♪ >> good morning. welcome to "bloomberg markets: the european open." we are live from the city of london. i'm anna edwards alongside matt miller in berlin. >> today the markets say give us a reason to keep going. european futures are lower after u.s. indices hit fresh record highs on monday. will the rally continue if bank earnings disappoint the cash trade is less than 30 minutes away. ♪ >> expect a call on trade.

steve mnuchin says he may had to beijing of trade talks aren't productive. this as europe's braces for u.s. tariffs on $7 billion of goods and legal aircraft subsidies. trading revenue will be the talking point for goldman sachs and jp morgan as they report quarter results. we will hear from the cfo, john shrewsbury. and buyers reprieve. the german company's legal payout over its second round up by $55 million by u.s. judge. there are some harsh words in that case. >> he called their behavior reprehensible. --ant to talk about bitcoin everyone has harsh things to say about bitcoin, from president trump to his treasury steve mnuchin, saying it is only backed by thin air.

on can see it hit 12,000 friday and just dropped over the weekend, trading now a 10,700 between four dollars. one of the problems for bitcoin is that a lot of people have bad things to say about facebook's libra as well, even maxine waters is out against libra. but i'm not sure they should necessarily be making the connection between those two what it looks like investors are. let's take a look at european equity index futures, right now daxing up a mixed picture, futures up just slightly, as our cac futures. in asianlittle action equity indices overnight, very low volume to go along with low volatility. what do you see on the gmm? >> picking up way less. low volatility, low-volume day in the asian markets. this is the picture.

chinese equity market under pressure, the japanese market considerably under pressure earlier and playing catch-up. bad andrea not doing so the fx side of things, the south korean making a few gains. stateside, we will be looking at what the bank earnings story has to say. jp morgan and goldman sachs will be reporting. we will also hear from jerome powell later on, and u.s. retail sales, a headline grabber. as we look at the other side of the gmm, we are a little muted in terms of appetite but we seem to have an appetite for fixed income. certainly we have some sovereign bonds on the right, australia and new zealand in particular. let's just mention iron ore. some of our colleagues are talking about how we may need to watch out for those mining stocks in london when they open up because of what we saw in production particularly on the

dalian exchange. rio tinto looks interesting. >> let's get into the markets with mark cudmore, are bloomberg mliv managing editor in singapore. mark, what are you focused on? is it all about bank earnings this week, or are we still all looking at what central banks around the world are doing? of peoples like a lot aren't looking at anything to do with markets, they've gone on holiday. this is the actually the third session, third-most stable session for futures this year. bear in mind, one of the two quieter sessions was the morning of july 5, which coincides with july 4 in the u.s.. it is almost all traders going on holiday, no one cares. is it a coiled spring or the calm before the storm? i'm not sure. as for the catalyst on the

horizon, bank earnings are coming up next -- it's a little bit worrying and people seem nervous after yesterday's results with citibank. that puts a slightly darker tone on jp morgan and goldman sachs. we have this theme of financials underperforming the dollar index -- it's notable that the financial index of the s&p 500 has not made new record highs in recent months despite the broader index doing so. it has not yet validated the move. >> ok. we are watching the underlying earnings picture develop. fore ourbrings to the question of the day. can u.s. equities rally keep going, even if bank earnings fail to impress? it might depend on how many people have gone to the beach already. >> exactly. i think it will be hard for the broader index to sustain a rally -- of course financials don't

have the same importance they had a decade ago -- they've been demoted or surpassed by the technology sector. but i do think they will need to see financials cope with the imminent fed rate cut, will need to see them cope with a negative yield environment, and overall it will set the move for earnings season. we will need to see financials try to break through the previous high, not even record high from last year, with that broader index rally. that is what we are watching for today. --i have a chart of the vix this is just a one-year look. we've come down basically to what looks like a relatively normal level of in five years -- do you expect this to go even lower or are people starting to bet against that? of year not the time where you particularly want to buy volatility. we are getting into that summer lull season.

it seems like a hard time to play for vix. obviously if you have a directional view it seems a good time to express it, but we might be in this, range for a little longer, and we will probably grind a little bit higher -- i say that as a structural bear. but in a quiet environment it probably means more likely we will ride topside rather than down. >> thanks very much. mark cudmore joining us from singapore. remember, you can joining the debate on the question of the day -- can the u.s. equity rally keep going, even if bank earnings fail to impress? reach out and give us your thoughts. you can talk to the tv team using the function i.b. talk tv. let's get the bloomberg first word news with debra mao. europe is bracing for up to $7 billion of u.s. tariffs.

