morning.d welcome to "bloomberg markets: european open." i'm anna edwards alongside matt miller in berlin. matt: no yield is too low as money continues to pour into the bond market. 30 year treasury yields hit a record low. can color imagine a world where they go negative. european equities looked to build on the bounce. the cash trade is less than 30 minutes away. anna: stock traders get their fix.

the pboc sets its daily reference rate past seven dollars for the first time, but risk assets gain is the number is stronger than consensus. oil bounces from a seven-month low as the kingdom calls producers to discuss a response to the slide to the bear market in oil prices. as european earnings season continues, we will speak with the ceo of adidas and the cfo of merck. matt: good morning. less than a half-hour away from the start of equity trading. take a look at the 10-year yield. do you believe what the bond market is saying right now? dropping below 1.6% in yesterday's session. is that forecasting a recession to come? take a look at futures. they are indicating that the number is no. we see futures turning higher. interesting that futures are

trading higher across the continent and in the u k, as well. we are prepared to get some of the biggest ex-dividends on the index. astrazeneca, unilever, some really big weights on the stoxx 600, watch for them to drag on the index gained today. anna: we will also keep our eye on italian assets. this is the picture from the asian session. stop investors getting their fix. the chinese market higher. hong kong higher. south korean markets getting a boost with better mood music with better geopolitics with japan. all of this because we got the fix on the chinese currency that calmed markets. in the fx markets, we have even though it has

given up gains for 2019 now. that was an interesting development. let's move on to the other side of the gmm to show you what is going on in fixed income. we have a rally in everything taking place in markets, except in italian assets. the italian yields going higher as investors move out of italian debt. interesting headlines about just kind of longevity we have for the intaglio and governments and whether we will see fresh elections in italy anytime soon. here is the fountain. oil price up. this after the bloomberg scoop that suggested that the saudi's have been on the phone to other producers to stem the bear market trend, which is where oil are, of course. we also have this risk on move, which is lifting stocks. anything connected with the as oilnd those sensitive

prices go lower. let's get it bloomberg first word news. rising after the chinese that the daily fixing stronger-than-expected. the first time this is happened since 2008. while the yuan is up against the dollar, it is still at the lowest level since 2015 against a basket of years. oil is rebounding as saudi arabia looks to stem the tide and prices. it is contacting other produces to stem the route. riyadh will not tolerate continued price weakness as oil has been driven down by a surprise increase in u.s. stockpiles. u.s. treasury yields may eventually go negative according to pimco. it says it is no longer an absurd nation. assetsto the pool of that recently topped $15 trillion. pakistan has suspended trade

with india and downgraded diplomatic relations after new delhi revoked the independence of kashmir. will remain army vigilant. india's foreign ministry did not respond for comment. time may be up for the populist coalition in italy. the deputy prime minister said he may pull the plug and his partners do not yield to demands. even if they fall foul of european rules. rome could face early elections. ,lobal news 24 hours per day powered by more than 2700 journalists, this is bloomberg. anna: thanks so much. reported profit that beat estimates as demand booms for products and services. joining us now on the phone is the cfo of merck. , merck.have you with us

good to have you with us on the subject of merck, marcus. let me ask you about life sciences, the fastest growth in the process solutions eunice -- unit. >> good morning. we had a strong quarter driven by life science at 9%. we believe actually that the good market conditions will prevail for a wild. we see not any signals of market weakness and a very robust demand, which is driving andcially the growth process solutions, our highest growing business unit with 16% organic growth. on thes had a big impact life science division. new: how do you expect the

maven clad to compensate for the competition that you see? reached a we have very important milestone recently with the approval in the united states. we have started to roll out the drug and launch it. we have seen the first impacts coming from mavenclad. forwardident that going from the second half of 2019 franchiset our entire will return to growth. that means that from the second half of 2019 onward, we will be able to compensate the decline risinge incremental and sales. anna: can you give us an update on the business that you bought.

