>> it is "daybreak europe." 9:00 a.m. in dubai. i am joined by nejra cehic in london. nejra: i am nejra cehic, from bloomberg's european headquarters in the city of london. these are today's top stories. $70 after soared to an attack on a saudi aramco facility. president trump vows retaliation if iran was behind it. data misses from china underscore deepening concerns in the world's second-biggest economy as investors prepare for the fed on wednesday. borisg up a brexit deal, johnson prepares a hard-line

approach with jean-claude juncker. we are in luxembourg. manus: a warm welcome to "daybreak: europe." we are waking up to 5 million barrels of oil being taken out of the system by saudi aramco. is it a four-week affair? how much of the 20% price rise that we saw at the open is geopolitics and how much of it is supply? good morning. nejra: yes, the biggest sudden disruption ever is what we have been waking up to this weekend. we have certainly been mispricing oil markets up until now. >> we have indeed. let me show you the single biggest daily move. i put it in the library.

here we go. this is the kind of size and scope move we have seen on the oil market. we opened up on the biggest move since 1988. since 1990iggest when kuwait and iraq were at war. the question we must ask ourselves is how quickly can aramco get this oil back online? you need to speak to the market and make it very clear what is the damage, what is the damage limitation. let's look at the rest of the implications. we are seeing the lira take a bit of a tumble. the geopolitical risk is something we have been mispricing. money goes into the yen and comes out of the dollar. what does that do to the bank of japan? goldman sachs have a tracking note on yen. yen really screams as one of the major assets that is still cheap and should perform well in a downturn and that chinese data adds to that story. nejra. nejra: the other safe haven

rallying today is gold. we are awaiting the treasury market cash open at 7:00 a.m. london time. net 10 year yield after jumping 33 basis points, how much could it fall today. futures on the back foot in terms of that. we are seeing reactions across markets. manus. manus: let's stay with that top story. the oil facilities were hit by an attack over the weekend. strikes have cut saudi arabia's output in half. it wanted 5% of the global supply. the second-biggest oilfield in the kingdom. yemen claimed credit. the u.s. is blaming iran directly. let's bring in the team.

we have our middle east managing editor, our middle east markets reporter, antonina paula, joining us. tim graf is the head of microstrategy at state street global markets. it is around up to beat the roundups. first of all, anthony, the scale of this outage, 5% of global production. are we pausing for thought? >> we are pausing. the oil markets have reacted immediately. it seems the saudi's are pausing in terms of telling us what is happening on the facility and what we need to know is was there actual damage? was there lasting damage? how much will it take to be repaired and that facility? toknow it will take days resume production. that is under the best circumstances. it will take several weeks to get back to full capacity. that is a facility that processes much of the saudi crude that comes out of that

area. it is on the coast of the persian gulf. those are the biggest ones. this processes the oils so they can be shipped out to the customers. this is vital for global oil supply. nejra: great to have you with us as well. what are the implications for the potential meeting between the u.s. and iran and what might come out of those talks? >> good morning. the consensus now is this will put a pause on any -- u.s. and iran, which is slim to begin with. remember, we talked about how iran needs the u.s. to take a concrete step in terms of sanctions. pompeo came out and blamed iran. that sounds unlikely. they are locked and loaded based on who actually did that.

if the saudi's come out, you have to bear in mind they have not blamed anyone yet, but if they come out today, that is basically, you know, the end of it. manus: if we took our minds back a week ago, i was postulating different things. too many "ifs" in my equation. a different language. here we are, locked and loaded, with no evidence vows far that iran is responsible. i and the size the words "thus emphasize the words "thus far." alaa: no one expects saudi arabia to respond by a military strike against iran even if it does believe iran is behind it. foreignigned on no more adventures. he said before they were locked and loaded before another incident, and did not do it, so now, people will be watching closely and holding to his word.

is he going to ask or not? nejra: let me bring you in here. markets waking up to this geopolitical risk. they have been mispricing oil. do you expect oil, even if they stabilize, to trade in a higher range from here with markets waking up to these risks? infrastructure is vulnerable. that is the takeaway. anthony: it is really hard to know. quickly they-- how can get production back online. look at it not in the short-term or the medium-term, but in the very long-term insect other decline -- in secular declined to clean energy, the rise of electric automobiles. i am not certain. i have no idea how those variables will play out. for the short term, that is probably correct. for the long term, it is anyone's guess. manus: tim, one thing which my

last guest in the last hour said to me, he was surprised by the lack of aggressive reaction, s&p futures down .5%. you are seeing the lira take that for some of the growth currencies but there is not a more demonstrable risk off reaction to a president who is locked and loaded and ready to go with a 20% hike in the price of oil. anthony: it goes back to what he said a moment ago in that he has talked very tough and then backed down. this is part of -- we were in the midst of a more dovish pivot from trump in terms of last week sacking john bolton, who has been an aggressive hardliner on iran and trump campaigned on getting us out of foreign wars rather than involving us. this is obviously a very serious incident, but i think the market reaction speaks to those unknowns we still have, how quickly production can be

restored, but second of all, there is not this layer cut for retaliation, not least just because nobody knows who is responsible for this, so that, to me, is striking, in how little markets reacted, other than oil, of course. nejra: can we get a sense of where we go with the aramco ipo? there is a difference on the potential impact of the local or international listing. alaa: right now, as far as we know, you know, we have not received any word about a change in schedule, but things are very uncertain and the expectation is that they be tied to how long this outage lasts. the longer it lasts, the more uncertainty. any foreign investors with any doubt as to whether to buy aramco shares or not probably have more reasons to pause given the vulnerability of their key assets in saudi arabia. manus: no one thing we have

heard from both the saudi's and from the u.s. side is their ability to plug this gap. the president has made intonations he will release from the reserves, but the other side of the coin is of course the saudis have a very big geographic footprint. they have storage facilities way beyond saudi arabia. the ability to plug the gap is something we have to consider as well and that is something the market may be has taken into consideration this morning. alaa: probably. there is another element beyond their physical ability to plug the gap in the market. what if this happens again? no one expected an attack on a facility this size, and all of a sudden, you have 5 billion barrels out of the market, and that is also playing into, you know, into investors minds. the ability to plug that gap is outweighing this. nejra: thank you semi-for joining us. our middle east managing editor and our middle east energy markets reporter, tim graf from state street global markets stays with us.

bloomberg first word news. leanne darren's has it in london. >> prime minister brian johnson is set to defy the new law to stop importing to a no-deal brexit. he is vowing to do everything he can to secure a deal, but we have been told he will reject any extension to the deadline. this ahead of the prime minister's first face-to-face -- with jean-claude juncker today. in hong kong this weekend, the protests have taken a more aggressive turn. demonstrators set fire to a subway station and police hit back with tear gas and water cannons. unrest in the city is into its fourth month. the city had largely returned to normal by this morning's commute. kim jong-un has invited president trump to pyongyang according to reports from south korea. it would be the third time meeting. a local newspaper is saying the offer came in a letter delivered last month. inking talks have stopped

hanoi without a deal. apple heads to court this week to fight the world's biggest tax case. they will tell the court in luxembourg it is already the biggest taxpayer on the planet, but that will not convince the commissioner. in 2016, she ruled the companies tax ideals allowed it to pay far less than it should. 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. manus. manus: thank you very much. welcome to the "daybreak: europe " team. coming up on the show, the next governor of the bank of england is -- well, we don't know. around isften touted andrew bailey. onspeak with him later on all things brexit. that is later today. nejra: and when you are traveling to work, tune into

bloomberg radio. we are live on your mobile device and dab digital radio in the london area. this is bloomberg. ♪

manus: it's "daybreak: europe." dubai.nus cranny in nejra: juliette saly in singapore has more. great to see you. nejra, i am looking at the impact of that oil surge in asia. you have japan out of action for a public holiday but we are seeing asian stocks tracking lower, led by losses in hong kong today and also india, the index off by .4%. no surprise when you look at energy stocks in the region. they are doing incredibly well. we have seen cnooc up by as much as 8.7 percent today. the biggest jump since january 2016. we are seeing airline stocks under pressure. the bloomberg index of asia-pacific airline stocks, 1.5%.y .1% --

the japanese yen rising today. the other factor in terms of market movement in asia today data.en more dismal china i want to have a look at the impact we have seen. china's shanghai comp holding steady. a lot of movement in tech stocks. shenzhen and the chinext index up by .5%. the korean won is a little bit lower, down by .7% against the dollar but essentially, what you are seeing in the risk-on move in terms of some of these assets and. and china is the fact that investors are starting to bet we will see more stimulus, because clearly, the current efforts have not been enough to help the china slowdown. we saw a retail sales growth at its lowest level since april in the month of august. manus. manus: juliette, thank you very much. juliette saly in singapore. let's get you up to speed with your business flash headlines. >> thanks.

general motors staff have caught their first strike and 11 years, halting work at dozens of facilities across the u.s. the united auto workers union is digging in for a fight over jobs and benefits and says they offered an investment package which falls short in key areas. one analyst said the strike them $15t to million in lost production and that is everyday. . bloomberg scoop they have filed for chapter 11 bankruptcy in new york as part of more than a $10 billion plan to settle claims that if you will be u.s. opioid epidemic. it will see the billionaire family and the firm over to a trust but it will be controlled by the states, cities, and countries that have sued perdue. the hong kong stock exchange's unsolicited bid for the london

stock exchange has hit another roadblock. they claim rejection of the takeover. the official people's daily said there are persistent worries about hong kong given the unrest slapped down from the mouthpiece of the communist party which signals a growing resistance to the bid. be boeing 737 max 8 will back in service anytime soon. thetion regulators and united arab emirates are contradicting boeings optimism. they do not expect the plaintiff fly again before next year. boeing said it expects approval in the coming weeks, targeting a return to service in the fourth quarter. and that is your bloomberg business flash. nejra: thank you so much. china's slowdown continued in august, indicating stimulus policies may not be enough to counter the effects of the trade war. industrial output rose from the previous year, below estimates of a 5.2% gain. retail sales most forecasts, expanding 7.5%.

we are looking ahead to the feds policy meeting later this week. .25 pointexpect a rate cut. we are having a boj meeting as well. tim graf from state street global markets is still with us. let's start with the china data. do you think we need even more of a step up in policy easing? tim: i don't know. china is well underway in terms of stimulus, whether it is money market reform and the reserve rate requirement cuts, fiscal stimulus targeted to various areas of the economy, so i am not so certain. that explains the more relaxed reaction we have seen an equity markets, what would otherwise be a shocking set of data. everybody gets the notion that not only is china stimulating, the ecb has thrown another round. the fed is in easing of mode as well. -- easing mode as well. central banks have taken a lot of terms towards easing policy so i think that is being taken

on board. not to say that this is old news. it is only data from one month ago, but the response has been factored into the price. this, tim,debate is isn't it, as far as central banks, in developed markets versus emerging markets, the veracity of rate cuts in developed markets versus the impact of rate cuts in addition to rrr and lending rate being adjusted in china? would rate cuts have a more powerful mechanism in china than in developed markets? tim: probably. especially given some of the reform efforts that happened a few weeks ago. it doesn't seem as though they are trying to target improved lending to the small and medium-sized is missed sector, to the consumer sector as well, so it certainly would not hurt, i do not think. they have stimulus tools to use as far as the rate channel is concerned and you cannot say that about the bank of japan or the ecb.

