tv Bloomberg Daybreak Europe Bloomberg August 15, 2019 1:00am-2:30am EDT
matt: good morning from berlin. this is "bloomberg daybreak: europe." nejra: these are today's top stories. reaching a fever pitch. the yields on 30 year treasuries below 2% for the first time ever as inversion stokes recession fears. donald trump labels jay powell clueless. a new staken takes in warren buffett's conglomerate. sure boosts its net on amazon. counting the costs to chinese companies. protests rock hong kong. that is a bloomberg exclusive. donald trump says china wants a
trade deal, but is focused on unrest first. blocking a no deal brexit. jeremy corbyn asks the rival party to support him as prime minister in a coalition to block boris johnson from pursuing a no deal brexit. welcome to "daybreak europe." hit a record low yesterday and continues slide today. below 2% for the first time ever. we continue the inversion, but will it stick? does it mean you want to stop taking risks off the table straightaway, or have you got 18 months to consider? that is the question for the markets. yesterday we saw a risk-off with the s&p 500 dropping 3%.
the dow having its first route of the year dropping 800 points. we see stabilization in futures today. it's not all about bond mageddon.-- bond- carlsberg is out with earnings today. it is going tog initiate -- the brew were -- brewer saying it is going to initiate buybacks. outlook onsed that august 8. in terms of the first earnings, income was 30.4 billion krona. 5.17 danishas krone. net income and ebit are both out. sales is a whopping 33 billion krona for the entire half. in terms of what we are looking
at in markets by the way, i should tell you we are going to speak to the ceo of carlsberg coming up at 10:00 a.m. on the bloomberg surveillance. you don't want to miss that. in terms of markets, if you look at the 30 year bond there, the question is, is not driven by a safe haven bid, or is it just that investors are all about duration? i look at other safe haven assets, and although you see a bit of a bid, you seen -- you do not see the end back to its flash crash low. you do not see gold backup to its all-time high of just last week. well, not see the bund -- you do see the bund at an all-time low and you see it bid this morning. in other safe haven assets, you don't see the kind of records we hit in the 30 year bonds. it is interesting to watch that duration crest among investors.
kicking into higher gear. the yield on 30 year treasuries below 2% for the first time ever as negative yielding debt surpasses $16 trillion after the 10 year yield dipped below the two year yield in a precursor to u.s. economic recession. -- were roilede across the board. continued weakness in asian stocks this morning as well. historically, the spread between the two year and 10 year yield first turn -10 times, going back to 1956. the s&p 500 cap out anywhere from two years to three years later according to data compiled by bank of america strategists. you can see it does not necessarily mean sell stocks right away. nejra: and that's what i said. president donald trump called
federal reserve chairman jerome powell clueless and blamed his policies for signs that are recession is looming. according to the chief economic , headlines mayz lead to a slowdown. >> but there is a worry we may end up in a situation where people read these alarmist headlines, they get concerned, they stop spending. as they stop spending, they stop investing, and we get a major slowdown. we are asking, how serious is the u.s. yield curve inversion for assets? reach out to us on your bloomberg. joining us now is alan higgins, cio at coutts. let's start with the inversion and the 30 year yield below 2%. is this prompting you to
reassess your portfolio? >> good morning. a dramatic day. futures are recovering. yield curve inversion, it is serious. the track record as bank of america set out there. it means two things. one, rates are coming down. jeromedown midcycle as first indicated. for they are coming down sharply because of recession. we are conservatively positioned. we are not bearish. seeingket is basically -- it is not incredible to see tweets from the u.s. talking about crazy inverted yield curves. he has been well briefed on the inversion of the yield curve. matt: what does this mean? do we see a recession in the next year and a half in the u.s.? >> it is hard to say.
our work indicates no. there are other indicators you can look at. for example. unemployment always rises in the u.s. before a recession. interestingly, globally, the employment picture is very strong. back to what you said earlier, it can be two years and also, we do get many soft indicators. yieldk., for example, the curve was inverted for most of the 1990's. nothing happened. you do get false indicators. rather than being outright bearish, it is right to be somewhat conservative. we have had support from u.s. treasuries in the portfolio. we wish we had bought 30 years instead of tens. you cannot have it all. what do you need to see to convince you to pull money
out of equities? that chart earlier shows you do see a rally in equities. anything from two months to two years after a yield curve inversion. it has been different every time. the other indicators are not flashing red generally. there is certainly no euphoria in markets, as we know, with equity markets in particular, it has been negative flow market for some time this year. really since 2008, 2009. it has been flat to negative. if anything, the euphoria is in bonds. is a factor for just being conservative rather than outright bearish. in terms of indicators, for it to be a recession, the consumer needs to go down. it was housing that brought the consumer down. in 2002, tech layoffs led to the consumer going down.
it is hard to see that right now. conservative is right because the yield curve is such an important indicator, but outright bearish? no. matt: you wish you had bought 30's. i wonder what you think about this duration, safe haven argument. do you own any negative yielding debt as a safe haven? are you betting on negative yielding debt as capital appreciation play? shame, negative yield buyer. we don't have much of negative yields, but you can make it work. over a year ago we bought negative yielding very short dated euro debt. it is because the ecb has deep negative rates. basically, you can hedge that euro debt back into sterling and make an attractive yield. for example, on the macro level, two-year italy is about zero.
not very exciting. hedge that back into dollars, it turns into two and a half. in that context, short dated that, you can --'s short dated debt, you can justify. what i have a problem with is the bond curve. the swedish curve. this is very strange. if you think about it, for corporations to issue longer dated debt at -10, on the one hand, it shows they are buying back equity or reinvesting in business. leverage for free. the other half is it shows longer-term value. i don't want to be one of those analysts who says, be cautious, be conservative longer-term, but you may remember about a month , the income streams. and,: to stick with fixed
you have talked about not being bearish equities. in fixed income, you wish you had bought 30 year. had shorteryou had duration credit? is that an approach to take from here? alan: no, i would not load up on duration now. this kind of search for yields, when you see the 30 year performance overnight, it is quite an interesting indicator. there's a lot of momentum chasing government bonds right now. stream, it is harder to justify. our guest host this morning as the cio at coutts. i want to get over to tom mackenzie in beijing with the first word news. >> thank you very much indeed. warren buffett has up his wager on amazon.
perch are hathaway's stake rose 11% in the second quarter. it is valued out more than $1 billion, but it's taken amazon is much smaller than the holding in apple worth $49 billion by the end of the quarter. more from the 13f filings. buffett'se in warren perch are hathaway. his fund took a holding worth $619 million. the famous activist investor's stake is not expected to be an active one. could the u.k. see a caretaker government to block a new deal brexit? that is the plain of jeremy corbyn. he has asked rival parties to support him in a bid to stop boris johnson's plan for the u.k. divorce from the eu. jeremy corbyn says if successful, he will delay brexit and call a general election.
india's prime minister has defended his move to revoke kashmir's autonomy speaking in his address on the nation's independence day, modi says special status has only led to terrorism and separatism. willys the recent moves allow kashmir to play a meaningful role in india's ongoing development. 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. matt: tom mackenzie in beijing with your first word news. president trump is praising xi jinping, saying beijing can quickly and humanely solve what he calls the hong kong problem. protestss amid ongoing in the city, which is feeling the economic impact of disruption. for the latest on the ground, let's go to our chief north asia correspondent stephen engle.
>> you know, let's dissect that tweet a little bit. the white house has been in muted tones. it's clear why. the ultimate prize for donald trump with china is a trade deal eventually. it looks as though they do not want to push beijing to hard to derail any possible trade deal in an election cycle in the united states. the words are muted, but i have to pick out two points in his latest week. when he says i have zero doubt if president xi wants to quickly and humanely solve the hong kong problem, he can do it. humanely is the key. we all know china can, if they wanted to, i'm not suggesting -- if they wanted to quickly solve this, we fear what he could possibly do, but the key is donald trump saying, pleading to china, do it humanely. also, personal meeting last
night,? fact theyding to the can use the hong kong issue to talk about things as well as the trade dispute. he is linking it a little bit. donald trump not being to committal on hong kong on either side. he said yesterday he hopes it works out for both sides, hong kong and china. he calls it a tricky situation. others have been sharper in their support for democracy in hong kong. thank you so much. stephen engle joining us with the latest on hong kong. coming, jp morgan says the recessionary risk trigger needed to drive treasury yields toward zero has gone off sooner than expected. we will discuss that next. traveling to work, tune into bloomberg radio on your mobile device you can access it anywhere in the world. if you are in the city, tune in on dab digital radio in the london area.
nejra: this is "bloomberg daybreak: europe." matt: let's check on the markets in asia. surprise, most markets are lower. we see a turnaround in u.s. futures and chinese authorities added a bit of liquidity to the system. the nikkei started the day down by over 2%, currently down 1.3%. you have the asx 200, one of the worst performers with a big drop in energy shares dragging on the index. we had employment numbers out of australia which were better-than-expected area also a lot of money going into australian bonds today. the yield on the tenure falling below 1% to a record. the csi 300 faring better than some in the region. a little bit of upside in the hong kong market.
liquidity i mentioned really helping out sentiment in hong kong. let's have a look at tencent. we were talking about the fact most analysts expected it would seem a bit of a slowdown in ad revenue, but it was worse than expected. ad revenue only coming in at 60% growth. it has been hit by rivals and we start to see this broader economic slowdown hit tencent. you can see the 20 day moving in terms of volumes on this stock is very high, we have seen sawes fall by 3% after we the u.s. fall by 4%. it has prompted broker houses to cut their price targets on hong kong -- on tencent, i should say, after the numbers. citibank and goldman have , calling it a disappointment. nejra: let's get the bloomberg business flash now with tom mackenzie.
>> thank you very much. hong kong's ongoing protests making companies think again about fundraising in the city. several chinese companies are reconsidering plans to ipo. planesapped three because of the unrest. they will now instead look at a u.s. listing. morgan stanley nabbed this year's largest ipo, but the firm is missing out on the second largest, we work. the investment bank step back from a lesser role in the public offering after wework rejected its pitch to be the top underwriter. the lead role will be taken by jp morgan. fundank's second vision has already scored an unexpected win. the company is gaining trust from investors. new investors probably won't hurt its debt outlook. softbank's debt is among the
biggest for a japanese nonfinancial, but analysts are starting to look at the company differently as it increasingly takes on the characteristics of an investment firm. searching for a successor. bank's chairman is looking for his replacement at germany's biggest lender after a tumultuous period marked by a slumping share price that hit an all-time low in june. we are told he intends to complete his term that ends in 2022. that is your bloomberg business flash. thanks very much. the recessionary risk trigger needed to drive treasury yields toward zero has gone off sooner than expected, at least according to jp morgan. it is accelerating the process by which the u.s. may join countries like japan and germany
with negative rates. the fed will likely be powerless to keep the u.s. economy from falling into a recession and the 10 year yield could sink to zero by 2021. that is a year quicker than he predicted last month. still with us is alan higgins, cio at us. coutts.t do you think this is a possibility? >> you cannot rule it out, can you, when you see what bond yields trade. it is antill say outsize risk. us, it is more like fed funds heading toward the 1.5% range. therefore, you can justify where the 10-year trades today. we were seeing there is lower rates are old refinancing.
we should expect stimulus to come through. you cannot rule it out, absolutely. nejra: what you talked about being the trigger is the extended u.s.-china trade war as corporations reduce or delay spending. also what's supporting the stock market is buybacks. leads us onto banks as well. saw the banks pummeled yesterday. of bank equity, we are out of bank equity. our previous investment in bank equity some time ago was affecting -- basically the idea it is pretty hard to see normalization of rates. 3% real. it's alls, for us,
about financial debt. return on equity is challenging for the banks. solvency and basically debt security is not specific to national banks. we are a big investor in -- as tier one debt in europe. the poster child is deutsche bank. if you pull up deutsche bank shares disaster in contrast, credit risk has compounded, 3.5% to 4%. those payments are contractual. that is by no means a premier bond. >> what do you expect from the ecb as it relates to those banks? are you expecting some sort of tearing? without effect investments? think they have to.
with the ecb, they have missed the chance to raise rates when the sun was shining in 2017, 2018, when we had global synchronized growth. they missed a chance to get rates toward zero. they are in a real tough spot. i think they realized and it is priced into the markets that only a modest change in rates can see the damage. some kind of tiering. i would be surprised to see the -- buy bank debt. this was central bank has been buying equities for years. no one complains about that. where is the better income stream? bonds or equities? equities are the better income stream. nejra: coming up, betting on berkshire. a new stake in warren buffett's glamour exiting united
>> what's happening today is broader than just the fed. it's about global economic weakening. >> you don't need the yield curve to realize things are not frozen anymore. >> the bond market in the u.s. is finally screaming, we've had enough. ofif you see six weeks inversion, followed subsequently by the yield curve starting to steepen, i would say, it's a sign of a recession. it's also signaling you a turnaround. >> the fed is working -- looking a very hard. >> lifting structural
impediments. unfortunately, that is unlikely to materialize. that is the big concern looking forward. ♪ matt: those were some of our guests reacting to the decline in yields and stocks yesterday. don't forget, it was a huge with the dowocks jones industrial average falling 800 points. this is bloomberg daybreak: europe. let's chat about the market reaction. these alarmist headlines, it encourages people to stop spending and that's when you get concern. happenedignore what yesterday. the questions i posed where, if the curve stays inverted, how much concerned is that cause? do you want to actually reassess now or do you want to wait another 18 months?
we know there's a lot of a recession coming after yield curve inversion. if it happens at all. history might not be the guide this time. that yield below 2% definitely signals they concern out there in the markets. it might cause alarm at the fed. matt: absolutely. dani burger was trying to make it happen like heather was trying to make fetch a thing. the sentiment i agree with 100%. when the curve inverted yesterday, it was something that ripple around the world. when the 30 year bond yield hit a new record low and went further, low 2%. that is something you can't ignore. the carnage we saw in equity markets was immediate and severe. it's definitely something that all investors have to keep an eye on. historically, it has been a fantastic indicator of a recession.
that's a concern for global growth. nejra: what's interesting as well on the duration question, we have allen higgins onset with us. i asked him, would you want to add to duration at this point? he said, that might've gone too far. that's another interesting point of view. today, we are asking the question on mliv, how serious is the u.s. yield curve inversion for assets? you can join the debate, reach out to was in the mliv team on your bloomberg. hong kong is facing another threat amid antigovernment protests. we've learned several chinese firms are reconsidering ipo plans in the city because of the unrest. that's according to bankers working on the deal. this risk is undermining hong kong's position as a financial gateway. chinese companies have raised nearly $9 billion this year by listing in the city.
joining us now is bloomberg steals reporter who has more details on this scoop. thank you for joining us. our companies really reconsidering their appetite for deals in hong kong? >> very much so, nejra. thank you for having me. it's a topic we have been hearing about over the last few weeks. we've had 10 consecutive weekends of unrest here in the city. people are starting to evaluate the potential economic impact. as part of that, what is the deals impact in this city? we are seeing a big impact on ipos. also spreading into the bond market and m&a. china, whichs from typically see hong kong is the main venue for releasing their shares, are thinking twice
before going ahead with their deals. we'll see how long this impact spreads in time. for now, we're definitely seeing an impact. matt: does it have to do just with chinese companies or does it apply to global firms as well? >> that's a great point. we have seen the biggest chunk of the impact so far on chinese companies. we are also starting to see some impact from other international companies that were thinking of leasing their operations here in hong kong. continue, this may impact other companies that are thinking to come to hong kong. like i said, it's not just in ipos but also on auto deals as well. about so it's not just ipos. it's having an impact on other deals, too.
tell us more about the extent of that and what you are seeing it. instance, take certain industries that are typically more sensitive to the environment, like the financial industry. ofve seen a huge amount inflow of insurers. for those thinking about doing deals in hong kong or in between ,ong kong and china, for sure companies are thinking twice and reassessing their activity. that's not to say that deals won't happen. companies are thinking before making announcements on deals, certainly. matt: thanks so much. bloomberg steals reporter brought us this scoop out of hong kong. great to get time with him. let's get the bloomberg first word news from tom mackenzie.
tom: thank you. .he bond rally continues tensrday, the twos and treasury curve inverted. it might not be time to jump out of equities just yet. strategists say the s&p 500 stop -- topped out two years after previous inversions. trillion is the pull of negative yielding debt which just heard a record high. that could be about to get bigger. a jpmorgan strategist sees u.s. yields getting pulled to zero. he says ten-year treasuries couldn't the level by 2021. the u.s. may even join countries goingapan and germany by negative. a great leader, that's how president trump has described
the chinese president xi in a series of tweets. he said his counterpart is a quote, good man in a tough business. he ended the post by saying, personal meeting? he did not clarify if he was suggesting a summit with president xi. could the u.k. see a caretaker government to block a no deal brexit? that's the plan of jeremy corbyn. he's asked rival parties for support in a bid to block boris johnson's plan for the uk's divorce from the eu. corbyn says if successful, he would delay black -- brexit and call a general election. india's prime minister has defended his controversial move to revoke kashmir's autonomy. regions special status has only led to terrorism and separatism. he says it will allow kashmir to play a meaningful role in
india's ongoing development. global news 24 hours a day on air and at tictoc, powered by more than 2700 journalists and analysts. this is bloomberg. matt: thanks very much. tom mackenzie and basing. hedge funds have released their 13f filings for the second quarter, giving a glimpse into some out -- how money managers are position. tech stocks are the flavor of the day. who is buying what? joining us now to explain is a record. -- annmarie hordern. >> they are boosting their bet in amazon by 11%. at $1 billion. it shows the shift in berkshire towards their views towards technology companies. thisould remind ourselves, is nothing compared to their holdings on apple. that is $49 billion. bill ackman, what has he been up
to? a new share in berkshire hathaway. this is not expected to be active. technology is the flavor of the day. i want to show you what's going on in uber technologies. these are alumni from tiger management. they are crowding into this uber technology. viking was the biggest one. they had $620 million holding in uber. uber has been hitting the brakes recently since its ipo in a -- may. the stock has fallen 25%. it spent more time below their ipo price than above it. nejra: think is a much. still with us is allen higgins, let's get your first reaction to what annemarie was reporting. we often ask you about tech. where do you sit on it now? >> there's tech unicorns and
there's tech affable companies, apple being the poster child where you have a total return to shareholders of 8%. the buyback is huge at apple. i can understand that and the amazon investment. it's very token. i don't have an issue there. really different from 1999 where cisco was at 170 times earnings. i don't have an issue. the unicorns are a separate investment for me. maybe there is euphoria here. for us on tech, we lightened up. going back to what we've been talking about all morning. we are more conservative now. we have lightened up a little bit in terms of tech. when you by the u.s. market generally, you are picking up 30% tech.
we do have general investments in the u.s. market. there is hidden tech in our exposure. nejra: absolutely. matt: what do you think about growth versus value right now? at this stage in the market, you can debate when you want to get out. the yield curve certainly is not a great signal. how do value stall -- stocks look? disaster forbeen a multiple years. we previously had a bias towards gross quality. those are closely aligned. a lot of the growth stocks actually have relatively low debt and strong earnings. there can be some crossover there. we have rebalance the portfolio slightly towards more value. why? with the fed easing policy and the ecb, it could be a predictable. how value stocks respond.
we could have -- especially if we get a 50 basis point cut coming up from the fed. we could have euphoria as people look towards the recovery. no one is talking about a manufacturing recovery right now. if that happened, that would be a major surprise. we have rebalanced slightly towards value. overweight value, no. that's a massive call. nejra: yesterday we were talking about that call from scott linus saying they need to go big between meetings. i was talking to somebody, a portfolio manager. he was saying that what the market is not picking about right now is beyond the next 100 basis point cut. it does matter. we've had people talking about the fact we could go negative for a long time. is that something you think about? you have to invest in the long-term. what is your fed trajectory from here?
funds inenario is fed the one point 5% range. not negative. then, most likely, the midcycle aspects come through and you see some kind of recovery. a you look at it from corporation, we can really issue debt cheaply anywhere in the world. that has some attractive characteristics. those who are on the u.s. refinance.tes can there's natural stimulus coming through from lower rates. you don't see much of it in europe. in the u.s., it's more reliable. lower rates does mean stimulus. to go all the way to zero, that is the negative scenario. we're not there yet. we are conservative, not bearish. you will stick with us. hour ont cohost for the
what has to be a historical day. the last interest rate hawks can make a stand this week. the nordisk bank will leave its key rate at 1.25% today. it may leave the door open for a hike in september. this would make norway's central bank the loan hawk globally. the governor faces a tough call on whether to stick to a plan to raise again. in june, he said the balance of risks may warrant a rate hike. this would go against the global wave of easing that was kicked off by the fed in july. nejra: they face increasing headwinds from abroad. it is trying to squeeze in a fourth increase to cap inflation. he wants to steer an economy that has bumped up against capacity amid a boom in investment in its offshore oil industry, the cooling global outlook could make policymakers
wary. their plan is being helped by a near record week krona. local economists say the rick reduced theks have probability of a september hike. if they send a clear signal, that would be recognizable monetary policy. something thaty we will be paying attention to do. asksg up, germany corbyn rival parties to support him as prime minister in a coalition to block boris johnson from pursuing a no deal. highly unlikely but we'll discuss the implications, next. nejra: if you are traveling to work, tune in to bloomberg radio . this is bloomberg. ♪
matt: this is bloomberg daybreak: europe. let's get a check in on the markets around the world now in london. annmarie hordern. great to have you with us. what are you focusing on? selloff dueeing the to bond. the twos and the tens averted. inverted for the first time since the financial crisis. this is sounding the alarm for a potential recession. australia is down more than 2.5%. we have japan's nikkei down. a little bit of easing. futures in the u.s. and europe are actually pointing to a higher start. the bright spot is the australia dollar. gaining some strength as employment growth beat estimates there. with asovereign bonds
rally continuing. softermodities, a touch copper. the standout has been the precious metals. gold and silver. a lot of investors flocking to them as a safe haven. i'm looking at japan's benchmark indexes morning. it is falling below the target range. bit -- wants to keep it between plus-minus 2.5%. if they defend the yield, that might be seen as hawkish. at the same point, they have been trying to loosen their grip on the debt and yield, considering the fact that these yields have been kept artificially low for years. there's a lot of speculation on what the boj will do next. matt: they have to give into bond again. i agree with the sentiment.
thanks very much for that. let's look at the bloomberg business flash now. tom: thank you very much. isg kong's ongoing protest making companies think again about fund raising in the city. several chinese companies are now reconsidering plans to ipo. one company scrapped preliminary plans for going public in hong kong because of the unrest. they will now look at a u.s. listing. morgan stanley nabbed this year's largest ipo. the firm is missing out on the second-biggest. we were -- we work. they said back from a lesser role in the office space companies public offering. they rejected their pitch to be the top underwriter. we lead role in that role -- drill will be taken by j.p. morgan. deutsche bank chairman is
looking for his replacement as germany's biggest lender. that's after overseeing a tumultuous time marked by revamps and a slumping share price. we're told they intend to complete his term that ends in 2022. that is your bloomberg business flash. nejra: thank you so much. the time until the next brexit deadline keeps ticking away. jeremy corbyn has asked rival parties to back him as a caretaker prime minister to block no deal. the leader of the opposition says he will table a vote of no-confidence at the earliest opportunity. a senior tory mp suggested the government could enact a no deal brexit early as a surprise tactic to win a general election. wrangling,litical the u.k. yield curve inverted for the first time since 2008. still with us is allen higgins.
the brexit headlines are making my head spin. let me ask you about the yield curve. we have a clearly on the chart. we know what happened along with the twos and tends. is the inversion telling you? that happened after we had better than expected inflation data as well yesterday. >> quite. the u.k. yield curve is less of a consistent indicator. the u.s. is the classic. with demand from pension funds has never been that reliable. in the 1990's, the yield curve was nearly always inverted. what does it mean mathematically? rates are more likely to fall the rise. you could say the u.k. market is pricing in a higher probability of no deal, for example. that is one way of looking at it. generally, there's a scramble for duration right now.
bit, 10 yearack a yields at less than 0.5%. what will you do with that income stream? funds look at the capital gains he can make from short-term trading in gilts. it is something that has been substantial. matt: what is your call on -- if the bond market is pricing in a better chance of a no deal, what about the fx market? what is your call on sterling in terms of dollars and euro pound? >> we have to open up. we have been wrong on sterling. not all are investments are braced on politics of brexit's. sterling is undervalued longer-term. obviously, conventional wisdom and politics are dominating right now. look. we think sterling has been
discounted with no deal and uncertainty. the trend is for weaker sterling. you can't fight that right now. longer-term, we see the value in sterling. sterling is a mean reverting currency. should there be some clarity, we could see sterling coming back. matt: very interesting. the mean reverting currency issue, i would love to dig into that but we have to go to break. allen higgins, thank you so much for joining us. allen will join us on bloomberg radio as well. if you want to hear him carry on the conversation. anywhere in the world, tune in to bloomberg radio using your mobile device. has the world's largest container shipping company held up against the slowing economy and the all-important trade war? we will speak to the ceo about
at comcast, we didn't build the nation's largest gig-speed 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. nejra: good morning from london.
i'm nejra cehic. matt: i'm matt miller, live from berlin. this is bloomberg daybreak: europe. these are today's top stories. reaching fever pitch. the yield on 30 year treasuries falls below 2% for the first time ever. and version stokes recession fears. donald trump labels jay powell qs. -- clueless. bill ackman takes a new stake in warren buffett's conglomerate while exiting united technologies. this as berkshire boosts its bet on amazon. we are across all the 13 us. counting the cost.
chinese companies are rethinking hong kong ipos is protest rock the city -- as protests rocked the city. president trump suggests china does on a trade deal but is focused on the unrest first. u.k. opposition leader jeremy corbyn asks rival parties to support him as prime minister, most all of them say, no way jose. ♪ nejra: welcome. just gone 7:00 in london. we are under an hour from the start of cash equity trading. a sharp selloff in u.s. equities. the s&p 500 dropping 3%. the dow losing 800 points. why the immediate risk off? we saw the twos and tends invert
in the u.s. for the first time since 2007. the 30 year yield continues its slide, dropping below to percent. the question that everyone needs to ask themselves is, is it time to be fully risk off yet? allen higgins said to us, he's not bearish yet. when that yield curve has inverted historically, recession can take as much as 18 months. stocks have rallied many times afterwards. we are coming back a little judging from the futures in europe today. u.s. future stabilizing. ftse 100 in the green. matt: are we headed for a bond apocalypse -- bondmageddon? we continue to see futures bid. downcould drive the yield to another record low. 10 year bond futures rising again as well. we could see that inversion hit again and stake.
these are definitely not good science for the market. -- signs for the market. we are now getting headlines across from moller-maersk. nejra: the trade war will be a big topic dominating here. we speak to the ceo shortly. second-quarter revenue, $9.63 billion. the estimate was 9.77. a little bit soft. the second quarter underlying profit at $134 million. here's the guidance. they still see $5 billion. the estimate was 5.3 7 billion. a little bit soft. that guidance is something we will dig into. joins us fore ceo his first interview of the day. do not miss that conversation shortly. let's check in on the markets on asia -- in asia.
juliette saly has more. what is the fallout in asia of what we saw in the u.s. yesterday? >> let's start with equities. asian stocks have come up the lows of the day, ignore india. it is closed today as is south korea. we are seeing weakness coming through in these markets. are faringnd china better than some others in the region because we did have liquidity coming through from authorities in china. the nikkei started the day down by over 2%. it was australia that was the hardest hit today. down by 2.9% on the close in sydney. the worst day since october for aussie stocks. we saw a big plunge in the energy sector. when it comes to those yields, certainly we are seeing the same momentum you saw globally.
let's have a look at those. the yield on the tenure in australia falling below 10%. our mliv strategist saying, new zealand could be the next to fall below 1% as we see this race to zero globally. taiwan's tenure yield also falling to a record low. it picked up a little but it hit .62 earlier which was the lowest we have seen for that notice well. -- note as well. nejra: the big question, whether your belief in duration. could it be getting copy? the bond rally kicking into a higher gear. the yield falling below 2% for the first time ever. surpassesielding debt $60 billion. and inversion of the twos and tends curve. risk assets were riled around
the curve. continued weakness in asian stocks this morning. we are seeing some stabilization in u.s. and european futures. historically, the s&p 500 topped out anywhere from two months to two years later. this is according to data compiled by bank of america strategists. matt: in a series of tweets that you can't have missed yesterday, donald trump called jay powell clueless and blamed his policies for signs in the bond market that a recession is looming, saying, the fed is holding us back. according to the chief economic access to -- advisor, alarmist headlines may lead to a major slowdown. he's look with -- he spoke with david westin. >> we may end up in a situation where people read these alarmist
headlines. they get concerned. they stop spending. companies stop investing. and then we get a major slowdown. matt: we're asking the question on mliv, how serious is the u.s. yield curve inversion for assets? join the debate. reach out to us. joining us now is chief investment officer at nutmeg. let me take it off you with this question. how serious do you think the u.s. yield curve inversion really is? >> it's a symptom of week level growth and the push towards more kiwi. -- qe. i think this is about global growth rather than about the u.s. heading into recession. we don't think there's a recession coming in the u.s.. nejra: do you want to stay invested in u.s. equities right now? to what extent? >> we have been increasing or
duration in long data treasuries and gilts. we think there is room for it to continue to rally. i think both bonds and equities can do well in this environment. the weakness is coming from china rather than any g7 economy. that is filtering into japan and europe. the u.s. will be ok. not as well as it has done. the push towards your -- lower yields is coming. matt: you like the duration trade here in europe as well? german 30 year bonds are already showing nominal negative yields. do you buy those? >> we do not. you are better off owning long data gilts. they offer a positive yield. we will see some pretty aggressive breakups from the bank of england irrespective of brexit. we still think you can rates are going lower.
decent premium a and gilts. nejra: given what you said about the fact that you are not doesrned about the u.s., that mean that while you are overweight in u.s. equities, you are more negative on emerging markets and european equities? >> we have been aggressive in reducing our japanese and emerging-market equity exposure. the premium is still there. we are very underweight. complex willtray continue into next year. what is the central bank situation. -- situation? does the fed respond to donald trump's tweeter not -- tweet or not? does it show was a big cut? scott minard was calling for a big one yesterday. towardsnk we are moving a 50 basis point cut in
september. whether that comes in four meetings or not, it's difficult. i think they will wait until the meeting to cut rates. the fed is looking behind the curve based on what's going on globally rather than focusing on the u.s. economy. they are thinking globally. they need to cut quite aggressively from here. nejra: what would cause you to reassess or draw down that overweight in u.s. equities? is it something you need to see in the data or markets? the question we ask is, will it stick? if it does, how much longer can the rally go? the rally in u.s. equities can be anything from two months to two years. there's reason to stay invested. what would make you change your mind about that? >> we are seeing this weakness in global trade feet into the u.s. tech part -- sector. we are worried about the u.s. outlook. if we see china start to stimulate the economy very
become much, we more optimistic and take that money and rotate it into assets that are more exposed to chinese growth. that is a resistant prospect. for the moment, you hold u.s. equities and duration in the u.s. as well. thank you. let's get the bloomberg first word news with tom mackenzie in beijing. tom: thank you. warren buffett has upped his wager on amazon. the stake in the e-commerce giant rose 11% in the second quarter. it is now valued at more than $1 billion. his stake in amazon is much smaller than the holding in apple. worth $49 billion at the end of the quarter. more from the 13f filings. the lachman has taken a big stake in warned bossip's -- warren buffett. $690 million.
we are told the famous activist investors stake is not expected to be an active one. a great leader. that's how president trump described chinese president xi in a series of tweets last night. the u.s. president says his counterpart is a good man in a tough business. he ended the posed by saying, personal meeting? he didn't clarify if he was suggesting a summit with xi. could the you kc eight caretaker government to block a no deal brexit? that is the plan of jeremy corbyn. he's asked rival parties to support him in a bid to block boris johnson's plans for the uk's divorce from the eu. corbyn says is -- if successful, he would delayed brexit and call a general election. india's prime minister has defended his controversial move to revoke kashmir's tommy. -- economy.
-- autonomy. he says it has lead to terrorism and separatism. it will allow kashmir to play a meaningful role in india's ongoing development. day,l news 24 hours a powered by more than 2700 journalists in more than 120 countries. this is bloomberg. matt: thanks very much. we are getting headlines across from the supplier of wind power. we are seeing them coming out operatingngs -- profit at 128 million euros. that is lower than the estimate. net income out at 90 million euros. that is lower than the estimate of 99 million euros. as far as the outlook, they are now ring their guidance. it sees its operating profit margin at 8-9%. bringing it down towards the
bottom end. up, we will speak to henrik andersen, the new ceo of vestas. don't miss that interview shortly after 8:30 london time as the company pulls its estimate down to the bottom. mayorscoming up next, earnings beat estimates. it realized $1 billion of synergies faster than expected. they are reaffirming their view. the ceo joins us for his first interview of the day. this is bloomberg. ♪
london. shipping's biggest group has beaten estimates for second quarter but says the global outlook remains very uncertain. the group stock twits for your outlook and says it realized synergies faster than expected. conglomerate have had a tough month as donald trump escalated his trade war against china. joining us now for his first interview of the day is the ceo. great to have you with us. thank you for joining us. let me pick up on the comment you made about uncertainty. take us behind the numbers and give us a sense of how concerned you are about the global uncertainty for the rest of the year. thatwould like to say trade tensions have been quite manageable for us so far. demand grew inr the second quarter. u.s. imports grew 2.5%.
they went down around 7% from china. goods are coming into the u.s. from any other places. we have managed the situation quite well. looking forward, we read the papers and hear the news. there are lots of uncertainty also throughout the trade tensions between china and the u.s.. it will eventually be resolved or not. also, all kinds of asset prices and fuel prices are going up and down with a lot of volatility. right why we believe it's to anywhere pence for the year. matt: from your point of view, do you see the u.s. and china needing to come to the table and make a deal? do you hear that they are both more willing to do that now? >> right now, there's not much that suggests a deal will be
done anytime soon, as fast as we can see. it seems to be going in the other direction. with that being said, for our business, what decides demand, that's not charity. that's the consumer and consumer spending. the u.s. consumer is in a relatively good mood. salaries are increasing. confidence still remains relatively good. fact that it'se a relatively small share of the u.s. consumer spending basket that is impacted by that. as small as 4% that is impacted by tariffs at this point. so far, so good. nejra: it's interesting that you say that. what we've been talking about is that, in the bond market, we
have seen an inversion in the u.s.. in the past, that has been a strong recession signal. bid forlso seeing a big long end rates. from what you are saying, are you not particularly concerned about a global or u.s. recession anytime soon? way, we have been expecting a slowdown all year long. when we came out in february, we guided the global demand growth in1-2% in container shipping the expectation that we would be seeing a slowdown in the global economy. grown so far.has we expect that to continue for the rest of the year. -- or 3% growth is consented
consistent. that is what we are planning for. matt: can i ask you about your funding operations? are you able to take advantage of these incredibly low yields globally to refund debt? >> as a company, we have deleverage sharply over the last year. from $20 billion to just $13 billion. we are financing ourselves through bonds. we are enjoying quite low interest rates and have also been in the bond market for the past four. nejra: would any of that encourage you to participate in another wave of m&a in the industry? do you see that coming? >> yes. we also participated in that with the acquisition. we don't have any plans to do
further m&a on the carrier side. with our current market share of just below 20%, there's no strategic imperative for us to do more. we are competitive. we have some of the best margins in the industry. us doing, i don't see anything in that space right now. we would rather do more on the lame side. matt: can i ask you about the issues with the persian gulf? are you still sending ships through their? do you have any issues with the republican guard? 40 transits through the straight every week. this is something we follow very closely. we are taking some safety measures in terms of not having
any ships anchor or slow through this area. also changed the route a little bit. for now, we don't believe that there's much risk to container ships transiting the hormuz strait. matt: thanks so much for your time. really appreciated this morning. we want to get to the bloomberg business flash. we go to tom mackenzie in beijing. tom: thank you. a bloomberg scoop now. isg kong's ongoing protest making companies think about fundraising in the city. we've learned several chinese companies are reconsidering plans to ipo. one company scrapped plans for going public in hong kong because of the unrest. they will now look at a u.s. listing. fundank's second vision has scored an unexpected win. the company is gaining trust from investors that new
investments won't hurt debt outlook. it's debt is among the biggest for a japanese nonfinancial but analysts are starting to look at the company differently as it increasingly takes on the characteristics of an investment firm. now searching for a success at deutsche bank. the chairman is looking for his replacement. that's after overseeing a tumultuous time marked by revamps and a slumping share price that hit an all-time low in june. we are told he intends to complete his term that ends in 2022. thisn stanley nabbed year's largest ipo but the firm is missing out on the second-biggest, we work. they stepped back from a lesser role in the office space companies public offering after they rejected their pitch to be the top underwriter. the lead role in the ipo will be
taken by j.p. morgan. that is your bloomberg business flash. nejra: thank you so much. let's get a check in on the market. the msci index dropped below the 200 day moving average and closed below with yesterday. asia is still in the red. the curve, a of big question of whether it sticks. the 30 year yield continues its decline. below 2% for the first time. seeing aready turnaround in some risk assets. matt: we could see a little bit of the debt cap bounce. s&p futures rising, euro stock 50 futures rising. bunds year bond, german still at an all-time low. -66 is what we are looking at. that's it for daybreak europe. bloomberg markets: european open is up next.
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