matt: welcome to bloomberg markets. we are live from our european headquarters. shares in asia were mixed this morning. china shares gained big. even with trade sanctions continuing to move forward. the cash trade is less than 30 minutes away. the ruble's poison pill. the russian currency sinks to its lowest after the u.s.

announces penalty sanctions. washington threatens further punishment if russia does not bow. italy's deputy prime minister tells bloomberg he will play hardball with the eu to push through his budget plan. italian bond yields spike. chinese shares are searching. equities bounce after benign inflation data shaking up the decision to match american tariffs on $16 billion worth of imports. we are 30 minutes away from equity training. futures a bit of a mixed trade. cash futures are down on the cac. dax futures up. both can be considered little change. ftse futures gaining 0.2%. check out the china csi 500. up 2.7%.

onshore, hong kong stocks gaining. shaking off any concerns they may have had about the tariffs. you saw the new zealand dollar taking a hit. new zealand bonds right now sinking 10 basis points as investors by those up. you can see alumina making a big move as well. these black boxes mean we are seeing a really extreme move. more than three standard deviations away from the 90 days. big moves in the new zealand currency and aluminum prices. let's get the bloomberg first word news. saudi arabia has said it will continue to ratchet up pressure on canada for criticizing the recent arrests of women activists. that is as justin trudeau upheld his stance on human rights. the kingdom's foreign minister says the next wave of retaliatory steps could affect investment flows between the countries.

>> saudi arabia has the backing of being dcc and the backing of the arab league and the organization of corporations. saudi arabia is part of an arab league and a large islamic organization and canada must understand its actions are unacceptable, not just for saudi arabia, but to arab nations and the entire islamic world. juliette: italy is ready to repeat the tough tactics used to win concessions from the european union on migration when the budget battle get serious. this uppity prime minister told bloomberg the country's antiestablishment coalition wants enough flexibility to introduce a flat tax next year. he suggested if the eu changed the way the deficit was calculated, his government's plan could be implemented without reaching the limit. is uk's prime minister stepping up preparations in case brexit negotiations break down.

bloomberg understands theresa may is planning a top-level meeting of her cabinet early next month to discuss readiness for a no deal brexit. a working group of government officials is being convened to does it -- devise ways to keep the irish border free of customs check if -- checks if there is no agreement. global news, 24 hours a day on air and @tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. matt: thanks very much. the ruble plunged as the u.s. announced a new sanctions over the nerve agent attack in the u.k. the currency came to its lowest since 2016. the penalties will limit american exports of sensitive goods and technology. bloomberg's and reporting -- annmarie hordern joins us on set.

the ruble could face further downsize. >> there are a few sanction lists going around. a local russian newspaper actually published what would be the sanctions. this is due to election meddling. they are saying these are crushing. these would sanction sovereign debt, banks, transactions -- matt: those are not the sections we are talking about. >> those are not. that is where the ruble was breaking out of this range it has been trading in since april. when the fresh sanctions came, you can see at the tail end, when the new sanctions were announced, you can see the ruble was hitting those lows since november 2016. these new ones are due to the chemical weapon used on u.k. soil march 4 on the double agent and his daughter. this is under the u.s. 1991 law

that sanctions countries using chemical weapons. this was only used with north korea, syria, and now russia. matt: these sanctions could get worse. >> exactly. matt: russia had a response time where they are allowed to make amends. >> they have to commit to not using them again. they have to allow inspections on site. an emerging markets strategist says that is not likely to happen. if that does not happen you have a second round of sanctions which will be a little more hard. this will target exports like oil and all goods and technology they deem -- the u.s. deems is a case of national security. matt: thanks very much. asian stocks were mixed. chinese equities jumped despite the ongoing tit-for-tat tariffs

between beijing and the trump administration. china confirmed it is going to match u.s. tariffs on $16 billion worth of imports. another ratchet higher for the incremental trade war. it did not hold back these gains. the csi 300 up 2.6%. onshore, we saw the hang seng rising more than 1%. joining us from singapore's mark cudmore. -- is -- from singapore is mark cudmore. new trade war news is not really new. as a result, chinese stocks shrugged it off. >> absolutely. it is an impressive performance today. the market has come around to the view that trump is willing up trade framework to get gains for u.s. companies long-term. he is willing to take a long -- a hard-line. it has become clear china has

done a hard-line response. the third thing the markets come to realize is it is much slower to implement tariffs than to remove them. it takes a while to research what levels are most appropriate, which areas of the economy are most effective. but they can be unwound the very next day. that incentivizes both sides to take a very hard line stance. as the market has come around we are now very aware we are probably going to keep getting rounds of tariffs. it might cause more of a reaction than we saw. the market is worried about where we are going to be six months from now. this is something that is going to ebb and flow all year for a long. of time -- along period of time. it is what the and game is going to be, not the short-term headlines. that is why chinese markets have brushed this off. tuesday -- up day

