>> good morning. welcome to "bloomberg markets: european open." i'm and edwards matt miller in berlin. today, the markets say stick to the sideline. trade talks are back in focus. the yen fluctuates after the bank of japan leaves rates unchanged. the cash trade is less than 30 minutes away. ♪ anna: bucking the trend, bp

outperforms european rivals with earnings that beat estimates. we speak to the ceo, bob dudley, in just a moment. back to the table, chinese trade negotiators hope the u.s. -- hosts the u.s. trade team as huawei reports earnings. mexico's president says he wants lower rates to boost. >> the economy is not growing as we would want it to grow. on the other hand, there are no risks of recession. matt: less than a half-hour away from trading across europe and in the u.k. i'm looking at a five-year chart of the pound. we are getting back down to the 2017, asit in 2016 and the likelihood of a hard brexit seemingly increases.

that is not affecting equity index futures in a negative way. take a look at equity index futures across europe after the gains that we saw in asia. we still see gains in ftse futures, as well as cac futures. however, dax futures are still down this morning, although just marginally. euro stocks, ftse futures indicating a flat open. what are you seeing on the gmm screen? anna: let's talk to you about the markets. it reflects a mixed picture in asia overall. the asian equity session up by 0.4%. in the fx markets, interesting to look at what is moving around. top to movers, the colombian peso and the british pound. anybody who is looking for a venue in which compromises could be made, from some in -- seemingly entrenched positions, will not be excited to see boris johnson made a pr-conditione to

eu leaders. that seems to be weighing on the pound right now. the big moves on the pound dominating things. the earnings season continues aplenty. we will pick up on earnings stories when we get to the start of equity trading in around 17 minutes. let's get to the earnings story. in fact, with a fantastic conversation, bp has bucked the trend set by other european oil companies. the cash flow from operations reached $8.2 billion in the second quarter, the highest since late 2017. joining us now on set in london, bob dudley, the ceo of bp. good to see what to get on the program. better than estimated numbers at the net profit level. better than the highest estimates. what is going right at bp at the moment? bob: had a good quarter, strong operating results. 93%-90 5% of operating operating -- 95% of

facilities. it was a big milestone for us to get through and the business is working well across the board. anna: he reiterated the view you have for the full year. what is the risk to that number? is there risk to the upside were downside on that number? will would make you change that? bob: we are right in range for that. we are running a little bit light on that, but i think by the end of the year, we will be near the middle of that range that we set. we set that in 2017 all the way out through 2021 and we are on track for that. anna: let me talk to but the price of oil. brent is at $64 per barrel. iea is predicting a big oversupply next year. are you concerned with global growth issues? are you concerned about oversupply in the market? bob: i think there is a lot of uncertainty in the market. we are planning bp around the $55 per barrel. we are above the planning range. you have the downside issues in

venezuela, iran. lots of uncertainty. crude coming on in supply. chinese demand. right now, first half of the year, a little bit of softness and demand, but it is coming back up. hard to predict, but we will be fine. anna: what clues do you have in terms of the global growth story? you sell your products globally, very into an the global growth story right now. where do your nerves focus? bob: energy demand generally tracks gdp growth. we are seeing growth of still over one million barrels per day, 1.1 million barrels per day for this year. right now, we don't see softness and products. if you market welcome, you can overcome simple demand growth. right now, we feel pretty comfortable going into 2020. anna: on the supply side, there were concerns around the straits of hormuz recently. how safe do you feel it is sending ships full of crude through that waterway? bob: we need to be extremely careful.

we have had ships move in and out. we have had some concerning incidents. right now, we are not sending british ships and crews into the persian gulf. but it is quite a chokepoint. 20% of the world's oil passes through it. one out of every three tankers passes through that small area. that is why it is getting a lot of attention. anna: there are talks of putting convoys together and allowing shipping to be protected that way. what kind of cost impact is this geopolitical tension having on your business? or is it too early? bob: it is too early to say. the royal navy is now escorting british ships in and out of the straits. having good open maritime trade is important, whether it is oil or any kind of trade. it is concerning, but the straits are open now and the oil is moving in and out of it. not the first time in history we have had tension there. anna: you can protect your business from that?

