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tv   Bloomberg Surveillance  Bloomberg  August 14, 2018 4:00am-7:00am EDT

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francine: the lira bounces. turkeys currency gain some ground. china's growth momentum stalls. bite, will beijing deliver more stimulus. nejra: welcome to "bloomberg surveillance."
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. am nejra cehic francine lacqua has the day off. a bit of a rebound on the session in asia. stoxx 600 up. the lira report is what we are focused on. look at it rebounding, up 6%. it is testing session highs at the moment, and impacting across global markets. bundrday, we saw the spread which -- reach the widest since may. we are still above 20% on that 10 year yield. markets, on the gm function, we did see the dollar strengthened against emerging markets and other currencies including the euro. the dollar index hit a high. today, the currencies on the right, you can see the lira rebounding. space, therating em
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random reverberating -- we're sf currencies with some movement in the ruble as well. space, you can see turkish equities higher as well. yesterday, we saw periphery hit on the concerns. look atitch it up and other asset classes. a little bit of a dollar weakness across the board. some of the seeing fixed income space, and cds at the end of gmm coming up a little bit after a spike in the cds yesterday. let's get the bloomberg first word news. has regainedh lira some ground lost from yesterday. as they aren
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worried from donald trump's administration there is nothing to negotiate. white house national security adviser john bolton delivered the message in washington yesterday. turkey imposing capital controls as they quote a real possibility unless on kara comes to an agreement with washington. they have taken steps to limit trade in u.s. dollars, preventing people in hedging u.s. dollars and so forth. the next step could be complete currency control, and not allowing dollars to get out of the country. argentina has taken emergency steps to stabilize its currency in the wake of an emerging market rout. it jacked up its interest rate, already the highest in the world.
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note a record 45% and pledged to keep it at that level until october. in london, armed police officers have responded to a car crash in westminster after his vehicle hit barriers outside parliament. a car was in a collision with parliament.side of the male driver was detained by officers at the scene. a number of pedestrians have been injured. officers remain at the scene. global news, 24 hours a day on air and at tic-toc on twitter, powered by 2700 journalists and analysts in more than 120 countries. this is bloomberg. nejra: thank you so much. let's get to our top story, turkey, the lira has gained against the dollar in today's session ahead of president erdogan and the finance mr. speaking today. -- the finance minister speaking today.
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lamotheus from is dan ,- joining us from istanbul turkish lira bouncing back, up 6% right now. how likely is it that this will last. that is the key question. we have been trading at a range since the central bank issued yesterdayment that they made those calibrations when it comes to liquidity. they will do what it takes for financial stability. the market has been's stable against the dollar. in the last few hours, we have seen a rally. the central bank has not intervened in a way of swap auctions, but remains to be seen is what we will hear from mr. erdogan and the finance minister that could provide additional direction in either way. nejra: thank you.
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i want to talk to you about the rupee. is that down to lira contagion? >> yes, absolutely. the move we saw in the rupee is essentially reflective of the global risk aversion from the plunging of the lira and the russian ruble. so, the rupee and the emerging hit byissue has been and the -- we see the hardest hit in the last two days. nejra: the current account deficit is in common with turkey . is the bank of india expected to react to what is happening to
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the currency? >> yes, absolutely. the central bank has been intervening in the fx market. that is going to be the line of defense available to the bank of india. us that are telling while the bank of india is expected to intervene in the currency market, but they are to protect at this time. yousef, let me come back to you as to the level of the lira we might see the government targeting. we do not have details on them doing that, but what are we expecting from erdogan today? been a few busy hours. not just politically with the standoff with the united states, which we are watching as well, that we are hearing more voices from the corporate sector say there is a need for tighter
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monetary policy. they are looking past the stabilization, we are seeing the turkish currency, and they say there is a need on monetary policy front. we had the ceo of one of the key lenders saying that needs to happen. we had the turkish business association speak out as well, echoing that sentiment. domestic pressure is being piled on the government to do a little more, maybe to move on the controversial interest rates. president erdogan has tried to shy away from. you get the idea in assemble the government is experimenting with different tools, everything that is possible. whether that will be enough to hold the lira at current levels, or prevent a further selloff liquidity in's these markets, that remains to be seen in the coming hours. nejra: thank you to yousef gamal
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el-din. --julians, julian: chillingworth cio, rathbone unit management,mtn -- head u.s. vinjamuri, leslie: & americas programme, chatham house. -- i wouldian: hesitate to jump back in. this is a positive what i expected in the crisis. that is the thing that gets investors concerned. see howntly, we need to the next few days plays out. nejra: the fault lines in emerging markets, you need to be selective about where you go. absolutely.
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we have been pursuing that policy for some time. we have been uneasy in certain developing markets, particularly in russia, south africa, from latin american markets. we have been favoring the asian markets who are in a stronger position. focus on ant to geopolitical aspect, one part of the turkey story. we have the top national security from the united states, john bolton, saying the united states has nothing further to negotiate until the detained american pastor is freed. will either side back down? julian: we are looking at two tough leaders. this attracted president trump to erdogan, he wanted to a friend him, and was the first to call him in the successful referendum, but now things have turned, and that stubbornness, that toughness is likely to lead
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to a protracted traces. trump is looking back home, he is under domestic pressure. he wants the evangelical base on his side. he has taken the pastors release as his issue. this will remain a crisis for some time. countries heo threatened, turkey and russia, you have seen the market react in the lira and the ruble. ilian: i think -- leslie: think he reads the policies as being successful. turkey is different. it is a nato ally. for the president, that has not factored into his willingness to on those metalne tariffs, on sanctions. this is outside what one might expect. he is also holding up the transfer of 100 f-35 jets to a nato ally. serious politics are being
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played. nejra: you make a good point about the nato allies. president erdogan has said turkey can look to other allies, but how realistic is that? is it something trump is likely to believe? leslie: how realistic is it, it is realistic that inevitably, and we have seen in turkey, softening his stance on russia. the u.s. is taking a harder line. whether we like to see next, it is going to get more difficult between the u.s. and turkey, but it is unusual for an american president to not take deeper consideration of the question of nato allies. nejra: we saw the bloomberg dollar index strengthen to a 13 month high, and a little softness in today's session. on the reaction we have seen in the yen, is it too early to be bearish on the dollar? julian: much too early.
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you have tighter monetary inicy, the markets baked in september, and we expect another one this year, and that trend going. i also think the rising oil price, the rising dollar is not good news to a number of developing countries, and that rising about the dollar liquidity crisis as well. consequently, that all plays to a stronger dollar in the short term. nejra: how is that likely to play into what president trump does next? parts of his administration say they do not like the stronger dollar. if he: it is interesting takes that rational calculation into his consideration. what we have seen on tariffs with respect to europe, canada, and now a different situation with turkey, that rational economic calculation has not been a key factor driving this
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president so far, with the exception of the american economy looks good, the job numbers look good. the bilateral relationship when it comes to tariffs, it is not altering his opinion. it is unclear how he will react to the impact on the dollar. nejra: growth has held up in the u.s., the equity market has held up. equity volatility is subdued. will that pick up along with volatility we have seen in the last few days? i think whatand concerns us about the u.s. market, we have had great corporate news, and we are pretty well close to the top in terms of the earnings numbers improving trend, and we will see a slight fall backwards through the rest of the year. we are concerned about the narrowing of this market, and as a market narrows and you have more emphasis on tech, you will get more volatility. , lesliehank you
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vinjamuri, head u.s. & americas programme, chatham house, and julian chillingworth, cio, rathbone unit trust management. industrial output retail sales came in below estimates, increasing pressure on the government and central-bank to do more to support growth. chinese officials have vowed to support infrastructure investment, but it will take time for those measures to have an effect. , is stillllingworth with us. does that suggest to you when it comes to the dollar trade, it is all about tray? julian: yes, i do think that. what is becoming quite apparent is that probably earlier in the year, the chinese authorities advising the president thought this would play out, and the would be af issue
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small stone in the coffee cup. donald trump playing to his home audience again, and the , i think theing up dollar trade is the one that is likely to see further pressure, and people will concentrate on that again. you were saying earlier when i asked about the em space, asia emerging markets, does the data from china today give you any signals that a slowdown in china could have a broader impact? julian: i do not think we change a, because we are taking five-year view. in the short term, i think a weaker chinese economy, and we
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are witnessing that now in the second half of the year, will ony out as having an effect asian economies and the world. a weaker chinese currency makes chinese exports more attractive, and exports out of other asian economies attractive. the pressures -- seea: are we likely to pressure is on global growth from china, or is it more likely to come from other parts of the emerging markets, or just the tightening of monetary policy globally? tighteninghink monetary policy is key. a weaker chinese economy is not good for the global economy because it may be a small the i think that will be reflected again, it has been great that the u.s. economy has been so robust. at, the u.s.nting
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economy will slow slightly, but it still remains solid as we go into next year with tightening rates. nejra: what we seem to be learning from data out of china and the slowdowns, it is perhaps no longer growth at all costs. turkey, hasn'tm shown us that in general growth at all costs is not work? toian: i think to be fair the chinese authorities, they managed there in economy better than the turkish economy. they have recognized they need to deliver a solid and reliable level of growth that will sustain the broadening out of the economy, and that is one of the big thrusts of the president's initiatives, getting the economy back to the consumer for consumer consumption, and build a long-term solid consumer-based economy, and not
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so dependent on exports. thea: looking elsewhere in emerging market space, is there anywhere else you can see opportunities once the dust has settled on turkey? julian: not particularly, because the volatility in russia and latin america and south africa leads us to be concerned that the problems they face are quite long-term, and are not going to be resolved quickly. and also, the quality of governance and earnings accounting qualities etc. nejra: in your investment outlook, you say emerging-market debt looks attractive. julian: we will focus more on asia, away from latin america particularly. nejra: julian chillingworth from rathbone is staying with us. next up, we find the most withrable emerging markets a special market check.
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this is bloomberg. ♪
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nejra: this is "bloomberg surveillance." i am nejra cehic in london. here is a special market check. gmn, theooking at this biggest price move, this is up more than 1%. greece, qatar, these are under
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pressure. a lot of the banks have exposure to the turkish markets. lira, up 5.5%, and this rebound in the lira is what we are seeing through the other emerging-market foreign-exchange, like the south africa, and the rupee in india. on the sovereign bonds front, turkey's 30 year prices are rising there, and the yield is coming down 32 basis points. down 30%ira has been over the past month, 20% in the past four days. we want to look at where the crisis will be, making its way into other markets. bloomberg intelligence is looking at who is next, who is most vulnerable. using the countries turkish model, and have flagged
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high current account deficits, sizable external debt, week governance, and high inflation. in their analysis, they found fragile ones are argentina, colombia, south africa, and mexico. exhibit similar symptoms in terms of weakness to not as extreme. amongst these five, they say colombia and south africa are the most likely candidates in terms of contagion, due to lower than average risk, unlike mexico and argentina. argentina yesterday hike to 45%, still making it the highest rates in the world. nejra: the new fragile five, i love it. thank you. let's bring you up-to-date on headlines outside westminster in london.
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a car crashing into barriers outside the parliament leaving several pedestrians injured. police have said they arrested the driver, but we have new headlines coming through in the u.k. police saying the counterterrorism command is leading the investigation. you can see overhead pictures their of westminster. we are keeping a close eye on that. shoring up the lira. possibility of capital controls in turkey. we will bring you that interview next. this is bloomberg. ♪
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nejra: economics, finance, politics. i am nejra cehic in london.
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planso-based food giant to overhaul its global packaging design to find greener alternatives. trump is taking credit for a rise in military spending. it could be because of his russian counterpart vladimir putin instead. stories on the bloomberg terminal, mark mobius warns there is a real possibility of turkey imposing capital controls. john bolton warns there is nothing to negotiate until turkey releases the american pastor. some have dubbed this manic monday. data get you some u.k. which should be crossing the bloomberg now. we have been awaiting this, and we have a here. in terms of the unemployment rate, it is lower than expected.
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weekly earnings have come in at 2.7%, in line with estimates, and we also have numbers coming through on the employment change. if we look at what is happening with the pound, we saw it strengthen earlier area it is not reacting much in terms of cable trade, up 0.4%. that can be down to the dollar weakness in the session. here is bloomberg first word news. >> the turkish lira has regained some ground lost in yesterday's losses. the u.s. has nothing further to detained until be american pastor is freed. white house national security adviser john bolton deliver the message in washington yesterday. emergencyhas taken steps to stabilize its currency in the wake of an emerging market right -- emerging market
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rout. policymakers set the rate for seven-day notes at a record 45%, and pledged to keep it at that level until october. china's economy has hit a rough patch in an effort to curb risky trade war withhe the u.s. retail sales expansion slowed to 8.8% from a year earlier. that was the slowest pace since 1999. global news, 24 hours a day on air and at tic-toc on twitter, powered by 2700 journalists and analysts in more than 120 countries. this is bloomberg. nejra: thank you. derrida --esident president erdogan is speaking at
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the moment. he is speaking in ankara, a hotly anticipated speech. we have seen the reverberations in the moves of emerging markets. the lira, -- we saw rebound today. there is a translation there. there is a top live blog you can follow, and commentary as well from our editors. you can watch the speech live online go. -- live go. we are still seeing the lira more than 6% against the dollar. it is, for today's highs a little bit. the lira is stronger by about 5%. let's get back to the u.k. where we have jobless data. unemployment falling to 4%, lower than the 4.2% estimate.
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wage growth slowing to 2.7% from 2.8%. the pound is trading slightly higher, but it was higher before we got the data. the jobless rate is hitting its lowest since february, 1975. let's bring in julian chillingworth from rathbone. we have seen cable a little higher at the moment. would you be a buyer of sterling right now? julian: probably not. we have a bumpy ride until the end of the year. consequently, if i was a dollar investor, i would not be buying cable at the moment. dollar strength has further to run. what does that mean for your allocation across other u.k. assets? u.k. market is fairly low at the moment, is that an opportunity? julian: we think u.k. assets are cheap.
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probably until the end of the year, and hopefully get more clear about brexit, there may be opportunities on domestic plays as well as international plays. -- the ftse has health ftse itself, we have seen a lot of investors exit over the last nine months. if the situation where to improve slightly, and there were clarity over the negotiations around brexit, you may see more money come back in to the leading names like the ftse 100. nejra: among the ftse 100 which sectors could outperform? would you be looking at the miners, the retail stocks based on consumer spending? julian: i think domestic focus stocks are going to be quite tough. our own balance view on brexit is the distinct possibility we will be kicking the can down the road.
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although we might reach an outline agreement, we could then have a two-year transition. which would not big great news for the domestic economy. i would go for international companies, and global growth has a huge, you do not want overweight situation with the and on simple valuation metrics, not expensive, you might be looking at some of the international plays as well which have been unloved. i would also be looking at the financials as well. beneficial to financial names as well. yieldsdo you see gilt moving higher? being thesee gilts safe haven play?
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julian: i do not see them as a safe haven play at all. you can outline various scenarios, if we get a softer if we get ane, outcome where the gilt market was going up, that might be because we have no deal, and that consequently would mean people are worried about growth, and so obviously they do not see rates rising in the u.k. soon, but that is not good news for the economy. nejra: julian chillingworth from rathbone stays with us. best get back to turkey and emerging markets. capital controls is a real possibility. the concerns were spoken with bloomberg news earlier. deeper concerns now because of the standoff. i did not realize trump would be so tough in regards to getting his return. takingsee a bargaining
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place between the two leaders. both are strong and not willing to compromise. mark, has erdogan backed himself into a corner by saying he will not take a bailout internationally, and he will not raise interest rates? mark: this is a problem. it seems to me the only opening andhim would be to give up to the u.s.astor that would be the best alternative for him. you may see that happening. there may be a face-saving effort on trump's part and erdogan's part. it remains to be seen. i cannot be too optimistic. trading 50% ofre
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the dollar against the lira, would you be taking money out and putting it under your mattress? i have gotten most of my money out, but i am keeping some in because longer-term turkey will be an interesting market to be in. if you have turkish lira, you i have ag, and my case little turkish lira, so i am in pretty good shape. i am concerned about currency controls if i want to get that money out. it would not be the near future, but this is something we have to look at. is capital controls inevitable because there is pushback on any possibility of a imf bailout? it does not look like there are many friends to step in. and understandably the central
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bank could raise rates and may not have much of an effect. mark: absolutely. as you know, they have taken steps to limit trade in u.s. dollars preventing people from hedging u.s. dollars and so forth. the next step could be complete currency control, and not allowing dollars to get out of the country. this is something that is a possibility, unless, and this is with a big question mark, erdogan and trump can come to an agreement. nejra: that was mark mobius, co-founder, mobius capital partners speaking to bloomberg earlier. turkish president erdogan is speaking right now. have commentary from our expert editors and reporters. you can watch the speech on lives ago on your bloomberg
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terminal. -- you can watch the speech on live go on your bloomberg terminal. he says the turkish economy is moving like clockwork. he says there is no extraordinary situation to warrant a lira decline, and asks how did the dollar -- how did the dollar jump. there are issues that need butlving like rates etc., we have to remain a strong political staff. we are taking all technical measures needed, and turkey faces an explicit economic attack. you can follow all of that on the bloomberg. in terms of how the lira is reacting to this, it is strengthening as it has been all of this session, but it is coming off the session highs, 4.5%. we were at 6% earlier. it is jumping quite a bit. it is where we trade on the turkish lira right now. this is bloomberg.
