matt: good morning from berlin. this is "bloomberg daybreak: europe." boris johnson prepares an ultimatum for the eu to negotiate brexit on his terms in the next nine days or face a no deal divorce. a big stall. american manufacturing slumps to his weakest level in a decade. economists suggests lower or longer could mean no recession this time. braces for more unrest after it demonstrator is shot in some of the most violent protests yet.

we are live on the ground. matt: welcome to "bloomberg daybreak: europe." we are looking at possibly the end of a global drop in equities. if you take a look at ftse futures, for example, they are still being sold. the open now slated to selloff across europe. however, the u.s. futures don't look quite as bad. a big selloff we saw yesterday. the pound had rallied on hopes that the eu was considering helping boris johnson by limiting the time the backstop is in place. the pound fell.

right now we are at 12283 against the dollar is no deal brexit is back on the table in a substantial way. you see yields now rising as investors are selling debt. they did buy it yesterday on concern about the manufacturing numbers that disappointed the market. thosere now selling treasuries and pushing the yield up to 1.66%. speaking of manufacturing, the u.s. economy is losing speed. economists are wondering how slow it can go without dipping into a recession. growth below 2% would have almost guaranteed a contraction. now some economists believe the u.s. will continue at around 1% to 1.5 percent without falling under. this would be a decline in the speed.onomy stall that is an aviation term.

the economic equivalent is the point at which growth is no longer self-sustaining. the belief the u.s. will continue on albion's lower -- slower, the- albeit isn falling to its weakest number since the last recession a decade ago. the dollar lower. similarly, disappointing data out of europe. we are seeing warning signals about the global economic slump. joining us now is the senior currency strategist at cba europe. thank you for joining us this morning. this ideau make of is at a stall speed lower level than it previously has been? do you think growth under 2% is going to mean we slip into a recession in america?

in thedomestic demand u.s. is quite resilient. the payroll report is going to point to solid employment conditions. there are worrisome signs the u.s. economy could potentially slow more than the fomc projects. the contraction in u.s. manufacturing activity. perhaps ancern is sharper slowdown in u.s. business investment. whether the sharper contraction in manufacturing activity in business investment, they are all the process of the uncertainty generated by u.s.-china trade tensions. of what it means for the u.s. dollar, one of the reasons not to expect a

significant u.s. dollar strength slowdown theounced fomc projects. but also because you look at inflation expectations in the u.s., they are declining. look at the 10 year treasury breakeven rate. years,age, over 10 inflation is expected to average around 1.5%. this is going to continue to put downside pressures on fed funds futures rate and contain u.s. dollar strength. on friday, ther nonfarm payroll number is very important. you mentioned the job number everyone is going to be watching closely. the survey is for the u.s. at 147,000 jobs. what is your expectation? how do you see those numbers going forward? they are expected by economists

to slow. >> that's right. what's going to be more important rather than the pace of job gains is the pace of wage growth. the u.s. economy is basically at full employment, and it has been for quite some time. whether we are at 140, that's not going to be the big mover of u.s. rate expectations, or even the u.s. dollar. a bigger mover will be the pace of average hourly earnings growth. at this stage, judging from the leading indicator, from business surveys, consumer surveys, it looks as though we will have a pretty decent u.s. average hourly earnings growth at roughly 3.2% in line with consensus. that not a surprise to say even at 3.2%, judging from the fact where employment is in the u.s., we should be much higher. nevertheless, it is going to be an encouraging number, at least in the near term.

it's going to be one of the supporting factors for the u.s. dollar. what does this mean for the fed? they are not able to get inflation to run hot as maybe some of them would like to. they are looking at a real slowdown in the manufacturing side of things. they must be worried that's going to spread to jobs. as you say, 3.2% even, but when you have less than 4%, it should be higher. does the fed have to cut again? >> right now they have a wait and see approach. that is the message essentially from the median fed projection. there are nomura cuts implied at this stage for the fed. weking at fed funds futures, are looking at another 50 basis needs. -- basis points. the potential contraction in

manufacturing activity, the slowdown in u.s. business investment, and more inortantly, the decline inflation expectations, whether you look at it from a survey measurement expectation or market-based expectation. we think the fed ultimately will be compelled to cut interest rates, especially if global growth continues to lose momentum. we are going to get to the fiscal side in a bit. do you think the u.s. is going to get more physical health? donald trump wants to cut taxes and he seems to want to put money back in people's pockets. >> i think if there is one thing that can unite democrats and republicans in terms of fiscal stimulus, it is increased infrastructure spending. that is a common theme across all parties. how it's going to be

implemented, that is anybody's guess. there is a big divergence in terms of how to implement spending programs, which will clearly be a threat for the u.s. economy going into 2020 and beyond. at this stage, it doesn't look like we will have much of a positive fiscal impulse in the u.s.. that is another reason to expect maybe a slowdown in u.s. economic activity going forward. but you expect the slowdown to keep cap on the gains in the dollar. we are going to keep you with us, our guest host for the hour. bloomberg, guy johnson is going to interview chicago fed president charles banking the gic central series in madrid. don't miss that conversation just after 7:30 a.m. u.k. time tomorrow.

