welcome to "street signs." i'm joumanna bercetche these are your headlines european markets shrug off trade tensions as china fights back against washington's tariffs by implementing levees of its own. the prospect of a trade war gathers pace as u.s. president donald trump threatens to up the ante and impose further measures in excess of 5$500 billion. thyssenkrupp shares surge after the ceo offers to resign

and falling out of orbit inmarsat shares sink after receiving a takeover bid it's friday, it's also tariffs day and nfp day. we saw a balance in asian equities with most of the asian equities in the green. the picture in europe is more positive as well, but moderate gains of about 0.2% for stoxx 600. heat map is about 70% in the green, 30% in the red. very little gains oz of yet. a lot of questions about ou thehow these tariffs will be implemented. let's switch to individual indices. green across the board

xetra dax lackinggging around te flat line. for the week, let's look back at how these indices have done. a volatile week. dax is up 1.3% ftse 100 is the laggard, down 0.4% for the week. let's switch the sectors and look at where some leadership is coming from. real estate, media leading the charge, up about 1%, 0.9%. on the down side we have construction material down about a half percentage point. banks down 0.2%, in line with some activity we saw in u.s. trading with the flattening of the yield curve. all eyes on that after the fomc minutes. let's get to our top story china said it implemented tariffs on u.s. goods saying it will always fight back when its interests are impacted this after u.s. president donald trump fired the first shot in a trade war by imposing u.s. tariffs on $34 billion worth of

chinese goods at midnight eastern time the commerce ministry accused the u.s. administration of acts like bullies and vowed to safeguard free trade eunice is in beijing there seems to be confusion as to what the state of play is exactly. a couple of headlines have come out saying china have imposed tariffs, but then rescinded that now they say they only implied tariffs on some goods. what's the current state of play >> within the last hour, the foreign ministry clarified it did, indeed, impose tariffs on several u.s. goods so the foreign ministry said that china retaliated with its tariffs immediately after the u.s. move. and also what we know is that customs authorities levied a s additional tariffs the targeted goods include cash

crops, as well as cars this was discussed by the chinese in the past several days earlier today the commerce ministry said china had no choice but to fight back after the u.s. launched as what beijing described as the largest trade war in economic history. the chinese move only escalates what many fear here could become a protracted trade war president xi jinping has not shown signs of wavering. president trump also doubled down on his stance yesterday tweeting that he could impose tariffs on all 5$500 billion of goods imported from china. the commerce ministry also today pointed out that the potential for disruption of the global supply chain could be very, very harmful to many different types of companies including foreign companies. yesterday the ministry pointed out that foreign companies account for two-thirds of the experts from china subject to the tariffs.

they said about $20 billion worth of goods so a lot of people here wondering how long this is going to last. exactly how is it all going to end. as of right now there doesn't appear to be any significant or meaningful discussion or dialogue going on between the two sides. the foreign ministry hinted at that again today, joumanna, by saying that china believes that unilateral pressure is futile. >> i have a question related to some of the latest comments out of president trump overnight again, he's threatened essentially that they could look up to imposing tariffs on up to 5$500 billion worth of goods. there's a bit of a mismatch here the u.s. only exported about 0 $130 billion to china. what can china do in case they wanted to retaliate to 5$500 billion worth of tariffs from

the u.s. >> a lot of companies here say they're non-tariff barriers, or a lot of companies here describe as qualitative measures. these are measures that would be outside of the tariff scope. and the business community here fears it could be a regulatory thing in nature. so potential slowdowns for getting licenses approved. potentially seeing more checks at the ports fire inspections, environmental checks, greater safety checks, investigations of their business and the american chamber of commerce eventually called a private meeting discussing this with members and most of them had voiced their concerns about becoming a political football between these two sides, as the trade war appears to get worse there was some concern that these actions, which companies have seen in the past, would

only escalate and that it would become state sanctioned. >> thank you for bringing us the latest there china's state media attacked the trump administration saying the white house is behaving like a gang of hoodlums an editorial accused the u.s. of blackmailing and racketeering. adding that tariffs could have a negative impact on the global economy. the bank of england governor says brexit should be a warning to political leaders about the cost of trade barriers carney cited britain's economic under-performance as a lesson on the risk of deglobalization. he also cautioned that u.s. growth could be hit as much as 5% as a result of a full blown trade war. angela merkel said that she is in favor of reducing eu tariffs on u.s. car imports. washington had proposed dropping

