>> this is daybreak europe. asian equities drop with bonds extending a global selloff as traders way a slower pace of

u.s. interest rate cuts. antony blinken makes an 11th visit to the middle east as the u.s. renews its push for a cease fire between israel and iran backed militants. clear skies for sap as revenues jumped 25%. we will speak for the cfo of europe's biggest software company later this hour. we checked these markets with a focus on fixed income with a global selloff and bond markets and we will reflect on the u.s. 10 year shortly. you are looking lower on the back of the futures, currently up .1% down across the asian markets.

a little bit of modest selling in u.s. stocks after that record that was pushed through. european futures pointing higher, waiting for a catalyst and fed speakers as well painting an uncertain picture but building out expectations that maybe they will go slower. s&p futures off by .2% and the nasdaq looking to lose around 68 points. let's look cross asset because that bond selloff is pronounced. it has moderated to some extent but 50 basis points higher over the last 30 days at the front end, currently back above 4%. part of that down to fomc speak but also it seems expectations that maybe trump is leading in this election. japanese yen under pressure. you have an election in japan over the weekend so expectations

may be that the coalition could become weaker. brent currently down .4% on oil after the gains yesterday. further gains for gold on the session trading at 2734. avril hong standing by for a check on the asian markets. >> a lot happening today. i will do my best to try to break it down for you. against the backdrop of higher yields it is proving to be uncomfortable for asian equities. the benchmark is down for a second day but also tying in some of these corporate developments because the macro is influencing. you can see how hsbc is under pressure to trim costs, given the pressure on margins and it's announcing how it is streamlining its business and combining both its global, commercial and investment banking arms and you take a look

at what we are seeing on the trading debut and of course after a record ipo, 3.3 billion dollars raised as of last week good we were watching out for how it would fare on the first day of trading. so far looks like a lukewarm reception. it looks like those animal spirits returning to the ipo market and that's going to take a while more until we actually see that firming up but that is what we are seeing in terms of stocks. against the backdrop of higher yields the subtext is the trimming of those bets and we are not just seeing that in relation to the federal reserve but also the reserve bank of australia. earlier this week, one official left the door open for a hike and you see that reaction now still in this australian 10-year yield. the aussie is gaining ground on a day where currencies are getting hard hit let's flip the

board and take a closer look at that relation between asian stocks in u.s. yields if we have a path towards 5%, it could prove to be a lot more pain for asian equities. that is something to consider on a day where we are seeing's telling in asian stocks overall. >> avril hong joining us out of singapore. potential 5% yield on the u.s. 10 year because bonds are extending that selloff as investors consider cooling expectations of cuts for the rest of the year. mary daly says she does not see reasons to stop cutting rates while other fed officials favor a slower pace. >> i have not seen any information that would suggest we would not continue to reduce the interest rate. this is a tight interest rate for an economy that already is on a path to 2% inflation and i don't want to see the labor market slow further.

>> for more on these bond markets, let's bring in valerie. was it fed speak that moved these markets yesterday or election risks? >> many people scratching their heads over what exactly was the catalyst for this bruising session not just for the treasury market with the global bond market. some say it could be more election fears, that if we get a sweep either way, we are headed for more fiscal spending and more treasury supply. it's interesting to note the bruising in the treasury market is extending in the asia session. yields are higher by nearly two basis points in the sector on the treasury curve but let's flip the board. i want to talk more about fears of fiscal supply and essentially what the market is telling us, why this steepening of the curve, the selloff led by the long nand -- long end that we

are more jittery about the prospect of a u.s. deficit, more treasury supply than the market has to digest. we have sinned term premium jump and i want to take a step back and think about what happened last fall. this is when the u.s. treasury announced bigger auction sizes, saying the u.s. government had to borrow more so they had to increase option sizes. we are seeing the grumblings of a similar move in that kind of term premium. >> talk about the european bond markets and how they shaped of yesterday on the back of european data and expectations that maybe the fed will be less aggressive in terms of cutting. >> it was a painful day in europe. there was no data to spark this other than the move in the treasury market. what caught my eye was this move in italian 10 year yields, a 15 basis point move, surprising for that and if you flip onto my next chart we can take a look at

