be the next page in this chapter that has now been going on for several months. >> thank you very much, stephen engle. let's ask a question of our guest host this morning. the hong kong impact -- there is a global perception. impact one global markets? impacts the hong kong the global outlook? max. bring that to -- >> people take this as an excuse to just sort of mask the underlying fundamentals have deteriorated and have for a year and a

half already. taken geopolitical risk, political risk as the excuse to say if we hadn't had fine.we would have been the old world order would have been with us still. if all that is

nejra: this is "bloomberg daybreak: europe." check out your first word headlines. the markets. juliette saly never does first word headlines in this show. what's wrong with me? good morning. >> i use to. but i'm covering the markets today. we are seeing the yen with a handle of 106. the impact tariffs kicking in. 0.4%.great start to septedown t

in australia, energy stocks are under pressure today. the rba coming through with its decision tomorrow. weakness in both the kiwi and aussie today as the tariff impacts come into play. just concerned about the ongoing trade dispute hitting those commodities. soothing words coming through from authorities, saying liquidity example and the risks are controllable. this is despite the fact that the official pmi came in weaker than expected here in hong kong stocks still being hit by the protests. a lot of weakness coming through from the casino and property players today. let's have a look at the impact the protests have had on retail sales. on friday afternoon after the bell, the first official read of retail sales in terms of four months of data since the protests began. they fell by 11.4% in july. much worse than the mere 7% drop in june. bloomberg intelligence is saying

it will tip hong kong into a technical recession when we get the third quarter numbers coming through. even though retail sales are not a huge component of the overall gdp, they do under score the weakness you are seeing in the overall economy and retail is a big employer as well. bloomberg intelligence saying hong kong's economic outlook on the back of these retail sales is quite bleak. manus: indeed. thank you very much. juliette saly in singapore on the markets. it is set to be an eventful week for the u.k. lawmakers, set to return to parliament. the prime minister faces pressure from the opposition party which will present legislation aimed at stopping the country from crashing out of the eu. the minister in charge of no deal planning told the bbc that fresh food shortages wouldn't be a problem. >> there will be no shortages of fresh food. we will -- >> will food prices

go up? >> i think there are a number of economic factors in play. some prices may go up. other prices will come down. we have our bloomberg international government executive editor joining us on the line. good to have you with us. how are lawmakers going to react when parliament resumes tomorrow? is there enough support behind potentially jeremy corbyn's motion? >> that is the question indeed. boris johnson faces a busy week this week and possibly a challenging one when parliament comes back on tuesday. lawmakers seem to have moved away from the idea of trying to block the suspension of parliament and they are instead focusing on one of two things. that is a bill that forces boris johnson to either seek an extension of brexit, which pushes it back again, or a no deal brexit. there seems to be a cross plan forming their.

what they first have to do is get control of the order paper in parliament and that's where the speaker comes in. we know he's been a bit upset about the behavior boris johnson of late. the question is whether he backs that. as you say, they need enough lawmakers across all parties to say we are angry enough that what boris johnson is doing and we are afraid enough of a no deal brexit that we are going to try to stop it. nejra: is there any sense exactly what boris johnson himself is going to try and achieve this week? there is some speculation that he is actually moving towards an election sooner than some might think given the spending plan he has announced. >> boris johnson pretty much been in campaign mode now for some weeks, as has the opposition. they all know this is probably headed towards an election before too long. boris johnson is probably focused on the immediate task at hand, which is parliament and the threat he has been making against rebel conservative mp's. there are many reports that

those within his ranks might cross the floor. if they do so, they could be expelled from the party. he is trying at the moment to say you all need to fall in line behind me on brexit this week. he was out in an interview on the weekend, saying to people this is what the british people voted for, they wanted brexit, i'm trying to do that, and you are trying to block it. that's the narrative we see him taking into election. he tried his best to deliver brexit and he was stymied and therefore he must now take it to the people. very much the language of someone who is gearing up for an election. manus: ok, thank you so much, -- mathieson.son kill,he threat of fill or to use a market term, in terms of brexit by october 31 -- what is your base case scenario? is it hard or an election? max: listening to all this now,