threatened duties on european cars in return for concessions joining me to discuss all of these things is julie beckenstein. going back to u.s./china and the numbers mismatch, the 500 billion on the u.s. side, 130 built on billion on the china side, doesn't that mean china ma mohae to lose than the u.s.? >> china has more to lose, but i think it's worth highlighting there's also a political mismatch that's very much in play when it comes to who has an election coming up next, that is the u.s. and donald trump. we have the u.s. midterms coming up, and a lot of these tariffs will hit the u.s. farm belt hard the farm belt traditionally votes republican, but a few states could be key swing states in the election and will be hit

hard. >> presumably donald trump would not have made those comments yesterday if he did not feel emboldened that all of the measures he's taken to date would be supportive. >> there's an interesting mismatch going on. his base likes the rhetoric. they like the idea of punishing china, but the impacts economically have not been felt yet. the pmis are not showing businesses impacted yet. businesses are saying we're not going to change our plans right now for these current projects, but if these tariffs move forward we'll tap the brakes on future projects. so in order for this to be resolved you would need to see things get better before they get worse? >> i think it's possible things will get better before worse certainly republican senators will be watching closely what happens in their states. what happens with agriculture prices and the pressure that

puts on. polling numbers will play a big roll in the months ahead >> we are getting confirmation that china applied tariffs to the same value of u.s. goods as u.s. tariffs on china goods at the same rate. so now they have completely applied those $36 billion in tariffs. there was a bit of opaqueness about some of the responses earlier in the session so you're saying you do expect things to get better before they get worse? >> i think you said get worse before they get better >> i think there is a risk for some deterioration there's been discussion for tariffs on 16 billion worth of goods that is actually under public consultation right now. at the very least we expect those to be put in place and for china to respond we expect some further tariffs it's not our core view that we will see tariffs put in place on

200 billion to 400 billion worth of goodsed a dig ed a digtadditw are already seeing the impact on farmers. we think donald trump will look for a way to pull back we also note that the negative impact on consumers will be felt much more substantially if he tries to enact the next set of tariffs. these tariffs right now are focused on intermediate goods and imports. if he tried to take the next step he would target things that are low margin and the feed through would be much more rapid, things like toys and games, furniture, textiles we've seen the trump administration try to steer away from that. if you look at the difference between the april list and the june list of goods that were going to have tariffs put on them, the thing removed in june was consumer goods that's an indication that the trump administration is

acknowledging that they don't want the consumer to be hit. they're getting a lot of political play saying we're going to punish china, but they also know there will be an economic impact if they do so. >> let's talk about the china side of the equation do you get the sense these tariffs are beginning to bite? so far we're seeing the pboc are enacting some form of policy support. they cut the r.o.r. by 100 basis points, pledged to do more we've seen a weakening in the currencies all of this in anticipation of further weakness or are the tariffs or expectation of tariffs actually beginning to bite? >> certainly the expectation is a major driver of currency weakness that's a driver for now, but in 20109 we wou 2019 we would expect the pain from china if these tariffs remain in place. >> we were just talking about merkel and the fact these

actually on board with reducing the auto tariffs to zero on both sides. do you think if europe succumb and cut tariffs to zero that they're setting a bad precedent? >> i think europe has been a bit more conciliatory when it's come to tariffs the german automakers have signaled they don't want these tariffs to go forward. we long said germany and the eu is not the main target for the u.s. any way, despite the aggressive rhetoric. we always said if you look at the size of the deficit, it is china is trump's key target. in terms of what trump wants to focus on, it's not surprising he would take a deal with germany and the eu i keep saying germany because it would be germany that would be hurt by tariffs on autos

in terms of negative impact, if the tariffs go down to zero on both sides, we don't think that would be hugely negative for the european automakers because there are a number of other non-tariff factors that we think act as a hindrance to the u.s. exporting autos to the eu. as such, maybe it's an easy win on both sides. trump goes back to his base and says look what i have done for you auto sector, look what i've done manufacturing sector, the eu gets to put this to the side and without too bad a hit for the auto sector. >> makes sense julie, thank you for joining us this morning has washington launched the opening salvo in a full blown trade war? head to cnbc.com for the view from australia's former ambassador to china. if you want to get involved in the conversation, e-mail us. the address is streetsignseurope@cnbc.com we're on twitter, tweet us

at @streetsignscnbc and tweet me at cnbcjou as well. more on the chinese ipo right after this break why did i want a crest 3d white smile?

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welcome back shares in thyssenkrupp are trading higher following the news that ceo heinrich hiesinger has offered to resign from his role the supervisory board will meet today to decide whether or not to accept his offer. the chief executive is facing pressure from investors to restructure the group following the completion of thyssenkrupp's joint venture deal with tata steel. four days ago heinrich hiesinger said they were honest about job losses >> we tried to give the employees a stable outlook for the future therefore, for the maturity of the sides committed and made agreements going to 2026

but we were also honest. for some sides we said it's not possible because we need to go for the synergies. therefore we openly shared from day one that our present assessment is that on both sides we probably need to reduce our work for by up to 2,000 people 2,000 on the tata side, 2,000 on the thyssenkrupp side. as i said we do this in order to gain a more secure future for more than 40,000 employees so it was an honest dialogue from day one >> elsewhere, inmarsat shares are lower after receiving a takeover bid from echostar the firm said it made a compelling cash and stock offer that values the firm at 532 pence per share. echostar had a previous bid for inmarsat rejected in june, while a french peer also backed away

from an offer as well. preparations for the public listing of saudi aramco have stalled. according to the "wall street journal" doubts are growing that the ipo will go forward with one aramco executive saying everyone is almost certain that it's not going to happen. the listing of the state-owned oil company is seen as a key part of saudi arabia's plan to diversify its economy. saudi aramco and the kingdom's energy minuistry declined to comment on the report. >> xiami is setting its ipo price at about $17 a share shares in the chinese consumer electronics maker are expected to start trading on the hong kong stock exchange on monday. arjun has more

>> i want to run viewers through what xiaomi does it makes devices from smartphones through to tvs and air conditioners it creates an ecosystem of products, it's been dubbed the apple of china i want to get into where its money comes from the majority is from smartphones. 70% from the handsets, 20% from the internet of things, so that includes tvs, smart speakers 8% comes from what it calls internet services. this is the additional services such as music streaming that it adds on as well to customers i want to run you through as well where the profit is coming from has this company been making money? yes, it has. that's been increasing in 2017 it brought in about 12.2 billion yuan of operating profit it seems to be making money, but there are concerns over it being

very reliant on its handset business how does it stack up to its rivals xiaomi is the fourth largest smartphone player in the world let's compare that to samsung, the biggest smartphone player in the world, 317 million smartphones in 2017. apple, 215 million iphonesin 2017 so it's a lot smaller than some of those bigger rivals i think that does lead to some of the big risks around the company coming through to the ipo. one of those, as i mentioned, is the reliance it does have on smartphones. 70% of the revenue from smartphones, and 70% of revenue from china as well it relies heavily on that market that market is extremely saturated. there's slowing smartphone sales there, and it has competition. and as xiamoi oshgashxiaomi ree

smartphone shares, will they see a benefit? they are also looking at investment they want to enter the u.s. market that will be increasingly difficult as we've seen many of the intelligence agencies in the u.s. warn against chinese products like that from rivals that could be a concern when shares start trading next week >> let's have a chat about this, it's topical given that it's a chinese tech company that is coming to the market they wanted to ipo they wanted to achieve a valuation of 100 billion they only received an valuation of 54 billion. do you think this is just an

example of the market beginning to punish tech companies with exposure to china now given everything that's going on in the world? >> i think there's a few things at play. there was the initial thought that xiaomi would delist in hong kong, that's not happening another factor is investors have realized that xiaomi is very much a hardware company. as much as they tried to tell the story that they created this ecosystem of devices, as we saw, 8% of revenue only comes from internet services. that's not a lot if you compare that to apple which pushed forward on its software and services business. that reliance on china is a concern. if the chinese market slows down, that will really impact xiaomi, and it looks like it will be increasingly difficult for it to expand into other markets, especially in the u.s >> we were looking at the performance of other big tech