what is the timescale. >> actually, there is not much news to share. that means we continue to expect the closing at the second half of 2019. we are working ourselves to roll the regulatory approvals with the authorities we have received , meanwhile all regulatory china, so except for everything on track so far. matt: it will boost the smallest of your three divisions. how important is it to you to balance out those divisions and what kind of deal you think you need to do next to fulfill that goal? a,for the time being, m and , the focuse closing

is on sustaining organic growth .nd preparing for the closing we have a pretty dedicated process of strategic capital allocation in the group. purpose that we said we want to invest, strategically strengthen our materials and the space that is a growth opportunity. if we can close the acquisition. this had been the focus and we do not have any outside portfolio targets, so that means for the time being that there is

no need to rebalance the focus on, but we organic growth. you have growth in the division because of demand for thea -- from china for liquid crystals division. i want to us about the china demand and the current. any concerns that it weakening yuan will dampen demand for your products? so, let me put it this way. we are carefully watching the further escalations in the u.s. and china trade dispute. we're watching some of the developments. we see more uncertainty in the , but also in the macroeconomic environment.

that is why we are a little bit more careful, especially in the semiconductor space, and we expect a recovery in the first half of 2020. thank you very much. thanks for the update. coming up, we stick with the corporate earnings theme. the manufacturer has confirmed its outlook for 2019, the year of its 70th anniversary. we will talk big birthdays up next. bloomberg radio is live on your mobile device or digital radio in the london area. you can listen to a globally and we will be bringing you all of the latest earnings stories. this is bloomberg. ♪

matt: welcome back to "bloomberg markets: european open." we are about 60 minutes away from the start of cash equity trading. big green arrows. up ftse futures are 1%.bout let's get the bloomberg business flash with olivia in london. olivia: hedge funds have turned

the most bearish since 2015. they are limiting to a shrinking group of companies. they sank to the lowest level in 3.5 years. ryanair pilots have voted to strike in a pay dispute. that is as they have struggled disputes.bs on that is your bloomberg business flash. matt: all right, thank you. and you this reported second-quarter operating profits that missed estimates. the earnings were squeezed by higher freight costs and cheaper pricing. joining us now is the ceo of adidas, kasper rorsted.

you talked about freight costs and i want to get you to detail what you are flying in for why these costs are hitting the bottom line? kasper: sure. if you look at our numbers, we are 100% on her forecast. we have confirmed the annual outlook, so there is no change of the outlook. we said that we have a comply constrained situation and that .eans that we are flying in 14% and china growing their online business growing. you talk about a less favorable pricing mix this time around. what is driving that? kasper: we are seeing the consumer demand is coming from the market. , we area different mix

seeing a very large demand from consumers across the world. whichever market you go into. matt: we have been talking about the fact that it is your anniversary and that is a little shameless plug for anyone who has not seen the film, it is exceptional and focus is at least in part on adidas' help in winning the world cup in 1994. what has your growth been like in the soccer/football arena over this period? it has probably gone up with the effective of 100 since 1954. the heart has been in running and football. go ahead? matt: no, i meant in this reporting period. clearly, from 1954 until now, it is an unbelievable crime, but how has the business been this year? , but unbelievable climb

how has the business been this year? kasper: the football is declining when you have a nonevent year. this year, we don't have an event. next year, the european cup. every other year when we don't have any event, the football goes down and the following year, it goes up, so it is a natural evolution. we are defending our position where most markets we are the leader globally. anna: can i ask you about tariffs? the effect of on chinese imports into the u.s. would be catastrophic -- what kind of impact is this having on your business? given that you experienced tariffs anyway, before this tariff conversation became mainstream, is it not having that big of an effect yet? what can you already see? we do 25% of our total business in china.

20% is in china. we can still move the rest out of china and still have impact. of course it will have a negative impact. impact is we are much more concerned because the moment you start having the weaker level, it is an evolution to think this will be a lose-lose scenario. when you look upon the macros of it, the currency war is much more severe with much bigger consequences than the tariffs. ont: i know you are focused the day-to-day management of the business and focused on execution of your strategy, but if i look at the stock, the shares have quintupled over the last five years. they are up 50% this year to date. does that concern you as a manager that the market may be getting a little ahead of itself? you know, i don't look

upon the daily evolution of the stock and the frustrations up or down on a daily basis do not bother me very much. i think the most important part is that if we consistently grow our business and expand our margins to deliver double-digit returns to our shareholders. this year, it is 50%. over time, you cannot have a 50% share price expansion every year , that would not be appropriate. i'm much more concerned about or focused on consistently developing our companies to deliver better results every quarter. anna: talking about how you develop the direct to consumer business, you talked about investing in that, is that something investors are going to see more and more investing in that particular outlet? kasper: what you are seeing is an increasing growth in our business on stores -- in stores and online.

