Fed chair jay powell has to strike a fine balance at jackson hole. Fears of recession swirl, but regional fed president s question the need for more cuts. As i look at where the economy is, it is not yet time. Im not yet ready to provide more accommodation to the economy, without seeing an outlook that suggests the economy is getting weaker. Matt a working weekend at the g7. French president Emmanuel Macron tells Boris Johnson a new brexit deal in 30 days is unlikely to happen, and italy has a few more days to cobble together an unlikely coalition. Plus, the perfect storm. Germanys Buddhist Bank bundesbank say it is not time for stimulus even as sentiments hours on the manufacturing sector. Welcome to bloomberg markets, the European Market open. Were looking at futures pointing to gains. The u. S. 10year yield continues to climb. 1. 64 , 1. 65 the next stop, and in terms of European Equity index futures, we see green across the board, on s p futures as well. Upe a look, dax futures. 75 , cac futures up. 66 , ftse futures gaining about 51 points, so not a bad start to stocks in about 30 minutes time. Stocks in asia advanced, but with relatively low volume. U. S. Futures, treasuries, all as investors await Federal Reserve chair jay powells address at the jackson hole summit. Three policymakers at least have voiced resistance to the notion the u. S. Economy needs lower Interest Rates. I will say 3. 5, because one was kind of on the fence. Symposium,t of the Esther George, was one of them. As i look at where the economy is, its not yet time. Im not ready to provide more accommodation to the economy without an outlook suggesting the economy is getting weaker. Matt lets get to the markets with mark cranfield, our bloomberg mliv strategist in singapore. The question of the day is particularly relevant, considering the german, the failed german auction and now all the fed president s pushing back against rate cuts. How close is the end for the bond bull market run . What are you hearing . Mark good morning. A little morere jittery today then just 24 hours ago. We see australian bonds, the asian session, in japan, but indications are people are giving up bonds a little, but nothing too dramatic so far. They want to hear from jerome wasll, even though the fed not as dovish as people hoped. So some doubts about how much more stimulus this bond rally will get. But so many other questions are swirling around, in terms of trade issues between the u. S. And china,t he pm the pmi numbers which continuously seem to fall, with the exception of france yesterday. A slew of asian pmis in the next couple weeks, and none of them are expected to be too hot. Bond ont be giving a giving up on bond positions to butly, but too easily, the doubts are creeping in. A negative auction, with rates in negative territory, makes you wonder. Some people pulling back a little. Veryrome powell is not dovish, that could trigger more selling into next week as well. Matt what do you expect from Jerome Powell, this weekend . Is he going to address jackson hole is always a place for great, important speeches. But this is a sensitive time for the fed, and they seem to have not a lot of agreement. Been giveninly, hes some ammunition here by the people who spoke in the last 24 hours, talking up the economy and saying theres no need for dramatic Interest Rate cuts. He will probably try to address it in stages, keeping the door open for a rate cut in september, what the market is pricing for. He would not want to do too much to upset that. The key, where does he see it beyond september . He may take it as an opportunity to try to calm people down a little, and indicate he wouldnt mind a pause between september and the end of the year. That wont be easy. It is a fine lien to line to tread. But considering his colleagues arent really seeing anything disastrous on the horizon, he probably wouldnt mind getting the market to come back a little from the idea of rates at every meeting. He doesnt want the market to be saying, ok, every time you stand up, i expect when he five basis points. Thats not very healthy i expect 25 basis points. Thats not very healthy, so i dont think he would mind cooling that off a little bit. Matt you also have the issue, the u. S. Economy is doing well enough to not need another rate cut, you have this incredible he powerful u. S. Dollar and there doesnt seem to be any way to turn it around. Of course, Central Banks never focus on the Exchange Rate, they tell us, but obviously they do focus on the Exchange Rate. So how can they deal with the bloomberg dollar index at 2012 . Mark thats a pretty tough one for the fed, because of course it is not their jurisdiction officially. It comes under the u. S. Treasury. But it could easily become a point in time where the dollar is so strong, it starts to affect the economy. If the fed can link the performance of the economy dollar, to the dampening effect on the economy, a damping effect on inflation, if they can tie those things together they can talk about the dollar having an impact they need to address in conjunction with the treasury. But just to say the dollar is too strong isnt really their mandate at all, and at the moment it is not Strong Enough for them to consider it a Major Economic factor, either. So for the time being, powell will be happy to dodge that question. I dont see him addressing the dollar directly. He may do it in a roundabout way, but he wants to continue to focus on the main issues ahead. Low inflation, the fact the Global Economy seems to be slowing, and what happens if the trade war goes on indefinitely, how much damage will that do to the American Economy down the road . Matt mark, thanks for joining us. Mark cranfield, bloomberg mliv strategist. By the way, 1212 was the number i looked for on the bloomberg dollar index, currently trading at 1,012. Its always interesting to ask, when is the bond bull market going to end, because its been so long now. , ib tv ons the bloomberg terminal. Now, bloomberg first word news. Naomi japans Prime Minister accused his south korean counterpart of damaging the relationship between the countries after seoul pushed out of a intelligence sharingpacked. Important to the united states, and we hope each of those two countries can begin to put that relationship back in the right place. Naomi hong kongs political crisis could trigger a global recession, according to harvard economist carmen reinhart, who cited the citys turmoil among her main concerns, along with the u. S. China trade war. Antigovernment protests have been going on for three months and are putting serious pressure on the economy. These are not segmented, regional effects. These have really global consequences. So what could be a tipping point, that could trigger a very significant global slowdown, even a recession . Hasi president macron called on the g7 to discuss what he describes as an emergency in the amazon. The fires in the rain forest, data from the country shows an an 84 year on year increase, but brazils president says it sensationalism wont help the problem and criticized macron for politicizing the issue. Global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. Matt coming up on bloomberg, were live from jackson hole as investors take positions on how fast and far the fed will ease. Will the fed ease at all . Series ofgreat interviews, first james bullard, and then robert kaplan, loretta mester, patrick harker, all on later today on bloomberg television. Bloomberg radio is live on your mobile device anywhere in the world. In the london area, you can tuning on dab digital radio. This is bloomberg. Matt welcome back to bloomberg markets. This is the european open, right now 15 minutes from the cash equities open and looking at gains across the board in terms of the equity index futures. Expect a positive open at the start of trade as well. Trade wars and an economic slowdown, thats the background of this years g7 meeting in the french surfing resort of biarritz. Adding to the worries, disagreement over how to deal with iran and the increasing chance of a no deal brexit. Joining us to discuss, bloomberg markr International Editor champion. Alan, what will Angela Merkels role be here . Shes typically been since the election of donald trump sort of the leader of the free world at these big summits. Does she continue holding that mantle . Alan she will continue to try, definitely, but she will try to seek unity, certainly alongside the europeans, alongside Emmanuel Macron. But really something all six apart from trump can agree on is about the necessity to try and ameliorate the effects of the trade war. They are all suffering. Germany of course with its export oriented economy is suffering more than most, so thats at least one issue where they can agree on a common position with the obvious caveat of what the u. S. President thinks. Matt one thing we know he thinks, if america should by greenland. That the kind of thing, is it likely to upstage the whole summit . Or of course, his issue with china could also upstage the summit. What do you think . Question we will get some drama behind the scenes. The previous summits. Blewentioned denmark, he up a visit over greenland. Talking about nato spending again, and hes been talking about germany and the economy, in the putting merkel cross hairs as part of his narrative back home, so its pretty clear we will see. It could be a little better. They will be trying to make it a little more harmonious than the last one which busted up over the communique. But the french, for the first this are ready to do without a communique if necessary, which would be the First Time Since the g7 started in 1975, so an indication things are beginning to change. Matt i have, by the way, my personal suggestion is that they offer one Million Dollars taxfree to each and every greenlander to vote in a referendum. It could go trumps way if he does that. Only 56 billion total. Not so much money for such a massive piece of land. Thes johnson will be at summit as well. Hes already had disappointing trips to berlin, paris. How will biarritz be for him . Alan the fascinating thing. We regard that as disappointing, but sections of the u. K. Media so again we see a disconnect between the european view of brexit and the u. K. View. Want tohell definitely try to speak to macron, merkel, the italian Prime Minister, even though hes resigned and will be a lameduck. Matt conte will be there in a provisional sense. Alan what can he actually say . Nothing. Boris johnson will undoubtedly hes meeting with trump on sunday morning and will try to pitch a trade deal. Decidedse things are not from one day to the next, so i dont think he comes out of it with huge reassurances. Matt i checked on the surf conditions. This is really the birthplace of surfing in europe, the heart of european surfing. We wont see any decent swells until wednesday, at the earliest. So marc, what is the point of the g7, in this sort of no longer multilateral world . Does it still serve a purpose . Marc very good question. The first thing, donald trump these things, and if he had his way he wouldnt have to go. By now, i think many of the others do, too, because they are simple he trying to survive. They are designed to show unity among these major powers, and now theyre just hoping to survive without showing the opposite, a sort of stage play for a dysfunctional family. So there are questions arising about the worth of it. A couple things to say about it, though. One, for the europeans in particular, there arent a lot of alternatives. They still need the united states, as difficult as the