matt: good morning. this is daybreak europe and i'm matt miller. nejra: and i'm mayor cain pitch. these are today -- nick here -- nejra cehic. these are today's top stories. donald trump held a rally, saying negotiations are going well ahead of a rally with the chinese premier. president trump: you know, i'm dealing with china right now. they are in washington. we're going to see if we can make a deal. they want to make it. we are going to determine whether or not we make it, but they've been very nice. nejra: the pound jumps the most

in seven months after a meeting with u.k. print minister boris johnson. >> what i would hope is that what happens today would be sufficient to allow negotiations to resume in brussels. nejra: and changes at the top. sap's long-standing ceo announces he's stepping down as rental looks to -- rental -- replace thes to ceo. ♪ matt: good morning from berlin, nejra. we have had a lot of fed news out, a lot of trade news out, a theory a news out. basically, washington is the place to be. nejra: i found the comments really interesting in terms of what he might see as a rate cutting cycle. we'll get into that.

it is the trade news dominating markets. investors taking the positive side, the fact president trump says he's present for talks with chinese vice permit or. if -- vice permit or. -- vice premier. matt: we will have to talk exit -- brexit again today and tomorrow, as well. we do see asian stocks falling, u.s. stocks up on positive trade news. we just heard donald trump say the attorneys have been very nice and -- the chinese have been very nice. you have that going for you. the s&p 500 gaining today after gains on thursday and on wednesday in the cash trade. futures are gaining the last couple of days. gainingave the u.n. today. this is the final day of the

week that it's been up for an entire week. it was closed monday for the holiday, but it was getting against the dollar. now it's up again today, maybe showing investors they are comfortable with chinese currency packed. -- pact. nejra: speaking of moves, the yen is set for a weekly loss against the dollar again in the general risk on. in terms of that, it's headed for the biggest weekly drop in a month. i put the pound up there because we saw the biggest jump in the pound yesterday. we hold onto the gains from yesterday, this all on the fact we heard from leo brekke there could be a pathway to a possible deal. the 10-year yield charmed, along with -- jumped, along with the two year yield. 10 year study after jumping eight basis points yesterday.

matt? matt: so far, so good. trade talks wrapped in washington with signs pointing to a positive day one. president trump sounds optimistic about negotiations. over signal hope, as well, prospects of a partial deal that could lead to a temporary tariff truce. but the president repeated he would prefer a complete agreement. talks completed when trump meets with vice premier li hu. president trump: you know, i'm dealing with china right now. they're in washington. we're going to see if we can make a deal. they want to make it. they've been very nice. if our opponent had won the election, you know what would happen? china would be the number one economy anywhere in the world, and right now i can tell you,

they're not even close. nejra: some are skeptical a pact should be part of the accord. -- paymentital capital told bloomberg washington should continue to take a hard line with beijing. >> everything that china is doing in the united states to subterfuge our economy and steal from us has to be addressed today. and my guess is if trump needs a short interim trade deal, maybe he can trade soybeans for the delay in tariffs, which any president could do. the hard-won is getting a more substantial agreement put together, which i don't think will happen at this point in time. matter tol china gdp assets more than a trade deal? you can reach out to us. joining us is joseph little, global chief strategist. welcome to the show.

great to have you. a bit of a pumped up friday terms of risk assets a somewhat we heard from trump. are you tempted to add to risk tactically based on a partial or many deal, which at the moment, looks awful? joseph: that's a big question to start with. we have to watch things closely and carefully. there's a lot of uncertainty around what might happen. there's some optimism. a politicaln economic cycle over the last month and quarters, where we've had uncertainty around the politics, trade tensions, anxiety. that's been impacting the macro outlook, growth prospects, deafening spirits, affecting complement -- confidence. and now, more recently, we've

seen the policy easing coming through. the question for investors is whether or not the policy easing is enough to offset anxiety on trade. it is stabilize the microsystem, get things better in terms of a stronger foundation for risk asset to continue to perform, or whether the cycle is going to roll again and we're going to see more phases of political uncertainty. it's hard to know what is going to happen in terms of negotiations. traders moving around these headlines as they do every day, risk on, risk off, depending on the tweets of the morning. what do you see investors doing at hsbc? have they been trading around this? are they prepared to move if we get some sort of deal? joseph: thanks, matt. i think we've got to be nimble and you've got to be active, and we need to be responsible about the situation changing.

