Transcripts For BLOOMBERG Bloomberg Surveillance 20240714

Surveillance. I am Francine Lacqua. These are your markets. A lot of these european stocks higher at the opening. Now they are down a touch. Lets call it flat. I am looking at oil. A lot of the picture is contingent surrounding iran so you see a little bit of a lift up for american crude. What is going on with these european markets and you are seeing it reflected in yen. Yen is the one story that is the haven. Any risk attitude is reflected on yen. European stocks, a lot of investors are looking at these amounting into political risks. Ifore getting some figures. The german index, 97. 4. We get up around we get the with hernan a cristerna. Lets get to the bloomberg first word news in new york city. The drumbeat for Federal Reserve rate cut is getting louder. Minneapolis fed president says he called for a reduction at last weeks meeting. These comments reinforcing expectations the central bank is on course to cut rates. Trump says he would be able to demote fed chairman if he wanted to even though he denied saying this. The president reiterated he is happy with powell passat actions. Actions. s trump says the economy is good enough. Boris johnson repeated his insistence the u. K. Must leave the eu by the end of october. He says the split will happen if he becomes Prime Minister. His campaign suffering a setback after police were called to his home amid reports of a heated argument with his partner. Johnson has refused to comment. Im learn issuing its third profit warning in a year. Facingpany blaming costs. Xtra fees of a euro amount the carmaker is investigate is facing investigations over excessive pollution. It sees this years profit being at a similar level to last year. El dorado resort is reportedly buying Caesars Entertainment. That is more than a 30 premium on fridays close. Thinking of moving to saudi arabia . Ae kingdom has just opened up residency program. It is designed to attract Foreign Investment. It is going to cost 213,000. The residencies will allow foreigners to buy properties. Global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. This is bloomberg. You. Ine, back to francine trump says the u. S. Will impose major sanctions on iran today. He abruptly called of airstrikes in retaliation for the downing of a navy drone. Its continued threats and acts of aggression against israel, our allies, in the arabian gulf and against u. S. Personnel and assets across the middle east are not signs of a nation seeking peace. On monday there will be a set of new sanctions. I am not going to go to war it if it is it will bleed will be obliteration like you have never seen. No preconditions. Francine go not month the trying to figure out what these sanctions look like given the are very few targets left. How is iran taking these threats . We have had one response from a Navy Commander saying iran is prepared to shoot down more u. S. Drones if they enter iranian airspace. Whate here are wondering else is there left for the u. S. Government to sanction. It is going to be important to see what the u. S. Statement guarding sanctions will contain. I think the iranians will respond accordingly but given what we have seen so far in the iranric, i cannot see welcoming any overture from the United States to talk while it is increasing pressure on irans economy at the same time. Francine what would it take to get iran at the talking table . The talking, if table existed it existed back in 2014 and 2013 the United States was present. From irans point of view, the Trump Administration helped to renegotiate help to the redefine. Putting a huge amount of pressure on iran and almost punishing iran for things that are outside the premises of the nuclear deal. Iran has said that if the Trump Administration rolls back these sanctions, if they reserves if they reverse their position before the deal, then iran will think about talks. They have also said it is a reversible situation that that will require the trump initiation going back to the deal that already exists. Iran would expect the American Government to compensate iran for damage done to their economy within the past year from those heavier sanctions that have been imposed. Francine golnar, thank you so much. Lets keep the conversation on geopolitics and the markets. Joining us now is Holger Schmieding. Thank you for joining us. Iranian economy is crippled by sanctions. What else can the Trump Administration do . It depends on what the officials find major. We could end up with an exhausted list of individuals and companies that they would put under sanctions and say these are major set of sanctions but because they have already inflicted damage on the economy, it will not do much. I would be interested in looking at what they can do if they will do anymore on banks because that is the week links for the economy and something the company the government has struggled to fix. This is an area that we need to be watching. Francine as far as i understand on iranian sanctions entities including banks and should and shipping sector. Is there anything else other than deeper sanctions on banks . , i am struggling to find struggling to think what else is out there. That is why dont allow the fact that they would add to this and say and describe this as sanctions when we look at it, we find is not adding much. Francine holder, what does this mean for the people which is extremely important . What does it mean for oil . Unless there is a hot or involving iran and saudi arabia, the impact on oil prices should remain modest. What i am watching most is whether sanctions would have a lot of third country impact. That is if say in europe or china anybody who has any links to iran would be defective punished by sanctions. That could be a significant one. Using the port of iran itself. Francine this is a great chart looking at some of the iranian wti on futures as compared to some of the sections we have had over the last six months. How do you stabilize allies for the region . The more the iranian hardliners are pushed to the edge, you expect to outcomes, one is saying we are going to talk. Two is, more and more of the limited but escalating attacks. That is unsettling. Governments, you talk to people across the board and they talk about his war coming . Francine what is the potential for war . This would be worrying on a number of reasons, but is it a 5 chance . 20 chance of something ugly happening . Officials that we have talked to put it at very low risk. Both sides are watching each other carefully. Both sides dont want to escalate. Both sides want war. There could be accidents and lets say, as we saw last week, when u. S. Forces were ready to would bean, and what the reaction . Daily in yemen sophisticated attacks, daily attacks by the yemen rebels targeting saudi oil, power plants. It is heading in that direction. Andcine alaa shaheen Holger Schmieding stay with us. Up next, a rebuke to president erdogan. That stories next. Story is next. This is bloomberg. Francine economics, finance, politics. This is bloomberg surveillance. I am Francine Lacqua. The lire has a just after the candidate in a rerun to Mayoral Elections. The march had been overturned lost. A party narrowly he spoke after the victory positioning his when is a win for democracy. You have protected the reputation of democracy in turkey for the whole world watching. You as a nation have protected our tradition of democracy that goes back 100 years. Thank you, he stumble thank you, istanbul. Francine joining us is alaa shahine. How weekend izzy by the mayoral ex election how weekend izzy by the Mayoral Election. He lost all the major cities including ankara so it is a significant point in a 16 year rule for the man to have lost. He is weekend because because it stumble is a turkish commercial hub. There is a network of patronage. It is too early to tell if this would have an impact on erdogans ability to stay in power for the selection or beyond. Francine he has consolidated so much power so it has shielded him. He is weekend domestically, can he bring back some of the power . It is too early to tell. This is someone who has hardly lost election in 16 years. This is one that he is lost not only once but twice. Look at the margin. 800,000. Sked for iran, this is a crack in his structure. It is a Mayoral Election, fine, but it is significant. Francine what does it mean for investors . It is a very encouraging sign. ,t is still sort of a democracy that turkey is not going down all the way toward putin. The institutions in turkey have weakened. Their yearning for the european lifestyle and political system is still there. That i find pretty encouraging. Francine he is meeting President Trump at the g20 because the u. S. Says it will impose sanctions because they bought a russian antimissile Defense System. That is the next thing coming because we see both nations have been at odds. No one is willing to compromise. Turks are saying no, the missiles are not coming. U. S. Tightenedhe was withs on turkey the arrest in turkey. The markets were on the verge of a crash. This is something that definitely erdogan is going to try and avert. Francine this is looking at emerging markets. How much does a how much of a break does turkey get . Turkey gets quite a break from fed policy. The financing is there, it just depends on turkey to make it attractive enough. With the election that we just had, turkey has lost a little step toward reestablishing credibility and confidence among investors. It depends how erdogan reacts. If he acts imprudently, we have a problem. Francine thank you both for joining us. Business falls from a mother prior. Germanys largest economy with this is bloomberg. Francine this is bloomberg surveillance. I am Francine Lacqua. Lets focus on europes biggest economy. Business in germany drops with the ethernet index falling to 97. 