to bloc expects the wto give the u.s. the green light, this over the 14 year dispute over illegal aircraft subsidies. washington says it could cause economic damage to the u.s., and the wto could rule as soon as this summer. theker nancy pelosi says house will vote on a resolution condemning president trump, this for his attack on for female lawmakers that have been dubbed racist. representative o'connor seo cortez says the comments won't distract them from pursuing their agenda. the tweets have been widely condemned, including by u.k. leadership contenders. >> if you were the leader of a great multiracial, multicultural cannot useu simply that kind of language about sending people back to where they came from. decades andt decades ago, thank heavens for that. u.s. treasury secretary steve

mnuchin has expressed serious concerns about facebook's proposed cryptocurrency. plans for libra have already drawn criticisms from president trump and democratic lawmakers. but nguyen says it is a national security issue, adding that the potential for illicit activity is high. >> the treasury department has expressed very serious concerns that libra could be misused by money launderers and terrorist financiers. >> the number of people suffering from hunger in 2018 to an eight-year high according to a united nations report. turmoil, civilc conflict, and climate shocks. an official says things are not improving at all. global news, 24 hours a day, on air and at @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. >> thanks very much.

debra mao in hong kong with your first word news. next, bayer shares called higher after a judge slashes damages on its round up verdict. but take a look at the shares over the past year. after losing three trials in california since the summer, they have dropped by almost 40%. and remember, bloomberg radio is live on your mobile device or on dab digital radio in the london area. this is bloomberg. ♪

♪ welcome back to "bloomberg markets," this is the european open. we are 70 minutes away from the start of equity trading across europe and the u.k. at citigroup, foreign banking is in. trading profits, not so much. trading revenue fell more than analysts estimated, even after warnings from the ceo. other major banks report as investors brace for more disappointments in trading -- here with the details as dani burger. 5%, morenumbers fell than estimated. but they cut costs $100 million more than what was expected, and that helped them beat on profits and it really underscores the need for banks to look beyond

trading to get that profit. we saw it beat, and though they did also miss in net interest margins. for the big three others that are reporting today -- goldman, jp morgan -- that portends poorly for them, and already options are showing wider moves when they report today. but also the bar may have been set lower by what we saw from citigroup. we also saw bigger ones this wednesday and thursday. thursday, morgan stanley may need there money management unit to help make up for any lapses. hadou said before, the ceo warned against lower trading, as did all these banks -- it shows it is a trend in the broader industry. the blue bar is what we expected this year versus last year -- every bank up here is expecting a slump compared to last year. vix,we look at the partially shows us how tough an environment it was.

it never went above 25. the highest it went was 21 times in the second quarter, average 15. still the blue index did pick up, but still city mixed. he also blamed the trade war influence on investor sentiment, and that is why it was so problematic. i just want to show you what the the weight is city, and how poorly they did -- this is traders starting to price in poor expectations, which could be telling us that investors expect a fourth quarterly decline for the trading business across wall street. bloomberg's dani burger, thank you. let's get a bloomberg business flash in hong kong with debra mao. finished with the

scandal hit fund and is sent to pay investors a premium. they will pay a 50 basis point premium on holding for clients of the more than $7 billion absolute return fund. this helps to draw a line under a year of scandal. ackmanaire investor bill has made about $700 million betting on burritos. the value of his stake in chipotle has surged as the chain hit a record high on monday, more than three years after the safety crisis battered the stock. it is returned about 48% on investments this year through july 9. and bad news for costco and walmart as amazon shoppers snatch up potato chips and toilet paper. sales of consumable products during the first nine hours of amazon's prime day were about triple what they are on a typical day. these results show the appeal

stretches beyond electronics and other big-ticket items. and that's your bloomberg business flash. >> thanks so much. debra mao in hong kong. bayer has won a ruling slashing a jury verdict to $25 million from over $80 million over claims that the round of weedkiller causes cancer. this same judge to reduce the punitive damage request -- rejected the new trial. they have vowed to keep dissenting its popular weedkiller. joining us from munich is tim low, who covers bayer. reductions this new in the amount of punitive damages? the surface, it looks good. than $80on is nicer million. but the real thing they were hoping for came on friday when the judge rejected a new trial. no they have to formally appeal the case, which will take quite

a bit of time. this is the second of three trials that bayer has already lost, so i guess given friday's news this is a best case scenario. >> the judge called monsanto's behavior reprehensible. "while monsanto repeatedly includes it stands by the safety of its products this paints the picture of a company focused on attacking or undermining the people who raise concerns to the exclusion of being an objective arbiter of safety." even though he is saying they don't have to pay as much money, he wasn't very positive about the company that bayer bought, monsanto. how do we expect shares to react, and how do we expect the ceo to hold his feet, given he staked his career on this acquisition? >> that's a great point. it's a really messy situation.

