730 7. 3 . Of i want to bring you this. What do we have at the start of the year . We are just 52 basis points now. That is probably factoring armageddon. What could possibly be going on in the eurozone to have yields that far out that flow . That is a thought. To new york and join su keenan. With germany,t this is a could muster 55 million in stimulus funding. The governmenth says it spent last time a crisis hit more than a decade ago. And it says it has the reserves to do the same again if necessary. The Prime Minister says action is not needed yet. The biggest problem is uncertainty costs in ongoing u. S. China trade wars. Senior white house advisers fanned out across the sunday talk show circuit to push back at fears of recession here in the u. S. They said the economy remains robust and consumers are still spending. Top economic aid larry kudlow and trade advisor Peter Navarro said there are no additional plans for not staying the course. I sure do not see a recession. We had some blockbuster retail for the end of last way. Really blockbuster numbers. , moste a lot of worries economists on wall street were marking up their forecast. For the 34th quarters. That echoes our view. Su argentina has been downgraded further into junk. The president was soundly defeated in a primary election. That puts argentina on par with zambia and the congo. Its Sovereign Rating was lowered to band a negative outlook was added. A peso has fallen to a record low. Tens of thousands of protesters decide heavy rain in hong kong on sunday to march for a 11th straight weekend. Hong kong finance secretary says there could be an economic typhoon in the city because of the continuing unrest. This is bloomberg. President trump has indicated that trade talks with china remain generally on track. Trump went on to tie negotiations to the protests. He pushed back on media reports Commerce Department is going to do business with huawei. We will see what happens. Im making a decision tomorrow. Now is a guestus to talk more about all this. Good morning. Nice to see you. Short, yields are below zero. Would you still be buying this today . Portfolios are still pretty defensively positioned here. The world is a pretty uncertain place. Sovereign bonds still offer a lot of protections for investors from a total portfolio perspective in terms of what my protect you if things go wrong. Before we brought you in a, we heard from President Trump. He talked about how u. S. Officials are pushing back on the notion that there may be a recession. Obviously no one knows and we will have to wait until it actually happens. Is there anything over the next six months in your view the could be a potential deflation event . I think we may have seen a little clumps of that late last with talks of a potential stimulus out of germany. The scope policy is now the one thing that market investment should be in very wary of. Providing banks are all the stimulus and they are in full on easing that. To really get Bond Investors worry, you have to see a significant amount of stimulus coming through. That has been largely absent. Europe, weeaking of the bonding about yield in austria. About half of 1 . What is that pricing . It does seem for 70 years, we will be in a quagmire. Absolutely an extraordinary environment that we are in for the bond market. We are heading more into negative territory. This point, we still have not found the bottom. Just to tie in the , the threathe chart ,f potential fiscal stimulus with government yields that way, it is almost a nobrainer to borrow and spend. Germany said they would spend annexed or 55 billion. How do i know when it becomes a real risk to bond markets . , the noise onnt fiscal stimulus is very patchy. Of itbeen cashed in terms would only come if germany would fall into recession. What bond markets want to hear it now. That of course brings us nicely to talk about what is going on. Is it a fear of a deeper session . [no audio] we have nothing to fear about a recession right now. People seeing a lot of seeing a trade were continue. Rishaad it seems this is coming from two angles. Of a recession begets a recession because people are so scared. The other one is, is there a genuine reason for us to fear one in the first place . The fact is, the Global Growth backdrop here is not strong. Outside of the u. S. , the growth picture is soft. There is a concern. I would agree with the comments on the u. S. Consumer. , thetil really recently u. S. Retail picture is incredibly strong. The risk of that negative feedback loop that we can talk ourselves into a recession is there. I was quite interested in the u. S. Consumer confidence readings that came out on friday night. These are numbers just offer the after the fed has cut rates. Confidence of fallen to the lowest level since 2016. These rates seeing cuts as a negative thing that. No iw would agree with him that it is one of the top indicators to watch to see if theres Something Real happening here. Have talked at length about how an inversion and the Treasury Curve begets the u. S. Recession. Does that apply to australia . You have not had a recession in years. Yet your yield curve is that. Does that apply to you . Do we eventually invert over in australia . Obviously as you have mentioned we have seen a flattening and the australian yield curve in the past two months. There is much less evidence of the impact of australian yields having a curve inversion. I certainly would not be reading into anything in terms of aussie specific developments. The inversion of the yield curve in the u. S. And the u. K. Is a bond market telling the world that it is a little bit concerned with the outlook year. Here. About. Lots more to talk we will talk about what you are buying and what you are avoiding. Coming up, we will talk about the man behind Southeast Asias top budget Hotel Service. Ceo tells us how he convinced investors with his frugal spending plan. Rishaad a new marketdriven rate system in china. This is bloomberg. David we will get you out of there was some intellectual competitions here. This looks confusing and complex because that is the point. Starting tomorrow, they will try to simplify this. They will try to do it libor style. They will ask banks to try to submit where they think rates should be. Hey will compile that at the 20th of every month, they will come up with a new prime rate. We have cleaned this up for you to show you how it works. Let me shift this for you here. What you have is your average Interest Rate on loans is the green line. Below that white line is the primary. Your loan prime rate. New rates could come in the forms of easing. They couldome come between these two rates. There is a way of cutting rates without cutting the benchmark, which they have not touched anyway and a long time. Rishaad it comes tomorrow in beijing. How does this all fit into chinas Interest RateReform Program . Reform in significant terms of Interest Rate changes here in china. There has been a problem for the pboc in the transmission mechanism. Getting the cheaper rates to the parts of the economy that need it most. By initiating this Interest Rate change, they could get some way toward that. This is the loan prime rate. They what businesses and commercial banks to do is price their loans to businesses and households more on this loan prime rate than the benchmark rate. It will be lower than the benchmark rate. Youre talking about cheaper liquidity. How they can regulate it is by having 18 banks submit once a month there rates of loans based on open market operations. With a bit of a spread. They can take the mean number. That becomes the lmp. They want banks to price their loans on that lmp rather than the benchmark rate. That will helpt stimulate parts of the economy that are currently under pressure. David any Immediate Impact we are expecting . What can we surmise at this point . We are expecting tomorrow a drop in the rates. It will end up being priced into loans. Packed off to commercial businesses and households. Currently the rate is 4. 35 . They have not moved it in some time. 3. 3 . G is at drop inld see a Interest Rates. The Banking Sector could get hit by this. That is why you have some reducests say they may the reserve requirement ratio to help soften the blow for the Banking Sector. Others say you could see property prices rise. Those are some of the implications that could come about as a result of this. What is the impact . With the trade war in place, what does the market and foremost about what is going on . How does it dovetail on what is going on with the u. S. Markets . I think it is another big headwind for Global Growth at the moment. We have a lot of uncertainty about the way these trade wars will involve. We are getting news on that everyday. The market is having to adapt to that news. In the meantime, the overarching impact is on the business uncertainty. Probably consumer uncertainty. What still looks attractive to you and i world where there is almost no yield and negative in some cases. We keep going on and on about these flat yield curves. People keep chasing this rally. If you had to chase this rally, what would you buy. We are still positioned in the u. S. Long end. We have been for the last couple months. We are hitting new lows. Alltime lows. Pointsve fallen 60 basis in a matter of weeks. It is not without risk. Having had such large moves. At the moment, we do not see a lot of catalyst for higher yields. We are heading into an interesting. Period of meetings. In onehoping to deliver way or another. Bond markets will get what they want from Central Banks. We are earning the u. S. Long end. We are happy holders. Rishaad we have the question of the day. Which political crisis should investors care about the most . Or which political crisis keeps you sleepless . Brexit. Not been really invested in u. K. Bond markets for quite some time now. It is such a binary and an uncertain thing to deal with those kind of event risks. Those sorts of development we think are important for the u. K. And europe. But probably not big enough to affect the global picture. We are not laying awake worried about the italian election uncertainty at the moment. Probably a consensus after. Chineseu. S. Political developments are certainly at the top of our wrists list. Can blow eight deal a blow to the global landscape. David if you have to worry about changes in the Political Landscape of italy, you would be sleepless for seven years. Thank you. That is right. David coming up, we are at hong kongooking protests. This is bloomberg. Rishaad we check in with the business flash headlines. Call fores climb volatile calls. Jpmorgan will be hosting a call. Is all amid worries on wall street that current volatility could cause quantitive fronts to dump billions of dollars worth of stock. Tesla is trying to revive its Solar Division with a rental scheme. Elon musk describes it as having money printed on your roof. Less thanlaunch comes a month after tesla reported its third quarterly decline in solar inflation. Buying Industry Leader solarcity for 2. 6 billion. Rishaad indias largest lender says credit growth will slow this year. Theirlso need to overhaul lending practice in the agriculture sector. India ve brink of bank of india looking at a credit crunch. The economy has been slow down by the consumer. David reports from tokyo say scrutinystepping up and Foreign Investment in the chip sector. New rules will be introduced that will learn overseas and under will go a government review. It is fairly complicated there. But give you something simple. How about a look at the philippines . We are looking at the property developers. The Gaming Authority will stop accepting new implications for what they call pogos, Online Gaming centers. It is a big political issue in the philippines. We will not get into the details of this. The benchmark is not a quarter. Speaking of Southeast Asia, have a look at where we are with the thai bhat. We should be getting the latest gdp numbers coming out in just a few minutes. Rishaad looking out for that. Here is the nikkei at the moment. It is up. Im so used to saying down. We are back after this. This is bloomberg. My family and i did a fundraiser walk in honor of my dad, who was alzheimers. I decided to make shirts for the walk with custom ink, and they just came out perfect. [announcer] check out our huge selection of Custom Apparel for every occasion. Youll even get free shipping. Get started today at customink. Com. It is 10 20 9 a. M. In hong kong and shanghai, 10 29 p. M. In new york. Im su keenan with the first word headlines. President trump has indicated that trade talks with china remain generally on track, and has scheduled meetings in washington next month. He tweeted that things are doing well and that the two sides continue to be in contact. The president s top economic advisor, larry kudlow, says recent phone calls with beijing have been positive, with more planned for the coming days. Japanese exports fell for an eighth straight month in july, with slowing growth in the trade war continuing fears of a global recession. The finance Ministry Says the value of shipments abroad dropped 1. 6 from a year earlier and economists surveyed by bloomberg estimated they dropped 2. 3 . The trade balance was up ¥250 billion, or 2. 3 million. Easing the lockdown and cashmere, partially lifted on communication links. Mobilephone services have resumed and schools and local government offices will reopen later monday. Un Security Council has open discussions for the First Time Since 1955 with united settlement. 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. Im su keenan. This is bloomberg. Thank you for that. Areland evp numbers, what we looking at . Estimate, anddian just in case we get it, that should be the slowest pace of growth back to 2014, which if i remember correctly was when the flood inundated the city. Looking out for those numbers against the backdrop of a barton, it includes the dollar as well. It is a race to the bottom. That was when we had those five Big Decisions coming through. As soon as we get it we will bring it to you. Let me just go through the numbers last time we had gdp that is currently what we are looking at, that should hopefully be in the next 20 seconds. Headline tells you one of the other teams we are supporting, planning a 10 million economic boost to hit 3 growth and if the estimates come in, we are some distance from hitting that target. It is a package of government theding and loans, economic slowdown caused by the trade war across the region as well as the currency strength. Bangkok, of course, is the most visited city in the world for tourists. Amazing. Learn something new every day. I think we will leave it here for now and we will get you those breaking numbers otherwise we will run out of things to talk about. Lets talk about hong kong. Defying the heavy rain we saw yesterday. One of the largest onstrations begin in june yvonne man is out on the streets for us this morning. The rally was largely peaceful. It seems theres been a change in the tone as far as the crowd was concerned. Change of tactics, as well. It seems like the message was peaceful, rational protest and no violence. We saw a stunning show of people, one point 7 Million People according to organizers, the government put it at 128,000, nevertheless it shows that Public Opinion has not changed despite the condemnation of these recent escalations and despite the fact that we saw these violent clashes at the airport last week it seems like it gave police less of a need to act with more aggressive tactics. We saw officers take a handsoff approach over the weekend, three days of rally and no teargas was fired. Breathing a sense of relief. We have gdp numbers for hong kong friday, secondquarter growth contracting more than anticipated. How much can we really put at the doorstep of these protests and how much was down to a slowdown that was taking place anyway . The finance secretary mentioned on sunday that the political unrest, even with the trade war, is leading the economy to falter. They slashed the forecast last 2019, and the steeper contraction we saw a raises a lot of questions on whether hong kong can prevent from falling into a technical recession in the recorder. He also mentioned how bad it is at the moment, he says it is level three danger. Heres the terminology we use during storm coverage. The scale goes all the way up to level eight, the city basically shuts down. We are not quite there yet, but we are still talking about the Material Impact it could pose. Reports saying the Hong Kong Monetary authority is talking to banks, making sure they check with small and Medium Enterprises on the difficulty they have in supporting these businesses. Speaking of the poster child of difficulty in the corporate world, Cathay Pacific remains under scrutiny. We had the ceo stepping down on friday. Is that going to be enough to appease beijing . Well, we are getting some mixed messages at the moment, this is an airline not just dealing with the cancellations and the tens of thousands of customers that were stranded, but this layer of uncertainty. How is a Company Going to tow the line between appeasing beijing, one of their key markets, and dealing with staff in hong kong that take part in these protests. It seems to be a cautionary tale for a lot of businesses and how they will keep that balance. Beijing stat