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tv   Bloomberg Daybreak Europe  Bloomberg  August 20, 2018 1:00am-2:30am EDT

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>> good morning from bloomberg's european headquarters in the city of london. these are today's top stories. putin and michael find common ground. shared concerns push the two nations closer. we are in moscow and berlin. fresh emerging-market turbulence. of thela carries out one largest currency devalue that history. turkey's credit rating sinks deeper into junk. bond market pain. traders warned about record short positions as we await jay powell's speech at jackson hole.
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good morning, everybody. it's monday morning. this is "bloomberg daybreak: europe." it has just gone 6:00 in london. show you where we are in the asn session. start to the trading weekend, but momentum up by .3%. a lot of things in the mix. the ongoing trade conversation between the u.s. and china. jackson hole is on the agenda as well. its trajectory, how that plays in for emerging markets. all of that will be relevant. all of these themes could come back during conversations at jackson hole, and we get the fed minutes this week. all of that will be playing into the dollar this week. we are pretty study on the dollar. jeffrey'smore about
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comments, talking about records were positions in treasuries. why is the market so sure that the fed will not be put off by the tensions listed on the agenda? offshore is pretty stable. lots of talk in the last few days about whether the chinese are supporting their currency a little bit higher as they make those tradewards conversations with the united states. markets will be thin in turkey because we have got the turkish markets close much of this week. we do see movement in the turkish lira this morning. we could see outsized moves because of a lack of liquidity. we thought we would put that in there this morning because of the prominence we have given the turkey story all of last week. that is what we are looking at in terms of the risk radar. u.s. futures looking pretty flat this hour. a lot to talk about when it comes to the jackson hole conversation, but also how long is this bull market going to last?
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pretty flat at the start of trade. by the close of business on wednesday, this will be the longest bull market in history. they do not die from all days, so who cares record?at kind of we will talk about that this week. this is one of the conversations you need to tune in for this week. we will speak to p are moscovici -- to pierre moscovici. 11:30nterview, just after , london time. juliette saly in singapore. juliette: thank you. turkey may be on the path towards a 300 basis point as banksrate increase have been cut off from borrowing at the benchmark 17.75% repo the and forth to turn to overnight lending rate currently at 19.25%. it is trying to counter the lira's slump without formally hiking. cutey's credit rating was
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further into junk by both s&p global ratings and moody's. venezuela has taken drastic measures to shore up its economy, devaluing it by 95%. the official rate will leap from 285,000 to the dollar to 6 million. the government will try to offset the shock by raising the minimum wage three point 5000% -- 3500%. italy will press ahead with plans to revoke the highway concession despite its parent company's offer of 500 million euros in initial eight after the deadly jamila breach collapse. it mustty premier said open its wallet, rebuild everything, and compensate everyone for the disaster. donald trump's lawyer has said "truth is not truth" when discussing why having the president interviewed by robert
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mueller for the probe into election interference is not a good idea. rudy giuliani said went to people like trump and former fbi director james comey tell different versions of the same story, it is somebody's version of the truth, not the truth. cast further doubt on whether the president will voluntarily speak to investigators. in india, more than 800,000 people have been displaced in at least -- and at least 350 killed. it has triggered landslides and destroyed homes, roads, and bridges. weather conditions have improved considerably. nearly 10,000 people should be rescued today. the first hollywood film in almost a quarter-century with a largely asian cast topped the north american box office. rich asians crazy
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had good reviews and social media buzz and took the top spot from another warner offering. it made 21 million dollars in its second weekend. 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. you can find more stories on the bloomberg at top . we are seeing mixed movement coming through in these asian markets. you are seeing an upside coming through in hong kong's hang seng index, rising up .7%. weakness coming through in the nikkei. yuan has studied. negotiations set to resume in focus. gdp numbers for the second quarter came in slightly better than expected. let's have a look at some of the stocks we have been watching. isaustralia, woolworths
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seeing its shares up one point. it blamed the single use plastic bag ban on some of its four-year earnings, which missed the estimate. japan coming under pressure, but they closed significantly higher on friday following a tender offer to take majority control of the company. upgrades ahead of the result tomorrow. .ay bank upgrading the stock it's expected to come through with pretty good numbers considering we are starting to see this love affair for premium beer coming through in china. anna. anna: thank you very much. juliette saly in singapore. breaking news. business basedgy in johannesburg. their eps is coming in at 87.44 rand. 184.5 billion rand revenue. we heard from them not long ago
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about their profit guidance. full-year profit probably phil at the world's biggest producer .f fuel from coal $1.2 billion. that is what we heard from them at the end of july. we are getting the numbers that go along with that guidance, one assumes. beenis a business that has transforming itself from this big producer of fuel from coal into a big player in the global chemicals space. the currency putting the rand on the platform. on saturday, angela merkel posted vladimir putin in germany. this is their first bilateral meeting since 2013. relations into crisis saw them discussing syria, you came -- ukraine, and iran. tariffs,ussed u.s.