how that was the second-biggest move this year second to the move that we saw earlier in april and that was a hot labor report that caused the move. this was quite similar in the italian bond market but on no clear catalysts, makes us think perhaps the market is getting more jittery about the election. >> thank you very much. we will continue to monitor because european bonds will start trading and i wonder to what extent the budget in italy is a factor as well for investors. we will have an interview with christine lagarde. do not miss that conversation. 3:00 p.m. with christine lagarde. has below as it fired missiles targeting tel aviv suburbs and a naval military site. for more, our reporter in jerusalem joins me with the latest. what do we know at this point,

then, about this latest hezbollah attack? >> what we know is that as we speak hundreds of thousands of people in tel aviv are in bomb shelters. this is the result of a hezbollah salvo at israel's coastal metropolis and commercial capital. i'm not aware of any significant damage or casualties but this is nonetheless an early display that has below retains fighting capacity despite having taken a drubbing from israel over the past five or six weeks and this comes as antony blinken, a top u.s. diplomat is on his way to the region for what will be his 11th attempt to broker a cease-fire on the back of his really gains in this war. >> and we are seeing now live pictures i believe of beirut. we are talking about hezbollah oppose go most recent attack on

tel aviv. that has crossed in the last few minutes and you are giving us the update. when it comes to that attempt, the 11th visit by antony blinken to the region, presumably israel will point to exactly this kind of attack for their rationale for continuing to press hezbollah in lebanon. what is the likelihood of any movement when it comes to peace talks? >> that is anyone's gas but i think the big difference in blinken's trip now is he is coming after israel, turning the tables against hezbollah, having overrun the gaza strip, beaten down hamas in gaza militarily although there are pockets of resistance. we are potentially seeing has below husbanding what remains of its missiles to launch these headline grabbing attacks that don't cause that much damage relative to what it might have done prior to this counteroffensive in lebanon so

he might come to the israelis and say take the win, which is a phrase that apparently the biden administration is fond of. take the win and let's go for a regional cease-fire. the israelis have voiced optimism. there is also a war that's been going on for more than the year now but i think the americans will have to come up with an excellent deal that would persuade hamas to return the hostages to return them to back off verifiably from the israeli border. for now there is no sign of either group being open to that. the question is where iran stands in this as other groups have been attacking israel over the last year and i think the iranians will be looking for a significant reprieve, perhaps a guaranteed reprieve from israel's promised retaliation from the iranian missile salvo

october 1. we have heard the israelis promising retaliation for that so in the absence of a guaranteed retreat israel will not do anything that will seriously jar iran's stability or economy. i'm wondering if the iranians would be on board with a package deal. >> a number of factors to consider as we continue to monitor blinken's latest visit. dan williams in jerusalem. thank you. here's what else to be thinking about. the bricks summit begins in russia, an attempt by vladimir putin to show that they are not as isolated as some in the west would believe -- would like. visitors coming to that summit that starts today. 2:45 p.m. u.k. time we will hear from andrew bailey of the bank of england. will he say anything that builds on expectations for a slightly more dovish move from the bank of england.

and aftermarket on the earnings front we have sales and revenues so some details there in terms of those european names on the earnings front with a touch on the consumer. and you can get a roundup of the stories you need to know to get your day going in today's edition of daybreak. subscribers can go to da why bigo on the terminal. the selloff is front and center. coming up, it is two weeks until the u.s. presidential election with polls still very tight. we bring you the latest on the race. plus later in the program we will speak to the cfo after your a biggest software company posted a 25% increase in cloud revenue thanks at least in part to ai. that conversation kicks off at 6:30 a.m. eight -- the is bloomberg. ♪

