tv Bloomberg Daybreak Europe Bloomberg July 12, 2019 1:00am-2:30am EDT
nejra: good morning from bloomberg's european headquarters in london. i'm nejra cehic. fed chairman jay powell isn't moved by stronger inflation data, affirming his message on policy easing. says waningn business confidence is his main concern. >> the first quarter was fine but the indicators for the second quarter unless strong. people cutting back existing plans but there are also not leaning forward in the way you might, as strong as the numbers that shown in our economy. nejra: president donald trump
claims china hasn't increased its purchases of american farm product as promised. awaiting the outcome of high-stakes meeting between japan and south korea. digital date. trump slams facebook over plans of a cryptocurrency. vw and ford are set to announce an expanded alliance today. welcome to "bloomberg daybreak: europe." 6:00 a.m. in london. treasury curves across, following the better print in the u.s. despite the fact jerome powell kept to his dovish message. the 10-year and 30 year yield jumping eight basis points yesterday. we had the lower than average bid to cover ratio in the 30 year option. the 10-year at 2.13.
we did see the 30 year yield the and's main in yesterday's session and the s&p 500 hitting a record high but not closing above 3000. at one point, equities taking a dip halloween president trump's comments about china. sensitive things are. will we close above 3000 and the week? how much further do we have to chronically gains? look at the dollar. weakness in the dollar for the third day. sayinghow from goldman the risk of fx intervention from the u.s. into the dollar is low, but a rising risk. we haven't seen fx intervention in dollar since 2011. they say that could be seen as unconventional monetary policy. dip yesterday dropping more than 1% but we are still above 1400.
oil, 60.52, heading for its best week in three. let's check on the markets in asia with david inglis. how is it looking this friday? david: it is flat, uninteresting. a frontloaded heavy week. we are pretty much mixed and what is interesting to note is what we should be having at this time, we were looking for the pricing of budweiser, the burglary, the asia -- brewery, the asia ipl. -- ipo. we do lack a bit of direction. week on week, we are lower on the benchmark. volumes are lighter as we wrap up the weekend to singapore was out with a shockingly bad gdp number for the second quarter. we will talk more about that later. let's look at some movers. to your point, across the bond market in asia, yields are up
not just across the curve but the region, led by this massive moving australia on the 10-year. is your currency space and in asia, it is about the thai currency. central banks stemming what is really the best performing currency in the asia-pacific. second-best globally after the ruble. a few movers in the japanese earnings season. lawson, up the most since 2016 on the back of net income coming in above highest estimates. , greatdavid inglis to see you carry u.s. inflation data topped estimates yesterday but it will like -- unlikely deter jay powell from cutting rates this month. core consumer prices rose 0.3% from the prior month, the most since january 2018. the reading contributed to a
week adding 30 year bond auction. on day two of this testimony, jay powell suggested the central bank has room to ease monetary policy. >> central banks around the world are seeing weakness everywhere and they are also providing more accommodation. we have signaled we are open to doing that and you are seeing that in the curve now. you are seeing that embedded in the united states interest-rate curve. nejra: in an interview with bloomberg, the richmond fed president said powell's message on rate cuts has not changed the june meeting. said the same thing yesterday that he has been saying for a month and we said in our last memo, which is we don't have forward guidance anymore in the memo. we are watching carefully what is happening in the data and we are looking very much on upside risk and downside risk.
at this point, they are more tilted to the downside, which is why we are looking at it. nejra: the round off the fed speakers, the minneapolis fed said he saw a cut in june to remake inflation. >> let's look at the data, let's look at the wage data and until we see wages pick up, we know we are not really at full capacity of the u.s. economy. nejra: joining us now is the global economist at capital. how convinced are you buy the data yesterday on the cpi? i know it is only one data point but we could see an increase in inflation in the second half of the year? >> the view of the second half of the year, we do think the u.s. inflation will trend higher because of the higher energy prices that technically push the year on year cpi up but also in terms of core inflation because of the tariffs and the stronger
we doy from powell -- expect inflation to trend higher but it wouldn't be a threat because it is just core inflation to three percent to 4%. beon't think it will worrying, the level of inflation despite being higher in the second half. >> it seems this week from the comments from jay powell that he seems determined to message to the market to send the dovish message that a cut could be coming. when that be the writing for the fed to do? either a 25 basis point cut or more for 2019? for now, a july rate cut is likely. it would be right because we think monetary policy -- the influence has a lag, so if he is --ried about a week economy
weak economy six-month forward, maybe the fed should cut now as uncertain -- insurance because of uncertainty in the global economy. and also the fading fiscal stimulus. i think market expectation of two further rate cuts this year is too aggressive. the fed will wait and see how the market reacts before they cut another time, but if the trade attention persists, we could see one more rate cuts after july but our current market profile is too aggressive. nejra: if you think the market profile is too aggressive and say we get 125 basis point in 2019, would that be enough of an insurance cut? what would be the point? janet: there is insurance cut in july and if data doesn't go well or the trade tensions escalate or continue to persist, they may look to another cut in september or december. i think that will serve the
insurance purpose but we need to see the data, the trend because they continue to be data dependent and need to look at market reaction. nejra: are we going to see a yield curve steepening? not just on the two's tens, but other parts of the chart? tens, 30's? we had the 30 year where the bid to cover ratio was less than average. the fed has no control over the longer rates, just the front and but do you expect the curve steepening trade to continue with force? janet: if the fed does cutjanet: in july and projects a more -- if there is a insurance cut, the market has to be more uncomfortable with the outlook on the u.s. economy further out and that would effectively make it more likely. nejra: we've hit the highest since may for the 30 year but
over the long-term, the trend has been downward for the shields. if the long end of the bond market priced correctly based on your expectations for the u.s. economy beyond the next year or two? the fixed-income market is too expensive so i don't think it should be where they are carried bond yields should be higher given where economics the u.s. will still be delivering strong growth. in an economy where we have technology innovation, or we have good labor supply -- in terms of growth, it should be quite solid. i think the bond yields are not pricing in reality but having said that, longer-term bond yields are impacted by structural factors like pension funds which have been driving down the term premium a lot. nejra: in your portfolios, you prefer holding long-term bonds as insurance? janet: we've had more discussion on that and we would be
considering adding more to duration given the fact we have been more cautious about macro outlook but currently, we are thinking prices are expensive on the fixed-income side. nejra: janet mui from cazenove capital stays with us. will the expected decline in the earnings outlook outweigh the fed rate cut? join the debate and reach out to team, ib + tvv . deborah hot -- >> warning of u.s. intervention in the fx market. president trump's repeated complaints about other currencies has brought u.s. policy back in the spotlight. analysts are contemplating the wildcard notion that the u.s. could forcebly weaken the dollar. 50-50 if the eu will
strike a trade deal on industrial goods with the u.s. and it could come this year. that is according to the german economy minister. after meeting robert lighthizer, he told reporters there is a mutual interest to avoid an escalation. a powerful weather system in the of lng mexico may -- 70% exports at risk. hurricane barry is threatening facilities. surgedn lng exports have with three plants coming online since december. holding off on imposing sanctions against iran's foreign minister. sanctionen expected to him as part of the u.s. crackdown on iran's top officials. this follows tensions in the middle east. incident, a standoff between the u.k. and iran over the passage of a bp tanker.
president trump has capitulated in the fight over a citizenship question in the census. this follows a defeat at the supreme court. he has announced a face-saving plenty use government data to estimate the number of non-u.s. citizens in the country. this is reportedly the same approach the census bureau had recommended. global news 24 hours a day, on-air and tictoc on twitter, powered by more than 2700 journalists and analysts in more .han 120 countries this is bloomberg. nejra nejra: debra mao, thank you. president trump is warning facebook about its digital token. he tweeted it will have little credibility and if facebook wants to become a bank, it must seek a charter and be subject to regulations. facebook has yet to respond that has faced questions from regulators and lawmakers since its floated the idea of a cryptocurrency. from hong kong, germany's cross asset or 4 -- reporter.
what are his criticism about facebook? tell us if they align with what other lawmakers are saying. ,> with facebook and libra trump is saying you facebook wants to be like a bank, they should apply for a banking charter and be subject to the regulations that are covered by banks. this falls generally in line with criticisms and the back and forth lawmakers have been mulling over over much of the last year when it comes to cryptocurrencies overall. it seems to be that private industry is forcing the hand of regulators a little bit here. when it comes to facebook, one of the criticisms of facebook is -- its handling of privacy concerns for users. the concern for lawmakers is if we aren't able to trust facebook to handle our private data, can we trust facebook to handle our money, as well?
nejra: has there been much market reaction to this and if not yet, could there be if president trump keeps weighing into this debate? libra yeah, -- eric: yeah, we haven't seen much reaction from the corn today. bitcoin movedts, up a little bit but the price swings we are seeing today are in line with the price moves we have seen with bitcoin on any given day. it is interesting we haven't really had a trump way in on the currencies till this point. the fact he has chosen now to get into the arena is certainly going to be quite a focus for cryptocurrency investors going forward and makes everyone pay more attention to what trump has to say and if he has more to say about cryptocurrencies. nejra: eric black, bloomberg's cross acid reporter in hong kong. coming up, we speak to douglas flint, chairman of standard life aberdeen.
nejra: this is "bloomberg daybreak: europe." i'm nejra cehic in london. a muted session in asia on the headline level. msci pacific goes nowhere. we've jumped eight basis points on the 10 year treasury following the cpi print. despite the fact the jay powell stuck to his dovish message, we are moving away from 2%. 2.13 is where we are. the australian tenure jumping 11 points. futures on the front foot in the end -- u.s. we didn't close above 3000.
we dipped on president trump's comments about trade. the dollar weaker for the third day. fx intervention is a low but rising risk from the u.s. is goldman and crude, 60.58. let's get the bloomberg business flash with debra mao. investingkswagen is in ford's self driving partner argo, expanding the alliance formed this year. the move will value argo at $7 billion. vw's audi unit will old its own autonomous operations into the company. pw and ford are expected to announce they will cooperate on electric cars. don't miss our interview with chief executives of both companies at 3:30 p.m. london time today. the chief of boeing 737 program is retiring after about a year in the post. eric lindblad headed the largest source of profit. the line will be run by one
facing the challenge of returning the max to fight. more than 500 planes are stored around the world in 150 have yet to be delivered. airbus delivery delays pushed iag to buy from boeing according to the chief executive. he said there was a factor in history -- decision to place a $25 billion order for the. he doesn't want to be solely dependent on one company for his entire narrowbody fleet. that is your bloomberg -- bloomberg business flash. nejra: debra mao, thank you. let's update you on a story. outave comments trickling from the south korean presidential official on the ongoing dispute with japan. to bring you some lines, south korea proposing a probe into the japan claims on illegal shipments. south korea, also saying japan should apologize if it can't provide proof and south korea demanding japan to provide clear proof of violations.
a have this briefing, presidential official saint south korea expressed the regret over irresponsible comments by japanese officials on allegations south korea didn't abide by sanctions on north korea. japan and south korea, meeting in tokyo for their first face-to-face discussions today over the japanese export controls implemented last week. we are waiting for an explanation from tokyo, over the curbs but not necessarily expecting any negotiations today as such. sticking with trade, donald trump has once again hit out at china for not following through on promises. he says china hasn't increased purchases of american farm promises -- products despite promising to do so. kata thursday indicates the asian nation has slowed purchases of american agriculture products following the g20 meeting. when asked about the trade tensions between the two, the
asian infrastructure investment bank president said he remains optimistic of a resolution. decades, i last four would say lots of positive things between the united states and they work together. nejra: janet mui from cazenove capital is still with us. we saw how nervous the market is about trade tensions with the s&p 500 receding from headlines yesterday. how much are you bracing for more volatility as the result of trade tensions? janet: trade risks are -- we are closely monitoring. it is still a concern. we are still keeping it -- our equity position neutral mainly because of the fed pivot. we think the global accommodative policy will continue to support equities. however, we still think there is some downside risk which we need to protect. that is why we have increased
our gold and cash allocation. the case for gold is because we see global real yields going and negative yield everywhere, particularly in europe. we think the gold should perform in such an environment. to answer your question, with increased gold and cash to protect our portfolio. nejra: i want to ask about the dollar because this feeds into the trade tensions in terms of the comments from trump about a weaker dollar. goldman joining the warning on u.s. fx intervention. the latest note saying action to weaken the dollar is a low but rising risk. trade weighted dollar index is approaching an all-time high, so you can ask yourself whether president trump has a point of my question to you is how much of a risk is this actually? it is not going to be easy for the u.s. can unilaterally intervene in the dollar, is it? janet: it is very difficult.
the dovish fed hasn't done much to the dollar and how much can the fed possibly cut interest rates to help with the dollar depreciation? and may have to reset qe the fiscal stimulus they are doing actually increased the budget deficit which should be dollar negative in the longer run. is really not a lot of leverage they can pull in order to depress the dollar and i think it is a dangerous act because what we see could be the start of the currency war with ese orro falling, the chin asian currencies and if the u.s. joins in, it will really depress market sentiment. nejra: and it is interesting because in this commentary from goldman, is a direct fx intervention is a low but rising risk. against this would go the normal recent decades,
developed market central banks have recently used their balance sheet more accurately. cane tovention is a unconventional monetary policy. what a weaker dollar b good for global growth? in normal times, a weaker dollar should be good for emerging markets. we've seen the historical relationship. lowers the borrowing cost of asian economies and boosts global liquidity, so a weaker dollar should usually be positive for the global economy. i think if the u.s. were to take action and manipulate the currency, i think it will be negative for investor confidence. nejra: if we get the weaker dollar, that would be great for emerging markets stocks. janet mui from cazenove capital stays with us. weise to on number, the ceo of jpmorgan india. don't miss it at 9:30 london time. tune into bloomberg radio live on your mobile device or dab
nejra: this is "bloomberg daybreak: europe." i'm nejra cehic in london. let's get the first word news with ever now in hong kong. debra: the federal reserve has room to cut rates. that is what jerome powell told the senate banking committee. he said the economy is in a good place but the central bank wants to use its tools to keep it there. seeing weakness everywhere and there also providing more accommodation, we have signaled we are open to doing that and you are seeing that in the curve. you are seeing that embedded in the united states interest-rate curve.
policymakers -- not all policymakers see it has a done deal. ithmond fed president says hasn't made the case for a reduction. he is concerned about winning business confidence. we spoke to him exclusively. quarter was fine but the indicator was for the second quarter being less strong. i don't see lane folks off, i don't see backing up existing trends, but they are not leaning forwards as you might as strong as the numbers have been in our country. debra: that a partner of britain's ambassador to the u.s. has been politicized according to the favorite to become the next u.k. prime minister. boris johnson is trying to deflect criticism of his reaction after he failed to defend -- in a tv debate. global news 24 hours a day, on-air and tictoc on twitter,
powered by more than 2700 journalists and analysts in more .han 120 countries this is bloomberg. nejra: debra mao in hong kong, thank you. let's check markets around the world. and in us in mumbai london. indian equities, heading for their worst week in two months. this come even with a dovish jay powell. what is going on? is it concern around the earnings season? >> good morning to you. this is despite the central bank sounding more dovish, too. it is concern around earnings. the commentary of companies giving guidance of what it would look like. it was not the most optimistic. -- goodncy services
quarter and we are waiting two crucial numbers today. the start of the banking season. the long and short of it is people don't expect the earnings season to be great. iti expected 3% revenue growth, which is abysmal for indian standards. if the earnings season shapes up that way, i daresay people would be disappointed. back to you and hope you have a super sport friday and sunday considering wimbledon finals and cricket finals. nejra: thank you. like wall street's record-breaking stock rally even though we didn't manage to close about 3000 on the s&p 500 is losing luster in the asian trading session. dani: i don't know how i am gloomy with those great well wishes for the weekend but even so, we are seeing the stock market rally. k bit of a breather, especially when we look at markets sensitive to china trade
considering the tweet from trump yesterday and the cocktail of the strong cpi print versus the dovish chairman powell. we look at the markets, australia is dipping again. very sensitive to the chinese trade conflict, down .3%. i would direct your attention to the sovereign bonds column. those black boxes mean the bonds are moving three standard deviations or more than their historical movement. that is australia and new zealand. tracking u.s. 10 year yields. nearly every g10 currencies, falling against the dollar. crude, moving higher. storm forminge off the u.s. gulf coast is perhaps why we are seeing wti up nearly .7%. focusing on the australian 10 year yield, it is moving three standard deviations. --n we look at the futures and it wouldn't be friday if we didn't end on the technicals. the futures market is looking like they are bumping up a nice line of support. that is the 50 day moving average.
over the year, that has been pretty solid to push the bond market higher in the futures. once it hits that line. yes, we have trade tensions, the dovish central bank, there is a lot going out there but for any chart watchers, anyone who focuses on technicals, this might be a positive sign the selloff in the aussie 10-year has overrun. nejra: technicals and tennis. you to really know how to set my weekend off right. thank you both. today, we are asking the willion on mliv, unexpected decline in the earnings outlook outweigh the positive impact for equities of a fed rate cut? you can join the debate. breach out for us and the mliv team ib + tv on your bloomberg. let's get the view of janet mui from cazenove capital. what easy or view? janet: if there is disappointment, he will outweigh the fed rate cuts.
the reason is because rally was seen, the s&p reaching its peak, a feds have the view of cut -- because of trade tensions and uncertainty, and that is because we are supported by the fed. that is priced in. the thing ends, the earnings are mostly for 2020 double-digit, which looks too high for us and for a number of market participants we speak to. in k's companies do start to have profit warnings, one about the trade tensions affecting their fund, they plan to lay off staff and not hire more -- that will affect market confidence because we have seen a strong rally and that was supported by the fed. unless the fed does more, even more dovish guidance or for the rate cuts in the years ahead,
now we are pretty much priced in the fed pivot already. nejra: you've got bloomberg intelligence saying this earnings season compared the worst of times as eps falls 2.7% versus the second quarter 2018. to mark a 2019 low and even though analysts have cut second quarter views to the bone, considering the economic data, they may have not gone far enough to cut future estimates. would you say you are that gloomy on the earnings because wanting you could point to is the cpi print yesterday. could that provide hope that maybe companies have the wiggle room to raise their prices, which could lead to better profits? janet: our view is on the contrary, the white -- rising wage pressure could put margin pressure on companies. may note, the tariffs be able to pass on consumers. in this economic environment, we
ave -- we are ultimately in slower environment and consumer confidence is still holding up but there is a chance it could deteriorate if they are seeing slower growth. we don't think it is a good environment for earnings growth generally. earningso think that are more likely to disappoint rather than surprised to the upside. nejra: you've already said the equity market has gone as far as it can on the expectation affect cuts. let's focus on other central banks. we got the account of the ecb's june meeting marked by a dovish turned with consensus pollen mate -- policymakers were prepared to ease euro area monetary policy. that follows a toughened language of mario draghi saying the outlook doesn't improve and that would be enough to warrant action. some economists forecast a rate cut has soon as this month. janet mui from cazenove capital is still with us. what do we get from the ecb in
terms of either cuts to the deposit rate or a resumption of qe, or both? janet: i think the data has deteriorated since the last -- they last met. i can understand the more dovish tone but in terms of an immediate policy action, rates are already negative. they communicate they may read dish -- want to cut rates but in a minute rate cut may not do much. they need to communicate how to deal with the negative interest rate that are already affecting bank profitability. before they can cut rates, they need to actually deliver the message on the tearing system. that may alleviate pressure on the negative interest rate and they will guide the markets to think they will be more qe coming or we start qe, but i don't think it will be imminent in july. does ahow much potential dovish turned by the ecb or any
action taken have to weaken the euro? this leads back to the conversation we were having earlier about the low but rising -- as goldman put it, risk of dollar fx intervention. how much could anything the ecb does weaken the euro and therefore feedback into the fx intervention debate? janet: i think there is a high risk that the euro will fall further. that is really because ultimately, central-bank policy really matters for currency but ultimately, it is the growth differential that really matters. that is why i am more pessimistic on eurozone growth because -- especially on the manufacturing side, and i don't see how that recovers in the new term given the trade tensions and slowing chinese growth. growth,the weakness in if it persists in the eurozone, there is more a case to sell off the euro versus the dollar given the dovish ecb and already
negative interest rates and we growth. -- weak growth carried there is more of a case for the eurozone depreciating further than the dollar. nejra: what does that mean for yields in europe? let's focus on the bund yield. we backed off a little this week but how much more negative could we get on the bund yield by year-end? janet: we are seeing bund yields have get below the ecb deposit rate and i think that could happen again. just because the ecb hasn't really acted on the potential stimulus and if they announced anything, the markets would expect only so far further in the euro area. markets are used to this in -- negative interest rate and think there is no floor anymore. nejra: no floor to the bund yield? fair enough. is there a floor under sterling? janet: it is hard to say.
sterling pricing is still in the middle of a no deal brexit and the potential deal. i think there is still room to fall if the markets perceive there is a higher possibility of a hard brexit. right now, it is. 20% to 30% of a no deal brexit according to our betting market. boris johnson is likely to be p.m. according to the polls and if that is the case and he projects a tone that he is favorable of a hard brexit, i think the risk for sterling depreciation is high. nejra: janet mui, of cazenove capital, thank you for being with us. a panel of german lawmakers is to publish a report with recommendations on carbon pricing. arlin is a considering expansion of taxes on carbon pollution for industries including transport.
are atng the meeting, we the news on the future of the alliance with ford later today. commercial vehicles and autonomous driving is to be included in the partnership and we are live from luxembourg for the asian infrastructure investment bank annual meeting. we will bring you exclusive interviews, one in this show. douglas flint, aberdeen life chairman is at 8:30 a.m. you can time where philip time will be joining us after 5 -- 9:30 u.k. time. ceo of --peak to the this is bloomberg. ♪
two ipo's softens derail this week. unit re, and the asian guided prices to the lower of the range. the ipo may be growing, but firms face a fragile microenvironment. with more, dani burger. periodt is the biggest for ipos since 2014 in dollar value. for companies hoping to hit the opening bell, there are a lot of things that could derail them. we have to look at the geography of where these ipos are coming from. a 29we look at asia, billion -- that is double the value for the size of the market in north america. 10 times the size of europe. ask, if trade talks turn south, what happens if the market is disrupted and demand is zapped. we are seeing valuations at
highs, stocks rally so that should create demand what we are not seeing that. there is a risk between buyers and sellers. in six of the 10 biggest listings, priced at the lower end or even below the range. that includes three of the biggest. uber and ab inbev. we are seeing how that data valuations at their peak and that might make it difficult for investors to jump in. the idea of an ipo is jump in early and realize gains. 80% of new offerings have no earnings at all. that measure is pretty equivalent to what we saw at the height of the tech bubble. the thing with this is the problem with more acute in europe. when you think of economic growth issues, there is a lot of political confusion and profit warnings. of listings in europe going to the upper and so only 7%.
in america, one third of the companies are in the upper end of the range and it is 40% in asia. this could be a sign of cracks in the market, a frothy ipo market so the question is, can ipo's continued to be listed at their current pace? nejra: dani burger, thank you. let's get the business flash with debra mao in hong kong. president trump has warned facebook over its plans to create a digital currency. he tweeted the currency will have little credibility, adding if they spoke wants to become a bank, it must be subjected to normal banking regulations. the social media giant has faced questions from regulators since it floated the idea. volkswagen is investing in ford's self driving partner argo, expanding the alliance formed this year. the move will value argo at $7 billion. vw's audi unit will fold its own autonomous operations into the company. later today, vw and ford are
expected to announce they will cooperate on electric cars. don't miss our interview with chief executives of both companies at 3:30 p.m. london time today. the chief of boeing's 737 program is retiring after about a year in the post. eric lindblad headed the largest source of profit. that program will face the challenge of returning the max to fight. more than 500 planes are stored around the world. 150 have yet to be delivered. that is your bloomberg business flash. nejra: debra mao in hong kong, thank you. let's focus on finance and africa's most populous country. access is now nigeria's biggest bank by assets. the acquisition earlier this year saw axis bank's assets rise more than 30% to $18 billion. let's discuss the future with the ceo ande,
joining us for an interview on the london set. delighted to have you with us. congratulations on the acquisition. biggest bank by assets, but some of your rivals do surpass you in terms of being more profitable so how do you plan to catch up on that front? >> we've got to push our retail business. when we came into this plan, the whole idea was to focus on retail and bring down cost of funds. this deal will fix that. synergies, bring down the costs up front which is already happening and transaction activities come from retail. we will get the synergies to the point where we can get there but we are extremely confident we will within a couple of years, two years. nejra: are you planning more acquisitions ordeals of any kind? eurobond loans, local debt, etc.? knockt: no, we have to
out this transaction, get the efficiencies right so we don't have any acquisitions right now. in terms of our capital plan, we have a disciplined capital plan we stick to. eurobonds wek the have issued, feed them back with diamond. we think we are ok where we are for now. i think the institution is now set for the growth that we want. nejra: your nonperforming loans rose following the acquisition of diamond bank. how worried are you buy that and how do you cut them down to get them below the 5% regulatory threshold? herbert: we've done this before. when we did intercontinental, it was past 5%.
managementust risk culture. we were able to get it to sub 5% over three years. one of the things we have seen that we are happy about is the fact that we are seeing loans turnaround. we are getting significant recovery just because the market understands we have a robust risk management culture. our -- how much recovery we get over the first year. in six months, -- three months already, we have achieved those numbers. i think we are on track and at the end of this year, he will be sub 10, well below 10. by this time next year, we will see where we have been traditionally and a year and half later, 2.5% where we were before the acquisition. nejra: sounds like in three years, you will get below the regulatory -- herbert: we've always had the
best as far as nonperforming loans have been. we will get to that number in three years. getting below 10 will happen this year. getting to five will happen next year. nejra: thanks for the clarification. let's talk about some of the measures by the central bank that aim to force banks to lend. to look on the positive side, you are actually one of the few big lenders to already be above 60% in terms of the loan to book ratio. tell me your view on the measures a central bank has taken. was it a good or bad move? herbert: it was a good thing. we need to stimulate lending , to lende real sector i to medium and small-scale enterprises. it would benefit the entire economy and we hopefully would see gdp grow. .t is a great thing
the natural thing would be to crowd out the government and all of that but this effort coming from the central bank is to encourage physical banks to support the real sector. nejra: i understand the rationale behind this policy change, telling banks to increase loan to deposit ratios to at least 60% but will it work, given that it is happening against the background of a weak economy in terms of growth and inflation being in double digits and government bonds yielding almost 15%? herbert: i think it will happen. first of all, banks will comply. competitive advantage enterprisescale even though it is a little small and comply within the timeframe. it may be a bit tricky, but people will have to comply and basically what that would do, help small and medium enterprises continue to grow.
if we don't have that kind of thing coming from the central bank, most banks will not do it. we are beginning to use technology to create out the rhythms required to support and it is happening more. this initiative from the central banks toonly bring profit quicker. nejra: herbert wigwe, ceo of access bank. next, the luxembourg finance minister joins us for his first interview of the day. do not miss that and bloomberg issues -- users can interact with gtv . catch up on key analysis and save charts for future reference. when traveling to work, tune in to bloomberg radio on your mobile device or dab digital in the london area. i'll be joining you there from 8:00 a.m. from the equity market open in just over an hour.
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bloomberg's european headquarters in london. i am nejra cehic. this is "bloomberg markets: european open." jay powell is not moved by inflation data. business confidence is the biggest concern. >> the first quarter was fine, but the income -- the indicators for the second quarter are less strong. i do not see people cutting back existing plans,, but they are not leaning forward. nejra: president trump claims china has not increased
purchases of american products like promised. south korea demands a probe into japan's claim of illegal exports. trump slammed facebook over a cryptocurrency. and expanded alliance today. just past 7:00 a.m.. welcome to "bloomberg daybreak: europe." we have had five days of weakness and european equities, it looks like we can and on a high. dax and cac and u.s. futures higher. s&p 500 hit a record high, above 3000, but it did not stay there. it closes just below it. u.s. equities did take a tiny bit of a hit when we got the
line from president trump complaining that china has not been buying u.s. farm products. trade tensions are still weighing on the markets. looking at bonds, we have a reaction to the u.s. coming better-than-expected. jumpingear yield the eight basis points. the 30 year yield hitting its highest since may. we didn't get on the auction, the two-year yield rising. futures, more of a steady day. you can see and that u.s. 10 year bond future. up.e we will see an edge david has more in hong kong. a bit of a muted friday in asia. david: yes, the lack of momentum, we are overall
slightly below water in the region. we are down for the week. we got the singapore gdp numbers earlier. what we should be getting our chinese trade numbers, very late . we did not get pricing on the asian unit we were waiting for. we are flat and mixed, across-the-board. have a look at the movers, and earnings story in japan. store is a convenience operator. the dollar is under pressure, putting upside risk when it yields are screaming higher in australia. up 12 basis points on the aussie 10-year. nejra: thank you so much. we got that moving yields in the
u.s. despite the fact jay powell is sticking to his dovish message. u.s. inflation data topping estimates yesterday. the move is unlikely to deter jay powell from cutting rates. 0.3%.onsumer prices rose the most since january 2018. the 30 year yield climbed to the highest level since may 30. fed chairman jay powell suggested the central bank has room to ease monetary policy. >> central banks around the world are seeing weakness everywhere, and providing more accommodation. we signaled we are open to doing that, and you are seeing that in the curve. you are seeing that embedded in the united states interest rate curve. nejra: in an exclusive
interview, thomas martin said powell's message has not changed since the june meeting. >> he said the same thing yesterday that he has been saying for the last month. we do not have forward guidance anymore on the memo. we are watching carefully what is happening in data, and looking at upside and downside risk. at this point they are more tilted to the downside. nejra: two round off the fed a half-point cut in june to reenter inflation. inflation.r >> i'm continuing to deb council let's look at the data, and until wages pick up, we know we are not at full capacity.
that make things and ship them around the world are suffering because supply chains have been impacted. case, and you know this is a slowdown, this gives you the specific opportunity for where investors might see miss pricing. i think the consumer sector might do better than it has. , consumers are doing fine, growth is fine, there is nothing to indicate consumers are suffering. if consumers are, that is a different teacher. are those opportunities best expressed an equity market, or how would you play that? , there is nobody uncertainty whether the u.s. is headed for a full recession, or if this is a slowdown.
or whether this will be an extreme slowdown or whether it will be quite mild. at the moment all indications are for a mild slowdown. the fed is acting early. equities look appealing. nejra: great to have you with us. the asian infrastructure investment bank is holding its annual meeting outside of asia for the first time. it provides financing for infrastructure projects in asia. it is headquartered in beijing, and half voting shares are controlled by china. the aim is to recognize the social benefits of conductivity between countries and regions. bylinda amin is standing with a guest. great to see you. haslinda: great to see you and to be here in luxembourg. this meeting, we are talking about brexit trade and of course
question marks about what the fed will do. joining me today is pierre gramegna, minister of finance, grandy duchy of luxembourg, before we get to that, what is expected to be achieved at this meeting. luxembourg is the first to post it, it is significant. largestit is one of the international events we have organized in luxembourg. council ministers of the eu meet here regularly. aiib we are hosting the meeting for the first time in europe, and we were the first ones from europe to join the aiib. played as a small country, believing in multilateralism, and the aiib is a wonderful initiative that we
need in these times of uncertainty. theinda: infrastructure and context of growth, looking at growth in the eurozone, we have the european commission downgrading growth. what is the outlook like? what is the source of risk? pierre: the downgrade has been light by 0.1% to 0.2%. rose will be an average of 0.1% this year. next year luxembourg will enjoy a double rate. one should not overdo or over exaggerate this downgrade. it is limited. we have less growth than last year. greatest threat is on international trade. there,de tensions are the trade war eventually looming. but i think a meeting like this
one of the aiib shows what we need is more international order, more common action. i would say for the time being, we are in a wait-and-see position. also, the latest trends in terms of growth of services in europe, and growth, the picture is much better. theinda: the picture, manufacturing cycle has yet to bottom. pierre: table impact the exported machines. again one should be .easonable in what is happening --mate change
the commodity of monetary policy with interest rates that are below zero on the one hand. many countries that have a little bit of space are using that fiscal space to push consumption and public investment. i think we have all the elements in place in europe, to counterbalance. this is not a recession. haslinda: christine lagarde will now be the next president of the ecb. who do you think is a good successor for her? pierre: the person ideally that we need should be someone that has a good experience in crisis management. when you look at the last 10 years, we have had a lot of crisis, the international financial crisis, difficult
times in the euro area. we have been able to get out of this crisis in the euro, so i think persons who have played a role in these 10 years and faced this crisis are the ones that qualify. haslinda: do you see a joint candidate for the imf? pierre:pierre: i think it woulde smartest, especially when the euro area would agree on one candidate, which would make things easier. the process in the making would have to be patient. in the coming days, something will emerge. haslinda: the world is looking to the fed to see what it will do. we heard jerome powell talk about the global slowdown, but stopped short of saying he will cut rates. how much room do you think there is to cut? pierre: it is a tradition that finance ministers do not comment on policies of the fed or the central bank. let's be objective here.
the rates in the united states are at about 2%, a low rate, but far higher than the european union, as we have with european central bank. there is a bit of room for a maneuver, but the slow down that is happening in the united size. is a limited i think the american interest rate has more room to maneuver. they are running out of ammunition, can the fed save the global economy? pierre: the american economy is the most important in the world. haslinda: that is a yes? pierre: yes, definitely, when the american economy is running well it will not only grow inside, it will attract a lot of investment. and it will import a lot of
goods. growth isngine for international trade. at the beginning of 2018, what was driving the world economy was international trade. the imf keeps telling us that. haslinda: pierre gramegna, we thank you for insights today, the finance minister from luxembourg. coming to you live from the iaab meeting, the first outside of asia. nejra: thank you haslinda amin at the aiib annual meeting. coming up, the finalists for the tory party leaders go head-to-head. do not miss our interview at 9:30 a.m. london time. this is bloomberg. ♪
nejra: it is almost 7:20 in london, 40 minutes away from cash trading in europe. this is "bloomberg daybreak: europe." again, 500 topped 3000 touching a record high, but then ended the session below. days ofhad four declines for european stocks, but we could end the week in the green. yields rose across the curve. hitting a mayeld high. yields taking lower today. the dollar lower for a third day. we have a note from goldman sachs dollar fx at a low but a rising risk. gold bouncing back a little. oil on the front foot set for tensions.eek on iran
joining me is georgette boele, senior fx & precious metals strategist, abn amro bank. delighted to have you with us on the show. let's kick off with trade. the s&p 500 went about 3000, but it did on those headlines from president trump, basically complaining china is not buying enough the u.s. farm products. you change your base scenario on trade tensions, why? because we think the overall sentiment is a bit more negative that the trade tensions are here to stay. it will have an overall influence on sentiment in financial markets, and we changed our economic outlook. , we changed our currency views, becoming a bit one negative overall currencies. a bit more optimistic on the dollar.
but probably the most upside is in safe haven currencies like the japanese yen and the swiss franc. nejra: you are positive on safe haven currencies, and you are positive on the dollar. on the dollar, goldman joining wall street warning on u.s. fx intervention. and thek about action rising risk. how much risk do you see if the u.s. intervenes to weaken the dollar? georgette: i think overall if you look at intervention in fx market, usually if there are comments that markets are , icting on it, taking action do not think it is likely. years, weback so many have not seen so many times real fx intervention, and the effect of it is not that lasting.
one of the central banks which has been on the fx intervention would be the swiss national bank , the last couple of years they have intervened. that is to stop the upswing of the swiss franc. have recordsalso of intervention, and sometimes real action, but i do not think from the u.s. side it would start in currency markets. if they start talking about it, it is more what the impact will on the central bank front. more policy uncertainty, it will have a situation that sentiment will deteriorate, and the currency situation is helping the dollar and not weakening the dollar. hima: you mentioned the fed
bonds, and equity markets in the u.s. setting themselves up for rate cuts from the fed. jay powell has done nothing to push back on those expectations. are you expecting from the fed in 2019 in terms of cuts? georgette: we expect 24 basis point reduction at the next meeting, and another one in december. this is priced into markets swing fromhe market 50 basis point rate cut to even maybe some expecting no rate cut. there was a small probability some of the markets were not expecting a rate cut. sentiment is overall good, but now i would say you have around 25% probability of a 50 basis point cut, and 75% of the 25 point base cut. our base case is one reduction
in september of 25 basis points. in the current environment, that will support the dollar, the only thing that is important is that sentiment. nejra: what does this mean for gold? we are holding above $1400 per ounce. does the rally have much further to go? georgette: no, i do not think the rally has much further to go. that expectations are more dovish than we expect. the market is quite low on speculative loss on gold, so i expect at some point investors feel they cannot push it much higher. a few times about 1400, and that some time it gets restless and starts taking profit. belowk we will get back 1400 around the breakout level of 1375.
large, these are quite if they start to be unwound, the move can be more large. at the moment, i do not think there is much upside. we could see some weakness on that, especially if u.s. yields start to rise again. if the dollar is recovering somewhat, i expect lower prices. longer-term, i think they are going higher because central banks easing policies for the especially in 2020 we expect a weaker dollar. nejra: thank you for joining us, georgette boele, senior fx & precious metals strategist, abn amro bank. we have headlines breaking in the past few minutes that i need to bring you. wtp is planning shareholder return of about one billion pounds.
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"bloomberg markets: european open." live from therds european headquarters here in london. .tocks in asia, trade mixed european equity futures point to a positive open. cash trade is less than 30 minutes away. sticking to the script, fed chairman jerome powell builds the case for a rate cut despite strong inflation reading. thomas
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