bob: yes, there are ways to do that. anna: let me ask about another region over in the u.s. and the permian slowdown. people talking about the rate of growth in the permian coming down. bob: the number of rigs is coming down, but production is still going up. it says something about the dynamics of the fields and some of the strategies of the smaller independents. however, it is also bottlenecked. infrastructure will be built, some of it will get through through the end of the year. production should rise, as well as natural gas production. is a good news story for the u.s. it puts pressure on world supplies and the opec plus group has adjusted for it. all of those things with the geopolitical tensions, it is really, really an uncertain period. we just have to plan for a world of uncertainty at a lower oil price. anna: what impact does this have on your unit in the region? big bpx, we made the

transaction with bhp focusing on three basins -- we put the permian third in the queue. two actually get it, bringing up the time the infrastructure is coming on, it is the most economic thing. anna: in terms of the bhp asset you took on, may be still some of our colleagues have been writing about how that asset vents just over 15% of the gas they produce. it cannot be used in any other way at this point. are you looking to bring that percentage down? bob: absolutely. absolutely. reducing emissions as we go through that portfolio. lots ofness itself, synergies coming through much faster. we will get to $350 million of synergies as we move through

2021. over $90ready well million right now. that is what we are going to do. routine flaring. absolutely. put all of our technology on methane detection, stopping leaks. anna: when you bring down the flaring rate, does that slow your growth? bob: no. and being able to use it as a fuel to run the election around your facilities is just good goingss -- having flaring and use it as a fuel to run electricity around your facilities is just good business. anna: stories seem to be coming around a little more frequently than they were -- tell me about your conversations with investors and how they are evolving. bob: you have a full spread of investors. very good returns on the business side or energy companies when you have a 6% dividend rate, which is hard to get anywhere. very much underpinned. people want to see us move to a sustainable future.

we absolutely agree with that. , we are building business models to create lower carbon businesses, but it is a transition. i believe natural gas is so vital to bring down emissions in the world, combined that with renewable energy and that will be a great part of the future. but the world is going to need all forms of energy. it cannot just be a race to renewables. it has to be a race to reduce emissions and everything we do. anna: you talk about initiatives you are doing, solar, other renewable initiatives, but at the same time your oil and gas production are up 4% year on year. is that a mixed message to investors? bob: no. to enter into these new businesses in transition, we need to generate the cash. this will be a long transition. you said initiatives -- these are significant investments. like source bp, now in 10 countries around the world. developing solar projects. last week, we merged our

businesses with a brazilian company to create a new company. it is the second-largest bioenergy company in brazil. this is your renewable businesses. this is energy made from photosynthesis, really. these are big initiatives. today, we have 5000 people who get up every day working in renewables. then this new brazilian company has 10,000 alone. this is serious. these are big investments. anna: what balance do you see between investors who say we are not going near this business right now and others who want to stay and engage an be with you on thatd transition journey you talked about? i imagine you have conversations with both types. bob: right. there is a whole spectrum of investors. some would like us to go into renewables tomorrow, 100%. probably is not going to create the returns our other investors would like. so, we just show them longer-term, this is a transition we want to get on

with. but people know that there are really high returns in the other parts of the business, the conventional parts. people don't want us to get out of that and remain investors. anna: let me ask you finally about brexit. we sit here with the pound under pressure a second day in a row. down 0.6%. what kind of impact would a no deal brexit have on your business? granted, it is a global footprint for bp very much, but to me about the brexit experience and exposure. bob: we are seeing it is a grand negotiation right now. the front minister has been in place less than a week and he is negotiating hard. we will have to give him a chance to see what he can do. for bp, less of an impact because revenues are in dollars and we pay dividends in dollars. is a company in london, we are probably less impacted by brexit outcomes. sendsthe weak pound investors into ftse 100 stocks to get exposure to businesses

such as yours. bob: we do see that. we do see that there is a drift into us given that we are in pounds, but the devens -- dividends are in dollars. anna: thanks so much. bob dudley, the ceo of bp. , rally or bubble? the s&p 500 is rising to highs. can the fed sustain the so-called everything rally? this is bloomberg. ♪

matt: welcome back to "bloomberg markets" -- this is the "european open." right now, we are looking at pictures out of tokyo. live press conference from the head of the boj. saying that the boj will take action to prevent risks from materializing. he needed to clarify, he thought, the boj's readiness to act. we did see a little bit of yen strength against the dollar. we continue to see it strengthening against the dollar. right now, you can only buy 108.6 yen for your u.s. dollar. kuroda also saying that oversees risks are high.

similar to what we heard from mario draghi and olaf schulz. also, changing the variables he has to deal with and that he needs to be more mindful of risks to price momentum. with that, let's get to markets. mark, what do you think of the --'s sort of failure to move i don't know if failure is the right word, but they did not move today, just like the ecb did not move last week and the fed is expected to move tomorrow -- what is that going to do to the fx trade? >> i think what the boj does does not really matter at all. they did not move today and markets did not move to react. the boj is largely in nonevent. they have failed to hit their inflation target for so long, they have pump so much liquidity into the market -- the 2%