Current Administration is for them. It is a hard world. Russia is still trying to define a somewhat unstable way postsoviet union. You have arising china. There arent any alternatives, and they need some sort of format in which to be able to manage this relationship with the u. S. So, as difficult as it is, i think they are hoping they will be able to get beyond the Trump Administration with it more or less still intact. If not to get back to how things were before, which is probably impossible, but back to some manageable relationship. Matt all right. Alan, marc, thanks very much. Marc champion in london, Alan Crawford in berlin, thank you very much for joining us. London foro naomi in the Bloomberg Business flash headlines. Naomi Deutsche Bank is paying over 16 million to settle sec allegations it hired relatives of government officials overseas to win business. It is focused on the asiapacific region and russia. They are settling the case without admitting or denying wrongdoing. Societe generale is considering options for its Asset Management business, including a sale or a merger of the unit that oversees about 150 billion euros. Anden is cutting costs selling assets to shore up finances. Hps chief executive is being replaced by the head of the companys printing business, and a new boss is looking to make changes at the worlds secondlargest personal computer maker, working on a Global Review of company strategy. He will share some of his conclusions in early october at a company event. That is your Bloomberg Business flash. Matt thanks very much. Naomi koeppel in london with your business flash. Atlook at up next, a look stocks to watch, including much bigger. If it needs to be big, we should use concrete. Matt peppa pig gets ready to move house, as Entertainment One reaches a deal with toymaker h asbro. Well discuss Market Reaction next. Matt we are just about five minutes from the open of stock trading across europe. Lets get your stock to watch. Annmarie hordern. Is instead unsted covering entertain at one. Energy met 1 covering Entertainment One. Entertainment one, what is the story . Sam the company that produces fora pig, bought by hasbro 4 billion, about 30 above yesterday, so expect a pop at the open. Interesting to hear what analysts say about potential rival bidders. Matt definitely a newsroom favorite. A lot of our producers watch that on a regular basis. Annmarie . Higher, ont is word of concrete talks to merge, theell see shares pop at open for thyssenkrupp. Matt you can get the stories by typing first go into your terminal or the bloomberg mobile app. We should see gains in the open next. Matt we are one minute away from the start of cash Equities Trading in europe and the u. K. Lets look at the markets. Annmarie hordern is standing by for that in london. Dayarie the morning of the we have talked about all week, jackson hole. Msci asiapacific, the regional benchmark index, up 0. 2 . We saw gains across asia this morning. The kiwi in new zealand is higher after our exclusive interview with the central bank governor, flagging that they are taking a wait and see approach. Gold, lingering around 1500 per ounce. Bulls seem to be pulling back a little ahead of the meeting in wyoming. Lets look at how futures are doing ahead of the open. 40 upse 100 up, cac 0. 4 . U. S. Futures also higher at the moment. Its friday morning, and lets look at how markets are doing. Openingspain, ibex higher 0. 5 . Ftse 100 up. We saw the pound jump earlier, and overnight, coming after maybe some optimism a deal will be able to be done before the october 31 deadline. Commerzbank says the market is definitely biased toward an agreement. Clearly looking like a riskon day. Here we go. Lets look at how sectors are doing. A sea of green, besides energy in the red. Thats interesting, because we have oil poised for one of its biggest factor that gains backtoback gains. But european equities are poised to have their worst drop since month, but today a riskon day. Curious after the huge beat from salesforce in the u. S. , the software companies. The movers, who are you seeing . Matt definitely sap. 528 stocks gaining out of the gate, only 50 down. Sap is the biggest gainer by wei ght, adding the most points to decentxx 600, up a amount after the salesforce beat. Make chipmaking equipment, gaining. The downside, tell it 2. A total, losing only. 25 , but theh that tiny drop it takes most off when not many other stocks are losing. European markets moving higher. Asian stocks advanced on low volume. All of this riskon move comes as investors await Federal Reserve chair Jerome Powells address at the jackson hole summit. Joining us as guest host for the hour is benjamin jones. Let me first ask you about the fed situation, because there has been a repricing of Market Expectations, and kind of a dramatic shift. We have got three or four regional president s pushing back against the need for rate cuts. What do you expect from jay powell at the jackson hole summit . Benjamin good morning, matt. Clearly, obviously todays going to be the big event of the week. I think Jerome Powell has a very difficult message to try to communicate. Its been very interesting the last 24, 48 hours, a number of the regional fed speakers have tried to talk more hawkishly. Thats clearly not what the market wants to hear or see from his speech later on today. If you go back to the minutes, the earlier part of the week, a slightly hawkish tone there. If you look at the state of the economy, that is warranted. I dont think the u. S. Economy warrants the kinds of cuts the market is asking for. The problem is, if the fed really shocks the market by not delivering another rate cut in september, that will be taken very negatively. I think Jerome Powell will probably take a slightly more dovish tone than some of