tv Bloomberg Surveillance Bloomberg August 19, 2019 4:00am-7:00am EDT
what else pushes back against the idea the u.s. is heading toward a recession. the german finance minister says at the country could spend an extra 50 million euros to sustain the out turn boosting german equities. marching in the rain. organizers say nearly 2 million people for peaceful protests in hong kong. welcome to surveillance. i am francine lacqua here in london.
we are seeing a little bit of a lift. 0.8%.g some a lot of that has to do with a little bit of optimism when it comes to trade news. we know the conversations are ongoing. i am looking at the u.s. 10-year yield. 1.6 after a big week. lower negative rates in europe. we will have a look at 10-year yields. we will ask ourselves what the inversion meant. oil, 55.52. oil rising after we had this drone attack at oil gas facilities once again underscoring some of the fragility of that region. coming up, we have an interview with the boston fed president. don't miss that chat after 6:30 p.m. london time today. this goes back to the conversation as jackson hole
starts on thursday. let's get to the first word news with viviana hurtado. viviana: the iranian tanker looks to be heading for greece. that is according to a vessel tracking data compiled by bloomberg. it was released by the british territory after being detained on suspicion on sending oil to syria. rain for an 11th straight weekend. 1.7 million people are tested in hong kong. estimatedwhere police 130,000 gathered. the demonstration was largely peaceful. this is in contrast in -- in contrast to the increased violence. -- it is according to a times report citing government documents. the dossier prepared also warned
that job losses and disruption to the u.k. ports for as long as three months. oil is rising for a second day after a drone attack on a saturday oil tanker. rebels from yemen attacking the facilities in the southeastern parts of the kingdom. no disruption to production. 50 billion euros of extra spending. that is what german finance minister says the country could muster in an economic crisis. it is the first number berlin puts on possible physical meatless. -- fiscal stimulus. getting tougher for argentinian president, his economy minister quit this weekend saying the
country needs economic renewal. that coming a day after the credit ratings were cut to junk by s&p both citing the possibility of a sovereign debt. global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. i'm vivian hurtado. this is bloomberg. francine: thank you so much. let's get the latest on the trade story. donald trump sang the u.s. is doing "very well" in talks with china. he said he is not ready to close a deal. the appletrump said chief executive has voiced concerns about the main competitor samsung gaining an edge. because their products will not be subject to tariffs. derek. us,
how significant are these comments from president trump on apple? >> i think they are quite significant. i think they are significant because it seems that tim cook has found an argument that the president finds persuasive. this is a big deal because u.s. industry has been trying for really long time to get the residence in or on a lot of this and a lot of the ideas they have had have fallen on deaf ears. haven't unable to move the needle. tim cook's central argument seems to have landed. the argument he is making is, look, if we are asked to compete against another really good company, in their view talking about samsung, we are going to have a 10% differential that we have to now deal with that they do not have to deal with because we are at the supply lines are based versus samsung's which are more diversified and in places
that apple is not -- that seems to be a persuasive argument. will that matter? hard to say. apple is facing 10% levees going on some of its products on september 1. on a whole bunch of others december 15. know abouthat do we president trump in his -- and his executives at the market was plunging last week? >> it was really interesting. the white house is taken great pains to say the timing of this phone call, vis-a-vis the market dive was entirely coincidental. i will let you be the judge. healthy dose of skepticism. the thing that i would say is the white house has taken great pains to say after that call that there is no recession on the table. the white house has been clear about that.
says franklina roosevelt -- channeling franklin roosevelt, the only fear recession is the fear recession. this is so critical to this president. he is a 401k president meaning he is asking his voters to look at their 401(k)s and judge the economy. you are talking about a dagger at this president's central reelection argument. that is going to be a really big thing to keep a hold of as we go through the next couple of months here to november of next year. central argument is the economy. if there is a recession, it really hurts president trump's chances. francine: derek, thank you so much. what does this mean for markets
and investment? iannelli. andrea thank you so much for coming in. yesterday was a big market move. we saw a lot more yields an inverted. we saw markets in turmoil. was it because it is august? is it more systematic? -- lookingust is not at the last couple of years. what is going on, you are seeing data that is mixed. you are seeing trade numbers, macro data that is slowing. markets are interpreting that and thinking about what does this mean for the fed, for monetary policy and for yields. what markets are not telling the fed now, whilst we may see the occasional improvement on the trade front, this is not something that is going to
disappear tomorrow. something that is going to last into next year. you are seeing the manufacturing sectors struggling. it will be interesting to see what powell says this week. francine: does it mean if they do not do more, we risk a recession? andrea: we don't see a recession at the baseline. the curve hasn't had an impact is because investors associate it with an end -- with a recession down the line. our best case is this is not going to happen. the consumer is still very strong growth that continues to go ahead and doesn't seem to blink. francine: have they looked at what president trump doesn't say. listened, do we
think he is going to be more mindful of these consumer products and tariffs? andrea: the white house is looking at. as derek mentioned, he is the 401k president. on thelth impact electorate does matter. not going to move in the way it did by postponing some of the tariffs on a more consumer decemberoods to because it gives a more of a feel-good factor. francine: going back to what you said from jay powell, it is a most indirect the first time we will hear him directly say it will come in september or will it be more nuanced? andrea: it is going to have to be dovish if he doesn't want to disappoint the market. it is going to be difficult for the fed, depending on what we
have in the price already. over 110 basis points i the end of next year rate cut. dubbing the market is going to be challenging. he can do better when he tried to juggle. will get back to some of these yields. come, live in hong kong for the latest and the 11th week of protest. will there be a change in tone among demonstrators? -- weall street's mania discuss more on that next. this is bloomberg. ♪
francine: economics, finance, politics. i am francine lacqua. let's get straight to the bloomberg first word flash. viviana: concerns from tim cook about competitor samsung according to president donald trump. the chief of apple is worried that south korean company will get an edge because its products will not be subject to tariffs when they are imported to the u.s. on septembert, -- 1, apple products will be hit by tariffs. it is tough for apple to pay tariffs when they are competing with a very good company that is not. he said how good of a competitor? he said a very good competitor. paying tariffs because they are based in a different location. i thought he made a very compelling arguments so am thinking about it.
--iana: tesla has a plan to the company is offering no contract packages as part of the relaunch. elon musk tweeting with a new lower pricing, it is like having a new money printer on your roof. it comes less than a month after tesla reported its third consecutive quarterly decline in solar installation. don't be some boost -- don't be seduced by negative interest rates. he says his company is shying away from cheap credit as others take advantage of the borrowing to pay for expansion. the brewers chief says companies that issue debt because it is cheap may end up with balance sheets they cannot afford. that is the bloomberg business flash. francine: much was made last week of the yield curve inversion. mohamed el-erian things it may have been -- thinks it may have
been -- they could cut spending. president trump's national economic advisor has been trying to allay recession fears. >> i sure don't see a recession. numbersome block buster towards the back end of last week, really blockbuster numbers. in fact, despite a lot of -- focus on wall street has been marking up their forecast for the third and fourth quarter. that echoes our view. francine: still with us is andrea iannelli. trying to get some charts up for you which i will get. it is like a monday morning. the yield curve inversion, you say it is nothing. jay powell have to press the markets he wants to get something done. -- will have to price the markets if he wants to get something done.
>> it does feel like a race to the bottom. we have had cutting rates. 15 central banks and emerging markets cutting rates year to date. in the last 12 months. competitiveness -- if competitiveness is achieved today, if the fed stands still with ecb, that is giving guidance of more ease and -- more easing to come. the monetary policy backdrop in the u.s.. there to keep grinding -- they have to keep grinding. in terms of yields, what does it mean? yields will stay in check but continue to go nowhere. also because you are not getting anything outside of the u.s.. you are getting zero based on negative yields. francine: my charts!
i am just able to get charts up. bonds hasielding stopped $60 trillion. is there a cycle to cap this? capea: there is no obvious or limit considering how much easing is still expected to come. buying byor income and just a lack of options. to investmenting grade credit. to done: if the fed needs more than everyone, what are the chances that yields in the u.s. will go negative what does that mean? what happens? andrea: compared to other
jurisdictions, let's say a lot more legroom to cut rates compared to the ecb, the boe and so on. arguably for u.s. yields to go negative, you need a pretty back economic backdrop -- pretty bad economic backdrop. if you see a recession, you could see yields going in that direction. never say never. francine: i have a chart. i am on a roll. andrea, this is another one of my favorites. yield curves in japan. overall, what is more surprising when you look at yield? is it that -- germany compared to japan? are now getting used to negative yields in europe.
the entire german curve is trading up. surprising, the speed of the move. shores up the ecb. it will be interesting to see next, whether governments who are not getting paid tomorrow will decide to go ahead and pull the trigger and start issuing more. francine: andrea, thank you so much. he stays with us. protesters rally for an 11th straight weekend and hong kong but this time it is peaceful. president trump meanwhile's -- truck warns the situation could threaten any deal. this is bloomberg. ♪
francine: this is bloomberg surveillance. protesters are rallying for 11th straight weekend in hong kong pick organizers claim 1.7 million people took to the streets and what was a large and peaceful rally. stephen engle joins us. what is the situation after what appeared to be peaceful? stephen: it was a pretty peaceful weekend. no teargas was fired. we are listening in to the regular police press conference and getting the latest news.
keep in mind there were vastly difference on the sides of protest when there was heavy rain. it was quite large. organizers say it was upwards of 1.7 million people. that is tremendously large given the city has a population of 7 million. the police are saying it is 128,000. most people i am talking to says it is much larger. there is a discrepancy. the police are saying there were zero arrests over this weekend. there was no teargas fired. however, protesters are saying they are going to test the limits again coming up in five days, on saturday. they are calling for a civil disobedience on the way to the airport. last week there was the injunction from the courts disallowing protesters or anybody who didn't have an airplane ticket to get into the airport terminal after six
straight days of demonstrations. now protesters are saying they want to call for disruption for people to make it difficult to get to the airport on saturday. police have just responded saying, if the demonstrations are peaceful, orderly and rational, there should be no reason for any crackdown or violence. police are warning they will treat any illegal activity at the airport quite seriously. francine: thank you for the update. we will have much more from stephen engle. up next, the government documents predict post-brexit shortages. we will discuss boris johnson next. this is bloomberg. ♪
the idea the u.s. is heading toward a recession. derek ludlow says trade talks have been positive. german finance minister says the country could spend an extra 50 million euros to sustain the downturn. marching in the rain. organizers say nearly 2 million people take to the streets in peaceful protest in hong kong. good morning, everyone. this is "bloomberg surveillance." i am francine lacqua. the iranian oil tanker detained last month has left gibraltar and is heading toward greece. swan has been released by the it is territory after gibraltar rejected. what do we know about the vessel? >> we know the vessel has left gibraltar and is headed greece -- headed toward greece.
you can see the vessel is off the coast and at the moment it is headed toward greece. the destination can change multiple times in any single journey. what happens to more than 2 million barrels of crude to brokers? it could be in international waters. it could be shipped to ship cargo transfer. the big question is how does it get back to iran? francine: what does this mean for the relationship between the u.s. and u.k.? we spend a lot of time trying to figure out where boris johnson would be next? >> the u.s. has made it clear, they are not happy with the british government about the swan from grey
gibraltar. what u.s. officials are saying -- the u.k. should look at the broader picture and the fact that boris johnson is trying to negotiate a trade agreement with the united states looking to leave the european union. said do theicials british want to do business with the u.s.? or iran? it is a very tense topic and it is going to take center stage with boris johnson and president trump. francine: some of the latest on the oil tanker. let's get to bloomberg first word news. viviana: doing very well. that is how donald trump is categorizing trade talks between the u.s. and china. he suggests white house is not ready to sign a deal. the president touted "big
state offter the weak the economy, china needs an agreement after -- more than the u.s.. ofna is denouncing it stem interest rates. must be priced with reference to a revamped benchmarks. that rate is linked to the price of pboc charging lenders for cash over one year. oil is rising for a second day after a drone attack on a saturday oil field. -- on a saudi oil field. says are in says -- are in it was only a small fire. -- that is what german finance minister a lot schultz says the company could muster in an economic crisis.
it's the first number berlin is putting on fiscal stimulus while action is imminent. warning signs are increasing signs on angela merkel's government. confirmed anis interest in buying it. denmark says it rules out selling the island. the president called a move a "large real estate deal." president trump is said to meet with danish officials. 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: the u.k. prime minister boris johnson will travel to france this week to make clear that leaving eu with or without a deal. u.k. -- the u.k. faces shortages in fuel in the case of a no deal brexit
according to a times report citing leaked government documents. the dossier prepared the office -- the times says the report sets out the most likely aftershocks of a no deal divorce, not worst-case scenarios. still with us, andrea iannelli. around,u for sitting andrea. first of all these leaked guess in a lot of people's interest, if you are boris johnson, you can have a way out of saying i had to postpone because we were not ready. if you are jeremy corbyn and you say, going to be a nightmare, we need to stop this. >> sending a signal that we are unprepared for might -- for what might come. we are getting close to october 31. needed tohemicals
keep the british oil surprised -- oil supply safe. the report says this is the likely scenario. the government says this is the worst case scenario. gas is an understanding between. where are the preparations at. the business is trying to bring goods in and out. how do they change. there's is talk of the free movement of people stops. there is no clarity. the absence of that clarity, what you're getting is this report that sounds like fighting. week we spent a lot of time thinking boris johnson could somehow go for no deal brexit and call for an election in one or two weeks afterwards? is that likely? it is difficult to read. boris it is hard to -- johnson is sticking to his language. he is going to paris and berlin before he goes to the g7.
onsays we are going out october 31 with or without a deal. he hasn't moved away from that. point there'shis nothing to renegotiate, whether it that is a tactic, it remains to be seen. because boris johnson is forced into one or whether he feels it makes sense. he can go back to the people and say i tried to get brexit done. the labour party will not work with me. francine: does this point to pound weakness, because it is difficult to read? there is likely going to be further weakness and sterling assets which to think about where we -- where we were earlier in the year, you still have some soft brexit sort of
potential options that were being discussed. right now, those are no longer considered. there are no longer on the table so the market has to reprice everything. it is unlikely given the uncertainty, given the news flow and the headlines that this is going to change in the short-term given how uncertain the whole period to the end of october is going to be. francine: do we have any insight? are they likely to give the u.k. something if they really think we are going out with a no deal? rosalind: they are trying to allow the u.k. to have more time. let's talk about it. we are not willing to reopen the deal but let's not rush out. it is going to be the worst scenario for everybody. they might say, hold up. let's just wait a bit longer. there's no sense in the u.k.
cratering out. francine: we have a viewer question. iptv.our writing, is it your judge that a hard brexit will worsen any potential recession that europe is facing? economics element to it. we have seen the expert numbers have been suffering as a result of the uncertainty in the u.k. the u.k. is a big trading artan are for the euro zone. however, it does look like they will get more time that will provide it to the u.k. negotiators that were given a lot of -- made a few
compromises. there are some important redlines that cannot be crossed. francine: if we do go to an , we heard from jeremy corbyn saying -- do we have any idea whether we trust the polls? whether we see a brexit or not? rosalind: it is a very high-risk election for everybody. results to close leave the eu. the polling is pretty widespread. it is hard to know. it will people say that boris johnson, there's a chance to get brexit through? will they say they have had enough of the tories. will they say they do not want brexit at all? the safer option is jeremy corbyn. in the pro e.u. conservative
camp, they don't want jeremy corbyn. heart, a lot of people in rural britain, he is a hard-core socialist. as we are talking about a time where you might be going into a severe risk of a global recession down the track. francine: rosalind, thank you so much. andrea iannelli stays with us. stay with surveillance. plenty coming up including a political risk alkylation and sell viennese push for power -- -- germanyeanie could spend the next 50 million euros in an economic crisis. this is bloomberg. ♪
francine: this is "bloomberg surveillance." let's get straight to the bloomberg this is flash. viviana: president donald trump is pushing back on report the u.s. will renew while ways temporary license he says huawei is a company that we may not do business with at all he added, he considers it a national security threat. that follows reporting that the u.s. part of -- u.s. department is expected to renew the waiver. recession risks are low. that is the take of the bank of america chief. he says global concerns are driving the recent bond market turmoil. moynahan cited the slowdown in europe and china and businesses having to rework the supply chain to deal with the trade
wars. >> we have nothing to fear about a recession except for the fear of recession and that is what is going on. you see a lot of people looking had and if this doesn't get solved, you can see this finally getting to the consumer confidence which is the critical thing to maintain. viviana: do not be -- do not be seduced by negative interest rates. he says his company is shying away from to credit as others take advantage of the borrowing to pay for expansion. the chief says companies that issued that because it is cheap may end up with balance sheet they cannot afford. that is the bloomberg business flash. francine? francine: matteo salvini's push for power is being derailed by his rivals. the five-star movement are tipped to join an alliance to block the plan. between the two parties, they
would have the votes. the latest of elements come -- come a day before the appearance before the senate. something that can control anxiousness among investors? are we going to have the idle party lobby with anti-euro sentiment? andrea: such an anti-euro sentiment, whoever is going to end up in the seat in october, that is when the negotiations with the european commissions are going to heat up. it is going to a difficult task of squaring up the promises made to the electorate with public constraints. historically politicians have been shy which will automatically go up in the third
quarter and fourth quarter of the year unless they find 23 billion euros somewhere else. that is going to be difficult. for markets, it does look like some underperformance. be bearish wouldn't in this environment. we could ease anytime in credit. a yield, you get right? then it turned sour. that has to be some repricing to come. and underweight in assets as a result. unlike previous sectors, chances are that the wider the spread, it is going to be lighter than we had given the difference in the market backdrop. , can they protect btp's?
not necessarily. when wehink about it, had the big widening in btp's spreads last year, people were still buying. the qe program was in full swing. francine: to questions. this is the 10 year btp boone yield spread. d yield spread. does she do something different? draghi asset to say, it is a most hurt them? >> madame lagarde will have an interesting task. mantral continue the that draghi laid out. in.e is an
you need to push the physical labors we are seeing the change in tone and europe especially in germany. that may be a game changer. chances are it is to take longer than people think. francine: this is our question of the day. which political crises should investors care about the most? i don't know whether we go to europe or u.k.? andrea: in terms of political crisis, they both matter a lot from european investors point of view. italy is a big part of the debt market. if you think about the european aggregate indices, italy weighs about 13% to 40% depending on which index you look at -- 14% depending on which index you look at. we feel this leads to spillover. francine: andrea, thank you so
francine: we have a breaking news. we had the euro area inflation being revised down to 1% from 1.1% in july. this is breaking news. it may have an impact on europe. now to talk about this and a little bit about germany and possible fiscal spending, we are back with andrea iannelli. your area of inflation was right down to 1%. this is not something mario draghi wants to see. andrea: it seems to be going that way. the fall wefirms have had and expectations. -- in expectations. recently because of the
dropping and prices. -- dropping in prices. the ecb is going to have to deliver. meaningful stimulus in september. francine: deliver what? the ecb is at the forefront of the markets. if you go further into negative territory, the german banks are ready to get crushed. andrea: the ammo they have left, it continues to be qe. the rate cuts. as it has been mentioned by mr. the buckle has to pass at some point. borrow. paid to anything theyhere
will try to test? what is your right now? is it funding currency? does it become something else? andrea: it is funding currency given yields get by shorting euros. the currency will remain one of the main escape modes of any monetary policy divergence. elements between what the ecb does and what the fed does and the economic backdrop matters a lot. the euro has been weakening in line with what we have been seeing in the euro zone. what we are watching carefully is what companies are going to do about yields. to --vernment is want this year given where yields are, we don't think that matters
to investors now francine: andrea, thank you for joining us now. bloomberg surveillance continues in the next hour. don't miss our excessive conversation a little bit later on with eric roth and grin. that is coming up at 6:30 p.m. london time. we are seeing a little bit of stability. last week something that was quite significant. stocks in europe, u.s. equity futures pretty much advancing globally. we are expecting some news from the federal reserve chief's at jackson hole. this is bloomberg. ♪
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heading toward a recession. ludlow says trade talks have been -- crisis cash. all of schultz says the country organize a say nearly 2 million people take to the streets in a protest in hong >> this is bloomberg surveillance. a little bit of the eurozone data, it did move the euro slightly because that inflation was revised down to 1% from 1.1%. >> we don't get any evidence of inflation in the eurozone, something that is a concern as we see the bond yields go lower and lower with the 10-year going below one and a half percent. >> this has massive impacts.
let's get straight to the bloomberg news in new york city. >> the current owners are not even though president donald trump confirmed interest in buying it. denmark says it ruled out selling the island. the president called the move a "large real estate deal." next month, trump is set to meet with danish officials. organizers say more than 1.7 million people protested in hong kong. police estimate 103,000 initially gathered. the demonstration was largely peaceful. this is in contrast with the increased violence of recent weeks. rebels from yemen attacking a facility in the southeastern part of the kingdom. saudi aramco says there was only
a small fire. they produce around one million barrels per day, just under 10% of aramco's total capacity. banh korea is considering a of exports to japan. chinawill likely turn to and singapore. last year, 79% of japan's tariffs came from south korea. global news 24 hours a day on air and @tictoc on twitter. powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine: as we get ready for another week of trading, we are looking at futures pointing to a higher open. the s&p 500 is less than 5% below the record close. treasuries or falling for a change. the 10 year yield back above 1.5%.
of course, we mentioned how last week, it fell below 1.5%. the index in hong kong managed to string together four days of gains. china announcing plans to reform the interest rate system and reduce foreign cost. wti climbing after a drone attack on oil and gas until it -- facilities in saudi arabia. this is after three weeks of decline. , youd see some movement were just mentioning the drone attacks. will focus on fed chair jay powell's event. that may actually change the dynamics in the market. for the moment, i'm also looking at euro-dollar after we had that inflation data.
>> of course, when you look at what is going on this week, one of the big topics will be global recession. incan really be summed up this one chart which tracks global manufacturing. 50 indicates expansion, below 50 is retraction. explain why every country wants a weaker currency. this is the backdrop. >> of course. have wantedntries weaker currency for some time, but it's a race to the bottom, you wonder how much you can lower it. it seems to be almost a parallel to a weak economy. this is my chart, a very simple chart looking at yield premiums.
2010.n see it flipping in inversion, ite might have an consumers spooked by coverage in the news media. they could cut spending and start some real trouble. national, trumps economic adviser has been trying to relieve recession fears. had some blockbuster retail sales, consumer numbers toward the back end of last week, really blockbuster numbers. worries with of the volatile stock market, most economists on wall street toward the end of the week as been marking up their forecast for the third and fourth quarter. that echoes our view. now, head of u.k.
investment assets. as always, thank you for coming in. i was going to ask about the inverted yield curve and whether what we heard over the weekend, especially from president trump that tim cook of apple has spoken to him. >> not only on his companies, but ultimately the consumers. the decision to push spec implementation of tariffs which could have had christmas shopping. going one step further to make sure that supply chain doesn't get disrupted or there are no price increases. he is sensitive to swings in stock markets. >> are we just expecting more from the fed? >> we need to look at investor behavior.
they are just going further down the curve to pick up some yield. especially with the pension funds and longer-term you i've -- longer-term liability. that behavior has driven market news and that doesn't signal a recession coming through. let's look at investor behavior rather than recession. >> speaking of investor behavior, a plunge in bond yields. explain whether this is comparable to what we saw in the lead up to the financial prices in 2008. >> traders looking at changes in intoield curve heading 2008. if you recall the process, we had a good point where it was called the great moderation and
the yield curve was actually inverse. spending on credit, that really started to take off. surprise the market by and then we all know what will happen next. six income volatility in an environment where you can go from a very moderate to yield steep again,enly that is something we really need to watch out for to return to a temper tantrum period. >> things could turn very quickly. ease?likely to pick up or >> right now, if you look at the amount of -- it's very speculative right now. feels like trading that actually want to go the other way. absolutely not a sudden pickup.
>> very quickly, what does jay powell need to do on friday? >> it's very important not to make things worse. one central bank has to be dovish. you don't need to add to that signal confidence and i think the markets would appreciate it. >> thanks very much. later, ana little bit interview at 1:30 p.m. in new york, 6:30 p.m. in london. it will be interesting to get his stance on inflation. this is bloomberg. ♪
>> this is bloomberg surveillance. thea has a plan to revive solar division. the company is now offering no contract passages as part of the relaunch. with the tweeting newer, lower pressing "it's like having a money printer on your roof." it comes less than a month after tesla reported its third consecutive quarter of decline in solar installations. concerns from tim cook about samsung according to president donald trump. the chief of apple is apparently worried the south korean company will get an edge because the products, unlike apple, will not be subject to tariffs when they are imported to the u.s.. on september 1, products are set to be hit by tariffs. recession risks are low as consumer spending remains strong. that is the take of bank of america chief brian moynihan.
recent turmoil has largely been driven by global concerns. and china ande businesses having to rework their supply chains to deal with the trade dispute. and that's the bloomberg business flash. minister,. prime boris johnson will travel to germany and france this week to make it clear that britain is leaving the e.u. he is set to tell his counterparts that the e.u. will face a new deal or face britain leaving the block without one. let'sgorman also gives -- go straight to our bloomberg opinion editor who writes for brexit amongst other things. thanks for sticking around. it could be the end of the world, we have a new deal
brexit, the government saying that is the worst case scenario. how much do we know of what actually happens? >> there's a range of possibilities. we know the government is viewring for the point of of those who want to stop a new deal brexit. it gets harder for boris johnson to convince people this is actually a realistic option for them. for johnsonproblem is that he needs to convince in europe that there is no reasonable way to stop a new deal brexit, he needs to convince voters in the country that a no deal outcome is not going to be as dramatic or devastating as some of these reports suggest. it becomes harder when there are these leaks. it is setting us up for the
election battles that we are pretty sure is to come. >> who could win from an election battle? if you look at the polls, it's unclear. out in the open about who could win. >> what is worrying for those thatppose johnson is jeremy corbyn, and we will hear from him today, is two subject. what is anti-austerity and the other is trust. is a government that is proposing lots of far-reaching promises, almost left wing in some of the economic descriptions. on not sure that his attack the government is a conservative austerity government is going to work and the trust issues all both ways. are a lot of voters who won't trust a labor government with their interests. election, i think boris johnson would like his chances, but
everything depends on timing. mentioned, boris johnson will be heading over with angela merkel later this week to try to convince them that they need to offer a better deal. from an investor point of view, will this move the needle between these senior folks who will be making these decisions? >> right now, much of it depends on whether there is any prospect merkeler macron or saying there is a chance of renegotiation. so far, that door seems to be shut. maybe markets can react positively but it seems like everyone is prepared. a lot depends on that. >> also, jeremy corbyn getting ready to deliver this speech to
promised to do everything necessary to prevent a no deal brexit. how much faith to investors have in jeremy corbyn? does he matter at all? >> the matters a great deal, let's take that. members of his party or someone so far he has not been willing to countenance that. it's not really consistent. i don't think people feel convinced yet. will depend on whether we do have a no deal or we don't have a no deal. do you still think that we are not going to get a no deal? run us through what happens from now to october. be news either through parliament or legislation, that will need to be an extension.
maybe we will have a general election of the side or the other side. if that happens, i think the e.u. will agree to an extension to avoid a no deal and after that election will happen, we will cross that bridge when we get there. again, look at positioning. they are prepared for this. wait,al question, as we boris johnson leading these different european leaders, are we going to get a more clear picture of whether general elections will be called by the end of the week? >> i don't think we will get a clear picture by the end of the week, we will have to wait for parliament to come back in session. we will have to see what happens when jeremy corbyn calls a no-confidence vote and in the crucial question will be this 14 d whether a national unity candidate can be agreed, and it think is looking very unlikely. then, it comes down to whether
there is any kind of chance for alternative legislation and i think that is probably the best route that those opposed to no deal have. >> thank you so much. check out her great opinion piece on boris johnson. we will be back. up next, the latest from germany and italy. we did have that inflation report actually worse than expected. as someuch inflation probably would want. this is bloomberg. ♪
♪ scarlet, we have data this area that euro area inflation was bigger than initially reported in july. meanwhile, germany's finance minister says he europe's largest economy could spend an extra 50 billion euro in an economic crisis, the first time he has put a number on this. we have a very specific number, 50 billion euro or $55 billion. what exactly would prompt
germany to act and start spending this money? >> there are two things. no clear confirmation of the recession, so we probably need another quarter. we need that data confirmation. political pressure from the populace to act. mighter whether something tip it over the edge tariffs come through for europe as well. germany will not hesitate to push back against that stimulus. number, 50ific billion euro, is that a meaningful amount, do you read that as the minimum or the maximum? >> i think that is meaningful. , i think the german household is in pretty good shape. the german labor markets have been enticing. the question will then be how
bad the meaningful package is for the eurozone, because if germany is fine, the southern eurozone is not. let's get a conversation going about fiscal union. >> how is germany coping with negative rates? rights tough for germany now given the pension liability and the demographics compared to other eurozone nations. a bond tantrum at some point if people start to question that. this point, it is something the labor market really needs to deal with. people working to get the tax intake flowing because they have a liability. >> what does a tantrum mean for the rest of market? >> different things to different markets. a bond tantrum firstly, would actually be welcome. that spreads, what does
the duty eurozone spreads? that is a completely different equation altogether. look at what happened back in the day, something to read in the context. coming up later today, the global head of asset allocation will be joining bloomberg television. that's coming up at 10 a.m. eastern time in new york, 3 p.m. in london. from new york and london, this is bloomberg surveillance. ♪
let's get bloomberg first world news. trump sayst donald trade talks between the u.s. and china are doing very well, but the president added the white house isn't ready to sign a deal. trump says china needs the agreement more than the u.s. because of "the weak state of its economy." the iranian tanker that said sale from gibraltar looks to be heading for greece according to vessel tracking data compiled by bloomberg. it was released by the british territory. via has warned the u.s. switzerland against targeting its tanker in international waters. a likely collapse of italy's popular coalition after one of its leaders said it is no longer viable. and its-star movement leadership are not credible. on tuesday, the prime minister is set to address parliament.
the split sets the stage for a new election. and life is getting even tougher for the argentinian president. his economy minister quit, saying the country needs significant economic renewal. this, coming just a day after the credit rating was cut deeper setting the possibility of a sovereign default. global news 24 hours a day on air and @tictoc on twitter. powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. scarlet: thank you. a big week coming up. here is what you should be watching for this week. we will skip ahead to tuesday because italy's prime minister will be addressing the senate. this comes amid the political chaos that has gripped the country. the next day, germany would be auctioning bonds as yields continue to hold record lows in
the eurozone. on thursday and friday, it is the big thing in wyoming, investors focusing on the gathering which comes at a critical time. and on friday, this weekend, but is prime minister boris johnson making a debut at a meeting. that is saturday, i'm getting ahead of myself. it has the potential to unsettle the international order. oh, to be a fly on the wall. let's get back to trade. francine: to be a fly on the wall, my goodness. getting back to some of the things they will be talking about, we will have to do a lot with maybe negative rates. the u.s. is talking with china, but he is not ready to make a deal. the president also said that tim
cook has a voiced concerns about samsung gaining an edge because products will be subject to tariffs. ,oining us now from singapore -- thank you both for joining us or sticking around. let me start with you. when you look at some of the concerns and the fact that trump is now saying that apple is worried, we knew that, but the fact that the president said that, does that mean we are more likely to find a trade deal between the u.s. and china? that china isnk likely to strike a deal in the near time. even though tim cook has expressed his concerns, china is trying to delay the tariff escalation. i don't think the trade deal is imminent in the near future. francine: what does that mean,
we just need to get used to a trade war for two years or 10 years or 15 years? i think there could be a nominal trade deal, meaning that a final one around sometime next year, perhaps before the next u.s. election cycle. doesn't want to sign a comprehensive deal that the u.s. wants. geoff, we hear the central bank reacting to the uncertainty caused by the trade war. trade deal lead to recession? >> in a very aggressive trade war, tariffs are being jacked up a lot more than they are right now. we would not rule any scenario out. we are nowhere near that yet. i'm a bit more worried for the
medium to long return for the supply chains, that is a productivity negative, that lowers global growth. that disruption to global supply chains, how long does it last for? we may not get a resolution for years to come. >> i totally agree, it's permanent. if you move a factory from southern china to wisconsin, it's going to be permanent and there will be short-term productivity losses but there no guarantee that the productivity gains you will have in the distant future will match what we had in the last two or three decades. that is what bond markets are telling you. francine: do you believe that china can withhold that, how long can they hang in with the trade? seen it., we have not
growth, i think that the trade war and the new tariffs going up in the next two or three quarters, very soon, by mid to next year, china's growth will drop below 5.5%. not long that china could hang on 6% growth. francine: would you agree with that? >> that's probably going to be hard to achieve heading into next year. i think that's a very important angle. the trade war is actually prompting china to accelerate rebalancing, focus more on the domestic side. it is just accelerating the path in which it makes china's growth more sustainable. we will take it. francine: policymakers no matter what are forced to respond because of the elongated trade war.
does the interest rate cut helped or hurt chinese economy? >> i think it is helping china because the rate cut would actually allow china to cut some of their domestic onshore interest rate as well. there will be some china room were on the credit policy. we've also heard that china is making some changes with interest rate policy, this had the effect of helping chinese stocks as well, the plan to reform the interest rate system and reduce costs. what is your take on this? is it effective? immediate impact of this new reform does not necessarily reduce the chinese lending rate. i do think that the best way it was not the climbing as aggressively as people think.
they have to do more steps to lower the corporate financial cost down. to aet: let me bring you chart that i showed at the beginning of the hour. how does that move going forward? , the burden depends is more on chinese rates. sometimes, on the other hand, if ,e stabilize run those levels that is the point that u.s. rate cuts, it's a good environment to. in general. scarlet: both are sticking with us. coming up, we go to hong kong for the latest on an 11th straight week of protests.
♪ scarlet: this is bloomberg surveillance. let's get the bloomberg business flash. china is revamping the interest rates at the economy slows down. the move is aimed at pushing down borrowing costs. from august 20, new loans must be mainly with reference to a revamped benchmark. that is the so-called loan prime rate linked to the price they
charge lenders for cash over one year. don't be seduced by negative interest rates, a warning from carlsberg's chief executive. asia's the company is shying away from chief credit has others take advantage of borrowing to pay for expansion. that issuedanies debt just because it is cheap may end up with balance sheets of they can't afford. and president trump is pushing back on reports the u.s. will temporary license to buy u.s. bond. trump: we don't want to do business with them for national security reasons. we will see what happens. i'm making a decision tomorrow. >> of this follows a reuters reporting the u.s. commerce department is expected to renew the waiver for 90 days. and that's your bloomberg business flash. >> thank you so much. let's turn to hong kong where protesters turned out in force through heavy rain to march for an 11th straight weekend. more moderate leaders fought to
reset the movement after violence at the airport last week. kong, our from hong north asia correspondent. stephen, we have seen china respond by showing video of troops and tanks across the border from hong kong. to give an indication of what kind of response could be forthcoming if the protests continue. have we heard anything more from china and the way of giving warning to hong kong people? >> that is what it is. likely a warning, holding over the head of hong kong. there has been no indication that the army is going to be coming across the border to quell the unrest, especially after this weekend. we had fairly peaceful protest and there were zero arrest, there was no tear gas fired. there was only one projectile fired for the police. -- part, thecart
protesters are saying they want to propagate this message that it has to be peaceful. those were the literal and figurative quarters that they gave to the people who showed up in that rainstorm this weekend, yesterday. million -- 1.7 million people showed up. the police said it was probably 148,000. there's no indication that the chinese will use physical force. what they are doing now in state media is trying to really label the protest leaders as troublemakers. that's the big problem because there hasn't been any real named protest leaders. what they did, they need a state , an old terminology, troublemakers who have oftentimes been arrested and thrown into prison.
they named the gang of four for hong kong today, including senior pro-democracy leaders. they are using the pen and the paper to also threaten hong kong. but no tanks or troops coming across the border at all. way that china has responded is to pressure companies to act in their own self-interest. instance, the resignation of a ceo last week and encouraging companies to fire workers who participate in the protests. have we seen any other companies move forward with this, and tell their workers or customers that they need to get back? -- step back? >> this is the new reality that any company that is based in hong kong that has significant business in china may have to face. the example is a prime example of a company caught in the
middle. on the one hand, you don't want to tell your employees that you can't think or act in ways that you would normally do in a free society. on the other hand, when you have china basically summoning the rapping for a knuckle and a subsequent -- and the firing of the ceo and the firing of at least two pilots, and today, again, another state newspaper in china really saying maybe these firings do not go far enough. fact, they said they have had a lukewarm attitude in dealing with these radical employees. so, the pressure is still on, even though they have appeased the authority of china and the firing of the ceo. >> new reality.
i will bloomberg chief north asia correspondent. let's get back. when you look at some of the ramifications i guess for the stability of hong kong, will it deter people from going into business in hong kong? yes, i think it is definitely deterring people visiting hong kong, at least for business .ravelers i don't think that these will actually go beyond three to six months, no further escalation. doese short-term, it actually have significant impact on the business community doing business in hong kong. >> but are you expecting these protests to escalate? have we had a turning point since the violence?
>> i think there could be some turning point at the beginning of september in my view, mainly because in september, the hong kong university school stop some of the students, they might actually go back to school as well. i will assume that these might cool down the weekend protests a little bit. >> thank you so much. the chief china economist joining us from singapore. geoff is sticking with us. a quick check on apple shares because tim cook and donald trump did speak, and tim cook made the case that apple is at a disadvantage with the tariffs on apple products coming into effect, at least for now in mid-december. you are looking at apple shares rising 1%. bank of america, another stock we are keeping an eye on. banks deal with lower interest rates with all of these bond yields. we want to mention as well that
they can america ceo spoke exclusively to bloomberg. we asked about the recession and process of recession, i should say. loways recession risks are as spending remains strong. >> we have nothing to fear about a recession right now except the fear of recession and you are seeing a lot of people look ahead and say, a trade war continues. if this doesn't get solved, you can see this finally getting to the consumer confidence, which is actually the critical thing to maintain. ♪
♪ >> this is bloomberg surveillance. from london and new york. , we talked ak little bit about trade, china, brexit. what we did not talk about was the emerging markets. investor, you will hang onto jay powell's every word this week. >> indeed. on the other vain, if jay powell can confirm that plenty more that'sts are on the way,
going to be something to not exactly celebrate or to feel comfortable with because that's the best time to invest. if you look at all of your board, doesn'the go down to actually having the right currency call on the dollar? >> absolutely. because sometimes you can be in an environment where the dollar is actually strengthening and going up, that is a great environment for re-emerging markets as well. but if the dollar has peaked and rates are not going higher anytime soon, that is almost like the perfect environment for emerging-market carry. many marketshy so are trying to push ahead of whatever the federal reserve does as well to get that moment of advantage. as we look around the globe and look at the different issues that face different countries, i want to pose a question to you.
you've got stuff going on in the u k with brexit, argentina with a shocking primary election result. the hong kong-china protests. italy and the possibility of a new government. which political crisis keeps you sleepless? which crisis should investors care about the most? >> i think in the short term, if i had to take, -- if i had to pick, i would still go with italy. if i speak to our investors, especially in europe, so maybe i'm a bit highest, -- a bit biased, the prospect of the european debt crisis which it that really went away, often comes through in conversation and also, we cannot afford to just ignore or neglect in europe. we don't want the situation being made worse by ongoing political uncertainty in europe
because that is the large economies in the world which is the most urgent need of reform. we have to go with italy on that. >> italy would be a source of concern. you mentioned how the european debt crisis never really went away. you look at government bond yields and they are much lower than where they were during the last round of european debt crisis. how quickly can things turn for europe? >> you could make the argument that spain and portugal, they are not large enough, relative to italy, especially the bond issuance is not large enough to make investors worry and have sleepless nights about the debt issues. again, it's about italy. things could turn around quite quickly. because investors become a lot more selective about funding and that would put the european sovereign debt issue back in the fray. it never really went away.
this could come back very quickly. >> thanks so much. up, federal reserve bank of boston president, that interview at 1:30 p.m. in new york, 6:30 p.m. in london. we will ask him about dollar dynamics. in the meantime, our dynamics on the market, stocks in europe rising. a lot of traders trying to figure out latest trade news, treasuries falling with european government bonds. ♪
the white house pushes back against the idea that the u.s. is heading toward a recession. -- german find finance minister says germany could spend an extra 1500 billion euros -- 15 billion euros. and marching in the rain. say nearly 2 million people take to the streets in peaceful protests in hong kong. the morning, everyone. good afternoon if you are watching from asia. this is bloomberg surveillance. scarlet fu is in new york. tom keene with a week off. we have been to spank now coming up seconds ago saying that they see a risk to the german economy, that it could shrink again in the third quarter. it is interesting that the german finance minister may have preempted that by saying there is 55 billion. -- 55 billion euros ready to spend if there is a crisis. scarlet: we don't know the conditions that would prompt the german government to deploy that spending per geoff yu mentioned thatthe german economy --
perhaps this latest headline set the scene for a german recession, but until we get confirmation, it is unlikely that we know whether german will -- whether germany will open its purse strings yet. francine: the buddhist bank saying that the german economic outlook is unclear and that hinges -- the bundesbank saying that the german economic outlook is unclear and that hinges on it. here is viviana hurtado. in the: the u.k. faces case of a no deal brexit, according to a report from the from leaked, government documents are we're talking about the brexit situation going on right now in the united kingdom. there is a doe ca prepared by the cabinet office that warns of .ob losses this is a times report talking about the report that is out most likely aftershocks of a no deal divorce, not worst-case
scenarios. we continue moving on with monitoring stations designed to detect nuclear radiation. they have gone silent after an explosion from a missile test area critics say that russian government is trying to reset -- restrict evidence of the accident. the current owners are not giving up greenland even though president donald trump confirmed an interest in buying it. that mark says it -- denmark sparsely selling the populated island. next month president trump is set to meet with danish officials. an attack on a saudi oil field. redmond -- yemen rebels attacking in the southeastern part of the part of the kingdom. it produces one billion -- one million barrels a day. global news 24 hours a day on air and at tictoc on twitter,
powered by more than 2700 journalists and analysts in 127 countries. newcine: as we set up for a week of trading, we are looking at s&p 500 futures pointing to a gain at the moment. the president making some comments about talks with china going well. that perhaps helping a bit here as futures revisit their higher levels of the session. a change here in that we are not seeing treasuries rally. the 10-year yield inching higher as a result, up to 1.62% after falling below 1.5%. keeping an eye on the index in hong kong, the hang seng, protests were not violent this time. china is announcing plans to revamp its interest rate program. we will talk about this later on, but there was a drone attack on oil and gas facilities in saudi arabia, so that is lifting
brent and wti. francine: let me just kick off with what euro is doing. we are seeing a little bit of a lift to the markets with european stocks up 6%. europe not moving on the back of that bundesbank headline. 1.10103. with the risk of an economic recession, that is what the german economy could enter a recession that is something the markets will look at very closely. this is because we have negative rates in germany. the german government did yesterday signal it could spend more if the crisis worsens. it could have an impact on local stocks, and we will keep an eye on that. you mentioned fears about a german recession, this time from buddhist bank. -- from bundesbank. this chart really is a source of concern about global recession fears. we get individual pmi reports
from the u.s. and the euro area, including france and germany. anything above 50 indicates expansion, anything below 50 indicates contraction. you can see it has been heading south for most of the last year or so. the weakest reading since october of 2012. this is going to be the big question, the big issue, the big discussion point in jackson hole. to trade tensions in part blame about weak manufacturing around the world, fueling global recession concerns? global depression on the monetary side. i have a very simple chart looking at the differential -- over thechinese u.s. treasuries. you can see it up mid-2018, scarlet. scarlet: we want to get onto the latest trade story. the headline of course is that president trump says the u.s. is
"doing very well" in talks with china. however, he is not ready to sign a deal. his national economic advisor has been trying to allay recession fears. blockbusterme retail sales, consumer numbers toward the back end of last week, really blockbuster numbers. in fact, despite a lot of worry with the volatile stock market, most economists on wall street toward the end of the week had been marking up their forecasts for the third and fourth quarter. that echoes our view. scarlet: joining us now, jon -- and miller, chief marty schenker. don, let me start with you. he is looking at the u.s. economy, and usually when we talk about global recession, they are sparked by the u.s. economy shrinking. this time it may be triggered from outside the u.s.
what is the precedent for this, and how does it usually play out? matters man u -- trade to manufacturing, and manufacturing matters to corporate profits per the manufacturing sector is not a large share of the economy but it is a large share of the volatility of the economy and it matters for swing factors like investment. whenever there is a problem with trade and manufacturing, we want to consider what that means. there is probably an elevated chance of recession, but i still do not think it is the base case because the u.s. consumer is doing quite well. without rising on employment, it is hard to see how you get the recession case. scarlet: brian moynihan spoke to bloomberg saying that the u.s. recession risks are low because the consumer is strong. he says we have nothing to fear about a recession right now except for the fear of recession. our consumer driven economies like the u.s. more vulnerable to fears of a recession before
getting a recession? marty: yes. brian moynihan is quite correct. the concerns could force consumers to scale back their purchases. consumers have been driving this economy, manufacturing has been week. isany pullback by consumers going to be very troubling. francine: what does that mean in terms of what the president is looking at? we try to guess what the president looks at as a measure of success in the stock market. that theysten, saying do not need to worry about tariffs? marty: trying to discern exactly what the strategy is in the white house is very difficult, as you know. the question is, is there really a strategy? there is reporting that the trump inner circle is very concerned about the economic downturn -- about an economic downturn, and that is why you battering toant
cut rates to ensure against any prospect of the slowdown. francine: marty, apart from does presidentho trump listen to chinese trade policy? marty: peter navarro is probably the strongest voice. when donald trump says trade talks with china are going well, what exactly does that mean? does that mean he wants to inflict more pain on the chinese and he is not there yet? and i think that is completely driven by the trade talks led by peter navarro. he listens also know to fox and friends as well. this was written over the weekend, posing a question about what is wrong with the global economy. "in almost every country, the national conference is driven by -- he is talking about the shrinking labor force, the decline in productivity, the
growing debt burden. ourselves aoing disappointment, we need to define economic success and failure." what do you make of that? should we change our definition in terms of success for rapid growth? should developed economies like the u.s., germany, and expand -- and japan, except -- accept one or 2% of growth and be happy with that? don: i don't think all of what we are seeing here is structural. some of it looks to be cyclical. may be the tool we are using, whether it is monetary policy, fiscal policy, trade policy, or regulatory policy, that conversation should shift away from monetary policy, they be toward some of the other choices. i don't think it means we have to give up. scarlet: perhaps we are starting to see some of that with germany getting ready to open its purse strings. our thanks to marty schenker, and don -- and don rissmiller, who will be sticking with us. exclusive our
you can check it out on live go. francine: we will have more on jeremy corbyn, and the fact that he says if he does go to an election, -- ghost -- two pieces of data out of the io that we need to watch out for. inflation weaker than initially reported in july, and breaking moments ago, bundesbank warning that germany, your apostle largest economy come could be about to tip into recession -- economy, couldt be about to tip into recession. ecb palm 8 -- ecb policy makers consider more stimulus in september. the german finance minister talking about possible fiscal stimulus just as the ecb is making a little bit more. we are joined by matt miller, a european markets bloomberg anchor. this a direct warning to
president trump and saying don't touch us? but we can readjust? from i think what it is the finance minister is an answer to so many officials who have been saying -- he just seems like an ostrich with his head stuck in the sand. we spoke to him on bloomberg television about three weeks ago, and he said there is no crisis in germany, and for that reason he does not see any need for extra spending. but now with so many bad data points and even the bundesbank warning that germany may fall into a recession, it seems like it is time for somebody in berlin to answer these -- to answer these demands from not only investors and bankers, but also government and ngo officials. bundesbank actually saying first of all that there is more momentum in their industry, and that is going to
lead to continued weakness, will it hit domestic demand as well, and it is that what they worry about? matt: that is the concern. they pointed out that it was demand from abroad. the export demand that was a problem in the last quarter -- they are worried that a manufacturing slowdown will worry through -- will carry through to the service sector, which has been very strong here. domestic demand has been surprisingly strong here. that is the main concern. it should be said that germany is in need of some extra spending on infrastructure. it is in the worst shape it has been in decades. airports,k at ports, the roads, everyone thinks the autobahn is this beautiful, smooth racetrack with no speed limits. it isn't. it is a constant string of construction sites with very few people working on them, and germany has a serious problem
with broadband as well, not covering the whole of this relatively small country. it is not just the fiscal stimulus, a shot in the arm in terms of fiscal policy that germany needs. it is fixing the broken down infrastructure that is important. usrlet: matt miller joining from berlin, thank you so much for giving us the latest on the possibility of stimulus out of germany. we are keeping watch on hong kong, protesters rallying for an 11th straight weekend. this time it has been peaceful after violence last week. president trump has warned that the situation in hong kong may threaten any trade deal. he talked about a humanitarian response from beijing. we will discuss all of this next. from new york and london, this is "bloomberg surveillance." ♪
viviana: let's get to the bloomberg business flash. tesla has a plan to revive its flagging solar division rental. the country is offering no contract passages as part of a relaunch. elon musk tweeting with the new lower pricing, "it is like having a money printer on your roof." it comes less then a month after tesla reported his third consecutive quarterly decline in solar installation. china is revamping its system of interest rates as the economy slows. the move is aimed at pushing down borrowing costs. from august 20, new loans must
be priced mainly with reference to a revamped benchmark. it tracks the price of credit too's best customers. the low prime rate is linked to the pboc charges mentors -- lenders for cash over one year. wars, recession alarms, and superlow interest rates. jay powell has no lack of material to address when he speaks at the jackson hole symposium this friday. the yield curve was at the top of the mind, but the central bank was headed on a path of tightening. let's take a listen back. >> the treasury curve is very consistent with what we have been saying in our economic outlook, and consistent with what the fed has been saying with the -- about past rates. >> there is no reason to challenge the yield curve. inflation is low, stable. it is barely up to target. >> i think there is reason to think it may not be signaling
the same as it happened -- as it had in the past and it is depressed now for other reasons. in particular, there is demand for safe assets. quality into the u.s. treasury. >> this is not our objective, to manage the yield curve. we use it as a signal to say what does it tell us about our policy path. scarlet: a complete change from a year ago. don rissmiller from strategic us -- from strategic research is with us. the federal reserve has signaled it is going to cut rates further, and it has already cut 25 basis points. if you are the fed, how do you not disappoint investors? don: the problem is the market wants more than the fed seems to willing -- seems willing to deliver. anyone looking at a model will always be looking at the point estimate and the standard error around the point estimate. when you are looking at the economic data, it has not moved
all that much. what has moved is the financial market data like the yield curve and other things. for fed officials to look at real economic data, it is not looking way off as some of the models with estimate. without getting several standard deviations away from what you thought, it is hard to change her mind. that is why the fed is institutionally biased to go a bit slow. francine: they can look at -- scarlet: they can look at market data and the financial conditions. what a 50 basis point cut change financial conditions to the point where they say that is enough, we have done what we need to do? don: i don't know that we know that even. i think it would go quite a bit in that direction, but what does the market expect after 50 basis points? the fed wants to be careful to not leave the market -- lead the market further than they are willing it to go especially with
these topics discussed. itdon: it is a great lens in tes of the currency affecting financial conditions. also indicators like the yield curve do matter. they matter more to certain individuals than other individuals, but while you can use a lot of the global flows to explain a fat -- a flat yield curve, it is hard to get to an inverted yield curve and not say something is wrong. just because the future is more uncertain than the present, you would expect a curve to look a certain way. an inverted curve is signaling something is wrong, and what it is signaling right now is that there is policy action that needs to happen. francine: does that mean that they are looking at the inverted yield curve and will try to go in reverse? don: they are certainly looking at it. it is a signal, not the only signal. the problem is hard economic data like retail sales and consumer spending, they will look ok. a 50 basis point cut will look
at some sort of emergency item, and without an emergency like a financial crisis or some negative gdp or something of that sort, it is hard to do that preemptively. don rissmiller stays with us. in the meantime, we will look at pound. corbyn, theeremy leader of the opposition, is calling for a second referendum. he is talking about possibly being a caretaker prime minister, something that was initially rejected by the head of the liberal democrats. the labor leader is now seeing he is committed to giving voters a final say on brexit. ♪ from the couldn't be prouders
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where there were peaceful protests over the weekend after you the violence we saw last monday and tuesday. it is interesting to see that president trump once again in tweets seems to be leaking -- linking some of the protests happening in hong kong with and a lot of political commentators saying the president of the united states would not have averted -- he seems to be suggesting once again that his chinese counterpart, president xi, should hold talks with leaders and come up with a resolution to the political crisis. since july 1,est and we will see whether there is linkage between the protests and trade. let's get to first word news with viviana hurtado. viviana: south korea is -- japanng a ban of
would likely turn to china and singapore for kerosene and gasoline imports in the event of a korean band. last year, 79% of imports came from south korea. how presidentl is donald trump describes the trade talks between the u.s. and china, but the president added the white house is not ready to sign a deal. mr. trump says china needs an agreement more than the u.s. because of "the weak state of its economy." a likely collapse of italy's teetering populist coalition after a coleader said it is no longer viable the anti-establishment five-star movement says its leadership is not credible. prime minister can't take is expected to -- prime minister conte is expected to address parliament on tuesday, and that might set the stage for a new election. country need significant economic renewal. this coming just a day after a
credit rating was cut deeper by s&p, citing the possibility of a sovereign debt default. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more i am vivianantries, hurtado. this is bloomberg. hong kong protesters as theyut in force tried to reset the -- joining us from hong kong is stephen engle, are bloomberg chief northeast asia correspondent. the temperature has come down a little bit after last wii's violence. did the government's announcement of measures play a role as well? -- after last wii's violence. -- after last week's violence. did the government announcement
of measures play a role as well? >> there has been some criticism that none of it was really targeted toward the main source of the protesters. the university students and those in their early 20's. most of it was for lower income families and also primary students, secondary students. but still, it is finally some sort of concrete step from the government acknowledging that the economy is definitely getting hurt not only by the protests but also from -- the headwind from the china u.s. trade war, which the financial secretary said was in response to those other headwinds, not necessarily the protests. but definitely things are slowing down here in the hong kong economy. we just got a report saying that occupancy rates in july here in the central part of the city were falling to a three-year low in july. andhey are seeing some pain
the financial secretary also ratcheted down expectations for full-year growth from zero to one. the previous forecast was 2 to 3. it is the 11th weekend of demonstrations in a row, and a lot of people were relieved that the police did not have to use force. francine: steve, what happens next? if we have the protests getting bigger but more peaceful, do they just stay? how does china handle it? do they kind of ignore it for the moment? stephen: well, yeah. there is no sign that the frustration here is abating. people, according to protesters, turned out yesterday. i'm telling you, it was a downpour. a driving rain yesterday. police say it was 128,000. that is a huge discrepancy on the guessing of the jellybeans
in the jar, but it was probably somewhere in excess of one million people. there is still a lot of frustration here, and in fact, they are going to start testing the bounds of the patients of the police as well. ce of the patient' police as well. police and the last hour or two are saying, you know what, as long as things are -- their words -- peaceful, orderly, and rational, there is no need for force. but they are warning again, quite sternly, they will treat any illegal activity at the airport quite seriously. so i have used this term so many times over the last 2.5 months. there is a bit of a tense calm right now. next move, protesters and what the next move is from the government. scarlet: a very uneasy calm from the storm. stephen engle joining us from
hong kong. , anders i by phone -- what doesyou china do next? how does it respond to these protests? it has the potential to turn violent again. are we preconditioned to think that they will respond to the protests the same way they did in 1989, i sending in troops and tanks? anders: i think that is a concern of china watchers. that china would send in some troops to repress the protesters. but the protesters strategy has completely changed. they are following a quote "d ewater" strategy. it will be difficult for china
to respond with that kind of force. they are also looking to change strategy in the coming weeks to seeet companies that they as pro-beijing. for example, mcdonald's is one of the companies that they see as pro-beijing, and i think they are going to target that with boycotts or possibly other nonviolent demonstrations. scarlet: we see people in hong kong responding as well. those were wealthy and have a second -- those who are wealthy and have a second passport could perhaps be getting ready to make a use of that. fleeing tourse also other places. talk a little bit about the impact for the rest of the region. we have seen some movement to thailand, australia, the u.s., so there is definitely emigration of people and capital out of hong kong, and you have got capital controls that are kicking in in china, so you have
an increased attempt by chinese both on the mainland and in hong kong to move their money and people out of china if they can. the problem for them is that they often cannot because of regulations, especially on the mainland. china discredit the protest movement, or is it also difficult because it is a loose coalition? you do not know if there is a person on top of the protests who is asking for these protests. how does china deal with it? definitelyy are trying to discredit the protests in state media. there are a lot of allegations from the protesters that the police are disguising themselves as protesters, and there is definitely video evidence of some arrests,o where the police describe themselves -- disguise themselves as protesters, and
then they go into the protests and arrest people. the police are potentially faking videos so there is a widely distributed video of a cocktail a molotov films by protesters, and there is a lot of evidence or there is some allegations from protesters that the police could be involved in some of the more militant tactics, like the molotov cocktail and some of the slingshots or catapults. francine: anders corr, thank you so much. we are trying to figure out what is happening because of their -- because there are allegations on both sides. let's get back to don rissmiller. across theou look world, we had our wall of worry. i had to say there is central-bank action, debt deficit. a lot of them are spurred by political crisis or mismanagement by one party or brexit, china,t
or the u.s. out of all the political concerns, what could actually change? don: there are a couple of things coming up as we move through the third quarter into the fourth quarter. one we are watching closely is whether we get european auto tariffs on the u.s. side because that is still floating around as an idea. in other words, the trade war morphed from the focus on china to a focus more on china and europe, so we will see how that goes. that could still be a surprise as we get into the fall. you aboutwhat worries europe, that we abandon fiscal targets, deficit targets, that they turn anti-euro, or is germany constantly driving low? -- italye is just no
has had structural problems and they are still there, just like some of the action from the ecb, productivity in italy has looked flat for over a decade. maybe we will get some fiscal stimulus from germany. that would be welcome. but i would like to see the details, when this comes, how it is going to be allocated. that could be interesting, but we will need to see how they response plays into what we could see next. scarlet: we talk about a political crisis in italy and it seems like it is constantly in a state of crisis along with other countries. why is it that investors -- why is it that it does not seem to capture the imagination anymore? that it does not send up alarm bells? don: there is a lot of hope being placed on the ecb, that they have a bazooka, and if necessary, they can come in and tell a country, here are the conditions, let's take this and
move forward. but that has not been tested in this situation where there is a country like italy, a big country involved. some of the other countries mentioned were relatively small. italy is big when it comes to the debt market. that would be the inflection if we wanted to see something going forward. francine: thank you so much, don rissmiller from strategas. we have a government spokesperson talking about the brexit deal, saying the deal in on the removal of the irish backstop, something we have heard many times from the e.u. that they will not budge on. we are looking at that. there is also something that the u.k. has published. the president is saying the u.k. will end the freedom of movement from the e.u. on october 31. scarlet, it is unclear to me whether this automatically means there is no freedom of movement from the e.u. because we get a no deal or even if there is an extension like people say we could have, they could
unilaterally end that freedom of movement. it is unclear to me, but it looks like pound traders are a little bit nervous about the latest headlines. scarlet: i am sure that boris johnson will be discussing this with angela merkel. coming up, our exclusive interview with eric rosengren, president on the several reserves -- president of the federal reserve bank of boston. london, this, from is bloomberg surveillance. ♪
listening to "bloomberg surveillance." that is jeremy ofbyn, talking about plans other party leaders to prevent a no deal. he is often saying that he should be taking over a caretaker government. we have the emergence of a brexit party, with nigel faraj. if you look at the t.r.y. party system, -- at the t.r.y. party system, no caretaker government we will see whether the labor leader -- it does seem that the omanesperson, the spokeswoma said the prime minister will discuss with angela merkel. she also said the brexit deal hinges on the removal of the irish backstop, something which so far the e.u. has pushed back against, and they also say that they are ruling out recalling
parliament early and that is the only way of getting an early election before september, calling it before september, but they are also saying they will end the free movement from the 31. on october that seems like doubling down on the no deal brexit. chart, dona best rissmiller of strategas research. i will spare you the brexit conversation for just 30 seconds as we look at the negative yield conversation. the value of negative yielding bonds topping $16 trillion and rising. what does that mean? do we need to reprice german bunds to level everything off? don: it is a great chart. if it were five or six years ago, i am not sure i would have believed negative yielding debt would last very long, but it is here, it is growing. it is a world we will have to adapt to, and so what i think it is telling us is monetary policy
has been pushed about as far as it is going to go right now, and i think that is why you are getting some conversation about fiscal policy, fiscal expansion. you could also reveal use regulatory changes in this area, use-- you could also regulatory changes in this area. francine: what does it actually tell us about yields in the u.s.? could we see negative yields in the united states of america? don: we could. i do not think we are all that close, so i think that is probably a discussion for the future. if you had a downturn -- in germany, you have had some of the negative numbers. you have not had that in the u.s., so certainly we could. there is a chance may be going up, but i think you would have to get closer to an actual recession, actual negative gdp to be thinking about those types of considerations. scarlet: i am glad francine
brought up treasuries and what happens to yield. treasury is considering an extra long wound, 50-year duration, 100-year duration. is there demand for this? is there shortage along data treasuries? this has come up before. there was not necessarily demand for long-term debt. you can see what happens in countries like argentina and when you do this. you take some risks. maybe things are changing. maybe there is a number that will clear the market. if there is ever a time to consider it, this is the time, when rates are this low. there is a conversation before, but maybe it is changing. scarlet: so why should treasuries issues deals -- why should treasuries issue the is? just because they can? don: this might be a time for locking in some of those rates. if you have projects that take a long time and you want to match some of the borrowing to the
length of the project, how long it is going to benefit the economy, that might be another reason to let that burden be shared over time. scarlet: don rissmiller of strategas research, thank you very much. francine: -- scarlet: the iranian tanker that left from gibraltar appears to be heading to greece. oil prices head north. this is bloomberg. ♪
viviana: this is "bloomberg surveillance." let's get the bloomberg business flash. do not be seduced by negative interest rates. that is the warning from carlsberg's chief executive. his company is shining away -- shying away from cheap credit. the brewer's chief says companies that issued debt just may endit is cheap just up with balance sheets it cannot afford. today several u.s. companies will be in washington to testify as to the possible pair up with france. there will be a public hearing of posing france plus 3% tax per
the tariff could pass imports like french wine. that is the bloomberg business flash. scarlet: the iranian oil tanker detained last month on suspicion of illegally hauling oil to syria has left gibraltar and is heading for greece, according to tracking data compiled by bloomberg. greece won. dexter bolter rejected a u.s. bid to seize it. emily horton has all the details. what happens with this vessel now? >> it is renamed, re-flags, and that is the question. what happens to this vessel now that it is in international territories. is it a ship to ship transfer when they take some of the iranian cargo that we still think is on the vessel to smaller vessels? if they do that, the next question is, how does the vessel iran?rn back to
the united states could seize it. if it goes around africa and needs to refuel. it clear thatade anyone who assists this vessel could come under sanctions. scarlet: what does this mean for the relationship with the u.s. and the u.k. when gibraltar did not comply with what the u.s. wanted? >> that is a great question that will come to really a point this week and went prime minister boris johnson and president trump meet at the g7. the u.s. has made it very clear they are very upset with the u.k. for allowing it to happen, and they said the u.k. should have thought about this in a broader context in negotiating their free-trade agreement with the united states as boris johnson tries to negotiate a brexit deal with the -- the brexit deal with the european union. they did say the u.k. should think about who they want to visit this, the united states or
iran. francine: thank you so much. bloomberg surveillance continues on your radio. also, do not miss our exclusive conversation with the boston fed president. that is at 1:30 p.m. in new york, six, 30 p.m. in london. stocks are climbing globally. treasuries are dropping. we had a little bit of news from germany. first yesterday, we had all of schulz, the finance minister, saying he had 55 billion euros he could spend in a crisis. no buddhist bank saying they say that they see a real risk of the german economy entering a recession. this is bloomberg. ♪
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president trump talks up china, where larry kudlow downplays recession fears in a media blitz. pboc changes lending rates to prop up businesses. and fiscal put in effect? theesbank warns country considering fiscal stimulus. david: welcome to "bloomberg daybreak." i'm david westin, welcoming back alix steel. we missed you. did you get to watch any of the sunday programs? it was not subtle what the administer she was doing. they sent everybody else to say -- what the administration was doing. they sent everybody out to say the economy is just fine. presp: