The threat of u. S. Sanctions. Adds that he will reduce rates significantly by yearend. And a different kind of trade war. Citigroup kicks off the week with week trading revenue expecting to weigh on the numbers. Manus a warm welcome to a break gear. The worlds first Largest Sovereign Wealth Fund has delivered its annual report. That theare saying twentyyear year return is forcing a 5. 4 the majority the 696 ilya and in at billion in assets. If you are one of the unfortunate people running into a bumpy time looking for a job, they are looking for if managers. Expect to add new managers. In terms of the positioning, of the boarde 55 actively managed, up from 50 . Private equity playing a critical role. There are some lines and there about india and china. We will discuss the markets with our guest host. A look at us take some of the markets. A record00 closed at on friday. Futures point to a bit of a flat open. The focus turning to fed speakers that we will hear from this week that also earning season. Bloomberg intelligence saying this could be the worst of times. That is where people are turning for equities. We have had three days of decline. And copper bouncing on the london metal exchange. Betterthanexpected data in terms of retail sales. All of those coming in a little bit better than expected it and showing a bit of a rebound. And the gdp number coming in the worst since the early 1990s. We will digest all of that. Consecutiveurse, to quarters of negative earnings. Have a look at the yield curve. My last guest said the fed has no clue. This is the yield curve. Steepening the most since october. Rounding by 10 basis points. Is there more to come . What is it that causes this to fell in fall into check . What affects volatility . Looking shaky. Steve mnuchin morning the government could run out of cash as early as september. Looking at the other key assets. It was bad in china. Seeing a small bounce in the aussie dollar. There is an underbelly of support. Giving us aollar small point hired. Working. Leveraging is and looking at the oil market iran assets rising. Stille iaea says there is too much oil. Let us head to david ingles. Good morning. David a ton of data out of china. The market implications coming out of the lunch break in hong kong. Keep in mind that japan is closed. Take my wordse for it, it looks much better than how the equity market looked before the china data came out. The seconds market in asia post reinstallation in may to enter a bull market after the shanghai composite measured from the last low. Have a look of the other things we are tracking in hong kong. Also related to the liquidity story and what is happening to the chinese mainland a common a. , for the first time in a month, we are below that. The hong kong dollar is weakening as well. That takes us to the other corporate story. The pullout of the aba ipl. Broader markets are on the way up. Hkx is on 1. 4 . That takes me to the last bit. 318. First time are seeing yields in china on the way up. Forwardll of the activity indicators. On the back of the credit numbers that came out on friday. Long story short, they Beat Estimates in Industrial Production and retail sales. At higher than the highest estimate on there. Almost doubledigit growth for the First Time Since 2017 or 2018. That was enough to pull risk appetite. A david, thank you from hong kong. Sticking with china. The economy slowed to its weakest pace in three decades. Factory output and fixed investment were bright spots. Andddition to this, import export figures that came out on friday also shrank. And that as domestic demand weakens. Pressure remains on chinese policymakers. Joining us now to discuss all of this is Arend Kapteyn. Great to have you with us this morning. Markets reacting positively. How optimistic should we be feeling about that data at the moment . Arend the focus is clearly on the sequential improvement in the data. Not great but better than it was in q1. One of the most encouraging aspects of what you just posted on the screen is what is happening in retail sales, particularly auto sales. That seems to be clearly bottoming out. There were some sales promotions related to cars being phased out for emissions. Manus and the morning to you. Many will speculate that this is perhaps the consequence of every leveraging by the pboc coming to bear. Have a look at this chart. Global repercussions. Chinas trading partners. Pmis up 50. The world is still in a very uneasys date. Will it take more stimulus from the pboc to get us back above the 50 number globally . Arend it does not look like they are doing enough to have positive spillover on anyone else. You see that in the detail of their own data. The primary sectors are a bit better. Manufacturing is still weak. You are still not getting a lot from their own stimulus of spillover into manufacturing. And so, it is a bit missed. The improvement you are seeing in the chinese data is a natural bottoming out. Nothing to do really with the stimulus. The stimulus has been quite choppy. Where you would expect to see activity in infrastructure, there is still not a clear trend that the credit impulse is improving even though the numbers are improving. Anna it is interesting that you bring nejra it is interesting that you bring up the infrastructure. Israstructure development excavating sales. Is that an area that we should still be concerned about . Sales and other parts of the domestic economy are improving. Arend it was supposed to be the workforce. The one leverage are leverage the control is infrastructure. You have seen an injection of liquidity into that space. Though, because the other parts of the economy are Getting Better at the margin, it is enough to keep you around 6 growth. Manus one of the great debates, there are a number of them, one is about liquidity in markets and another is about foreign exchange. What does an fx war look like in 2019 and 2020 . Argues that they may not outright intervene in the markets. He talks about a cold currency war round three. You have tweetology. And you have Monetary Policy. What is your perspective on the prospect of the chinese in gauging the additional lever of currency . Arend extremely skeptical. They have had a few episodes where they have tried to engineer a weaker currency. There was a sense of a loss of control. Pressure on reserves. Given the financial system, i think the incentive is to contain any kind of currency weakness. We see currency drifting up towards seven. It could go a little bit higher. I do not think the weakness will be engineered by the chinese. Frank, theus be market did get its way with the fed. They did not have to push very hard. Let us get your first word business roundup. Companies may be approved to Research Sales with huawei. The chinese tech giant was blacklisted. The wall street journal reports plans to cut jobs the wall street journal reports that huawei plans to cut jobs. President trump has been accused of racism after suggesting four female democratic lawmakers go back to the crime infested places they came from. Ofs is aimed at a group firstterm representatives. Three of the four women were born in the u. S. But none are white. Haseys president downplayed the risk of u. S. Sanctions following the purchase of a russian as 400 missiledefense system. President erdogan says the white house does not favor sanctions. The Missile System could undermine nato and jeopardize the fighter jet. Postponed a mission to the moon halting plans to be the canceledthe lodge was just 56 minutes before liftoff because of a technical snag according to the space agency. The mission will be rescheduled. Novak djokovic has beaten Roger Federer winning his fifth wimbledon title. He won after a five set epic. The winner was just a single point away from victory. And a day earlier, simona halep beat Serena Williams. Preventing the american from winning championship number eight. Global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in over 120 countries. Nejra debra mao in hong kong, thank you so much. Coming up, getting ready to go. Jay powell has all but guaranteed a rate cut coming up. How low will it go . We will discuss. This is bloomberg. Manus this is bloomberg daybreak europe. I am manus cranny in dubai. Nejra let us get a check in on the markets. Green on the screen in asia particularly in china. Japan is closed. Treasuries not trading. Positive reaction generally to the data. The dollar hitting a threemonth high. Index treadingr water after three days of declines. Question we have to ask ourselves is we hit two records thursday and friday sequentially in the s p 500. Has a note out this morning. Global equities running 8 higher but their position suggests limited upside to equities. Bitcoin of course against the dollar. Mr. Trump does not like bitcoin. And there is and there are 900,000 barrels too much of oil. It shows you the volatility you have in the bitcoin trade. Let us get our business flash. Debra mao is in hong kong. Paya gilead has agreed to 1. 5 million to raise its stake in a belgian biotech firm. Onearchers are focusing inflammatory diseases. Ab is suspending its hong kong listing of its asia unit. The share sale wouldve doubled the amount raised from 79 other listings this year. 2018omentum generated in when more than 200 companies raised more than 37 billion in hong kong. Bitcoin humbling after President Trump criticized the currency. The president saying he is not a fan of a bit point. They are not money and the value is based on thin air. And that is your Bloomberg Business flash. Nejra debra mao in hong kong. U. S. Banks kick off the earnings season this week. Investors will be watching closely to see if falling Interest Rates hurt the big things and if trading revenue has improved. Here to talk about that is dani burger. Longterm rates have been following all year. That means banks and investors alike may need to bring down their expectations for profit this quarter. Citigroup will set the tone and the bar. Investors are warning of a drop in the quarter. Investors expect a drop of 3 . A smaller decline than expected. We will get a better idea tomorrow when goldman reports. And management has spent a lot of time looking at trading. Ratesn mortgages, low mean homeowners refinancing which could potentially be good news for wells fargo. Jpmorgan on tuesday followed by bank of america the next day the biggest landers in the country lenders in the country believe that there will be growth. The market is sure to take notice if they trimmed that number significantly. Lookings will also be at any deterioration in credit quality. Morgan stanley round out the week and focus will be on its large Wealth Management business. Givening a decent quarter the markets and the Second Quarter ended on a high note. Just want to quickly point out that some investors are not waiting to assess the fallout from lower rates. When we look at banks ox trading at just about the Biggest Discount in more than a decade. Manus thank you very much. Great scenario there on the banks. Back to jay powell. Last week he left us all but certain that the fed will reduce Interest Rates this month for the first time in a decade. The debate now is how deep will it go. Charles evans said a couple of rate cuts may be needed to bring inflation above the 2 goal. This morning, President Trump weighed in on his views regarding the Monetary Policy. He wrote in a tweet that the country is doing great economically despite what the fed says. And isapteyn is from ubs our guest host this morning. Participating in the debate about what the fed should do. Let us deal with facts. China is slowing by the most in decades. Off todata from china on to make us believe that there is one cut in july and a series of cuts to calm . To come . Has almostink it nothing to do with the trade in china. I think it is more about the u. S. Data. It is actually coming in much stronger than the fed narrative suggests. The inflation data which is running at 2. 5 annualized in q2. The Economic Data is coming in stronger than the narrative suggests. They seem to have made up their mind to cut. We think the cut is coming in july. Because of the strength of the data, it could now renegotiate it down to something that is not 50 by 25. Our call is 50. Given the strength of the data, i think we five is on the table. Nejra i know you said 25 is on the table. But you think 50 is on the table for july. But one and done. Why is that enough . Arend you have gone through a normalization cycle. There is a sense that it has gone too far. You dont know where neutral is. Down 50. And then you wait to see how the data behaves. That suggests that is all you need to do. It could get better. And you sit and do nothing. I think the rationale for doing a lot more than that is you are assuming that Something Else that is going to happen. There are a lot of things you could identify. Including trade tensions as collating. Tensions deteriorating. Manus global issues around the world. Less to do with the domestic situation. But you have just said very differently. It has less to do with trade. Less to do with china. And more to do with domestic data. The jobs data did not change the direction of the fed. Why do you think that china and the global issues are not what is driving the fed . Arend the global issues matter. Not the data. The uncertainty, the global uncertainty be cited by the fed and Central Banks is code for terrorists attention. We have had tariff tension. Morei, mexico threats, china tariff threats i think this has all convinced Central Banks that we are moving into uncertain territory. Part of that we are seeing reflected in the chinese data but i think the focus on china has much more to do with the negotiations over the tariffs then import or export growth. Nejra i was reading earlier that historically a fed easing cycle usually means a recession follows shortly after. It sounds like you are not ecting and easing cycle does that mean you are also not expecting a recession . You get into a fiscal drag. We will see growth at 2 next year for a couple of quarters and then the fiscal drag comes in at the end of the year. It is a typical forecast. Everything goes back to an equilibrium and is stable. The thing i would site that is not part of the fed narrative is jort there was a ma distraction. Thecan see in the data how information has disappeared. Nejra Arend Kapteyn will stay with us for the hour. Up next, turkeys president promising significantly lower Interest Rates by the end of the year. What does that do for the nations Economic Policy credibility . We will discuss. This is bloomberg. Nejra this is bloomberg debris. I am nejra cehic in london. Manus and i am manus cranny in dubai. If thisto ask ourselves is a bond market. Negative yielding junk bonds can it and well . Look at the web around we saw in sovereigns last year last week in europe. I think our guest post from last week said it is a interest set of assets to have because when it whips, it really does hurt. Nejra when you look at the iively yielding debt know we have seen a bit of a backup and treasury rate but the gains we have seen in stocks can be seen as a hunt fouryearolds. We did have a gain of more that we did not have a gain of 0. 5 last week. Manus in terms of market positioning, there is a lovely mork there is a lovely story out this morning. They talk about positioning. Look at the bond market allocations. 20. 8 . Higher than even the post lehman story. Historic numbers. We are positioning to extremes which means the smallest movement can shake down the markets. Nejra and what kind of Small Movement might we get this week . Equity and markets will take their cue from that but they will also take their cue from earnings season. Let us check in on the markets around the world. Great to have you with us. We were talking about earnings on friday with you. Earnings. F u. S. Not that optimistic at all. The worst of times. Talk to us about the reported earnings today. Is that helping to lift the broader benchmark . Good morning to you. It did help to lift the broader benchmark at the start of trading today. We did succumb to some selling pressure. Down have decided to go from the bank index offsetting any gains. Exporters, some are doing well. Hearing you talk about the ease, world. Hotomy in the happens, that may force a trigger but for now, the markets are absolutely flat. Manus great context. Thank you. We have had the chinese data. Where do you take the curb . Focus today. In the trade seems to be beneficial for stocks. Much of this has been baked in. See a lotk, you will of green when it comes to stocks. Chinese stocks for example. Local stocks getting a boost from the numbers. Today butnds falling let us point out the philippines. Up by more than 1. 5 and set to enter a bull market. A lot of the emerging markets getting a boost today. Rupee also getting a post a boost. Highly correlated with what is happening in china. A high beta asset will also will always react to china. I also want to touch on bitcoin. Day at it testing that 50 moving average. We had the tweet from donald trump on thursday criticizing the currency. This chart emphasizes how testing 10,000 dollars. If it continues and falls to 8,000 which some analysts say it might, it would erase all of those gains we saw in june. Nejra great to have you both with us. Thank you. That is get the Bloomberg Business news. Debra mao has that from hong kong. Debra u. S. Companies may be a proved to restart sales to huawei within four weeks. The commercets department is evaluating all licenses after the chinese tech giant was blacklisted over National Security concerns. The wall street journal reports it plans to cut jobs at its u. S. Subsidiaries. President trump has been accused of racism after suggesting four female democratic lawmakers go back to the crime infested places they came from. The tweet seemed aimed at an Informal Group of representatives. Three of the four women were born in the u. S. But non