we do need to be responsive to that. the right approach is to be dynamic and how we're positioning asset allocations to be agile in terms of how we're responding to the news. there are a few interesting pieces of information in terms of the core fundamentals around trade, which are also important to think about. if you look at the data we've had on trade for the major economies, germany, some signs of stabilization. evidence taiwan too, on semiconductors, the trade,ogy, also exports, stabilizing beginning to show signs of improving. maybe we'll come back to it later in the shop. but the evidence we've seen in pmi's also reinforce them. those facts about the macroeconomy, improvements in

the trade cycle, some ideas bego affirm and improve again in the manufacturing area. very important, as well as thinking about what might come out over the trade negotiations during the course of the next day and over the weekend and looking forward. nejra: is there a sense that any kind of flop in the trade negotiations would be far worse for risk assets than any kind of partial deal or any positive momentum would help process guest -- would help risk assets? and therefore, would they be defensive? joseph: that's right. that's what we're seeing in global markets generally. market bull market ofble pessimism. that's to reflect the weak data we've had, worries around

policy, out of ammunition, ideas. and also the trade side, the manifestation of the political uncertainty we're facing. when you put that together and you're thinking about building strategy, many investors nervous, anxious about the situation. that's obviously going to have a bearing in terms of how markets perform, going forward. matt: are you expecting a recession then? trade has been a major concern we've seen for the economy, of the sleet a real dampener. do you think we'll see a recession due to it? joseph: good question, the question in many respects. i might reframe it a little bit. the critical issue for me is not to i think there will be a relation -- recession, but what will the market think? is the market fearful of a

recession and economic weakness? in relative to that scenario, how do we see things potentially playing out? and what i would say is, this bull market and pessimism, the pervasive feature of investment markets today. i think that's really the critical thing. you don't need to be that optimistic about the macro outlook to become triple being optimal to be macro being proactive. i think anxiety and probability around risk is high. never say never, but implied ability -- provocatively -- probability and excitement is high. nejra: you also see opportunities in credit and emerging markets. talk to me about what. joseph: when we're building

prefer this, you want to -- portfolios, you want to build , emerging portfolios markets continue to be unloved, hated by many investors. and what that meant is valuations look attractive at this point. i think you need to be careful on how much you lean into that thee, because as we know, issues around trade have been problematic, big challenge for open economy asia, in particular, they problem in terms of asian earnings. that's been a challenge for asian equity markets, emerging equity market performance. offerequity markets investors good perspective yields. there's other places in fixed income where we can swerve the

issue around global government bonds and negative yields, unattractive valuation, a lot of pessimism baked in to current pricing. and as you say, look at asset classes like asia credit, which does look very interesting to this point. matt: joseph little from hsbc global asset management stays with us throughout the program. let's get the bloomberg first word news for rob lynch and in hong kong. rob? >> thank you. the u.k. and e.u. are a step closer into agreeing to a brexit deal after a meeting between the british and irish prime minister's. they urge negotiators to renew talks in brussels, but discussions hit a stumbling block. what to do about custom checks at the irish order. -- irish border. >> i had a good meeting with the prime minister and our team is together, very positive and very

promising. i am now convinced britain wants there to be an agreement. that's in the interest in ireland and the united kingdom. i do see a pathway towards an agreement in the coming weeks. syria, andow to president trump is pushing back at bipartisan criticism of his decision to have u.s. forces pullback. it let turkish forces move in. he says he's carrying out his campaign promise to stop u.s. involvement in and this wars. but critics say he's exposing loyal allies to the risk of slaughter. giuliani haverudy been accused of violating finance laws, allegedly a plot to oust the u.s. ambassador to ukraine. this is a part of the house impeachment inquiry against president trump. the fbi arrested the two men at

the airport. they were leaving the country with one-way tickets. renault is poised to oust the chief executive days after his partner chose a new ceo. pastare working to move the carlos ghosn era. global news, 24 hours a day on air and at tictoc on twitter, powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. wrestling chin in hong kong, thank you so much. there's a possibility for a deal after talks. live in brussels next after we talk on whether this could get negotiations back on track. if you're traveling to work, tune into the radio. this is bloomberg. ♪

nejra: this is daybreak europe. i'm nejra cehic in london. matt: i'm matt miller in london. happy friday. let's check in on markets in asia. juliette saly from singapore. michael: happy friday for the markets -- juliette: happy friday for markets. the latest on the trade front giving a boost to investor sentiment. the msci pacific index the biggest jump since august, on track for our weekly gain. you can see the nikkei in late trade, over 1%. south korea had underperformed in the region, given wednesday's holiday, also looking solid. the csi 300 tracking higher. you can see the onshore chinese currency getting a boost, along with the likes of the korean wan optimism. i want to show you hong kong. we're looking at the volumes on the hang seng index.

this is a different story coming through on chat groups in hong kong, similar to reddit. essentially what we are hearing is a lot of the protest organizers are telling people involved in these protests to dial it down a little because they are worried about the impact to the cities. if they are going to have protests, they don't want them to be violent, not hitting the banks, and of course the violence we saw over the last weekend. we have weakness coming through in real estate, consumer staples. but you can see a lot of solid buying and hong kong and look at the volumes we saw, particularly in the latter part of trade. this is predicted at 4:00 hong kong time, when the hang seng index closes. it's looking like the hang seng is going to close and have its best jump one-day gain in about a month. nejra: juliette saly in singapore, thank you so much. the u.k. and european union have taken a step closer to agreeing

after a positive meeting between boris johnson and leo greco, who have huge influence over the rest of the eu on brexit. after private talks, the leaders emerged seeing a pathway to a potential deal. >> i had a very good meeting today with the prime minister and our teams together, very positive and very positing -- very promising. britain wants there to be an agreement. that's in the interest of ireland, the united kingdom, and the european union as a whole, and i do see a pathway towards an agreement in the coming weeks. sterling jumped the most in seven months after a holding today. for more, maria tadeo joins us now. if there were renewed optimism in brussels about a deal -- are the renewed optimism in brussels about a deal done in time? shifted andone has that is reflected.