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>> welcome back to bloomberg daybreak: europe. it is the final stretch. just two weeks left in the u.s. presidential election campaign. www the polls still have donald trump and kamala harris almost no can that. they are in full campaign blitz mode, competing for any votes among the few remaining undecided. kriti gupta with us. certainly the financial markets seem to be increasingly batting

at this point on a trump victory. >> it is a turnaround from what we saw not long ago, the idea that harris had a lot of momentum when she first got them out -- the nomination, a lot of people in social media choosing not to do the traditional interviews and it worked until it did not and it pared back this idea that she is outperforming the former president. this is important in the context of who is actually driving the votes. you are seeing a presidential election unlike any other we have seen because of who could make or break this election. of course abortion is a high voting priority for a lot of these people. asian americans could be making the difference given that kamala harris is in half -- is in fact have asian american. and donald trump is making a concentrated effort to some of the union workers trying to get the endorsement of what's been a

traditionally democratic group of people, given the bernie sanders legacy over trade unions in detroit and other parts of the world and now he is trying to say i can create policies and tariffs that would help support american manufacturing and increase some of the stories we know a lot of labor movements in the states have been pushing for print >> he's not yet committed to an increase in the minimum wage. there is no evidence she did not. in terms of your a's response, we have heard from christine lagarde and emmanuel macron being straightforward in terms of their concerns about a trump white house once again and how to revisit that for europe. what are we hearing about how europe is girding for this possibility. >> we are seeing a priced into the market. he made the crucial point about bond selloffs and that this

environment could largely be a function of donald trump's policies but you have defense as well. we know he has been vocal on the idea of not funding things like nato. that creates an incentive for european countries to ramp up defense with limited raw materials and budget and when you have that kind of squeeze it creates the inflationary challenges, not to mention tariffs on things like steel, which are hanging over the u.s. and european union. they have been changed to quotas simply to appease the european authorities until we get a new president exporting things like liquor, beer, cheese and other things coming out of europe with american consumers on the docket. >> liquor and cheese. thank you very much indeed, bloomberg opening trade anchor kriti gupta, who is not adding her opinions to this reporting, bringing us up to speed on what is unfolding.

coming up, the brics summit kicks off in russia. talking about the geopolitical challenges with expansion of the group on the agenda. more on what the alliance is hoping to achieve next. the is bloomberg. ♪

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thank you! guys, can you keep it down. i'm working. you people are (guitar noises). hand over the air guitar. i've got another one. tom: welcome back. the dunne summit begins -- the brics summit begins today in russia. let's bring in bloomberg's greg sullivan. how important is hosting this meeting for vladimir putin? greg: this is definitely an important moment for him. for one, it lets him demonstrate he's still able to be a player on the international stage amid sanctions imposed by the u.s. and allies, which have sought to

punish putin, but he is saying he is still around, he's a player and able to convene. it also lets him demonstrate his message of reshaping the u.s. led global order does have appeal for other countries outside of russia. finally, i would note this is a chance for him to have meetings with key partners that are hard to pull off. tom: there's a practical reason for hosting as well. it was on the guest list? greg: this is the largest gathering of leaders in russia since the start of the invasion of ukraine. other leaders such as antonio good sierras -- antonio guterres. xi jinping will be there. and turkey's president, a non-brics leader.

they are anxious to join the group and erdogan will be present. lula sustained a head injury and home and had to cancel before coming. tom: to what extent is this going to be a talking shop and to what extent is it an attempt by putin to bolster his international standing? is there anything that will be hammered out at this meeting and to what extent is their unanimity or at least agreement on some of these key issues for the brics nations? greg: that's a key point to bring out. in a lot of ways this is a group for these countries to come together but they have diverse interests and motivations. there are significant issues on the agenda. one of those is how to replace the u.s. dollar. russia is heavily sanctioned and it is seeking to d dollar eyes trade. but not all countries are

on board with that. some are skeptical of replacing the dollar as a reserve currency even as they promote using natural -- national currencies and bilateral trade. another issue is the expansion of brics. there's not agreement on whether it should be expanded moving forward with some countries in opposition to further expansion. that could be an issuer you see progress but issues of the dollar and alternative currencies team further up. tom: that's interesting and i know china has a slightly different approach to that versus what putin and moscow are hoping to achieve in terms of de dollarization. former president trump has made some comment on this recently as well. to what extent is the russia-china relationship becoming further and mashed or are those important divisions beneath the surface when it comes to that relationship between beijing and moscow? greg: beijing has long sought to

