tv Bloomberg Markets European Open Bloomberg March 28, 2019 2:30am-4:00am EDT
nejra: let's get you breaking news. asian equities on the back foot. a lot of the pain being felt in japanese equities. general risk off. breaking news on nomura, planning to cut 100 plus jobs in europe and the americas. planning to cut dozens of jobs across its trading and investment banking businesses in europe and the u.s. the brokerages struggling to make a profit. yield hasyear jgb fallen to -10 basis points.
a lot of discussion about the challenge globally in this negative yield environment. let's get the bloomberg first word news. may promises her own lawmakers she will step down if they back her brexit deal. the prime minister still short of the support she will need. parliament has signaled that is support a softer break with the european union. may must now decide if she will bring her divorce deal back for a third vote. u.s. negotiators are in beijing to work toward a trade deal. is trump administration challenging beijing on his geopolitical redline. sailed a warship through the taiwan strait. the move defies china's warnings
against meddling. trump's pick for the federal reserve owes more than $75,000 to the irs. documents filed say the government won a judgment against him for unpaid taxes. he says it is not an attempt at defrauding the government. instead, mistaken direction of child support and alimony payments. monsanto loses another judgment saying roundup causes cancer. awardedancisco jury compensation over $5 million and a punitive damage of $75 million. the case was of a 70-year-old man who sprayed the herbicide on his property for decades. 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.
this is bloomberg. check on the markets around the world. joining us now is niraj shah. good to see you as always. indian equities bucking the trend today. what's going on? >> good morning. i was surprised. -- not only did we start off marginally higher, we have done well. up half a percent for each of the benchmark indices. just another day. rate sensitive spaces are moving well. , andof the auto companies
real estate. the markets could be on hold for the time being. in the green. back to you. dani, we are seeing this relentless fall in global yields. what are the repercussions? >> you only need to look at japan. they lead declines falling 1.6%. when we look at other assets, you have the yen higher by 0.4%. there is that classic risk-off haven buying. to -1010 year yields dip basis points for the first time since 2016. we see the kospi down as well.
equity markets taking this lower. this hunt fork growth my fuel growth asset. would seeexpect we more action like india. malaysia, this is a three standard deviation move. lira, one of the worst performing currencies, falling more than 2%. we have elections this weekend. we are seeing maybe this is the calm before the storm. volatility has skyrocketed. have traders saying volatility is going to get worse because liquidity is thin. maybe after the election we will get traders to take out there long bets. nejra: those moves in the
turkish market have been eye-popping. there needs to be a solid monetary policy case before officials act to mitigate the side effects of negative rates. that is according to the ecb chief economist. >> it reflects concerns. our policy has not changed. guidancehis forward which says the rates are going to stay at present level until the end of the year. the reason, the increase of wind bunds -- blend prices -- prices, they reflect the concern about the economy in general. >> are you concerned about
germany? >> not particularly. balance sheets in general are in good shape. this is a country that can absorb a number of shocks. on the other side, it is very much manufacturing. has been hit by international uncertainties. the u.k. has been -- investment has come to a halt. germany is a big exporter of investment. been hit today by the soft brexit related concerns. i think the country is resilient. on the other hand, they are exposed to manufacturing.
>> talk to me about risks. there's china, there's trade. you mentioned brexit. concern?our biggest >> the concerns are of a political nature. the persistent character of these uncertainties are weighing on economic sentiment. only the positions of these uncertainties at some point. businesses continue their investment plans. it's about time we reduce uncertainty. political uncertainty. nejra: what can you do to do that? .> we have a mandate we used instruments we think to
reach our objective. it is only limited. you get fundamental uncertainties to the trade regime. the central bank cannot do much about this. it needs to be supported by other policies in general. wouter sturkenboom, chief investment strategist for northern trust asset management is still with us. the ecb is one of the few central banks that adopted negative rates without mitigating measures. should the ecb mean more concerned -- and be more concerned? i think what they did at the last meeting was a positive side. the risk of bank funding coming up and said, let's make sure that risk is mitigated.
they are starting to look at the banking sector. now they are starting to see maybe those negative rates are tother measure we could take make sure they continue to fund the recovery. it also shows the ecb is running out of options. investors should be asking themselves can the ecb do enough? nejra: meanwhile that 10 year bund yield stays below zero. we had germany selling notes at a negative yield. say to me, don't look at the bund yields. what is the bund yield telling you? wouter: yes, indeed, investors are worried about global growth. they are worried about trade, about brexit.
all these geopolitical events are weighing on the german economy, the eurozone economy, and the global economy also. it is really a multifaceted weighing of the bund yield. looking at eurozone growth under the expectation trade talks one and badly -- will not and badly, we should see a bounceback. we should see recovery in eurozone growth. we should also be a driving force for the bund yield to go back into positive territory. commentse of the other that came out, he said if there was a slow down it would manifest itself in the widening of credit spreads. you were talking about the fact you are positive on u.s. high-yield. u.s. and european high-yield spreads. are you positive on european high-yield? we think both markets
are attractive. we think the technicals are supportive. there is not a lot of issuance going on. think growtht, we will recover. which means the default rate risk is muted. high-yield space in the u.s. and europe. nejra: with yields falling havetlessly globally, you already talked about the fact you like u.s. high-yield. you are looking at real estate well. enough ifing to be yields remained suppressed? or do you need to search for new areas of returns? wouter: right now it is enough. obviously, if you need more because of the return and yield potential you are looking for in your portfolio, you need to look elsewhere.
things like emerging-market debt will start to pop up. we are not there. i understand if investors start to branch out. nejra: would you like duration either in bonds or equities? wouter: at the moment, in bonds. we are neutral in terms of duration. we have liked the duration angle. we are now at the lower end of our range. we are starting to become more cautious. nejra: thank you so much. --wouter sturkenboom will be continuing the conversation with us on bloomberg radio. saudi aramco sweeps for a majority stake in a local chemical giant. we discuss that next. i just mentioned radio. always tune into bloomberg radio live on your mobile device. this is bloomberg.
nejra: this is "bloomberg daybreak: europe." let's get more on brexit. u.k. lawmakers rejected all eight options in a series of votes. speaking ahead of the annual conference of the british chamber of commerce, westminster cannot keep chasing rainbows. he said members are frustrated and angry over the brexit process. let's go left to westminster where we can speak to inspector general of the bcc. we looked to be facing stalemate
again. how does business take this? >> good morning. this is enormously frustrating. it has been going around in circles the past three years. we are facing another deadline. businesses don't know what they are -- what they are trading conditions are going to be. it's hard to overestimate how angry businesses are and how concerned they are about the changes they could face. there were eight options put forward. are any preferable for british business? are seeing so many different options put forward in westminster and once that is going on, where he -- we are seeing firms having to take drastic action. companies in the west midlands saying to us my investors don't
want to go ahead. people losing contracts in northeast of england, having to move product very quickly in the west of england. these are the real impacts we are seeing. parliament can debate as many options as it likes, but it has got to start taking some choices. we have seen no evidence from last night's vote that our elected leaders are ready to do that. nejra: if we get a longer extension, because we don't manage to get theresa may's withdrawal deal through and 22, what eu by may that long extension make things even worse? >> there are differing views in businesses on this question. there are some who think you need to draw a line under this process, because forever extending uncertainty and pushing things out further to the right is quite negative and harmful.
is against theew messy and disorderly exit. going for a longer extension to avoid msc and disorderly exit is probably -- avoid a messy and disorderly exit is probably preferable. nejra: one thing that has been interesting is amid the uncertainty and preparations, wage growth in the u.k. has been robust. marketbritish labor continues to defy gravity many firms have had such a huge unmet demand for skills that they are still recruiting people. some are doing so in anticipation this low of skilled people might be disrupted during the brexit process and we might not see as many people coming to the united kingdom to take up jobs. laboris an element of
going on here and an element of business trying to get ready for an uncertain future by getting the best people they can now. of getting ready for that uncertain future, whether it is to do with labor, with stockpiling goods, what proportion of the businesses you speak to actually are prepared for any eventuality? >> it is a very small proportion who are prepared for any eventuality. there tend to be larger companies, corporate's, internationally active firms who knew from day one they would be immediately affected and able to prioritize those resources and people to focus on brexit as an issue to be dealt with. a third of chamber members across the u.k. doing active contingency planning. we have another third watching
and waiting. it is an entirely reasonable approach for them to take because they might not have the resources to dedicate to a million different scenarios. what they are doing is hoping for an outcome so they can quickly put plans in place. there is a segment of business, the final third, where people are doing nothing. there are indirect impacts that may be felt i businesses down the line. anya: briefly, if we get kind of definitive resolution on brexit, the business investment that has been held back, do you think that will surge or will investments stay suppressed for the longer-term? i don't think we will see any full resolution of this question. i think we will see a bump in business investments if a withdrawal agreement is passed. some businesses will be able to get decisions over the line and move projects forward. there is still a big question
mark at a huge amount of work to do to repair its international investment reputation. marshall, thank you so much for joining us. now let's turn to the middle east. saudi aramco will by a majority stake in a chemical giant. it will pay the kingdom's sovereign wealth fund over $69 billion. that is the biggest ever deal. the biggest transfer of cash from one arm of the state to another and this will finance the crown prince's economic agenda. matthew, great to have you with us. talk us through what happens next. >> good morning. now that we have come to an agreement on the price aramco is willing to pay for this state in sabic, tensions are going to turn to financing. aramco has said in the past they will be looking at the bond
markets. an aramcoecting international bond issuance coming sooner rather than later. $10 billion are a lot more. if you look at the size they , the amountnce sovereign bonds have been able to raise, we could be looking at a very big aramco dollar bond issuance coming out in the next couple months. that will be followed by borrowing from the local market through bonds or loans. trying to raise as much money as possible from various sources to plug the funds it needs for this massive acquisition. we aredoes this mean getting closer to aramco's ipo? >> aramco has said it put the ipo plans on hold to some degree whilst it pursues the acquisition.
once that was done, it would start to turn back toward the ipo. it would not expect that until 2021. i think that is looking optimistic. there is a whole host of regulatory approval sabic the sabic deal needs to go through. process is going to keep aramco occupied. closer toe are a day the ipo, i do not think we are expecting it on the horizon that anytime soon. nejra: i was saying in the introduction part of the rationale for the deal as it will help finance the economic agenda of the saudi crown prince. what does this mean as well for the saudi sovereign wealth fund? >> obviously with the aramco ipo not happening, a big chunk of the funding that was going to fund the transformation of the saudi sovereign fund to an
international sovereign wealth fund, that was going to come from an aramco ipo. they came up with this strategy to sell the sabic, so now the fundbe receiving money to these massive deals we have seen in the past. they have been unafraid of writing large checks with $45 billion going to the softbank vision fund. big stakes in tesla. moreld expect we will see headline grabbing deals shortly as well. nejra: thank you so much. now, coming up, more on those unprecedented brexit votes in u.k. parliament. plus, just over an hour until european equity trading gets underway. we keep you up-to-date with the
nejra: good morning from bloomberg european headquarters in london. hehic.jra c theresa may offers to stand down if her brexit deal passes, as parliament rejects eight plans. japanese bond yields dropped amid recession fears. nomura could cut over 100 jobs. ecb's chief economist tells bloomberg exclusively that policymakers need a solid monetary pace for a tiered rate.
♪ ♪ nejra: good morning and welcome to "daybreak europe." we start the cash equity trading in europe in just under one hour. futures on the front foot. 40 futures in cac the green after european equities closed flat, rather than falling like u.s. equities. interesting that we see this, with weakness in the asian session and u.s. futures on the back foot, jitters in equity markets and risk assets because of the relentless slide in bond yields. let's switch over and look at what's happening in bond markets. ten year treasury yields, 2.35 handle. some money moving into treasury futures. fed funds futures pricing, market pricing in at least one rate cut from the fed by the end
of 2019. also looking at the european bond market, germany selling 10 year notes at a negative rate for the first time since 2016, something to bear in mind. might haveke futures a steady open in european bonds, or if anything a bias toward yields kicking higher. year jgb, negative yield, something to focus on as well. with that in mind, yvonne man has more. we are still seeing the risk off in asian markets? risk off, mixed in equities. talking about the bond rally reigniting, perhaps we could see bunds fall, but that doesn't bode well for equities. the nikkei 225 ending the day down 1.6%, the biggest under performer in asia.
chinese large caps down 0.4%. andtuating between gains losses. trade talks resume in beijing, but we heard the premier speaking in hainan about the domestic economy looking sound, risks abroad. up 0.6%, bucking the trend we have seen, on course fora sixth weekly gain indian equities ahead of that election. hong kong, slightly higher, 0.25%. looking at what we are watching in movers, talking about banks in china. the first of the four to report, china construction bank. it was down 1% for the stock right now. interesting to see. but thingsng 5%, could look murky now that the economy is slowing.
zhongan online, the insurer in china skyrocketing after being granted a banking license in hong kong. air china, oil prices stabilizing and the renminbi. z te, interesting to note the full-year loss was actually wider than expected, but jeffries saying the prophet was a massive beat despite all the concerns we are seeing. but stock up some 10%, still ailing from the u.s. ban on some critical components. nejra: yvonne man in hong kong. thank you. let's kick it off with the latest on the u.k. brexit stalemate. in an unprecedented series of votes, the house of commons signaled it is more willing to back a softer e.u. departure, but none of the eight brexit options earned a majority. theresa may said that she would stand down as prime minister if they passed her deal. the u.k. brexit secretary says
the government still hopes for a third vote on the theresa may deal, perhaps tomorrow. >> the results of this process the house has gone through today strengthens our view that the deal the government has negotiated is the best option. tora: let's go live westminster and bloomberg anchor anna edwards, standing by. in terms of what we learned from last night's indicative voting and the stalemate we have, what does that tell us about where we go from here? anna: good morning to you, nejra. we learned some interesting things about what mp's in the house behind me could support in terms of brexit. there is a trend toward a softer brexit that they favor, but no majority for any of the options on the table that were voted on. the option that came closest to securing a majority was a customs union. the option that got the most votes was a second referendum, a confirmation referendum, one
option chosen by the house. both of those options got more than the 242 theresa may secured for her deal in meaningful vote number two, which is very interesting. we also learned more about the no deal story, which is not popular across the house as a whole, but still very popular within the conservative party. today the focus is on whether theresa may will bring meaningful vote number three to the house, whether she thinks she can win it, whether she thinks she can get the dup on her side and whether she can get around the rules the speaker of the has put in place to prevent her bringing it back again. she did win over some key voices, although there was dithering around the dup position. but to enable her to get support, she had to promise to step down as leader. we will be faced with a conservative party leadership contest. we could see a different leader of the conservative party, a different leader of the country,
leading the next stage of brexit negotiations. so what we are talking about here is the withdrawal agreement, the part that is legally binding. the future relationship is not, and could still be meaningfully shaped by a new leader, a new person in charge of the conservative party. nejra: bloomberg's anna edwards at westminster. thank you so much. etfing me on set, an strategist. great to have you with us, as always. a stalemate, a real lack of clarity. i was talking with the british chamber of commerce about how worrying that is. what is that meaning for investors? do they see a spill over to other parts of the market, or a very idiosyncratic u.k. story? >> now that the risk of a no deal is kind of reduced, and the prospect of a soft brexit is climbing, i think market reaction to any brexit-related
has littlend of, impact on the market. the little impact on sterling this week, one example of fatigue from the market. is becoming increasingly a u.k.-focused political issue. nejra: it is interesting, because that sort of lack of movement we have seen in cable could be attributed to fatigue, but also just uncertainty of where we go from here. one thing i find interesting. you pointed out that we have seen inflows into u.k. focused etf's. why is that? morgane: investors are seeing compelling valuations in the u.k., outweighing the political risk in the u.k. so we are seeing net inflows year to date into u.k. focused etf's, contrasting with what we saw last year, net outflows on the year for u.k. etf's. nejra: that is interesting,
particularly when you think about the fact we have seen net outflows from europe. does that suggest investors are actually more concerned about the outlook for the euro zone? morgane: absolutely, because the euro zone outlook has a much greater impact on asset allocation decisions than brexit , because a prolonged slowdown in the euro zone could impact not only euro zone countries, but also abroad, emerging markets, china, so much larger repercussions in the broad markets than brexit alone. nejra: i wonder, with those outflows you talk about in europe, whether that, mainly equities or bonds, and i ask because the 10 year bund yield is stubbornly below zero, germany selling notes at a negative yield for the first time since 2016. morgane: that underlines a flight to quality and safety. we see inflows into fixed etf's
outpacing equity etf's, so there's definitely a rotation to more defensive assets. in equities alone, defensive sectors have recorded net inflows year to date, with quality as a factor outperforming all others. definitely investors are seeking more safety, and are adapting to the slowdown in the global economy. nejra: it isn't just in but you talk about quality as a factor in equities generally, because we have certainly seen rotation around, particularly in the u.s., the search for high-paying dividend stocks and also some of the bond proxies, as yields stay suppressed. sticking with yields, talking about the u.s. the 10 year treasury, 2.35 angle. i have a chart here that shows the need for forward rates. discussing how much the yield curve is signaling recession this time around. the fed last year said that this
forward spread is more statistically robust in proving a recession, because markets are usually right in calling fed rate cuts that tend to anticipate recessions. the market is pricing at least one rate cut by the end of 2019. do you think that's what the fed should do? morgane: difficult question. what is driving the fed is economic data and inflation. it i think inflation now, toves the fed the option slow tightening and not cut rates, as is priced for september this year. those options are still valid. looking at inflation alone, what's interesting to see, we don't foresee inflation spiking over the next few years. why is that? because energy prices is a big component of inflation, and inflation expectations.
looking at the forecast of the international energy agency, more additional supply from the u.s. to the oil markets, that should actually put downward pressure on oil prices. that gives time not only to the fed, but to all central banks in developed markets, to think -- helpw they can put their economies without necessarily drastic measures. nejra: it is interesting, if the market sees anymore easing from the fed, it could be as a result of the inflation outlook rather than global growth, perhaps that gives another booster risk assets. thank you so much. bmoane delledonne, from global asset management. some headlines crossing in the last few minutes. speaking on the latest in ongoing trade negotiations, reiterating that the chinese
vice premier will go to washington next week, adding that beijing and washington are in "full swing on a trade deal." let's get the bloomberg first word news. nnabel: staying on china, its economy faces new threat from weak global demand, but the premier says the domestic economy shows signs of stability. the u.s.-china trade war remains a major source of uncertainty. negotiations continue in beijing this week. there needs to be a monetary policy case before officials moved to mitigate the impact of negative interest rates, according to the ecb chief economist. they are examining tiering, where some bank reserves are exempt from the lowest rate, but the issue isn't a done deal. >> you cannot just conclude
there is tiering because the economy is slowing down and rates are low for longer. it is fair to say that we have to go into this issue, but need a convincing monetary policy case to do that. lyft raised the price range for its initial public offering, the biggest listing of the year so far. the ride-hailing company is seeking to sell 31 million shares, raising as much as $2.2 billion. they previously marketed the shares at $62 to $68 per the listing is set for thursday. global news 24 hours a day, and at tictoc on twitter powered by 2700 journalists and analysts. this is bloomberg. nejra: thank you so much. a growing money laundering
scandal -- what are the allegations? earlier this year, a swedish broadcaster alleged sweater bank handled $10 billion in suspicious transactions, growing to $100 billion from 2010 to 2016. unrelated, bill browder alleges they handled money connected to surgery magnitsky. now alsoorities are reportedly investigating the lender, alleging they misled authorities about suspicious activity, and allegations have been made that paul manafort, trump's former campaign chairman, received payments through swedbank. in response, a spokesman said the lender is limited about what they can say about any communication that may have taken place with u.s.
authorities. our nordic editor joins us, from stockholm. through, we have gone the story from the beginning. what should we expect today? kathleen: it was a really bad stockr swedbank, the ending down 12%. after the market closed, more bad news, that the economic crime authority is expanding the investigation, no longer just breaching insider information rules, but whether they misled the market between october and december. we can expect a fairly tense agm, i think that is fair to say. so the ceo and the board and the
chairwoman -- they are facing multiple investigations. learned after we apparently misleading authorities in new york, they are being investigated in connection with the panama papers, mossack fonseca. the question now, what is the full scope of the scandal? nk, difference from danskeba we got a since last year of the scope of the scandal, the bank coming forward to prevent a huge number. it shocked the market, but left people with the feeling there were not more skeletons in the closet. the feeling with swedbank, we are not yet at that point, so investors are understandably trying to get more answers. the public is trying to get more answers. the politicians are wondering what's going on with sweden's oldest bank. in the meantime, the questions
about whether the bank has misled the public, looks like it is becoming a big part of the investigation. nejra: that is the important distinction to make between swedbank and danske bank. bloombergogger, nordic manager in stockholm. swedbank has been downgraded, a price target of 165 krone now. coming up, the megamerger talks continue. we focus on the prospects and problems with a deutsche -commerzbank tie up. e intoing to work, tun bloomberg on your mobile device or on dab digital radio in the london area. this is bloomberg. ♪
minutes from the equity market open in europe. in london.cehic bond yields seem to be driving everything at the moment. yield steady, and negative territory, with germany selling negative yield rates at the first time since 2016. jgb hitting negative rates for the first time since august 2016. lowest sinceield, december 2017, fed fund futures pricing at least one fed rate cut by the end of the year. fx markets, dollar study and emerging-market currencies under pressure, turkish lira significantly underperforming. touched 1000%,es with bonds and stocks crumbling lira.ders scrambled for
theme this quarter has been u.s. stocks and bonds rising in tandem. how long can that last? stoxx 50, diverging from the trend of risk-off. let's get the latest on a potential megamerger. is said to be concerned about commerzbank's credit worthiness. deutsche is said to be concerned that the smaller rival has been loans,reful handing out raising the possibility of write-downs. joining us is dorothea schaefer, researcher at the german institute for economic research. great to have you. thank you for joining us. what does the finance ministry in germany actually expect from this merger? dorothea: the finance ministry is not really expecting that much from the merger, at least
the finance minister himself says he's rather neutral about i t. but in the beginning, he was the first to talk about industry policy in the banking sector. y have confidence the finance minister is behind the talk of the merger. combined deutsche bank and commerzbank be strong enough to survive on the international level against other global investment banks? dorothea: they would certainly be a very large bank. the third-largest bank in europe. strong in the export financing, at least for
german firms. they have abe that very realistic chance to become in the european market. they aree same time, also too big to fail together. deutsche bank is already a make a bank. nejra: and one of the arguments for germany to merge the banks, to create a national champion. would the positive aspects of that outweigh the negatives, the challenges of merging the two banks? dorothea: national champions itself have no economic value. but you can them, also hate them. not really we have
strived to have a national banking champion in the past years, because we had a very and in banking crisis, that crisis the problem was that all the large banks were doing the same thing, and they were there for all in trouble -- therefore all in trouble at the same time. so now there are huge fears that a lot of employees will lose the stafftions, and reductions, there is a high commerzbank would take the highest burden in this, so there are really fears.
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>> good morning. we are live again in westminster. i am anna edwards. cash trading is less than 30 minutes away. parliament says no. british mp's reject a different deutsche -- 80 different brexit proposals. bloomberg learns jp morgan plans hundreds of job cuts and nomura is set to shed workers in europe
and the united states. the ecb chief economist says that there needs to be a solid case before taking action on negative interest rates. fair to sayt is that we have to go into this issue, but we need to have a convincing monetary policy case to do that. nejra: a warm welcome to the european market open. half an hour to go, just under that until the start of the trading day, and let's get straight to a breaking news line out of japan, in connection with sony's technology business. the former ceo and current chairman of sony, kazuo hirai, will retire after being with the company for 35 years. the cfo will be nominated to the board. other appointments and changes are being made, so keep an eye on that. interesting story earlier this week about the future direction
of sony, whether they still have the appetite for shutting down part of the business that are not as moneymaking as they could be. mgmt is the function to use on your bloomberg, it tells you how long everyone has been on the board, what the return to shareholders has been during the tenure. a developing newsline we are watching now, red headline across the bloomberg, kazuo hira i, sony chairman, is to retire from the business. live in westminster with the latest news surrounding brexit. we learned last night a little more about what mp's in the house of commons are prepared to vote for. it looks like broadly speaking a softer brexit. doesn't mean that comes to pass, but a flavor of what they are minded to support at this point.
no option got a majority of support. what got closest was a customs union. the most votes went to something called a second referendum, confirmation vote, a second referendum on anything decided upon in the house behind me. so neither of those got a majority, but they were the best-supported options in the house. interestingly, both they better than theresa may's own deal in meaningful vote number three. crunchingues the numbers looking at support for no deal, unpopular across the house as a whole, but still popular within the conservative party. today the question is around meaningful vote number three. will we see that brought tomorrow? willie dup support it -- will the dup support it? will it be changed enough that this man, john boko, the speaker theercow, the speaker of house, who has said you cannot
bring the same deal again and again. is it too late? has theresa may lost some of the remainers within her party? we explore what the house once, if theresa may can get her deal through, and we look at those as we go through on the brexit beat. in singapore, as always. good to have you with us. we saw as a result of the lack of majority for any option coming through, a little weakness in the pound, although flatter this morning. it was not a surprise that no majority was found. that is why the process is designed in two stages. yesterday was a long list of options, and monday if we get that far there will be shorter list. mark: absolutely. as you mentioned, the reaction in the pound quite subdued so far. traders have essentially given up on
predicting brexit. chat i wasa whatsapp with were much more interested in what will happen in turkey over the next week, because nobody feels the government has a clue,, and the indecisiveness from the government is matched in the sterling market. there are ramifications of what we have seen so far. long-term, this is negative for sterling. one thing that's very clear, there has been a lack of certainty for a long time, eroding business confidence and spending in the economy. even if we get a good decision and a relief rally, it will quickly be sold into. even with a brexit deal, we would have to negotiate how the trading agreements work longer-term, meaning the uncertainty will remain for a long time. anna: you say none of the traders care. i keep reading stories about the
international context, how much it has fallen off the radar for international investors. haveps because traders something on their mind more significant, the ever lower trend to lower bond yields. my focus this morning on lower bund yields, getting below zero. doesn't seem to be a sign of that stopping. australia, three year yields lower once again. below,ond yields going jgb yields. we talked about that on the mliv question of the day a few weeks ago. treasuries are continuing to move. our colleague talked about convexity, the mortgage bond markets causing extreme treasuries moves. it looks like initial momentum has gone through. it is important to recognize that the yield moves don't necessarily signify a massive panic or an idea that global
growth will collapse. yes, there is risk aversion. as mentioned, turkey is leading to some contagion around em's and other assets, so there is risk reduction. but it is more that there is no sign of inflation, and we have infinite money out there, and central banks will keep pumping more, moving more dovish. we know there is no sign of inflation. there is a little risk aversion. a perfect mix for a bond rally to continue, but it has gone a --g way quickly, so not sure you might have said that anytime the last couple days. [laughter] anna: or weeks or months, perhaps. interesting, the data on the u.s. has been on the weak side, a focus when jay powell last spoke. we heard about china overnight, iang speaking about
strengths and weaknesses. the mliv question, will emerging market weakness we deepen and lead to a selloff? mark: we had some of that already, and a little more, not too much. this is all coming from turkey. why? positions are trapped there at the moment because of the explosion of funding rates, 1000% in the turkish lira overnight market. 250 to 300% in the one week market. longmeans people with positions can't afford to exit them. unfortunately, we see value risk metrics exploding because of this, meaning thanks and funds are being pressured to remove risks, cannot get out of turkish exposure, so they have to sell other exposure. normally turkey because it has been in a multiyear decline economically, most exposure is in dedicated em funds, which is why most risk aversion is
feeding into other em markets, but some will feed into developed markets. we saw some yesterday, but there's still a few more days of this, next week going into the turkish election on the weekend and how that plays out in the we remarket -- the lira market next week. anna: putting it all together. thanks very much, mark cudmore, bloomberg markets live managing editor, joining us from singapore. get your thoughts on the question of the day -- will the emerging markets be a trigger for softness in developed markets? how much contagion from turkey? you can tell us what you think about the brexit votes we saw yesterday as well if you feel so moved. let's get a first word news update. u.s. negotiators are in beijing to work toward a trade deal, as the trump administration increasingly challenges beijing on geopolitical redlines.
the u.s. sailed a warship to the taiwan strait, and released a criticism of travel restrictions in tibet, which could be seen by china as meddling in internal affairs. going says it plans -- boeing says it has changes to submit to the for approval, trying to quell fears about the best-selling jet. investigators are trying to piece together what caused the two crashes in the last five months, but regulators in washington are looking at anti-stall system. bayer loses a second round of trials claiming roundup causes cancer. awardedin san francisco awardedin san francisco damages in the case of a man who
used the herbicide on his property for decades. global news 24 hours a day, powered by 2700 journalists and analysts in over 120 countries. anna: thank you. we are live in westminster, keeping track of the latest on brexit. theresa may signals she could go, but the brexit stalemate remains. we are live from westminster with the latest. remember, bloomberg radio is live on your mobile device or on dab digital radio in the london area. this is bloomberg. ♪
signaled they are more open to back a softer deutsche departure -- e.u. departure, but none of the measures won a majority. theresa may said she would stand down as prime minister if they passed her deal, but this brought things no closer to resolution. in a surprise move,, fitch put the u.k. on a formal downgrade warning last month, citing the u.k. government inability to stop the brexit impasse as one of the reasons behind the warning. let's talk about what this means . joined by morris kramer, previously with s&p, chief sovereign ratings officer. great to see you, as ever. what is the risk to the u.k. credit rating from brexit? morris: good morning. ofpectacular display indecision last night, and also
remarkable how the sequencing of the process went. two days before the original formal exit, for the first time, the formal process where the political leader in parliament tries to decide what they want. this is all upside down and should have happened before article 50 was triggered. now it is a little late in the game. as far as ratings, my personal view is that even after tonight, maybe especially after tonight, an accidental hard brexit is probably much higher than many people appreciate, and the markets appreciate. if that were to happen, i think there can be little doubt the rating agencies would take that as a negative and would lower the rating. i think fitch made that clear, as you point out. their negative outlook, by the other rating agencies. this would be bad news, and ratings would go down. even if this were somehow
averted, the longer delay of brexit to find a solution out of this impasse, the political ability to take decisions in a decisive, forward-looking way would be jeopardized, hampered for some time to come, and that would also be a negative as far as rating agencies are concerned. interesting, your comments on the process -- anna: interesting, your comments on the process. one of the lawmakers who crafted the process said it should have taken years, and they are doing it in two days. how complacent is the market around u.k. assets, the pound, for example? moritz: that's a good question. glad you asked it, because i was wondering how to weave that into my talking points. if you look at the pound, it is up year-to-date. that's rather remarkable,
because if anything it has become clearer in the last few months, starting in november and december, that there is consensus on anything in the british political system. let's recapitulate what happened last night. parliament voted against remaining. they don't want to remain. but they also voted against any perceivable way to exit the european union, so we are none the wiser. the great uncertainty this brings is not properly reflected in the market. it goes wider than that, not only brexit. political uncertainty globally, about trade, about the possibility of a china slow down, of policy mistakes made there. be policy uncertainty is at a high, at the same time volatility and valuations signal everything is fine. this gap will have to be bridged, one way or the other. one way to bridge the gap, which
would be unprecedented, would be for the markets to more thoroughly integrate the risks we are currently perceiving, which would mean some weakening, some higher volatility,, and maybe a correction. anna: you mentioned policy uncertainty, something we see globally. people questioning the global growth story, seeing money going in the bond markets, yields going lower and lower. bund yields go increasingly negative. how low can they go? moritz: we are now 10 years from the beginning of the great financial crisis, and we still have negative interest rates on the benchmark bonds except for the u.s. rates byhave policy the big central banks which are basically zero. there's no wiggle room left, compared to what was there before the last crisis. so i am not that pessimistic on the near-term, this year or next
year, but the next recession or next crisis will come, and if that happens, the central banks simply have very little ammunition left. the same is true for the fiscal, for the budget. we have not repaired the balance sheet damage in public finance created by the last crisis. so the next crisis, when it comes, and it may be related to brexit or something completely different that we don't have on the radar right now, there is so little policymakers can activate to lean against the wind that can lean against the breeze. there is not much ammunition left, and that means that any downturn that would come would be deeper and longer than it would be if monetary and fiscal policy were still in a position to counter the downturn and stimulus -- stimulate demand, but i don't think we really have that.
♪ anna: welcome back to the european market open. let's get the stocks we are watching. dani burger looking at the latest from swedbank. dani: swedbank, but a contentious agm it is about to be as the ceo job is on the line. new headlines crossing, they will not discharge swedbank's ceo from liability. a lot for investors to concentrate on, as the money laundering scandal thre deepens. the latest bad news surrounding roundup for bayer? >> they lost their second trial
related to the roundup weedkiller, the second in one week, ordered to pay $80 million to a man believed to have gotten cancer from using that product a number of years. not a huge number, but there are another 11,000 cases like this outstanding. analysts believe total liability could be $5 billion. there is a positive note, that said, saying perhaps the selloff is overdone. keep an eye on the shares this morning. anna: ok. and m&a in the auto sector? >> absolutely. nissanrted renault and could seek to resume merger talks, and could involve fiat. no smoke without fire here. sebastian, joe,
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>> welcome back to the program. a minute to go until the cash equities trading day. we are getting the latest results from sunday's election. i'm in westminster covering the u.k. political story. let's get to dani burger taking us through the market open. the action continues to stay in the bond market. u.s. 10 year yields now below 2.4%, their lowest level since december 2017. will that spill over into equity markets. saw some pain in japan. 1.6% lower than yesterday. anna, you must have taken all the action because the u.k. not
doing too much higher by just 0.3%. other markets looking a bit weaker into the start. germany down by 0.1%. bond yields negative. the first negative sale on germanyyield notes from since 2016. that impact might be seen in the markets this morning. whether or not they open lower, that is the question. in the u.k., they take a cue from the pound. because the pound is not moving too much, we are not seeing too much movement in u.k. assets. the dovish central banks around the world, the ecb supporting banks, might help assets from here. germany, that is one to watch. we have the conflicting reports of lower yields very correlated to banks as well as the ecb helping them out. let's look and see what some of the sectors are doing. we are looking at health care. moving lower today. that was one of the best-per