tv Bloomberg Surveillance Bloomberg June 4, 2018 4:00am-7:00am EDT
francine: president trump is set for a clash with american allies the e.u., canada, and china threatened to retaliate. the final hurdle. italy's populist governor prepares for a populist vote in parliament. george soros warns the country could be on a course for fresh elections. safety in numbers. as rumors swirl about banking mergers, we ask, should regulators be favorable? welcome to "bloomberg surveillance."
these are your markets. the stoxx 600 gaining 0.5%. that is being boosted after we saw asian equi rise. this is on the back of some figures we had on friday. there was a little more confidence from markets. yield, 2.92.ear coming up on bloomberg surveillance, we will talk trade with andrew sheets as president trump heads for a showdown with its allies. a.m., we will bring you an exclusive interview with bulgaria's deputy economy minister. later in the morning, we are joined by adam posen. that is at 11:00 a.m. u.k. time. let's get to the bloomberg first word news. here's taylor riggs. taylor: china says it will annul
trade agreements with the u.s. if the trump administration pushes ahead with tariffs. commerce secretary wilbur ross flew to beijing for talks and president trump prepares for a showdoe g7 summit in canada. >> don't blame trump. blame china. blame europe. blame nafta. blame those who don't want reciprocal trading. to severalsponding decades of trade abuses here. taylor: the u.s. has warned north korea that it will win relief from sanctions only when it has shown irreversible moves toward denuclearization. james mattis met counterparts from south korea, japan, and singapore. he says he expects a bumpy road and insists the west must maintain a tough stance. vigilant andmain
we will continue to implement u.n. security council resolutions on north korea. north korea will receive relief only when it demonstrate steps to denuclearization.e italy's populist government is preparing for a confidence vote in parliament. it is one final hurdle before it sets about trying to overhaul european union rules. three days after being sworn in, weekval will be -- this for the prime minister. the antiestablishment five-star movement and the anti-immigrant league currently hold a majority in both houses. global news, 24 hours a day, on-air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. you so much.nk
president trump is headed for a showdown with u.s. allies at the g7 meeting in quebec, canada. the e.u. threatening retaliatory measures against america unless trump changes his mind on levees. china is piling on the pressure, warning that it will backtrack on trading commitments if washington carries out a separate threat to impose tariffs on beijing. joining us for more is tom mackenzie. he joins us from beijing. how is china's stance actually changing? of: we got a sense frustration from chinese policymakers over the weekend. this had been two days of the wilbur ross working with his chinese counterpart. the idea had been that they would be fleshing out this agreement that was reached in may around china imported agricultural and energy products. after that agreement, you had president trump saying that
agreement was probably unworkable. last week you have president trump touting threats of tariffs. there was frustration from chinese policymakers around the ebb and flow of the direction when it comes to the strategy around trade. that was highlighted by this statement. chinese state media saying the red line for china is they will not implement these agreements if the u.s. continues to threaten tariffs. francine: give me a sense of what china could do. i don't know if it is retaliation or they give something to the u.s. so president trump goes easy on them. tom: the path they've been trying to follow is trying to accommodate the u.s. in terms of track length -- tackling that trade deficit. they've been trying to increase imports, whether that is coal,
or cutting tariffs on food and health care and cosmetics products imported from the u.s. the other side of the story is on their industrial policy. that is an area where china has not wanted to budge. tariffs, thehe chinese have said they will retaliate with their own countermeasures. it looks like june 15 is when the trump administration could outline the list of chinese products that may be subject to that tariff. if they produce that list and initiate tariffs, the concern from u.s. corporate's is that you get unofficial pressure, whether that is licensing agreement or holding up their products at port. we still haven't resolved the question of the chinese telecom maker zte. then you've got the geopolitical machinations around north korea and tensions between washington
and beijing. that is in the mix. the ball is now in the court of the u.s. in terms of whether or not they initiate tariffs. francine: thank you so much. joining us for the hour, andrew sheets. chief economist and head of research at the official monetary and financial institution, an independent think tank. thank you both for joining us. worried thatou trade tensions are back on and can escalate? adam: i think they are. ithink you could categorize as constructive ambiguity. on a number of fronts, it has been unclear which direction trade and the administration were going to take. the markets could still imagine a better scenario. i think we are reaching the point where these deadlines are nafta,up, steel tariffs, where a decision is going to
have to be made. that meanwhat does for world growth? >> is an important component of world growth. seen so farwe've are a small component of u.s. trade. the question is what the measures will beetaliation. also taking this in context of what is happening in global trade, this is not the first time the u.s. is doing it. the e.u. is the next in the list of countries that have seen that happen. francine: would it make a difference if the e.u. retaliates and certain constituencies where donald trump has more to lose in the midterm elections? do we always need to bring it back to domestic policy? andrew: my colleague is right. the numbers are quite small when it comes to gdp. that effect is more on market sentiment, escalation, and whether or not what comes next
are going to appear like more targeted repercussions. the e.u. has been clear as well as mexico and canada that when they look at potential measures to take in response, they are going to be thinking about segments of the economy that are politically important to the u.s. francine: what kind of impact? does china really retaliate? are we talking about the possibility of a trade war, or trade tensions that will flare up, but nothing ugly? >> the term trade war can be quite misleading. the e.u. trade commissioner said it is more about what the measures will be in retaliation. a first point in the process. in terms of china, it fits into the broader context of the relationships between washington and beijing. chinese investment abroad in the u.s. and the e.u. has been growing fast.
now we see more tools in terms of screening for investment into strategic industries in the u.s. it is about how the world is coming together in terms of the u.s. retreating from the global stage. we've seen the first futures contract in renminbi. this vacuum that the u.s. is leaving has been filled by china and the stronger relationship between china and russia. the u.s. and the e.u. drifting apart is worrying. francine: what does it mean for the markets? andrew: we are heading into a summer that is going to remain volatile. we have upcoming headlines on steel tariffs, on china trade negotiations, nafta, and uncertain political backdrop in italy, a new government potentially in spain. this is a lot for the market to digest. you have strong earnings growth. i think the number of issues that are on the markets' radar
that can lead to volatility increased. that warrants taking position down into the summer and having a more neutral risk position. francine: they don't really know how to price in -- they are focusing on fundamentals in the u.s. economy. that leads to fed hiking. andrew: i think it is a fair question. in some ways complacency is maybe an appropriate word. markets have been struggling with the difficulty of reading a situation where there has been a lot of ambiguity. when these first trade tariffs on china were proposed, there was uncertainty over whether the number was on the total amount involved or the actual amount of the fine. i think markets are trying to do their best in response to that. i think as the summer goes on it is going to be harder to ignore
and the impact will have repercussions. francine: how much is this a concern for germany? germany has a lot of exports. we are seeing the trump administration look at cars as well. you could see potentially some tariffs on cars. that means the german economy probably has the most to lose. >> it is a concern for germany. does this carry weight in terms of how the e.u. will respond? francine: thank you both for joining us. stay with us. plenty coming up including italy's new populist government showing signs of diverging priorities. we will discuss the outlook for ity and europe. s&p futures are higher after strong u.s. jobs data. what does optimism in the world's largest economy mean for the fed? this is bloomberg. ♪
francine: economics, finance, and politics. this is "bloomberg surveillance ." let's get to the bloomberg business flash. here's taylor riggs. taylor: bayer said it will drop the monsanto name once it has completed its acquisition. monsanto products will retain their brand names. the german company said it plans to complete the deal this thursday. unicredit is reportedly considering a merger with societe generale, a move that would combine two of europe's largest financial institutions. , whotalian lender's ceo
once worked for socgen, has been developing the idea for severa months. the french bank denied any discussion regarding a pottial merger with unicredit. calls and emails were not answered. with u.s. agreed authorities to settle probes into interest rate manipulation and bribery of libyan officials. the french bank agreed to pay to resolve the u.s. investigation that it submitted misleading numbers and in a separate case bribed libyans to win investment deals. socgen said the penalties are fully covered by existing provisions without giving further details. considering acquiring a minority stake in klm in a move that would see europe's biggest hotel operator build ties with the carrier. the hotel group says it is at a
very early stage and will discuss it with the carrier in time. air france klm shares are higher. satellitet launched a for a long time customer, marking its 11th mission of the year. the falcon nine rocket carried it from florida. the company is targeting roughly 30 missis in total this year. that is your bloomberg business flash. francine: thank you, taylor. european stocks higher with s&p futures this morning after jobs data boosted optimism. ratingser-than-expected suggest that america's labor market will keep powering growth and reinforce market expectations for a fed hike later this month. still with us, andrew sheets and dnaanae.
thank you for sticking around. andrew, when you look at u.s. growth, is it ok? we were talking about the danger of the u.s. overheating. andrew: growth in the second quarter looks very strong. economists at how tracking estimates, it is over 3%. the current elements of growth are not the issue. the question is, does that decelerate? there's concern over how much fiscal stimulus is in the system now. our view is that growth in the u.s. will start to decelerate between now and the end of the year. inflation will continue to rise. core inflation will continue to pick up. we think the fed will hike in will september, and they stay on that path as core inflation picks up. how much impact would trade tensions have on u.s. growth? >> it is one of the factors that
will decelerate growth. it is quite strange that we are wheng so strong jobs data the economy is meant to be so close to full employment. the factors that have influenced inflation still quite contained. francine: i have two charts for you. treasury yields. what happens here for the 10 year? andrew: i think what we are seeing is, we are clearly breaking out of what has been a 30 year bull market. it also doesn't mean the next step is 5%. we have moved a long way in treasuries. there is going to be a tension between what the fed is trying to do and what the market will believe is a sustainable rate. we think that means the curve will continue to flatten. francine: does it invert?
andrew: we think it does invert by early next year. the market is concerned that what the fed is doing will ultimately not be sustainable over a longer time. francine: do you look at markets or do you focus on the broader economics? >> more on the broader economics. it is also the first time in a long time that we are seeing the tightening monetary policy and easing fiscal policy. francine: i guess the million dollar question is, does an inverted yield curve mean an impending economic slowdown, which can lead to recession, or is this time different? andrew: usually it does. it is dangerous to say this time is different. we are currently not forecasting a dramatic one. i don't think any investors are. one of the most widely held views we encounter for investors is the next recession isn't
until 2020 or later. we all know that everybody in the market is quite bad at four seeing recessions, downs, for a variety of reasons. francine: understatement of the year. andrew: our view is we are later in the cycle than the market is discounting and the risks are higher than what the market is discounting. francine: where will the next recession come from? are we focusing too much on the last recession? -- the cycle is in a very late stage. the question is what will trigger the end of it. within can the trump victory, brexit, upsets in europe, and that has triggered the downturn. anything could trigger it looking ahead. the trade tension is an important factor. how these translate into geopolitical tensions, is also important.
what will happen in europe? will we see tensions for the euro area? andrew, what does dollar do? is my euro-dollar chart. we've been trying to figure out the impact on emerging markets. andrew: in our view, the dollar six toaken over the next 12 months. it is several factors that are going on. the dollar looks relatively expensive. the euro and the yen are very cheap, and yet are still running large current account surpluses. side, weerging markets think many of those fundamentals remain silent. real interest rates are high versus the u.s. ultimately i think the dollar will weaken. francine: thank you both. andrew sheets from morgan stanley. stay with us.
unicredit is pushing for a merger with societe generale according to a report in the financial time" which this can times whichnancial says discussions are at an early stage. the deal would see europe's biggest financial institutions join forces. how likely is it that a deal can be struck? joining us now is jonathan. thank you for joining us. when you look at the probability of something like this happening , what is the rationale? >> compared to a couple weeks ago, discussing barclays-standard chartered, we don't think there will be a big deal. of all the deals that could happen, you look at the combination, they've both got investment banks that need a lot of work. get ag this together, you
pan-european champion. francine: you saw what happened with btp's. a lot of italian banks got battered. >> i don't think anything is going to happen for 12 to 24 months. if you thitrategically, does this make sense, for a lot of reasons it does. -- why on earth would socgen even entertain that? it has domestic retail in france that is still horrible. four quarters in a row have been subpar. we are not fans of the whole pan-european loads of m&a. strategically this would create a bank that makes more sense. francine: does it make more sense than into has a-credit suisse or any of the other combinations? >> definitely.
we were talking about this deal 15, 20 years ago. you have overlap. you have germany, austria, investment banks which need a lot of work. there's a lot of reasons you could buy into this. is it going to happen in the near term? almost impossible. francine: is that because of regulators? would they say yes now? >> they've both got 1%. forget, he's been there two years. he spent two decades at socgen. he ran the investment bank. people are quite important in these deals. i guess the question will be what happens. there's a lot to work out. fundamentally, this is the sort of deal that intellectually makes a bit more sense. francine: thank you so much. jonathan tyce, senior banks
analyst. we will be back with andrew sheets from morgan stanley. , italy's new populist government is showing signs of diverging priorities. we will discuss the outlook for italy. if you look at some of the market reaction, intensifying trade tensions could be a long-term negative for u.s. dollar if the american economy suffers a result. this is bloomberg. ♪
are the best ways to unlock north korea's economy? on tictoc.re on bomberg.com, asrhetoric over, read why the united states and china could need a new framework. and, trade talks feature highly. stocks shrug off the tension as the haven eases. and we will look at how trump and allies are setting for a showdown. there could be a big merger in the banking space. unicredit and socgen could join forces. let's get to the bloomberg first word news. annul: china says it will trade agreements with the u.s. if the trump administration pushes tariffs. the warning came after wilbur ross flew to beijing f talks and as president trump prepares for a showdown in canada. >> don't blame trump.
blame china. blame europe. blame nafta. blame those who don't want reciprocal trading, tariff rates, and protectionism -- trump is responding to several decades of trade abuses. the u.s. has warned north korea that it will win relief from sanctions only when it makes irreversible moves toward denuclearization. james mattis met counterparts from south korea, japan, and singapore. he expects a bumpy road ahead and insists the west must maintain a tough stance. >> we must remain vigilant, and we will continue to implement you and security council resolutions. north korea will receive relief only when it demonstrates a verifiable and irreversible step to denuclearization. taylor: global news, 24 hours a
day, on-air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. francine: thank you so much. italy's government has been three months in the making. now it faces one final hurdle before it can start putting it plans into motion, a confidence motion in parliament. the coalition is showing signs of diverging priorities. the five-star leader has set a universal basic income will be among the first measures he plans to push through. cut 5ague wants to billion euros of assistance to asylum-seekers. billionaire george soros has warned that the risks to the parties could see the government collapsing, triggering fresh elections. how worried should investors be? still with us, andrew sheets from morgan stanley. thank you for staying with us.
, when you look at italy, what are the chances that they manage to fund all the promises and that the parts stick together? >> it is a fragile coalition. there is very little that unites these parties. a populist government with not much experience, a coalition between the left and right, it is not the first time we are seeing this. italy is not greece, of course. it is a much bigger economy. in terms of how europe will react, we've seen angela merkel comia clear vision of what they want out of european monetary union reform. inre is a lot of unknowns terms of how politics will play out. it is a fragile coalition at the moment. francine: andrew, if you look at the market, do we need to look at italy or the consequences
that this italian vote and government has on the way the germans look at further ation? andrew: first, i do think that you have a high likelihood or a decent likelihood that merkel and macron will use this as an opportunity to refocus on reforms in the upcoming summit, which we think can be supportive for the euro. for italy, that is the bigger market of uncertainty. btp's fell and rallied back. this remaiuncertain situation. we are still not sure what the next -- what the first steps are. ratings agencies are waiting for that. francine: what are the chances the constitution gets changed. signaledalition has
that this is not one of its plans. it backtracked from that have euro membership as one of the issues it wiaise. francine: how should markets view this? were ready for a coalition of populist governments or leaders, and as soon as the euro was when therethat is was widespread panic. andrew: there are a couple of things. first is the rating agencies, which are operating out of any sort of european union government function. they are independent. moody's has already put the rating on a watch negative. war that measure to be introduced, they would have a view on it. the second question is, does how the european
union faces britain in the brexit talks? francine: and it must. andrew: you would think so. you would think at some level, does that mean stcomes are more difficult? if it looks like there are fewer consequences, does that raise the risk of other countries wanting to push for it? minds, ick of people's think that issue has to be there and is another live issue. francine: do you think it is impacting brexit? >> i think it is a valid point that the european union has a stronger incentive to be tougher on the u.k. a third factor i would add would be held the ecb reacts to this. we are looking to the ecb gradually exiting its qe program. there are strong signals in that direction.
will tensions in italy cause it to reconsider? a big economy in the context of the euro area. francine: we charted the spread between spanish and italian yields. ,ou can see the spread widening then retracing a touch. this tells you that there is still a lot of uncertainty in the bond markets. other equity markets have healed. we see equities in the green today. this is an issue where bond markets are telling you that there's still a reasonable level of uncertainty. this also is a difficult situation for the ecb. they've already flagged that they want to be pulling back from market support. measures thate have been proposed by the government, if taken in total, could violate some of the bounds
that the ecb has said are important. quite a bit of uncertainty and i think the spreads are telling you this is far from over. francine: do you worry about italian banks? andrew: i think that is a somewhat separate issue. ,talian banks are in many cases the funding situation or capital situation is so much better than where it was in 2012. this is going to flow the other way around. focus isk the markets' on the government bond market and what proposals this government will take. francine: thank you both for joining us today. ande, chief economist, andrew sheets at morgan stanley. coming up, plenty coming up, including bulgaria and the euro. we talk to the economy minister about plans to join the single
francine: this is "bloomberg surveillance." europe.astern s&p upgraded the outlook for the bulgarian economy to positive. the rating agency says it expects strong growth to continue on the back of strong demand. bulgaria has reaffirmed its plans to carry on to joining the euro by applying for admissions to the exchange rate mechanism
despite the fact that the ecb has expressed serious concerns. is the country still optimistic? joining us now is the deputy economy minister of bulgaria. andrew sheets is still with us. thank you for joining us. talk to us about foreign investment. why is it declining? >> it has been increasing for the past years. in bulgaria, the amount of investment is about 29 billion euros. the u.k. is one of the leading partners of bulgaria with 2.6 billion euro investment so far. there is a reason for it. the economy has been growing very fast for the past years. yearmarked yet another with significant economic growth.
3.8% for 2019.g we can offer some of the most favorable conditns for investors in terms of taxation system for example. we have one of the most beneficial systems. francine: is that what you are focusing on? when you come to london, what kind of business case do you present to attract investment in your country? of the most, one favorable systems in europe. we have 10% corporate tax and 10% flat rate tax on personal income. we have the lowest cost of resources and the lowest operational cost for production in the european union. increasing have been
for the past years. very well-developed industry. very well-developed sectors. we have the fastest-growing sector in southwestern europe. automotive is one of the leading industries in bulgaria. francine: first of all, are you still up relying -- still applying by the end of june? you paint a very positive picture for the economy. if there is one thing you could fix now, what would that be? forhe most important joining the eurozone is that bulgaria fulfills all the requirements. in terms of price stability, interest rates, government debt, and everything that is concerned , so this is a very good signal to investors. there is a very safe place to
invest. we've been very stable politically for the past years, even during the years of the global financial crisis. francine: andrew, when you look at eastern europe, what are the questions you ask yourself? andrew: one question is, we've seen inflation wages starting to rise across central and eastern europe in a number of countries. you mentioned the advantages from a cost perspective. how do you see the relative costs across eastern europe, and how do you see the inflation picture going forward? inflation for the last 12 months is 1.4%, which is quite low so far. we have some pressure on the labor market, but this is cyclical for eastern europe and for europe as a whole.
we expect some increases in the fact has to be removed by the introduction of innovation. keeplieve that we will potential to have this lower operational cost. francine: do you worry about trade tensions between the u.s. and the rest of the world impacting bulgarian gdp? you have a lot of manufacturing. directly know, but indirectly there will be a negative impact. the automotive sector is one of the fastest-growing. today, eight out of every 10 cars in europe are produced in bulgaria. u.s. putsbut if the trade sanctions on cars, you will be hurt. >> and also on steel and
aluminum, which is used in car production. this would have a negative impact. we really hope that those trading partners will pick up these measures. has shownan union that they wouldn't accept this. analysts are talking about it. have you modeled how much it would hurt your economy? >> not yet. we haven't measured the impact yet. we hthat the situation will go in a most favorable way. francine: deputy minister, thanks for joining us. the deputy finance minister of bulgaria. we stay with andrew sheets.
francine: economics, finance, and politics. this is "bloomberg surveillance ." let's get to the bloomberg business flash. bayer said it will drop them monsanto name once it has completed its acquisition. monsanto products will retain their brand names. the german company plans to complete the deal on thursday. unicredit is reportedly considering a merger with societe generale, a move that would combine europe's largest financial institutions. according to the "financial has beene ceo developing the idea for several months. the french bank denied any board discussion regarding a potential merger with unicredit. calls and emails to unicredit representatives were not answered. acquiring asidering
minority stake in air france klm to build ties with the carrier grappling with a costly labor dispute and change in management. the hotel group says the move is at a very early stage and will be discussed in due time. air france klm shares are higher this morning. spacex has launched a satellite for a long time customer, marking its 11th mission of the year. the rocket carried the payload from complex 40 in florida. the company is targeting roughly 30 missions in total this year. that is your bloomberg business flash. francine: thanks so much. microsoft has agreed to acquire github. that is according to bloomberg sources. the deal sees microsoft returning to its roots, serving the tech community.
terms were not disclosed, but github was last valued at $2 billion in 2016. joining us now is alex webb. andrew sheets from morgan stanley is still with us. alex, what is the logic behind the deal? its largest part of the business is its cloud business. what a lot of companies do when they are working on software -- google for exa has a c language. it is a of on boarding them on to these cloud services. if you've got apple products, they tend to work better with each other than they do with a microsoft computer. the logic will be the same with github. if they can align it more closely with microsoft products, it will work better with
microsoft. francine: can you tell us about how many things microsoft has bought? alex: it has a pretty spotty track record. it bought nokia and had to write down the entire value of that. it bought sky. there was a great story on how sky hasn't worked out that well for microsoft. on the flipside, they also bought linkedin. this seems a lot more similar to the linkedin acquisition. github is very much like a social network for coders. out, really building them and the ability to sell additional services to those users. francine: do you look at these kind of acquisitions to see whether you will invest in the tech stocks? andrew: these are probably a little more micro, but it does speak to the fact that this
sector does have quite a bit of cash. has more cash after the recent tax legislation which has allowed that repatriat would see a in m&a sector that is suited to that. i think in on thing about this cycle is the m&a volumes are to 2006 orelative 1999-2000. it applies more broadly for the et. the case for the market is routed around m&a. francine: when you look at this, going back to github, there is a link to the cloud. alex: absolutely. if you can convince people -- you build your software on github online and you collaborate with other people. you then have to download that and make it work on something else.
if microsoft can find a way to make it integrates seamlessly, that is a great opportunity for them. have moredoes seem to of an appetite for risk. it has lagged in recent years. it did recently overtake google. francine: thank you both for joining us. alex webb and andrew sheets. "bloomberg surveillance continues in the next hour. tom keene joins us out of new york. we will be talking to john norman and rupert harrison from blackrock. this is bloomberg. ♪ retail.
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the e.u., china, and canada threatened to retaliate. the final hurdle. italy's populist government prepares for a confidence vote in parliament. george soros warns the country could be on track for fresh elections. the turkish lira advances after a jump in inflation. markets look to the prospect of another rate hike. is is bloomberg surveillance. i'm francine lacqua in london. tom, one of the things we need to talk about is whether regulators have a little more appetite for m&a in the banking sector. unicredit possibly merging with socgen. i had a great conversation with jonathan, saying of all possible combinations, this one makes more sense. it comes off the news of barclays and standard chartered. you wondered when this was going to start.
i guess maybe it does start this morning. francine: if you look at how italian banks were hammered last week because of political turmoil, you have ask yourself, why would you go after an italian bank, so i think timing is crucial. let's get to the bloomberg first word news. taylor: president trump is headed for a showdown with u.s. allies over trade. members of the group of seven will meet in the back. the european union and canada are threatening to retaliate unless the u.s. reverses course on. bloomberg spoke to the chancellor of the exchequer. >> we are disappointed as allies of the u.s. that they have taken this step, especially if they've taken it on national security grounds. we continue to talk with them. taylor: china warns that it will back out of trade commitments if president trump carries out a
separate threat to impose tariffs on chinese goods. james mattis has a warning for north korea. regimesays kim jong-un's will getonly wheshows irreversio giving up nuclear weapons. kim and president trump are set to meet next week. a british lawmaker warns that russia is using tactics from the kgb to wage covert war on the west. saysservative party member the kremlin considers nonmilitary methods of attack to be potentially more powerful. among them, social media, tv news, and political groups. spacex successfully carried out its 11th mission this year. the company launched the satellite overnight from florida. spacex is hoping to have 30 missions this year after 18 last year. global news, 24 hours a day, on-air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries.
i'm taylor riggs. this is bloomberg. markets after that bang up ort on friday and all the international swirl of news. green on the screen. a little bit of curve flattening. that would be something if we curve flattening. i'm going to leave it there. not much going on. toncine: it is still good take stock of the optimism we are seeing in the world's largest economy after that jobs data and the fact that investors seem to be putting protectionist fears at the back of their mind, although we are seeing more concern about china. treasuries slipping. for the bloomberg today, i want to do the bloomberg, michael mckee's economics. mr. mckee is authoritative on
economics. here's michael mckee tweeting out a brilliant thread of tweets just one. and here's it was an astounding and depressing weekend. the president's assertion the u.s. is more respected than ever around the world is 180 degrees from the truth. i thought that was quite a statement from our michael mckee. tom, this is why this chart matters. i'm looking at turkish lira. turkish lira advanced after a jump in inflation. a lot of people in the markets are speculating that the central bank will raise rates. i lumped everything in this chart. it is looking at the lira and overnight lending rate. i'll push it out on social media. we are on the lookout for turkey. tom: very good.
right now, interesting weekend to say the least. the president, well it is going to be a showdown at the g8, the g six, maybe it is the g7. china says all commitments are off if he imposes tariffs. ence kudlow says there are others to blame. >> don't blame trump. blame china. blame europe. blame nafta. blame those who don't want reciprocal trading. to severalsponding decades of trade abuses here. tom: lawrence kudlow, advisor to the president. maybe you were watching a basketball game or hockey game. what you need to know is this is becoming a global response. tom mackenzie in beijing, the overlay here with the shangri-la
dialogue in singapore is well on the south china sea. what is the beijing response to the trade issues, or are they distracted by general mattis? >> i think they've got an eye on both issues. we've heard a toughening of rhetoric from the chinese side. they are frustrated that they can't get a grip on what the u.s. strategy is, if there is one. that came to the fore with comments or rick perry -- commerce secretary r' visit. that followed a comment from president trump. there were concerns around what they could achieve over the weekend. as you say, in terms of the geopolitics, mattis gave something of a dressing down to the chinese and said there will
be further consequences. when you talk to the military experts, they say the u.s. and its allies have been caught sleeping at the wheel. that will.s. can do change china's behavior is the question. what is the tom: relationship? is there any linkage of the two in this discourse? >> there a couple of linkages. when you talk to trade experts operating in china, they say there was a clear opportunity for washington and brussels to team up and pressure china on a number of issues, market access, intellectual property. that clearly isn't going to haven now that the tariffs been imposed on the european union. chinese officials have been in europe on a charm offensive to
get them to encourage european .nvestment in china there's not much consensus that china and the european union can work much more closely than that. clearly the divisions that are in place now are to china's favor. francine: tom, thank you so much. joining us for the hour, rupert harrison. thank you for joining us. rupert, when you look at tensions, they flare up and go back down. is there a time where china just retaliates instead of playing nice? rupert: this is a return to normal. the extraordinary event was treasury secretary mnuchin's statement based on very little deliverables from the chinese. i think that cut across a lot of people's views that this is
going to be with us for some time. this is a strategic challenge for the u.s. and china. therefore going to go through a bumpy process. even if we eventually get to a negotiated outcome. mnuchin put that on hold. it is further complicated by the issue, i on the china think president trump has a lot of support from the u.s. and from allies. the steel and aluminum tariffs cut across that. that is going to make any kind of coalition difficult. francine: john, how difficult is it for the markets to price all this? john: i think pretty easy over the medium term. this is sort of chump change.
if people think that markets are pretty complacent it is because the risk is not that material. on a day-to-day basis, it is almost impossible to price. the rhetoric is so inconsistent. of gettings is kind filed in the category of just noise. tom: do real rates matter? do central banks matter? or is it about capital flows as we go through the year? john: real rates definitely matter. if you have to choose what is the trend versus the variance around the trend, those are going up. there's a lot of volatility in markets around the fed story, but the underlying dynamic is monetary policy. does the fed not look at trade?
they look at it, but they are a long way away. they are looking at very strong domestic data. they feel comfortable with the direction of macro wages. two, in last week or response to mainly international developments, we saw fed pricing come off a lot. thank you both for joining us. rupert harrison will be staying with us. coming up, ellen zentner. that conversation at 6:00 a.m. in new york. we will ask her extensively about dollar dynamics and treasuries. this is bloomberg. ♪
taylor: let's get the bloomberg business flash. microsoft may be does return to its roots. the software maker has agreed to buy github, a code company popular with software developers. was founded to write programs for a new microcomputer. terms are not known. investors and analysts are puzzled by nintendo's biggest two-day selloff in years. the japanese company fell more than 6% two days after losing 4% on friday. volatility has jumped since april. investors are trying to gauge whether the company can maintain the sales momentum of its switch game console. that is your bloomberg business flash. francine: thank you so much. italy's populist government has
been three months in the making. it faces one final hurdle before it can start putting its plans into motion, a confidence vote in parliament. the government is expected to get the green light. some analysts predict tougher times ahead in future votes as the league and five-star movements battle over which of their promises to an act first. george soros has warned that the risk between the two parties could see the government collapse. still with us, rupert harrison of blackrock and john norman of jpmorgan. is it that you look at how europe can integrate after we saw the fear that italy stoked? is it that italy could turn eurosceptic? there are various angles. john: there are. what is the likelihood the italian government puts in place irresponsible fiscal policies. if you look at the campaign
platform, you seem almost 100% guaranteed of that. if you look at how quickly the government seems to change its big open so there are questions about the way this goes. the near-term issue is, what is that going to look like? how do they fund this? does it have an impact on ecb? spanisha spread between and italian yields. rupert: the ecb would be happy to see market pressure on italy as long as it is not systemic. there clearly is going to be a big conflict over fiscal policy. short-term, they backed off a bit. the one thing that was really toxic for markets was this idea of somebody leaving the eurozone back on the table.
that has been put back in the box. things have cooled down a little short-term. there's probably a little bit of upside strategically over a one to three-year horizon. thesevery hard to see partners in government lasting it is hard them -- to be an optimist long-term. rupert, from where you sit, is this just another day at the races for italy? is there something different this time? rupert: there's clearly something different. got an first time, we've anti-system government. it is a bit of a hybrid government. you've got a mixture of out and out populist politicians and some technocrats. they are trying to temper some of their program to stay just
the right side of the line. they don't want to be forced into losing control of events. challenge longer-term is that this government may not last very long. and then of course as a strategic allocator, there are these massive unresolved issues around the structures of the eurozone banking union. the next time we get a serious economic downturn, italy will be front and center. john norman, i think you invented the phrase eurosclero sis. , dohese political stumbles they dampen economic growth and nominal spirit? john: they haven't yet, but they
can. ratesg as the borrowing stay above nominal gdp growth, u have bettees for the economy. you could say this is a threat for italy. is somewhateurope better insulated against that. i think it is wrong to say this is going to kill european expansion. you have downside risk on that outlook given what is happening in italy. francine: does it kill the banking union or capital markets union? rupert: most of that was dead already. the prospects for serious cardsss is just off the -- almost was off the cars already. solidly backry into the policy regime in europe . harrison with us,
italy's largest bank is reportedly considering a merger with societe generale according times."financial the chief executive who once worked for societe generale has been developing the idea for several months. unicredit shares rose after the open. socgen is also trading higher. whoing us is jonathan tyce, covers banks. , are we goingall to see more consolidation, and if we are, is this the one merger that make sense? just a bit more domestic consolidation. there's plenty of room for that across the eurozone. this is a lot more appealing intellectually. if you look at the retail overlap, you look at the need to -- they are both
underperforming. politically, there's question marks for italy. there's question marks about would france feel about handing the reins over to an italian as the ceo. there's a lot of appeal to this deal. they need a bit more help. --ergies would be reasonably there are quite a few question marks. tom: congratulations on a terrific research note that you put together. who is the acquirer -- who is the acquiree? i can't figure it out? who is the acquirer here? i think they would dress it up as a merger of equals, but i would have to say the italian presence would be felt more strongly. socgen is still really struggling.
months notmonths and turning that around. both halfway through three-year strategies. they are both struggling. the french might push back harder.francine: thank you so mr joining us. rupert harrison of blackrock and john norman of jpmorgan are staying with us. coming up, the eurasia group analyst after 7:30 a.m. in new york. we also speak to adam posen a little bit before that. this is bloomberg. ♪
the threeore about economic bells on the peninsula. the united states and china could need a new framework altogether. and trade in different ways. president trump and the allies are set for a showdown. on top of the pile, there could be a big merger in the banking space. a terrific briefing a short while ago. tom: yes. right now, let's look at a strong dollar. jpmorgan, who thinks about this all day, 24/7. trump strong dollar a
strong dollar? >> not at all. this has nothing to do with the president. it has to do with fed policy and performance of other banks. another a couple 8%, but it has nothing to do with the latest weeks. tom: there was a lot of talk into the tread follies. what do the people who link the dollar to the trade balance -- battles, what do you get run? >> is right to think of the dollar as underperforming when the u.s. is engaged in trade for -- trade conflict. is pretty much astounded. have beenssue they contending with with her five months. the rhetoric or trade
policy come i don't think it will affect the dollar with the yen and the euro. something even worse on trade to make the dolly go down. -- the dollar go down. what we are looking at now is more crystallization of existing fears rather than your fears. and tom: where is your trade opportunity? for the short-term, the next one month or two months, the dollar will go out against the majors. the u.s. economy showing some acceleration while juror -- while europe and japan and other emerging markets are not showing the same momentum. the short-term giving some cyclical emergence given where economies are going. this strong u.s.
economy. stimulus is the drawback. the slowdown in europe and in tina more broadly and america, that has made the u.s. outperformance a lot more. you see rate differentials come back in compared to the rest of the world. from here, that is a little less true. we see the jobs report last week, the concept is that the u.s. is strong and widely accepted in markets. bonhomie inome places like europe and the rest of the world. one bit of data, but if you start to see some suggestion that there is a joe maddon european slowdown, you can see how the concert -- the currency start to perform better.
with ago, the netherlands were doing better. right now, in new york city, we have taylor riggs. taylor: the white house economic adviser says don't blame president trump for the trade crisis. rule breaking is going on all over the place in the president is responding. i -- and joel -- to 4%,re going to close before the crisis, and this has the potential of slowing down the recovery because it hinges on the level of confidence. >> his allies are headed for a showdown with president trump at
the meeting in quebec. mueller made a fun the limits of presidential power. asserted an almost unlimited right to halt investigations and issue pardons in still, rudy giuliani admits, pardonsdent trump himself, it would probably lead to impeachment. the trump administration is set to announce a compromise on biofuels today. it will tan down costs for refiners. eight is a big issue for makers -- for lawmakers. in italy, the new government faces confidence in both houses of element this week.
the slim majority in the senate could face a risky road. 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. i'm taylor riggs. this is bloomberg. ♪ francine: brexit is back this week as u.k. lawmakers are term from a parliamentary recess. theresa may is facing important decisions. in a sign of ongoing frustration, chrisman of the says the only looser being a minister, i don't think that theresa may can carry brexit through anymore. >> when you look at rupert, the ofxit, you have a load
rebels in the government, but we have to wait for that white paper to be published. are we going to get it? >> i think we probably will get it. i don't think it will be much leading into the city -- to a successful june summit. in terms of domestic politics. theresa may has continued to push back issue by issue. there is a repeated pattern of recognizing reality at each the cabinet makes the decision that it is uttered to keep the show on the road, keep brexit alive, and swallow a bit of writer meantime. francine: civil servants put together a steady that prepares for the end of days. scenarios, there
is mild, severe, and one called emaar get in -- armageddon. should this worry us? >> i think it should comfort us on balance. the reality, looking at the tone theythe government, clearly are more realistic about the idea of no deal being a plausible outcome. i think this report has a ring of truth. but there are serious disruptive potential from a non-negotiator despite -- disrupted exit. you look at the calculations camp, their exit primary injury projected should be to deliver brexit. they need a negotiator outcome. there's no deal.
france is receiving gradually. francine: we asked what rates should do. >> for the u.k., we -- where we have had a spike of inflation, there is still's for the bank of england to slowly increase rates over time. impact solook at the far on the economy, you can take one or two and just relax. >> if you take one or two interest-rate hikes over the next three or four hikes. is have an economy that struggling. it is not buckling, but it is struggling. the environment where you want whereasapid increases
the turkish leader advanced after speculation that the central bank will raise rates. is due to make thursday ahead of a much-anticipated election on june 24. would it be a strong signal to the market if they were to high great the presidential election on the 24th? >> definitely. today. the lira rally the centralion that bank will have to do something on thursday as price into markets are now. this is the second hike in two weeks. in first was two weeks ago an emergency hike to avoid a currency crisis. tom: do they have control of
their dilemma? thinks not.t the marketplace they are so far behind the game they need some astic action to catch up. this inflation number was right line with expectations. tom: what do the turkish people want? a bizarreays been thing between the government and the people of turkey. >> this is an interesting election. for the first time, the economy seems like a liability for everyone. he has been viewed as financials to iliad economic progress. the question is whether the turkish public will or will not give the polls suggest it will be a tough race. francine: thank you so much.
if you look at what the turkish leader is doing, we see stronger inflation. what are the markets looking more from this thing -- from the single bank? what needs to happen? >> i think you need to see a period of higher interest rates for a while. it could be for six months. and then a high, real interest rates go up. but this level needs to maintain for quite a while. it would address some of the imbalances in the economy and reassure investors that monetary iticy setting may be maintain for as it needs to be maintained. client asked has been the most vulnerable of the emerging markets to the strong dollar it is possible they may get
either some benefit from a pause or a mini reversal. i see more economic conditions outside of the u they clearly have taken this position in the last few weeks, weighing the currency without weighing the canned rates. if the dollar can help them, fine. if it weekends again, then we should go to the bigger zones. >> i think it is the case for a handful of emerging markets and an important distinguishing characteristic from five is ago. there is one country that has an inordinate amount of china. you can have a balance sheet beblem and it troops to
-- or report. "the new york times" says facebook has hit the manufacturers their lead to full generation and networks with friends. cell phones makers create their own version. this -- even though the data seems to stand the phone, the day need to -- the data does not. tolan: i wanted to do this for our glorious over and. brad stevens, a conservative of the in our times has been treated to a huge president. palin was that sarah said about president donald trump's foreign policy, that he was alienating allies? ubre soundsf
louder. of the heat over the weekend in these united states of america. stephanie baker is with us. she reviews these things. someone sued with the republicans. where republ this monday especially after what we have seen in trade. >> as you saw, over the weekend, dominated by this letter to robert, that was leaked by the trump legal team, china to hit back at any challenge of his crime moment. that it may be a novel view,
basically, it boils down to the checking status regardless of motivation. rs livesit down with we are facing now is a big constitutional fight i had of us over whether he or she would that would play out. this weekend, they show out at a what is new jersey, robert mueller china to do right now his week is as went as usual size -- usually to the rousseff was a.
when i overheard tennis street i had to e him that that was not the change or -- says- beezus have come from this is line. we've never understood whether or not he wanted to look for a court fight over whether or not trump will sit in an interview. chomp has decided regardless of the neighbors is than else,
earnings hard to mines syrian to part of the strategy is to say, he doesn't have time to sit here with him and diner on, information and the . he doesn't always say so the script. pushingour, his yourself to fight the race. if she is lord of the math, does that qualify him to work for the british government? >> may be. we should talk in dallas talk some votes. marx find it difficult of price in.
war. the g7 turns into a g 6. a bitterly divided white house. the gop is not divided. a trade war hits everyone, most of all republicans. we consider the search for real wage growth this the fed, america's international economics. good morning, everyo'm. this is bloomberg surveillance. -- good lacqua, morning, everyone. tom keene. this is bloomberg surveillance. morning, everyone.
francine: given the turmoil on italian banks, it is not a straight away. you are looking very dapper. my: this is mysh boy bowtie. brexitity of me. right now, to a better than good first world news. overhigh-stakes fight trade. members of the group of seven will me in quebec. and canadan union are threatening to root leave. >> we are disappointed that they have taken this step, and
especially on national security grounds. we continue to talk with them. >> china will rinse it will back trump insist on carrying out tariffs on chinese goods. kim and president trump are set to meet next week. thattish lawmaker warns tactics from the old kgb to weights a secret war against the west. the kremlin considers nonmilitary efforts of attack more hour full-length invention war -- conventional warfare. states that he is past 7 p.m. this year.
helping to have the remission of this year after a record 18 last year. thom colin thank you so much for the discretion. very cool to attend for 20 flights. we will talk to alan about that. european equities on the higher side. a lot of the traders and market are referring stocks. the treasury alsoown, but also without betty.
theory. trump.t blame blame china. blame nafta.fared blame those who don't want reciprocal trading. severalsponded to decades of trade are you involved? tom: we don't want him to currently design. . duty out of asia what do the chinese make of all of this. how does beijing react? from the start, they in gauged with the process that
and looked at a couple of youtube videos. what the many de losses are. it is not just consumer and producer surplus. add that weight loss is bigger than we presume. throwing moneyst away for people who do not market things. -- enoughenough but to put us into recession. question of how much that consumers pay, how much did the company lose, bowie force people to invade somewhere, there's definitely disruption. ramps of.wraps --
of a world where everything is done by politics and the intervention of government. com-- they become an artist -- an arbitrary starts moving here as well. this is bad short-term, bad long-term. wille number of other .rticles dime bag to seward why is now different than the the waterooth all of to be a source for the u.s. trade policy. we are in a much more integrated the saidpared to say
lot more at stake. francine: why is the turning point fromhese types of trade negotiations that charlie, that are off and own. moussa: for economists, we understand that lingering uncertainty itself can damage economic growth. if you don't know how your supply chains my dearest of late , if you can't see what your
around what it sounds like a conciliatory te, we open why do social circuit says -- result for services. it is something china can do as well, promise to import more energy from the u.s.. there are things that can be done to sort of de-escalate these trade tensions. but it only takes a tiny misstep to amaze best to make move things forward. tom: they can put it tariffs on peterson institute abroad. we will continue on bloomberg radio. one of the nation's experts on the south china sea aaron new american security. stay with us.
787's with options for four more. it is the most aggressive in 20 years. investors and analysts are puzzled by the nintendo' biggest selloff in 18 months. volatility in nintendo shares has dropped ends april. that is your bloomberg is flash. tom: thank you. adam pozen with us from the peterson institute europe and alan ventnor. this, but weto do have got to do this. everyone has a three to four-year rate increases. away from where the dodd fell, what is the dynamic the between the dynamic bet and the
governors and vice-chairman? >> the pricing we have seen this year shows that the market was right about where the fed was, split between whether they go three or four times. we have seen every pricing in the past week or two where futures have come down, betting closer to the three hikes this year rather than the fourth. this will increase the mats coming out of unbridled enthusiasm over fiscal trade tensions. that was something that governor brainerd had highlighted in her speech last week. we see it is down to three white -- three hikes. these tensions come outside the u.s., if you are all not cost, that will quote you toward the
till times a set of 4:00. that morgan stanley recognizes the peterson institute. raiseppens after they interest rates? going'?d keeps on one is priced in is the three parts of the financial he said? that will be more than we will actually get i wore you and markets? there would be less than sign in if youttle move my look at governor brainerd speech, one of the things that has cap them there is that she is looking forward to highly last week. the answer is not queerwe have n fleshman. we had a killer jobs report.
reaching the limits of participation growth. this is something where the knife fed founded. not tighten.ten or it is not the end of the world. julia: how do we look at the yield to yield curve should we take it as a bad sign or should they be more? . the reality is that that is not a target of policy there is always the question of where is of emergent coming front course, you say yeah, they are really tightened and overshot. a --er it's because they they secret size and the economy ew
abner,e clerks for thurgood marshall, and an early kennedy. and anthony kennedy. like the philadelphia eagles, he is a winner. cavan, this is a winning theme for the president with his constituency? can they take it beyond his constituency? kevin: that's a great point. the base of the trump political movement is in lockstep with trott been made -- and former
mayor giuliani. the question is whether or not independent voters feel the same way. i don't feel that they say they -- they feel the same way. they want to see this come to a natural conclusion. bob mueller is operating on his own timeline. tom: what is the scheduling? the supreme court will have a busy week, a busy month in june. will mr. mueller have a busy weekend month of june? he has not shown his cards in the sense over whether he will wrap this up before november in the midterm elections. ,he congressional committee these are separate investigations on what goes on with bob mueller's investigation, which is the one that matters. the congressional committee investigation matter.
they have chosen to politicize this.ighten the basis of if. you are trying to price what this means come no, it i a wildcard, just like the last election. it can motivate progressives to get to the polls and conservatives to get to the polls. youryou cannot wear philadelphia eagles jersey in the oval office. you can't do that. [laughter] castella, stay with us. this is bloomberg. ♪
divided. it will not be a g7, it will be a g6 plus one. >> the french finance minister at a fractious g6 plus united states meeting. i want to show you what the new media does. this is our wonderful michael mckee with a thread that blew up on economics. this is one of the statements of his reporting of the mood at whistler. "an astounding, depressing weekend." "180 degrees from the truth. i was frankly shocked." what were you shocked about? >> shocked at the level of vitriol and anger at the united states. i have been going to these meetings since 1995. the entire world was unite against the united states. normally we lead in this case. >> the money question is can the
leaders get together with china to perform some kind of thrust against mr. trump's desires? >> there is reporting to the effect that china is looking to try to co-opt some of the anger against the united states, but you also heard a lot -- and i talked to the finance ministers -- the anger of china. they agree that china cheats and something needs to be done about it. they just disagree with the idea that the united states should go after the chinese by itself. they feel multilateral effort to pressure the chinese would be the most effective. >> michael, whether any talks about an accord? we heard about a plaza accord for currencies, but is there talk about getting trump at the table to find an accord on trade? >> i don't know if you would call it a plaza accord. they came to the meeting with an idea of what they wanted to do. you will see a semi-united 67,
or g6 rather. they want to make it clear to him that they need to see a change in the way the u.s. is dividing. the alliance. apart and there are a lot of issues, iran at the top of the list. they've got to address them and right now, they don't have a way to do it. >> bring this up on the screen. this is the website for what canada is doing. we love countdown clocks, three days, 17 hours, 27 minutes. does the president show up, and how does the greed it? >> he is scheduled to attend. when we talk about anger in vitriol, it is within the confines of the diplomatic niceties. they won't be throwing things at him. but behind closed doors, they will in no uncertain terms make it known that they are not happy. that is what we are told about
the meetings they held in whistler among the finance ministers, and steve mnuchin got beat up. you heard the japanese finance ministers saying he felt sorry for him. >> are you going to quebec? >>l be here, sitting next to you, talking about it. >> michael mckee, thank you. to our first word news. here's taylor riggs. >> the white house economic advisers say don't blame president trump for the trade crisis. larry kudlow says it's going on all over the place, and the president is responding to years of trade abuse. china says the u.s. imposes tariffs on chinese goods in beijing will back out of commitments it made to reduce trade surplus. secretary-general says it could hurt growth. >> we're growing at close to 4%, which was at speed before the crisis, and this, of course, has the potential of slowing down
hingesovery, because it on the level of confidence. >> aca's allies are headed for a showdown with president trump at the g7 meeting in quebec. the battle between president trump and special counsel robert mueller breaches presidential power. a private letter from the president's lawyers in january asserted his unlimited right to halt investigations and issue pardons. still, rudy giuliani admits that if president trump pardoned himself, it would probably lead to impeachment. the trump administration is set to announce a compromised policy on biofuel today. bloomberg has learned it will broaden the market for ethanol. the plan will also try to attempt down refineries made from corn. it's a big issues for lawmakers who want to guarantee demands for ethanol. and in italy, the new government faces a confidence vote this week.
the prime minister should win approval for his 18 member cabinet since the popular movements hold a majority in both houses. but the slim majority in the senate could make the vote risky. global news, 24 hours a day, powered by over 2700 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. tom, francine? >> thank you, taylor. let's go straight to alan boettner. let me start off with you, adam. we heard from george soros writing and one of the italian papers, that he doesn't think this coalition can last. first of all, are you worried about the politics of it, or are you worried about the funding? >> oh, no, i am much more worried about the politics in the funding. there's no question that the fiscal plans they had, if they do everything they say -- lower taxes for the north, universal
basic income for the south -- they will break the bank, and rollback the pension. but that is all moot unless they can politically sustain it. i'm much more worried about the politics, about the political backlash in germany, which is completely unhelpful. i'm worried about the continuing momentum of non-centrist parties in europe. >> so i guess there are three angles politically. is italy a country that will stay in the euro, or that will create noise? the other one is doesn't impact brexit, and what does it mean for european integration? what worries you out of those? >> yeah. the biggest one is the exit risk for italy, which is not something one would ever thought should be in question. you do look at the polling data, as my colleague has done, and ceilinges stand out as
-- as feeling that the euro is not serving it well. most of europe feels quite strongly positive about the euro. but then you have also seen some nasty stuff coming out of germany in the last week, not from chancellor merkel, but from practically everybody else. this is much more serious than i think people give it credit for a few weeks ago. >> adam, where do you see brexit going? we are just hearing from the government spokesman, saying that the u.k. is preparing for all brexit scenarios. they're answering questions on the report we saw over the weekend, saying that civil service put together a study looking at three scenarios. one of them is called armageddon. i don't know if that's a good but to put near brexit, isn't comfortable that they are
looking at all possible scenarios? >> it is comforting that they are trying to tell the truth, but this is a truth that has been out there for two plus years, than an abrupt, full brexit without a transition plan or without a decent relationship with europe is going to be, maybe not armageddon for the u.k., but a very, very serious blow to an economy that has already followed to the bottom of the g7 in terms of productivity growth. so i have -- as much as i care about the u.k., i just basically ignore the week to week stuff, because clearlis government is not willing to make up its mind, and clearly the leadership of the labour party is unwilling to confront the realities, either. the eu keeps saying, here are your options, pick one, and as a number of people have pointed out, the real issue is northern ireland. they have no solution for that. >> dr. posen, you are one of the
experts on germany, and to that extent the core of europe. they talk about the musical chairs of europe. what does that mean, the musical chairs of the eu? >> well, that's getting thrown up in the air, because of the italians. basically, my colleague is talking about when you are dealing with these top level jobs, the top couple jobs of the ecb, which will be coming open in the next year, the head of the european investment bank, the head of the banking supervisor, the changes that are coming in european parliament, the very top level jobs, there's always a certain amount of work. prior to the italian mess there was a sense that nobody outside of germany really wanted them to take over the ecb. so the question was, could you train something with france or a job somewhere else to get a german slot, or vice versa?
but right now, that is getting messed up because of the anger on both sides. there is no direct border, but the figurative german-italian border. >> could this impact the u.s. economy, whether you have a german at the top of the european central bank, or whether european growth peaks? way we lookhink the at it is similar to the way monetary policymakers look at it. we have a directive to focus on the u.s., and doing the kinds of policies that keep the u.s. fundamental growth going. what happens outside our borders can certainly impact us, is through financial channels and conditions. we have seen italy and other political developments in europe from time to time bleed over
into the u.s. through financial conditions. that is what monetary policymakers are watching. the volatility that is created in markets from these political uncertainties, and the debt sustainability in europe, you bring to light over and over again how that can threaten economies and threaten financial conditions, and it is something that reminds us in the u.s. every day just how overextended we are getting with our budget dynamics and long-term debt sustainability. i think we should take lessons from europe and what happens when local economies are punished, when debt sustainability is deteriorating. >> let's continue with ellen, adam, thrilled to have them with us, particularly on international economics. gtv go, this is a real tool. you can take our charts and you can put them over to your bloomberg and dazzle ellen.
♪ >> this is "bloomberg surveillance." let's get your bloomberg business flash. bayer will close its mega deal with monsanto this week. it will raise up to $30 billion in shares and bonds, helping to fund its transformation into the world's biggest maker of seeds and agricultural chemicals. this is one of the last hurdles to completing the takeover.
facebook is disputing a report about how it shares data with mobilephone makers. "the new york times" says they spoke with device manufacturers, allowing them to pull information on users and their friend, but the social network says those deals were intended to help full makers -- to help full makers create their own versions of apps, and that the data mostly stays on the phone that accesses it. story" could wars end up with a beauteous distinction, the first movie in the franchise to lose money. t hit a worse than expected 65% in its second weekend of release. one analyst estimates the movie could lose $50 million. tom, francine? >> thank you so much. boeing's latest battle with airbus has moved from the u.s. to india, a market seen by the european playmaker as crucial to extending sayers to its
lightbody aircraft into asia. the campaign in india has already dealt airbus a setback. joining us now is the mana editor fl business in europe. and index, thank you for joining -- benedict, thank you for joining us. this is the next frontier for airbus and boeing. what can you tell us about how lucrative the indian market is? >> the indian market is a huge market. certain pockets of land in the world, of very established market. is a market, india that is growing exponentially. we have really strong, low-cost markets there. a new classdigo, of travelers that are coming u, leisure travelers. that is a market that both airbus and boeing has to win. what we are seeing now is bowling taking some orders away from airbus, particularly in the wide-body model, traditionally
one of the wing -- one of boeing's strengths. it looks like they have taken away an order from airbus for the 330. s might get something in the single market, but it is a tough market. >> if you look at the crusade, how much of it is backed by aggressive pricing in the tax cuts implemented by president trump? and could've possible trade war change anything in all this? >> boeing is really the darling of the trump tax cuts. they almost doubled in stock price. airbus had a decent year, but nothing near that. there's a lot of optimism from the u.s. that boeing will benefit from the trump administration. looming,rade war is
and that is a powerful tool for countries like china. if they don't like what's happening in washington, they might use it as a weapon to turn around and say airbus produces the planes in china. how much of a sardine can are these? a seat up to 335, and i noticed today the emirates will boost up premium economy. what is the dynamic of packing people into these china and -- into these giant planes? >> more people in bigger planes, but they will try to pack in as many as they can. these premium, first-class cabins, they are coming to an end. they need to think about how can i make money here. fuel is a huge cost. we just heard overnight that the outlook isn't what it used to be six months ago because of fuel costs and wage costs but
airlines need to think about how can i maximize each flight, and the way to do that is to turn them into sardine cans. the premium travel remains a niche but going forward it will be nothing but. >> thankou so mu we will continue with lm for morgan stanley and adam. coming up on bloomberg radio, eurasia group. stay with us. ♪
♪ >> "bloomberg surveillance." we forget negative interest rates. the german two-year is zero und, the blue line way up high. there is the blip on italy. you can see the spike down on italy, gloom and doom coming to an end. we come within reach of the moving average. our and adam in studios. and my supposed to be concerned
about negative rates, adam, or can we intellectually say they are justified? >> they are justified. in germany, you have had everything possible go right, no inflation, everything possible go right and productivity went down the same way it did in the u.s. and most other western economies. put all that together, the real rate should be low, and phenomenal rate should be lower. >> right, but what about the financial angle? chapter two of any intro text book is, oh, yeah, the banks. what about socgen, bnp in the res -- bnp, and the rest? >> it's not about the yield. as the imf pointed out a few d cross-border nee consolidation in the european banking industry. this is why the socgen credit story is of interest. the hope is it will be the
really big cross-border bank consolidation. the negative rates make it slightly harder, but that's not the real issue. it is a structural lack of profitability. >> but at the same time, there are overlaps in the russian business, a pretty strong french bank, italian banks that have so far -- >> it's a fair question, francine. i try not to comment on individual companies and deals, so i wouldn't know. what we do know is that there is a logic to breaking down some of the barriers across orders in europe, getting a larger deposit network. in italy, the btp problem, meeting that banks are stuffed to the gills with sovereign paper, is much worse. unicredit and a lot of the other larger banks in italy have come through with real recapitalization through the ecb scrutiny. but are still vulnerable,
that is not really a broad concern for italy. it is the smaller banks that are the problem. >> alan, when you look at the rest of the world, does the fed ke oe role of central banker to the world? are we certain to figure out the emerging markets that have debt denominated, how much they are vulnerable to fed hikes? >> i think the fed has to be concerned with the feedback effect. their primary concern is the domestic u.s. economy. they have a domestic directive. we can trace this all the way back to bernanke, chairman bernanke in 2013, when with the taper tantrum he was asked by a reporter, don't you care about em? he basically said no. what we do in the u.s. is good for the rest of the global economy. but the fed can't ignore if things are blowing up elsewhere as it is raising rates, because there's going to be a feedback effect. what we see, going back to the
speech last week, is that as international concerns rise, they will use language of wa closely, following closely. >> those adverbs again. >> yes. for fed watchers, we get to know adverbs very well. if they say they are closely watching, it means things going on abroad could dampen rates in the u.s.. posen has an use an adverb in 22 years. thank you. we'll drive forward the conversation. robert kaplan in the 9:00 hour on the south china sea. this is bloomberg. ♪
president trump. larry kudlow says, don't blame trump, it is your fault. times"he "financial reports unicredit is developing a merger plan with socgen. analysts are skeptical. and facebook fumble. more questions about how facebook shares data with device makers. the company defends itself, as the stocks hit a record high. >> welcome to "bloomberg daybreak." i'm david westin. the summit going on in singapore next week -- >> what's interesting about this market in general is you have tensions, italy still has issues, spain as well, get the markets are following the jobs data in the u.s. and ignoring everything else. >> either they don't react or the react for a minute. >> i was talking to a ceo over the weekend, how can i make a decision based on