stocks in china. so the back drop has not been that positive. you have alibaba down 10%. tencent down 9%. certainly the financial markets conditions were not the most positive around this so let's talkta about the marke exposure they have a significant amount of their revenues do some from china. they don't have a presence in the u.s. yet in this environment doesn't that put them in a better position than the likes of zte who do have exposure to u.s. and are caught in the crosswinds >> it shields them from that and what they've been looking at as expanding to india, their second largest market and recently opened physical stores in places like spain as well so europe's a focus for them we've seen hardware businesses get punished in the markets. when samsung two years ago faltered on its hardware products, the market punished samsung because they didn't have

an alternative source of revenue. in the past couple of years it has brought up its chip business but biao asxiaomi, 70% of the ps come from smartphones. >> with the cash they raised from the ipo, do you expect them to invest more on internet side of the equation? >> yeah, there's a few areas of investment i expect from xiaomi. chips is one semiconductors, the internet of things, perhaps new services and software they may introduce to recreate that recurring revenue much like apple. >> let's keep an eye on the performance of that stock in the coming months. samsung electronics estimates that operating profit likely rose 5.2% in the second quarter, the slowest rate in more than a year the tech giant sees the figure

increasing to 14.8tri trillion korean yuan. this as some analysts are worried about samsung's mobile business the firm's chip business is expected to post its seventh consecutive record quarterly profit coming up, british prime minister theresa may calls for unity ahead of a key cabinet summit more after the break i love you, basement guest bathroom. your privacy makes you my number 1 place to go number 2. i love you, but sometimes you stink. febreze air effects doesn't just mask, it cleans away odors. because the things you love the most can stink. and try febreze small spaces to clean away odors for up to 30 days. breathe happy with febreze.

welcome to "street signs." i'm joumanna bercetche these are your headlines european markets shrug off trade tensions as china fights back against washington's tariffs by implementing levees of its own. the prospect of a trade war gathers pace as u.s. president donald trump threatens to up the ante and impose further measures in excess of $500 billion. thyssenkrupp shares surge after ceo heinrich hiesinger offers to resign less than a week after sealing a landmark deal with tata steel.

and falling out of orbit inmarsat shares sink after rejecting a takeover bid from echostar quite a positive start, positive day for u.s. equities yesterday. that was one day after the independence day liquidity was thinner than usual. the three major indices ended up in the green today the picture looks to be positive we have the dow opening up about six points higher. nasdaq about five points higher. generally speaking, the tech sector has been doing very well in the u.s. with the nasdaq having its best day in more than a month. switching to european markets, generally trading in the green we've seen xetra dax bounce about a quarter percentage point

in the last 15 minutes or so so it looks like there's good momentum there in these early hours of trading what we've seen is ftse mib is outperforming today as well as cac 40 ftse 100 up 0.2% and is the underperformer on the week let's look at foreign exchange dollar/yen trading slightly stronger but no major moves there. euro/dollar and cable pointing to slight dollar weakness. tl dollar/renminbi has been on everyone's radar, and the renminbi is weaker by 0.2% british prime minister theresa may issued a rallying call to her cabinet to do their duty on brexit may urged ministers to deliver a deal that realizes the benefit

of brexit. the challenge facing the prime minister was underscored after it emerged that foreign secretary boris johnson held a separate pro brexit meeting. ahead of today's meeting, may met with angela merkel who called for close ties with london even after britain leaves the eu >> translator: as time is short we must clarify the political framework as early as october. it's important what the british government will decide in the coming days, i'm pleased today we have the opportunity once again to discuss things bilaterally. i would like britain and germany to remain closely linked in the future this will certainly be the case in area of foreign and security policy in particular and on other issues we still have to

see what britain's ideas are >> joining me to discuss is the chief economist and head of research and imfev, and james boris. so, people are saying that today really is a make or break summit for mrs. may already there's talk of potential resignations if things don't go to plan for the hard core tory brexiteers we already know in the past couple of weeks david davis threatened to resign on this issue of the irish backstop how crucial is today's meeting >> we heard this before. many times there's been threats of resigning of ministers, even david davis. this is not something we're seeing for the first time but today's meeting is crucial we will see some phrasing that everyone can get behind.

