>> good morning from the city of london, i am nejra cehic. roadblocks. it is a holding pattern for global stocks amid reports that a u.s.-china trade summit could be delayed until next month as leaders wrangle over the right venue. likely to cut growth and inflation estimates, but will any members break ranks over race? and, political instability, a teetering german economy, and a will they, won't they trade war? to frankfurtheads

for a conversation with stefon engels. ♪ welcome to "daybreak: europe." from unicredit, first quarter net comes in at 1.1 billion euros. 995.3 million.s that is a beat. it is confirming its target for 2019, the target for revenue it is confirming it of course, what we heard earlier this week was that it was selling its entire stake. that is a reminder of that. in terms of the update today, the main number to draw your eye to his the third quarter net, which is a beat.

lehman's numbers coming in as well. full-year adjusted, industrial businesses, 9 billion euros. the estimate was 8.61. that is a beat, at least on that number so far. looking through some of the other headlines, decline in market volumes for short cycle businesses. this was a problem last quarter as well so it seems this issue is still remaining. year 2020 of 6.3 to seven euros, excluding charges. the outlook will be something analysts are keen to hear more about. the global macro economic development, some dude in the full year 2020. that is a bit of a downbeat guidance. the main two headlines, a decline in the market volumes

for short cycle businesses, and the full-year adjusted ebit-a. it proposes a dividend increase to 3.9 euros. that is in line. a lot of interesting headlines. the ceo from lehmans joins us. domestic just after 6:30 london time. commerzbank as well, a lot of headlines. it cut its 2019 that income guidance. a year on year decline. it still targets a year and ratio of at least 12.75%. but it no longer sees slightly higher full-year net income. the ceo, we heard this yesterday in terms of the ceo welcoming the banking union plan. lots to discuss later this morning. afteric conversation 10:30 a.m. london time.

we have got tons of breaking. estimateon euros, 1.19, so a beat from live tons of. it is a neat on the third quarter adjusted. the adjusted margin, 12.7% versus 14.1% year on year. revenue, 10.2 billion euros, estimate 10.1. it confirms the guidance. what you want to take away is that the prophet has declined and that has eclipsed cost cuts. even as the third quarter adjusted ebit was better than expected, earnings fall highlights the cost challenge. joining us for the hour, paul from newton investment management. all those earnings coming through, what is your first takeaway from what we have learned this morning?

difficult for the european banking sector, given that balance sheets are not as strong, the european market, that makes it quite hard for credit growth. for us, we like to see good demographics, good markets. competition in europe, needs more consolidation. live tons a, like the rest of the companies, we are seeing a lot going through the summer. this is no surprise to start seeing some of the earnings beat estimates. for the tons in particular, a lot of capacity clearly being taken out of the airline industry. we should start to see that her fares as the competition is taken out. well, heading to 2020 as what will you be looking for as far as company performance?

would you be looking at how the companies cut costs, the impact of the trade war. given all the geopolitical risks and guidance, what sectors do you prefer at the moment? i think the sectors that have proven more robust have been those focused on the consumer. nonmanufacturing, the service sectors remaining quite robust. companies such as u.s. house builders, demographics very good there. continuing to see good household formation. but, household formation remains , since the financial crisis, has remained below the 60 year average. some very good improvements for the house builders. other areas, you have to be aware of the trade talks. that is what companies are looking for. -- question now, many of

many people are talking about the turnaround over what he thought would be a recession. starting to cut costs to protect margins, that could lead to more unemployment and therefore the service sector. which could lead to a downturn. nejra: watching the concerns. trade, andought up trade doubts are creeping back up. the meeting to sign a partial trade deal looks like it could be pushed back to december. alaska,tions, iowa and have been ruled out. we have learned that locations in asia and europe have been looked at instead. a commitment to buy more agricultural goods from the u.s. still with me as paul flood. are you anticipating that we see phase one done for the end of the?

-- end of the year? paul: i think the u.s. wants it done before march. if you want a trade deal, it will take six months to feed through into numbers in the economy. do a capex spend. they have been holding back, remember. everyone worried about the trade deal, and that has produced corporate capex expenditure. if a trade deal gets done, they may well start to look at projects and invest in capex, buildout those business plans. that will take time to feed into the economy. clearly, the trump administration will want a strong economy going into the next election campaign. i think they will want one done by the end of the year. clearly, china is looking at this. we are in a different space then we were just six or 12 months

ago when the u.s. economy was strong, china was in a weaker position. it is not that long until the next election. they may well want to push the bulk of these trade deals and see who the next administration is. let's say we get a partial trade deal. would you expect a lot of corporate's to take action on a phase one deal? what in the deal would change your view of corporate behavior? paul: for us, this is not just about trade. this is about security and all sorts of geopolitical tensions that underlie the trade deal. for us, this will rumble on for a lot longer. clearly, with the tariffs come is good for american corporate's. if you take those tariffs away, they will not invest in those.

