nejra: from the city of london, i'm nejra cehic with matt miller live in berlin. fed cuts cut, the rates but jay powell says only moderate moves are needed from here, sending the dollar higher. >> if the economy does turn down, a more extensive sequence of rate cuts could be appropriate. we don't see that, it is not what we expect that we would follow that path if we deem it appropriate. nejra: another day, another repo. powell addresses concerns over the repo market saying more operations are to come including a third today.

central bank governors a, the boj will re-examine prices and the economy at its october meeting after holding rates. there was a bank of england decision today and is nordisk bank the first hock standing -- hawk standing? matt: a lot of headlines last night out of the fed. first diving and then recovering, although not setting new highs again on the s&p 500. nejra: i did find it interesting because yesterday's meeting and the press conference engender debate. i said it hawkish cut with a question in my voice because i am not sure it was hawkish. he saw division on the fomc but te tuesday 10 curve -- two's

ns, but the equity market is key, as well, perhaps signaling something more balanced. and we almost got a whatever it takes moment from powell during the presser. policymakers lowered their main interest rate for a second time chairman powell saying moderate policy moves should be sufficient to sustain the u.s. expansion. the overarching story was one of division on the fomc with updated quarterly forecast showing officials split over the need for rate cuts this year. nejra: how left the door open to a more extensive sequence of cuts, if needed but stressed this is not what officials expect. pricing and other cut in 2019, donald trump took little time to jump on the announcement, saying the fed chair had no sense, and no vision. overshadowing the announcement was the fed's decision to calm

money markets. powell said the central bank could resume alan she growth earlier than thought. he touched on concerns in a money market to negative or us -- rates and risks on the horizon. >> we are not on a preset course. we will make decisions meeting by meeting as we see this and we will try to be as transparent as we can. if the economy does turn down, a more extensive sequence of rate cuts could be appropriate. we don't see that, it is not what we expect that we would follow that path if we deem it appropriate. i do not think we would be looking at using negative rates. if we experience another episode of pressures, we have the tools to address them. we will not hesitate to use them. it is possible we will need to resume the balance growth of the balance sheet -- organic growth of the balance sheet earlier than expected. we are watching carefully and

they will come a time when we butk we have done enough there is also a time when the economy worsens and we would have to cut more aggressively. we don't know, we will be watching things carefully. far as to went as refer powell as the artful dodger and said he dodged all questions regarding the course of rates going forward. us, head of fixed-income. great to have you with us. matt and i were just discussing what sort of message powell was delivering. did he manage to come across as not to hawkish in that news conference? >> i guess the response was pretty muted. for powell, it was fairly mixed commentary. he talked about a lot of things that could change direction. there is no plan to cut rates immediately but they are looking at data, how the global economy is reacting and what the dollar o going forward.

i think they will look to cut rates again looking at trends are for the love -- lower growth. they will need to, i think so. matt: we've heard from big names, from stephen schwarzman, jeff gundlach, negative rates are bad for the system and they all talk about the reason being, it dissuades banks from lending. jerome powell said he doesn't think we should go to negative ates, but is is a positive, least for financials that the fed doesn't necessarily look like it is on the path to continue these cuts deep into 2020? lead to at was to steeper yield curve or something banks can use to maintain healthy growth in their balance sheet, it is a positive thing but the market has priced in a lot of rate cuts going forward.

fairly flat yield curve, which is difficult for banks. it is certainly healthy they are not talking about moving to negative rates, which does penalize the banking sector, slows down the ability to lend but all in all, the fed are doing the right thing. of rate cuts lot to get even close to negative interest rates. unless they accelerate the path of cutting, we will have a flat curve because the data suggests a weaker outlook if inflation doesn't pick up and start to decline -- he will stay with a flat curve which is not great for the banking system, not great to help them build their profits. nejra: is this why you are looking to build up government duration again? is it in the u.s., as well, you are looking to do that? paul: we felt the market had got ahead of itself.

the central bank never moved as fast as markets predict. the markets get overexcited by the activity and meet on a regular basis, and take a longer time to make a decision. the data in the u.s. isn't has weak as the data in the rest of the world, so there is a strong base in the u.s. economy that suggests rates should stay where they are go up of the outlook is definitely interior -- deteriorating. having taken some out, we are happy to see building once again. matt: where do you want to build those positions? the message i got was we don't need, they don't need to be seriously aiding the economy pretty the economy is in decent shape. what does it mean for you as head of fixed-income? paul: he's focusing on good

employment, pretty full employment and pretty good spending from the consumer. ,he concern is the outlook driven by business investment, slowing down quite fast and the overseas global effect. will bethose two inputs reducing employment gradually over the next six months and changing consumer sentiment. change with the potential to keep jobs. we would be positioned, we are not too worried about inflation in the near-term. curve,happy to go up the between five and 10 years is a good place. we owned the long and already -- end already. we have recently put money into the front end of the curve because it backed up so much but generally five to 10. nejra: your long dollar, short