prop up russia dimmitt -- diplomatically and economically. china has become russia's most important partner and this is another chance for putin to meet with xi jinping and keep solidifying and entrenching the relationship. trade has grown between the two countries and putin seeks to continue that. china has shown it is willing to prop up moscow, willing to support it diplomatically. xi jinping will be present at the meeting and that one-on-one will be important for putin. there's no doubt there. that's another reason why this is very important for putin, a chance to meet with those leaders, especially xi jinping. >> greg sullivan on the latest in terms of that summit and the importance for putin's standing in that relationship as well. some other stories making news. china is on track to the largest market.

europe cut imports following the invasion of ukraine by russia. bloomberg calculations indicate russia exported 23 billion cubic meters of natural gas to china in the first nine months of 2024, nearly 40% more than a year ago. the u.k. is to loan ukraine 2.3 billion pounds to purchase military equipment paid for by profits generated by frozen russian assets. the funding comes as part of a wider 50 billion dollars package from g-7 nations announced in june. g-7 allies have collectively frozen about 200 $80 billion of russian central-bank assets with the majority in europe. italy's government has passed a new law to overcome a court ruling that blocked the prime minister's plan to send asylum-seekers to albania. 12 migrants were returned. they originated from

countries that cannot be recognized as safe. italy's cabinet has approved a list of 19 so-called safe countries to allow the plan to continue. we will have a conversation with the asml ceo as part of the bloomberg tech conference at 9 a.m. u.k. time. this -- the ceo speaking for the first time since that surprise cut to the outlook. coming up, europe's biggest software companies sees cloud sales job. we will speak to the s.a.p. ceo next. the is bloomberg. ♪

♪ tom: good morning.

i am tom mackenzie in london and these are the stories that set your agenda. bonds extending a global selloff as traders wait a slower pace of u.s. interest rate cuts. hsbc merges global businesses as the new ceo looks to rein in costs. we will bring you the details. clear skies for sap as cloud revenue jumps 25%. we will speak with the cfo of europe's biggest software company in a couple of minutes. let's check in on these markets. european futures pointing higher by .2% after modest losses yesterday. s&p futures lower by .2%. ftse 100 futures looking to lose about 19 points. nasdaq futures also lower by 55 points. the bond selloff is there.

u.s. treasuries yesterday with 11 basis point move higher on the 10 year yield. currently at 4.03. the japanese yen 150, largely unchanged, but weakness about 5% the last 30 days versus the u.s. dollar. brent trading lower by .4%. gold up .5%. let's get back to the earnings story because sap's adrs gained post market after the cloud revenue jumped 25% in the latest quarter, as it beefs up its ai offerings. the chief financial officer was recently featured in our new briefing newsletter. very pleased to say we are joined by the cfo of sap. thank you for your time this morning. the 25% increase in terms of

cloud revenue in the quarter. give us deep some details in terms of the breakdown. how much of that came from existing customers versus new customers in the quarter. dominik: we had actually, if you adjust for currency fluctuation, cloud revenue growth of 27% and by now have more cloud revenue than any other source of revenue. we can say after four years of heavy transformation towards the cloud, our strategy is paying off handsomely. if you look at the composition, 84% of the cloud revenue is generated by the core offering of sap which is growing 36%. that is the 11th quarter where the growth has exceeded 30%. that is the core engine powering our growth. what is even better, our

so-called 12 months ahead committed subscription revenue is roaring at 29%. there is also good visibility on the growth lying ahead. tom: yes, that backlog in terms of orders is still there. in terms of that transition then for customers, from the on premises software solutions and the licensing to the cloud options that you were not offering them, does that stretch into 2025? how far does that go? how far does that take you in terms of that tailwind for the business? dominik: the runway is pretty long. we've just -- a quarter of our so-called maintenance base, the customers paying support fees on prem, which is already paying both subscription and the maintenance. even with that kind of first quarter, it is not completed yet.

