tv Bloomberg Daybreak Europe Bloomberg August 14, 2018 1:00am-2:30am EDT
russia sends its foreign minister on a two day mission to ankara. ♪ manus: throughout the show this morning we are going to be covering turkey in depth. let's get straight to our colleague on the ground. weak foots on the again. yousef: a political update. deliberations between u.s. and turkish officials did not go well. we are seeing stabilization in the turkish lira. rv investors catching their breath -- are the investors
catching their breath? get into a little more detail as the morning goes on. numbers have it the tape, that headline. we saw prices ratcheted higher by 70% in the first half of the permits, the emissions up by 83%. they are saying the first half is at $870 million. the market has estimated 823. this is a comfortable lead for rwe. now concentrate on the business of generation.
burden.ces the debt that was one of the top lines coming through here. anna: picking up on the breaking news. we have numbers hitting the bloomberg. first-half net income for this 561 million swiss francs. they have also named a new cfo. rate.get to the risk we will show you where we are with equity markets in the asian session. steady in the first half of the day. asia-pacific up by 4/10 of a percent. japanese markets not weighed down by the strength of the yen. chinese data was pretty weak.
a bit of a rough patch. retail sales in the industrial production coming in weaker. we are pretty stable on the dollar. i put the gold price at the bottom of the screen. it did not rally yesterday. move is offsetting the haven status we have seen. we have lost 8.5% on the gold price. we see some weakness in the turkish lira. nothing like the size of the moves we were seeing. this diplomatic resolution with president trump seeming as far off as ever. there are no talks and there will be no talks taking place.
you have a chart on turkey as well. inus: we will get to that terms of volatility in a moment. have a look at the indian rupee. this is what the emerging-market traders are doing -- currency traders are doing. the indian rupee breaks 70. you are seeing a protesting on retesting on the upside of the dollar. we understood there was intervention from the indian markets. will that be called upon? the deputymock -- governor said we are not in the business of targeting our currency. the red headline is a break of 70. the lira is touching on the low side.
is volatility for the lira versus emerging markets. you are back at a one-year high. does this continue? there will be no intervention in the line in the sand. the argentinians, you can say they got out of ahead. -- raised rates by 45% 4%-5%, trying to defend the currency. goldman sachs says that shows determination. anna, how are the futures looking? anna: the futures are really interesting. i wrote down how much the em diverging from turkey link holds up/ -- holds up.
yesterday the s&p dropped for the fourth day. travails are sticking to the developed markets in the united states. cfo will be joining the bloomberg team at 4:30 p.m. u.k. time. lots to talk about. let's get a first word news update. trump's top national security aide has warned the unitedbassador states has nothing further to negotiate until the american pastor is free. the white house national security adviser delivered the message in washington. it signaled the standoff between the countries will continue as the turkey financial meltdowns birds to be emerging markets. president erdogan says his
country will stick to the rules of the free market economy. he spoke to turkish ambassadors in ankara. process, we as a country have never and what never compromise the rules of the free market economy -- . capital controls is a real possibility unless it comes to an agreement with washington. >> they have taken steps to limit trade in u.s. dollars. step could be complete currency control and not allowing dollars to get out of the country. uliette: global news on air, 24 hours a day and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries.
you can find more stories on the bloomberg at top go. a little more stability coming through in markets in asia. you have the index higher. investors are assessing how much of a contagion be turkey issue is having into asian equities, particularly when you have the u.s.-china trade relationship simmering. the nikkei still seeing weakness and hong kong -- in hong kong and china. some of thet stocks. samsung is one of the front-runners in terms of market cap. a news report says it could lower the price of the expensive smart phone. -- san see some optical unny optical down 25%. everbright watching
international. it is planning to raise $1.27 billion. shares are falling down to around 22%. manus: a red headline on the optical story. billion has been wiped off the doll you that hong kong stock. the united states and turkey. no negotiations until a detained released.astor is it signals be standoff between the countries will continue as turkey's financial meltdown spreads to emerging markets. we have a reporter on the ground. the turkish ambassador in turkey requested this meeting with the u.s. officials. what can we expect from the security meeting? pointed --is is a
this is a pointed reminder that turkey is fighting a standoff over policy credibility with international u.s.tors, and also the pastor being held in turkey. there were no dramatic results from this meeting. their heels deeper into the ground. while the turkish government was still taking a public position on this, the united states slapped tariffs on aluminum and steel, warning signs they are willing to go further into the conversation. for furtherential to your urination, or even a another set of sanctions -- further deterioration, or even another set of sanctions. anna: how likely will this last? yousef: nothing short of remarkable.
this has been going on for 14 hours. this is a currency that has lost about 25% of its value. voices sayingey that old action is needed. this needs to move quickly. are still taking a lot of pain. the bank bonds are getting absolutely smashed, $.80 on the dollar for nine of these bank bonds. thewith the devaluation in lira, that raises questions and thistainability, story is just getting started. anna: thank you. from istanbul with the very latest. cfo from capital
management joining us. to get context of how you are digesting the moves you are seeing in turkey, i have a chart brought to my attention. we have not seen these usual measures of stress and financial markets. does this tell us anything helpful about how worried we should be about contagion from turkey? we should be worried about emerging markets writ large rather than turkey. we will have a much better scope on the availability of goods and credit later this year. the treasury is no longer going regarding supportive the issuance and retirement of
debt position. emerging markets are going to be squeezed. i don't think investors are that surprised. james: -- your british understatement is absolutely brilliant. the markets are going to be having a bad time. relative to the s and p, i know you were a contrarian investor. how contrarian are you this morning? we're looking at a low valuation relative to the s&p. you make of em this morning? not picking up em as an index tracking position. there are selective investors in the em world certainly worthy of consideration.
taiwan semiconductors, i see a -- a global company engaged and emerging markets stock, given that it is first world in the way it operates. i would be looking at utilities companies in brazil. there are other areas. there on the long-term upside from current levels. anna: does this do anything to the fed trajectory? the usc gilt has fallen a little bit from the 3% level -- u.s. yield has fallen a little bit from the 3% level. does this matter to the fed? i look at the u.s. economy and i believe we can see a one percentage point hike over
the next 12 months, 3% in the next year. the one thing that bypasses some of this, argentina raised rates to 45%. regrasp credibility. is that when needs to happen to turkey, a rot in series of quantum leaps in interest rates? james: not at all. situationen in this so many times, when international players look at theyest rates and think, want to be in that economy. you don't savor an economy, you savor its currency.
if i were invited to speak on the turkey issue to turkey itself, what they want is a well-rounded economy. what they need to have our are interests -- rates. removeed to let the we around. they need to accept there will be loans to turkish entities in other currencies. thank you. there is nothing smart about a 45% interest rate. james bevan stays with us. coming up, more emerging markets. the economy takes steps to stabilize currency. breaks 70.ian rupee and the south african trade minister it joins the bloomberg team at 1030 u.k. time. this is bloomberg. ♪
anna: good morning. 6:20 in london. 1:20 in the afternoon in singapore. what's a business flash with get ate saly -- let's business flash with juliette saly. musk talks about taking tesla private. post, he said he has lined up legal advisors for the possible transaction. a company spokesman says mus
k's tweet refers to his own advisors. prepares for a landmark asset swap with a rival in germany's biggest ever utility deal. cash to reduce its borrowing. the move signals a debt deduction at the rival company eon. the cfo joins us at 4:30 p.m. u.k. time. credit suisse is breaking up its international wealth management push toanother reorganize the bank. will give the region more autonomy to make decisions. the separate regions are latin america, brazil, western europe, central america, and others.europe, among
60 $4 billion acquisition of a company has been dropped after two firms came out in support of the deal. icahn said the steel were 8 -- were to be a travesty if it proceeded. face evenhas kept after an investor exodus sent prices of the metal tumbling. associates maintained three point 9 million shares in gold shares and 11.3 million shares in gold trusts. manus: thank you. now to the data.
china's growth is clouded by trade tensions. key economic data for july disappointed in industrial retail sales. james bevan is still with us. i take you straight to the library. it is a trifecta of disappointment. people would be begging for an 8.8% to retail number. they would be dying for 5.5% fixed investments. is your glass half-full or half-empty on china? james: china is three quarters fall. for the rest of the world it is only a quarter full. i am optimistic. we have seen a trade off in china between the central bank recognizing monetary excess is
associated with inflation and that authorities are more concerned about the possibility of an acceleration with inflation. monetary policy will not ease as much as some suggest. anna: relatively pedestrian for china. you have seen much sign of policy easing in china already. buts: i hear all the talk, see little action in the numbers. i will not accept there is material easing other than statements made to encourage people to be more optimistic. $1 trillion of off sheet balance lending went on with the chinese bank. they are part of the top 10 biggest banks in the world. do you stay away from financials in china?
how do you position yourself for the three quarters half full story? chinese demand is important and chinese consumers recognize they do not want ever larger deposits in the domestic currency. they have become major buyers of london properties and of luxury handbags. you look at the sales figures of lvmh. a huge portion of their growth is coming from china. the price tag is high. anna: thank you. james stays with us. mobius says he is deeply concerned about the standoff between president erdogan on and dogan and trump. president trump is not planning
manus: a quick refresh on these markets. pushe seeing traders against the lira. annmarie hordern has your charts of the hour. annmarie: we are seeing a bit of stabilization. the s&p 500 down for a fourth day. in the longest streak we saw in five months, still with some pressure on equities. the next day, up almost 2%.
australian stocks and india up. pressure on the rupee topping 70 for the first time ever. -- the lira lower, edged lower but stable. bloomberg intelligence is looking at what currency is vulnerable besides the lira. of large model external debt, weak governance and high inflation, the square called -- scoreca vulnerabilityrd -- scorecard vulnerability mentions argentina and mexico. also includesve columbia and south africa.
they offer lower than average risk-adjusted returns, unlike mexico and argentina. argentina hiked rates to 45%. we continue to watch the contagion story. let's get a first word news update. trump's topnald national security aide has warned turkey the u.s. has nothing further to negotiate until a detained american pastor is freed. john bolton delivered the message to the ambassador in washington yesterday. the standoff between the countries will continue, as the financial meltdown in turkey spreads to emerging markets. taken emergency
steps to stabilize currency after the wake of any merging markets route. it will sell $500 million. -- policymakers said the rate for a seven-day note was 45%. china's economy has hit a midyear rough patch as efforts lending andy expense of debt collided with a deepening trade war with the united states. retail sales expansion slowed to 8.8% from a year earlier. fixed asset investment rose 5.5% year on year, the slowest pace since 1999. global news on air, 24 hours a day and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. thank you.
argentina took emergency steps, raising rates by 5%. they have the highest rates in the world. the market is focused on turkey. the ceo of a capital company, joining us on the phone from vermont. scale of we in the concern for you? how would you describe the turkish situation at the moment? i think mobius put a finger on the problem. turkey has been mismanaging their economy for a while. has spent more time consolidating political control than thinking about the economic welfare of the population.
there has been these distortions. have this standoff between the united states and turkey -- we could have a very ifrp u-turn in the markets awayan decides to give politically in this crisis. solve the real problems underneath and that will take a bit more work. it is difficult to predict where we are. we could be at the beginning of a long erosion in turkey. journal" called for ousting turkey from nato. or this could be something where erdogan and trump kiss and makeup. anna: it could be. debt.ld turkish
what would encourage you to take more? the realmost measures, debt problem the country has is in the corporate sector. the companies have been the ones borrowing and building. butgovernment has borrowed, it does not look like the country itself has too much debt, the sovereign. why there is a good chance you are going to have some companies default, it is likely the country well. there will be a pretty sharp bounce in prices when this crisis subsides. it has been a sharp selloff. there are some pretty good values. add today,king to
but market liquidity is such that people are scared. the prices on the screens are lower and there is not a lot of volume trading. manus: would you be shorting cds's at this juncture? would you be brave enough to buy corporate debt? assets whet your appetite if the bids are there? hans: we are looking at government debt.a we were taking a look at the long end. others were looking at uff.lower dollar price st we don't mess around much with cds. we started looking at the corporate sector.
we don't have any real conclusions. anna: moore appetite for the sovereign -- more appetite for the sovereign. you mentioned what could happen to the demand for sovereign debt in turkey as tensions subside. this be enough to reduce tensions with the u.s., or is this about real change in the approach from the turkish government? based on the rhetoric over the weekend, erdogan was calling tions ated states' sanc stab in the back. he was proclaiming that turkey would for new partnerships with iran, qatar, russia and china.
politically, he is getting a bit of support for this. turkssuggest that 80% of blame the united states for the problems. tois going to be difficult the aligned politically but these countries. turkey has a lot of tension with them as well. other countries have found when they try to realign, it is not easy to do business with some of those countries. goes, the this crisis last the turkish population will support erdogan. he owns this at this point. international commentators are saying most of this is self-inflicted. the turks at this moment are when thee of him,
economic damage really bites, it will come back to haunt him. manus: would you say that erdogan has a capacity -- you are on the phone, but i am going viewers this scorecard in terms of current account deficit and governance. the next ones in position for a columbia, argentina, south africa, and mexico. i understand you hold some argentinian debt. where is the biggest opportunity for sorting on that scorecard? i don't think you would want to short argentina now. argentina was doing it before it was really be
worst-performing bond market in the emerging markets. write down argentina? jim the darling of the argentinaarkets -- became the darling of emerging markets. most asset managers probably overweighed argentina. we are much closer to the bottom then we were a few weeks ago. the one thing that would differentiate all the countries ,ou could name from turkey these countries are willing to embrace more of an economic reac tion to these crises.
you mention argentina hiking rates as much as they have done. columbia is going to be a standard market reaction. they have pretty strong finance people. countriesse other will manage the shock better than erdogan has. hans, thank you for your time. lira crisis intensifies, turkey postulation jet with russia has come to the fore -- urkey's relationship with russia has come to the fore. erdogan is on a tuesday visit. there might be conversations between turkey and qatar.
for the latest on the russian relationship, our guest joins us from moscow. tony, what does russia want to get out of this crisis? bolton message to turkey will be music to putin's ears. russia is eager to exploit these divisions between the united states and turkey. erdoganws -- it draws closer and closer to mr. putin. the syrian border was a real crisis. but since then, erdogan and put in have come closer and closer. both sides would say they are as close as they have been for some years. manus: do you think turkey will turn to brush up for political a lead, or will there be
in terms of the financial relationship? where is the lean going to be? erdogan spoked on friday at the peak of the lira crisis. erdogan did not ask for economic assistance at that point. projects russia is involved in already. russia is building a power plant for turkey, a $23 billion project. russia is building a pipeline. there is a lot of russian money going into turkey are ready. -- already. these sanctions imposed by russia after 2015 have for the most part been lifted. already, giving a lot
but explicit financial support during this crisis i don't think is on the table. russia is having problems with the ruble at the moment. russiaur bloomberg government edgar, thank you. let's leave geopolitics there for the moment, and talk about what is going on in the united states. james bevan is onset in london. we are seeing a lot of dollar strength. has been one of the big features of these trade tensions. the global asset convergence trade, which suggests other currencies will catch up with the dollar, that is no longer seen as happening. run doesfurther to this strong dollar trend have? the dollar will continue
strong for two reasons. as the global economy slows, the u.s. typically is a beneficiary. i think u.s. assets will remain significantly supported in terms of global government debt. the ceo offers a much more attractive real guilt. u.s. dollar bond market has been substantially supported i european and japanese investors who look at our domestic bond market and say, that yield is so low for where we are in the economic cycles. into the put money u.s. bond market. the dollar has been strong relative to the expectations prior to the tax cuts. analysts have been rushing to upgrade numbers and
companies have been coming to the table with better than expected data. market willity continue higher from here, rather than lower. we have the out performers of the s&p relative to the rest of the world. has been one of the most dominant themes we have touched on. you take that out of the equation, it might look different. how much of a believer are you in the united states without the bank component? imdb supportive of what is going on in the u.s. economy. we have tax cuts and bank regulations. the s&p 600 is outperforming the s&p 500. superior returns have been
delivered to big-cap partners. that speaks confidence in the outlook for the u.s. economy. james, on the money as ever. be continuing his thoughts on markets on bloomberg radio, as of 7:30 a.m. u.k. time. let's get back to the turkish story. said imposings capital controls on turkey is a real possibility. he spoke about his concerns earlier. i have much deeper concerns due to this standoff. i did not realize trump would be so tough in getting his return. we now see a real bargaining taking place between the two leaders. both of them are probably not willing to compromise.
mark, has erdogan. himself into a corner by saying he will not take end international bailout or raise interest rates -- an international bailout or raise interest rates? him: the only opening for would be to give up and return the pastor to the united states. that would be the best alternative. you may see that happening. there may be a face-saving effort on both sides. it remains to be seen. i cannot be too optimistic. >> a question about turkish banks and u.s. bonds trading on $.50 of the dollar there. if you had eight deposit in a
turkish bank, would you be taking the money out? mark: i have a deposit in the turkish bank, but i am keeping some in. turkey is going to be an interesting market to be in longer-term. i you have the turkish lira, am in pretty good shape. i am concerned about any currency controls. i don't want to get that money in the near future. are capital controls inevitable at this point given that there is pushback on the possibility of an imf bailout? it doesn't look like any friends are willing to step in. the central bank has raised rates by 1000 basis points but it may not have much of an effect. mark: they have already taken
steps to limit trade in u.s. dollars to prevent people from hedging. the next step could be complete currency control, not allowing dollars to get out of the country. this is something that is a real possibility. erdogan -- this is a must erdo erdogan and trump can come to some agreement. manus: -- anna: mark mobius. let's have a look at what is happening in global markets. a quick look at the lira. this is not in the color we are used to seeing. the be brett is not doing as badly this morning.
the turkish lira is bouncing and up by more than 1% against the u.s. dollar. mikes talk about ashley. he rescued a department store last week after a buyer pulled out. ourmore, let's bring in head of strategy. street.s on every high what are the plans? what is top of the agenda? >> thank you for having me. there is a lot of hard work to be done it. this is about elevating the
portfolio and the brand, elevating the product in the store. the rightproducts at time and right price. people want a better experience, so they will be investing heavily. we think it's a huge opportunity. anna: how expensive will this be? how many closures will take place? least 8%. there are much more ambitious plans from the previous management. we feel we can bring more to the table with our ambition. pure trying to keep 80% of the current stores open -- we are trying to keep 80% of the
current stores open. manus: you save you will elevate -- say you will elevate the brand. what has gone wrong that needs to be taken away? liam: we have our own flannels brand. the luxury market is on fire at the moment. we have 30 flannel stores. we need to bring that knowledge to the table. about removing the own bra nds. we need to bring in brands people want. anna: even in locations where you find a house of fraser, you think there is enough appetite for flannels, rather than making it a sports direct outlet? >> certainly not. stores are very
successful, but the flannels and is where we see this coming. that is where we need our partners to push towards. that is where the future is and where we see the market going. liam, i am on this elevator with you. put harrods and the house of fraser together? liam: we have a very large stake, almost 30%. this is not us taking on house of fraser. we are holding their feet to the fire. they need a lot of help. have a want synergy with sports -- we have a lot of synergy with
sports direct. logic.here is a liam: it is not about competing. when all retailers are competing against each other, it is a race to the bottom. you need to understand core retail principles to turn a business around. that is what we want to do with harrods and house of fraser. rowley, thank you very much. joining us to talk about creating harrods on the high street. ourng up, we are joined by guest to talk about emerging markets and the u.s. budget deficit. the u.s. administration wants to
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manus: good morning. this is bloomberg daybreak: europe. these are today's top stories. storm,calm after the there are rallies after the mining monday selloff. turkish capital controls are a possibility. ready to intervene, emerging ,arket policymakers central-bank hikes rates. no negotiation. the u.s. is said to hold off on talks with to until a detained pastor is freed.
russia sent its foreign minister on a two-day mission to ankara. we're live in istanbul in moscow. moscow. .nna: it is 7:00 a.m. in london let's get to the german data. we have heading the wires. the german economy group in the second quarter, the estimate was an increase of 0.4%. lots of people asking questions about whether the eurozone and the 19 nation euro area will start its rebound even if companies are way down by trade tensions and talk of trade tensions. better-than-expected gdp coming from germany. so far a solid domestic demand in europe's biggest economy with one of the drivers of strength out of germany and it seems
there is a pickup in the second quarter. the prior month, the prior month have been 0.2%. interesting how much it contrasts with the ecb viewer not. he had seen sluggishness in the second quarter of the eurozone. later on we can get the full so we will look out for that. we will see if we get any reaction to that news. so we will look out for that. better-than-expected numbers coming through on the german economy. we are getting some breaking lines coming through from some of the business groups in turkey. the group is urging measures to protect the economy. you're seeing joint statements two companies urging tighter monetary policies and urging a roadmap to reduce
inflation. these are the problems on the ground in turkey. the business groups are urging better ties with the eu's business is beginning to speak out. this, it is within his power to alleviate this crisis and turn it around. you one of the bigger atper producers, coming in $904 million. net cash cost guidance remains unchanged. will be $1 billion. billion.will be $1 these comments will add to the rhetoric around that and you see a littleorary relief, bit of a carry through. the china did it was slower but european futures are higher.
we are seeing the markets trade a little bit higher. it is a glass half-full or three quarters full. fascinating to see the comments putting aside concerns about higher interest rates. more on high inflation and we can do. i wonderedacific up of 1%. such a headwind. the dollar index is stable or down a fraction, .1 of 1%. the dollar against the turkish lira, we have that in because this makes a change, the dollar is down 1% against the turkish currency. manus: let's have a quick flash at the bond market. the bandwidth, bond volatility in the u.s. is still below the one year average. you have the equity story rising slightly, bond futures being in the u.s. but there is no huge
rush to protect oneself in u.s. treasuries which suggests the options traders, volatility traders are seeing a contained issue within the market in turkey. o.a.t.'s up one pip and the central office for statistics in the u.s. cut the growth forecast to 3.1% from 3.3%. and third dipping by five ticks at the moment. bunds are dipping juliette: by five ticks. juliette saly has your first word news. trump's topnald national security aide warned the turkish ambassador the u.s. has nothing further to negotiate until a detained american pastor is freed. white house national security adviser john bolton delivered the message to the ambassador yesterday. the standoff between
the countries will continue as the financial meltdown spreads to emerging markets. hisident erdogan said country will stick to the rules of the free market economy. turkisha speech to ambassadors in ankara. >> during this process, we as a country have never and would never come, rules of the free market economy. no one should take can cherry assertions seriously. -- contrary assertions seriously. juliette: stabilizing its currency in the wake of an emerging route. it is the highest in the world interest-rate and will sell $500 million to support the peso. the rates andet pledge to keep it at that level until october. the cryptocurrency of the
distorted legend network tumbled as much as 17%. the biggest drop since march. the digital coin is down 60% compared with bitcoins 54% slide as it skyrocketed over $1000 in february. the cryptocurrency of the it sold digital tokens in exchange for crowd sales known as initial coin offerings. cofounder joins us at 8:00 p.m. u.k. time. 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. you can find more stories on the bloomberg at top . you're seeing the regional index higher has have a look at that big rise coming up in japan. we had industrial production which was weaker similar to what you saw in the weaker chinese data but that weaker yen boosting stocks. chinese stocks under pressure, the data that anna was talking
about disappointing. indian stocks are looking good and tech stocks are being sold off in hong kong. are watching the currency saw it and earlier we slip past to the dollar. it has come back a little stronger. 69.8 but one of the biggest losers as we see the turkey route intensify. having a look at the indonesian, the country is going to focus on maintaining stability. a lot in the market digesting we could see a rate hike. and watching sterling because of a lot of data coming through. it is fairly flat against the .ollar after a gain yesterday you have the u.k. employment data coming through later today. anna: thank you. lots of data out in europe
today. let's talk about what is going on in turkey. the standoff between the countries will continue, turkey's financial meltdown spreads to emerging markets and more stable today. joining us now from istanbul, good morning. the way have said the turkish ambassador in turkey was meeting with u.s. officials, what can we expect from the security meeting that is set to take place? both sides are digging their heels deeper into the ground. her have been a few days of combative rhetoric from both sides and the u.s. administration slapped it tariffs on turkey because of this ongoing dispute over the american pastor who is being held in turkey, andrew bronson.
the turkish government have always said they are not going to have certain conditions imposed on them. it appears they have not come closer in terms of positions and that leaves the door open for maybe another response from the u.s. to reassert their point they're not willing to back down on this issue. we broke those headlines, businesses in turkey are trying intalk to the president terms of policy. the lira has one small reprieve and we are seeing a little bit of a bounce. this is anybody's guess how long that will last that what is your sense they are? usuf: stabilization is surprising given the amount of feedback we have from investors who said the only way you could stop is with interest rate hikes. it has been almost a full
trading day. he also heard from the bundesbank, one of the executive board members saying it needed action. are we going to see anything later in the day, that is the question even if the lira stabilizes. it must way 5% in the last three or four trading sessions. this good shape the narrative. president erdogan is scheduled youpeak again later on and have the finance minister who is expected to give a press conference in ankara. that could add a lot more color, maybe more clarity about how far the turkish government is willing to go maybe what the turkish government is willing to recalibrate. a lot to consider. anna: thank you. trying us now further -- joining us now is the senior economic advisor at hsbc.
we will come to your most recent notes about the u.s. and what it hopes to do. let's get your thoughts on what is going on in global markets. the correlation between the lira and other emerging market currencies. how long do we see the instant move between turkey, do they divert from here? affectedey are being by a set price issue. rather with the federal reserve is doing, raising interest rates probably faster than people had expected six months or a year ago. that has led to a strong dollar and many emerging markets especially with large accounts, a lot of those deficits in foreign currency. when the dollar goes up the currency goes down. which -- a country
is looking more vulnerable. you can see it with other countries other than turkey. there is a rich history of this. situation by which the fed raises rates from a low end [indiscernible] we have created a wonderful montage for you, the scorecard, current account deficits, external debt. you made the point that the difference here is with the other nations, they would most do at theprepared to conventional thing you need to do to save yourself. -- would you agree that anybody else finds themselves, it is a better place rather than the individual who is driving the bus who is
erdogan. a populist, a as nationalist who wants to put turkey first and does not want to be in a situation where he is being dictated to by international markets are does he want the imf coming into real turkey out. the situation is tricky. painful.ngs are and when you look at what has countrieso other which have been in this situation, the deficit [indiscernible] you get there by imposing a recession and that is what everyone wants to avoid. you end up with a standoff whereby the risk is the currency gets weaker and inflationary pressures rise rather than fall. guy: how much of a headwind is the stronger dollar? the stronger dollar makes
the funding issues more difficult. just in the emerging markets? does the big global story continue? guest: you can look at the u.k.. theyraised interest rates, earlier in the month, you might say, you look at the minutes of the meeting, there was not a clear view as to why the rates were going up and the answer is the bank of england is worried about weakness and in the face interest rates, what can the bank do? it has to respond. if you have sterling continuously falling against the dollar, the bank comes under pressure. it is with the u.s. doing -- is doing, also through developed markets. let's finish with that
thought from the bank of england. we have created a chart that shows you could invert the yield curve in that scenario where sterling takes a bath on a hard brexit. the bank of england needs to step in. what kind of a bath does it take to get the bank of england to reverse and raise rates more aggressively, what is the trigger point for real brexit sterling catastrophe? guest: i am not sure i can go there. you sure imagination. -- use your imagination. if you have a hard brexit there is total chaos so they could fall further. then you have an obvious problem. with a much weaker sterling inflationary pressure is building faster. does it feel it has to respond? if you have a hard brexit with what the u.k. has you will be faced with a situation where you
have to crimp domestic demand and by doing that you and up with weaker [indiscernible] manus: it took that one on-the-fly. with us. if you are a customer you can watch the show using tv as well as the video stream and follow our charts and functions and you can message us on the functions. anna: we continue our discussion , with a warning for donald trump, the president's ambition to reduce the u.s. deficit poses risk. after yesterday emerging markets selloff, south africa's trade minister joins us here at 10:30 a.m. u.k. time. this is bloomberg. ♪
anna: 7:20 a.m. in london, this is bloomberg daybreak europe. where 39 minutes from the start of the european cash equity trading day. let's check out what is trending. days --h it packet catch up packet days could be numbered. find greener alternatives. manus: let's talk about trump. he is taking credit for the rise in military spending by nato states that in the eastern reaches it could be because of his russian counterpart vladimir putin instead. anna: on the most read stories on the terminal, turkey's
meltdown has rippled across emerging markets. -- you can find out more on the bloomberg terminal. let's look at how much the lira has moved. a bounce in our hands, we are over 3%. we have to have this bounce, you business of those consortium saying get ready to put your house in order. crisis is owned by urdu on so you are seeing a drop in the dollar, a rally in the lira, have a look at the five-day, it begins here. what a tortured soul this currency was. hazard one practice -- has urdu one backed does up into a corner? over the past five days you can still see the lira has lost one third of its value and five
trading days. that is what you call a currency in crisis. be careful what you wish for. have been told. stephen king's warning to donald trump, his ambition to reduce the currency poses considerable risk, not least to the u.s. itself. still with us is our guest. what are the biggest risks in a while should it be -- he be careful what he wishes for? big playhe has made a to reduce the deficit, he has blamed the chinese and others of cheating. what is missing here is why the u.s. has a current account deficit. it boils down to the savings behavior of countries elsewhere liquid keen on owning assets because the u.s. dollar
is the world's reserve currency. as the savings close it boosts asset prices and lowers the cost of capital and encourages americans to spend more than they otherwise would spend to ensure that they end up importing more and you have a continuous deficit. so that raises the problem, if you have a situation whereby the rest of the world finds american assets toxic for whatever reason they sell the assets, that means lower asset prices, higher cost of capital, weaker dollar. that crimps u.s. domestic demand. anna: one of the point you make in your report which is the u.s. deficit is not a reflection of poor american competitiveness. placecoming off a lower than other countries. this is the euro area and china.
u.s. competitiveness has improved. the rest of the world wants to put their money into dollars and invest. how is the u.s. making itself less attractive? this is a long-term story but one issue is how the rest of the world reacts to american protectionism. encourageion may trade. is more important and you can find that the currency becomes less important. were it happen you would end up in a situation whereby [indiscernible] keen to buy dollars. and he for you know it suddenly the dollar is not quite the current reserve currency choice
and that would be damaging for the u.s. manus: how do you think the fed looks at everything at the moment in terms of productivity that you just mentioned. we have seen a downgrade to growth come through from the cbo. stephen: the growth numbers are looking good. it is outperforming what we are seeing in europe and other parts of the developed world. the fed is on track to continue raising interest rates. the race is a difficulty from the current account deficit which is one of the reasons why the u.s. is raising rates. fiscal stimulus means higher demand and higher demand means a larger rather than smaller current account deficit. it reduces american competitiveness and raises the deficit. you have a inconsistency whereby you want a reduction in the current account deficit and budget expense deficit. anna: thank you for joining us. the turkish at
guy: we are live from our european headquarters, i am guy johnson alongside matt miller in berlin. matt: japanese markets bouncing fallstrongly as china following a week set of data. the cash trade is less than 30 minutes away. guy: the lira bounces. the turkish currency is up over 5%. as the trading book it's handed over to eur w