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sharing concerns about the unpredictable nature and impact of recent levees. joining us, and really -- a nnemari -- annmarie hordern. >> the big takeaways are clearly gas as well as general tom -- donald trump's trade tariffs. they view the relations going a bit sour. they did not exactly mentioned trump by name. these concerns about the unpredictability and range of tariffs and what this could mean for economic negotiations going forward and trade assistance. on gas, putin has said this is purely economical, not a political decision. this was the drama that trump continued to speak about when he was in europe visiting. he called germany captive to russia when he was at the nato meeting in brussels. you can see germany relies
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.eavily on gas imports 90% of the gas comes imported. merkel in the past said we cannot leave ukraine out, but of course, this would be a more direct to line. it is on track to be completed. even if the u.s. was to sanction some of the countries involved, they said they could find it themselves. they said they want to work to get it to make sure north stream 2 ends up happening. anna: they are being pushed together on a number of fronts. they both committed to stick with the iran packed, to what effect we have to wonder. agenda?e was on the syria is somewhere putin plays an incredible role and angela merkel is keen to stay ahead of any potential refugee crisis. annmarie: one thing putin said
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in opening remarks is he reports return of syrian refugees to their homeland and warned that europe cannot deal with the migration crisis. that is one thing he said. he suggested some humanitarian aid. i think the biggest take away on syria was the fact that they a meeting involving france and turkey as well as russia and germany. that was really interesting if they were to have some international meeting on syria to come to some sort of agreement on where they stand. anna: germany putting the onus on russia with its role in the united nations. , watching itern for us in berlin. joining us now is state street's globals and riser and head of strategy. great to have you with us this morning. what are your thoughts then as we look at merkel bringing putin in from the cold? does this make russia more investable from your perspective? >> it is a long stretch to
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say that. these early steps, as you said, they have a famously frosty relationship. the important implications, as really onaid, is syria. the crisis in syria, merkel not being on such strong footing, needing putin's help to stem that flow is one of the most important takeaways. in the face of an unpredictable u.s. making russia looked like a more solid partner. waterk there is a lot of under the bridge and we will have to wait longer for that. anna: more than one meeting to make that happen. better relations between russia and parts of the west is fascinating. if he ends up driving a wedge between parts of western europe and the united states.
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this changes the geopolitical landscape substantially that we see a merkel twisting on a dime to welcome putin into germany. altaf: it's amazing. some of it stems from the fact ist -- excuse me -- merkel not on such strong footing as she was when she got the leadership, so she is feeling the rise of populist parties. she has got trump acting unpredictably as usual, so she is wondering where she can find seem an and putin may unusual ally, but i think that is what she has got at the moment. anna: more from out of the some, -- altaf, coming up later on the program. hedge funds shorts on the 10 year hits the highest level on record. we bring you the latest and we will discuss one of the biggest currency devaluations in history as nicolas maduro attempts to contend with runaway inflation in venezuela. dropping a few zeros from the
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currency. this is bloomberg. ♪ ♪
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anna: good morning, everybody. good afternoon if you are in sydney. the asx 200 pretty flat. any leadership we are seeing, bac doing quite well. we are hearing results from them later on this week. a bloomberg business flash with juliette saly in singapore. tougher demand> by regulators may cause banks such as standard chartered to shift more jobs to europe than originally planned due to brexit according to tracy clark, the bank's regional ceo. it has been waiting nearly nine months free you officials to approve a banking license which will turn its frankfurt branch into a subsidiary to read while it originally expected approval
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by spring, it has been at the mercy of regulators finding their footing. the u.k.'s ministry of justice has taken immediate control of birmingham prison permits inspection4 after an found widespread evidence about the hall, drugs, and violence and reported cockroaches, blood, and vomit. they are moving hundreds of prisoners out of the facility today. of the biggest london listed businesses are earning an average of 3 million pounds less than their male counterparts. average 5.8 million pounds compared with 2.6 million for women. around 12%narrower when comparing basic salaries. 36 for bonuses and 75% for long-term incentive plans. musk says he will not take
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a different approach despite calls for him to change the way he works. that came after a arianna huffington wrote an open letter accusing him of inefficient use of human energy, something must rejects. rejects. a new york times interview described the past 12 months as the most difficult and painful of his career. that is your bloomberg business flash, anna. anna: juliette, thank you very much. no outdated use of human energy on this program. have fallen 20% in less than two weeks since elon musk's suggestion that the company would be taken private has been brought into doubt. the stock could be poised to fall even further as the saudi arabia and sovereign wealth fund is reported to have taken a electricanother carmaker. questions have been raised over his fitness as ceo following reports of his work and sleeping habits and the comments we heard from huffington.
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bloomberg's su keenan reports. begins,he trading week big questions will be hanging over tesla's stock. chem recover from the 9% drop we saw on friday? the biggest drop we saw in two weeks. the reason the stock dropped is the astounding interview that elon musk gave for the new york times in which she tearfully talked about the august 7 tweet that has the fcc investigating whether he has secured funding to take the company private. it looks as if he has not. the 120 hour work weeks where he tweets while driving indicates ambien toleep agents take through the night. this after a arianna huffington, who promoted a book about the benefits of sleep. she indicated a 120 hour work week is not deficient and it is
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not how the brain and body is designed. not caused elon musk to tweet in reply saying he gets off at the factory at 2:30 in the morning. "you think this is an option? it is not." some are saying they will be torn between whether to act on behalf of shareholders, to rein loyal to a to be maverick ceo who many people are close to. there continues to be very close scrutiny over tesla and where stocks goes from here. su keenan, bloomberg news. us, the warning for bond traders, jeff says the buildup of speculative short positions in u.s. treasuries is setting those traitors up for pain ahead. the bond investors are in for a big week. jerome powell expected and jackson hole.
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advisors still with us. very good to have you comment on this then. we got these comments from jeffrey talking about the next short treasury positions indicated by the red mark on recordart, hitting levels. investors, hedge funds in particular, assuming if it sticks to its course and will not be put off by turmoil in emerging markets. is that your view? altaf: we say underweight global bonds as well, including the u.s.. strong. economy stays and we see no reason for the fed to alter its hiking cycle. whether that is because of emerging-market risk or something else, for us, it is about as interesting as watching paint dry and it will keep continuing. anna: it relies on a lot of
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decoupling for the fed to do , not fingers in ears having to react to emerging-market turmoil. some have said turmoil has made the fed hit the brakes, but not this time seems to be one of the messages. altaf: i think you are absolutely right. last year felt like a year of synchronized global growth. this year feels like a much more decoupled year. an america first policy, whether the fed is working on the same as trump or not, it is thinking about the american economy and where that is going rather than worrying too much about the global perspective. anna: trey conversation set to -- trade conversations set to take place between the u.s. and china. a ceo saying that the u.s. will be a loser. we will see slower trade growth 4%the united states by 3% to
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, and he thinks that will be a big factor. you would say it is up to china to come to the table. you think china blinks first? altaf: a global trade war is a lose lose for everyone. it will hurt the u.s. and the rest of the global economy. in terms of where people are in terms of global norms of trading , we think china is a lot more offside than the u.s. and other global trading partners. i think that has been recognized, and i think that does mean it is time for china to make a few confessions come to the table. clearly without losing too much face, and start negotiating rather than engaging with posturing. anna: they are allowing the yuan to weaken amongst the chaos. it is surging on thursday and a little bit more stable right now. do you think this is the chinese saying there are talks ahead and we will pause things here? altaf: the chinese have felt enough is enough. benign neglect has been the
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policy for the last few weeks. it feels like, ahead of the stocks, they are trying to shore it up. more domestically. they feel like they are in a stronger position going into these talks. it is up again today, .1% higher. people could be hurt by it. it is the pace of the move that really matters. he said the u.s. exporters, emerging-market debt suffer will continue to as they have over the course of the year, but if this is a creep upwards, then maybe it will not hurt so much. a surge upwards could be an issue, and that is kind of what we are looking out for. anna: what are you looking out for from jackson hole? we have not got the full agenda. are you going to be looking for clues strictly around fed policy
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from jay powell or will it be more about the communications strategy and those themes? altaf: it is about the broader picture, how the fed sees its economy,in the global whether as we were saying before, it feels like it is all about the u.s. economy, and that's make sure america is on the right footing. is it about fitting into the picture?obal the topic of the conference is about global trade links and the structure of that, and how that affects policymaking, so i think it could be a very interesting few days and could really highlight a new look for the fed, if you like. anna: thank you very much, altaf kassum. a new look for the fed. we will look for that later on this week when we are watching what's going on in wyoming, jackson hole. a quick line on the energy company out of south africa. we mentioned their earnings. we may have run the graphic with the dividend. there is a correction, so apologies. 79090 rand in terms of --
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rand. investors are scratching their heads over the price of gold. why has the alloy metal been falling for weeks straight? this is bloomberg. ♪
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anna: good morning everybody. 6:30 here in london. a: 30 if you're in mecca. mecca -- you are in 8:30 if you are in mecca. eastts a class the middle are closed -- across the middle east are closed this time of year for the pilgrimage. is get back to the main story. nejra cehic has it for us. >> we have seen some gains in the session only in the msci asia-pacific index. a touch of weakness coming through on the nikkei. we are pretty much unchanged on be -- p
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it is a fairly big week. traders are so trying to assess what is going to come of the u.s. china trade talks that are set to resume this week. that is how asian equities are shaping up at the moment. it was with such -- switch the short and take a look at the lira we are so unfocused even with turkish markets closed. you may see bigger swings. volatility in the lira actually hit up record -- hit a record. 64% on monday and it has since come down from that. it has really been pushing that fx volatility generator. there is another great chart in the library showing that. implied volatility in the lira is twice that in the south african rank just to give you some context. the turkish lira pre-much unchanged. some -- we saw -- we saw weakness on friday. the yene dollar-yen,
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has been acting as a safe haven this month. it is the only major currency that has been gaining is for the month of august. what is interesting is hedge funds are still sort of short the yen. how therelking about may be some pain because there are some bearish signals and dollar-yen. the lower part of the chart, if you look at the moving average convergence, divergence indicator the two things come up has dropped below zero and also dropped below the so-called signal line. the last time this -- dropped below zero was january. that is one bearish signal. also, the bearish trend that we have seen their towards the end of the chart. another signal we could see some more weakness in dollar-yen trading at 1/10 right now. anna: with get an update with juliette saly from our studio in singapore.
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juliette: italy will press ahead to go ahead with highway concessions. that is after the offer over about 5 million euros in additional aid. deputy solving he said -- sal vini said they should rebuild everything and compensate everyone for the disaster of the bridge collapse. donald trump's lawyer has said truth is not truth when discussing why has the interview not interviewed robert mueller for the interference and white is not a good idea. when two people like trump and former fbi director james comey told different versions of the same story, it is somebody's version of the truth, not the truth. the president- will voluntarily speak to investigators. this is nearly as emily people
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gathered in relief camps across at the southern state. the death toll has climbed to 341 since the monsoon started in june. it is estimated that the worst flood -- it is the worst but since 1924. $2.8 billion of damage. global news, 24 hours a day, on-air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. anna? anna: thank you very much. let's turn our attention to emerging markets. the pain is not over yet. turkey's credit rating was further -- casted further into junk after a chaotic week for developing economies. venezuela has devalued its currency by 95%. this is not the only drastic measure by the president. , inflationn bolivar is forecast to reach 1,000,000% this year in the oil-rich latin american nation. we are joined by bloomberg
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global emerging markets justin carrigan. is this new on turkey? move or is this -- does it move or is it catching up? and think it compounds concerns the arguments that have been very well express up to -- of until now. many commentators and economists out there, it will not move, but it will do is probably going to he has been, forthright by blaming external forces for turkey's predicament at the moment. that will give him further, if you like, cause for rationale on that argument, if you will. know, -what- we will not see much of a selloff on this no, --
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np, we will not see much of a selloff on this. pityme degree, it was a that they removed some of the goodwill that had been coming through on thursday. if you remember president erdogan's son-in-law also the economy minister, spoke at a conference call to several thousand traders and investors thend the world to map out steps of the turkish authorities would take to shore up this crisis. we are kind of back to where we started and we see today that the lira is kind of going sideways at the moment. still, at very elevated levels in the will continue to be a worry for the turkish authorities. is not a biga, move is it, by turkish lira standards? have beenthorities, quietly and acting some measures in response to the crisis.
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not necessarily announcing with great fanfare what they are up to but it is having an impact that you might say from higher interest rates. >> that is right. with the central bank has done is effectively close the window were banks have been borrowing up until now and force them into the -- a different window where rates are actually higher at the moment. the effect thereof has been a 150 basis point increase a foreign cost for banks. if they move to a higher rate again in crow lows the current window we will see an even tighter restriction on banks. we have interest-rate increases by stealth and you can also remember last week that the turkish authorities put limits --certain soft transactions swap transactions, the effect to stop people shorting the lira of short which is a capital control
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when you look at it closely. there have been these measures, have not well -- been well announced or trumpeted but there has been an attempt to shore up the lira and address some of these issues without necessarily making a big fuss about it that might upset president erdogan. anna: venezuela then, what can moved tof maduro's devalue the currency? he is taking it to a cryptocurrency. explain. anna: that is right. this is a recognition by president maduro that venezuela is in a very bad place. all thet have to list nasty things that are going on in terms of people leaving the country, inflation out of control, and the ball of art rendered worthless by what is going on -- bolivar rendered worthless by what is going on. 95% evaluationly
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, he has posted the minimum wage at the same time, and he is -- has introduced kiosks around the capital and other places where currency will be distributed at government rates. it is somewhat unorthodox and it is a homemade plan. we shall see to what degree this impacts the very critical situation in venezuela. and do not think many people are very optimistic that this will have much of an effect. anna: think you very much, just in for joining us -- just in -- justin, for joining us. i want to show you this chart. this is what justin was referring to. this is overnight lending rates jumping as the banks shot the repo window. is this thinks that's how things are going to move? we do not see necessarily big
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declarations of actions we see things moving behind-the-scenes resulting in something that looks like a higher interest rate. >> will turkey has done is they have introduced cap controls in effect a rate hike through the back door, i think ahead of the holiday effectively this week, that was a smart thing to do. have put a floor under their currency it feels. it does not address the issues of the economy but it gives people a little bit more confidence that the lira is not going to keep falling. anna: how systemic could it be for you? have two different views on friday, one guest saying this is really systemic, the size of the turkish economy is take, -- big we cannot let a collapse, the other one was the banking sector has been over them -- overdone. the tradeh economy, link issues and really fascinating to see that the biggest trade link that they have is of germany. no surprise that it is the
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german finance ministry that said that turkey is now a global economic risk. according to germany this is right up there on their radar as a global economic risk. >> germany is very exposed but at the same time we know about some of the key european banks that are exposed. all in all, we are in the latter camp that you mentioned. with think it is a specific issue to turkey, they have a relatively small weaken the equity indices and we do not think that turkey by itself could bring either of those markets down and emerging markets. but, the key is where the sentiment of the investors toward emerging markets. they start to sell other pieces of the emerging-market. anna: if you need to do that, thank you, stay with us we will be back to you shortly. gold is in the midst of its worst run this year. the precious metal has tumbled amid growing trade tensions among raising rates, and a strengthening dollar. but why?
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let's bring in our metals and mining editor in singapore. today about why all of this chaos and emerging markets is not -- has not been good for gold. why has gold not performed in recent markets? >> the real issue is, when you have emerging-market turmoil, you have worries about geopolitics. you have concerns about a global trade war. you have the unpredictability of a u.s. presidency in times past, people would have flocked to precious metals and to gold, but that hasn't happened this time around. people have gone to the dollar. and things like u.s. treasury's. also, hedge funds and other speculators in new york have cut their bets that are most bearish on gold since 2006. investors of also been pushing back on their holdings. investors fundamentally, the story here, is that investors
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are going to the dollar rather than precious metals. anna: i am looking at a correlation. the 20 day rolling correlation measure, it is a correlation between what happens with gold and with the dollar. where does the market see gold prices going in the near-term? i think you're absolutely right to point out the correlation. the future of gold this year does depend very much on where the dollar is going. if we see a dollar weakening we could see more upside in gold. but, apart from that, that is the main thing. unless there is something that we have not forecast. it is hard to see gold making head waves. the goal does not pay the interest. the fed is tightening. it is a tightening cycle. it is shrugging its balance sheet. that makes gold even less attractive in that environment. it is hard to see what drives will be push on the outside. having said that, in the longer
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term, when the fed does move potentially toward anything cycle, a long way down the road perhaps, and concerns reemerge tout the u.s. level of debt, in the u.s. is more than triple six 2007, we are expecting it -- a budget deficit perhaps by 2020 of $1 trillion because of the tax cut, because of the new federal spending, then you make a your interest in gold. a lot of people will be saying look, gold is always good to have some in your portfolio just as insurance, just in case rings do not go well. things go belly up. that could happen. that is what the whole gold -- a right now short-term -- upside is difficult to say. anna: thank you so much our mining and metals editor in singapore. advisors are so with us here in the city of. great point that he was making
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about the correlation between gold and the dollar. it seems that that matters. that seems to matter more than any kind of safety bit. >> at the moment, you have not got a strong view that inflation will spike up. global growth is so strong but not strong as it was last year. china is definitely coming towards him landing -- some sort of lending. there is no room for commodity. with the dollar being a strong as it is it is hard to invest in gold rayna. -- right now. we are looking at the long duration treasuries where we think there is a flight to safety that is where people are going to go. anna: not the short-term because as we talked about the market is assuming that the fed stays on course. you think there is room in the long and? -- the long end? >> there is a structural demand from hedge funds and insurance companies. we feel that is a safe place to hide if you are worried about a bit of an insurance protection. anna: thank you very much. great to see you this monday
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morning. strategy.f investment you can interact with the charts that we are using during the program if you are a bloomberg customer. to the go is a place to go -- tv go is a place to go. greece officially concludes its program today. debtmbolic moment after a crisis that left the economy and the likes of its people completely changed -- the lives of its people completely changed. we will be speaking to that european commissioner for economic and financial affairs. that interview, just after half past 11:00 london time. this is bloomberg. ♪
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anna: good morning everybody, early morning if you are over in new york. 1:49 in the morning in new york. 6:49 in the morning here in london.
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hole will be not in new york but in wyoming later on of course in the week for that symposium. let's check out what is trending across the bloomberg universe. where it with tictoc led defending his relentless work hours as concerns are said to have spread about his health and stability as he moves toward taking the electric car company private. all eyes on the sec perhaps. leading economists are predicting additional hikes next year. a survey shows a majority expect the rate to reach 1.25% by the end of 2019. most doors on the bloomberg terminal, let's run through those four you. in third place, but as well as 95% devaluation adds to the nation's chaos. a build of inshore positions in the treasury market could cause a squeeze. we talked about both of those stories. and, mec tariffs will hurt the
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united states more than the rest of the world. that said but what is going on in greece. todayilout program ends after a decade of crises that required more than 300 billion euros in aid. the country remains in facenation and the lenders higher financing costs when the ecb stops accepting government debt as collateral tomorrow. we of the senior research fellow at the overseas of allotment in -- institute. we are talking about this big isnt today, but how free greece going to be to run its policy its own way from here? >> good morning, anna. greece is still as you know, still under significant fiscal constraint. even though they are exiting their bailout program, they will still need to me a fiscal target of surplus in the primary fiscal
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the of around 3.5% for foreseeable future for the next couple of years. is more important constraint that physical commitment balanced with achieving sustainable growth. both having decent fiscal accounts and achieving pretty good growth as well in the next couple of years. that is a significant double constraint, if you like. anna: as we look back on the number of years of free bailouts over a. years,s -- a period of has the description worked for greece, you can define worked anywhere you like -- any way you like. like for the people in greece and their living standards. anna: -- >> it has worked in the sense that greece has been able to access the financial markets.
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waslatest bond issue oversubscribed, they will likely be able to access financial markets or bond market successfully. thehe other hand, greece is fourth poorest country in the eu at the moment. it is a difficult road that lies ahead in terms of achieving decent growth. above the 1% growth we have seen, we will have to achieve significantly higher rates of growth to see an improvement in the general economic situation here in greece. anna: what kind of reforms theresa may to see taking place in greece? those investors dipping their toes back into the market, perhaps they are excited by opportunities, what do they need to watch for in terms of reform? >> the biggest game changer is privatization. we have seen some developments around that.
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when you link that to growth, the biggest game changer in the growth numbers will be investment funding -- spending. it has been have, it is about 11% of gdp. germany has about 24% investment spending growth is the share of its gdp. i would say privatization and the type of investment spending we see will greece be successful in scaling back its public sector in favor of more spending in the private realm and how that feeds through to private investment spending. ofa: we're showing the death gdp -- depth of gdp. we are taken the point that we now have a surplus in the annual budget. what kind of drugs off this pose and how sustainable is a for greece now? >> the next couple of years looks pretty manageable.
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there is a push in liquidity. however, it all comes back to growth. if we have success, if we see growth sustainably accelerating that debt to gdp burden will be a little bit more sustainable over the short-term medium-term's. in the longer term, that debt to gdp number is quite high. at leastave to see access the market in a sustainable fashion, and we will have to also see privatization as well. the foreign minister wants to roll back some of the labor reforms including increasing minimum wage. what have wages been doing for the greek people? >> we just have declined significantly in greece. that is the main source of increased competitiveness that we have seen.
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so, we could not really say an improvement on the competitiveness front through the exchange rate. we have seen it all come through nominal wages and real wages as well. inflation has dropped significantly in greece. quitet respect, it is understandable that increases in minimum wages are being proposed, but not much else has been forthcoming in terms of improving competitiveness. i think wage bargaining and ways in which wage bargaining takes place or has been tweaked but we need to see. anna: think you so much for your time. , joining usdavid from athens. boon and merkel have their first bilateral meeting over the weekend. we will be live in berlin where
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the meeting takes place. it will be live in moscow as well. more on the markets up next, this is bloomberg. ♪ -- this is bloomberg. ♪
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anna: good morning from bloomberg's european headquarters. this is "bloomberg daybreak: europe." vladimir putin and angela merkel find common ground. shared concerns about donald trump's policies pushed the nations closer. emerging-market turbulence. venezuela carries out one of the largest currency devaluations in history and turkeys credit sinks deeper into junk. record treasury short positions as they await fed minutes and jerome powell's speech.
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good morning, everybody. 7:00 here in london. this is what we see in futures. we are expecting to be stronger at the start of trading day. things have been flat to positive in the asian session. overall we were higher. we saw the chinese market coming off a little bit. the nikkei weaker down by 0.3%. that is something we need to keep an eye on. this is the picture on futures. headlines from pepsico. i want to bring those to you. israelinction with the business, pepsico is going to buy soda stream international representing a 32% premium to 30 day volume weighted average in a statement coming through from one of the businesses involved. the deal will be funded with cash on hand.
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this is fascinating given the changes of top of pepsico. we will keep an eye across the israeli dimension to that. the futures were pointing higher when we look to those. let's show you the risk radar. we wait for a number of set pieces bentz in asia. -- set piece events. jerome powell will be speaking, we get more on the agenda on thursday. we get fed minutes as well. we will keep an eye on equity. the u.s. dollar is up 0.1%. not a great big move. dollar strength is a big part of the conversation. words of caution from jeffrey gundlach. the record short position in treasuries, he says that is setting itself up for something that could cause a squeeze ahead. the chinese currency looks little more stable this morning after a period of strength at the end of last week as we move toward trade conversations. the u.s. dollar is a little stronger against the turkish lira.
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we see turkish lira weakness, but that turned around in the last hour. we could see volatility in the turkish currency. now down 0.3%. we could see a lot of volatility because many in the middle east are on holiday for this week. not at their desks. let's get a bloomberg first word news update. turkey may be on the path toward a 300 basis point interest-rate increase. thanks has been cut off from borrowing at the benchmark to75% rate in forced to turn the overnight lending rate, currently at 19.25%. it is trying to counter the lira slump without formally hiking, a move opposed by president erdogan. turkeys credit rating was further cut by movies -- moody's. venezuela has taken drastic measures to shore up its
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economy, devaluing the boulevard .- bolivar the government will try to offset the shock by raising the minimum wage three and a half thousand percent. inflation is forecasted to reach 1,000,000% this year. donald trump's lawyer has said truth is not truth when discussing why having the president interviewed by special counsel robert mueller for the probe into election interference is not a good idea. rudy giuliani told meet the press that when people like trump and james comey tell different versions at the same story, it is somebody's version of the truth, not the truth. the comments cast doubt over whether the president will voluntarily speak to investigators. giant of fixed income markets is warning a buildup of speculative short positions in the treasuries market is setting traders up for pain. according to be commodities futures trading position, short
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positions on treasuries has had the highest level on record. jeffrey gundlach says the extreme nature of the opposition has raised the risk of a possible short squeeze. 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. you can find more stories on the bloomberg at top . a few key markets are keeping the regional index higher in asia. the nikkei weaker by 0.3%. hong kong is looking good, as is india. a lot of the ends, we had data from thailand showing gdp grew at a faster rate than expected. speaking of the aussie market, all eyes on bhp billiton coming through. let's look at how bhp has closed out the session. it trades in london as well.
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it will be key for market watches. bhp closing higher by 1.5%. in currency, we coming through from the commodity currencies -- and the new round of under a little pressure. beenhinese yuan, we have -- for a third day in a row, lysing to -- rising to its highest level in a week. that is going to be one currency in focus ahead of the new tariffs coming into effect. anna: thanks very much. let's start with some geopolitics this hour. hosted vladimir putin this weekend in their first bilateral meeting in germany since 2013. they discussed syria, iran, and ukraine, where the annexation of crimea plunged their relations into crisis. concernsd putin shared about the unpredictable nature and impact of recent u.s. levies.
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joining us from moscow is bloomberg's germany government editor from berlin. let's go to you first. after years of strained relations between these two, why did angela merkel open her door to president clinton? ? is it allt putin about trump? >> it is a host of factors. trump looms large. this has been some time in the making. putin and merkel have been in power for a long time, both of whom know each other very well. they are stepping up their schedule of phone calls, something merkel often emphasizes, we are staying in touch with russia despite differences, and also there visits, maybe it is notable
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putin was not invited to the .hancellery in berlin but to the chateau, which is in the countryside. it is mostly about trump as the kremlin was saying afterwards. we have not heard much from the german side. the interpretation is pretty obvious. they are being pushed together -- as a prudent spokesman said, by the unpredictable the if trump. did not get the chancellery, just the chateau. is this seen by russia as coming back in from the cold? welcomede back -- back? >> it is a step in that direction. big breach in relations in 2014 at this is a move toward normalization, recognition of russia's role in rolled problems.
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is too important not to consider. while the germans tried to play down the significance of it, for the kremlin it is a significant. , donald trump is a big figure driving that move. anna: merkel has been reaching out to erdogan, now clinton -- putin. what does this tell us about her position on the global stage? -- germany always has this issue of being at the center of europe and having -- being this great export machine and at the same time of course, importing russian gas, which is something merkel and putin can agree on easily. it is more like, she is having to shift ground. the one place where she is vulnerable, putin of course immediately seized on.
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it is fair to say in a backhanded way, the refugee issue. although there is no quote unquote refugee issue in germany, it is a constant topic. and putin'se syria support for assad in syria come into play in this latent way in which merkel is honorable. -- a vulnerable. anna: she has been reaching out to erdogan and you wonder whether that is part of the refugee conversation. both erdogan and putin with his role in syria. merkel has been one of prudence must passionate opponents -- putin's most passionate opponents. why is she reaching out? >> a lot of it has to do with donald trump in the fact that
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merkel feels herself to be a leader in the west, taking the mantle from the u.s., which is preoccupied is not taking that leadership role. ukraine in syria, the u.s. is not playing a role. merkel seems to be the one to step in. , it is an opportunity for her to make progress on these issues and get her agenda in, particularly on syria, where the refugee issue is a vital one. putin's comment -- comment was if you don't help us bring a settlement there could be a bigger refugee crisis in the future. anna: thank you for your thoughts. really fantastic to get both perspectives on what we saw over the weekend. joining us this half hour, the of investments.
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i spoke to our guests about whether this makes russia more investable, brings russia in from the cold. this is very small, the did not make it to the chancellery. something quick material is happening on the global stage. trump and his reshaping of the world alliances. >> that is true. it shows you the importance of international dialogue. the russians have in making more of it than the germans have. the other issue is being proposed gas pipeline, which gas.ny -- needs the whether they are going to go ahead with it, rather than go through ukraine, that brings its own political issues with it. a number of things to discuss.
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the russians are very pleased they have been brought in from the cold. are: one of the things we looking at, leaving aside politics between these countries , will be contemplations between china and the united states around trade. maybe we don't get too excited just now. how much can you see any kind of resolution coming? i was reading an interesting piece by one of my colleagues who said in singapore at an event, attendance were asked whether they think trade tensions are going to be something that outfit president trump. lots of people said yes. this has moved the dial regardless of who is in the white house. is that how we should look at trade? >> populism is writing everywhere -- rising everywhere. trade barriers might help political leaders in a number of countries. this is the card which president trump is playing in the u.s.. lookiew, especially if you
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at it from a perspective of being an economist, trade barriers do not help economies, but they can help all editions. -- politicians. he tried to curry favor with the electorate ahead of the midterms. i am guessing the more sensible people in the white house are saying, we have got to try to get these trade barriers down and get a better deal with china. perhaps this is something which is going to be recurring until the midterms are over. more stability in the chinese currency as we head towards these talks. have we seen the chinese weaponize in the currency and now they are saying, we will calm down and try to get it to be stable given that talks are now on the table? therere is a reminder that the chinese are losing some competitiveness by tariffs. the exchange rate can fall back. that is a dangerous game to play.
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but they don't want to do is in the situation of 2016 where there is a lot of downward pressure on the currency and you suffer capital outflows over a six to nine month period. china lost its reserves trying to protect the currency and restore confidence to chinese financial markets. it is possible the chinese are playing that game. it is a very dangerous one to play. it can get of out of control very quickly. anna: thank you, the chief economist at investec staying with us. a quick recap from pepsico. pepsico agreeing to buy soda stream at $144 per share in cash. the transaction is then valued at $3.2 billion. by texaco'sunded cash on hand -- pepsi co.'s cash
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on hand. keep an eye on mulberry as well if you're interested on high-end luxury. they put out a profit warning this morning. materially reduced if u.k. trade -- trends persist. the highest level of shorts on the 10 year. jeffrey gundlach issues a warning. we will get you analysis. coming up later we will be speaking to the european commissioner for economic and financial affairs. that just after half past 11 london time. ♪
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anna: 7:19 in london.
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8:19 in berlin. european futures showing moves higher at the start of trading. u.s. futures look flat. we will see how long that rally last at the start of european trade. let's get a bloomberg business flash. pepsi-cola has agreed to buy soda stream for $3.2 billion. the $144 per shale -- per share deal is above the weighted average price. pepsi co. says the deal will be funded with cash on hand subject to regulatory approvals. it is expected to close by the end of this year. elon musk says he will not take a different approach despite calls for -- to change the way he works. a letter accused him of inefficient use of human energy, something musk rejects.
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tesla shares fell on friday after a new york times interview in which musk described the past 12 months as the most difficult and painful of his career. demands by eu regulators may force banks like standard charter to shift more jobs to europe due to brexit. it has been waiting nearly nine months for eu officials to approve a banking license that will turn its frankfurt branch into a subsidiary, has been at the mercy of regulators. that is your bloomberg business flash. anna: thank you. a giant of fixed income markets has a warning for traders. just been likes of the build up of short positions in u.s. treasuries is setting traders up for pain ahead. bond investors are in for a big
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week with commentary from jerome powell expected at jackson hole and august minutes from central-bank policy meeting. the chief economist at investec is still with us. let's start with comments from jeffrey gundlach. these big short positions on treasuries. ,ssentially assuming the fed despite emerging-market turmoils , delivers the hikes that has been much talked about. is that your base case? brexit is for the time being. -- >> it is for the time being. most investors are agreeing. they see the volatility brought about by emerging markets is being temperate. what we should hear from the fed is number one, confirmation the economy remains solid, the labor market continues to tighten, but i think the important bit comes friday with the jackson hole
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conference and powell's speech. what clues does he give on how far the fed is prepared to move. we have heard about the fed wanting neutrality. if you look at the dot, it is suggesting rates will move. does the fed still think that? at what point does he think that may happen? we will see if we get any clues around that. what about u.s. divergence? what form will divergence take this year? is that one of the things we will see? what does that do for the dollar? fiscal stimulus the u.s. has brought about is having a positive impact on investor sentiment. continue? how do you view that? stimulus may have a continued impact on the economy next year.
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by its very nature, it does not have a long-lasting impact on the economy. coyotethese wile e moments ben bernanke talked about. >> exactly. we see the impact on corporate earnings and investment prospects not right now, but that is something to look at going forward. also the impact of politics, the midterms, is the special we have seen suggest republicans are struggling and democrats could begin to take the house back in november. we talk about this blue wave coming back. if so, that stymies the republicans idea for a second batch of tax cuts. anna: does that mean the u.s. does not decouple that far? is that the upshot? >> i think that is probably right. everybody is talking about rate hikes from the fed.
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what would begin to say is a reversal of the quantitative easing. back $50ill be selling billion of bonds every month. the pace is something like 15% of its qe. at some stage markets will begin to say, look, markets cannot carry on raising rates every second meeting. the have to pause and wait to see what happens. anna: this is the big balance sheet unwind. some people have raised concerns about the treasury issuing a large amount of bills at the short end. you see the treasury trying to atse money in bond markets the same time as the fed is pushing that money back into markets. is that something that worries you? >> the treasury market is very liquid and you can do that. the price you pay as you are going to have to burn high yields at a time when the u.s.
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debt is rising despite the strength of the economy. what you're talking about is the fiscal stimulus, increasing the deficit. it is not difficult, but it becomes more expensive. that is why we are seeing that short position data. anna: thank you. the chief economist at investec. continuing his conversation with us at 7:30 a.m. u.k. time. you can move over to bloomberg radio for that. stay here and you have the european open. if you're a bloomberg customer you can watch the show using tv . you get all of the charts and functions we have been using. the charts i have been showing. the trade function we showed earlier. the ones we use for all of our guests and reporters around the world. you can also interact with the team on that page. that's it for daybreak europe.
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the european union open is up next. futures in the u.s. flat the positive. ♪
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guy: welcome to bloomberg markets. this is the european open. i'm guy johnson alongside matt miller in berlin. matt: asian equities not giving us any sign of direction today. mixed trade there. european futures are pointing to modest gains. it is going to be interesting to see this market churn open in less than 30 minutes. guy:


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