inflation target was an when economicst was based around populations growing around the world. it is not for a time when japan's demographics has changed. they are not going to get the new birth -- 2% inflation target. no one cares of boj is directly on the margin. yen has been strengthening recently because there is a little bit more of a deteriorating outlook for the global economy. matt: are you going to be saying the same thing in the next months and years about the ecb and europe? mark: it is a very good question. i'm not sure. i think there is a worry we get there. i will say the same thing that i think generally the whole framework of a 2% arbitrary inflation target needs to be completely revised. not only because demographics

are in changing and the structural disinflationary influence of technology, not only because of the amazon effect, overall we have structural disinflationary pressures and qe has completely changed the game. the mindset of central banks needs to be overhauled. that is what i will say about the ecb and it applies to most of the major central banks around the world. however, the eurozone still has a growing population at the moment. there are less of those constraints there. the boj and ecb are pretty much identical balance sheet sizes. $5.3 trillion. versus $3.8 trillion for the fed. the euro zone an economy twice as large as japan. japan is the one who has way too much liquidity in the system. europe is theoretically not pushed to the end of the strain yet. in years ahead, it might go that way, but not quite yet.

anna: let me ask you about what is going on in the pound. what is the lens you are looking at this through right now? seems that we are getting further away from any venue, any meeting point, physical meeting point of european leaders. without something like that on the radar, the pound just keeps dropping. mark: yes, i hate to kind of repeat my views, but it is what i have been saying the past few weeks or months. even a sterling continues to weaken, it feels like there should be a release value, the fundamentals keep getting worse and worse. thell say that more of market is starting to realize that the bank of england meeting must be a negative. on one part, you have this currency weakness stimulating upside inflation pressures, risk to inflation expectations. but how can they be hawkish when the recent set of pmi's said the

country is heading toward recession likely? that is never mind the brexit risk. the bank of england must be dovish instead. that dovish feeds more currency weakness, which boosts inflation expectations, which puts them out of whack with what they need. we have seen this dynamic before. we do see it in emerging markets all the time. at some point in emerging markets, the central bank must hike aggressively even though there is an economic slowdown to stop a currency crisis. given that the u.k. is a large and growing current account deficit, it may be forced to that measure itself. at some point in the next couple of months, we may realize we should trade the pound like an emerging market currency. anna: fighting talk, mark. thanks very much. mark cudmore joining us with the latest on the market. you can join in the debate on today's market moves. tv is the function to use.

,f you want to get involved give us your thoughts if the fed can sustain the everything rally. that is being thrown around on the mliv blog this morning. we will take a look at your stocks to watch. this is bloomberg. ♪

matt: just over five minutes from the open. let's get your stocks to watch

from around the newsroom. annmarie is focusing on bayer. joe is covering reckitt benckiser. annmarie.t with you, what is with the ambitious forecast? annmarie: that is what everyone is going to be focused on. sales missed estimates. the 2019 outlook looking increasingly ambitious. a bit worrisome coming in there. we are seeing calls down 2%-3%. anna: what is the story with reckitt benckiser? >> they cut their sales guidance. as you mentioned earlier, it is mainly the baby milk formula in china. there is also a white label -- ar also a lot ofe white label alternatives coming on the market. the shares were boosted by the weaker pound. made 2am holdings only million swiss francs in the last quarter. >> that's right.

shares still called higher by 1.25%. they have hired a new ceo, hoping to put the scandal behind them. anna: thanks very much. the european market open is up next. ♪ ♪

anna: a minutes until the start of cash trading this tuesday morning. let's look at markets and see how we are positioned for the start of tuesday's equity session in europe. msci asia-pacific, modest gains. treading water, waiting for the news around trade, steven mnuchin and robert lighthizer on the ground in china where they are set to have meetings and be entertained. the pound is down .6% after the falls of yesterday. boris johnson, doubling down on the hard brexit. focus with a little movement in dollar-yen this morning. much in termsoing

of big change. they are hoping for some change in other central banks and waiting for the fed to do a little work in terms of cutting interest rates. this is the futures picture for europe, expected higher on ftse futures and cac futures. dax could be a laggard as suggested by futures. here we see the currency market moves i mentioned, euro fairly flat and dollars fairly flat but the yen is seeing movement to the upside. strengthening and the dollar and a big move in the pound, down .6%. the ftse 100, going higher once again. the negative correlation between the pound and the ftse 100 seems to be to the fore. the ftse 100, making outsized gains of .5% this morning. cac up .2% this morning.