a very limited amount they can ease by that channel, where it is limited -- available to china. that is what we will see if they would like this to show negative fallout from the trade dispute. nejra: given the recent signs of a truce, at the very least, what is your expectation for the yuan for here in terms of further strength or weakness by the end of the year? tim: any weakness will be modest. there probably will be a little bit because i don't think we have priced in all the bad news from this, but ultimately, come early next year, when the u.s. election cycle really starts to accelerate, if you are still in this environment of slowing local growth, that will feedback negatively to the u.s., and trump especially will be forced to pivot. the chinese do not need to back down. they have the option to wait it out. trump has significant resistance going into lose that election and will probably do what it takes to ratchet down tensions a little bit so i suspect that is

what we will see. it may take some volatility in the interim, but it seems as though we are heading towards that given the discussion we had last week about delaying tariffs. i suspect this is part of a broader game to decelerate tension. manus: of course, that very word, interim trade deal, was a catalyst for repricing. we wrote a nice story about the possibility of attacks from the united states of america, where trump said he would look at something for the middle class, something very substantial, something very, very inspirational, but as per normal, no substantial detail. is this what we then focus on tong into q1, tim, a change the fiscal narrative in the united states? tim: i suspect he will try. i think whatever efforts he takes towards reef lighting the lating the u.s. economy more.

on the fiscal front, he needs the support of congress to enact tax cuts and it is not quite clear that that is going to be so forthcoming with a democratic house, so i would put a little bit higher probability on success in removing trade tensions as opposed to trying to stimulate it. it is possible, but do you want to hand trump and electoral win in an election cycle? i am not so certain that will be so forthcoming. we havehe pivot that seen in treasury yields, and 33 basis point jump over the course of last week. have we reached the top of that where yields have gotten to? tim: i suspect, given what the ecb has done last week and announcing qe probably for the rest of my career. who knows? at least until inflation gets back to target, which might take that long. you might see some medium-term and long-term guys coming in given the repricing in rates and

given rates and the rest of the world will continue to be under pressure. and a shortage, more importantly, of safe assets that are being taken off of customer accounts from kiwi but also from regulatory requirements. that really incentivizes the holding of safe assets. there is not enough to supply to meet those needs, it looks like. manus: you are going to have a very long career because i certainly do not intend to go anywhere. qe forever, i say. i want to show you austrian bonds. i have that foresight. have a look at this. this is a shocker. bonds, look at it. 20% reduction. 20% drawdown on price, so we corrected on austrian bonds, and 1.5 billion dollars of negative yielding that went positive. positive.g debt went they shifted from negative to

positive. what do you make of that correction and austria? what -- in austria? what does it say about the tightness of this market? tim: it goes back to the point before. there is this natural shortage of safe assets, of which austrian bonds are one, and especially in europe and the u.k. as well, where duration matching and pension liabilities is a key variable in fixed income markets. he will probably see moves like this. the demand for austrian bonds was obviously not economic so it can only be explained by two factors. the shortage of safe assets but also there is an element of the greater fool theory in terms of people buying the bond in hopes they can unload it to the next unsuspecting person for a significant profit so you are getting moves like that but at the same time, they were backed by this notion of global deceleration and disinflation, and now, you have had a policy response to that which is likely to take supply further out of

the market. manus: ok. him, thank you very much. you upset half the bond trading community. state street global investment. we are back to our top story this morning, oil on the move, the biggest jump ever. ♪

manus: this is "daybreak: europe ." i am manus cranny in dubai. nejra: i am nejra cehic in london. what a monday for oil markets, manus. the biggest jump ever for brent after we had the single worst sudden disruption ever for oil markets with this attack on saudi aramco. manus: from a context point of view, people are benchmarking this back to the iran crisis in 1979, to the iraq war. so the question is, the size of this outage and the duration of this outage, and disaggregating the price in between geopolitical risk and supply risk. isn't that it? nejra: absolutely. we have been talking about

citigroup saying that for a wild, markets have been mispricing oil. the question becomes how you integrate that new paradigm of the geopolitical risk premium. do we just traded in a higher range for the short to medium-term? analysts was with us earlier on daybreak middle east and he was talking about the price, five dollars to seven dollars. at the standard deviation moves, up 20% on the open. we are now up 10%, so the question is about information filling the supply gap, as it were, in the oil market. let's get the rest of the markets in context because there has been a global ramification to the oil story. let's get to our partner in mumbai. the move.e rupee on oil prices moving. and you are at ground zero in terms of market reaction for the oil repercussions. good morning. >> good morning, manus had a look at the equity markets. the morning start was slightly

lower than what you are seeing right now. currently, the indices are trading at .3%. loss was int early morning trade. equities, on indian the currency to we can quite significantly in the early morning session, which had its own drag on the equity markets as well. we will be watching out for all of the oil markets today which have seen pain in the system. one of the worst performers are the oil marketing companies. all of the companies that have crude oil as their main material the input have seen a bit of a slump. you have tire makers, aviation stocks, and also paint companies. nejra: thank you so much. and of course, with oil prices soaring this morning after two strategic oil assets were attacked over the weekend, one

was the world's biggest and the other is saudi arabia's second-biggest oil field. annmarie hordern has more. >> the attack has knocked off about 5.7 million barrels per day of saudi production, which is half of the kingdom's total capacity. 5% of global supply. it is the single biggest sudden disruption on record. iraqi seeing kuwaiti and supply during the gulf war. as you can see here. i want to focus your attention on the heart of the kingdom's oil production and export infrastructure. single mostly the important facility in the saudi oil sector, processing half of rm closed last year, it is the biggest crude processing solidity in the entire world. the big question facing the kingdom and its customers around the world is how long will this disruption last? an industry consultant estimates it will be able to restore half the lost production as early as today, but people familiar say