in the first quarter of transformed customers with runway. the legacy products, they have been using, they are running out of mainstream maintenance in 2027 and out of extended maintenance in 2023. there is some -- 2030. there is some good momentum to drive that conversion into the cloud. we have passed more than 50% of the revenue base into the cloud. tom: ok, further to run on that front. clearly, ai is a catalyst. this is part of the program that was initiated with some determination at the start of this year. your ceo saying yesterday on the call about 30% of the cloud sales in the third quarter have some kind of ai business relation. when does that get to 100%? when is this 100% of your clients wanting some of those ai solutions? dominik: we believe this will

gradually increase. we are developing a lot of these cases. we have said we want to have 100 use cases on generative ai by the end of the year up and running. we have achieved that ahead of time already now. this is gradually moving up. what is super important for our customers is when they deploy ai, they want us to be very relevant to their businesses. it has to be reliable based on solid data. and it has been -- it has to be responsible. there's a lot of compliance and regulation around ai and all of these things have to be mastered. our customers are keen on the type of processes we run into and to get an off-the-shelf solution to empower them with more productivity, gain better insight. i am convinced this ratio will move up. tom: when it comes to the broader macro economic picture, europe's economy broadly flat 90, the u.s. is growing but less

strongly than it has been. so, the growth in the u.s. is cooling even if it is still there. which parts of the client base are looking most challenged in terms of spending at this point? dominik: i think it is relatively broad. we see that macro headwind and small parts of our business. we have a small portion of our revenues that are more consumption based. this is in travel bookings. when you hire contingent workforce or temporary workers, we see the macro with traces. nevertheless, by virtue of the strong conversion of our installed base, up and cross sale with other customers to sustain the 30% suite -- in that 36% growth, that transactional headwind is displaced. tom: when it comes to the market cap, the stock is up about 50% year to date. you can take something of a

victory lap on that front. the market cap is up about 100 billion euros since this time last year. it means on your listing, you are bumping up against that 15% cap. is germany still a good place to be listed? that is a bit of a challenge, is it not? dominik: you are right. we would like to see that 15% cap disappear because it strains the demand in germany. we are focusing on the large pool of capital available in the united states. there's a lot of room for us to grow and attract new investors. we would like to not exit germany but attract capital into germany. i have to agree the 15% cap is not very helpful in the dax. there's other regulation in europe, which are actively managed, which are also a little constraining. trying to convince those who run these indices, those in charge of legislation to reconsider that cap. tom: you would like to see that

cap reconsidered. you say you want to attract capital into germany, but is one option if that cap is not removed to consider removing the listing from germany and listing somewhere else is your primary destination? dominik: that is not the plan as we speak. we would rather attract capital into germany rather than exiting. tom: talk to us about -- in the u.s., your second largest market is a key market for you clearly. there is this doj investigation right now into allegations of price-fixing. in terms of what that is doing to client demand in the u.s., particularly among government agencies, is that having an impact at all? dominik: first of all, u.s. is our largest market. it is almost a third of our revenue. now, there is no new news on the famous investigation. for many years, like many other tech companies, we have been

using it as a reseller to institutional customers in the united states. there was a civil investigation launched in august 2022. we have since then cooperated with that. now, the fbi search that has happened more recently in september of this year, as confirmed in writing, it is unrelated, completely unrelated to the civil investigation we have been operating -- we have been cooperating with since 2022, which dates back to incidents as late as 2014. tom: ok. in terms of personnel at the business, there has been some changes. you don't have a sales officer right now, chief revenue officer at sap. when do you expect to have someone filling that role and what will their priorities be? dominik: i am sure christian would disagree because he's in charge of that activity and driving the transformation. we have been criticized by

investors for extremely high expense ratio, almost 27%, selling expenses to revenues last year. now there needs to be transformation to make sure we get more efficient, more bang for the buck on our investment in go to market. christian client is driving that. yes, we will recruit a successor but that is the job of the supervisory board so you would need to interview them. tom: before we let you go, you are embedding ai into the business as well. can you put a dollar number on the efficiencies you have seen so far as a result of that push? dominik: it is not something you can dissect out of the business. we have seen various improvements in productivity. giving you one example, we are going to double the offers we will issue to customers over the next three years. we want to achieve that without adding any new personnel. that gives you some feeling about the kind of productivity gains we can gather.

there's also our copilot jewel which makes the interaction with our tool much faster, much more intuitive. there are so many fronts. i mentioned 100 use cases where we can add that productivity. also proprietary sap language where coding becomes much easier with generative ai. tom: ok, sap cfo dominik asam. thank you very much, on the back of those results. our newsletter, cfo briefing, is a weekly look at what finance leaders need to know available to bloomberg's subscribers. we will have a conversation with the ceo, part of the bloomberg tech conference. you should tune in for the interview. that is at 9:00 a.m. u.k. time. mirsky has raised its for your guidance as red sea attacks boosted freight rates. the copenhagen company sees underlying between $11 billion

and $11.5 billion this year compared to the previous forecast of up to $11 billion. car sales in europe fell in september as the region's economy continues to stagnate and consumers trim spending. new car registrations fell 4.2% compared to a year ago to 1.1 2 million units. stellantis posted one of its biggest drops with registrations plummeting 26% in the region. now, hsbc says it will merge two of its largest businesses outside the u.k. and hong kong, and restructure regionally. the ceo is looking to rein in costs against a backdrop of falling interest rates. let's bring in russell ward for the details. let's start with the organizational changes at hsbc. what are the key points that have come out this morning? russell: big changes at hsbc.

the organizational changes are that they are streamlining their businesses into four main businesses. hong kong, u.k., corporate, and institutional banking which is merging two big businesses, and creating a new international wealth and premier banking team. obviously, the hong kong and u.k. businesses, they are reflecting the importance of the two big home markets. more interestingly, the combination of the corporate and institutional banking team that has been reported earlier, that is something that has been quite resisted by leadership in the past. that is one interesting aspect of this change. the other one is the creation of this new wealth division. that is reflecting the growing importance of wealth management for hsbc and big global banks. on top of that, there has been some regional changes. basically, splitting its geographical businesses down

into two lines. this is the eastern markets division which is asia-pacific and the middle east, and? which comprises u.k., europe and the americas. the goal is to reduce costs against the backdrop of the bank facing lower interest rates, squeeze on lending income, and the ceo has wasted no time to make cost savings a priority. he's already reported recently that he's been cutting event spending and cutting travel spending at hsbc. on top of that, the sweeping changes. tom: some interesting changes in terms of personnel as well. the appointment of pam at cfo, what do we know about her biography? russell: right. pam will be the first woman to be cfo at hsbc in its 159-year

history so that's a big milestone. she joined the bank about 10 years ago. her background is in accounting. she's currently head of risk and compliance. she's going to be tasked with this immense job of cutting costs. the cfo position is a very important position at hsbc. al hedery was the previous cfo. predecessors like you and stevenson. they were renowned for bigger cause cut drives. we will see if pam kaur can continue those efforts. tom: we appreciate it, russell ward, on the changes at hsbc. thank you very much. coming up, a chief economist says there is a growing chance the fed actually stands pat next november and does nothing. we discussed that view with my next guest, coming up. the bond market selloff

continues. stay with us. this is bloomberg. ♪

tom: welcome back. apollo's chief economist sees a rising chance that the fed will leave rates unchanged as the u.s. economy grows. it is a view that seems to be getting traction on wall street as some data suggests of the economy is flirting with a no landing scenario. joining me is isabel, the cio of close brothers management. do we need to be pricing in a pause for the fed in november? >> i think the exact timing of a pause is open to debate. there are some real truth here in the market has massively been overpricing the amount of cutting that was likely and now pricing is looking much more realistic.