the judge used the word reprehensible, which isn't good, given that there are 13,000 other plaintiffs who sued them. these are not friendly environments where the trials are taking place. a lot in california and st. louis, which is seen as a friendly environment for the plaintiff side. that sentiment is not a good signal. is themillion figure maximum the judge deemed allowable under the president, so while it is a nice cut, they still kind of maxed it out. keeping his job -- it's a messy situation. the massive overhang on the stock and this litigation is such a huge cloud. who have new investors been hinting at a desire to break up the company. i think a lot of people think

that changing the leadership right now, almost in the middle of a big war -- it would just create even more drama and tension. the best case scenario is you have to start winning some trials, and you are able one way or another to see your long-term vision. but man, is that a road riddled with question marks. >> certainly seems this business will be seeing further inside the courtroom. away from the open of the european equity trading for this tuesday morning. up next, the stocks we are watching at the open. we are going to focus on burberry after they eat estimates on new designs. we will bring you that story and a couple others. this is bloomberg. ♪

♪ we are just about six minutes and change away from the start of trading across europe and the u.k. let's get your stocks to watch. dani burger is focused on an irish cement company. joe easton is covering burberry. and we are looking at all stremme list. let's start with you on the winemaker. >> that's a weird story. yesterday we learned ams is

making a counteroffer at 38.5 euros per share. later, wehours learned that they have pulled the offer, saying there is potential ground for proceeding. we don't know what's behind it but it is pretty weird. it is probably reversing those gains this morning. >> we look for a drop there, weird is the word. what's going on at burberry? from the update fashion house. >> burberry reported costly sales around 4%, compared with the estimate of 2%. notably they say china sales it isn the mid teens, but not all positive. morgan stanley says some of the commentary sounds quite prudent and perhaps a little bit held back, and that is despite this really strong performance from the new product line.

thatn stanley does note perhaps they are predicting volatility in the coming quarters. it is quite strong but it is not clear how the rest of the year will go. that said they are expecting shares to rise somewhat this morning. >> we are expecting shares for this aren't we? >> the irish cement maker -- who knew cement could be so exciting? blackstone making a bid for their european distribution arm. people told bloomberg a deal could be expected as soon as this week. it could be as much as 1.7 billion euros, so expect shares to rise as part of a sweeping overhaul to get cash for more acquisitions. >> thanks for joining us. you can get all the stock stories you need to know on the mobile app. we are watching for a fallen , hayes alsongs could be under pressure. more subdued trading but no

change in guidance without a range of negative commentary coming up. coming up, the start of european equity trading. we will get you started for your tuesday inequities. this is bloomberg. ♪ we're the slowskys.

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anna: welcome back to the program. one minute to go until we see the start of the cash equity session for this tuesday morning. on the markets, we expect a little positivity at the start of trade. the futures looking pretty flat to me. the msci asia-pacific, also pretty flat. a pretty lackluster session in asia. a few headlines around trade, around the possibility of restarting the conversation, but really we look ahead to the earnings season, retail sales data and the u.s. later on. u.s. futures look fairly flat right now. a slight move to the upside, but nothing dramatic. the yield on the u.s. 10-year, 2.09%.

glimpse, but little movement in fx. dani talked about low volatility hurting the banks, and fx markets have been part of that. u.s. futures flat to negative, at the start of the trading day. not expecting any big moves. waiting and watching the earnings season develop. andbers out of citi, goldman sachs and jp morgan reporting later on today. the banking story at the heart of things around trading, in that lower volatility environment. the cost-cutting moves banks are having to make in the absence of topline drivers, also part of the story as well. ftse 100, slightly downward. see the gray on the screen, we're not making giant leaps in any directions or the dutch market down 0.2%. the dollar fairly flat this morning, the yen a little

weakness, british pound a little weakness as we continue to watch the leadership race between boris johnson, jeremy hunt, which is due to come to an end next week. we'll certainly cover that. back to the markets, a look at what is going on from a sector perspective. nothing convincing in either direction, the short way to describe it. green,als, healthcare in suggesting the risk-aversion in the markets, but utilities fairly mixed. unsure it's quite so simple. and some financials just turning green behind me. pretty mixed picture. what do you see in individual movers? matt: i see more losers than gainers. gaining right now. on the plus side, pharma companies, the biggest companies on the stoxx 600.

roche, astrazeneca, glaxosmithkline, sanofi adding to the index. on the downside, nestle on top, but takingbout 0.6%, a lot points off the index. then metals, miners, oil companies. total, royal, dutch shell all down, pulling the index down about 0.2%. european markets opening marginally lower, as asian stocks traded with thin liquidity ahead of earnings of three major u.s. banks. joining us now, the head of european equity strategy at j.p. morgan asset management. earlier, about citi looking at the fact it missed analyst estimates even though michael corbat warned trading would be a problem.

if you look at all the estimates for trading revenue on the big u.s. banks, they're all expected lower than the same quarter last year. is this a concern for you? are banks a losing proposition, and is that therefore a bad time for u.s. stocks? >> obviously there's one large u.s. bank i am not in position to talk about right now. but more generally, volatile, if we think about volumes and participation in these markets, there's been a lack of conviction, if you like. s&p 500 making new highs, but not a great deal of follow-through. and the treasury rally taking yields below 2%, looking fairly mature. it is no surprise you get this quarter on quarter with numbers. mean itnecessarily

suggests a broader problem in the u.s. economy. growth in the u.s., inflation is holding up around trend or slightly above. inflation, although it is not where the fed would like, is reasonable. so nominal gdp growth, the u.s. has that advantage over europe. anna: stephen, good morning to you. let me ask you more broadly what you are looking for from the earnings season. as we're caught in the middle of a trade spat between china and the u.s., increasingly protracted, what will you look executives,'s when they give their commentary and narrative around earnings? stephen: one thing we've looked at internally, capex intentions around the world. wherever you look, capex intentions have rolled. scome u.s., the survey ha -- has come off its best. there was an impact

from fiscal reforms a year-and-a-half ago. intentions, capex have come to negative territory, and negative territory in the u.k., so there is clearly a confidence issue in firms about whether to invest, which is entirely rational given the questions on the destination of the supply chain. matt: what do you think about the, the buybacks discussion has been interesting. the first six months, tim fox on the mliv blog did an analysis showing $500 billion of buybacks were announced in the first six months, i think 534 billion dollars, but it was over $700 billion in the first six months of last year. firms are slowing down the buybacks they are announcing, maybe because their share prices continue to rise, maybe because they are worried about the trade war. what does that all mean to you?

stephen: it is a really interesting question. we looked at this on the background work we did for a piece about asset returns this year, which will be published in november. one thing we noted, u.s. companies have paid out more than 100% of earnings, if you put dividends and buybacks together. we think that proclivity to do buybacks will continue, but not quite 100% of earnings, so we think they will be a modest extra investment that comes through. but the flip side of returning more than 100% of earnings, you want investing in your business, and that is feeding through to a growth,f productivity which has been the most disappointing thing about the recovery from the financial crisis that central banks and politicians engineered. i also think because of the issue over trade, the nature of

relationships between countries, it's more difficult to discern exactly where companies should invest. add as the icing on the cake, central bankers looking client to -- look inclined to add stimulus again, meaning extra liquidity. it is entirely probable that companies will use that to buy back stocks rather than investing in the business. anna: not exactly as intended. but what about the overall strategy, the big point, given the backdrop? you talked in your note about maintaining a defensive equity allocation. where do you suggest? stephen: the problem you have, if you think about where you will drive returns now, given the rally in bonds, sovereign yield, government bonds become attractive,-- less not a safe haven you want. thinking in real terms, relative shaaban --n neither

sovereign bonds or cash are giving you that safety. we're going into equities. we think the cycle is mature, and in making that allocation you need to be mindful, the companies with business strategies and positions that are the most concrete. anna: as yields come down, more and more stocks look like on proxies, if you compare the return. stephen: yes. although really interestingly, looking at the market the last 12 months, it hasn't just been bond profits. -- proxies. in europe, stock exchanges, and industrials only recently off the best, so not just playing the reduction in yields, but also buying companies with strong business plans. matt: stephen, you will stick

with us. stephen mackler smith -- mackl ow-smith, guest cohost for the hour, the head of european equity strategy at j.p. morgan asset management. it's like de leyen, "fawn," for you brits out there, is waiting to speak in european parliament, waiting for the votes she needs to become european commission president. it is important for -- an important day for frau von der leyen. and stocks on the move, including telenor, which has dropped in oslo after cutting its outlook, something investors are not liking very much. this is bloomberg. ♪

anna: welcome back to the european open. a break from the market story for just a moment, live pictures coming from strasbourg. ursula von der leyen, saying it is time for a female e.u. commission chief. she is speaking of course at the e.u. parliament, addressing the e.u. parliament before parliamentarians vote on her

potential appointment as the chief of the european commission. there she is, speaking in strasbourg. back to the markets. new york manufacturing improved, indicating factory activity might be stabilizing after slumping to a almost three year low ahead of a fed rate decision at the end of the month. today we hear from several speakers including raphael bostic, charles evans. of j.p.maclow-smith morgan asset management is still with us. your expectations for the fed, if you look at the most recent new york manufacturing data, quite a bounce from the previous month. the jobs report last friday, the cpi figure. you might not suspect the fed was about to cut interest rates. stephen: you might not. but i think the job of central banks is more about setting as dictations or markets, rather than what you actually delivered.

central banks, if you disappoint market expectations, that can have unintended consequences in asset price volatility. it is a difficult space for central bankers, to steer the market in one direction and pivot away from that. theour point, i think indicators for the u.s. economy are not necessarily so weak that you'd think a cycle of rate cuts is necessary. but as i said earlier, you had the downturn in cap ex intentions, in earnings under pressure this year, partly from the loss of the fiscal boost, the s&p forecast to grow by only 2% to 3%, very modest. so it's like an insurance cut that they are building in. matt: i wonder if they have any choice, stephen. i want to show you a chart. u.s.10-year yields, real

10-year yields, and they have just slipped negative. ever else in the world, central bankers -- everywhere else in the world, central bankers have dealt with real negative yields on 10-year debt. the fed, if they raise rates, wouldn't it be disastrous for everybody holding this? stephen: you raise an interesting point. i cannot quite see the scale on your chart. but if i think about the background for the last five or six years, what's been interesting is how real rates, despite the fact that expansion is long-lived now and has generated an enormous amount of jobs, real rates have hovered close to zero that entire period, and they are still close. it raises a concern in the back of my mind as to what is so undy economy that on other measures is growing, that it can't withstand positive real

rates. you go back to a lack of productivity, unfortunately the drum we have been banging for a couple years now. i think you are right. -- the central banks will have to act, because disappointing markets has unintended consequences. matt: anna was talking about this yesterday, stephen. it hit me like a nine pound hammer, coming back from two weeks on the beach. if you look at all the sovereign debt across the globe, debt hasl japanese negative real yields, almost all of british, almost all european returning you less than zero after inflation. at what point do investors, do the brave investors go out there and start to short this stuff?

stephen: you would need to be really brave to short it, particularly when you have a's interbank that has indicated -- a central bank that has indicated they are ready to act. from the point of view of central banks, i can't sit in the minds of central bankers, but i wonder if they are wondering at what point investors stop crowding into sovereign debt and start to redeploy cash into the economy and drive up the velocity of money. to my mind, one of the issues with quantitative easing, you haven't increased the velocity of money. i am not sure that is what central bankers would have expected, when they embarked on this route. but yet again, you circle back, if you drive up the velocity of money, you need to spend money on real things, cap ex, and we already seeing that.

anna: if we see another round of stimulative policy, these questions will be asked again. thank you very much, stephen macklow smith, who stays with us. up next, ursula von der leyen steps down as german defense minister ahead of a secret ballot that could cement her as the european commission's first female president. we are bringing you live picture of von der leyen addressing the european parliament in strasbourg. we will get analysis next. >> of course i know about the importance of cohesion, but we need more. theall our regions have same -- ♪

welcome back to "bloomberg markets." this is the european open. we are 21 minutes into the trading day, looking at a definitely mixed picture. down 0.2%. but like we saw in asia, very little volume and direction. the e.u. parliament is set to vote on ursula von der leyen set to become next president of the european commission. she is speaking right now. we are looking at live picture of the outgoing german defense minister. she needs to secure a majority in european parliament, but some lawmakers are not backing her, since she wasn't one of the official contenders who

campaigned in may's e.u. elections. maria tadeo joins us from paris. are there any doubts about von der leyen getting a majority? maria: good morning, matt. decided tosting, she speak in french, opening that speech in french, perhaps a nod to the french mep's. i have to say, the vote is tight. there was speculation it could be pulled or delayed. one senior official told me the fact it is going ahead doesn't necessarily mean she has locked up the vote. she needs 374, but in real terms anything below 400 votes would make her look very weak. her biggest problem is that she didn't run in the european election. we were told, the next commission president would be an elected official who participated in the european election, which is clearly not the case with von der leyen.

this was a last-minute decision cut between the french and the german, and that is her big problem, where you are seeing the resistance. particularly from european social democrats, who were so close to getting this job, but essentially lost it to von der leyen. they are angry about this, and they think it is not so much about von der leyen and who she is, but the fact she didn't run in this european election. they think this is bad overall for european democracy. anna: so that raises the question, what if she doesn't win the support of the mep's we see here? maria: anna, that's the nightmare scenario. brussels took three days to negotiate, a record 19 hours summit, and it would really be an embarrassment for european leaders. keep in mind, they already deployed a lot of capital to do this, and it would be bad news for angela merkel. she'd lose the commission head as a german, but also bad news

for emmanuel macron, who suggested von der leyen and seems very much in tune with her idea of a more federal europe. a nightmare scenario, and also an embarrassment, so they are hoping this gets cleared through today. anna: thanks very much. maria tadeo, joining us from paris. she will be on her way to the g7 meeting, which takes place in france a little later on, where the fiscal spending narrative which perhaps von der leyen we'll touch on here will be talked of. now, as ursula von der leyen calls for proper taxation of tech giants in the european parliament, one of the things she has talked about in her address, in the u.s. facebook's proposed a digital currency libra is on the agenda when the senate banking committee meets later. fed chairman jay powell criticized it, and treasury secretary steve mnuchin has called it a national security issue. the house financial services committee will grill representatives of facebook, amazon, apple and google as part

of a antitrust hearing. tech is under fire on both sides of the atlantic. stephen maclow-smith is still with us. these regulatory concerns about technology, on both sides of the atlantic. you see opportunities in european tech, in software? stephen: yes. if you look at the european technology sector, it's done reasonably well, and within that software has been one of the leaders. s.a.p., having achieved a slow nowsition toward, accelerating the process. gemini, having cap just completed a acquisition. heavily popular themes.

anna: they aren't talking about them on capitol hill. [laughter] stephen: people like facebook, google and amazon, they are cross-border, and you can only regulate within-border, so there are questions for regulators. i think about cryptocurrencies, cross-border, how do you control? matt: when youth think about these big platform -- you think about these big-platform companies, is there a historical comparison? are you worried about a breakup? are they unstoppable, google, facebook, apple, amazon? stephen: a very good question. we are slightly in unchartered territory. back a couple decades, you had capital controls on currency, regimes were tightly controlled, part of the post-second world war settlement. now you're in a situation where the regulations have been relaxed, and companies have pushed the envelope. anna: stephen, thank you very

much. stephen maclow-smith will be joining us on bloomberg radio, a little later on this morning. up next, an underpriced risk. we talk bond markets. this is bloomberg. ♪

♪ matt: 30 minutes into your trading day, let's get the top headlines off of the bloomberg terminal. expect a call. steven mnuchin says he may head to beijing this week if trade talks are productive, as europe braces for u.s. tariffs on $7 billion of goods over illegal aircraft subsidies. trading revenue will be the talking point for goldman sachs and jp morgan as they report second-quarter results. wells fargo's numbers are also on the docket. we'll hear from cfo john shrewsberry. and, set to make history? ursula von der leyen speaks in strasbourg ahead of a secret ballot that could cement her as the european commission's first

female president. we'll bring you the headlines. good morning, and welcome to bloomberg markets. this is the european open. i'm matt miller in berlin, alongside anna edwards at bloomberg european headquarters in london. anna: 30 minutes into the trading day, and we seem evenly divided. regardless of which way the overall market is moving, we're pretty divided in the makeup of stocks. 600, most stoxx others to the downside, so fairly evenly balanced as we look at what's going on in european equity markets. burberry, the luxury goods company, up over 7%. they delivered a sales update to the market that seemed to go down nicely. interesting to see airline stocks in europe doing well. we had a bit of a warning from ryanair, suggesting the problems tothe 737 max meant they had rethink their plans for 2020. what's bad for them might be good for others, and the relative makeup of their

aviation fleet. easyjet making gains, lufthansa as well. as one ofust over 2%, the courts in the united states cut the amount of punitive damages they had to pay in the most recent appearance, so something to watch. itv up two point 4% after a positive upgrade to the stock. at the downside, we don't have any ex-dividends to talk about today. downor, telecoms company, 2.4 percent, disappointing to some in the market. sticking with scandinavian, aak food packaging business down just over 3%, with numbers out in the coming days. after a profit warning from a.g. barr, the a drink you bru, may have come across if you have been in the u.k.

a little weaker on the back of what they had to say about suffering sales. let's get bloomberg first word news. debra mao has that, in hong kong. debra: anna, citigroup has vowed to keep cutting costs, despite managing to save more than analysts expected. it wasn't all smooth sailing for citi, who sought trading revenues drop 5% and investment banking slump 10%. the chief executive says they aim to return 12% on tangible equities this year. we're likely to get more trade talks between the u.s. and china this week, but they will remain by phone for now. treasury secretary steve mnuchin said if they are productive, the white house trade teammate travel to beijing. indicatedtrump tariffs were squeezing the chinese economy, saying this is why beijing wants to make a deal. europe is bracing for up to $7 billion of u.s. tariffs. the bloc expects the u.s. trade

organization to give -- the world towarrade organization to give the u.s. the green light, over the dispute over airline subsidies. the u.s. says that subsidies to airbus damages them. the wto could rule the summer. speaker nancy pelosi says the house will vote on a resolution condemning president trump, for his attack on four female lawmakers that has been dubbed racist. representative ocasio-cortez it says the comments will not distract them from their agenda. the tweets have been widely condemned, including by the u.k. leadership contenders. >> if you are the leader of a great multiracial, multicultural society, you simply cannot use that kind of language about sending people back to where they came from. [applause] that went out decades and decades ago. thank heavens for that. debra: the number of people

suffering from hunger in 2018 climbed to an eight year high according to a united nations report, which cites economic and climate stock. i you and official says -- a u .n. official says things aren't improving at all. this is bloomberg. anna and matt? anna: thank you very much. debra mao in hong kong. the u.s. government will run out of cash in october unless congress increases the debt ceiling. bloomberg intelligence forecasted the government could come close to default by mis -september -- mid-september with as little as $10 billion of wiggle room. yields aroundl the key dates, circled on the chart. joining us with some analysis and strategy, from geneva, the

dynamic solutions at natixis investors. thank you for joining us. why does this create a headache for investors? what is the link between the debt ceiling narrative and equity market volatility? >> well, we have seen the market so focused on trade, and on the fed, and both seem to be going in the right direction. so the markets have been quite sanguine about the debt ceiling, and it hasn't really caught investors' attention. long-termbly not a market consequence, but getting into august, with news this week that they could run out of money sooner than expected, that would leave very little wiggle room and time to pass an agreement. i think that would add

volatility to markets, as we start seeing those headlines, and seeing extreme partisanship. as to some of the headlines around the situation in the u.s., it might just exacerbate it. matt: i mean, extreme partisanship is probably not going anywhere, esty. but volatility looks like something the market could use. looking at a chart of the vix, just a one year chart, but the spike in december, then back to $12 right now. when do you expect this to start picking up, and is it may be a good price to buy vol here? probablyhink we're in a new normal for the vix. i don't think we will go back to some of the numbers we used to see. we have central banks who want to keep investors investing in the markets. they don't want to many of those moves. when you see this type of retreat, where everything seems

some,it can be protection, but it doesn't mean it will spike either. i think we will to see more of a few days like in the last few months, not the beginning of the year when you have much bigger moves an intraday markets. anna: and on the trade front, some headlines. steve mnuchin talking about trade calls with chinese officials, likely this week. so a drip oif small news items n the trade agenda. you suggested maybe there is no incentive to do a deal on trade until later in 2020. talk through your timescales. there's noe moment, incentive for president trump to stop being tough on china. he risks being attacked both from his base who see china as people, and from democrats -- see china as evil, and from

democrats are being soft on china. looking at his reelection campaign when the u.s. economy is doing well and well, it is not in his best interest. the news we have had since g20 in osaka works well. we've avoided further escalation. yes, we still have tariffs and shouldn't forget this is inchi back -- inching back to where we were a year ago, but you don't have escalation. you have headlines saying there are phone talks, and if that goes well they will travel and talk again. that means you don't have too much of a deterioration in sentiment, and equity markets continue to do well. the fed is expected to provide cushioning in the next few weeks, possibly even with a further hike later this year. thee's, it just allows narrative to continue, for this tough-on-china story to continue. if you have an agreement too soon, it's positive for the u.s.

and global economy, but it opens president trump to comments. matt: if i am looking at a long-term chart of the 10-year yield, which i'm sure you have done many times, i just see it going down and down, from the 1980's to now. is it time for this to turn around, or do we keep dropping, below 2%? is the bull market in bonds never going to die here? esty: i definitely don't think it is dying anytime soon. i do think below 2% is a little too low, and the market is pricing too many rate cuts. i don't see the fed embarking on a full easing cycle. ass is maybe one or two cuts insurance to give a support to the u.s. economy, and then seeing how things develop. i don't think we are in a full you turn, back to doing everything the fed has done the last two years. but that doesn't mean the yields

will back up sharply, either. fair 2.20 range seems for where we are in the u.s. economy at the moment, but expecting yields could rise back up to 4%, i don't think that is happening anytime soon. anna: thank you very much for your time. of dynamichead solutions at natixis. coming up, stocks on the move including a.g. barr. further details of how they are trading, the irn bru drink maker plunging after warnings. down 29%. this is bloomberg. ♪

matt: welcome back to "bloomberg markets," it is the european open, just about 45 minutes into the trading day and some slight green arrows. the ftse made down -- mib, down 0.4%. not a lot of move as far as the major european equity indexes. the e.u. is considering possible concessions to offer the u.k. to

avoid an expectedly chaotic no-deal exit. just now, they nominee for european commission president, ursula von der leyen said that she's open to a longer brexit delay. this comes as e.u. brace for brexit talks to become more hostile under the next british government. yesterday both boris johnson and jeremy hunt echoed this hardening stands in a debate organized by "the sun" newspaper. >> we promised readers, listeners up and down this country we would be out by the end of march, and we betrayal distressed when we failed to do that. >> brussels will get at long last from me somebody who has that clarity of vision. if you get this wrong, you will end up in an election before brexit. and the one person who will never, ever deliver brexit is jeremy corbyn, and that would be the most dangerous thing of all. >> i also agree that there is no

need whatever to have hard infrastructure, physical checks at the border in northern ireland. >> the reason we have not got to where we want to get to buy this stage is not because of calm leadership, which i think theresa may did show. it is because she had the wrong deal. anna: jeremy hunt, boris johnson there, still vying for leadership of the conservative party and to be the next prime minister. let's bring another voice to the conversation. she sued the government wants and won, and she says she will do it again if boris johnson toes to suspend parliament force a hard brexit. gina miller previously won an article 50 lawsuit against britain. thank you for coming to talk to us. about launching legal action against the government again. are you in talks with other parties?

john major and others talked about legal action. gina: quite a few people have been talking about it, anna, the hypothetical if it were to happen. i came along on june 6 when dominic rabb, one of the leader contenders, talked about this. so straightaway my legal team and i looked at it, and we had written to the wood-be -- wou ld-be prime minister, because we believe it will be boris, saying if you do this, we will see you in court, so it is not theoretical. process,e the critical if he should go there. anna: would you team up with john major and others to add weight to your camp? gina: last time i went to the supreme court, others joined us, and others would join us. but i will be categorically clear, if anyone tries to politicize this, i would decline their joining us, because it is

about the black-and-white, letter of the law, which we did last time and would do again. anna: you said it wasn't about brexit or no brexit, but about the constitution. what is the legal point contested this time around? be constitution seem s to interpreted in different ways, as we see here. gina: this is the beauty and the downside of having an unwritten constitution, that i t's predicated on convention and presidents. this happens every year around april or may, when the prime minister goes to the queen and asks for a short break in parliament. new,ng -- preroging is not but using it to make parliament not have a voice, this would actually stop parliamentarians prior -- from voting for resources or money to deal

with a mp-dea./ -- no deal. parliament would be shot, which i was advised is illegal, that parliament's voice be shot. matt: -- be shut. matt: you certainly have a voice in u.k. politics. well-regardeda constitutional scholar, because of your activities surrounding brexit. do you have any desire or do you feel any obligation to run for office in the? gina: i don't. the reason i say that, for the moment all of my battles are about transparency or constitutional etiquette, and that doesn't have to be on one political party. achievenpartisan, i can the aims my team is looking at. anna: so you will not be teaming up with? ? the liberal democrats on thisgina: i won't -- on this?

gina: i won't. there is a strong possibility of a election this autumn, either before or after the brexit deadline, because we are in a constitutional crisis, but i would not be standing. politics, itt to would be in the future when we could talk about holistic things, rather than one issue, brexit. so not saying never, but definitely not the near future. matt: a little lesson for an american on constitutional monarchy. gina, if the prime minister i guess asks or tells the queen to dissolve parliament, in order to push through his plans, is it possible the queen would say no, or could? gina: this is one of the problems with this issue. it's, dissolving parliament tends to happen when we have an election, and mp's don't take seats because they need to be

elected. aorogation is different, short break in parliament, then mop's take seats again. doing it in this context would put the queen, the monarchy in a very difficult position. i can't see the queen would actually decline a prime minister, because it would then make the queen an active part of our political scene, and i cannot for see that happening. anna: do you see any significance? we talk a lot about the process here, have kept it to the process. but in the end outcome, do you see significance if the labour party little by little changes the stance to a second referendum? gina: chances for a second referendum are almost zero. the reason i say that, labour, if there is a conservative party, which they will be between now and october 31 unless there is an election, in that case the labour party is

the remain party, but if there were an election, they say they would be a leave party, s they theys confused as have ever been. you have the politically elected members and the nec's, who run it. there are deep divisions, and i can't see those being resolved between now and october. anna: thank you for joining us. direct founding partner. up next, the battle of the charts. bloomberg users can see all the charts and interact with them gtd go on -- g tv on the bloomberg. this is bloomberg. ♪

anna: welcome back to "bloomberg markets, the european open." 8:55 in london and time for battle of the charts. dani burger goes head-to-head with matt. dani: i will pick up where the last conversation was, talking about hard brexit risk. we can see this clearly priced into the options market, when we look at the euro versus the pound. so here i have three month for month versus two volatility. three months captures the october 31 deadline. it is priced with much more volatility, the spread at 1.3%, the highest since march 2017. from the rhetoric coming out,

issues between the e.u. and u.k., weighing on the options market. matt: dani very much on brexit. matt? friend,will cite my old pimm fox from the mliv team, share buybacks are affecting the market. using the bloomberg custom ratio editor, to look at an index of the biggest buyers back off the top 100 share buyback companies in blue, and the s&p 500 in yellow. even though share buybacks have declined, you see the ratio of share buybacks index to the s&p 500 coming down, to almost the lowest level since the beginning of 2017. we could see a reversion to the mean, and companies that buyback a lot of shares actually start to gain. anna? anna: this is what makes my job

difficult, because i like both. dani, no doubt we will return to that chart, talking about the new conservative party leadership next week. but matt, we are talking about this more this week, the future of the share buyback story. ♪

>> fighting on two fronts. trump says china wants a deal as steven mnuchin considers heading to beijing. trading revenue will be the talking point. asking for the european parliament's backing to be the first woman to lead the commission.