the manufacturing will remain open. the u.s. will want to bring some of them, so they want to have that fair playing field. corporate's clearly will be looking at what is the trade deal, how that impacts their investment plans. underweight bonds at the moment, or avoiding them at least. is this because you optimistic about the outlook for the global economy? are: we are -- valuations high in the equity market. for me, the bond market, it is a manipulated market by qe, interest-rate policy. been of the market have manipulated and there is not price discovery, so to speak. for me, the numbers from the service sector look strong. warrantshink that

interest rates where they are. the fed, they have clearly done exactly what trump is wanted to do. they have pushed interest-rate cuts, looking forward at the trade deal and uncertainties. the trade data has remained quite robust. i would expect this to move toward an interest rate cycle of rising interest rates next year. opportunities, you see it in semiconductors. increasing japan, asia, and industrials as well. that all speaks to me that you are quite positive about the economic cycle. am i reading that right? paul: i guess we are playing sort of a barbell approach. stronges, those with cash flows, stable cash flows, volume -- valuations are quite high as well. some of those areas we have been reducing our exposure to. where we see value is that

industrial space. the industries that have not taken part in a cycle. , the industrials, the financials start to perform. done,get a trade deal that is likely to amass what we have been seeing over the past months. strong performance. we think that continues if you get a strong trade deal. that is what good valuations are. nejra: paul flood stays with us for the hour. get the bloomberg first word news with annabelle droulers and hong kong. >> in the u.k., the first cabinet resignation during an election campaign in a century. the welsh minister quitting. the opposition labour party also suffering a blow. deputy leader tom watson announcing he is leaving politics after 35 years.

he has long clashed with leader jeremy corbyn over the director -- over the direction of the party. opec pushing for cuts. they are likely to stick to output targets. they are anticipating a supply glut in the first half of next year and prices already lower than most members need to balance the budget. opec is set to meet in vienna in the first week of december. escalating pressures on ukraine. the top u.s. envoy in key says he became concerned about the president's personal lawyer, rudy giuliani, echoing previous redimony that he raised flags about involving giuliani in an investigation of one of president trump's political rivals. whatg for saudi arabia is two former twitter employees are being charged with.

twitter says it is committed to protecting those who use it service. it is supporting the justice department's actions. global news 24 hours a day on air and at tictoc on twitter,powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. up, our job is done here, the fed's charles evans says they are in a good place and someone calls for fiscal policy to take over. driving to work, tune into bloomberg radio in the london area. this is bloomberg. ♪

nejra: this is "daybreak: europe ." chinese state owned entities are said to be considering investing up to $10 billion in the saudi aramco ipo.

are are among parties that reportedly in discussions. chinese commitments would help aramco shore up the share sale after money managers pushed back on the valuation. wait to see you. what is driving the chinese appetite for investment in saudi aramco? >> this is a tricky time for saudi arabia primarily with saudi arabia looking to get $1.6 trillion to $1.8 trillion in that valuation. when it comes to china, could be a reciprocal interest. at the one hand, the relationship in terms of the exchange of oil products. china is actually more important than his partner in terms of oil exports than the united states is. then you have a scenario where china could become an active stakeholder. from a broader hedging your bets

kind of perspective, it is critical. at a time where at the moment some of the oil prices are relatively sanguine, that could easily change. in the event where you have rising oil prices, instead of suffering pain from that, you could offset that by holding a stake in saudi aramco. i understand that some of the other groups could be having those talks as well. beenis point, nothing has finalized. nejra: jp morgan has told prospective investors that it created an asset test scenario for the company. >> a little bit of game theory, counterfactual's, seeing how they would hold up. asset tests. what they came out with was, at a production of 9 million barrels a day, aramco would only remain within self-imposed

borrowing targets by cutting its dividend and slashing spending dramatically. as much as you could argue that some of the others would not be in as much trouble in a scenario like that, it is the optics of this that really matter. to the extent that the saudi government is now marketing, or at least some of the authorities and corporate officials are marketing the ipo domestically, saudi aramco, the national champion where saudi citizens can take part for a brighter future for the kingdom. it is interesting how these angles are coming together now. nejra: thank you so much. now let's talk central banks. the chicago fed president says they are in a good place and no further weight changes are penciled in. charles evans gave his first public comments since the fomc

delivered a third consecutive cut. >> i am not even sure what neutral is anymore. i think it may have moved down. we need to make an adjustment. i would say moving from leaning toward a restrictive stance as a path or leaning toward an accommodative stance. that is pre-much what we have engineered with a third rate cut. now, in my own mind, i am searching for something that was definitely accommodative, not hugely, but definitely on the accommodative side of neutral. on a long-run basis, my assessment of neutral is 2.75%. when westill below that paused. i think we are definitely accommodative but i am not entirely sure that the short run neutral funds rate is not a lot closer to two. nejra: that was chicago fed