you are seeing similar growth last quarter and last year. we are seeing online take more and more and we are building more big boxes where the consumer can come in and experience our custom products in a different way. we recently opened a new store in china, 4000 square meters. we continue to invest in the direct experience with our consumer to ensure the consumer gets the right.. effect of is the negative rates on your business? one -- very good little. we are not a high capital-intensive business. the current negative rate has very little impact on us. anna: thank you so much. kasper rorsted, the ceo of adidas. happy 70th birthday when we get there later this month. minutes away, we will take a look at the stocks on the move. will be closely

watched. the german industrial giant is considering selling divisions as it cuts profit outlook. this is bloomberg. ♪

anna: welcome back. six minutes until the start of the cash equity trading day. burger is focused on of the

the. asset sales could be a theme. yes, earnings were reported, which looked pretty ugly. interest is down 32%. that is expected by analysts. struggling to keep their business alive. the company is considering selling parts of their business and that is something the markets do like. matt: what is the story with aviva? reports confirms early it is looking at options for its asia business, but that did not give us many more details than that. we are looking to turn around the shares. shares crawled higher as they look forward in the business. matt: if you want to get the

go on theries, bloomberg or the mobile app. a positive start to the trading day signaled because of the you want fix. this is bloomberg. ♪

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anna: a minute to go until the start of cash equity trading. let's look at where we are. through in theng chinese market after you saw the pboc fixing of the you want -- you want. -- fixing of the yuan. yuan, the pboc fixing the but it was over seven for the first time since 2008. you can see the market jump on the risk on side of the story. here is the u.s. 30-year yield. you can watch all of that curve and ask just how low bond yields can go. oil prices are up. even though the general movement has been downward.

that has the saudi's talking to other producers. about what they can do to tackle the bear market. that has boosted oil prices. we are expected to go higher at the start of the trading day on the european equity markets. futures points strongly to the upside. we could see some pressure on italian assets today. we saw that the bond market stood out. in everything.y money going into stocks, money going into bonds. we will see if we get any movement in the italian equity markets. in london, could we see the oil majors and those in the mining sector a little bit volatile today because we have higher energy prices? we also have some big ex-dividends. we will keep that in mind as we watch what is going on at the start of the trading day.

the spanish market up strongly. the ftse 100 a little bit more of a leg up. we are seeing a strong start to the european equity session. it looks as if we are broadly very green across these markets. utilities in red here. bear in mind what was said. be in stocks do seem to the green. health care also in the green. this rising tide seems to be lifting all of these boats. matt: it is actually fascinating that we are still seeing such strong gains. you do have 510 gainers and only 40 losers, granted. that is him most guaranteeing swings to the upside. you have some big stocks up. nestlé, novartis, to tell t --otale, taotale. -- nestlé, novartis, totale., you have really big gains on the plus side of the ledger.

zürich insurance up almost 4%. 2.5%.ne up on the downside though, you do have some big heavyweights that have gone ex dividend. diageo,rio tinto, barclays have also gone ex dividend. we also see ex dividend, unilever, which is a big stock, standard chartered, astrid zeneca. on thee going to weigh stoxx 600 a little bit, but in general you do see european markets moving firmly higher. fixinget the yuan slightly stronger. bond yields also recovering a little bit. joining us now is the ceo of latitude investment management. let me first ask you what you think these historic lows in bond yields mean. is the credit market telling us

that a recession is around the corner? >> that is certainly one read of it and it is certainly telling you that glove -- growth is slowing, but we still do have positive growth in developed markets. this would indicate that we are close to an inversion, but we are not quite there yet. i don't think it is yet necessarily a guide to a recession coming in u.s. in particular, but i do agree with some of the comments from pimco that yields can go a lot lower from here and potentially all the way down to zero, especially if we and up in a recessionary scenario. anna: let's listen to what pimco was saying about u.s. treasury yields going negative. >> what it would take for negative yields to happen in the u.s.? it is probably not around the corner, but i think what it would take is a fear of downturn in the economy, in which the fed will take the rate all the way down to zero. we will restart qe, and at that

stage, we may well see negative yields in the u.s. as we are eating them and many other parts of the world. fels ofat is joachim pimco. let's start big picture. what is driving this on an ongoing basis? we see once again a rally in everything going on today. stocks, bonds. the trade tensions are seeing many investors heading into bond markets. if that does not change, does the bond trade change? freddie: central banks are still the most important thing in this economic recovery. we have had this extraordinary fiscal boost from trump, then people were getting nervous about rates being too high in america and that there is a little bit more to be concerned about some of the trade war. that has led the fed to be a little bit more dovish than expected, that is what is causing bonds to rally, and that is what is causing equity markets to rally.

