On china comments. The 10 year yield at 1. 51 . Then we have the ceo comments and outlooks twowa and well, onto weigh, as china tariffs. We will get into details in a moment. Lets get more insight following the latest statement on trade from Chinas Ministry of commerce. It reads in part, china has ample means for retaliation, but thinks the questions that should be discussed now is about removing new tariffs to prevent escalation of the trade war. Joining us from washington to dissect this and more is bloombergs shawn donnan. Avery cleverly worded statement. Does it indicate any kind of . Hange in tone from china shawn this repeats what weve heard in recent months with china in recent months from china. We really dont want to escalate , and we want this trade war to goes away to go away. Donald trump seems to latch onto china calling for calm in these trade wars. We heard that again from him this morning, and a fox radio interview this morning, pointing to a call later today between the u. S. And china at a different level. Dont know quite what he means by that come about the fact that they are talking about a possible facetoface meeting in september is certainly positive. Vonnie ultimately, china is asking for the u. S. To back down a little bit, saying we are not escalating, so now the ball is in your court again. Will the u. S. Respond again . Shawn the answer is the u. S. Is not in the mood to back down at all, in fact. This Holiday Weekend here in the United States, we are going to see another wave of tariffs going to place on about 110 billion in chinese imports. That is the escalation of a couple of weeks ago finally taking effect, but donald trump is showing absolutely no signs of backing down on that. In that same fox radio interview this morning, he was asked about criticism by some republican senators that his trade wars were starting to weigh on the economy. He said, look, im not backing down. These tariffs are working, and thats where we are going. Vonnie what comes next . We have the United Nations meeting coming up, and all sorts of other geopolitical events happening. Is there something that comes out of these, or rv talks now at a technical level or are these talks now at a technical level backandforth . Shawn it is hard to protect what is going to happen a month from now. At this point, i think we need to focus on the daytoday. We will look for this call today, see what happens there and what that means for a facetoface meeting here in washington in the next few weeks , and whether that takes place. We need to look at that and see if theres any substance there. We are going into the labor day traditional end of summer here in the United States, and it is fair to say we are in a worse place than we were going into the summer on memorial day. Vonnie on that note, thank you. A little pessimistic, but you never know. These things change on a dime, and certainly the markets are higher today on hope. That is shawn donnan in washington, d. C. For more on the impact on Global Markets, we are joined by alberto gallo, algebris manager. Ts portfolio it does seem like a dichotomy where the equity markets are full of hope, the bond market not so much. Vergencethe reside a there is a divergence between main street and wall street. Investors in the real economy are going to wait. The small caps, the equities, whatever is linked to growth is not rallying on hopes of an agreement. What is rallying is bond proxies , Largecap Companies with safe dividends. This is consistent with the rally in the bond market, so investors predict that the trade war is going to continue to be volatile and Central Banks will rush to do more quantitative easing to try to protect the economy, and therefore they are buying both bonds and stocks, which are essentially a bond proxy. The real question is whether Central Banks will have enough dry powder to help the economy this time around because, as you know, the buffer of Interest Rate cuts and asset purchases is becoming thinner, especially outside the u. S. So we have a left round we have a last round of what we see as qe. Vonnie on that note, we had a lot of comments today alone on the ecb, and while you talk about easing, we have Christine Lagarde revealing a pretty dovish position. She told the European Parliament she would basically follow Mario Draghis policy, and that there wasnt an end to the lower bound , that there is still room to maneuver. Then we have some on the ecb saying conditions do not yet warrant the need for further qe. How do things proceed . Alberto i think the last comments are definitely a tale of hawkish comments. I wouldnt take them too seriously. But we will probably include a tiering to smooth the impact of negative rates on banks on deposits, and a resumption of qe. The euro zone does need a return to qe. However, negative rates for a prolonged time tend to have a lot of collateral effects, particularly on an economy that depends on banks. Is from banks, and if you keep rates low, banks have problems lending to small businesses. , someinders job creation on the one hand, the ecb wants to keep the euro low, but we think they should focus on quantitative easing and helping Interest Rates converge to a lower level for periphery countries, which are the ones that need it the most. It is probably not the end of the qe process for the ecb. Vonnie we are at 0 in spain, portugal, mind a 70 basis points in germany. Portugal, 70 basis. Oints in germany btps are low. Alberto you can put a billion euros in a cubic meter of space and essentially, you will get zero rather than paying 70 basis points. , and is a physical limit that is also the reason why the ecb should focus more on the real economy. For example, buying more Corporate Bonds or