some moves to the upside as we wait for news around trade and factoring the earnings stories. from a sector perspective, we've got financials looking broadly positive. other side,to the looking negative with a little positive. maybe a little risk on in appetite for financials versus health care right now. energy stocks, bright green this morning and perhaps a bp effect in their. utilities, looking green, telecoms to the downside. -- consumer discretionary goes higher and industrials mixed. front and center for you when you look at individual movers this morning. matt: the energy story on the gaining side of a ledger. downe 288 stocks up, 207 -- 277 down. bp, coming down with net adjusted income better than the highest estimate in our survey

so as you spoke with bob dudley there, bp puts up again of more than 3% to kick off the trading day. that is good for the stoxx 600 because it is so heavy. i should point out some breaking news on a company that does not trade on the stoxx 600 but in tokyo. put out a first-quarter operating income of ¥27 billion. that misses the estimate of ¥30 billion by a lot. nintendo, huge mess. as far as other losers, financial stocks are down. than 1% and bnp paribas off almost 1%. santander, other financials taking a big hit today so watch the financials. it is tough to have a rally if you don't have the financials leading the way and indeed, we have the stoxx 600 down by about .6%. anna?

anna: european markets, opening slightly lower and asian stocks edge higher as investors await the news from the resumption of trade talks. joining us now, goldman sachs managing director for equity strategy. good morning to you. we understand there will be lots anmeetings taking place in art deco hotel. theses the location for trade talks. our expectations low for what they can deliver or are you minded to be enthusiastic? >> i think it is finely balanced. the u.s. probably will butse more tariffs on china slightly more than even chance they do that. theeyes are on it and markets are unsure. there is a lot of uncertainty. the you wantsets

to hold here for safety? we see the yen gaining strength, gold gaining strength. is that the right play with this much uncertainty on the table? problem is anly lot of the safe assets have done extremely well in recent months and years because of the uncertainty and the trade issues. in some ways, they are quite highly valued and have done well. i do understand the uncertainty is still present. it's not just the trade talks but there is uncertainty about the exit, italian politics, growth and the people people have hidden in have been defensive stocks that have done well in recent months. anna: a lot of nervousness. a long list of things for people to be nervous about and i've pulled up this chart mapping cyclicals versus defensives. as you look at the corporate earnings season we have seen so far and a host of companies

downgrading guidance, in particular german industrials spring to mind. how are you playing the cyclicals versus defensive sharon: in the short term, there is a chance cyclical's have a bounce. it will depend on the outcome of the trade talks. if it is adverse for trade, that could hit cyclicals, but if you look at the recent pmi data, it has been incredibly weak. if that improves a tiny bit over the next months, even a modest improvement given how much people have sold down cyclicals, they could have a bounce. anna: they are looking for a bottom. sharon: desperately. the bottom -- you could see an improvement from these low levels but you are unlikely to get a sharp acceleration like in 2016 or 2017. matt: i want to point out we've had a disappointing outlook, from the chipmaker for carmakers than any other company.

an interesting story that tsa is looking for possibly acquisition when people don't meet cap a standards. carmakers are really in play here. are they going to get hit harder after donald trump is done with china and turns to europe? is that something you expect in his playbook? europe is next in terms of the trade war? sharon: obviously, he's looking at that. our view is that you won't see the tariffs imposed upon europe that it is a risk for auto companies, they have risks at the moment. the industry and short-term on potential trade tariffs. and very short term in terms of low economic growth but in many ways, a lot of those are in the share price already. have valuations less than eight terms -- eight times the earnings and that is why people are looking at these

companies. i can see why people are looking because these stocks are incredibly cheap. >> a few lines coming through on margins in profit the first half, eight point 7% according to a press release from the company. the consumer business sales revenue, sales for that versus shop -- smartphone shipments rising 24% year on year to 118 million units in the first half. the chairman, saying huawei continues to see growth, even after it was added to the entity way, in reference to the this business has been targeted in the trade tensions between the u.s. and china by the u.s. administration. huawei to his difficulties ahead

which may affect its growth pace in the short term ahead. pc live pictures of the chairman of huawei. next on the program, stocks on the move including bp, gaining with higher production offsetting the effects of lower prices in the first half. this is bloomberg. ♪

anna: welcome back to the european open.

10 minutes into your trading day and the ftse 100, outperforming once again partly because of the weakness in the pound and because they rely on stocks like bp doing well on the back of earnings. that market, up .3% and the stoxx 600 raleigh down .3%. let's get individual movers with annmarie hordern. annmarie: bp was a beat for the company, up more than 3%. they have higher production which offset lower oil prices. we talked to bob dudley, one of the standout measures in the report was the cash flow of 17% from the year-earlier at $8.2 the entire across industry, this is a standout for big oil, which other big companies. siemens gamesa in spain, one of the biggest losers, down 7%. they missed the lowest estimate which has to do with wind turbine prices falling and

volatility in emerging markets. 5% asckitt benckiser down they cut their growth outlook and they are blaming china on this. different from what we heard earlier from dannon when they are seen growth in china. matt: annmarie hordern with some of your big movers. concerns are growing over the expect tatian the federal reserve will routine -- resume its easy money policy of the fromand it is being cited thei sergio ermotti to ray dalio. "we are setting ourselves up for a period of inflating asset prices which ultimately will not be sustainable." sharon bell, managing director european equity stategy at goldman sachs is with us. where do you stand on the debate? sharon: i stand in between.

i have sympathy with the view the economy doesn't need a massive further easing injection. employment is close to full employment, inflation is relatively close to target. growth has certainly slowed the last year. ago, the economy was growing 4% and now it is 1.5% or 2%. that youand the view don't need additional stimulus at the moment but then we have been talking about the risks earlier. concerns about trade, growth in china, growth in europe. i think the fed will be cutting rates as an insurance policy against a weaker environment. i do understand the reason for cutting rates. i think they will do a rate cut at the meeting this week, probably another one later in the year as an insurance plan rather than the hugely stimulate growth. anna: that will be the narrative the fed gives, an explanation

jay powell comes up with for cutting rates that will be illuminating indicting the market as to where we go next. sharon: absolutely. our view is that he doesn't need to do a further stimulus through 2020 or 2021. clearly, there could be a vence that shift that view but at the moment, given the pace of growth, unemployment, inflation, huge further stimulus would be unnecessary and lead to fears some have expressed. asset price bubbles or too much inflation in the future. matt: you focus on equities. i wonder how many zombie companies you see out there. how much of the problem developed already as this is one of the asset bubbles people are worried about? of companiesdea that shouldn't be survivors can survive because interest rates are so incredibly low. there is an element of truth in that.

supply there is too much in certain industries, companies can't increase margins for growth, so there is the risk of all of that developing and it is another reason for not providing too much stimulus at the moment. more insurance cuts rather than a whole string of rate cuts here. anna: can the fed sustain the rally? that is the question on the markets live log. -- blog. we have seen such gains, new record highs in the new yes and gains for bond markets, as well. some of theird intention is not to create record levels in the s&p for other indices. they want to consider stability of growth and inflation, but they do create the environment where you can see asset rices do relatively well. the last few years, a lot of the gains in the s&p 500 were by earnings. it depends on whether you see the reasonably good earnings rather than expect the markets

to be driven constantly by easier and easier policy. there is certainly a limit to that. the fed will want to see markets rise over time. investors,d for pensions, but they don't want to create a bubble. matt: are we going to see european equities make up some of the difference in the discount that the currently show against u.s. stocks or is this the way it is? sharon: i think it is the way it is, really. i don't believe there is a huge discount between europe and the u.s. though it is on paper. on the u.s. it is 17 times and europe come a 14 times so on paper it looks like a huge discount. most of the differences accounted for by differential growth rate. europe is growing in terms of before thegs since

financial crisis have hardly grown in europe as they have expanded rapidly in the u.s. that reflects the different growth rate, different topline growth, margin growth, sector exposure with the u.s. with lots of technology companies. europe with lots of banks, companies like the autos which we discussed before. i don't think there is a huge gap between the u.s. and europe. it is literally a difference in earnings growth and sector. anna: nice segue into our next conversation around growth. sharon bell goldman sachs managing director european equity stategy. when we come back, we will talk more about the growth story in europe. french growth, underperforming. gdp numbers this morning came in below estimates. could this be the first european data disappointment of the week? should we prepare for more? this is bloomberg. ♪

matt: welcome back to "bloomberg markets: the european open." 20 minutes into the session and a mixed trade with gains in london and losses on the continent in terms of equity indexes. french economic growth came in weaker than expected. another blow for policymakers who are fighting fires across the euro area and it could be the first disappointment for europe's economy this week.

dani burger has more. france is supposed to be one of the highlights of the gdp coming in because we had a strong consumer supposedly after the reforms the government made after the protests. into a pictureg of slower growth through europe and it sets us up for this number disappointing, point to growth i have on the board here. this is after .4% last year. a downward trend supports the ecb's decision of more firepower to take action in september. uncertainty is also very high right now. this is the bloomberg economic uncertainty gauge. this shows a host of different measures about where the economy is going. , in recentto the end months, uncertainty is picking up. this is 1.6 standard deviations above the mean.

