tv Bloomberg Daybreak Europe Bloomberg August 31, 2018 1:00am-2:30am EDT
anna: good morning from bloomberg's european headquarters in london. nejra: these are today's top stories. anna: president trump threatens to leave the wto if it does not treat the united states better. he spoke to bloomberg in an exclusive interview. theident trump: i would say wto is the single worst trade deal ever made. if they do not shape up, i would withdraw from the w tee up -- the debbie deal. nejra: the ceo tells bloomberg that markets will be able to escape the effects of trade tensions. being, i amime positive.
it is relatively contained. the rest of the world economy is stable. the argentine peso slumps further, even as the central bank raises interest rates to a global high of 60%. indonesia, turkey, and india also feel the emerging-market pain. anna: good morning, everybody. it has just gone 6:00 here in london. you are watching "bloomberg daybreak: europe." let's look at the risk radar. reasons to be gloomy in the asian equity session. we are down by 0.3%. trump, we understand, planning tariffs on another $200 billion of chinese imports, even as the consultation period has not yet finished for that particular maneuver.
and he had a conversation with the editor in chief, and is threatening to pull out of the wto. suggesting the united states could add into that the emerging markets turmoil. a fume reasons to be -- a few reasons to be gloomy. stable,es are fairly the dollar is fairly stable, the yen is fairly stable. s&p futures pretty flat at this hour. we saw a little retreat in u.s. stocks,.near those record highs we did see a retreat yesterday on all of that news around trade in the tensions with nafta. we have seen a strong rally in stocks since the middle of this month. we are heading to the last trading day of the month. we are heading into the argentine peso. the u.s. dollar making gains of 13% in yesterday's session against the argentine currency. it has lost 50% of its value today, 20% this week, despite
interest rates as of yesterday at 60%. there is a contagion conversation here as well because we see the indian rupee at new lows, the indonesian rupiah at lows we have not seen since the financial crisis. nejra: it is interesting, because they have taken precautions. the rate hike, but also reaching out to the imf, and the peso keeps falling. what you are seeing is emf ask heading to a monthly loss, assets in general heading to a loss. but emfx heading to a six-month streakhe longest losing since 2015. i also want to talk about dollar bonds. vanguard does seem more emerging-market pain, but does see opportunities in this space. it is particularly favorable for columbia, croatia, and paraguay. it shows the yield spread of em's. it has widened more than 60 basis points to 359 basis points
60er five years, average 3 basis points. the question becomes, even though the spread has been widening, whether investors still will be compensated for their risk. anna: let's show everyone what is coming up in the program. we will have more from president trump from our exclusive interview. he spoke with john mickelthwait. what his policy did in terms of the removal of taxes in the united states, the fiscal stimulus, stay tuned for that. a lot more trade for europe. and the conversations around the wto as well. let's get the bloomberg first word news update with juliette saly. she is in our studios in singapore. 's argentina currency crisis has deepened as an emergency interest rate increase hit exit percent -- hit 60%.
the peso extended losses after the bank raised its benchmark measure by 15% to a global high. the hike is the second this latest attempthe by policymakers to defend a currency that has lost more than half of its value this year. rupiah flipped to a two decade low. -- slats to a two decade low. countries the deficits such as indonesia and india seen their currencies and bonds come under selling pressure. the argentinian price of and -- fallsnd turkish lira under the for rate hikes which is led to a return of foreign funds. warren buffett has told bloomberg that the u.s. banking system is "in great shape. also said he is still buying stocks, even amid record wall street highs. --i am buying stocks, but i
i am buying them because i think they will be worth quite a lot more money 10 or 20 years from now. i don't know whether they will go up or down today or tomorrow or next year. i know they are good businesses. becamee: u.k. companies more pessimistic in august as concerns that brexit will hurt growth increased.according to a survey led to theconfidence lowest levels since december, with both trading prospects and optimism toward the wider economy declining. 21% of the companies intend to increase hiring over the following year -- over the coming year. global news 24 hours a day on air and tictoc on twitter, and powered by 2700 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top . it is getting real now in asia in terms of the tariffs eventually being implemented from next week. we are saying a lot of jitters in the markets, particularly hong kong and weakness in china
as well. the hang seng off either .9%, and a bit of our spite in korea -- a bit of a despite in korea. the indian rupee at a fresh low. e.m.'s starting to bite. we see the upper regional index up by 1% over the course of august. in terms of stocks we are watching, the reason you are seeing the weakness in hong kong is a decline in tencent. this as they start to clamp down on gaming addiction, particularly amongst children, clamping down on the number of titles. tencent off by 0.4%. the bank in tokyo falling by the most in a week, this after reports that the chairman may have siphoned ¥1 billion for personal use. we have been watching the airways -- watching jet airways. they are waiting for a clarification after the complaint. this company continues to push out its earnings results. anna: thank you very much.
juliette saly in singapore. president trump has threatened to pull out of the wto if it does not treat the united states better. he spoke exclusively with bloomberg's editor in chief john mickelthwait, saying that nafta was the second worst trade deal ever made apart from the wto. president trump: i would say the wto was the single worst trade deal ever made, and if they do not shape up, i would withdraw from the wto. anna: and in another sign that trade disputes between the united states and their allies are not soaring, he dismissed the eu's offered to scrap tariffs on auto imports. president trump: not good enough, nope. they do a lot more auto business then we will ever do. first of all, it is not just tariffs, there are barriers. downwill take the barriers and charges no tax, but it is not good enough because they will always sell more cars.
their cars, their consumer habits are buying their cars, not our cars. anna: donald trump hit out again at china, saying the world's second-largest economy would not outlast the u.s. in a trade dispute. he said they were re-examining how a country such as china is manipulative their currencies. president trump: it is a formula, and we are looking very strongly. as you see what has gone with the yuan, they are trying to make up for lack of business by cutting the currency. it is no good, you cannot do that. nejra: joining us for moore is our -- joining us for more is our editor. let's start with china. what have we learned in the past way for hours about the next round of tariffs? bloomberg is reporting that trump will go ahead and impose the $200 billion with the
tariffs, and shortly after the public comment period ends. there were question marks about whether or when and how much he would impose, but we are hearing those go ahead. china has been bracing for this for a while. they have already announced they are going to drop her talent terry tariffs on $60 billion worth of goods. they are ready for this. many see this as more of a long-term fight now between the countries. anna: good morning to you. something that is rattling the markets. how the chinese would retaliate if this is the action, what about the threat to pull out of the wto? it is something hinted that before but rolled back by others in the administration. how serious do we take this? daniel: that is the big question. these threats come and go, and this is the latest one from
trump. starting to pressure the world trade organization. he mentioned in the interview that there are a lot of decisions going the u.s.'s way, now that he has been putting this pressure on. he sees it as his way to get the outcomes he wants at the wto. whether he will actually follow through with the threat to withdraw, that would be a monumental decision of ending the global trading -- upending the global system the u.s. helped put in place. nejra: thank you to our editor daniel ten kate. joining us now is the investor at wells fargo asset management. good morning to you. everyone closely watching this space. how is it translating to the choices you make in the world of credit? guest: at the moment, and if you look at trump's comments yesterday, there is a negotiation and coming and going in terms of what he is putting forward.
there has been progress if you look at the discussions in mexico. there has been a degree of progress in the discussions with the eu. i think his grill vogel point is china, but it is causing a degree of uncertainty in the markets. we take that into account and we use that in calibrating the risk profile. to you.od morning let me ask you about how you see things developing. i have a chart that underlines the lack of balance in the trade relationship, which is what trump has complained about for a long time, but it also highlights that if he goes ahead with tariffs on $200 billion more in tariffs, the chinese cannot respond in kind. they will perhaps want to do something else. the main risk from the trade war is sentiment. if the chinese start imposing other types of barriers, this is not going to be positive sentiment. henrietta: no, and i think that is quite right. it is hard to predict how the
tariffs will play out given their scope. it is quite hard to see how china is going to retaliate. of this, it ise not about trade elements. it is also about intellectual property. there are a variety of topics that are being approached. i think nejra is quite right. the big aspect is sentiment and how the markets are going to react to that uncertainty. nejra: how specifically are you recalibrating your risk profile? henrietta: if you look at our portfolio compared to last year, we have taken down the risk profile. we are expecting more volatility in the markets, which we have seen to an extent through the emerging markets. that is where the pain points have been felt. it has been in emerging markets. you touched on earlier, the country got the higher deficits and it is dropping.
also, it is translating into a higher dollar. nejra: and i think trump said emerging markets are looking to weaken their currency. yes and no, it is his action causing a bit of a push. that he did say he did not think the currency should be controlled by politicians. [laughter] anna: that is how you are be calibrating the risk. what are you doing with inflation? he said we have no choice but to push this on to the consumers if we see tariffs. and if that is globally applied, how inflationary is this? henrietta: i think that is right. we continue to see these tariffs coming on. we will see a bit of inflation pressure coming through. it is to be transient, though. i expect to a degree, central banks will look at it that way. you look at the behavior of the ecb in terms of inflation.
still well below what the ecb would like. enoughu.s., will it be to change their process in raising rates? no, but to continue with the culture of raising rates. nejra: henrietta pacquement stays with us. taking a bigger bite of the apple, warren buffett has already a large stake in the company. why he thinks the text giant is underpriced. anna: and we will have more from our exclusive interview with thiam. he gives us his take on global trade tensions. this is bloomberg. ♪
medical equipment, they created a new standard. not that doesn't standards are higher, they are different. so our companies cannot get the medical equipment in europe. the big medical equipment. you have to change your ways because the european union, it is almost as bad as china, just smaller. with president trump speaking in a next was of it interview with editor-in-chief -- speaking in an interview with our editor-in-chief, document tariffs. i have a fact check that shows the eurozone is actually bigger than china in gdp terms. this is the eurozone showing that is bigger than china. but the direction is fairly clear. let's get a bloomberg business flash. here is juliette saly in singapore. donalde: u.s. president
trump has said he is considering a capital gains tax break. the capital gains change what/tax bills for investors -- would slash tax bills for investors by adjusting the purchase price. he made the comics in the inner -- you made comments in the interview. there are a lot of people who love it, there are some people who don't. but i'm thinking about a very strongly. juliette: china's regulators plan to limit the number of online games and the total number of titles. that as beijing tries to mitigate gaming addiction. the measures come on top of a freeze of game approval nationwide. shares of game related stocks across asia fell on the news. wpp is set to name mark reed as its new ceo as early as next
week, according. tobloomberg sources he has stood out as a likely successor. he became the interim operating officer after the departure in april and has been at the company for most of the three decades that sorrell took to build the largest advertising firm. nejra: thanks, juliette saly in the singapore. warren buffett has told bloomberg that the banking system is in great shape. he also said he is still buying stocks even admit a record wall street hike each -- admit record wall street highs. i i am buying them because think they will be worth quite a lot more money 10 years or 20 years from now. i don't know whether they will go up or down today or tomorrow or next week or next year. i know they are good businesses. in relation, you have to measure investments in relation to each other come and/or alternative for most people is fixed -- and your alternative for most people is fixed income.