bank bonds. If you keep Interest Rates negative for too long, you can have deflationary effects in an environment or people need to say for their pensions. If they see that returns are lower come of they are actually going to save more if Interest Rates are lower. We dont believe so much in the rate cut story as a push for but the growth, competition of qe and fiscal stimulus is key. For that, we need some leadership on the fiscal side by the eu and germany, and we havent seen that yet. Vonnie on that, we have the bundesbank saying theres no need for fiscal stimulus, even after reports that german lawmakers were considering fiscal stimulus. What do you think the conversation is like in germany at the moment . Why is the bundesbank saying there is no need for fiscal stimulus while everyone else is saying there most definitely is . Alberto the bundesbank has always been on the very hawkish side, opposing most of the things the ecb has been trying to do, so i am not surprised. However, if you look at the german finance minister, they have been discussing more measures to support green energy and infrastructure. You have to really think hard about not spending if youre borrow, ind 0. 7 to the case of germany. You are essentially getting paid to spend. Yearany issued a 30 bond a few days ago. Thanwill bring less they have outdated today in 30 years. We are in this position for a kick the can economy with lower rates, companies surviving, but not thriving, and earnings gradually slowing down, but we are getting close to a weaker economic environment, so we are a bit more cautious into year end. Vonnie a lot more to talk to you about. Dont go anywhere. Alberto gallo, algebris portfolio manager, stays with us. The nasdaq is up 1. 3 now in spite of some comments from companies on their earnings about china. We are getting a little more of a positive tone about the trade war in markets today. This is bloomberg. Vonnie live from new york, im vonnie quinn. This is the european close on bloomberg markets. Lets check in on the first word news with ritika gupta. Tika Hurricane Dorian is aiming to become the first major hurricane to slam into floridas coast in 15 years, likely to become a category 4 within the next 72 hours. Forecasters say the hurricane will packed wins of at least 115 Miles Per Hour entrenching rains. The storm is already carrying axum sustained winds of about 85 Miles Per Hour after racing past puerto rico and the u. S. Virgin islands wednesday. Itlys president has given hellion premier designate Giuseppe Conte has given italian premier designate just a piquant take designate Giuseppe Conte the mandate to form a new coalition government. Syrian state run media and a war monitor says Government Forces are pressing ahead with their inlitary offensive Idlib Province following yesterdays airstrikes, which killed 12 and wounded 34. More than 550 civilians have been killed since the offensive began in april. Two of the biggest names in the Technology World sparred today on subjects ranging from the dangers of Artificial Intelligence to the future of education to the exploration of mars. Sharing a stage at the world ai conference in shanghai, alibaba chairman jack ma took a shot at Tesla Ceo Elon musk. Mars becausefan of i think its easy to go to mars. You go on top of the hills of the building, just one step you go to mars. We would never be able to come back. Thats not how it works, though. We need heroes like you, but we need more heroes like us working hard on the earth, improving things everyday. Thats what i want. Ritika on the subject of Artificial Intelligence, ma expects humans will prevail over machines, while musk says doomsday is coming. 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 ritika gupta. This is bloomberg. Vonnie thank you. Lets check Global Markets now. Heres abigail doolittle. Abigail the bulls are certainly out around the world. In the u. S. , solid gains close to session highs. We hit lower briefly on ecb officials seeing the Economic Outlook at this point wouldnt quantify more qe, but we are back to session highs on trade optimism around the world. We also see the cac 40 in paris rallying, up 1. 4 . ,merging markets up about 0. 4 held back by some very minor declines in the asian session. , this is as p 500 sixday chart, and three out of the last five, the s p has been higher. Yesterday we finished higher come of right now off the highs finished higher, but right now off the highs. Will we go back lower as we had in some of these other previous trading sessions on all of the uncertainty that investors are wrestling with . As for some of the big winners for the s p 500 today, retail is dominating. Dollar general on pace for its 2017 afternce quarterly earnings. Corp. , the company that owns a number of clothing brands, they beat. Bullisht, wedbush very on this name. Andee gains there, investors also bidding up apple. However, we are stuck in a range. One question could be whether or not the s p 500 will follow the tax. This is follow the dax. This is over the last year and a half or so. Both are really stuck in a neutral range, not going anywhere. 500, and blue, p the dax. We bears taking over, but have a series of lower lows, but that is not yet true for the s p 500. If these trade in a somewhat similar manner, it could suggest more volatility to the downside for the s p 500. Vonnie abigail doolittle, thank you for that. We are back with alberto gallo, Algebris Investments were fully manager. Investments portfolio manager. Your fund is outperforming 98 of its peers year to date, and part of that is the short on argentina. Im curious as to what youve done with the reprofiling now, and this morning, more news again. Asking the imf to push out the length of their securities even more. Alberto we think we are getting into an environment where active management can make a difference. In the last 10 years, with the surprise of qe, essentially all assets went up. But this year, and to some extent last year, we are starting to see the weakest countries or Companies Falling off, restructuring their debt, not being able to pay. We had all the bond universe go up, but one by one, the weakest rings in the chain are getting hurt. In argentina, we have always been a bit skeptical, in particular because we saw positioning across the emergingmarket investors face was very long and hopeful polls showing a 5050 credibility a 5050 probability between the opposition and the current government. We think theres other opportunities in the world which are probably less under the radar, like ukraine, for example, or egypt, in emerging markets. In developed markets, we still like italy, with the repricing in btps, sovereign bonds, and a new government, but still a lot of wide spreads, wide premium on corporate and bank bonds. So there are niches where you have positive yield. Everything with positive yield has risk. We have found this year that our longs and shorts strategy has paid off. Vonnie you mentioned banks and italy. Do you mean it italian banks, or italy bonds and banks more generally in europe . Alberto generally, the corporate and bank bonds, which are it bit more links to the cycle. So in the u. S. , but also in europe, particularly spain and italy, countries a little more linked to china exports and have Less Government stability. These things are interesting, but you have positions for and improving sovereign backdrop. In the case of greece, for example, new elections confirmed a reformed government which has lifted capital controls, and risk premium has come down substantially. Now we are seeing a similar story in italy. Propositions which flirted with populist economics are realizing this does not work. So you have a post populist government in italy. The u. K. Is still going through hasetential populist p with a hard brexit. Vonnie help me understand why money flowed into btps then, alberto. Alberto well, if you think about portugal or spain, portugal has 135 roughly debt to gdp. Italy has the same ratio, but the problem was an unstable government unlike of reforms, especially around the banks and the legal system. Investors were always skeptical. If you think about 10 year bunds, they are around 70 basis points. Italy is still just below 1 . In absolute terms, that yield looks relatively low, but on a relative basis, you have a very widespread. If the country has a pro reform government like the one coming into place, then you have a chance for a virtuous circle. The other thing is bank bonds and Corporate Bonds, trading at 7 , 8 yield. Theres are much more interesting, but you have to know what youre buying. If you think about the largest banks, the National Champions like unicredit, santander, these are bonds that give you between 300 and 600 basis points, between 3 and 7 additional yield, depending on how down you go in the capital structure. Obviously, the mediumsized and small banks will have a consolidation process. Interest rates are going to stay low, but the large banks will probably survive and do well. Vonnie we have to leave it there, but thank you for your time today. Our thanks to alberto gallo, Algebris Investments portfolio manager. This is bloomberg. Vonnie lets get a quick check on u. S. Markets now. Indices are still up more than 1 apiece. The nasdaq is up 1. 5 , and the s p 500, some retailers pulling higher, some pulling lower. Dollar general the best performer, up 8. 8 . Best buy the worst performer, down 8. 8 . In europe, we are also seeing a rally in major indices. The ftse 100 up 1 , the dax up 1. 2 , the cac 40 up 1 , but the , with italy looking like it will have a stable government, up at 1. 9 higher. The european close is next. This is bloomberg. 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. Vonnie it green across the screen. Some places worse than others, including the cac 40 in paris. Italy doing pretty well. The scandinavian countries to join lets take a look at the major indices. The ftse 100 up 1 . A nice performance in britain from several retailers and several other companies. The dax up 1. 2 . All components, except for the big rental landlord in germany were higher. There is a rental cap coming which will inversely impact if it does get past. The ftse mib, this is a geopolitical story because we may have a new government in italy, abat in combination of democrats and fivestar under conde. 10 year yield invalidity 10 year yield in italy was down, now it is offering relatively better value than some of the other countries. Portugal, even though the debt profile is better it italy. The british pound treading weaker than the dollar, 1. 2192. Weaker atollar 1. 1059. Lets move to the United States. The s p 500 holding onto most of its gains on more positive talk from china. China sort of backing down, saying it will not escalate with more tariffs. Also asking the u. S. To deescalate. The 10 year yield 1. 51. Crude oil up 1. 25 . It is staying above 56 a barrel. Lets take a quick look at other items, including the dollar index. Index andthe dollar the 210 spread stronger. I thought it would be interesting to have a look at some of the retailers. 2 , althoughwn some of the dollar performances are much better. Best buy down 8. 8 . Andad a difficult quarter gave some warnings on tariffs. Condeg back to politics, is set to return as italys prime minister. He spoke to reporters earlier today. To exit the uncertainty that we find ourselves in caused by the political crisis. We are at a difficult economic conjuncture that