we are not suggesting a deep recession or a proper recession across the u.s. or elsewhere and you get this goldilocks and aerial or discount rates go lower, bond yields are very unattractive compared to ftse markets, so equity markets justifiably can continue to rally even without earnings growth, so even if you don't see earnings growing, there is a lot of equities versus bonds and you can see that rally in everything. matt: more value than in gold? rallye seen an incredible and i think a lot of investors are saying with this, i would rather pay money to store gold then i would pay money to lend some country some cash. do you think that this rally has legs or do you think you would still rather hold with gold at 1500? you'd rather hold equities? freddie: i own both in our funds . we have owned gold since the middle of last year.

i still see legs in this rally. if you look at the 10-year yield in america for the last 30 years, they have been coming down every single year in quite a tight channel as debt to gdp has risen higher and demographics have gotten worse. the channel does imply yields going dramatically lower from here, not going back to the lower level is a lot of people have claimed. i think that is what guides the market for the next 3-5 years. if that is true, gold is increasingly attractive because yields in your bank account will be zero or negative around the world and yields on bonds could be negative in higher numbers than they are today, so i think gold has a lot of relative attractiveness. anna: what about stocks? you talk about the relationship between stocks and bond markets. you think stocks can go higher from here. let the question of the day anyway. we have been asking, does the s&p 500 hit 3200 or 2701st?

it is a fancy way of asking if it goes up or down? freddie: slightly mean question. [laughter] freddie: it definitely could sort of continue to drop a little because the moves we have seen down early in august have not been that dramatic yet, but i think it will get to 3200 in the next 6-12 months, unless we see earnings alling. earnings are still rising on an aggregate level. still reporting solid economics, solid employment, good wage inflation, and a good short-term outlook. so, we are still seeing no sign of a recession and if you don't see a recession or and earnings recession, i think there is a relative attractiveness to bonds and equity markets can continue to rally from here, which would be a big shock to the markets. matt: freddie fighting back against the narratives -- earnings narratives. ready is going to stick with us. up next, these stocks on the move, including a big gainer,

zürich insurance. the company says it expects to be financial targets as it enters the final stretch of a three-your turnaround. this is bloomberg. ♪

anna: welcome back to the "european open." 10 minutes into your trading day. it's get a look at the top stocks stories. annmarie hordern has your movers. annmarie: good morning.

zürich insurance to the upside. they beat first-half profits and they expect to exceed all of their targets. that likely pushes their stock up this morning. krupp is up by 2% and they are open to selling some divisions. downymes to the downside, more than 3%. earnings came in somewhat in line, but revenue and income was a miss and also the cfo is leaving just after 18 months in the job. the company is taking a lot of headwinds. thanks very much. a couple of your big stocks movers. oil is rebounding this morning after saudi arabia said it was working with other producers to

halt the assets slide. while some analysts say the trade war is the only game in town when it comes to dictating hardy the ceo russell disagrees. that a huge we know amount of energy comes from the strait of hormuz. a huge amount of crude comes through. we are slightly protected by being outside the gulf itself, which creates that opportunity into more of a hub than it is today. are we underpricing it? probably yes. they are slightly underpricing the risk that supply could be interrupted. anna: the ceo there. the cio of latitude investment

management is still with us. we were talking about commodity, supply and demand, the two driving forces. looking more broadly at commodities, i have an impressive sharp -- chart of iron ore. it is bouncing a bit this morning, but that has been the path. it seems that concerns about global trade and what that does for the global growth story just seem to dominate supply concerns in all kinds of commodity markets. freddie: i think the bigger worry is that knock on effect. tightening up trade restrictions commodities trigger as well. i think it is incredibly hard to price. that is why you have seen an incredible upswing in commodities in the last 12 months and why you are seeing some sort of correction now. iron ore has not fallen back to the lows. anna: yes, that was pretty good. freddie: it was just a

correction from a steep rally, in my opinion. today, they are still rallying. this plays into the narrative that we have, that economic growth was incredibly strong, particularly in the u.s. this year. it was always going to grow. as economic growth prevails, we will continue to see this asset price inflation. , if i look atal the bloomberg commodity index, at least over the last one year, i see it coming down pretty substantially. this puzzles me because we have such low borrowing costs. a nickel to go on spending spree, i can easily borrow cash to do that. why do you think that is? it seems to signify a drop in demand, but it could be a jump in supply. in certain markets there have been jumps in supply. things like cobalt, obviously.