4. Fuest. Us is clemens for. To me about the ee it doesnt mean the worst is not over. How do you see the German Economy develop . Clemens it could get worse. Maybe not much worse but we see the weakness in manufacturing continues but this is now spilling over to service. We see some industry related side effects. A weakening so this is happening having an impact. We also see the construction seems to have peaked. This is a sector that has been booming for a long time. Here, the index has declined a little. But a strong is trades so we have had wage increases and people are consuming. The rest of the economy is weak. Francine do you think the ecb should roll out fresh stimulus . Clemens it is justified to at least postpone any tightening of Monetary Policy. I dont think further easing will help very much. Mario draghi has pointed out that. The government needs to use other instruments. Germany should cut corporate taxes. I dont think Monetary Policy will save us. Francine if it were to restart qe, should the ecb need to lose on Government Bond purchases . Clemens that is not a technical question, can it maintain the purchase key should it by more at some point . We will have to do some restrictions, otherwise, it will not work. There is no hurry to return to quantitative easing. Candyne how quick Germany Economy bounce back . Clemens that depends on the world economy. We have some domestic issues. That dieselgate would be over at some point. That may not materialize and there are some policy issues in germany. We have uncertainty about Energy Prices and other challenges for the German Economy. It also depends on how Economic Policy behaves. Francine it was very clear that draghi said ecb was ready to act. How much leeway do they have . Clemens they would have a lot of leeway. The central bank can do a lot with its own money. It might even buy equities. We are not in a situation that is close to the point of if worse came to worse. It will open up the way for potential easing. Say you get the next meeting that they would keep rates low at current or lower levels for longer. I dont think in july they will have to do some easing. Quickly, clemens fuest, when you look at concerns over germany. His president job and president if President Trump and president xi meet at g20, does it make a difference . Tariffs and trade conditions are one burden on the economy. Agreement toe return to more reliable rules and more longtime rules. Francine thank you so much. Coming up, 80 of a 10 billion m a deal has been in the u. S. But where next for global mergers and acquisitions . This is bloomberg. At comcast, we didnt build the nations largest gigspeed network just to make businesses run faster. We built it to help them go beyond. Because beyond risk. Welcome to the neighborhood, guys. There is reward. Beyond work and life. Who else could he be . There is the moment. Beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. Take your business beyond. Francine washingtons warning to iran. U. S. Prepares to slap new sanctions on to run after President Trump calls off airstrikes. Pompeo heads to the middle east. Election shock in a stumble. President erdogan is dealt a stunning blow. Unlucky. E it is a bumpy ride for daimlers new chief executive is the good morning, everyone. This is a bloomberg surveillance. I am Francine Lacqua. Lets check in on what is moving the market. I am going to pick it up where you left off. Daimler is down more 4. 5 . This is a third profit warning for the year over at over emissions issues. Lets do a read across across the markets. That section, autos and suppliers, are the biggest losers. Attack they cyber faced in early june which affected their Information System across a number of countries. Materially impacted financial results. To the upside, or stead, one of the biggest gainers. It is one of the worlds biggest suppliers of wind energy. Buildinggoing to be this off the Atlantic Coast close to atlantic city. Francine Annmarie Hordern there with some of the major stock movers. Lets get to first word news. The u. S. Plans to announce major new sanctions against iran. This just days after trump called off airstrikes at the last minute after the Islamic Republic shot down a navy drone. The president says he is willing to negotiate with tehran to ensure the nation never acquires nuclear weapons. I am not looking for war and itthere is, it will billy will be obliteration like you have never seen before. You cannot have a nuclear weapon. If you want to talk, good. No preconditions. A stunning blow for president erdogan his party lost rerun of it stumbles of it stumbles mayoral race. It is a stinging indictment of after the president refusal to at to accept a defeat. The reserve bank of india governor resigning. Bank he isntral unable to continue his role at he cites unavoidable personal circumstances. He loves he is leaving the Monetary Department at he joined the r. B. I. In january of 2017. Daimler issued its third profit warning in a year. It is blaming the regulatory scrutiny. It is facing extra fees. The german carmaker is facing investigations in europe and the u. S. Altar allegedly expensive pollution. It sees its it is seeing this years profit at a level similar to last year. Global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. This is bloomberg. Francine . Francine lets focus on mobile m a. My next guest says architect been driven by transformational deals in north america. He says they are 25 deals worth more than 25 billion. What deals can we expect for the rest of 2019 . , he leads thea team around the world focusing on m a he joins me this morning. Always great to have you. When you look at exactly what is going on in the m a deal, is it because people are worried about where revenue comes from so they think bigger is better . Companies that can find synergy and value . Hernan m a remains the future of the markets. The dialup with their clients are very good. Our clients want to do deals. We look at the levels of activity in the market, i think it is very good. The market is down 12 or so. The first half of last year was the best in m a markets. The market then decelerated last year, something that by the end of the year, we are coming pretty close in terms of activity to 2018. What is interesting to break down the activity, where what we find is essentially volumes in north america are flat. The volumes in europe and asia are down 30 . Furthermore, francine how do you explain that . If you look at overall deal counts, whether it is north america or the rest of the world down 25 , the issue is there is been a vintage of transformational deals. With values greater than 10 billion which has been dominated the u. S. So far this year, 25 deals rated value. 5 billion in francine what does it mean . M a that you do for the bad regions and m a that you do for the good reasons. If you look at geopolitics, does it further them into more m a or less . Hurco the critical difference is the regulatory challenges to m a are significant. The reason why we see so many deals in the u. S. Because the challenges francine because of the supply chain . Hernan industrial policy, trade wars, the overall Regulatory Environment is very complex to do over the border deals. Francine how are they funded . These record low Interest Rates and the fact we had another bout of central bank the viciousness, does it help m a . Hernan what i would say is another key aspect supporting market is it will prices are very full. If you look at deals that can be funded using stock currency, that compensates for market prices. It is a much easier structure. Francine are there a lot of companies that want to do m a and france but are afraid because of logical because of political . Hernan the Regulatory Environments and pollute and approval is much greater when you look at any number of these different jurisdictions. Ceos are more hesitant when you the one supported by the french government or german government, possibly for good reason. When you see those kind of deals being tripped by regulatory over view francine what do ceos ask you . Are they worried about the trade war and the impact . Look at apple. They are moving things around. Her coat the ceos ask me the most about hernan the ceos ask me the most about china. How long will it take for this deal to be approved . Is it going to take three months to be approved . Or is it going to take 18 months to be approved . All the discussions say beyond the nature of a deal, beyond a deal making sense, will this deal be approved . Francine is it still ripe for consolidation . Hernan when you look at the crop of deals you are seeing in defense, a lot of health care, the dinner her g deal. See scope for consolidation in every sector. The warning for nonus companies is that if the strength continues where u. S. Companies continue to pursue these transformational deals and companies in japan and europe stand back, the question is, it is a warning. Could this lead to a situation where some of these europeanjapanese Companies Inside lose competitiveness . Francine a lot of Japanese Companies and Southeast Asian companies and european Companies Want to be a part of m a . Hernan they very much want to do that with the issue is regulatory challenges. We have to work with our clients to think through these issues, to avoid any surprises and get those deals across the line. Francine these regulatory issues, are they because they are flawed because the regulators are slow . Hernan it is just the way things are. In a complex environment, there is rising industrial policy. Regulators are becoming a bit more unpredictable. We see that any of these large deals, they take longer to be approved. It is very different for a ceo to know what they are buying for today. That Company Might look very different. The european banks ever going to consolidate . Hernan that is a very complicated puzzle. Brexit . what does that mean for u. K. Companies . Hernan it adds to the whole recipe of uncertainty brexit adds to the whole recipe of uncertainty. Volumes in europe are down because the biggest market is a bit of a standstill. Fundamentally, u. K. Companies need to diversify regionally. Become more exposed to different regions. One of the once we get through, i dont think my clients think that brexit is good or bad, they just want to understand rules of the game and apply those rules. In thank you so much for coming on here. Up, questions of character. Boris johnson in a race to become Prime Minister. This is a bloomberg. Francine this is bloomberg surveillance. I am Francine Lacqua. Exactly three years ago, investors most were not expecting. The two Major Networks both projecting a win for the leave campaign. Projects thebbc u. K. Will leave the European Union. The exit from the erm is a minor black for the move. It is already down. But we get a will we get a downgrade for the u. K. . A brexit vote would lead to downgrade in the u. K. Region. The british people have made a decision they take a different path. As such, i think the country requires fresh leadership to take it in this direction. A negotiation with the European Union will need to begin under a new Prime Minister. Rumors about who may fill his shoes. Anyone assuming it would be Boris Johnson. Learned, the bookies can get things wrong. He is a bookies favorite and michael gove has been instrumental in the leave campaign. Theresa may has also been mentioned previously. Francine that was some of our coverage from june 24, 2016. Amazing to see they are the same problems and same names. Three years on and brexit is hunt dominating jeremy has called on Boris Johnson the bookmakers favorite to take part in interviews and debates. Johnson refused to answer