whatever is agreed will have to be agreed by the eu. it's not the end of it today >> let's talk about this so-called jersey option which is that the proposal would entail the uk maintaining single market access for goods, possibly on the regulation side. but not for services is that going to be palatable? >> we have the different sides of the cabinet in opposite views. so some are concerned about the effect of brexit and business on the economy, some want to lead the eu more on a hard brexit side the jersey option combines some of the elements that the uk wants to preserve. for example, having as frictionless trade as possible, in the case of goods but also being able to establish its own international trade policy, which we will be able do for services it's complicated because in the case of goods, it's not enough to say they will be in the single market for goods to avoid a hard border. you need harmony of regulations

as well. also in the case of services, that's something that's important to the uk. what is interesting is the last couple of weeks we heard various businesses start speaking out and warning about the impact of a lack of decision that it will have on investment strategies. we heard from jaguar, heard from airb airbus huge companies with a big presence in the country. do you think one way or another businesses may influence the outcome of these talks and maybe they understand they have to push for a slightly softer brexit and to listen to what companies are telling them? >> the clock is ticking. businesses are already making their contingency planning the issues of brexit has influenced certain members of the cabinet, the chancellor

throughout the time has been on that side. now it's putting pressure on the cabinet as a whole james, so far there's not much of an impact on a day-to-day basis, but broadly speaking uk stocks tend to be undervalued. do you think most of that is because of this brexit premium >> i think part of it is because of the brexit premium. part of it is the nature of the uk market. it's been out of favor for the last year, 18 months because people want a much more cyclical market we rotated out of europe into the uk because we wanted a market that's slightly later cycle, there's more oil, more miners, more defensive stocks in the uk also because the uk is cheap it's one of the most underweight markets on our fund manager's survey >> you know how brexiteers say no deal is a good deal

how do you view it >> no deal is the worst deal for the uk economy that is the one where you have the most disruption, potentially big hit to the uk economy. could be anywhere, 3% to 5% of gdp over a periodof time but the market would basically have to say certainly they need to go significantly lower because the uk's access to the biggest market would be significantly impaired that probably requires sterling to be 5%, 10% lower than here to provide a cushion against that for us, no deal is the worst deal the question for the markets at the moment is are we heading towards no deal, which might happen if it all breaks down today, or are we heading towards something like the jersey option, that's our central scenario but theresa may has the real problem of trying to carry her cabinet there. then getting it through parliament and then getting the

eu to agree to it. it's been very hard to work out exactly where we'll come down in the end. >> question from the eu side of the equation do you think that because the eu perhaps are more focused on their own issues now, dealing with migration, political survival in the case of chancellor merkel, dealing with a new italian government that in a sense they may be a little less patient when it comes to dealing with brexit negotiations and that it may somehow backfire in terms of what type of agreement the uk can extract from the eu? >> it's been astonishing how united the eu has been in the case of brexit when you think about them having to deal with so many of their own internal problems, be it debt crisis, migration crisis, but when it comes to discussing brexit, and when brexit is on the agenda, it's almost like a feel good factor that everyone agrees given those problems that some eu countries are facing, there's

an incentive to be harder on the uk because of that so the jersey option will be very difficult to pass through the eu, especially because of the four freedoms that are so important to the eu. there is some sense that that has happened with the swiss model. but the swiss model has not been the favorite of the eu switzerland has been able to get away with that but i doubt that the uk will be able to get away with something more, not having the freedom of movement as well >> all right we have to leave it there. thank you very much for doing that still with us is james barty from bofa merrill lynch deutsche bank has been upgraded to buy and there's some comments also from merkel here saying

that she had asked the chairman for his assessment of the deutsche bank situation. looks like merkel is looking closely at what has been happening there. clearly focus on deutsche bank in the last couple of months with the new ceo taking over a huge task at hand in terms of overturning the business and restructuring it at least we know merkel is on the case there as well sticking with germany, german lawmakers reached an agreement over the treatment of asylum seekers the two-page deal speeds up the process of sending migrants seeking asylum back to the eu countries where they originally filed their application. the agreement resolves a dispute between germany's ruling parties that threaten to topple merkel's coalition government president trump has been ratcheting up the pressure on nato ahead of a summit in brussels next week's meeting comes at a time of heightened transatlantic tensions amid a brewing trade