the analogy is one that i would take back to equity markets. commodities are deeply uncertain and heavily cyclical in terms of their price action. the same thing is true with value stocks and cyclical stocks within the equity market. the things that you have seen in every rally is that the stocks that continue to do well, leading the market, are the high-growth, the compounding, the well understood compounding stories within the market. the uncertainty gives you an indication of the investor mindset. very few people are willing to speculate on commodity markets rallying aggressively at this stage in the cycle, because everyone continues to believe we are at the end of the cycle. where yet we may still be somewhere in the middle. anna: let me ask you what the trade tensions due to that cycle. we were having a conversation in the break about the extent to which markets are holding out for a trade deal. -- whatt of resolution do you think resolution looks like and what timescale?

freddie: in this uncertainty hating market, people are looking for a resolution. people are waiting for a deal. the man in charge wrote "the art of the deal." i think about it differently. i think this is a necessary, but slow rebalancing of the tensions between china and america. china has benefited enormously over the last 10-15 years, and now they are so large they need to slightly play by different rules. it cannot all set in one go in my opinion. i think this is going to be a series of skirmishes that go on for 12-18 months. for: our markets priced peak globalization? freddie: probably. i do believe we are at peak globalization, the amount of populism across europe, the arab spring five years ago, we are seeing more of this idea of national unity as opposed to global unity, which i think it is a negative, but something we need to price in. i think it is priced in because this is not going to suddenly crack.

i think this is going to be a decade of change. we are back to the trade war. i believe we will not get in near term deal and that will disappoint the market. matt: we saw surprise cuts out of new zealand am out of india, out of thailand. these 7 yuanu have per dollar spook. that the indications banks are in a race to the bottom? are you worried about a currency war? freddie: i would be worried about a currency war if we saw when starting. china has sent a small shop across the bow by cracking 7 this week. i think it is very early to say. what we have seen of the last decade through this qe period of this economic cycle is that whenever we have been threatened with a trade war -- a currency not sorry -- it has actually happened because, as you rightly suggest, everyone is trying to do the same thing. if everyone puts a similar amount of monetary supply,

exchange rates should broadly stated the same and no one wins from that process. i continue to believe that is more likely than one singular trade war. we have seen the pressure on the dollar, the political pressure to try to weaken as well and that is the pear that everyone sets off against. i can't see china maintaining capital. they will have a lot of capital flight as they go well through 7. i don't believe they actually have that lever that people believe they actually have, because you can only set one of the three things in an economy, and if you lower your interest rates or your currency, you will lose capital. anna: i read a bloomberg opinion piece that suggested that they is not such a risk of capital flight this time around. an interesting one to explore. thank you very much. freddie stays with us. let's have a look at the sectors on the move today. making the broadpoint that they are all in positive territory. the couple of voices over the

pbocdays has said that the you on fix --yuan fix is all that matters to investors. this would seem to support that. beinge the risk on mood carried through into european equity markets as well. up next, conviction contrarian and under the radar. we unveil freddie's favorite trades. this is bloomberg. ♪

anna: welcome back. 22 minutes into the trading day. -- up by 0.8%.y let's talk about the favorite trades with freddie. let's get into some of your conviction trades. you believe that the consumer is still strong. give us the rationale. why still sticking with that theme? is a largersumption and larger part of most developed market economies. it is often service-led. it is more immune to trade wars and trade skirmishes. we have a great line of sight that it world where populism and support is getting increasingly strong and consumption can amazon puttinge

hour, that will feed back into supermarkets and things like that. yowant to look for the dominant players and things like that. tesco is the largest u.k. ofermarket. there are a lot market positions to play for. they had the accounting scandals , they had of a bit of a mismatch, but they fixed to that. anna: do people make money in online grocery? freddie: not yet, but i think it is coming. anna: ok. matt: i wonder about your contrarian trade. it is interesting because you have u.s. banks. i'm looking at the kbw banks index. it has fallen 10% over the past two weeks. because obviously everyone is freaked out about lower interest rates, pressure on that interest margin, and of course trading