the two men put out a joint statement. they appeared to be on the same page, saying there is time to get the deal done before the end of the month. that is a very different message, very significant, because the tone is so different to what we heard at the start of the week when they put out the controversial rita in which they claimed -- readout in which they claimed the deal looked very unlikely. the tone has shifted. at it's very significant, least when it comes to the momentum in the talks, which are still very much ongoing. matt: yeah, the tone change is palpable. there has been one major optus -- obstacle, and that is the irish border. are there any obstacles left? one bigell, there is obstacle, the irish border and

frictionless trade. the europeans have a problem with the u.k. proposal that both northern ireland and the customs union, but keeps it in the sickle market. there are many question marks into the tax, in terms of those checks, and assuring the single market stays united and protected. in terms of today, we're expecting michel barnier to have -- this has significance because friday, we've seen at the deadline, talks to move before the summit next week. that's when we are expecting the maker break moment on the brexit deal. matt: thanks very much, maria tadeo there in brussels talking about the change in tone. but of course, the problem still remains of the irish backstop. joseph little is still with us. can you see any way around the irish border issue, or can your

clients see any way around it? are they optimistic? joseph: yeah. so, the brexit challenges and the situation and the uncertainty posed by brexit continues to be a key issue for the macroeconomy, for economists, and for investors. it's highly uncertain how things are going to play out. still, to me, lots still on the table, everything still on the table in terms of negotiation and the way things can go. i mean, what i would say is that this is not a crucial period. tracking the news flow is going to be important, moving to super saturday, we may even get more news of significance this afternoon. we've got to watch this closely. it's interesting, when a beat with clients, when i speak with our investors or investment team about strategy, everybody always asks about brexit.

always, what's going on with brexit? what's the next step? what's the sequence of political events? no one ever asks about the ftse. nejra: interesting. that said, you do hold a position in big caps. and we saw a research in the pound. not only that, one-month month risk reserve for -- reversal researched, as well. does that make you worried about ftse 100 holdings? so the way we think about it is if no one ever asks about the ftse. the reason is, since 2015, it's been a massive under performer. it's been a dog compared to the s&p and other allocations. it's been the forgotten equity allocation. massive under performer. where things stand today, for big cap u.k. equities, from the

perspective of an international investor, sterling asset classes look really attractive. you've got sterling very beaten up, sterling dollar, sterling euro, quite extreme low valuation, and quite high yields, extremely interesting valuations on a relative basis offered in those big caps. what we've been trying to do and think about and develop in our own strategy is leaning in to that theme, investing more into u.k. equities. we think tactically, dynamically, it's a good place to be, even if a bit scary given everything in politics. nejra: we had a pound surge yesterday, but not necessarily that's going to last in the ftse. joseph little staying with us. great to have you on the show. coming up, we speak with stefon diggs now after the pound european stock exchange unveiled

its new strategic plan. don't miss that interview after the break. matt: and is the

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nejra: this is daybreak europe. i'm nejra cehic in london. matt: i'm matt miller in berlin. breaking news on oil, there has been a blast on a tanker, an iranian tinker in the red sea, and that is causing oil to spill their according to reuters. you can see brent crude now rising a little over 1%, still over 60 dollars a barrel. i've been surprised lately to see oil as it rises, still holding at low levels, considering the damage done in saudi arabia over a month ago. here, you see brent crude coming back, nymex wti also rising in

today's trade. but still at $54, right now %54.09. an iranian tanker blast causing oil to move fire. nejra: they've said geopolitical risk mispriced markets. we had a guest yesterday that said something to a similar effect. if that is true, no surprise we are spiking higher on the headline, though we're awaiting clarity that. speaking of clarity, jury is out on whether the current u.s. slowdown will turn more severe, that's according to robert kaplan, who said at this point, any rate adjustment should be restrained and modest. he spoke exclusively to bloomberg. robert: i think moving modestly now gives us the best chance to avoid a more severe slowing, and that's why i want to use the ammunition now, even though yes, it will have a little less

ammunition for later. nejra: the end of the fed rate cuts might be coming a little closer than many investors are expecting. neel kashkari says the case for half percentage rate point cuts have declined, and another argues policymakers should wait for fresh economic data before deciding their next move. joseph little is still with us. you were saying to as earlier we it in marketson is overdone. do you think the fed perhaps needs just one more rate cut? and then it can be done? joseph: yeah, that's the kind of scenario i'd expect. you never say never. the facts are always changing. give got to continue to monitor the data closely. -- you've got to continue to monitor the data closely. we have seen a lot of headlines and concern around the manufacturing data, in