the speakers over the last 24 hours, but i dont think he will be able to positively surprise the market with an even more dovish speech. Matt the other problem, even if the u. S. Economy is doing fine right now, the strong dollar continues to rise. Bloomberg dollar index now at closer toser and highs. Problem, certainly donald trump is worried about it, that jay powell needs to think about as well . Benjamin by a lot of measures, the dollar is looking quite rich. We know theoretically the fed doesnt target the dollar, but it probably is a little bit of a concern. I would say that the u. S. Sed, comparedry clo to others, so the strength of the economy has less impact than in other markets, so at the moment the fed will be more sanguine about the dollar. Is keepingtatus the dollar bid, and if things worsen on the trade front, it will be bid for those reasons, regardless of the rate differentials. Theres nothing the fed can do about that, so it has limited control over that. Like i said earlier, i think the fed has limited control over the real economy as well. The economy doesnt need these rate cuts, because companies and consumers are not struggling with high debt costs at the moment. Matt obviously that would be exacerbated, the strength in Consumer Spending, if we get more tax cuts. President trump talking about indexing Capital Gains. If we get more fiscal help, does that reinforce the finance the bias against more cuts from the fed . Benjamin i think possibly. But if you look at the type of fiscal stimulus trump is talking about, hes talking about Capital Gains tax that really hits the upper echelons of society and income. These consumers have a very low marginal propensity to consume, so the tax cuts they will see, i dont think that will unleash a flood of spending into the u. S. Economy. If you want fiscal spending to boost Consumer Spending further, i dont think you need that necessarily at the moment. You need to hit lowerincome earners, and Capital Gains does absolutely nothing to help those kinds of consumers. Matt ben, stay with us here. Cohostn jones, our guest for the hour joining from state street. Up next, we talk about a gathering of minds. Were live in biarritz as leaders arrive for the g7 summit, with not a lot of surf there. Globalith a Slower Economy and risk of recession, they certainly have other things to do. Can they make a difference in biarritz . We will discuss. This is bloomberg. Matt welcome back to bloomberg markets. This is the european open, and we are 10 minutes into the trading day looking at gains across the board of. 5 or more, no matter where you look on the major equity indexes. World leaders are gathering in the french resort town of biarritz this weekend for the g7 summit. Set against a backdrop of growing uncertainty, the meeting will provide a chance to address some of the concerns, such as the u. S. Trade war with china, and risks of a global recession. Joins uss maria tadeo from biarritz. It looks to be a contentious meeting, maria. Whats going to be on top of the agenda . Maria good morning, matt. It could be contentious. It could be unpredictable. Officials here already expect President Trump will arrive tomorrow, and expect a twitterstorm, something he tends to do to create talking points before an event. Its interesting to see how everyone here is checking twitter. On the sidelines, theres many issues that worry officials, not only in europe but globally. Of course, trade. They worry about the state of the Global Economy. They worry about perhaps a recession. And they worry about the politics. The truth is, its pretty unstable everywhere. Of course you have trump, unpredictable in many ways, but also brexit, the idea of perhaps a no deal brexit. And in europe, you have Angela Merkel, and italy, which could get another election. We dont know when the time for that would be. Theres many unknowns. Many officials will tell you, we arent even going to get a communique. The point here is just to have a debate. Matt there certainly has been a debate over brexit. From the european perspective, Boris Johnsons meetings in germany and france didnt go well. The u. K. Press is touting them as optimistic. What are we expecting at the g7 in biarritz . Maria right. So, the Prime Minister has said, unlike theresa may, with him as Prime Minister the United Kingdom will leave, the European Union do or die. By theting, the spin u. K. Press, that this was two very good meetings and there is still time to change the agreement. Talking to the europeans, they will tell you actually nothing changed. All that macron and merkel said is that theres still time to avoid a no deal brexit, but the talks are deadlocked. The issue of the backstop, nothing has changed on that front, either. In terms of potential breakthroughs, the bar is very low. No one is expecting anything to come from this meeting, but we know that Boris Johnson will meet donald tusk, the head of the european council, on sunday. Perhaps something to keep an eye on. The other thing many europeans are keeping a close eye on, the special perhaps relationship between Boris Johnson and donald trump, who already tweeted the European Union has been mean to the United Kingdom when it comes to negotiations. Matt maria tadeo will be on the ground covering the g7 for us in biarritz throughout the meeting. Ben jones from state street, still with us. I have to ask what you expect. Of course, nobody expected much in terms of the u. S. China trade war right now. Do you think we could make any progress at all, at this meeting . Ben call me a cynic, but i dont think we can make any progress. If you look over recent years, the g7 summits, there hasnt been a lot of progress on many avenues. So i think these are really just a photo op at unity, and not a lot else photo opportunity, and not a