has been horrible. does that not concern you? freddie: don't rub it in, matt. [laughter] freddie: for the last three years, banks in the u.s., we have only owned u.s. banks. the u.s. banking system is separate from other global banks. they have traded almost bang in line with the 10 year yield. as 10 year yields fall aggressively at the moment, you will see banks rolling over likely. we own goldman sachs and bank of america and they trade 10 times or less earnings around book value. these are businesses which have gone through an incredible cycle since 2009. they have doubled capital, they have tripled liquidity. the asset quality is incredibly high. the have only been making high-quality lending, hi-fi go scores, etc. then moving far away from net interest businesses toward recurring models. i think maybe it will take a few more years to prove the concept

out, but i think we can see those stocks continue to generate and pay back all the money in shares, buybacks, and dividend yields. bank of america has a 12% rolling yield at the moment and i see great value to shareholders and owning these for the long-term, but they will suffer if yields continue to suffer in the short term. anna: how long do you hold gold? that is one that you like to talk about because it has been quiteen gold is wobbling a little but this morning, but let's not let that put us off. freddie: it is a very good question. it is a fantastic thing to own if you continue to believe that

rates are going to be capped where they are or fall from here. i think for the medium-term, that does seem likely. it does not seem that the next move up will be up. it seems that the u.k., europe, and the fed will be lowering still. in that environment, a lower relatively gold attractive. i still see value in gold. i still see it in a good place. i think you would sell it if you believe the growth inflection is .potted thing -- bottoming if that were to happen, you would start saying, in the medium-term, you will see a rate rise and that way you won't so gold. matt: how do you like to hold it? do you buy gld do you buy the miners? do you put it under your bed or store it in a facility? what is the best way? freddie: you can't own it physically for our clients, so we use etf's. the miners is an interesting call. i've met a lot of miners around this potential investment and i actually personally don't see great value and owning the miners compared to gold. if you have cash, you can just buy a little bit more gold. i see gold is a better investment. anna: thank you so much. the ceo of latitude investment

management. he did not say putting it under the bed, matt. pretty will continue the conversation on bloomberg radio. up next, the pboc reference rate above 7 per dollar for the first time since 2008. we will talk china next. this is bloomberg. ♪ ♪

matt: 30 minutes into the trading day, let's get your top headlines. stock traders get their fix. sets the reference rate above seven per dollar. but risk assets again as the number is stronger than the consensus. adidas missesrk, estimates. -- ceo tells us he is worried about a currency war. weakermoment you have a renminbi, it'll hurt all countries. this will be a lose-lose scenario.

oil bounces from a seven-month low as saudi arabia calls producers to discuss a response to the slide in prices. welcome to "bloomberg markets." i am in berlin alongside anna edwards in london. anna: we see a lot of breadth in the rally lifting all sectors. it gives you a sense of how much of the market has been impressed or convinced to take more risk as a result of pboc fixing. -- oil-dependent companies feature quite strong. bp and others are benefiting from those bouncing oil prices all on the back of the bloomberg scoop which suggested saudi arabia is finding out if more can be done.

zurich insurance moving higher by 3.8%. profits coming in better than expected. side ofok at the other the ledger. some big names in here, but that is partly an ex-dividend story. barclays,ex dividend, a few of those going on. looked -- osram licht falls as a result. we spoke to adidas, complaining about the trade environment. by 2.5% on thewn back of those numbers. let's get a first word news update. >> oil is rebounding from a seven-month low as saudi arabia

looks to extend the slide in prices -- stem the slide in prices. reality will not tolerate continued price weakness. weakness isil driven by the trade war and a surprise increase in u.s. stockpiles. yields mayry eventually go negative, according to pimco, which says it is no longer an absurd notion. 11 countries have negative yields. pakistan has suspended trade with india and downgraded diplomatic relations after new ofhi revoked decades autonomy for the disputed region of kashmir. india's foreign ministry did not respond for comments. time may be up for italy's front populist coalition. the leader is hinting he could put the public -- pull the plug if his five-star partners do not

step up. reached --nt is not a detente is not reached, they could face new elections. the victoria's secret founder says it is a tremendous shock but adds it pales in comparison to the unthinkable allegations epstein now faces. manhattan,il in having pled not guilty to sex trafficking charges. global news, 24 hours a day on air, on tictoc, and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. anna, matt? matt: thanks very much. here is what you should be watching today at 9 a.m. london time. the philippines central bank will make a rate decision, consensus points to 25 basis points, but will we get another surprise?