particular, the ism data last week, six year lows, a lot of concern of capital spending and new world order is going to have an effect, and some of the manufacturing softness and manufacturing recession is beginning to spill into the services sector. dut our feeling is still base on the evidence we see across the whole economy, the labor market. the u.s. trade says it still ok. we do a thing called now casting, a big data modeling of global growth. that tells us he was growth is 2.5 percent, slightly higher. that's not great. it's not a goldilocks economy by any stretch. but i think what you say is the right way to put it, that a lot of the cyclical pessimism we see, a lot of anxiety around recession is probably overdone

at this point. far: what do you expect as as the bond purchase program? the fed wants to kick it back into gear, says it's not quantitative easing, but it seems like a could put a lot of downward pressure on yields. so i think there's a lot of confusion around some of the recent statements from the fed. they've been talking about organic balance sheet expansion. maybe we need some inorganic gm modified balance sheets. i don't know. but the decisions that have been taken and the adjustments that have been made in terms of dealing with challenges in the market are technical solutions to technical problem. that's what we would call open market operations. the bigger question really is whether or not there is a policy

signal, change of policy that is moving toward, easing more into funds for a new expansion in quantitative easing. we've got to watch the data closely to see if that could happen or be required. at the moment, i just don't see that the situation is going fast enough to require that. nejra: and jay powell said this is not qe. last year, we had a record low yield. that reflects the demand for the long and and the recession you talked about. given the fact they're overdone, does that mean they are underweight while you're overweight global equities? joseph: that's right. what's important here is not what the fed is likely to do the next three months or six months, but how rates look like in five years and 10 years. when we think about bond market pricing, that scenario over the

medium-term have the right trajectory -- how the rate should i tree looks -- rate trajectory looks, is a lot more important. assume a scenario of a couple more cuts, a scenario of tough growth, of low inflation, of interest rates into the medium-term. assumptionaking an of fed rates going higher. that's a low rate of interest rate by any sort of historical comparison. what's fascinating is even once we do monitoring, analysis, based on those interest rate assumptions, we still end up with negative bond risk premiums, negative evaluation signal looking at long-term treasuries. that's not surprising. treasury bond yields are just over 1.6%, very low rate of interest.

and that means we want to be underweight. att: joseph, you've got global title, but i'm assuming a lot of your clients holding assets with hsbc are in the u.k., in europe. what importance does the strength of the dollar have to your clients? and do you see that continuing? i would typically think if the fed is going to cut rates, richard jones says he things four times from now through 2020, that would weaken the dollar. but it's held up pretty well, held up really well over the first couple of cuts. joseph: yeah, yoou're right, matt. the dollar has been performing well. on the face of a weakening economy, inflation, policy easing from the fed, and forward guidance, which is taking you towards the idea that there's more policy to come, but it is all relative.

where an environment negative rates are a third of the instruments in the government bond universe are yielding negative rates, u.s. fixed income looks a little bit high-yield in terms of the characteristics. so, the attractiveness of the dollar and the relative gain of currency and trading and currency management is understandable. i think it's tricky in terms of dollar direction, done very wel l. of u.s. exceptionalism in terms of excellent -- in economic performance, has begun to be challenged with some of the data we've seen. so i thinke -- and we need to see how the trends are evolving in some of the macro data, but perhaps we begin to see a little more of a range

bound or even dollar weakness in the relative near-term because of heather's trends are evolving -- because of how those trends are evolving. matt: joseph little, thank you. he is going to stay with us a little longer. we want to get to euronext. the exchange company has revealed a new three-year strategic plan, aiming to grow revenues by 2% to 3% over the period. the pan-european stock exchange says it wants to step up "transformational dealmaking" in an attempt to build markets. the ceo of euronext. before we get to your plan, i want to ask about your brexit plan. we've had a change in tone to the positive, but if we don't get an irish border solution, could see a hard brexit. i wonder what that does to the mechanics of your business.

are you concerned a hard brexit withrow a spanner in the works of european trading? >> good morning. we have to distinguish the operational issues where we are fully prepared. for practical purpose, and the finance sector, brexit has already happened. the realities that all the market participants across europe, in the u.k., have made plans to be ready on the 29th of march. and they are ready and they have implemented their plans since april, irrespective of the political forms. thatm very confident everyone is already prepared because everyone has already implemented in the finance sector what needed to be implemented for brexit. beyond thesaid, preparation of the financial sector, there are other aspects that impact macro trends in

terms of gdp, recession, etc., that have to be factored in. but they will not affect our operations, per se. mr. boujnah: good morning --nejra: good morning. good to speak to you. does that mean you won't have any extra staffing the day after october 31, if you say the preparations are in place? will it be business as usual, whatever the outcome? sure,ujnah: no, for every time there is a significant event, we have extra staffing, extra capacity fisher, because there's about -- for sure, because there's volatility in the markets. what i was trying to underline is the fundamental perversion has been implemented by market participants that want to continue making operations within the european union. again, big decision between what had to be ready for months and

what is business as usual in terms of particular events for which we are prepared. matt: let me ask your take on big m&a. after we saw the hong kong exchange deal fall apart, it seems like there aren't going to be any more big takeovers in the industry. is that your view, as well, or are you looking at smaller acquisitions? mr. boujnah: frankly, i don't know about the others. what i can tell you is that euronext, as a united diversity company, has been able to achieve, over the past few years, as we have done with the irish exchange, as we have done with ups. we do know within the european context, within the model where each exchange is a part of a decentralized governance model, we do know how to make cross volatility.