president charles evans speaking to bloomberg. a new york fed official says monetary policy has its limits, calling on stepping in for fiscal stimulus. >> going further negative will quite likely not have a positive output or inflation. for this reason, fiscal policy has to take over. it should not be simply an extension for expenditures on social issues if it is to be productive. it needs to be in such a way that it offers higher future outputs. what exactly do you mean by that? what would that look like? >> that is simple. to deal with future challenges, every country needs to upgrade,

needs to make sure that young, dynamic enterprises survive and prosper while old ones are dying. you need public expenditures that help the youngsters. nejra: paul flood from newton investment management is still with us. let's go back to the fed. earlier, you were saying that you thought the fed would have to start hiking again. in 2020. in a cut how can the fed manage that change without causing dislocation in the bond market particularly? paul: going into 2019, everyone was expecting more hikes. then we got more cuts. the bond market will move around. i think what was very clear in that conversation, the neutral rate. we are well below. they believe we are at an accommodative stance and below neutral.

the economy is more robust than is expected. they will want to at least get up to neutral. the market will start to price that in. that is what we have got to think, as fund managers, where is it going? i think they would eventually move for that, economic data. of trade some sort deal, the market will start to press that in. nejra: you are underweight bonds. what is your position on equities? manus: we are underweight --paul: we are underweight equities as well. u.s. equities but overweight more of the -- the asian emerging-market space, semiconductors, the ev plays, and also thinking about the fiscal policy, the industrial side. we are moving from a world of qe

for financial markets to people's qe. fed move we do see the back to hiking, what does that mean for the ecb? paul: it would suggest you have a stronger dollar. just through those comments, monetary policy has reached its limits, i think that tells you all you need to know about where bond markets are going to be. they are either flat or you will see interest rates move back up. that will be bad for the bond markets. financial is asian means that the markets are much more sensitive to small moves in interest rates. small moves in interest rates can really start to impact valuations in equity markets as well. to takeould you want any bets along the curve, for

example, if you would expect hiking to come back into play? >> at moment, we are short gilts. in the u.s., we think there are better ways to play through the equity markets. certainly, that would be another way of playing it, but things can change quite rapidly. nejra: what about credit? paul: we are underway to the whole of the bond market. that means credit as well. from newtonflood equity management stays best. coming up, the bank of england is expected to cut growth and inflation estimates. will any members break ranks over rates?

and, europe's biggest engineering group reports better than expected profits, but the expectation for 2020 is a happy reading. and, tune into bloomberg radio. this is bloomberg. ♪

nejra: this is "daybreak: europe ." let's get the bloomberg first word news with annabelle droulers in hong kong. annabelle: the phase one trade deal may not get signed this month. president trump and xi may wait until december and the summit could take place outside of the u.s. they are looking at sites in asia and europe. the longest u.k. pay slump in two centuries is coming to an end. the resolution foundation predicts real basic weekly pay surpasssser -- will now

its 2007 level by the end of the year. returning to precrisis levels is very different from making up lost ground. tofany is looking to lvmh improve its takeover offer. theluxury jeweler sees $14.5 billion offer as significantly undervalued. isters reports that lvmh considering its next move. both companies declining to comment. hp confirming xerox's takeover offer, a potential deal that could reshape the printing industry. it hasn't decided whether to protect -- whether to accept the offer. it would likely need to take on at least $20 billion of debt to close the deal. global news 24 hours a day on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. nejra: annabelle droulers in

hong kong, thank you. at of the rate decision later today and with the u.k. heading to the polls, bloomberg spoke exclusively to the former governor of the reserve bank of india amid speculation that he is a potential successor to mark carney. we asked him about the political landscape in the u.k. and the boe's brexit dilemma. >> since banking has become a very political job, it is important for central banks to understand where the rocks are, where the shores are where they can run adrift. i thing it is best to have somebody you can understand local politics. any kind of separation, without adequate preparation, adequate structures to maintain trade, is going to be very problematic. the -- we adapt

move andy, but the brexit, which could be back on the table, could be substantial. nejra: that is the former governor of the reserve bank of venue -- reserve bank of india speaking exclusively to bloomberg. as political uncertainty swirls in the u.k., the bank of england is expected to keep interest rates on hold and cut its growth forecast. for more on this, annmarie hordern joins us now. >> the message was clear on uncertainty. that message is not likely to change. little clarity in sight. not a single analyst surveyed by bloomberg expects a change today. we could see change in the lineup of the spectrometer. some have said that it could spur the need for rate cuts. michael saunders is really the one to watch today. he has the hawk, but he is