november, december, i don't think it matters a huge amount. the key point is we are seeing more rational price expectations this year. even going into next year. i think it is next year and looking at where rates trough where there is still some repricing that needs to take place. so far, it is a little less from the fed because of the economic strength you mentioned. tom: are you looking at 5% on the 10 year in the next six months? does that seem like a rational move? isabel: i am not sure about exact levels but thinking about the direction of things. i would expect to see the trough level begin to creep a little bit higher. tom: what are you seeing in terms of the earnings story? the hardware supplier. the bank is doing quite well stateside. we have european banks reporting this week. what is your readthrough on european earnings and was looking mispriced? isabel: i think it has been a tale of two halves. on the one hand, you mentioned

financials are real bright spot in terms of where analysts are repricing their expectations, revisions have been much more constructive. looking more broadly, really not such fantastic earnings season in terms of where revisions are going. with that in mind, i think potentially if we see that continue, we could be at a place where some of the more cyclical areas of the market are actually looking a bit more attractive because expectations are more rational. it could be positive. i think we probably need to wait until next year, clearing some of the volatility, some of the kind of key events for upset to find a better entry point. tom: you think of the u.s. elections. what are the best market outcomes from the u.s. election? isabel: the good news is quite a lot of outcomes could be constructive. first of all, we are going to be trading a less regulatory type

period. either outcome, we are seeing that begin to ease. because we have a huge amount of fiscal stimulus unspent, there's a good chance that provides a tailwind for the u.s. economy. thirdly, i think there's a high chance we see a divided house and senate. that provides a bit of a check and a balance to whatever the incoming president decides to do. in terms of most market favorable outcome, i think if you take a long-term perspective, it is a democratic win with a divided senate and house. that is because of it think about what happens if we see the democrats lose, we are probably seeing the next candidate being more to the left. if we see donald trump lose, you will see a more centrist market. tom: how are you think about positioning in the u.k. on the lead up to the budget at the end of the month? isabel: there's a lot going on

in terms of market speculation vis-a-vis the budget. the way i think about it is two halves. one half is about filling this blackhole and raising taxation. we're really hoping the treasury tries to target that in a way that will not harm business or consumption spending too much. the other half is there's going to be some changes to the borrowing rules. we are going to see more borrowing, but the market will probably tolerate that because the focus is going to be on increasing investment. that obviously has gdp implications. tom: that is really important in terms of the signaling and whether the market can absorb that additional debt load that could come through. really interesting views. isabel, thank you for joining us bright and early. isabel albarran, investment officer at close brothers asset management. stay with us. this is bloomberg. ♪

tom: welcome back. as markets contemplate a less dovish federal reserve, fewer cuts is the path for lease resistant higher from here? that is the view of markets from our mliv team, saying positioning into the u.s. dollar upside is not looking stretched. here's a comparison of where the dollar has landed versus citi's views in terms of economic surprise index. the highest level since april. again, the focus on the strength of the u.s. economy and a fed that might not be cutting as much. getting further upside for the u.s. dollar. let's flip the board and have a look at an interesting and intriguing call from goldman sachs and their strategist. the opera formers of the s&p over recent years.

on an annualized basis over the last decade, the s&p has performed about 13% on an annualized basis. goldman sachs, next decade, looking more out 3% because of competition of other asset classes including u.s. treasuries. at 3 p.m. u.k. time, the occlusive interview with christine lagarde. before that, we will be hearing from the asnl ceo from the bloomberg tech conference. you can catch that exclusive conversation just after 9:00 a.m. u.k. time. the opening trade is up next. stay with us. this is bloomberg. ♪

it's our son, he is always up in our business. it's the verizon 5g home internet i got us. oh... he used to be a competitive gamer but with the higher lag, he can't keep up with his squad. so now we're his “squad”. what are kevin's plans for the fall? he's going to college. out of state, yeah. -yeah in the fall. change of plans, i've decided to stay local. oh excellent! oh that's great! why would i ever leave this? -aw! we will do anything to get him gaming again. you and kevin need to fix this internet situation. heard my name! i swear to god, kevin! -we told you to wait in the car. everyone in my old squad has xfinity. less lag, better gaming! i'm gonna need to charge you for three people.

>> good morning from london. we are one hour away from the opening trade. here's what you need to know. lobo bonds extend the selloff as