tv Bloomberg Daybreak Europe Bloomberg June 8, 2018 1:00am-2:30am EDT
morning, from bloomberg headquarters in london, i am anna edwards and you are watching "bloomberg daybreak: europe your car anything get done before president trump jets off to the north korean summit? >> it is aware the community moment. ben bernanke says the u.s. could fall off a cliff. >> and, bloomberg exclusive. deutsche bank's chairman discusses the merger with top shareholders. could it revive consumer confidence in germany's largest lender? ♪
>> good morning, everybody, it is friday. it is just 6:00 here in london, 7:00 in paris or berlin. we are done .6 percent on the msci asia-pacific. the confidence we saw at the start of the week is winning a little bit. due to the emerging markets story command and all the facets that that includes, braving market investors globally. looking at this, it looks like they will be flat or negative at the start off trades. nasdaq wasd, the also very weak yesterday, technology part of the focus. it was down the most in three weeks. over thet the picture last 24 hours, and we saw more appetite for u.s. fixed income. got a bituries
of a boost. we are at 2.93 on the u.s. 10 year. they put the brazilian reality here, we are eyeing the for real level, to the dollar level. we are not there yet, but the markets are watching. is your focus on emerging markets on turkey and their decision? what the brazilian real, and argentina as well. they are idiosyncratic stories, they emerging markets are. in the dollar weakness is hanging over all of them. >> that is the question, whether there would be the dollar effect as well. at dollar-yen, over the weeks, it is pretty much unchanged. we have a blogger writing the perhaps dollar-yen traders are estimating event risks. let us take you to the chart,
the dollar-yen is two thirds away from forming our bearish head and shoulders pattern. it has breached the initial itistance around $1.10, -- could result in the bearish head and shoulders formation and if it does that, it would lead to a point 08, the lower yellow line. but declined to 1.06, would not the improbable. that would be a decline in the dollar, with the yen strengthening. if you look at the one-month risk reversals, we like looking at those options, there are relatively cheap, compared to levels seen last month. coming, the event risk the g-7 summit come of the meeting between trump and came, and as we mentioned, three of the world's biggest central banks meeting next week, the fed, the ecb and the fed bank of
japan. let us get to features, nasdaq futures are suggesting a weakness here. as you say, we focus on the g-7 story as well. something coming up and programming in europe that we need to tell you about, we will be jen but a ceo, for the european markets open, 7:30 a.m. london time. let us go to juliette saly in singapore. >> u.s. president donald trump will leave the g-7 summit in quebec early and head straight here to singapore to meet with jong.korean leader kim leaders are meeting today and tomorrow and what is shaping up to be the most divisive gathering in th years. america's closest allies frustrated with president trump's decision to instill terror's last week, as well as the decision to withdraw from the i run a nuclear accords and
the paris climate agreement. administration's powerful fiscal stimulus could fade causing a rally community moment, according to a former federal reserve chairman,. then bernanke. he says the $1.5 trillion in personal and corporate taxes -- tax cuts, make the job of the fed harder, because it is coming at a time when very low unemployment. >> you're getting a stimulus at the wrong moment that the economies are ready for love full employment. you are getting a stimulus which under current law, we will see --ther it is rendered are whether it is renewed or not. but by 2020, the economy will look down and there will be nowhere for. anna: it to land at that. anna: point a standby arrangement from the imf has country toto this
help restore investor confidence in argentina. the rescue program which would run for 36 months, is the largest ever in imf history. it will depend on how much the government has. it comes amid an emerging markets selloff that has shaken emerging-market economies around the world including brazil, turkey, mexico and others, and forced central banks to hike rates.t the russian bank chairman is said to have spoken with shareholders about merger with rival, commerzbank. we understand that there was a combination of the two leaders that talked about this, as a germany's largest lender struggles with its turnaround than. the deutsche bank spokesman declined to comment. global news, 24 hours a day, on air and at tic-toc on twitter,. powered by more than 2700 journalists in over 120 countries.. you can find more stories on the bloomberg at top . anna: here in asia, we're seeing
markets lower for the final trading day of the week. >> paring their weekly gains, up only by 1.7% over the week. we were actually performing in the best weekly for the past four months. the nikkei is down .4%, and we see a retreat from tech players in china today. taipei, down by about 1%, zte suppliers have been given a bit of a boost by the comments from over is.ss the ge and the u.s. coming to an agreement one of the tech players that is really lagging kong.cent in hong trading below its 100 day moving average, failing to hold above the key technical level. shangri-la also worth noting in hong kong, paring its weekly gain. this stock has been on a tear of ahead of their summit in singapore because it was named as what part of the special zone
