♪ anna: good morning. welcome to "bloomberg markets: european open." we are live from our european headquarters in the city of london. i am anna edwards alongside matt miller. matt: today the markets say curb your enthusiasm. asian stocks mixed and european futures down. cash trade less than 30 minutes away. ♪ anna: easy does it. jerome powell reiterates the stronger take for a rate cut,

but his colleague pushes back against the 50 basis point move. >> i think 50 basis points would be overdone. i don't think the situation really calls for that, but i would be willing to do 25. things can change. anna: goodwill from washington. the u.s. is said to delay the next round of china tariffs. trumpet meets with xi at the g20 this weekend. h2o and hot water. asset see thegers biggest decline. good morning. matt: good morning. less than a half-hour away from the start of european trading. i am looking at a chart of bitcoin. than now trading for more $12,600, the highest we have seen in well over a year.

it looks to have gone parabolic. maybe a warning? maybe people investing should be watching out. ,bviously, this is a commodity currency, depending on how you see it, that tends to jump higher and crash over and over again. this last 12 months, jump higher. take a look at the futures trade in terms of european equity indexes. dax futures as well as cap futures down about -- cac futures down about 0.3%. reflective of a fairly mixed picture in asia. we see some of that reflected on the gmm. interesting moves in fx markets. new zealand dollar up right now. apparently, there was one erroneous tweet from one company which meant that markets and

algorithms were a little chaotic as a result of that no change decision. the fed maybe not quite as generous as some hope for. what could we hope for for the g20? even if the u.s. does not wrap up those -- ramp up those tariffs right away -- the dollar stronger. president trump will not be pleased about that in oh zika -- osaka. we also have the picture here for oil, which is interesting. crude prices higher on brent and wti. the shrinking of the stockpile data front and center. joined by our guest from sydney. is it inevitable the next global

currency war will begin at this week's g20 meeting? i know you have been considering this question this morning. , given that topical we have these reports that president trump is not happy with the strength of the dollar. he even said as much not long ago. >> he has said that on numerous occasions, one back to the early days of his presidency. it is understandable, because it has been a real feature of the post growth gfc. you have the last 10 years, just about anytime anybody gets uppity when it comes to rates, the currency war brings them back down. going into the g20, we think it topic,ry, actual something in front of everyone. considering the fractured nature of the g20 universe at the

moment, it is hard to see the managing test them managing -- them managing to much in the way of tamping down on currency were concerns -- war concerns. you looked at what happened with the new zealand dollar today, it does not look as impressive because we have had a strong day for the u.s. dollar. the central bank came out and said we are holding rates at a record low. we expect to cut them again probably soon. we have strategists bringing forward forecasts for rate cuts after the statement, yet the currency rises. we are going to enter a currency war. some of my colleagues think we are already in one. perhaps the winner, so to speak, might well end up being the dollar. it has got much more rate cut any munition than any of the --

rate cut ammunition than any of the others. u.s. dollar perhaps has more to lose. matt: certainly, it seems that warning shots may have already been fired. garfield, what do you think has been priced in? it looks like in terms of rate cuts, at least a quarter-point has been priced in to these markets globally. what about in terms of a trump-xi meeting? what has been priced in? what are the markets expecting? >> i think the markets are actually kind of weary of expecting anything much. both sides have continued to talk tough. it is extremely unclear if there is really much of a consensus building, as far as a way forward goes. perhaps they do not want to make things worse, but it is hard to

see a path to make it better. i tend to think that the markets are mostly pricing in a bit of can kicking. we have had so much of that. europeanen one of the policymaker's biggest ever exports, can kicking. some would be ok with that. garfield, let me ask you about what we are seeing in treasuries of versus equities -- treasuries versus equities and the way they seem to be pricing in different things. we see treasuries coming down and the yields going higher today. in terms of the bigger picture, that both of these tests story -- picture story that both of these asset classes are painting for you, do they point in a different direction? >> and comes down to whether or