questions this weekend. Lets get the latest with david merrick. Isst of all, the concern that he had a massive row with his girlfriend and he never talked about it . Or is he being accused of cowardice because he doesnt put himself in front of media enough . David we know mr. Johnson has a comical private life. Affairs, children from different relationships. We all know that, but his campaign has been tried has been trying to steer the focus off that. It completely dominated the front pages. He refused to engage with it. His opponent is trying to bring it back to the question of character. His refusal to face anymore scrutiny. It is exactly where the boers campaign doesnt want the focus to be. Francine it is his to lose. The less he talks the more he can keep on track. Has it impacted the polls . That is the big question. It is about what the conservative Party Members think about it. He spoke in front of members in birmingham. What i liked about this question, the interviewer was view was booed by the audience. A truck be sort of feel to meeting. Maybe task polling from conservative Party Members notoriously many of them do not engage with the polls. A strange constituency but there was a poll on sunday that showed his lead had reduced. This story has had an impact. It is a race that we thought was a foregone conclusion. Francine poker, talk to me about holder, talk to me about. Holger do they sign their Withdrawal Agreement are not . The European Union is very unlikely to offer any serious conceptions. It may offer a footnote. It offers changes to the declaration of our future relations. The eu is saying you have to pay your dues. You have to protect ireland and Northern Ireland so let us sign up. Francine what do markets find . You could have anything between the second referendum, general elections and the like. Holger the markets probably want to have some solvency about it and ideally it would be the u. K. Deciding with deciding the agreement. A long period during which the details of future relations could be discussed. Get it over by signing the Withdrawal Agreement, rectifying it by the end of october is what markets would want. Francine david, since this has shifted to the characteristics of Boris Johnson, how much do we know about policies . David mr. Johnson has time to write is Daily Telegraph column. There are no specifics. He says we have to get brexit done by the end of october. There is no explanation of how he plans to do that. We know that parliament is going to try and block the deal. He is going to be leading a minority government. Not going to be getting any of his policies through is going to be very difficult. What he has to do is change parliament. Once he has taken over, will really be heading towards a general election later this year . Francine i cannot make my mind up whether Boris Johnson is a hard brexit or no deal brexit . Or whether he could turn it around . Boris johnson an interesting character. He believes very much in himself but doesnt seem to carry a lot of ideological baggage. Isonly decided whether he for against brexit the moment he had to hand in his there is a chance he now campaigns to Prime Minister. Only to say in october to say we have to rectify mays deal and call it the boers deal. Due to his flex ability, it is becomes that brexit more pragmatic. Francine is there anything that we know for certain about how he will government how he will govern . He will want to hang onto power no matter what. That will give us an indication of what he will do with brexit. David it is a minority, we had a warning from the chief wit that he could he only needs a couple of his own mps to vote against him. Is the end of his government. The numbers in parliament are stacked against him. He is stuck by the parliamentary arithmetic and something that is going to have to change to get anything done. He does have a chance to get the agreement through that made did not have because when boris is in power or hunt for the high larne the hardline brexiteers. They know they are not going to get any more sympathetic Prime Minister than him. He may get more support for reconciling the agreement. Theres a chance this doesnt and to badly. Francine thank you both very much. Coming up, daimler cuts. This time as the dieselgate scandal continues to thrive. We are diet we are live next. This is bloomberg. Francine it is the third profit warning from daimler. A bigger than expected hit from the asian emissions scandal. From the diesel emissions scandal. His diameter the only one with this problem . Is daimler the only one with this problem . We have seen a lot of profit warnings from european automakers. Bmw had a couple last year. A report on problems back then. They were talking about Emissions Regulation and of course of trade became an issue and now with daimler, it is the Diesel Scandal. There always seems to be some oneoff reason it isnt limited to daimler. Francine european carmakers speaking out about a recovery in the second half of the year. Is that likely . It is less likely than it was before. If i knew more certainly, i would be able to make a lot of money. Are note here is really looking good. Car sales in europe are below where they were last year. A lot of the things that automakers said at the beginning of the year about recovering, things picking up, those are looking a lot less likely. Come september we have a new wave of Emissions Regulations coming in that are only going to make this harder. Francine thank you so much. Bloomberg surveillance continues. Tom keene joins me out of new york. With emory to send. Dish with armor to send. We will look at President Trump meeting with president xi in china later on this week. This is what the euro is doing. Also looking at the 10 year yield. This is bloomberg. Francine washingtons warning to iran. U. S. Prepares to slap new sanctions on tehran after President Trump calls often airstrike. Pompeo heads to the middle east. Election shock and assemble. President no one is dealt a stunning blow president erdogan is dealt a stunning blow. Third time unlucky. The bumpy ride for daimlers chief executive is the group issues the third profit warning this year. I am Francine Lacqua in london. Tom keene in new york. What is happening with turkey and with iran. The g20 with President Trump and president xi. Tom the g20 at the end of the week. This i case in america, a question on iran. President blinks on ice. Forward towe stagger the g20 meetings. Lets get to the bloomberg first word news in new york. The drumbeat for a Federal Reserve rate cut getting louder. Minneapolis fed president says he called for a 50 basis point reduction. These comments reinforce expectations the central bank is on course to cut rates. President trump says he would be able to demote Jerome Powell if he wanted to even though he denies saying this. The president reiterated he is not happy with powells actions. President trump says the u. S. Economy is Strong Enough to pull through what he says is the headwinds of the feds rate hike. The u. S. Is expected to announce new sanctions against iran today. This is days after President Trump calls off air strikes the last minute. The president says he will be winning to negotiate with tehran to ensure the nation never acquires nuclear weapons. A stunning blow for president erdogan in turkey. Racearty losing a mayoral by a landslide. A stinging indictment of ankara s policies after the president s refusal to accept an earlier defeat. It put an end to months of Political Uncertainty that had weighed on the currency. Global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. This is bloomberg. Equities, bonds, currencies, commodities. I cannot say it is quiet yet. Features advanced nicely. Curve staying where it has been since the powell arm shall. Euro advances. Stronger euro. That has rounded up 58 on american oil. The vix showing some of the tension. Theres the dow closed. 26,000. We had that record as well. U. S. Twoyear, i am still not used to that. The german 10year, that should be read on the screen, lower by two basis points. Francine a lot of markets in europe are managing political risks. Also gearing up for this highstakes meeting between President Trump and president xi later in the week. Im looking at oil advancing. We have a lot of questions on what these sanctions could look like. And remember the and remember the. Tom is a stable yen, not a stronger yen. How about these equity markets . How about where you have been three times in a row, back to early last year . Correction, never to a bear market. Up we go to a bear market and that ugly december. Highs. T near record only for the brave only for the brent. Francine thank you to hilary clark. I wanted to look at inflation. It is basically the euro inflation swath forward. Up can see they are picking a touch. Inflation expectation building again. For more on the markets, joining us now is peter dixon and Simon Derrick. We have a lot to get through talking about lira and the euro. Peter, we look at these markets, it seems they have in the back of their mind, geopolitics. They are focused on the dovishness from central banks. Peter that is exactly why. It goes up, it goes down. Is driving the market . It is the sugar high of the Interest Rate cuts. We have the ecb last week. I think it is reminiscent where we were perhaps in the late 1990s and against to and again 2008. The markets rally. The font amenities the fundamentals will out. Takeine are we going to corrections and currency . Simon they have become more volatile. I suspect it is a good thing. The safe haven story is an interesting one because it might not be what we expect. If you think there are increased tensions between iran and the u. S. There are two good reasons. The ministry of finance responsible for the intervention on friday. Currency. Really the it has been the swiss franc making the gains. I suspect that is where you are going to see a lot more action. Tom peter dixon, Simon Derrick if heonly be with us could hear your adjustment. We had draghi in a conversation. An archhave to readjust economic claw after the courage of last week . I wouldnt say that. What we have heard over the past week, we have been tending toward markets toward that view. The fed rate cuts are coming. Ecb. Will be done from the basically, all of last week told us effectively what it confirmed what many of us thought before. Weakthe arch claw is dollar. Push against that, please. Do we assume light dollar . Simon i do believe in a weak dollar. If you were talking about geopolitical tensions, you would think the dollar would go higher. Over the course of the last four years when there has been tensions between the u. S. And iran, the dollar has not done well. When there have been threats of military action. A weak fed and the fact youve got the story building. Both say the dollar should be week. Francine against which currencies should it be weaker . Simon it is going to be about euro and the swiss franc. Happened overas the course of the last three days. Tom very good. Starting here dashing. The g20 meeting. On oil, i mentioned at 58 a barrel. Here. Give us a briefing the sanctions to be announced today by the president. Stay with us. Uber surveillance. Bloomberg surveillance. Francine this is bloomberg surveillance. El dorado resorts reportedly buying Caesars Entertainment. The company is paying 8. 