euro call is under review. what might make you change that? little nervous that have gone too far but recognizing that it was worth holding. after last night, it is still us. the dollar is going to be one of the stronger currencies and as usually with currencies, it is a mixed bag of things you don't like. you have to find things that you much.dislike that the u.s. is in that category with the highest interest rate. matt: is that because you didn't see the fed has been terribly dovish and you see other central banks leading in that direction? chinesenteresting the didn't take advantage of the fed, the boj didn't take advantage of the fed to make their policy more dovish. paul: the reason it is under review and moving away from the short term -- it is under review

because the next 12 months, it is the fed that will be cutting interest rates if the economy continues to slump. the other central banks are nearly exhausted all her monetary policy firepower. ecb --t see the boj or but that's priced in. if you look at the forward curve and what the market was looking at yesterday, it was looking for further rate cuts. a lot is priced into that just in the, so short-term, the technicals will support the dollar. we need to review that because isr the next 12 months, it the fed that would cut the interest rates in most if the u.s. economy slowed. matt: please got to get more from you today. paul brain, head of fixed income at newton investment management and he is our guest cohost for the hour. let's get the first word news

with annabelle droulers in hong kong. president trump says new sanctions against iran are response to an attack on a saudi arabian oil facility. secretary of state mike pompeo was in the state to coordinate the response. saudi defense ministry explain what were their weapons involved. in the u.k., a final day of hearings in the u.k. supreme court for the suspension of parliament. or as johnson's lawyers had promised the government would put out a statement on what it would do if it loses the case. the court hasn't given a date for the ruling. it has the potential to derail boris johnson's brexit strategy or cut short his premiership. the bank of england looks set to keep rates on hold. came at noon

london time but lawmakers are looking for clarity on the timetable for the governor's successor. they have written to the chancellor after it was reported carney's term could be extended. the bank of japan has left policy unchanged, calling for prices and the economy at its next meeting. the decision comes as central banks moved to support their economies and speculation japan might follow suit. global news 24 hours a day, on-air and tictoc on twitter, powered by more than 2700 journalists and analysts in more .han 120 countries this is bloomberg. inra: annabelle droulers much.ong, thank you so let's check on the markets and we are pretty unchanged on the msci a asia-pacific where u.s. equities and it. -- ended.

concernse front foot, in the region on possible sanctions on iran. dollar strength is what we saw yesterday but pretty flat and the yen, the best performer in g10 against the dollar after the doj. to see the yenng strength when the boj did nothing and the fed actually cut. look at the 10 year yield, 1.78 is the number you will get. 1.4 weway off from the saw a couple of weeks ago but also from the 1.9 on friday. euro stoxx 50 futures are falling, although very little. are telling that s&p falling and the asian trade, looks like the thumbs down to the fed's seemingly hawkish cut. i agree i don't think it was a hawkish cut. coming up, the last hawk in the

room? we speak to the governor of the norwegian central bank. olsen after 10:30 london time. this is bloomberg. ♪

matt: this is "bloomberg daybreak: europe." i'm matt miller in berlin. nejra: i'm nejra cehic in london. juliette saly has more in singapore. juliette: we are seeing the msci pacific, japanese stocks paring early gains. fromange coming through policymakers that they did say they are willing to add further stimulus if needed and you've seen a big reversal in the japanese yen, which was holding at a seven-week low. hong kong stocks under pressure today, led by the banks on fears they may not pass on rate cuts, the hong kong monetary authority matching the cut but we heard

from the monetary authority saying they are still seeing downward pressures, particularly in the third-quarter growth forecast due to the effect of the trade war and protests in the city. mainland china pretty flat but you are seeing aussie stocks higher. areg rally in bonds but we seeing the aussie dollar sold off with yields after the jobless data came through. we had back-to-back rate cuts from the rba in june and july. they are really trying to get the jobless rate to four and a half percent. -- 4.5% and it has ticked up to 5.3%. we saw 37,000 jobs created in august overall that there was a big drop in the number of full-time jobs created. and youf full-time jobs saw participation rate pick up, so it will have the rba scratching their heads and have money markets suggesting are we going to see another rate cut

coming through from the reserve bank of australia? matt: things very much, juliette saly in singapore with a look at the markets. let's get an update on the aramco attacks. the saudi military has displayed what it claims are parts of iranian drones and missiles, saying the strike on the oil to see in that facility came from "the north." they added the attacks were unquestionably sponsored by sensex. president said new sanctions are .oming -- sponsored by tehran start.s easy to we will see what happens. matt: let's go to riyadh or yousef gamal el-din joins us. after 24 hours of international diplomacy, what can we expect this afternoon? night, it was a dramatic the press conference went underway in the later part of

the evening in riyadh and the evidence was presented that suggested iranian sponsorship but it fell short of what many observers would argue should have been a clear-cut accusation that iran was behind this attack. it almost seemed the kingdom was giving itself some diplomatic wiggle room. they don't know for sure where the missiles were fired from. they say it could have been iran, iraq, but they are excluding the possibility it could have come from yemen. the iranians for their part are holding the global economy hostage. it is a key theme that has emerged and they have gotten a stronger hand in any potential tops going forward. you look at a lot of the key metrics in the local markets from equities to bonds to credit default swaps and currency forwards. at the moment, no signs there is an imminent escalation, but you know better than i do the markets got it wrong in the past. on that point, we

didn't see much of a moving oil overnight, either. what are you hearing in reasons behind that? yousef: well, the next milestone will be this tour that appears together.ng we are expected to get an invitation from the ministry of guidedfor a bit of a tour of some of the damaged facilities to get a better impression of the extent and scale of some of the infrastructure that has been attacked. in terms of the oil market, there are two important forces pulling in different directions because overnight we had inventories from the united states that came in with a surprise bill, the bloomberg consensus was for a construction -- contraction in supply. the iea stepping out yesterday and saying they expect saudi arabia to resume 11 million barrels per day capacity and

they do not see the need for an emergency stockpile release at this time. again, we will have to see how the politics play out because that is the wall of -- wildcard. nejra: another push and pull in oil markets is the physical markets versus the reserves he referred to. yousef gamal el-din in riyadh, thank you. let's get a first word business flash with annabelle droulers in hong kong. tiffany's is planning more stores in china. they want to attract greater demand to offset a fall in chinese luxury shopping overseas. in an interview, the chief executive told us he is streamlining operations to cope with the trade war. >> the effect on mainland china, so it is something that is beyond our control but we want to deal with it, but not just by increasing prices so we will act on efficiencies in order to mitigate this factor.

has cost: brexit london only 1000 investment banking job so far according to a report. estimates of hundreds of thousands of positions shifting to the eu and the firm says it is down to some firms waiting for clarity on brexit. microsoft is buying back as many as $40 billion of stock. the world's largest software maker boosted its quarterly dividend to $.51 a share. flush with cash, microsoft has been a market buyer of its own share for nearly 20 years. its market cap remains $20 million -- $20 trillion. matt: i'll pick it up. annabelle droulers in hong kong. turning to another central bank and another policy decision, the boj has left monetary stimulus alled for and c

re-examination at its october meeting, raise it -- raising expectations of further easing next month. paul brain, head of fixed income cat newton investment is still with us. what do you make of the boj decision? is it more of the same? paul: it is more of the same. the bank of japan has limited firepower so why would they use it now when for japan got a lot has changed. the things to watch are the effects of the trade war, the effects of the global slowdown in trade for 12 months now which really affects japan. room to do more on interest rates but what they've done so far they think is working for the domestic economy, keeping rates close to zero but across the curve is the right strategy, they think.

they are doing enough in terms of providing liquidity. there is not much more they can do. there is no need to tweak the front end of the curve. dollar-yenyou short given what you said about the fact the fed has more room to cut than other central banks and what you have said about the boj? paul: with the dollar-yen, we are sitting on the fence. from a punitive interest-rate point of view, you would be in favor of the dollar and short the yen, but too much is priced in -- was priced in to rate cuts so we will probably favor the dollar-yen more because of that but given the geopolitical risks out there, given the uncertainty thet the trade situation, yen could do quite well on the safe haven basis. it is a bit like sterling. it could go either way significantly. no need to take the risk, so sit

on the fence for the time being and we prefer to use the euro as our shorting currency, the currency that is the cheapest one too short. nejra: paul brain, head of fixed income at newton investment stays with us and later, a conversation you won't want to miss. we will hear from the reserve bank of india governor at the india economic forum in mumbai. lots of central banks to digest. we've heard from the boj, the fed, we look ahead to the bank of england and the nordic bank, too. matt: looking forward to the other central bank decisions. the currenciesng are reacting the way they are considering the fed cut and we didn't see action from the two major banks we have heard from so far. china and japan. by the way, i want to remind viewers they can become listeners traveling to work. tune in to bloomberg radio live dabour digital of eyesore

digital in the london area and nejra cehic will be hosting the 8:00 hour, i will be hosting the 9:00. this is bloomberg. ♪

>> i'm disappointed by what the fed has come out with here, because the market is priced for substantially more action and so the fact that the fed is sort of disappointing based on market expectation -- >> it is hard to say this is a dovish situation in which they have cut. i actually prefer the way it has been characterized as risk management as an insurance cut. i think this was the second payment on an insurance policy. >> we were expecting more. we were expecting more in terms of the dots. not asink the fed is i

accommodative as it could be because my forecast is running below 2% over the next three years. >> i think the fed is way too preoccupied with inflationary expectation. the fed has changed the way it is operating at a fundamental level and they have moved toward this expert tatian -- expectation of looking at the economy rather than sticking to variables they used to look at and it is very confusing. matt: those were some guests on bloomberg television reacting to the federal reserve policymakers lowering their main interest rate for the second time this year, and the press conference that followed. this is "bloomberg daybreak: europe." i'm matt miller in berlin. nejra: i'm nejra cehic in london. with minor, disappointed the fed and generally the message across is markets are disappointed in how far the fed has gone but that has been clear from the get-go.