i think the only thing we know is that we know nothing. and coming from southern germany, who have got difficulties -- i have difficulties understanding germans, let alone british people. i'm finding it difficult to form a base case for markets. from an asset allocation perspective, that tells me i can't really take an active position. actually what we've seen over the last couple of weeks and months -- what we've seen is that u.k. mid-caps and equities have suddenly started to outperform large caps, even though sterling was going down, which is completely counterintuitive. that was the one relationship that i as an asset allocation guy could still rely on to say it still may go down, then the more export oriented large caps in the u.k. will outperform the more domestically focused mid-caps. even that has been breaking up of late. for me -- from my perspective, it gets incredibly difficult to form a

base case and to say anything other than staying neutral and staying completely put is really not worth it, i think. nejra: what about buying guilt -- gilt? the 10-year gilts yield may turn negative on a no deal brexit. given your view on rates generally, would buying gilt be an option here? max: not from a tactic perspective, given where rates and expectations already are. but from a structural perspective, comparing gilts to bunds, the level doesn't really make sense. even if we have a deal, for example, the u.k. would still be faced with exporting to the euro zone, where, structurally, we see growth continuing to slow down. we have two high asked -- too high estimates of potential growth in the euro zone. .3,e have growth at .2 and we might see a lot more

indication of technical recession. yields,king at gilt that is a huge gap. it makes no sense. from a structural perspective, buying gilt still makes absolutely great sense to me. manus: ok. we will fill our bucket with gilt. how about sterling? i know you don't necessarily want to have a position in this because you are an acid allocator, far -- an asset allocator, far too smart. have a look and tell me what logic suggests. three month implied vol. we are almost at a record where the highest -- do you think this goes higher with the hubris over the next couple of months? max: first, i wish i was that smart. to clarify. but from an fx perspective, yes, i think a lot of people have been hedging against it, not only in sterling, but even in european equity volatility. when you look at the euro stocks

fall -- vol, that has been going up. i don't expect it to go much higher. nejra: max is staying with us. thank you. coming up, on the brink of default, we will discuss argentina. this is bloomberg. ♪ - my family and i did a fundraiser walk in honor of my dad,

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this is "bloomberg daybreak: europe." argentina's currency crisis is a spiraling. some would say out of control. the government is imposing controls as it teeters on the brink of default. the flow of money we are seeing from argentina is what is driving. the central bank has set a deadline for exporters to repatriate foreign currencies. the government has also said institutions will need authorizations to sell pesos in the foreign exchange market.

closelypledged to work with them. let's bring in our managing editor for emerging markets. this is the hemorrhaging of cash. you have the moment of time where the election came through, and then we have this moment of trying to redenominate the bonds. capital controls. what does that say? hast says that mccree turned everything he stands for out of the window. he is the man who, when he came into power, was going to liberalize the economy. he got rid of the capital controls. he got rid of the policies previous governments had imposed and gotten a bad reputation for, reestablish a relationship with international investors, sold 100 year bonds, which is loudly praised around the world and very well subscribed for.

here we are just a few days after an effective default on debt. a request to re-profile the debt. now we have capital controls. we heard from bloomberg intelligence saying argentina's public debt re-profiling only postpones the pain. are all these actions postponing the inevitable, which is an actual default? i think the markets are pricing something like a 95% probability in the next five years. how soon could that actually come? >> very soon. i think if you look at the momentum with which this crisis is unfolding, getting closer to that everyday. what is interesting here is that the president has decided that it is better to act now in the interim before the election on

october 27 in this bid not just to save his own presidency, but also really to save the argentine story. he has not really got very much choice right now. he is really, if you like, inflicting now on ordinary argentines the kind of measures that were anathema to him just a few years ago to try to, you know, keep the story afloat. it is a very leaky boat. manus: it is indeed. justin, thank you so much. our managing editor for global emerging markets. let's give you a little bit of breaking news coming through. expected to encompass about 20% of shares. on the intends to list nasdaq in stockholm. they have about 40 billion assets under management.

this is the kind of backdrop. more than 51 billion in euro investments since the start 25 years ago. as we get more on that story, we will bring that to you. dani burger is in london. is really interesting. we have the latest round of tariffs kicking in. china has been surprisingly resilient when it comes to the equity markets. they saw pmi's weaken saturday. 1%. so, china is up over that might be because over the weekend we heard policymakers signal support, saying they would be accommodative as economic weakness continues. when you look at markets sensitive to trade like australia, down 0.5%, new zealand up in large part because of what we are seeing in the currency. down 0.3%. hedge fund net shorts have risen to their highest level since november as economic deteriorates. bond yields coming up a bit.