tuesday. it is way too early we have -- to say we have seen just yet. matt: let's bring the conversation back to europe. de maiod today even as is going to play hardball with the european union, that pushes up yields on italian debt. there is still only a 2.91%. investors demand more interest to load the united states of america money. does that make sense? i know the spread over bunds is big. they are still yielding yet less than u.s. tenure data. there is very little concern and italy is not under pressure at the moment. they are not at a dangerous level for italy. this is not looking like unsustainable levels. overall, investors believe the

ecb will continue to back. the political world is a strong and they will continue to concede to demands. he said, if you change the rules, we will not break them, which seems tenuous. at some point if he continues to push the fiscal limits, the market might start realizing he is putting them on an unsustainable path. so far it is not too stressful. seven year yields, when they trade above 3.1%, if at that point we don't see concessions and backing down, then we are having a problem. matt: thanks very much. mark cudmore is a bloomberg mliv strategist. you can follow his insights as well as the rest of the team on the bloomberg. up, the ceo of the zurich insurance group joins us for an exclusive interview. the company wrote ported -- reported a boost in profits.

this is bloomberg. ♪

matt: zurich insurance is on track to meet its targets after reporting a first-half profit that beat estimates. net income jumped 19% to $1.8 billion. joining us now for an exclusive interview is the company's ceo.

thanks very much for joining us. forput the company on track a three-year restructuring plan. you seem to be ahead of your targets incrementally where you should be. are you thinking about raising your expectations? raising investors expectations? >> first of all, good morning to you and to everybody. we are pleased with results. we going to change target from the beginning. at the end of 16 we said -- we set the target to the end of 19 and we will hold this target. hopefully we are going to be the target. -- beat the target. but the target will stay there up to the end of 19. we feel good about that. we are on track to beat or reach the target. we need to continue working for

the next year and a half that we have in order to fully deliver. matt: it helps to have a decrease in natural disaster claims. that is obviously not something you can count on going forward. i wonder if you see the trend increasing for natural disaster claims, although you escape that fate this quarter? >> in the first half of this year, natural disasters have been slightly higher than last year. slightly. yearyear was not a light in the first half. the second half of last year was especially happy because we had the storm's in the u.s.. we are not counting at all on any natural disasters. they come as they come. again, we were slightly above

the year before. matt: we are talking about the first half of the year. it is a quarterly profit report we are citing. you were able to raise premiums in the property unit. do you expect to be able to continue to do that? and at what pace? >> you are right. we had a successful first half of the year on premium growth. of course we have lots of initiatives active on customers development and retention is going quite strongly and positive. this is going to continue in the second half of the year. profitability the of the casualty business. the profitability for us comes on top of it. softening,he market

we will take the consequent actions. we prefer flexibility. just as growth is in life, it is also farmers. that is a very interesting market for us. we just want to develop our size quarter after quarter. which part of the business are you most passionate about? you come into this with a lot of energy. you are making a lot of moves. what are you most excited about? >> i am very very excited about the success we are achieving on customers and metrics and satisfaction. these are very remarkable success for us. we are tracking now customer

satisfaction through all of our markets and it is moving up steadily. quarter by quarter. we see the benefits of this in higher retention with our customers. tos is an exciting job become a customer focused organization. we do regular calls, we are engaged in responding to customer needs. it is changing the culture of the organization in ways which were unthinkable years ago. i find it exciting and i find it important to shape the organization for future success. a goalhat said, you have to cut $1.5 billion of costs out of the business by next year. you reported you have already cut 900 million by the end of the first half. do you expect to achieve that target early?

do you expect to overshoot that? we are very confident to achieve all the targets we set in 16. the cost target is one of the being one continue track of it. this is what we planned. we have continued through the year. we planned by the end of the year to be above $1 billion. to reach $1.1 billion by year-end. we will have $400 million next year. this is a very ambitious target. this is a nominal reduction. it is a visible one. everyone can check that as a nominal number in are counts. the fact we are on track after a year and a half is impressive. one thing you have done to reshape the business is make a flurry of act is -- acquisitions, rebalance

clients. and retail do you expect to continue on an m&a path? how much cash to you have set aside for that? >> we did some quite interesting m&a. our philosophy is that either we go for strategical acquisitions like the one we did on travel and services where he wanted to build a global platform. now after three progressive acquisitions in a year and a half, we do have it. we can see an extremely powerful platform to develop in the next year's. or we go for countries. development in acquisitions. the progressive acquisitions in the last few years and now we are a leader in the us trillion markets, a

markedly -- the australian market. we followed the same path in south america where we had acquisitions one after another. we are strong in brazil and mexico. we have continued with the same philosophy. we have continued working on countries strength and we have it continued trying to achieve market leadership. believers in cross-border acquisitions. we do not think they work well in insurance. at the country level, yes, they are very effective. matt: the results are positive. you are optimistic about your turnaround. i just wonder, what are the biggest risks? what are your biggest concerns in the insurance business for

zurich? risk.urance is all about we tried to put risks under control. struggle we have is to manage the risks in a way which will generate expected results on organization. so far we have been able to do it. it's a daily struggle. we wanted to make the organization predictable and not randomly behaving. that in the last two years we have achieved that. we are concerned as everybody else's for the geopolitical risks. we see a lot of them around the world. the other big risk we see for our industry is the time, how fast is the customer's transformation happening and how

quick we are in delivering to the customers what they want. this is where really we are putting all our efforts, to be as fast as possible in anticipating customer needs. matt: thank you very much for your time. appreciate you joining us. thee are a congruence -- zurich insurance group ceo. there is a lot of movement around fx. we see the turkish lira getting crushed again. the kiwi sliding to a two-year you -- low as the reserve bank turns dovish. as far as the dollar yen dollar euro pairs, we do not see movement. the ruble moving up to 66 and change after the u.s. puts more sanctions on russia. our next big interview of the morning, merck's second-quarter

profits slumped as its business making liquid crystals remains in the doldrums. is ang us now on the phone german company's cfo. just talk us through what happened here. it looks like the market has reason to be worried. >> good morning. west of all, let me say that said at the beginning of the be a transition year and investment year where we are investing in future growth opportunities, which is what we are going to do. if we look on the reasons for the profit decline you have mentioned, it is to say first and foremost the reason for the decline is actually related to currency. decline, some7

11% attributable to negative currency effects. only 2.7% is organic. the organic decline is due to higher investments in our health care division to drive our projects and to prepare for an eventual launch in the u.s. it is a little bit less positive compared to last year. last year we received a milestone payment for our new drug. last but not least, also the decline in liquid crystals. that also had an impact on the quarterly profit numbers. sharewhat is the market picture looking like in liquid crystals? how is it shaping up and how can you make sure to protect or we see innst a drop

the past? >> the market share development actually follows our expectations we have outlined recently. a market call at the beginning of july, we said we expect business to decline over the next couple years continuously, but in a very controlled way. after 2019, weds shall be back also to let's say 2% to 3% growth in the future and a marginal level of around 30%. we are defending our market shares with our quality leadership claim with good technologies, which -- with service and supply reliability. with the competitive advantages we still have when it comes to

producing liquid crystal displays. m&as it possible you do any in this vein? or do you have any plans to do m&a going forward? >> that is absolutely correct. for the deleveraging still remains to be a top priority on our agenda. i cannot completely rule out small acquisitions over the next one and a half years. we will definitely refrain from any move which would be 500 million or more until 2019. that is not on the radar screen at the moment. also the net cash receipts from the upcoming sale of our consumer health business are supposed to be used for deleveraging only. matt: let's switch gears and talk about the life sciences unit. it is one of the bright spots

there. what are the drivers you see and the developments you expect of life sciences going forward? nice have seen a very quarter when it comes to topline growth. growth is actually driven by all of the three fp is. solutions, we see strong growth in the volume of experiments. we see continuing growth in academic funding. also ongoing investments in industry r&d. in process solutions we are benefiting from strong pipelines , and from ag demand continued shift to single use products. growing.een nicely growth is coming from

overarching megatrends. population growth, rise in quality standards, and increasing testing needs that go along with stricter regulations. we are very satisfied with the topline. the bottom line, we have encountered in the second quarter which draw for the life science slightly below consensus, but we are expecting to catch up. ebitae kept our organic guidance for 2018. matt: thanks very much for joining us. appreciate these explanations. merck. of german mark -- less than 25 seconds until equity trading opens here in the u.k. and across the european continent.

let's look at futures. they have now turned down with the exception of u.k. futures. ftse futures still everywhere else in europe with the exception of stockholm, we see futures down. the market just opening up, the equity market just opening up here in the u k and across europe. let's take a look, first off that what we are seeing in stocks. i will pull up my monitor. actually, i have a copy of guy johnson's monitor here on the desk. the ftse opening first and then the dax and smi trail. the ftse down 0.3% this morning in the first traits of the gate. the ibex is opening up down as well, slightly less. the ftse performance there, even trailing that of the cac although ftse futures were up. we can see it will be a negative

trait across europe, and if you take a look even more closely into the market at the industry groups, you will see a sea of red. here's the bloomberg europe 500 index, and we have the imap there showing big losses in financials, as well as industrials, consumer discretionary, and consumer staples. materials and energy stocks down as well. health care is one of the few bright spots in this market, and even it is not that bright, as you see, the h.c. section. individual stocks on my screen, 347ing at the stoxx 600, movers to the downside, 172 gainers this morning. as far as the losers, royal dutch shell and bp really leading the market down after that 3% drop we are yesterday in crude. you also see down moves, bigger

sized moves in bt group and hexagon. a look at the winners this morning. orsted, a 5% gain of this morning, otherwise not many size moves. 6%, sin world -- cineworld up possibly thanks to that new "mission impossible" film. i will see it. chinese equities outperforming, despite the ongoing trade war. the global head of solutions at soc gen joins us on set. thank you for your time. we have seen a pretty negative picture in europe. it has to be hard to blame it on the trade war, since chinese stocks did so well overnight? >> i think the magnitude of the move is small, so i would not