as for the others, i don't have any particular views. each exchange is a successful exchange. we are about to embark on a new plan where we are the leading european market infrastructure to be more present in different asset classes, to be much more present in different pieces of the value chain, in particular where we are going to grow significantly in data. and definitely in corporate services. position ton a continue deepening our projects to a leading european infrastructure. nejra: and you've been talking about transformational m&a industry to teach it -- strategic -- in the strategic plan you put out. how would you find it? would you go to shareholders to raise equity?

mr. boujnah: the situation, we momenta-rating at the with a stable outlook and the commitment to do more m&a. we are committed to keep operating strong investment grade. so, we still have headroom for euros, more, 700 million depending on the cash flow generation. opportunity toan a significant value, we will go to shareholders and offer them to invest more in the larger euronext. matt: so you would go to shareholders if you need to, and you think this is a good market in which to do that? mr. boujnah: absolutely. euronextt is good, but is doing better than the market. the momentum of the euronext

target and performance is amazingly distinguished from the rest of the market. margin ofubled the the market. we have multiplied almost four the market cap. the rating has been significant. it seems the hard work done by the euronext teams is paying off in terms of valuation. if we have an opportunity to continue doing more in calibrating the cost structure in assets, then we will offer to investors to be a part of the new voyage and the new growth story, similar to the ones we've achieved so far. nejra: the plans you've outlined, are they going to be enough to mitigate slowing revenue from stock trading at euronext, these plans you've outlined in the strategic plan? blendednah: well, the revenue growth of the topline

for the euronext is 2% to 3% per year in average. it's what it is. it reflects the fact that equity markets has been, in the recent months, relatively slow. we are seeing a return of volumes. i do believe that equity is going to be the only asset class that we provide significant yield in the years to come. we have covered the situation of interest rates. if you want to lose money to investment fixed income, if you want to make some money or a lot of money, you invest in equity. so the world of equity is going to be back and is starting to be back because everyone realizes there is no other as a class that provides yield. we are at the turning point. lifting us back in europe with significant success stories being lifted in the past few weeks and scheduled to be listed in a few weeks, so i think we

are at a turning point for equity. i'm extreme the confident euronext, in addition to its ambition, to trans promotional m&a, will be able to strengthen and further its core equity business, which is already extremely profitable and powerful. matt: thanks so much for your time. sorry, well, we both thank you. we're both appreciative of your time. nejra? nejra: matt, here's what you should be watching today. wrath of policymakers speaking. we joined the bank of spain's governor to speak at an awards ceremony over the u.s. eric will be speaking at a university of wisconsin symposium. and call-up said robert kaplan speaks to the commonwealth club of california in san francisco after speaking to us on bloomberg tv yesterday. matt: and the last price to be

awarded this week is the big one, the nobel peace prize. swedish climate change activist greta berg is -- greta thunberg is among the finalists. and we get a cpr reading in the next 15 minutes or so. that's followed by spanish cpi at 8:00 a.m. london time. stay tuned for those data points . this is bloomberg. ♪ ♪

matt: this is daybreak europe. i'm matt miller in berlin. nejra: i'm erica in london. features extending gains after an iranian take a blast is causing oil to spill in the red sea. we're joined by anne ray hordern. what do we know? annmarie: lots of reports out of iran and reuters that the iranian company that owned this

tanker, to caused this explosion and we now have oil spilling into the red sea. reports are also saying this happened 60 miles from jetta, the sally port city in the red sea. there are reports it's being investigated at the moment. we did see brent and wti tick higher on the news. brent is up nearly 1.5% on this news. of course we've been talking for weeks about the geopolitical risks in the region, and the price of oil. it seems the risk has gone away and the price is trading below we were pre-saudi attacks, which wiped out 5% of global oil supply. analysts have said the geopolitical risk premium is not pricing in and this is another incident that takes you to the oil market and possibly concerns about escalation of tensions in the region. matt: we're going to stay across

this story, for sure, with annmarie hordern covering it. thanks for that. let's get back to our guest of the hour right now, joe, we were telllistening to stefane us he thinks fixed income is the place to go but your clients have been good -- been doing quite well with fixed income. he sees a new era for equities which frankly, equities have done so well they're starting to look toppy. what do you think of that are in are you seeing clients rotate out of fixed income and equity at all? joseph: thanks, i think it was interesting comments, and i pretty sympathetic to what the other guests was saying. when we think about the asset allocation decision today, investors are confronted with that choice between very negative interest rates or slightly higher nominal rates, but negative in inflation

adjustment terms, versus an dpportunity of carry an potentially high perspective returns, higher risk-adjusted returns, in global equities. what we have to get comfortable with his bearing the volatility that's associated with equity risk, and then the opportunity of kind of capturing those perspective returns. my sense is that we have been in a world where fixed income has done well this year, double-digit returns are crossed a host of double bonds. fixed income really well. but i think the critical question is what comes next, what happens next? when we look at those valuation metrics, the market odds, the relative attractiveness of equities, you're getting very good odds to take on the volatility, stave concerns

around recession. you don't need to be optimistic, in terms of growth, profit, or political situation. nejra: yes, and you're talking about the equity risk premium. actually -- it's free and contrast with the u.s. you could argue that's because bond yields are so low in europe, reflecting a downbeat view of the economy, so you don't want to be in european equities either. would you take the view or see more of an opportunity in european equities versus the u.s.? joseph: it's always relative. we might feel that, wouldn't it be nice to have the delorean from back to the future and sort of go back in time and invest in equities at much cheaper valuations than today? but that's not what's on offer. what is on offer is a government bonds, european guns, and dish bunds, and -- european bunds.