it is that picture of global economic weakness. brent and crude come up. i want to stick with copper because copper again is this economic indicator. we have seen it weaken. copper telling us the economy is not doing well. hedge, other investors also bearish. when we look at the net future positions for noncommercial citigroup also points -- this is just the staccato chicago data. there is the same bearishness. things could get worse from here considering there is a whole swath of investors who have yet to come off the sidelines and buy into the bearish cover -- copper story. nejra: let's get the bloomberg first word news now.

slapped tariffs on $110 billion of chinese imports yesterday. the 15% duty hit consumer goods from footwear to technology products. china retaliated with higher tariffs rolled out in stages. president trump told reporters face-to-face talks between washington and beijing in september are still on. hurricane dorian has made landfall in the bahamas. it's tied is the most powerful storm to come ashore anywhere in the atlantic. they probably will hundred 85 mile-per-hour winds and storm surge could top 23 feet. it may leave the islands devastated for years. uncertain weather patterns mean dorian could it florida, georgia, or the carolinas later this week or not make landfall at all. -- are patrolling key hong kong subway stations after calls for more protests that have rocked the transport network. it follows another weekend of

clashes between demonstrators and police. 63 people were arrested on saturday evening. is splitting its energy industry and mining portfolio into two ministries. theenergy minister with responsibility of energy policy, but he will lose oversight of industry and mining. the move comes as oil trade slows the kingdom's breakeven levels and reflects the sense of urgency in balancing markets. italy's premier designate says he plans to permit -- present a new government by wednesday. president mattarella seeks to hold together a new ruling coalition. luigi demaio threatened early elections if policy demands were not met. 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. much. thank you very

you --ake a look at how how your trading week should look. it is a smaller board of data. monday, several european countries and the euro zone releases its manufacturing pmi numbers for august. second-quarter gdp. after a slight pickup in the how the country exits a recession. wednesday, data from services and the pmi for spain, italy, germany, and france, not to mention the u.k. services pmi. what impact will persistent brexit uncertainty have? deking of europe, thursday, we wait for german factory orders to give us a snapshot of how deep the slowdown in europe's largest economy runs.

there is a rate decision from russia's central bank and that is the last u.s. nonfarm jobs data before the fed meeting this month. elevated economic uncertainty. -- earlier,ed on you were emphasizing you would not be wanting to get into risk assets right now because there is a structural slowdown going on away from politics. in the u.s., you think the impact of fed easing is going to be limited. as a multi-asset strategist, what is the alternative to buying bonds? all, i have a larger portion of bonds than equities. that is the more straightforward one. case, evenave a base if i assume that the rally might have gone a little bit too far, you still have a lot to do on the shorthand.

if you look at short duration high yield in europe, you look at short duration emerging-market external debt, that paces around roughly 4% -- pace is around roughly 4%. something very attractive in the environment we are in right now. there is enough to be done in the fixed income portion. on the equity side, i would be cautious. much more than emerging-market equities. want you to take a look at this in the gtv library. the debate is, what policy response does the fed need to do? this is one of those recession indicators. high yield over treasuries. you can see we are nowhere near where we were in 2008. nowhere near where we were back in, say, 2001. this high-yield market may well

be telling me something that we are over egging in regard to recession risk. what do you say? >> that is one of the big dilemmas i think investors are facing right now. one is the data looks pretty crude, but positioning is very light, so it does not pay an awful lot to be to bearish. i am bearish, but i cannot declare a december 2018 but because positioning is so high. the second dilemma, what you have just said. equity markets are telling us something completely different then, for example, comparing it to the yield curve. ofre is a certain portion financial markets that tell us we are at the break or even over the brink of getting into recession whereas high-yield markets are equities are counting a completely different story. i would be somewhere in the middle just to get out of the

discussion. in all seriousness, from a high-yield perspective, i would rather be in euro high-yield and dollar high-yield. short duration, i would rather high euro higher yields -- yields because purchases from the ecb might be accelerating the effect and the buying of people in europe. in dollar high-end -- high-yield , i'm not sure. excluding energy issue, we are tight already. close to the energy where we have been in 2017. that looks overdone. is a glorious chart. i showed it to our goldman guest and he said he is watching it two 10osely than the curve. how much spread widening would you need to see on that

high-yield chart to give you an even more strong sense of a gloomy outlook you are picturing ? >> i have severe difficulties putting a number on high-yield. as we all know, when we have a week, there might be a 50 basis point selloff. there might be 30, there might be 50. who knows. i'm having difficulties. i cannot really put a number on it. -- if we compare this across asset classes and we say cyclicals versus defensive's, if we are looking at 10 year rates, high yield spreads, if all of these markets flash the same signal, then i would be worried rather than putting a specific number on it. manus: thank you very much. that is max kettner over at

hsbc. dorian ashore in the bahamas. the most powerful storm to hit land anywhere in the atlantic. florida is not out of the woods yet. annmarie hordern has been tracking. good to see you this morning. this has got huge implications all the way across the u.s.. take it away. bahamastation in the from dorian's 100 85 mile-per-hour winds. catastrophic storm surge on theg likely occurring grand bahama island. the national hurricane service called this a life threatening situation. florida not out of the woods just yet. fluctuations in weather patterns could hit florida or further up the coast in georgia or the carolinas. form not make landfall at all. or not make landfall at

all. trump's resortd in mar-a-lago often used as a winter white house. isrida's fuel situation particular. supplies have been draining up as drivers have been filling their tanks head of today's labor day holiday. of gas stations in the miami-fort lauderdale area are without gasoline. this is according to gas buddy. you can see all these updates. this unusual supply situation for the state. it relies on tips to bring most of its fuel. a hurricane could risk port closures and the state being cut off from supply. the last thing i am watching today are bonds tied to weather risk which are above market yields in exchange for the risk the principle could be wiped out by a disaster. index at theond

bottom. it jumped 0.8 percent this week, the biggest since december as dorian is closing in. you can see the historical impact we have had from a bond. katrina, irene, florence as well as irma in the past. these,g in reference to not that big of a move, but this is one we need to keep an eye on. forcially as dorian is tied the most powerful storm to come ashore anywhere in the atlantic. doriandevastating certainly seems appropriate. thank you. coming up, new tariffs take effect. the u.s. and china's lap -- china slap duties on billions of dollars of goods. ♪

manus:manus: it is "bloomberg daybreak: europe." let's get the bloomberg business flash now. >> regulators may keep the boeing 737 max 8 grounded into december according to dow jones. officials have complained boeing failed to answer questions about modifications to the jet. it reports boeing will now have to resubmit documents describing proposed software changes. in macau, casino revenue dropped for the second straight months. the world's biggest gambling hub face headwinds from protests in hong kong and regulatory uncertainty. highrollers have been cautious after beijing moved to clamp on gaming. its latest numbers are further bad news after a mixed year for revenue expansion. toai's biggest bank wants increase its foreign ownership limit to 40%. torates nbd says it plans

seek approval from shareholders and regulators. this comes as the united arab to attract more international investors. that is your boom bird business flash. nejra: let's turn to environmental social and government investments, traditionally held accountable for profit. a growing number of investors want to add more member -- measures to that environmental impact. about $31re's trillion in funds. up.ainable investments that is according to a report by the global sustainable investment alliance, a group of organizations tackling -- tracking, i should say, those moves in five regions from the u.s. to australia. joining us is the global head of esg research at ubs. ubs is hosting their first ever

sustainability symposium today. great to have you with us. timely as ever. if i asked you, what is the pivotal moment the has caused a dramatic shift in investment in esg, what has that been? the paris climate agreement? what was the moment that really shifted the dial? >> that is a great question. it is hard to pin down a pivotal moment. cup 21,right to mention which focused everyone's attention. many things that happened since then, it is much more of a cumulative process. back at the intergovernmental panel on climate change, if we look back at the global i/o diversity -- biodiversity, basically the environment seems to be out of

control. beenhouse gases seem to rising. water stress is constantly in the news. we monitor other environmental issues such as air pollution. that is improving, so on and so on. it is accumulation. the meetings of the annual conference of the meeting on climate change, they have galvanized everyone over a number of years. the success in paris, you are right to mention that as a key moment. nejra: you have a great question i want to bring to attention, which is how is it possible to leverage the power of markets to channel resources inadvertently producing the problem sustainability seeks to address the alco can you flesh out what you mean and whether you have an answer? the $64 billion question we are addressing.

it is the kind of question one brain cannot solve. withe collaborating finance and investment. they have that conference and we have borrowed their speakers to join us. i'm not pretending i have an answer as to which way this could go. i can think of plenty of examples which demonstrate. for example, one of our most widely read pieces of research relates to sustainable mobility. our team worked with m.i.t. on this. there was basically a panel discussion. m.i.t. said, you know what, sustainable mobility, electric vehicles, green energy, driverless cars, it could be environmental heaven or in environmental disaster. there is no way of predicting that. let's imagine one scenario in

which people use electric cars. they are ridesharing. they are using this new technology in environments in which people are environmentally aware. that results in a more resource-moderate economy. on the other hand, we know people love technology. they love buying the next gadget and throwing the old one away. maybe people look at these more ands, they do more, and you end up with a resource intensive economy. onus: do you think we are the frugality mission? my generation is become aware of the need to imbue that in millennials. where are we? a great question. i'm not sure i can say where we are. by thed of reassured

mentioned theave 31 trillion. it is hard to know what that means. there are so many different definitions. that number is worth mentioning in the context of this space. climate 100 is a group of investors trying to ensure large emitters will start moving the right direction. everyone knows the u.n. pri. placedown firm, we have a good deal of emphasis on sustainable development goals. excited to have ubs' global visionaries with us. they are a small tree of entrepreneurial organizations looking at sustainable development goals.

there is a lot of momentum, and i find that reassuring. nejra: thank you so much. great to have you with us. you can look at all the charts we have shown you -- this is bloomberg. ♪

nejra:nejra: good morning from bloomberg's european headquarters. manus: this is "bloomberg daybreak: europe." china is hit with a fresh round of tariffs. pmi data helps push stocks higher. his --nt trump focuses focus shifts to dorian. the u.k. labour party readies legislation to prevent a no deal brexit. pledges billions in domestic spending.

parliament returns tomorrow. temperature rising. hong kong officials go through emergency law is the city sees some of the worst violence since the unrest began. nejra: welcome to "daybreak europe." i bet some traders are happy august is over. september not looking that much better. rallied the most since 2008. one of the biggest banks has gone from much higher ownership limits. they hope to get to 40% ownership. the stock rallies. 14%.tock rallies 5% to 20%.

what does that mean for the flow of money? we have a lot to pack in. tariffs are live. data in the mix. how are the futures looking? >> a bit of a bad start in terms of u.s. futures. when i referred to august, we saw a loss in global equities of 2.5%. the last week of august showed a little bit of green, but now we have the imposition of tariffs and no sign of the trade wars going away. if the word from authorities might be in terms of chinese equities. ftse 100 futures doing a different thing. u.s. markets are closed for labor day. ftse 100, dax, and cac 40 futures getting a lift. as you pointed out, a global rally. the question is, where is the alternative now? yes, where is the

alternative? certainly not 100 year argentinian bonds. that is the other story this morning. the cash market is closed. futures are flat as a pancake. they are the most over-bought in many years. we'd had a conversation with max kettner. -- heilt versus the vs. the bundt yields. let's get a check of the rest of the markets from singapore. >> not the best start for the month of september after that volatile august. tariffs coming into play. the yen higher. the nikkei closing of the session weaker by 4/10 of 1%.

weakness in the commodity currencies, the likes of the kiwi trading at a four year low. --tralian stocks down by dragged down by energy players. you have a reprieve in china. the tie should and the manufacturing pmi numbers coming on not too shabby. soothing words from authorities saying risks are controllable and there is liquidity. stocks maintaining gains in late trade. the process in hong kong hitting sentiment once again. casino players coming under pressure. we also had a read on retail sales showing the first drop in terms of the first full month of data since the protests began. let's have a look at my chart. but also what contributed to this downt sales was fewer mainland chinese tourists. the number of chinese for the e

in 18 months in july. that means they were spending less, obviously. a 24% drop in jewelry and watches weighing on the overall retail sales. the outlook for hong kong's economy is bleak. we could see a technical recession. because youapore could see upside in tourism. .ingapore picks up the slack u.s. slapped tariffs on 110 billion dollars of chinese goods ranging from software and apparel to home textiles and certain technology product like the apple watch. retaliation took effect on sunday. you've got pmi data.

the unofficial gauge some manufacturing expand. despite the escalation with trade wars, the u.s. president donald trump says talks are still on this month. >> they have not changed it, we have not. we will see what happens, but we cannot allow china to repulse off anymore. we cannot allow china to take $500 billion a year out of our country. we cannot do that. >> joining us now is the deputy cio of brooks mcdonald. thanks so much for joining. as we see tariffs being imposed, tell us what you think your base case is where we go from here. so money people say there is not going to be a deal before 2020. >> our base case is we will get some deal at some point.

trump'sthing is whether tariffs have an impact on the u.s. consumer. if you see that happening in terms of inflation, with that is where we think political pressure will match up. especially as we get to the 2020 election cycle, that is coming through. december reflects that. trying to make sure it does not affect that u.s. consumption story. how urgent is the need for a more substantial policy response from the pboc in the form of rate cuts? the ppi data this morning. >> this is linked up with that narrative of weakness in terms sector.se manufacturing in terms of further stimulus,

that could come from monetary policy from a cut in terms of the pboc or physical policy. that is where we would expect the bulk. ingive you an idea, we saw 2016 double what we saw this year in terms of fiscal response. that is half of what we saw during the financial crisis. definitely more room for china to react. make sense to what you are maintaining a technical overweight asian equities. overall, you are quite pro-risk at the moment. i wonder why. our previous guest host from hsbc said the slowdown we are seeing, much more structural. he's not seeing reasons to buy the dip. what is telling you equities are a good alternative to bonds? is,ne of the things to do

strategically, we like equities over bonds because of the equity earnings yield, so much higher than the bond yield. that has been the theme of the last 10 years. equities are incrementally, every day you have those in your portfolio, earnings or so much higher. on a technical basis, we are tactical basis, we are slightly underweight because we are concerned about the response.olicy the ecb have started the mood music of more central-bank policy. in our view, the market got carried away there. we think market expectations have gone too far. we see risk of a near-term correction. anus: you talk about overweight position in asian equities. valuation, the pe

stands at about 13. the correction of equity market to look at valuations more deeply? >> that is of critical importance. when we are looking at the times pe over13 the next 12 months, the ones that are cheap, we've got the euro zone, the u.k., asian equities. the asian growth story is so much more important. you can see where valuations got to in terms of how the market reacted in 2018. asian equities outperformed in the united states. that is partially where they got to in terms of where the markets underperformed. what we are seeing is this emerging story that when we seeing news around the u.s.-china trade tariffs, it is

not a situation where it is bad for asia. we are seeing mixed results in terms of the u.s. as well. manus: stay with us. edward park from brooks mcdonald asset management with the latest on the markets. there is the performance in terms of a bad month for global equities. the first back-to-back to back negative months of 2018 -- of 2019. >> police are patrolling key hong kong subway stations today after calls for more protests. it follows another weekend of violent clashes between demonstrators and police. 63 people were arrested, including inside the subway saturday evening. has impose capital controls in a blunt policy reversal controlling the financial crisis. corporations will require

central-bank authorization to buy dollars in the fx market except in case of international trade. president macri trying to stem the economic crisis ahead of presidential elections. germany, angela merkel's defends against a surge by the far-right. the result may stave off a deeper political crisis in berlin. saudi arabia is splitting its portfolio into two ministries. has responsenister ability over energy policy, but he will lose oversight of industry and mining. the move comes as trade falls below the breakeven level and reflects the sense of urgency in

the market. italy's premier-designates has he plans to present a new government by wednesday. he seeks to hold together a new ruling coalition. italy's markets were unsettled friday when the five-star leader luigi dimaio threatened early elections if his policy to men's were not met. 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. nejra: coming up, super september. here's what to look out for. next week, parliament will be suspended. we will be on top of all the action in the u.k.. manus: mid-september am going to be on holiday. the frankfurt motor show. chair jmm exit's

from the eu will topc

nejra:, 42 minutes from the start of cash equity trading in europe. this is bloomberg daybreak: europe." into ourt's get markets. one big story. nbd raising their foreign ownership limit to 20% from 5%. they are seeking to raise that to 40% with comments from some of our regular guests. this is going to have an impact

in the medium-term. the sharks are circling. nejra: the new zealand dollar reflecting concerns around trade. the yuan pre-much unchanged. the dollar trading at a two-year high even though it is flat in today's session. futures on the back foot. in treasuries on labor day. european futures pretty much flat. >> regulators may keep the boeing 730 seven max grounded -- december.r boeing failed to answer questions about modifications to the jet. boeing will now have to resubmit documents describing the

proposed software changes. in macau, casino revenue dropped .or the second straight month the world's biggest face headwinds from protests in hong kong and regulatory uncertainty. highrollers have been cautious. further bad news for macau after revenue expansion. dubai's biggest bank wants to increase its foreign ownership limit. emirates nbd seeks approval from shareholders and regulators for the move. foreigners currently hold 5% of the lender as emirates eases its rules. your bloomberg business flash. angela merkel's ruling coalition -- the euro skeptic

did not make it in the local elections. stave off could political crisis in berlin. was a little bit of a .urprise for angela merkel the key is whether they can carry through on this. >> i think you can say angela merkel's party, they are breathing a collective sigh of relief today. coupleere polls the last weeks that showed the alternative for germany, this populist party, would win the election. that did not happen. they still had a very strong showing. in social democrats hung on the state that surrounds berlin. they hung on.

they will need to find other partners to govern, but they will keep hold of that state. in saxony, that state has been controlled by angela merkel's winy, and they hung on to the election as well. the coalition here in berlin, ,hat is what we care about potentially this unrest will quiet down for some time. the social democrats are looking closely at whether they want to remain in this coalition. they said they will give an update by the end of this year. this should quiet this down a little bit. it won't go away completely. the social democrats won in brandenburg, but in saxony, the social democrats came in under 8%, their lowest going ever. state ing ever in a germany. week as u.k.ntful

lawmakers return to parliament. boris johnson facing pressure from the opposition labour party, which will present legislation aimed at stopping the country crashing out of the eu. bbc foodove told the shortages would not be a problem. >> there will be no shortages of fresh food. will prices go up as you used to say was inevitable? i think there are a number of economic factors in play. some prices may go up. other prices will come down. manus: michael gove speaking on the sunday shows. it's bring in our guest host from brooks mcdonald asset management. nobody knows. there is a great set of unknowns. i want to delve into the bond market in the u.k.. citi. out from they say the risk is the 10 year

government bond gravitated to zero. is that something in your sight line? >> it is possible. we are looking at the moment at rate probability for the u.k.. that is implying we would have one rate cut at the moment over the next nine months or so. that is sort of trying to weigh out those probabilities. no deal and some sort of softer brexit. if we see a shift toward no deal, it is possible we see rate cuts, and that could bring the , a lot of maturities of -- the 10 year, a lot of maturities of gilt. nejra: would you be willing to put that cash to work? it is an underway position we have as our benchmark. a net 12 12 month --

month earnings basis, it is one of the cheapest in the world. we are definitely looking at that. clarity, thatexit might come in terms of a no deal maximum uncertainty. i think we would be nervous of diving straight into markets, see how the response comes in terms of fiscal policy and monetary policy. if we sign more market friendly outcome, that would be time for us to start giving arto. we -- dipping our toe. the u.k. is somewhere we can actually look to long-term strategic capital. we need some sort of outcome. aat does not just mean postmarked outcome. it could be no deal as well. the u.k. was that bastion of law and order, absolutism in that hasorder, and

been upended. you are underweight equity in the euro zone. oryour euros in weighting exposure contingent in part on the outcome of brexit? >> our largest concern is chinese demand on germany, but also the risk if we did see some sort of deal between the u.s. and china, that the focus of the white house might move toward europe. brexit is one of those factors that is really reflected in our therweight u.k. more than eurozone. if we did see a more positive outcome in terms of exit, i do not think that would change our fundamental euro zone view, primarily around german manufacturing numbers and the fact we are seeing over the week. did you find anything

surprising, or does just confirm your view that you prefer the u.s.? >> it is quite surprising. historically when you think about markets, you have that view that if you go into a downturn, you want the u.s.. is showingesearch over the last six months, the last two years in general, where we have seen election market drawdown, we have seen the u.s. market down 110% of that. only 70% of that. that is at odds with our current positioning. it is more around the fact that there is less hot money. if you are still in europe, that is because you are looking at a strategic long-term growth story, not necessarily trading that around momentum. that is why the u.s. market is volatile.

thank you for joining us. that is it for "daybreak europe. " when you're traveling to work, tune into bloomberg radio. ♪

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matt: today, the markets say brace yourselves. the data is coming. manufacturing pmi's out this morning from all europe's major economies. the category five storm heads towards america's east coast. the cash trade is less than 30 minutes away.