Watching us from the united states. These are your markets. We are seeing a bit of a lift to european stocks, actually, not so much. They were lifting, but now they are flat. About 56. 65 after that opec plus meeting. Gold is down a touch. Remember, because it is fourth of july in the u. S. , treasury markets are closed. Coming up, dont miss our coverage of the boston pops fireworks spectacular, it is a bloomberg special and starts at 8 p. M. New york time. So if youre watching from asia or europe, its definitely worth it. Lets get straight to bloomberg first word news. The tanks are ready to go and the fighter jets are set. All part of President Trumps changes to the traditional fourth of July Celebration on the National Mall. The present will speak from the steps of the Lincoln Memorial and critics say he is turning the event into a campaign rally. President trump warned iran against stepping up uranium enrichment. Iran says it will restart the model reactor if europe fails to offer economic guarantees by a july 7 deadline. The u. S. Is hitting back on to the lawallenge that prevented from selling to federal agencies. They say it is designed to prevent china from gaining a strategic foothold in the networks of federal agencies. China has accused the British Government in interference in hong kong. Beijing reminds the u. K. The territory is quote not what it used to be. Wordsscalates the war of after theresa may says to us shocked by violence after protesters stormed the legislature. Commission has decided against disciplinary action against italys debt after rome vowed to address concerns. They now see the 2019 deficit in line with eu rules. Switzerland has not singapore off its perch as the topranked destination for expats, ranked in the best place to live and work. The u. K. Sank to 27th, citing poor economic and political stability due to brexit. 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. Francine u. S. And chinese officials are set to resume trade talks. Now, kudlow says that, for those discussions will happen over the phone. I dont know precisely whether, it will be on the phone this coming week, they will be scheduling facetoface meetings. Lots of communications. Francine and while there may be optimism over a trade deal, that has not stopped President Trump from leveling more accusations of currency manipulation. He tweeted that beijing and brussels are manipulating currencies and pumping money into the systems. Bloomberg economics chief asia economist joins us from hong kong. Great to have you on the program. Is china minted living the yuan the ulating the one yuan . If anything, the central bank is doing the opposite based on our model. The pboc has been setting the currency stronger than implied by market forces. According to the pboc statement, they said that should be fixing the rate based on yesterdays close. It is fairly based on market signals. It would have been much weaker. Using whatc has been is called the countercyclical. Actor to set stronger fixing francine give us a sense of what the outlook for the yuan is and what the pboc can do Going Forward. Going forward, they will still be under depreciation pressures. For example, the u. S. Comments about currency regulation and the fed have indicated an intention to ease monetary policy. Those would be supporting em currencies in general. And obviously, that includes the renminbi. But if you look at economic fundamentals, chinas Economic Outlook is not so positive. The economy is going through a doubledip. Monetary policy is expected to be ease further. Would be putting downward pressure on the renminbi. Is going to do is continue to walk a very tight rope. On the one hand, some currency depreciation is welcome. That would provide some support to the economy. , they do nothand want to see rapid depreciation because that would this anger would disanchor expectations and outflows. So what they could potentially do is focus on the rate of exchange in the currency, but not a particular level of the currency. Francine interesting, thank you so much. , joining us from hong kong. Joining us for the hour is the global head of fx strategy at rbc and mary owens thompson. Thank you both for joining us on this fourth of july. A pretty important date when you look at the brandishing of currency that glitters. What do the chinese do . To be honest, as her chief economist just said, theres not much to do. Market forces are pushing the renminbi weaker and the chinese are stepping in front of that. At some point, they will have to allow it to break seven. We heard a speech from the pboc governor, trying to steer people away from seven. I think that is laying the. Round for that eventual break francine if it touches seven, we have been waiting for this moment for such a long time, does it shifts the market . Mary it is exactly as you say. Matterse, psychology and it will have an impact on various other assets . Assets. But i would like to stress the fact that it is very hard to create competitiveness in the International Commercial arena through a policy set out to weaken the currency. When we look at countries we admire, they are countries with strong currencies. Germany, switzerland, these are countries that have strong currencies. It has in no way had a negative impact on the economic performance. And we look at countries that have a deliberate policy to weaken the currency and we see how that works out for them. Not very good. Francine what do you think the psychological level is at this point . This is that even if it touches seven, does not make that much difference. But are we going to see a Quick Reaction . That, given the importance people have placed on seven, that the first time we breach we might see a. Breach, then they might manage it back. They cannot run higher without stopping it, but at some point, they will bow down to the inevitable and manage that pace through ups and downs. Francine getting a bit of breaking news on the rand, reaching 14 for