for the trump-kim summit. in hong kong as well -- in shanghai, we have this company rising by the daily limit on its debut, foxconn, before being suspended. it is now china's top listed tech company by value. anna: thank you very much juliette periodic macro monday between president trump and his g7 counterparts is increasing ahead of the summit in quebec today. french president emmanuel macron has said that no head of state is eternal, and that he stands ready to work with other g-7 members if the u.s. wants to standalone. president trump it back by saying that france and other countries charge they u.s. a lot of tariffs. he did say at the end of the two each, i look forward to seeing them tomorrow. nejra: he has earned the announced that he will leave early to head to singapore for
his summit with kim jong-un. . we are joined by jodi schneider income, first of all, president trump leaving the g7 summit early. what kind of signal does it send ? >> we seem to be having a problem with her microphone. it will be a fascinating is.tion, whether signal we have to wonder, with vladimir putin and president xi jinping gathering for a meeting in china, you have to wonder where president trump would rather be. clearly, up his mind is on all things to do with the korean peninsula. jody, will look get back to you shortly. . nejra: let as get to james, chief economist at imc joining us on set great to see you, james. comes tokend when it political relationships,
especially diplomacy. when you look at economic implications, what do you need to see at of the g7 summit to feel ok about project area of global growth? when youunately to get a back-check of the iran deal? no. you had larry kudlow speaking earlier this week saying that he will stick to the guns on trade. it will be challenging to get anything out of this, especially if you will not be there for the last day, saturday. he will not it can be there to sign the agreement. nejra: it is interesting to think about whether the g-7 letters or does not matter. i put up this chart, it is the manufacturing pmi numbers come out that with you have rolled over recently. i find it interesting that marcus managed to put aside, not just the talk of trade, but also on the global growth story, a positive way. some of the data is not looking amazing.
what do you make of that. >>? >> i think the first quarter globally was pretty disappointing. >> united kingdom numbers were particularly dreadful, and we saw problems in europe. numbers in the second quarter are looking better. if you look at a run, -- if you look at this model, there are suggesting second-quarter u.s. 4.8%.uld be that is a bit high, but something north of 3% is looking possible. the u.k. bouncing back, europe should post reasonable growth. i am still pretty up the heat on global growth prospects. i think of the ongoing story of unemployment coming down, real household disposable incomes rising, there is enough there to keep the global economy going. nejra: china is not going to be present at the g7, but it is a big presence looming over it nonetheless. what are the prospects of those trade tensions ramping up and an all out trade war impacting
global growth? >> it will be lingering for quite some time. europe and japan and korea are caught between u.s. aggression and chinese intransigence on the issue. getting momentum behind a deal is looking challenging. but we have to remember, the u.s. midterm elections are up.ng the politics in this is very important as well, because trump is not particularly popular. he may be popular within his party, but within the population as a whole, he has the worst approval rating of any president in. this state of his presidency at the same time, republicans are lagging behind the polls by about 7%. . anna: so they need to do something to gain momentum and regain control of progress i just saw a poll on bloomberg, it also said that i'm an omicron also has a 40% approval rate. i wanted to ask you about the comments from ben bernanke about where the community, china
having the ability, etc.. where do you make of the u.s. you think is making the point -- firstly, that it is making too much of a stimulus, and also, that the problem comes when the stimulus is gone? .> he has a point, i think you have $300 billion of extra spending this year, a lot of money to lift the it.omy as said, it is looking that we will get a second quarter gdp growth that is really good. so there is a nervousness that we will not see the stimulus continuing to come through, it will be fading. of course, transposition had been that they will get the stimulus in terms of investment spending. this 1.5 trillion that they would put to work on airports and roads. that is not looking forthcoming right now. so yes, i think he has a point. that there will be a drop-off. also, the yield curve story. if the fed continues with three more rate hikes this year,
coupled with a 10 year that is struggling to make above 3%, the presidents with the inverted yield curve has of course pointed. anna: to a recession at some. anna: point james comer stays with us. we have lots more to discuss. we do have bloomberg's senior. international editor jodi schneider back with us. good to see you again. president trump is a were saying, leaving the g7 early. what kind of signal does it send? >> he will be leaving early and will bill even after what is expected to be some very tense conversations about trade policy from the u.s.. he will only have 24 hours to try to defuse what are escalating tensions with the g7 member countries over u.s. tariffs and trade policies, and also the u.s. is go-it-a loan policy. so, it will be an interesting time to make an early exit.
it will also leave him not there for some other interesting conversations about things like limit. anna: there is a whole host of issues the could make their way onto the agenda, jody. people are already talking about this being that g six plus one, .ather than the g7 >> there is the issue of climate as we were just saying, there is clean energy as well, that would be a big topic. if you these before the canadian makes his press conference, the traditional press conference by the host at the end of the session, there is worry about that.