or other global equity markets where, as you say, the global risk premium is 4.7% today. we can always argue about exact precision, but the point is at this stage in the cycle, given the situation that we've seen in terms of the profits this cycle, that's still a very attractive reward that the market's offering us to take equity risks. i think all of the signals, all of the valuations are incentivizing and attracting investors to come out of some of those more low volatility, safety asset classes, which could be quite dangerous at this point, and we're being encouraged to move into volatile asset classes. matt: but they have done quite well, fo rsure -- for sure. you're going to be a happy man with capital appreciation.

thanks for talking with us, joseph little, chief asset strategist at hsbc global asset management. nejra: and coming up, so far so good. optimism after high-level trade talks in washington. this is bloomberg. ♪

morning nejra: good from london, i'm nejra cehic. matt: and i'm matt miller, live from berlin. this is bloomberg daybreak: europe, and these are today's top stories. setting the tone, global stocks rise on positive signals from trade trucks in washington. president trump says talks are going well ahead of a meeting with the vice premier. >> i am dealing with china right now. they are in washington. we will see if we can make a deal. but they want to make it. we will determine whether or not we want to make it, but they have been very nice. matt: a step closer. the pound jumps the most in the seven months after an upbeat

prime minister boris johnson irish punt mayor lee a brat car. is thati would hope what happened today will be sufficient to allow negotiations in brussels. matt: and oil gains after reports of an iran oil tanker blast. we see brent crude rising more than 1.5%. ♪ matt: we have got breaking german inflation data, and it is grim but that was expected. it month over month, it is absolutely flat. we are talking a consumer price index in germany, 0.0% month over month.

that was the survey, so investors were not looking for anything month over month. year-over-year, they were looking for 1.2%, and that is exactly what we got. 1.2%n cpi comes in at year-over-year, absolutely flat month after month. nejra: following the data we had yesterday, which did not show much upward inflation pressures for the fed to worry about. what is preoccupying investors is the state of the trade talks and president trump saying they will go very well. the question you have got to ask yourself, does president trump being in the room, will that make things better or worse? in any sense, we are taking the bright side of the coin in terms of equity markets. global equity markets gaining on trade optimism. gains. seen two days of ftse 100 futures very much on the back foot compared to dax and cac futures. that is down to the spike we saw

in the pound, jumping the most in seven months, on the signs of or a pathwayress toward a possible deal between the eu and the u.k. matt: we will take a look at how that news has affected bund futures and u.s. bond futures. we do see investors selling futures on german bunds, so you could see in that the cash trade the bund fall and yields rise. see it going back and forth between a green and red arrow, unchanged. the u.s. 10 year futures are down, although the cash trade, the yield is coming down as well. frankly, it has had a decent rise. he u.s. 10 year yield at

1.664%. five significant digits. oil futures are extending gains following reports that an iranian tanker blast is calling oil to spill into the red sea. we are joined by annmarie hordern. annmarie: you can see that we have brent trading just north of $60 a barrel. we are seeing a bit of risk premium coming back into the market after these reports from iranian news agencies, as well as reuters, saying there was an explosion on a vessel owned the national iranian oil company. they are saying the oil is spilling into the red sea. 60 milesel is just from the saudi arabia port city of jeddah. we should note that 10, 5 years ago, we saw a much higher spike on this news. rbc's leade to analyst in the oil market, and

she says the market has been too complacent for these geopolitical risks, considering we are one security incident away from a conflict in the region. this region is crucial to the oil market. it is the biggest oil-producing market in the world. we are seeing prices spike higher. this entire time, the market has been focused on the demand-side picture, demands about manufacturing out of asia, and the ongoing trade war that has dampened the oil market demand. we are seeing risk premium. we know from these reports this is being investigated, but at the moment, this is all the news we have. matt: more reports now that the explosion was likely caused by missiles. went to air, we were seeing the iranian news industry channel saying this explosion was caused by missiles. you have those reports to add,

and that may be why we see oil continue to rise from the already steep spike we saw this morning. nejra: we have breaking news coming through. at redhead line is they are $1.1 billion of net outflows. it sees the outlook mixed. you have the number for the outflows. the outlook is mixed. it will continue to review further purchases. to also to repurchase up $100 million of shares. we have this update, but the main headline to cast your eye on is the $1.1 billion in net outflows. trade talks wrapped up in washington with initial signs pointing to a positive day one. president trump sounded optimistic about trade negotiations. china has also signaled hope over a partial deal that could lead to a temporary truce. the president repeated this week that he would prefer a complete agreement.

the talks will continue today when trump meets the vice premier. withu know, i am dealing china right now. they are in washington. we will see if they make a deal. we will determine whether or not we want to make it, but we have been very nice. thatr opponent had won election, do you know what would have happened? china, it would be the number one economy anywhere in the world, and right now i can tell you they are not even close. matt: some analysts are skeptical a currency patch should be part of the accord if it invites a stronger yuan, which china wants to avoid. eric just told bloomberg that washington should continue to take a hard line with -- our guest told bloomberg that washington should continue to take a hard line with china.

>> any economy that wants to steal from us has to be addressed. needs a is it if trump short, and room trade deal, he can trade soybeans for the delay in tariffs, which any president could do. the hard one is getting a more substantial agreement put together, which i don't think will happen. nejra: today, we are asking the question on mliv, will china do gdp mean more than a trade deal? you can reach out to us on the bloomberg. joining us is the head of investment strategy at black walk -- blackrock. there seeing prices rise on optimism around at least a partial trade deal. how meaningful has the etf flows been into risk assets this week based on the optimism around this partial deal? guest: we have seen significant risk appetite coming back. this week, especially with the equities.

very meaningfully, taking slightly longer. european domicile etf month.re a record more incrementally turning positive and investors are allocating swiftly in response to that. having said that, august was a record outflow month, so we are sensing there is a lot of indecisiveness among investors. nejra: what -- 1 matt: what kind of deer do you expect from these talks today? broader be something and lasting, or is it going to be something very narrow, like a truce for the time being? is more trade truce likely than a comprehensive trade deal. i think the scope of what would

be discussed or what was said at the beginning of the week, we have seen absent flows since then. but in our view, given how much both sides want the deal and patchifficult it is to the structural issues around intellectual property, around industrial practices, what is more likely to happen is a bit of a trade truce of a limited scope and impact. nejra: if we do get that limited trade truce of scope and impact, do you get the sense investors are ready and waiting to put more to work? or do they want that broader structural deal? guest: i think a broader structural deal, however unlikely, will actually be needed for that very meeting will, significant risk, especially considering that we have not had a meaningful, come brands of deal, but the u.s. market is close to an all-time

high. at this point, markets are quite positive. how much more positive can markets get without a more meaningful, longer-lasting trade deal is debatable. as we enter earnings season, we see more downgrades coming through as well, and that could be dampening sentiment. matt: do you think investors should be locking in? we are looking at the s&p 500, 17% on the cac. should investors be locking in these gains from equities and going to capital preservation mode? guest: we think investors should stay invested in markets, but be more defensive and more selective in which part of the markets they own. the reason i say investors should stay invested in markets, even though it is a bit scary with the uncertainty we talked

thet just now, is we are at later part of the cycle and risk asset performance at this point in the cycle tends to be even higher than the average throughout the cycle. the marketkets of that is a bit more resilient, it, thatbenefit from is ever strategy. we would highlight quality as a factor, minimum volatility as a factor, to focus on. nejra: sectors is one way to get defensive. would you also do it regionally, focusing more on the u.s. versus europe and emerging markets? guest: at this point, the answer is yes. we have overweight u.s. equity, neutral on european equity. in part because of our expectation for earnings. they are getting lower in terms of expectations, but the u.s.

remains bright in terms of growth, compared to the counterparts, the emerging-market counterparts. nejra: wei li is staying with us. let's get the bloomberg first word news. oil is surging after reports of an iranian oil tanker explosion. the oil ministry says it was likely caused by missiles. local media is reporting the tanker is on fire, spilling crude into the red sea. no immediate word from saudi arabia. to syria, and president trump is pushing back on criticism for his decision to have u.s. forces pullback and allow turkish troops to move in, attacking kurdish militias who had fought alongside american troops. he says he is carrying out his promise to stop u.s. involvement in endless wars. critics say he is exposing loyal allies to the risk of slaughter.

two associates of rudy giuliani have been accused of violating campaign finance laws. that is allegedly as part of a plot to oust the u.s. ambassador to ukraine. this is part of the house impeachment inquiry against president trump. the fbi arrested the men at dulles international airport. they were leaving the company with -- leaving the country with one-way tickets. italy will start taxing digital companies like facebook and alphabet. that follows similar initiatives. it raises the prospects of u.s. sanctions to him pause a broad eu wide levy that failed this year. are modelinges similar taxes. 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. ros, thanks very much. coming up, light at the end of the tunnel?

the u.k. and irish leaders indicate there is the possibility of a deal after talks. we are live in brussels next as we discusse whether this gets negotiations back on track. and oil jumps after reports of an attack on an oil tanker in the red sea. ♪

it is 7:18 am in london. we are 41 minutes away from the start of cash equity trading in europe. i'm nejra cehic in london. matt: i am matt miller in berlin. we want to get a check in on first of all oil after the reports of an iranian tanker that has had an explosion in the red sea. reports from an iranian news agency says they were caused by

a missile. as a result, you have brent 50.25 aising about 2%, % barrel. we will continue to bring you the developments throughout the morning. nejra: we are also keeping an eye on the reaction in terms of positivity in the markets because of what president trump said with the talks with china, saying they went very well. strengtheen a bit of a in the aussie dollar, along with the u.n.. we will also talk about the pound reaction, jumping the most in the seven months yesterday and hanging onto those gains today. matt: the pound is going to be in focus because of that improved mood music, to use a term of the hour. though u.k. and the european union have taken a step closer to agreeing the terms of brexit. that is after a positive meeting

between prime minister boris johnson and irish premier leo varadkar, who has a huge influence over the rest of the eu on brexit, considering his proximity to the united kingdom. after two and a half hours of private talks, the leaders emerged seeing a pathway to a potential deal. >> i had a very good meeting today with the prime minister and our teams together. very positive and very promising. that we wantinced there to be an agreement that is in the interest of ireland and the european union as a whole. i do see a pathway to an agreement. sterling jumped by the most in seven months after the news, although it faded a little from there. for more, our reporter joins us out of brussels. is there a renewed optimism in the european capital that a deal sure in time, butaria: i'm not

there is a new sense of optimism, especially because those words came from the irish shark, the biggest stakeholder in the negotiations. the europeans have made it clear there is no deal until the irish feel comfortable with the final version. what is significant is the change in tone between the irish and the u.k. at the start of the week, it was a very different picture. there was a very controversial readout between a call with the prime minister in angela merkel, where british officials say she had given up on the negotiation and that deal looks unlikely. yesterday we had on the contrary a joint statement with similar language, very optimistic language, from both men, saying we do see a tunnel, we do see a way to the deal before the end of the month. there is still time to get this done before that hard deadline we are facing on october 31.

nejra: what are still the major obstacles to a deal? obviously one is the irish border. anything else outstanding? maria: that's right. the british officials will tell you the backstop needs to go, the prime minister needs to be able to win a political battle and say, i was able to get concessions theresa may was not, therefore my deal needs to go through. for the europeans, there is a problematic and i would say clear initiative they need to solve first, which is that problem of staying in the single market but pulling out of the customs union. there is renewed optimism in the language, but the major problem optimismputting the onto paper to make sure they are able to have a technical document today that they can put forward to european leaders before that make or break summit on october 17. nejra: thank you so much to

maria tadeo in brussels. wei li from blackrock is still with us. we saw a significant jump in the pound yesterday, markets moving on it as well. does this change anything for you at blackrock in terms of how you would allocate based on brexit? wei: what we are starting to see is investors are getting brexit fatigue. they are coming to us and is saying, i don't have any insider information as to how this will turn out. can you assess my portfolio it and make sure i don't have binary exposures to brexit outcomes? we are helping them in that area. and in terms of the progress we see anybefore substantial concrete proposal, i remain not very convinced we are headed toward a deal before the october deadline.

there is not a lot of room for error. if you also look at more recently, we see inflows into equities, inflows into exposures. not a lot can go wrong. investors are sitting on those exposures. matt: what do you think about the ftse 100 versus the other major european indexes? it has not done half as well year to date. it is not even up 7% compared to 17 on the cac and 16% on the dax. it is missing almost 10% performance in ftse, and what we have seen investors doing is to play relative traits, thinking about while the ftse has more than 80% of the revenue derived from the outset for international investors accessing ftse without hedging out the sterling has thet potentially

additional currency translation. we have seen investors with relative value in playing the u.k. equity market. nejra: do they translate their views, their concerns, their thoughts around brexit into how they want to invest in continental europe? wei: european equities is an interesting space to watch. september is the first month with significant inflows we have seen in over a year. if you think about year to date how much flows have come out of european equities, more than 96 billion dollars of assets have come out of european industries. of $2tember, we saw north billion. that is starting to turn. we are recognizing that european equities -- to see theming bridging the gap and trying to go into european equities, both

by u.k. investors and european investors. matt: wei li, thanks for joining us. we appreciate your time this morning. happy friday. wei li head of investment strategy at blackrock. storyrecap another top this morning, and that is the extension of gains in oil that we are seeing after reports first from reuters that a blast on an iranian taker had oil leaking into the red sea, then ministryna, the oil news industry, that a missile caused a blast. shana says the missile struck and a rainy and taker -- an iranian taker and it is leaking into the red sea. on track fors also a weekly gain, and that seems to be done partly due to the optimism around trade talks, which is dominating asset classes the other markets. futures are pointing higher in europe.

the ftse is an outlier because of the strength we have seen in cable. but that is it for daybreak europe. you are next with this open. matt: when you are traveling to work, tune in for bloomberg radio on your mobile device or dab digital. this is bloomberg. ♪

anna:anna: good marketing. -- good morning. we are live in the city of london. i'm anna edwards, alongside matt miller in berlin. matt: today, the markets say it is a done deal. asian stocks and european futures rise on hopes of a u.s.-china trade agreement as fx markets price in an injection of brexit optimism from ireland. the cash trade is less than 30 minutes away. ♪ anna: