>> good morning from berlin. this is bloomberg daybreak: europe. i matt miller. >> and nejra cehic. these are today's top stories. officials on chinese liked to the detention of muslims ahead of trade talks tomorrow. stocks turn lower. jay powell says the fed will securities to avoid recent turmoil. we will be live in dublin on morning after ireland presents its no deal budget just 22 days away from the deadline. ♪

matt: good morning from berlin. , it seems that the disintegration between the u.s. and china further continues deteriorating and hurting stocks around the world. nejra: it is getting to be a bit of a complicated mess. itse is discussion about stock flows of u.s. money into as well.e travel bans it is not looking good head of trade talks. that is what markets took away even as we got comments from jay powell. matt: exactly. i think they might be separate issues to some extent. stocks fromat the

the hot mess, there were declines of 1% across the board in europe. take a look at what we see in the msci asia-pacific right now. down .6%. s&p futures are currently up right now. remember, it is really going in the futures trade and fairly thin in asia. here.e nymex crude we are so low here. maybe a second-degree relation in that the trade issues cause slowing global growth and that makes the price of oil less because of the demand issue. nejra: interesting you are seeing u.s. futures higher. over thereat quote last week where someone was saying that investors are literally sitting there saying trade talks on, trade talks off.

in theek we saw drop tenure yield of some 15 basis points. this week, we have barely moved. we moved slightly higher today. this is near the one-month low. the stronger fixing and maybe that is what is lifting the aussie and new zealand dollars because if it is not about trade optimism, that could be fueling gains. but generally not much move. the dollar index steady as well. negotiations are set to begin tomorrow, but the u.s. china relationship seems to be deteriorated by the day after the u.s. announced it was blacklisting a chinese tech companies on monday. we heard china's state dropped the nba's preseason games and local sponsors have suspended their ties with the league. the u.s. has slapped a visa bans on chinese officials went to the detention of muslims. selena, great to have you with us.

talk to us about china's response to the blacklist and travel ban. the last i heard, they said "stay tuned." commentse heard harsh coming from china asking the u.s. to retract their decision and asking the u.s. to stop interfering in internal affairs. we could see movement on china's unreliable entities list which it did announce after huawei was put on the blacklist. this could include companies and individuals seen from the chinese government as damaging the legitimate interests of chinese firms. you have been reports that fedex could be on the list. just for context, this is really the first significant step we have seen from a major world government to take action against china for the alleged human rights violation.

the u.n. has said as many as one areion ethnic uighurs detained. this has been bubbling up in washington, d.c., for some time. the timing is very tricky. what is the significance ?f the fallout is a huge story on social media and a huge story for the common fan. what is the significance in terms of the trade issues? the fallout has been rapid and fast. it is going to stop broadcasting nba games. hina's big trouble -- travel company, and more have tried to distance themselves from the nba. viewers, notching

double-digit growth in the country since 2008. western businesses doing operations in china, the political reality and sensitivities are just becoming more challenged and more height. ahead of the trade talks, it exposes the core cultural differences and issues that these countries are facing. this was ant example of china taking a zero-tolerance hardline policy against anything that it sees as interference in internal affairs. nejra: thank you for joining us. silly no one in beijing. joining us is from brooks mcdonald asset management. great to have you on the show. have heard about the various facets of the deteriorating relationship. happy with ans be interim or partial deal after talks this week or later?

>> i think any form of certainty would be well received by markets. but we are fairly skeptical if that will actually occur. when we look at the last few months, the last year and a half, it has thought to been quite an effective tool to kind of shift between a very hawkish and more dovish chinese rhetoric. the pressure on the federal reserve allows it to take some steam out of the economy. donald trump and particular in the white house, they will want to keep this trade narrative a alive up until the 2020 election. then we may see something sizable in terms of the deal.

then we determine the level of stock market prices. do you think this will prove to be a buying opportunity the echo -- opportunity? does this mean he conjure it off if he wants to? >> i think he does have the option to turn it off if he wants to. aroundkets are trading 12.5 the next 12 months of earnings. it is actually very cheap equity markets. this, at least, is for effect. some sort don't get of conclusion in november, i think there will be some sort of to show that he has been tough on china and delivered something. nejra: it goes back to my first question about it investors

would be satisfied with that. if they want some kind of resolution. to accept if those structural issues will be resolved. we see them rally with a deal. >> there were strategic opportunities that you mentioned, but those are difficult issues to solve. difficult to solve in a trade deal. but you also have to look at enforcement mechanisms. we would not be that optimistic on it. but what we would look to is situations like north korea with it really bubbled up massive pressure tactics to really bring it to the floor. -- to the fore. moved to aed is, it new spotlight. if that happened with u.s.-china trade, markets would be happy. park stays with us,

our guest cohost for the hour. i want to go to bloomberg first word news. >> thanks, matt. turkey says its military will cross the syrian border shortly according to a senior government official. the move is intended to force u.s. backed kurdish militants away from turkish soil. the new york times is reporting willthe kurdish forces attack the turkish military if it enters syria. to brexit. islands prime minister says it is hard to see a deal being clinched next week. they say problems remain over the border with northern ireland. after they agreed to meet with boris johnson for talks at the end of next week. and singapore has been the u.s. to the top spot of the global competitive ranking.

the report came from the world economic forum citing growing uncertainty from u.s. business leaders and declining trade. the other spots in the top five went to hong kong, the netherlands, and switzerland. global news 24 hours a day on-air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. much. thank you so given her first major address at the head of the international monetary fund, talking about the worldwide effect of the u.s. china trade war. she spoke about the possibility of a further slowdown. >> there is a big issue of trust. is also, in my view, there risk of complacency. we are decelerating. we are not stopping. and it is not that bad.

, unless we act now, we are a more massive slowdown. trust.ught the issue of it is absolutely fundamental for always think not only what is good for me, but what is it you face? what is your domestic constraint? what are the challenges for you? and how can we craft space for that allows the whole to be bigger than some of the individual parts? at this issue of trade now and from where i sit the privileged position i am in, it is tit-for-tat not only with the , the u.s. andent

china, but you mentioned switzerland. war -- how will you define the trade war? and what is your to do list to remove us from this tit-for-tat? >> we will be talking about trade piece, not about trade war. it is the economic impact that will fight the loss of confidence. >> that is where i wanted to go. >> lots of productivity. firms have to pay more for credit because they are trading with a partner that may be in worse shape. the indirect is what we need to zero on. why? confidence,now that

once undermined, is harder to rebuild. governance is about leadership. what is your leadership approach that will instill confidence necessary to get toward your peace of trade? show,t we want to do is as clearly as possible, that everybody is a loser in a trade war. everybody will be a winner in trade peace. that losst clear that may be higher for some countries and lower than others. but everybody is impacted. imf: that was the new managing director krista li na george eva -- kritsallina georgieva. aairman jay powell stresses move should not be seen as a return to the past. we will discuss next.

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this is bloomberg daybreak. i'm matt miller in berlin. nejra: and i'm nejra cehic in london. in singapore, we have more. great to see you. asia playing a little bit of catch-up yesterday it looks like. >> absolutely. a very risk-off here. we have seen asian stocks give back what they gave yesterday. the nikkei down by .7% with quite a bit of weakness coming through in electronic makers today. australia had a pretty gloomy confidence rating. watching the msci hong kong index because it has fallen through a key gauge of 14,000 points, down about 18% from the april high.

we see the effects of the protest hit the likes of the banks and casino players. morgan stanley also downgrading the hong kong banking sector. , it isly off of the lows a stronger-than-expected fix from the pboc. and have a look at the yuan because when china came back online, people were pretty surprised that the daily fix was quite steady. and you can see it reflected that the pboc has been keeping things right. the bluelected by line. still that very big divergence what we aregh and seeing in the offshore currency. nejra: now let's get the bloomberg business flash.

aramco is expected to publish the ipo prospectus before the end of the month. that is according to the wall street journal. the paper reports it will come out in arabic on october 25 and in english two days later. with then to go ahead offering will probably be made after a welding process in november. the journal says aramco did not officially comment. johnson & johnson has just been ordered to pay the largest u.s. jury award this year. the $8 billion verdict is over the alleged mishandling over an antipsychotic drug. the jury found it wrongfully marketed the drug to teenagers. the verdict is unlikely to be upheld on appeal but sounds an ominous warning for j&j. the company still faces 13,000 suits over the drug. that is your bloomberg business flash. matt: thank you very much. the fed will resume purchases of

treasuries in an effort to ensure on in the money market. powell said that officials will soon announce plans to add reserves -- to add supplies to reserves. he stressed the buying should not be seen as a return to quantitative easing. >> i want to emphasize that the growth of our balance sheet for management purposes should in no way be confused with the large-scale asset purchase program's we deployed after the financial crisis. neither the recent technical issues nor the purchases of treasury bills we are contemplating to resolve them should alter the stance of monetary policy. not drop majord hints on the fomc policy move but charles evans set separately that he wouldn't mind seeing another 25 basis points cut. from brooks mcdonald asset management, edward is still with us. first of all, what do you expect