starting to sound like a dove. saying the central bank may have to cut interest rates. tone, theyke kind of said it should be nimble. he was an official that helped lead the charge in the last two rate hikes. another recently echoing the sentiment, saying it would depress economic growth and require further monetary stimulus. we may not have this change in rates but we could see a little bit more appetite for monetary policy in the future. nejra: question is whether you get one vote for a cut. annmarie hordern, thank you. paul flood is still with us. there is a range of views out there. bank of america merrill lynch, hsbc, they are bearish on front end gilts. in 2020.est-rate cuts what are you expecting? paul: i think the situation has

changed now. onhave got an election december 12. we are going to see one of these candidates hopefully get a majority. parliament,ung johnson has his deal, jeremy corbyn says he will negotiate a deal and get brexit done as well. we have two deals on the table effectively. if that is the case and we get certainty for companies, then we may well see those companies start to invest again. the rest of that is if we start to see corporate scott employment, unemployment rises. i would probably think that the bank of england, like the fed, would be looking at the data and if we go into next year with a stronger economy, brexit close to being done, the economy recovering, wage inflation strong, we have just seen the

data there, the consumer remains quite robust. i would think they would start talking about rate increases. nejra: so you see rate hikes in 2020. paul: probably in the second half of the year. but i think the market will price it in earlier. nejra: what about the fact for those who argue they are bullish on the front end and expect rate cuts, they say there are uncertainties from the bank of england and u.k. economy beyond brexit, and that is why they are bullish on guilt. paul: there are always uncertainties. once you get the election through and it is clear what is happening, some of those uncertainties go away. then it gets down to the job of, how do we get the trade deals done? the eu is going to want to be in a position where they have a good deal with the u.k. nejra: global equities and

global bonds have benefited from these dovish turns globally. you have been saying that you see the fed turning to hikes in 2020. in that scenario, it makes sense that you are underweight bonds and also underweight equities. where are you putting your money? paul: about 25%, 30% of the funds are in real assets, renewable energy assets. the returns are much better. there is some inflation protection in there as well. some of those areas we find much more attractive. music royalties is another area where it has -- where has had a decade, two decades of falling revenue screams -- revenue streams. now we have music streaming picking up. electric vehicles is another area where we think there is a great opportunity. the will be the year of

electric vehicle. that is all about regulation. car manufacturers do not sell enough electric vehicles, then they will see -- we have seen that with angela merkel, who has put these subsidies in place. nejra: i am hearing you are saying that 2020 is the year of the electric vehicle but also of rate hikes from the fed and bank of england. now, the president of south africa says the beleaguered state utility company is too big to fail. cyril ramaphosa spoke to my coanchor, manus cranny. deal, theyt to see a want us to deal with the debt. they also want us to deal with the expenditure. we are already committed to reducing expenditure on a number of platforms. at the same time, we are on howg now on the debt,

we are able to deal with the debt. we will be able to deal with the debt by improving the operations. manus: are you prepared to take some of the debt onto the government balance sheet? we are being told it is cheaper to stick it on the government balance sheet and move on. >> we have already taken quite a lot of debt by giving them bailouts. the minister has now said, we are no longer going to give you bailouts, we are going to give you loans. these are loans that over time you will have to pay back. that, in a way, is a very important step. in the end, the government has to stand behind it because it is too big to fail, it is too important an entity and the life of our economy for it to fail. so we are committed to supporting it going forward. say it is too big to

fail but the reality is that you are at war with some of the people in your cabinet in terms of what to do. perhaps, if i may challenge you, it is you who is blocking a road to sorting it out? >> it isn't. is the to sort out eskom way that i announced. we are going to restructure eskom and not turn back from that. we have announced the modernization of our energy supplier, the way the world has gone in a number of countries. there is no other option. nejra: that was the president of south africa speaking to my coanchor. manus joins us now from johannesburg. so good to see you again. great interview. fill out the picture for us a little bit more about what cyril andphosa achieved yesterday

with the greatest threat to the finances still are? manus: very strong there, from contact to contract was the tagline at the end. if you look at the rand, at the wasomy here, $24.5 billion committed yesterday. himink, when i challenged and said, you guys can't even agree between yourselves what to do, goldman sachs was saying to be more aggressive, he said, we don't have to be dramatic. we don't have to be dramatic to get things done. we have got to work together with our partners. the point, back to the unions, margaret thatcher in the 1980's, the mining industry in the u.k., the sheer banging of heads that came to pass to create change, we are looking at something of the same magnitude and scale to the economy here in south africa.

not only does it power the economy but the financial ramifications are pretty significant. i think really he has got three months to work it out but there are some near-term risks as well. nejra: there is also the global uncertainty. we have learned over the past 24 hours, the phase one talks might be pushed out to december rather than this month. how would a trade deal between the u.s. and china impact south africa? language was very clear that it is not going to be a panacea. if you look at those relationships within china and here in south africa, it is very clear. it is a commodity-based relationship, a exporting relationship. that will, in his words, unleash the potential. he needs a trade deal. pretty much, just like everybody

else needs a trade deal. ofwill pervade across all the other ceo conversations. the bottom line, this country needs that trade deal to happen. nejra: manus cranny in johannesburg, thank you so much. you are absently right, the trade conversations pervading all of the ceo conversations. coming up, better-than-expected fourth-quarter profits but the outlook for 2020 isn't happy reading. and, when you are traveling to work, tune into bloomberg radio live on your mobile device. this is bloomberg. ♪

nejra: this is "daybreak: europe ." here's a look at what you should be watching today, starting with a rate decision from the bank of england.