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nejra: this is "bloomberg surveillance." debts from portugal to greece sold off yesterday, and banks may be exposed to turkish assets. the blunder spread is at its spread is at bund its widest sense may. europe's fundamentals look solid. region'su play the debt market in this environment? still with us is julian chillingworth from rathbone.
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banks have concern in terms of exposure to turkey. in terms of where the bund spread is now, would you be compensated enough in italy? julian: no. simple answer is no. the reason is i think the turkish issue is a sideshow. i think the problems rest firmly in italy, and i expect we are part way through act i of a three act play between the ecb and the italian government, and they are going to put pressure on the ecb to offer some form of try to get them to support the bond market. the ecb will be reluctant to do that. we are currently -- i do not think anything will happen of
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importance until september, and then i think the pressure will grow. ony may put enough pressure to force another election, saying they have to go back to the country and get a stronger mandate as a coalition, and therefore there is a lot of political uncertainty to face up to in the months after christmas. d spread is under 270 basis points, off the highs of twist thousand 11. how much further could we see the spread widen out? i think there is more to worry about. the politics and the banking system we talked about in the past and italy is a concern for investors. none of the actions to date have allayed those concerns. nejra: what about other peripheral debt?
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would you see spain as an opportunity? julian: we tend not to buy peripheral debt in european markets. spain is in a much better position, and they have done much more to come to terms with their banking system. ratios,ish banks'q1 they could absorb the losses. they are in a stronger position. nejra: on the euro we have seen that swept up in the contagion, if you want to collect that from turkey. the euro is a big part of the the dollarou look at index. you talked about dollar strength earlier. does that mean you see the euro weaken against the dollar? julian: i think in the short-term, you can see reasons why the dollar will strengthen. we talked about monetary policy,
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and obviously we touched on tariffs. on the short-term, tariffs will be a positive for the dollar. whether the president will be keen on that in the longer term, and in the very long-term, any form of trade war is not good news for a currency, and it will cause inflation down the line. consequently, it will have a negative effect on the economy. nejra: so the euro weakens even further from here? julian: in the short term. nejra: up next, elon musk says .rivate equity firms we bring you the latest. this is bloomberg. ♪
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, finance,nomics politics. this is "bloomberg surveillance ." i am nejra cehic. you can see from our live shot, resident erdogan speaking right now. some of the latest lines coming through from erdogan, he says we
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will boycott american electronic goods. turkey we haven the best phones. we are tracking the turkish lira. it did jump as much as 6% against the dollar. it is still at 4%. he also says the nation will dollar fx andinst rates. let's turn to tech. goldmank says he tapped on a bid to go private. $70 billion at joining us now are more on the who writesex webb about technology in london. and still with us is julian chillingworth from rathbone. let's talk tesla. this latest now, does it make it more likely that we will see
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tesla go private? >> i do not think so. i think the news flow we have had thinks that initial tweet has not given any more substance to what he said to begin with. he had an extensive blog post where he makes it clear he had conversations with the saudi sovereign fund, and they expressed an interest in backing a transaction which takes tesla private. it is far from a done deal. he is tweeting that he is excited to work with goldman sachs and silver lake. he does not say he is working with goldman sachs and silver lake. working they are not with tesla. i take that with a pinch of salt. there are so many moving parts. until we see a substantive shareholder vote with money on the table, it is hard to predict what will happen. nejra: what role is the sec
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playing in this? sec is asking questions of tesla. we do not know that they have opened an investigation. questions, whether the disclosure process is new york times reported board of teslae had no idea he would tweet that, or did not know about the possibility of the transaction. the bigger concern is whether he lied were was misleading in his tweet, and manipulated the market. that seems to be the main bone of contention here. nejra: thank you so much. julian chillingworth from rathbone joined us for the hour. ourlex webb,
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columnist here in london. let's go back to president erdogan. you can follow everything on lies go on the bloomberg -- live go on the bloomberg. let's update you on headlines from erdogan. he says they will continue their path with the turkish lira. he says we will be surrendering if we convert the lira to fx. he says to boycott american electronic goods, in the past few minutes, saying if the u.s. has iphones, others have samsung's. in turkey we have the venus phones. ,f we look at the turkish lira and how it is faring today, it has strengthened against the dollar, and has come off some of its highs. it was at a high of 6% earlier. in to what else president erdogan has to say as
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"bloomberg surveillance" continues for the next hour. we will speak to south africa's trade minister who will join us after 10:30 a.m. u.k. time. the south african rand was pounded in yesterday's session. this is bloomberg. >> every single one of our 81 million citizens, and in addition to that we have extended to those suffering in other parts of the world. , wealthyhy nations countries of this world say we are the richest. ask them how much they have helped the underdeveloped parts of the world, and the poor in the world. ♪ retail.
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economic attack. they will use samsung phones, not iphones. the lira weaker. musk speaks. public shareholders mollified. president trump does not speak. he snubs senator john mccain as he introduces the john s. mccain national defense authorization act for 2019. silence ensues across capitol hill. good morning. this is "bloomberg surveillance." i am tom keene in new york. nejra cehic holding court in london. francine lacqua is off on holiday as they say. an extraordinary speech by president erdogan. i guess you could say they moved the market in anticipation, but now lira is back off to a new weakness. nejra: the lira is still
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strengthening last i checked against the dollar. .t strengthened as much as 6% we have seen session highs. president erdogan has expressed some confusion as to why the lira moved as it did as we saw the lira move towards seven. he is talking about boycotting american electronic goods. tom: there are many different themes. the lead one is the idea of the conversion to foreign exchange. he is not going to let it happen. we will be surrendering if we allow lira to convert to fx. he says development is a conjectural crisis. i'm not sure what that means. here is kailey leinz. kailey: there were some terrifying moments in the heart of london today. a car slammed into the barriers outside the house of parliament and injured several people.
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authorities are not saying whether it is a terrorist attack were not. in march 2017, a car plowed through the screens outside parliament. -- pedestrians outside parliament. the lira is getting a bit of a break today after falling 30% in the last month. the currency rose 5% against the dollar. turkish retail accounts took profits after the slide. the issue says the signs -- the u.s. will not negotiate until the ordained pastor is released. elon musk says he is getting interest for taking tesla driver. he has been slowly releasing details for a deal valued at $70 billion. momentum in china has stalled.
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details on industrial output came in under expected. pulled policymakers have back on the news of tightening, and they are in encouraging banks to lend more. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am kailey leinz. this is bloomberg. tom: thank you so much. as nejra cehic mentioned, stronger lira over the last three or five hours. that is tens, important. that comes in under 26 basis points. oil is not part of the story. euro reverses to weaker euro this morning. the vix 13.92 shows the training. maybe the resiliency of u.s. equity markets. the turkish lira strengthens to about 6.54.
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we have just given that a little erdogan speech. question the u.s. dollar-based turkish two-year yield that was 6.3, it has now exploded out near 10%. many would say that is untenable for the banks of turkey. what do you have this morning in data? nejra: i have similar in the sense that i am showing the turkish lira as well. yesterday, we saw e.m. selloff and the dollar gained at 30 month highs. we are showing the yuan. althought moved much we got disappointing chinese data. we are seeing a rebound in a number of em currencies. european equities rebounding as well. there is more risk on this
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session. i wanted to show dollar-yen because yesterday we were seeing yen strength. that has reversed somewhat this session in seeing weakness of the yen against the dollar. tom: thank you for that. nejra: the 10-year still in focus. the spread widened yesterday and closing up today as european bonds are showing some resilience despite the contagion from turkey. tom: why don't you bring in yousef right now? nejra: let's get back to our top story, which is turkey. joining us from istanbul is yousef gamel. we have just gone through some of the headlines from president erdogan. is anything surprising in what we have heard from him? >> let's start off with the political element. the reality is overnight we had deliberation between turkey and
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u.s. officials in washington. he did not produce any results. last time around was a standoff. the u.s. slapped tariffs and sanctions. we understand there is a possible round to if turkey does not budge. what we have heard from the political front in terms of turkey boycotting american goods, the economy being under siege and under attack is a clear signal that from the turkish side of things they will not budge either. nejra: it is interesting because we are still seeing strength and the lira despite the fact that i have not heard anything from president erdogan that could be read to reassure fx markets. many investors i have spoken to have held out a glimmer of hope that there would be a sign of some reconciliation on some fronts. the country is fighting a war on two fronts.
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one is the political dispute and the other is convincing international and domestic investors that they are right without hiking rates. without progress on either front , there are a lot of questions that are not answered. he is digging a deeper on both of these issues. tom: don't go away in istanbul. i want to show a chart of a litmus paper of this crisis, which is turkish lira. we are looking at live images of mr. erdogan. he has just spoken to turkey and global wall street worldwide. we welcome you all on bloomberg radio. let me just give you two things that we saw here with turkish lira weakening fractionally through the speech. the idea that he will boycott american goods. he directly said that they will use samsung funds, and they will not use apple iphones.
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that was the language he used. headlinesgo to two from bloomberg. 2023,rminal says that by turks will have doubled their wealth. mr. erdogan goes on to say that this nation will not go down, will stand firm on its feet. here is a chart of turkish lira right now. jason, please get this up. this is a chart that is logarithmic. it means slow matters. seven for out above that moment yesterday. we have only come in this far off the relatively good news we have seen in the last 12 hours. critically, the center tendency is down here. 5.25-ish.ning, they have a long way to go back
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to normal. the people of this dental know it is a long -- of istanbul know it is a long way back to normal. does mr. erdogan understand? yousef: at the moment he does. my conversations on the street in istanbul and beyond say it is critical that the steps that president erdogan has taken, he is seen as a defender of turkish nationalism and will not let anybody just stopped in and do what they want. you have seen that, the nationalist card is always easy to play. if the currency has lost 35%, even if the lira stabilizes at this level, over the next few weeks and months, that will feed into inflation. then his supporters will ask why is my paycheck no longer lasting until the end of the month?
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what a lot of investors are looking for is a change in tone from the turkish president because of some of the domestic realities he has to live up to. he is willing to go far on this. you have heard what he has said in terms of the boycott on american goods. in terms of total trade, it is not the u.s. that is the most important trade partner. it is china and russia. tom: thank you so much. yousef gamal el-din. we appreciate that. with our asia foreign-exchange team, he has spent decades in india and the knock on effects in a.m. -- em. the contagion word was barely used three and four days ago. then things changed. where are things now with this idea of e.m. contagion? >> thank you, tom. the shock in em currencies is
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reflective of the global risk aversion, and the contagion has hit the asian currencies, particularly the indian rupee, hardest. a wave of riskis aversion, it is the country's with high current account deficits that are vulnerable. that is what we are seeing in asia right now. as the the indian rupee hardest hit, among the countries that have the highest current account deficits. nejra: good point that you make about the current account deficit. india reserve bank of doing anything to stem the raft in the rupee? >> what the reserve bank of india has done is intervene in the market.
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traders told us they intervened yesterday and today as well. the intervention has not been aggressive because of the magnitude of the global risk aversion is so huge that they don't want to intervene in a big way. what they are doing is intervening in small doses to send the message that there is no panic. they want to avoid a run on the rookie. information in the fx market right now is on what they have been doing so far. nejra: thank you so much to our bloomberg reporters on the ground. let's get to our guest, john hardy, who joins us from copenhagen. thank you for joining us. i have a chart. you cannot see it. it shows the correlations between the there and other emerging market -- lira and
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other emerging market currencies spiking to a three-year high. turkey has moderated a bit today. has what we have seen in the past couple of days shown that you need to be selective in em fx? >> you do need to be selective. when you have these risk on risk off markets, correlations rapidly move towards one. it is a correlation affect. people reduce risk in categories. everything you do is risk on or risk off. i would expect that type of behavior to continue as long as the volatility is high. tom: thank you for the correlation analysis. the basic goal is to move from four standard deviation down. erdogan succeed in doing that in the speech we heard
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moments ago? john: not at all. there has been no change in his defiant stance. tossis rate, we need to the charts at the window and talk about recovery rates. i think that is where we are. i think mr. erdogan has crossed the rubicon. it is about whether these turkish debts will see five to $.10 recovery or $.50. tom: last night in the telegraph, a blistering note, i thought it was a great lesson. he had two of our surveillance guests in it, which is great to see. they allude to the idea that south africa, indonesia, and columbia, that surprised me, would be next in line. here is the key sentence, the world has become hypersensitive debt grapples with a to gdp ratio of 318% of their
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economy, some 40 percentage points higher than on the eve of the lehman crisis of 2009. the fed is unlikely to come to the rescue this time until there is blood on the floor. give us the blood level now in emerging markets, john. john: putting the on the spot. i think you are clearly seeing widespread contagion from emerging markets spreading into developed markets, that is when you see the fed response anticipated. i don't think we are there yet. of course, that happens at some level. nejra: we saw the bloomberg dollar index hit a 30 month high yesterday. does this mean it is too soon to be bearish on the dollar? john: it is too soon because this is part of the whole problem. you have all of these debts denominated in foreign currencies. it is throughout em. it is those countries with current account deficits that
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start to feel the heat when you see credit spreads widen. as long as you have this problem, this will be the case. it is not so much turkey, but it is the chinese currency and whether they will be able to stick to that policy of keeping the chinese room nimby around the 6.70 level. john: let me -- tom: let me show you where turkish lira is. the erdoganipating speech here. then we have this churn here at the critical 6.55 level. that is where we are within the turmoil in turkey. china ever important. donna kwok will join us. please stay with us. this is bloomberg. ♪ ♪
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kailey: this is "bloomberg surveillance." i am kailey leinz. bain capital private equity has agreed to buy the british insurer einsurer. that represents a 45% premium over friday's closing price. private equity firms have been snapping up insurance companies. rweermany, the company prepares for a landmark asset swap with rival. will focuseal, rwe on power production. thank you so much.
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china's economy hit a rough patch as effects curve and risky debts collided with the rest of the world. joining us now is bloomberg's executive editor of china ubs,my and donna kwok of senior china economist. great to have you on the program. is this a slowdown to be concerned about at this point? >> it is a big day for chinese data. we are seeing signs of slowing. that is not that huge of a surprise when you look at the trade war's internationally and domestically, although they are pivoting away from this deleveraging camping. does china's economy have the firepower to withstand the wrapping up of a trade war with the -- ramping up of a trade war
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with the u.s.? it depends on how you define a trade war. we are already in a trade war. at the end of the day, the softening data we saw in july is still coming from domestic headwinds. the domestic policy of the chinese government is self-inflicted. if donald trump imposes more than just 25% on the next $200 billion of goods, and this is not our base case, but if we see both sides impose tariffs on all sides, and we go to a full trade war, that is where my answer might be not so sure. tom: i am glad to have you with us today. i want you to wrap all of this policy and analysis across the chinese stereotype that they can wait anybody out. as a culture, as a country, they
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can wait out president trump, the global economy, even president erdogan and his follies. that stereotype is at risk to me. patients like right now in beijing? donna: i would say it is less about in patients and more about how well can they continue to fine-tune the patient's game they have been playing -- patience game they have been playing for a long time. they have been patient about pushing forward with reforms. the boomerang that has been thrown into the game comes more from trade, which is not softened in china. exports in july picked up slightly. as we go into 2019, we start to see exports softening more. more important from a sentiment perspective, this is going to shake up on shore markets given more.
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that is where we are more concerned. tom: simon, we are thrilled to have you with us today and our global mandate across bloomberg. erdogan, president with the g3, g4, g5, however you want to count it. how closely linked are they to these crises in developed economies? >> you certainly have at issue an umbrella theme with the strongmen running different key economies in china and the u.s., but again maybe taking -- somean maybe taking inspiration from trump style smash mouth politics. the tensions we have seen between turkey and the u.s. and you may see increasing between
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china and the u.s., as long as that politics remains domestically approved of, you will see it on the international stage. nejra: speaking of the international stage, we have barely seen the yuan react today. does that mean the directionality of it relies on where the trade standoff goes? donna: i would agree. at the moment, the recent weakening of the yuan has been driven by escalating trade war risks. i think markets are starting to price in easing already. is still not, it a full-blown trade war. the next stage to watch would be in september once you get confirmation of exactly how much in tariffs will be imposed on the next few hundred billion dollars worth of goods and whether that derails or goes
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beyond market expectations, especially for onshore sentiments. that is what is driving volatility on shore. nejra: has the chinese response to the u.s. been proportional yet? donna: did was initially. it started out proportionally with the first $50 billion worth of goods. in the second round, which is yet to be confirmed, it was not proportional. what we have had is a threat that we might see another 25% on another $200 billion worth of chinese goods. the chinese response was actually waited around 18% worth of tariffs on $60 billion worth of u.s. goods. at the same time, we have not seen any equivalent being thrown out in nontariff trade measures. i think at this point, we are
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not fully proportional. it is not clear to bystanders as to what exactly is being done. nejra: thank you so much to donna kwok, ubs senior china economist. bluebirds simon kennedy -- bloomberg's simon kennedy stays with us. we have seen the south african rand really hit in yesterday's session. it has recovered along with other emerging market currencies today. that and a lot of things to cover in the discussion with rob davies. this is bloomberg. ♪ ♪
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nejra: i am nejra cehic in london. tom keene in new york. francine lacqua has the day off. let's look at what is trending
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across the bloomberg universe. kraft heinz plans to overhaul its packaging designed to find greener alternatives. donald trump is taking credit acrossise in spending nato states. mobiusspecial, mark warrants there is a real possibility of turkey imposing capital controls. john bolton warns there is nothing to negotiate until turkey releases a detained american pastor. find out more across all of bloombergs platforms. elon musk continues to release details about his plan to take tesla private. he says he is getting interest from goldman sachs and private equity firm gold lake. alex, are we any closer to
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understanding what happens to tesla next? >> i think the reality is no. he did not even quite say he is working with goldman and silverlight. it is still very unclear. the way he tweaks seems to be hedging on his part in terms of demonstrating what tesla is doing and what he aims to do with tesla. ngths toto great le demonstrate from saudi that he had the funding to take it private. but that demonstrated he did not have full support. a granular in fashion examined everything elon musk has said and tallies it with where this company is. the reality is we are not in a significantly different position from last week. nejra: what about any regulatory backlash? sec isnow the fec is --
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asking questions. they are clearly following this with great interest. tom: let me bring up the matt levine piece. it is a tour de force as we always expect. i cannot say enough about it. it is complete and professional. will the majority of tesla shareholders approve of mr. musk going private but turned down his offer of money, preferring to stay in the stock as it goes private? comedy,were a romantic that would be a satisfying ending. this is a highly regulated stock market. there are rules here. you can't just wing it. is mr. musk winging it even if he has the prestige protection of goldman sachs and others? alex: it certainly seems that way. muskeeper point is if elon
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is approaching on a wing and a prayer, what does that say about the way he manages the company more broadly? he clearly demonstrated he does not follow the structures that one expects when dealing with this material information to a public company. what about how he runs that company? it speaks to the broader concerns long-term investors might have. those things would be on my radar and encouraging me to ask questions. tom: mr. musk touches on board action. what have you learned about what this board will do? alex: we know the board is going to meet this week at some stage to evaluate what he has proposed. there seems to be a certain amount of surmising amongst the analyst and investor community that they don't think they are likely to buy this. one reason is that it undervalues tesla.
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a lot of bulls on tesla think it is valued at more than the current price. the issue remains, what is the independence of that board? how many of them are too close to elon musk to make an independent decision? it is very hard to predict what they are willing to do. tom: we never agree on anything. readth just shut up and matt levine this morning. i will put that on twitter. right now with our first word news in new york, kailey leinz. kailey: in london, the counterterrorism unit is investigating a crash near the houses of parliament. a car slammed into the barriers outside the main public entrance, injuring several pedestrians. police have arrested the driver. about a year and a half ago, a car plowed through pedestrians
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outside of parliament and killed five people. president, turkey's is sounding defined. stands the nation will against the dollar and boycott iphones and other american electronics. the lira gained today against the dollar after falling 30% this month. unemployment in the u.k. has fallen to a 43 year low. the jobless rate in the second quarter fell to 4%. notght labor market has shown a big growth in wages as wages fell. the 110 million he has already invested, he is trying to raise turnout among infrequent voters motivated by the idea of impeaching president
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trump. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am kailey leinz. this is bloomberg. tom: thank you so much. we had headlines across the bloomberg in the last few minutes that the united kingdom police commenting on this parliament crash are now saying they are treating it as a terrorist incident. we are thrilled to bring you simon kennedy, who has greater knowledge of all the bloomberg parts and pieces than anybody, on brexit, yes. on everything. a tour de force last night on turkey and what they call the fragile five. the countries set up for real risk. what did you learn in that report that really stands out? >> i think the message is that
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the team at number economics have been pushing for a while and refreshed over the weekend. there are hotspots around the world. when you look at current account deficits, the quantitative easing covered all of this. it is warren buffett's line that wendy water goes out, you realize who has been swimming naked. this is done a lot of work for the markets showing who the guys think is swimming naked, columbia, argentina, south africa are up there. the interesting thing with turkey is it could be a test case. it is perhaps idiosyncratic at the moment. moments and reasons to think turkey is unique. when the fed has raised once or
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twice and the eu stops buying bonds, that is where we will start to see the pain. tom: we spent way too much quality time together in 2007, 2008, and 2009. you have lived central banks. i remember secretary john snow in some important meetings. how important is the leverage buildup now versus 10 years ago? many are indicating that there is a lot more leverage out there to tip south africa, columbia, or others. >> there are certainly some that say this time is different. those are the world's worst words for any economist or investor. any economy has gotten itself into better shape than 2008. there is a lot of leverage out there. you have to look at turkey for
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that. there is a lot of dollar borrowing, sovereign debt on the radar, international finance, and the guys have been pointing that out for a long time. there is also a lot of corporate debt denominated in dollars. when you put this together, there are reasons for concern. especially if the vigilantes come back in the next few months and punish those economies that did not take advantage of qe and era.the easy money nejra: what i have been asking people all morning is does this turkish crisis actually show the importance of being selective in emerging markets? your research shows yes. what are the importance of being robust? >> critics will always say why on earth would you trade and emerging-market basket?
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turkey is not the same as other economies. interestingly, we have seen signs from other central banks. we saw the argentina hike yesterday. other central banks holding the line. south africa currently not planning to react. there are pockets out there. nejra: we have talked through some of the weakness in countries that could follow in the footsteps of turkey. those economies seem to be concentrated in parts of asia, south korea, taiwan, thailand. >> they have stronger fundamentals. south korea is an odd case. they are developed. they are the producer of a great deal of technology and semiconductors. you have these pockets of relative calm. that has always been the case with emerging markets. there are ones that have poor fundamentals and stronger ones. nejra: what about the risk of
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return? >> i am not in emerging markets justice. you have to ask them. tom: i will try to get it out on twitter today the bloomberg intelligence piece. it is really extraordinary showing the matrix of emerging-market currencies. turkish lira churning after that erdogan speech. for your morning brief, coast-to-coast, worldwide on radio london, karen moskow, bloomberg daybreak. we will continue on turkey, on tesla, on trump. this is bloomberg. ♪
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tom: good morning. "bloomberg surveillance."
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nejra cehic in for francine lacqua. i am talking in new york. this will be our most interesting interview of the day in international relations. he is minister of trade and industry in johannesburg, south africa. rob davies understands capitalism emerging markets. he was exiled from south africa for 11 years. he is a member of the south african communist party. he joins us in representation of the south african government. is president trump threatening global capitalism? you have an interesting view on this with the decline of multilateralism, does the president of the u.s. threaten the capitalist architecture of the world? think he is doing that, but i think he is trying to rebalance the global trading system more in favor of the u.s.
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and industries in the united states. this is taking us along way away from what we in the developing world considered to be the agenda of the multilateral trading system, which is to introduce reforms that are going inclusive growth. he enables many of the poorer parts of the world to support the industrial revolution. i think that is what is happening now. we are moving back to work until is a. -- too mercantilism. i think that is damaging to the world economy and those of us in the developing world. tom: if we are back to mercantilism, mr. erdogan is dealing with that this morning. the contagion risk, do you link that to turkey for the fact that we are back to mercantilism? rob: we have been affected by
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the currency instability. the south african rand has gone something tout 30 the dollar to 14 something to the dollar as a result of the contagion from turkey. we are affected. i think more fundamentally, ourselves, we have been subject to some of the punitive tariffs of the u.s. the tariffs on steel and aluminum products have been imposed on us. not some other developing and developed countries. we have been subject to those. we don't believe we are a cause of national security threats in the u.s. we don't believe we should have been, but we have been. we are also under investigation for the extension of those tariffs to automotive products as well. that is the reality we find ourselves in in this global
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trade war. davies, could we see south africa retaliate and hit american imports like meat with tariffs? rob: that may well be a decision that is not taken directly by government. when i was in the eurozone and had a chance to meet the secretary of commerce and u.s., we did inform them that south africa has initiated a court action in which they are claiming the concession we have made towards the u.s. and which was linked to our continuing participation in algona has been undercut, and we should remove the tariff concession on poultry. that may happen. that may not happen as a result of decision by government. it may happen as a result of
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decision by our courts. nejra: we have talked about the weakness of the rand earlier. is the rand at a comfortable level for south african exporters? rob: it certainly is, although in the context of fuel price rises, it is also posing challenges for our consumers. for exporters, our message would be go out and make hay while the sunshine's. -- sun shines. it is having a mixed impact because field prices are rising. those are having an effect on cost of living for our consumers. our government is trying to grapple with how can we believe consumers, low income consumers from the consequences of that?
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that in thecern is vacuum china will take over investment in africa. to south africa. is there an opportunity for communist china to take over much of investment in south africa and much of em? rob: i think china has emerged about five years ago as a net foreign investor rather than a recipient. their investment in south africa has been growing over the last few years. we welcome that. china is nowhere near the investment levels of our traditional investment partners, starting with the eu, the united states, and so on. south africa's investment in china by volume rather than number of countries is larger
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than china's investment in south africa. we are encouraging chinese investment in a variety of industries that have come into our country. they are quite reliable investors. when they make a commitment, they follow through with it. they add value to our economy. our investors welcome them. ar president is going through major investment drive right now. nejra: you say you welcome chinese investment. what other markets could south africa look to given the strained relationship with the u.s.? is: our prime priority african regional integration. we are strong proponents of the african continental free-trade area. along with the rest of the continent, we are working to bring that to fruition.
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we are already about 25% of our exports, of which about more than half of those products go to african continent. our future is very much the african continent. we support the continent is going to be industrializing across the board, moving up the value chain. we are looking for to the time when we can be trading with the rest of the continent as producers of different components. where finished products are probably going to be several of us together. we look forward to that time. we are preparing for that. bul is our main all work -- wark and focus of attention on the trade front, the african continent. tom: thank you so much for being with us. rob davies is south african industry ministry -- minister.
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this is mr. lavrov visiting ankara. the ambassador meeting was yesterday. mr. lavrov making comments on the backdrop of the tensions between the u.s. and mr. erdogan in turkey. 6.55urkish lira right now with some stability. final thoughts with simon kennedy. of bloomberg economics worldwide. let me bring it back to brexit. we are back to a 1.27 handle on sterling. is there a level of sterling beneath which changes or reinvigorates were amends the brexit debate? >> i think the pound is kind of a lightning round for the brexit debate. it is a weathervane if you like.
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certainly the more he goes down, the more defects tourists, british tourists wanting to go abroad for the summer. they are feeling it in their pocket. whether that is enough to spark a re-think is perhaps in question at the moment. tom: let me ask an open question. what are you studying in this holiday august on brexit? what is the thing that has your attention? >> i think the big question is what is next. theresa may is on holiday. parliament is taking some time out, though obviously boris johnson is not. it is what happens next. she is trying to piece together a deal before she even has a deal with europe. she has to deal with politicians around her. on ross reporting yesterday a plan to stay closer to europe for longer. that is not going to go down well with eurosceptics.
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nejra: we have unemployment at a 43 year low, but still failing to ignite pay growth. is mark carney wrong when he says there are domestic pressures on inflation moving upward? >> they obviously voted unanimously to hike rates. the economist the of is that they will hold fire through the brexit vote next year. pretty muchg it for every major central banker around the world. the lower you push on employment, it still seems inflation has yet to ignite. nejra: we are seeing some wage growth in the u k, is that likely to sustain? >> it is too early to tell. it might pick up. but it is too early to see. tom: to round out through this crisis that we have seen, we have talked in the last hour of multilateral, our last guest from south africa talked about a
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tilism, how do you perceive the new mercantilism? >> it is certainly a case of what comes next. the trump administration ratcheting up terrace--on china. riffs on china. is thing to watch out for the bloomberg heat map, a graphic representation of what all the manufacturing companies are telling. as andexes, we see that early reminder of what might come. there is certainly fitting under the way. tom: simon kennedy, thank you very much. executive editor of bloomberg economics worldwide. what a set of stories continuing force. what is so important for me is that it is in real time that we
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get actual headlines from mr. whatv of russia and also we saw from mr. erdogan. nejra: absolutely. it did not seem like president erdogan came out with something in terms of what markets need to see. we have seen the lira rebounding in this session, rebounding as much as 6% earlier. we are still 5% stronger. tom: very good. stay with us across bloomberg television and bloomberg radio through the morning. much more going. the intraday of the turkish lira coming down to a level, looking for new turkish strength. this is bloomberg. ♪ this is bloomberg. ♪ this isn't just any moving day.
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simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. speaks. turkey faces economic attack.
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they won't use a samsung phones. the lira as we speak a stronger. to bank bankers private. speak,nt trump doesn't he snubs john mccain as he introduces the natural -- national defense authorization. a silence ensues across capitol hill. good morning, everyone. this is bloomberg surveillance. we are looking right now at the continuing management of message. this is the russian message from the foreign minister, speaking with the foreign minister of turkey as well. lirardogan's stabilizing with some actual strength in the last hour. nejra: it's interesting what we
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heard from him. we got him on the offensive and defensive at the same time. he was on the offensive against the u.s., he was defensive about turkey. the turkish lira did strengthen. session,onger on the but it has come up since we heard from erdogan. we are hearing from the turkish foreign minister, saying an official will visit today. we are talking about this being part of issues that have hit turkey recently. tom: this will be much on our minds. christopher will join us and we will speak about the fed and emerging markets. he was in conversation with david westin. let's look at home depot. i'm going to turn right now with the 305. comp sales are up a huge 8%
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versus 6.5%. headlines tobanner help you get ready for the morning. worde going to nail first news. the car slammed into a barrier outside the main entrance of the houses of parliament. police arrested the driver, a man his late 20's. parliament is in recess and the review lawmakers in the building. into a crowd outside parliament several years ago. elon musk says he is getting invited to take the company private. he has been slowly revealing details of a potential deal revealed to be $70 billion. advisors are working with mosque, not the company.
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momentum in the chinese economy has stalled. they all came in lower than expected. the new credit flowed. policymakers have pulled back on the pace of tightening, encouraging banks to lend more to get the economy going. it global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries, this is bloomberg. this is bloomberg. tom: thank you so much. right now, let's set a better morning for mr. erdogan. futures are up 10. dow futures are up 89. the curve is flattening, not that much is going on. let's move on to the second screen as we can as well. this shows resilient equity markets, some of that assisted by home depot. the turkish lira came in further overnight to a stronger
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stability at 6.55. the bottom yield is extraordinary. the u.s. dollar dominated. debt yielded .66. that should be green on the screen. higher deals over the last few days. nejra: risk off yesterday becomes risk on today. european equities are on the front. the dollar hit a 13 month high. the dollar is still stronger against the yen. that's safe haven has not hit yet. nine the 10 year rose basis point yesterday, it is higher since may. it is tightening up as you can see against peripheral yields falling. tom: we will do that now. we are joined by kevin cirilli in washington.
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let me go to you. you see him speaking in istanbul. what does russia want from his turmoil? : this has been building up for some time off the spat between turkey and the united states over the american pastor held in the country. there were deliberations overnight involving john bolton. that did not produce any results. erdogan,rd from mr. they are adding more to their threat. they are not backing down. they are putting in the wider context of maybe turkey needs to realign in terms of foreign policy toward russia and china and away from nato and the united states. what you watching on the ground today?
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yousef: quite a few things. it's been a busy few hours. we are waiting to hear from the finance minister. you mentioned the move, there was a rally with the central bank that has kept liquidity. retail accounts are taking profits. it's not necessarily the most reflective picture of the reality of supply and demand in the market. we are waiting to hear from the finance ministry on any further legislation that would stabilize the lira. they are not unlikely to move on what is the most contested issue on the ground. that is interest rates. nejra: on to the speech from president erdogan, the lira is maintaining its games. of tone fromnse erdogan against the united states. yousef: absolutely.
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he thinks the turkish economy is moving like clockwork. this is verbatim from the speech. he is asking why the turkish lira was moved to seven. he says is a targeted attack from the west to undermine the turkish economy. -- they are going to boycott american goods. i need to run you through a couple of lines that are happening domestically. what we see is business groups come out and put out a statement calling for tighter monetary policy. even though the lira has stabilized, more needs to be done, even in the opinion of local investors. this is no longer about policy credibility abroad. this has become a local story. tom: thank you so much. of these moments, our conversation moments ago in
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south africa with the trade minister, we see from two foreign ministers right now from russia and turkey. kevin cirilli is in washington. it is extraordinary how people are talking about mercantilism and some form of numeral away from a multilateral world. departmente state ?eact to the kevin: the president will meet with mike pompeo to have this said, john as you bolton has met with the turkish ambassador yesterday. , theorted this last week president erdogan picked up the phone and called president vladimir putin on the same day president trump called emmanuel macron. the issues in many critics of point out is that turkey being a
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ally is going right towards the russians. there is the situation with the energy sector and syria as well. nejra: that we have seen the selloff in the lira, we were selling off yesterday. we have seen to a certain extent a similar reaction in the ruble in recent days. is this going to strengthen president trump's resolve that sanctions work? kevin: from the administration's perspective, they believe that turkey is dealing with a difficult economic time prior to the increasing the commodity tariffs we saw last week. asterday, i interviewed democrat from california. -- pointold me plant blank is there is pressure to get president to work better
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with nato allies. that criticism has emerged. said, this is very much a local issue. he feels talking tough on the u.s. plays well with his political base. ditto, for president trump. tom: as we watch the foreign ministers speak, america is sheltered by oceans. john mccain never believe that. he has had an internationalist pow,in the navy, as a gravely ill in arizona. president'sain the silence yesterday? drumes a thing up in fort and does not mention the senator. how was that taken in washington? kevin: senator mccain released a statement last night after trump
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signing the defense reauthorization bill named in his honor. that was done by his senate colleagues. the back-and-forth between the president and senator mccain is something we have covered extensively over the past several years. senator mccain thanked his colleagues in a statement of gratitude to his counterparts for naming that afternoon. mentiont trump made no of senator mccain being named after that piece of legislation. tom: thank you so much, greatly appreciated. sitting patiently is christopher. they talk about a fed that is really upfront and is in on
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emerging markets. does the vector toward higher 2009, doestes and in that affect now emerging markets? christopher: it seems to. it's the idea that interest rates in the u.s. are going up. it's a better place to invest then potentially emerging markets. it draws money out of emerging markets. that seems to be a problem. officials have always said that policy is based on domestic economy and not outside influences. it depends on how much the currency crisis balloons here. if it really gets the fed's attention, they may's get a rate hike. the currency has to fall much further than it has so far. nejra: are you expecting to see more dollar strength? chris: i don't think a lot.
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the whole idea of higher interest rates in the u.s., how much is that a drawing factor of theitional purchases dollar. i don't know if we will be rates driven. i think we will be more commodities driven. commodity prices like the price of oil are not going up as much now. we will see later on. chris will be staying with us. thank you so much. coming up, we have a research analysis talking about home depot. this is bloomberg. ♪
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kaylee: let's look at the business flash. private equity well by the british insurer insurance. the price is $1.5 billion. that's a 37% premium. private equity firms have been snapping up insurance firms. companyny, the energy prepares for an asset swap with a rival. they are buying 18% in the first half of the year. they will look at our generation. investor carl icahn his given up his fight to stop the acquisition of that company. they have come out in favor of the deal. he called it a travesty. overpayingsignal was
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the asset manager. that is the bloomberg business flash. nejra: thank you so much. the chinese economy has had a rough patches efforts to curb excessive debt collided with a trade war with the u.s. join us is the deputy chief economist. it's so nice to have you with us. is the latest data showing deleveraging working? deleveraging, the trade war, we really don't see china growing. the economy is whether in the trade war rather well. indicators,ifferent including exports to china, electricity production, all of those indicators are supportive. the outlook remains positive. nejra: do you see the slowdown
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in credit growth as a positive thing? >> absolutely. if you look at the funding numbers, they are 15%. at theu start to look data, the slowdown has been led by those categories that they worry most about, trusted loans and accepted notes. when you look at the loans, the biggest part of the lending, that is up 11%. is there is still deleveraging that continues to target sectors they are worried about. they are not worried about growth. they are hedging against uncertainty. if they were, you would see the
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numbers rising massively. tom: when we look at china right now in one of our themes has been china, is china at an trade?ge in we are going to more limited trade. that is a very good question. xi isled by president the champion of global trade. think china wants the ability in the global trade area so they can pursue the one road. been done byy had the 101 view. it's becoming more multilateral.
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towards very much moving a position where they see the benefit of mass multilateral global systems. that is driven by free market trade. tom: thank you so much. us and it's wonderful to have you with us as well. christopher is still with us right now. i look at this debate about mercantilism, it's got an extraordinary. chris: the only thing i would caution about his it seems the trade war with china is still coming, the effect is still coming. it's way too early. the $44 billion in tariffs went through. 6, the extran july don't come on until august 23.
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it is still in play here. tom: it's august and we have had an eventful august to say the least. in the heart of the matter that is beginning to percolate in this essay, the u.s. government is raising interest rates. that is an immediate knock on effect. are these the same as 20 -- 2008? chris: it seems like interest rates in the u.s., we are almost afraid of our own shadows here. in terms of what the fed is 2004 anddo, back in 2006, they were raising rates eight times the year. 200 basis points he year. now they are arguing to go one more time this year or two
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times, pushing it to 2.5%. be monetary conditions? it's amazing how people are allergic to these rate hikes. nejra: what is a neutral rate in the u.s.? chris: good question. we just had one of the policy makers, the president of the 3% werefed say 2.5% or equally defensible. i always liked how they say equally defensible. i think rates have further to go. howell, he is one of the first fed chairs to realize or at least say explicitly that the fed rot down the house before, they raised rates to aggressively.
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he doesn't want to do that again. forget that he is the president's man. i think powell doesn't want to overdo it on rates. he doesn't want to push rates too high. nejra: not long ago, the money a rate were pricing in cut in 2019 rather than a rate hike. is that a likelihood at all? chris: might professional economists, we like to see a recession around every corner. that's when people pay attention to us what happened here is people are thinking that it's been 10 years, the economic expansion started in july. maybe we are nearing the time were a recession could take place. tom: that's what they do in europe.
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nejra:nejra: i wish. tom: i know. we had in august 1 meeting, september is live. that we pretty much know. i would suggest given what we've seen in the last three days in turkey, these meetings are a complete mystery. chris: it is more uncertain. remember how janet yellen took world growth concerns? she stopped the fed from doing additional rate hikes. we are not there yet. if the situation in turkey worsens, like when the russian ago, melted down 20 years if the currency start moving lower, some of these rate hikes are going to come off the table i think. tom: with the tragedy outside parliament where we've got this announcement of people injured. it was called a terrorist attack. hours, therehree
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is one headline about lower wage growth in the u k -- u.k. chris: it's quite a mystery. part of the problem is how do you measure it? it seems to be countrywide. countries don't want to give you a raise. maybe you could go to your boss. my bosses watching this. he loves her show. we are up to 42 viewers? chris: i don't know why they are not raising wages. aren't hired 12 months of now, then you've got a story. ofra: are we at more risk gross undershooting than inflation overshooting? chris: i am pushing back on the idea that inflation is going to break out here.
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i really don't like this inflation. it's part of how you define it. that inflation indicator never seems to go up. much cpiave as inflation as we did when rates were pushed to 6.5% in 2000. rates are 2%. we continue on home depot with the hotel and by three group. this is bloomberg. ♪ xfinity mobile is a new wireless network
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saving you hundreds of dollars a year. plus, get $300 back when you buy a new smartphone. xfinity mobile. it's simple. easy. awesome. click, call or visit a store today. and francine has the day off. we are awaiting a news conference from the metropolitan police in the u.k.
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they arrested a driver that crashed into the parliament. the counterterrorism group is leading the investigation. two people have been injured. we will bring you more on that as we get it. let's get the first word news. >> once again, the turkish president is sounding defined. he said today the nation will stand strong against the dollar and promised to boycott iphones and other american electronics. the lira is taking a breather today after falling 30% in the last month. they took profits after the slide. hasployment in the u.k. fallen to a 43 year low. it felt .2% to 4%. this has not translated into a jump in pay. wage growth slowed down.
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tom steyer is adding $10 million to his drive to help democrats control house. that's on top of the $110 million he has already committed. increase voters motivated by the idea of impeaching president trump. iglobal news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries, this is bloomberg. tom: thank you so much. international maelstrom we've been talking about, there is an american boom economy. where'd you see that? you see it at home depot. joseph feldman is with the chelsea advisory group. he has followed home depot over the years. there seems to be a reset in the revenue line. it's a reset of make america great again economy. can home depot sustain 8%?
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joe: the 8% is pretty impressive. that's going to be hard to sustain. they have been sustaining this single digit number. their guidance calls for a mid-single-digit same-store's sales. this gives the fact that even though housing may be slowing a little bit in terms of sales, home prices are ok. tom: it's a 25% time again. it's been a more than lucrative investment. how much of the international depot have?home are they like amazon where there is so much more to go? perspective,tore they built out to where they want to be. there is still market share to be had. 50% of the businesses are still mom-and-pop.
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there is still opportunity to gobble up market share. the service side of the business and the maintenance side of the business with small apartments and buildings were they been going after that type of business. nejra: it's great to have you on the program. in terms of stocks that you like, you like home-improvement stores. you also like sporting goods. recoveryink there is a happening in the retail sector. last year was tougher and more challenging. there was too much inventory. we are getting a lot more innovation from the manufacturers, from nike and adidas. that is driving sales. they are still running fairly hot. nejra: how insulated belize companies be if we get a slowdown in consumer spending? lowe's areepot and insulated as things break down
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your house or need repair. you have to do it. there is the maintenance beyond that that you have to keep up on a regular basis. that area is pretty well preserved. the dollar stores are well preserved. some discretionary categories, you may see a slowdown. there is some concern that as you head to the fourth quarter, as people look at this we will see what happens. tom: how is the amazon affect going? i see a lot of empty stores in new york city. how are they changing retail? joe: they are doing a very good job changing retail. everyone i speak to continues to say their number one competitor is amazon. they gobble up share. it's the convenience they have. some people are doing well competing against it. .almart is doing a good job
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there are some pockets where you can differentiate amazon. tom: joe feldman, thank you so much. again, the headline if you are just joining us, home depot just kills it this morning. even 8% store sales. surprised,t has not we are waiting for scotland ride on the terrorists attack. there is a small set of injuries. before that, this is a direct linkage. nominal gdp really matters in america. chris: that is what the cash register sales are, the actual current dollars. i wouldn't think when i was hearing the story about home -- we dids not just get a massive tax cut.
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as economists, the consumer has this money. they spend it all out. it can't continue at that rate for the next year or the year after that. it's a one-time effect. that's not like negative on the economy, the government dole to out some money, the effect is one year. next year, the boost to gdp won't be as great. it's going to be hard to sustained anywhere near 4%. tom: within the estate of consumption, i'm getting conflicting research on the leverage the consumer has. turkey is overleveraged, columbia is overleveraged. is the consumer in america overleveraged? chris: the new york fed has a good number. it tells you about payments on
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to thet relative consumer in scum. -- income. it doesn't look like it is excessive. it's nothing like the housing bubble years which crested in 2006. most of the stories stem from the fact that there is a lot of student loan debt out there. credit card debt is making new highs. it is barely back to the highs of a decade ago. nejra: i'm glad tom asked about consumer leverage. i want to ask about corporate leverage. is that a concern for you? chris: not at the moment. the companies seem to be able to refund the debt. it a lot of these corporate debt issues that we see in the market are oversubscribed by four or five times. there is tremendous man for the
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higher yield and corporate debt paper out there. at the moment, it all looks sustainable. the corporations themselves to the given the biggest corporate tax cut in history almost. they have the money to service the debt. i would not be worried about debt at this stage. nejra: we did see some moves from businesses to front run the concerns about tariffs in the last gdp print. how might that shakeout? chris? : what was your question? nejra: we saw businesses trying to front run around the tariff story. how might we see that growth shakeout in the following quarter? chris: is difficult to see was going to happen. if we look at these durable
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goods, these long-lived orders for equipment, this is the 10th year of the expansion. all ofusiness ordered the equipment they need to meet the demands for their goods and services for a while? i would be surprised if business investment spending continued to ramp up. maybe some of it was front run based on these tax cuts. tom: looking over at the terminal, the stability of the turkish lira, we have a whole stream of news for those of you waking up. there was an interesting speech by mr. erdogan. we will continue on that watch. in the united kingdom, there has been a stated terrorist attack. are awaiting important comments from scotland yard. we will bring those to you when
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they arrive. another attack near parliament. worldwide, this is bloomberg. ♪
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>> this is bloomberg surveillance. but ray been falling, dalio is keeping the faith. they have maintained the position in the two largest backed by gold. it fell 5% in the second quarter. it's another push by credit suisse ceo to regionalized the bank. they are breaking up its
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international wealth management unit from four units into seven. the regions will be given more economy to make decisions. they want to focus on wealth management. k, most of the house of fraser sports will stay open. to the head ofs strategic investment. quickstart aim is to keep the we have much more ambitious plans than previous management. we feel we can bring a lot more to the table than was previously done. >> that is the bloomberg business flash. we are delighted to have you with us. you said when it comes to u.s. growth, the growth of the 90's is behind us.
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don't like the idea of inflation overshooting. that is not the new paradigm. what is it? chris: i think there has been a shift, it's the groom a graphic -- demographic headwind we are facing. 20 years ago, the baby boom toeration born from 1946 they that wave of people, are 50 to 70. they were 30 to 50 years old 20 years ago. when you're heading into your retirement years, you don't spend this much. a key driver of the economy is missing. there is nothing really wrong here. it's pointing out that we should have seen this day coming two decades ago, that potential growth wouldn't be there. youatter how many tax cuts
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give people, eventually that money will run out and the economy will settle back to 2% growth. nejra: we've got a news conference from the metropolitan police in the u.k. on the car crash outside parliament that is being treated as a terrorist incident. let's listen in. >> a silver ford fiesta was involved in a collision. it collided with cyclists and pedestrians before hitting a barrier and coming to a stop. two people have been taken to hospital. one man has been discharged and one will remain being treated for nonlife threatening injuries. another man was treated at the scene, but did not require hospital treatment. wasdriver of the fiesta arrested at the scene by armed
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officers who were nearby. it the man is in his late 20's and he's been arrested on terrorism of -- terrorism offenses. he remains in custody. given that this appears to be a deliberate act, this is iconic site, we are treating this as a terrorist incident and the investigation is being led by officers from the counterterrorism unit. no other weapons of and found at this time. at this stage of the investigation, no other suspect has been identified or reported to police. there is no intelligence at this time of further danger to london as the rest of the u.k. collected desk connected to this incident. our priority is to identify the suspect and establishes motivation if we can. he is not currently cooperating.
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detectivesd expect, are making various other urgent inquiries to make sure there is no outstanding risk to the public. toanyone has information assist the investigation, call us. thank you for the many people who of already come forward. if you captured footage or images of this incident, you can download those to us. clearly, we are treating the scene and parliament square as a crime scene. be blocked off for some time as they carry out the important work to establish what happened. i can appreciate this causing disruption this morning to those who live or work in this area.
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thank you to the public for their patience and understanding while we deal with the incident. we will be working as quickly as possible in order to reopen the area. i would ask the public try to avoid parliament square and westminster at this time. the safety of the public is our top priority. police will continue to do all we can to protect the people of london. the public should remain vigilant if you see anything suspicious or something that causes concern, please dial 999. i am happy to take a couple of questions. [inaudible] >> i heard that this morning. ambulanceit was an and it was an unrelated call.
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>> the of vehicle drove liberally at two police officers. driver targeting officers? >> we can't say that at this time. >> it are they aware of the man you have in custody? >> have not identified him yet. thise moment, we don't person was known to mi five or counterterrorism. in: the commissioner scotland yard. we will have much more on the story in london. we are going to come back with christopher, he wants to talk about a most interesting chart that shows the dynamics of fixed income and turkey. they with us worldwide.
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this is bloomberg surveillance. ♪
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tom: i am tom keene in new york.
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what we need to know right now on turkey is it's in better shape. the german yield and a little bit. maybe we want to see this single best chart. these are the two yields in turkey. the white yield is based off 25% in what is really important. rather,the u.s. yield coming up in this explosion in the proxy for foreign paper in turkey. it is 9.6%. will you explain why dollar-based yield in emerging markets is a big deal? chris: it depends on the country. borrowed a lot in dollars, which i believe turkey has borrowed a lot in dollars, if the currency melts them, it will take more lira to pay that
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off. that's the danger here. it's an extraordinary situation where turkey, the markets want to see a rate hike. stop ant an attempt to currency flight. they haven't raised rates yet. who knows where this is going to end. tom: let me ask you an unfair question. does someone like larry kudlow have to sit down mr. trump and ?ay get off turkey are we at this point? chris: good luck there. it's not just rates driven. the president does like a fight. morning in out this response to the head of the press conference today. play,ot just rates in that is a powerful chart.
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it's also politics. where were we when the president tweeted on friday? let's see what happens if we get another tweet this morning potentially. nejra: if we get further emerging markets fallout, could that push president trump to back off? those i would not use terms for him ever. , he ist the personality a political brawler, a businessman, he has done a lot of negotiations. he sued a lot of people. he is litigious. i don't see him backing off. i don't know where this is going to end. i wish we could get some movement on the american pastor and see what happens. this is very much a political story in addition to an interest rates story. tom: thank you so much.
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coverageontinue with from their today as well. let's look at foreign-exchange right now. it will be interesting what markets do. at 111.20.uld be it's not. into as the turkish lira 6.58. we've got to do bitcoin it, breaking under 6000 this morning. bitcoin is sitting on support. please stay with us through the day, this is bloomberg. ♪
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alix: turkey strikes back.
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president erdogan boycotts american electronics. manic monday turns to tuesday. elon musk says he has lined up legal advisers to take tesla rabbit as the board distances itself -- private as the board mutances itself from sk's tweets. david: welcome to "bloomberg daybreak." i am david westin. president erdogan speaking, don't buy iphones. that will fix the economic crisis in turkey. alix: if we knew that, we would have done that a long time ago. way, their local cell phone stop went up. alix: in the markets, it feels like relief rally underway. how far will it be sustained? euro-dollar is flat.


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