7 billion in cash in stocks that values caesars at 13 a share, that is more than a 30 premium on fridays close. Mcdonalds plans to pay out a regular dividend of 20 to 30 . It issued dividends in the range of 10 to 15 . It is struggling squeezing profits. It cut expectations for the year blaming falling revenues. Daimler issues its third profit warning in a year. The company blaming cost related related cost related to regulatory issues. The german carmaker is facing investigations in europe and the u. S. Over allegedly excessive pollution. Analyses this year profit being a similar level to last year. That is the Bloomberg Business flash. Francine thank you so much. I will are is saying its legacy issues. The leadership saying these are longstanding proceedings. Still with us, peter dixon. Peter, i dont know whether this is a specific risk to dialer or whether the automakers risk to daimler or whether automakers. Peter this is a big picture story. The industry has suffered from overcapacity. With seeing the slowdown in damos largest market, china. Away got this transition and toward electronic cars. We heard the profits are expected to be the same this year as last. That is an ok performance. Diameter needs to put money toward electric cars in selfdriving cars. What does it need to do to back on track . That is pretty much where we are because basically, it is a case of youve got to pick the longterm winners. Tesla, they are not going to usurp the big plan. To the likes of diameter to move the market forward. We are not there yet and we cant say we are going to put all of our eggs in this particular basket. Needs a little bit of explaining. Euro had been over here at 116. Difficult for daimler. Simon derrick, the longterm euro decline, is this in place . Is that a structural weakness in eurodollar . Simon issa think it was. I used to think it was. The reserve money that is out there, the foreign reserve accumulation dried up. I am starting to feel a little differently. I suspect a lot of what has happened has been about that dollar strength. Tom peter, not to do decimal points but what euro does dialer germany want . Versus what greece wants . Huge. The greeks will be quite happy with where the euro was 20 years ago. Germany can live with a eurodollar waited around 140. What we are hinting at here is the huge dichotomy between economic performances within the within the individual members of the euro zone. It will be determined about how investors see the German Economy. That will drive the euro lower over the course of the next few sessions. We stopped to digest some the news coming out of germany. Francine this economy is kind of wobbling. When is that one to bottom out . Peter you will find the Second Quarter when you get those lined up. My view is the economy will bottom out, maybe make some headway. Expecting huge amounts of strength out of the out of germany. It will take a while for we will see the extent. Francine what moved euro . Moves euro . Does brexit move euro . Clearly not. Having a look at what the ecb thetold us, look at where sovereign spreads have gone within europe. They areng to still buying it. Politics, right . Having no impact whatsoever on the euro. Everything that you have seen that is domestic to europe is having no impact whatsoever over the course of the last couple of weeks. We are seeing the stoxx accelerating. Go back to [indiscernible] as a result, suspect that is going to happen. Tom peter dixon, want to go back to first principles. If President Trump got halfway to a 140 from where we are lets say 128 what does that do to the portuguese economy . Peter to the extent that the likes of portugal is exposed to latin america, that particular wellof it will not do too it also to the extent that it is exporting within euro zone germany, france, the currency impact will not be as dramatic as we might imagine. Obviously, it will squeeze the market. It will be squeezed by a move in the europe. Tom really good conversation. Trying to get that chart out on the computer as well. Everyone worldwide. Derrick in and simon a spirited conversation to get us started on this monday. It is the end of a quarter with four more an important g20 meeting. I will be speaking with Peter Navarro. Withd you need a briefing the Eurasia Group and the 6 00 our. Hour. Stay with us. This is bloomberg. Francine this is bloomberg surveillance. Tom and francine. Tensions in the middle east are escalating as to trump buttons iran with additional sanctions. This as the Islamic Republic its Islamic Republic its on iran. Crude continues to rise following the biggest weekly gains since late 2016. Bill kennedy joins us now. How far can the price of oil go if the alliance between saudi and russia stays . I am not sure it is usually bullish. At the moment, the continuation of that is priced into the market. The only slight bit of contention is the last level of devotion quota level of the russian quota. Outcome is the same level and the russians will come on board. They like to do these things. They dont like to play their hand to early. Francine when you look at the tensions. The u. S. Saying it will impose extra sanctions. What more can they do . What more can hurt oil . At this stage any additional sanctions, things are really hurting iran at the financial level which would isolate the entire country from the making things difficult on the oil front. These sanctions impose last quarter but the big news has already happened. The u. S. Is determined to drive all exports close to zero as possible. They could do a few things at the margins. It is not going to be huge. Tom lets go to too much information on a monday. This is what you get. This is too much energy and information tv. Will, all you need to know is saudi arabia, iran, i get the idea that iran is not a big deal. How much power does saudi arabia the sunnis of iraq . This saturday arabians still have a considerable the saudi arabians still have quite a minor power. It really is one that matters. The Bigger Picture saudi arabia and this may come into focus later in the year especially if you see the economy slowed down. Market share and market power to the u. S. The dominant seen remains the rise of shale production. The rise of u. S. Exports. Something unthinkable to years ago. Saudi arabia remains the want to watch. The longerterm strategic isnt as powerful as it used to be. Describes the decline in Oil Production of opec. Barrel for barrel, is that made up by the u. S. . Pretty much at the moment. The market is imbalanced. It is tight but everyone is getting oil that they need in moving further ahead. Morepeople starting to see supply than demand year which may require saudi arabia to move production a little bit more. Francine will kennedy. We will be back with peter dixon and Simon Derrick. Up next, it the liver rallies as wins. Position party we will talk much more about turkey and investors and of course what it means. This is bloomberg. The two Major Networks are projecting a win for the leave campaign. The bbc projects that u. K. Will leave the European Union. Exit is just a2 minor blip compared to what we are seeing on the british pound this morning. Down by 11. 22 . Do we get a downgrade for the u. K. . For at least a year. The brexit vote would lead to a down growth downgrade in the u. K. The people made a clear decision to make a different path. I think the country requires fresh leadership to take it in this direction. Negotiation with the European Union will need to begin underwriting Prime Minister. Rumors about who might fill his shoes at number 10. Is everyone assuming itll be Boris Johnson . He would be the bookies favorite. As we have learned, they can get things wrong. Favorite. Ookies secretary has been mentioned. Theresa has been mentioned previously. Tom what a wonderful effort to bring us back three years ago. Mikey observation is everyone has aged, except guy johnson. Guy johnson is timeless. He does not aid, does he . Francine no, he doesnt. Tom formaldehyde or something. Person wethe only were not talking about that much was jeremy hunt. There is a lot going on in the u. K. With jeremy hunt accusing Pierce Johnson Boris Johnson of cowardice for not being on televised debates. Define whatrying to his character is because of that row with his girlfriend on friday night. Brexit ien you look at dont know what needs to happen for people to shift or have a scenario about what form brexit will take place. No deal, second referendum, general election. Peter what has to happen now and what will happen is the assumption that Boris Johnson gets the gig. It looks likely he will be the next Prime Minister. A brexit Prime Minister will own issue. Then they have to deliver. At that point the brexit camp will realize the difficulties inherent in taking the u. K. Out of the eu. They will have to think about how they want to proceed. If its a second referendum or general election, thats entirely possible, i just cant see it happening. You never know. If anyone can sell it, boris can. Tom do you believe in an october 31 cutoff date . Because for dont all the tough talk the candidates have come up with during the leadership campaign, ultimately they dont want to drive the economy off a cliff. I could be wrong about that. This is the party that claims to be supporting business. I just dont think an exit can be negotiated on the 31st of october unless they are prepared to sign the deal on the table without crashing the economy. Francine i read the telegraph. He saysn on details but the u. K. Will leave the eu on october 31. Suspect at the moment they cant really focus must be on midseptember in working out the fros. Al to and a noconfidence vote at the end of july, yes. Itit possible or generally could be Boris Johnson coming back with no deal . Yes. Is there a narrow path that can see Boris Johnson back from brussels that may be sufficient and voters would vote on . Just about. The idea we will get the done deal by october 31, its a one in four chance at best. Tom simon and peter are with us. In new york city, it is viviana hurtado. Viviana President Trump says he would be able to devote Jerome Powell if he wanted to demote Jerome Powell if he wanted to. He is not happy with powells actions. I dont think he has done a good job. Trump says the u. S. Economy is Strong Enough to go through the headwind created by the feds rate hikes. Bernie sanders wants to cancel 1. 6 trillion worth of outstanding u. S. Student debt. How will he offset the cost . By taxing wall street. Today sanders is expected to promote the legislation. It would provide debt relief to 45 million americans by creating fractional passes on stock and bonds trades and derivative transactions. Bitcoin breaking past 11,000 earlier for the first time in 15 months. In contrast with the last search, there are signs of mainstream interest. Facebook moving into the crypto space could help reinvigorate demand. Thinking of moving to saudi arabia . They just opened applications for a Permanent Residency Program designed to attract Foreign Investment bubble will cost a hefty 213,000. The socalled premium residency will allow forwarders to buy property antibusiness without a saudi sponsor. Global news 24 hours a day on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. I am viviana hurtado. This is bloomberg. Francine thank you so much. The lira jumping as the turkish opposition candidate secured a landslide victory in the Mayoral Election of istanbul. It was overturned after the ruling party nearly lost. He spoke after his victory, positioning it as a win for democracy. Joining us as our least managing editor. Peter and simon are still with us. There is a big emerging market form tomorrow. You look at turkey. Investors like the fact the president seems to have weakened. How weaker is he actually because he has consolidated so much power . They like the fact he did not say im going to call for another revote. He seems to be conceding the victory. This is the first time in 16 this we see an upset like for the ruling party. If you lost other big cities with a big margin, yes, he has a lot of power and its a significant turning point in his rule. Francine how significant is it for the president he is seen as handing President Trump bought antrump antimissile Defense System from russia. How does that for policy played back home . Alaa the rhetoric that could play with the domestic audience, digging in, which put him on a collision course with the u. S. If the u. S. Decides to impose sanctions. From the last time we saw the confrontation over the detention of the american pastor in turkey and we saw the almost came to a crash, and the west is now spitting different scenarios that would put more pain on the turkish economy. It is a tough spot for him right now. Tom lets make it like a chess match of which you know a lot about as a chess champion. Did they lose the queen today or did he lose a pawn or a knight . Give us the scope and scale of losing istanbul. Bishop mayght and a be, not the queen. It still is a Mayoral Election. Given the size of istanbul and the importance to the turkish economy, it is a significant loss. Tom kenny lose the other cities on the mediterranean . Can he lose out yeast . East . Alaa everyone was zeroing in on istanbul. He was the mayor of istanbul and there is a vast network of patronage he relies on to garner support. It is not insignificant. That is why he said losing istanbul means losing turkey. Yes, it was perhaps to try to rally the troops but it is not complete truth. Francine you look at the turkish lira, little will the rally be limited . There are positives here. An easy dollar means easier rates, easier levels on the price turkey has to pay on its dollardenominated debt. The central bank can push back. Turkey is exposed to higher oil prices. From that perspective you have another factor kicking in. It is interesting the lira did not rally that much. Its very, idiosyncratic. Really coalescing . Twon i think there are clear stories. They are coalescing into one broader one. The chinau. S. Three has many particular drag for south korea and taiwan. Higher oil prices kick in as well. 8 of the oil came from the gulf to asia. That,dia and places like you could have the double whammy in the high oil prices. Thats the story overall. Tom double whammy maybe the literature read of july and august. Simon, thank you so much, and peter dixon of commerzbank with us as well. Usilled to have alaa with in the london studios. He will be a modest conversation. , he has ascended. 8 30 on radio. This is bloomberg. Tom good morning, everyone. This is the conversation of the day. The president will recover in iran. Us, peterenbaum joins dixon as well. Served as has also Compliance Officer with the office for the u. S. Department of treasury. What was that like . Sitting at a cubbyhole telling fancy people what to do on sanctions . Pretty much. We advised the world and how to comply with u. S. Law and economic sanctions during the first tom tehran dials. What do we do . What does tehran do . It was a kinder, gentler time. Things were a little simpler. We would try to give companies clarity on how to follow on to the right side of the law, but it was a simpler time. Things have evolved since i left government in terms of how companies have to look at the law. Tom we will talk to Peter Navarro. China, trade, they are just moving things over to vietnam and trading that way. Are they the same leakages for tehran and all of commercially otherr moving over to european entities and avoid sanctions . Daniel that used to be the case. Under the iran deal, the u. S. Eliminated secondary sanctions. Wese are the mystery of what can see the Trump Administration do. They forced Foreign Companies to choose between doing business with the u. S. Or with iran, but not both. They came into effect in the obama administration. They have only been used twice. You can freeze assets of companies in the u. S. , ban them from dealing with the u. S. Outright. You can really do some damage to an economy if you find collaborators with iran continuing to support them. That could be the sanctions the administration is talking about today. Francine this is an economy that is crippled already. If you look at the sanctions so far, 1000 entities including banks, individuals, vessels for shipping in energy, and in may we had another wave of sanctions hurting a lot of commodities like aluminum and copper. Daniel we are running out of significant things to sanction at this point. It will besaid, important to separate whatever announcement is made, if it is made today from reality. Whether these are symbolic designations of additional actions coming out against additional figures in the iranian government. There is not much left that has not been sanctioned. What they are likely going to be focusing on is other third parties found to be continuing to support iran. Thech possibilities euled mechanism to support trade between iran and europe. This was supposed to be focusing on permissible humanitarian aid, even in the eyes of the u. S. There has been a number of threats against it by the u. S. Government over the last few weeks in terms of concerns around the legality of the mechanism. Francine do sanctions work . If the point is to get iran to the table again to talk, if it is to the incentivize them from nuclear threats, does crippling and economy is it the right way . Daniel picking sites to solve a trade dispute over an ongoing diplomatic dispute likely is not the best mechanism. If you playback what is happened, the u. S. Pulled out of a deal that iran was generally viewed to be complying with. Iran downs a u. S. Drone. The u. S. Threatens to retaliate, pulls back and then threatens more sanctions. We have become an extreme the unreliable trading partner. Threes do sanctions work . I would argue no. It is hard to see how they are working to bring people to the table. Tom francine brought up daimler earlier. If mercedesbenz in germany has a secondary sanction, are they not going to be able to sell mercedes in america because they are selling them in tehran for the 12 people that can buy them . Daniel that is a possibility. That company, any Company Found to be trading with iran, if the west points them out can be banned from the u. S. And have assets frozen in the u. S. There is flexibility in how the u. S. Can deploy the mechanism. Francine peter dixon, as we figure out what major sanctions the president is talking about are the industries that can suffer most . If banks are frozen out, is that the european banks, the u. S. Banks that have a lot to lose . Peter to a large extent the Banking Sector has been fairly insulated from iran, the last few years anyway. A lot of the sanctions were nominally lowered three or four years ago. I think the europeans are very worried about getting back in. They foresaw we would see a resurrection of this problem. I was at a forum went bank said we cant do that much business with iran because we are freighted with the u. S. Will do to us. To a large extent we are going to escape this one. Francine peter, thank you so much. Daniel. Coming up, the European Commission vice president. Thats coming up at 11 00 a. M. In new york. We will ask him about the price of oil and european pricing of energy and the impact it has on businesses. This is bloomberg. Francine this is bloomberg surveillance. Who will be the next european banking champion with all the merger chatter in recent months . Two columnist to put forward proposals. WouldDeutsche Bank merger bring together highly complementary businesses. A threeway combination of unicredit, commerce back and socgen could take on u. S. Rivals. Take the you want to u. S. In terms of the Investment Banks . What you want is a european banking champion. The sources of capital and europe mostly depend upon bank loans. Capital market union is not here yet. It depends on bank loans. If youre a regulator or government, you want to ensure the capital necessary for Economic Growth is always available. That means sourcing them domestically. There is a strong incentive to have a european banking champion to compete with u. S. Giants. Francine ubs and Deutsche Bank of fill that role . Elisa lets clarify that. All these deals sound great. Deutsche have a lot of issues. They are complementary. They would be a strong Investment Bank across fixed income and equities. They would not be the european champion that mark is talking about in terms of the geographic location. You have switzerland outside the European Union. There are industrial reasons why it could work and help make europe banks fitted to compete with wall street firms. Tom let me show a chart of three of these banks. Deutsche bank, unicredit and commerzbank. It is the ugliest chart on the planet as both of our sitting guess no. Know. Unicredit has done better. What is the urgency to clear the market and combine . It is delay, delay, delay. Recognizes the need for crossborder mergers. The german regulator was willing to knock through