no change in policy is expected area it will be followed by a press conference with governor mark carney. finance ministers need to pick a new board member and discuss economic forecasts. could germany be stabilizing? we will be discussing numbers that suggest better gains than expected, 1.3%. fed president robert kaplan speaks. discussestic also policy in new york. siemensndustrial giant expects a decline in volume next year, especially highlighting declining weakness in its software and automation division. they warned a downturn in some markets would weigh on its full-year goals. the bright spot, it did eat estimates with fourth-quarter profits and adjusted ebit-a ris ing. isning us from europe

aeser.s ceo joe k first, i just want to get your take on the german economy. questions are starting to be asked whether we are finding a bottom in the global manufacturing cycle. do you think we have hit a bottom in the manufacturing sector in germany? the wholenot talk for german industry, obviously, because it is chemical and automotive's. what i can do is talk about my company, the space, the verticals we are in. quite a decline on the industrial valuations space. mainly the discrete factory environment associated with the downturn with automotive and toolmaking. is what we see is this

leveling out over the next six months while our customers take charge in innovation and shifting to products that are well demanded in the world. the big question, is there going to be a solution on the trade war activities, will the -- how will the brexit turn out eventually? we believe there is enough strength in the german economy to get this one right, especially in the export sector. somee china seemingly with uptick going into 2020. we cannot forget about india. there is a lot of opportunities. but certainly it will separate basically the companies which are strong and competitive from the others, who are weak, and we will see some consolidation

challenges. will 2020 look for you then? you say you see the macro economic development subdued, will 20/20 simply be a year of transition for siemens? joe: i would not call it a year of transition. it is a year of optimization. think back to when i took over 6%,013, the company was at 7%. about 12. at a lot of have happened. this into aocusing very structured three company approach. health care, industrial, and energy. we have announced recently that we are going to spin off the energy business. we have created a new company, energy.iemens

that is exciting because we will see more focus. re-rating on the stock because of the massive discount we have. coming back to what you said, what you called the outlook, all we say is, in the industrial automation space, we have automation systems and software, and we will see them continue on the discrete automation, compensated fully through our massive and very competitive offerings in software. so, the infrastructure, actually, we are saying we expect growth and energy. so we are pretty excited about bringingave in 2020, siemens energy to the market. nejra: why did you decide not to

give 2020 margin guidance at group level and instead on a divisional level? is that due to a lack of visibility? actually, the country is the case. we have had a conglomerate that big, big gas turbines, circuit breakers, the best health care in germany,, and the average temperature of a hospital, it does not help you to cure. you want to be very specific about industrials, about infrastructure, about energy, about mobility, keep transparency to investors. as you have probably noticed, we still give guidance on the group level in terms of what we expect on topline growth. people think in a 2,

3, 4 percentage environment and growth. seven. 630 and a comparable number for 19 was 641. transparency and details about the different businesses we are running. i am pretty sure investors will very much appreciate the transparency so they know exactly how we think and what we align our guidance to. if i say the market will be flat, we talk about industrial operations, and not the whole company. nejra: when you said a moment ago that you expect the short cycle businesses to level out in six months, and of course that has been an area of challenge, what makes you think that will level out? is it all predicated the resolution u.s.-china trade tensions. a plays a role of course

because we are in a capital goods business rate -- capital goods business. it is about investing. if you don't know the next morning what will come out about what, then people are worried and they will wait until the dust settles. , alwaysther hand looking into political statements and trade wars and what have you because they are very localized companies. almost 60,000 people in the u.s. where we are a net exporter, 40,000 in china. we are very localized. so we can rely more on talking to our customers rather than watching what the trade war is all about. that makes us more confident, what we hear and see from our customers. secondly, we had a very, very

strong fourth quarter. you just look at the competitors numbers and you know what i am talking about. said of course a bit, as i , curious on what the october numbers would be. a sellthrough of our product giving us automation. whether it would sell out the product, and it did. especially in china. i believe we are well underway to deliver on the promises as we have done the last six years, every single year. it is always better to under promise and over deliver than the other way around. thanks to siemens ceo joe kaeser joining us. paul flood is still with us. paul, your reaction to the conversation i just had, from any angle, siemens or the german

economy? paul: again, everybody talks about the trade deal. have attracted that capex expenditure. if we get a trade deal, if they remain concerned that it is not playing out, they will start looking at cost-cutting. aboutmany, again, we talk fiscal spending, germany will be a big beneficiary. bottomed in terms of the sector? paul: it appears to have at the moment. do businesses invest, do they start to cut costs? that will start to be seen certainly in germany. nejra: it all hinges on that trade deal. paul flood, great to have you with us this hour. coming up this morning, matt miller will be speaking to the commerzbank ceo stephan engels

after the german lender downgraded its full-year profit outlook. domestic and after 10:30 a.m. -- don't miss that after 10:30 a.m. london time. this is bloomberg. ♪