lot else. I dont see how a meeting of this very fractious group in the best of times will come to any Real Solutions over the course of the weekend. No, i dont think there will be much coming out of this weekend. Might have a few photo opportunities, but no Real Progress in the u. S. China situation, and none on the europeu. K. Situation either. Matt no progress on the brexit issue. But what about the european situation, getting some really weak data from the German Economy . Obviously there are issues still, with the peripheral economy, certainly with italy. Is it possible that leaders can talk Angela Merkel into a fiscal stimulus package . Ben i think this is going to be the interesting topic. We have spoken about this on programs before, matt. If you get fiscal easing in europe, particularly in germany, that would be a game changer. Not just because germany needs fiscal easing and infrastructure, that would be a very good thing just for germany itself, but it would then signal a loosening of the reins allowing Southern Europe to be a little more fiscally easy as well. And there are more and more hints were moving in that direction. Its going to be a slow, gradual process, not something that could happen this weekend or indeed the next month or two months, but a gradual push. So the optimist in me would say yes, thats a positive if we head down that road. Thats good for europe, more broadly good for the currency as well as for sentiment more broadly, but is that something you will get hard news on this weekend . I dont think so. Matt what do you make of the germany,nd auction for wanting to sell 30year at zero. It should have gone wellish, but they only got off 800 and change, so why the lack of demand . Ben i think people are getting withtle fatigued negative rates, very low yields, and are pushing out the risk factors to try to get more yield. There are still opportunities out there if you want some sort of income. Btps, for example, in europe. You can go to the u. S. , and get a much healthier yield as well. Mliv dont think, as the question today is asking, i dont think it is necessarily the end of the bull bond market, but it is pushing people into other assets, away from traditional fixed income instruments, but i dont think it is the end of the bond market just yet. Matt i say thats probably a safe bet. Ishave been asking if this the end of the bond bull market since i started at bloomberg, i think, and it has been a long time. We have more to talk about. Up next, stocks on the move this morning, including Entertainment One, the owner of peppa pig. The shares and bond absolute restoring after the hasbro deal, rising above the price. Maybe investors think it is more worth more. This is bloomberg. Matt welcome back to bloomberg markets. This is the european open. Were 20 minutes into the trading day, looking at gains across the board on indexes. Lets look at individual stock stories. For that, we go to Annmarie Hordern in london. Annmarie a lot of movers to the upside. Entertainment one, up 29 . Hasbro buying Entertainment One for 4 billion, its biggest acquisition ever. Enkrupp,group thyss anconcrete talks to create allgerman steel giant, after theirbanned for proposed takeover of tata. Oncorp, a bit of a bounce readacross from salesforce in the u. S. With the big beat in earnings. Matt thanks very much. Annmarie hordern, looking at individual winners this morning. Those, not one of heading for its first weekly loss of the month. After climbing 25 in the last 12 months, is the rally starting to lose legs . Andes hit records in india, chinese buyers are paying the most in five years. Steady,into etfs are but they have historically been late to shift momentum, holding peak to year after prices in 2011 peaked, their alltime high, and still selling two months after last years bottom. Just shows etfs are a little late. Back to state streets ben jones. Gold, a conviction trade. Why do you still like the precious metal at 1500 an ounce . Ben obviously it has had a phenomenal run. Hard to find any asset that has done better over the last 12 months or so. But theres probably still more upside in the longer term for gold. It will have these pullbacks, for a number of reasons. Prime among them, probably that speculative investors, if you look at cftc information, have established a reason be large net long position, so you might see some profit taking those positions in the shortterm. But those positions dont have to collapse. In fact, its very normal to have elevated positions. The unusual pattern was at the end of october of last year, when we had speculated investors running net short positions, which is very unusual. The etf flows you pointed to, there still strong, and etfs for etf, for gold will remain and put a little bid on gold. The biggest demand on the longterm side for me is more the Central Banks, and what we see is a soaring demand from Central Banks to buy ho gold. This speaks to a longerterm thesis of dedollarization, the idea that russia and china want to move away from reliance on the dollar, a story that will play out over years, probably decades. But that tells me there is more demand for several banks for gold. This year, we see russia, china and india increasing purchases of gold, but even Central Banks like poland, they bought 100 tons of gold in the first part of 2019, the largest sixmonth purchase of gold by a central bank since 2009, when india did something similar. So Central Banks buying, etfs buying, speculative investors a little long maybe trimming positions. The slight pushback this week, some of the retail investors, the chinese and Indian Markets for example, which are very big buyers of physical gold, that market softening a little because prices have run up. But also in india, you have seen an increase in tax on imports of