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tv   Bloomberg Daybreak Europe  Bloomberg  July 30, 2018 1:00am-2:30am EDT

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>> good morning from bloomberg's european headquarters. this is "bloomberg daybreak: europe." steve mnuchin first the economist -- versus the economist. his view as at all with most forecasters, including the fed. bank of america recommends shorting after the social media stocks flop. central-bank bonanza. in japan, the u.s., india, and japan meet this week with markets expecting hikes from the r.b.i. and the boe.
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good morning everybody and happy monday. breaking news from the boj. its thirdnducting fixed rate operation this month. that brings it up to seventh the start of yield curve control. we will keep an eye on that and give you the reaction. we have seen the 10 year jgb yield edging higher above 0.1%. also, numbers from heineken. we are deep into earnings season here in europe as well as the u.s.. first half adjusted operating profit coming in at 1.7 5 billion euros for heineken. it's for your views updated. first half organic revenue of 5.6%. the company compiled estimate was up 4.6%. that seems to be a beat.
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the interim dividend per share coming in at 59 euros. -- revenue growth is expected to continue. those numbers coming through from heineken. we did get that headline from the boj. the 10 year jgb yield actually not moving a lot on that. we can see maybe if we have got any reaction in dollar-yen. it has been unchanged in the session. it is a still unchanged. equities,ith asian snapping four days of gains, we are down 0.5%. tech stocks are providing one of the biggest drags in terms of the asian session. we saw the s&p 500 closed lower on friday with tech stocks weighing on u.s. indices even though there was a weekly gain for the s&p 500. the 10 year treasury yield up one basis point. this will be in focus with the fed as well. and if we do get any global fallout from any kind of tweaks
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we might get from the boj, we have seen global repercussions through the bond market from the 10 year jgb yields move we saw last week. that yield more than tripling. a bit more yuan weakness. we are well past 6.8 on the offshore. it is hitting its lowest in a year. topiceek, interviews with second, including the ceos of barclays, credit suisse, and general. bloomberg first word news with juliette saly in singapore. u.s., charleshe koch has voiced his concern that donald trump's actions on trade and tariffs put america's booming economy at risk of recession. , who leads a powerful political network, said protectionism is detrimental. time, the u.s.
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treasury secretary has said the country as well on the path to for five years of sustained annual growth. but his rosy outlook is at odds with economists as well as the fed. >> we can only project a couple years in the future. i think we are well on this path for several years. i do not think this is a one or two your phenomenon. i think we are in a port -- a period of 45 years of sustained 3% growth at least. or five years of sustained 3% growth at least. juliette: president trump has floated the idea of shutting down the federal government if he does not get his way on the border wall. senior republicans and say they doubt the shutdown will happen and that action on the border wall can wait until after the midterm election. britain's prime minister has been given fresh hope of striking approached -- a
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post-brexit trade deal. -- says hisright government will back britain and is a cure easing -- accusing the european union of trying to swindle great britain out of their decision. he urged theresa may to take a tougher stance with brussels. the bank of england's governor has told bloomberg he spends half his time preparing for the u.k.'s exit from the eu. mark carney said in terms of brexit, let's be clear, it takes around 50% of my time. fair amount of time in contingency planning, but now it does crowd out other things. in the latesthat edition of bloomberg markets. japan's retail sales rebounded, recovering from a sharp drop in may and offering a sign of improved consumption. inail sales met forecasts june haven't falling 1.7% in the
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previous month. sales increased 1.8% on the year above estimates. the news will be some relief to the bank of japan as it starts a two-day policy meeting. in greece, officials have said the death toll from wildfires has risen to 91. another 25 people are reported to be missing six days after the blaze. it's the most deadly wildfire in europe since 1900. 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. you can find more stories on the bloomberg at top . steve mnuchin talking of the u.s. economy failed to give investors here in asia must of an appetite to buy. stocks down across the board. regional loss on the index since last monday. heavy selling in hong kong, also japan. australia's market weaker in
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late trade. flat in south korea. we have seen the yuan fall, the yen study. -- steady. a lot of impact on the tariffs coming through into a lot of these companies, particularly the yuan, which distributes things like nike, adidas, it has those factories now. b.i. might be forced to move its factories to vietnam for china. it is down 12%. m&a capital also missing. numerous saying it's nine-month profit was a lot weaker than expected. a negative impression. to the upside, a lot of buying a macron chinese railway stocks. brokers upgrading their view in the sector in the wake of that plane for industrial momentum coming through in china. much.: thank you so
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we get policy announcements from three of the world's biggest central banks this week. tomorrow we hear from this anchor japan. -- from the bank of japan. atis offering to buy notes 0.1%. secretary steve mnuchin united states is well on the path to four or five years of 3% growth following strong gdp data. later this week we hear from the bank of england, expected to raise interest rates. good to see you. how different could the world of central banking look by the end of this week? >> good morning. it certainly is a big week for central banking. on the one hand we will have the end of the- air of easy money continuing. it will be a different story in each economy. take japan. while the bank of japan is not expected to tweak its policy,
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there is an expectation they are starting to look at how they will exit from their gargantuan monetary policy at some point. it could be happening within a year or two where they start to tweak their settings as growth is broadly on track, even though they don't remain anywhere near their inflation targets. , a differentngland dynamic there. they are expected to tighten policy. it could be a case of one and done. the ongoing debate around brexit and the european union. there is a view the boe can be on the sidelines. then you have the fed. of all of the central banks, they have the most consistent narrative. growth is on track, doing well. inflation is around where they wanted. wage growth still is not.