>> good morning from the city of london. daybreak:loomberg europe." a holding pattern for global stocks. a u.s.-china trade summit could be delayed until the next month. entrenched uncertainty. likely tof england cut growth and inflation estimates, but will any members break ranks over rates? i will be live. gloomy outlook. siemens sees a decline for two dismisses next year. in frankfurt, commerzbank cut its full-year profit outlook.

welcome to daybreak europe. more signals for the german economy. factory orders better than expected. looking at industrial production , we are looking year on year at a decline of 4.3%. expected,of 4.4% was so it is ever so slightly better than expected, but month on month production has a drop of 0.6%, so that is actually worse than what was expected, which was a drop of 0.4%. a little bit of mixed messages. numbers not looking as hopeful. let's also get to the breaking news. at 238d pretax comes in million pounds.

the estimate was 243 million pounds. that is not quite as good as expected in that first half adjusted pretax. first half adjusted revenue comes in at 16.86 billion pounds. the consumer outlook remains uncertain. brexit might have something to do with that. it is the first half adjusted pretax that is the headline. aston martin numbers coming through as well. challenging trading conditions exist. it meets the financial view for the full year 2019, but it is cutting its total wholesale view . a few headlines coming through from aston martin. also, rolls-royce. a line coming through on the bloomberg that it now sees

full-year operating profit and fcs at the lower end of ranges. a lot of corporate news to digest all morning. in terms of how futures are set up, we have seen four days of gains for european equities. is that going to continue? perhaps yes, even in a muted fashion. ftse futures up. cac 40 futures are flat. in terms of u.s. equities, we ended flat. people perhaps not wanting to pile on too much risk given that we have questions over these trade talks, hearing they might be pushed out to december. bid, safeing the yen haven. we saw yields decline in europe yesterday. we could see further declines in the 10-year bond yield and also in the 10-year btp year of -- yield.

the number of houses quite bullish on guilt, because they do expect hawkish fires to be taken away from the mpc guidance. we will get into that and just a moment. treasury futures are not doing too much. check in on the markets. juliet has more. what is it looking like in asia? a bit of a mixed picture, it seems. certainly mixed, but we have seen the ms ci slide slightly higher. going into the yen. we have seen semi conductor stocks hit hard today. australia's market was among the best performers. we had a surprise expansion of the trade surplus and also some strong mom -- numbers in the financial sectors. one -- yuan is trading a

little bit better despite a strong fixed income from the pboc. i want to show you with what is happening with some of the carmakers. conflicting reports from two of japan's biggest automakers. toyota is the white line. the blue line is mitsubishi. toyota came through with numbers that beat estimates and announced a $1.8 billion share buyback, 1.2% of shares. toyota the slow down, has done ok mainly due to cost-cutting and some marketing efforts. at the other end of the scale, mitsubishi shares fell the most since may as it slashed annual blamingnd sales outlook the stronger yen and weak demand. those carmakers telling a very different story about the stage of the global car market. nejra: interesting.

now let's talk central banks. the chicago fed president saying the economy is in a good place and no further rate changes are scheduled. he spoke for the first time since the fomc delivered a third consecutive cut. >> i'm not even sure what neutral is anymore. at thing it may have moved down on a short-term basis and we need to make an adjustment so policy would be -- and i would say moving from leaning toward a restricted stance as a path toward leaning toward an accommodative stance and that is what i think we have engineered with our third rate cut at our last meeting. searchingmind, i was for something that was definitely accommodative, not hugely accommodative, but definitely in the accommodative side of neutral. i think neutral probably moved down. in a long-term basis, my 2.75%.ent of neutral is

we were still below that and now we are at 1.5%, so i think we are definitely accommodative, but i'm not entirely sure that the short run neutral funds rate is not a lot closer to numeral 2%. nejra: that was the chicago fed president speaking to bloomberg. european central bank official robert holtzman says monetary policy has reached its limits. he called for the government to step in with fiscal stimulus. >> monetary policy seems to have reached a downturn. will further negative quite likely not have a positive impact on the output or inflation. for this reason, fiscal policy has to take over. fiscal policy should not simply be an expansion of expenditures on social issues if it is to be productive, it would need to be offering higher future output, not only more demand now.