it could take weeks to restore full capacity and the company declaring itself unable to fulfill contracts on international shipments. aramco will be able to keep customers supplied for several weeks by drying on their stockpile. it has storage tanks in saudi arabia holding millions of barrels of crude as well as netherlands, egypt, and japan. they have been running low on these levels since 2016. we have levels we have not seen since 2008. the kingdom has much less to work with than it did three years ago. as bob mcnally put it, about 37 days of cover for the full 5 million barrels per day. manus. manus: thank. great context from annmarie hordern, tracking the oil story from our london hq. further,s the story our guest. what we have been trying to grapple with is the market opens up 20%. she is up 10% now.

that 10%, what do you reckon is supply angst versus steel pole -- geopolitical angst? >> supply is not going to be a major issue right now. we have seen the u.s. starting release its reserves. we are just coming out of a week where we ended on a sour note, and that is probably one of the reasons we had this big spike. there is no doubt we have been so much focusing on the economic slowdown in the recent weeks and months that the geopolitical risk premium all but disappeared even though we had some concerns about iran and the strait of hormuz. it will be five dollars or $10, we will have to decide that. nejra: that geopolitical risk premium, as you hint, seems very hard to price at the moment, so what do we do? stay stuck in a higher range or just have a lot of increased volatility in the short-term or

both? ole: we will for sure see increased volatility. we are dealing with something we have not seen for many years and a lot of traders have never experienced things like that before so it will take some time to sort itself out. we have been stuck in a range around six for the past few months so it makes a lot of sense that we now move up to maybe a 65 dollars to 75 dollar range in the short term. the saudi arabia is the single source of income. they will do their work flat out to get this up and running as quickly as possible, and overnight, we had another batch of bad economic data out of china, so we should not forget thiswe are still facing economic downturn, and with that also, potentially a further reduction in demand growth going forward, so that is not a theme today and probably not tomorrow, but that could be turned the coming weeks. nejra: it is amazing -- manus: it is amazing how myopic we become. we push the china data to one side.

do you think there is a probability of an emergency calls between the opec members? week, nigeria and iraq on a platform in abu dhabi, committed to being in a news conference, the express numbers they would cut production. is this one of those moments we expect opec and opec plus to have an emergency gathering if this endures? ole: they all like to see a higher oil price but they do not like to see it for this particular reason. they would like to see it due to a rising strong demand. that is not what we are seeing right now. to high shock leading oil prices rarely ends well, and whether the world can afford these levels or even higher levels, that remains to be seen. one thing is for sure. weis not a good time when are faced with a slowdown in demand, so in the short term, perhaps they will maybe hold back on these because they can see there is intentionally the

additional mean, so the pressure say,e cheaters, you can iraq and nigeria, has eased somewhat this morning. nejra: that is the opec side. if we look at the u.s., president trump already authorized a release from the spr. we are looking at 645 million barrels. could we expect anything more on the u.s. front? ole: they have been looking to get rid of some of their strategic reserves. they do not need that huge overhang in supply. it starts with their own production rising as fast as it has over the past few years, so this is probably a good time for them to offload some of that oil which potentially could actually be saudi in everett -- saudi arabian oil coming back in. it built up over the past 30 years and has come from the middle east and probably a major source of that has been saudi arabia. the oil quality probably fits what the market needs right now. manus: the other side of the

supply gap is from the saudi's themselves. their reserves have been steadily declining. if i am not wrong, we are back at the levels we have not seen since 2008. ofthat a big risk in terms their ability to plug this cap enduresp if this outage longer than we anticipate? you it is a risk because -- could also argue we got the increase in production from the u.s., but the quality matters. it will come back again. it is different quality. crude. the refineries in asia, they like the saudi arabia and crude. arabian crude. you may have a problem when it comes to quality. it is something that may be a concern in the short term. so much and the ability to move, but overall, they have cut production by more

than they had to, so in that sense, just get back to that production level. the agreed production level with the other opec plus members. it could add additional barrels as well, so i do not think it is going to be a major issue right now, but obviously, the quality a story tontially look into. nejra: ole hansen, head of commodities strategy at saxo bank in copenhagen. thank you for joining us this morning. let's get the bloomberg first word news. u.k., prime minister boris johnson is set to defy the new law to stop enforcing a no-deal brexit. he is going to do everything he can to secure a deal but we have been told he will reject any extension to the deadline. this is ahead of the prime minister's first face-to-face negotiations with jean-claude juncker today. kong, the protests have

taken a more aggressive turn. demonstrators set fire to a subway station and police hit back with water cannons. unrest in the city is now into its fourth month but the city has largely returned to normal by this morning's commute. kim jong-un has invited president trump to pyongyang according to reports from korea. it would be their third meeting. a local newspaper is saying the offer came in a letter delivered last month. working level talks have stalled since the summit in hanoi ended without a deal. apple heads to court to fight the world's biggest tax case. the iphone maker will tell the court in luxembourg it is already the biggest taxpayer on the planet. that will not convince the commissioner. deals6, she ruled the tax with ireland allow it to pay far less than it should. 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. manus: thank you very much. here is a look at what you should be keep an eye an i -- an eye on. we will be watching for that ruling tomorrow. we are also keeping an eye out for the showdown between apple and the e.u. in court. the iphone maker fighting a $14 billion tax bill. all eyes on the fed on wednesday. the rate decision is due. this will have repercussions for central banks and their decisions around the world on thursday. because of course, at that juncture, it is boj, boe, indonesia, and the s&p. nejra: friday sees the rugby world cup kick off in japan, and then protests for climate change are also expected around the world on friday, and all this

week, bloomberg news is part of covering climate now, it global collaboration of more than 220 news outlets to highlight climate change. coming up, the brexit showdown. boris johnson is set to defy a ban on no-deal as he heads to luxembourg to speak with jean-claude juncker. that is next. this is bloomberg. ♪