Deutsche Bank and commerzbank. It acknowledges the biggest banks in germany need some help. I reckoned unicredit could convince the german regulators it would be a good steward. Tom do you agree . unicredit comes with a lot of italian sovereign debt. Convincing the germans might be difficult in that regard. The in terms of complementary business and synergy, the businesses together would bring definitely a strong argument for that. It would make a strong lender to the middle there are manys germanys enterprises which are the back bone of the economy. They would at least listen to unicredit. Francine he was playing m a fantasy . Is it the ecb trying to make these dinosaurs mate . Mark it needs to be a step back. In terms of local regulators no one wants a massive banking champion other books. Doing nothing is not an option. These banks are getting killed. With the European Central bank about to reduce Interest Rates again the environment is not going to get better for banks going forward. Crossborder mergers is what theyre going to have to look at. The catalyst is the graph tom just showed. They cant get much worse without disappearing from view. You dont of the u need at a time when it is plunging into a downturn. Tom what is on the Deutsche Bank calendar this week . Do something. What is he going to do . Second part of the u. S. Stress test is this week. We will learn about how much freedom the Deutsche Bank u. S. Unit has gained from regulators. Share prices are low but european banking regulation and the lack of a banking unit makes it feel difficult. Tom you guys are killing it on informing eu banks. Work thatally good bloomberg opinion. G20 is upon us. My conversation with Peter Navarro on Bloomberg Radio later today. We need a briefing. This is bloomberg. Tom this morning, the g20 meeteing. Meredith sumter. Blinked . President we speak with dr. Navarro later this morning the dow up 15 year to date. The bull market, you are not in it. The end of the quarter. December 2018. So, so distant. This is bloomberg surveillance < live from new york bloomberg surveillance, live from new york. Francine, i need a boris update. He is still running . Francine of course, and hes under attack from jeremy hunt. Tom what a weekend. Francine police were called to mr. Johnsons domicile because of a row with his partner, girlfriend. Jeremy hunter is saying if there is a character flaw, we need to know about it. He is urging him for speaking up to the press, showing up for the debates. Tom we know nothing about character flaws in american politics. We will keep that in the united kingdom. Im getting. In new york city im kidding. In new york city, here is viviana hurtado. Viviana a rate cut is getting louder. President polis fed said he is calling for a 50 basis point reduction in the last meeting, reinforcing expectations the central bank is on course to cut rates next month. A stunning blow for president erdogan in turkey. His party lost istanbuls mayoral race by a landslide. Ofis a stinging indictment the economic policies after the president s refusal to accept earlier defeat. It sent the lever rallying. To put an end to months of Political Uncertainty that had weighed on the currency. Daimler issued its third profit warning in a year. The company claiming cost related to the rugged tory scrutiny of its vehicles. It faces extra fees of a high three digit million euro amount. The german carmaker is facing investigations in europe and the u. S. Over allegedly excessive pollution. It sees this years profit at a similar level to last year. An extra week to get its act together to avoid eu penalties. Brussels wont trigger disciplinary action this week to give rome more time to come up with commitments to bring down the countrys deficit and debt. The political situation in italy is complicated by deepening divisions in the populist coalition. Saudi arabia thinking of moving to saudi arabia . They are opening up applications for a Permanent Residency Program designed to attract Foreign Investment will cost 213,000. The socalled premium residencies is the buy property antibusiness without a saudi sponsored. Global news 24 hours a day on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. I am viviana hurtado. This is bloomberg. Vegas, andreno, las what we do when we are out there. They are merging. El dorado reno meeting with caesars of las vegas in a rather large deal. Really underscores the value out there. The statistic is 17 billion on that merger. Much more on that. Equities, bonds, currencies. It is a quieter day. Futures advance up 6. Barrel oned to 58 a an extreme with euro strength near 114. Dow closing on friday. The twoyear yield pretty much where it was but it underscores the german 10year yield. That should be red on the screen, lower by 2 basis points. 0. 31. Francine i am looking at a lot of the equities. They are turning on the downside. Shares are slipping because investors are trying to figure out what the geopolitical risk means for the portfolio, and whether President Trump and president xi finding a deal. U. S. China trade war. Zeitgeists sequential over the weekend in the United States. One of the touch points of the weekend was an article in the washington post. Joining us from washington is jenna fitzpatrick. Jack, i will cut to the chase. We have a president to blinked on iran, who blinked on the immigration issue and ice. Who says he wont blink on china in a short number of days . Jack i think you are right to raise the events of the last week on iran as far as consistency goes when it comes to a foreign policy. There does not seem to be a lot of faith in the president right now in his ability to make decisions in a way that keeps things stable. About thefrom maxine backandforth on iran. Another call for impeachment. Questions about what the drone in iran was even doing there when it was shot down. Hill beforecapitol they left last week was certainly not trusting of the president. Tom lets get to the immediate moment of this monday. Additional sanctions on iran. Dan tannenbaum is an expert and says it could have substance. Is congress on board on those additional sanctions . Jack we have heard from mike mccall, one of the top the Top Republican on the Relevant Committee in the house saying he encourages it. There has been some discussion of the fact that according to mike pence, 80 of irans the economy has been sanctioned. Banks. Ve hit oil, steel, this would have limited consequence compared to what they have already done. There is some concern if they go much further, it is less about hitting the regime and more about hitting iranian sanctions. That is a key part of the debate to look forward going forward. Tom jack fitzpatrick, thank you for the briefing this morning from washington. Inare thrilled to bring you this important week for the white house, america and china, Meredith Center of Eurasia Group. She joins us now from washington. I want to go to the question i always ask you it interview mid interview, what are you reading in chinese right now . What is the mood in china as their president goes to this important meeting . Meredith the mood is much less optimistic. Over the medium and longterm the mood could be in washington. When you talk to beijing, post , those contacts are not talking about xi jinping wanting to of had a deal with President Trump. Notice the past tense. Wanting to have a deal. The chinese are not in lets make a deal that is going to last mode, but more in what can we do to stave off further escalation . What can we do to manage risk coming from washington without actually wanting to agree to a fundamental deal that will resolve the underlying structural constraints that cause the three when investigation to begin with . Francine always great to have you on the program. When you look at President Trump and what hes doing with iran, what is his end game . Bring them back to the negotiating table, or the same strategy with china . Meredith this is a president that tries a maximalist campaign to bring people to the negotiating table. With tehran in particular, they are not interested in talking. Not after the u. S. Pulled out of the agreement. Not after its campaign, and after the u. S. Ended all sanctioned waivers. We are seeing a change in strategy from tehran since april. That is reminiscent in all of the uptick in attacks we have seen on oil tankers, oil infrastructure, the downing of u. S. Drone. In the last month they were attacks on three drones. Two of which were successful. What is tehran trying to do here . They are trying to claw back inerage from the u. S. Preparation for an eventual negotiation. Tehran certainly is not interested in talking now, but i would say should we have a second term President Trump, at that point tehran is unlikely to be able to withstand the economic pressure we have seen to date and will probably look to move towards some sort of talk or negotiation to relieve the pressure. Thecine if you look at Pressure Point at which President Trump is applying china, possibly turkey with sanctions to a russian mobile Defense System that they bought, and iran. Is this where things could turn ugly . Meredith from a conflict standpoint i would say iran is the risk that worries us at Eurasia Group most. Last week alone, before the was called on and then rescinded the retaliation attacks for the downing of the u. S. Drone, we raised the probabilities for a warlike scenario with the u. S. And around 40 . 40 . In that what we are seeing is both tehran being far more tolerant of the risk of directly attacking u. S. Assets in the region. That combined with President Trumps having his administration pushing for more of a retaliation. What you can see is a trigger point that could cause both sides, even though they dont what war, both to movie on the brink. The most concerning triggered for the Eurasia Group is if you have an iranian attack that results of u. S. Life. That could trigger President Trump to actually retaliate. Tom please stay with us, meredith sumter. Coming back we will address directly china and the g20 meetings. Part of that conversation will be on Peter Navarro. His title is assistant to the president and director of the office of trade in manufacturing policy. He is the china hawk. Stay with us. This is bloomberg. Francine viviana lets get the Bloomberg Business flash. El dorado is buying Caesars Entertainment with a deal where 17 billion. El dorado is paying 12. 75 per share. It will be split equally between shareholders of both companies. Talks for a majority stake in a russian miner. The chinese conglomerate is considering teaming up for a joint offer. 