Anna warm welcome everyone to this is bloomberg. Bloomberg daybreak europe. A lovely piece on the bloomberg. Takeould be watching it back to basis. What are you looking at . You are looking at a momentum shift. It is about the short positions. Aree funds and speculators the most bearish on the dollar since 2013. This is aggressive positioning. Positioning is building. That represents a swing. This goes from along the dollar ranges. It is down to trumponomics. The hedge funds are well aware of the hawkishness around the fed. Maybe some of the surprise index, related data coming through, or the white house over delivering. Their ability to pass through legislation. Lets leave the dollar and get through the other asset classes. Lets go to the risk radar. Equities asian equities are up. Low volumes through the asian session. Chinese stocks bucking the trend. We have lots of earnings to wait for, from the likes of pepsi, j. P. Morgan. Eye on it. An it will come down to whether the bank of canada moves tomorrow. The firstbe substantial centralbank to substantially switch . Bond yields are at 1. 39 . They are rising by the most 008. E 2 stepenersrs had curve on. You have seen the largest shift in nearly nine years in terms of twoyear Government Bond yields. Anna we wait to hear on inflation, keep your eye on nymex. The former algerian minister fromsts if we see outputs libya and nigeria, that would be enough to fix it. Manus you need to sustain inventory draws. And evidence that opec nonopec cuts are working. If you do not get that, you will drop 40. Novack said it is working. Anna more on the commodities through the program. Lets get to the bloomberg first word news. Juliette President Donald Trump a new banking regulator. He was an official in the george bush administration. Inis expected to play a role playing out the u. S. Secretary of state is in the gulf in a bid to resolve the saudi crisis in qatar. The crisis puts washington in a difficult position. Buyer ofbia is the top american weapons. They have been able to weather much of the economy being isolated him a that has happened because of turning to turkey for imports. Qatar,says they support and say it is trade and prosperity maintained in the region. Have strong ties with all of these countries. Yes, we think qatar should be treated in a more fair fashion. Dont want any fallout when it comes to trade. Lawyere Donald Trumps acknowledges his client received a letter from a someone is saying they had damaging information on hillary clinton. It came through gmail from a former british tabloid journalist linked to trump through the Miss Universe pageant. The confederation of british industrys say u. K. Banks are less banks insurers are less optimistic. Time infrom the fifth june. Theresa may has been a forced to suspend one of her lawmakers from the conservative party after using racist language to describe the possibility of leaving the eu without a trade deal. This reduces theresa mays numbers. She lost her majority in last months election. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. You can find more stories on the bloomberg. A bit of a bitter session in asian markets, although volumes are light. 1. 2 . E hong kong up by trying to regain momentum from last week. We see good games coming through from in. If you look at the tight at, it is the tyex, it is well supported. We are talking about the deal yesterday that it will acquire another company. Citigroup says the deal is sensible. Deutsche bank says it is a preferred buy for them. Are under a lot of pressure in tokyo. This is on a news report that Japanese Police are trying to curb gambling. Looking at this chart, not only can you buy nearly everything you can think of on the ecomm erce giant they have risen more than 30 this year. They are starting to flatten off, but showing that you can buy them on thline. Anna that is an interesting birthday gift. Manus as if i havent got enough on my own. Lets talk about the markets. Asian stocks are higher this morning. This is ahead of the federal chair this will be about the stronger jobs report we had. Anna this keeps the central bank on track to raise rates. Earlier this morning, the San Francisco fed president spoke about u. S. Inflation and Interest Rates. Ifi would argue that inflation gets stuck at 1. 5 percent, that would argue for going more gradually and raising Interest Rates or holding off on doing that for a while. I am not overly concerned about that, because in the u. S. I see a lot of signs for wages, and an economy doing well. Clearly, the economy is strong and continuing to move ahead with good momentum. Manus joining us is Michala Marcussen, global head of economics at Societe Generale. Some called him crocodile dundee. He has made the same speech several times. But the debate is all about the testimony from janet yellen, and to what extent do you as an economist will or look for signals from yellen that this inflation is helping. It is aelieve transitory issue or something more sustained . Down to theoils real economy and what is happening on the real economy dynamics. If we continue to see the labor see as tighten, you will pickup in wage inflation. I do not think the curve is dead, but there are shifts around the curve. Weis not behaving the way thought it was behaving in the past. There is a lot of debate about how you measure slack on the market. There are uncertainties, but what you see on the silex curve is not much happens. You get a more sustained pickup in wages. As we talk about wages, it is important to remind ourselves that there has been some pickup in wages in the u. S. , it hasnt been as quick as we are used to seeing. What is important is if you look at the share of copper compensation, that has gone up relatively steeply. Cycle seeing late science, starting with the cycle in the u. S. Anna how much of your prediction is predicated on fiscal policy from the white house . We have heard conflicting comments from the white house about tax reform. Official saying they wanted a tax agreement before the august recess. It looks to be a tight timescale. Michala i think this is critical. It is one of the most critical assumptions in the forecast today. As i said, we are coming into the later stages of the cycle. Without tax cuts, i think we could be in a situation where the u. S. Economy could be slowing down more substantially, as soon as the second half of 2016 2017. Think those tax cuts are critical, and we will get more clarity ont more that coming in late august, september, when it we will get more visibility on what is being planned on that front. Managelets assume they to get something done this year. They talk about the percent as the achievable they talk being the achievable target. What do they need to get 3 . You need sustained productivity gains. To get stronger productivity gains, you need stronger investment. It goes to a deeper reform that you need to see. It is not just a one day outcome. Investment,e educational attainment. All of these things need to happen. From our perspective, we are fairly hopeful the tax cuts come through, that is our baseline view, i think lifting the u. S. Economy up to a sustainable 3 growth level, i do not see the evidence that that is in the pipeline. If we see slowing in the u. S. Economy, you say that is not your base, but it we do, any hike from the fed risks looking like a policy misstep. Michala that is the hardest thing when you predicate policy. Anna the fed suggests they factored that into their forecast. Michala we have heard slightly mixed messages on how to respond to that. I think the fed is right to continue run a policy on the basis of what it is observing and see the trend in the economy, and not to secondguess too much on the policy front. On the other hand, if the fed does not do something here, and the economy continues to run, that could be a mistake as well. What is interesting is we are seeing an increased focus on the instability risks. We heard that from yellen recently, and i think that is very important. Manus trying to take things out this isinutia of today, the backdrop. Priceslking about improving, financial conditions are fairly easy. Looking at financial conditions, very accommodative. The backdrop to another rise, would it be enough . Thed it be enough to unseat growth trajectory of the United States . Michala i dont think they want to unseat the growth sector. Manus but that is the concern. Michala with any Economic Modeling you do, it depends on the Financial Market reaction. If the Financial Markets react in a very aggressive, negative way, then that could be enough to stop the fed in its tracks. 2015 and think about why the fed delivered one rate hike. We had a massive appreciation of the dollar which tightened u. S. The u. S. Dollar. Reacted very aggressively to that. At how conditions have been since then, the market has not tightened as of yet. Anna interesting to tie that back to where we started the program. Despite what we have heard from the fed. Thank you. She stays with us on the program. Manus later in the day, bloomberg speaks with david chilton. Isa the u. K. s theresa may setting out on her commitment on economic reform. The Eu Economic Affairs council meets. Manus the Federal Reserve governor gives his speech, a keynote address in new york city ahead of a Janet Yellens testimony tomorrow. Anna a new study shows how britains finance ministers are less optimistic about business. We will talk about the latest. This is bloomberg. Manus welcome back. It is 1 20 in the afternoon. Seng flying hang high, up by 1. 39 . These equity markets are in a risk on kind of mood. Stocks are flying high. Lets see what Juliette Saly has to say about the business flash. Juliette thank you. Ipoes have fallen below the price at 17 a piece. They drew investors enthusiastic young people sending video messages, now they question the companys ability to grow as fast as initially expected and make wider declines in stock in tech stock worldwide. Amazon introduced a service that threatens its geek squad business. It helps customers install and can bigger in the net internet services. T buy acquired geeks god geek squad a decade ago. On what cracking down its citizens can find on the web. The Chinese Government has ordered the three Major Telecom companies to block individual access to Virtual Private Networks. That is according to people familiar with the matter. Blocking a vpns shuts down a major window to the internet. Thousands of websites are blocked in china, including the bbc andimes, the twitter. Anna juliette, thank you very much. A new study shows the questions surrounding brexit hurts britains business mood. Are less optimistic in their outlook because of the uncertainty in the eu divorce. Manus sentiment about the business situation fell in the three months for the fifth time in the last quarter. Retail sales rose more than estimated in june. Michala marcussen is Societe Generales head of global economics, and she is with us to continue the discussion. If you look at this eta, the gdp is the trending line. What confounds me is the more hawkish rhetoric from the mpci. They talk about our credit cards, and our mortgage borrowing, and our car borrowing, but there has been a shift the between data and rhetoric. Youala i would agree with on that, and at the end of the day, i think the likely scenario is the banks cut rates. As we head into next year, i think what you will see is the higher Consumer Price inflation will eat into peoples budgets. You will see a slower consumer. The uncertainty we were talking about, i think that will weigh on business investments. I think next year, the u. K. Economy will grow by less than 1 . You have a whitening out a widening out. One argues for rate hikes, the other for rate cuts. You will end up seeing the bank cut rates. One month of u. K. Sales show rebounds. You are focusing on a weakening consumer picture. Michala thats right. What i am focusing on is what happens to peoples income. That is a critical factor. Anna what about wages . We will get to wage data this week. The hard bit of data is for the august bank of englands meeting. Say augustlysts could be light for the bank of england. We will not get the majority needed to vote for a rate hike. How important is that wage picture . Michala i think at the end of the day and this is probably what yellen will tell us in her own testimony is that we need to look at a broad asu it ties back into income prospects. It is an important factor. I think they will look at a lot of Economic Indicators and what sterling has been doing, because i think that is one of the important drivers here as well. Manus anna and i read the same article this morning. They are talking about the trade surplus, which america says they have with us, and which the u. K. Says we have with them. Michala awkward starting points. Anna awkward starting points. This story ise in the u. K. It must be desperate to demonstrate it is able to get something from the United States. The starting position is rather polemic between the two. With run for a bear hug the United States. This is not the solving of all the evils of trade in the united kingdom, is it . Michala no, but when you look at the u. K. Him at the u. S. Is one trading partner. The bigger partner is the european union. I do not think the u. K. Can compensate about brexit deal with the u. S. Trade deal. I dont think one ou tweighs another. It is critical to have a good trade deal with its absolute biggest trading partner, the eu. Pwc has a forecast for something around 0. 3 . At the end ofnk the day when i am looking at the u. K. Economy, we will still see a decent 2017. For me, it is a much lackluster 2018 on the horizon. Anna Michala Marcussen from Societe Generale. She stays with us. Manus we will be joined by john curtis, professor at the university of stratton. Anna next up, we will talk to turkeys deputy Prime Minister to talk about the qatari crisis. We will get analysis next. So we need tablets installed. With the menu app ready to roll. In 12 weeks. Yeah. The world of fast food is being changed by faster networks. Data, applications, customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Fast connections everywhere. Thats how you outmaneuver. So new touch screens. And biometrics. In 574 branches. All done by. Yesterday. Banks arent just undergoing a face lift. Theyre undergoing a transformation. A data fueled, security driven shift in applications and customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Hello, mr. Deets. Every Branch Running like headquarters. Thats how you outmaneuver. Manus tokyo, 2 30 in the afternoon. Dollaryen is risk on in these markets. Yen lower, equities higher, dollaryen is moving lower. Bank of japan will be happy with that. They win went in last year and cap out the 10 year paper last week. Lets get nejra cehic. Good morning. Nejra certainly is risk on in the asian equity market for a second day. The pacific Index Trading near a record high. In fact, this year the chart has normalized. Outperforming global equities. Rally. Based a little softness in shanghai earlier, but the shanghai composite index has recouped those losses. Not just across different regions, but across the industry groups. Tech stocks leading the rally for a second day. Asian equities bid. Is the party over for the new Zealand Dollar . The kiwi dollar weakening after data of an inflation reading and credit card spending data. Kiwi dropping the below support in this technical chart, some are asking if it could be the start of a bigger correction, particularly if we do get more rate hikes from the fed and a stronger dollar. Kiwi dollar in focus today. Worstperforming g10 currencies against the dollar. The dollar is bid across a lot of the g10 currencies in this session. Is oneoned the fed, that thing the markets are focusing on this week with janet yellen due to speak on wednesday. Also earnings, earnings. A lot of charts in the library. Check this one out. Jpmorgan saying when you look at the second half, weaker produced price growth could spur an eps slowdown. Keep an eye on ppi data when looking at earnings. They are pretty closely correlated. Anna thanks very much, nejra cehic in the markets. Here is a look at some of the stories that have made it into todays edition. Hasld trump juniors lawyer acknowledged his client received and email last year offering a meeting with someone who had potentially damaging information on hillary clinton. This came after reports the younger trump had been told it was part of a russian effort to help his fathers campaign. Manus the second story is about markets. At 7 00 a. M. , how is it weathering the squeezing Household Finances . Analysts seeing the risk for closing amid a market weakness and low consumer confidence. Then you have jeffries who say the market share may grow due to better products. Were allthe doing some shopping. Anna finally, daybreak focuses on oil, Goldman Sachs 40 crude as a possibility of efforts to rebalance the market dont mayor fruit. If we dont see the necessary cuts from opec, very set of factors, we could see oil some 40. Manus hsbc may well be in focus. At the highest level since 2015. 1. 3 in hong kong trading for the financial. We will see how that comes through in the european trade later on. Anna the session in hong kong has been pretty strong. U. S. Secretary of state Rex Tillerson during the gulf in a bid to end the standoff between qatar and other u. S. Allies in the region