read too much on the performance today, because as you said, we are down a couple tenths of a percent. the market today, we are in the summertime, you have a bit of a seasonal effect where dynamics are pretty much range bound, so ,he main focus remains brexit the trade war and the italian negotiations. and from key events, my perspective the most important ones are the rating agency decisions. you have moody's on september 7, and standard & poor's on october 26th. key dates to watch out for. not: brexit obviously is --gressing at all, although the trade war is just progressing, it is so well-telegraphed, at such a slow clip. what about the italy situation? that has to be one of the most interesting current events going on right now, because we

actually see italian spreads blowing out, and expect real progress in this news. kokou: absolutely. you also have the implied volatility of btp, rising close to highs for the year. an interesting situation, path of leaste. resistance would be for the government to come to an agreement. on the other end, you can also see, they clearly want the best deal possible to sort of have some sort of fiscal easing and sort of reduce the pressure from the e.u., so i think volatility will behind going forward. no one wants the $2 trillion debt market running, essentially creating more mayhem with respect to the e.u. matt: looking at the w.e.i. screen right now, i will pull it up on the bloomberg. you can see year-to-date

performance. the ftse mib in italy is only down 0.6%, not bad. the dax down 3% year to date, cac up 3.2% year to date. what is going on in the french and german equity indexes causing such divergence there? kokou: i think some people have argued that there's a bit of a world cup effect, and in general that creates positive momentum when it comes to gdp, but i think there's clearly less of an export risk when it comes to french equities, compared to german equities. you think about the german cars affected by the trade war, and therefore a lot of the auto sectors have been underperforming. dax, pretty much a domestic versus exporter sector of averages. matt: luxury goods have done very well in paris. there is a serious world cup effect. i spoke with the cfo of

commerzbank in frankfurt a couple days ago, and he said it was truly detrimental to them from a marketing perspective, because they expect to do big a marketing -- a big marketing push for five weeks. since germany had such a dismal, embarrassing performance, they were not able to get the kind of exposure to the market they wanted. kokou: there's been a lot of studies that show there's sort of an increased marginal propensity for consumers to spend. you feel good, and that helps sales, and also consumer confidence. i think we need to wait for a couple quarters to see that reflected in the data. matt: i want to quickly mention the russia story, russia now saying according to ifx it may use counter sanctions laws to respond to u.s. sanctions. this is only getting started right now, because the u.s. sanctions are kind of the opening volley in this chemicals, nerve gas attack.

they now give russia the chance to sort of admit it, apologize, then make the situation better, which of course no one expects russia to do. that means more sanctions will come into effect. could this escalate? could this spook investors? kokou: interesting dynamic. the same dynamic with china as well. the u.s. and trump ultimately trading bully their partners and see if they will give in. investors are sort of used to that dynamic, but you are right. if you look at the ruble, the price action, clearly the risk premium is increasing. if you were to get a full-blown trade war, the u.s. would be the last man standing, so to speak, and clearly no one wants to have this escalation. there will be a tipping point. the question is, how long can russia continue to hold its ground? markets will ultimately decide, and that will also be a function currency,ances, the

but also the pressure domestically. today as it stands, it doesn't seem like putin is getting challenged domestically. these are indicators to watch. matt: looking at the ruble here, it is a rough move as the line goes up, that means the dollar can buy more rubles. as the line rises, that is ruble weakness. you can see how bad the situation is. if i bring it out to year to date, you can see it was already getting pretty bad in 2018, as we were told on set moments ago. the russian story continues to move forward. as a reminder, we are getting headlines now that russia may use counter sanctions, a counter sanctions law to respond to u.s. sanctions, according to ifx. obviously the russian market not nearly as big or important as the chinese market to the u.s. or the global economy, but still an interesting story that develops. kokou will stick with us this morning. a lot more to talk about with

gen. agobo-bloua of soc quickly looking at the world map, wm go on bloomberg. that big red blotch is obviously russia, down 0.6%. not seeing huge drops across europe, only a few tenths of a percent with the ftse, down about 0.5%, the biggest loser. we will come back and talk about more of the themes moving these markets with factors to watch. this is bloomberg.

matt: welcome back to "bloomberg markets." this is the european open, about 12 minutes in. guy johnson is off this week. we will continue looking into one of his favorite functions, ftw go on the bloomberg, to dig into what is driving performance today and this year. the factors behind the moves in the markets, with our reporter dani burger. dani: it should be your favorite function, because it is mine as well. a down day in the markets. what is leading stocks lower? the big loser, down 0.5%. these are the most popular stocks, health care, tech. we had eps revisions, eps growth. this is what companies are

saying in earnings expectations, the market not rewarding that. actual sales growth up nearly 0.5%. a little risk on move. stocks with a lot of volatility doing well. dispersion, value also an interesting trade doing well today. i want to dig into another theme . i brought this chart with me that i think is pretty interesting. this is about activist stocks, stocks targeted by activist investors losing their luster. thyssenkrupp, we had earnings today, but it turns out in six of the last seven months we seen stocks targeted by activists underperformed the broader benchmark, declining about 4.5% more than the gauge so far this month, one of the worst performances in over a year. investors essentially saying, we don't care about your financial engineering, balance sheets are more important now, matyt. matt: thanks very much.

dani burger talking about the factors to watch. kokou agbo-bloua, global head of solutions at socgen, is still with us. one of the takeaways dani has. you would expect activist stocks to do well. someone takes a stake, fixes the business or demands it be fixed to drive valuation of. that hasn't been doing well lately. kokou: you are right. this would be the logic. i think there's a risk that activist investors tend to put pressure too much on the force term -- short-term, forcing companies to make short-term decisions at the expense of long-term strategic plans. this could be one reason why you tesla, for example, exploring ways to take his company private via lbo. the pressure of investors on short-term reverence could be dan -- returns could be damaging to investments required for the

long-term prospect of the company. matt: what do you think about that? i will pull up tesla stock, just a look at it. what an insane story this has been. now the sec is investigating his claims he has it funded in case he wants to do an lbo. it really helps to get this bump in the stock, because he has a bunch of convertible bondholders he would much rather have taking paper rather than cash, in march almost $1 billion is due. a look at the stock over the last month -- three months. what do you think about this story? kokou: it is difficult to have a clear view, but clearly it is a bit unusual to make that announcement. matt: on twitter. kokou: on twitter. it goes back to the theme about activism and management. it is a situation where the stock is supposed to reflect the health and risk of the company, but these are not situations where the stock can actually have an impact on the

fundamentals of the company, so this is where you have this mainstream versus wall street reversed, reflexivity as soros used to call it, where the stock can influence the path of a company because it influences its financing. matt: if you were going to buy an asset, would you announced to the world you would do it at a future date and name the price level at which you wanted it? kokou: i have to admit, this is a bit unusual. i don't know what elon musk has in mind. matt: dani showed us a one-day look at factors to watch in performance. i pulled up a year to date look, and we see eps revisions, companies want to see profitability. price target changes. companies want to see this kind of growth. over the last year, my dear. on the bottom -- over the last year, mind you. on the bottom, we see dividend yields. investors, it doesn't matter

your dividend now if the shares tank. what do you think about this form of investing, in factors? it has picked up a lot of popularity. kokou: absolutely. this is something that's very interesting. if you look at traditional asset classes, one could argue over the last 10 years they have been distorted by central banks. there has been q.e. of government bonds, credit. totors seem immune distortions, so a lot of investors are looking at factors as a pure way of analyzing risk. they are supposed to be orthogonal, and do not create a correlation between these factors. that being said, one thing we have seen, there's a lot of factor rotation, and these can be triggered by rates, rate volatility on the yield curve. factors are one way of looking at risk, but they are not immune to the macro environments and i also think this is a good

complement to the way risk has been managed from portfolio management perspective. matt: interesting segment of the market. i know you guys are doing a lot of work in it. we will keep kokou here. kokou agbo-bloua, global head of flow strategy and solutions at socgen. up next, stocks on the move so far, including pandora. shares rise in the jewelry-maker as the ceo touchdown. the stock is up 8%, but it lost a quarter of its value a couple days ago. not just stocks on the move. currencies are some of the biggest movers this morning. we have been talking about this. the lira, although there is a green arrow, that means it is getting crushed, as does the green arrow on the ruble. 5.4 liraw you can get fou for a dollar, 66 rubles for a

dollar, and the kiwi sliding as the reserve bank of new zealand becomes dovish. we will continue to talk about that. this is bloomberg. ♪

matt: welcome back to "bloomberg markets." this is the european open. i am matt miller in london. top stock stories, 20 minutes into the session -- >> pandora stock jumping on news the ceo is stepping down, after

pandora cut its profit forecast earlier this week and lost almost a quarter of its value. because of that, the stock earlier was jumping as much as 10.5%, the most since may 2016. shares at the moment below when the ceo joined. the search is underway for a new chief executive officer. a gift thatp is keeps on giving. adidas sold a record number of jerseys, even though the national team it sponsored lost out to those sponsored by nike. second quarter profit beat. adidas moving higher. on the downside, a hot summer, airline disruptions, weighing on profit. matt? matt: thanks very much for that.

by the way, kokou, do you know why adidas is called adidas? kokou: i think i'm about to know. [laughter] matt: the world cup is where adidas started. inventeddolf dassler the removable cleat for the german team so they could play in different grass, different feel positions. they won the world cup. there's a great movie about it. adi-das, named after adolf dassler, became very famous. his brother rudolf started puma. i like these little pieces of sneaker trivia. it's a sport shoe day. let's talk about currencies. the biggest movers of the morning. the lira just hit a record low. the new zealand dollar weakens

after the dovish tilt from the central reserve bank of new zealand. we have of course been talking about the ruble, still dropping after the u.s. imposed sanctions following a nerve agent attack in the u.k.. kokou agbo-bloua is the global head of flow strategy and solution at socgen. fx trading has been fascinating this morning. what do you think about the moves we have seen in the turkish lira? an ongoing story, a slump they must want to turn around, but for some reason the central bank isn't acting. kokou: the central bank is obviously trying to act. the question is whether it has the credibility. it is a situation where it is a negative cash flow country with a weak balance sheet problem, a lot of foreign-currency debt. about $100 billion within the year. if you look at local government bonds on the 10-year point, around 20%, and inflation at

double digits. clearly a situation of stabilizing the currency first, because the government clearly will have to borrow more to repay debt that is maturing. so i think it is a question of trying to bring stability and confidence to markets, and that will be a question of the government, and their ability to be more, how erdogan runs the country, which becomes a big question mark. matt: the interesting thing, i think, about the kiwi story and the rbnz, central banks around the world seem to be wanting to normalize. clearly the u.s. is already there and moving on, but mario draghi has promised that they will not raise rates until the end of summer 2019, but people take that as a promise they will raise rates at the end of summer 2019. that, think they can meet the ecb can meet that target, or

might they have to push it back as well if they don't meet inflation targets? kokou: this is important, because it also ties into the yield curve. the clear view is that this is a business cycle, which is ending in late 2019, early 2020. as a result, global growth and where the u.s. is, it does not leave a lot of room for central banks to normalize policy. on the flipside, the central banks need to normalize policy as fast as possible so they had ammunition to cut rates when the cycle ends. that's why you have a bit of a conundrum between a flat yield curve that is essentially showing that the fed obviously owns a lot of treasury and they need to sell at some point, but then the marketers will say, within two years, the end of the business cycle, the short-term rates are too high. this is clearly a good question. my personal view is that it will be data-dependent. matt: the drg wanted to raise rates.

rate raise aone year. kokou will stay with us, from socgen. more to talk about, including a late. thi -- italy. this is bloomberg. ♪

matt: 30 minutes into the trading day, your top headlines off the terminal. italy's deputy prime minister says he will play hardball to push through his budget plans. italian bond yields spiked. the ruble sinks to its lowest level since november 2016 after the u.s. announces sanctions, and the lira hits a record low. the new zealand dollar also declines. china's stocks are surging as european shares fall. stocks bounced in the world's second-largest economy, shaking off beijing's decision to match american tariffs on $16 billion of imports. europe heading down, but not a huge drop.

welcome to "bloomberg markets: the european open." matt miller at bloomberg european headquarters in london. guy johnson is off this week. let's see how things are shaping up as far as individual stocks. we talked about adidas getting a world cup bump, the stock of almost 9%. pandora getting a boost as the ceo says he will step down after missing sales and profitability targets. the stock not fully recovered from the 24% drop we saw yesterday. take a look at some of the losers this morning. tui one of the big losers, talking about that stock down almost 8%. the heatwave made their business a lot more difficult, plus airline disruptions made it hard for them to operate. somne earnings -- some burning stocks. merck, we talked to the cfo. let's get the bloomberg first

word news. sebastian: italy is ready to repeat the tough tactics it used to win concessions from the european union on migration. the deputy prime minister said the country's antiestablishment coalition wants enough flex ability to introduce a flat tax and citizen income next year. he suggested that if the eu changed how the deficit was calculated, his government plans could be reached without breaching the limit. saudi arabia continues to ratchet up pressure on canada for criticizing the recent arrest of women activists, as justin trudeau upheld his stance on human rights. the kingdom says the next retaliatory steps could affect investment flows between the country. >> canada will always stand up for our workers and companies. we need to make sure we are projecting canadian interests in any situation. we continue to engage with the government of saudi arabia, the minister of foreign affairs had

a long conversation with their foreign minister yesterday. diplomatic talks continue. sebastian: the u.k.'s prime minister is stepping up preparations in case brexit negotiations break down and the country crashes out of the european union without a deal. theresa may is planning a top-level meeting of her cabinet early next month to discuss readiness for a no deal brags that. a working group of -- no deal brexit. a working group is being devised to try to keep the irish border free of custom checks, even if there is no agreement. powered by more than 2700 journalists and analysts in 120 countries. this is bloomberg. matt: thanks for a much for that. more on our top story, italy's budget battle. joining us from rome is greg viscusi. let's talk about de maio. looks like he setting up for a fight with the e.u. he says he-- greg:

wants to do the same battle with over.u. his premier did migration in june. salvini played hardball going into the european union meetings, saying they would walk unless italy got what they wanted on migration, when italy was feeling they were left alone from the rest of europe. they won a limited agreement from other european countries to help a bit with the migrants arriving in europe. moreio says he wants flexibility in how the budget is calculated. not a totally new idea. lots of talk, the french president macron also mentioned, that either investment spending should not be included toward the metric, the definition of what counts as a deficit, or some deficit spending should move to an e.u. budget.

it's unlikely de maio will get all he's saying. it is actually unclear what he's pushing for, he was not particularly detailed. but it is not an idea coming out of left field. matt: it makes sense, greg, that the italians were left holding the ball when it comes to immigrants coming to europe, and they are not exactly the most prepared country, not the wealthiest, clearly. but now what he wants to do, it seems, is cut everyone's taxes and pass out free money, which is always something that makes the government popular. is that something the e.u. is going to be into? greg: probably not. let's be clear about one thing. italy is very far from the 3%. it is well below the 3% limit of what the metric says the deficit should be at. it will be 1.6% this year, way lower than france or spain, for instance. but because of italy's high debt, they reached the targets

with the european commission, and italy has to make more of an effort to bring down the deficit. surplus,s a primary something the french and spanish can only dream about. there will be a discussion that italy is throwing money away. they are not. but with the campaign promises comingaio and salvini, from two different parties but merging their promises when they formed a coalition government, it would blow a hole in the budget, no question. that's what the talks are about. there is talk within italy about where they can save money else. we are in this for the long haul. theare putting -- serious talks on the 2019 budget will not begin until september, not taking effect until january. matt: good to get your clarification to balance out my cynicism a little bit. greg viscusi, joining us from rome on this big story. kokou agbo-bloua, global head of

flow strategy and solutions at socgen, is still with us. the interesting thing, i think, a chart of the spread between italian 10-years and twos and bunds in the same maturity. tode from, i know bunds have be the benchmark for italian debt, and i get why, but i'm fascinated that investors are willing to charge only 2.9% interest to italy for borrowing andears worth of money, they charge more interest to the u.s. does that seem interesting to you, that the u.s. is somehow a bigger risk over 10 years than italy? kokou: one thing you need to be careful to look at, the components of bond yields. rates plus inflation, credit spread. europe setates in by the ecb are still negative, the spread is not going to be as so when you combine both,

you get sort of a negative rate plus basis points, getting a number that's clearly lower than 10-year treasuries. what is more interesting is the concept of distribution of outcomes. he is playing hardball, but also with his banking system. on tail risk could be a run his banking system, making life for the government more difficult, so they are trying to play hardball, but don't have as much ability to go all the way, will benk, the endgame some sort of compromise between both parties. matt: it will be interesting to follow. we will continue to following that -- follow that. kokou agbo-bloua, our guest for the hour here on the european market open, from socgen. you can catch more from kokou, heading to radio now to

join the europe daybreak team. you can type radio on bloomberg, in americaon dab, on on sirius xm. the sec is reportedly investigating elon musk's tweet about a possible buyout of tesla. regulators want to know if the message he had funding already set up for this was factual. an sec spokeswoman declined to comment, as did tesla. meanwhile, bloomberg's been told that elon musk talked to masayoshi son last year about softbank investing in tesla and taking the company private, so maybe that is one source of funding. a source we spoke with said that negotiations stumbled when musk proposed taking just a portion control, so maybe that is not the source of funding. joining us is on its web, bloomberg opinion -- alex webb, bloomberg opinion columnist. it would look to the cynic like elon musk was just trying to

bump up the share price by making these tweets, but that seems like it could get him in trouble with the sec. alex: if that is the case, that seems to be the bone of contention. there have been questions about whether it was even permissible to make this sort of comment on social media without filing a form you need to submit in order to alert the markets of material information. because it seems as though you might not need an 8k because there was no substance to this, but if there was no substance to it he should not be tweeting it, so a strange dichotomy. matt: there was a bloomberg story yesterday that tesla has a lot of convertible bond holders who are going to want to be paid back in cash, unless the shares eclipse $360 apiece, which they have handily done since he tweeted, then they can begin shares instead. tesla, which doesn't have a lot

of spare cash lying around because of its production plans, would prefer to pay them out in shares. that's kind of an interesting twist on what could be happening. alex: ultimately, the other conundrum in all of this is that as much as there are short-sellers, the problem is not short-sellers. the problem is to has led has a huge debt pile, and there are questions about whether it is able to service that debt. matt: they are certainly not happy about short-sellers. they keep the shares down as well. alex: servicing that debt is the thing that makes it difficult. that would go some way towards solving it, but there remains other debt not based on convertibles. if it is true they are not going to be able to solve cash problems this year and have to go back to the market to get more money in debt or equity, y t's a snowballing role of cash flow at tesla. i don't think necessarily taking

a private resolves those any more readily. matt: great to have you with us. bloomberg opinion columnist alex webb. check out his work by typing opin on the bloomberg. quickly, the ddis function, one of the first functions i learned when i joined bloomberg about 20 years ago. i have this up now for tesla. you can see debt distribution, and when certain types of debt are coming due. a great function. the stock of the hour, from u.s. equities back to europe. adidas, i think, has to be the stock of the hour, the biggest 600.r on the stoxx we saw a move up of 8.1%. we have seen it moving higher intraday. the graphic dashboard, the function on the bloomberg terminal right now, where we can see that it is a huge move,

8.1%, atypical. the volume is way off the charts here. hte news metrics -- the news metrics are off the charts as well. you can get a lot of information from the screen, including the amount of buys, holds and sells on the stock. a price target of 214, 12 months out. it is not that far off right now, 205.16. up next, we bring you some other stock movers this morning, including g4s, taking a hit after reporting first half results that disappointed the market. this is bloomberg. ♪

matt: welcome back to "bloomberg markets." 46 minutes into the trading day, let's get your mid-cap movers. >> looks like first half numbers ,re giving a lift to cineworld saying it is confident the full year will be in line with expectations. earlier we saw the stock rises much as 7.2%, the most since august 2015 and the highest since 2017. down day for g4s, down almost 6% after first-half results came in light. a messy set of numbers, the

stock dropping the most since november 2017. randgold resources moving lower after a second-quarter profit number of $58.4 million, some analysts seeing that as a little underwhelming. matt: thanks very much for that. 21st century fox is laying out plans for a new fox aws its 71 billion deal with disney news completion. locklin murdoch says it will sports, most engaging including the nfl and independent programming. all this came after earnings and sales topped analyst estimates. we are also waiting to hear if fox will raise its bid for european satellite operator sky. joining us is alex enders. i don't know if you are a real american football fan? alex: not really. matt: soccer? lex: football.

world cup. matt: the results were very good. fox news did quite well. alex: the real standout takeaway here is how well the cable network programming division did. 60% of fox revenue. more importantly, the center of profitability. as you mentioned, fox news, also the fox business channel, fox sports of course. the big picture, the businessse -- these business channels are highly profitable. if you have a sports channel you have to buy in content, so perhaps less profitable. the real picture is around the new fox asset that will remain with fox and not be transferred to disney. matt: so why is bob iger so excited about the integration of as, in his future plans, disney results really disappointed? alice: filmed entertainment is what fox is really bringing to

sky,ix, and also 39% of which as we know is the number one pay-tv company in europe. so, that filmed entertainment piece is very valuable to disney, because it really wants to launch a direct home offering in 2019. that's what 2019 is all about, a hulu sort of based product. a netflix competitor they are looking at. in the filmed entertainment division at the box office has always been a bit sub-scale. disney is a juggernaut, but fox relies more on hits like "deadpool." more of a pattern here. it is important for disney to pack in films and determine. disney also plans, they have three buckets, filmed entertainment, merchandise, parks. those two, merchandise and parks, are linked into the

filmed entertainment, a unique explication model you can do when you are a family entertainment company like disney. obviously fox is not a children's company, but it will pack in a great offering to consumers all across the piece for disney, all across the explication. matt: we see walt and mickey. we could see them holding hands with young bart simpson as well. it makes sense, the way you explain it, makes really good sense for disney to buy fox. what about comcast? brian roberts wants assets. does that fit make sense to you? alice: comcast has dropped out of the fox bid, as you know. that game is over. now comcast is really focusing on the acquisition of sky, and sky is a very important asset for comcast to acquire, because

you need to reflect on the fact that comcast's pay-tv business is u.s.-focused. we know that there is cord cutting, all these pressures in the cable environment in the u.s. obviously driven by new forms of consumption. netflix, amazon prime and all that. so indeed, this is very important for comcast to break out of the u.s. market. it does have an international studio, nbcu, but a small piece. the core of what comcast does is pay-tv, and i think it is very determined to get sky. matt: sky makes a lot of sense for comcast. thanks for coming in today. really appreciate it. have you seen the new "mission impossible" movie? alice: no. matt: apparently it is doing very well, why cineworld is up so much today. i will check it out tonight and report back. alice enders, joining us.

thank you very much. bloomberg terminal users can interact with the chart to see on bloomberg tv using gtv . save charts for future reference if you like. i mentioned that because up next is "battle of the charts." mark barton is coming back to the european market open. this is bloomberg. ♪

matt: welcome back to the

european market open. let's get straight to the battle of the charts. mark barton has agreed once again to grace us with his presence. he's going head-to-head with a favorite, annmarie hordern, so it will not be easy. mark, wide-out you kick things off? matt, good morning. i am here, alive. youek ago, did he say me or ? he did say me. a week ago, bank of england raised rates 25 basis points, unanimous, to 75 basis points. the big, big, interesting chart in the markets is this one right here, because some are betting on a rate cut. yes, some investors are buying money market options that pay off if broad market expectations swing toward a rate reduction in march. you know what happens in march, when the u.k. exits the e.u. so the thinking is that if the

u.k. doesn't strike a deal with the e.u., the bank of england might have to cut interest rates. traders buying 30,000 short sterling options due march 2019, strike price of 99.125. the trade becomes profitable at gtv.line, 99.14, matt: fascinating chart. clients love that chart, because they have been clicking on it all day. what have you got? annmarie: looking at european equities, investors have been fleeing european equities over the last three months except for one standout, oil stocks. as you can see, the steepest discount in three years attracting cash into oil stocks. of theows the p/e ration stoxx 600 oil and gas index, versus the stoxx 600. investors increased average exposure to the energy sector,

the highest since 2014. matt: mark, i love your chart, but annmarie's chart i think is more important for european investors across the country. annmarie takes this battle of the charts. ♪

>> fresh sanctions hit russia. the ruble six and russian stocks sink. the kingdom retaliates further, threatening to target investment flows. justin trudeau's says they will not change their approach. executivea's chief steps down after they lose nearly a quarter of value. shares jump on the news.