Some of the optimism when it trade, s pe tone on futures back down after the cash trade yesterday. Markets are optimistic about the situation in italy, you can see bid, nowian btps are down to 1. 21, less than 200 basis points above boones. The dollarer against as the greenback falls. Italy thatews out of the Fivestar Party has halted Coalition Talks unless the democrats agreed to keep Giuseppe Conte on as Prime Minister. They previously pushed back against that, especially the leader of the Democratic Party, for hisis supporters Parliamentary Group had any say, they will have to concede, because they will want to say. We will continue to cover the story in italy. Coming up, we will speak to nigel wilson, the ceo. You can catch that interview at 11 30 a. M. London time. Lets get to the bloomberg first word news with Viviana Hurtado standing by in new york. Talking, but only if the u. S. Lift sanctions first. Thats according to hassan rouhani, following President Trump signaling he would be open to meetings with the Islamic Republics leader. It echoes the initial outreach to north korea, resulting in three meetings with kim jongun but no breakthrough deals. Not considering tariffs on japanese autos, according to President Trump at the g7, but he left the door open to slapping livvys later on the 50 billion sector. Washington and tokyo have reached an outlying deal in late september. I deal to end a feud over frances plan to tax tech giants. Yesterday Emmanuel Macron announced that they reached an agreement. The french finance minister says tariffs are definitely up and President Trump didnt confirm the deal. And there is no need for chinese troops to tackle the unrest in hong kong, according to the city leader. She says her government can handle the ongoing demonstrations but still wants to hold talks with protesters despite a recent flareup and violence but she wont resign. A responsible chief executive at this point in time should continue to hold the fort and do the utmost to restore law and order in hong kong. Myouldnt say that government has control. We are not only supporting my name we are also acting responsibly. To after a slump in exports. Its wants to blame germanys economic malaise and trades subtracting 0. 5 from total output. The bundesbank thinks it could decline again in the third quarter. It is putting pressure on berlin to provide stimulus. Global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Thank you very much. Viviana hurtado new york. Lets continue to focus on whats going on in italy, the Fivestar Party has halted Coalition Talks with the democrats unless the democrat , or togrees to continue keep Giuseppe Conte as Prime Minister. We do see yields coming up a little bit from where they were 122, stillare at relatively low. The bonds are being bid. Equities are still up half a percent on the day when European Equity indices are down. Is possible investors expect the democrats to come back and concede that he will stay on as Prime Minister. Lets get to the top trade story today. European stocks declining outside of italy, along with futures,ty index investors showing skepticism over the everchanging china trade narrative, despite yesterdays softer tone. When you say maybe they want to end maybe they dont i think they want to make a deal, im not sure they have a choice. Im not saying it as a threat. Meantime the United States which has never collected . 10 from china will in a fairly short period of time be over 100 billion in tariffs. I think they want to make a deal. Very badly. Our senior on this, editor joins us from singapore. He certainly has struck conciliatory tones you dont hear President Trump speaking like this too often, and i thought all weekend that the g7, he didnt complain about zarif being flown in cash he said that he agreed that macron could bring him or that he allowed him to bring him to summit. He has made conciliatory olive branch iran marks, and the chinese have listened. I think they will want to make a deal is that why the markets were up, and why are they continuing to gain question i think thats exactly right. I think theres a certain amount of whiplash that has been going on if you look at fridays giant selloff and add for games that resulted afterwards, there was some amount of position taking coming back in. You is one of the dangers get to in terms of trading on sentiment, because President Trump did show a lot of good behavior. A lot of total shifts with what we might call happy talks, but the threats for additional china tariffs are still in place. One of the things i am paying attention to is the chinese response, because the chinese are acting a little bewildered by what President Trump is talking about. Chinese officials came out and said for the second time that they are not sure what talks the president is referring to, and it seems like theres some dissonance between the white house in china in terms of exactly what has been offered by the chinese side, and i think there is some amount of hesitance until we see some of these concrete threats pull off. And im thinking about september 1, october 1, december 15. Thanks very much. Singapore,in striking the trade tone, which is what influenced markets it seems that the lack of optimism is showing stop joining us for the hour is the Global Market strategist at j. P. Morgan Asset Management. Donald you think about trumps more conciliatory tone that he struck all weekend at the g7, and he now seems to want to make a deal doesnt matter . I think it matters hugely. What the Global Economy really kneels is for the trade war concerns to go away. The problem is there is a nonlinear development in terms of as the trade war escalates, it has a problematic impact on the Global Economy. Whether or not these latest comments will come to anything is anyones guess. But clearly what the Global Economy needs is for the trade war to dampen down and to take a step backwards. It is a most impossible to trade that because one moment it looks like things are Getting Better and the next moment it looks like things are escalating again. As a result of that, a more iftral tone matters because trade tensions were to escalate further it risks tipping the balance of the Global Economy to where the risk of an economic downturn would rise quite significant. Is trade right now more important than Central Bank Monetary policy . Is the trade story more important than the fed . I think so. Unfortunately we are in a world where Central Banks can react to the deterioration in Global Growth that is taking place largely as a result of the ongoing uncertainty impacting businesses and to an extent consumers because of the ongoing trade war. But if trade escalates further, if we get to a world where you have 25 tariffs on all of chinas exports to the u. S. , unfortunately at that level of trade it would be very difficult for the Central Banks to offset that. Moment the market at the is assuming that the central bank will ride in and save the day. Unfortunately if the trade war gets worse from here, it is unlikely that Central Banks will be able to fail the equity market out. Does donald trump have to come in before the 2020 election . Our bloomberg anchor in the u. S. , joe weisenthal, between to the other day that typically politicians are accused of trying to juice the economy during an Election Year at the expense of longterm sustainability, trump is taking the opposite approach, risking growth and the stock market and the surface of a structural goal. Do you think trump stays the course or does he fold on the way into election 2020 . I think it is almost impossible to say stop they make trading markets so difficult, which is why we are taking a more neutral approach. From an economic standpoint, clearly it makes sense not to be Going Forward and escalating trade concerns heading into an election but a political standpoint you could argue that with the core base that support the president that perhaps they want him to be tough on china. The economics and the politics perhaps pull in Different Directions which makes it difficult to predict how this will play out. From that j. P. Morgan Asset Management guest host for the hour. Coming up, italys fivestar movement stops discussions with the democrats on the Coalition Government. Will he stay on as Prime Minister . That is what fivestar wants and what the democrats are kicking back against, but still, bonds are bid in the equity markets rise further. We are live in rome next. This is bloomberg. Economics, finance, politics, this is bloomberg surveillance. Im matt miller, in for francine lacqua. Lets get over to italy, where the antiestablishment fivestar movement says it will not hold any more meetings with the centerleft Democratic Party unless the democrats agree that Giuseppe Conte remains on as Prime Minister. Joining us now is our rome bureau chief. This is been a Sticking Point i think throughout the night of the democrats do have to come back and concede . The markets are still bidding looksonds and stock, it like markets think it is a done deal. Probably not a done deal, but they can probably force the democrats hand to come out publicly and say they agree on the government. This has been a Sticking Point through the night. For now they say they wont hold anymore talks that were supposed therepen, but for now will be no talks until the democrats come out and officially support the Prime Minister. We will see how it goes, but as the bond market says, probably it will happen eventually. I was just speaking with an thereist who says that are risks if this coalition comes into power that italy gets a downgrade on its debt. Why doesnt the market seem to be concerned about that . Leak hadbecause the been founded very aggressive and very aggressive toward italys european partners. Elections,e new people wont have the budget ready in time. There will behind confrontation if thisope and even government has fivestar support rather seek compromise with the european union. The bond markets seem to be bullish about the perspective of not having elections this year. Usthanks so much for joining , very busy in the rome office covering these ongoing negotiations. He will continue to bring you breaking headlines. Still with us is mike bell from j. P. Morgan Asset Management what is your take on the italy situation, still at 200 basis points over boones, a pretty decent return. On the positive side, with the ecb likely to restart qe, they can probably provide some support for telling Government Bond yields. You reallyside, are getting compensated for the growth risk facing the euro zone . That doesnt emanate just from italy but from places like germany as well. Whether it will also over in the next 18 months, whether italian bond spreads will be contained by ecb action or whether spreads will widen. Today,ad confirmation the final reading of gdp out of germany of the contraction in europes biggest economy. Are you concerned that berlin isnt paying enough attention or isnt willing to support the to . Omy sooner than it needs rightl, i think you are the Manufacturing Sector looks like it is struggling, the future business components of the recent german pmi survey suggests thats not getting much better. The german Manufacturing Sector looks pretty weak but the Service Sector is holding off relatively well. Was a lowwhy it Unemployment Rate and the German Government perhaps didnt feel like now is the time to be delivering too much stimulus, given the Unemployment Rate is at lower levels and capacity is relatively constrained. To get the German Economy lifted out, they do need some stimulus. If we get fiscal stimulus it will be pretty key to see whether we can extend the cycle from here or whether the Manufacturing Sector weakness builds across into the Service Sector and elevates the risk to the economics. All right. We will talk more about germany, incredibly important story, slightly under covered due to the focus on italy, trump, and the situation in general. Guest will stick with us. Surveillance, we talk about the highlights from the g7, from trade to Climate Change to brexit. We dive into the details from a headline filled and dramatic summit. This is bloomberg. Economics, finance, politics. I am matt miller in berlin. A Global Market strategist at j. P. Morgan Asset Management. I wanted to ask you about the valuation in u. S. Stocks as weve seen the drop over the past couple days and as weve seen the yield on the 10 year fall. Yield is s p dividend far higher now than the 10 year treasury, and if you look at the earnings yield, 3. 8 Percentage Points higher than treasuries. Do you think u. S. Stocks are undervalued . If you look at the market as a whole, the s p 500 above sincelightly the early 1990s. Certainly not stretched too much, nowhere near the overvaluation you saw during the dotcom bubble. But its not extremely cheap either. If you look back to 2009, it is not supercheap. A very difficult play over the past couple weeks. About, thiso talk is bloomberg. Matt trading on tone, markets soothingadjust trumps words on china. Italys antiestablishment Fivestar Party holds talks with the Democratic Party, unless conte can stay on. Be open to talks with the u. S. But only if sanctions are lifted now. You are watching bloomberg surveillance. Lets check in on your biggest stock movers. Dani ferguson industrials falling to their lowest levels after a month. They put a price target of 50 quid. At 58, it has some way to go. Analysts saying there is limited upside, valuations do not look great, and they do not see upside. Today,airport rallying first half earnings beating analyst estimates. Analysts areas rbc capital says they have reached a turning point on capital. Is splittingnip into two. They are breaking off engineering and construction, spinning it off. Saying valuearly loss. Matt now what the bloomberg first word news, Viviana Hurtado. Viviana donald trump may have left the g7 summit with a softer assertsard china, but he is not abandoning his tough tactics to force ideal. In recent weeks, little talks has been made and any advances perceived by the president many have to do with his mood. Autos heapanese left the doors slapping levees later. Washington and tokyo have reached an outline deal on trade and hope to formalize it. A deal to end the feud over paris and washington reached the agreement. Tariffs are definitely off. Confirmt trump did not the deal. Chinese troops do not need to tackle the unrest in hong kong, according to the citys leader. Violence,flareup in carrie lam wants to hold talks but will not resign. That is one of their key demands. A responsible chief executive at this point in time should continue to hold the fort and do her utmost to restore order in hong kong. I would not say my government has lost control. Day in and day out, we are not only supporting Law Enforcement bodies. We are acting responsibly to deal with other issues that have arisen. Viviana global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am Viviana Hurtado. This is bloomberg. Matt donald trump could be about to change his position dramatically on a run. Iran. He has made his most expensive offer yet to meet with the president and would do so if the circumstances were correct. This echoes has offers to north korea, as well as the response. Iran wants sanctions lifted. Dubai, thefrom likelihood of the u. S. Lifting sanctions before talks is very slim, so will this happen . Golnar that is a redline for iran, the idea that the u. S. Has to make a massive shift in its policy and approach towards the Islamic Republic, is what iran requires to even consider talks. That is what rouhani said this morning. He made it clear that if donald op, theen wants a photo only thing he has for now is photoshop. Those were pretty much has precise words, the u. S. Can use photoshop if they want