war. at a rally in montana president trump criticized nato members over defense spending. >> i will tell nato, you have to start paying your bills. the united states is not going to take care of everyone we're paying from 70% to 90% to protect europe that's fine. of course they kill us on trade. they kill us on other things they make it impossible to do business in europe yet they come in and they sell their mercedes and bmws to us. we have 1$151 billion in trade deficits with the eu on top of that they kill us with nato they kill us >> mike pom papeo is back in noh korea today seeking a list of nuclear sites to be declared he is looking to fill in some of the details around commitments made during kim jong-un's

meeting with president trump in june he also looks to secure the remains of 200 u.s. troops missing from the korean war. a giant blimp has been given the green light to fly over london during the u.s. president's visit next week. a crowd funding campaign raised more than 16,000 pounds in order to fly the blimp the blimp will fly around the parliament for a few hours police say they reserve the right to stop the launch on the day. coming up, the federal reserve has flagged rising concerns about an all-out trade war in its latest fomc minutes more after this break.

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welcome back to the show just to give a bit more commentary around some of the headlines crossing about deutsche bank. so a german local newspaper has said that jpmorgan and icbc of china are interested in deutsche bank but have cited no sources

and the same newspaper has said that merkel has also asked ubs chairman weber for his assessment of deutsche bank's situation. and that is also in the same newspaper as well. the latter headline was citing sources in the government. interesting news here is that a deal has not been confirmed and no sources have been cited, but the stock is up 4% or so already in trading. federal reserve officials have concerns that letting the economy run too strong could lead to a significant economic downturn the fed has released the minutes from its june meeting which also outlined worries from business leaders about tariffs and the threat of an all-out trade war the minutes revealed some businesses had scaled back or postponed capital spending because of uncertainty around trade policy let us not forgot the u.s. non-farm payrolls are due today and are seen rising 195,000

after surging 223,000 in may it's also expected the monthly average earning also have risen 0.3%, lifting the annual increase to 2.8% joining me to discuss still is james barty, head of global cross asset and europe peep equity strategy from merrill lynch. let's talk about the minutes it's interesting that the concerns about trade are beginning to show up there certainly they're watching this closely. the language around the deteriorating rhetoric between the two sides is something that the fed are paying attention to now. are you of the view that perhaps markets are a little bit complacent about some of the downside risks that could materialize because of these measures >> i'm not sure the markets are being complacent about it. the markets have already started to factor in some of the bad news from tariffs. the fact that the u.s. had a

rally last night indicates that. if the tariffs were not there tomorrow, you get quite a strnge bounce for investors, fundamentals are good, valuations are relatively cheap if we get into a full blown trade war the damage to global growth could be significant. that's what the fed were looking at last night. we've seen companies talk about this already in the ism report companies have said we're looking to move production elsewhere we're looking to a adjust our business the first round of tariffs today won't do that much damage. but if we get into the hundreds of extra billions that the president was talking about, then you get the retaliatory measures, that's a very significant hit to global growth markets would have to react to the down side. >> do you hedge for that potential down side risk it's a low probableability but high impact event if it does

happen what is t happen what is the best way to hedge that likelihood? >> we are long the s&p 500, the ftse, emerging asia, but what we've done is used what is still relatively cheap, volatility to own hedges against that. any investor to any fund manager who turned around to end investors said said we saw the tariffs and rhetoric but didn't do anything to hedge portfolios, you wouldn't be doing your duty. fund managers have to own hedges against that risk. i don't think those hedges are particularly expensive >> let's talk about emerging markets. there's been significant outflows out of asian equities in the last couple of months to the tune of $35 billion. huge amount of alphas, not necessarily yet in fixed income what is your view on em from here do we stabilize now that it's a case of buy the rumor, sell the fact, or the other way around in this case.

are you expecting things to stabilize from here onwards? >> emerging markets are getting fairly oversold. if you look at the weekly rsi as a whole it was very elevated back in january. it's now one of the lowest readings we've seen since february of 2016 so emerging markets are getting oversold the view of our emerging market team f we have further tensions on trade, there is room for markets to still go down further. but we are getting oversold, as with markets more generally, if we find president trump fines a route out of trade wars, you have room to bounce back sharply. >> i see just looking at your asset allocation that you're long s&p, long ftse and long asia, ex-japan what would you say is the major risk to your portfolio potential inflation in the u.s.? more trade wars? where will the major headwind

come from? >> in the short-term it's all about trade wars if we end up with another 100 billion, assuming that adds up to real mocney, further out the bigger risk as we move into 2019 is -- assuming we don't end up with these trade wars, the ongoing strength of the economy tightens the labor market and the fed has to tighten further that's the longer term risk. that's why we're still short treasuries within our portfolio. >> one of the big themes of discussion in the context of fed is the yield curve flattening that's taking place. do you see that and think we're about 30 basis points away from inverting, this could potentially be very bad for markets and for market price action >> i think the best way to think about the yield curve, bond markets are telling you about what they think the risks are. now part of the flattening recently has been a function the

fact that you have the risk of trade wars if trade wars disappeared tomorrow, the curve would re-steepen again once the curve goes inverted, the lag between when the curve goes inverted and when the economy goes into recession are long and variable. it's anywhere between 12, 14 months out to five years so you can't say the curve has gone inverted today, there's going to be a recession tomorrow it's not as simple as that it's telling us we're getting later in the cycle >> do you think that the ten-year stays around this level for the foreseeable future it tried to break through 3% a couple times already to no avail, despite the fact that the treasury are going to be issuing a lot more in the next 12, 18 months or so why do you think we're stuck around this 2.80 level do you think that changes? >> the reason why we came off the peaks after the fomc

meeting, you're going back to trade wars the market has to factor in the risk to growth and the risk that the fed doesn't follow through on tightening. if those risks lift, i think we go back through 3% our forecast for the end of the year is 3.25 that's assuming those trade wars at some point dissipate. if that happens, we refocus on the fed and the fact there are four hikes for this year, three for next year, that's enough to push yields comfortably through 3% >> all right the big seeds continue to fall marin cilic has crashed out of the second round of wimbledon. and rafael nadal is through to the third round following a straight sets win over kukushkin. the match tested the spaniard with the players on the court for more than two hours.

for british fans, only one man stays in the competition kyle edmund reached the third round for the first time the news was not so good for the women. the reason i kept you here, james. i want to talk about the world cup with you quarterfinals kick off this afternoon when france takes on uruguay. brazil faces belgium this evening. england will go up against sweden on saturday following tuesday's historic penalty shootout against colombia. this is the first time england reached the quarterfinals of the competition since 2006 if england win the game they will face russia or croatia in the semifinals russia will round off the quarter fifinals with their gamo saturday evening >> might you be supporting england tomorrow >> yes i hope it doesn't go to another penalty shootout one per tournament is enough for

us all right. england will have the support of the country and its central bank behind them. bank of england governor mark carney was spotted sporting a three lions lapel pin at a business event in new castle i didn't think i would have -- i had this for a few years i didn't think i would have a lot of opportunity to wear it. i'm wearing it proudly the work ethic, the sense of -- i read a good article today about the team talk about background, where you're from, humility and the innovation of the team this is a pleasure to watch right now. so we're behind them >> yeah. in gareth we trust >> exactly >> james, thank you very much for joining me this wi-fi is fast.

i know! i know! i know! i know! when did brian move back in? brian's back? he doesn't get my room. he's only going to be here for like a week. like a month, tops. oh boy. wi-fi fast enough for the whole family is simple, easy, awesome. in many cultures, young men would stay with their families until their 40's.

welcome. we begin with breaking news. the united states officially imposing new tariffs on $34 billion worth of chinese imports. president trump also threatening to extend those tariffs to all 500 billion of goods imported from china the u.s. tariffs that take effect today aim aircraft parts, heavy machinery, construction equipment, medical equipment, diesel powered trucks, lcd screens for tvs and touchscreens and another 16 billion are expected to go into effect in the next two w