i thought yesterday was interesting because market reaction was muted. i've been sitting here questioning how hawkish was the message from powell and the dots? matt: well, we did have the s&p down one full percent and it rallied back to positive territory so you could argue powell's press conference convinced markets to trust him that he will do whatever it takes. he didn't use that term, but he said they could get more aggressive if needed and would if needed. i also think it is interesting fed'sou look at the injection of cash into markets for the short-term, the overnight lending market, they haven't held back on that. they will today for a third day put $75 billion for treasuries and other collateral. nejra: they also lowered the interest on excess reserves and they used toction,

do this regularly before the financial crisis and you wonder whether that is how they are going to continue because there wasn't mention or commitment of balance sheet expansion in relation to what we have been seeing in repo markets. interesting, i agree with what you said on the equity market reaction. we did see a bit of twos, tens curves flattening and breakevens falling, so you saw a little disappointment but a mix market reaction, division on the fed one economistt described powell as the artful dodger. matt: the division is important to keep in mind. for the next meeting, you have 10 that will be opposed to another rate cut, only seven or eight. -- 74 it. annare joined by devina kh and annmarie hordern. yesterday, how is

that playing out in the indian market? devina: not into zs tick for the indian equity markets at the moment. started on a low note, but it seems like the gaps have deepened more. on the index, we have broken below the crucial support levels 50.10,70 the major heavyweights on the nifty bank are causing the index to move lower. strengthenedhas this morning but that is not showing up, even in favor of the export oriented names. nejra: thank you, and anne-marie, you are looking at how the rest of the world is reacting from the fed and boj. is the morning after the fed where we have this policy decision and what to do for the rest of the year.

they did make that cut and the bank of japan didn't do anything, but a little of ringing the alarm, saying they see rising risk overseas. a mixed picture over asia but the msci asia-pacific is a touch lower. 1.3% but we see strength in australia and japanese equities. in foreign exchange, the australian dollar weaker today as unemployment rate rose and the yen had been at a seven-week low but is higher today. the boj says they need to pay more attention to moving momentum toward a 2% inflation target. sovereign bonds, some strength to the upside. the two-year, five year, and 10 year are coming down but yields are higher in indonesia. iron ore, trading around $91 a time. it was a loser. i want tot today,

look at oil because this seems significant on the u.s. oil etf. it is the first time in eight years you see the cost of bearish bets versus bullish bets plunged to an eight year low. you don't really see this, this is the first in eight years. it signals bullishness in the market. tobe traders are starting wake up to the fact that they need to possibly price in the more geopolitical concerns, something they have shrugged off the entire summer until this past weekend when we saw attacks in saudi arabia. anda: divina, in mumbai annmarie hordern. international retail has faced a tough climate amid a week yuan and the ongoing trade dispute. tiffany, falling sales from chinese tourists in america is pushing the company to open more stores in china to attract local demand. can further fallout from the trade tensions, tiffany's ceo told bloomberg the company will absorb tariffs rather than raise prices. >> i think the main driver has

been currency fluctuations it comes with a strong u.s. dollar has affected and hong kong, etc. that is an influence on chinese tourists to buy abroad. salese seen increase of strength in mainland china where we have seen several quarters of double-digit growth and in the last quarter, we grew over 25%. side toute this on one the petri nation of chinese consumption in mainland china, but also on the actions we have done it tiffany. in terms of marketing, communication, and i think it is the combination of these two that make -- effects us proud. >> tiffany's jeweler is exported

from the u.s. into china has been that hit by tariffs. how have you dealt with these added costs? >> now they are affected by remainduties but we competitive and not to transfer the additional cost on to consumers in order to keep separate duties, away from the final price. nejra: delta's ceo has seen some effect of u.s.-china trade tensions come on weakening demands from large corporate customers in asia but he sees the risk of how people talk themselves into a recession. >> i worry that everyone gets obsessed wondering when the next recession will occur and we talk ourselves into it, because it is about consumer confidence and the consumers are doing, unemployment is at low levels,

people are seeing a lot of opportunity in the marketplace. you've got winners and losers that are being created at a faster pace than ever before. nejra: paul brain, head of fixed income at newton investment is with us. athout talking ourselves into recession, you reduced risk from the start of the year. is that based on escalation in the trade war and how that affects the global economy? paul: i guess and we are also seeing a slowdown in investment. there has been a prolonged or gradual slowdown in global trade, european, chinese economy, even separate to the trade tariffs. those economies are struggling to make headway. we've seen the peak in global trade maybe 12 months ago and we

saw unwinding. lack of investment will affect companies. profits will be under pressure because of that, but let's not get too scared about this. we are not looking at too big a slowdown in growth because central banks are trying to provide as much liquidity as they can. we don't think that will be enough. over 12 months, you will need something else, as well. it is worthwhile taking risk off. it has been good run for things like high-yield, emerging markets, sovereign owned investment grade credits, we reduce. matt: what do you mean you need something else? what else are you looking for? paul: it is fairly clear that the ecb with the rate cuts and the resumption of qe, the fact the bank of japan don't really have much in the tool locker to do more stimulus, and china is trying to fix its own domestic credit system.

all of that together suggests monetary policy is nearing the end of its useful input to growth. no one is suggesting last week's move by the ecb would turn around the european economic outlook, that's not going to fix germany. what we are looking for is what they have been asking for, fiscal stimulus. we need governments to investing in economies. the private sector will pull back because of uncertainty, the government's need to step in and increase the amount of fiscal stimulus to economies, and that always takes longer than the markets expect because governments move more slowly. they tend to move with a crisis rather than move ahead of a crisis. nejra: as an investor, do you need to become more ok with the political process and with what central banks are doing? paul: yeah, it makes the job harder. as we've seen with many

political systems recently, understanding what they are going to do, what they can do. banks, if they are going to cut interest rates, we can analyze that and they cut interest rates. we know what the monetary effect of that. if governments, they can talk about stimulus but can they get it through their parliaments, their democracies and other structures? that is a difficult task to analyze, i guess. matt: are you concerned the trade war is going to export deflation with china continuing to allow the yuan to weaken? paul: yes, that is one of the reasons we think inflation globally is not going to be a problem and why central banks can use all the tools they have available for them because inflation globally we think is on the decline.

war has been made by politicians. it can be temporarily fixed by politicians, if donald trump wants to get reelected next year, you've got to argue he needs to do something about that. he has created an outside problem and he probably could address that problem temporarily. i don't think necessarily they will remove demands for china to restructure its manufacturing process, etc., but they will or could the problems by backing away -- ease the problems by backing away tariffs temporarily. he could get a deal done if he needed to. matt: paul brain, head of fixed income at newton investment. pleasure having you with us for the hour. let's get the first word news with annabelle droulers in hong kong. the federal reserve

made clear it doesn't want u.s. money market rates despite again. it has announced it will inject cash into the system for a third day. jpmorgan's chief executive shrugged off the turmoil. he said it isn't a significant problem and will only be troubling if the economy weakens. the final day of hearings and u.k. premier court -- supreme court for the parliament's suspension. promised the has government would put out a statement on what it would do if it loses the case. the court hasn't given a date for the ruling. it has the potential to derail boris johnson's brexit strategy or cut short his premiership. the bank of england looks set to keep rates on hold. staying out of the way of global easing. the decision came at noon london but no news conference from governor mark carney this time around. meanwhile, lawmakers are looking for clarity on the timetable for the governor's successor. they have written to the chancellor after it was reported carney's term could be extended. the bank of japan has left

policy unchanged, the central bank calling for a re-examination of the economy at its next meeting. the decision comes as central banks move to support their economies and speculation japan might follow suit. many see the boj's firepower as already depleted. global news 24 hours a day, on-air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. nejra? nejra: annabelle droulers in hong kong, thank you so much. coming up, the big promise from big oil. how are the oil giants doing on their climate numbers? are traveling to work, tune in to work, tune into bloomberg radio, live on your mobile device anywhere in the world. just type in bloombergradio.com in your browser or in the london city area, check us out on london dab digital.

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>> i refuse to postpone taking on climate change. we will address the catastrophic problem of climate change and transform our energy system away from fossil fuel. >> we will make sure we get to net zero greenhouse gas emissions no later than the year 2050 and we're halfway there by 2030, that we mobilize $5 trillion over 10 years to do that. >> by 2028, cut all carbon emissions for new building. by 2030, carbon emissions for cars and by 2035, paul carbon emissions from the manufacture of electricity. the leaders the g7, of some of the greatest powers of the world sitting to talk about one of the greatest challenges in the world, climate

change and there was literally an empty chair where american leadership could have been. nejra: those are the views of democratic presidential hopefuls on climate change and bloomberg news is part of cluttering nowate -- covering climate to highlight climate change and we are taking a look at the role of big oil and gas. with all the details, here is annmarie hordern. annmarie: as the climate heats up, so do shareholder meetings. beennd gas companies have facing off with activist shareholders who want to force management to think more green. bp caution investors voted this year for the company to report on how its investments align with the paris by mccord and this summer, we saw investors dumped big oil shares. general investment management invested about $300 billion worth of shares in june. investors may have cause for concern according to a new report by the transition pathway

initiative, looking to shed light on climate change when it comes to paris -- meeting the paris climate agreement, only two companies will come into alignment before 2050. with the least ambitious pledges, the majority of the companies in orange are not aligned, mostly because they are focused on cutting their operational emissions while not worrying about the product they sell. when it comes to big budgets, bp is taking a lead, 83% of its potential capital expenditure is allocated to projects that will likely be safe investments in a world that keeps warming below two degrees celsius according to a report by carbon tracker, which counts major banks and scientists among its staff. hordern, thank you very much. we are continuing our focus on

esg. i saw a story from bloomberg overnight that points out peabody energy, a coal producer may be forced to pay interest -- 8% interest on bonds, more than double the average of similarly rated peers. it goes to show investors are really starting to pay attention to the sustainability of their investments. nejra: i'm going to have a look it.hat story and get matt: let's get to annabelle droulers, she has your business flash out of hong kong. one of warren buffett's deputies is striking out on her own. she will start her own firm after 10 years at berkshire hathaway. been an advisor to the

oracle of omaha helping the company take care of struggling businesses. the wall street journal reports her new venture will be a platform to acquire and companies. -- build companies. microsoft is buying back as much as $40 billion of stock. the world's largest software maker boosted its quarterly dividend to $.51 a share. flush with cash, microsoft has been a market buyer of its own share for nearly 20 years. its market cap remains $20 -- $1 trillion. british airways pilots have walkoutff a one-day this month, looking for meaningful new talks over pay. the pilots association's halting industrial action to prevent serious damage to the brand. a two-based reich last week forced the company to scrap almost all flights. the airline pushed the -- put the cost of 40 million pounds a day. that is your bloomberg business flash. matt: annabelle droulers in hong kong with the business flash. joining us now, the senior portfolio manager at kb i

investors. he manages sustainable infrastructure which invest in long-duration assets within water, clean energy, and agricultural business and markets. let me ask quickly about the story we were chatting about a moment ago that peabody energy, the coal miner may be forced to bonds,interest on bb more than twice the average interest of similarly rated peers. it seems investors are really starting to pay attention to the sustainability of their investment. do you agree? >> absolutely. you raise a good point. how we look at the world is sinful and in terms of the energy mix today, and we believe coal is in long-term secular decline and we will see plants decommissioned across the globe for several reasons, one of them being climate change, co2

emissions but also around competitiveness and thus, it cannot compete against lower-cost renewables as wind and solar in particular are in the early stages of the learning curve, we should see further advanced technology which will pressurize the coal industry. nejra: wind and solar, two areas you are constructed on but you've got some stock top calls. what are they? colm: within the wind and solar markets, we are holders of vestas wind systems, the number one term i'm manufacturer -- turbine manufacturer in the world. it is a company we are constructive on in the moment. its backlog has grown steadily over 18 months as new markets have emerged and secondly, what we really find attractive is moreure to two of the

attractive markets within wind, the u.s. onshore wind market is poised to grow very strong and then the emerging offshore wind has beenich till now centered around northern europe around the upa -- u.k., germany. china, andca, taiwan -- in the solar space -- go ahead? matt: i want to know how you avoid companies that are clearly not sustainable in industries like oil but somehow change their profile to make them screen as such? stricte have a very revenue purity criteria for a company to meet our universe for selection. to have at least 50% of revenue from clean energy, water, or agricultural business. a company whose earnings are still driven by oil markets will not meet our criteria.

nejra: colm o'connor, senior portfolio manager at kbi investors, thank you. coming up, we will dissect jay powell's news conference and market reaction. this is bloomberg. ♪

matt: good morning from berlin, i am matt miller. this is "bloomberg daybreak: europe." these are today's top stories. the fed cuts, rates for the second time this year, jay powell says moderate moves are needed sending 10 year yields and the dollar higher. the economy does turn down, a more extensive sequence of rate cuts would be appropriate. that is not what we expect. we would follow that path. repo,another day, another powell expresses concerns on the repo market saying there are more operations to come.

central banks than anzac, the boj says it will re-examine prices, and the economy at its october meeting after holding rates steady. the bank of england decision is to come today, and is the notice bank the last standing? nejra: welcome to "bloomberg daybreak: europe." we are debating whether it was a hawkish stance from jay powell. the markets suggest it was. curve flattening. it was a divided fmoc. could behe dot plot

hawkish, but how much do people focus on that now really? matt: i think the division is probably the one argument for that. you do see at least 10 members of the fmoc who are not in favor of another rate cut. only seven are. the market expects one more rate cut this year. saw such aesting you strong move to the upside from 1% down in equities yesterday to positive territory. , forollar strength against example, the chinese yuan, even though the chinese did not take advantage of the fed easing and do some themselves. nejra: equity market reaction is key. futures in the u.s. are softer today. jay powell managed to turn that around saying he could act

aggressively. this year, a minority want another cut. more worrying, next year the dot and suggests no more cuts higher rates in 2021 and 2022. howell focused on the strength of the u.s. economy. the reaction was muted. 10 year yields falling today. backede two year yield up a little, so no huge moves. matt: i saw a quote earlier in a story from the chief investment haveegist at qma, they $128 billion in a fund. he says he would rather have a strong economy that does not need assistance, than being propped up by the fed. i think this was powell's message, and investors should

take solace that the u.s. is growing, unemployment is below 4%. it does not seem like an economy you need to be slashing rates by 50 basis points. nejra: that makes sense. we heard from guggenheim saying they are disappointed with the fed. it is still a debate. futures in europe a little soft, flat in yesterday's session. europe futures down 0.2%. cac futures edge into the green. not much action in equity market. index has definitely been outperforming the vix. matt: let's look at the bond futures trade. very important considering all the central-bank action we have

seen, and are preparing to see today. bund futures trading down. risemeans bund yields will . we are still 50 basis points in negative territory. italian bond futures are being bought. yields fall, that would be interesting to see the spread tighten up. u.s. 10 year bond futures are rising. we see in the cash trade, 10 year yield is coming down slightly to 1.78%. the 10 year yield continues to recover from the spike at the end of last week. nejra: i am looking at the two year yield down a basis point. federal reserve policymakers lowered their interest rate for a second time with chairman

powell saying moderate moves should be sufficient. the story was one of division, forecasts showing a split over the need for rate cuts this year. the door openeft for a more extensive sequence of cut if needed, but stressed this was not what officials expect. the markets are pricing in another cut in 2019, could be set up for disappointment. donald trump was disappointed saying, the fed chair has no guts, no sense, and no vision, and overshadowing the announcement was the fed to calm money markets. powell said the central bank could resume organic balance sheet growth. a lot to digest around central banks. speaking after the decision, powell touched on issues from

concerns in the money market to negative rates and risks on the horizon. >> we are not on a preset course. we will make decisions meeting by meeting. transparentto be as as we can as we go. if the economy turns down, a more extensive sequence of cuts would be appropriate. that is not what we expect, but we would follow that path if appropriate. i do not think we will use negative rates. if we experience another pressured episode, we have the tools to address those pressures. it is possible we need to resume the organic growth of the balance sheet earlier than thought. carefully andg there will come a time when we think we have done enough. there may be a time the economy worsens, and we would have to

cut more aggressively. we will watch things carefully. powell was referred to as the artful dodger, and that he dodged all questions regarding questions of rates going forward. joining us now is charles diebel , head of fixed income, mediolanum asset management. thank you for joining us. let me get your take. if you think it was a dovish cut? charles: no, it certainly was not dovish. matt: i meant do you think it was a hawkish cut of course. charles: yes, to a degree. the dot plot sent a message point about it being a midcycle move. he ist a clear message

expecting to pause at the next meeting. the door is wide open for further action if the data than they are anticipating. that is our expectation. certainly heading into next year , we think the data will weaken further, and that will bring the fed back to the table. i do not think the market will back off much. think vole will remain a feature, is that because of what you hinted at? that butit is partly also the fact that it is worth remembering central banks have been easing, and emerging markets are still easing rate. in a low rate environment, the vole has a difficult time

remaining elevated. further down the line, the fed will come back on the table. we are in no man's land. are they going to move again or not? we could see some swings, and if we get data surprises one way or the other, that could spark short-term vol. i doubt it will be sustained over the longer term. matt: market participants are saying negative rates are poisonous or dangerous for financial markets. are a market rates mechanism here to stay. do you agree? , given that, i do central banks have chosen that path. to roll backgoing

from that quickly. they have to live with it, so to speak. the ecb is faced with an economic outlook that will quite a time, a couple of years. i cannot see the ecb coming off negative rates for quite a long time. we are well aware of where we are in switzerland or japan. i cannot see that changing because the economic prospects are not sufficient to do that. if, for whatever reason, everyone has it wrong, the u.s. economy proves to be stronger, stimulus from china for example, then we could see a rebound more significantly in the latter half of 2020. that is why no means a central scenario. i think growth will be lackluster over the next 12 to 18 months. nejra: do you prefer the longer

and of the u.s. curve -- longer end of the u.s. curve? very much so. conventionally, if you take a defensive stance against the fed turning more neutral in the short-term, you will change the duration of your portfolio. we see a dramatic flattening of the yield curve that would cost you money rather than save money. given the inflationary bias globally, particularly in the u.s., it looks unlikely that it will get carried away. the long end facing many challenges, and the longer-term growth story kicks tenure --means that 10 year notes will get back down

below 1.50. nejra: charles diebel, head of fixed income, mediolanum asset management stays with us. let's check on the markets in asia with juliette saly. asian markets digesting the fed but also the boj. juliette: yes, absolutely. let's start with the fed. basis point cut passed on. because of funding concerns, whether they will pass on this cut, the hong kong managerial authorities saying downward pressure into the third-quarter growth due to the ongoing effects of the u.s.-china trade dispute, and the protests in the city. .obless rates spiked up aussie stocks are high, aussie dollar is falling, and a big fall in yields particularly on the two-year note in australia.

stocks seen japanese closing higher by 0.4% on the nikkei. the is a reversal in japanese yen, rebounding from a seven-week low after the boj decision. we saw the boj maintained its policy rate and hit the 10 year of 1%.arget at -1 the boj concerned about the ongoing effects of the global economy, saying they will be ready to add further stimulus if needed. it looks as if the bank of japan has kicked the can down the road until the october 30 meeting. kickingy it ain't so, the can. it has been a couple decades they are doing that. coming up, the last talk in the

room? the governor of the norwegian central bank, do not miss that interview after 10:30 london time. this is bloomberg. ♪

nejra: we are 41 minutes from the start of cash equity trading in europe. this is "bloomberg daybreak: europe." i am nejra cehic. matt: i am matt miller in berlin. let's get an update on the aramco attacks, saudi arabia says it is iranian missiles, and the strike came from the north. officials did not elaborate, but added the attacks were sponsored by tehran.

president trump says new sanctions against iran are coming. plentynt trump: there is of time to do dastardly things. it is easy to start, and we will see what happened. wherelet's go to riyadh yousef gamal el-din joins us. international diplomacy going on, what can we assess this afternoon? yousef: it has been a tense night. a lot of details and images and video describing what they say is evidence that links a lot of what happened with the saudi aramco facilities back to iranian sponsorship. the people i have been speaking to make the point that what was not made clear in this announcement is direct iranian as strong as some expected it to be. it leaves the kingdom some diplomatic wiggle room.

we expect to hear more from the united states. we did get lines from the u.s. secretary of state who is speaking with his saudi counterparts, and he is expected to speak with the united arab emirates later today. a line crossing the bloomberg says they will be joining the led coalition to protect maritime traffic. that shows there is a coordinated response that has yet to be seen from the saudi's and their allies including the united states. political conversation is far from over. the iranians continue to deny they had anything to do with it. the oil market largely trading within range. nejra: yousef gamal el-din in riyadh, thank you so much. we have been getting update from

the french foreign minister saying the claim of attack from outhis is not credible. here is the bloomberg business flash from hong kong. >> american jeweler tiffany's is planning more stores in china. in the exclusive interview, the saysny's chief executive he is streamlining operations to cope with the trade war. it is something beyond our control, but we want to deal with it, not just by increasing prices. we hope to mitigate this factor. is buying back $40

million of its stock, and posted a quarterly dividend of $.51 a share. been a massive buyer of its own shares for 20 years. it's market cap remains $1 trillion. thank you so much. turning to another major central bank, the bank of japan has less stimulus and called for a re-examination of prices and the economy at its october meeting. it raised expectations the boj ,ight ease further next month especially if it loses momentum towards its 2% inflation target. charles diebel, head of fixed income, mediolanum asset management is still with us. you expect stimulus from the boj? charles: i think it is a they haveone because been kicking the can, and tearing out forms of support for

and as yet they have not had any material impact on the economic outlook. have not turned the japanese economy around. the bank of japan is a relatively innovative central bank, but it is the whole concept of if they do something given their history of purchases so far, it would have to be something special. ultimately, you are talking about a discussion you get proper debt monetization. changer ande a game change the psychology, and would make investors understand the bank of japan was going down a more extreme path. i am not sure they are ready for that. maybe a year or two away.

matt: german, u.s., japanese real rates, it seems to be converging towards zero. what does this mean, how difficult does it make your job as head of fixed income? it is a very interesting point because this has gonef inflation out the window. like break evens in the u.s. or europe are at cheap levels. it looks unsustainably cheap in the short-term. we are using products like that to diversify the risk in our portfolio. equally, over the medium term, do i think we will see really strong inflation research?

i do not. it is much more and evaluation argument. where there are real returns out there that are worth investing in, we are involved in at the moment in emerging markets were you have high interest rates on offer against a good macro backdrop. places like brazil which is going through structural reforms and cutting rate. offer, indonesia, they real returns. that is an area we remain interested in. nejra: it is interesting because that sounds like an area you can take more risk in the portfolio. where else are you expressing risk visioning? -- risk positioning? charles: we have been de-risking in areas like banks were needed debt in europe, but stepping up

in emerging markets where there is a good macro story where we think the government's are doing everything right. a bigre a risk versus dollar move? yes, but the world has moved on in terms of emerging markets being a function of u.s. rates and the u.s. dollar, because the idiosyncratic and macro stories are making a difference. like indonesia, russia, brazil offer good levels. you have to trade them with a slight degree of caution, they are not like trading german bunds, but they offer returns and allow us to deliver the kind of alpha our clients expect. you also need to look at where volatility in the short-term will be coming through. possibly we will get that in currency markets. us,: great having you with

charles diebel, head of fixed income, mediolanum asset management. later another central-bank conversation, exquisitely -- ♪

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to "bloomberg markets: european open." we are live from our european headquarters in london. i am anna edwards alongside matt miller in berlin. matt: how hawkish was jerome powell? the u.s. yield curve flattens after updated projections. futures point to a negative open in europe and on wall street later. cash trade is less than 30 minutes away. anna: