Transcripts For BLOOMBERG Bloomberg Daybreak Europe 20240714

Dialogue with protesters can resume once the by log violence ends. Pacific shares tumble as a cancel slides. Afterr embattled leader argentinas assets plunged president Mauricio Macri warns against return to a previous regime. We havereatest problem today is that the alternative to the government, the kershner alternative does not have international credibility. Ive been saying this for three nap years. International investors do not trust them. Good morning. Lets take a look at the assets across the world. After the news out of argentina and china. Asianpacific stocks look down more than 1 . After the retreats in europe yesterday in the u. S. After that, in response to hong kong we see the asiapacific index down. Chinas 10 year yield reaching a low of almost 3 . Right now 3. 01 . It had been down that low. You can seals even in china where growth and inflation are yields in china where growth and inflation are higher is down to 3 . Then the sei em currency index falling at concerns about argentina rebel throughout markets. Ripple through markets. U. S. Session yesterday the low bond yields did not supervise support to equities. We saw that yields cash the 30 year yield cyber record low. And that 10 year yield dropped. The 10 year yield steady after dropping a must attend basis points. Everything a little recovery in s p futures up. 2 . Overall a bid for safe haven assets and a selloff in risk assets. That is turning run ever so slightly today. The risks continue with hong kongs embattled executive carrie lam saying the citys economy is suffering as a result of the ongoing protests and warns it could take a long time to recover. Hired everyone here to put on their prejudices, try to calm down emotionally. I urge everyone here to put down prejudices. Look closely at our city. Hong kong, our home. We want to see hong kong fall into an abyss. Meanwhile hong kong airport says operations are back to normal when hong kong flights were canceled yesterday amid a satan i of protesters. Amid a sit in yesterday by protesters. Are we seeing any signs that civilization might be coming soon . Operationally, the hong kong airport says things are getting back to normal. Keep in mind you had hundreds of flights affected including cancellations. Even Cathay Pacific is saying is going to take another couple of days, tomorrow and thursday to get all of the passengers redirected and to their destinations. So it is not necessarily back to normal for the airlines. By the airport is operating. At regular capacity right now. Just trying to get all of those planes slotted and flown out of here. Passengers have been arriving. It has been a steady buzz and drum up of more people. Behind me, let me step away for second. Is not like yesterday where we had an estimated maybe in the high side but about 10,000 or so protesters which led, of course, to the sudden decision by the hong kong airport and the Hong Kong Government to shut down all flights outbound and many of them inbound yesterday afternoon. And it remained pretty much shut throughout the night as protesters also stayed here. They did start leaving of their own volition yesterday evening and into the early hours of the morning as rumors spread that right place perhaps would come in. However that did not happen so far, ive been here since five this morning. So far we have not seen any Police Presence other than airport security. One thing we have learned in the last hour though, and the last five minutes the airport express train which yesterday got clogged to standing room capacity only, theyre going to reduce the frequency from every 10 minutes to every 15 minutes. We talked to a spokesperson for the airport and they said that is pretty much for crowd control. They do not necessarily want a repeat of yesterday, even though protesters are calling for more protesters. Once youve got your rest back home, come back to the airport today. Carrier lamb earlier in a rowdy news carrie lam earlier in a rowdy News Conference. Is there anything she can do to calm this unrest . Now she is not said anything new, other than that the economy continues to weaken further. She is not given in on any of the five main demands from the protesters. Firm that it is not the time to resign. She has to see this through. As i said, not a lot new from her today other than again, warning that the hong kong economy could fall into the abyss. Mo, ao heard from claudia pan democrats lawmaker she is giving more support to the protesters. She said it is clear from the press Conference Today who her bosses and that is beijing. Carrie lam has basically confirmed to the press who is actually running the show in hong kong, and that is beijing. Carrie lam though, did show more emotion then she has in the last couple of weeks since resurfacing before the cameras prayed she said she is heartbroken that there were protesters injured on the streets of hong kong over the weekend, including of course the one who has become as ability protests including here yesterday at the airport become a symbol of the protests including yesterday at the airport. Hit by a Police Project on the eye. Stephen thanks very much. Stephen engle at the hong kong airport. Now risk off momentum is gathering pace, the yield on the u. S. Long bond has grossed an alltime low has brochin long time alltime low. Events in hong kong and argentina over the past 24 hours have added to the negative sentiment. The yield on the 10year note depth as well. At one point it was just five basis points more than the twoyear. That is the flattest that the sinceends curve has been 27th 2007. Ubs has dropped its forecast for the 10 year treasury yield from 2 . This chinas tenure sovereign bond yield fells for the First Time Since 2016. Chinas many data has not helped sentiment. Growth back to the slowest on record. Lets look at the drop in long bond yields in the u. S. First. Had goldman this week turning neutral on global bond duration after the recent rally. Would you bes making this a movie . If you look at what is going on globally, growth is slow and slowing. Inflation is nonexistent, the momentum in the economy is downwards. After that some jeep that some geoPolitical Risk and theres only one way to go for a bond yields and that is down. Spread, do youhe see it actually inverting and what is that mean to you . At the moment we still see that the u. S. Yield curve is still basically flat. That means that the market is not really pricing in a recession just yet. So u. S. Yields are low, but compared to global the global yield, u. S. Yields still look reasonably attractive from a global perspective they still offer some yield at least. Which part of the curve looks most attractive to you. If you say yields have only one way to go do you prefer the longer and . For our clients we are pretty neutral on duration. It is pretty difficult to invest with bond yields in your about the negative and the u. S. At 2 . We are pretty neutral but the direction is pretty clear at the moment. If you want to take some duration risk, if you want to take some leverage, at least you want to go out to the longer and the curve. What are you recommending to your clients . Is this a time where you would rather focus on preserving capital than chasing returns . We got into that Inflection Point . Arees for our client we basic claim making that call. Here markets are still up 10 for the air. It is fine to look and lock in some gains given the glow outlook. Bonds are not really attractive. Basically as preservation of capital at this juncture. Talk to me about risk assets you mentioned equities. The s ps top 500 stuck between the 50 day and 200 and moving averages. If we break the 200 Day Moving Average to the downside, would you be expecting losses at the magnitude of the december route that would keep you away from equities . Or is still summit positives on risk at what assets. Equities or maybe on credit . For our clients we like credit a bit more than equities. On the equity side we do not see the growth of their. For the credit side, it is really difficult for a company to default, given the low Interest Rates. Global growth is weak but not that week. So we kind of prefer credit over equities. Small on the way equities. Leaning toward a more negative sense stance. The timing is not there. That technicals could be one of them. Or in theory the fundamentals which we are not seeing at the moment. Are there any regions that you prefer . Prolonged time we have seen europe undervalued in relation to the u. S. In terms of equities. Asia is one that a lot of people have been talking about as well as being undervalued. Perspective,uation the case is clearly for europe []for but for little Global Growth outlook you want to prefer the u. S. That is usually the region that outperforms if things get into a special situation. You said you might be looking to increase the underweight in equities. You said one thing that might trigger that would be the technicals. If you and yields drop further with that make you want to take any off the table from equities. But with interest in yesterdays low bond yields did not support the equity market. So far one thing that kept us from increasing the underweight is that the bond yields are support. Markets love low rates. We are enthusiastic about that. At a certain point there is a negative cycle feeding in. And the bond market is telling us something that dings are not that sound. That negative sentiment really changes that lower yields lead to lower equity markets, that could be a clear catalyst. , roelofs elements are guest cohost. Lets get the bluebird first word news. Bloomberg first word news. Italian Prime Minister will have to wait before consolidating power in rome. Senate leaders have not agreed on a date for conference vote. Decisions in the Upper Chamber will continue tonight. If there is a new election, salvi needs commanding lead in the poll means he will likely be the next Prime Minister. Vice president lenny in 2022. On a run she said she would not have run for the vice presidency if she did not feel ready for the top job. She does not want the u. S. To take sides in the u. S. China trade war. To be more friendly with china or with asian neighbors would mean decrease our friendship or our relations with the united states. And i do not believe in that. I do not believe that the philippines should choose between the u. S. And china. Robredo. Hasapore the city state seen growth at zero to 1 this year. The outlook has darkened in recent months. The trade war has raised the prospect of a recession and job losses. Global news 24 hours a day on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Coming up, another embattled leader after argentinas assets plunge, president Mauricio Macri warns against a return to the previous return previous regime. Toand when youre traveling work, tune into Bloomberg Radio live on your mobile device or on dab on Digital Radio in the london area. This is bloomberg. Good morning this is bloomberg daybreak europe. In on the markets in asia. Risk off once again we are taking our lead from what we saw an global stocks overnight. We had a number of markets in asia resuming trade today after a Public Holiday yesterday. Quite some accelerated losses in the likes of the nikkei down by 1. 2 . We also have a weaker yen today. And the philippines is at an 11 week low in its index as it resumes trade. The hong kong hang seng index continuing to be sold off protests generating seven sentiment. Cathay pacific shares falling sharply for a second session. Reprieve coming through in these markets today. We have been seeing a lot of money going into bonds in asia as well you were mentioning the yield on chinas tenure falling to 3 for the First Time Since 2016. I also want to show you what is happening hinge singapore. We had a negative read in Second Quarter gdp. Actually falling i 3. 3 , which was below estimates. When we had seen 3. 8 rose in the prior quarter. If we see another quarter of growth that is going to be a technical recession for the singapore at the same time the government coming through and cutting their 2019 growth forecast to zero to 1 from one and half to 2 . All of this in the wake of the u. S. China trade dispute. Bluebird economics saying stagnation in singapores economy in the Second Quarter could set the stage for a recession in the second half. Juliette, thank you very much. Lets get to south america the secondbiggest market selloff regions50 across all happened yesterday. After president macri had a landslide lost in weekend primaries to his populist opponents Alberto Fernandes, the markets followed suit. The peso tumbled 33 to a record low six ypres dollar. And the marybelle stock index lost the most in intraday trading. In a press conference the president blamed the market rout on his populist opponent. The greatest problem we argentina ands have today is the alternative to the government, the kershner alternative, does not have International Credit ability. I have been saying this for three years. International investors do not trust them. Jonas now are managing editor for global markets. Just in, why are investors so scared of the Previous Administration since it should be mentioned that Christina Fernandes to cash in her would be the Vice President will Alberto Fernandes returning to power . I guess theyre worried theyre not going to get their money back on their bonds, that is underlying this whole issue prevents why we are seeing people selling argentina so strongly. We are seeing the peso plunge. The problem here is that macri for the past four years has been trying to establish a credibility as we heard in that clip just now. That is pretty much the story. That is why International Investors have trusted Mauricio Macri. He has on his level best to try to put the country back on a stable footing. He has won a record imf bailout to try and help, as i said steer the country back on some kind of realistic economic model. The alternative is that we go back to the populist policies that you talked about, the the fernandez camp represents. That doesnt speak to what the ordinary argentinians are feeling. They are feeling the doubledigit unemployment 50 inflation you have this kind of dichotomy divide between how the International Community looks at argentina, and how ordinary argentines see the country. That is why we see this big sharp election results, and the concert and markets at the moment. Cana but the thing is Alberto Fernandez actually achieve the same goals with different policies while maintaining the support of the imf . The imf is key here. Really important now is to see how fernandez negotiates these next couple of months. Is he going to make all the right noises that say yes, we will talk to the imf . We will try to continue some of the policies that macri has brought in . Or is he going to say no, we will go back to the old plan. And that is really what people want to see. The initial signs are not entirely positive. Because he has already started to blame macri for the state of the country. And macri has said look what markets are doing right now. That is all a reflection of what people think you represent. So it is very much the blame game going on at the moment. Said hes has already does not want to default on the bonds. Yes, who would . But the market is seeing it very definitely now. About 75 s talking probability of a default over the next five years. According to credit default swap. Matt one of the things i was talking about with colic this morning is how likely is it that Market Pricing changes the outcome of an election . We have seen these kind of things before. For example in turkey, when the leader dropped out of control, or rose in relation to the dollar. When the lira dropped out of control arose in relation to the dollar. It did not seem like that affected erdogan in his situation. Can we expect voters minds not to change and argentina either . You brought a very good point. Of course we see all these numbers and they look very ugly. But again, people on the ground are not as aware of what goes on in the stock exchange. They are not looking upon prices pretty theyre looking at how to get to the next few days. Is inflation. On ifs big selloff in the peso it is sustained this way, and it looks as if it might be for some no one sees time the peso coming back from this. Then that will have an inflationary knock on effect. But that will not show up for a while yet. And certainly not before the election. And argentines are already grappling with 50 inflation. So what is a little bit of extra inflation on top of that really going to do . Is it going to make much of a difference . I doubt it. Also quite used to a volatile and week currency. Let me ask whether the market in your mind has fully priced in all the dangers that justin point is to have a fernandes when, or if we could see even more extreme moves from here . It is difficult to say in this environment because the outcome is pretty binary. That is the worrying part. The mess from the market is pretty clear. Argentina defaulted eight times over the last hundred years. I think the probability clearly from the bond markets and currency markets is that they will default again if the populist regime comes into power. I do not think it will change the voters minds. Because they are really feeling the pain on the street. But the market is pretty clear. Argentina depends on the kindness of strangers. And the strangers happen to be foreign investors. Thank you so much. Go format. Go for it, matt. Depthwe have seen the dropped so much. . 55 on the dollar is where we see argentine century bonds trade trade i just wanted to point that out. Talking about this hundred year debt. It is certainly not worth as much as it once was. Nejra absolutely not. Thank you so much to our Global Emerging Markets managing editor. And coming up snap election on ice. Mall tales solving these bid for power have to wait longer. As italys Senate Delays a noconfidence vote. We will discuss that next. This is bloomberg. From the couldnt be prouders to the wait did we just winners. Everyone uses their phone differently. Thats why Xfinity Mobile lets you design your own data. Now you can share it between lines. Mix with unlimited, and switch it up at anytime so you only pay for what you need. Its a different kind of Wireless Network designed to save you money. Save up to 400 a year on your wireless bill. Plus get 250 back when you preorder a new samsung note. Click, call or visit a store today. Nejra this is bloomberg daybreak europe. Im in london. Matt and im in berlin. What a day for markets we saw yesterday. At the beginning we saw equity indexes soaring over 1 on the continent, and writing rising in the u. K. Even with a stronger pound. That turned around as soon as we saw the unrest in hong kong ground flights at the airport. Nejra yes it was interesting are sentiment turned you sought in the u. S. Futures as well. Initially positive. And they turned on the increase in the unrest in hong kong. To me that speaks to how sensitive and fragile the sentiment is at the moment that you could see such a turn into the red just on an escalation there. It was like investors were climbing a or of worry and hong kong was just adding to it. Matt yes and thats global, not just what we see in hong kong and china due to trade concerns. But in argentina, the loss of macri in the primaries drives the stock market there to the biggest loss of any stock market globally, the secondbiggest loss of any stock market globally since 1950. So it is hard to overstate how much we saw drops and equities there. Also in currencies. In death. For to much everything is being premuch in debt. Everything is being sold off. Nejra we are waiting to see clarity. Everything is being sold off. Stocks, bonds. And the pesos hitting a record low. Question of whether the may be a contagion. Pimco is saying there might be. Terms of hong kong that started to bring up questions over whether hong kong is going to have to feel globally that it needs to do is play more of a show of strength display more but show strength. Dropping,rries yields equities dropping. Today a little bit of stabilization in the 10 year treasury yields in u. S. Futures. In by. Us our partner mumbai. Any standouts in todays session . Good morning. Reliant if reliance had not done what it is doing, you can see from the benchmark they are not doing as poorly as the rest of the asian markets are. Exar down. Other market stocks are down. Reliance industries, the Second Largest Company by market capitalization is standing out. It had the best gain in the last two years, courtesy of a deal struck with ronco. Aramco is buying 20 in the Chemicals Business i stand corrected 13 . Gainmust be the biggest that one of the largest companys in india has had in a number of years now. Been for this announcement yesterday on a market holiday we would have been down about a 1 for the indian markets. That is helping hold the index slightly better and what the rest of the asian screen is doing. Matt thanks for much for that. And ironommodities ore, what do you see . Goldman is out with a new bold call. But i want to start first with what is going on around the world. We have seen the latest catalyst of hong kong and argentina really way on emerging markets weighing on emerging markets and assets. Hong kong is down 1. 5 and the nikkei is down more than 1 . In foreignexchange the dollar against the swiss franc and dollar against the euro. A lot of economists are saying that next month at the snv meeting we have to cut the benchmark Interest Rates to prevent this currency from continuing to appreciate. The Interest Rate is already at. 75 . We are seeing a rally with yields coming down. The chinese 10year is the one to watch hitting that 3 , a level of the First Time Since 2016. Is not shown here at the moment. In commodities what im looking at his iron ore down more than 2. 5 . Goldman sachs says it is just temporary. Comeback kid. It is a bold call especially when you look at how other banks do not have these kind of calls now on iron ore. They say can search far above hundred dollars per ton, even further out it can surge to 115 per ton. They are saying this is a temporary leap in prices and it not be longlasting effect on the iron ore price. One more thing to add the yuan fixing has preoccupied us so much of the last several days. That may be adding out tubes ability in some parts of the market. Today we are asking about ml id. At the Global Economy is heading toward recession. Which assets will outperform . Andcan join the debate reach out to us. Ib tvgo on your bluebird. In hong kong and battled leader carrie lam said hong kong is descending into chaos. I urge everyone here to put on their prejudices. Try to calm down emotionally. Use a minute to think seriously and look closely at our city, our home. We want to see hong kong fall into an abyss . Global anxiety showing up in the treasury market. Deals on 30 year Treasury Bonds approach an alltime low. 10 year yield also fell. It was at one point just five basis higher than the twoyear note. That is the flattest this part of the curve has been since 2007. The u. S. Fiscal deficit has already exceeded the fullyear figure for last year. The gap has grown to over 850 billion and spending growth has outpaced revenue. That is wider than last year shortfall of just under 780 billion puts is already the largest federal deficits in 2012. Singapores cut its forecast to almost euro for growth. Desk u. S. U. S. In china trade war dampened the regions growth prospects. In outlook has doubled singapore in recent months the outlook has changed in recent months. Global news 24 hours a day on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Matt the fate of italys populist government still hangs in the balance per the Italian Senate will set today the date of a confidence vote in the government. That is after leaders failed to reach an agreement on monday. This means the league leader, Matteo Savini, will likely have to wait another week before moving ahead with his paragraph. 20 us now from rome with bloomberg. Maria, do we have any clarity at on the schedule of how things will play out . Morning. There is confusion here in adelaide. We are almost a week into the government crisis triggered when theres confusion here in italy. Its a week into the government crisis triggered. We understand they ought to reach theyre going to meet again today and come up with a date. Is looking like it will be august 20, one week from now. That is the first step toward ending formally this coalition and the first step toward the election which solve any is pushing to get in october. But it will on the president of the italian republic. He may decide to wait to see if theres another majority that can be formed and then go to new elections. Bera how problematic will for salvini if the election does . Ot happen quickly ech very problematic for him. He has very strong incentive to get this done quickly. He is pulling at 40 and theres a lot of momentum behind him. He wants to get this done now. He is very popular. He has been popular on migration. He is very tough on national security. All this has worked for him. But issues here is that there are difficult decisions that will have to be made toward the end of the year. Forbudget, the hike planned 2020. And we have never actually had answer questions on the budget and funding. And there is the idea the longer this drags on people want to hear him on these issues. Much so muchyou for us in rome. Central banks around the world taking a more dovish stance to combat the downward Global Growth. They say they cannot seem like the economy by themselves. But can governments pull their own way echo Major Economies will be running a deficit this year. Some like germany have far more fiscal space to rack up bills. And markets may be running out of patience for italy. It has really been cheaper for governments to borrow. The question is which finance ministries have room to help and which are listening . It is an ongoing discussion we have been having for years here, how does that impact you in terms of how you want to invest in fixed income in europe. For now the chart here was pretty clear. Germany has a 1. 1 surplus. They have a 7 currentaccount surplus as well. The markets are basically bull markets are telling germany to spend. But they wont. Which probably means that bond yields will stay here for a bit longer. The only claimant town has been Monetary Policy the only game in town has been Monetary Policy. But we were reaching the limits. That has to be passed onto the fiscal side. It has to be taken up by strong or countries which are not doing it. To think there is going to be a point at which the germans have to spend . We see a lot of need for spending here, obviously the infrastructure needs a little bit of a revamp. Is there anything you think that will spur Angela Merkel and left schultz to do that spending . Olaf schultz to do that spending echo from now the message is pretty clear. The auto sector is in a recession. The Manufacturing Sectors pretty weak. If there is a case for germany to be made, it is now from a Government Point of view. You can probably spend something on climate change. You can spend something on infrastructure. It is pretty easy to come up with projects. Which have a positive rate of return. Nejra you point out where it stuck with low growth and low rates. In that environment, when we are talking about the u. S. You said you are a little more positive, perhaps on equity rather than equities. How does that shape up in europe . To look at credit, do you look at banks . Because of the prospects of ecb stimulus echo to look at other parts of the market perhaps defense sectors . The story on credit is similar to the usp the story on banks is clearly very, very different. In the u. S. You still have banks lending a lot of money. You still have steve or flat yield curve at least. And you have a positive rate of return. In europe the story for banks is somewhat more problematic. Youre seeing more and more banks coming out saying, well increase the limits of Monetary Policy prayed weenie growth, we need a steeper yield curve. In this environment we cannot be running a possible business. So we are cautious on the banking side. What about on the fx side. Sounds like a plea dire outlook for europe. Like a dire outlook for your. Does that follow that you at the euro will lose ground against the dollar . Will obviously never say this. But one of the transmission mechanisms for Monetary Policy is still a weak currency. Although it would not help as much as it did in 2012 2016 with global trade was so much more positive than it is today. The ecb if they do something, and they probably do announce some thing later this year, cuts to the deposit rate, the only positive impact that will have on markets and the economy is via weak currency. But of all Central Banks are doing the same, it is a relative game again. Nejra are you temp to do by any italy here . We do not see italy defaulting in the next 025 years. The problem with italy zero 25 years. Stagnant the growth has not picked up over the last one he five years. Growth has been even weaker than in japan. From the longerterm point of view italy has a growth concern. Which is why you need a government which does some structural reform. With Interest Rates this low, there is no risk of default. Nejra are the stress spreads attractive to yucca are the spreads attractive to you . Still reasonably attractive. Matt i wonder why people are not piling into debt at 170 when you have to pay the German Government to hold your money. Why isnt it a bigger trade . Are people just restricted in what they can do . For our clients, there are clients who basically told us we only want to invest in court europe. Any italy is not part of core europe. Yet that is one of the restrictions investors are facing. Another is people are faced with time inconsistency. You have no concern on the short term. There is Political Risk but nor concern on the short term. There is a growth concern later on. Italy needs to do structural reform which they are not doing it. Right, rolloff solomons thanks so much. Our guest host for the hour. Heres what you should be watching this week. We get the u. S. Inflation reading this week theres also data out of germany including the dew survey. U. K. Follows tomorrow with economists forecasting a small contraction. Nejra also on wednesday, earning from asian tech tines alibaba and tencent. 30 we get a Rate Decision from the nordness bank likely to defy the dovish stance of Central Banks and single higher interest. China shows fresh signs of slowing. Is it time for officials to boost stimulus echo this is bloomberg. Matt good morning this is bloomberg daybreak. I am matt miller in berlin. Nejra the Global Economy is heading toward a recession which assets will outperform. You can join the debate and reach out to us. Ib tvgo on your bloomberg. Corn plunged by the exchange limit of 6 yesterday after the u. S. Agricultural Department Said American Farmers planted more than estimated. Futures capped their worst day in six years as the agency said u. S. Yields and production would be bigger than forecast. Cathay pacific tumbled to a tenure low yesterday on the news of hong kong ongoing process. The airline extended fights after the carrier canceled more flights. Hit out last week after employees joined antibeijing protests in hong kong. 40,000 restaurants is not enough for some. Yum brands is looking to grow even more. The owner of kfc and taco bell is looking at partnerships and investments to be even adding any restaurant chain, that is according to incoming chief executive david gibbs. The Company Announced he will take over the top job generate first. Cvs and viacom are keeping investors waiting on news of their merger. The media giants work specter to announce as soon as yesterday for talks have but talks have dragged on. The current instructions discussions would value viacom are on the current level. Five, investors may not get the premiums they would have liked. That is your bluebird business flash. Bloomberg business flash. Year bond yield falls to 3 for the First Time Since 2016. Ask license and the trade war and fresh signs of a slowing economy have repelled a rally the government knows. Data released on mondays suggest in july the countrys credit demands fell to the Second Lowest amount this year. This is likely to increase pressure on chinese officials to boost their sales programs. Roelof salomons it still whether us. If the fed is considering boosting stimulus, you would see investors piled into u. S. Stocks. Is he going to work the same way . N china yucc the chemchinas to watch the monetary data. Growth is slowing. They probably will do some stimulus. They have the room and the capability. Roelof it is just a matter of timing. If you see the monetary aggregates picking up a china people will be buying equities. Does that make you concerned about the impact on china or Global Growth, or defend more positive that it can serve spur more stimulus yucca roelof from the china side there still leaning toward the side that good news is bad news they still have a lot of room to stimulate growth. People 11 worried about the chinese debt problem for years. Yet. Ot a main concern it is a close capital account. They consume elated and they can contain it. And they wills to elated. And they will stimulate it. Matt what you think about the yuan. It will be interesting to see if they weaken it or not. How they control capital. At what i do start really using the yuan as more of a reserve currency . Be af that is going to long, long story. That is not a revolution, that is an evolution in china. The currency has been pretty strong. They want to keep it strong to be able to show to the world that it will be eventually a reserve currency. Aey have been branding currency manipulator. You could have done that 10 years ago. You cannot do that now. The currency is basically plea strong. They want to contain it from weakening too much, basically to show to the world that they are sound. Nejra are wind where china is exporting Deflationary Forces to the rest of the world . Roelof we are at a tipping point. That is a concern. If you look at commodity markets, they have been down in and china current account surplus is basically gone which makes the currency manipulation case difficult to make. If the chinese economy does not juncture, yous are at risk of disinflation becoming deflation. Nejra im wondering what that means in terms of whether you would want to invest in chinese bonds. Do you see yields, given how low we are in the u. S. And elsewhere . Roelof im not the expert in chinese bonds. We are not investing in chinese bonds for our clients. At 3 yield you could argue that at least their higheryielding. Matt i wonder how much your clients are really interested in chinese assets in general . Is this something you think made street global wall street is really delving into, or is it just something that affects other investments . Evolution is the story the chinese equity market will become more dominant, it will grow in size. For now the story the last 10 or 20 years has been a story where chinese equities are mainly, chinese growth and chinese equities are mainly for interesting stories for the e. M. Perspective. There are clients asking what are your views on chinas physically and chinese equities specifically. Mind, it is difficult to invest especially in chinese global local markets. If you think Global Equities are volatile, dont even look at chinese equities. Nejra interesting. Weve not even discussed the trade war because when absence of headlines today. But in terms of caution, we were talking earlier about the fact that you want to be cautious but you still want to be able to make some money. How are you balancing that at the moment, in terms of staying cautious but still getting returns for your client . Roelof the problem is from a global perspective we almost are not really that good. But from a monetary side of things is still very stimulative. Growth is slowing but not that week. So you want to be, you have to be nibble here. Take the risk and credit and not in equities. Have a small underweight in equities. It is pretty expensive to be too negative. The buyback season will probably start 85 of companies have reported, so they are now at a blackout they can buy back stock. They are not investing in the real economy, but they are investing in their own equities. So you have to trade around positions here. If you want to be purely fundamental, that is not the wisest thing to be doing at this juncture. Nejra all right, thank you so much for joining us. Roelof salomons our guest host for this hour. Coming up, hong kongs and battles leader chokes up as she warns the Asian Financial sector risks sliding into an abyss as protests continue. We are live in hong kong. Matt remember bloomberg users can also interact with all the charts shown on this program it all the others. Terminal gpvgour to browse recent charts featured on tv. Use thecan choose charts for recent reference use of any work gtvgo. This is bloomberg. Good morning from bloombergs European Headquarters in the city of london. I am live in berlin, this is bloomberg daybreak, and these are the days top stories. Risk off. Unrest in hong kong and argentina weighing on sentiment as asia stocks extend u. S. Losses. The treasury long bond yield near an alltime low and chinas 10 year falls to 3 for the First Time Since 2016. Trade continues to be a primary concern as chinas money supply under shoots estimates and singapores government slashes its forecast for economic growth. Chaotic situation. The hong kong chief executive carrie lam says dialogue with protesters can resume once the violence and. Tumble asific shares the Company Cancels 200 flights. We are live from the citys reopened airport. Another embattled leader as alts, assets plunge president warns against a return to the previous regime. The greatest problem we argentines have today is the the government doesnt have international credibility. Ive been saying this for three and a half years. International investors dont trust us. Good morning, welcome to bloomberg daybreak. German data right now is bang with the estimate. We are looking right now at cpi ,onth over month, 0. 5 yearoveryear 1. 7 . It is exactly in line with estimates and the more important data we are looking for in germany is the gdp data that comes tomorrow it will be interesting to see if germany actually is growing, continues to grow, or if we are looking at a situation where there is a contraction and a lot of sayingts are contraction. Markets have been taking their cue from a lot of things in todays session, the wall of worry is growing, the unrest increasing in hong kong, a plunge in the assets in argentina, the peso hitting a record low. Index erasing the year to date gain, strong risk off in the Asian Session seems to be taking its cue from the u. S. Session, the s p 500 dropped more than 1 . 3 ,s a drop of more like and we are seeing a mixed picture in terms of how futures are set up. Lower, u. S. Futures pointing to a slightly positive open, this after we saw bond yields stabilizing. Even with bond yields plunging they provided no support to equities. Take a look at bonds, futures. Dax futures are down, investors are looking to buy bond futures, which could push the yield on german debt to another alltime low. Risingond futures are after they had reversed trade we on italian bonds at 1. 7 . Take a look at the u. S. Tenure bond future, right now down a little bit. We could see the u. S. Yield come back a little bit if those bonds selloff in the cash trade. On the other hand it looks like we are setting up for a risk off day. I wouldnt be surprised to see that turnaround and investors by u. S. Bond, weighing more on the yield. That is certainly what happened yesterday, the risk off really grew as we got into the u. S. Session. Hong kongs embattled chief executive says the city economy is suffering as a result of the ongoing protests and warns it could take a long time to recover. I urge everyone here to put down there prejudices, try to calm down emotionally, think seriously and look closely at our city, our home. Do we want to see hong kong fall into an abyss . Hong kongs airport says operations are back to normal after flights were canceled yesterday amid a sit in by thousands of protesters. Our chief north asia correspondent is at the airport good to see you. Give us the latest. The hong kong airport has operations back to normal, flights leaving and coming in, but there is nothing normal about this. We are having larger protests than we had this morning, there was a call for a congregation at the airport starting around one hour ago. Ive been here since 5 00 a. M. And it is now just after 2 00 p. M. And the numbers have steadily grown. Been of protesters have singing songs from les miserables, and chanting the slogan of revolution of our time , handing out these kind of banners to arriving passengers. Heeding the warnings that they have been repeatedly getting from the likes of carrie lam or mainland thatse authorities who say hong kong is on the brink of economic ruin. They say that is how they are getting their message across to the world. We heard from carrie lam and around a News Conference at a rowdy airport, is there anything she can say that will calm the unrest . Well, they have five main demands, including the resignation of carrie lam, the withdrawal of the controversial extradition bill that kicks this off 11 weeks ago, and of course the formation of a formal say is into what they Police Excessive force or brutality. Of all the five demands, carrie lam has not given into any of them. She did show a little bit of human emotion, choking up when talking about future of hong kong. She also said i feel heartbroken about the people who were hurt in the protest. Nevertheless, one lawmakers speaking earlier to reporters said it is clear from the continued, repeated answers who the boss is, and that is beijing. Confirmedve basically who is actually running the show in hong kong, and that is beijing. So whats next . Thats the big question. There is no plan to end this. Protesters say they are staying here and the few we have spoken up thethey did not show future of their city would be sealed because it is in the hands of the mainland chinese. Theres going to be more protest today and a large rally is being planned, at least applied for, for the coming sunday from totoria park in the plan is march to central again. They wanted to be a familyfriendly peaceful march but we have not heard whether that permit has been approved by police. Thanks very much. Our chief north asia correspondent at the hong kong airport. We are checking in on the markets in asia with Juliette Saly. Surprise, those protests are holding at january lows, but it is a off across asia and we have a number of markets resuming trade after a Public Holiday yesterday and even though you have a weaker yen you are seeing weakness in japanese equities. Chinese equities down about 1 in late trade, and we have seen big moves in bonds, the yield on the 10 year note falling to 3 for the First Time Since 2016. In singapore the government downgraded its growth forecast in the wake of the u. S. China trade war after we saw a negative read on secondquarter gdp, stocks off by about 8. 1 . Lets have a look at Cathay Pacific on the g function, because shares are falling quite heavily for a second session, down for a fourth session in a row, holding at decade lows after it was forced to cancel a lot of flights in the wake of the protests, which has sparked a number of analysts changing their outlook. Face andold that they they have cut their rating to a strong self. When you look at the anr 13 cell there is still and five hold on the stock stop Juliette Saly in singapore, inc. You. Lets talk about the risk off momentum the yields on long bonds have approached an alltime low as investors seek shelter amid a fraud geopolitical backdrop. Events have added to the negative sentiment. The yield on the 10 year note dipped, and at one point was just at five basis points more than the twoyear, the flattest curve since 2007. Ubs has now dropped the end of 2019 forecast from the 10 year treasury yield to 1. 25 from 2 . That would also be an alltime low. They havent been contained to the u. S. , chinas tenure ,overeign bond yield fell 10 chinas money data hasnt helped sentiment as it plunged back toward this slowest on record. Joining us now is another record low . If you look at whats happening in the world and if you look at yields, the u. S. Is a safe haven and the u. S. Is yielding positive yields across the curve, so it is starting to look like the odd one out. The reason for that is better at but ifent in the u. S. , you use that aspect and this growth slows in the u. S. , then they are looking quite attractive at the current levels. How supportive is the environment for u. S. Credit . Yesterday we saw this plunging bond yields but it didnt provide any support to equity markets and the risk of sentiment gathered pace in the u. S. Session. Are we seeing credit hit in the same way, or should it be hit in the same way . You have to watch what credit spreads do and i think we are in a different environment to what we saw a little earlier in the where you had yields going down, equity markets being supported for credit spreads, because you had the dovish turn which was well perceived by the market. But why did the Central Banks turn . Because they were concerned about growth. That they are concerned about growth means you have to have a bit of spread on the credit markets and you may see more volatility. Youver, that being said, are looking at a market that is being supported. Investors are looking for yield, and youve also had a change in tack from the companies in europe in the u. S. , looking at their Balance Sheets with more care, which is supported for credit markets. How is the underlying growth . You do have still in the u. S. And here incredibly low unemployment, wage growth that is far higher than inflation, and consumers that seem to be willing to spend money. Consumers are doing fine. Whats worrying the market is the fact that you have this distinction between the Manufacturing Sector and the service Sector Service is fine, manufacturing is struggling. Andmbination of the cycle uncertainty bought by the trade wars in the u. S. And china because it has been lasting for quite a while, it is starting to impact people thinking about the supply chain you also have whats happening in the auto sector in terms of transmission of that industry. You have a lot of things going on that have the potential to impact growth, and markets dont like uncertainty. Markets seem able to impact sentiment. What was attributed to the risk off was the increase in the unrest in hong kong and what we saw in argentina stunning in those markets. When you see what you could call idiosyncratic risks like hong kong and argentina impacting markets what does that tell you about what we can expect for the rest of the year in terms of volatility and risk off . The markets are gearing up for that we have to remember tende in august which does to amplify the moves you can see. A collection of idiosyncratic risks and an uncertain framework thate economic side all is weighing on sentiment. I do think we have some big hurdles to come over the last half of the year, brexit is still going on in the background. We knew there was going to be a bit of noise with italy when they were negotiating a budget so that was something that was known. There are a few hurdles to come and it means they will keep investors on their toes. We will discuss more of those in a moment. Henrietta stays with us. Lets get the first word news with olivia hows. Thanks. Argentine assets tanked after the president shocked his defeat. The peso plunged and the nation stocks on 48 , the second worst daily performance in the last 70 years globally. There are now concerns in a fullblown financial crisis in argentina. U. S. Fiscal deficit has already exceeded the figure for last billion of to 850 spending growth that outpaced revenue, wider than last years shortfall, which was already the largest federal deficit 2012. Singapore cut its cost to almost zero as the u. S. China trade war damages the most trade reliant economies, seen growing near 1 this year. The outlook has darkened in recent months and the trade war has raised to the prospect of a recession in job losses. Is philippine Vice President keeping her options open on a president ial run but says she wouldnt run for the vice presidency if she didnt feel ready for the top job. She says she doesnt want the philippines to take sides in the u. S. China trade. Being more friendly with mean or the u. S. Would decreasing our friendship or our relations and i dont believe in that, i dont believe that we should choose between the u. S. And china. Global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Olivia, thank you. Coming up, snap election on ice. Matteo savinis bid for power has to wait a little longer as italys Senate Delays and noconfidence vote. We will discuss next. This is bloomberg. 7 21 in london, 8 21 in berlin. We are minutes away from the market open. This is liver daybreak europe. Lets get a check in on the market. The idiosyncratic risks of argentina and hong kong and you get clear risk off in these markets. 1 , noi down more than doubt taking its cue from the losses u. S. Equities. Chinas 10 year yield touches to percent for the first time in 2016. We get negative signals on credit growth, and the 10 year yield earlier you said we might turn more risk off, and we are down another two basis points after dropping 10 basis points yesterday. Yieldalso see the 30 year at 2. 12 , so the u. S. 30 year following to record lows, the s p 500 futures right now are up a little bit, looks like s p futures are still showing a little bit of green after yesterdays drops of the cash trade, euro stoxx 50 futures are down as we see european futures down across the board. Lets get the Bloomberg Business flash with olivia hows. Thanks. Cathay pacific tumbled to a 10 year low yesterday, the biggest losers from hong kongs ongoing protests. They extended that drop today after the canceled hundreds of flights, adding to the woes. Acing the company stop it seems 48,000 restaurants isnt enough for some. Bellwner of kfc and taco is looking at a partnership and investment, maybe even adding a new restaurant chain, according to the incoming chief executive. The Company Announced yesterday he will take over the top job on january 1. The u. S. Judge has reinforced in order or mechanics Airline Service to end alleged slowdown. The carrier said it had a ,evastating effect on flight arguing it would pressure the airline into a new contract agreement after more than 600 flights were canceled. ,horting u. S. Tech stocks socgen says increasing regulatory scrutiny and new tax rules which is likely to fade. Last month the u. S. Justice department sent the strongest signal yet it is prepared to take on the likes of facebook and google. And thats your Bloomberg Businessweek. Thank you so much. The fate of italys populist government still hangs in the balance, the italian said it will set the date on a confidence vote after leaders failed to reach an agreement on monday which means Matteo Savini will likely have to wait another week before moving ahead with his power grab. Guest is still with us you are underweight italy are you waiting for any interesting opportunities to open up . We are underweight italy given how much the spreads have tightened. We have given back some with uncertainty about the government but italy has had a good year and we feel now is the time to trim ourselves in terms of italian risk. It doesnt mean we wont get back in we were expecting that volatility to happen in september or october but it has come a bit sooner, given what they are trying to do. There are interesting elements to look at in the credit market, we were talking about banks earlier on that were issuing in the nonpreferred senior states, and it has a bit of spread and in this low yield environment that can be an interesting opportunity. We are keeping an eye on it, seeing where it gets, and it is underweight at the moment. What do you think about industrial debt customer when you look across europe there are concerns in the stock market about the auto industry. What does that trade look like from the credit side is to mark side, some ofedit the spreads still looked tight from my perspective. If you look at the auto sector, it is an area that is in transition. It still has its work cut out at the moment. We are cautious in that space. We are starting to see some opportunities open up, and we are keeping an ionic, but for me it is still because of the rally weve had, not quite there yet. Junkbond spreads in europe have widened the most in two months i wondering if you see an opportunity because of the widening or if you prefer to stay in quality and short duration stop junkbond markets have been interesting, acause youve already had favoring of quality in the junkbond market. But has performed is the upper end. Had a trickier year as investors have shunned the more difficult credit names, and that has been driven by rates and by spreads. We have already seen a bit of dispersion from that perspective , be it in terms of rating but also in terms of name. You really have to be careful and it has been a high quality rally. Henrietta, thanks so much for joining us. Head of Investment Grade credit europe at wells fargo asset management. Coming up, we will talk with louise dupree, the ceo of the embattled South African retailer steinhoff, live from cape town. From the 5am wakers, to the 6am sleepers. Everyone uses their phone differently and in different places. Thats why Xfinity Mobile created a Wireless Network that auto connects you to millions of secure wifi hot spots. And the best lte everywhere else. Xfinity mobile is a different kind of Wireless Network designed to save you money. Save up to 400 a year on your wireless bill. Plus get 250 back when you buy an eligible phone. Click, call or visit a store today. Good morning. This is the european open, im that miller in berlin. Today the markets ask who spoiled the party. We talk about the asset and argentina and stasis in hong kong, all blamed for a fall in u. S. And asian stocks. It looks set to carry on into europe, the cash trade is less than 30 minutes away. M