>> we are finance ministers. we have a key responsibility to fight against climate change because we should really provide the necessary funding for fighting against climate change. we need a green finance, and we need to have our own european values, our own european -- to be sure that the finance is helping us to fight against climate change. >> i believe we have to invest

in green energy and green solution. for two main reasons. one being to save the planet, and the second one being to create jobs and growth. >> it is important that everyone knows that we now need to take firm steps to stop climate change created by humans. that means we have to do that in our countries, but also internationally, and of course, on the european level. it is good also that this may well be the central theme of the european financial policy. nejra: that was some of the e.u. finance ministers at the euro group meeting on friday.environmental , social, and governance concerns are playing a bigger role. a majority of investors inside a company with high integrity will outperform its peers, but it's ease -- but is it really good for investor concerns? for more, dani burger. dani: today is really the

perfect day to be talking about the number one reason investors argue why esg leads to better returns, and that is lowering tail risk. if you are interested in an oil producer and a geopolitical event reduces output, you could have avoided it. sure, the returns between the carbon free index and the all world index look similar, but the idea here is that you shrink the left tail of your portfolio, so the upside risk might be similar, but the downside risk is better for some of these investments. but then, there is also the camp that says esg necessarily has to lead to lower returns. if investors are shunning these stocks, it means they are underpriced. so those who stay invested in them will get higher returns. in other words, they are the ultimate value play. we did see these sin stocks in the white, valued, rallying with the rest. he argues we should really be

embracing lower return for sustainable investing. it is a good thing. not investing in bad companies, you are increasing the cost of capital, making it harder for them to find bad products, but it also means that people who stay invested and continued to get them capital should expect a higher return. and we do see some of this. 56% of investors in the survey expect better returns, but within that same pool, 76% of also said that personal values are important here, so investing for virtue's sake is still in, manus. manus: great round up and context. dani burger on esg. business flash headlines now with leigh-ann gerrans in the london hq. >> general motors staff have their own strike in 12 years. it is halting work at thousands of facilities across the u.s. is united auto workers union

digging in for a fight over jobs and benefits. it says -- $7 billion investment package falls short in key areas. one credit suisse analyst says the strike could cost general motors $15 million in lost production everyday. a bloomberg's group, purdue pharma has filed for chapter 11 bankruptcy in new york as part of a plan to set all claims that it fueled the u.s. opioid epidemic by illegally pushing sales of oxycontin. the settlement will see the billionaire family hand the firm over to a trust controlled by the states, cities, and countries that suit perdue. the hong kong exchange's unsolicited bid for london stock exchange has had another roadblock. -- hit another roadblock. they are praising the rejection of the takeover. the official people's daily said, this weekend, there are persistent worries about hong kong given the unrest. this from the mouthpiece of the communist party shows a growing

resistance to the bid. bass are growing that boeing 737 max will be back in service anytime soon. aviation regulators are contradicting boeings optimism. they do not expect the plaintiff fly again before next year. boeing says it expects approval in the coming weeks, targeting a return in the fourth quarter. and that is your bloomberg business flash. nejra: leigh-ann gerrans, thank you so much. boris johnson says he is working flat out to reach a brexit deal. he is heading to luxembourg today for negotiations with young claude juncker. johnson is prepared to take a hard-line approach to the top. effectively defying a ban on no-deal brexit. tim graf is still with us. tim, with this approach that boris johnson is taking, is it time to take profits on sterling against the euro, first of all?

tim: i suspect so. 88.50 would be a good profit level. simply because if you look at prediction markets, and they are flawed in their own unique ways, they are pricing a probability of deal to maybe 20%. so that seems a bit complacent for me. boris johnson does not have a lot of options. his choices are to defy the law and probably face a vote of no-confidence at some point. to ask for an extension, which he has said he is not going to do, or to resign area those are the kind of three scenarios. i do not know if he is going to do any of those other than maybe try and defy the law, but nevertheless, whether a no-deal brexit is avoided, i think it is still an open question. it has been a lot of good news put into sterling. i suspect we are about to run out of the good news road for a little while. let's run with that. we have run out of the good news road. is the next logical an election?

which camp do you fall into? we wrote this piece that a labor coalition would take table to 1.30, rather than a boris johnson led tory government. i would have to go back to this story. do you subscribe to that? tim: yes. i think i do. in that a labor coalition is going to be tempered by -- labor, in a general election, the chance of labor getting majority is pretty close to zero so they will have to rely on the lib-dems, the independent mp's, green party members. it will have to rely on a coalition. i think that helps to temper maybe the worst tendencies markets fear about jeremy corbyn and it also takes the probability of a no-deal brexit probably close to zero. not completely zero, but pretty close. if you have a conservative majority, at the very least, that is a negotiating tool. it very possible outcome for

brexit. that is why i think, as crazy as that might have sounded maybe a year ago, the prospect of a labor coalition is probably a little bit better for sterling in the short run. maybe he gets more power and gets the majority. for the short run, avoiding no-deal brexit is probably the most important factor for sterling. nejra: the path for sterling higher in the event of a labor led government, you think the no-deal brexit risk is so underpriced that cable as well move slower from here? tim: i think so. we have to go through a lot of hurdles. in the near term, given how much volatility has fallen and sterling has rallied, the very short run trade is to look a lot of those probabilities to reverse harder. manus: i want to remind you of some of the worrying signs of the gtv library, the pmi's. construction services and