>> so, what exactly do you mean by that? what would that look like. >> very simple. in order to deal with the future challenges, every country needs to upgrade, needs to make sure that a young, dynamic enterprises survive and prosper as the older ones are dying. you need expenditures, but expenditures that help the youngsters. nejra: joining us now is the head of u.k. rate strategy at hsbc. let's go back to charles evans. neutral at 2.75%. monetary policy is moderately accommodative. the fed has says it is on pause, the market seems to buy it. could the next step be hikes? >> let's take a step back. i think a lot of people referred to the three rate cuts that we have seen from the fed is midcycle adjustment and central banks seem to have been taking a

pause, as you say, but i think we are still in the world of can't hike, might cut. instead of muddling along neither in this extreme a muchon scenario or faster rate of growth, so markets are flip-flopping between which of those scenarios looks a little bit more likely. in the meantime, we are stuck in this range trading regime, where we are heading toward the top of those ranges and then for us, the next move is still likely to be down, therefore it is by the bit mentality and you have these treasury yields now back above 2%. thinking about some of the comments there and if the neutral rate is around 2%, then 2% is quite good value here. nejra: let me take the other side of the argument. my guest and the previous hour does think the fed is going to hike in 2020, the services data

holding up strong in the u.s., questions being asked over the past few weeks whether we are seeing a bottom in the global manufacturing cycle. we could have a trade deal between the u.s. and china by the end of the year, put all those things together and do you start to think that maybe the fed might not cut again in 20 20 and could even hike? daniela: well, our forecast is for the fed to be on hold in 2020. i still think it is more likely for them to cut rather than hike. u.s.ates -- data in the has held up relatively well. manufacturing is starting to bottom out, but some of that weakness has infected and spread and spilled over into the service sector. ,bviously, the trade tensions the headlines move around all the time. someems that maybe we get

false starts, but it will take something quite big on the growth front for us to change our forecast. nejra: got it. and you say with trade it could go the other way. they are not going to meet potentially until december and who knows if that gets pushed out any further. i'm guessing, given what you have said, that you are bullish on the front end of the treasury curve. daniela: we are. value in, there is two-year treasury, but in terms of looking at the long-term picture, i think five-year treasury yields at 2%, if you think about the neutral rate of of zero, andeld inflation of 2%, then i think the duration here globally looks attractive. nejra: and you are holding your 1.5% year-end forecast for the 10-year treasury yields. you said there would have to be something really big to change in the growth front to change

your view that the fed is in a can't hike, might cut mode. what would have to change to change your view? daniela: the big missing picture amongst all of this has been inflation. if we rewind 12 months ago, one of the first reasons why the fed moved more dovish was the decline in inflation breakevens through the fourth quarter of 2018 in the focus to shift onto the persistent undershooting of inflation, which has not really gone away. if you look over the past decade, the fed has midst its inflation target 90% of the time. until that changes, i think it is difficult for the fed to be tightening policy. they have been talking about willingness to tolerate a period of above target inflation to make up for the prior undershooting. maybe it is time for that kind of thinking to be tested. i think rate hikes are still

some way away. nejra: very well put. daniela stays with us. let's get the bloomberg first word news. deal mayase one trade not get signed this month. president trump and xi might wait until december and the summit could take place outside the u.s.. both alaska and iowa have been moved out and they are looking at sites in asia and europe. in the u.k., the first cabinet resignation during an election campaign in the century. quitting after reports he knew about a former aide's role in the collapse of a rape trial. party also suffering and blow. the deputy leader tom watson announcing he is leaving politics -- leaving politics after 40 years. he has long clashed with jeremy corbyn over the direction of the party. the biggest producers in opec plus are pushing for deeper

cuts. they are likely to stick to their current output targets. the group is anticipating a supply glut in the first half of next year and prices are already lower than most members need to balance their budgets. opec is set to meet in vienna in the first week of december. global news on air and on twitter. this is bloomberg. nejra: thank you. coming up, entrenched uncertainty. the bank of england is likely to cut growth and inflation eczema and's -- estimates. will any mpc members break ranks? when you are traveling to work, tune into bloomberg radio on your mobile device or on digital radio and the london area. this is bloomberg. ♪

nejra: we are 42 minutes away from the start of cash equity trading in europe. this is "bloomberg daybreak: europe." commerzbank has downgraded its full year outlook. the chief executive grapples with rock-bottom interest rates and competition. matt miller joins us with more from frankfurt. great to see you, you will be speaking to the cfo later. what are you going to ask him? matt: for one thing, i'm going to ask him if he has anymore outlook cuts to share with us. it seems like every few weeks that they cut their forward guidance. it might be better if they would do it all at once. seems notimes, he terribly confident with the guidance they are giving and that is followed by an outlook cut. why doesn't commerzbank just

come out with all of it? i realize that the central bank just recently cut rates again, but it was only by 10 basis points, and they have also started a tearing program that ringo post to gush t -- tie togram that is supposed cover those. what is the case going to be for commerzbank? i will want to talk about the m&a situation. banking consolidation is something everyone expects. commerzbank sees -- seems perfectly placed as a target. can they find any buyers after their deal with deutsche bank collapsed? nejra: we certainly got a comment from the ceo supporting the comments that we got from all of schultz, as well. that they areoint giving these outlook cuts in bits.