gold. If we look back over previous years, about three years ago there was an increase in the sales tax, added on then, and the month prior to that increase there was a surge in demand for gold trying to get ahead of that. But afterwards, we didnt get a massive pullback. So i think the general demand from the consumer is probably pretty strong for gold. I think you will see days like today were you get a little pullback, but in the environment of low for longer negative rates, the downside to holding gold is minimal. Matt let me ask quickly about your contrarian trade. We know donald trump interested in danish assets. You like their equities. Why . Ben an interesting one that we looked at, at the beginning of the week. The danish market is fairly small, goes under the radar for a lot of investors. Noton the news this week, just because donald trump wanted to buy greenland, but also this danish Bank Offering negative mortgage rates. One of the things we are looking Financial Markets dominated lower,s, financials, do when the yield curve is flat. But the danish equity market is primarily health care, more than 50 of the market made up by health care, only 5 made up by financials, so lower rates wont have the drag, because the Financial Sector isnt a drag. Health care is attractive. It offers growth, offers income, offers a little bit of value as well, so health care is doing well. We think that will boost danish equities. Matt all right. A value play, contrarian for sure. Ben, thanks so much for joining us. Benjamin jones, senior multiasset strategist at state street. Place, a rock and a hard fed chair jay powell needs to strike a fine balance at jackson hole as fears of recession swirl. At comcast, we didnt build the nations largest gigspeed network just to make businesses run faster. We built it to help them go beyond. Because beyond risk. Welcome to the neighborhood, guys. There is reward. Beyond work and life. Who else could he be . There is the moment. Beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. Take your business beyond. Matt lets get your top headlines off the bloomberg terminal. Jay powell needs to strike a fine balance as jackson holes fears of recession swirl. But the president questions the need for more cuts. As i look at where the economy is, it is not yet time. Im not ready to provide more accommodation without seeing an outlook that suggests the economy is getting weaker. Matt a working weekend at the g7. Emmanuel macron tells Boris Johnson a new brexit deal in 30 days is unlikely and italy has a few more days to cobble together its own unlikely coalition. Plus, the perfect storm. The bundesbank says it is not the time for stimulus, even as sentiment sours in the german manufacturing sector. Welcome to bloomberg markets. This is the european open. I am matt miller in berlin. Lets see how things are shaping up in terms of the stoxx 600 index. Take a look at the moves screen here, most stocks are gaining. , 559 down. Gain due to strong results out from the u. S. U. S. Competitor salesforce. On the losing side of the ledger , even a small drop in total is enough to drag on the index. You have got other stocks that have gone ex dividend, which is why you see the big drops. Lets get to first word news in london. Hong kongs political crisis could trigger a global recession. That is according to harvard economist carmen. She cited the citys turmoil among Major Concerns along with the u. S. China trade war. Antigovernment protests have been going on for months and is starting to put serious pressure on hong kongs economy. These are not segmented regional effects, these are global consequences. Pointould be a tipping that could trigger a significant global slowdown, even a recession. President macron has called on the g7 to discuss what he describes as an emergency in the end zone. Brazils amazon. Brazils policy has come under scrutiny. They say and 84 year on year increase in forest fires but brazil says sensationalism wont solve the problem and has criticized macron for politicizing the issue. Japans Prime Minister has accused his south korean counterpart of damaging the relationship tween the two countries. Pulled outer seoul of an intelligence sharing pact with tokyo. They seek to work with the u. S. To maintain security. The battle to host the worlds biggest ever initial Public Offering is heating up. A host of global exchanges are stepping up the courting of saudi aramco. Many firms have been actively pitching the giant in recent weeks. Hasbro is setting its sights on becoming a media giant. The toymaker is spending 4 billion to buy Entertainment One , a studio that makes movies, tv shows, and animation. It is getting big children plans brands including have a big peppa pig. News 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. This is bloomberg. Matt . Matt thanks very much. Investors wait for fed chair jay powells speech today at the jackson hole symposium. Will be closely watched for any clues on whether or not the central bank chief still sees july as a midcycle adjustment or possibly the start of something bigger. The chief executive advisor at allianz says and easing cycle may not be what the economy needs. For markets, it is really important. Markets are looking for a cycle that goes at least 75 basis points. Some argue even further. But the reality is it wont do anything for the economy. The reality is it may boost asset prices in the short term but increase the risk of instability around the world. Have priced in a 25 basis point cut for next month. Three fed policymakers have voiced resistance, saying they want to avoid taking further action unless they have to. Is of those dissenters Kansas City Fed president Esther George. As i look at where the economy is, it is not yet time. I am not ready to provide more accommodation