this will be the highest reading of uncertainty since the european debt crisis. essentially this is telling us as we get more numbers, we have confidence numbers coming in later today. we have german inflation. stage that might set the for the ecb confirming any easing action in september. anna: dani burger on the european growth story. let's talk to sharon bell about this. goldman sachs'managing director european equity stategy still with us. i want to dig into the comparisons between europe and japan you did. picture,ng data stagnant growth picture, bund yields dropping, inflation expectations falling. many people asking is this the japanification of europe? i've got a chart the talks about the more recent history. what is your thinking on the banks? sharon: the european banks are

similar to japanese banks in two respects. growth has been weak in europe and inflation has been low. you have a week thing domestic nominal growth backdrop and banks tend to be domestic companies. related to that is the fact interest rates are low. they have gone negative which is painful for banks net interest margins and bond yields are low we have a very flat slope of the yield curve and those are damaging for european banks and similar to japanese banks in recent years and unsurprisingly, european banks have performed poorly in absolute terms and in markets. is this concern about asset bubbles from lower interest rate, if it is true even a little bit around the world, do you see the rich getting richer, going out and buying a rolls-royce, a birkin bag? are you starting to see luxury

as a good play here? sharon: luxury goods in europe have done pretty well. it is one of the few areas europe has got a kind of advantage, comparitively to the rest of the world. i'm not surprised see luxury goods companies do well. you've got an expanding middle-class globally. it is not just the top 1%. it is a growing middle class and emerging markets. i think there is an element of that too. anna: tell me about the way europe isn't japan. inflation is a different story and we've got some inflation in europe compared to the japanese story and the demographics don't

tell us the exact same future. sharon: i think that is fair. i spend all my time comparing europe with the u.s. that is what everyone is asking me but europe sits between the u.s. and japan so we should compare it to japan too. i completely agree that in terms of inflation, japan has suffered several bouts of severe deflation. in europe, we keep talking about it but you haven't actually seen it. haven't seen a deflationary mindset. in europe, core inflation has been running around 1%. we are talking weak growth even the french numbers were positive. anna: and it is not a new topic of conversation is it? this comparison in europe. it goes back a decade. sharon: yes, and i was looking at reports we did in 2010 and 2011, we were saying is the western world europe and u.s. a new japan? people make the comparison less

with the u.s. now because of the economic recovery the u.s. has had a but the fact european inflation has failed to pick up, please got pockets of severe unemployment in europe, economic growth remains low even though it is not as low as japan and europe has more the demographic similarities even though it is not the same as japan. matt: sharon, you will stick with us. managing director european equity stategy, goldman sachs. bp beats, the oil giant gains more than 3% this morning. we will discuss how it worked the trend of losses. this is bloomberg. ♪

matt: 30 minutes into the trading day and your top headlines off the terminal. as the oil giant outperforms rises in the first half. ceo bob dudley tells bloomberg there are risks ahead in the middle east. >> we are going to be extremely careful. we've had ships move in and out. we've had concerning incidents. we are certainly not sending british ships and crews into the persian gulf. matt: back to the table. chinese trade negotiators host their u.s. counterparts in shanghai. huawei reports a 23% rise in revenue for the first half but warns tougher times could be

ahead. amlo exclusive. mexico's president tells bloomberg he wants lower rates to boost growth. growing asomy is not we would want it to grow. on the other hand, there are no risks of recession. matt: welcome to "bloomberg markets: the european open." i'm matt miller in berlin alongside anna edwards. anna: 30 minutes into the trading day, 3 -- 400 stocks to the downside of the stoxx 600. a bias to the downside in terms of the bulk of the stoxx 600. , up 5.3%, the biggest gainer on the stoxx 600. bp, of 3.3%. broadly speaking, talking positively about the demand picture for oil and we will talk

more about bp in a moment. well,rials doing quite the likes of abb, rio tinto trading higher. to the downside, it's look at how some of the corporate earnings season has been reflected. centrica down, the u.k. utility changing dividend policy. the renewable energies business down 11% or so. deutsche lufthansa down. theytt down 4% after reported. grenke down this morning. let's get a first word update with annabelle droulers. annabelle: commuters in hong kong this morning faced delays as protesters disrupted services on the subway. it is the second time in less than a week protesters have disrupted the railway and this

latest action comes as beijing warns violence will be tolerated following clashes with police over the weekend. forget about rate cuts. the fed should be hiking according to the chief investment officer at guggenheim partners. he warns of overheating saying preemptive rate cuts will lead to unsustainably high asset prices and that could only make the next downturn worse. axegroup is preparing to hundreds of jobs in its trading division, including 100 positions in the equity unit, accounting for 10% of the division. facing their lowest first-half trading revenue in more than a decade. gam has named a blackrock veteran has chief executive. movediss asset manager past. it is said to repay

investors a premium. is reporting a 23% rise in first-half revenue to the equivalent of $58 billion. it is an indication the chinese surviving theis u.s.'s efforts to stem its business. huawei has warned difficulty ahead could hit the pace of growth. -- democrats in overridee needed to the move with a two thirds majority and failed. global news 24 hours a day, on-air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. with annabelle droulers your first word news.