now let's get the bloomberg first word news. >> boris johnson is sending his new plant to the eu today. he is ready and willing to leave without a deal. we have learned his offer includes a special customs arrangement for the irish border , but the key is it will only last for about four years. a time-limited backstop is a nonstarter. in the u.s., more heat on president trump allies over the ukraine call. house democrats warning mike pompeo about possible charges. that is after he blocked testimony from five state to permit officials. lawmakers said in a letter on a conflict to have of interest because he listens to the phone call. u.s. secretary of state mike pompeo visiting europe. top of the agenda, the looming

prospect of new u.s. tariffs. yesterday, he met with giuseppe conte. that goodscerned from food to cars could be hit by the new levees. they are expect to come in as this month. the eu has vowed to retaliate. north korea has fired what appears to be a submarine-based missile just hours after saying it will resume talks with the u.s.. president trump has downplayed short-range tests as routine. lived up to his pledge to halt nuclear testing. defeatedniversity has its anti-affirmative action lawsuit aimed at stopping the school from factoring race into admission. says the college does not discriminate against asian americans, adding that considering race as part of the process is lawful. it is a ruling that is likely to be challenged all the way to the

supreme court. 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. thanks very much. up, after some of the most serious clashes since the rallies began, we are bringing you the very latest live from hong kong. that's next. when you are traveling to work, tune in to bloomberg radio on your mobile device or dab digital in the london area. this is bloomberg.

matt: this is "bloomberg daybreak: europe." hong kong is reeling from the

most serious clashes since protests began in june. a protester was shot by police with a live round as china marked 70 years of communist rule. protesters are planning for more disruption. sophie kamaruddin is outside the train station in one of the districts affected by the protests. could clouds over hong kong make things worse today? life has returned. it's going to be difficult to show up to today's event. is the burned-out entrance of a subway station. i can still smell the char in the aftermath of tuesday's event, a day of grief. the police chief is calling it hong kong's most violent and chaotic day yet. more than 180 arrests were made.

theitalizations, including 18-year-old student who was shot by police. he is in a stable condition after surgery. it must be said while this is a scene of destruction and damage, we have tens of thousands of hong kong or's demonstrating in a peaceful albeit illegal assembly as they push for demands. after the use of live firearms, the question is if hong kong is nearing a turning point as they are still pushing for demands while carrie lam seems to be lacking a viable solution. matt: what's likely to happen next? what should we be watching for? >> there are calls for restraint. the hong kong general chamber of commerce calling for peaceful dialogue. oute are still small groups with acts of defiance, including

lectured protesters who held a sit in at the school of a young man who was shot. as we see, a flash mob of young professionals are congregating on their lunch break. 96 people are set to appear. there was a: social media to participate in a general strike. it's going to be difficult to gauge how much participation they may have with frustration still in the air. thanks for joining us. now let's check on the markets in asia. for that, we go to juliette saly in singapore. taking our lead from

what you saw on wall street. disappointing manufacturing data out of the u.s. weighing into sentiment. china markets remaining closed for golden week. down in the topix late trade. hong kong's market not doing as badly as earlier. it resumes trade after the public holiday yesterday as well. ,he asx 200 is under pressure particularly the big banks that have been hit by the government -- the rba rate cuts in full. the cost be under pressure after we heard news of a missile fire from north korea. that is weighing on the won as well. .tocks are rising in seoul i want to show you jgb is following that manufacturing data. there is a note saying the decline in the differential between the u.s. and japan is likely to act as an anchor on the dollar-yen.

