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tv   Bloomberg Markets European Open  Bloomberg  July 10, 2019 2:30am-4:00am EDT

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anna: welcome to "bloomberg markets: the european open." i am anna edwards in the city of london carried treasury yields rise as investors settle on a fed cut for july but they aren't sure what to expect afterwards. will we get clues from jerome powell later today? european equities expected slightly lower. is 30an cash trade minutes away. anticipating powell. stocks in a holding pattern
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ahead of testimony. will he provide a clue as to the central bank's path after july? forecasts net inflows in the first half despite an overall loss of 14 million francs. scherzer called hire at the start of european trading. u.k. mp's backup plan to prevent a no deal brexit but gordon johnson refuses to rule out suspending parliament in a debate with jeremy hunt. welcome to the european market open. session inkluster the asian markets, range bound on many markets waiting for jerome powell. it looks like we will be range bound at the start of the trading day in europe. here came futures pointing flat with a slight downward bias. a few interesting corporate stories and global stories that might be expressed through european equities. this is the gmm function on the bloomberg on the asian session.
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it flags any outsized moves based on standard deviations. we've got some markets to the upside in asia but the overall move in the asian market is pretty balanced. in a holding pattern in global equities as we wait for more clues from jerome powell. july seems to be the expectation from when we see a rate cut from the fed but after july remains a big question and something we will talk to mark cudmore about. treasury yields, heading up a little and that has supported the dollar overnight. that is something in the fx market to keep an eye on. we are at more than a five-week high on the dollar versus japanese currency. interesting to look at emerging market currencies, we don't see the peso. that is good for anyone looking for low volatility in the peso. we saw it falling on the news of the minister's resignation yesterday. we are 27 minutes until the
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start of european trading day. let's get to the markets with mark cudmore, our mliv marketing editor in singapore. givingyou have been thought to what we will here from jerome powell and how he will move markets today. i think your focus on what happens after july. alldon't see much chance of shaking the markets expectations for a rate cut this month. mark: absolutely. as a team, we try to divide -- debate the outcomes. it would be surprising if he doesn't validate the market pricing for july. the fed doesn't pre-commit. i don't think he will say yes, we are cutting in a few weeks time, but he will not change the market pricing because to change the market pricing for july, he would need to be very proactive. will kind of is he leave the market pricing for july. the real debate that we are unsure of is whether he will get
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away with not affecting the market pricing after july or hawkish or dovish. if he is dovish, what are the reasons the market perceives as to why he is dovish? is it because he is panicked by the economy? is it because he is being bullied by the market? or is he being bullied by trump? cut, what be a july is the rate path after july, and if he is dovish, why is he the best? anna: the why is going to be crucial in answering the question of the day. will the treasury curve be flatter or steeper after jerome powell's hearings? it goes back to why we are getting these dovish messages from the fed and to the extent to which they are dovish. mark: i think that is very much the case. i noticed there is a bias out there from clients for a steeper curve as the more likely outcome the matter what happens. he isis a view that if
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slightly hawkish and surprises the market that way, there will be a larger reaction at the backend because he is saying look, we might cut in july but it is an insurance cut. key are not heading into a 0% interest rate world. why is the market pricing that way? goes the front-end, we will cut rates aggressively, that would be seen as a surprise he might, but stimulate the economy again, stimulate inflation and therefore after the initial reaction, the curve might sleep in -- stephen. the written -- steepen. there is definitely a lot of uncertainty. greenspan,annel alan the maestro of fed governors and not surprise the market at all. it may be a complete nonevent but fewer people are thinking that is the case. anna: let's have a word on some of the data we have seen overnight.
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a host of fed speakers, but also data out of china. deflation, factory deflation. what is new for you overnight? china has stone problems. would have been focusing -- its own problems. we have been focusing on the u.s. economy but in china, the pickup in q2, the bounce in the economy and something i believed in that they restimulated the economy, there are worrying signs. it is coming from the architecture. the seizure of the bank has led that to go to the other parts of the economy into the medium and small banks. further idea of ppi is squeezing profit margins which we know are already in trouble around the trade war. we're also hearing about supply chains shifted off china had an immense case. that are a lot of stories that are worrying about the chinese economy and that is a reason i am worried about the global
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economy. this is not just one of the major economies that is trouble, it is all of them at once. they all have idiosyncratic problems that maybe they could deal with in isolation, but when it comes together at once, the china is trouble, u.s. is in trouble, and europe is never out of trouble, then it is a problem. anna: thanks for the summary. mark cudmore, bloomberg and live managing editor. will the treasury curve be steeper after jerome powell's hearings this week? the suggests a bias for steeper side of things. reach out to the market live team. ib + tv is the function of your bloomberg. breaking news across the bloomberg, based in madrid wins the saudi contract with $3 billion of value. that could move the share price of this particular business, based in madrid. infrastructure, construction business. this comes a day after the saudi's awarded $18 billion in
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deals for work at various oil fields. the saudi's, giving out some contract at the moment in various parts of their energy economy. let's get a first word news update with olivia hows in london. china's factories barely escaped deflation in june, unchanged from a year earlier. is deceleration rate troubles repaying debt. the largest supplier of consumer goods is warning the trade war threatens the existence of china factories. because now, the u.s.-china trading corridor is being disrupted by whether there is a deal or not, whether there are tariffs or not. as result, a lot of customers, u.s. base customers are trying to diversify outside of china. cannot leave china but diversified outside of china. putting less eggs in one basket.
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olivia: you can members of parliament have a livered a warning to the next prime minister. they won't allow a no deal brexit without a fight. the house of commons passed a --sure from stopping the eu u.k. from leaving the eu without an agreement. jerome powell will likely leave rate cuts on the table when he testifies to congress after the strong jobs report. the central bank's chief is set to speak today and tomorrow. the minutes of the fomc meeting are to be released tonight. deutsche bank will release bonuses according to the ceo. it is despite the german lender reporting its fourth annual loss in years -- five years. deutsche bank is trying to prevent its best employees from jumping ship. climate change is undercutting ending hunger. the world isn't on track to an supreme -- extreme poverty. the report says the pace is slowing.
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global news 24 hours a day, on-air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. anna: olivia hows here in london. next, can airbus get back on top? to thepany looks to get top again as the 737 max 8 say toll on boeing's numbers. bloomberg radio is live on your mobile device or dab digital in the london area. we are taking you through the corporate news. more of that to come. this is bloomberg. ♪
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anna: welcome back to the european open. 70 minutes until the start of the equity trading session in europe. -- 17 minutes until the start of equity trading in your. -- europe. down .1% on european equity markets. a stock that could outperform today, gam. but in a a net loss sign the asset manager might be turning around its fortunes after a scandal, it is forecasting net inflows for the period. with more, our finance editor in rome. we see the stock called pirate the open, suggesting the market will focus on the inflows more than the profits.
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today awe are seeing lot about a damage control exercise. yesterday, shares fell 11% after ubs set out a note questioning their earnings going forward and their inflows. if it does rebound 6%, that is making up some of the ground from yesterday. the announcement was unexpected treat they are putting out their earnings on july 30. a response for them to try and say it is not as bad as it looks. contextry important with the move yesterday in the share price. goes back many months, the suspension of tim hayward. had to liquidate their second ggest strategy. how far through that process are they? ross: that is one of the positives from today. they are confident they will
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wrap that up completely by the middle of this month, july 15. that is good. they are still on track for that and it is certainly something investors will be glad that they have been pretty quick we and efficiently. it will be a positive for the shares and there were some positives for acid under management improving -- assets under management improving. anna: thanks very much for the update. ross larsen, our finance editor in rome. let's get a bloomberg business flash with olivia hows in london. olivia: boeings second quarter jet delivery slid 54% from a year earlier after the global grounding of its best telling 737 max 8 after two crashes. airbus next 200 orders ahead of boeing after contracts for 145 planes engine. tesla is planning to boost
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production in fremont, california according to an internal email. the news comes after tesla achieved record deliveries in the second quarter. it beat expectations and eased fears of demand for electric cars. sold --k's spacex has in equity. loan investor wasn't identified in regulatory filings, but the pension plan announced it has backed the company. richard branson's burgeoned galactic will become the world's first publicly traded tourism company. -- the dealing to will fund the company until it can generate a profit. >> the deal from the saudis, that was not possible and if we were to actually take this public ourselves, it would take a long time. i think the approach seems to work very well for us. olivia: that is your bloomberg
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business flash. anna: olivia hows in london. breaking news conference data. may industrial output, rising 4% year on year. the estimate was for an increase of 1.6% so the number looks to be above estimates. month on month, the industrial output figure rising 2.1%. month on month, the estimate was for an increase of 0.3%. manufacturing production, getting those figures. that is for the french economy this morning. we see the euro spiking a little on the back of that. 112.15, -- now at 1.1215. this takes us nicely into an airbus story. and aviation story. that fromring about olivia and industrial output numbers. let's get to manufacturing company -- numbers. are european transport deputy editor joins us on set in
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london. good morning to you. we have data out of both boeing and airbus now? give us the state of play. >> six-month figures from boeing and airbus, and this is the impact of the max grounding for boeing. also, the fact airbus has got its act together after a slow start to orders too. after the first six months, we have 145 orders for airbus alone in june from the heiress -- paris air and that takes them into positive territory. boeing are -119 orders for the year. that is partly as a result of the cancellation of some max planes, but other aircraft being lost in the books. some of this is because both manufacturers have massive backlogs already that stretch for five plus years. the incentive to order new planes isn't huge, put on top of
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that and boeing, we got the max being grounded. no aircraft -- max's are being delivered. they are sitting around various boeing'sants, so delivery tally fell by more than 50%, as well. is not exactly streaking ahead because it is hard to eke out orders at this time but they launched the 321 xlr which is long-range, narrowbody. the top end of the market that the max is aiming at. anna: remind me where we got to on the 737 max 8. and you were in paris, we were hearing a lot about estimates and gates as to when the aircraft would fly again. willie walsh put his backing behind the aircraft. or have we gotten to? nothing from yet. since the airshow, we have had other issues emerge.
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boeing and the faa said there are a few more things we need to address. at the same time, we are hearing the european regulator is settlementensure the that is eventually reached on getting a max back into service satisfies its own requirements and those are more stringent than those at the faa. anna: thanks for the update. chris jasper, european transport deputy editor on the aviation beat for us as morning. next, the stocks to watch at the open. we talked about airbus and gam. bayer discussing a combination of its animal health business with aramco. this move stocks in the yes -- u.s. yesterday. this is bloomberg. ♪
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anna: welcome back, "bloomberg markets: the european open." 7:53 in london. six minutes till the start of the trading day in europe. let's get stocks we are watching around the east -- newsroom. page group, and bayer. i think we've had gloomy news,
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downgrades out of the sector. >> it comes after yesterday, a on the from basf chemicals side based on macro economic conditions. today we had another warning that is not companies this effect. operating saying the profit will be on the low end of expectations. concerns havet led to profit decline around 2.4% in the last quarter but i've looked at the numbers and regionlook at it, the declined 8.7% in terms of profit growth from around 9.9% in the last quarter. it is not just the u.k. that pagegroup is warning not, it is the entire european region and it is a huge read across the company's. -- companies. it could be a big sector
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movement in terms of this read across. ran stead was already down. dani, let's come to you on bayer. dani: they have been planning to sell their animal health care business, mids from private equity firms. a reuters report hit that bayer is -- has reportedly approached alanco. said a sale remains the top irt. to exit still looking the channel health care business but this means while they are exploring the merger, the bids from private equity funds will likely have to be put on pause. senseays the merger makes but it will be complicated from a regulatory standpoint. this will be the first session
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traders will be able to price the news in. anna: dani burger and it showed easton, thank you. first go is the function on your bloomberg to follow stock stories. -- newsing new slow flow. plots to watch this is bloomberg. ♪
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anna: a minutes until the start of cash equity trading this wednesday morning. this is the european market open on bloomberg tv. a minutes until the start of cash trading. the asian equity session, pretty flat and it entirely. waiting for jerome powell to speak later. u.s. 10 year, waiting for powell. the market is convinced about july. questions remained about the rest of the year but yields ticking higher, 2.8%, supportive to the dollar. the pound, down .1% or so. johnson andm boris jeremy hunt, both vying to lead the party. boris johnson has been doubling down on his brexit by the end of october assertions.
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parliament has made moves in the background block any attempt at no deal. wti crude up a little on data from the supply story in the u.s. it does remain a day where we could be in a holding pattern, waiting for jerome powell to speak later and he just doesn't speak today, but tomorrow as well. we will hear a lot from fed speakers. dani burger will take us to how many we will hear from. that is part of the narrative of the markets this week. inome powell today washington and tomorrow, so we will focus on that. what will he have to say about confirming market expectations for july and about longer-term or medium-term into the rest of this year and early next? that is what we are talking about with their mliv team. what is driving his dovish commentary? european equity markets, slightly more negative start to trade than anticipated. the spanish ibex off .5% after the periphery move.
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resilient,0, more down around 18 of a percent. -- 18 of a percent. begin is flat to negative. picture,of the sector we don't see many areas of green. a few coming through, a few industrials and financials looking in positive territory. looking as ifs, there are movers to the upside. that is the sector story for you. getting to what we are seeing on these markets this morning from a stock specific perspective, let's have a look at what is going on on the mov screen on the bloomberg. overall in terms of the market split, stocks gaining versus declining, two hundred five stocks going up, 377 to the downside. seems to be a preference for moves to the downside. a up 2.25%.
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i don't see a great deal of news flow behind this. a few oil names up there. servicesome of the oil moving higher in connection with oil prices. on the downside, this is interesting. lower in theiding recruitment sector. this is having an impact on markets this morning because hayes is down 6.3%. a rival business. randstad down over 2% and it was sessionin yesterday's on the back of a double downgrade from goldman sachs. to change expectations are declining in the recruitment side. amadeus, ex-dividend. going through some of these others. we've been through the major ones. interesting to see gam is on the rise, up over 2.5% this morning.
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european markets, opening lower. stocks in asia trading makes and u.s. teachers -- futures waiting on jerome powell. joining us on set, global head of fx strategy at union. let me talk to you about what is going on at the fed. we do find ourselves in a holding pattern, don't we? areet expectations expecting a cut in july. is that done? >> it is done. if they were to push back against the july cut, they would have been talking about it or tried to move the market down from the expectation. it would be late in the day for powell to reverse course and say july won't be a done deal. they removed the patient stance in the last monetary policy meeting so a july cut is probably a done deal. further rateis cuts.
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he will probably say the data has been missed. we have seen pmi data deteriorate but the jobs data has been ok and retail sales have been ok. you have a mixed picture. there are reasons to consider further rate cuts. ,eavily inverted yield curve declining inflict -- inflation expectations and multi-year lows. you have a global economic slowdown, as well. there are good reasons to consider further rate cuts. anna: the question on the mliv blog is what kind of market reaction we will see. will we see a treasury curve after jerome powell has spoken? will it be flatter or steeper after he speaks? one of my colleagues said it depends on the extent of the dovishness we hear and why he is dovish. what is the markets interpretation? i think it should flatten a little bit. we see modesty in recent weeks. once he confirms july is more or less a done deal and if he
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alludes to the slowdown in the global economy come you will find the 10 year becomes lower and a flatter curve following his testimony. the move got a lot of data coming up. the key for me is the pmi data on the 24th of july. if that deteriorates significantly, you will see more. anna: we've seen decline globally. in a manufacturing sector or a broader recession. this is new york fed probability of a recession in 12 months and it has a good record of taking these things. it has been picking up in recent months over the last couple of months of 2019. what prospects, what importance do you attach to this data? this is based on three-month tenure curves -- ten year curves. what do you read into that kind of data? peter: if you look at the chart alone, if that doesn't scare you
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as an investor, i don't know what will. is an important chart and important data series to look at. you got a lot of things happening. is a manufacturing recession but most recessions start with a manufacturing slowdown and spread into services. you've got to take note of this slowdown. part of that is due to the trade war concerns, but we are seeing a clear global slowdown. and europe, we are seeing a global slowdown. have responded with rate cuts or and easing bias. it is about time for the fed to get involved. anna: what is your dollar call, as we've been all the fed talk? peter: our view is to see a weaker dollar over the remainder of the year. we will move to levels around 1.18 by years end with risk on the upside. anna: peter kinsella stays with
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us from union bancaire privee. next, stocks on the move. in the share price of gam, rising after force cast -- forecasting net inflows in the first half. the markets, focused on the positive in the gam story this morning after a steep decline the share price yesterday after ubs put out a critical note. this is bloomberg. ♪
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anna: welcome back to the european open. nine minutes interior trading day and we are a little weaker across the european equity space, .3%. losing our footing as we wait for jerome powell later. let's get individual stock stories with dani burger. dani: pagegroup one of the biggest decliners. in issue we have is weakness a plethora of markets from the u.s. to china. the company says some of the trade concerns, as well as brexit uncertainty has caused them to see their 2019 operating profit at the low end of analyst expectations. that is the biggest intraday decline since 17. gam to the upside. a net loss,they saw au them declining hurt revenue but shares tumbled yesterday on a negative or art.
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somests at bloomberg said market expectations are that the worst is over for gam. doing thentex group, reverse. rallying on speculation that there was buying of the diaper maker but ontex group saying it hasn't received any offers so we are now seeing shares decline by about cents. -- 4%. anna: breaking news across the bloomberg. we had been reporting abu dhabi fund was said to be buying 30% of cbcs domestic in general. a u.k. appliance warranty provider. it seems the deal has been confirmed. confirmation across the bloomberg. 30% of capitals domestic and general. have voted in favor of
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a plane into preventing the next prime minister from forcing through a no deal brexit. the result was dramatic as the amendment passed by just one vote. the issue also led to a clash on live tv between the two men fine for party leadership. here is what boris johnson and jeremy hunt had the same delivery brexit by october. >> i'm not going to take anything off the table anymore than i will take no deal. >> they would be a rather curious thing to do if this is about taking back control for parliament to actually shut it down. for nos vital we prepare deal and come out on october 31. >> i am as keen as you to leave by october 31. i certainly think a badly handled disruptive no deal brexit could be costly. >> what you are telling businesses is they don't need to prepare for no deal and that is very dangerous. >> i don't think we will end up with a no deal exit.
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i don't think there will be the disruptive or disorderly brexit that you fear. that will leadership guide us through a big constitutional crisis and make a big success of brexit. that means putting ourselves on the path to long-term success and the way to do that is to get brexit done. anna: the whole our condensed into one minute. joining us now, rosalyn mathieson. good to have you with us to explain. what did last night's move by parliament mean? the jostling between the contenders to become the prime minister, but before that was happening, we had a dramatic block noarliament to deal but it didn't go as far some had wanted. >> what it is telling us is whoever comes after theresa may have is rough a time with parliament has made it. part -- she did. parliament saying we won't take kindly to you suspending us to
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get brexit done. boris johnson says he's keeping that option on the table and would suspend parliament if need be. --could have an intestate antagonistic relationship between boris johnson that parliament because johnson is on the hard-line of brexit. the center was in and did try at the last to have some sort of compromise. byis johnson is not starting saying i want to talk to the other parties, parliament to get a deal done. he says this is what i want and i will get it done. that is setting things up for a contentious time. anna: does this keep the potential for no deal brexit on the table? he says he is not in the business of taking things off the table and the amendment passed yesterday was not as extreme as others that would --e gone further in avoiding what does this mean for no deal? it means it is on the
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table and boris johnson wants to keep it as a negotiating tactic. he doesn't want to go to brussels with nothing. they will say hang on, the deal is not negotiatable. them --it might force some kind of concession from brussels. in the tape, he says he doesn't think the crushing exit is going to occur but the fact he is keeping it on the table means it is an option. anna: rosalind, thanks for explaining. rosalind mathieson. let's do that economics. peter kinsella at union bancaire privee is still with us. i pulled up a chart of the strong and of gdp data since 2013 for the u.k., and the estimate for today and we will hear about today stands in contrast. the small red box on the right hand of the screen. it looks as if we could get something that will keep newspapers busy in terms of
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writing gloomy headlines. a q2 gdp print saying q1 was overstated or exaggerated, reflecting the inventory buildup of the deadline ahead of march. the data since then has seen a clear deterioration of april, may, and june. u.k. economic surprise index has fallen off a cliff and is moving rapidly into negative territory, which is telling you we are seeing an aggressive slowdown in the u.k.. it wouldn't surprise me to see a negative gdp print today and we could see another negative gdp print in q3. it looks like we are moving toward recession. anna: two of those red boxes and it is recession. let me ask about the politics a little bit because we didn't see much reaction in the pound yesterday to these amendments being passed. one of our colleagues said the reason the pound didn't jump on this and conclude no deal has been pushed further away or been
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made less likely by the amendment was they passed the wrong amendment. other amendments would have been more extreme and the one they passed told the government to report back on northern ireland, you have to keep parliament open. what was your take on all of that in the pound? peter: the u.k., domestic political machinations in parliament -- you had another example of the u.k. debating with itself again rather than debating with the eu. we have a hard line -- hard deadline of october. if that is not met, you can see the u.k. crashing out of the eu. what parliament says -- parliament has proven itself to be effective at either stopping brexit for changing course on brexit so far. the europeans so far are saying look, we are basically not going to extend brexit again unless there is a general election in the u.k.. we will not get into the idea of
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extending ad nauseam. my leaning is toward hard brexit . we see cable at 120 minimum by september and go from there. anna: let's put that in the context of this chart. this shows the pound, the groom pushing the pound to a two-year low. this is a reflection of our relationship with the rest of the world. -- and what of beyond? >> that his political context. if we move toward a hard brexit, we are looking at a general election and what we have seen in the u.k. is we have an extreme right and extreme left. anna: there will be enough rebels of the tory party to trickle that -- trigger that? peter: yes, and that would lead to a general election. center ground in the politics has shifted. the prospect of jeremy corbyn in
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government is not good for sterling. we will have to see how things go after brexit. , aftereter kinsella brexit. global head of fx strategy at union bancaire privee. he stays with us. coming up, why wait until september? data out of europe is hardly expiry -- inspiring so why would mario draghi wait to ramp up stimulus? we discussed the risks of underpricing the ecb next. this is bloomberg. ♪
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anna: welcome back to the european open. 22 minutes into the trading day and looking sluggish around the european equity story. the german market one of the laggards, down .2% as is the stoxx 600. ftse 100, fairly flat. he had upside coming through on the ftse mib in italy. investors betting the ecb will wait until september to ramp up monetary stimulus, maybe underestimating the risk of earlier action. the euro area economy is suggested limping. president mario draghi is given reasons to act on his pledge if the outlook doesn't improve. a fed cut could push the euro higher against the dollar, dampen eurozone inflation and give the ecb reason to step up
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its own stimulus. peter kinsella, global head of fx strategy at union bancaire privee still with us. you may take issue with the weakening in the data. sure, the eurozone data story is weak, but you see stabilization. peter: if you look at this prize indicator, it has increased lately which tells you the data is not surprising as negatively compared expectations. we are no longer seeing deterioration in euro zone data. the french ip data today, decent and better than expectations. you have seen stabilization in the data. if it continues, that would indicate easing from the ecb from july might be premature. at this stage, but we are talking -- user 10 basis points on the depomed, 20, that doesn't do a lot. cuts at thisype of
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point won't achieve a lot in my view. anna: you are not accept -- expecting a remove? peter: i would say september. anna: when your implied -- itlity has cratered has been this low in 2014 but we had some periods for things got more exciting. it has been fairly stable, but you see room for upside in the euro. tell us how high and will that create vol? peter: i think it will. volatility is not forecast double. the only thing you've got to go on our anecdotal's of historical levels. when we see one your volatility, three or policy rarity -- volatility around 6%, that is good. they could be hedging decisions by eurozone corporate's, the fed's cycle, or the ecb. a lot of things could lead to
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the corporate hazards that we should reach -- three hedge our order books. if they just cut in july 25 basis points and say the data is more stable, we will wait and see, that will not send the dollar down that far. peter: not illicitly, but when do the fed ever do just one cut? they might start with one. they don't have a lot of ammo in the tank in the since they've only got roughly 250 basis points it can potentially cut. there is a risk of qe if things slow anymore. there is a lot of risk to the dollar. anna: talking euro zone economy, what we heard from basf yesterday, ringing some alarm bells among analysts. maybe the concern is broader because a colleague pointed out basf fits high in the supply chain from everything from cars to food -- it is across a lot of sectors and for this german bellwether to be doing badly
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doesn't bode well. is this going to be a very german slowdown story in relation to the eurozone? if the strongest guy in the room starts weakening, it is not good for everyone else. although it is interesting you are seeing a coincidence lowdown between china and germany. obviously, the chinese slowdown is having an impact on german growth. that is a given, and really we are looking at chinese data which has been continuing to weaken in the last quarter. overall, i don't anticipate any ed recovery in germany unless we hear about more fiscal stimulus in germany. we know things have to get worse before they consider these actions. , globalter kinsella head of fx strategy at union bancaire privee. peter will continue the conversation on bloomberg radio and 9:00 london time. let's look at the sectors. stoxx 600, down .2%.
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sector, goodalling and beverage, health care, telecom moving lower. we see defense is being sold off. an interesting move on the day we are negative. next, more on powell. this is bloomberg. ♪ hey! i'm bill slowsky jr.,
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trading day, here are your headlines. stocks adopt a holding pattern ahead of testimony from the fed chair. will he provide a clue to the central banks path? shares in a swiss asset manager rise but are still down over two days following a ubs downgraded. and u.k. mp's back a plan to prevent in new york brexit boris johnson refuses to rule out suspending parliament in a heated debate with rival jeremy hunt. welcome to "bloomberg markets." 30 minutes into the trading day,
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this is how things are shaping up. tech stocks to the upside, ams the biggest gainer. but broadly speaking, there is a downside bias here. as a wait for jerome powell, we seem to be drifting downwards. banking stocks making moves higher. commerzbank and caixabank moving higher. some support from the italian sector helping them to outperform. let's focus on the downside. we had a warning today on the recruitment today. paid group is a recruitment readess and there is a that is possible to make. hayes is down in sympathy. yesterday, a double downgrade pushed this particular staffing business down as well. the market is rethinking these stocks ahead of the earnings season. micro focus is also weaker.
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amadeus is down. that is a quick look at where we are. waiting for powell is really the headline. butts get a bloomberg first word news update. -- let's get a bloomberg first word news update. -- andu.s. and check china have held high-level talks. larry kudlow says the initial talks were positive. started in spring, then it stopped. hopefully, we can pick up where we left off. ambassador lighthizer and secretary mnuchin are exploring all about. discussions today went constructively. but it's too soon for details. south korean president moon jae-in's warning business leaders of an extended trade battle with japan over export controls needed to produce
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semiconductors and computer displays. there are concerns it could disrupt global supply chains. u.k. members of parliament have delivered a warning to the country's next prime minister. last night, the house of commons narrowly passed a measure to stop parliament being suspended to force the country out of the eu. second quarter jet deliveries slated 54% after the grounding of the 737 max 8. airbus ended the year hundreds of orders ahead. this is after it signed contracts for 140 planes in june. climate change is undercutting to drive to end poverty and hunger according to a united nations report. says the world is not on track to end extreme property by 2030. inr the number of people poverty has declined, they say the pace is slowing. global news, 24 hours a day on air, on tictoc, and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. anna: thanks.erg.
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to long-termype bonds have flourished but there returns hang in the balance with jerome powell due to speak later today. if he fails to confirm rate cuts , some of the hottest strategies by flounder. with more, here is bloomberg's dani burger. dani: we have to start with the basic theory for returns in this environment. assets are valued on the expected cash flow which gets discounted by interest rates. , thatn we see rates fall boosts nearly every single asset in the market. that has benefited a whole swath of hedge fund styles. so the recent winners might slip if powell does not satisfy. keptes i spoke too pointing to its specific leverage strategy made famous by ray dalio.