what you rather invest in a company earning 15% or 20% in bond --pital with a 3% or a 3% bond? at the same time, there are stocks that are good bargains. when the markets are high, that means values have gone up quite a bit. you are sitting on a lot of cash. don't we need to have more in the marketplace? >> i love it. i don't love it for the country as a whole, but that creates prices that make me want to shovel money as fast as i can. but we have been shoveling out money anyway. it is not as attractive as when i was buying in 2008 and 2009. 1974 was the best year for buying securities in my lifetime. that will happen from time to time, but you cannot sit around and wait for it. you will never catch the bottom and everyone will be terrified.
we keep buying as long as we find something attractive. and at a reasonable price. if it is at a juicy price, i love it, but i keep buying. >> health care is something you have been outspoken about. let's go back to 1960. the total gdp in taxes went from 2% to 4%. health care has gone to almost 18%. you are now involved in a joint venture with j.p. morgan to correct that. how will you fend that cost? >> i wish i knew. get the smartest people we can working on it. we have a terrific later on it. -- a terrific leader on it. expect something will happen on it next year or the year after. industry $3.3 trillion . it has all kinds of factors. you cannot just chip a little here and there.
we are not in a hurry. we would like to be, but we will not try to do something faster than it can be done. >> what is he doing? >> he is thinking and hiring people. not many people. he has been thinking all his life, but he is now focused on looking at the system and saying, is there a system that could check this growing tapeworm, which is a little 18% of gdp and growing every year? and can we do that and at the same time deliver a better product for patients? anna: that was the berkshire hathaway ceo warren buffett speaking to david westin. he was giving us some of his top calls in terms of liking stocks. henrietta pacquement. warren buffett likes stocks.
given how far we have run, or u.s. equities in particular, how do you balance that against your world? the credit universe? henrietta: i think it is fair. his comments on stocks compared to bonds is an interesting one. from our perspective, we are slightly bearish on rates, particularly for europe and the extent -- to an extent in the u.s. the risk is the political risk. trade, e.m., and so on. we are also bearish in terms of rates. andher area that we like, that touches on his stop comment, we quite like financials. you have to watch the volatility there, but that is an interesting place to play in the credit markets in europe. particularly as european banks have been improving their fundamentals. and we still like loans. if you look at the investment grade, that is another area we like.
we favor it over high yields. nejra: is there any true competition for u.s. equities in fixed income? i am thinking about the front and particularly. henrietta: the front and is -- the front end is for a lot of things. you look at the short end, you could get 2%. if you are looking at emerging markets, it could be attractive if you do not want the volatility. . , if you're confident about the groswth. nejra: henrietta pacquement stays with us. coming up, talking trade with tidjane thiam. we will bring you the complete ceo with the despicably interview with the ceo next. this is bloomberg. ♪
nejra: good morning, everybody. this is "bloomberg daybreak: europe." the ftse 100 futures are a little weaker, and there are a few reasons to be gloomy. let's take a look at what you should be watching for today. the eu brexit secretary is back in brussels today to meet with his eu kind of hard -- eu counterparts. we are in continual negotiations. nejra: we have seen the pound we can this week because of comments by him, so that has been the focus of the prospect of a no deal. also in terms of what we are watching, the orion neutral deal
-- the iran nuclear deal. anna: we get a sovereign rating update on italy. that is fairly unusual this time of the morning. getting headlines across from the italian newspapers. he is saying italian politicians may seek european traditions. t italy alsoria -- reporter: it is the last trading day of the month. asian markets are barely holding it together. i say that because we just turned positive of it in japan and china. the cost be in the south korea has been up, but we have seen them -- the kospi has been up in south korea. this is the trade war is back front and center as people close to the manner say donald trump
is ready to impose his chinese import tariffs as soon as next week. also, president trump a hit at the wto, threatening to pull them out. want to moveina, i on and talk about the strong economic data we saw out of the country this morning. chinese manufacturing pmi and nonmanufacturing, both edged higher for the month. you can seestion, it at the tail end of this church, but the question is in the face of these new tariffs, can they remain resilient? i want to look at what is going on in emerging-market currencies. the peso close-out the day more than 11% against the u.s. dollar. the central bank tried to stem the loss by hiking rates 60%, an extortion very amount for any other country. the main thing here is the peso
is not part of the fx index. you can see at the bottom, the parity for the peso is even stronger, one of the strongest we have seen in terms of parity net strength for the year. the peso is the worst emerging market currency for the year. very quickly, i want to end on the worst emerging market currency for the month. that is the turkish lira down nearly 30% of the month of august. it is the worst drop since the lira became free floated in february 2001 from the turkish government. the em currencies is the story today. nejra: absolutely. also for the month, e.m.fx heading for a fifth monthly lost. nellis get the first word news with juliette saly. u.s. president donald trump has threatened to pull out of the wto if it does not treat his country better.
he wants the us to take a more aggressive approach to the organization, arguing it is a get bubble of dealing with a nonmarket economies such as china. the wtowithdrawing from would be far more significant for the global economy than even trump's growing trade wars. he made the comment in an exclusive interview with john mickelthwait. theident trump: i would say wto is the single worst trade deal ever made. if they do not shape up, i will withdraw from the wto. juliette: donald trump rejected a european union offered to scrap tariffs on cars. his comments in that interview with bloomberg came hours after trade commissioner told parliament lawmakers that the eu would be willing to bring down zero,he car tariffs to all tariffs to zero, if the u.s. does the same. president trump: it is not good
enough, nope. because they do a lot more auto business than we will ever do. first of all, it is not just tariffs, they have barriers to the cars. they will take the barriers down and not church tax, but it is not good enough because they will always sell more cars. their habits, their consumer habits are to buying their cars, not our cars. juliette: warren buffett has told bloomberg that the u.s. banking system is in great shape. the berkshire hathaway chairman and ceo said he is still buying stocks, even admid record wall street ties. >> i am not buying stocks because of next year, because they will be worth more money 20 years from now. i don't know whether they will go up or down tomorrow or next week or next month or next year. i know they are good businesses. becamee: u.k. companies more pessimistic in august as concerns that brexit will hurt growth increased.
according to a survey, business confidence led to the lowest level since december with both trading prospects and optimism declining. only 21% of the companies intend to increase hiring over the following year, down by 30% in july. global news 24 hours a day on air and tictoc on twitter, and powered by 2700 journalists and analysts in more than 120 countries. this is bloomberg. anna, nejra? emerging-market assets are headed for a monthly lost as declines in argentina and turkey's sparked fears of global contagion. a ceo does not think that it will spread. tidjane thiam spoke to tom mackenzie. economies.ll-managed economies that have a current account surplus are public finances in order, and have
significant foreign reserves. the market, when people fear contention. fore is no contingent well-managed companies -- there is no contagion for well-managed companies. have aecause they significant current account, and that makes them vulnerable. it is not because they are emerging markets. it is important to manage the fiscal situation responsibly. it is important to be in the current accounts office. of will find with a lot emerging companies, the ones that have pressure in turkey and brazil, have more fundamental -- [indiscernible] ] i met with all the senior authorities, and it is clear that argentina is a real
challenge to deal with. but to extend that to other emerging currencies is too simple. tom: in terms of the contagion from turkey in particular, you think it is being overplayed? tidjane: exactly. i don't think there will be material contagion overtime. it is a strong, spontaneous reaction. tom: and the impact on european banks? tidjane: it is manageable. they are in the best situation. back then, you look at the size of the turkish economy. very good production in turkey. positive long-term in turkey. demography is one of the reasons why. with reasonable exposure, they have exposure to turkey. tom: does it unwind any
positions? tidjane: no. very minimal. tom: in terms of italy, we see concerns about the debt. there is reasonable appetite for yesterday's auction, but the yields have picked up slightly. are the markets underpricing the risk coming out of italy? tidjane: that is a tough question. i would be very cautious to say if they are underpricing things. have it close enough to strongly. [indiscernible] tom: would you say the ecb should step in at some point? they -- it will do what is necessary. we see overtime that it is very resilient. when never worried
portugal, ireland, greece, i was never concerned. history is important. europe has a rich history. and they will do whatever is necessary in the end to ensure the euro continues. tom: switching focus to the u.k. and the inevitable question on brexit, it seems like the deadline has been pushed back. it implies there is no deal. you must have game planned this. we all presented plans. everybody hopes there will be a reasonable outcome. was tidjane thiam
speaking exclusively to tom mackenzie in beijing. and our guest joins us from the blog, and henrietta pacquement from wells fargo asset management is still with us. christine, good morning. , the lowest since the asian crisis. questions of whether there is contagion. when i look at argentina and see the fact it is hiked rates to the highest in the world, and you look at indonesia when the central bank has raised rates or times since may -- four times , --e may -- guest: to protect currencies, but there is this combination of other fundamental issues, for example in indonesia and turkey.
the extent of which you are not seeing in indonesia where growth is good, the economy is developing. it has a lot of potential to fuel the growth for years on end. when you take into account the other fundamentals, apart from the fact that central banks have done similar things, that is when you can start to see maybe there is a way for these currencies to diverge from each other. let's get your thoughts on this.i have a function on the bloomberg . poster some of those children for the market crisis at the bottom. the argentinian peso, the turkish lira, the rand as well. there is something you said which i thought was interesting, that investors are still in the mood that things could still get cheaper tomorrow. 'ee's point,
there is variation. henrietta: i think you have got a variety of the metals in the emerging markets side. not all countries are in the same situation. we have seen the weaker shoes drop. argentina is an economy that is in transition from a consumption economy to something looking at deficits as well. that is not very integrated into the capital markets. a weak link. when you look at turkey, for me it is a slightly different situation. turkey.very specific to you have businesses, but you also have a political situation which is difficult. concentrating power around himself and question marks about the independence of the central bank. i agree if you look at argentina, turkey, they are
idiosyncratic stories in their own rights. however, we are in an environment which is a bit more difficult than it has been in recent years for emerging markets because of the changes to the dollar. nejra: is this as simple as investors shying away from economies with current account deficits? because indonesia has that similar to turkey. kristine: it is a big part of the issue, because it is something we saw a few years ago during the taper tantrum era, where a lot of the countries that have a weaker account work rewarded. the ones who made vast improvements were rewarded eventually and managed to rebound. deficits are one of the aspects investors are looking at, but to henrietta's points, there are other factors investors might want to take into account. for instance, the political situation, the central bank looking at that
altogether and making an assessment of who is in place to weather the storm. anna: and the turnaround in the dollar trajectory. henrietta, this seems key, even if we got rid of the idiosyncratic risks around the markets, if we have a fed that is hiking and returns that could be made in the united states it does way wthey do, little change. henrietta: correct. i think you need to see a change in the trajectory of the dollar to get confident in emerging markets. you have to realize in the background, you have the trade discussions with china. anna: are we going to see that change in the direction of the dollar? it has been a little weaker. henrietta: it has been a little weaker in terms of yesterday. tot year, if you looked growth, it was about synchronized growth across the world. emerging markets, europe, the u.s. here you have had a day over the course of 2018.
that germany has been one of the drivers for the strength of the dollar. nejra: this chart i showed at the top of the show shows eight yield spread. is this an opportunity? have you compensated enough for the risk? henrietta: from my perspective, i like to see a bit more turnaround before jumping in. but yes, these valuations are starting to be interesting and people are going to start looking at edging and you need a turnaround and more color on the dollar and trade as well. anna: thank you to both of you. thank you to kristine aquino and henrietta pacquement. let's get a bloomberg business flash with juliette saly in singapore. juliette: u.s. president donald trump has said he is considering a capital gains tax break. the capital gains change with slash tax bills when selling assets such as stock or real
estate by adjusting the purchase price for inflation. he made the comments in an interview with john mickelthwait. president trump: thinking about it, i am thinking about it. there are a lot of people who love it and some people who don't. but i am thinking about it very strongly. juliette: china's regulators plan to limit the number of online games and the total number of titles has hit some stocks as beijing tries to mitigate the effect of gaming addiction in the nation's children. it comes on top of a freeze in game approvals nationwide, and further muddies the waters for the industry. related stocks fall across asia. 12 ashas set september its most important day of the year. that is when the most valuable public company unveils the new iphone. the company posted an invite to gather around on its apple
campus. that is your bloomberg business flash. nejra: thanks so much. threatenedrump has to pull out of the wto if it does not treat the u.s. better. he spoke exclusively with john mickelthwait. wtoident trump: i think the is the single worst trade deal ever made. if they do not shape up, i would withdraw from the wto. nejra: the president went on to describe nafta as the second worst trade deal ever made. canada said a trade deal is possible earlier today. our reporter spoke to them. >> we know they are working around the clock. we know there is good well, much progress has been made. it is our response ability as the government of canada to make sure it is in canada's interest. we also know that a trilateral deal has to meet everybody's interest. you look for points of alignment. we have been doing that assiduously for a number of
months. that wewith goodwill are seeing and hearing and with determination, the chairman will get to the place we want to be. reporter: what is the chance? a 60% chance? >> i don't bet. i never win. reporter: an agreement can be reached by friday? >> if there is a possibility, but we are looking at the long-term. the trade deal is about generations from now. we are free traders. we believe it is in our best interest to establish these relationships around the world, including here in asia. it is my first trip out of north america since i took on this new job, and we are doing it for a long time in the future. reporter: you have suggested that some progress can still be made realistically. what progress can be made? >> we know what the issues are. mr. freeland has been very clear with the canadian people about
the issues most important for us. we need stability and predictability. we want investors to know that when they are making a deal with canada under these roles that those rules are going to be around for a while. dealan always make a trade better, you can always make it stronger, modernize it. we came into these discussions with that objective in mind. we are working through it diligently, and i am hopeful we will come out with a stronger deal for all three countries. reporter: is it safe to say that chapter 19 is the red line? when you get to chapter 19, nothing has been said by mr. freeland. that mustthat -- >> be that they are negotiating in private. reporter: are there red lines? >> we have been clear with the people in canada about the issues most informed us. certainty. there has to be a way of solving disputes. there needs to be a mechanism.
we believe in a rule-based trading order. we are keen to host a number of countries in october to talk about wto reforms for the same reasons. andictability, certainty, that these trade agreements are in everybody's interest. it is important to canada and should be to all of our trading partners. anna: that was jim carr, speaking to haslinda amin. aw with us, alan winters, real expert in global trade at the university of sussex. thanks for joining us. it seems that in terms of nafta dispute resolution is one area that canada is trying to push for. given your expertise in trade, how important is it that we have some mechanism around dispute resolution in nafta 2.0? deal is important in any
because [indiscernible] the americans have never very being told what to do. is they have known for quite a long time that they are trying to circumvent the dispute. it is very hard to persuade them. what: professor winters, sort of timeline would you foresee for actually reaching agreement that is not just bilateral, but is a true nafta 2. 0? alan: i think that is on north american policy. i cannot feel terribly well from here. it is a big day in the timetable, but on the other hand, these timetables usually shop with big asterisks when one uses timetables.
they will reach a se ttlement. canada -- end, i would have thought we would see something in the next few days. anna: in our exclusive interview with president trump overnight, he told bloomberg he was pull out of the wto if it doesn't words.p, in his do you think the wto is ready for the extensive change the trump administration wants to see? alan: the wto has a great deal of trouble working out how to change itself. unlike any other organization, it was by consensus. 20 years, they hardly agreed on anything at all. it is true that if the threat by the u.s. to withdraw is really serious, that would cause the line and things could happen.
but the wto is in for a very sharp change if it has to agree in a new set of rules. the sort of change that mr. trump wants to say is far from the change that other less powerful countries want to say. nejra: president trump says the eu offer for no auto tariffs is "not good enough." is zero for zero the answer? alan: 020 was probably a pretty tosonable deal. -- zero zero is probably a pretty reasonable deal. i thought his comments on this this.ular issue shows he said i don't want to do a deal with europe because their
habits are to buy their own cars. me if that is that mr. -- the fact trump wants to change it and dictate have it i would find very harmful for the trading system. abit i wouldte it h find very harmful for the trading system. size and scopeof for global trade tensions, this takes us into a new dimension. how do you expect the chinese to retaliate? they will run out of imports on their own to put tariffs on. alan: i think that is right. theyrms of retaliating, will find it quite difficult to find things to compromise on. but there will be other areas
where china can make itself difficult. north korea, for instance. dealsump likes to see his on a very broad canvas, and the chinese are likely to play it safe. remember also that although the orts to china, the u.s. is was prepared politically for a big trade war them china is. chinese society is pretty robust, actually. it is not clear that president trump is particularly so robust. the idea that the trade war is easy to win because they sell more than we sell today, it does the political disruptions. nejra: thank you for joining us, alan winters, professor of
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nejra: good morning from bloomberg's european headquarters in london. i am nejra cehic. anna: i am anna edwards. this is "bloomberg daybreak: europe picked -- europe." nejra: president trump threatens to leave the wto if it doesn't treat the u.s. fairly. single worsts the trade deal ever made and if they don't shape up, i will withdraw from the wto. anna: staying positive. the credit suisse ceo says that is for now -- that for now, markets will escape the effects of trade tension. >> or the time being, i remain positive.
i think there is potential on trade but it is contained. most of the world economy is still tolerating it. nejra: p.m. currency contagion. the argentine peso slumps further as the central bank raises interest rates to 60%. anna: good morning. this is "bloomberg daybreak: europe." 7:00 in london. fascinating news coming across the bloomberg. this is of an mn day nature in the beverage -- m&a in the beverage space. coca-cola is to buy costa, the business that operates on many u.k. high streets and rivals starbucks.als valued at 5.1 billion u.s.
dollars. buy pricese is -- 3.9 billion. excluding accounting affects, this from coca-cola, proposing the sale of costa. this is not the first time this will have been mentioned. we talked about it as a -- whitbread as a sum of parts. it has many businesses besides, so when costa might be spun out from this company, it will be interesting to see where this opens up at the start of trading. questions around peak coffee consumption in the u.k. and the like. coca-cola's long-term targets remain unchanged, but the headline, coca-cola to buy costa. let's get to the european story. nejra: under an hour till they
european equity we saw weakness in the asian session and the u.s. close lower as well. some concerns about trade seem to be feeding through to equity markets. donald trump on the wto, china, and the eu's offer of no auto tariffs. ftse 100 futures down .2% and dax futures down the same. cap futures lower by .1%. headlines coming through from the bank of england -- indonesia governor, commenting on the rupiah. you talk -- will talk about pms currencies, but intervention in the last two days and the fact the bank of indonesia is committed to maintain the economy and rupiah stability. we have seen the rupiah fall to its lowest since the asian crisis and this is fading into equity trading. anna: absolutely. emerging market tensions the picture.
msci asia-pacific down .3%. maybe the threat by president trump that the u.s. could pull out of the wpo -- wto if it doesn't "shape up," or the red of tariffs on another 200 billion dollars of chinese imports into the united states. we are down .3%, including the emerging market terminal -- turmoil. mary mine, treasuries are pretty flat. the dollar index, pretty flat, down .1% but not in or miss move -- in or miss -- enormous moves. equity fairly flat. we have come a long way since the middle of august in the u.s. equity picture. yesterday, equity is that -- were down on trade tensions. a argentine peso, losing ground once again to the u.s. dollar yesterday. it has lost 20% of value just
this week and that is despite a 60% interest rate. the contagion story is really fascinating whether the rupiah or the indian rupee. the argentine peso, despite the rate hike, it continues to decline. e.m. fx for the worst losses since 2015. looking at how bonds might open. you mentioned the 10 year treasury yields steady and that is reflected in the futures. bondsms of how european will be trading, we have the cash market open now. futures, the btp 10-year btp yield closed yesterday at its highest since may 2014 but it looks like perhaps the yield might take down slightly. it is unchanged, actually. a lot ofk at -- not movement in the btp 10-year futures. let's get the first word news with juliette saly. argentina's currency
crisis has deepened as an emergency interest rate increased to 60% failed to stop investors from pulling money out of the company -- country. the peso extended losses after the bank raised its measure to a global high. the hike, the second this month, was the latest attempt to defend a currency that has lost more than half its value this year. slade to a rupiah two decade low, spurring intervention from the central bank. as investors dumped turkish and argentinian assets, indonesia and india have seen pressure. the route in argentinian peso has led to aira return of foreign funds into its debt market. legendary investor warren buffett has told bloomberg the u.s. banking system is in great
shape. the berkshire hathaway chairman and ceo is still buying stocks amid record wall street highs. >> i'm buying stocks, but i am not buying them because they are going to go up next year. they will be quite a bit -- worth quite a bit more money in 10 or 20 years. i don't know about next week or next year. i know they are good businesses. u.k. companies became more pessimistic as concerns brexit will hurt growth increased. according to a survey by lloyds, confidence at the lowest levels since december with optimism toward the wider economy declining. only 21% of the companies intend to increase hiring over the coming years, down from 30% in july. global news 24 hours a day, on-air and tictoc on twitter, powered by more than 2700 journalists and analysts in more .han 120 countries you can find more stories on the bloomberg at top .
final trading day of the month, august has not been great for asian equities. the index off .9% after a .6% gain in july. today, china under pressure ahead of the potential imposition of these new tariffs coming through from next week from president trump. the nikkei closing flat. we are seeing gains in the cospi, and australia under pressure but it has been all about the em's today. tencentve a look at chairs. it has been in focus and part of the reason you are seeing the selling coming through in tech stocks in asia. this as china continues to clamp down on gaming addiction, particularly amongst children and is clamping down on the numbers of titles game makers can sell. we have been watching closely what has been happening in the rupiah. bank indonesia is committed to rupiah stability, but we have
seen it at the lowest levels since the asian financial crisis today and the indian rupee at another fresh record. seems to happen every day. we are seeing a push toward the 71 to the dollar handle. andconvergence between that that -- trading at a record high. anna: juliette saly in singapore. from recap the m&a news the top of the hour. we have heard that coca-cola will be buying costa coffee. this is the chain that is part of the whitbread house. the breakup of whitbread is not a new theme. we heard in july some reporting talking about how costa had attracted bids from tpg. not the winneris here because coca-cola has made the winning bid. interesting that whitbread says the majority of proceeds will be returned to holders. we have seen whitbread trading
higher on a number of occasions on speculation the business could be spun out or on broker notes that suggested that could have taken place. proceeds will be 3.8 million pounds and the majority of proceeds will be returned to holders. aboutving a conversation whether or not we are at peak coffee and the ceo says we are not. certainly not. back to trade and president trump has threatened to pull out of the wto if it doesn't treat the u.s. better. he spoke with bloomberg's editor-in-chief saying nafta was the second worst steel ever made, surpassed only by the wto. say the wto was the single worst trade deal ever made and if they don't shape up, i would withdraw from the wto. nejra: another sign of disputes between u.s. and allies aren't following, he dismissed the eu's
offer to scrap auto tariffs. >> not good enough. >> why? >> because they do a lot more auto business than we will ever do. first of all, it is not just tariffs. they have barriers to our car. they will take our barriers down and not charge tax, but it is not good enough because they will always sell more cars. their consumer habits are to buy their cars and not our cars. anna: donald trump hit at china again saying it wouldn't outlast the united states in a trade dispute. he said his administration was re-examining how to determine whether countries like china are manipulating their currencies. >> there is a formula and we are looking strongly at the formula. they areok at the won, trying to make up for lack of business by cutting their currency. it is no good. you can't do that.
anna: for more, enda curran joins us from hong kong. good morning to you. on china,he message because prior to this conversation with president trump, bloomberg suggested he is minded to put tariffs on another $200 billion worth of goods from china. what is his message? he doesn't seem to be in a hurry to negotiate with china? enda: that's exactly right. no hint of a change of tone or strategy from the president. it seems we are heading headfirst for the next round of tariffs and in the next round of tariffs is going to be on a bigger basket of goods than so far. $200 billion worth of goods, tariffs on between 10% and 25%. our colleagues in washington were reporting it looks like they could go into effect as soon as next week. you heard his comments during
the interview with bloomberg. it doesn't feel like there is a new term -- near-term exit from the negotiations, even though they are approaching an on nafta. there are talks with the eu. of on the u.s.-china side things, it seems to be locked on for a more protracted dispute and analysts think it will not be solved anytime soon in this part of the world. nejra: good morning to you. in terms of the comments from trump for our colleagues in washington, he talked about the wto, the eu, and china. what did we learn about the broader trade war? did we get a sense that president is taking a more hawkish stance? enda: he certainly seems to be determined on the china side. there is no doubt about it. a -- no hint he is key specifict out
demands for china to meet that would lead to a breakthrough. there is a view in this side of the world that china is happy to sit it out until mid-terms are over and see what the political landscape is at -- like after the elections. with the comments from president trump and the trade hawks in washington and the view china is happy to dig in until the midterm elections at least, it doesn't feel like we will have a breakthrough in the china-u.s., even though the broader global trade war may be easing up with some agreement with the eu and nafta, but the china-u.s. story seems to be digging in deeper for the long haul, i think. anna: enda curran in hong kong joining us with the latest on the trade story. from london, we are joined around the desk this friday morning. good to see you. i have pulled up the function on the bloomberg to highlight the importance of the trade
'snversation because the u.s. three biggest trading partners are canada, china, and mexico and gloom large on this graphic. you suggest that the strategy from president trump is a lot of luster followed by negotiation and is that what we have learned around the nafta story this week? yes, a lot of bluster but at the end of it, a willingness to do a deal and that is what we are seeing perhaps, tentatively, with mexico? >> i would like to think so. if you look at their track record in these types of negotiations, and i would extend this to north korea, the pattern is straight out of "the art of the deal" to make an outrageous position and you negotiate and eventually, there is a deal. having said that, there is the risk of miscalculation. areese authorities well-equipped to retaliate and well-equipped to hold out in the short-term through an initial round of tariffs. the political strategy
heading into the midterms? is it a winning strategy or is it an economic strategy? are they looking for an escalating trade war will have inflationary consequences? nejra: you are positive on the canadian dollar. does that hold even if we see more protracted negotiations on nafta 2.0? ranko: the nafta 2.0 thing is critical. inthere is a collapse canadian participation with it will suffer but that is not what we are seeing. canada is probably the u.s.'s closest economic relationship in terms of the integration of supply chains and exports to canada. it is an intimate partnership and i would like to think that surely the people making the decisions in the trump administration realize that if that relationship is collapse, -- does collapse, it will have political consequences. canada may make concessions on
gary & up to the deal. anna: we spoke to the ceo of credit suisse this morning in our asia programming and he said the main risk of a trade war is sentiment. do you think it is still sentiment if we start to see the trump administration put tariffs on another $200 billion of chinese imports? this escalates things from the 50 we were at. abilitybeyond china's for tit-for-tat. these are big numbers that could be material for global growth? ranko: i would say definitely. the threshold for avoiding an inflationary contactor fee -- catastrophe is around the 200 billion mark discussed now. anything beyond that, china can't directly retaliate further and i think you will see growth consequences.
you have to deal with the federal reserve that asks if the terminal rate is good enough? what happens next? stays witho berich us. for now, let's get the business flash with juliette saly in singapore. donald trump has said he is considering a capital gains tax break. -- byal gains change would/ adjusting the original purchase price for inflation. he made the comments in an interview with bloomberg's editor-in-chief. >> thinking about it. i'm thinking about it. there are a lot of people that love it and some people that don't, but i am thinking about it very strongly. buyinge: coca-cola is costa from whitbread for 3.9 billion pounds.
the british company says the majority of proceeds will go to shareholders. name our read as its ceo as early as next week. that is according to sources. reed was the likely successor. he became interim operating officer after the departure in april and has been at the company for most of the three to build theok largest advertising firm. that is your bloomberg business flash. anna: juliette saly in singapore. em assets are headed to a loss as he climbs in turkey and argentina sparked contagion. >> the world managed economies are safe. there are no such thing as emerging markets. well-managed and poor managed. ,urrent account surpluses
houses in order that do not run a fiscal deficit are safe. people fear contagion, they are wrong. there is no contagion from poorly managed economies to well-managed economies. there are countries under pressure. why? it is because they have a significant current-account balance problem and that makes them vulnerable. it is not because they are emerging markets. it is important to manage the fiscal situation responsibly. it is important to be in a current account surplus and have reserves. you will find a lot of emerging market economies are in that position. the ones under pressure, turkey and brazil, have more fundamental microeconomic problems. and met theentina senior authorities there and it
is clear argentina has some real challenges to deal with. to extend that to other emerging economies is too simple. >> in terms of the contagion from turkey, in particular? >> i don't believe there will be material contagion over. in the short term, there is always spontaneous reaction, but it is not justified. >> the impact on european banks? >> banks are in a much different situation than they were back then. you look at the size of the turkish economy. very good transactions in turkey . -- is one of the main reasons why. banks have reasonable exposure to turkey.
>> any unwinding positions? >> no. >> in terms of italy, we see concerns about debt. reasonable appetite for yesterday's auction, but yields have picked up slightly. are the markets underpricing the risk out of italy? , i would tidjane: hmm be cautious in any situation to say the market is mispricing thing. i don't have a strong view. we need to see how things go in the coming months. >> do you expect the ecb to step in at some point to support? the ecb manages inflation, it will do what we have seen over time. the euro is very resilient.
over irelandorried or greece. i was never concerned because histories are important. europe has a rich history and i whatever is necessary will be done in the end to make sure the euro continues. anna: that was credit squeeze's ceo speaking to tom mackenzie. ranko berich is still with us. when you look at what is happening in the e.m. fx base and see the argentinian peso continue to decline, the rupiah at the lowest despite four hikes since may from the bank of indonesia. and then you listen to talk about how it comes down to current-account deficits. what hope do e.m. countries with those deficits have of supporting their currencies at all? ranko: it depends on the specific currency.
are we talking about credible monetary policy, credible fiscal policy? are there reserves? that is additional on top of that. sayingjane is right in it is not a contagion thing were all of e.m. will enter a bear market. in places, you have very good prospects for a rally. in the case of argentina and turkey, they are dealing with currency crises the question monetary policy in turkey and argentina, fiscal policy. anna: fiscal policy must be part of it because the lesson from argentina seems to be that interest-rate hikes are necessary, but not a sufficient path in dealing with a challenged currency like the argentine peso? ranko: absolutely. if you think of christine class andeaching a
crisis management, argentina is taking notes in front. you talk about imf, fiscal stimulus. anna: and still the currency falls. ranko: erdogan is the kid who skipped economic class. you have to ask how valid is that playbook? if we believe higher interest and intervention with the imf will stabilize the currency crisis, we have to believe the peso will eventually stabilize. i don't know if it will be now or in six months time. i know without the credible monetary policy, which is what you lack in turkey, currency will continue to depreciate. strengthening dollar having far more an effect on e.m. fx and what the yuan does from here? ranko: at the moment, it is that impending increasing your oil yields india not -- real yields costing this risk off sentiment
in emerging markets, which has benefited from the kerry trades for a long time in does being withdrawn -- and is being withdrawn. in some cases, it looks like an overreaction. anna: ranko berich, monex europe. we will keep an eye on costa coffee. perhaps a win for activist investors. beveragesg that hot is one part of the drink space coca-cola has not had a presence. almost seems unbelievable. nejra: i wonder if it is to do with millennials not wanting to drink sugary drinks and moving on to coffee. that is it for "bloomberg daybreak: europe." the european open is next. we look ahead to the equity market open. from the futures, we could see a lower open after declines in asia and the u.s. closed lower, yesterday. this is bloomberg. ♪
guy: friday morning. welcome to "bloomberg markets: the european open." from our european headquarters in london. i am guy johnson alongside matt miller, who is in finland today. yeah, i've come to helsinki for an exclusive the governor of the bank of finland. the cash trade is less than 30 minutes away. guy: the single