initial jobless claims come in at 1:30 p.m.. we estimate they could rise another 5000 from seven days prior. after markets closed, bloomberg will release results uber willrst half -- release results for the first half. and occidental's takeover of anadarko could be completed. anna: that yuan -- value on -- the yuan rose but it's the first time in the reference rate has been set weaker than $700. joining us -- 7 per dollar. joining us is enda curran. are we seeing stabilization? why is the market taking it this way? >> quite right.

say, it has gone over a threshold. the symbolicver level, but the key takeaway is that it has been fixed somewhat stronger than anticipated. they arel is that allowing it to go a certain direction, but it seems like they want to keep a flow under. that is important because they have in preaching they want to keep it somewhat stable. they don't want to let perceptions run away. that is probably what the market is taking today. matt: how did economists reaction -- react? >> i think there is a split view. there is one cap which takes what is outlined, saying this is just another level. the overall move is pretty modest.

it is in china's interest to keep the currency stable. but there is another camp which thinks this could be the start of something more pronounced. it could be the crossing of a threshold which would allow more weakness. china has an option to let the currency weaken. of course, there is the political economy aspect anyway. is enough toing set the red flag flying in washington. president trump responded by calling them a currency minute later. there are those that will tell you this only adds to the optics that we are in the middle of a new currency war. what does this mean for how things develop from here in terms of effects? -- of the fix? what do you think the pboc is

going to do now? do we stay around this seven mark? would that be overstated? >> that is the big question them the unknown. -- qustion, the unknown. there is speculation about how far they let it go. as you mentioned, capital outflows are a concern. easy thing to do for an average saver or a company. ony have kept the lid pressures in recent years and don't want that to open up again. let's see where trade talks are going and if they do happen in september. also let president trump responded and see if they put more pressure on china. there are a whole of measures beyond the pboc control. matt: appreciate you joining us,

chief asia economic correspondent and the current -- enda curran. equity indexes have rallied across europe. for the most part, we're seeing a sea of green. gaining,p, the dax the ftse is gaining as well. up next, faring well. signals the price were with uber might be easing. we get the latest on the battle of the ride hailer's. -- hailers. this is bloomberg. ♪

matt: welcome back to "bloomberg markets." we are 42 minutes into the trading day, looking at green arrows across the board. let's get to the ride-hailing apps. yesterday,d reporting earnings that beat estimates. uber also got a bum after the report. report.umb after the and is also reporting today people are questioning if it will be met with the same enthusiasm. was: the lost from lyft

better than expected and gets to the core of what these earnings mean, does the business model work, can they start to bring in a profit? so the forecast we get is going to be crucial. the burn rate is massive. the chart i have is third-quarter estimates for uber and lyft. million, and because there are so many uncertainties, especially around the of -- of the business model, traders are expecting fireworks during today's session. this is implied volatility for the earnings price reaction. they are on 11% for both comparing to the russell 1000 average of 7.8%. investors definitely need to buckle up, pun intended, for today's session. uber, as we get earnings results

today, we are seeing investors take out hedges on options pricing. it means there is a whole lot more -- there are a whole lot more bearish options as investors hedge. anna: thanks very much, bloomberg's dani burger. toving from one type of lyft lift, grantedf this only works if you are not american, this industrial giant cut profit outlooks as it struggles with a slowing german economy. the ceo spoke exclusively to bloomberg. usclearly, value is driving at thyssenkrupp for our shareholders. there might be alternatives that could be evaluated but it is too early to say.

when the time is due, we will assess what is best for us and our shareholders. anna: all these moves, are they going to be enough to turn the company around? >> i clearly think so. if you take a look behind the current figures, you will see strong development. although the overall numbers are clearly distorted by the week automotive industry and the problems in steel. we could catch up what we lost compared to previous years, so we are clearly looking ahead that we can fulfill guidance for the full year. , all our capital goods businesses have increased cash flow spy more than 500 million, which is quite a step -- by more than 500 million, which is quite a step. we can see the new changes in strategy are working and we see results in our cash flow. manus: we are always

trying to get a sense of the shift in speed. talk to me about the momentum of the slowdown and where is that most demonstrated? in which geography? if you take a look into our numbers, it is europe and european steel which is, with high iron are prices, -- ore prices, most significantly hit. you see weaker demand, especially in china and some kind of slowdown in the u.s. and europe. steel, we are just affected in europe but you see it with our competitors everywhere. hit by higher iron or and weaker demand, which is to some degree a natural. matt: that was the thyssenkrupp

ceo speaking exclusively to bloomberg. up next, we bring you some of the stock movers. sinkingg osram licht, after its biggest shareholder rejects a takeover offer. this is bloomberg. ♪

>> china just admitted yesterday they have been a currency manipulator, first time they have ever been called out. companies are moving out by the thousands and we are doing very well. anna: welcome back to the european open, 50 minutes into the trading day. looking equity markets good. markets,fixing calming adding to risk on sentiment. let's get the individual stock movers. annmarie: to the upside, sbm offshore, a services company to the oil and gas industry. they raised the 2019 outlook, saying they are entering a significant period of growth. osram licht to the downside, their biggest shareholder allianz is saying no to a takeover, saying it was a

knockdown price and should never have been accepted. 's to the downside, down more than 3%. jeffries says it was a core set of results and there are just no buyers out there. matt: thanks very much, annmarie hordern with some of your movers. asset managers are facing and existential crisis. for years, they have been shifting into passive funds, pushing fees lower and leading to the loss of thousands of jobs and large-scale consolidation. now the industry is on the brink of a shakeout and only the strongest will survive. joining us is bloomberg's european hedge fund reporter. thanks for joining us. what surprises did you find in your research? >> the industry is clearly struggling and is at a tipping point. active managers have been

charging too much for subpar returns for too long. investors are voting with their feet. they have been pulling money out with -- out of passive funds. lower, jobs grinding cuts, and large-scale consolidation. that passivets will overtake active. anna: compression is a trend we are witnessing, a move into passive is another. what can the industry due to respond? >> one response has been consolidation. if you are an active manager with under 500 billion and don't have a specialty, you will struggle to compete with blackrock and vanguard, which between them manage 11 trillion in assets. so in addition to helping with it caner fee problems,

help with rising regulatory costs. course, it is worth noting the largest managers have the ability to get into both active and passive. anna: got to be big or niche. >> exactly. matt: these things can turn around, what do you expect for the future? >> more consolidation is absolutely going to happen. smaller players will be absorbed by bigger competitors. some won't survive and most will have to cut costs. another thing asset managers are grappling with is modernizing the operating models with data and technology, which will result in cutting underperforming business lines. anna: thank you, bloomberg's hedge fund reporter with this great peace of research. markets, 53your minutes into the day, it is a positive session.

this is what we have got for you. a strong session for the stoxx 600, as you can see. up by .9%. the ftse 100 is an underperformer, but what is outperforming is technology. look at where these gains are coming from, it is big players like sap, asml that are rallying quite strongly. we have got smaller ones as well , ams also to the upside to -- by about 3%. no technology stocks in europe are in negative technology -- territory. has launched al new health act in south asia, it is called pulse and can help meet with doctors and have medication delivered. we heard one malaysia was the pick for the rollout -- why malaysia was the pick for the rollout. >> we have gone through

extensive beta testing. it is a comprehensive app, and to end from diagnostics to the location of telemedicine, and importantly in a market like malaysia, it has the capability to identify dengue fever areas. public-private partnership we are very excited about and the government is as well. >> i am assuming you will be gathering a lot of data on this app. how useful is that? the data itself is secure and won't be used for underwriting or product purposes, if that is the direction of your question. it is artificial intelligence. the application itself gets smarter and provides more and more personalized advice. but we have taken the steps you would expect us to do to protect data and make sure they can

trust the application. >> we are seeing a race to the bottom when it comes to rates. what is your strategy for dealing with headwinds when it comes to interest rates? have worked across a lot of rate cycles and our product set is not particularly great focused. almost one billion pounds of earnings came out of the health part of our business in asia. a lot of consumers prefer unit-linked products are dissipating in portfolios. participating in portfolios. that was the prudential speakingwells exclusively on bloomberg. back to the market story, european equity markets are very strong this morning. the technology sector very much to the fore. matt: we are seeing a big gains

and a recovery, to some extent, in yields. that's it for the open. up next is "surveillance." anna and i are headed to radio. this is bloomberg. ♪ ♪

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china -- the yuan climbs. 30 year treasury yields test record lows. pimco imagines a world where negative yields reach the u.s.. s'sdas is warning -- adida warning, shares drop on a disappointing results -- on disappointing results. ♪ good morning, everyone, and welcome to "bloomberg surveillance." these are your markets.