most points toe the stoxx 600 this morning after a bucked the trend for oil companies in europe. higher production offset the effect of lower energy prices in the first half. he isdley told anna planning for the price of oil to move lower. >> i think there is a lot of uncertainty in the market. we are planning bp around $55 a you've got big downside issues potentially in venezuela, iran,. ian crude coming on, japan but right now the first half of the year, a little softness in demand but it is coming back up. matt: for more, our european big oil reporter kelly gillam. what were the big takeaways from this earnings report? >> i think the big take away you saw this quarter is the strength of bp's upstream division, which has done very well bringing

projects on time and on budget. that is a thing the industry has a mixed record in and they have been focusing on high-margin barrels which has helped cash flow and profitability and led to this. try -- trying to get more insight into how they are having to change shipping through that waterway because of geopolitical tensions and we got a little insight. >> yes we did. we are learning from bp they are being very cautious. a few weeks ago, they had canceled a shipment in cargo that was going to load in iraq and going to europe. that ship left the strait of ho .muz empty they are continuing to exercise this caution and say they will move fewer ships in and out of this important point to the global oil market. matt: what is the expectation in

terms of oil supply around the world? because we've got those bottlenecks in the strait of hormuz and on the other hand, shale production in the u.s. doing so well, how does that even out? the iea said there would be an oversupply going into next year and even though you have this geopolitical tension happening, this speaks to the strength of what has been happening in the u.s. and the ability of shale fields to make up for any sort of shortfall. -- weare hearing opec need to cut even more severely than they did in the previous meeting they had. bp, based on what bob dudley said today -- he doesn't see any worry about demand and doesn't seem that worried about the oversupply. anna: the transition into being less of an oil and gas company

and more of other things, renewable and other sources is an interesting one with big oil, isn't it? you've been writing about what they can do in the short term with their bhp assets which they took ownership of in march. the flaring issues in the permian. the flaring is important because it is such a potent greenhouse gas and mission, it could offset any admission from co2 because it is so potent in the atmosphere. they are going to wait for more infrastructure to bring more gas online which should help reduce the flattering but for now, it is a major problem and with regulation, it can always come in and punish companies that are doing this to a large degree. anna: some of it, they flare because there are no pipes to take it to anywhere, houses and businesses. that's right, which is amazing that a product this company sells is being sent right into the atmosphere and not going to anybody.

matt: thanks so much for joining us. kelly giblin, our european big oil reporter on a very busy day and will continue to be for her. next, stock movers including bba aviation, jumping more than 5% following a deal to sell its unit to capital partners. this is bloomberg. ♪

anna: welcome back to the european open. 41 minutes into the trading day and we are seeing oil and gas and auto sectors pulling markets in the opposite direction. the stoxx 600 is weaker by four point sent but the ftse, up .1% because of big oil and reaction to bp numbers. to the downside, otto weigh on the dax. mexico's president has called for lower interest rates. dor saidt lopez obra levels are too high for the economy. >> one thing is what is to be desired and another is what is possible. i would like the central bank not only to work on its controlling inflation, but for it to be thinking about growth, as well.

we are talking about what the central bank is doing. they are more cautious about inflation. this is not a bad thing, no. this is not the wrong thing to do. it ist saying that, but important to lower the rate to encourage growth. this is an issue i am leaving for the central bank to decide because we trust we are not just going to be able to not onlyalso develop growth but development because growth, that is what we want to change and to create new paradigms. growth is creating wealth, but not necessarily distributing wealth.

development is growing and distributing wealth. through our administration, what it is now doing better than income sodistributing scarce,hough growth is little growth, there is a better distribution of wealth. that is, there is more well-being. that was mexican president lopez obrador. let's get to our top stock stories with annmarie hordern. annmarie: one of the biggest gainers this morning is bba aviation, up more than 5% as they agreed to sell their division ii cvc for about $1.4

billion. the deal should offer capital return. centrica, plunging. 11%, cutting its dividend for the first time since 2015. their ceo is stepping down and they will be exiting their upstream oil and gas businesses. lufthansa, down 6%. more gloom for the airline industry. they missed estimates and one thing weighing on growth is the price for taking place in germany and austria, in particular. anna: u.s. trade team has arrived in shanghai for talks with the chinese that expectations for the meeting are pretty low. after a three-month hiatus, u.s. representatives are set to attend a dinner tonight with chinese negotiators. meanwhile, huawei remains at the center of the talks. this morning, the company reported strong sales numbers but warned sanctions could start

to bite in the latter half of the year. for more is our asia tech reporter in hong kong. i've read a lot this morning about the location for this dinner, the art deco hotel, very glamorous apparently but is all that to distract us from low expectations around these trade talks? what do we expect? >> that is exactly right. the symbolism around shanghai is it is the commercial center, they want to get people's focus back on the business of global trade. that is where they want to do it but expectations remain low. i don't think there will be any grand resolution at this particular round of talks but what we want to see is the direction. which direction will we go in? more cooperation or away from it? matt: what do you take away from the huawei earnings release today? came out and said

they posted a 23% growth, which is down from the first part of the year but still pretty remarkable considering the u.s. has said they were going to develop -- going to give them a death sentence. huawei is saying there has been no death sentence. we are still growing, our revenues are going up and while we expect weakness in the next part of the year, it doesn't mean we are going away anytime soon. anna: interesting, getting a headline across the bloomberg. huawei recovered 80% of overseas mobile sales since the ban. thanks to asian tech reporter shelly banjo in hong kong. later, we will speak with the huawei chairman. next, at citigroup, hundreds of trading jobs are set to go. does it set the tone for the rest of wall street? this is bloomberg.

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matt: welcome back. this is "bloomberg markets: the european open." we are 50 minutes into the trading session. you see gains on the ftse as the pound falls and drops elsewhere across european equity indexes with the dax down .5% right now. let's get to hedge funds at a

time when many are slashing costs for investors because of poor performance. have a different approach. the element c ceo is raising performance fees to a whopping 40% at the end of this year. it is a testament of his success. it has produced an annualized return of 20% since its inception. with more, our reporter in london. i was surprised when i saw this story. i thought most hedge funds had to slash fees because of tepid performance. >> you are absolutely right. element is an outlier. what is going on in the industry since the financial crisis, fees have crashed. there are about 1% management and 15% performance fee. that is probably the trend in the industry but some fun this like element -- funds like element which boast amazing

returns when others have struggled are still able to charge these kind of fees. it goes to show investors don't mind paying fees as long as your performance is good. alone in this level of fees. fund manager who came out of retirement last year to start his own hedge fund charges 40% in one of the share classes his hedge fund offers. alan howard, another major hedge fund manager started his own fund and charges 30% performance fee. what is unique about element perhaps is this high performance with relatively high management fee, as well. the goes to show because of performance, they are able to command pricing power. anna: they are cutting the management fee but you say it is still relatively high. what does that tell us about

whether investors will stick around for this? i guess it depends on how much money they make for them? nishant: investors will find it hard to get out of element. not because of fees, but because they are struggling to find hedge funds with that kind of performance and large enough to take huge amounts. we can always find someone who can perform like this, but they are small and you can only invest $5 million, $10 million but that scale and size and infrastructure of element gives investors a lot of comfort they can put in $100 million to work. that is important for large pension funds because they have billions of dollars to invest and they write $500 million checks and it doesn't move the needle. anna: element taking performance -- advantage of their performance. nishant kumar here in london.

citigroup is planning hundreds of job cuts in its trading unit throughout 19 -- 2019. it includes 100 roles in equities, 10% of the divisions workforce. jim, give us the context. this isn't the first story i read -- this quarter of the year about job cuts in trading and no doubt not the last. >> it certainly won't be the last. this is the first major job cuts story out of the u.s. we've had a big job cuts and are expecting more out of european banks but all of the banks are facing the same sort of macro headwinds, industry headwinds. you've got a low level of volatility, you've got a high level of passive investing, -- thegot the increasing march of automation which makes trading much more efficient and

slices trading profits. the people we spoke to in this citi job cuts, pointed out this won't be the last of these stories you read. matt: exactly. they said this will spread and you will see more of this on wall street. i'm sure a lot of viewers want to know who is next? where else will we see these cuts? jim: it is a great question and obviously hard to say but the one thing to look out for -- and this is why you are seeing citi ceo onfirst mover, their earnings calls and speaking publicly has been aggressive in --ms of needing specific meeting specific cost-cutting targets. when your ceo is out there committed, you will have to make these moves and that is why we are seeing citi move first. you want the clues in what

executives have said. anna: jim hertling, joining us on the latest on citi. and we got a red headline across the bloomberg on dubai, and the fate of abraj. matt: what was once the middle east's biggest private equity fund will be fined $315 million. the dubai financial services penalties ofoses $299.3 million on abraaj investment management and $15.3 billion on abraaj capital. included carrying out unauthorized activities in the difce and misusing investors my. -- money. $315 million in fines. anna: time to check the markets as we bring this hour of programming to a close.

european equity fund its down .4%, pulled in two directions. big oil lifting london markets. elsewhere, we are weaker. the pound sinks this morning. this is bloomberg. ♪

>> harder brexit, softer sterling. the pound continues to sink as a chance of no deal gross. expectations, shares rise as production offsets prices. cautious aboutn the strait of hormuz. >> we have to be extremely careful. we have had ships move in and out, some concerning incidents now, where certainly not sending british