to the economy without seeing an outlook that suggests the economy is getting weaker. Hiring has slowed. Our companies struggling to find workers or are they cutting back because of uncertainty . Get so far arewe that businesses are having a hard time finding people. Still wrestling with wages and thinking about how to compensate a workforce they need to be productive. That is still one of the largest concerns, keeping the workforce they have an figuring out how to compensate them. My next question, where is that wage pressure you have been looking for . Eeingthink we are soon s higher wages. Its true that we were not seeing a pickup in wages for a couple of years. Over the last couple of years, you have seen that pickup. Productivity has gotten stronger. The recent releases suggest inflation is not going to pop up in a way that will undermine the workers ability to realize some gains. Let me ask you how you look at monetary policy. You were an advocate of raising rates to get ahead of inflation. If you are not ready to cut, are you happy with where rates are given that inflation is lower than anticipated and would you be happy to leave them at this level . That is a process of judging how the economy unfolds. Where rates are right now relative to unemployment, it suggests we are at an equilibrium. I would be happy to leave rates ore, absent some weakness some upside risk. That was the host of the jackson hole symposium, Kansas City Fed president Esther George speaking to mike mckee. Cant stress enough the amazing experience we have their there. Up, all eyes on the southwest of france. G7 leaders headed to the resort town to a resort town to address global concerns. All talk, or will there be action . We discussed what is on the agenda next. This is bloomberg. Matt welcome back to bloomberg markets. This is the european open, 44 minutes into the session, we are still looking at decent gains across europe. There could be a few clashes this weekend as g7 leaders meet in southwestern france. The allies are divided on how to tackle trade, of course, and the slowing Global Economy. Whether they take any action as all at all appears unlikely. Joey jones,s Strategic Counsel at cicero group. Let me get your take on the biggest issue. The u. S. China trade issue is something we are unlikely to see any progress on, or do you disagree . Joey i think it is fiendishly difficult to call any of the summits at the moment. We remember the one in canada breaking up in acrimony with the american president flouncing out in distaste at the way canada was running the show. , one on past president should not be too optimistic, and yet there are some a wild cards you should not rule out progress either. Donald seems to be in mercurial form. It seems as though he is more on the crotchety side, if you like, then anything else. And this row about his purchase of greenland demonstrated that an almost the five parity almost defied parody. I would not rule out progress, but it does not feel like the mood music is headed in that direction. Matt so progress on the trade issue, you dont mean progress on the purchase of greenland. Joey on that front, i would rule that out categorically. I meant on the china trade issue. Obviously, normally, what one would anticipate is that others at the summit would try to corral the american president , persuade him that there is a need to make progress because it is so damaging in terms of uncertainty and the paul it is casting pall it is casting. But other leaders themselves are not seeing eye to eye on a range. F issues, notably brexit i would say the bigger concern about the slowdown in the Global Economy eclipses brexit. I cannot see that merkel or macron care too much about brexit anymore. I do think anyone does outside of the u. K. Dont think anyone does outside of the u. K. But the trade problem has put berlin in a difficult position. They dont want to make any stimulus Spending Plans and the ecb is not able to move the needle. Xi tohey be on trump and do something about trade . , everybodyroblem is knows this is not just about objective and coolheaded objectively and coolheadedly addressing these issues. They have real, unpredictable, and headstrong individuals. Any attempt to try to strongarm donald trump tends to be counterproductive. On that basis, i imagine there offensive butharm there is always the difficulty that it would just bounce back in your face. There is no doubt that Emmanuel Macron is ambitious in terms of his approach to global diplomacy. Just a few days ago, he was talking to Vladimir Putin about proposed Security Architecture and bring in russia as well. But for this occasion, his ambition does not extend as far as suggesting they would be able to put together a communique. Such as his expectation this can be a challenging discussion. Dozens Boris Johnson wanted a no deal brexit anyway . t that basically the plan the plan . Joey it has left up the agenda and it is much more likely. He is clearly willing to embrace it and away his predecessor would never have done. At the moment, i think he has been mildly outmaneuvered by Angela Merkel and Emmanuel Macron who have thrown the ball back into his court, shrugged their shoulders and censure and said sure, knock yourself out and come back with a plan. Time, being well aware that simply is not going to happen. For the u. K. Arder government to blame everybody on the eu side if, as we anticipate, the stocks collapse with no agreement. Which would precipitate us towards the no deal exit. Matt thank you for your time, joey jones, Strategic Counsel at cicero joining us to talk to seven. Best talk g7. Lets go to Annmarie Hordern. Wildfires in the amazon, are they on the agenda . Annmarie they certainly seem to be now. ,e heard from president macron he took to twitter saying he wants us to be on top of the g7. His words were our house is burning, literally. , whichzon rain forest produce 20 of our planets oxygen, is on fire. It is an international crisis, lets discuss this emergency. No surprise, president bolsonaro of brazil hit back, saying this suggestion the issue be discussed at g7 without the participation of countries of the region of oaks a misplaced evokes a misplaced colonialist mindset. On your map, you can track the wildfires and what other assets they may be near. A pretty cool function there. But obviously, a horrible ecological disaster. Is there any chance they get these wildfires under control . Annmarie right now, the data agency says it is the most on record. 84 higher. It is a dry season right now in the amazon, so the worry is they can actually get worse. Matt all right. Annmarie hordern, our reporter covering trending stories on the bloomberg terminal. The amazon wildfire is something everyone is paying close attention to. Exclusive shares in chinese auto targets pop up as volkswagen shows interest in growing its spot in the market. This is bloomberg. Matt welcome back to bloomberg markets. Day,nutes into the trading looking at decent gains across equity indexes. Most developed Central Banks have shown caution. The reserve bank of new zealand surprised market with 50 basis points. Now, the governor says he cant afford to wait and see if or considering further accommodation. We spoke exclusively to the rbnz head at jackson hole. , we wereg forward saying everyone is telling us we needed to be lower. Everyone is telling us Global Growth is slowing, so lets get ahead of this. Lets move now and reduce the probability of doing more later. Are the Downside Risks materializing . Banks of newthe zealands Manufacturing Index post its first drop below 50. Signaling contraction for the first time in seven years. Without doubt, there has been a lot around uncertainty. Off. Ally had to get a head the governments fiscal position is very strong, but the global trade uncertainty has held everyone back from investing. So it is the Business Confidence and the investment that is the anomaly. I think that is global. When you look down the road, people are already talking about the next got cut. Are they on the right track . Is that the decision you have to make . When to cut rather than if to cut . We certainly dont hold out from doing anything. We will do whatever it takes. We like to think we are in a positive position where our Exchange Rate has come off relatively competitive, particularly against the u. S. Really, we are in a position to say how much of the slowdown actually benefits the Economic Activity slowdown. Likewise, we had fiscal policy and spending very low. It is a good position. Waitnt afford to watch, and observe what is happening. We have already taken a preemptive double cut. A double cuts indeed. It save time, didnt it . [laughter] its interesting, people say it was surprising, but every economic commentator was there. They were all surprised me with their. We went there. What is happening now . What will be the trigger where you cannot wait. Inflation expectations are important. It is much harder trying to lift Inflation Expectations if they are declining. I far prefer to keep them where they are around the 2 mark. As long as we can keep people concerned, expecting higher inflation and keeping that through, then that is a good thing. Things that would trip us the other way, a sudden, significant decline in Inflation Expectations. Likewise, the government not being able to spend as quickly as what they are predicting. So fiscal impulses being slower or later. Reserve bank of new Zealand Governor speaking with our very own Kathleen Hays at jackson hole. Bloomberg has learned a volkswagen is exploring potential investment in chinese suppliers. To secureooking access to Key Technology in the Worlds Largest car market. Joining me for more is our reporter in berlin. Talk to me about the logic behind this move. It is, of course, the Worlds Largest carmaker. And china is the Worlds Largest car market. It is also leading technology in terms of transitioning to electric cars. Volkswagen wants to get in on the ground level and make sure it is part of the transition. As you know volkswagen is investing a ton. They are down the road here in saxony, converting a whole vehicle planned to just electric cars. But one of the things that is a little bit concerning for germany, volkswagen would not do this in germany. So it is kind of this sign that the advanced innovation technologies coming from china and ignoring germany in the process. Matt theres a great story we got on the terminal today. Today, you are talking about the perfect storm of trade woes and the tech shift fits in with that. The trade woes are hitting the economy hard and we had a slew of awful data yesterday. What is the situation like in germany . It is like you have two things happening. The trade woes of germanys since theing financial crisis was coming along at record levels ongoing gangbusters. Hits thetrade war brexit hits, that hits day today hard. Day to day germany needs to move away from its court manufacturing and Mechanical Engineering and that is what is happening now. You have got these issues hitting at the same time. Matt creating the perfect storm. Risk coverage reporter here in berlin. Thats it for the open, stay with bloomberg. Up next, it is surveillance. I am headed over to radio. 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. Nejra jay powell needs to strike a fine balance today, but will he reset Market Expectations . France as gather in issues of brexit and the new Italian Coalition loom large. And the bundesbank says it is not time for stimulus, even if sentiment sours on its manufacturing sector. Welcome to bloomberg surveillance