the First Time Since midapril. What is that . Global dovishness . Elsa this is really a story about yield. Those quite a bit of uncertainty heading into the elections and the choices made have been fairly reassuring to markets. More than anything, it is the fact that the yield is just so attractive. Francine you wanted to jump in on china. Marie often, the u. S. Talks but other currency movements. The causality of that move was residing with other countries. Whereas in actual fact, often it is a dollar move. So when you look at the volatility in the renminbi, it is often the same you can see in other major currencies. I often find a bit of a biased portrayal of what is actually happening. Thank you both. Elsa and marie stay with us. Plenty more coming up, including japan a vacation japa nification coming to europe. We talk debt markets. And as a uber eats looks to expand, we speak to the chief. Es companys ema this is bloomberg. Francine economics, finance, politics, this is bloomberg surveillance. Lets get straight to the Bloomberg Business flash. Boeings offering 100 million to the victims of the families of the two crashes. The incident killed 346 people and have led to scores of lawsuits. The money will go towards education, hardship, and living expenses. They are committing these funds over multiple years. Bain capital and carlyle have made a 3. 4 billion euro bid to acquire osram licht, the german lighting company. They will decide shortly whether to accept the offer. This company is falling sharply on news that the founder and chairman has been detained in shanghai. The news trickled an investor exit that you racing more than 4 billion of market value triggered an investor exit, you moreg more than erasing than 4 billion of market value. Francine countries have seen 10 year yields drop below zero for the first time. By one measure, these negative yields are worse in europe than in japan itself. When you have a Central Banks that are exceedingly dovish, you get this 13 trillion kyl of negative debt that continues to build up tile pile of negative debt that continues to build up. Numbers, itnto the is actually japan that has the largest stockpile of negative debt. But when we look at it in percentage terms, there are a few countries that have more in terms of negative yielding debt. 69 . Erland at the yield of 50 year yields are basically at zero. Germany is also higher with yields hitting new lows. Denmark, more than half of the debt is negative yielding. Anywhere you wanted to buy a positive bond, you would be out of luck. Entire curve is a subzero is subzero. Two year yields a dipping below zero, yesterday, the 10year at the lowest on record. The u. S. Is mostly escaping this phenomenon and the world at 24 . Thats 24 looks even more stark when you look at a chart. Last year it was as low as 7 . That is because the hopes for synchronized growth would spur inflation. And in another measure of how investors are gorging on these bonds, Long Duration is invoke. Investors in vogue. This index a here tells us basically how many years will it take for an investor to get some of the cash flow back. This is at 8. 4 years, the highest on record. Francine thanks so much, day burger with some great lumber charts bloomberg charts. Lets get back to our guests elsa and amarie. Maire. We were talking about whether this means we need to rerate banks. Marie it is obviously not easy for certain segments of the economy when we have edited and Pension Funds and Insurance Companies and so on. We all have a challenge of how to generate returns in this context, that is for sure. , it isthe same time always possible in any kind of market to still make money. Ares not because they negative it necessarily means it is impossible to generate returns. Francine let me bring you over to the yields we like. This is a spread between 10year btp and bund yields. When you look at the moves and the italian yield, it seems crazy. Elsa it is amazing when you think just 57 years ago, we were in the heart of the eurozone crisis. We were worried about the complete meltdown of these market. Now they are doing particularly well. But i think that in an environment where the ecb has signaled is open to buying more , you cant really Read Economic signals from these yields. Italian so this is the spread between italian and bund yields. What do you do with jgb . Elsa that is a market where you have a Central Bank Buying a limited quantity of assets. They are the single largest holder at the moment. And again, it is another one where it is so dominated by the domestic Investor Base that, for the most part, i dont think it attracts that much interest. Francine is europe becoming like japan . We keep on saying it, but there are stark differences. Marie right. Important to is remember that japan is a fantastic place. I dont think people in japan are suffering. You can have a high quality of life under these circumstances, that is for sure. And if we go to the fundamental issue that Central Banks are trying to stimulate more inflation and trying to do that with monetary policy, we have to ask ourselves why we have such low inflation. A very dominant factor is the technological revolution. Internet and everything is pushing prices down. Those are structural developments and you cannot fight structural developments with cyclical measures. I understand the preoccupation with Inflation Expectations, but i still think it is a little bit misplaced to try to fight structural is inflation with cyclical measures. Francine what do you do with the yen . Elsa a lot of debate at the moment. It has gone up a little bit as we price in those fed cuts. But now the question is how deep do you think the cuts will go . If this is a case of one and done, it does not materially change the hedging dynamic. Francine thank you both. Stays with us. Up next, italy and the eu race a truce in the ongoing deficits saga. We discuss that next. This is bloomberg. Francine this is bloomberg surveillance. 30 month low after the eu spares the nation. Freshas offered commitments to fiscal discipline but a tighter budget might come at the expense of the touted radical tax cuts. Still with us is elsa and marie. I dont really know what you do with the italian short end of the curve. What does this tell us . Should we go back to the japanification theme . I think there are always other things at play. How we analyze the drop in thiss from thinking expresses the markets view of an impending recession or whatever, i think that is an oversimplistic view on the to certainly look at a value between Asset Classes , given that stock markets are at record highs. It makes sense for many investors point of view to try to reduce those positions and go to the bond market. The bond market is like, what else . Francine you have to keep that in perspective. Christine lagarde, the freshly nominated president , what is she going to change at the ecb . She may be tougher on fiscal. She may be tougher or able to rally the troops. Will she lead to euro volatility . Elsa i dont think so. We had a lot of debates about what she may or may not mean. But at the end of the day, she is a diplomat, a politician at heart. After mario draghi, those are big shoes to feel fill. Not an economist in training, but you have a very capable chief economist. So i think we will see more of the same rather than a radical shift. Francine do you agree . Marie i agree exactly. Taking the words out of my mouth. And i have to say in these gender focus todays, i find it very positive days, i find it very positive to have a female leader. And the commission, that will be a from it will do a. Formidable duo. Francine a formidable duo both stay with us about we talk oil and iron ore next. Francine currency criticism. President trump accuses china and the eu of manipulation. The u. S. Retaliates by intervening in the fx markets. European bond yields on a tear. On the way, jobs report and trump revamps the fourth of july with fighter jets and an unorthodox speech in washington for Independence Day. Theave the boston pops, bloomberg spectacular, later this evening. Good morning if you are watching from america. Lets get straight to your movers on the markets. Lets kick it off with unicredit come up more than 4 unicredit, up more than 4 . Osram up 2 after they confirmed the 3. 4 billion euro bid from bain and carlisle. Down to the downside, among 3 . 113. Ore trading around there is some worry that they were having this pullback. Saying that the fundamentals do not match what is going on in the market. Francine lets get straight to the bloomberg first word news. Trump has resumed his attacks on china and the eu. He claims both are manipulating their currencies to gain an unfair vantage. He says the u. S. Should do the same. His comments sparked speculation that treasury could intervene to weaken the dollar. U. S. And chinese officials will talk by phone in the coming weeks to solve echoing trade war, according to larry kudlow to solve the trade war, according to larry kudlow. We spoke to mark mobius. The currency weapon has been on the table for some time. As you know, the chinese have used this weapon. Its interesting that maybe in preparation for this next meeting, the chinese about their currency to get stronger against the u. S. Dollar. Deutsche banks overhaul plan could reportedly cost as much as 5 billion euros. The Financial Times is reporting it could tip the german lender into a loss this year. The strategy may be unveiled as soon as this week. And familiar face is leaving the race to replace Christine Lagarde at the imf. 2to1arney is at odds to get the position. Global news 24 hours a day and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am Sebastian Salek and this is bloomberg. Francine . Francine thank you so much. Breaking news on oil. I dont know whether it is having a direct impact on the price of oil. Saudi and kuwait making a breakthrough in the neutral zone oil talks. This should add a limit to the market. Brett a little bit to the market. Brent barely budging. Iron ore hitting the highs level in more than five years after a disaster in brazil and oil declining as a smaller than expected drop in oil crude and gasoline inventories added to bear sentiment. Lignos, ands, elsa mary owens thompson. Mary comeau when you set some of the modeling in your mary, whenhat is you set some of the modeling in your forecast, what is your price . We are looking for an average oil price of 16 60 per barrel on the wti. Last year, the average was 65, which happened to be a prediction. Often, we imprint on the higher numbers. Thats why i wanted to mention last years 65. People may not be aware that the average was that low. Francine Going Forward, if you look at the last five recessions , they were either directly caused or impacted by a shock in the price of oil. Is this time different . I think fundamentally, the dominant factor in the oil market is obviously u. S. Shale. Therefore, this oversupply of oil is what we are focusing on the most. Although, of course, we are completely aware of geopolitical risks and things that could cause oil price spikes, but we dont think they will last. Francine what does this mean for your world of currencies . Currencies that have typically had a very strong relationship to oil has seen that relationship we can a attle bit weaken little bit. We have seen the Canadian Dollar year rate more on two spreads or the Economic Data in canada. Francine when does that change . As you begin to see more Pipeline Capacity coming online. It looks like it is likely to be a 2020 story. There are still petrol currencies out there. Rubel does well. At the end of the day, in the g10 space it is less of a driver than it once was. Francine this is not the kind of inflation that we are looking for but it is linked tenuous we to the price of oil tenuously to the price of oil, but when will we see inflation . Issue right is she right . Yes and no, a typical economist answ