you have seen the spread between the nation's 10 year yields back towards those lows we saw earlier in the year after we have seen the boj try to steepen the yield curve this week with that bond purchase program. securities saying if we see another week rate in terms of services data, you can see the dollar-yen back towards 105. matt: thanks very much. let's get the bloomberg business flash. for that, we go back to hong kong. sales took a big step back in december. nissan toyota honda saw double-digit slump. deliveries could come in worse than the anticipated drop. a long-awaited car sale collapse may be coming. we will get the fuller picture today as gm and ford report. thiam has broken his

silence. he prays the outcome, saying full count ability has been taken. he described recent events as deeply regrettable, adding mistakes have been made. .he board exonerated him credit suisse declined to comment on the note. schwab hasn't triggered an online brokerage bloodbath after the market leaders that it would eliminate commissions for u.s. stock, etf, and options trade. 10% with competitors tumbling as much as 26%. that move echoing a price war as investors moved to cheaper products. kind to value investors. greenlight capital gained 8.4% across its funds. that brings returns for the year to a weighted average of 24%. the gains came amid a temporary

shift away from favored momentum stocks toward inexpensive equities. that is your bloomberg business flash. matt: thanks very much. now, billionaire investor ray dalio has said the trump administration may be inching toward bigger moves against china. the bridgewater associates cochairman wrote in an essay that limiting capital flows must be considered among the possibilities. dalio's comments follow bloomberg scoop that the white house is considering a decoupling of the world's largest economies. a treasury spokesperson issued a partial denial to the revelation. chair of thee american chamber of commerce in china has weighed in. >> the relationship is never going to be the same as before. both countries recognize their needs to be a very significant

recalibration, new rules of engagement of how we deal with trade, how we deal with national security, how we deal with law enforcement and other issues. there is quite a lot that needs to be sorted out between the countries. is still withddad us. what do you think about the idea of a u.s.-china financial decoupling? if the trade dispute moves along the capital ,orefront, sterling escalation in terms of our base case scenario, we would expect the u.s.-china trade dispute to get worse before it gets better. big structural diversions is between both that have yet to be hammered out. also from a political perspective, trump has the political capital to take a harsher or continue with his harsh trade rhetoric with

respect to china. the rating at the national level, comparing favorably as reagan or even barack obama. his rating in key swing states has not deteriorated. more importantly, if you look at america's views of china's trade policy with respect to the u.s., political spectrum, it is viewed as increasingly negative. we are concerned we could see in escalation in trade more measures to curtail capital flows from the u.s. to china and vice versa. if there was aee u.s. recession a turnaround in the trade policy? he certainly wants to get reelected in 2020. i can't imagine a sinking economy would help.

elias: there is certainly one school of thought that has become a narrative. president trump could engineer some type of retreat considering his polls have not improved and also because the u.s. economy is slowing. at this stage it looks like he is putting the blame on poor u.s. manufacturing sector, entirely to blame on the fomc and the fed for that matter. it is a potential risk to a better outcome, certainly. the u.s. economy does deteriorate significantly, that on his tradeim rhetoric. at this stage, not very likely. matt: what if there is an impeachment in the house? will it embolden him or turn them around you -- around?

>> i would not be concerned about impeachment procedure with republicans in control of the senate. the republicans have control of the senate. impeachment is not going to gain any traction. more importantly, trump's approval rating with his or will can base is very high. -- republican base is very high. i don't see how impeachment will lead anywhere. elias haddad stays with us. we will continue to talk about him about the dollar. coming up, the u.k. pm is set to brexitussels negotiate on his terms or face a no deal divorce. more next. ,hen you are traveling to work tune in to bloomberg radio live on your mobile device or dab

digital in the london area. this is bloomberg. ♪

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matt: this is "bloomberg daybreak: europe." let's check on markets around the world. global growth concerns front and center again after yesterday's weak u.s. isn number. what are you seeing? spot we.s. was this one had strong growth as the rest of the globe started to fall back. manufacturing data might spill into other areas of the economy. we are seeing basically all the major markets in asia down today. the nikkei down 0.4%.

otherwise, some idiosyncratic moves. the aussie dollar has reached a very low point after the rba cut. the pound weaker. we are waiting for johnson giving an ultimatum to the eu. in terms of commodities, surging more than 1% after a drop in u.s. supplies. i had my focus because we had that very week option in japan, but now it looks like they are taking the cue from u.s. treasuries. we are seeing yields dropped, prices coming back up. japan coming back up. i want to check us -- take us into the charts. even though it looks like japanese bonds, the damage might be done. look what basically is the mix for jgb's. we are seeing a volatility spike to its highest since 2016 after we saw that massive selloff in japanese 10 years.

-- this is market implied volatility. 's plans to steepen the curve, that week option for japanese 10 years, and this chart shows today we might get the recovery, but it is certainly a bumpy road. matt: dani burger looking at the markets and the jgb vix. an ultimatum from boris johnson. -- u.k. prime minister is says negotiate brexit on his terms or face no deal divorce. his office saying he will present a fair and reasonable compromise to the eu. >> i understand the uncertainty around brexit can be challenging.

our change in preparations has made a deal outcome more likely, a no deal outcome more manageable. every department now has the resources available to prepare for no deal. let's get more details with our executive editor. with the key part of boris' proposal, and how workable is it? what boris johnson is going to propose is replacing the backstop proposal with a plan with the u.k., ireland in one customs union and europe in another. he is saying, give us four years and we will come up with something else to replace that arrangement.

already we are seeing signs of .oncern from the irish there worry is a hard border in ireland itself. seeill be interesting to how europe wakes up to this proposal. they may be willing to put a time limit on the backstop. matt: sources from other countries discussing a timeline on the backstop. the irish said that was not being discussed. it will not be limited from the eu's point of view. johnson has set a new deadline of october 11, which is interesting. what does this mean for the eu summit after that? >> he seems to be saying rather than going to brussels, he wants

an agreement before he goes to brussels. he wants to sign off before he gets there. it would be a wording of theresa may's deal with some changes around the margins, hoping he can bring that back and get that through. boris johnson seems to be saying , no, he wants to go there with an agreement already. thanks very much. to klaus baader --elias haddad, still with us. we saw initially the pound jump after ian's scoop that some eu nations are considering time limits for the irish backstop.

we then saw it come back as the irish, they are not discussing it. where do you expect us to land in terms of the backstop agreement between the u.k. and the eu. elias: it's going to be difficult and wishful thinking to believe boris johnson will this irisheplace backstop with some type of clause that would be satisfactory for both the european union, but also the more fragmented u.k. house of commons. if you cannot get a deal by the 19th of october, he will be forced by the brexit delay bill to ask for an extension of three months to the end of january. he says he won't. means,s of what it bottom line, u.k. political uncertainty will remain high. it continues to be a big drag for the pound. the risk of a hard brexit end of

october is still low, but you cannot eliminate it. there is a clear and present danger. that's another big drag for the pound. we've got this political game of chicken going on between the u.k. and the johnson government. on one hand, you have the opposition mps. they are reluctant to call for early general election until boris johnson asks for that extension. same time, they want -- they don't want to form this caretaker government to ask for an early general election or an extension because it would validate boris johnson's harsh brexit stance. boris johnson insists he will not ask for an extension. the brexit delay bill means the opposition has the upper hand. he says he's going to go

ahead if needed and leave the eu without a deal. if he tries that, clearly it would be a legal issue. what would it do to the pound? we were down at 120 in august. we were above 125 a couple weeks ago. until we have a firm ortainty he will go himself opposition mps at the end of the this caretaker government and ask for that extension, either way, until we have uncertainty, we could probably head back to last month's low. , seniorias haddad currency strategist at cba europe. i just wonder what you think about the euro pound. in augustow for that

as well and it has come back pretty sharply to 90. where do you see the euro pound going? the eu had its own problems and the eu would have its own problems with exit. -- brexit. elias: in terms of euro zone, it is going to be driven by u.k. political uncertainty. that's one of the supporting factors. euro tofactor for the make more headwinds against the pound, it is the ecb open-ended and highly accommodative monetary policy stance that will continue to be a big headwind not just for the euro against the pound, but against the dollar. on the supporting front for the euro, you have a current-account surplus in the euro zone that is pretty big at over 2.5% of gdp. euroimportantly, the

exchange rate is in full effect. undervalued by 10%. all of these are big supporting factors for the euro against most major currencies, including the pound and the euro. a senioras haddad is currency strategist at cba europe. a lot going on. it's only wednesday. i think it's only wednesday right now. seems like the week has been long. for now, let's go for your first word news. >> the u.s. economy is losing speed and manufacturing is stumbling. the isn factory index slipped to a 10 year low as president trump is blaming the fed. he says jerome powell and his colleagues have allowed the dollar to get too strong, hurting manufacturers. the bloomberg dollar index is up less than 2% on the year.

in hong kong, protesters are planning a fresh round of disruption after violent clashes saw pulled -- police shooting demonstrator. media is reporting the man is expected to survive, but remains in critical condition. yesterday's rally coincided with celebrations in beijing marking 70 years of communist rule. korea has fired what appeared to be a submarine-based missile just hours after saying it will resume talks with the u.s.. downplayedrump has tests as routine, saying kim jong-un has lived up to his pledge to halt nuclear testing. university, harvard has defeated an anti-affirmative action lawsuit aimed at stopping the school from factoring race into admission. a federal judge saying the college does not discriminate against asian americans area -- americans.

adding that considering race is lawful in a ruling that is likely to be challenged to the supreme court. 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. matt: let me give you a look at what you should be watching. 9:30 u.k. time, hong kong releases august retail sales. data is likely to register a deep decline as social unrest continues to discourage spending. in the u.k., prime minister boris johnson takes the stage at the conservative party conference. his speech being closely watched for any announcement on his brexit strategy. in washington, d.c., president trump is meeting the finish president to mark the 100 anniversary of diplomatic ties between the u.s. and finland.

we will be hearing from fed speakers starting with the richmond fed president at 1:00 p.m. u.k. time, followed by the philadelphia fed president and the new york fed president later in the day. andmakers including ford general motors reporting there u.s. retail sales number for a third quarter that was substantially disappointing for honda and toyota. coming up, last month's stockmarket rotation killed returns for hedge funds, but one managed to make it percent. -- 8%. this is bloomberg. ♪

matt: this is "bloomberg daybreak: europe."

one fund has emerged from the rubble. greenlight capital gained 8% across its funds in september. dani burger has the details. >> a very value oriented strategy. that really paid off this month. value came back. momentum lost its steam. looking at long positions, we can tell just why it did so well. g.m. for example has a price to equity ratio of five compared to the s&p 18. a value play. green light paid off massively. two big short positions we know. netflix.d these are highflying momentum growth shares. both of which declined in september.

this was good in september, but this value oriented strategy .ost in light more than 33% -- or canng to see his value strategy play out? value doing really well of 12%, beating out momentum. if we take this to a more recent time horizon, just one day, it looks like this is starting to reverse and things are going back to normal. momentum hits the top of the border, whereas volume is near the bottom. shorts against netflix, against names, the more momentum might start to hurt from here on out. very interesting stuff. a lot of changes since those returns were made. we will talk more about it. dani burger talking about the rotation. let's get the bloomberg business flash now. for that we go to hong kong.

>> u.s. auto sales took a big step back in september. nissan, toyota, and honda saw double-digit lumps. it suggests overall deliveries could come in worse than the estimated 12% drop. fears that a car collapse could be coming. we will get the picture as g.m. and ford report. hasit suisse chief thiam broken his silence. he praised the outcome of the spying probe saying full red spots billet he has been -- responsibility has been taken. credit suisse declined to comment on the vote. charles schwab has triggered an online brokerage lead bath after the market leader said it would eliminate commissions for u.s. stocks, etf, and options trade. the stock split almost 10% with

some competitors tumbling as much as 26%. the move escalates a long simmering price war as investors move to cheaper products. norway's trillion dollar growth fund is getting the go-ahead to sell $6 billion of oil and gas stocks. it initially wanted to dump all of its petroleum investments. decision shield some of the biggest oil companies will reducing norway's exposure to fossil fuels. that is your bloomberg business flash. much.thank you very let's get the latest in u.s. politics. president trump has ratcheted up his attacks on those pursuing a whistleblower complaint saying the inquiry amounts to a coup. three democratic house chairman have warned mike pompeo of possible criminal charges after plan to takehere testimony from five officials.

burger do things stand in terms of impeachment and the whistleblower investigation? trump has made it clear he is not a fan of this investigation. coup rather than an impeachment inquiry. that is the seventh time he has but the firstup, time he has done so in regard to thisukrainian issue around july 25 phone call in which he asked the craney leader to investigate his rival joe biden, the former vice president who is also running for president in 2020. the investigators in the house of three different committees are looking at the whistleblower's complaint very closely.

there are things related to that including mike pompeo and william barr. mike pompeo is on his way to europe. what are we hearing from the secretary of state? was --concern is that he it was reported he was listening in on that phone call. that is one of the things the three committees in the house want to hear about. they want to hear from him and also how that call was handled afterwards. he is saying he is concerned about this and he will block to have by the house his staff provide documents. this is a showdown with mr. pompeo as well as the president. they have subpoenaed rudy giuliani, the president's

personal lawyer, with regard to any contact he has had with craney and officials on the president's behalf. matt: senior international editor jody schneider on the latest in the impeachment investigation. up inquiry heats washington. secretary of state pompeo has flown to europe. at the center of his visit is the prospect of new u.s. tariffs in retaliation for the eu's aid to airbus. pompeo met with giuseppe conte to voice his concerns over the impact levees would have on italian products. elias haddad is still with us. we had seen -- we continue to see a relatively weak euro. what do you think of the prospect of tariffs here? >> it is another big headwind for the euro.

it could increase the of trade tensions escalating between the u.s. and the euro zone. a bigger driver for the euro outside trade tension with the u.s., monetary policy. we have the fed in the wait and open-endedb with a monetary policy stance, and divergence between both countries and both central banks. it is a big drag for the euro. euro, butdrag for the it is important to remember the euro has fundamental supports. the first coming from a current-account surplus, and the currency is undervalued. that is why i don't see much downside potential here for the euro, especially in the context where a u.s. dollar upside is

limited. it is limited because the fed will ultimately be compelled to cut rates, probably as much as what futures currently imply. that is overall the reasoning behind the euro-dollar. euro you don't see the falling much lower than this? what is the range you are expecting? elias: in terms of medium-term range, 1092 112. we could continue to under shoot, but i do not think it is safe to go below this level. especially with respect to limited u.s. dollar strength. matt: we have heard obviously fors from mario draghi fiscal help. it seems to be coming from france. you have the tax package in

germany, they have the climate package. draghi is saying the multipliers are higher with lower bounds. how does that affect the fx trade? i think it is a fantastic point. that is an upside risk. if indeed we have a bigger physical struggle, fiscal impulse out of the euro zone, especially germany, germany is on the verge of recession, they need more fiscal policy. they need a physical thrust here. if we have that, this could of aially reduce the odds sharper slowdown in euro zone economic activity. it would be quite supportive of the euro. at this stage, this discussion of fiscal stimulus is still in the early stages.

i am not getting too excited just yet. matt: a little too soon. thanks so much for joining us. pleasure having you with us. this is bloomberg.

matt: good morning from berlin. these are today's top stories. boris johnson prepares an ultimatum for the eu to negotiate brexit on his terms in the next nine days or face a no deal divorce. and the big stall. american manufacturing slumps to its weakest level in a decade. economists suggest lower for longer could mean no recession this time. braces for more unrest after demonstrators -- at least one demonstrator is shot in some of the most violent protests yet

in the city. we are live on the ground. good morning. this is "bloomberg daybreak: europe." we are getting earnings out from tesco, the british supermarket operator. it is saying first half revenue was up 31.9 billion. that beats the estimate for 31.8 billion. the adjusted profit was 4.1 billion pounds. the ceo at tesco is stepping down. dave lewis is going to leave tesco. ken murphy has been named as the successor. if you want to know who the top boss is at your local circle -- supermarket, ken murphy is

replacing dan lewis. if you own the stock, you are going to get interim dividend pr share of 265 p versus 167 a year ago. you're going to get more money as a shareholder and a new boss as a shopper. is's take a look at what going on in futures this morning after a rough day in equities yesterday in the u.s., after those ism numbers this appointed. the worst drop in equities since august. european futures pointing down. ftse futures off almost 0.5%. let's take a look at the bund future's. german bund, italian btp, and u.s. treasury futures as well this morning all down. offee bund future's selling , which could indicate you see the yield rise. the same is true of these others.

in live trade, we are seeing the yield rise on 10 year. we certainly call wall street cold in asia. stocks lower across the board after manufacturing data out of the u.s.. the nikkei lower by half of 1%. the cost be had by news north korea fired a missile. seen peace stocks rise ahead of talks. australian stocks under pressure. the government hitting out, but not passing on the rba rate cut in full. trade down by a quarter of 1% in mainland china, india also out of action for holidays. hong kong retail trade coming through after the bell. no surprise the ongoing protests now in there for the month expected to hit retail trade

hard once again. we are expecting retail sales to fall 14% year on year in august following 11.4% decline in july. this is as we continue to see mainland tourism stay away from hong kong. the number of mainland tourists to hong kong down by 40% in the month of august, expected to be another sign of the ongoing pain in hong kong economy. we are just one quarter away from a technical recession. thanks very much. juliette saly in singapore. i have more big personnel news to break this morning. standard life aberdeen's martin gilbert is going to retire on september or in september of 2020. it will be the 30th of september 2020. martin gilbert will not seek reelection. standard life's martin gilbert

is going to retire in september of some timber 2020. -- in september 2020. standard life aberdeen losing martin gilbert in basically one year's time. also has a ceo stepping down. ken murphy is going to succeed dave lewis. dave lewis will step down as ceo of the u.k. crozier. ken murphy will step up as the top boss at the food shop. the company also came out with earnings, of course. big numbers that beat expectations. the first half adjusted operating profit was 1.4 one billion pounds. the estimate was for 1.3 billion pounds. tesco doing better than the street expected, also in terms of sales. tesco had first half revenue of

31.9 billion pounds compared to 31.8 -- .79 in the estimate. willig news is dave lewis leave. ken murphy is succeeding him. ultimatum from boris johnson. the u.k. pm is set to tell brussels to negotiate brexit on his terms were facing no deal divorce. he will set out more details when he speaks to the conference in manchester later today with his office saying he will present a fair and reasonable compromise to the eu. the chairman told the conference the government is prepared for no deal. >> i understand the uncertainty around brexit can be challenging. our step change in preparations has made a deal outcome more deal outcome no more manageable. every department now has the

resources available to prepare for no deal. matt: let's get more details with our exec it of editor for international government. oft is the key part johnson's proposal? is it workable for the eu? some defiantect language today when he releases details on the proposal. he's going to say those who want brexit have been played for fools for several years. he is going to suggest northern ireland stay in the customs union with the u.k. whereas europe was saying northern ireland needs to be in a customs union with it. boris johnson will say that needs to be the case for four years, at which point they will work out some kind of other solution to limit difficulty in terms of the flow of goods across the border. essentially it still is some kind of border, which is what

the irish have been worried about. the europeans as well. he is saying give us four years and we will find something, try to make it as painless as possible. the irish are saying they are concerned about this. it will mean things have to go through some kind of check. where that is on the border, near the border, the point of origin, the point of destination, is unclear. it will mean goods cannot travel unimpeded, at least for four years. that is the plan he is going to lay out today. it will be interesting to see how europe reacts. matt: obviously the october 31 deadline is the one we are watching, but it looks like johnson's that a new deadline of october 11. what does this mean? how will the eu summit work the following week? the dealtrying to get done before he goes to brussels. parliament is now being recalled against his wishes.

he's trying to limit parliament's influence on what he is doing. parliament is saying if he cannot get a deal, he has to take an extension. that is something he says he will never do, which can get bogged down in legal challenges. he is saying, we need to coalesce around something. i will take up to brussels. i'm going to go to brussels and negotiate. i want something we can agree on that is clear and understandable beforehand. matt: thanks very much for joining us. talking us through some of the latest twists and turns in brexit. ,oining us now is klaus baader global chief economist at societe generale. let me ask you what you expect hear from brexit. i know you are an economist, but

you have to be following this zeal the rest of us are. how much of a problem is this? >> the uncertainty is a problem for everybody. it is not really so much the u.k.. i just finished a two week marketing trip there. nobody asked me about brexit. merely because it is so unclear. i think also it is a bit of a sideshow, which it is not. and no deal brexit would almost certainly push the u.k. economy into a deep recession. if there as deep as had been more time to prepare. our estimates adjusts for every percent less u.k. gdp, euro area gdp will be down .25%. he deep recession would push the

euro area to recession. that becomes a global issue. i think the whole situation is as clear as mud. it is really unclear where this is going to go. we have been working on this topic for two and a half years. politicians have made very little headway. we will see. prime minister johnson's strategy of negotiating with the me what basically give i want are jump out a window is not going to be successful. matt: how does the eu economy look without brexit? how much trouble is the eu economy in as mike pompeo flies over here to talk about tariffs? the eu economy, i prefer to think about the euro area, but it is in a certain degree of trouble. most of the trouble is from germany.

we have seen a drastic deterioration in german economic conditions with a negative quarter. it is highly likely the third quarter is going to be negative as well. germany is on the breakup two consecutive negative corridors. -- quarters. this is external shock. it is a testimony to the deep uncertainty generated by the u.s. trade war with china and threatened trade war with many other economies, as well as brexit, which in all probability is making people uncertain about investing. the services sector is much larger. it is holding up well. the trouble is historically it is the more volatile manufacturing sector that puts you into recession or not. the situation is quite worrisome. the big issue is monetary policy has run out of road. fiscal policy will have to -- i

think that's not only true in the euro area. it is true for many areas. from mario draghi yesterday. he has been asking for governments to step in with physical help for years. -- fiscal help for years. yesterday he said fiscal policy becomes more powerful and monetary policy is close to the lower bound as the multipliers are higher. do you think berlin is listening? >> to some extent. the change in germany is going to be brought about by the change in the overall setting. germany has resisted fiscal expansion because the german economy was going fairly well. quite well in fact. unemployment was declining. saying, look,re it's not clear german economy can withstand fiscal expansion. now germany has gone to bp under

performer in the euro area. we think it is only a matter of a few months before unemployment is going to rise and focused the minds of german politicians. it looks as though fiscal expansion was going to be dressed up as environmental package. everyone has to take into account germany is now being paid to take on debt. having value for applied to surplus, has been -- at this stage. to have you with us. global chief economist at societe generale, klaus baader stays with us. let's get the first word news.

>> more heat on president trump's allies over the ukraine call. possible charges after he blocked testimony from state the permit officials. lawmakers said pompeo appears to have an obvious conflict of interest because he listens to the phone call. in the u.s., harvard university has defeated an anti-affirmative action lawsuit aimed at stopping the school from factoring race into admission. a federal judge saying the college does not discriminate against asian americans. adding that considering race as part of the process is lawful. it is a ruling that is likely to be challenged all the way to the supreme court. to value was kind investors. greenlight capital gained across its fund. that brings returns to a weighted average of 24%. the gains came amid a temporary shift away from momentum stocks

toward inexpensive equities. 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. matt: thanks very much. after the most serious clashes since the rally began, we bring you the latest live from hong kong. that's next. this is bloomberg. ♪

matt: this is "bloomberg daybreak: europe." as china marks 70 years of communist rule, hong kong was rocked by the most serious clashes and widespread -- since widespread unrest begin in june. a protester was shot by police.

sophie kamaruddin is in the central business district of hong kong, where there has just been a flash mob protest. what is the latest? >> hundreds of people participated in that flash mob that saw traffic disrupted. here is one of those groups who were chanting just moments ago. some of the chains we have become familiar with. five demands. freedom for hong kong. pfeiffer hong kong. adding a new one. expand police, no delay. there is public backlash against police brutality after rounds were fired during clashes. shot.on was anger is certainly heightened. doubtis a little bit of among protesters as to who might -- being chained to just now.

several human rights fronts, the organizations that organize the illegal rally on tuesday, they are saying they will organize another large-scale mobilization and they are calling for a day of mourning given the use of live rounds. matt: what is likely to happen next? what should we watch for? there be more escalation of violence? there have been calls to remain calm. the hong kong general chamber of commerce calling for peaceful dialogue. the government and police have condemned the violence of the hardline protesters. they may approach the demonstrations in their demands, that will be key to see whether or not we will see intensification after the events that took place yesterday. while the police chief defended the use of firearm by the

police, saying he was defending himself, saying his actions were reasonable and lawful under the circumstances, there is a lot of criticism. sayinge one lobbyist police are being trigger-happy. how is this addressed in a way that could see compromise with the public? that is going to be key. again, more unrest very much likely. kamaruddin in the business district, moving around with the mob. thanks so much for that. let's get the bloomberg business flash. >> tesco's chief is stepping down. he will leave the business next year and be replaced by ken murphy. he is currently executive vice

president. giantk. supermarket reported profit for the first half that beat estimates. standard life aberdeen's martin gilbert is retiring. the u.k. finance veteran was previously the chief executive of aberdeen asset management. a company he cofounded in the 1980's. it merged with standard life in 2017, making him co-ceo of the u.k.'s largest asset manager. he will step down in september 2020. m hast suisse chief thia broken his silence over the spying probe. in an internal memo, he praised the outcome. he described recent events as deeply regrettable, adding mistakes have been made. credit suisse' board exonerated him, ousting the chief operating officer. credit suisse decline to comment on the note.

that is your bloomberg business flash. matt: thanks very much. we are following that story there very closely. the u.s. economy is losing speed manufacturere falling to its lowest level since the end of the last recession. past, growth below 2% would almost have guaranteed a contraction. now, some believe the u.s. can continue out one to 1.5% without falling into a recession. klaus baader, global chief economist at societe generale is still with us. there's a lot of talk about the possibility of the theoretical stall speed being lower. what is your take as an economist? >> yes, i think that is absolutely true.

potential growth has slowed in the united states as it has in multiple economies. that is a function of two things. one, slower growth of the labor force. ofondly, a continuation labor productivity growth which belowues to fumble along its long-run. it is those factors. your equilibrium growth rate is lower. as you the u.k. economy -- the u.s. economy can slow without falling over is logically intuitive and appealing. the trouble is that is not usually the way economies go, unfortunately. it has been our call for quite a while that the longest expansion in u.s. economic history, all the way back to the 1850's, is probably going to come to an end around the middle of next year. we are looking for recession then. probably a shallow and short

one. it is driven by a big squeeze. the u.s. corporate profit margins have declined steeply. a precursor tois recession. matt: what do you expect for the number monday? withonsensus is 140,000 3.2% growth in wages. away.are not far the u.s. labor market continues to perform well as it does in many other economies where growth has slowed sharply. the labor market does tend to be an indicator. it will not be able to defy the slowdown in gdp growth. the call for isolation comes back to what i said. gdp growth has slowed much faster. labor productivity growth is slowing. matt: thanks so much.

, global chief economist at societe generale joining us out of the london bureau. that is it for "daybreak europe "the european open" is next. we are going to speak with the ♪

anna: we are live from our european headquarters in the city of london. i'm anna edwards alongside matt miller. matt: the markets say how slow can you go? stocks slide as u.s. manufacturers had a 10-year low. europe points lower. cash trade is less than 30 minutes away.