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the labor market seems to be in strong condition. , and it will track be interesting to see if they signal any more hawkish outlook. the broad picture will be central banks dealing with growth, it will very much be on a case-by-case basis. growthspeaking of robust , you have got to talk about that u.s. gdp print from friday. the takeaway seems to be that will not change the outlook. >> no, it is interesting. if they were more hawkish than anticipated and said the fed really has to move to get ahead of the curve on inflation, that that -- but i do not think print would have surprised observers. the fed is well-positioned. i have anticipated that your directory the u.s. economy is on -- the trajectory the u.s. economy is on.
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a more hawkish outlook would ricochet around the world, markets in asia are closely watching where the fed will go. i think right here, right now, emerging markets are pricing the fed. to get ae a surprise more hawkish turn from their meeting this week. nejra: thank you so much to bloomberg's chief asia correspondent live from hong kong. is the us now on the set head of investment strategy at barclays. happy monday. i hope you are not melting, we have had rain over the weekend. it has been a big week in terms of central banks. which of the central banks have the at -- the potential to move the markets most this week? thing, aboutsting the boj, is that it is actually
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policy may have to stay lower for longer is the problem they have got. inflation may be being kept low by rising volatility and other factors, they are having to look at some of their stimulating effects of monetary policy on the economy. this may be one of the things i've talked about. that is one of the things people are looking at the moment. >> basically what they are having to balances the currency on one side, but on the other, supporting the bank. >> the banks, there are some stories they are worrying about excess risk-taking among some of the banks. that may be something they are focusing on. inflation is, nowhere near their target. they are really just trying to work out keeping monetary policy very low. nejra: do we get more fixed-rate
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operations like we had in the past month? or do they give a little more flexibility around that tenure target? >> we do not think they will. it's one of the things people are looking at. we had that tweak from last week. that was one of the things people are talking about. whether that would have ripples in the rest of the bond market. our view is that is exaggerated. main monetary policy thing to focus on is still the u.s.. aat is where you got plausible consistent narrative towards raising interest rates. you have still not got much more since 2000 -- since 2016 have rises. large basis point whether they're going to have to step up the price is a temporary factor. >> on that point with the gdp, ongoing task, is this as good as it gets?
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-- i am going to ask, is this as good as it gets? estimating as are bits are added because of the soybean surge trying to get ahead of the tariffs. nejra: the question is whether that is going to sustain. tax cut sugar exits the economy's bloodstream, you have got an underlying trend of real growth. that is what consumption should be growing at, roughly speaking. your trend is lower, that's the reality. you're going to have a lot of payback next quarter. exports are going to go the other way. soybeans are going to be we can from that. investment should still be strong. we will find out more about that wednesday or thursday, whenever the manufacturing is. i gives us a good lead on
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investment. that will remain robust. interesting as well was the rates market did not seem to believe this level of growth would sustain. you saw the 10 year treasury yields drop. if you look at eurodollar futures, this is more towards the fed stopping its hiking cycle. those went negative, suggesting a rate cut. let me show you this chart. it is the move index. treasury volatility coming down. any chance this could pick up? >> you got inflation prints. the major thing you are at the moment in terms of a pickup is really more inflation surprise. you have not seen much. you want to be careful that forecasting inflation to knowledgeably. but it looks like your pce is going to come more or less in line. probably not just yet, but certainly if you look at what's
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happening in the u.s. economy, you got full employment. you are adding a little spending, a load of tax cuts. -- a load of spending, a load of tax cuts. -- is economic models are right. of course, we have heineken numbers we brought you at the top of the show. another headline to update you on. heineken cutting its guidance to about 20 basis point decrease. later this morning, we will be speaking to the heineken cfo. she will be joining the team on bloomberg markets, "the european open." after facebook and twitter tumbled, is the worst setting in for faang? this is bloomberg. ♪
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nejra: it is 6:19 a.m. in london. hong kong much more sunny than london at the moment. lines coming through from china's state council are for foreign affairs saying that on tradeialogue remains open, but also the u.s. did not fulfill obligations. he is meeting with the u.k. foreign secretary. they are holding a strategic dialogue presser at the moment. the msci pacific index down on the session, snapping four days of gains. internet platforms are set to face tough new content laws in europe as brussels cracks down on hate speech.
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bloomberg has learned companies including google, twitter, and facebook could face fines if they fail to take down propaganda and hate speech. germany has already passed laws that threaten sites with fines up to 50 million euros for not tackling terrorist content. of serious is set to meet later today to discuss the future of the ceo. bloomberg understands it is a scheduled meeting just days before the company reports results. it comes as he was accused of sexual harassment by six women in a new yorker article. heat knowledge there were times decades ago when he made women uncomfortable by making advances, but said he never used his position to harm anyone's career. owned amr holdings is said to be buying a u.s. based analytics firm.
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bloomberg understands the deal could be worth up to $600 million. it is part of arm's push into the internet of things. the world's biggest copper mine is facing strike action after union leaders rejected a pay offer. workers in chile will vote on whether to accept what the company says is its final offer. support for industrial action is said to be overwhelming. a strike ended with no agreement. a rise-- contributed to in copper price and global shortages. nejra: it's time to short faang stocks bank of america says. is the signammering of a peaking market and investors would be wise to prepare for might -- for monetary tightening. the head of investment strategy
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at barclays is still with us. i hesitate to put the faangs into one basket. very different business models. does anything unite them aside from the fact they are over and -- over owned? >> what you could argue is that grouping relative to the rest of tech has a little bit more positioning evaluation and regulatory risk than the rest. this is really a question of to what extent do you want to diversify into broader tech. our opinion is that tech is still effectively like many businesses, the macroeconomic factors, this is an investment cycle still picking up which is going to continue to lean towards tech. that still to just there are legs to run. focusing all your eggs in the faang basket is not the best thing right now. >> is it about putting social media stocks to one side? facebook and twitter plunged after the results.
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>> these are business models that have not been tested by many cycles. we do not really know how they fare in different economic backdrops. you want to be very careful about how much your overall investment assets is geared toward these very new business models. nejra: what parts of the tech sector do you find particularly appealing? >> the thing we're looking to do is play into that business story business capex story. you are vulnerable to the trade war, and that is one of the tricks you have got to play. the main thing we are playing at the moment is once the dust from this trade scuffle settles, we are trying to look through that dust. if you look at lead indicators for growth, there is more of the
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same to come. there is a good strong underlying global economy and economic story in play. that is for you have got to lean portfolios. the capex story, that is where you have got to go. will cap continue outperforming as long as u.s. growth is robust? >> theoretically. is your valuation -- the answer to that is no. aggregatetions at the level are nowhere near where they were in 2000. the other thing to watch in terms of characteristics that have changed, because you can move towards the software model, you have longer duration cash flows. much more like health care and consumer staples where you have got these long cash flows were you can see the future, they start to behave more like perpetual bonds. rise, this rates
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might be one of the sectors that is more sensitive to health care -- sensitive like health care. you have got that strong global economic story, and that is the thing you still play. we have been long tech for the whole cycle. that is starting to fade a little bit. we want to start giving a little more importance to some of the values in areas like some of the areas that have been left behind a little bit amid that tech story and cycle. europe, are semiconductors attractive? >> potentially. the semiconductor cycle does look to be peaking a little bit. particularly in asia. be careful. investment of strategy at barclays investment solutions stays with us. up next, we will talk banks. we will bring you interviews
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with top executives, including the ceos of barclays and credit suisse. ♪
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♪ 6:30 a.m. in london. boj with itsthe rates rising. and mary: let's kick it off in japan can china mainland down about .4% in the hang seng down a most .8%. u.s. and u.k. equity futures pointing to a lower start when trading begins in london and new york. low.gust or summer
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we have five central banks reporting. the bank of japan begin their two-day policy meeting today. conductings they are a fixed rate operation for the third time this month. the goal for the bank of japan is to extend the increase in yields. let's look at what the yields have been doing. the highest they have climbed in more than a year your this is speculation they will tweak or fine-tune the discussed changes to their ultra-loose monetary policy. it is a big week in terms of earnings. where barclays, bp, and caterpillar will report before the u.s. opening bell. tomorrow, apple. negative is saying market sentiment has led to a meaningful gap. here's where you can see it,
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between the msci in white and earnings forecast in the blue. blackrock is saying this presents a moneymaking opportunity. -- expect to >> thank you so much. let's get to bloomberg first word news. u.s., concernse that donald trump on trade and terrace with a mirror -- put america's economy at the brink of recession. protectionism at any level is very detrimental. at the same time, the u.s. treasury secretary says the "ountry is "well on the path for four or five years to sustain annual growth of 3%. mnuchin's rosy outlook is at odds with many economists, as well as the fed. >> we can only project a couple
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of years in the future. i think we are well on this path for several years. i don't think this is a one or two-year phenomenon. we are definitely in a period of or five yearsur of sustained 3% growth at least. juliette: the bank of england's governor says he spends about half of his time preparing for the u.k.'s exit from the eu. itsaid, "let's be clear, takes 50% of my time now. we spend a fair amount of time in the contingency planning. now it does crowd out other thinks." -- -- s."ngs her
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sales increased 1.8% on the year, slightly above estimates. then use will be some relate for the bank of japan as it starts a two-day policy meeting. in greece, officials have said the death toll from the recent wildfires has risen to 91. another 25 people are reported missing six days after the blaze. it is the most deadly wildfire in europe since 1900. global news 24 hours a day, on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. ♪ much. thank you so earnings season continues. we heard from some of europe's biggest banks. this way, rbs, barclays and credit suisse will report for the second quarter. jonathan, good to see you. thank you for coming in.
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what can we take away from the earnings. >> in the u.s., decent trading, equities a strength. particularly the friends, the underperformers year-to-date. two q consensus has come down. if they cannot beat now, they will continue to trail for quite some time. >> what will be the big focus that we will hear from barclays, credit suisse. socgen -- and we saw ubs miss. part of that was a one-off. they have an opportunity to make a nexus to -- an extra step. that 30 billion pounds paid out so far and in june, people said,
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hang on, there could be a next her 20 billion pounds -- and extra 20 billion pounds. ra: are you constructive on banks? >> at the moment. q, we saw -- the top line has been disappointing. one q was disappointing for trading. i will be disappointed if we are disappointed for this quarter. they should have gotten the message is more right. they can't keep blaming europe are being soft on the u.s. nejra: do you prefer the u.s. over europe? . >> at the moment, europe is the value opportunity. this is the area where, if the european economy, which we still see is growing about the
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daschle, should provide a more conducive backdrop with banking profits going forward. even if you don't see it return to precrisis days, banks are cheap. in the u.s., it is a different story, shareholder payout, they are not massively expensive. an economy -- if you have an economy like the , it shoulds motoring be fine. loan growth is growing at a respectable pace. the banking sector should benefit. it has been the weathervane for risk off appetite we have seen this year, whether it is the trade war, italy, the smoldering eurocrisis. nejra: i wonder if there are any
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banks or region you find riskier. are there any areas you would stay away from? >> from us -- for us, you get to tailor your risk appetite. if you want to hold italian banks, that is the riskier end of the spectrum. italian authorities have been making progress for a more stable bet. the reality is, if you are holding core in europe, and a lot of that stuff is priced in. depending on your risk appetite, you turn more to the periphery. that has you feeling more nervous. distentionmake a between the u.k. and continental europe. >> there is much less of a recovery play to do here. european banks and european equities in general, continental in equity.nentally
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nejra: how much of your outlook on banks is predicated on where you see rates going? or are you looking at with the businesses are doing themselves? >> the rate story is helpful. there is increasing evidence to show that we focus too heavily on the shape of the yield curve on rates on how to buybacks or what bank profitability does. in europe, you're not expecting much in rates. is the loan growth story that offsets that. there's no doubt that, if the ecb moved earlier, if mario draghi manages to get at least one rate rise, that might to be [indiscernible] >> i completely agree. , there'sat italy
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plenty for everybody. you can position yourself on the risk curve very easily anywhere geographically with european banks. definitely not expensive. we need some momentum to return. much. thank you so this week, we will bring you interviews with a whole host of executives, including the ceo of barclays. if you have any charts you want to look at, you can check them out on gtv . charts,download those play around with them, take them to your morning meeting as well. ining up, live pictures harare, zimbabwe, where the nation is holding elections. polls around 6:00 p.m. u.k. time, that is when they close to we will be live from the capital next. we will be speaking with the
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, just after half past 7:00 london time. this is bloomberg. ♪
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nejra: it is 6:44 a.m. here in london. looks like we could see u.s. equities extend declines from friday. we saw the nasdaq and the s&p 500 index close lower. now let's get the bloomberg business flash. internet platforms are set to face new content laws in europe, cracking down on hate speech antares messages. and facebooker
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could face fines if they fail to take down propaganda and hate speech. fines up to 50 million euros for not tackling terrorist content. the board of cbs is to meet later today to discuss les moonves. this wasas move was accusedoonves of sexual harassment last week. decades ago when he may have made women uncomfortable but he says he never used his position to harm anyone's career. is set to beings buying -- the deal could be up to $600 million. commentman declined to well a representative did not
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immediately respond to our request for comment. the world's biggest copper mine is facing strike action after union leaders rejected a pay offer. dino --at the as for escondido mine in chile refused to their final offer. globalributed to a copper shortage at higher prices. that is your bloomberg business flash. nejra: thank you so much. let's take a look at what you should be watching this week. a lot happening. first zimbabwe holds its elections since mcgarvey -- mugabe left. speculation around any kind of tweaking. jgb yields moved on that last week.
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on wednesday, federal policy -- it is super thursday for the bank of england. governor mark carney giving a news briefing. we round off the week with nonfarm payrolls out of the u.s.. we were talking about banker names earlier. i want to talk more globally about the earnings picture. this chart shows global disconnect. you have the msci world index blended forward 12-month eps estimate. nailed it. what does this chart tell you? year, lookinghis 12 months forward, 11%. the u.s. is a big chunk of that, obviously. expectations have resume 16%. what you found, if you look at
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context of aem and european underperformance this year in absolute terms, that is what the chart shows clearly. in europe and em, two of our favorite areas, these are coming from already inexpensive levels. it suggests that, if some of the fears do not materialize, this present opportunity. moving beyond what is happening in the current, earnings expectations rising and reports coming in as good, look, the trade war wealth trash all of that -- the trade war will trash all of that. nejra: have investors been focusing too much on the trade war, the prospect of it, at the expense of looking at the fundamentals? will: it is one of the difficult things. economists have done a simple assumption. onyou have that much tariff
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that much import, that affects the gdp. difficult to account for uncertainty and the effects that has on investment. it is very difficult. , becausextent, maybe of the amount of the headlines, the tariff war grabs, it is an interesting story, it may mean it gets exaggerated in our minds relative to the frontal impact and the likelihood of it actually occurring. tune out the trade war. eventually, hopefully, the economic and elliptical celfin -- political self-interest will cause a de-escalation and the fundamentals will shine through. nejra: we have already talked about the fact that your long tech, constructive on banks. but you're also long-run industrials. versusn the u.s., europe, u.s. industrials have
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done worse in recent times. there is an opportunity, especially if you're looking at that -- we go back to the investment story picking up. investment, pent-up all the way up until the middle of 2016, and then it starts to pick up. where is the capital expense are going to? it should be going to industrials in tech. that should be the revenue beneficiaries. it is keeping that kind of post cyclical slump within portfolios. we cannot see the recession on the horizon just yet. that means you still have to invest in a way that shows that growth is continuing. nejra: to bring that that to the oint, what asset classes do you like in em? is it a costs -- is it across the board? >> they tend to be reasonably correlated. the same factors explain performance, whether you look at
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credit, stocks, fx. we are focused on the equity story. the valuation could get a little bit extra. you have stronger earnings growth in the region. that means the stocks are placed to do it. towards the ma. we do taiwan, offshore china. we look at that in the context of what is going on in the world. nejra: what about turkey? will: turkey is a difficult one. there's worries about the central bank independence story. you have law changes, which has given the president mark powers. there are change -- more powers. there are changes to the economic team. everyone is worried about what you will see in terms of central-bank policy. relyig thing is we can't long-term on politicians to make the right decisions at the right time, the painful decisions at
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the right time. it is not in their interests. the incentives are wrong. that's why we are weighted by the u.s. and why people worry about turkey. you have the gathering affects of the lira selloff in the first half. you should have a tougher second half in the turkish economy anyway. this is not an area we will be singling out for investment risk. nejra: just because of the insurgency, you would stay away, looking for an opportunity to get in on lira weakness or any signs from the central bank, if there is a turnaround with an emergency rate hike. will: the more noble investors are looking at the bank that it may be and so on and so on. for us, you've got to be noble. what we like and -- you have to be nimble. what we like about asia, you have better diversification and strong macroeconomic stability in terms of policymaking. your institutional context is stronger and more positive. if you contrast that to parts of
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south america, turkey, and the fragile trio, south africa, turkey and argentina, those areas really show what it means to have stronger institutions. your economies tend to grow faster and more reliably if you have stable law. those are the things we look for in that area. unfortunately, turkey is lacking in that part. nejra: this is what you will be familiar with in terms of globally and where to put your money. u.s. small-cap stocks, this has been the trade to prepare for a potential trade war, money coming in to u.s. small caps and out of emerging markets. is this overdone? will: all sorts of factors go into it. the u.s. economy is clearly humming. you haven't already healthy economic act drop. then you load -- backdrop. then you load onto a fire that doesn't really need it. one of the best ways to play
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that would be your domestically small-cap arena. the difficulty in playing the trade war this way is working out your supply chains are difficult to copper order -- to categorize and predict in terms of how and what and where it falls to and he will have trouble with the cost structure. in a simplest it way, yes, the em should struggle a little bit. but our best bet is really that you will try to look through this and try not to trade it to aggressively -- too aggressively. nejra: thank you so much. we were just talking about em. let's focus on what is happening today in zimbabwe. it began voting for a new leader in a too close to call context that comes eight months after robert mcgarvey -- robert m ugabe was forced to quit. now is michael coe
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hen. so far, is there any side of who is likely to win? >> it seems to be a really close contest according to the few opinion polls. they say it could go either way. the odds are in favor of the incumbent president. will depend on whether that is credible or not. nejra: we understand this is a historic election for zimbabwe. why is it so important? >> since mugabe has stepped down, it was marked by political turmoil. looking for elections to supply the foundation to start rebuilding their international repetition
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and reboot the economy, which was laid to ruin the past two decades. nejra: what do we see as the best outcome for investors? >> a lot of investors we are speaking to seem to think -- will be the better outcome. the economy,d attract foreign investment, and make the country open for business. he seems to be the favorite. the new leader of the main opposition is somewhat of an unknown. he is very young, 40. not sure how he would manage the economy. cohen live from her right, zimbabwe. how is governor mark carney preparing for brexit? with our very own stephanie flanders coming up next. we will talk through a big week for central banks. we get decisions from the boj,
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the fed, and the bank of england. this is bloomberg. ♪
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♪ good morning. this is bloomberg daybreak. mnuchin versus the economist, predicting sustained annual growth for the next four years. time to this tech. bank of america recommending shorting fangs. bonanza.ank policymakers in japan, the u.s. and the u.k. meet this week with hikes expected from the r.b.i. and the uab.
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we are just under an hour away from the european equity market open. looks like we could see a down day on this monday in europe. we saw the u.s. close lower on friday in terms of the s&p 500 and the nasdaq. we have seen some weakness in asia, snapping four days of gains. if we get a little recession in europe, that would snap two days of gains on the stoxx 600. looks like there could be some broad-based losses on the indices on this monday. if we look at how the bond market how -- might ship up, we have a cash market open right now in europe. dse 10-year treasury yiel have been steady. we had another fixed-rate operation from the boj. judging by the futures here, we could see the 10-year bund yield if anything it -- if anything
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yield lower. get the bloomberg first word news. u.s., charles koch has voiced concerns that donald trump's actions on trade and tariffs puts america's economy at risk of recession. protectionism at any level is very detrimental. at the same time, the u.s. treasury secretary says the fortry is "well on the path four or five years of sustained annual growth of 3%." with many odds economists, including the fed. >> i think we are well on this path for several years. i don't think this is a one or two-year phenomenon. ofdefinitely are in a period 4% or 5% -- for a five years of
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sustained 3% growth at least. juliet: donald trump has again floated the idea of sitting down the federal government if you does not get his way on immigration and his border wall. he tweeted he is willing to bring washington to a halt if the democrats fail to approve legislation on border security. action on the border wall can wait, democrats say, until after the election. britain's prime and's or given a prime minister- has been given a fresh hope of striking a deal. his countryni says will back the u.k. and accuses swindlingan union of u.k. voters. in greece, officials have said the death toll from the recent
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wildfires has risen to 91. another 25 people are reported missing six days after the blaze. it is the most deadly wildfire in europe since 1900. global news 24 hours a day, on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. you can find more stories on the bloomberg. asia, we see equities and currencies and bonds tracking lower. you have the nikkei finishing down about three quarters of 1%. a lot of weakness coming through in the chinese market. .75%.x down you cannot stop the run that the market has been on. checking in on stocks we have an watching, the flowing effect from wall street with week is coming through in the tech space.
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you see tencent is the worst performer when you look at arctic cat in the region. to the upside, there have been good earnings coming through. rico in japan came through with good first quarter numbers. the main reason for the overshoot was better than expected growth in its paid search advertising sales. a few winners. overall, a bid of a negative start to the trading week. nejra: thank you so much. let's bring an exclusive. the bank of england governor says he has spent half of his time on the u.k. exit from the eu. he says let's be clear, it takes 50% of my time now. we spent a fair amount of time on the contingency planning. now it crowds out other things. we could have a disorderly brexit stress test. you can read that full interview in the latest edition of
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bloomberg markets. us now to talk through the interview. we hear that mark carney spends 50% of his time thinking about brexit. what do we know about contingency planning? jill: this is interesting cover on how much he spends on this. we know there's quite a bit of work on the financial stability side. that is all quite public. the issue of derivatives, for instance. the sbc at the blank -- at the bank says that joins are at risk. looking at risks to financial services. on the monetary policy front, if you look at carney speeches, like the one in may, all options are still in the table. he even flag, if there is a disorderly transition to a new brexit deal, they could balance brexit-off after the
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vote results when they started qe and cut rates. while the bank of england is expected to raise rates this week, all options are still on the table. there is a high level of uncertainty. nejra: the interview touches on trade, something with a lot of uncertainty. mark carney telling bloomberg that a larger increase in tariffs will have a substantial impact. we can choose the low road of a high road ofnd liberalization of global trade and services. the low road will cost jobs, growth and stability. the high road can support a more inclusive and resilient globalization. how big of a threat is a trade war for the u.k. economy? will that come up in the assessment? jill: it will be flagged as an outlook this week. the u.k. economy is a very open economy. the bank's current forecast is
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expecting growth in a u.k. to the -- to pivot from consumer spending to trade and investment. that will surely be fined as a risk. that being said, since that interview, there's been some relatively positive news on the eu-u.s. trade front. that was something draghi mentioned last week. trade talks are being conducted within an existing multilateral framework. nejra: super thursday, the rate hike is priced in by the markets. but we look ahead to forecasts as well. the boe -- publishing new forecasts. mark carney mentions this. he says it is important to have. relatively clear messages. now they have to be accurate. should people in the country be oriented that rates are more likely to go up without not? yes, they should, because that
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is more likely, but not at a more rapid pace. i am already getting lost. we will also hear from the neutral rate. jill: very interesting decision. at the end of the day, we are getting you forecasts. there is a rate rise coming for not typically positive reasons. the potential growth rate of the economy is now just 1.5%. growth this year is expected to be 1.4%. that is still generating inflationary concerns. it could give some indication as to where policymakers see interest rates settling, what this new normal is post crisis. that could give households some indication. if it is limited and gradual, at what point does that stop? nejra: thank you so much.
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you can read that full interview conducted on june 4 in the latest edition of bloomberg markets. really worth a read, especially saying you up for a big week for central banks. on the note of a big week for central banks, are you positioning at all for any kind of ruptures in the market at the end of this week? >> i think this week we will not see anything dramatically unexpected. the u.k. looks like they will raise rates. thing jillteresting said was the commentary on where the neutral rate is. in our portfolios, we don't have a lot of exposure to gilt. but we have added a bit recently. we think longer-term interest rates will probably not move up that much, even if we have short rates rise gradually. that's because economic growth in the u.k. will probably be 1%
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to 1.5%. generally, long-term interest rates tend to attract long-term growth and long-term inflation. nejra: if we rewind back to decisions we will get before the boe -- of course, we have the boj tamara and the fed on wednesday. the boj has been interesting. we really have seen market reactions quite strong in the jgb market, justin -- just on anticipation. i think they have already done probably most of what they wanted to do, which is testing with the market reaction would be. we have already stopped doing some of the longer data purchases. those have been scaled back. we expect to see the longer 9.1 or rise be at further. . in bankt expect change of japan policy.
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very equity market can be fx-linked as well. so they do that, you could see a big rise in the yen, which has impacts for their exporters as well in the equity market. nejra: do you expect the yen to move higher? it has not really been acting as ace -- a trade were through the -- as a haven in the trade war drama. >> japan will ease monetary policy, but not likely to be until sometime next year. they still have quite low inflation numbers. they are not seeing a lot of wage growth. i don't think there is a ton of economic reasons they can look to to say this is the time to raise interest rates or to dramatically scale back on quantitative easing. nejra: the stock about the u.s.. the gdp print on friday got a lot of attention. is this as good as a gets on u.s. growth?
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u.s. is hard to see the growth being 4% consistently for the next three to five years. nejra: what about a 3%? >> it will be difficult. there are a lot of longer-term economic factors that constrain the us economy, and all economies globally, in terms of aging population, lower road activity growth. it will be interesting to see how the fed reacts in a statement this week, what they make of the higher growth numbers. we also have a jobs report coming out on friday. of theen the state world, it is hard to see that performance repeated in the coming years consistently. nejra: what is everything you said about the boj and the fed mean for your asset allocation globally? >> we added a little bit more into government bonds recently. not in japan are in europe. but in the u.s. on the u.k.. isthink economic growth now probably about as good as it gets. that doesn't mean we have a
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recession coming, but we were not -- but we are not going to 4% or 5%. dated yields will stay flat. especially in the u.s. come a few have treasury yields around 3%, that about covers inflation. so you're kind of flat in terms of real yields. treasuries can act as a good hedge if we do have more turmoil in markets. we have become a little bit less negative on bonds. i would not say where positive yet. but equity markets are in good shape. we have valuations fall this year because we have had dramatic increases in earnings growth. earnings growth in the u.s. this year. we had equity markets come down or be flat in some cases around the world. we will talk more about equities in a moment. on the bond side of things, the bond market reaction to the u.s. gdp seemed to show that investors don't see that level of growth sustaining in the longer term. do you like the longer end of the u.s. treasury curve, like
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10, 30, that sort of area? >> the curve is quite flat today. you have to have longer dated bonds if you use them as a hedge. a two-year bond will hold its value, but will not do it -- do much as a hedge should something happen in markets. if you look at it that way, you have to do longer-dated bonds. this year in the u.k., we moved from shorter-dated bonds to longer dated gilts, just because we want that aspect of it. stay with us on the program. don't forget to catch our coverage of three of the world's biggest central banks this week. tomorrow, we hear from the bank of japan, a news briefing. the next day, it is the u.s.. federal reserve. on thursday, the bank of england announces its latest decision. governor mark carney gives a news briefing.
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if you are a bloomberg customer, you can watch the show using tv as well as a via stream. you can follow all of our desk video stream. you can follow all of our charts and message the team directly. this is bloomberg. ♪
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♪ london, 40s 7:19 in minutes away from the european market open. if we look at how they might open, we could see a lower open going to days of gains in the stoxx 600. we have seen some losses in asia as well. on fridaylosed lower in terms of the s&p 500 and nasdaq. tech stocks providing a big drag. a big week for central banks, 10-year treasury yield traded at
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2.96%, higher after a drop friday following the u.s. gdp print. let's get the news business flash. : internet platforms are set to face new content laws in europe. companies, including google, twitter comments race book, could face fines from number if they fail to take down propaganda and hate speech. the board of cbs is set to meet later today to discuss the future les moonves. it is a scheduled meeting just days before the company were boards results. it sounds as he was accused of sexual harassed by six women in an article published last week. acknowledged there were times, decades ago, when he may have made women uncomfortable by making advances, but says he
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never used his position to harm anyone's career. arm holdings is said to be buying treasure data. the deal could be worth up to $600 million. m's pushrt of ar into the internet the thing. -- internet of things. the world's biggest copper mine is facing strike action after union leaders rejected a pay offer. workers at the escondido mine in chile will vote on whether to accept the company's final offer. support for industrial action is said to be overwhelming. talks last year failed and triggered a strict with no agreement. a contributor to a global copper shortage and higher prices. that is your bloomberg business flash. nejra: thanks so much. another busy week earnings. several tech companies are reporting only resorts --
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results on tuesday. the day after, auto manufacturers rep or as donald trump and john claude yunker agreed to pursue lower import levies. to -- youruct constructive on equities. is that globally -- you are onstructive equities. is that globally? >> it hard to see them going off a cliff when companies are growing. the u.s. looks quite positive in the short to medium term with the momentum they've got in terms of economic growth. the u.k. is a good value way. a lot of companies test good ay.ue play -- good value pl there are attractive value names in england as well. nejra: are there some you like more or less given the earnings
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season? >> health care is something we have had in our for oil for a couple of years. nejra: is that a long-term play? >> yet, but with all the worries about trade this year, he's the a lot of grades -- you see a lot of rates -- you see a lot of upgrades. there is a lot of innovation. this earnings season, we started to see good earnings reports especially from the big pharma companies that have been like pushing her while. energy is another sector where the earnings growth is on par with energy. people forget about that. that is just the effect of heil -- higher oil prices and the deployment of capital. nejra: this chart shows a global disconnect. they're blue line is the msci world index blended forward 12 months, eps estimates.
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the white line is the msci world index. the church show investors are ignoring the fundamentals in favor of concerns around a trade war? or does it tell you something us? >> the trade war sentiment and the hits sentiment is definitely where the impact will be. economically, you have not seen a lot of the impacts of whatever the trade war might bring, whatever is implemented from it changes every week at this point. this year, he had earnings rise dramatically. . a lot of that was the u.s. tax cuts. . many may have written that off as a one-off. but there's good economic growth overshadowed by politics. i would agree with that assessment probably. stocks are more attractively valued today than at the beginning of the year. nejra: does the bull market have longer to run? -- >> wek it does think it does. we do not see any signs of a
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u.s. recession. there are some things like the yield curve rising. but you've got good economic growth, low unemployment. you've got a bit of wage growth, moderate inflation, all the signs are pretty positive. nejra: what about tech? i don't want to put it all in one market -- basket. americaaw bank of saying short the fangs. they are incredibly different business models. you cannot put apple and netflix into the same bucket. for amazon and facebook. -- or amazon and facebook. t is valuation -- we look at how the ration. valuations,look at regulatory framework, future growth opportunities. there's still a lot of growth in the tech sector with things like cloud computing, all those areas
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have further to run. so we still have technology in our portfolios. we are not shorting it any means. we are being selected by which names we select. we don't sure it investments. exposurehave a lot of -- we cut some of our emerging markets exposure earlier this year. part of that is because the u.s. dollar has been strengthening. that is quite negative for emerging markets. we had a great run last year, but we also have political issues, brazil, turkey, even india with thing slowing down. that is an area we are less positive on. nejra: thank you so much. great to have you with us. this week, we will bring you interviews with a whole host of top desktop executives, topuding the ceos --
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executives, including ceos of barclays. tune into bloomberg radio. this is bloomberg. ♪
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>> good morning. welcome to bloomberg markets. we are live in london. i am guy johnson. matt miller in berlin. matt: futures point to a negative open in europe. the cash trade is less than 30 minutes away. ♪ guy: the boj back in the market here in kuroda makes it clea


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