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tv   Bloomberg Surveillance  Bloomberg  August 30, 2018 4:00am-7:00am EDT

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simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. compromise a top position to theresa may risk a no deal brexit. president trump says trumps with canada are going well. both countries see an agreement possible. the peso plunges, argentina. a record low after the president asks for faster payments from the imf. nejra: welcome to "surveillance. "
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we saw the s&p top 2500 close above that or the first time, a record. we're seeing weakness in european records. the stoxx 600, lower by 3/10 of 8% -- 1%. it was taking above the 130 handle, it seems to be amongst thomas from michelle barnier saying the u.k. could get an unprecedented deal. questions seeing nothing much being done. cable holding onto gains. one pointen oil job 4% in yesterday's session, higher by .4%. following that inventory data from the u.s.. will speak toe warren buffett, and you can see that interview live at 4:30 p.m. london time. let's get first word news with taylor riggs.
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taylor: donald has accused china of undermining u.s. efforts to , indicatingth korea his trade war is starting to exacerbate geopolitical tension. the president called off a trip ,o north korea by mike pompeo saying there had not been enough progress in talks aimed at denuclearize and that he would return, probably after trade disputes with china were resolved. in a trade we are war, i think our country is doing well, but china is having a tough time. inna makes it more difficult terms of our relationship with north korea. eulor: the u.k. has told the they must compromise on their opposition to theresa may's lands or risk a no deal brexit. even then, the pound rallied to its highest level, despite minimal efforts many saw in
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president negotiations. they say britain could not have its cake and eat it as it quits the eu. >> everybody has to be aware that you cannot be in and out. .ou cannot be out and also benefiting of all of the advantages of being a full member of the european union. out of the european union and do not have the same position, the same rights, and the same advantages as the other member states. taylor: the international monetary fund has said it will consider argentina's request to speed up embarrassments -- reimbursements. it came nine hours after the president surprised the nation by saying his country needed the money to demonstrate it had
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enough cash on hand to fund the 2019 budget without going further into debt. the peso plunged to a record low. donald's former campaign manager may not learn for several weeks if he has to face off against robert mueller in a third trial. toller is seeking more time decide whether to retry metaphors on 10 counts, facing a deadline to make a decision, he said his team did not have enough information because of montfort's lawyers have not filed their posttrial motion. the judge did not immediately rule on the request. global news, 24 hours a day on air. powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. nejra: thanks so much, taylor. donald trump has said talks with canada to overhaul nafta are going well, expressing optimism
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the countries could reach a deal. >> we are negotiating, they want to be a part of the deal. we give them until friday and we think we are on track. in any event, things are working out. nejra: meanwhile, justin trudeau has said his government is trying to reach an agreement but added that canada will not sacrifice its goal of getting the quote right to do -- deal. great to have you with us. the dealmaking continues in washington with canada. we have heard optimism from president trump, of course, their foreign minister saying a huge amount of work is left on specific issues. what are those issues? canada is less optimistic than president trump sounds because they have a few deal breakers. one is dairy products, and there is still work to be done
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according to their foreign minister and trudeau. but the real issue, the real dealbreaker for cap, and this could determine the whole deal, is on whether anti-dumping will be resolved by panels. this is a big issue for canada. they have walked away from other deals where they did not get these panels to determine these resolutions and have said this has to happen. there is not clear language in the current agreement they hashed out on this issue. this could really determine whether or not canada signs off, either one has to blink. the u.s. once a deal to announce to congress by friday, so there is a tough deadline here. we will see if canada will sign off one of. nejra: a tough deadline.
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if we do not get an agreement by friday, what happens then? the u.s. wants that agreement because they want to get it through congress, they would need approval. it is a midterm election year, so politics play into this. if they do not get it, it is unclear what would happen. a bilateral agreement would have a much tougher time and a loss of business leaders are very concerned about a bilateral agreement as well. they say that could disrupt north american supply chains, and they would much prefer candidate in the deal. we will see what happens, if canada does not sign off, if that means there will be another round of negotiations or if they will start over. that is why president trump is really pushing for his canadian counterpart to come to the table and to have some kind of agreement. nejra: bloomberg's senior international editor jodi schneider.
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joining us is the head of g10 affects research great to see you. is it time to start positioning for a positive outcome? valentin: we think so. we remain cautiously optimistic going into in important day. tomorrow, we have bearish dollar caps. while there is some uncertainty, we are seeing that risks will start updating before law so investors -- before long. all of these outlooks could play out as positive. beyond this, everybody questioning what these talks between canada and mexico mean for talks between the u.s. and china. is a positive outcome less likely? valentin: there is a tendency
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last week where investors threatened the trade deal between the united states and they will reach out to all of its trading partners in a similar way. i think that maybe the wrong view at this stage. there may be further escalation in the trade tensions between the united states and china. know, we haveyou the review of the proposed new tariffs on $200 billion of chinese imports. that review will be completed next week, september 5. it will be interesting to see if to theview will bring for the issue of potential further escalation in the trade dispute. theme permitse andmoves in the g10 space
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has created an outperformance of the canadian dollar and under performance, currencies that are china, the australian dollar, the new zealand dollar, and we are quite cautious on those two. nejra: hold on one second, i need to break some headlands from air france. unions are proposing actions to employees shortly. air france unions saying there are no alternatives to the hardening of the conflict. there, shares doubt more than 4.5%. back to the conversation on trade, in terms of positioning, if you are not expecting a positive outcome soon, we will talk more about the dollar later, but against others, asian strength -- valentin: it is making a cautious return. the take away was the argentine peso and turkish lira is weakening, looking at the indian
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rupee, they have exposure to china. they have certainly been following closely. you can clearly see that, if trade tensions come back, those currencies are likely to be vulnerable. strengthen the yen ? valentin: they have been torn between the abating risk sentiment and its exposure to china. past experiences have signaled that when we get to an escalation of trade tension, we get risk aversion, which is positive for the yen. so that is one currency that may hold its ground. nejra: stay with us, plenty coming up. argentina's president asks the imf to speed up payments and the peso slumps. we talk em next. zte reports.
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we're live in hong kong, this is bloomberg. ♪
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nejra: economics, finance, and politics. this is "bloomberg surveillance." i am nejra cehic in london. let's get a bloomberg business flash. nigeria has ordered for banks, including citigroup and standard chartered, to return $8.1 billion they say was illegally asked patriot over eight years. the wireless operator quote strongly refuted the claim. theria's central bank says for banks will be fined $16 million. was ordered to participate
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in the refund and shares have fallen sharply. seen their credit rating cut to one of not above jump, adding two problems of the structural reforms. ofy have cited the erosion the global business decision and of the turnaround plan that could cost more than $10 billion in the next 3-5 years. vodafone hutchinson australia has said they will merge the local broadband providers in a better attempt to challenge market leaders. the transaction loss in u.k.-based vodafone and hong kong's ck hutchinson for two years. the debt is being reassessed from the deal and will be guaranteed by to offer giants -- to offshore giants. nejra: argentina's peso has
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plunged to a record low after the present appeal to the imf for cash faster. they approved a $15 payout in june as part of a credit line. it reminded investors of the fragile landscape. joining us is our emerging-market editor, and our guest is still with us. great to see you. the lira, still declining yesterday, despite moves from the central bank. worries over argentina and turkey are having an impact across em. should we be worried about the spillover effect? >> in emerging markets, we have reached a stage where, if the lira false 3%, the peso false 7%, people are asking did you wake me up for this? we are getting used to this volatility.
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but there are two separate selloffs happening. one driven by stories, the other by dollar strength, and they should not be confused. in emerging markets are pretty much contained within but we shouldents be worried about the dollar and focusing on the direction for the dollar, because asian a differentre of dynamic and will be affected by fed policy and growth differentials that is where the pinpoint lies. nejra: i understand your point, but in terms of turkey, is there any reason for markets to stop being at -- as negative as they are? >> it depends on the two governments. investors are in a move to send
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a strong message that they must act with fiscal responsibility. they must cut back expenditure, improvement fiscal balances. pending that, no amount of assurances are going to help. the focus is on fiscal policy. the government response, there is the potential for it to be a mess. if the bleeding stops, you could make four points of return on the peso. a similar return on the turkish lira. if these two governments take concrete measures, not trying to put with investors, but actual have scope forey renowned. -- rebound. valentin: following that, there are reasons to expect they may stage a return.
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intervalrs driving the -- individual currencies could be augmented by the threat of a trade war going into next week. and we all know that a combination of fed tightening, the outperforming u.s. economy, and a trade war, has fueled the persistent dollar that has been supporting it across a range of vulnerable emerging-market currencies. it may be the beginning of a broader correction. nejra: and the spillover into the euro, is that euro weakness done? we do not expect a repeat of that episode where the turkish lira weakness spilled over into euro weakness. we are not seeing that the couldial problems
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ultimately derail the path of cautious policy that the ecb is on. view, it isint of not a significant negative. the economic outperformance we expect will justify such a normalization and should boost the outlook. nejra: ok. ballantine merrin of stays with valentin malikov stays with us. up next, we hear from the ceo of samsonite. this is bloomberg. ♪
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nejra: you are looking at live pictures of theresa may. this has been a three country tour for her on the continent of africa, which started in south africa, moving on to nigeria. we are seeing pictures of her visit to kenya. you are watching "bloomberg surveillance" the trade war between u.s. and china is dampening consumers, and the top luggage maker says it will continue to slower growth, another sign of the fault. the seconde into half, we will probably be into
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the high single-digit range. i see consumers feeling some of the impact of trade wars. i do think that has some impact to consumer confidence. nejra: still with us is our guest. the traders discussion, putting up some sort of fault line in terms of earnings. valentin: it adds volatility to we are seeing that aussie and qe should underperform. constructive of the outcome of the eu-u.s. trade negotiation. it is relatively bullish. you have to winners, losers. the dollar is stuck in between. but certainly, trade discussions will be without in the coming months. one interesting question is whether the trade discussions will add to that risk that seems
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to be creeping back in, especially if you look at the dollar across asia and the lesson currencies. nejra: thank you so much. up next, going around in circles. the french president macron is set to propose a new structure based on concentric rings, but will others get on board, and how will it affect britain's relationship? this is bloomberg. ♪ xfinity mobile is a new wireless network
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saving you hundreds of dollars a year. plus, get $300 back when you buy a new smartphone. xfinity mobile. it's simple. easy. awesome. click, call or visit a store today. nejra: "bloomberg surveillance." thi south korea could be home to the first 5g city.
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million project looking to bring unlimited bandwidth to everything from rose to surgery -- roads to surgery. the eu is planning for all possible outcomes, including no deal. our most read stories on the bloomberg terminal, and third place, the 20 hour flight for qantas is coming. closes in on aon $1 trillion market cap. top, trump blames china forestalled nuclear talks with north korea. now, it is time for our weekly brexit show. u.k. and european union are said to have dropped their october deadline for brexit deal. both sides publicly said they want an agreement wrapped up in the next seven weeks, bloomberg understand that behind scenes,
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senior officials admit it is unlikely. they now mean to finance the divorce terms of the middle of november at the latest. the pound rallied to its highest level in three weeks yesterday, despite minimal evidence of any thaw in the frozen brexit negotiations. at the same time, france's finance minister said britain could not have its cake and eat it as it quits the eu. >> everybody has to be aware that you cannot be in and out. you cannot be out of the european construction, out of the european continent, and also benefiting from being a full member of the european union. if you are out of the european union, you do not have the same position, the same rights, in
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the same advantageous of the other ministers. france is preparing idea ofncy plans in the a no deal. it underlines rising concerns that britain make crush out of the block with no deal ready on time. the u.k.'s prime minister revealed plans to boost britain's investment in africa after brexit. theresa may says she is unashamed about entering the per country sends the continent. 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.
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you so much. just got some breaking news to bring you. first-half net income coming through at 27.1 billion yuan. let's get back to brexit. emmanuel macron has weighed in. sees theh president relationship as a series of concentric circles with europe and the euro in the middle and the u.k. in the second ring. he plans to talk about the plan, was depends on an amicable brexit at the summit in austria in september. what does this mean for european unity and the relationship with its partners? joining us from brussels is the deputy director at -- thank you for joining us. i want to ask you whether the prospect of a no deal has increased this week? maria: that is a very difficult question to ask.
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it is still a nonzero probability event. since we are approaching the deadline and not seeing a concrete deal on paper, and it probably is increasing, it is right that we need to consider contingency plans, like france is doing but also other countries, but at the same time, it is important to realize we must avoid a no deal brexit. it doesn't benefit anybody. doesn't benefit the u.k. or the eu. we really need to try and sort it out. nejra: what would you call the 11th hour? would be the last opportunity that we could still get a deal at the end of this because the deadline is already being pushed back? maria: indeed. the 11th hour definition is not a fixed thing, that we had hoped that the summit in october would have been the last time, the last limit that we would need for a deal so that they could
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then go to national parliament, be ratified, and back to britain after christmas. that seems unlikely. the next likelihood will be the summit after that, just before christmas. that is the ultimate deadline. nejra: speaking of the eu, we saw the pound rally yesterday on onments from michel barnier an unprecedented -- the pound dropped back reflate below 130. -- what to the u.k. be looking for? maria: it should be looking to stay at the current rate we have. mainly, trade can be as free as
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possible. it cannot be as free as it is now otherwise would be a member of the market. would you have a free flow of goods and services arranged with minimal interruptions for a deal to be a successful one. after that, we need to have a very complete deal on the flow of people, of labor. has we treat the eu citizens already in the u.k., and withrocally, had a deal european leaders in the -- u.k. leaders in the eu. these are the two things that need to have concrete answers. after that, we can work out the details. describe mayou begin to summit brexit in name only for some of the hard-liners in the u.k.. no.a: yes and
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the reason why a no brexit deal is not a good idea is because it would bring the economics back, both for the u.k. and the eu. if we are trying to preserve good economic relationships and ensure the economies grow, we have to stay as close as possible. what is difficult is what is under the jurisdiction that happens. brexit is are arguing we should not follow eu, law oil e.u. says we need to -- while at eu law says we need to follow it. nejra: thank you so much for joining us today. at next, britain's warning to brussels. the u.k. government says the eu must compromise or risk a no deal brexit. we will talk the pound next. this is bloomberg. ♪
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nejra: welcome back to our weekly brexit program. the u.k. government has told the eu they must compromise on theresa may's plans or reach a no deal brexit. negotiations resume tomorrow when brexit secretary holds a meeting in brussels with his european commission counterpart. the pound had a 1% rally after barnier said he would be willing to propose an unprecedented relationship with the eu. we heard from barnier today talking about the fact that one of the options is a no deal. what does yesterday's job tell you about positioning in
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sterling? >> one of them was the abatement of a concern about a no deal brexit. they will be working on it to get a deal as soon as possible. a lot of the move had to do with positioning. market is short. the pound is undervalued. the combination of all of these factors traded the move higher. nejra: in terms of where we are now, we are are just below 130 now, do we just come back down from here? : we maintain a relatively cautious fund. we are optimistic for this quarter.i'm happy to admit we may stay close to these levels awaiting waiting for more concrete evidence that progress has been made. ultimately, we think that the pound is heading higher. we are seeing a softer brexit on
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the table. that may come at the price of an extension of the article 50 implementation down the road. there will be a of political uncertainty associated with that. we think 140 or 150 cannot be excluded. we are talking longer-term outlook.before that, the persistent political uncertainty , and certainly how brexit negotiations will progress from here will likely keep any bulls on the sidelines for the time being. nejra: 140 and 150 would be quite a significant rally. how would you time that? what are you waiting for and where the moments you would strike? valentin: odyssey, the summit will be the focal points. clearly, the october summit has lost significant, but you have
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the november presume to summit, plus the december 1. the deal will be key. are we going to have a deal and whether that deal will involve our expectations of free trade agreements that will involve free trade, but will exclude services. ultimately, to preserve the irish border and be agreeable for the eu and u.k. parliament. that will be the signal for the bulls to step in and by the pound. november or december could be pretty interesting. these are the two summits we are focusing on. nejra: if we do get that soft brexit outcome you are predicting, what does that mean for the bank of england? do think there will be significant repricing in the rate market in terms of hikes? valenintin: to a degree. it is the case that most of the resilience we saw in the immediate aftermath of the eu
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referendum was due to a sharp buildup and consumer leverage. in the meantime, that. buildup has slow down access to funding is still more expensive. damage has been done. the bank of england will want to aboutt the implications what the the -- assess implications will be. i would not expect immediate change in that view, of the immediate of start would be that ultimately remaining more hikes than expected at the moment, especially if the recovery in the economy on the back of that is swifter or more aggressive than expected by the bank of england. nejra: we have talked about your target for cable and eurosterling, what about the pound against other currencies? valentin: if you look at the pound against asian currencies, you can clearly see value there.
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the pound looks very undervalued against the australian dollar and new zealand. at the same time, sterling swiss is another interesting, we think the swiss franc is quite overvalued, the pound is undervalued. one of the better trades we can have on a softer brexit outcome would be a long sterling swiss as well. the very negative swiss rate. nejra: a long sterling swiss on the outcome of the brexit. thank you. valentin stays with us. at next, hitting you high. how much steam do these equities have? we will explore next. this is bloomberg. ♪
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nejra: economics, politics, finance. this is "bloomberg surveillance." stocks hitting record highs in the u.s. session yesterday the s&p 500 cleared up of 2900 for
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the first time. u.s. stocks hitting that record high. s&p 500 above that 2900 mark. we saw all of those corrections in the market. option positions are pointing to more gains. as you can see here in the blue, this is where the strategists are saying it is going to go. barclays, now expecting s&p to hit 3000.if they are right, it would give the equity benchmark a 12% gain for the year. s&p 500 waiting for that market to open in new york. i also want to look at the nasdaq. it hit a fresh high as well. also but also climbing following the report from morgan stanley. don't get too hot on stocks yet. this is shows the breath of what is happening.
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the s&p is in the blue and the nasdaq is in the white. the s&p has been stronger in general. keep a focus on this as well. in terms of what you can see the futures looking like for the nasdaq and s&p. nejra: thank you so much. let's get the taylor riggs. taylor: nigeria has ordered for billion inturn $8.1 funds illegally traded by a mobilephone company. it strongly refuted the claim. nigeria's central banks of the for banks will be fined about $16 million. mtn have fallen sharply in johannesburg trading.
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moody's downloaded ford -- downgraded ford. turnaround plan could cost more than $10 billion in the next 3-5 years. willone australia says it merge with local carriers. the transaction locks the u.k. based vodafone and hong kong for two years. debt$3.5 billion of u.s. is being reset from the deal and will be guaranteed by the two offshore giants. credit suisse is having second thoughts about doing his mess with the owner of the national enquirer who is at the center of a scandal involving has money payments and 2016 two women who had affairs with donald trump. bloomberg has learned the swiss bank was planning to help
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america refinance. i met a flurry of negative headlines, it is seeking to put -- back out of arranging the debt. nejra: let's get back to the dollar because we were just talking about u.s. equities before we went to the business flash. is there a prospect of a stronger dollar hurting u.s. equities? valentin: there is a negative correlation that explains a stronger currency on the revenues of part of those talk indexes. right now, the correlation is compromised by the repatriation of earnings by u.s. corporate. at statistics like the share buyback in the u.s. it
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hits a new multiyear high. u.s. carpets are holding close to three chilean dollars. $3 trillion. the likes of google and amazon, all of the companies that are known to hold quite a large amount of unpatched rated earnings, their stocks are doing so well. even though the dollar is rather strong, that is not reflected in the stock market under performance. i believe those two are moving together. the common denominator seems to be the earnings repatriation. nejra: we were talking about emerging-market fx earlier. weakeningca's rand against the dollar. some weakening in emerging-market currencies. one of the big discussions around the em state in terms of being selective, has been around surface is a deficit.
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valentin: the fact that tom's policies coming to a situation where rates will ultimately undermine demand for dollar denominated assets, we're not there yet. the longer term that is one of the reasons we expect the likes of euro-dollar to go higher, dollar-yen to move lower. interesting here is that the focus right now, the reason investors are buying dollar is u.s. growth. one of the things that makes us more cautious in the dollar outlook, is the fact that we may be dealing with peak divergence when it comes to u.s. growth differential. termsifferentials in against the boj. the u.s. economy has peaked in the second quarter of this year.
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year basis, next year is going to look much weaker than this year. as a result, that may mean that eurozone will continue, growth there will continue to accelerate. growth diversions helping the dollar will start losing momentum and actually going in reverse. nejra: what is your biggest eviction call for 2019? tin: 121 is our focus for euro-dollar. we expect renewed dollar weakness into the year and. at the same time, we also like european currencies as a whole. we like norwegian crown, swedish crown. i think if they really is value money to be made, think it is putting more outperformance us candy -- scandinavian
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currencies. that may be an interesting that. nejra: thank you so much. "bloomberg surveillance. continues in the next hour. tom keene joins me out of new york. later, we will be speaking to warren buffett. this is bloomberg. ♪
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tom: this morning, just me, it is idiosyncratic.
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we consider the correlated dysfunction of the lira, the rupee and the selected peso. incoming. the debt and the ever greater trillion dollar deficit. it was adams versus jefferson, this thursday, trump versus google. we consider the outlet that alphabet. i'm tom keene in new york, this is "bloomberg surveillance," ne jra, em currencies, quiet. here, here and here, weakening forever. you were ahead of the curve with bringing this up yesterday as well. aboute saw was jitters turkey and argentina feeding through to the rest of the space. we continue to see the lira weekend as well as the rand. tom: we will show the numbers. alex, i love that chart. nejra does, the way
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it. president trump is optimistic the u.s. and canada can reach a deal on the north american the trade agreement this week. the president is giving canada until friday. justin trudeau says his government is trying to reach an agreement with the u.s. but he says he will not sacrifice the goal of getting the right deal. it is a sign that president trump's trade war is starting to exacerbate geopolitical tensions. the president accused china of undermining attempts to pressure north korea into giving up nuclear weapons. he says that is because of trade disputes between washington and beijing. president trump says it is not helpful that china is providing north korea with money, fuel and realize are. -- and fertilizer. iran will be at the top of the agenda when eu top officials meet in vienna.
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decision toump's pull out of the nuclear deal has turned up the pressure on europe. france and europe have called the eu to adopt policies that sidestep the u.s. the international monetary fund is considering argentina's request to speed up payments from the credit line. the president says the country needs the money to show it has enough cash on hand to find the budget next year. the peso plunging to a record low. 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. i'm taylor riggs, this is bloomberg. tom: taylor, thank you so much. equities, bonds, currencies, commodities, currencies front and center. futures away after a number of good days. curve flattening but not a part of the story. euro, 1.17. vix, 1.34.
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you don't need to memorize these numbers but turkish lira is weaker, not up to seven but getting there. .97, a newn peso, 33 number. after doing this for years, to see indian at 71, it is surreal. it is tough. it is odd. nejra: record lows for the r upee. we are on the same page with lira. weaker for a fourth day, despite moves from the central bank this week. european equities taking a turn for the worst, down six cents of 1% as we saw the s&p 500 close above 2900 for the first time yesterday. we can talk about why.
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1.30 handle and strength in brent as well as wti. tom: we are showing a lot of charts. this is the jpmorgan blended emerging-market fx index, elegant and it is ugly, ugly, ugly. march, the drop, beyond elegant against the selected moving average, this plunge, the long chart, this is a huge lunch, now down to new weakness this morning, breaking through the old lull. that is as ugly as you get. nejra: it might look ugly in em fx but it looks pretty in u.s. equities. 2900&p 500 closing above for the first time yesterday. even with the continuous grind higher in u.s. stocks, wall street, perhaps not as optimistic as you might expect. strategists are not impressed.
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they have not changed their forecast much. the median forecast is to end of the year at 3000 and that is only 3% higher from where we are now. interesting point. staying with emerging markets selloff for now, argentine in peso, -- argentinian paso plunging to a record low -- argentinian peso plunging to a record low. we get to the border outlook with martin. thank you for joining us. we have seen what some have called contagion from turkey and other isolated cases in em. martin: we do not think it will continue. there are first traces on some parts of the weaker emerging markets. now in the wake of the first traces of fiscal tightening that
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sorry, monetary tightening, we are seeing around the world, and the first traces of interest rates being higher, it is being seen in the part of those emerging countries that have the biggest current account deficits, the weakest levels of currency reserve and also the highest levels of inflation. that is the combination in place in turkey, argentina before, and we have seen markets not trying to spell it over to other countries but i think this will not be sustainable. there will be a point in time where investors -- the good, the bad and the ugly so to say with regards to emerging markets. it is not the selloff story for emerging markets altogether. there will be opportunities as well. nejra: d.c. long-term opportunities in those markets with strong fundamentals. where? is now the time to get in? martin: we saw the first signs
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already, when the first wave of speculation, selloffs hit india, for example. that was in the first wave of lira selloff. do a comparison between turkey and india when it comes to fundamentals. the current account deficit in india is 2.3% whereas it is twice as high in turkey. inflation is 5% in india, attached high but not the 16% in turkey. also the level of currency reserve in comparison to gdp, it is twice as high in turkey. india is probably a case in point raising markets are testing. they are trying to draw comparison and they will come to the conclusion eventually that it is not the same story and that india is probably a buying case. tom: i want to go back to your studies in hanover. you have to study irving fisher. we are thrilled to have you on and we have catherine mann in
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the next hour. irving fisher, links foreign exchange to bonds. i know no one cares. it is idiosyncratic. come on. that links to the higher yields within em nations. doesn't it? it is a story where investors, first of all look for the obvious cases. experience a strong in the 2013 temper tantrum. we are looking at the notorious five. india, turkey was in there. the most likely cases that investors will look at is the rest of the bunch. that is quite normal. we are in a world where we see liquidity not extending anymore. global liquidity is on the retreat. that will leave traces in em. we are starting to see that. we will see more differentiation between the good and the less
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good cases. that is starting to be the case now. look at turkey. we are actually quite cautious on the turkish case. as you say, it is idiosyncratic. it is a point where we see emerging markets are not all alike. we need to differentiate. tom: is the market differentiating? within the troubled currencies we plot, that makes for good tv and theater, we are getting a differentiation between polish and others? martin: that is right. muchurse, this is not so just about the economic story. it is also the political. polishquote the currency, and others in europe, it is a question of how sustainable is investment in these countries? how will the relationship with the eu develop going forward?
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this comes into play if you look at emerging markets in eastern europe. nejra: when i talk to people about where to look for opportunities, they say, emerging asia. is china a long-term opportunity for you? martin: china is a case where you can see, it is moving the economy back and forth. it is getting more and more complicated for the chinese government to really micromanage, control an economy that is getting bigger and more complex all the time. from relatively easy to steer and control, every culture dominated economy but now it is more about industry, high tech services, high-tech research and development and all these kinds of things. what we see in the chinese government, they are moving back and forth. if you go back to 2015, they were facing the risk of a hard landing, than the government
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decided to go back into investing money in infrastructure. now they are withdrawing again. nejra: would you buy chinese equities? martin: we are overweight china, overweight emerging asia, and we think they are on the good side. us.a: martin, staying with this is bloomberg. ♪
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♪ this is "bloomberg surveillance," let's get the bloomberg business flash. more problems. costly restructuring, moody's has cut the automakers credit rating to one notch above junk.
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they were citing erosion for the global business position, saying the company faces challenges implementing restructuring that could cost $11 billion in the next three to five years. the world's largest luggage maker says the u.s. trade war with china is having an impact. samsonite says the dispute has hurt sentiment among chinese consumers and that will lead to slower sales growth. if the u.s. and a more tariffs, that will add it 10% to the price of samsonite products. shares of sales, down in premarket trading. platform of a cloud came out with disappointing forecasts, that did not satisfy wall street. salesforce ceo was interviewed for the first time since being named to the position. >> it is a very trust-based
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relationship. that gives us an opportunity to focus our strengths. mark is a visionary, he has great ideas around product strategy, he is passionate about the culture. my focus is on operational excellence. amazon is frequently isticized bipartisan -- criticized by president trump now it is being criticized by bernie sanders. he will introduce a bill that requires large employers, like amazon and walmart to pay a living wage or else face a tax. that is your bloomberg business flash. nejra: taylor, thank you. the deutsche bank ceo had a stark message for the thousands of banks in the european union. he says the pressure to
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consolidate will rise significantly as regulatory requirements increase. problems for the european continent continue in the form of brexit. the u.k. has warned that eu it must compromise or risk a no deal exit from the bloc. we are pleased to say we are joined by felix hufeld , president of bafin member of the supervisory board of the single supervisory method. let me ask you about brexit. in terms of what you have seen from banks planning, are they preparing for a no deal brexit? absolutely. all the major banks, institutions across the world, whether yo u.s. or u.k. or japanese firms, are investing enormous resources. the full picture across the
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whole of industry is slightly more diverse. more medium-sized and smaller institutions are lagging behind. the crucial institutions are investing heavily time and money to get prepared. nejra: could there be any winners from brexit and the banking sector? -- in the banking sector? well, every bank knows that if they do not have significant operations eu 27,shed in post-brexit, they will have difficulties to continue business in eu. they will have to relegate certain types of businesses. that is exactly at the center of all action being discussed with us as regulators and supervisors. nejra: what are the big -- one of the big questions is around contact -- contract continuity. should there be guarantee?
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felix: that indeed is one of the major challenges we have. in my view, it is almost impossible to fix that problem exclusively just by one side of the stakeholder,. the industry itself or individual supervisors. i would rather prefer that regulatory or legislative solutions to fix the problem, we have billions and billions worth of derivative contracts, and to offertracts the necessary degree of securities going forward, there should be a solution on a political level. tom: wonderful to have you with us. i want to go back. my german fails me. i have got to get to babble. the word is, scale. everyone wants scale. the leadership of deutsche bank,
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full-scale panic. jamie dimon once scale. everybody wants scale. define germanic european scale? felix: that is good to hear. why do they not do it? tom: why not? the will the banks do, pressure to build up, how is that going to unfold in germany and continental europe? are we going to see mergers? massive cost-cutting and consolidation? how do you get the scale that is not anglo-american? all, let me of point out a simple fact which tends to be overlooked. consolidation in creating scale is a fact of life in my country. betweenny, every year, 15 to 40 to 50 banks are going out of business by means of merger, year by year by year.
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we have a consolidating industry. you are talking about major institutions to create what is commonly called, national or european sanctions, and creating scale in that environment. i'm sure it will happen. currently, you shouldn't underestimate the complexities of cross-border consolidation, which are massive. i think postcrisis, there is still quite a bit of homework to be done including major german institutions and other european institutions as well. the market will sort it out. we as supervisors will stay very close by. tom: well said. within the supervision, is the sense of regulation across continental europe. is it every nation and every regulator for themselves? or can there be a consolidated and united regulation within europe? felix: absolutely.
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regulatory, meaning legislative level, most financial and banking regulations, the same would be true for securities and insurance. it is now european law. the degree of fragmentation has decreased, which is a good thing. operational supervision, as you know, since the end of 2014, has been moved up to ecb, which is mentioned before, i am proud to be a member of the supervisory board. the actual application of regulation by means of supervision has elevated to a european level which will promote a more unified european marketplace. let's not underestimate the complexities going along. what has been achieved within four years is massive but the next 10 years will be interesting as well. nejra: to that point, and the single supervisory mechanism, we
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are expecting big personnel changes. how is the focus of the ssm going to change? felix: no. most certainly not. frankly, i do not think there triggeredbig shift, by a change in the role of the chair. we will have a new chair as of january 1. the challenges and the agenda is well carved out by the supervisory board. we have a clear strategy how to on reducing risk, reducing nonperforming loans in particular, will remain high on the agenda. ,or the industry going forward the answer is, no, forget it. nejra: you have said before that you have been concerned by any contagion from italy. in terms of turkey, big theme,
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e.m. this week. should the ecb order banks in europe with turkish exposure to hold more capital? we are engaging with those banks, having the highest exposures the turkish risk. we are talking to them on a continuous basis. mind whatde up our the reaction should be. short-term, i would doubt that increasing capital requirement would be the right answer. we are closely watching the situation and we will sort out measures in close dialogue with institutions most concerned. it is too early to tell whether capital increases would be the right measure or possibly even sharpening the situation. tom: thank you. bafin president.
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martin, maybetly, you do not want to talk about regulation on banking. that would get him in trouble with blackrock. he can talk to us about the investment strategy of global finance. are we heading toward global scale in every industry? investment strategist, a global roll up can be part of the scene. martin: we are seeing that the world has moved closer together ad buy that, there has been need of scale in many industries. there are certainly industries that are still locally confined but that is probably the exception. you were touching upon the banking industry before. we can see that there is a lead off of more global approach and scale and size, referring to the german case, the peculiarity of the german banking system, the
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savings banks are so strong and the corporate banks are so strong, so we have big networks outside of the private banks, commerzbank, deutsche bank and the others, that dominate the industry. they are consolidating. when i started my career in banking in the early 1980's, they were consolidating for quite some time. this process has been ongoing for several decades and it is still. it will continue in the future. germany is a particular case here. tom: i am watching lira unravel to 6.63. are we going to see the western world, developed nation banking combines, acquire troubled e.m. banks, or have they done that enough times with a know it doesn't work? martin: it might be too early to say that it will not work. hope inhere has been
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expanding reach to subsidiaries, the ones they purchased in emerging parts of the world. in some cases, it will develop better than in others. now what we see is certainly a lot of pressure on banks in countries, as i was saying before countries with strong current account deficits and turkey alone has debt running up over the next 12 months in the ballpark of $150 billion. there will be pressure. tom: this is a wonderful conversation. thank you. we will continue. david westin will continue with the interview of the day, mr. buffett, the gentleman from omaha. this is bloomberg. ♪
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tom: "bloomberg surveillance," nejra in london and on tom keene in new york. catherine mann will join us in the next hour. we will talk about her historic
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academic work on dysfunction between china and the united states. i am really looking forward to that. in all the years i have known her, it is the single best time i know, to talk to her about dysfunction in economics. right now, not this functional. nejra is trending. nejra: let's check in on the bloomberg universe. south korea could be home to the world's first 5g city. it is a million-dollar project to bring bandwidth to roads, to emergency services., the eu wants to keep close as possible to the u.k. after brexit. the eu is planning for all possible outcomes, including no deal. third-place. quantum says the 20 hour flight is coming and it may have a jim and bunk.
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amazon, closes in on the market cap. and trump blames china for stalled nuclear talks with north korea. let's get the first world news. taylor: china is urging the trump administration to back away from tariffs on another $200 billion on chinese goods. this 25% duty ranges from chemicals the bicycles could take effect after september 6. beijing calls that u.s. bullying. president trump has backed off some barriers that began his administration talking stance on trade. he granted exemptions to three large producers of steel. brazil and, argentina. they accounted for a fourth of u.s. steel imports. paul manafort may not learn for several weeks if he will face a third trial.
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special counsel robert mueller once more time to decide whether counts that an 10 jury deadlocked over last week. him of bankvicted and tax fraud and he faces a trial on money laundering next month. venezuela slides. starvation has become a disaster. thousands of migrants have been pouring over the borders, the numbers equal to the mediterranean refugee crisis. haveillion venezuelans fled the country from 2015, international organizations will meet about the problem next week in ecuador. 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. i'm taylor riggs, this is bloomberg. tom: taylor, thank you. turkish lira out. bring up this chart. we have shown it many times.
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standard deviation move. two standard deviation move in the middle of august and this is row, 1, 2, three and the new leg up to 6.64 level. giving you the tension seen in the em story. strategy, ikets, fx want to know the positioning in the market. is this a hedge fund dirty? -- derby? who is the market in these troubled em currencies? lira is still on your chart you show this, 7.2. we have witnessed a classic correction over the past few byks to around 6
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consolidation and resumption of the upside trend earlier this week after turkish officials following the holiday last week, failing to reveal new measures that could restore confidence among investors. it still remains vulnerable. tom: you said it was parabolic. this could get mathy. the idea is, it is acceleration. are we getting into parabolic or accelerated moods, which means that institutions will have to step in, like imf, like aren't argentina? piotr: turkish officials have not done enough to restore confidence. this upside trend in dollar-lira, which has been in place over the last few years is accelerationit is on the upside of the underlying trend.
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it couldr to assume set another new high as the bulls have not given up and turkish officials need to restore confidence, allowing the central bank to raise interest rates quite substantially on september 13. this will have to be accompanied by fiscal tightening. the turkish economy over the past years has been driven by fiscal stimulus, led to double-digit inflation. finally, ankara should make efforts to ease the nomadic tensions with washington. those three issues, unless they are addressed, the path of least resistance for the lira, for the dollar-lira, is going to be on the upside. nejra: great to speak to you. if the strength of the dollar is showing up the fault lines in
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emerging market fx, which em fx would you be buying from here? piotr: the dollar is still in a bullish mode. we have adopted a bullish view on the dollar early this year, after the fed indicated it intends to keep raising interest rates this year. at the same time, other major central banks like ecb and others remain reluctant. the interest rate differentials continue to widen in favor of the dollar and this causes pain across em. in addition, we have the ongoing trade war with china and the u.s. we expect dollar to remain strong against the vast majority of emerging currencies, at least for the next few months. nejra: how much does the underperformance in emerging market equities against u.s.
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equities feed into emerging market fx weakness? definitely an interesting correlation. around the middle of this year, u.s. stocks have started significantly outperforming em stocks, as investors shifted afterl from risky assets, trade tensions between china and u.s. escalated, in favor of u.s. stocks. in addition to the ongoing trade war, u.s. stocks are also supported by robust economic activity in the u.s., as witnessed in q2 gdp growth yesterday. em assets will continue to underperform u.s. stocks and as a result, the selling pressure on em currencies is likely to prevail. nejra: thanks.
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great to have you with us. martin, still with us. how is strong dollar in the path of the fed driving your cross asset global allocation? martin: we look at it from the standpoint of the fundamental data. there is one thing, the u.s. trade relation on the one hand, regarding different countries, that the u.s. as an economy has a trade deficit with many countries, so that needs to be filled. we need foreign currency buying, unless we see the trade being done in u.s. dollars, being actually carried out in u.s. dollars. the thing is, we see a strong differentiation between those countries that will have a strong performance in economic
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fundamental data and those that are weaker. again, at this point in time, we can see -- there was talk of venezuela earlier, wheels of economic risk ongoing, political marks ining, question other emerging markets like the middle east, a lot of risk in turkey now -- we prefer in em exposure, emerging asia. tom: that is where i wanted to go, exactly. this will be a huge equity opportunity in the uproar. how do you research that linkage of fx and bonds, higher yield to, i want to overweight a certain em country in their stock market? all, this veryf much remains a story driven by fundamentals at the micro level, the company levels. our analysts look at performance
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of the company's, the quality of governance and that has improved in emerging asia in recent years according to our analysts. aslook into the trade links well and this is where the currency impact comes in. there are some countries, some companies as well, which have stronger exposure and are more dependent on changes in currency, ie from a stronger dollar than others. this is where we need to draw the line, where the fault lines are and where we differentiate between under and outperformance of the companies we invest in. nejra: martin stays with us. coming up, interview with the credit suisse ceo. get up early for that. this is bloomberg. ♪
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♪ i am in london, francine lacqua has the day off. emmanuel macron signaling they have had enough after months of jabs from president trump. the german and french leaders called for greater autonomy from the u.s., taking on global responsibility for defense and creating a separate financial system. still with us, martin lueck of blackrock, looking at europe,
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is this an interesting proposition given the weakness we have seen, equities for example? martin: this is still one of the better environments for european assets because mostly global investors tend to be more willing to invest in european equities when we are risk on. if we are risk off, they prefer u.s. generally speaking. having said that, in the equity environment, the growth in earnings is so much stronger in the u.s. partly thanks to the tax reform that we are currently overweight u.s. equities and a bit more cautious of the european backdrop. because there is a shift in the contribution to global growth compared to last year when the u.s. was closer to 3% whereas europe would probably coming nearer to 2%, slightly below, in terms of an earnings driver is speaking in favor of the u.s. and less in favor of europe.
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nejra: plot you favor the u.s. now, what could be the catalyst to make you shift? martin: he could be some of the political issues being sorted out. brexit, the open questions in that regard, we have the question of, the italian budget coming up, uncertainty about the europe crisis. it has never been a way. it is still there. it needs to be solved. the talks between the german and french government in order to solve the euro crisis, or make the european integration story more sustainable, they could be a catalyst to make investors think more positively about european equities. is, what dostion you do now that cash has a value? as a chief investment strategist, do you have asset
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allocation or a mixture you care about? are you high in the clouds? you do not care about clipping coupons this weekend? martin: generally speaking, we still believe the risk on environment and the level of interest rates we have still makes us believe it is a good idea to be overweight on real assets. on part of our clients, we get demand for real assets. there is a mix. it is a contrast to the past when we wouldn't think about real estate or other liquid assets, we are seeing a lot of interest in that, in that part of the investment spectrum. apart from that, we are still overweight equities with exposure right now focused on the u.s. but also, positive emerging markets. emerging markets are cheap. as long as investors are looking at this bracket of countries in an undifferentiated way, there are opportunities.
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putting your money in comes back to the value trap of emerging markets. they are not a value trap? we were talking the other day in another interview about eu banks as a value trap. that is to be avoided, right? martin: there will be lots of jitters around these investments over the next couple of days and weeks probably. i think we will need to see some, in some countries, the stories will get worse before they get better. in others, we will see opportunities opening up soon, over the next couple weeks already. this is a question of the micro cases. this is where the analysts come in. they look into the companies, banks. they will give it a judgment and recommendation to the respective portfolio managers who will then decide where is best to go overweight and underweight. nejra: martin, staying with us.
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you can interact with the charts , you cansing gtv browse the recent charts, the fantastic lira chart, the s&p 500 chart. you can download them and play around with them and save them for future reference. this is bloomberg. ♪
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♪ taylor: this is "bloomberg surveillance," i'm taylor riggs, let's get the bloomberg business flash. credit squeeze having second thoughts about doing business with the owner of the national marred inrer, scandal. credit suisse once to back out of the deal to help american media refinance, $425 million of debt. amazon is frequently criticized by president trump and the company is being attacked by bernie sanders. he says he will introduce a bill requiring large employers, such as amazon and walmart to pay a
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living wage or face a tax. amazon says he is making inaccurate and misleading accusations. the world's second-largest the distiller is raising the forecast. the ceo says he will pass cost onto consumers if there is a trade fight, still he is optimistic about china. >> the consumer dynamics are there in china. you can have a volatility, or isg-term vision for china anywhere between high single-digit growth and low double-digit growth but that does not mean it will be volatility. there will be ups and downs but the dynamics are there. taylor: that is your bloomberg business flash. nejra: taylor, thank you. 2900&p 500 closing about for the first time yesterday. though we kept seeing the
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rise higher in the s&p 500, wall street has not wanted to of the estimates that much for the year -- up the estimates that much for the year. given what this chart is showing and perhaps some caution among analysts, is your overweight conviction guns blazing or overweight caution? martin: it is always overweight with caveats. share price growth has been driven by earnings this year. it is not been driven by the fact that investors are getting more upbeat, about the global context or the companies. it is driven by earnings. as long as this will be the case, we will see equity investors being opportunistic and purchasing u.s. equity, especially in a backdrop where global risk on, they want to
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have a foot in the safest and most liquid market, and safest and most liquid currency and this is an environment in which we continue to see at least until 2019 or the first half of 2019. nejra: you say u.s. equity investors react to what they see in earnings. we have a fed chair that says he will react to what he sees in the data. should the fed beef front running the data? martin: i think they are doing the right thing. there is a conundrum around the return of inflation. we see, if you look at the u.s. economy which has been running at full steam above trend growth for a number of years, we have seen unemployment rates below the equilibrium rate for several years now, we have seen monetary stimulus running full steam and still, we see inflation, core inflation, personal consumer
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expenses, going back to 2%. no overshooting. why? why is it so relatively weak? against that backdrop, it is good to be cautious and data dependent in your decisions on central-bank policy. tom: what do you buy within the united states? blue-chip, blue-chip, blue-chip. the answer is there are a lot of other choices out there now. what would blackrock by the united states? -- buy in the united states? martin: this is about the continuation of a plan, of a game that has been going on for some time. we think it is about momentum. if this plan, the fundamental drivers, continue to be the same for the next couple of quarters, then probably the outperforming sectors will also be the same or the outperforming factors in terms of investing, like momentum will probably be
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overweight on technology and also more potential in the financial sector. this is where we see the outperforming sectors. tom: thank you so much, martin lueck. always a good time to speak to catherine mann. i cannot remember a better time to speak to her about china, america and the many accountable dysfunctions. coming up, catherine mann of citigroup. stay with us. worldwide. this is bloomberg. ♪ xfinity mobile is a new wireless network
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included with your internet. plus, get $300 back when you buy a new smartphone. xfinity mobile. it's simple. easy. awesome. click, call or visit a store today. morning, in this hour,
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we consider the correlated dysfunction of the lira, ruby and a given selected peso. greater trillion dollar deficit. adams versus jefferson. this morning, trump versus google. good morning, everyone. this is "bloomberg surveillance." i'm tom keene in new york. nejra cehic in london. president seems to be a little alone in this argument. nejra: it was a fascinating discussion we had yesterday. big questions over where we go here, also what it means in terms of the first amendment and what is going to happen to these text companies after quite a stark warning from the president. tom: that is one of the stories out of washington. right now, in new york city, here is taylor riggs.
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taelor bang president trump is optimistic that the u.s. and canada can reach a deal on the north american free trade agreement this week. canada's prime minister says his government is trying to reach an agreement with the u.s., but he says he will not sacrifice the goal of getting the right deal. it is a sign that president trump's trade fight is starting to exacerbate deal of political tensions. the deal accused china of undermining pressures against north korea of giving of weapons. president trump also said it is not helpful that china is providing north korea with money, fuel and fertilizer. teetering nuclear agreement will be at the top of the agenda when the eu's top officials meet indiana. president trump -- meet in vienna. president trump's withdrawal
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from the agreement has turned up the pressure in europe. monetary fundnal is considering argentina's request to speed up payment from the credit line. the country needs the money to show it has enough cash on hand for next year's budget. that sent the argentinian peso plunging to a record low. 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. much. thank you so let's move to some pictures of theresa may, also for our radio viewers. we're looking at prime minister theresa may. at the moment, we're looking at the kenyan president. theresa may is holding a bilateral presser with the president of nairobi, kenya.
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this is the start of her three country trip. let's geither this quickly. -- get throughon this quickly. not much going on. one of our themes today with the turkish lira, four days of unraveling. argentina, thank you for watching. the indian rupee is a stunning statistic. nejra: lots of study statistics. i've also chandelier of their. we continue to weaken there for a fourth day. european equities taking a turn we see worse, even after another record in the s&p 500 closing about 2900. cable study now. above
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brent crude above 77. tom: here is an announcement. this is breaking news from campbell. this has been to me, a 20 year soap opera. what to do with campbell soup. they are under a lot of pressure. here, they announced they will sell their international businesses.this has been in the food industry, almost a daily soap opera. deal.a big campbell soup confirming they are selling their international businesses. it is a joy and an honor to have catherine mann. she wondered over to a bank to make a deposit and a said, we will take you. she is global chief economist for citigroup. we are thrilled that she is here capabilitiesarch on trade and the dysfunction of china.
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i want to get to the china-u.s. argument later in the hour. the veranda and jackson hole last year was your 30 page amendment. what do we need to know right now off of that handout about global trade? big deal on that handout was to show the big picture of global integration stalling. in the face of what an awful lot of people are saying, global integration has gone too far, too fast. in fact, the global integration has not continued a pace. to consequences of sailing engage more deeply with global trade, global services, goods, finance, the consequences of that are worse off for most people. that is the case. once told gwyneth paltrow nelson got angry, he got angry, -- paul
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he through chalk. chart, which is the ugliest chart in the world. this is jpmorgan's e.m. fx chart. can you bring the attention -- tension in e.m. fx and e.m. bond yields over into a global crisis? catherine: i think what is interesting about the e.m. is that there is a lot of heterogeneity in the markets. they're all being powered by the same brush. investors who are careful about looking for the nuggets are going to find some really good opportunities. the countries that i've been disciplined, even in latin america, the neighborhood looks dicey, but there are really good, disciplined countries there. nejra: i want to save another
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chart as well. you just mentioned opportunities, i'm not saying this is one, but this is a favorite chart of hillary chart. the argentine spread over treasuries climbing to the highest since the election. what i want to ask is whether the global market see -- policymakers are in a strong position to withstand any of these issues like an argentina. the key isi think that some countries are being particularly attacked by the financial markets. they have avenues for assistance. there are other ones that could use some domestic policies in order to offset some of the trends seen in the financial markets.i think the issue is that there are both domestic and international cooperation that can be done in order to affect
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the capital flows. nejra: when we see and e.m. fallout contagion, and at the same time you see the escalation of a trade war, what kind of potential duplications could that lead to? catherine: we've been looking a lot at whether or not the extent to which a global value chain collapse on the back of a trade disagreement, akin to its that is already being priced in our leading to different kinds of flows, whether or not those are countries that are more attached to the global value chains are the ones that are also the ones having the greatest capital outflows. we don't see a strong correlation, which is an interesting observation that investors are making a distinction between countries that are integrated with the global markets and are potentially exposed. on the other hand, have policy initiatives that can be put in place to protect themselves.
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tom: the theory has changed. companiesrging-market are more mature. there are more reactions under prices that make things better. do you really buy it that this time is different or new 4 p.m.? -- for em? catherine: that is a tough question because there is a sense of contagion. the point i am making is that there are a lot of different different should in the heterogeneity within emerging markets. tom: don't tell that to india right now running through 70. : they also have policy initiatives that they can implement. perhaps they even should be implementing. tom: where is turkey's implementation? catherine: that is another
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challenge. for india, there are policies that could be put into place for external and domestic ones. tom: do they sacrifice growth if they do that? we saw the announcement yesterday of argentina asking emf to the rescue to speed up payments. for all of our viewers and listeners, have we been here before? august is always a tough time. everybody wants to go on vacation and they think they're going to be able to go to the beach and be able to refocus and not have to watch bloomberg. august is also the case where a lot of these issues explode. i think that it could be different. ifcould be a different case, there is reaction to the heterogeneity that there is good and not so good. tom: did dr. mann just suggest
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that we shouldn't watch bloomberg in august? nejra: i would love to have catherine. because tom was asking about whether it is different this time for e.m., i wanted to ask if it was different this time for europe in relation to em. we will save that for later. cap a man staying with us. let's bring you up-to-date -- catherine mann staying with us. let's bring you up-to-date. a conferenceolding with the kenyan president. this is bloomberg. mr. president, i believe kenya excited about the huge opportunities. ♪
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taylor: i'm taylor riggs. campbell soup plans to sell its international operations in business.ed food the company says i will increase its focus on u.s. based soups and snacks it says it is still considering all other options. ford afterms for beginning a costly restructuring. .oody has cut it also said the company faces challenges in implementing that restructuring that could cost $11 billion in the next 3-5 years. shares of salesforce are falling in premarket trading. they came out with a disappointing forecast. existing contracts did not satisfy wall street.
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the ceo told bloomberg about running the company with the founder. >> it is a very trust-based relationship. it gives us an opportunity to focus on our strengths. about thereat visions company. my focus is on growth and really allows us to focus on our strengths. taylor: that is your bloomberg business flash. tom: thank you so much. we have been doing a couple of op-ed's. today a bloomberg opinion in a brutal short sa. must read. -- essay. must-read. the first amendment belongs to the government, not the private sector. the president of the united states is accusing google of a form of sedition.
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he might want to consider the text of the virginia resolution written by madison and response to the alien and sedition act. true in 1798, it is no less true now. we now go to our chief washington correspondent. is the president alone in this battle with google or does he have allies? not.: absolutely there are so many republicans i spoke with who ever really not only try to put pressure on google, but also other tech companies, including twitter and facebook. i interviewed the chairman of twitter.nd she took to they feel the social media companies are silencing conservative voices. here. be frank this is really a perfect example of where the left and right are not talking to each other on the sears of social media is there is a clear divide on how both political parties do it.tom:
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on the democratic candidate. the divide is in florida. the florida governor's race, that is a metaphor for what we're talking about. kevin: i also have my eye on last night in new york, the democratic primary debate. i thought that was also a clear illustration of the divide of the democratic party in terms of what could be at the forefront post the midterm election. there is some clear new foundations being laid with the future of the left and right. the tension between the populist movement both on the left and on the right, and the more center candidates. nejra: great to talk to you as always. for our global audience, can you frame what we learned from the florida primary with also president trump seeming optimistic about a new nafta deal by the end of this week in
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terms of what all this means for the midterms? kevin: if we start with what is going on in florida, i think what you're going to notice is that you are going to see even more democrats trying to really push through and breakthrough because florida, in terms of its stature, is something that is incredibly important. if you win florida, ohio, they are the most important states. that is why there is always so much attention on ohio and florida. with regards to nafta, the president saying he is optimistic to have some type of deal. whether or not the bilateral agreement with mexico and canada respectively, we don't know. a lot of pressure being placed on the dairy market. we talked a lot about soybeans, but the dairy and lumber are things that are really going to be very much at the forefront. the president and his administration showing more of a preference to negotiate with mexico than they are with canada. nejra: thank you so much to
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kevin, our chief washington correspondent. with --p, our interview worth waking up for in london. this is bloomberg. ♪
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tom: good morning, everyone. let me turn to the bloomberg terminal. we got a little bit of calm in turkish lira. we just got a bid to it in the
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last five or 10 minutes. turning at well, that weak spot this morning. jackson hole is beyond us. it is ancient news according to michael mccain. the parlor game of what they will do with interest rates. let's have a painful discussion herelet's have a painful discusn here about 2 and 4. i get september, maybe december. is chairman powell just a slave to the data? catherine i don't know if that is the right terminology. data matters, absolutely. how can you go forward with policy if you ignore the data? tom: of a crystal ball gazing too much? catherine:catherine: some of ths
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that were brought up in the discussion in jackson hole were about the stars. navigating by the stars. i think the most interesting start to be thinking about these days is what is the right r star. the point meeting, what is the right interest rate for the market and real economy? i think one of the tensions we're looking at right now is may be different than the start that equilibrium it's the economy. the tension between what is going on in financial markets and the economy is one that is going to be playing out next year and one we are paying a lot of attention to. nejra: is there any argument that in this time of uncertainty, the fed should get a head of the data? catherine: we learned long ago, monetary policy is long
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belagged. you always want to be a head of where you think the data is going. we are focusing a lot on looking es ine non-lineariti inflation. when does the labor market transition into -- when does the fact that you can push through price increases turn into everybody pushing through price increases? in have nonlinearities consumer price inflation. we are all looking for that. for.ow what we are looking we are looking for things that will give us some idea about whether we are near to that inflection point, that nonlinearity point, but you don't want to get a head of that either. be moving tooould fast, perhaps a little to matter
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for the financial market. trauma on the financial markets translates into potentially trauma in the real economy. tom: this is too much. we have a banner on "bloomberg surveillance." that is nonlinea. it doesn't get better than that. nejra: catherine mann stays with us. we can talk more about stars coming up. theresa may holding a bilateral presser with the kenyan president in nairobi. the third stop on her three country trip on the african continent. she has been saying she wants the u.k. to enhance global trade relations post-brexit. this is bloomberg. ♪
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to rent a movie? showtime. or buy the hottest shows. even here? we've got you covered. now they are all yours. to take on the go. on any screen. bingo! alright! and watch whatever you buy. wherever you are.
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head to to start watching. simple to rent, easy to buy, awesome to go. tom: the most important news of the day. "bloomberg surveillance." the queen has watched "the crown." 1952 whereebruary of
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the queen and prince philip visit kenya, but it is still the same. here is prime minister may visiting kenya. they're finishing up their comments and prime minister may trumpeting global trade, a post-brexit as well. let us get to our first word news, taylor riggs. china is urging the trump administration to back away from imposing tariffs on another $200 billion of chinese goods. this ditty ranging on products could take effect after september 6. beijing says what it calls u.s. bullying will not work. president trump has backed off of some of the barriers that began his administration's hawkish stance on trade. granted quoted exemptions to large producers of steel. before this year, the three almost a accounted for
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fourth of u.s. steel imports. paul manafort may not learn for several weeks that he will face a third trial. special counsel robert mueller retrymore time to manafort on three counts the had the jury deadlocks last week. convict him of tax fraud. he faces a trial and money laundering next month. slide toward mass starvation has become a continental disaster. thousands of migrants have been over the border e qual to the middle eastern refugee crisis. over the10 international organs will meet about the problem next week in ecuador. 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.
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tom: thank you so much. catherine mann with us of citigroup. we will dive into one of her core research thoughts which is our behavior around trade. inht now, stanley is washington. you know him from his work on the debt and deficit for years. policy rightiscal now. are we going to have a government shutdown? telling readers that there is about a 66% chance. it all depends on donald trump. wat=n't think congress once -- wants it. is his one big chance to take control of it in late september and early october. a 60% chance.
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we have a budget office that has a 2% run rate of the american economy. i know the president is going to push against that, but as the cbo -- i was actually valid numbers? stan: they are for the first five years or you get further out, 10 years or 20 years guesswork based on a straight-line extrapolation. i don't think you can take the net seriously, but cbo has a better record than the office of budget and management does. their job is to get the numbers right, not to protect the president's behind. i would take there's over the office of management and budget almost any day. nejra: great to speak to you, as always. you also talked about a textbook definition of political and political and
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legislative chaos. how do we get out of that? stan: for the short-term, you're not going to. we are going to go through up session ofed congress and which republicans may be losing their majority. about 10 or 15 republicans who have lost their seats won't return to vote or won't vote faithfully. if the democrats win, the chances are it will be a narrow majority. i think we're probably looking at two years of legislative chaos. maybe nothing much happening in the absence of a crisis that gives politicians the right to move from their established positions. in the unitedee states any change from the current political levels. if anything, they're going to get worse, not better. nejra: what does that mean for the fiscal situation? stan: it is going to get worse. trillion dollar deficits are here to stay. there is an economic downturn at some point over the next five years.
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we are talking about a congress and president that are largely going to be paralyzed in terms of what to do. this is going to be a new normal for the united states. we're talking about permanent trillion dollar deficits. llance"is is what "survei is all about. with us is catherine mann. everybody ignores the g dynamics, the partial differentials. does anything in the world matter, or is it like politicians where does that play into the american economy? catherine: the g matters tremendously. we're looking at it making a huge difference both on tax and the spending side for the u.s. economy. profits.into maybe some of it falls into conception, but it ultimately is
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a very important power to the u.s. economy right now. experts, do they factor that in now in the short-term or do they look beyond that as mr. colander just said to the chronic nature of trillion dollar deficits? catherine: right now, they are focused on short-term gains coming from both the tax cuts and spending. that is what we are seeing. i think we are seeing that reflected in a market dynamics. we're seeing it affected in the activity.t we are seeing it in low and employment rights but also high profits. rates, but also high profits. are the markets taking about 2020 and beyond, and the implications for what might be interest rates and so on. i think they're probably not discounting that correctly.
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if they are not -- stan: one of the bigger problems here is that these trillion dollar deficits are going to make it very difficult for the u.s. to look at new policy initiatives. we have a retirement crisis coming. we have infrastructure issues. those are the things that are going to be difficult and health care for the united states to address given the deficits already there. we had those issues in terms of health care and social security going into this round of fiscal spending and tax cuts. we doubled down on the idea that somehow this government approach can power the u.s. economy's potential and increase supply enough to make good on those commitments to the older generation.
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i think the evidence forever has been that that is not the case. that you get a demand surge. this is a good thing. there are going to be some benefits. there are definitely technological benefits. we see that in terms of capital expenditure for firms right now. the notion that it is going to pay for itself is not the case. iscan also observe already, that the tension between the older generation and the current generation, the current generations are not moving along andr expenditure patterns household gains and incomes like earlier generations did. younger people are going to be the ones that have to pay for the older people. there is a commitment there, a social contract there that is not going to play out well. nejra: i am loving this conversation. you were hinting earlier that markets are not really pricing things correctly after 2020. how should they be shifting those expectations?
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catherine: i think the issue is that we have pulled forward to the present the benefits that are in the real economy, but also in the financial markets. everybody is sort of taking the good times right now and are saying, there will be bad times in the future and we will deal with it then. we will make a different bet on the future when it comes. that kind of approach is not dissimilar to a financial markets have a tendency to do, which is to take a short-term view. tom: stan colander with us. we will continue with catherine mann. what a headline this is. a perfect headline to continue this discussion. european union willing to scrap car terrace in the u.s. trade deal -- tarifs in the u.s. trade deal. we will talk about that with dr.
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mann with her years of experience in paris. coming up, catherine mann on tooa, the u.s., and our many dysfunctions. this is bloomberg. ♪
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tom: good morning, everyone. "bloomberg surveillance." i'm tom keene in new york. nejra cehic and for francine. of china asoncerned a threat to america. catherine mann, on any number of trade fronts, she has been a academics.a trade
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i was in a room with michael rosenberg of bloomberg, you could hear a pin drop 15 years ago as you laid out a theory of this function, of the behavior of china and the u.s. , withs the trade-weighted a leveling out in the last three years. up, up. function likes the dysfunction you canonized 15 years ago? back then, the economics between the two countries was more of a dysfunction. right now, the politics are .enerating an economic dysfunction i also think what is happening between the u.s. and china right now is that the u.s. policies being put into place, and having them put into place in the government
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spending and tax cut has made the u.s. economy stronger than most people thought. china wase time, undertaking a strategy of trying to clean up their financial sector, they were implementing policies in order to make that happen. it was expected to slow the rate of growth in the chinese economy. what has happened is that there has been collateral damage in the household sector with consumption slowing a lot as well. even as the u.s. has been stronger than most people expected, china is weaker than most people expected. you are stretching the economic differentials between the two countries. you add on top of that, the issues with trade. i'm going to steal from steve, which is on the labor arbitrage. we're looking at a between the u.s., china and mexico.
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is it different this time in terms of those knocked down affects from a servitude of u.s.-china, china-u.s.? there are a lot more moving parts. catherine: this time around, the value chains are much more well-developed. the collateral damage for trade war's throughout the region are much more significant. the potential for protection this location -- production dislocation, much more significant. the stakes are much higher. not just for the two economies having the greatest tension, but there is no such thing as a bilateral trade war. not these days. everything is a matter of global value chains. any bilateral trade war turns into a global trade war right away. nejra: to that point about collateral damage in the yen asia, when i ask a lot of people what they would
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select, a lot of them point to emerging-market asia. itself, not heterogeneous. is there an argument for that given what you just said about collateral damage? catherine: we actually have a very good report that was issued earlier this week that looks at the countries in the region and is lightweight those countries on how they are related to china for the global value chain, which ones are most exposed. not just the countries, but the products within the countries. it also violates which ones are best positioned to benefit from -- evaluate which ones are best positioned to benefit from production changes. the long-term response is if this trade production process. some countries -- persists. some countries will win as trade fromdiverted from sabine china to buying from vietnam or malaysia.
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there are some winners in a trade war, but collectively, -- the magic of catherine mann is the m.i.t. and rigor and all of that, but you brought over the behavioral characteristic as well. the phrase i have been using is , which is my way or the highway. how does that play in china with years of experience? your decades of experience on that, how does beijing?eral play in catherine: i think we have seen and thee language of xi linguist coming out of the press in china that they don't want to be bullied. weightn't they just out
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the guy? catherine: they can, but you would like to not have all the damage. weighting out is a damaging strategy. coming up with some agreement to reduce the tensions and figure is how to do this right preferable than having an implementation tit-for-tat. again, it is not just those two countries at risk here. it is really the global economy. i think we have seen that even in the context of the discussions in jackson hole and my other central bankers that they can't ignore this. tom: this is a monograph about thick,ck, which is -- which is definitive on the fears americans had about the trade deficit. if you wrote it today, is it sustainable? the trade deficit is
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much smaller than it was back then. if we could find it to be sustainable back then, we can find it to be sustainable now. one of the points that that book made was that we need to think about sustainability on the real side as in reproducing enough and are the benefits of trade being widely shared, does it generate technology and productivity growth? also, sustainability on a financial side. the issue has changed in the sense that we are much more integrated financially. we have a much greater dependence, the united states does, on financial flows. we have a larger share of u.s. treasuries owned abroad than either by the fed, abroad by back then. issuesancial stability which were not a big deal back then, are a bigger deal now.
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tom: catherine mann with us of citigroup. this has been a real privilege. let me say some news. let's do your board first of the different european stocks. i want to graphically show. let's bring it up as we move. thank you for making that happen. bmw up a percentage move. this is the bombshell headline they will move as well. daimler shows that moonshot up to a 57 handle. please stay with us. this is bloomberg. ♪
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nejra: bridging the gender gap continues to be a topic of discussion. citi globalnn, chief economist. you are a perfect person to talk about this being you are one of the few global chief economist. catherine: as it turns out, the
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two of them are really merged. when we do an analysis of macroeconomics phenomenon, we have to look at microeconomic data in order to evaluate where we are going with the macro. i think what we are seeing here example, how do we decide whether or not a financial market is potentially at risk? we're looking at microeconomic risk an individual flows and companies. microeconomic analysis is essential in order to get us to our macroeconomic analysis. we could imagine wages. we are looking at wages across different skill categories. we are looking at wages across different parts of the country. in tracking that, in order to evaluate whether or not we potentially are on that nonlinearity in the phillips curve. curve, a bigillips question of discussion at jackson hole. does the micro at this point give us any more insight into
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whether it is broken and can be fixed? catherine: i don't think it is -- catherine: i don't think it is broken. it being fixed is a matter of how markets work. working together is going to be leading us into 2019. it is a matter of analyzing microeconomic data in order to evaluate the macroeconomic phenomenon of inflation. that is what central banks, in particular are interested in. across the board, the macroeconomic phenomena is what drives big decisions. it is the microeconomic analysis that gets us to understand, how is this happening? nejra: is the global economy and a dangerous place when the u.s. is out ahead and other economies are lacking? catherine: that has been the case for many decades is the u.s. as the global locomotive. it is interesting that we are in
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that position again. the united states is in a position again of being the global locomotive. over the decades, there has been a question of, is the u.s. strong enough to be the locomotive when as a share of the global economy, it is not as large because emerging markets have become larger, and china and we euro -- europe has become larger. as a locomotive, we are powering the global economy right now. thank you so much. catherine mann of citi. coming up on markets, our interview with warren buffett. this is bloomberg. ♪
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>> canada and the eu could cave to the u.s.. canada nears a trade deal with
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the u.s.. reports say the eu could be willing to scrap car tariffs. confidence falls in europe while price growth flows. the latest read on inflation up next. emerging markets are the terrible, horrible, no good, very bad august. having the worst august on hikes tos sent fed their lowest. david: we have been reading books. alix: i don't think we're quite at that level yet. markets to be a calm day. there are a lot of headlines bubbling up. in a holiday week, you know you will have swings in the market as well. s&p futures down four points.


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