not you believe in the magic of insurance rate cuts. treasuries have been pricing in for a long time an economic slowdown. part of the concern perhaps on the equities front had been that the fed was not seen responding to the economic slowdown. -- pivotedted we are,ll stay where it started a rally. warou sort of say, no trade and a fed on hold equals equity gains. trade war and fed cutting would seem to be signaling equity gains, whereas if the fed holds, then equities are in trouble. further down the track has to be the concern. by the end of the year, you have

to think that either treasury yields are higher or stocks are lower. matt: thank you so much for joining us. garfield reynolds is the head of the bloomberg asia mliv team. mlivan get his insights at on the bloomberg terminal. if you want to pitch in our give us your take on the question of the day, and that is, will the next global currency war begin at the g20 meeting, go ahead and go on your bloomberg. >> u.s. prosecutors have joined a multinational crackdown on into tried -- insider trading. the investigation focuses on a group of traders in europe and the middle east. they are suspected of having infiltrated banks and companies to obtain confidential information on may good deals -- mega deals.

president trump has threatened iran with overwhelming force if it attacks the u.s.. tensions continue to flare between the nations, with the president warning bit islamic republic of of the duration. last week -- of obliteration. oil could hit as low as $30 per the y if china devalues uan. beijing could let the currency weaken. china may even decide to ignore iran sanctions, resuming crude imports from the gulf. opec's meeting next week will be key to the future of the group's production curve. they are set to expire, with russia leading the calls for a wait and see approach. we spoke exclusively to kazakhstan's president. so we will be continuously

pumping. we want to be in full compliance with the opec plus agreement. our commitment is very much strong. we are open to the international club permission. we want to have -- cooperation. we want to have good cooperation with opec. >> global news 24 hours a day, on-air and on tic-toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. matt?nd anna: thank you so much. h2o's liquidity problem. more than 5.6 billion euros of assets evaporate. the money managers say outflows have flown since monday. is also always available to you on your mobile device or on dab digital radio in the london area. this is bloomberg. ♪

♪ welcome back to "bloomberg markets: european open." right now, 44 minutes into the hour, still 15 minutes away from the start of trading. take a look at futures. we are looking at losses in terms of ftse futures. cac and dax futures down.

as asset managers continue to feel the pressure in this challenging macro environment, the texas backed h2o is the latest casualty. after morningstar suspended its rating on liquidity concerns, which is kind of ironic, the funds have come under scrutiny, bleeding $6.4 billion of assets in just four trading days. eniorng us is a s banking analyst at bloomberg intelligence. are investors still pulling money out? >> yes, i suspect. they did the right thing. theymproved liquidity -- improved liquidity. they are doing all they can to stem the outflows. i suspect this will continue for a while. when you bear in mind that this fund had grown 24 since 2012 to

since 22 -- 20 fold sice 2012. they have allowed funds to bend the rules slightly. there is less liquidity in some funds. obviously, you would be able to tell if you are morningstar or one of the investors. then were we had not thing -- we needed to bit -- we need to get better scrutiny and better reporting. we know we are getting a report in the summer. how liquid are these things? matt: so this is not systemic,

in your opinion? when we were approaching the weancial crisis in 2008, started to see a lot of things like this happen up until the crash. you don't expect that is the case here? >> the report we have got out this morning, we talk about bp, and ubs, the profit warning at the beginning of 2008 on real estate assets. there were flags about other things. we are not saying there is no risk. there are pockets of asset classes were certainly there are questions about credit quality. the amount of leverage in these funds and the liquidity of these funds is a big unknown. i think what we are flooding today, we don't think this is systemic. there will be pockets of problems. investors have to start understanding the underlying

assets. , andthese bonds or loans autonomous research has picked that up, so i think it's a very fair point. anna: i was going to ask you about that. you mentioned that to me. what is the significance of this , when you start doing one thing and it morphs into something else pretty quickly? >> an amazing track record for a big company. -- rly he was known for his income style. how much of that in an income fund was appropriate? quickly,s grow very you have problems investing and continuing to grow. for us, flags are kind of one, has there been a style drift? two, how good is reporting?

three, how can you give investors comfort about the level of liquidity? matt: thank you for joining us. bloomberg intelligence, jonathan us. joining let's get the bloomberg business flash. says 2020 will be a transition year. it sees on improving outlook for e-commerce and the company has already made progress with revenue per package up more than 2%. that is tempered by concerns that trade tensions will worsen. china is considering adding the carrier to a list of so-called unreliable entities. tesla could be about to set a delivery record. elon musk says the electric carmaker will need to go all out but could hit an all-time high in quarterly deliveries. the company's previous best was just over 90,000 vehicles.

today, resumed its rally going over $20,000 -- $12,000 for the first time in a year and a half. bitcoin has more than tripled this year. cryptocurrencies have been gaining acceptance and attracting more interest from mainstream institutions. that is your bloomberg business flash. matt: thanks very much. you want to pick it up? anna: why not? up next, we will take a look at the stocks to watch at the open, including chipmakers. more on that next. this is bloomberg. ♪

♪ matt: all right, just about six minutes to go until the start of trading across europe and the u.k. let's get your stocks to watch around the newsroom. we are focusing on chipmakers. dani burger is looking at tobacco firms. --t's the story with this so the stock? >> we will be looking at ams, infineon. micron technology said they can

still ship products to huawei. we saw the stock surge after that. yara?what have you got on >> they are looking at doing an ipo for its industrial nitrogen business. they are doing this because they want to focus more on premium products. they want to carve out a position for themselves in that market. we are seeing some mixed calls on this. matt: finally, the interesting story on a tobacco -- well, a vaping ban affecting tobacco companies. >> we have the first major u.s. city banning the sale of electronic cigarettes in san francisco. look out for british american tobacco, imperial brands, who both sell electronic cigarettes,

likely to be under pressure today. anna: thanks to all of you. plenty of sectors to watch and indeed, individual stocks. you can get up to your speed -- up to speed with all of the stock specific stories. bca marketplace, not as big as some of the other companies. this company out of it germany. we have seen key shareholders exiting that. rps looked a little bit light. it seems that u.s. futures are pretty flat. matt: yes. u.s. futures have been pretty flat most of the morning. let's take a look now as we head to break at european futures. they continue to point down.

not quite as bad as they were about an hour ago. you see ftse futures down a little bit less than 0.2%. the open is up next. this is bloomberg. ♪

♪ anna: a minute to go until the start of cash equities trading this wednesday morning. welcome back to "bloomberg markets: european open." let's have a look at the market position. at the asian session was a little lackluster, down on the msci asia-pacific. maybe it is about a lack of progress coming from the g20. wti crude up a little bit in this morning session. in fact, up quite substantially in this morning's session. this is the yield on the u.s. 10 year. we heard from jerome powell yesterday. we heard from his colleague and

even he does not want 50 basis points cut. european futures look to be more negative. ftse futures, dax futures, and cac futures suggesting there could be a bit of a draft lower at the start of trade. european equity markets just getting opened up this morning. strength coming through in the u.s. dollar, which will not please president trump there and much. we will talk -- very much. we will talk more about markets, undervalued or overvalued, later. euro stocks pretty flat at this point. we will wait to get a fuller complement as stocks open to get a sense of where we are. a bit of weakness coming through on the british pound. euro stocks dropped further down. opening pretty

firmly, solidly in negative territory. the sector breakdown for european equity markets. we were flagging a couple of sectors to keep an eye on, tobacco stocks, san francisco banning the e-cigarettes. keep an eye on the chipmakers as can all beinfineon in focus as we got news from another chip business in the united states. consumer staples in the negative. industrials in the red. we have areas of green coming through in energy, not surprisingly, as we saw oil prices going higher at the start of trading. some of those material stocks not doing badly as well. that could be somehow performance for london. what do you see in the movers? starters, 400or

stocks are down, and 165 are up. in terms of the winners here, ams is up. tech stocks look to be doing well today. we heard about the chipmakers. see amsising -- we rising, possibly in line with micron. we see tech stocks getting this morning. if you change it down two points, you can see it is the oil stocks really powering us up-to-date. up today.day -- you see miners up as well, rio tinto. novartis.he downside,

we also see some of the defensive stocks on the downside. unilever is down right now. some of the consumer staples are following this morning. european markets desk falling this morning -- falling this morning. european markets lower. the futures do not look very changed in morning after jerome powell warned about rising threats to the economy. he said the lack of progress in the trade war and weak economic data are still concerns. >> the cross currents every emerged, with apparent progress on trade turning to greater uncertainty and with income data raising renewed concerns about the strength of the global economy. matt: markets have been pricing in a reduction of almost 50 basis points for next month's meeting. waterbullard dumped cold those expectations. >> just sitting here today, i

think 50 basis points would be overdone. i don't think the situation really calls for that, but i would be willing to go to 25 sitting here today. i hate to prejudge meetings. things can change. matt: joining us to discuss is monica defend, head of strategy at amundi. what do you expect from the fed? do you think moore is priced in then we will get -- more is priced in than we will get? monica: the economic cycle in the u.s. is not justifying such a dovish stance from the federal reserve. what we did is look in the past what happened. consistently with pmi's around 50, 53, which is in kind of a limbo zone, and eps has usually --n growing threat 3%-5%

growing around 3%-5%. we think that they might act, but honestly, we would expect them to wait until july to get some more of the macro ratings in. anna: let me ask you about a bit more about some of the underlying data from the u.s.. interesting to see some of the jobs data coming through yesterday. some referred to this as a warning for the markets. this is the jobs hard to get, jobs easy or hard to get number. in the white, just a small drop off at the end here. this is survey data, which some suggest is predictive of negative outcomes for the u.s.. are you concerned about any early warning signals in the

u.s. around a recession? monica: the session is not our base case scenario. honestly, what we need to look at is going below the gdp surface, and then looking at the quality of data -- at equality debated -- of data. looking deeper -- the quality of data. looking deeper into the quality of writings that will be released -- ratings that will be released. matt: what do you think the ecb will be doing here? they have nowhere to go in terms of cuts. there is no zero bound. it could be much lower than that. what kind of efficacy would that have? will they do it? monica: i think that president -- boldly oneek

the ecb position. we think they will be reactive to the fed. this is likely where the ecb is going to act. what we think is that they will purchase first, as soon as the fed packs, just ask and then only later they will look into cutting rates. anna: it is interesting to look at the response we got to dovish nest in central banks -- dovishness in central banks. cannotinted out they both happen in tandem, or maybe they are giving us different signals. do you think that -- what kind of signals are we getting from

the bond market versus the equity market and which one makes sense to you? monica: i think the fixed income market is maybe overshooting. we need some more data to come , inugh on the equities side particular the reporting season in the u.s. that will be opening up soon. that will give us much clearer picture of what will be happening. if you look at the s&p 500 analyst forecast, they still point to a 10% expected growth. we think this is too much. we are more comfortable with it 3%-5% expectation over the next year. the markets will react accordingly. whether thepends market is going to interpret the

monetary policy stance as insurance or preemptive move, or a reactive move. in the second case, the equity market would be negatively reacting. it -- in thecase, first case, it might be comfortable for the equity markets to the tire. -- to lift higher. matt: monica defend his head of strategy at amundi. we will bring you the stocks on the move so far this morning. this is bloomberg. ♪

eradicate a point to child abuse.

♪ anna: welcome back to "bloomberg markets: european open." european equity markets on the back for this morning. outperforms just a little, fairly flat this morning.

daxcac and ask both down -- both down. a concern about lack of progress at the g20 in the mix. >> my movers are all to the upside. individual gainers here. thyssenkrupp up nearly 5% after a company may be preparing an offer for their elevator business. ams also to the upside. micron technologies in the u.s. says they are still shipping some products to huawei. that is some good news and positiveness in terms of the test positive news in terms of the chipmaker market. up -- positive news in terms of the chipmaker market. adidas is up. anna: thank you very much. there may be some reprieve from

the next round of china tariffs. the u.s. is open to delaying the duties as both sides prepare for the meeting of president trump and xi at the g20 some. both sides still want -- g20 summitt. this weekend's meeting is a crucial juncture in the nearly two-year-old trade war. seems like longer sometimes. monica defend still with us. i want to ask you about the relative risks and rewards for the markets at the moment. at jpmorgan put quite nicely the top process that the market is going through. there is so much the fed can do to cushion investors from a trade war. would that be your thought as well? monica: on a longer-term perspective, we really don't

like the fact that the financial markets, in particular the equity markets, our that engaged -- are that engaged. this game has to end. central banks cannot forever be the only game in town. we think the fundamentals have to backup equity growth. if you look at the current levels and fundamental expectations, there's not much we can get out of the equity market. we think we are really approaching the end of a bull market, but we are not arriving there in a bubble. regime theeflation central bank has been using -- we are better positioned than we were in the past, but we are approaching the end of the bull market. matt: so you basically expect us

to see sort of a soft landing here? what do you expect for growth then, and inflation, or lack thereof, as this trade war continues? monica: if you look at the big numbers, sothe gdp we expect some softening and consolidation just a little below the potential and inflation we think will stay low longer. inflatee war can uncertainty. uncertainty is already reflected in the cap ex cycle. this will eventually have some negative spillover if the uncertainty is going to persist. having said that, the g20 meeting is a very important event in our agenda. with think negotiations will

continue -- we think negotiations will continue throughout the remainder of the year. anna: we should not hope for much at this g20. what about the concerns around currency and strength of currency? president trump has made it very clear that he does not like the strength of the dollar. i have a chart that shows the trade weighted index of the dollar. that is approaching on all-time high. that is one that some look at. at the when we look purchasing power parity function on the bloomberg, that has suggested some overvaluation of the dollar versus other currencies. how overvalued do you think it is? monica: we use it as an indicator of liquidity. 40% of the trade weighted dollar is made up of emerging currencies. theould really like to see persisting in order for the

emerging markets to gain some good moments in the market. the u.s. dollar, but everyone would actually like to have weaker currencies. the europeans as well. not in hisraghi is target, but actually, the ecb is going to react if the fed is -- g to the first asset class that will react will be the u.s. dollar. we do not think we will see much movement in the u.s. dollar. maybe we might see some weakening of the euro just because the political agenda will be richer. might be aat 114 good target. matt: we are going to get more from monica defend, the head of strategy at amundi.

let's take a look at the sectors on the move so far come almost 20 minutes into trades this morning. we are looking at on the day, oil and gas being the only substantial winner. banks are up as well, just treading water. oil and gas stocks, and these are big, heavy stocks, so they negate some of the drops. the index is down across europe and the u.k.. all of these other groups are care, real by health estate, construction, food and beverage. you see some of the defensive stocks on the way down, really dragging us into negative territory. it is a sweltering in germany. the country's stocks are on track for a cool monthly gain. we will take a look at what is driving the dax's best june

since 2003. this is bloomberg. ♪

♪ matt: welcome back to "bloomberg markets: european open." we are 22 minutes into the trading session right now, still looking at losses across the equity indexes. we see the dax and cac down

0.2%. the ftse mib as well. we are in the middle of a blistering heat wave in germany. temperatures are on track to beat a june high of 38.2 degrees today, over 100 for those of you that speak fahrenheit. it has been the best june for german stocks in 16 years, as optimism around looser monetary policy and a rebound in carmakers for an advance of more than 4% on the dax. monica defend is still with us. let me get your take on carmakers. there has been a few head fakes so far with production. we got the first half would see a pick up after a drop in the second half of last year -- the first half would see

a pickup after a drop in the second half of last year. monica: we think the automakers will improve in the second half of the year. it will be important to not get the tariffs on that. that is one of the risks we have been carefully watching out. china, for example, will recover momentum and the remainder of the year will have a good spillover into the german economy and in the car sector in particular. we think really that germany is really going to get some more momentum in the second part of 2019. anna: what about european stocks in general, monica? levels, valuation arguments, do you think there are reasons to rethink exposure and pickup exposure to european stocks? monica: it is something we are currently implementing throughout our asset allocation.

you are mentioning the light positioning and the fact that the market has already discounted the war. from a valuation perspective in relative terms, maybe you look tracked.e you need to select high-quality. stocks. . see -- do you you see, monica, stocks here that are extremely unloved? sectors that you think represent a good value? is the value play too soon? is a bighe value play subject. and positioning is a stream. for value, to outperform, you really need recessionary conditions to be there, which is

not the case. we are selecting where the position is really -- it is still a stockpicking story, not yet a top-down story. anna: what about credit, other types of debt? what is your preference? monica: we are building up getting the late financial cycle. in certain environments where the central banks seem to be just want to prolong this -- want to prolong this financial cycle, we think credit will stand out, and in particular, european credit. we like a credit. on the equities side, we really have a more cautious exposure with a particular preference for european equities. anna: thank you very much. thank you for your time this morning. monica defend, had a strategy at amundi.

germany's cabinet discussed the 2020 budget. government officials have told bloomberg expenditure will be cut by 3 billion euros. we speak to marcel fratzscher, president of the german institute for economic research in berlin. this is bloomberg. ♪

matt: 30 minutes into the trading day, curator at top headlines -- here are your top headlines. jay powell reiterates the case for rate cuts, james bullard pushes back against the 50 basis points. >> 50 basis points would be overdone. i don't think the situation calls for that. willing 25.be things can change by the time you get there. matt: goodwill from washington. the u.s. is said to delay the next round of china tariffs. trump meets with xi jinping at the g20.

h2o and hot water. the money manager sees the biggest single day drop after clients pulled more than $3 billion on monday. good morning, welcome to "bloomberg markets." i am met miller in berlin alongside anna edwards in london. anna: half an hour into the trading day, 433 stocks go down. we do have a bit of a move to the downside. g20, seeing if that delivers on tariffs and trade matters, what it delivers on fx. in the meantime, we have oil prices headed higher. we see some of that reflected here. points, youorted by would see some of the biggest gainers coming through the energy sector. but we also have moves higher from ams in the chip sector.

we had a positive read across from a counterpart in the u.s.. interesting to see those moves. --had an upgraded to adidas upgrade to adidas. a number of airport operators to the downside and a broker rethinking expectations surrounding various airport businesses. generally speaking, the move is modestly negative as we wait for the big events in osaka at the end of the week. let's get your business flash in dubai. growing and downside risks have reinforced the case for lower interest rates. that is according to fed chairman a jerome powell. this as market consensus is building the fomc will cut rates in the coming months. we asked james bullard about the size of a potential reduction. just sitting here today, i

think 50 basis points could be overdone. i don't think the situation really calls for that, but i would be willing to do 25 today. things can change by the time get there -- you get there. >> there may be summer pre-from next round of china tariffs. the u.s. is reporting willing to suspend duties as the u.s. and washington a restart trade talks. it may be announced after the meeting with president trump and xi jinping at the g20 summit. overwhelming force, that is what president trump has threatened iran with if it attacks the u.s.. tensions continue to flare between the two nations with the president warning the islamic republic of obliteration. last week, trump abruptly canceled airstrikes. time, clean energy

supply more of america's electricity and then coal according -- than coal according to april data. generated 68.5y million megawatt hours of power, the most clean energy the u.s. has ever made. 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 and map. -- and matt. thanks.anks very -- germany's cabinet meets to discuss the 2020 budget today. officials told bloomberg expenditures will be cut by 3 billion euros but defense spending will rise by 6 billion. joining us is the president of the german institute for economic research. thanks for coming in today.

as brussels and the ecb call for germany to spend more, they are going to reduce spending. is this because of a budgetary shortfall? less additional revenue them is planned cash ban planned.ed -- them was matt: there is no budget deficit, in fact, there is still a budget surplus. thee germans like surpluses difficulty is that germany has its own debt break. it means they have to run a surplus. matt: a legal debt ceiling. saying structural deficits of no more than 3.5% of gdp. it essentially means the german government has to run a small surplus.

the tragedy of this issue is that the government is not spending enough on public investment or infrastructure. concern that it is going to cut expenditures that are badly needed, thereby weakening economic potential. matt: anna? bit about me a little where you want the government to spend more money. a lot of people talk about infrastructure spending, but there are capacity constraints. i think germany really needs a long-term plan on investment. efficiencymany has and transport infrastructure of 7.1 billion euros per year. they have weakness in municipalities. germany has one of the weakest to digital infrastructures in europe. that as a gigantic task both private and public sector.

germany is spending less than comparable countries on education, so you can see the range of investment that is needed. you are right and the concern is ist germany's can -- economy at capacity, but what is really needed is a long-term plan to permanently increase public investment. that will increase capacity and growth potential. so it is a win-win. germany can spend more, europe benefits overall. matt: does europe benefit? some argue there is not enough spillover affect -- the effect. -- spillover effect. others say it will help everybody. marcel: it is a win-win. other companies are benefiting. stimulus,s a fiscal

the spillover is maybe 10% of growth spilling over. still, germany is the biggest economy and strongest overall. so it would clearly provide some stimulus. germany itself does not need a stimulus right now. but thinking ahead, i think it would be very wise. here in berlin, there are a lot of complaints about rising rent and a lack of apartments. time, why would you invest here when the government is talking about not only a rent but taking back private investment. does it make sense to you someone would invest more in building capacity in berlin housing? marcel: that is the irony. is that the now public sector, for too long, has

ignored the issue of investment. solve this issue is by increasing the supply of land to make it attractive for investors to come in. to build, and thereby to lower the price increases. but that will take time. and german government is trying to find the bridge of how to prevent increases. the reality is a rent is increasing so much faster that wage increases are too small to compensate for the increase in the cost of living. matt: there was a comment from ceo sayingfrom a maybe the rent cap is ok. so it is complex. let me ask you about defense spending. we point out they are going to spend 6 billion more on defense. but as a percentage of gdp, are we getting any closer to the 2%

level or even 1.5% level? marcel: it will be very, very hard to achieve. 6 billion is .2% of gdp. germany is currently spending about 1.2% on defense. so probably, they will not get there, not even to 1.5% by 2023. at the news budget, there is a temporary increase, but over the next few years, leveling off. , theng about capacities german defense ministry really of realizing those investment projects. and rather than looking at the amount of money spent, it should be the efficiency of it. and there, europe and germany are lagging behind. you have no procurement all over europe. it would make a huge improvement in efficiency if all 28 eu

money fromllowed other countries. so short answer, no they won't get to 1.5%. but most germans welcome that. matt: human if you don't look at the promises made, is the german -- even if you don't look at the promises made, is the german military in a position to fulfill its objectives? one has to make the decision between what germany's government is spending on defense and what the german military is taking as a responsibility in global conflict. is in manymilitary different war zones where does make a contribution. so i think that distinction is important. yes, spending is less, but terms of what the german military delivers and contributes to i would say it is delivering and keeping its premises. matt: thanks so much for coming in. cel is the president of the

german institute for economic research, di w berlin. we will bring you some stock movers this morning, including salvatori fared on -- salvador being upgraded. this is bloomberg. ♪

anna: welcome back, 44 minutes into the trading day, it is a negative session. the stoxx 600 down by .3% but rising oil prices helped the ftse 100. let's get your stock stories this morning. annmarie: i want to kick off with john wood group. one of the biggest gainers on the stoxx 600. , no change isnews good news as they kept expectations unchanged. in the luxury space salvatore 2.6%.amo up the ceo and seems to be reassured about her plans on addressing issues at the company. atlantia down this morning more than 3%. risks are growing for investors that they are still talking about.

they had concessions coming cabinet meetings, and going into that with the transport minister , he was saying he had a plan to revoke concessions on atlantia. that is why we're seeing some pressure on the italian infrastructure company. anna: thank you very much. , u.s.loomberg scoop prosecutors are investigating a international network of traders expected of infiltrating banks and companies to gain confidential information according to bloomberg sources. joining us now, one of the authors of the report who leads bloomberg's eu legal team. great to have you with us. what exactly are prosecutors looking at? >> a couple of things. it is an interesting probe. the u.s. is taking the lead on it, but prosecutors in france and the k are also looking at this on parallel tracks -- the u.k. are also looking at this on

parallel tracks. they are looking at traders with fun details, they use burner phones and change the cards. but they are looking at two things. one, how they get the information. were they getting it from lawyers or banks? how they get it, and then what they do with it. they are looking at relationships with the journalist and whether they are leaking information. so that might manipulate the stock price. where have u.s. prosecutors found these things? or where are they looking to find these issues? tony: the investigation has been ongoing for a while. it was stalled but they recently got a break when someone began cooperating. on and helpmoved it them continue the investigation. anna: you told us a few of the tricks these alleged insider traders have been using timidly

the market. using burner phones and staying beneath the radar, using messaging systems that are not going to implicate. what is it exactly supposed to have done? the have gotten information about big deals. they get that information and then they trade on it. and then they find ways to mix with the market -- manipulate the market. matt: do we know anything else about who is being looked at? about courthing cases going to court? tony: it is all very early, nothing to say about that. anna: tony, thank you. rons, who leadsaa bloomberg's eu legal team. u.s. prosecutors joining a multinational crackdown.

h2o sockets biggest ever one-day drop amongst asset. until now, they had been a market beating performer. that has changed as security concerns played the asset manager. some context for you first. rates andst central-bank stimulus to have caused managers to feel the pressure, looking further afield to get that yield. they often turn to less liquid assets that might be harder to sell on a short notice. --t push was partly this behind the demise of games -- gam's hayward. more recently, woodford's investment empire was brought to his knees. had waiting in companies that were difficult to sell and had breached regulatory guidelines.

that gets us to this most recent crisis at natixis. it was reportedly fund helped more than 1.4 billion euros of illiquid bonds linked to lars would force -- woodhorse. -- woodhorst. allegra fund was suspended over concerns over the quote liquidity and appropriateness of certain holdings. by monday, we get this massive number, 6.4 billion in assets at natixiss funds -- the funds. h2o has said that outflows in recent days have slowed. i want to show you some of the consequences. one of the biggest funds under pressure is called adagio. you can see that it has had solid inflows but then leaves

more than one billion euros which slips to net outflows. there are some recognizable names who count themselves amongst top managers. the numbers i'm going to show you are as of the last filing. as i said, you can really see some recognizable names. and one of the funds i definitely need to flag. this is in the top 10, 10 to be gam, that holds more than 13 million euros in those funds. matt: thank you very much. bloomberg's dani burger talking wethrough a lot of problems have seen over the last couple of sessions with liquidity issues. up next, battle of the charts. remember, bloomberg terminal users can see and interact with all the tribes we use. just type -- with all the charts that we use. just type gtv go.

you can also catch up on key analysis and save them for future reference as well. this is bloomberg. ♪

anna: welcome back to the european open, 54 minutes into the trading day that is a little lackluster here. european markets down by .3%. in terms of sectors on the move, oil, gas, banks, and retail in the green room everything else

is on the downside. real estate is one of the biggest fallers and utilities. utilities and health care are some of the biggest fallers. interesting sector dynamics we are, both stateside and in europe. oil and gas up .5%. that goes some way to see the outperformance on the london market. time for battle of the charts. today, we have got annmarie hordern going head-to-head with dani burger. i am looking at gold because it has been on a tear. the latest headlines with iran sending investors into gold. but you know i love a little volatility, this is the gold vix. recently, i want to show you what the surge has done. i want quoted in percentages because you cannot have a percent of a percent, but it has dropped up near 16. the volatility of gold is

at its highest since december of last year. drama going on as the gains continue in gold. annmarie: another asset on a tear is bitcoin. i know matt did this at the start of the show, but you can see here, we have not been at this level since january 2018. last time we saw here was december when it went to nearly 20,000 and then we saw that precipitous fall. the question is, is the rally here to stay, and what is driving it? is it institutional money, facebook's libra, or a potential haven? anna: i am judging, unfortunately for you, which is i'm going with dani. i am going with the tangible and the wearable over the digital. but thanks to both for playing. gtv go is the function to get all the charts. matt, equity markets a little sluggish this morning. matt: yes they are. and i would point out, you can

have a percentage of a percentage. for example, the 10 year yield, the89 percent up on bloomberg terminal. this is bloomberg. ♪

francine: fed chair jerome powell reiterates the case for lower rates is growing, but james bullard tells 50 basis points would be too much. , morequidity problems than 5 billion in assets is pulled. trump meets with xi jinping at -- this weekend your weekend. good afternoon, everyone. this is "bloomberg: surveillance."