manufacturing. even as we go to the bank of england, the rest of the world is cutting rates. can we just extrapolate something? let's go to the upside. there is a brexit deal. how quickly could the bank of england even count on its raising rates to push back against inflation if we got a deal? or would it be a policy mistake to raise rates in the near term? tim: a lot of it will depend on the nature of the deal. is it the current withdrawal agreement or some variation there of where the transition period is still relatively short? we are talking -- there were headlines over the weekend from the brexit secretary about the possibility of a deal where the transition period is extended area that would give you a lot more wiggle room. i suspect the bank of england's response to it in november would probably be a little bit too soon for them to raise rates. maybe early next year. if everything was to go well, they could countenance a rate hike in the strength of the

consumer. at the same time, over the last couple months, inflation has gone back towards target so they do not have any minute inflation problem. with the sterling rally, the inflationary impulse would be lessened as well. i think they can take their time. doing anything this year would probably be moving a little bit too quickly. nejra: thank you very much -- manus: thank you very much. tim graf, head of microstrategy. nejra andhost with myself. coming up on the show, our top story this morning is of course oil. jump,iggest ever intraday more than 71 dollars a barrel after a strike on the saudi arabian oil facility. we talked about it for hours. it is 5% of the global supply, nejra, and therein lies the risk to markets. nejra: absolutely. we will talk about the broader impact of markets beyond oil as well, coming up next. and later, the next governor of the bank of england is -- we do not know yet.

one name often touted is andrew bailey. we speak with him about that and ings brexit, later today. this is bloomberg. ♪

nejra: good morning from bloomberg's european headquarters in the city of london. i am nejra cehic. manus: and i am manus cranny, live from dubai. this is "bloomberg daybreak europe." oil prices soared through $70 after an attack on saudi aramco facilities. president trump vows retaliation if iran was behind it. the slowdown continues. daytime misses from china underscored deepening growth concerns in the world's second-biggest economy. investors prepare for the fed on wednesday. and talking up a brexit deal, boris johnson prepares a hard-line approach in his first

negotiations with jean-claude juncker. we are live in luxembourg. nejra: good morning, everyone. welcome to "daybreak: europe." for oil markets, the single worst sudden disruption ever, and we see brent jumped the most on record, and we start to ask ourselves how markets price the risk of further geopolitical risk and also whether supply can come in and fill that gap. manus: the americans have already said they will release from the special reserve. some lines from alexander novak. the russian energy minister, telling the world that there are enough reserves in the world to cover any oil storage.

nejra, this is where we begin to ask ourselves, will we have an emergency opec discussion, telephone calls? toak says there is no need make any forced decisions. this is critically important in terms of supply in the markets. there are enough reserves in the world. measure.ot a force more than 1979. more than the iraq war. re.s is not a force majeu strange. nejra: i talked about what we have seen in brent. a record jump. paring the jumped, gain slightly at the moment. we are seeing impact across risk markets. we have had three weeks of gains and global equities. we might see a down day. by .4%. futures lower on the flipside, we start to see a bid for the safe havens. goal jumping.

are keeping a close eye to where the treasury yield goes after a 33 basis point jump last week. what, you know contortions of a bond market, it is almost novel in the making. ds are little bit better bid. bond yields are unlikely to go substantially higher. think of the journey we have done on the treasury market. futures are open. bond yields are unlikely to go substantially higher after the recent selloff. here you go. grey swan in the middle. that makes you much stronger in terms of the bid for treasuries and the cover. maybe you want yen, maybe you want on spirit it is unclear if the ecb fiscal monetary policy ending would stimulate the economy enough to be bearish on the bond market. reversal rates, anybody? that is a debate we will have

with our guests. it is about savvy aramco and the oil facilities being hit by an attack over the weekend. in half.he output wiped out 5% of the global supply, triggering a record third in oil prices. it struck the world's biggest crude processing facility. the kingdoms second-biggest oil field the region. rebels in yemen who claimed credit for the attack, but the u.s. is blaming iran directly. the story grows. let's bring in anthony dipaola. let me fill you in. novak is saying this is not a force majeure. that reassuring the world there is no need for a force ineure and there is enough

the world to cover the oil shortage. a little bit strange. anthony: there's a lot of moving parts here and the point is it depends on how long this outage is. we are in a market where the physical market is tight, but in general, we are oversupplied. inre is a lot of crude stockpiles and in storage in the united states. on a company basis, what we are hearing from saudi aramco so far is supplies are continuing, they are meeting customer commitments, and they are able to do that from oil they haven't words. just doing a back of the envelope calculation, based on us, theysaudis told have roughly 70 million barrels of storage at several sites throughout the world and that includes the netherlands, egypt, and japan. 10t would last them about days to 14 days based on the outage, but they have been running the supplies down. we need to see how long that lasts. nejra: we are waiting to get

that update today. we paired the gains up as much as 20% in brent. exactlyve a sense of what the oil markets are pricing right now in terms of a three week disruption, a few day disruption, longer than three weeks? theony: for sure, geopolitical risk coming back in. and that is a little bit of an uncertain thing that people put numbers on. some people will tell you is five dollars. some people will tell you it is $10. that was the gain we had today. that was the geopolitical risk that something like that happens in the future. in terms of the outage, we just do not know. how long will this oil be off? people have been woken up to the issue of this risk, which has always been there, but perhaps we have been a little bit low, thinking it could not happen. we watched issues about the economy, the trade war, fallen demand, and we the supply is