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the idea is that it holds basically every asset class and gives higher waiting to less risky things like bonds. that style is headed for its best performance since 2010. with a long bond exposure has done well in anticipation of rate cuts. investors have been flocking to duration risks at this bond fund has seen the positive profits for the past consecutive eight months, trading at the highest level on record. but when it comes to equity markets, the winter has been low volatility funds. to a representative from research affiliates who told me they have done well since a weak economy. many of these are also bond proxies which plays into the long bond trade. i will show you the performances of these strategies, and you can see how the dovishness from the fed help them -- propelled them.
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but after the jobs report, the returns started to stall. but where do they go from here? that is the big question ahead of today. we have several fed events that could set expectations. we have powell who begins his minutes. and then fomc so any pullback in the dovish narrative could and easy money for the fast money profits. anna: thanks so much. dani burger explaining some of the ways you may be caught on the right or wrong side of jerome powell's testimony. joining us is the head of equity avestments at a monday -- monday. -- amundi. one of our colleagues was saying that this will keep treasury volatility elevated. what about your world? are you expecting volatility around this fed news?
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>> it is fair to assume. cycle of then the longest economic expansion on record in the u.s.. epic a slowdown in growth which is accompanied by high volatility. anna: what is your expectation? is you going to leave the market contact with his expectation of --5 point of basis point cut 25 basis point cut?. kasper: the market has gotten slightly ahead of itself and my -- it might need to take a more reserved stance. clearly, the economic signals are mixed. is the domestic economy driven by the consumer and the consumer in the u.s. is very strong. so that narrative does not play
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into a major easing cycle. anna: on to the european story. good at valuations is part of your thesis. so how much exposure to you have to european equities when we are fearful of the china slowdown? kasper: good point, anna. clearly, the european economy is much more open to the u.s. and more exposed to the trade angle. when we are seeing is that of the valuation is extremely compelling -- that the valuation is extremely compelling and is more positive in europe. so there is good ground for opportunities in europe. anna: fiscal stimulus, is that to be forthcoming in europe? kasper: i think it is. and -- as in the u.s., domestic demand is driven by the consumer. we are seeing strong employment and wage growth.
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we are looking forward to the biggest fiscal stimulus in about a decade. all of that is very stimulative for the domestic demand story. so the risk, as you said, is on trade. anna: the grr function tells me which sectors are on the move. i can see that some of these bond proxy sectors are unloved today. oftenk about bond proxies , but you talk about them as teddy bear stocks. talk about this. kasper: we are in the part of the cycle where there is a lot of uncertainty. investors like to cling on to something that feels safe and stable. the narrative here is the teddy bear stocks. at the end of the day, we are fundamental investors and fundamentals matter. when you look at the bond proxies, they are simply too expensive. so we tend to avoid some of those. if you have to go defensive, we prefer some health care sectors.
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otherwise, we find much more opportunities for value in the cyclical compartments. anna: talking cyclical, what about european banks? they are well beaten up, pretty cheap, but you like some of the european banks. kasper: this could be an interesting contrarian trade. we all know the negative narrative. interest rates are low, growth is anemic, the challenges are well known. when you look at the core european banks much on 7-8 times , this is very, very attractive. so there can be an interesting opportunity here. what about your biggest conviction trade? is it around oil? kasper: yes, when i look at oil, there is the combination of a strong balance sheet, cash flow
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generation, and hedging for the geopolitical risk. so this is a interesting opportunity. anna: good to speak to. kaasper, head of equity investments at amundi. retailer plunging after warning sales will fall in the coming months. the stock is down 1% or so right now. it was down a lot more than that earlier. this is bloomberg. ♪
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anna: welcome back to the european equity open. 8:44 in london. european equity markets are turning around a little bit. the ftse 100 is in positive cac.tory, as is the the overallng well, picture weighted down by the ibex and the dax. the world's largest supplier of consumer goods is the latest to sound the alarm on the damaged the trade war is doing. fung transports supplies for the likes of walmart and nike. the supply chain stretches
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across asia but gets most of its goods from china. that supply chain is under threat as producers threatened to shift production outside of china. the ceo told us he see's changes regardless of whether a trade deal can be made. last 12-18 months, the world has been experiencing changes, sometimes on a weekly basis. as a result, that disrupts the global trade flow for a lot of customers, especially u.s.-based customers. now, the u.s.-china trading corridor is being disrupted by whether there is a deal or not. a result, a lot of u.s. customers are trying to diversify outside of china. not leaving china, but diversified to put less bigs -- eggs in one basket.
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this is a risk for us, because when you diversify outside of china you go to different countries. and we have the biggest network in the world are we have deep knowledge, history, and relationships with local vendors where we can help customers move very quickly. it is actually a big opportunity for us now that the world is changing more and more. >> why is that? you are saying this is the best opportunity in 20 years. with have already seen companies shifting production out of china, even before the trade war. the trade war might have accelerated that, but why is now a more opportune time? >> even nothing seven shifting out of china, not enough. there are still some categories that are 80-90% sourced out of china. those are much harder to shift. ,ecause of our global presence we are able to help our customers shift quickly and find structures that fit their
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quality level much quicker. >> you are getting pressure from your clients now to shift production. is it mostly the u.s. customers? >> i would say it is mostly u.s. customers because of the tariffs. the european customers actually see now is a buying opportunity inside china. in china, many factories are not operating at full capacity and they are eager for business. and when they are eager for business, there is a pricing opportunity. so it is actually an opportunity for any non-u.s. retailers. european, japanese, southeast asian, or even domestic. >> are your clients trying to push production out of china? do you think the vietnam, bangladesh, india's of the world could ever replace china? >> physically, china has 1.3 billion people. there are a few hundred million in the manufacturing industry.
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when you look at any country outside china, most countries don't even have that many people in that country. so short of an extreme automation, i would say that in the next 5-10 years, no single country can replace china. but many countries will take up a different areas of products that china is trying to move out. and the chinese government has been trying to move out a lot of the low value and high labor manufacturing. so each country will have their own focus. the anon is a big beneficiary of that. -- vietnam is a big beneficiary of that. a lot of the southeast asian countries are. but no sink country will take over the production capacity of will -- single country take over the production capacity of china. anna: that was lee and funds -- li and fung's ceo speaking to
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yvonne man. annmarie: this sale has already begun. strategistsoke to who said that this sale is inevitable but not revolutionary. still, shares are rising today. dani: super dry on the other side, giving a warning for sales to come. it is actually a very third profit warning in the past 12 months, blaming warm weather. super dry trading at its december low paired some of those losses but still weaker by nearly 2%. falling in simple the its recruiting page group, giving a warning on their full-year outlook. hays is one of the biggest decliners, falling 7.3%. and we are seeing other recruiting firms hurt on the page group news. anna: dani burger with your movers and quite a few this
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morning. up next, hitting the gas on auto production. tesla tells employees they are raising output after achieving record deliveries. we get analysis of that. this is bloomberg. ♪
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anna: welcome back to the
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european open. 52 minutes into wednesday's trading session, things are looking a little brighter than they did. still down by .1% on the stoxx 600. some weakness coming through the german and spanish markets. some of the strength hedges the flat picture overall. strength from the ftse 100 up .1%. of the oil prices higher and that often helps the market. stronger, upalso by .7%. stock about the sector picture for the european equity markets. function which shows me the banking sector is the best performing in europe today. auto's and parts move higher as well. oil and gas is doing quite well and basic resources. those helped to lift what is going on in london. and individual technology names moving to the upside, but as a
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whole, the sector is fairly flat. telecom utilities, a couple to the downside. it is those bond proxies that seem to be out of favor. or teddy bear stocks, as we heard from kasper over at amundi. we are waiting for u.k. growth data. in the meantime, let's get to u.k. politics. on a plan aiming at preventing the next prime minister from forcing through a no deal brexit. the amendment was passed by just one vote in the house. the issue also lead to a clash on live tv between the two men vying for partisanship. here is what boris johnson -- four party leadership. here is what boris johnson and jeremy hunt had to say. >> i will not take anything off the table. >> it is a rather curious thing to do to shut down parliament. >> it is vital that we prepare for no deal and come out on
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october 31. >> i am as keen as boris in view to leave by october 31. handled, athat badly no deal brexit could be costly. >> what you are telling businesses is that they don't need to prepare for no deal. and that is very dangerous. >> i don't think we will end up with a no deal exit. that is to say, i don't think there will be the disruptive or disorderly brexit that you fear. >> we need at leadership that will guide us through a big constitutional crisis and make a success of brexit. that means being honest with people. >> put ourselves on the path to long-term success. the way to do that is to get brexit done. anna: the consensus for tory leadership, we will know more by the end of july. certainly, it seems boris johnson is favored, but we will watch a that develops. and watch how the transatlantic
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spat between trump and the u.k. administration develops as well. we get u.k. gdp in the next hour. next andance" is up they will be dwelling on the storyrote story -- growth and the weakness that is perhaps to come. , theding to a survey economy shrank for the first time in seven years last quarter. we will look for confirmation of that negative growth number. you see a very small red box which suggests a period of weakness after that stockpiling boosted the previous quarter. , our guest said it would be the first of two periods of negative growth which is a technical recession. let's have a look at the markets. ftse 100 is a just above a flat territory. just a bit of an upside bias.
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the stoxx 600 makes moves lower. really, we are waiting for jerome powell. will he confirmed market expectations? and what will he have to say about the path to rates for the rest of this year and beyond? this is bloomberg. ♪
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francine: jay powell faces congress today, but only one question matters to the markets, will he pushed the fed cut rates -- push the fed to cut rates? the candidates for the next u.k. p.m. clash over brexit. front.ther president moon jae-in tells companies to prepare for a prolonged trade battle. u.s. and china resume high-level good mornin


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