is that a lack of visibility or that they don't want to add the markets with all the bad news in one go? thinkto some extent, i there has been some optimism in the german economy that has faded. there was hope that they would avoid a recession. it looks like in november 14, we will see a technical recession confirmed. help that theably ecb and mario draghi would not cut rates again because analysts and economists don't see it as moving the needle on the real economy, but the ecb went ahead and did it anyway. there was a lot of debate in the governing council as to whether that would happen. likee other hand, it looks german banks have a difficult time in general dealing with reality. there are a lot more costs that need to be cut. commerzbank said they came out with a new program to cut cost further. they employ a lot of people and

have a lot of branches. they have 800 branches in germany and they only made one billion euros in operating profit last year. nejra: great to have you with us. matt miller in frankfurt. i look forward to that interview. we will be back in frankfurt later as matt will speak to the commerzbank cfo stephan engels. let's get the bloomberg business flash from london. spies for saudi arabia, that is what two former twitter employees have been charged with. helping the kingdom monitor dissidents. twitter is saying that it is committed to helping those -- protecting those who use its platform. apple is looking into sexual harassment misconduct. some shareholders have sued

google over workplace misconduct. the alphabet board special litigation committee is considering the claims. xerox's take offer -- takeover offer. it has not decided whether to accept the offer. citigroup has agreed to provide financing and it would likely need to take on $20 billion of debt to close the deal. that is your bloomberg business flash. nejra: thank you so much. we are waiting on a rate decision from the bank of england later as fiscal uncertainty swells with a general election around the corner. the bank of england is expected to cut growth and inflation forecasts. bloomberg spoke exclusively to the former governor of the reserve bank of india and asked him about the political landscape in the u.k. and the boe brexit dilemma. banking has become a

very political job. it is important the central banker understands where the shore is in which the central bank ship can run adrift. it is best to have somebody who can understand a local political environment. >> given the uncertainty of brexit yet again, how do you see the economy? separation without adequate preparation. it is going to be very problematic. we adapt eventually, but the , which a no deal brexit could be back on the table would be substantial. nejra: that was the former governor of the reserve bank of india speaking exclusively to bloomberg in singapore. withla russell is still us. let's talk about the bank of

england. we are expecting a cut in growth and inflation forecasts. economists expect a unanimous 9-0 vote to halt rates. could we get a vote for a cut? daniela: there is certainly a very strong chance. political uncertainty is a complete and utter nightmare for the bank of england. plagued with this uncertainty, which is taking install. an underlying growth or growth generally looks as though it is more or less stagnant and cracks are starting to appear in the labor market. the bank of england is likely to revise down its growth and inflation forecasts. the real question will be whether we get any votes for a rate cut today and we have heard several dovish speeches from various mpc members over recent weeks.

some have said they see underlying growth in the u.k. around zero at the moment and one even went to say that rate cuts may be needed even in a smooth brexit scenario. nejra: just need to break in one second because we have a red headline that china and the u.s. have agreed to lift tariffs in phases as the deal progresses. this is big news in the u.s.-china talks. they have agreed to lift tariffs in phases as the deal progresses. that is all we know at the moment in terms of the red headline. we will bring you any new information as we get it. futures are turning positive in the u.s. having been flat earlier. the s&p up 0.2%. mastec futures track higher by 0.3 -- nasdaq futures track higher by 0.3%. the 10-year treasury yield inches up. we approach the 1.85 handle on that. does this change anything we talked about earlier for you?

we have now got this news about agreeing to lift tariffs in phases. have beenarkets flip-flopping around with the headlines, kind of toying between the big risks toward a recession scenario or are the risks that we kind of got ahead of ourselves and things that bottomed out and starting to improve. that kind of remains the case and to the extent you can remove one of the downside risks, that probably pushes back toward the top of the yield ranges. i think it takes something a little bit more substantial. before we become too bearish on bonds. nejra: totally understood. i want to go quickly back to the boe, what do you expect next year if we don't get any cuts in terms of the pace and amount of cuts? to be honest, you can

take a step back from the political uncertainty and it is still toward rates being lower for the bank of england. . nejra: we will have to leave it there. that is it for "bloomberg daybreak: europe." this is bloomberg. ♪

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>> good morning. welcome to "bloomberg markets: european open." i'm anna edwards alongside matt miller, who is in frankfurt. matt: the markets say there is more to life than just the data. the industrial slump deepens. european futures are pointing to the upside, the cash trade is less than 30 minutes away. matt: