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tv   Bloomberg Surveillance  Bloomberg  August 12, 2019 4:00am-7:00am EDT

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francine: session warning. goldman sachs has risen through a downturn. selby needs a big story. an exit from the eu has never been his plan. he takes his campaign to the coast. sadia ramin:'s profit falls by more than 12% -- sally's to "bloomberg surveillance." i am francine lacqua. here are your markets. we are seeing a little bit of a
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lift when it comes to european stoxx 600. i am trying to figure out the risk. we are entering another monday. again is at 105.48. gold is down. cold acting as a haven. -- gold is acting as a haven. coming up, we are live on the beaches where we are speaking to sell vini. here is viviana hurtado. viviana: tense week of protests and hong kong as violence intensified. --onstrators but themselves the police responded firing tear gas. the clashes follow three days of demonstrations. they began friday. most protests were denied police permits. saudi a ramin: is posting a decline. exporterbiggest oil
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posted semiannual results. that is down from $53 billion a year. say it willcials sell shares in 2020 or 2021. this weekend, the opposition grabbing the moment -- the momentum. thangives him a bigger expected lead of 15 percentage points. posters have said he would have trouble overcoming the margin of over seven at the main election. that is in october. 32 people have been killed and 15 missing after a typhoon struck china. a typhoon came sweeping through the provinces toward shanghai more than one million people were evacuated as the storm approached. the damage is over $2 billion.
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this weekend jeffrey epstein was found dead in jail. the former financier was accused of molestation and sex trafficking. the jail where he was being held is now the target of two separate investigations. u.s. attorney general william barr says the death raises serious questions. boris johnson is being accused of spending promises. time he promises to cut taxes. the combination could lead to a big increase in borrowing. global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is bloomberg. francine: we are getting some
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breaking news out of hong kong. the hong kong airport says the emergency has been even -- has been activated. china says hong kong shows signs of terrorism. so far we have very few cancellations in the last three or four weeks. things are ratcheting up now they are starting to cancel flights is a big deal. if you need to travel from hong kong, just check with your travel agency or your airline before you do go to the airport. we will continue watching that briefing from hong kong. president trump isn't the only one worrying about the dollar's rise. worried the ascent could be a catalyst for recession. president trump has said the planned trade talks with china could be held off. joining us now, karen ward.
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gallo, thank you both for joining us. karen, let's kick off with you. trade concerns. day in and day out, seems to be getting better or worse. how do you deal with it? karen: understanding the roots of the problems and having adjustment about whether -- having a judgment about whether things will de-escalate. the hostilities, one in tariffs and one intellectual properties. who is going to dominate global tech? i think we have always been skeptical. de-escalategoing to and live very happily. we have been more risk-averse. defensivebout more ways of managing oil portfolio. the challenge is, we've got the
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central banks telling they are going to do as much as they can to support the outlook. for investors, the challenges i know i want to de-risk my portfolio. where do i go? providernment did not the clear safe haven statement. i think that is a challenge for investors. exposureus think about but more in a more defensive way. alternative.he francine: does the trade war stand for the next 18 months or did escalate? alberto: we see it in a long-term development. existing powers are trying to retain their predominance. at the same time, central banks are pushed to do more. maintain this level of growth.
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decreasing ande the monetary policy is decreasing. the patient has been under anesthetic from qe. there is no chance this qe is enough to make the patient's -- the patient recover. toare positioning for yields go lower. we prefer to have hard assets or things linked to hard assets. ding -- invest in countries where interest rates are still high like russia, mexico and brazil. francine: how have assets reacted when september rate cuts were called off? karen: the equity market and bond market look like they are on complete different pages. the bond market has the
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recession priced in and the equity market hasn't. it is not my base. all of our strategists have to concede that we are trying to make judgments about the political strategy. he does it -- he doesn't want to head into the election with people losing their jobs. --are all mindful of if you problems for the u.s. administration to change tact. we have seen that. it just adds to the challenges about the scale to which you want to shift based on the headlines. more moderate shifts but thinking about assets that you activelyare going to balance. francine: what moves the most if
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there is no talks between the u.s. and china? alberto: the markets are very polarized. the evaluations are consistent with a war which is long central banks but short growth. assets are required to pick up and growth memento him. momentum. unless there is a very strong u-turn, that is not going to change. the best on yields being lower by central banks are still doing very well. are gold to companies that monopolistic. quo.is the status we don't think the trade war disappears at least for the next three to six months. if trump wants a victory, it will probably be in q1 or q2 of next year. we are positioned with the view
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that qe and central-bank easing becomes the status quo becomes qe infinity which what -- which is what we have been saying over the past five years. francine: alberto, thank you so much. us.n, both stay with we are getting back to those headlines from hong kong. the airport services say the center has been activated. the advise the public -- they advise the public not to come to the airport and flights have been canceled. if you are due to arrive, just check the airlines before you go. coming up, italy's beach boy takes his campaign to the coast. he is set to become the companies -- the country's next prime minister. this is bloomberg. ♪
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francine: economics, find, politics. this is "bloomberg surveillance." let's get to the bloomberg business flash. here is viviana hurtado. viviana: cbs and viacom working through the night to determine a price for the long-awaited mark -- long-awaited merger. be sherryan would redstone whose family investment vehicle controls both companies. viacom ceo would lead the new company. for such is loss after one of its t-shirts sparked online controversy. the design lists cities and countries but shows both hong kong and macau as independent
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nations. verse she says it is "deeply sorry and resolutely respects china." -- he says he will continue at the swedish event company until a successor is in place but is looking for another challenge in his career. sharesis tenure, his have outperformed industry peers . ams has offered 3.7 billion euros for ashram light. -- osram light. the offer is higher than 35 euros a share. that offer was accepted by osram's board. it was rejected by top shareholder -- by the top shareholder. francine: thank you so much. the bid for full control has started on the beach.
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he is on the campaign trail after pulling the plug on bullish government last week. he is calling on swift elections. tadeo. us now is maria is he ready for an election? morning.od he is 100% ready for this election he wants this election. he went out here and speaking to people, going into the water, shaking hands. he is in full campaign mode. italy. to the south of he said i am ready for it and investors have nothing to fear. -- nothing to fear because we are not leaving the euro. let's take a look. >> an exit from euro for the euro is out of the question and not being discussed.
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what we are discussing about, find wrong and want to change our rules on immigration and taxes. there's no plan to exit europe or the euro. maria: that was matteo salvini who told me he will double down on this idea that italy needs a fiscal shock he wants to cut taxes. this is problematic because italy needs funding. we have seen the european union put water on the idea. francine: maria, thank you so much. ward andh us, karen alberto gallo. alberto, you have been following very closely. unclear when it is the election takes place. there are a lot of people who don't want this election. alberto: we have three
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scenarios. in october.s happen the second one is we have a technical government to carry through the country potentially next year or longer. the third scenario is the parliament with five-star and other parties taking over. the league has been promising a lot of spending. a lot of populist governments that we follow including the u.k. these promises are not realistic -- the longer he stays in power, the closer he is to the budget lull at the end of the year. the more likely his promises are going to appear as unrealistic and political lies. his incentive is to have elections now. every other party wants to wait.
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repricedt has clearly election risk but this was not a new development. the market is very liquid. you have big news. we think they are chances you longere a reshuffle or a extension. francine: if we do have early elections, what are the chances that sell vini governs -- that salvini governs? aberto: you can have coalition between salvini in other parties. we can have a coalition between salvini and the more moderate center-right party. this would be a more pro-business scenario. the question is, whether the northern league make it govern alone. they have not been against the
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euro but they want more spending and they want to cut taxes which in principle are good measures they have to come with reforms and not with just an increase in pensions. have to come with investments. -- they have to come with investments. and not just spending on short-term expenses. francine: karen ward and alberto gallo stay with us. flights are canceled as violence in hong kong continues. the chinese state company tells police -- we are live from the city. this is bloomberg. ♪
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francine: this is "bloomberg surveillance." i am francine lacqua it all flights out of hong kong airport have been canceled as violence intensifies in an intense week of protests. protesters through projectiles including -- some were filmed beating protesters. let's get to our asian government reporter. there's a lot going on. we were brew -- we were briefed by police. we were also briefed by airport security. ring us up-to-date about what is -- bring us up-to-date about what is happening now. >> we have thousands of protesters descending on the airport, one of asia's busiest. the airport has announced they
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are canceling all flights. that is huge news. a previous airport protest that led to hundreds of flight cancellations and delays. this is part of that sort of tactic from the protesters of ramping up a disruptive economye that hit the -- that hit the economy trying to get attention for their cause. the police are saying there have been more than 100 arrests after this violent weekend. [no audio]
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are we closer to a resolution if violence increases? i think we are at a point now where both sides are becoming increasingly aggressive, but at the same time, that is driving them further apart. we are almost further from a solution then we have been. a lot of people have talked about neither side being able to back down. gone too far. every single appearance carrie lam has made has only angered people even more. the police are coming out and
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defending their tactics which also angers the protesters and bring -- brings more people out on the street. we have beijing supporting the police and the government which is hong kong. a very intense affair in the sense that the government is trying to not -- is trying not to look they are in the squeezes of beijing. everything they are doing -- so for pro-democracy protesters in hong kong, you got a situation where it looks like beijing is backing the government. it looks quite bad. francine: we look at your markets. so far, not much trade sending stuff lower. this is bloomberg. ♪
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morning: recession goldman sachs a -- says a
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downturn moves over the u.s. salvini's beach story. he tells bloomberg an exit from the eu has never been his plan as he takes his campaign to the coast. sally are in snap profits fell more than 12 -- saudi are in's -- this is bloomberg surveillance. in london.cqua anne-marie: -- francine: i think we need to take a break and cover a couple of other stories and get back. a little bit of a shortfall compared to what analysts were expecting. the price of oil. on to more.
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i think anne-marie is now ready. over to you. >> the first time ever they reported first half profit. the first time they have had this earnings call. $47.umbers came in under about 12% less then this time in 2018. inciting lower crude costs but higher price. they struck this deal at the end of 2018 with other members of the cartels to restrict production. we have seen saudi production fall. potentially another headwind. two things if you're looking at this and want to be a potential investor. they are going to restart ipo talks. taxes.ve higher for each barrel of oil they put out, it has to generate less money than other producers.
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this is because the government aramco. in -- uses the payout of the dividend. it was very high. the only investor in the company is the government. if you are looking to want to become involved, they are signaling there's going to be a lot of cash payouts. much.ne: thank you very let's shift gears and talk u.k. boris johnson is being accused. he says -- it says a combination of things and brexit could lead to a big increase. still with us is karen ward and alberto gallo. karen, when you look at brexit but when you look at the combination of fiscal u.k. over
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the next 12 months, what do you do? karen: the spending is coming clearly thesuggests prime minister is gearing himself up for german election. whether that is him anticipating being forced on him by vote of confidence in the house or whether he needs to put himself into a german election in order to get a greater majority, to deliver a no deal, but also perhaps to extend the timelines before he wants to face u.k. voters. we are in election every mode. that is highly likely. for investors, the bond market like all bond markets are heavily weighed down by quantitative easing. sterling is telling you most about u.k. risks.
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international investors are worried about what is going to happen. francine: let's go to the u.k. 10-year yield. if we bring the u.s. 10-year yield which should be up on your screen shortly. it is at 1.69. the u.s. 10 year, it is a big move and you look at the yields. negative yields in europe ever more negative. how difficult is it? karen: it is terrifically difficult to find income. the government bond markets are going to provide an insurance if things get real. bond prices rise, you can still get 10% return on u.s. treasuries even from these yields. even if we saw these yields collapsed to zero. -- collapse to zero. the government can provide insurance but just not providing income. where are they going to provide
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income -- find income? going to do you see it zero, the yield? alberto: central banks have given this promise of qe and lower yields creating inflation. it is wrong. it hasn't worked. in europe rates continue to be inflationary. they will continue to give liquidity to buy assets. we expect them to announce a new qe program. the federal reserve will continue to cut also pushed by political parties. we do think that yields will continue to go down and even countries that were deemed to be safe like australia canada or sweden may start qe in the coming years. .heir economies are held down commodity dependent.
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we have been through 10-year's of low interest rates. the economy cannot sustain higher interest rates and we are stuck in this qe infinity environment. the challenge is -- the challenge is to invest. we don't invest in negative yields. francine: thank you both for joining us. gallo.ard and alberto let's get to the bloomberg first word news. viviana: at their riskiest u.s.t, that is how treasury secretary describe the u.s. and world economies. -- the u.s. has engaged in. goldman sachs says concerns are growing. the trade war will trigger a u.s. recession. , matteodeputy premier
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salvini, maybe catching sunshine at the beach after he pulled the plug last week on the coalition government. is league party leaders trying to drum up support. won support in parliament without having to drum up allies. >> i don't think anyone is scared of democracy. we ask for elections. one should be scared if we were saying we don't want elections. our not letting the people vote in coming up with strange government. alberto fernandez -- that gives him a bigger than expected lead of 15 percentage points. voters have said macquarie would have trouble overcoming a margin of seven at the main election. at least 32 people have been
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killed, 15 are missing after a typhoon struck china. it swept the eastern coastal province toward shanghai. as the storm approached, more than one million people were evacuated. china state tv putting the damage at over $2 billion. jeffrey epstein was found dead in jail. the financier was accused of child molestation and sex trafficking. his apparent suicide pumping outrage among the victims seeking justice. the jail were he was being held is now the subject of two investigations. global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. francine: thank you so much. let's get back to the latest on the trade dispute. planned tradeays
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talks with china could be called off. trump's words came shortly before the release of the annual report from china which suggested beijing should keep its exchange rate flexible. what does all of this mean for emerging markets? , thank you fordi joining us. kamakshya: pleasure being here. francine: it is not in better. kamakshya: one has to worry about and all the headlines are focused on -- what one should worry about is the outcome global growth. growth.me for global it is important to look at this in context. in 2018 when trade wars escalated and blew up, global growth was at multiyear highs.
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we were growing at 4.5%. this round, global growth is already pretty fragile. to me, that is the real concern. it is not so much seeing why. -- cny. it should be reasonably stable. they want to push back against concerns about disorderly and one-way bets. francine: are we looking at a possible recession? arekshya: it is -- if you closer to one then you are six months ago. i don't think a recession is our best case. markets are doing some other work. we are seeing a big financial condition easing. new shocks are best cases. you should see growth travel
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along at a decent rate. more broadly within emerging markets also globally. francine: how problematic is it for emerging markets using the strong dollar? -- stronger dollar? kamakshya: if you look at the dxy index, it has been pretty choppy. but when youem, look at emerging-market effects on a trade-weighted basis, it is not -- it has not done so badly. the effect has done well. it is an issue. it is likely to be with us for some time. any dollar downside that you get on account of the fed or dollar tromp wanting a weaker dollar, it is going to take some time to materialize. francine: he stays with us. opposition gains
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momentum. this is bloomberg. ♪
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francine: this is "bloomberg surveillance." i am francine lacqua it we did get some hong kong headlines in the last hour. hong kong airport saying the emergency center has been activated and has warned the public not to come to the airport because of flights have been canceled. they canceled these monday flights. protesters are back. we have seen a little more violence than we have in the past. that started yesterday with authorities responding with more aggressive tactics during the
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protests. officers going undercover to infiltrate the group and make arrests. we are keeping a close eye on what is happening in hong kong it argentina is at the crossroads. while mauricio macri is looking to -- his path to the presidency is at a roadblock. at primaries, his main rival, alberto fernandez, grabbed 50% ahead --came 15% ahead in the polls. has this vote decided argentina's next leader? >> good morning. a massive surprise in argentina a 15 point difference between fernandez and macri. i would say many analysts would hopeful for macri
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was at most it may have been a five point difference for fernandez so 15 point difference is really a huge, huge surprise. it will be very difficult for macri to overcome that in october. francine: what does it mean? what should investors expect from a fernandez government if he does when the election? are investors using patients? >> to ask a big question, fernandez gave a victory speech last night which was -- he didn't say that much. he was very joyous. the big fear is his vice president who was a populist interventionist eight years before she lost power to macri. investors are betting on the market rallied last week,
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investors are betting on macri environment. this fernandez is not clear and probably more interventionist. it is not clear what he will do with imf who is giving a lot of money to argentina. markets.carnage in the investors are not going to react well to this decision. fernandez may be more moderate. i don't think they will be expecting that right now. francine: jonathan, think you so much for the update. still with us, kamakshya trivedi from goldman sachs international . it is difficult to see what fernandez stands for. he has yet to lay out his economic policies. note,hya: i think in the we argued there may be a five point gap something that can be
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surmounted. as it was done in the last election. around, 15 percentage points raises the bar pretty high. market fellse the off today but there is feedback. themore the peso sells off, more you have inflationary pressures again that will make it harder for the incumbent resident mockery -- macri. [no audio]
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deep hole that has taken a long time. people are running out of patience. francine: how much weaker could peso be by the end of the year? kamakshya: our forecast is in three months time, 48. in 12 months time, 58. inflation rate of 30% which could go up quickly, the peso needs to depreciate to keep pace with the differential. the question is not whether the peso will depreciate, the question is whether it will depreciate more -- francine: thank you much, kamakshya trivedi stays with us. warned theley
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strength could contribute. this is bloomberg. ♪
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francine: economics, finance, politics. this is "bloomberg surveillance." i am francine lacqua could we have quite a lot to do. we have quite a lot of market movement to look at. the u.s. 10-year yield fell -- at 1.69. what d do with bonds? still with us, kamakshya trivedi . the goldman sachs chart which called it right. goldman turning neutral. what does that mean for the rest of the world? kamakshya: what it is saying you had a very fast rally. if the best cases right which is the global economy awards recession, i think the case for
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further longs here becoming unquestionable after moves you have had. that is the rationale for being neutral. of course, there are risks and the risks have to do with global ande, some of the political economic shocks we are seeing. if you do see some of those risks materialize, the best scenarios yields can move further. u.s. yields have more sensitivity to these negative shocks given their higher starting point. francine: what happens if you avoid a recession but rna deflationary -- but are in a deflationary environment? this person is asking why is it so hard to meet inflation goals. kamakshya: it is a very good question. clearly, what has been surprising analysts but central bankers to some extent for the
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last few years is to the agree labor markets have improved and you have not seen a path through into inflation. there are probably aspects of that leaks between -- links between tightness and labor market quantities into wage inflation. those relationships which have been the bedrock of inflation targeting, they have been some changes in that which over time we understand some of those changes have to do with technology and so on. there are changes in that that we don't complete understand. powell reported the fact that the level of employment is further than we think it is. there are some of those things that are harder to gauge in real-time. a depend what would like world economy look like?
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people bringlot of up the japan of acacian analog. lucky. we were so japan has lived with low level of inflation and growth for many years but many years and relatively calm and stable. the institutional setups -- you were talking about italy earlier -- may not be as conducive with lower-level equilibrium. francine: thank you so much. surveillance continues. this is bloomberg. ♪
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♪ francine: goldman sachs says the
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risk of a downturn looms over possibility ofe a trump/china trade deal before 2020 fades. remco's -- saudi aramco's net profit falls. we will hear from the chief financial officer. good morning. this is "bloomberg surveillance ." i'm francine lacqua in london. tom keene is a new york. so, hongst hour or kong canceled many flights from hong kong airport. tom: markets have moved on this news. we will go to the data right now. equities, bonds, currencies, commodities. we are at -13 on futures moments ago, right now -12. curve flattening.
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that is a big deal to get an ensht handle on the twos-t spread. let's go onto to the second screen, with the vix showing the angst. there's the friday close on the dow. .atching renminbi francine, what do you have before we go to hong kong? francine: i was looking at treasuries and the yen advancing, gold paring a drop. were down.ocks there's this mounting unrest in hong kong. joining us from hong kong is denton kate. i think for the first time they have actually canceled flights. where did they go from here? do they get worse? reporter: it could get a lot
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worse tonight if they happen to go in there and clear the airport. we've seen some increasingly violent scenes throughout the city on the subway lines. police fired tear gas into one of them for the first time yesterday, along with rubber bullets and using other crowd control techniques. a number there's just of people at the airports. they've canceled flights for the , but it is unclear as of now when the airport will reopen, how long the protesters will stay there, or how the police will deal with it. francine: how have the police dealt with it so far? it seems like there's more violence, or at least they've ratcheted it up over the last few days. what does that indicate? dan: the clear symbol from
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authorities from beijing has been to go after them. we seen a stepped up use of tear gas, indiscriminately really, sometimes with no warning. definitely some tougher measures. we've seen protesters get beat up in subway stations. they have had their fair share of violence as well, throwing bricks and things. but the police clearly have a mandate from beijing to go in and take care of business. tom: these are images from the airport. again, the hong kong airport closed. says flights coming setill land, and departures will leave, and that is it for the hong kong airport. ofit a monolithic group
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protesters, or do you distinguish between the character of the protesters? dan: there are a hard-core group generalsters, and then pro-democracy protesters that kind of comprise the greater public. in recent weeks, it's been more of this hard-core group pushing the limits with police. tom: can the authorities, whether they are in hong kong or the authorities in beijing, can they separate out those two groups of protesters? if they desire, can they go after the so-called hard-core protesters? they would probably tell you that they are doing that, that they are only going after those trying to attack them on the front lines. that's where we seen the pockets of violence going on, although in a situation like this at the
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airport, it is really impossible to tell who is one of the hard-core people. what we have seen that's been more interesting lately, the police have trying to been infiltrate the protesters by dressing up like them. particularly over the weekend, they looked like any protester with gas masks and facemasks, wearing black, and then going in and arresting people. ate, thank you for that report. again, images from the airport in hong kong that is closed. right now with the first word , viviana hurtado. on the death of jeffrey epstein, the coroner says that more evidence is needed. he had been on suicide watch,
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but recently was taken off. he was jailed on sex trafficking charges. markets are in for a rough day after a shocking primary election defeat in argentina. the president lost in a landslide to his opponent. he's known for his business friendly policies. argentinian markets are poised to sell off on fears interventionism will return. to guatemala, a conservative former head of the prison system has elected, a landslide winner. he is promising a crackdown on crime. he also wants to boost economic growth to slow down a flow of migrants fleeing to the u.s. today, saudi aramco looking headlines. the world's biggest oil producer india'sg a 20% stake in
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reliance oil. saudi aramco said net profits in the first half of the year fell 47 billion dollars due to lower oil prices. the company is preparing to go public as soon as next year. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is bloomberg. tom: thank you so much. the 10 year yield, 1.68%. let's go to the bloomberg. i didn't know the chart when i made it. year, 20cific, the 10 your success up to the crisis. down we go. breaking down the new 10 year .ows on the shares it is about capitalism. it is about risk, if you will. ofning us now, neil dwane
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allianz global investors, the global strategist, and janet mui er joins us as well. how do you take the many challenges of china and bring them over to a written piece? janet: i think first of all, what is going on in hong kong is very negative for the hong kong economy. aer 20 countries have issued travel warning to hong kong. i think that will really hurt tourism, which is a lot for the retail sector. the appreciation of chinese yen -- of chinese yuan will also hurt the economy. i think things are quite concerning for the hong kong economy, and i would be cautious on the region. francine: what does it mean for how this ends? if you look at the economy and
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now that they have actually canceled flights, does it get worse before it escalates? janet: i think there's no sign this is going to de-escalate anytime soon. it is in political gridlock at the moment. a lot of hong kong people are from the more extradition bill and wanting carrie lam to resign. francine: does this have an impact on the trade war? can china deal with the protests and the trade war, or does one overshadow the other? neil: i think it is all part of the same type of facet. clearly there has been growing washington. beijing historically has said no would interferes inside our country. they are last week accusing the
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u.s. of interfering in these demonstrations. i think it adds another complication to potentially the resolution of a trade deal. tom: when you go through the day at allianz, do you believe the corporations will weather this storm, that on a strategic basis, they can just do a strategic basis plan? neil: for many businesses, they can clearly pivot away from hong kong towards other centers in may beion which arguably are now offering more scope for growth, but many corporations now know that they have to have a decent presence in china. one way or another, they have to navigate the politics around hong kong, as well as protecting or increasing investments in the longer-term potential of the chinese economy and the consumer there. francine: how much of an impact is this on the chinese economy?
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what is the spillover effect? janet: i think hong kong is more reliant on the chinese economy than otherwise, so i don't think purely from an economics perspective it is going to have a huge impact on the chinese economy. i think it is more like the political pressure that will be put on the chinese government. francine: ok. thank you both for joining us. from -- and neil dwane of allianz. coming up, we will hear from the legal leader about the election plan. this is bloomberg. ♪
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? this --viviana: this is "bloomberg surveillance." the boards at cbs and viacom working overnight to determine a price for their anticipated merger. viacom's ceo would lead the new company. there could be a multibillion-dollar bidding war over a german lighting fixture maker. offer is higher than one from an capital and oslo group -- from bain capital and oslo group. orderedese government cathay pacific to ban all employees who support hong kong
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protests. that's your bloomberg business flash. francine: thank you so much. fullo salvini's bid for control of italy has started its campaign on the beach after pulling the plug on a coalition government last week. he's calling for swift elections that would likely hand him a majority in parliament. we go now to bloomberg's maria tadeo. how likely is it we go to elections in october? matteo salvini is 100% ready for this election. he was out here in sicily, southern italy, and full campaign mode, shaking hands, taking pictures, going into the water. he told me he wants the election to take place in october.
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he also told me investors have nothing to fear because there's no secret plan to leave the euro. he does not want to take italy out of the european union. let's take a quick look. mr. salvini: an exit from the european union or the euro are out of the question. there's absolutely no plan to exit europe or the euro. was matteo salvini, deputy italian prime minister. he decided to come to southern italy because for many italians, a man from the north is a no go, but he wants to present himself as a man of the people and break that divide. at close to 40%, so you can see why there is very strong incentive to have this election october, but it will depend on the president of the
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italian republic. it is unclear when the italian election is going to take place. francine: but if you look at the polls, how likely is it that he alone?ern if he doesn't want to do a new coalition with five-star, who does he turn to? maria: exactly. we are looking at a coalition with a number of other center-right parties that could get to the 50% threshold. it would be a clear victory for salvini, but there is a sense here in italy today that he got the timing wrong of this. there is another majority that could be formed by the left. , theis luigi dimaio five-star movement. matteo renzi is also well known here and could block matteo salvini. if he doesn't get the election now, there are difficult decisions to be made before the end of the year.
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a btp hike before the end of the year is not a good deal for any politician. tom: thank you very much, from the shores of italy, our maria tadeo. we thank you so much. on a very serious note, the hong kong chief secretary will be speaking any moment. we are really looking for that beginning. here we go, starting right now. the headlines are absolutely extraordinary. the hong kong police say they don't see current protests as "terrorism." again, the hong kong airport is closed, for those of you with family and business associates within the district. this will be the beginning of what you must believe is a lengthy. press conference you look at these events -- a lengthy press conference. you look at these events in hong kong, we can make clear on a monday afternoon into 6:00 in hong kong, the situation has deteriorated. francine: it certainly has. we saw that yesterday with some
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of the handling and some of the videos that came out. we will continue keeping a close eye on this. i know you spent a little time also looking at cathay pacific shares, which were at a 10 year low. tom: they say now they've got flights canceled until tuesday morning. we are in the late afternoon, early evening of monday. we will come back. markets on the move. we will be doing more data checks throughout the morning as well. don't forget, carl weinberg in our next hour. stay with us. this is bloomberg. ♪
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♪ " on "bloomberg surveillance eventfull -- on an monday morning. hong kong airport shut down for those of you with travel plans today. usl dwane of all liens with -- of allianz with us, and janet mui. about theng acceleration of negative rates. is the level of negative rates a a dynamicor is it
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factor? the negativek rates are getting pretty extreme at the moment. i think markets are probably overreacting to the global risk and how much central banks can cut interest rates. that they are way too expensive. tom: this may be the chart of the year, germany 10 year. a trend is a trend until it isn't. we've got the 10 year and the two-year coming down abruptly as well. how does this fit into the discontent of european commercial banks? neil: i think it fits perfectly. expectingarkets are even more aggressive behavior from the ecb. they were probably even
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disappointed that they didn't get some in july. therefore, i think the threat of more negative interest rates and more quantitative easing will japan, as we seen in threaten the profitability of many of the companies, and that's the reason i think euros and banks are at 50 year lows and are likely to say their -- likely to stay there for some time to come. francine: goldman sachs just turning neutral on this bond duration after the recent rally. where does this go to? neil: i think it could go a lot higher, depending on how aggressive the central banks become. the markets are clearly anticipating, may be over anticipating, how bad the current or prospective gdp of the world is looking, but they are clearly not underestimating the power they think resides still inside. the central banks. whether we think that -- still inside the central banks. is aer we think that
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factor. francine: thank you both. neil dwane and janet mui both staying with us. we are keeping and i for anymore develop its out of hong kong -- on anymore developments out of hong kong. we saw yesterday thousands of black clad protesters crowding the arrival area. more flight cancellations tomorrow. check with your airline before you go to the airport. this is bloomberg. ♪ from the couldn't be prouders
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save up to $400 a year on your wireless bill. plus get $250 back when you pre-order a new samsung note. click, call or visit a store today. ♪ tom: early morning in the united states, midday in london, and history in hong kong.
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we've had images from the airport. right now, the chief secretary of hong kong and his team are speaking at a press conference. we are looking for headlines on that right now. we mentioned earlier some of the headlines coming out. dow jones has a set of headlines. i'm looking through them right now. ,hina government officials "violent actions in hong kong must be punished without mercy." there is a heated rhetoric today. 7.06 on the offshore cny. very movable monday morning. please stay with us through the morning. right now in new york city with our first word news, here's viviana hurtado. viviana: the next drama involving jeffrey epstein may be over his mysterious fate, what
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federal authorities call an apparent suicide. he was being held on sex trafficking charges, including of underage girls. epstein owned a mansion, a private island and jet. goldman sachs is raising concerns a trade war could lead to a u.s. recession. the bank says it no longer expects the deal with china before next year's presidential election. goldman also cutting its forecast for fourth quarter growth by 2/10 of a percentage point to 1.8%. in eastern china, a typhoon has killed at least 32. 16 are missing. more than one million were evacuated from shanghai and a neighboring province. it has now been downgraded to a tropical storm. in the u.k., new prime minister says he will spend
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up to $3 billion on prisons as part of a crackdown on crime. in the last couple of weeks, he has also announced multibillion dollar spending plans on brexit and the national health service, all of this leading to speculation he's planning for an early election. 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 viviana hurtado. this is bloomberg. francine: thank you so much. for more on brexit and the u.k., we are back with neil dwane from allianz global investors and janet mui with cousin of capital -- with cazenove capital. what does this mean for u.k. assets? janet: in general, i would --neil: in general, i would like to feel that boris johnson putting a more positive aspect on brexit issues.
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the fact that boris has a plan outside brexit is good for the u.k. but for many investors, until we understand the mechanisms and politics around brexit, i think it is too early to say what we should be doing with u.k. assets. sterling is cheap. it has already priced in a lot of bad news inside the political risk outside the u.k.. we would say the u.k. is cheap, underground, but you may not want to do a matteo salvini and dip your toes in the water just yet until you have a bigger sense of where we are going for brexit. francine: is it cheaper even if we have a no deal brexit? neil: yes, i believe a lot of that is priced in. francine: do you believe that, janet? janet: we have been negative on u.k. assets because we see too much downside risk for the u.k.
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economy, from a political perspective and a global perspective. so we are long on u.k. equities for quite a while. tom: it's about the united kingdom and multinationals. how multinational are the u.k. companies? can you really dismiss them from brexit? janet: --neil: i think something like 2/3 of the ftse is listed the exposure in the u.k. as part of a small exposure. i think we have seen that bifurcation. domestic u.k. stocks have performed very poorly, like ,ouse builders and retailers and others have sold down due to the exposure to sterling and the fact they are in the ftse. i think it is a window of opportunity. in the last two or three months, we have begun to see a lot of international capital moving in acquire u.k. assets.
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that tells me on a five or 10 year view there's increasing interest to buy u.k. assets while sterling is so undervalued. tom: that's right where i wanted to go. the catalyst of a chief currency is remarkable. we believe the foreign money will come in at 1.18 sterling? neil: there's no doubt that --janet: there's no doubt that sterling at a 30 year low is attractive for investors. however, in the near term, i don't see a lot of foreign capital coming in because the brexit deadline is october 31, which is approaching. there doesn't seem to be a resolution in sight, and potentially we are likely to head into a general election. that really creates so much uncertainty. international investors are going to stay on the sideline for now.
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francine: neil, are you looking at some of the italian yields? neil: not really. i think we are happy to sit there and say italy is a unique case at the moment. we prefer some of the other theyheral yields where are, so i think italy is a exceptional case. you have to understand the dynamics that can come out of rome at the moment. francine: the day-to-day come up we are still unclear about the salvini plan of and things like that. what is your take? janet: the economic momentum in italy is slowing, as is the broader european economy. long-term estimate is very poor demographics.o we are seeing much more
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uncertainty at the moment, so definitely cautious on the region. francine: we talked a little bit about negative rates. how much firepower will draghi use? janet: i don't think the ecb has a lot of firepower, but i think they will cut the deposit rate by 10 points, and that is really because they sound pretty urgent in terms of the concern on , but i think they will because ie for now think they want to hold back some firepower for the rest of the year. up, right now price is yield is down, which means a lot of people have to consider cash. is cash and asset right now? you arepending on where investing, cash is an asset.
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i think unfortunately for many u.k. and european investors, where cash is a negatively yielding assets, i don't think it is a place to park your money. there are some shorter duration corporate credits or, dare i say, you hunt for some income around the world where there is income to be had. but unless you know exactly what you are looking for and how it is going to pan out, i don't cash is where to be. here, if you are just joining us come the global news of the day, the hong kong airport has been shut down. cathay pacific has suspended all flights, at least into tuesday morning. they are managing the message and hong kong. this is bloomberg -- the message in hong kong. this is bloomberg. ♪
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francine: this is "bloomberg surveillance." the world's largest crude oil producer will soon own part of the world's biggest oil refinery. 20% oframco will buy reliance industries and what is estimated to be a $15 billion deal. bloomberg's matthew martin is in dubai, and he spoke with the saudi senior minister of finance. we will maintain our position as the leading crude producers, while downstream, we will further diversify our operations and decrease production. francine: joining us from dubai's matthew martin. it is the first time we get
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these results from saudi remco. is this may be the strongest sign they are getting ready for the ipo? matthew: absolutely. i think that is a key way of reading this. withat conversation effectively the cfo of aramco, he said the company is prepared the saudisting, and and the company are getting ready for the increased transparency and scrutiny that will come as a publicly listed company, which we could see as soon as next year. francine: if you look at the earnings and you think of investing in the ipo, do you worry about the fact that it is not diversified enough and some of the oil reserves, or do you wait to see how they price? matthew: i think there's a huge amount of unanswered questions
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that we still have around aramco as it prepares for this listing. clearly, from the perspective of the company's ability to generate cash, it throws off a huge amount of cash from oil production i suppose the bigger question for equity investors is how much can it produce in terms of dividend for equity investors. the statements they put out for the first half, there is a $20 billion dividend they just paid to the government. that is another indication it could pull these huge financial resources to payout to investors. the question would be in a post-ipo environment, would it still be paying out that sort of money to investors, or is this just a one-off that's gone into the saudi budget to help prop up the saudi economy at a time when they've been trying to boost
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spending to grow the saudi economy? tom: are we any closer to understanding the accounting of aramco? matthew: i think we are. there is the transparency in there. we know exactly how much is being paid to the government through things like dividends, through royalty payments and taxation. thing that will be on the minds of equity investors in the run-up to an ipo is how do you disentangle a company saudi statefrom the and from the finance ministry? ultimately, the question is going to be, how many levers does aramco have to pull to boost its performance whilst it and saudirgy ministry government making decisions around its production levels, and has no control ultimately
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over what the price of oil is? francine: matthew, thank you so much. let's get back to neil dwane from allianz global investors and janet mui still with us from cazenove. when you look at saudi remco will come a what you think -- at saudi aramco, what do you think? tom: it is potentially a very big company --neil: it is potentially a very big company coming to the markets. the questions around how it is going to be taxed, visibility for investors, is going to be very important as we move toward this listing. the recent auditing of the reserves has been interesting. they used a world-class firm to do so. thesene thinks about things, investors are going to have to get more comfortable as we get more information. francine: what is saudi aramco,
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a pure oil play? is it the end of peak oil and things like that? or is it a saudi play? neil: i am starting to see. it is both. i wonder whether there are -- i am starting to see it as both. i wonder whether there are better oil plays out there. there's this you around the environment -- there's this issue around the environment. if you talk to bp or shell, they are concerned about going green. that is an issue for their shareholders. i'm not sure whether they will put saudi aramco under the same type of pressures. do you grab the big dividend? in europe, you've got big dividend with minimal dividend growth. is that attractive enough? neil: as we look maybe towards more volatility in the equity markets globally, i think potentially more of the equity return could come from the dividends.
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when i think about taking risk, i am concerned about the geopolitical risk in the middle east. when you look at particularly the big european oil majors, you are starting with a dividend of 5% to 6%. they've got a hedge against a reasonably good oil price. therefore, i think they fit inside many portfolios at the moment. francine: thank you. neil dwane from allianz global investors and janet mui of cazenove r staying with us. tomorrow, we get an update on consumer capital inflation. rateursday, a central bank from mexico. this is bloomberg. ♪
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♪ tom: "bloomberg surveillance." g. eventful mornin
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moving airlines into hong kong and out, but certainly constrained as they shut down the airport. cathay pacific into tuesday as well. right now we will diverge to a nation that had 20%, 25% orlation, and now has 50% even 55% inflation. that can only be argentina. with an economy that is "out-of-control." it is a stunning loss for mr. macri. does the other party have a plan? reporter: good morning. it is not quite clear what the plan of the other party is. sose were primary elections, the president still has to fight the real thing in october, but 16% points is all but
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insurmountable. the economy really struggling in the last couple of years. argentines could not take the pain, and those percentages tell their own story. there will probably something much more protectionist from alberto fernandez if he takes power in october. tom: was this a vote against macri or against madame lagarde? reporter: probably a little bit of both. clearly the imf package, the biggest ever credit line, clearly they were banking on a macri victory. the high interest rate and the inability to turn the economy around, argentines could not results pain, and the
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are very clear to see. francine: what does this all mean for peso and inflation? not open for does about three hours, but we are expecting carnage, essentially. it is unclear how the central bank can stop the selloff. it does have firepower, but we macrixpecting works for expecting a loss for macri, but nothing like this. markets are already tanking at the opening in europe. it is unclear how the central bank can stop anything. when the peso slides, that is even worse for inflation, already running at 56%. francine: thank you so much. jonathan gilbert their from our point is aries -- from our buenos aires studios.
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neil dwane of allianz global investors still with us. we don't really know what the economic plan of mr. fernandez is, but how would you read it? neil: it is clearly in mr. macri's interest to probe the weaknesses, but given the prior frustration that the deputy to , argentinians want to go back to that regime. i think it potential he creates more difficulties for latin america as a whole. you have mexico and venezuela in some disarray. brazil may be now has traveled too far, too quickly. bolsonaro is not getting everything through that he maybe needs to come i know we have problems returning to argentina through that he maybe
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needs to, and now we have problems returning to argentina. francine: is this idiosyncratic, or a test of things to come? neil: i think it challenges the politics in general, whether it is the politics of russia, south africa, mexico, argentina. there's a lot of idiosyncratic political risk which investors have to think about. you cannot just say the yields in these emerging markets look attractive, i will go there, because the politics maple you up. you have to be very -- the politics may blow you up. you have to be very careful where you're going. you do on an august monday if you've got a nice gain? depends on what your risk tolerance is and what sort of income you are looking for. i think we are reaching a world startedbe when we
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studying markets in the 1970's, you look to equities because that's where the income around the world is increasingly sitting, unless you are prepared to take the political risk of something like an argentina or indonesia. for many clients who are risk averse, i think the markets have done well for people this year. i think you have to look into the second half, the trade issues come of brexit issues, and think of what risk i really want to run in the second half. tom: neil dwane, thank you so much. i informative our with allianz global investors -- and hour with allianz global investors. coming up dr. carl weinberg.
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morning, violence in hong kong intensifies.
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police fire rubber bullets at close range. authorities closed the airport. cathay pacific shares closed at a 10 year low. markets react. yields, lower. the dollar this morning resilient. the grand experiment of ever negative interest rates in this hour. carl weinberg of high-frequency economics. this is bloomberg surveillance. your live from new york. from london, francine lacqua. everything pushed aside by the drama we see in hong kong. francine: i am glad our man will be on the ground shortly. we will be getting updates throughout the day. significant they have canceled the rest of the flights for the rest of the day. if you are traveling from hong kong, call your airline before you show up at the airport. this feels like escalation.
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we saw that yesterday with some of the police response to the protesters. tom: hong kong authorities in the last hour speaking. the news flow continuing into the early evening in hong kong. let me do a data check. important to look at equities. futures a little worse earlier. now -12. curve flattening. we have an ebb here in the last 20 minutes. a vix at 19.39. there is the friday close. market dollars stronger this morning. francine? francine: i have a similar data check. i am looking at equities. they were gaining earlier on. they have lost a lot of momentum. futures are declining. i think a lot of it has to do with what is happening in hong kong. it has soured the mood. the unrest in hong kong weighing on investor sentiment did gold and the dollar both turning
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higher. tom: we will have our continued coverage. joined at the hong kong airport shortly. now, first word news in new york. >> an autopsy has been performed on disgraced financier jeffrey epstein. the medical examiner says more information is needed before because of death can be determined. the federal bureau of prisons is calling his death an apparent suicide. he had been on suicide watch but was taken off. he was jailed on sex trafficking charges. markets are in for a rough day after shocking primary elections defeat. he lost by a landslide to the opposition candidate. --the results tensed in stands in october, macri would lose the presidency. markets are poised to sell off on fears interventionism will
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return. saudi aramco is making headlines. the biggest oil producer is taking a 20% stake in india's reliant industry and chemicals unit. aramco says net profits from the first half of the year phil 12% to 47 billion, this due to -- market conditions. our goal within the company is to maintain our position as the leading oil producers. -- we will we were diversify our operations and increase production. >> aramco is preparing to go public. possibly as soon as next year. global news, 24 hours a day, on air and on tic-toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. you so much.
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it has been an extraordinary weekend. of course, the early evening in hong kong. there have been any number of authority speaking. china's hong kong and mccall office spokesman. >> the hong kong protesters have been using dangerous tools. shown signs of terrorism. gentleman moving the headlines forward on terrorism. as we all know who have been to hong kong, the beautiful ride from the airport to the central district or the regret of leaving hong kong and heading to their international airport, on the highway somewhere is our man leading the coverage in asia. what is different about this weekend? what is different about this monday? that has have seen
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been different is that both sides, protesters and the government -- violence from both sides. we have seen flash mobs with protest. three-day sited a in in the hong kong airport. they have terrorized -- they have paralyzed the remaining flights for the day. we are on the airport express. we are seeing several protesters. tom: we are going to do this. that is a very difficult connection in the hong kong express. we will get her to the airport. the road i am told right now is closed. these are movable events to say the least. these are events affecting the markets worldwide. rich in markete
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and economic analysis. there is no more perfect guest this morning to speak of this then carl weinberg from high-frequency economics. what did you write about this weekend? carl: we were talking about the trade issues. tom:'s hong kong removed from the trade issues? carl: for the moment, it is. the hong kong issue distracts the leadership of china from addressing the trump trade wars. we are not expecting a deal until elections. this ensures the leadership i do not believe has the focus right now on the trade war. that is the least important of the issues. tom: this came up three times this weekend. how monolithic is president xi? no one really knows, do they? carl: no one really knows. from all the external signs, he is very much in charge.
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he has his consultation with party leaders. this could change. there is no evidence that is going to happen. the key thing to remember from the negotiation point of view is that president trump is going to come and go whether he gets a second term or not. xi jinping will still be the president of china. francine: it is unclear at the moment if the hong kong violence would escalate on the side of the police, how the west would deal with it. how would the u.s. react? carl: that is a good question. the chinese have lectured the americans to mind their own business and stay out of this. this is a chinese domestic matter. that is what they are going to do. they not going to be subject to insolence from the united states. we are watching this for the moment. i am not anticipating any formal u.s. interaction with the hong kong problems.
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from an investor point of view, investors are spooked by all of this. hong kong is the financial gateway for china for a lot of the financial enterprises. i'm thinking about whether six month from now or a year from now there is still going to be a hong kong as we know it did you think there will be. -- as we know it. i think there will be. it is a time to maybe look for an opportunity to the extent that people have been with betting on a less favorable -- have been betting on a less favorable outcome. francine: does this have an impact on the trade war? do not know if we are making lines when we are not. , andu look at hong kong you want to settle or go away because you are dealing with president trump? carl: hong kong is much more important to beijing than trade. the imf came out with warnings last week that protracted trade he could affect china's economic
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growth. a lot of the essence of china strategy toward engaging with the west is through hong kong. stability in hong kong is a clear priority for the government. the u.s. is not going to get a lot of attention or traction, at least not as much attention or traction with chinese authorities as they would like to have. they are rushing to get a deal done by election day. i do not think they are going to get it. aware forink flight their coverage. we are seeing flights still taking off. i see flights moments ago to l.a., san francisco, and o'hare. i see very few domestic flights within the flight aware strain. that is a great service. please stay with us. carl weinberg is a great service as well. stay with us. this is bloomberg. ♪
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>> this is bloomberg surveillance. let's get the bloomberg business flash. cbs and viacom working through the night to determine a price for their long-awaited merger. bloomberg has more on the media company hoping to reach an agreement today. the chairman would be sherry redstone. viacom ceo bob bakish would lead the new company. there could be a multibillion-dollar bidding war over a german lighting sensor maker. offering $4.1 billion for osram let. the offer is higher than the one from bain capital. the osram board had already offered -- had already accepted the offer.
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shares in cathay pacific falling to lower in a decade. have suspended a pilot who was detained while taking part in a demonstration. that is the bloomberg business flash. tom: thank you so much. getting us out of the five zip codes is all about the national news. max boot writing up in the washington post on the rest of america. he simply says, going to england and watching the tennis ball batted around, we are waiting for the mrr to come. it is monday morning. the interns are a little slow. last month, i was at wimbledon. on friday, i was at the anti-wimbledon. the iowa state fair. politics is just a sideshow. it is maybe like 100 people worried about 99 candidates. more is not room for much
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in the small so pocket -- small soapbox area. there are still plenty of kids who devote their energies to raising pigs rather than raising how. our step -- raising hell. our stephanie bentley would love to be at the iowa state fair tonight. toby keith is playing. stephanie, it is great to see the process of an election. cowthe idea of a buttered and the iowa state fair. is this an election as normal? can we get back to the cadence represented by the iowa state fair? this debate,been does iowa matter as much in this election as it has in previous elections given the prominence of national debates in the difficult rules to qualify for the debates to give those
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candidates a national platform to advance their candidacy. i think at this point, given that the field is still so large, there are so many candidates, really effective iowa is to winnow down the field. it is still wide open in terms of -- it is six months out. any number of those candidates could break out. we have seen in the past week, the leader, joe biden, make a number of gaps. so far, that has not heard him in the polls. if his candidacy does implode because of some of those gaffes, who did the biting voters go to -- true to the biden -- who do the biting voters go to? tom: when does the wintering -- the winnowing start and where these people running with 1% 3% polling results? >> they think they can still
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break through. i heard cory booker over the weekend, who is pulling at 1% to insay, look at john kerry 2004. he was pulling way behind in single digits. he managed to win the iowa caucus. i think there is hope that for some of those candidates who are behind, that they still have time. there are not that is the same this time around given how joe biden has remained resilient in his name recognition is so high, and given the fact these debates are playing such an outside role and the field will naturally be winnowed in september because of the qualifying rules. francine: what are the policies that will win the 2020 election? is it immigration? is it the economy? realr the democrats, the
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dividing line is over medicare for all. where did they stand on that? you have warren and sanders who are taking a far left position on medicare for all outlined in private insurance versus a moderate stance like joe biden saying that is going a step too far. is trying to plow a middle path. i think medicare for the democrats -- to clinch the nomination, that will be the central issue. there is a lot more agreement on issues like gun control, immigration, amongst of those candidates. francine: when will we know if it is a or someone who is further left that can go up against trump? >> i think it will end up winnowing down to a centrist or emaar -- or a more moderate candidate whether that is joe biden or maybe kamala harris if she can break through. and a more left-wing candidate
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like elizabeth warren or bernie sanders. elizabeth warren has run a very good campaign. she has pulled ahead. olling second in iowa. you could see a winnowing down to a more moderate candidate versus a left wing candidate. francine: thank you very much. stephanie baker, our bloomberg senior rater. as we had to pray, here is a look at what you should be watching this week. tomorrow, we get a look at u.s. inflations. gdp economistman forecast with contraction. get a central bank rate decision from mexico. friday, a big day. indonesia's president presents the annual budget. we will dig into emerging markets. this is bloomberg. ♪
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tom: good morning. markets on the move. features at -15 with news out of hong kong. the airport is closed. carl weinberg with us. i place him with the london school of economics. charles why plats with understanding the dynamics of europe. let's begin with what negative interest rates signal. price up, yield way down. what does it signal to europe? carl: at the most basic level,
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it means money has no value. you have to pay people to take money. people are not willing to pay you to put work into somewhere else. there is no good use from money in a financial sense. a 10nment, germany flooded year bond. that becomes the active bond today. if you buy that pond, you're going to end up with less money than you gave the government. there is nothing good that can come from that. for banks, negative interest rates means there is no good loan to make. tom: you has been one of the few economist to understand the dynamics this means upon the banks. now?does it mean right this chronic negative rate for the major banks of europe? carl: every bank in europe can make money by taking deposits. it can make a profit. by lending about it negative yields,d corporate bond
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if you lend money out at negative rates, you reduce the profits you make by taking the deposits of negative rates. no bank has an incentive to lend. there's a credit crunch coming for year. francine: the central banks just that monetary policy for the likes of you and me. do they need to look at more deeply how they can safeguard the banks? they are doing it to some extent .ith the tiering carl: public policy has to look at what they are doing for the banks, if it ensures their survival. i cannot see how a bank can survive that negative yields. you can make a little bit of profits on deposits, but it cannot make a lot. if you look at other financial institutions, the big pools of money like insurance companies, have assetss, they
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that have a duration of 10 years or less. they have liabilities, to pensioners to insurance customers of 20 or 40 years. as interest rates continue to go down, their balance sheets become negative because there duration of liabilities is greater than the duration of their assets. this is a bankruptcy situation. they can break if cash flows going negative. -- if cash flows go negative. francine: are you a seller of european assets? arl: i think you have to take really hard look at the balance sheets and the survivability of financial institutions in europe under scenarios of negative interest rates. ucb did believe the stress test. want to look at places for
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things to write. places for thanks to get into trouble. on the banking side, there is no good loan that negative interest rates. thanks are in the business of making money by lending, you cannot do a good job. tom: francine, an update on hong kong. i'm seeing much fewer flights coming into hong kong and leaving even then we saw 20 minutes ago. what do you see? francine: i am seeing the same. have three different briefings that have happened today. the airport definitely saying, do not come to the airport. check with your airline before you show up. a lot of them have been canceled. this is bloomberg. ♪ ♪
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francine, what do you see on hong kong right now? moodine: it is clear the in hong kong has been getting worse and that's part of the reason why we saw a lot of concern in a lot of the markets we followed. the hong kong mood is becoming more difficult and spilling over to all asset classes across the world. let's go to the hong kong airport where we are taking the temperature at the airport. what is it like on the ground right now? .o you have protesters nobody fight separate kits and so far? >> the situation has died down a little bit, i would say there so thousands of protesters still here staging this process. they were flooding that arrival hall.
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showing they have been canceled for the day. not sure how many flights have been impacted, but as far as the hong kong airport authorities, we have seen both sides pre-protesters, the government and police hardening their stances over the weekend. three days sit in at the hong kong airport. a hundreds if not thousands of people sitting out and handing out brochures and -- and letting them know the situation. they've been caught under fire and pressure perspective it is in china for taking part in these demonstrations. businesses feeling the pressure. tom: other protesters organized. within the day-to-day reporting of our team in the central district, are the protesters coalesced in one thing?
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>> it's hard to say. we saw -- we talked about how this is leaderless and these mobs popping up in areas. the crowds of actually gotten smaller and we've been speaking , it seemsf experts like because the crowds of gotten smaller, they fear the government may be winning in their tactics which is to not offer any major concessions until the violence dies down. i'm looking at the index futures. clear the rhetoric stepped up today, officials sing protesters have committed
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serious crimes. is that an indication they will deal with them in a heavy-handed way? >> it seems like we've seen the rhetoric ramp up from beijing. last supported police offices out there but we've seen hong kong police retching up tensions there. -- ratcheting up tensions there. if it reports a police going undercover wearing black protestersfiltrating and people -- and arresting them. for the first time, police officers fired tear gas inside the subway stations. thank you so much hong kong. landed.air 27 just
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the flights are significantly diminished in the last hour. this is video from yesterday. this.s what is captured the close proximity of these believe rubber bullets at the protesters ended the headline item. joining us in new york and we are honored to bring them in. carl with his important china note. michael joins us with ian opener, what is your comment on what you were writing about in the u.s. monday? is serious.ong it the rhetoric from beijing is
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worrying but we still see a fairly high bar for beijing contemplates. give us jonathan spence 101 on the separation of hong kong from the political elite in beijing. costs,e are political financial costs and their geopolitical costs. if the intervene aggressively. probably the political cost is the most serious. you can imagine what this would ,o for u.s. china trade issues it would escalate the situation in hong kong. we have an election in taiwan coming up on how the government in taiwan should deal with the possibility of independence versus reunification. the financial costs are considerable. hard to know how serious the
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impact is. it's a very important financial hub for beijing. kong -- comes under pressure, it is quite serious. we need to watch the situation. i think we should recognize there is a fairly high bar. >> do you have any insight on whether china wants to step in and is just waiting for the chance for they have the citizens behind it. become suddenly legitimate in dealing with it with more of a heavy hand or do you think they just wanted to get better without doing anything? >> beijing's preference would be for them to deal with the situation. they don't want to show that one country, two systems is a fiction. what we have to watch as if security conditions break down
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such that beijing's status as the ultimate guarantor of hong kong's stability thousand question. if the security situation destabilizing and if there are more overt actions to strike out , those are the potential tripwires here. tom: i know you've got thoughts on this conversation. this chart is extraordinary. fruit prices strata moonshot since march. there is a domestic problem with pigs. that's -- andine we seen a one third to one half drop. some of those imports going through will come from the
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united states. what we are seeing in china is that prices outside of those are very stable. we are seeing a one-time supply shock. i want to ask him a question. let's do that. months from now a year from now, is there still a hong kong? >> there is still a hong kong. thing is the current status quo was unattainable. this cannot go on. the question is what is the trigger that breaks the status quo and that is really hard to call. the authorities are hoping they can exhaust the protesters, clearly that is not working.
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the demonstrators view this is an existential struggle. a positive trigger would be she resigns. there's no sign she is complicate -- contemplating doing that. it's not clear that would be enough because she would need to resign and pave the way for some clinical dialogue. hong kong still a country with strong territory and institutions. i don't think hong kong will disappear. i think the threat is over the long-term. it's what it means for the territory status, we do see our clients financial service professionals thinking about does it make sense to have -- tom: we come to a change point for those firms. and frankly smaller businesses going as well.
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>> depending on what happens i think -- it's not just the threat from singapore, it's also the threat from beijing and shanghai in the sense that if you're going to -- if you're in hong kong to be closer to china's market then to have a separate legal political system, if that system isn't there, maybe you just moved to shanghai were beijing. the changes will be happening overnight. there is still the possibility if we stabilize the situation that those kinds of decisions will be on hold. if china were to deal with the protests in a different checkedld they have with the west they would be on board? with a check with the u.s. that they cannot put sanctions because of that? -- i don't see
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any coordination between beijing and the u.s. and western governments as being peaceful at this point. these are two did -- two very different views. the politics of beijing have become that much more predicable -- brittle. the fact that china has been quite strident in its response to the u.k. when speaking up in the situation in hong kong. the very politicized response, all of this shows chinese diplomacy is becoming more politicized and that is because they are taking their cue from moredent xi who is much confident and assertive stance for china. especially in the last two years. i see this is becoming more of a risky point rather than area of cooperation. we are very fortunate to
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have these two gentlemen with us today. if the news deteriorates in hong kong. we will have more from the airport throughout the morning. chart, thepacific expansion of the airline in hong kong. crisis and a painful rollover debt to a 10 year low. there are fewer flights into hong kong. stay with us, this is bloomberg. ♪
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move andets on the deteriorate -24 on the spx. yields may be with a new bound lower yield. maybe we get there. do onebest chart, we can on --, but let's go back to foundational weinberg analysis which is debt crisis in south america. i made this chart quickly. devaluation of argentina back a decade from a stunning three pesos and four pesos up to 45 pesos per dollar. it is a banana republic chart, what does the imf do with the peso and with 55% inflation? what do you do? isn't nice.ine
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-- hasn'tesn't worked worked so far has it? >> it hasn't been applied. i think we are looking at a prolonged instability of the economy. i'm not tracking it that carefully but if i was the incoming imf director i would wait for politics and economics to force the government into doing and addressing this head-on rather than trying to dive in right now. people winning well in this primary, that they have a plan? is there a theory or strategy for salvation of argentina? >> i'm not tracking argentina directly right now, but politicians usually say what they have to say to get elected rather than what they are going to have to do when they get elected. right now what we are going to see and what is being promised
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are going to be two different things. francine: what is your take on dollar? a from here? >> it seems to be getting stronger. so much for wishing makes it so. a lot of safe haven money is flowing into the united states now just on the basis of the economic fundamentals. if we get the 200 plus basis point differentials of the long end to get positive yields the u.s.gative yields, is growing with some stability. will get an economic slowdown, maybe we will get neither. lesss on the horizon is scary than what's on horizon for europe. whereess scary than japan people are dying in the population is shrinking. scary than china
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because the instability in hong kong even though the chinese economy is growing. there is stuff around that that gives investors some pause. i think we will continue. francine: thank you so much. we will continue keeping and what's happening in hong kong. on what's an eye happening in hong kong. most of the flights have been canceled. this is bloomberg. ♪
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francine: this is bloomberg surveillance. the league leader and italian prime minister is on the trail. that calling for elections would likely hand him a majority in parliament. us on the beach, first of all, salvini wants an
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election, will he get one? that is a big question -- in italy. he wants this to be done quickly. he is in full campaign mode in southern italy taking pictures going into the water. he promises to break the divide between the north and south and i spoke to him at the beach and he told me investors have nothing to worry from a salvini government. let's take a look. an exit from europe or the euro is out of the question and not being discussed. what we find wrong and want to change the rules on immigration and taxes, there is no plan to exit europe or the euro. that was matteo salvini, the
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deputy italian prime minister, he is polling close to 40% in their difficult decisions to be made in italy towards the end of the year. the budget and a planned hike for 2020. that's why he wants the election done quickly. i have to say there was already speculation that he could get a coalition of the -- a coalition of the opposition to block the election. who may say we are going to have to wait and get the budget done first. francine: thank you so much. let's get straight to the bloomberg business flash in new york city. >> shares of germany's commerzbank falling to a record low. this after the ceo announced a turnaround plan. over the past year and a half, all those gains evaporated.
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black rocks private equity unit striking its first deal. 875 million dollars to become the shareholder. deal valued authentic brands at more than $4 billion, including debt. that is the bloomberg business flash. francine: the world's largest crude oil producer will soon own a part of the world's biggest oil refinery. it is estimated to be a $15 billion deal. we spoke with aramco's chief officer. companyoal within the in upstream is to maintain our position as the world leading crude oil producers. further diversify our
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operations. attest that the company is ready for an ipo. the timing of the ipo will be determined by our shareholder or the owner of the company. just by the fact they are starting to publish a company -- purchase a company we are used to, does that mean they are serious about the ipo? >> they've done a lot this year alone really opening up their books and shedding light on the company. there are still a lot of questions that remain if you're a prospective investor. what does the structure look like? how do you separate aramco the
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company from the house of saud? opec deals are done by the ministry and executed by aramco. those of the questions that still remain. francine: what is the one thing you are looking at? we are just out of time. we will get back to you soon. lisa and tom will be on surveillance radio and we are getting breaking news from hong kong. it is one of our main stories today. protests are continuing at the airport. have been canceled. this is bloomberg. ♪ ♪
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♪ shock.argentine
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president macquarie suffers -- president macri suffers a dramatic loss in a primary election. u.s./china trade tit for tat takes a breather. calms.- pboc the waters how bad could it get -- combs the waters. how bad could it get? the economic warns indicator is as high as it has the financial crisis. welcome to "bloomberg daybreak" on this monday, august 12. i'm david westin, joined by nejra cehic, in for alix. good to have you with us. we are looking at a live shot now of down, -- of downtown hong kong. ne

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