impacted and that is a big issue. many people saw a relief with john bolton last week. here we are with a response. mr. trump saying he is locked and loaded in regards to iran. we will wait for the evidence. it should just be said that trump says he wants to hear from the saudis before -- and this is verbatim from the president of the united states of america -- the u.s. wants to hear from the saudi's before an attack response. this is a new level. this is a new level of risk. an attack response. he wants to hear from the saudis. anthony: the u.s. has a lot of military assets in the persian gulf u.s. has contingencies for these kind of things but when it comes down to is whether trump is literally and figuratively ready to pull the trigger on an attack. we saw earlier this summer when he.s., unmanned drone -- pulled back from the brink, according to himself, not ordering those attacks, because

there was no one injured, it was an unmanned drone. in this case, we do not have fatalities in saudi arabia saudisng to what the told us. this is an economic shock, a shock to the markets, and a brazen attack. once we see the accusations of who has done it from the saudis themselves, we will move it a little bit more in seeing what the reaction of the administration is going to be, but on the face of it, on his record so far, he has come up to the brim with iran and has pulled back -- the brink with iran and has pulled back. we will have to see whether he sees that as a sign of weakness towards iran if he does not react. nejra: we have been flashing those headlines from iran's foreign ministry, denying responsibility for the aramco attacks and saying it is natural for the year many people to react to saudi killings. thank you so much for joining us. anthony dipaola in dubai. joining us now is our guest

citigroupy conway, at global markets. your first take on the potential impact for equity markets? we are seeing futures lower on general risk off at this -- as this news reverberates across global markets. how long is that likely to last based on the uncertainty in oil markets? jimmy: without wishing to chime in on what has already been said, it will be a function of how long the outage lasts and primarily what the followthrough is from the geopolitical perspective. i think the equity market, we had this big rotation that started already. if this were a demand shock, i think he would be saying this is set in. starting to see value and growth stocks or stocks that are exposed to gdp kick on, however, it is very evident near supply shocks. that obvious trades and reactions this morning i think will be seeing the oil stocks higher, et cetera, but in terms

of the macro consequences of this, we will have to wait and see. manus: jimmy, good morning. welcome to the show. good to have you with us. welcome to "daybreak: europe." from a global perspective, perhaps i should sit back and go, what a tragic, tragic set of data from china. i should be more worried about that than i am about these moves in the oil market. is that a correct way to assess monday morning? jimmy: in terms of the historic nature of the move, it is too big to set it to one side, and i think the risk here as well is you do not know what else this may trigger. the positioning was not extreme in oil futures or oil stocks, so that could be ok, but we have seen lots of inns this is where it is the kind of butterfly effect, the small disruption in one market has led to a lot of unwinding and others. i do agree that given we do not know how long this will last and there's still a lot of open questions, we can still say what

does the backdrop look like? it is not reassuring from a chinese growth perspective although they are taking increasing measures to offset that, but i think, you know, as i said, it is just a wait and see. you go for the obvious trades first. you would expect that to be mainly oil linked very direct risk. but you know, the macro spillover -- you would expect oil to push inflation to push yields higher but we are seeing the opposite this morning. nejra:nejra: a couple more headlines or one more headlines to break the flow of conversation, but coming from iran, u.k. flagged tanker held by iran is to be released in days, so that is another update. headlines coming through fast, as you can imagine. it is hard to gauge sort of the impacts in terms of the macro picture, but one thing that a lot of people have observed is that when you look at the past three recessions, looking at

2008, 2001, early 1990's, they were preceded by a spike in oil price. is that something that you start to think about in terms of gauging the increased recession risk or is it far too early for that and we are just trying to get our heads around the next step in geopolitics? jimmy: i think people will be busy with other things. the most immediate risk is what is the spillover in terms of positioning and the fact that everybody has had a very bonds like equity portfolio on board for a wild. medium-term, if geopolitics is to here to stay, and we have acclimatize to a structurally higher oil price regime, yes, because it is a nail in the coffin for consumer confidence. the supply shock manifests for the consumer. the u.s. consumer is a big part of what has been keeping global

data strong-ish. you need to start thinking about what 2020 looks like in terms of recession risk and what are the available central-bank responses ? manus: i want you to have a look at this. this is gm for our global viewers. it reflects the oil story. i want to kiss in on yen. we have a number of central-bank meetings this week, one of which is the bank of japan. this is probably the last thing in the world the bank of japan needs. the central-bank policy response, we have the fed, the boj, the s&p. how pivotal a week is this and how much of a move is this for the boj? jimmy: they are an oil importer, and oil dependent region. no one is going to ignore something of this magnitude. i do not think it will

necessarily influence policymaking. they have other issues that are much more structural in nature. they will be paying close attention to what has happened at the ecb. and the response. how much room is left on the monetary policy side. in terms of the order of investor attention, people are much more focused on the ecb and the fed than they have been on the boj. one might say that if there is any creativity that they have been looking to deploy, perhaps this could be the catalyst for bringing that forward. know, onet is, you associates higher oil with inflation, this is a supply shocks, not a demand shock. you are seeing that from the bond market reaction this morning. manus: we will find out what that creativity might be and what you make of the ecb's creativity or not. jimmy conway, fresh "daybreak: europe to," citigroup global markets. fresh tosaly --

"daybreak: europe," citigroup global markets. juliette saly. juliette: you have seen the msci asia pacific index bring japan lower today. japan out of action for a public holiday. the first drop we have seen in four sessions. it has been in typical risk-off with that move in the japanese yen against the dollar as well. when it comes to energy stocks, we have seen a big spike in the likes of australian energy stocks. the energy index in asia has been tracking higher and the energy sector on the ms guy asia-pacific index, up by 3.8%. they are having the biggest jump in more than three years. the shipping stocks and the other factor of course that your guest was talking about which has affected asian markets is what has been happening in china. yet more signs of a slowdown in that country. it lets have a look at this chart which shows we did see a

number of indexes fall in the month of august with retail sales showing the lowest growth since april, expanding 7.5% compared to the projected 7.9% increase. the only upside out of this data is we have a little bit more coming through in terms of where we see more stimulus from chinese authorities because it is clear that the current stimulus does not appear to have helped slowdown in the chinese economy. you have seen a little bit of a tick up in terms of because inak, and the chinext -- terms of the chinext. and of course, more dismal data. narrow. nejra: julius -- nejra. nejra: juliette saly in singapore. boris johnson is set to defy a ban on no-deal as he heads to luxembourg. we will get all the details, next. this is bloomberg. ♪

manus: it has just gone 7:19 in london. you are 40 minutes away from the start of your european trading week. global markets up and running. it is "daybreak: europe." i am manus cranny in dubai. nejra: i am nejra cehic in london. let's get a check in on the markets. oil is leading everything today, manus. we saw brent jumped the most on record. we shot above 70. 66.30 is where we are now. geopolitical risk. they are stockpiling into commodities currencies. mary jane krone being one of them. one ofegian krone being them. we get the reverberation across global markets cross-asset, manus. manus: the question is the reverberation, the geopolitical risk. do you need to replace dubai -- we price dubai in any way -- reprice dubai in any way?

they are up 1.77%. we open up 20% on oil. five dollars to seven dollars of that. gold is big. if you wanted a boost in the arm, you have just got it in the form of this outage. is it a two-day event, if for four-day or more -- a event or more? boris johnson says he is working flat out to reach her brexit deal. he is heading to luxembourg today for negotiations with jean-claude juncker. johnson is prepared to take a hard line approach. effectively defying a ban on a no-deal brexit passed by the british parliament. let's get to luxembourg. maria, good to see you. boris johnson, jean-claude juncker, coming face-to-face.

what can we expect? maria: good morning, manus. this is the first time the two men meet. the prime minister said he would not be meeting -- the u.k. and the brussels negotiating team unless he agreed to make substantial changes to that deal, and in terms of today, we are hoping and expecting to hear from the two men. if prime minister will come here. it would succeed in breaking free from the european union. i have to say, those comments have not gone down well. jean-claude juncker was speaking to a german radio and actually set a no-deal brexit would be chaos and he expects boris johnson to have a duty to come up with a deal.

the sticking point continues to be the irish backstop. what to do with that border between the northern ireland and the republic of ireland, and here is the thing. the u.k. delegation will tell you they are making progress, that the negotiation has gained momentum. europeans are much more cautious and they will tell you they have not seen the level of detail that they would expect from the united kingdom, at this stage of the game, considering there is a month to go before that deadline. the expectation today is the meeting between the two will serve to accelerate the negotiations, manus. manus: diarrhea, let's see how the old -- meeting maria -- maria, let's see how the meeting will go. jimmy conway as our guest host this meeting with mary and myself. he is in our london studios. fed, thethe s&p, the boj, let's isolate brexit if we can for a moment. the prime minister of the united

kingdom, we understand, is about to defy parliament. ist kind of a pivotal moment this if the british prime minister decries the very essence of governance in the united kingdom? overturningi think parliamentary democracy in this country would be, you know, equities.r gilts and can that realistically be done? if you look at where cable is, the sanguine reaction in equities, it is pricing that there is still this safety valve in the form of either votes of no or various other ways to stop that happening -- no confidence or various other ways to stop that happening. it is unclear what the mechanism will be to get around the concept of parliamentary democracy, and as such, i think they are quite confident that that level of defiance is unachievable. whether or not it is, you know, for us, it is a question of we

would rather wait and see. we think that people are going to trade u.k. domestic equities depending on whether they get clarity, but pre-positioning is light at the moment. nejra: people are trying to guess what will happen next almost, so how would you advise to trade from here? do you wait on the sidelines or do you actually take one of those positions with more conviction in domestic stocks and perhaps have a different approach to the global stocks, the ftse 100? jimmy: it is dependent on the timeline. if you can stomach the market, there are u.k. homebuilders that are looking very interesting from, you know, a free cash flow perspective. even if they sort of bunker down. some of them have the balance sheets that are resilient enough to get through even the most extreme scenarios, so there is some appearing value there. but you know, from our perspective, we think that, you

know, it is very, very difficult to play position tactically. there are trades in the more exotic parts of the market, which are not for everybody, but you know, again, what do you do with the ftse? the interference that comes from the translation effect of cable earnings. one of the interesting things is to make sure that you do not accidentally have too much european risk if you believe brexit will happen. it is not like the euro stocks is going to emerge unscathed. making sure you are hedging around it. nobody really knows when that date should be. what do you buy? nejra: interesting thoughts. jimmy conway at citigroup global markets. we are looking at some live pictures and waiting for some live pictures as we get more updates, sticking with our top story of the saudi attack. iran denied responsibility for the strikes. the spokesman speaking in a

press briefing in tehran. we will stay across that story in the next show. the european markets open is next. myself and manus keeping a close eye on the oil markets as brent had its biggest jump on record. this is bloomberg. ♪

anna: good morning. we're live in the city of london. i'm anna edwards. it's all about oil. the attack on saudi aramco sends ripples to the market, with stocks pointing sharply lower. the cash trade in europe is less than 30 minutes away. ♪ anna: aramco attacks an aerial strike on a key saudi facility sees oil prices ng