tv Bloomberg Markets European Open Bloomberg March 23, 2018 2:30am-4:00am EDT
leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. this is bloomberg daybreak: europe. good morning if you're here in europe. 6:30 in london. over in tokyo, the yen has crashed through 105. haven demand the. mark cudmore says it's a grim day for equities. get your coffee and soakers. out of this risk go on priced for so long? let's talk to anne-marie. heightened concerns over that trade war definitely putting pressure on the asian stocks this morning. you see japan down 4.5% and
shanghai down 4%. msci also down two and a half percent. u.s. and european futures pointing lower. as you are talking about the yen, let's move on to the chart. i want to show you a tapping their. one place we are seeing some movement higher is the yen among all major market currencies as investors look for something spacey. and experts say the dollar could accelerate. he says the market factors are in trade tension. for action by japanese authorities. this could affect earnings. moving onprices area
from trade war's to central banks, russia has another rate decision to make. cuts are on the table again. most are expecting a cut for the 10th straight time. banks including credit suisse i will saying they're looking for more than 25 basis points. they're looking for 50. governor isbank looking for faster policy normalization. vladimir putin is urging the central bank to gradually cap -- cut interest rates and make loans more affordable. european leaders discussed russia relations in brussels yesterday. it was only after discussions wrapped up that president trump approved the european exception. how will the eu respond from the news staff to the news? it's going to be the first
order of business this morning. eu leaders were supposed to talk about trade yesterday but they wanted to wait to see what trump had to say. the key was whether eu was going to get an exemption. the trade commissioner have been in washington tried to secure one. there is optimism that nixon shall be granted. only after the conversation wrapped up yesterday that we heard from the admin is ration and trump confirmed it would be an eu exemption but only until may the first. how will the eu respond? we will see them continuing to respond from with retaliatory measures. they could put in place their own tariffs and take their own action around avoiding dumping of chinese steel and element him into the -- and aluminum into the markets. brexit has been pushed
down the agenda because the eu also toughening its hands on russia in light of the uk's by poisoning. absolutely. theresa may was your yesterday and she staying the trade conversation. she appeared yesterday and over , scallops, seaweed, and a lemon parfait, she convinced other european leaders to take a substantially tougher line around russia. she talked to emmanuel macron and angela merkel. them to say it's highly .ikely that russia was to blame they treated as much yesterday. it doesn't mean they're all quite the same page. e-cig oflessons is
pinning this on russia. and whether there will be any further action or the solidarity in zen word. bit of talk about future action for angela merkel. let's now bring back in julian howard. , we've seen a reflection asian equities. we'll find out in an hour and a half how european equities will react. in this potential global trade war, how much does europe have to lose? iv could be significant but i'm encouraged by the initial exemption is been granted. i think something will be sorted out around that. potentially, worst case, it could be very serious. but i don't think that will be the reality. what sort of impact might
we see on the euro? the seen the yen bidding questions whether it could go to 100. does the dollar weakened and the euro strengthen on the back of this and weigh on european inflation? julian: could even be the other way around if we have a really big trade war and the economic crisis, the dollar could become a haven currency. it used to have that status but lost out to the japanese yen. that could resume again. ironically, you're a weakening would be helpful for the european exports. there's a lot of factors swirling around the moment. it's difficult to make it clear currency: euro-dollar. generally, euro strength has been a headwind for european equities. we heard from marriott draghi briefly yesterday. --talked about full risks
four risks and one of them was protectionism. he said is the european economy. in terms of the size and scope of this fear risk, the fact that draghi put that the top number one suggests it something the ecb is watching closely. i think that's potentially encouraging for european stocks. it means that interest rates in the eurozone at the caps on the floor. the language is fairly dovish at the last conference. that the qes program is going to end in september but he was at pains to say that doesn't mean interest rates are going to be the next step. and i thinktay low any fear of a trade war will keep rates even more low than market currently anticipates. that could be good for equities. anna: anna: -- anna: some
of the measures are driving a productivity. those on the sidelines are coming back to the workforce and your business government more flak which me to continue growing without creating inflation. of course that makes the ecb's job more difficult. julian: we talk about the phillips curve challenge in the u.s. but europe isn't even there yet. we haven't even tested the phils curve. there's no inflation. that might be frustrating for the ecb but it's probably quite a good state of affairs. we can resume the conversation went on a the 6% or 5% level. kind of a nice path for europe.
growth improves but no price pressure. nejra: what about the fact that we seeing some softness in pmi for two months in a row now? if i take you to this chart, the andomic surprise index, actually under shoots expectations by the most in two years. our european equities syllabi? by -- a buy? julian: it is a bit of a challenge. i think that can be a bit of a headwind. also this idea of meditation whereby the data has been sober that is a good that people are used to it. in less the data remains amazing it continues to drive, italy this rollover. it doesn't mean that the data is
poor, but it's come up little bit recently. that's maybe one or two data points. i don't think we can draw conclusions quite yet. one discussion a was to happen is this transitional deal. did that change anything in the way you look at the u.k. is a investment destination? julian: i've been quite optimistic so far this morning but on brexit on a bit more pessimistic. i think the irish still have the ability to pull the plug on the transition deal. we've had this run-up in sterling and increased optimism. unless the irish are happy around the border arrangement, they could still pull the plug. that would be the newsletter option for them. it is possible. there are red lines around the heart border. i don't think the u.k. will expect -- accept this idea.
the opportunities are better elsewhere for example in emerging markets. moment change it for you on the conversation? are you looking for them to change their stance and stay in the union? orld that be a game changer would you just need to see the existing plan delivered against? it would be no brexit in name only. union withf customs a soft brexit where it's a nominal yes. wayng this really the only to preserve growth and access to the markets that the finance committee is looking for. i think at the moment we are headed for something a little harder. there have been signs from the
heart brexiteers of pragmatism. he can't get everything that he wants. not that he represents the hard brexit camp on his own. but there are signs there could be compromised. weree moment it looks like looking at a middle cause but it will still be damaging for growth in the medium-term. what do allocation decisions look like around u.k. assets? assets look better than others? julian: we are underweight in the u.k. not so much because of brexit. it's more about his relationship with sterling in the ftse. if there was catastrophe, sterling would fall and the ftse would rise. a handle more sterling is going. it's hard to predict the currency will behave.
that was quite unexpected. stay neutral around sterling and in terms of the equity market, we are underweight area we think there are better opportunities elsewhere. now that we've had these three or 4% selloffs overnight across asia, having that makes emerging markets very attractive. they are already trading at around 70% of the valuation of global equity another probably even cheaper. e.m. is where the future lies. that is were the growth is now with the growth is in the long-term. anna: time back nicely to our top story with his market selloffs are overdone. thank you ray much. he stays with us on the program. if you are a customer, you can watch the show on the rig or television but you also go to the tv function on your bloomberg.
there you will find the video stream and follow along with the charts and functions. ask julian a question. coming up on daybreak europe, a drop off an ipo price. why are investors went to pay up? and later -- eu leaders meeting in brussels. tariffs, and brexit on the agenda. we're live from the capital. let's look at what happened. the pacific index erasing all gains for the year. then notably one of countries knocking exemption so far from u.s. tariffs. down 4.5%.closed shanghai and hang seng still trading lower than more than 3%.
daybreak europe. in new7 in the morning york. are negative. suggesting we will see another day of selling around her business around trade. that's over talking a lot here. the nervousness around the story, u.s. futures down either side of 1% at the moment. let's go to the bloomberg business flash. steve wynn has sold his remaining eight-man shares in wynn resorts cutting his last ties to the casino company founded. he was forced to step down as ceo last month as he fights allegations of sexual misconduct. issuedely, wynn resorts more shares to got the entertainment. they have an estimated 5% stake
in the company. activist investor also singer has one around in his battle for influence at telecom italia. the announcement was company by decision to delay a vote on the boards composition until may. month of more than a wrangling between the billionaire was to give the company manager that coming together and them hedge measured is trying to break it up. deutsche bank has raised about 1.4 billion euros from the initial public offering of its asset management division. the drink sold 44 and a half million shares at 32 euros .5. compared with a maximum 25% shareholdings that they want to sell. the price value at six and a half billion euros in the shares in treading today.
the asset management ceo joins us after 9:00 a.m. new take time. that is your bloomberg business flash. u.s. equities took a tumble, investors were willing to pay for dropbox. expecteded more than competitive the market range. isning us now from hong kong the asian deals team leader. why is the man so strong? especially in state backdrop of public equity markets and the selloff we see in tech. dropbox is one of those rare companies that is really focusing on profitability. they've been in the private market for so long. there was a lot of excess of the companies i wish an but not before saying they have a chance to finally buy into the company a lot of people are using. it's cash flow positive and
really focus on profitability. anna: the ipo puts their value lower than the private valuation. what does that tell us? noteah, there's still living up to the lofty evaluations they had received the private market. been a down round is no longer the big statement that he used to be. this happened with square when they did their listing and they recovered. dropbox is a lot closer to where they were in the private market so it's only down a little bit. they have had a turbulent back-and-forth with their valuation of the last two years. now the public markets value is different than the private markets and investors are starting to be ok with that. anna: a fascinating day in the markets.
difficult for the ipo's. a fastening weaken the facebook story. is it to talk to strongly to call a real threat to the business models? onlyw facebook doesn't rely on advertising. only -- any stock only on the sales data, do they have to worry more about revelatory i think markets have a guarded invitation to increase regulation. i think it's more for the advertisers in the own company. social media tech is having some human tobacco moment. the business models being revealed to the users. to realize started that they are not the client but
as the avatars of the clients in fact the user is a pain for this apparently preservice with the currency of their privacy and data. they don't have control save handed it over. and the actually boost the case of active management around technology and looking carefully is social media companies looking at storage. of things like hardware. are you listen hardware? we were talking about the tencent earnings. perhaps is more related three threat in the other parts the world. less of a there is regulatory threat in other parts of the world. julian: as you had this selloff in aj makes them maybe a little bit more attractive.
you have these giants that are considered unassailable but a lot of the asian companies have been holding off competing with them because of the anti-chinese rhetoric coming out of washington. at one point, maybe very long-term, it's a good turn -- time to buy. that could be a very interesting opportunity. nejra: we don't yet know exactly how gdp are the absence of that in the you could affect tech stocks globally. the trade story, does oppose any concern around tech specific when the u.s.? julian: the intellectual property issue and the blocking of the deal between qualcomm and broadcom though they are singaporean resin chinese, that summing to bear in mind. when interest me is the fact that asian tech is looking for percent cheaper today than it was yesterday. that could be interesting given
that in the u.s. it's really tech that has driven the market up all this way. makes asia look that much more attractive. nejra: i've got a chart here. in terms of the weight of tech, it shows the weight of financials incidentally of the s&p 500. does that make you less positive on u.s. stocks overall or is there another narrative? thatn: it makes you think if anything you have to be selective in tact and financials are the opportunity. the 10 year yield has not fallen is what is expected and financials tend to do well with the rising 10 year yield. adding the backdrop is in place. jerome powell talks about inflation not being the threat everyone thinks it is would suggest the short and should stay low. meanwhile, growth is improving in america and that will push the tenure higher. this should be different financial stocks. brussels, one of
the things they did do was cast some doubt over the european commission's plan for a few percent revenue taxes on these big tech companies. what it be an unprecedented move to see revenue tax in that way? julian: i think it would and year of simply doesn't have the tech giants that the u.s. does. this is part of the reason that aropean equities have permanent discount against world equities because there is no technology representation. the europeans need to be a bit careful to -- about seeming to be anticompetitive. they don't have a tech industry to protecting the way the u.s. does. it's a good move to roll back from that. anna: julian howard, thank you for being with us. he conveys the conversation with us at 7:30 a.m. u.k. time on radio. up next, beijing backlash.
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♪ morning from the city of london, i'm nejra cehic. and i'm anna edwards in brussels. this is "bloomberg markets: the european open -- daybreak europe and here are the top stories. asra: global stocks selloff china hits back at trump tariffs. investors flock to havens. another white house shakeup. the president replaces his national security adviser with john bolton. --nwhile, the government's passes a $1.3 trillion spending bill. trade and brexit on top
of the agenda at the eu summit, we are live in brussels. ♪ nejra: let's see how the european equity markets might open up in under an hour. we could see a third day of losses. futures lower across the board. dax and cac 40 futures down 4%. we have seen losses across the leadinggion with japan losses. the nikkei down 4.5% as japan was not exempted from the u.s. tariffs. concerns around a potential trade war driving the msci asia pacific down. 1.05.has blown past how much further does it have to go before it gets 100? on concerns of
geopolitical tensions with president also changing his national security adviser to hock john bolton. john bolton. treasuries have been bid in the asia section. treasuries dipping below 2.8%. money moving into u.s. bonds. looking at bend futures and o.a.t. futures, they are unchanged at the moment. europe right in now, we saw yields fall across europe yesterday. will we see the tame today? brussels for in the eu leaders summit. we are also watching that today. and it links to the trade story that is at the heart of the selloff we are seeing in global markets. how will eu leaders respond to what we have heard from president trump? inhas put these measures place against china, but it is the eu has an
exemption from the still tariffs until the first. we will have more on the response to president trump as we go through the program. here is juliette saly with the business flash. washington, the senate has narrowly averted a government shut down by passing a $1.3 trillion spending bill. it increases military and domestic spending and strengthens background checks for gun buyers. the bill funding the government through september attracted by sartre -- bipartisan support while some conservatives complain about growing budget deficit and a lack of time to review the 2232 page measure. president donald trump has replaced white house national security adviser h.r. mcmaster with john bolton. former u.s. ambassador to the united nations is known for his hawkish views. the latest shakeup of the administration comes as trump reshapes much of his national security team ahead of planned talks with kim jong-un in the coming weeks and as he faces a
key decision in may on whether to maintain the iran nuclear deal. trump'st donald attorney in the russia inquiry has resigned as a new lawyer joins the white house team. john dart had maintained a andtion of cooperation deference to the mueller investigation, but hiring suggesting you confrontational approach. he suggests the president was framed. european leaders have sided with the u.k. over russia over the poisoning of a former spy. they believe it is highly likely moscow is to blame. some countries are now considering expulsions of russian diplomats in coming weeks with lithuania hinting as much.
japan's key inflation gauge picked up last month, putting goal ofcloser to its 2%. despite progress made, inflation remains far from target while the yen's 7% gain this year has raised the risk of price gains stalling. oil as a modest decline in price would weigh on the central bank -- struggle to generate inflation. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top . not great when you look at the world map function in asia on the we are seeing widespread selling. the regional index has erased the gains it has made in 28 teen. on track for a weekly fall of three .6% as we see the fallout of trump's trade tariffs and the potential trade war between the u.s. and china. the csi 300 closed down almost 3% lower. almost 4%.n was down
a lot of medals players weighing on the asx 200. the indian market looking like enter market correction territory. looking at stocks that have been impacted, it has been a lot of chinese export stocks. an apparel maker's stocks walmart and kmart in the u.s.. down almost 10% in hong kong. inha motor under pressure tokyo, off almost 8%. we are waiting to hear if japan is exempt from the tariffs. adding to the woes, tencent has lost about 10% in the last couple of sessions. it came through with a bump earlier, but a south african media company dropping into the stock. anna: juliette saly there for us in singapore. says it doesn't.
trade war after an ounce in reciprocal tariffs on $3 billion of imports from the united states. in response to donald trump's earlier levies on chinese metal exports, beijing said it plans tariffs on imports of american pork, recycled aluminum, steel pipe, fruit and wine. tariffsoposed broader on at least $50 billion in chinese imports over alleged intellectual property abuses. tom mackenzie joins us for more on this story from beijing. talk us through the reaction we have seen from china and the response we have seen in markets. one of our colleagues on the how asian ask equities could go mispriced for so long? question. good it seems like this is a shot across the bow from china in response to the initial tariffs on steel and aluminum from trump. rather than a punched in the gut and they certainly have another number of issues they could
apply should they choose to. yes, it has been a grim day on the domestic market, the shanghai composite down between three and 5%. a lot of the companies have exposure to u.s. demand, whether furniture makers or toymakers. the suppliers to apple are taking a big hit, as well. on the flipside, big agricultural names listed on the domestic stock exchanges are doing pretty well because of the tariffs on pork coming from the u.s. and fruit. there is an uptick there and there has been a move to safety in terms of the 10 year bond, taking up, yields going down. some have said the chinese response could have been a lot worst. they haven't targeted soybean imports from the u.s.. it is interesting to see and question why this wasn't priced in and we are waiting for details as to exactly which sectors and companies these $50 billion worth of tariffs
are targeting. nejra: dear point about the retaliation potentially having been a lot worse, how big a turning point is this in u.s. china relations? tom: the consensus view seems to be at the moment, this isn't a radical shift in the relationship between these two countries, though that could happen. the priority from china's policymakers seems to be to avoid a full-blown trade war with the u.s., though they said they would "fight it to the end their code they want to talk and we have and theyures this week say there are sectors in which they could open up to foreign investment. potentially, that could assuage trump if they talked, which is what beijing wants to see. they also made it clear there is a number of other areas they could hit back on. that could be the tech companies, the likes of apple and intel, or boeing is a prime target potentially.
there are a number of steps china can take, more radical steps would be selling down some of its holdings of u.s. treasuries or devaluing the yuan to give exporters a competitive edge. they are for the moment keeping powder dry. anna: away from those radical steps so far. thank you to tom mackenzie in beijing. joining us, the head of investment strategy and research at credit suisse wealth management. good morning, great to have you with us. you outlined two potential scenarios when it comes to trade tensions here. no trade war come about continued skirmishes is scenario one. scenario two is escalating conflicts. given where we are today, which is more likely? firststill think the scenario of skirmishes is the one in which we are now and one of the reasons for us to think asis that at the same time at face value, tariffs are imposed and more broadly, more regions affect did, at the same
time, there is intense negotiation activity going on at exactly the same time and leading to exemptions to the first tariffs that were imposed. we still think we are more into scenario one, where it is not a full-blown trade war. nejra: it will be interesting to see how those exemptions workout. japan notably absent from those. the yen blow past 105 for the first time in 2016. the level close to 100. you are positive on the yen. did you see it going to 100 and when? as our 12we have month forecast for dollar-yen, 100. for us, for the two scenarios, there was a great likelihood the yen could strengthen. one, it is a safe haven currency so at moments where risk
aversion is increasing, the yen strengthens. from an economic standpoint, a lot of the positive economic surprises have come from japan. japan has turned a corner. this will have implications on the bank of japan, as well. best -- base case, there is reason for yen to appreciate. when you look at the selling in global equity markets, the united states yesterday and into the msci asia-pacific down 2.7%. given you call this a skirmish, does the selling with overdone? we are certainly of the opinion that there is no meaningful change to the economic background we are having and growth is certainly helpful for the one asset class that benefits from growth, , when equities and for us there are setbacks like these,
we tend to think about them as good opportunities to invest in the sectors, in the companies in the regions that we like inequities. last and we heard from our guest that getting into emerging markets today would his -- be his suggestion because of the selling we have been seeing. where you looking to invest in a moment? are you talking about getting out of companies that are big players in global trade and into more domestically focused businesses, whether in asia or the united states? is that an investment team at the moment? nannette: two things, on emerging markets it is an area that benefits from goal -- global growth so we tend to be positive emerging-market equities altogether. but within emerging-market equities, there are certain sequiturs -- sectors that are attractive and part of a long-term conviction we are having. in particular, emerging markets
themselves much more to their own consumers and emerging-market consumer goods and sectors are among our most preferred ones. that is one area where we would be looking to invest, and then there are a number of additional things that we are quite convinced about, even in global equities. setbacks like these that are perhaps a little bit undifferentiated are opening up opportunities. nejra: what about credit? nannette: credit has been as the result of this long slide down in spreads, as well as yields, now offering less and less risk reward. if you were anticipating yields to move up. we tend to be neutral at the moment. we don't think that fundamentals are deteriorating to a point of getting out of credit, but to take much overweight in there, we don't
,ee a good reason to particularly in investment grade corporate credit as well as financials. nejra: you've got an equity outperform and you are protecting that with your position on the yen. what outlook you see for the dollar? hasof our mliv strategist commented that dollar strength has been shielded by the fact there has been so much attention on the yen strengthening against the dollar. nannette: we generally think the environment is one where the u.s. dollar should stay week if we are -- weak if we are having the rest of the world catch up economically to where the united states is. has deficits in the back, whether budget deficits or current account deficits, which make it vulnerable to capital flows. thegether, we are still of opinion that the year, in the end, is going to be a year where the dollar tends to soften. nejra: nannette hechler-fayd'herbe, head of
investment strategy at credit suisse wealth management stays with us. , u.s.special treatment president exempts the you from metal tariffs until may. how will brussels respond? we are live in the belgian capital. anna: and we speak to the ceo of deutsche bank's asset management arm on the date of the ipo. -- moreauduro joins joins us at nine :00 a.m. we will bring you european equity futures. we are expected to open down by 1.2%. -- cac,, the tax, the the dax, assumed down. u.s. futures point out, as well. this is number. ♪ -- bloomberg.
nejra:; 19 in london. we are just over 40 minutes away from the equity market open in europe. let's get a check on those markets in terms of what the futures are doing. pointing lower in europe by more than 1%. we are seeing losses on those andres in the ftse 100, dax cac 40 following the loss in asia, the msci really -- erasing gains. the 10 year treasury has dipped below 8% in this session and u.s. futures pointing lower. lossesd see more modest following the 2.5% drop in the s&p 500 yesterday. business the flash -- flash. and: steve wynn has sold his shares in wynn resorts, cutting ties. aswas forced to step down ceo last month as he fight allegations of sexual misconduct . separately, when resorts fell shares to-- sold more galaxy, giving the competing
operator an estimated 5% stake in the company. paul singer has won around in his battle at telecom italia. that is as the chairman and six directors backed by bollore are quitting the board. -- promisingame more than one month of wrangling between the french billionaire. he wants to keep the company together and the new york-based hedge fund manager is pushing to break it up. deutsche bank has raised about one point billion -- 1.4 billion dollars from its asset management division as john cryan works to complete his turnaround plan. the bank sold shares at 32.5 euros each. that is a 22 point 15% stake in deed of u.s. compared to the maximum 25% shareholding that deutsche bank want to the south. the price values deep get u.s. at 6.5 billion euros and the shares trade today. its asset management ceo joins us after
9:00 a.m. droptop has raised -- dropbox has priced above and already increased range. sold 36 million shares at $21 each. based on the number of shares outstanding after the offering, drop talks should make its debut on the nasdaq today at market value of about $8.2 billion. we will be talking to the dropbox ceo later today. that is your bloomberg business flash. anna: thank you, ed ludlow. european leaders discussed russian relations date -- in brussels yesterday. it was only after those discussions wrapped up that president trump approved and eu exemption for metals tariffs until may 1. there is lots we don't know about what happens to the metal tariffs after that date. nannette hechler-fayd'herbe's head of investment strategy and research at credit suisse international wealth management and is with us on set in london. --also heard and brexit
mario draghi said protectionism is the biggest risk to the european economy right now. would you go along with that assessment? nannette: for sure, the european union economies are quite geared toward international trade. they are also through that geared to global growth and whatever is impacting negatively both trade as well as growth could be a risk for the eurozone economies. i would agree on this assessment. the fact that the trump exemptions only last until may 1 and then he gets to decide whether they carry on after that, we will see some negotiation between europe and the trump administration. i also heard him yesterday saying when he signed that document around trade in china, this is the first of many. what is your fear around trade for europe?
which sectors would you be cautious about right now? europe, whenette: you look at the equity market, is having quite a lot of exposure to industrials. whatever is impacting industrials is a source of concern for equity investors in the eurozone. speaking, we are still of the opinion at credit suisse that we are in an intense negotiation period and even if there are some timelines -- now may, where the first exemption of the tariffs are coming to an end, this is really a period in which we should be expecting quite -- a lot of developments on trade. this will go along with quite some volatility on all the assets that are sensitive to send cement -- sensitive to sentiment of risk. for the time being, none of those measures, whether the
first or several of those measures, have meaningfully changed the macro economic outlook for the year in either part of the economy. so you stay positive on the euro and if so, where do you see it ending the year? nannette: we do have the opinion that the euro can strengthening further toward 130 against the u.s. dollar over 12 months. nejra: a lot of that is to do with the dollar weakness you talked about earlier too, but one thing you saw, european equities underperforming u.s. equities this year. a lot of people saying euro strength has played into that. how do you select european equities, then? nannette: the european equity market is very geared toward what the currency is doing because there are a lot of exports that are going out of european companies. but the market overall is
-- attractive because even if it underperforms in local terms come up for international investors as long as the euro is appreciating at the same time, the investment in eurozone equities altogether is helped either by euro strength or by the equity market. in terms of the sectors that we like those at, we that are exposed to the domestic side of the european economy, not to forget labor markets are improving in europe and that is good for consumer sectors. nejra: thank you so much. nannette hechler-fayd'herbe, head of investment strategy and research at credit suisse wealth management. let's check in on your european equity futures. about 30 minutes from the open and we are seeing futures point lower across the board. we could see a third day of losses for european stocks after the selloff in asia overnight. the msci asia index erasing gains for the year. anna: that is it for daybreak
guy: welcome to "bloomberg markets: the european open." i'm guy johnson in london, alongside matt miller in berlin. matt, cash trade less than turn it -- 30 minutes away now. ♪ guy: asia's he's read on trade. stocks tumble on big volumes as china hits back. market overreacting to what could be seen as a relatively cautious response from beijing? europe set to follow suit.
stocks are called lower, but not my as much. london, frankfurt, and paris expected to open around 1% down. london looks to be an outperform her. a tough day for ipos. deutsche's asset management division d w s market. bloomberg will speak to the ceo at nine: 20 gmt, 10:20 in frankfurt. we are less than half an hour away from the european open. it could be a rough one today. no doubt there will be a lot of trading. the last i checked, asian markets were 40% above their daily average volume over the past 20 days. take a look at european futures, down 1% or more on the continent. down only twondon thirds of 1% right now as the pound gains strength against the dollar, 1.41. look at treasuries, yields have
been coming down. it looks like they are turning back up right now. looking at 2.81, 2.82. although they are down, maybe they will turn up today as comfortableybe are enough after yesterday's incredible slide in the u.s. and in asia overnight, to get rid of some of those treasuries. what do you see on the gmm? guy: let's talk about the asian markets. you are getting a move on the shanghai, overnight in terms of the scale of what we are seeing. that tells you everything you need to know. nikkei trading down by 4.5%. higher, but aing big move on the japanese nikkei overnight. australia feeling the pressure, down by 2%. chinese markets down 2, 3, 3.5%. you have to remember that the chinese are responding to the aluminum and steel story, not the latest $60 billion from washington.
in some ways, you could argue this is a cautious response. the brazilian riel trading softer. japanese yen bid this morning. let's show you whether havens we are watching. there is a commodity ingles to what we are seeing in terms of the chinese response. the gold story, we are bid. wei, bit. lumbar commodity index only up by .3%. look at rubber, we are seeing weakness in some agricultural commodities space. let's bring it all together and get you a blue -- first word update with ed ludlow. ed: in washington, the senate has averted a government shutdown by passing a 1.3 trillion dollars spending bill. it increases military and domestic spending and strengthens background checks for but -- gun buyers. the bill funds the government through september and attracted bipartisan support. some conservatives complained about the budget deficit and a
lack of time to review the over 2000 page measure. u.s. president donald trump has h.r. mcmaster's as national security adviser with john bolton. the former you have to -- in massive are to the yuan is known for his hawkish views. the latest shakeup comes as ahead ofhapes his team talks with kim jong-un in the coming weeks. he faces a key decision in may on whether to maintain the nuclear deal with iran. sided with u.k. against russia over the poisoning of a former double agent on british soil. the block has said it could find "no other plausible explanation for the attack" and says it is likely moscow is to blame. some countries are considering the expulsion of russian diplomat in coming weeks. lithuania hinted as much. japan's key inflation gauge picked up last month, putting the boj past -- closer to its coal -- goal of 2%.
the yen's 7% gain this year has raised the risk of price gains stalling. a decline in oil prices would work against the central bank, which blamed it struggles to generate inflation on the collapse a few years ago. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. there with your first word news. china doesn't fear a trade war, it says, after announcing reciprocal tariffs on $3 billion of imports from the u.s.. beijing said it plans tariffs on imports of american pork, recycled aluminum, steel pipes, fruit, and wind in response to donald comes earlier levies on chinese metal exports. trump has also imposed broader tariffs on $50 billion -- targeted $50 billion in chinese imports over alleged intellectual property abuses. joining us from beijing is tom
warlick, bloomberg's chief asia economic missed -- economist. let's get what these new tariffs are, but city is out with a note saying the $50 billion are the targeted levels and it will be a much smaller impacting reality. some ambiguity in the phrasing of the trump administration. our take on these numbers is that we are looking at 25% tariffs on $50 billion worth imports. that is a total tariff of $12.5 billion. perspective,n china exports around $50 billion soear to the united states, $12.5 billion in tariff collection is not a huge amount of money. we are talking about across the board, the equivalence of an increase of about 2.5% in tariffs. is clearly troubling,
the substance in terms of the impact on china's exports and gdp, pretty minimal. matt: how do we expect china to retaliate, because the retaliation we have seen so far is only for the previous tariffs on steel and aluminum. what are you hearing they could come back with on this new round of tariffs? tom: i think that is right, we have only seen the first retaliation. i expect we will see more in the next week or so. my expectation is that china's response is going to be proportionate and if anything, they are going to try and de-escalate the situation. see a responsey that is less than the total amount of tariffs that the u.s. has imposed. we will probably see chinese leaders talking up the benefits of free trade, maybe even some well-publicized opening to more imports in key sectors.
that is because for china, the status quo is extremely favorable, they benefit a lot from the current trade relationship. they don't want to do anything to hasten its decline. out the, you have laid response that could be delivered, the proportionate response from beijing. if we work through the gears on the escalation, where could it take us if we were to see the story escalating? it is interesting some of the sanctions are targeted at trump far.s and thus i'm wondering how quickly things could develop. importantis the question, guy. the big question in my mind is what is the lens through which u.s. policymakers view this trade conflict? is it through an economic lens? if that is the case, sweeping tariffs don't make much sense. it imposes massive costs on the
u.s. economy. maybe that'll -- is not how trump and his advisers see it. maybe they see the conflict through the lens of great power competition between china and the u.s.. a competition ultimately that controls the global economy and if that is the case, maybe some are aterm economic costs price worth paying. if it is that great power competition, then clearly the potential for this to escalate, retaliation from china, other countries being brought in, is rather larger and we could start looking at numbers which to start taking a chunk out of china's gdp. guy: great stuff, thank you for the analysis. tom orlik, bloomberg's chief asia correspondent. thank you. let's stay in asia and go to singapore for more on the market reaction to all of this. mark cudmore joins us from our mliv team. function up. hrh
we are all the way to the left hand side of the distribution of outcomes we normally get in daily moves. chinese markets are reacting pretty aggressively, but the chinese response politically from a trade point of view isn't that aggressive. what do we have going on here? is the market overreacting? mark: you are right to point out that stocks in china have -- the response has been measured so far. in context, this will take many wakes to play up -- weeks to play out. we don't know where it will end and the latest round of tariffs won't be implemented until main first -- may 1. there is a lot of uncertainty, we don't know what countries will be exempted. it is hard to say the market has overreacted. they have suddenly woken up to a trade war that was flagged many weeks ago, repeatedly by trump and when cohn resigned, that was the implication. was implementtion a hard-line stance on trade over the price of u.s. equity market.
suddenly, equity investors woke up to that today. i don't think it is overreaction, but we need to see what the next moves are, what reactions are. i don't think we get -- get much more pain in the short term, there is no reason to jump in and buy equities if you are long-term investor. getare not going to long-term investors wanting to buy equities now when there is too much uncertainty about how far this spiral of tensions will go. guy: the chinese are likely to try and manage this event and figure out how to keep the story on the rails. see ast few hours, you pretty big move. the think the chinese are going to use the currency as part of this process? i could bring the chart up and you can see this turn that we are seeing in the markets. mark: certainly a lot of people that that is one way there might be a peaceful resolution between the countries. if china lets the yuan
appreciate quite a bit, especially with the fact that on manipulation comes up in july. there could be some grand bargain between the u.s. and china so they have a few tariffs, when at home, and that eases trade imbalance. that is definitely one theory. it does seem at the moment, they are firing shots. a china has been measured, but the u.s. is making clear they aren't going to back down until he get victories. i'm not sure a currency move to be enough of a victory for trump to bring back to his support base. i wouldn't count on that being the base case scenario for this to play out. overall in the weeks ahead, we will have more news evolution of this. we will get some good headlines, negative headlines, but i don't see why long-term investors want to public -- pilot to equities the next couple of weeks. it will be a traders market for some time now. matt: i read on the mliv blog this morning that this trade war
or a trade war could lead to in the u.s.,ion leading to more interest rate increases from the fed. bill gross came on bloomberg tv yesterday and said he doesn't think that a stock slump is due to trade war worries. he think it is still reaction to jerome powell's first press conference. what do you think about that? mark: with respect, i completely disagree with mr. gross. the perception from the most analysts, the fed reaction was dovish. yieldslar came lower, can lower. he gave an excellent fed meeting, jerome powell. he delivered a balance message, so it is strange to blame it on that. trade was a development affecting people. we have other issues, u.s. politics, h.r. mcmaster gone that is being overshadowed by the trade turmoil. there are other things now, political tensions and we have this heightened volatility. we have the higher rates.
i don't think fed was relevant this week, but maybe i am biased because i didn't think it would be in the first place. matt: mark, we appreciate your input. mark cudmore, numbered mliv strategist. you can follow, and i recommend you do follow, mark and the rest of his team on the mliv blog. mliv on your bloomberg. next, a big day for ipo's. maybe not a great day for ipo's, but the biggest -- dropbox priced overnight. deutsche bank's asset management business is minutes from its trading debut. we will bring you both of those stories on this exciting and possibly very bloody day for the markets. this is bloomberg. ♪
♪ guy:guy: 47 minutes past the hour, 747 the number. glaxo is withdrawing from the consumer health care bid process. we saw a reckitt announced the same thing. reckitt shares rallied massively on the back of the news. glaxo now confirming it is following suit. it will be interesting to see whether shares respond in a similar fashion. absolutely fascinating story. they just keep coming. on the ipo front, we have a ton of news today. shares will begin trading indeed of asset management. deutsche bank has raised 1.4
billion euros from the ipo. john cryan works to complete his turnaround plan. the price values deutsche bank asset management at 6.5 billion euros in total. its get more with -- in frankfurt. jp, how does the ipo price compare with the range? i know they were ready to sell a little more of this asset management unit than they did. >> the price of 32.5 euros is somewhere in the initial -- middle of the initial range. 30 to 36 euros. the valuation is in line with the largest asset manager, which has double the assets and market compensation. it is a decent price. deutsche bank might have hoped to get a little bit more out of it. guy: what are we getting out of the gray markets? today will be a tough day to ipo, isn't it? jan-patrick: it is definitely.
they could have waited, but it is a tough market for an ipo. early indication is somewhere above the ipo price of 30 euros. .t is early to say how much we expect pricing between 9:00 and 9:15 from the stock exchange. matt: what are the challenges that dwp faces going forward? today will be a challenging day for your first day of trading, but what do they need to do to get this stock up? jan-patrick: that is a good question. an easy market for asset management. you have to face the current market drop, which might result in outflows that you have to battle. on the other hand, you have this ongoing theme that asset managers and money managers around the world are battling -- battling lower price competition from passive funds and that is here to say.
-- stay. that is a challenge for dws. on the positive side, they have two anchor investors that willing gauge with dws and their business. market.e asian on the one hand, dws manages some assets for them and can help them grow in the market where dws is not strong at the moment. guy: thank you very much. jan-patrick barnet joining us out of frankford ahead of the dws ipo. you are looking at pictures from the european stock exchange. it is a big deal. we will make the most of it and are going to be talking to the david bds ceo later this morning. oreau will be joining francine lacqua. a tough day to come to market. let's see what the story looks like on the other side of the atlantic. yesterday.g hit
judging by the fair values, they will be down today. we've got the dropbox story ipo coming through. the company's ipo pricing a little higher than expected, pricing at $21 a share. the range was 18 to 21. demand was actually reasonably good. a stun the number of shares outstanding after the offering, dropbox should make its public company debut on the nasdaq at a value of around $8.2 billion. it is the relationship between that number and the funding round being very important. if you have in the funding round , you may be slightly concerned about the way this is going. recently, it was suggested it could be worse. team leader joins us now. then, how significant is it we are getting decent demand for environmentm market -- the market environment is not that great. ben: that shows people are looking at dropbox's push for
profitability. bid up the investors shares. the price range had already been increased and they priced above the top end of that range. investors are looking at dropbox has different than a lot of these other startups that may be rushed to market before they had a business model. although the ipo puts dropbox's value at lower than the private valuation. that doesn't sound good at all. is there nothing to fear about a down round now? , the ipo was a down round, but that doesn't have the same stigma that it used to. people have started to realize that private markets are very frothy and they value companies differently than investors in the public markets and are starting to be ok with that. they are thick -- looking at things like square where there is a lot of negative press aound the time they listed at
negative evaluation and since then, they have delivered for investors. people aren't is worried about that is now. matt: got it. then, thank you. ben scent, our asian deals leader. the dropbox ipo. it will be a rough day for ipos. although the u.s. doesn't look so bad, not as bad as yesterday judging by the futures trade. to the ceo ofking dropbox later on today on bloomberg. we are minutes from the open. the stocks to watch today. it will be an interesting day of trade. guy: asia being hammered overnight. the shanghai,, how will that ripple through into the european markets? miners could be front and center. we are joined by paul jarvis. where should we be looking? day fordifficult markets and on the forefront of
the difficulties will be the basic industry of the mining sector. we have already seen prices the likes of rio tinto, bhp, being hit hard in australia on the back of plunging iron ore prices. 5% ons much as six point the back of the escalate -- 6.5% on the back of the you at -- escalating trade tensions. you can look for mining stocks to be leading the declines in the stoxx 600 this morning. is a british retailer next. profitll-year pretax beating estimates. is that good enough? paul: it should be, yes. there was 1.i wanted to bring up from the statement from next, -- lost in the retail business, costs them 60 p. every one online delivers nine dp of profit.
hard next is having to work to make its online business make up for what it is losing in the retail business. it is really difficult for these store based retailers to get what they need online, and they are really having to work hard to do that. the guidance from next today is pretty good in terms of 1% up for full-year next branch sales. it doesn't sound great, but in the current environment, this is pretty good for a retailer in a market that retails are finding life very difficult right now as we have seen from the likes of copyright, mothercare, life is tough out there. we have a company that does medical products for veterinarians and humans. paul: indubitably, they will down substantially at the open. there was a u.s. court ruling finding that a rival product
the australian market was done as well and the miners. the stick a look at the fair values in europe very briefly. 0.75%. little bit, down you will see negative open as well. the ftse 100 could be affected by the miners. the ibex down 1%. london is actually holding up ok at this time. down .2% is a there to blue -- that is almost a positive performance. 350 on you over to the the imap. a defensive element to it is happening in the health care market and consumer staples are rallying. they are