from the fed? the market has priced in cuts this year and is hesitant to dip their toes in the water of 2020. >> that's right. when we look at market expectations, they are about 100 basis points priced in. this is in contrast to what jay powell has been saying. for those that were looking and when the services came out last week, this is a complete change. look at the rhetoric being said yesterday. it is still referring to this idea that the overall economy is in good shape. there is still a disconnect between this and what the market is expecting. and i would not get too hung up on the dot plots. implying on the median that there would be no cuts. 25 bit cut is

likely. but between what powell is saying and what the market expects scares us a bit. the market says we will bend and break or been banned bounce. do you expect the u.s. economy to bend and bounce? >> the services pmi data was less-- looking a little encouraging. we saw that come down to 52.4. there, look at the data we are expanding. grant the services being included. that is less positive. but unemployment is at a 50 year low. we have really strong retail sales. looking again at the q2 gdp reading, the consumption component is really strong.

for us, we are in a midcycle situation rather than an end cycle situation. but it could lead to a midcycle correction. think abouto you the fed presence in the treasuries market? it seems to me that it would push yields down. especially considering the amount of buying that they will have to do with all of their other mortgage bonds and such maturing. it looks like they could even double the size of the balance sheet over the next decade according to one report by bloomberg. what do you think? >> this is a thought of a move back to business as usual. pre-financial crisis, it was federal reserve policy to expand the balance sheet in line with the border economy. int is what was scheduled

march of this year as well. margin, this is not quantitative easing, just business as usual. it's just that recent business as usual included quantitative tightening. that there is some stock -- some talk about that money coming in a very short term. is there a difference between the pricing and what the fed will deliver? >> watching it in terms of being , is more thanasia we think where it will be more sensitive to global economic shot. it has been underway for some

time. the u.k. can discuss this brexit. it was a high beater to global gdp. we maintain things like the united states. it was a bit of a macroeconomic hedge. nejra: staying with us for the rest of the hour, brexiteers intensified. and ireland presence the no deal budget. talk trust oil and money as the shell ceo joins us for an exclusive interview at 10:30 a.m. this morning london time. this is bloomberg. ♪

nejra: this is bloomberg "daybreak: europe." i'm matt miller in berlin. report in ther german newspaper, so far we are looking at, i think now over 70,000 job cuts announced in hsbc'safter you add in initial 10,000 from last week. nejra: that's a big number. another thing we've been looking at is credit suisse weighing a return to u.s. private banking after the exit it made.

it's about offshore wells, the u.s. ranked fourth in the world in terms of that and it seems to be part of what is driving that move. matt: i want to get 15 million dollars under assets in miami beach, a great place for latin american and south americans to put their money if they want to keep it offshore. a new renewables , as investingnp trend discontinues continues to catch fire. let's check in on the markets around the world. great to see you, i just come back from holiday in india and i had a great time. indian shares had a bit of a cautious start to the day and volatility has begun to rise over the past month. what is happening?

your next holiday should come to mumbai as well. a bit of caution in the markets , weailing because last week had four straight days of corrective moves. flat, whiche been is probably not a bad sign. the thing that worries me is what is happening to the volatility index. typically if the markets have vix up for 5%, the india tends to come off. what we seen the last few days is that it has moved ahead and is trading close to five month highs. that typically doesn't happen with the market in a correcting mode. that should lead to a few people believing that maybe the pain is not out of the system as of yet. maybe things could change if the earnings are good but for now, the pressure remains in the

markets. you are looking at some modest decline throughout the rest of the world as trade tensions ramp up. to whatt compared happened to yesterday's session in the u.s.. we saw the s&p 500 decline by more than 1.5%. there are still certainly not as bad as we saw in the u.s.. tomorrow kicks off the first of two days of talks in washington on trade between china and the u.s.. perhaps what we are seeing is a little bit of caution, a little bit of hedging, waiting to see what happens. in terms of currencies we are seeing a weaker dollar. a lot of the g20 currencies moving higher against it. you can see the yuan up about .2%. when it comes to bonds, a mixed picture. year yields up, but commodities, i would keep an eye

on copper. .5%, oil alsot falling today. -- how where we see some it could manifest itself in some of these growth commodities. it's also about to be heading into two weeks from now potentially the brexit deadline unless we get another extension. you can see traders starting to gear up for this. these are butterfly options, essentially a hedge for any sort of volatility in the pound, now moving to its highest since the referendum. if you were to expand this chart to the referendum date, the current level looks minuscule. more hedges but traders are not expecting any volatility anywhere close to that 2015 referendum. thanks for that, dani burger, looking at the markets

here. let's get the bloomberg first word news from hong kong. the u.s. is slapping visa bans on chinese officials attention -- is the latest in a tit-for-tat battle between washington and beijing. china responded by telling the u.s. to stop interfering in domestic issues. this comes as trade talks are set to restart tomorrow. another of the battlegrounds in the u.s.-china conflict is the world of sports. the national basketball association is losing more of its local sponsors after a tweet from a basketball official in support of hong kong protesters. tencent has joined state television in not showing preseason games. now china's largest sportswear maker is among the companies distancing itself from the nba. turkey said its military will

cross the syrian border shortly, according to a senior government official. the move is intended to force the u.s. backed kurdish militants away from turkish so i. the new york times is reporting forces say they will attack the turkish military. singapore has beat the u.s. to the top spot in this year's global competitive is rankings. report from the world economic forum sites growing efforts from u.s. leaders in defining trade openness. the other sponsors of the top five went to the netherlands, hong kong and switzerland. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. much.thanks very brexit talks are at an angry stalemate with both sides

blaming the other for refusing to budge. any hope of a deal now rest on a meeting this week between boris johnson and his irish counterpart. but neither side looks like they will give ground on the crucial issue of their shared border. at why thes looked issue continues to derail negotiations. anna: the three hundred 10 mile border between republic of ireland and the u.k. and northern ireland, the only clue you are leaving ireland is heading into the u.k. is this road sign reminding you that speed limits will now be in miles per hour. but the border has had a famously bloody history. violence between irish republicans who favor united ireland and pro-u.k. unionist escalated in the 1970's. the troubles eventually claimed 3500 lives. in the 1990's, the eu single

market means that customs checkpoints like this one were allowed to gradually all into ruin. then the good friday agreement meant security checks were increasingly unnecessary. today, people and products flow seamlessly over more than 2 hundred rd crossings. trade between ireland and the u.k. is worth about $1.1 billion a week, an estimated 100 15,000 vehicles cross the border every day. no stops and no checks. so what would happen if after brexit, custom checks in some form are restarted? >> we have no borders come we have no controls. be faced withwill two borders. of red presents a lot tape and a lot of costs. because we are a service provider, if we see

manufacturing -- manufacturing prices drop, we could have a huge threat to our industry. >> communities fear division. the border runs right through the middle of this country lane, ireland on this side and the united kingdom on that side. it's a very open nature of this long and historically troubled order and makes taking the u.k. out of the eu very difficult. anna edwards, bloomberg, on the irish border. nejra: letter today we will speak to the irish finance minister at 1:30 p.m. u.k. time. edward, still the intractable issue of the irish border. talks descend into acrimony, where do we go from here? >> we've got the 31st of october deadline, it remains to be seen how boris johnson will mate to his previous wording and see how

it's going to go. there's been a number of iterations on how will work out from a market perspective, do or die has become the key phrase linked to boris johnson's brexit strategy. but there is no approach to asset allocation. do have exposure, we are exposed to the large multinationals that have the currency hedged by having dollar and euro earnings. we are focusing on those above anything else. we have added into the unknown, the idea of a general election as well. that looks reasonably likely, producing extensions. we've got 35 independent mps sitting in parliament at the moment, a lot of unprecedented numbers are flying around. the uncertainty is just so high. we expect the country to remain

the punching bag for that. matt: to the extent that your clients want to hold cash, i know a lot more investors have gone to cash in recent months. how much of it is in sterling? a lot of our u.k. clients are sterling investors. , to we have stopped doing have a bit of turn on our u.s. dollar exposure, we have started building up as well to give us some sort of context, for medium it haslance funds, around 8% in cash at the moment. that's with a high level of caution, projecting not only brexit fears, but also a concern over the european economic situation. thea: do brexit fears are reality of the worst case

scenario for investors make you think it could spill into assets beyond the u.k.? absolutely. german manufacturing data has gotten worse and worse. we had the reconfirmation of the figures last week showing that new orders are below 40 now on the pmi basis and that's a leading indicator of a leading indicator. if we saw i know do brexit, that could make that situation even worse. we're looking at that sort of data and we don't see that much bullishness going forward. so we definitely think europe could see some contagion from this. it's a situation where people are worried about no fiscal stimulus from germany or what is happening at the federal reserve.

do you expect any fiscal kick from berlin? edward: not in the short-term. we saw something like the climate change package that came out recently. 50 billion euros which in some ways seems like a big number, but it's not significant been doneo what has in the past. matt: pre-climate package, a lot of people were expecting that to possibly be stimulated, and after we got the details the market didn't seem too excited. us, ourark stays with guest cohost for the hour. coming up, the talk turns to oil and money is the shell ceo joins us for an exclusive interview, after half past 10 this morning

london time. when you're traveling to work, don't forget to tune into bloomberg radio, live on your mobile device anywhere in the world. if you are in london, it's easier than that. just tune in on digital radio. this is bloomberg. ♪

matt: this is bloomberg "daybreak: europe." nejra: here's a look at what you should be watching today. the fed minute from the latest minute, and we will watch for comments from chairman to rome powell. chairman jerome powell. we are seeing global growth slow. matt: meanwhile in europe, finance ministers meet in luxembourg as an economic

startsn in the region material i's. lastly, talks between the u.k. and eu over brexit have broken down. eu president jean-claude juncker will be addressing the european parliament in brussels today ahead of the eu summit on october 17 and 18, which is the last time brexit will be discussed, surely not here, but there, before the october 31 deadline. of course we will discuss it every day, pretty much constantly from then until the 31st. let's get the bloomberg business flash from hong kong. saudi aramco is expected to publish its ipo perspective before the end of the month. that's according to the wall street journal. the paper reports it will come out in arabic on october 25 and in english two days later. a decision to go ahead with the offering will probably be made after november. the journal set aramco did not

officially comment. has been johnson ordered to pay the largest jury award this year. the verdict is over the alleged mishandling of an antipsychotic drug. the jury found it wrongfully marketed to drug to teenagers. the verdict is unlikely to be upheld on appeal, but sounds on ominous warning for johnson & johnson. paypal is writing down over $220 million of investments in the third quarter, driven by a bad debt just before it went public. the company says is $500 million investment has declined by over one third. more details will come and paypal reports on october 23. has snagged a deal for a

new version of the narrowbody jet in september. the orders by an anonymous customer is the first since the megadeal in june. but that agreement has not yet gone through. -184ales for the max are for the year. that your bloomberg business flash. matt: thanks very much for that from hong kong. onco has been weighing in threats to the global economy. the ceo set a hard brexit is better than the current situation of being in limbo and that's a trade war could push the u.s. into a recession. he spoke exclusively with bloomberg editor-in-chief john micklethwait. >> the big picture is very simple. you have a trade war with china and we don't think it gets fixed in the near future. i think the best parallel you can think of, there will be

improvements, contagion, there will be ups and downs. see two economies emerging? internets, to supply chains, a much more regional economy? >> a much more regional economy and a global fight for the sectors. to think the u.s. is going slow down. the first half of 2020 will be slower in the u.s. gdp will dip to 1% or something like this. if the rhetoric on the trade war gets worse, you may even be in recession. which are you more scared of out of brexit or jeremy corbyn? i'm not saying you can't get both, by the way. [laughter] that itink obviously

would be bad for risky assets. of 1981,w reminds me they started to nationalize everything in sight. they had to do a 180 and decide it was not such a good idea. the core belief that i came to think that the government is not very good at running things. ? do use -- >> do you see jeremy corbyn coming in and running into trouble? >> if you look at his program, it is quite extreme. >> do you think that is worse than brexit? u.k. and we own a lot of u.k. bank.

in a hard brexit, they are fine. what you need is resolution at this stage. i think we are in limbo, and being in limbo is not a good thing. politics, the government, the house, the borders, it is so fragmented, and i don't have to tell you this, you need a way to get to an outcome. even if it is a hard brexit, it's better than having two more years in terms of nothing getting decided. nejra: the pimco ceo speaking with bloomberg editor-in-chief john micklethwait. edward park is still with us. i want to pick up on that question discussing brexit earlier. do you think a labor government would be more worrying for your

asset allocation than a hard brexit? edward: i was hoping you're going to ask that. in terms of the uncertainty, brexit, almost regardless of the outcome, could give some sort of midterm clarity for u.k. investors. what has happened in terms of a government change is it creates more uncertainty for a five-year period. that's where we get a lot of our concern from. clearly the key would be whether the labor government got a majority or whether it needs to form a coalition. , whether theythat full program through. in terms of adding an certainty to the u.k. economy, a labor government could be more damaging over the medium to long term, where brexit could lead to a sharp rewriting. matt: it's more dependent global

trade and that has been obviously slowing down, with global growth. what do you think about earnings in this quarter? will they be disappointing? seen thee have revisions quite heavily down. it turns out 2021 or 2022 have been upgraded. our expectations for this to currency valuations, it makes it quite difficult to hedge. also trade war concerns are weighing on that globally. nejra: that's the u.k. companies. if you expect something similar and you expect a disconnect between what investors expect from the fed and what the fed does, which is what you were saying earlier, do you think we could see the magnitude of a

fourth quarter 2018 selloff in the fourth quarter of 2019? edward: that's probably a more extreme version of where expectations have not matched with central policy. he's trying to pass the baton of policy torom monetary quite an unwilling german government. because of all of that, it's a fairly unique situation. i think there is a growing narrative where there is a ,oncern with european investors it would be worsening. nejra: edward park, great to have you as our guest host this morning. exxon mobil is set to weigh its

asian asset sale of up to $3 billion, the sale of elation offshore accident -- assets. malaysian offshore assets. we will have more on that in a moment. this is bloomberg. ♪ everyone uses their phone differently.

that's why xfinity mobile lets you design your own data. you can share 1, 3, or 10 gigs of data between lines, mix in lines of unlimited, and switch it up at any time. all with millions of secure wifi hotspots and the best lte everywhere else. it's a different kind of wireless network, designed to save you money. switch and save up to $400 a year on your wireless bill. plus, get $250 back when you buy an eligible phone. that's simple. easy. awesome. call, click, or visit a store today. nejra: good morning.

matt: this is "bloomberg markets." these are today's top stories. relationship breakdown. the u.s. slaps of visa bans on chinese officials linked to the detention of muslims ahead of trade talks. yourrow stocks turn lower -- lower. jay powell says they will resume buying treasury securities but it is not quantitative easing. intensify asars ireland says it will be hard to

broker a deal by the end of the week. in dublin all morning after ireland presents its no deal budget just days away from the deadline. ♪ nejra: welcome to "bloomberg daybeak: europe." andve been away for 10 days it feels like not a lot has changed in terms of the trade narrative. investors are on tender hooks in terms of rate expectations. matt: absolutely. the trade story gets worse. even when it gets better, it feels like that is just a head fake. ,he fed story is interesting because over the longer-term, you can see the fed double the size of its balance sheet with these treasury purchases, but

jerome powell says it is not qe. nejra: one comment he made it was comparing the two times in the 1990's when the fed cut perhaps hinting at another rate cut. that is certainly what the market is pricing for october. in any sense, it does seem the trade narrative is dominating. we have seen a sharp selloff in europe and futures turning positive, both in the u.s. and europe. you can see ftse 100 futures are flat. seenis even after we have some sort of complicated mess turning up in terms of tax bands in the visas. of course, some conversation as about u.s. money flows into chinese assets. but the bond markets are fairly

steady so far. matt: let's take a look at bond , and u.s.tp futures treasury futures as well you can see investors are selling those. if caught, you will see the yields start to rise. the cash yield has been rising, which i think is fascinating, because the fed has said it is going back into the market. it would put pressure on the sealants for checking it out in the markets, let's go to juliette saly. >> certainly risk off today. we got the msci asia-pacific index giving back everything it gained yesterday. south korea is that of action for a public holiday. weakness in australia after a disappointing consumer confidence read. in hong kong, the index dipped below 14,000 for the first time

since january but you can see it has picked up. china's market was the latter part of the day is looking steady. at tsmc.nt to look we had numbers coming through with third-quarter numbers a beat, above estimates with third-quarter sales at 293 billion taiwanese dollars. we have seen a good movement coming through in that stock. has been interesting with of the chart is that even though the stock is near a record high, you have seen it underperform the likes of the semi conductor industry index. still am pretty good numbers coming through. thank you so much.

trade negotiations are set to begin tomorrow but the relationship seems to be deteriorating by the day. that's after the u.s. a eight chinese tech companies. nba'st dropped the preseason games and local sponsors suspended ties with the league. now, the u.s. has slapped a visa bans on officials linked to the detention of muslims in the shin jim -- xinjiang province. worse,he rhetoric gets we may even be in recession simply because the consumer will lose faith. >> the concerns about the unreliability of the supply chain we see in and around the conflict. that's a little more enduring. >> we are talking trade peace, not war. everybody is a loser in a trade war. therefore, everybody would be a winner and trade peace.

nejra: joining us is the global head of credit strategy at bnp paribas. great to have you. the imf, which sees a global, synchronized slowdown. is that your base case as you are focused on credit? >> yeah, absolutely. i thought you borrowed one of our titles there. the problem with the trade conflict is the more angles you have to it, the harder it gets to dialback and to get to a comprehensive solution. i think we are clearly starting to see this in the u.s. growth data, or the u.s. manufacturing side is catching down with the rehnquist -- the rest of the world. and not manufacturing data shows weakness, suggesting this may

not just the manufacturing slowdowns, but also impacting other parts of the economy. all, it highlights how dependent we still are on central banks to spur the global growth outlook. matt: what do you buy, what do you sell? you see a slowdown coming. trade is throwing a spanner in the works. where do you go? bonds and corporate bonds. that the here is slowdown is not bad enough to suggest risky assets will completely selloff. but it is also sufficiently entrenched to make sure they have no other option than to remain on an easing path. we call this sluggish but dovish and the underlying idea is that what you will end up with our conditions that

might not want to take that money cannot meeting they issue fewer bonds, many there is a , oned or supply scarcity reason we are bullish on corporate bonds. nejra: what outperforms? viktor: investment grade outperforms in that scenario. , the economic deterioration is so entrenched that you will see an increase in the default rate next year. corporate balance sheets are still very highly leveraged. that manifests itself as higher and higher idiosyncratic risks. we see headlines of a defaulting company probably every month going forward. that makes it difficult for the lower rates to rally. but at the same time, ample support for the hybrid market committee including financials.

matt: so you like investment grade corporate bonds. what about regions, industries? this is probably the time when europe outperforms the u.s.. there are two reasons for that. , all the negative economic surprises are coming out of the u.s.. was previously thought of as immune to the global slowdown, but that is no longer the case. there are more negative surprises coming out of the u.s.. , quality is further ahead and europe cannot meeting the ecb is on the verge of another round of qe. that will clearly create another level of support for all bonds, corporate in particular. at this point, you want to be in europe. us.: our guest stays with

i want to get first word news in hong kong. >> thanks, matt. military wills cross the syrian border shortly according to a senior government official. the move is intended to force kurdish militants away from turkish soil. that kurdish-led forces say they will attack the turkish military if it enters syria. europe is calling on north korea to reengage in nuclear talks. that is after weekend talks between washington and pyongyang ended after just one day. the two sides disagreed on whether they had broken down, with the north korean envoy saying the u.s. came empty-handed. they say sanctions will remain in place until pyongyang reengage his. -- reengage his. singapore has beaten the u.s. to the top spot of the global competitiveness ranking.

the report cites growing uncertainty from u.s. business leaders and declining trade openness. the other spots in the top five went to hong kong, the netherlands, and switzerland. 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. matt: the brexit blame game has escalated as talks seem to have reached an impasse yet again. boris johnson is due to meet with his irish counterpart by the end of the week, but they say hashing out a brexit deal would be very difficult. budget released its which assumes britain leaves the eu without a deal. on the ground in dublin is anna edwards. what does the dublin government

say? anna: good morning to you and nejra. we have heard from the irish government in dublin, saying it will be very difficult to reach a deal. remember, next week is a summit in brussels. the border remains a big sticking point. how you extract northern ireland managecustoms union and to still have a very open border between the north and republican party of ireland, that is still a big question. and the question of what kind of veto is given to those parts of northern island. gentlemen these two will be meeting tomorrow. there is 20 of toxicity and blame flying around. we heard from the president of the european parliament questioning if boris johnson has ever really wanted a deal in the briefing raises questions over

whether the german stance has changed. germans suggest they have not. wasthe council president confused as to whether the u.k. does not want a deal or an extension. so what do you want? so that is a lot of the questions flying around the market. the question for investors is around timing and when we are going to see any kind of resolution. it looks as if sterling markets are not factoring in a departure at the end of october. nejra: anna edwards, thank you so much. we will talk brexit and the potential impact of no deal on ireland's economy with the finance minister. don't miss that interview. plus, the shell ceo joins us for an exclusive interview. this is bloomberg. ♪

matt: it's just about to go 17 minutes past 8:00 here in berlin. 43 minutes away then from the market open. this is "bloomberg daybeak: europe." nejra: honestly, the hardest thing on the show is counting down that clock. turning to the political storm in the u.s. cannot president trump has refused to cooperate with the house in its , calling itinquiry unconstitutional and invalid. our political editor joins us from hong kong. great to have you with us. what is the core of the argument for trump's refusal? just give us the latest. the white house counsel, in this eight page letter from basically said that there is a fundamental lack of fairness and due process that is being

afforded and they are therefore not going to participate. president is not participating, nor will senior becauses participate this is just an attempt by democrats to try and undo the andlts of the 2016 election is not a fair process. that is their argument. administration officials who work briefing reporters said that not only will they be blocking officials from testifying, but that they will not be providing documents to this inquiry, including subpoena documents. matt: how have house democrats reacted? >> they are, as you might expect, a little taken aback. but saying that they will not stop the inquiries, nancy pelosi, the house speaker, has

said that this is not going to stop them. that this reaction from the present shows he thinks he is above the law and therefore, they will continue to go on and continue with the impeachment inquiry. thanks very much, jodi schneider, our senior international editor. now let's get the bloomberg business flash in hong kong. saudi aramco is expected to ipo perspectives later this month in arabic and then in english two days later. a decision to go ahead and probably be made after a process in november aramco has not officially commented.

and johnson and johnson has been ordered to pay the largest u.s. jury award this year. is over the alleged mishandling of and antipsychotic drug. they wrongfully marketed the drug to teenagers. the verdict is unlikely to be upheld on appeal but sounds an ominous warning for j and j but still facing more than 13,000 suits over the drug. writing down over $220 million of investments in the third quarter driven by a bad bet on uber. the say the investment in ride-hailing giant has declined by over one third. more details will come when paypal reports on october 23. and boeing has broken the drought for its grounded. it's not a deal for a business jet version of the plane in september.

the order by an anonymous customer is the first since the megadeal with iag in june but that agreement has not yet gone through your and net sales are at -1.84 for the year. that is your bloomberg business flash. matt: thanks very much. fed it will resume purchases of treasuries in an effort to ensure calm in the money markets. says officials will soon announce plans to add it to reserve supplies but stressed that the buying should not be seen as quantitative easing. emphasize the growth of the balance sheet for reserve management purposes should in no way be confused large-scale asset purchase programs that we deployed after the financial crisis. neither the recent technical issues for the purchases of treasury bills should materially alter the stance of monetary policy. not drop majord

hints on the policy move, but the chicago fed president said it separately he would not mind seeing another 25 basis point cut and the market has priced that it. -- in. viktor from bnp paribas is still with us. what do you think about the fed expanding its balance sheet? how quick and expansion do you expect this to be? viktor: as you said, it's not qe, at least not yet. look, i assume that what they have in mind -- matt: do you say that tongue-in-cheek? the phrase doesn't matter, does it? if he doubles the size of the balance sheet, it is some kind of expansion. you could call it q you're not. or not.-- ro -- viktor: it is certainly easier to accelerate once you are already in the mode.

inssume that what they have mind is growing the balance sheet roughly in line with the growth of the nominal economy. is, of course, much slower than what they have done during previous qe. because we've seen time and again, the next step to accelerate purchases is fairly straightforward. nejra: huey is one side of the equation and so are the cuts. think theyess to did would disappoint and it would be a disconnect between the fed and the markets. you expect 100 basis point cuts from here. why? are you concerned about the consumer? istor: the economy deteriorating and the data last week was a bit of a game changer for the fed. hawks and doves and the hawks have been resisting aggressive easing because they were pointing to employment and the nonmanufacturing part of the

economy, saying that is fine. the economy is now less of a manufacturing economy and more of a services economy. last week emphasized not only the cracks in the manufacturing side but also increasingly in the other side. so that is probably enough to start pushing the hawks in a more dovish direction. you expect the fed to be able to rescue the u.s. from the brink of recession? look, it is a slow-motion slowdown so far. that eases the job of the fed a little bit. the key is for the fed to be ahead of the curve. if they cut by 100 basis points over the next 12 months that will take the fed to around 1%. nominal gdp around that time will be around 2%.

typically, recessions happen fed fundsal gdp and conference, so we will still have some leeway. but it is because the economy is in a slow-motion slowdown, not a deterioration. and in this environment with central bank to, you actually don't see corporate some borrowing that aggressively. why not? viktor: this is a big complication. in no place to pick up the mantle from central banks in order to do fiscal on the other hand, central banks, their job is competent by the fact that corporate leverage is already quite high. there is very little incentive for corporate's to take leverage even further and there is quite a lot of resistance. we think neither shareholders nor bondholders are putting

pressure on companies to take the cheap money to go further. that means that this more recent round of easing may have a reduced impact on real economic growth. without a net increase in leverage, you also say that means perhaps less leverage for share buybacks which could impact the equity market. thank you so much for joining us. morning, the shell ceo joins us for an exclusive interview. and that's it for "bloomberg daybeak: europe." the open is up next. we did see quite a selloff in futures and declines of more than 1% on the concern around the trade negative. futures are flat now. matt: it's interesting. but you have her number we lost more than 1% across-the-board in

yesterday's session in the u.s. did not fare so poorly and asia as a close up -- neither did asia as it closes up. as we said, european futures are flat 33 minutes away from the start of cash trading. this is bloomberg. ♪ from the couldn't be prouders

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to "bloomberg markets." i'm anna edwards in dublin alongside matt miller in berlin. matt: today, the market say don't hold your breath. asian stocks drop on the eve of trade talks but equity futures are pointing higher. the cash rate is less than 30 minutes away. than 30 minutes away.