after a very good working relationship between the two men come at the has been a lot of acrimony the past week with some comments from the canadian prime minister, about the u.s. not have in common sense when it came to the tariffs. president trump of course, shot back at canada over that. so there is a rift in there and back could be an interesting press conference to watch. nejra: absolutely, a lot of event risk potential coming up in the next week. thank you so much for bloomberg's sydney international editor, jodie snyder. germany's biggest lender is up for good to discuss a deal with rival commerzbank. we will have the details. this is bloomberg. ♪ you think the looking at
discussed the was local years ago, but nothing came out of it at the time. we are joined by matt right now, good morning to you. what is the likelihood we get .omething out of thi these talks they are not actually talking to each other, but within deutsche bank come i same-sex something is being considered. >> absolutely, as the share price falls to a really low, it seems like the chairman's throwing anything other want to see what will stick. he has to do something after losing three ceos in the last six years. this is an idea that he says has been floated in the past. germany'ss to merge two biggest banks, because there are so many synergies. this is a famously overbank country.
every corner you look at, there is a commerzbank on one side of the street and a deutsche bank on one side of the streets, so there are not enough for retail customers to satisfy the kind of capacity. by the way, the old deutsche bank building is right behind me here, right next to the new commerzbank building. there is another giant deutsche bank tower right down the street to my right. so, they are just packed in this small country, with these two big banks now. nejra: good morning to you matt. the biggest price obstacle here? matt: that is one of the biggest obstacles, certainly. i would not say it is the biggest one, because the one thing that the german government doesn't really like to do, and the german people are opposed to, is to set the company up for massive layoffs.
if you put these two banks together come with a synergies would be fantastic for investors. but they would need to fire far more people than they are willing to now. one of the reasons deutsche bank has the problems it has now, is because they haven't fired people fast enough already. there are just too many bankers. if you was the together, it would be a situation where this country will not add banking jobs for years to come. that is probably one of the biggest obstacles. going into it with a share price at an all-time low is also not attractive to any potential partners in a merger. nejra: what have we learned about who needs to approve this kind of deal should it get that far? anna: we should stress that this is very early in the conversation, but what do we know about how likely they would be to do so? really important part of the conversation that the ceo is having. of course, a lot of the stakeholders and shareholders years talking to would need to
be behind this idea. he has to have government support in germany. not the least of which is the reason that they own still, 15% of commerzbank. also, labor unions are a huge part of this, they have a lot of influence on the boards of companies in general, but especially on the boards of commerce bank and deutsche bank. as i said, they will not be behind a plan that could result in layoffs, a lot of firings, a for of jobs in this sector, years and years to come. nejra: bloomberg's matt miller is in frankfurt, thank you so much. there is a maze custom plan for theresa may'srry some custom plan proposal remains now. for
james is still with us. what is your best case for what happens here? >> i think we did need to this backstop, because the idea of the united kingdom being able to agree to a completely open trade deal with the eu by december 2018 doesn't look like a will happen, it looks challenged. -- itg a backstop is provides a bit more insurance. but i think that even that may not be enough. i can still see that december 2021, the endpoint slipping further. anna: and points, or just other lent to get the talks done by that? he was a little bit cagey on the language. in terms of the underlying u.k., they of have been talking positively about that. but economic data softening is another charts i have here.
that is one way to look at it. you could point to the pmi and said that is looking pretty robust. what is your take? james: we had a pretty poor first-quarter which a lot of people blamed on many things, but the u.k. was the worst performing economy in europe in the first quarter. it wasn't just the weather, there were more issues in the united kingdom -- uncertainty about brexit hampering investments, etc.. we had a bit of a bounce in the services pmi as he saw this week, and retail sales as well. also better weather, and but you still have the fundamental problem, brexit uncertainty. 0.3, well below what we will be seeing elsewhere. nejra: the wage growth that you pointed to end the expectations of the future visit of the rate ites, is that way have seen
not move very much despite the bank of england meeting? >> the bank of england made it quite clear there would like to could.ates if they citing wage inflation as a possible catalyst for this, that would keep inflation higher for longerp those were the comments from dave rims and yesterday, that if we will hit our target, we need interest rates to rise. but when you start to see jamaica sees move down a bit, unemployment rate tipping up a bit, that story -- when you move to see job vacancies down a bit, and unemployment rate tipping of a bit, that is a different story. next, e.m. is under siege. turkey and brazil step up efforts to protect their currencies as emerging markets face their biggest testing years. this is bloomberg. ♪ years. in retail.
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nejra: dollar yen dead flat. haven't really moved that much over this week. we could see more movement for the safe haven next week with quite a bit of event risk coming up. the dollar heading for its first weekly loss since mid-april. dollar yen unchanged. we did see a bigger move in the 10 year treasury move yesterday. that again steady today. steady and fixed income markets. we get breaking news. passenger numbers falling in the month of may.
the load factor dropping to 85.5%. the plane is a little less full carrying if you passengers and a part of this has to be because of the strike action. air france few fewer people -- flu fewer people in the month of may. to prop up the business at air france can him. this is a long-running story. let's get the backed up analysis with caroline kanaan -- carolyn kanaan. the damage that has been done to this business as we saw of the strike activity. caroline: as you can see, air france passengers are weighing on the air force klm group. passenger numbers are up 2.7% air france passengers down in the month of may. that is because you had four days of strikes and may and this
strike effective a lot of medium hold travelers because it was in the middle of the bank holiday. we will start to measure the financial impact of the strike since february of 22nd. the first day of strike like pilots. we have had 15 days of strikes at air france could cost as much as 400 million euros. you have rising fuel prices and the strong euro. klm warned that earnings and profits will be notably lower than 2017. the strikes in may already cost ceo whoce klm their resigned on may 4.
nejra: walk us through what we can expect if we get more strikes. caroline: we can expect more strikes over the summer and we will hear from the union later today. the unions are meeting after another week of discussions. they are not happy with the government and the management is telling them to wait until september, until there is a new ceo in place before they restart the negotiations. they don't want to wait that long so we can expect more days of strikes. very difficult for the french to plan their summer holidays because on top of that you have the state railway strikes. today we are in the middle of the strikes. the disruptions are getting smaller. trains today 80% of
running. we could see more days of strikes if they don't find a solution because the french government has said they are holding on to the reform. of quest is giving this image of -- but ofment who is course you have the strikes making this image of the country and possible to reform backfiring at the french government. down macron supporting just one percentage point. thank you so much. let's get to bloomberg first word news update with juliette saly. andette: president trump his g7 counterparts are raising the temperature ahead of this weekend's summit in quebec. macron tweeted that the u.s. might be isolated and the remaining six good sign a deal between them. insident trump hit back
tweeted that canada and france charged the u.s. enormous tariffs and create trade barriers. meanwhile, president trump says he can envision signing a treaty with kim jong on next week to end the korean war. he raised the possibility of inviting came to the white house trump predicted great success the the talks was will be first time is sitting u.s. president has met a north korean leader. mike pompeo will hold a deep debriefing. >> i would like to say it can happen in one deal. enuke.l have to d we cannot take sanctions off. they are destroyed nearly powerful. julie atco -- juliette: all right. global news, 24 hours a day,
powered by 2700 journalists and analysts in more than 120 countries. you can find more stories on bloomberg at top . saly.iette we'll get more to you next time. let's get on to a conversation about emerging markets did argentina has procured a $50 billion arrangement from the international monetary fund. still in south america, brazil central bank defended its countries economic at the end of another day of turmoil for the currency. brazil central-bank swore sales was not enough to boost the stock index. nejra: in of the emerging market, turkey surprised analysts why tightening their monetary policy and -- for the third time in less than three months it james knightley is still with us. james, is there going to be em contagion which mark --
contagion stories? james: these are countries that have fiscal deficits compounded by the problems of a strong dollar. that is only going to get worse next week with the fed hiking rates yet again. we have seen quite a bit of central-bank action from india, turkey and brazil. while that potentially provides something of a backdrop, it doesn't really resolve the underlying fundamentals. anna: one other country we talked about his brazil. the road to 4.0. this is checking the weakness of the currency. he gets down toward for to the dollar. this is one central-bank try to deal with the situation other central banks have a different approach. all of these central banks holding a very difficult line. to get in not wanting
the way of their own growth story. james: it is a very fine line for them. they are trying their best. they are china to find the financial stability floor. the primary mandate. the problem is if you got economic fundamentals, look over us as well. we got elections in all of these countries coming up. a level of uncertainty is very difficult to battle against. it is going to take quite a lot. i don't think this is going to be -- chart's take you to this that shows you asian currencies have been a little more resilient. this carries through if you look at equities. i showed the effects here. seeing losses but nonetheless, you get the point. is this to do with different reaction functions to the dollar? or is it away about the -- the economy is set up?
james: a lot of these countries got stronger current account balances. with china looking, it is going to be drawing close to 7% ties to that. there is more to be optimistic about in terms of those stories it that is providing a level of resilience in this uncertain environment. nejra: we talk about all of these emerging markets. not one of them is want to move the dial on global growth. what are your thoughts on how resilient the chinese story is in the face of the rhetoric? and the imposition of tariffs from the united states? presidency -- president xi is for life. that suggests that while china is going for better quality
growth, it is still going to be strong. fundamentally china is looking better. --this tariff plan, it is what has the u.s. done? we are still going to be liberalizing and giving young growth and japan better access. he is securing more access to u.s. companies, better protection of intellectual property. james: china needs energy and food. therefore it is in their interest to say we are offering you something. this is a concession we are giving you. we are not giving it a concession because it is not opening up china. >> is global growth decent cannot now -- the synchronized now? tim cook if you look the forecast out there, it is still pretty good. james: if you look at the
forecast out there, it is still pretty good. still looking at asia going 4% to 5% this year. relative to two of three years ago, it is pretty good. anna: is synchronized growth a good thing? james: at times, yes. this month in time we still have a decent underlying fundamental story. unemployment is coming down. real household incomes are rising. anna: james comer think you very much. -- james, thank you very much. you will continue this conversation on the radio. we played some great charts during the morning so far. 45 minutes into the program. if you want to look at those charge, you can do that on the bloomberg. you can browse all of the recent charts we have shown on bloomberg tv. you can save them for your own future reference.
>> this is number daybreak: europe. late in the evening over new york. s&p futures are weaker. down .2% and weakening as a go through the overnight in new york or the morning session here in london at technology very is after the: this nasdaq leads to record highs in this week. let's take a look at what is happening in the fx market. dollar yen is struggling for direction. the dollar overall on track for a first week of decline since april. we've got the yuan up. the euro on eight 118 handle. it has also gone into that
bearish profit. people also flat, 134.21. anna: list getting bloomberg business flash. juliette: anna, deutsche bank's chairman is said to expose top shareholders about merging with commerzbank. they discussed a, nation of the two lenders with investors and key german government officials. that comes as germany's largest lender struggles with its turnaround plan. a spokesman declined to comment. financial has raised $14 billion in its latest funding round as it accelerates the expansion of -- the funding makes the world's largest fintech firm equips it with enormous resources for expansion. jack ma is china's biggest online payment service and it
shows the world's largest money market fund. -- has soared in its shanghai debut. thumbs up for terry gou's ambition of nurturing a factory to help a company emerged from under apple's wings. it grows a maximum of 44% comparing a market value of more than 60 -- in shanghai or shenzhen. may -- xiaomi -- the smart phone maker past its hearing yesterday and it plans to gauging investor demand in the next few days did it will be the first listing. that is your bloomberg business flash. -- this is what you should be watching in the coming days good a looming double trade dispute is set to overshadow the
g7 summit as he gets underway in canada. anna: we heard from president trump heading back at macron and trudeau. he looks forward to seeing this to german. -- those two gentlemen. vladimir putin travels china today ahead of the shanghai cooperation foundation summit in tsingtao. the summitnder if name needs to be changed. i referendum that could put its central bank in charge of money supply. for more on that, katherine bulkley, good to see you. outline for us exactly what is being voted on. would haveproposal consumers accounts fully backed by central-bank money and held off commercial banks balance sheets. this is a bank is argued this
would politicize it and harm the economy. >> what do supporters say? catherine: they are it would prevent the boom and bust cycles . they're hoping for more of financial stability with this measure. nejra: why are the government and central-bank against it? argued thathey financial stability is better achieved by regulatory tools like buffers for example. that the sovereign mighty measure would push up the cost of credit and therefore harm the economy and cripple the maintenance system because it would end the fractional reserve banking.
it is the way banks have conducted business for centuries. anna: this would be significant but what do the polls tell us? catherine: the polls are suggesting it is going to fail. the opposition pulls show the opposition to the measure has been building. we will see what happens on sunday. there's a chance it may not proceed. nejra: catherine bosley, think you so much. the world's big three central banks me next week. the boj expected to make stimulus program while the ecb gears up to discuss the end of its bond buying era. we have to mention the fed expected to tighten emerging markets. they will not get some of the from the fed expecting to hike. em currencies have been selling off. joining us now from frank first
is esther reichelt. good morning to you. divergenceotential we are going to see next week and some of the dollar softness we have seen this week, is the dollar going to get a bid next week? esther: we have seen that the dollar is sometimes ignoring the -- the political discussions are definitely a possibility that can weigh on the dollar. we are having the g7 summit today. investors are very sensitive to the trade issue. i believe that the signals we get from the g7 summit over the weekend might set the tone because rate hike by the fed next week is already fully priced in.
anna: the fed has to deal with what comes out of the g7 summit. the domestic policy agenda of the trump administration. we had a warning from the former fed chair, ben bernanke e, about what we could see in the u.s. economy. let's have a listen about stimulus. >> what you are getting is a stimulus at the very wrong moment, the economy is already at full implement. her getting hit by big stimulus. to hitent law it is when the economy in a big way this year and next year and then in 2020, wiley coyote is going to go off the cliff. that will be sicily withdrawn at the point. anna: those are the thoughts of ben bernanke e. .- ben bernanke are we seeing too much stimulus at this stage of the cycle in the u.s.?
mister: -- esther: the economy is running well and they seem to believe it might be better the guess if the economy is on a downturn. the fiscal debt is going to increase tremendously. there might be less opportunity. the stimulusseems might only increase inflation. the fed will have to reckon this. this would also be a positive for the u.s. dollar. nejra: given what you have said about trade driving the dollar and that more next week rather than the fed, how much more upside does the euro have in the short term? not very much. yes, it is benefiting right now little bit. the ecb will discuss in end to qe next week.
rather wait until a later meeting and then they would rather say they have started discussions. they have time to wait. they were very pessimistic about the data at the last meeting. not that much has changed. are draw a an end conclusion right now? though the end qe, the data, the economy is not running that well that we will see immediate rate hikes after an end to qe. this is needed to sustainably support the euro. the upside to the euro is limited until we see further signs that we are seeing a normalization of monetary policy above and beyond an entity. when we look ahead to the ecb meeting next week, the timetable
for qe is going to be important. the backdrop of italy and the political turmoil, how do you think draghi is going to navigate that difficult political subject? i know he doesn't want to get involved in the pod like -- involved in the politics. >> and that there will be a lot of questions, about the yields. hasave seen that draghi stained office target. -- has stayed off the stock it -- this topic. not comment about political turmoil's. rather the signal their starting to discuss now is a clear signal to the market that they are staying off this topic and this has not changed anything for them.
nejra: let's talk about brexit. how much do the political development matter for your view on power? esther: not at all. we are pessimistic about the process in the brexit negotiations. when the conservative party lost a majority, it seems really impossible to find a way to support it at the eu. on the other hand, it is all supported by the brexiteers putting pressure on the government. notproblem right now are the negotiations between great britain and the you but rather discussions within the british government. we are the vote on the brexit bill next week. talks between barnier and davis on monday. there is a lot of interest coming up. we now believe an easy solution is anywhere near.
nejra: good morning. i am nejra cehic. anna: i am anna edwards. this is "bloomberg daybreak: europe." trump lashes out at the glass macron and trudeau on the eve of the g7 meeting. can any think it's done before he just talked to meet kim jong un. ben bernanke he says the us economy could fall off a cliff in 2020. this as the world's most powerful such a banks meet next week. nejra: deutsche bank chairman has discussed a comment by merger with top shareholders. ♪
nejra: good morning, everyone. let's have a look at how the european market might open in just under an hour's time. we could see some weakness. some significant weakness on the dax futures pointing lower by 1%. futuresure -- cac 40 off by the same. after we have seen some resilience and global equity markets, trade tensions, we are seeing some risk off coming through in the markets. that is indicated by the futures but also in terms of what we are seeing in asian equity markets. anna: i will go through that. bt group is saying that gavin patterson, he is gone to sit down. a -- in the netting kingdom that was set by scandal and italy.
a number of other challenging headwinds in terms of the competitive environment. the relationship with the infrastructure provider that it has within its business although separate legal structure and all of that quite tense period for the company. there's been a lot of pressure on the chairman to think about replacing the ceo. -- six his success in place by the second half of this year. there has been some selling in the asian equity session. the confidence we saw at the start of this week, and defiance of the rhetoric around protectionism, the confidence have wayne -- has waned a little bit. we see the msci asia pacific down right now. it has been technology stocks and emerging markets. that is where in the united states we saw some of the tension. the treasury got a boost in the yields fell.
we see a little recovery in the little flatness and the yield. that is encouraging in terms of the risk appetite. i mentioned emerging markets and hoaxing on one of the stories. an example of one of the mays -- one of the many stores, the brazilian central bank having to act in its own way to stem the money going out of its currency. continues, reality -- the brazilian real continues right now. nejra: where seen quite a bit of movement in the bp bunds spread. , the 10 market open year treasury yields steady at 2.92%. if you look at what is happening here with the futures. looking like there is a little bit of a mixed picture. looks like we could see a widening out of that btp on spread. that's going to spread.
-- bunds spread. we could see german yields coming down and the italian yield rising. a little bit of widening. even though it has blown out significantly over the past few weeks. anna: let's talk a little bit about what's coming up in programming. we are going to talk about which it probably. what does he have to say? the g7 commentary. that is later. let's get the bloomberg first word news update. juliette: u.s. president donald the g7 summitve in quebec early to meet with kim jong un. the leaders are meeting today and tomorrow in what is shaping up to be the most divisive meeting of leaders of
industrialized nations in years. by trump'sfrustrated tariffs. meanwhile, president trump says he can envision signing a treaty with kim jong un this week to end the korean war. it also raised the possibility of inviting can to the white house. trump trades to give up the country's nuclear arsenal in exchange for lee from u.s. sanctions. >> i would love to say it can happen in one deal here to maybe it can. -- one deal. maybe it can. sections are externally powerful. growth couldnomic face a wily coyote moment as trump's powerful fiscal stimulus
fades after two years. that is according to ben bernanke. the 1.5 children dollars in corporate tax cuts and $300 billion increase in federal spending makes the fed's job more difficult all around because it is coming at a time of very low unemployment. argentina has secured a $50 billion standby arrangement from the imf to help restore investor confidence. that is the government takes aim at double-digit inflation and a widening deficit. the program would run for 36 months. it would depend on how much the government -- it comes amid an emerging markets selloff that has shaken developing economies including brazil, indonesia and mexico and is forced central banks to hike interest rates. global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. you can find more stories on the
bloomberg at top . very risk off for the final trading day in asia. you are seeing tech players drag. a lot of selling coming through in large cap chinese stocks. australia closing pretty flat and it is weakness it has -- it is weakness we have seen today. track for the best week in four months. let's have a look at some of the stocks are mentioned. the tech selloff. since it has rally 9% -- tencent has a rally 9%. singer lot in focus. it is a hong kong listed stock falling after little bit of profit taking. it is a stock that has done very well because the shangri-la hotel named ahead of the kim-trump summit.
44% which is the daily limit in shanghai. >> juliette saly in singapore, thank you so much. -- acrimony ahead of emmanuel macron has said no head of state is eternal and he sounds ready to work with the other g7 members if the u.s. wants to stand alone. trump struck back on twitter saying france and canada cost the u.s. -- the most contentious in years. the white house has already announced that trump will leave the event early to head to singapore for his meeting with north korean leader. we are joined by jodi schneider. first, president trump will be leaving the g7 early to attend the summit with kim. tensions at the g7 are going to
be on the rise already, and now we hear he is not staying until the end. what kind of signal does this send? jodi: he is going to be leaving early to go straight to singapore for that other summit, the one with the north korean leader. he will have only about 24 hours to try and diffuse what escalating tensions over trade, particularly on the tariffs issue. leaving early doesn't send the best signal. he will be leaving an assistant international deputy there. another big player from the u.s.. we have already heard from macron, very concerned about what is happening with the tariffs saying he may not sign that traditional concluding agreement at the end of such sessions if there is not significant progress made on trade and tariffs.
canadat of the summit in , so the host as the prime minister, justin trudeau. he has concerns and has become increasingly critical of the u.s. about tariffs. >> as you pointed out, trade and tariffs front and center. what other issues are likely to come up? jodi: another big issue is the u.s. kind of having this go at it alone attitude, not only on trade but on things like leaving the iran nuclear accord, leading the paris climate accord, so that is going to be a matter of some discussion and probably some criticism of the u.s. wants president trump leaves will be discussions of climate, clean energy and oceans. things where u.s. may be criticized for its stance.
also prime minister trudeau will be making a press conference at the end and he and president trump have had a war of words in the past week. we may be hearing more from him than. that will be a press conference to watch. anna: a lot of dynamics. jodi schneider joining us there. fitzpatrick.ard very good to see you. you watch the developments that toppled around trade and the tweets and commentary around these events. how investable is the g7? do you watch it for the overall music? >> ist mood think if all straight out of president trump's art of the deal. create a lot of chaos. this could go either way. this is all about president trump creating more chaos.
even the marker of leaving early. against that on the other side, president trump and the rest clearly don't want to have a full all-out trade war which would lead to big economic losses. it could be somewhere in the middle. i don't think you're going to get a real disastrous outcome. be very careful going into something like this. nejra: i wonder why if that is why dollar yen is that moved that much. given the dollar yen hasn't moved that much, our markets underestimating the event risks that are coming next week? because of the g7 but because of the central banks? mark: right now we get -- gerard: right now, it could go either way. it has been relatively stable, the dollar yen.
do favorsk side, we the yen. we think the yen is quite attractive compared to other dollars. anna: some of the risk off has been focused around technology stocks. the g7 has the potential to weigh on the emerging markets story if it sets the wrong tone. emerging markets are not really represented there. i have this all tilted chart. -- i have this volatility chart. g7 a little more solid. where d.c. opportunities in emerging circuits just where do you see opportunities in emerging markets? >> we are overweight emerging markets. the opportunity is more in the diverse side of emerging market portfolio. looking at individual governments like brazil, like with turkey, that is where you
can lose a lot there. i agree in terms of the g7. that would not be good for emerging markets. nejra: are you overweight emerging markets because of your dollar view? or is it about the emerging market stories themselves? gerard: it is both. in the economies off of product emerging market index, we see the strength there. anna: let's get your thoughts on the u.s. economy. we had these comments from ben -- heke talking about the have questioned the need of stimulus with unemployment as low as it is he points to 2020 when the stimulus goes away. there's a crutch for the was economy it would you go along with that?
gerard: i share concern that. as if they wish and seven really attractive. interest rates have a big issue to play. in concern is when interest rates rise and stimulus gets taken away, what will happen to wider asset classes. bernanke's comments are quite extreme. we did see it -- we see a little more moderate. we see more of a moderate selloff in terms of risk assets. nejra: gerard fitzpatrick stays with us. anna: let's recap the headlines. the ceo gavin patterson stepping down. the company seeking a successor by the second half of this year. we talked to him about getting a handle on what happened in italy. the statement from the chairman, he is relatively new at beauty.
t. at b the broader reaction he says to that result announcement the mistreated to gavin and to the chairman that there was a need for changing leadership to deliver the strategy. itis a new person to deliver . nejra: one stock to watch at the open. the equity market open also deutsche bank talking about a merger deal with commerzbank. will be live with the details. this is bloomberg. ♪
although no formal talks on the .ay the two lenders discussed at the deal two years ago but nothing came of it. german banks reporter joins us from frank first. what is the likelihood that something comes from these informal talks. if you compare to what happened two years ago. clear nothing is imminent. these are informal talks. people talking about the idea that at a trial balloon to see how much resistance and how much support is there. is pretty clear that some large shareholders don't want this to happen at this point because it would be quite -- and deutsche bank, the price to book value is really low. below .4. it is not going to happen anytime soon people have been talking about it. maybe it is picking up.
we won't see anything happening very soon. anna: the concept of germany being overbank is something we have been talking about. what are the pros of this kind of merger? i think the fact that germany is overbank is one of the things that speaks for the merger. the two banks combined what have a lot more scale in the retail market. each of them is the big bank but still they have less than 10% market share. just take about that. -- just think about that. they would increase their market share. proximity is another consideration. it will need to show they can pull them off in their own banks before they can think about a project as big as merging these two banks into one. nejra: steven arons in
frankfurt. mario draghi is ready to end the ecb's bond buying program. peter pratt signals that policy makers will hold her first discussions on ringing institutions crisis fighting mode with started in 2015 to close. anna: the program was put in place to reinvigorate the 19 nation economy and is scheduled to run until september. gerard's it -- gerard fitzpatrick is still with us. the ecb story one we need to do with. it ties into the banking sector. does more m&a in the banking sector work for you? gerard: withidea? regard to where violations are gone, we have seen in the rise. therefore there is more desire for improved shareholder return. if we can see that shoulder return come through, organic earnings -- it is natural to see
banks looking for m&a activity. they can look at cost savings. i think it is pretty natural dynamic at this stage. take it back to the ecb, should there be a repricing around bunds? gerard: it is a big question when you look at where the italian risk is. we are underweight bonds at the moment. the dynamic we are likely to go in terms of the tapering. we can see them selling off and we can also see the attendant risks phase test the italian risk fade over time. >> if i take you to the spread. we have shown this chart many times. that spread needs to become down? >> over 200 basis points is a pretty attractive level before drill spike in concern. people thought this is the end of the world or the end of the euro. that was more politically
driven. both political parties have toned down the rhetoric. they should be supportive of where the europe is. -- ismore supportive it what lead to a tightening and spread and we would favor doing that tightening. >> it is not the end of the euro of the end of the world. what do you make of the euro given what we have heard from the ecb this week question mark -- this week? gerard: i think it is attractive for a couple of reasons. on the violation side, that's on the valuation side, that's pretty attractive. the potential for rising interest rates in europe would be relative toward other economies. we see potential for that being positive. nejra: what about the dollar then?
>> we are negative on the dollar. the rally has been more technical than structural. that is a result of a number of investors. nejra: what about interest rate? gerard: a lot of it is already priced in. the risk is the fed will not hike as much as the market is hiking in. inflation is holding back. differentialrate and that technical picture, we think that would underweight the u.s. dollar. the group that ties back to what we were saying test nejra: that ties back to what we were saying. the trade conversation, how much does that play into the dollar? there is more protectionist rhetoric. gerard: some of it is mixed. negatives on where the
is compared to the u.s. if there is risk off and the dollar will rally. we will see in these negotiations as risks get escalated, positive for the dollar. over, when these trade risks start to receive, you will see more -- cu does e.m. pose a risk to risk sentiment at this point? gerard: yes it does. the fact we have had these compound from a number of countries together at the same time coupled with e.m. risks such as italy. over time we have seen -- we think some of these receive as well. fitzpatrick joining us here in london this friday morning. we will keep an eye on air france klm and bt. nejra: bloomberg markets the european open is up next.
good morning. welcome. you are watching "bloomberg markets." we are live from our european headquarters in london. i am guy alongside matt in frankfurt today. >> guy, i am here for goldman sachs, 22nd financial conference. cash trade is less than 30 minutes away. ♪ >> does six plus one equal dribble? as trueu