1 deal could value at about billion. The plan to go public with stalled last year amid International Sanctions and a slump in commodity prices. That is the Bloomberg Business flash. Tom thank you so much. Meredith sumter from Eurasia Group in washington. Also in washington, Peter Navarro. We will speak with him later this morning on Bloomberg Radio. Scathingto erics summary of navarro economics at reason. Com. S an important website informative website with interesting articles. Navarro is planning a bait and switch to get to the world of lower tariffs. He said congress should give the president or power to increase tariffs. He goes on to say it is wrong to apply imports harm growth. They dont influence the calculation of gdp at all but they do have a positive correlation with Economic Growth. What is so important here about the essay is he goes to a Small Business in Washington State who gets 29 or 30 of their components from china. That seems to be the elusive issue for the president , this mixture of modern manufacturing process. Meredith that is exactly right. When pressing washington officials about what the actual costs are going to be to businesses in the United States that are importing products from china, the result is a response that is more so akin to we will all have to partake in some kind of pain for us to be economically stronger on the backend. Similar to the arguments made with the Agriculture Sector and u. S. Farmers who are like ways a great deal of pain this year as a result of the tariffs. Tom when we look at tariffs, the summation of all this, then showing thisessay is normal, folks. The president s trend is like that on gdp. Are we seeing the effects of tariffs now or is that to come . Meredith i think it is more so to come. We have been watching closely the activity of u. S. Bond markets over the past month and a half. Signs of the u. S. Economy weakening. Tariffs take time to bake in. If the u. S. President moves tariffswith this last on the 300 billion in chinese the costthat is when of tariffs are going to begin to be felt on the pocketbooks of u. S. Consumers here at home. If you going to levy tariffs, it takes about two months or three month for the cost of those tariffs to begin to be baked cost of Small Businesses and consumers, whether costs passed on to their pocketbook. The timing is quite politically precarious for the president. If we move forward with tariffs on china in the summer, it is going to be right when the 2020 campaign for his reelection begins to heat up in the fall that consumers are going to notice the rise in prices in stores and an impact on individual budgets. Francine will that hurt the president s popularity . What are they voting on . Perceived energy to get the u. S. A better deal people want. Meredith right question. Thats the argument weve heard from farmers to date. Its remarkable how well his base has held up despite the economic friction we have seen. The question is at what point does that balance begin to tip . To not favor the u. S. President . That is certainly a question he is concerned about as well. That explains the extent to which he is focused on having a conversation with president xi at the g20 this week in osaka and trying to find some way forward on a deal with beijing. Tom meredith sumter, thank you for the briefing. She is with Eurasia Group. Please stay with us. A little bit of lift to markets this morning. This is bloomberg. Francine this is bloomberg surveillance. The leverage jumped after the turkish opposition candidate security landslide victory in Mayoral Elections in istanbul. The initial elections in march were overturned. Victory,after his winitioning his win as a for democracy. Meredith center still with us. Thank you for staying with us. Meredith, president erdogan weakened by this loss. He is traveling to the g20 where hes meeting with President Trump to try to avoid sanctions. How will he deal with the u. S. Administration . Meredith certainly following the surprise defeat i would say the size of the defeat in the elections was quite a shock for the akp. Into the g20, it was thought he would try to find offramp with the missileDefense System he is set to receive from russia, a key source of contention with the u. S. Turkey relationship. Should he receive that system, the u. S. Is likely to move forward with further sanctions. Following yesterdays defeat, we see it is highly unlikely he would agree to some kind of delay in the delivery of the missileDefense System and will likely continue to move forward with that system regardless of his meeting with President Trump. Francine mark, we saw a little bit of a rally istanbul. Are investors thankful that president erdogan actually did did not say he would rerun the election . Mark a check and balance might be in place. This is not really a game changer at all. The structural damage to the turkish economy and turkish assets has been done. A great example came this weekend. Euroberg rebalanced its index and removed the turkish lira from the component. Thats a good example of the timing of how the turkish lira has lost its credibility. Tom this gets right to the heart of the matter. Is it true not an e. M. Economy . Mark its hard to analyze. I started as an em trade or. Erdogan was the case of an eu country doing well as it came out of the early 2000s crisis and that narrative has completely changed. It has a lot of construction positives, but at the moment there is so much damage done by erdogan, by his rule and the changing policies that Foreign Investors are worried but having money trapped in a system where the rules might change quickly. The liquidity has deteriorated which discourages investment in the country. Tom i want to get out front with what will talk about. Is the opportunity in em right now . Mark the opportunity is an em for the next two months. We are going towards a much more difficult situation for the u. S. Economy and the global economy. You will see this immense Global Central Bank easing and emergingmarket pain will come later. We saw this in 2008. The u. S. Was slowing down, the market topped out, but emergingmarket fx made a record high in 2008 before lehmans. Shorttermll be a squeeze of pain. Tom i will trade the mini squeeze. Sumterdmore, meredith thank you so much for being with us today. This is bloomberg. Were the slowskys. We like drip coffee, layovers and waiting on hold. What we dont like is relying on fancy technology for help. Snail mail we were invited to a y2k party. Uh, didnt that happen, like, 20 years ago . Oh, look, karolyn, weve got a mathematician on our hands check it out now you can schedule a callback or reschedule an appointment, even on nights and weekends. Todays xfinity service. Simple. Easy. Awesome. Id rather not. Tom happy monday morning. Survived the weekend . Francine just about. Tom now we have to survive an incredibly busy monday, including g20 and the end of the Second Quarter. Says he President Trump would be able to demote Jerome Powell if he wanted to, even if he denies saying this. The president reiterated he is unhappy with powells sanctions. I dont think he has done a good job. Trump says the u. S. Economy is Strong Enough to pull through with he sees as the headwind created by the feds rate hikes. The u. S. Plans to announce major new sanctions against iran, this just days as President Trump called airstrikes at the last minute. The president says he is willing to negotiate with tehran to ensure the nation never acquires nuclear weapons. I am not looking for war. If there is, it will be obliteration like you have never seen before. Im not looking to do that. You cant have a nuclear weapon. You want to talk, good. No preconditions. Viviana Bernie Sanders wants to cancel 1. 6 trillion worth of outstanding u. S. Student loan debt. How will he offset the cost . Taxing wall street. He proposes legislation to provide debt relief to 45 million americans by creating fractional taxes on stock and bond trades, and derivative transactions. Bitcoin breaking past 11,000 for the first time in 15 months. In contrast with the cryptocurrencys last surge, there are signs of mainstream interest. They could help reinvigorate demand. Global news 24 hours a day on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. I am viviana hurtado. This is bloomberg. Tom we begin with no chart. Whoo that with mark cudmore is barely described the contribution to market coverage across all of bloomberg. He joins us on our set in new york today. What is the oddest thing in the markets . What is the one thing distinctive about this on the morning . Mark probably the denial about what is happening around tariffs going into g20. Much of the world is just assuming there will be some kind of deal and refusing to price and the negativity in terms of earnings and growth likely to happen unless there is a deal next week. Many people assume pricing is status quo. Tom it is always wrong. The revenue glide path, the earnings glide path forecast needs to be adjusted and wrong. How off the mark are earnings and revenue guesstimates right now . Mark i am not an equities specialist. The Second Quarter earnings came in slightly worse. Thirdquarter earnings are being revised. We might be heading towards an earnings recession. It could be quite drastic partially because earnings were so good last year that we have this taxed into the u. S. U. S. Earnings are said to be downgraded significantly, especially if growth is down significantly. The Economic Forecast of the Worlds Largest economies have all been upgraded since the trade were escalated just over a month ago. Economists are waiting for this weekend. They will be reacting late and then bringing their forecast rapidly. Francine why is that . Chief executives dont want to spend money and therefore you lack investment and will pay the price in two or three years or something more sinister . Massive have seen a deterioration in growth regardless of the g20. No one wants to react to that until the g20. Jp morgan Manufacturing Index has declined her 13 straight months. It looks like it will be in contraction territory again in june with a further decline. We have seen the surprise indexes. They have been missing consistency. All the fundamental data has been very poor in the manufacturing base. They are waiting for g20. It will speed up this decline in manufacturing because of the trade slowdown be are seeing. We are seeing that in highfrequency data, particularly in asia. That will feature in jobs. Jobs is a massively lagging indicator. It did show a spike in unemployment. That is a lagging indicator. Overall we will see less business, less capex. The economy will slow and earnings will condense. What are global bonds telling us . Mark they are pricing for a high risk of a u. S. Recession coming late this year at the start of next year. They are right to be pricing that. I think they will be a very drastic slowdown in growth. If we have a recession or not is less relevant than the severe growth slowdown, which is not yet fully price did equities markets. They are using macro inputs of economists which have not yet reacted and they are waiting for g20. Downgrading Economic Forecast and earnings will probably happen two or three weeks after g20 assuming we get the base case outcome of saying they would like a deal but no concrete steps forward. Tom what you correlations look like right now . Talking about central banker to the world, coalesce how the correlations are working right now. See the most relevant is rates market where the whole world was pricing rate hikes to come. Forward, which we do given the massive correlated move . Mark if we get the deterioration in earnings i expect, and about a month or two we will start seeing equities in the u. S. Decline. That will be a sustainable decline, unlike the last couple of eight or nine years. Correlation to start decreasing between assets as we seen the pain and wealth damage sepa and other assets. Seep into other assets. Francine i dont know if you look at the Chinese Markets and the impact on the rest of the world. Mark i am worried in china. They missed have much the local credit markets are freezing up. It is not a liquidity problem. It was a trust problem. Companies were not lending to private companies. They really needed the cash and were not getting the cash. The smallbank seizure and medium level banks are not getting the cash they need. The credit problem is getting slightly worse. The yield continued to rise. We are seeing more cancellation of credit issuance. There is a severe problem growing in china, which the essential bank is doing a lot to try to address but they have not work that had to address the trust problem. China has a serious issue. The chinese equities market is not overvalued, not massively cheap but around average prices and fair pricing. The u. S. Stock market is very expensive on a forwardlooking basis. S pe ,rancine coming up later today the European Union energy vice president. He will be on about Energy Security and Energy Prices for european businesses. This is bloomberg. Tom i am tom keene. River move to the charles and boston pops by the numbers. Tom good morning. Bloomberg surveillance in new york in london. We are thrilled to have mark cudmore, expert on e. M. And the correlations into the greater markets. , bloombergas well executive producer for Bloomberg News in india. I want to bank of a single chart of the challenge i see for all of india, the price of oil. It is secondary in the United States and in more developed economies, but i look at the price of oil in the indian repeat and it is profound. How profound impact is it for a reinvigorated modi . India is a net oil importer. It impacts the budget deficit. The Modi Government has contained the headline budget by 3. 4 . The moment oil prices shoot up indias microeconomics go out of whack. Ofget deficit numbers go out whack. Oil prices have stayed relatively under control over the last five years. The government has been able to show prudence. If brent oil shoots up, it is difficult for modi to control. Tom it is now weeks on from the standing reelection of mr. Modi. To settledia doing down for the task of 2020 and 2022 . Harsha he has been welcomed by a huge brute political majority. He is faced with a bunch of challenges. India is facing the prospects of a slowing economy. All indicators show it slowing down considerably. He is faced with a significant jobs crisis. It is becoming unviable in india. He needs to act quickly to fix the jobs and get the economy growth back on track. Francine how much should we worry about the independence of the reserve bank of india with the latest resignation . Forha his resignation was several possible reasons. Speechout a statement, a about Indias Central Bank and the government of the day. We have a new guy in charge. It is a professional organization. Monetary policy set up by experts. There is a concern where the government is trying to cao ntrol it. Tore has been no indications anything to that effect. Interest rates have relatively come down. Most macroeconomic fundamentals are rather benign. Francine is the Deputy Governor stefan down not after jill before july 23, wasnt he one of the most outspoken critics of what was being done . How much will the bank suffer from moving such a strong voice . Harsha there are two aspects. One is with the governor has been saying in his capacity and if it counts towards Monetary Policy action. The Monetary Policy committee is an independent committee of people who take it independent of the views internally. He has been outspoken undoubtedly. A lot of people have been outspoken against the government. Singapore. Ial is india constrained and boarded by its own society domestically inbound . Is it expanding out across the rest of asia . Mark it is definitely expanding out but its more of a closed economy than others in the region and that insulates it to what is going on the global trade war. It is trying to expand outward put is the wrong time to be expanding outward. Isncine how much of a gift the fed to emerging economies such as india . Mark it is massive at the moment. Assets will probably do ok over the next six months, even as we get a deterioration in the u. S. There will be an initial squeeze but they will do well because there is high yield. If you asked this morning what this resignation would have meant, i would have said this was bad news for india. The reason it is not really bad news is india does not need rate hikes at the moment. Inflation is contained. The economy does have slow debt issues. There was a hangover from the credit problem. This means everyone knows the r. B. I. Needs to ease the policy. A government critic is less tester mental at this time. It goes into the backed up of the fed easing policy to support emerging markets in this next wave of more pain for u. S. Assets over the next six months. Francine if you get a deal between President Trump and president xi, if we dont get an escalation, does that help india . Pompeo iscretary in india this week for negotiations. The trade spat that is come as washington increased tariffs to hit backbite hiking tariffs to the tune of about 200 million products like apples and walnuts and almonds. Ensuredia once is to that tensions are deescalated. They come back to the negotiating table. There is a lot more at stake. President trump is on two tracks. He wants india to play a Strategic Partner role in that region to combat terrorism. India is a country where the United States once the trade deficit to be under control. 21 billion. I would think the Prime Minister it is slowing economy, the Prime Minister would want these rotations to be completed successfully and very quickly. Need ors india want or desire Chinese Investment . China has been an important trade partner for india. There is always a spirit of competition and there is a great deal of mistrust from what china really wants. Tom has that changed . Harsha it has not. India has not been a big fan of the belt and road initiative. India is leaning towards aligning with other partnering with the United States a lot more than it has with china. Francine thank you so much, harsha. Mark will stay with us. Coming up tomorrow, bloomberg hosting a foreign tier four in Frontier Forum in london. That is tomorrow. This is bloomberg. Viviana this is bloomberg surveillance. It is working to stem a wave of outflows from its h2o Asset Management unit. It is selling part of its bonds and marking down the balance. The aim is to reverse outflows that saw assets drop i went billion euro. Daimler issued his third profit warning a year. The company blaming costs related to the regulatory scrutiny of its diesel powered vehicles. It faces extra fees of a high three digit million euro amount. The german carmaker is facing investigations in europe and the u. S. Over allegedly excessive pollution. That is the Bloomberg Business flash. Francine lets get more on the daimler and auto story. We are joined by benedikt kammel. Daimler is the only one with this problem. Bendikt certainly not. This haunted the german and wider car industry for the better part of four years. This started with volkswagen in late 2015 when the Diesel Scandal really erected. Other carmakers have been dragged into this. Daimler does not seem to be able to properly shake it off. This keeps coming back once or twice a year. Every time there are recalls and costs associated. Evening theyn the slipped this out and said we will need to revive our profit forecast for this year. Instead of seeing slight growth for 2019 in terms of operating profits, we will not grow at all this year. They put this down to the recalls. Possibly this is the last time we will see something related to Diesel Scandals. Some analysts saying maybe we will see more revisions later in the year for a different reason. Francine european carmakers were speaking about recovering in the second half of the year. Is that still likely . Benedikt it is hard to say at this point. Probably everyone is looking at the g20. What kind of an agreement we might get out of the u. S. And china. That is a key moment. If we get something of an accord, of a better relationship in terms of trade, that will go along long way in terms of the outlook. If things remain stagnant or even take a turn for the worse, that could have a major knock on the car industry. We have seen it with the company like daimler. They make a lot of their cars in the u. S. , then ship them off the china. They rely on this and more fromly the shift combustion to the electric car will take a long time. Francine this goes back to the fact a lot of this industry has to put money in Driverless Cars and electric cars. Mark this story is just the latest micro story in a broader macro narrative, which has been struggling since the middle to end of last year. It has been very clear that overall the car industry is slowing down. March is when you normally see record highs. The last time a march did not see record sales in the Auto Industry globally was during the financial crisis. Francine thank you both for joining us. We are just getting a little bit of breaking news out of the Russian Energy minister. It is too early to talk about opec plus options. This is what the market wants to know. Bloomberg. When you rest on a leesa hybrid mattress, bedtime is no longer simply the time you go to sleep. 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Alix the president threatens iran with more sanctions instead of opting for war. Trump and xi. It will be a twoway street. The to prepare to meet at the g20 this week. Traders prep for another week of headline risk. Upset inbuls stunning the redo of the Mayoral Elections. The lira climbs the most in the world. David welcome to this monday,rg daybreak on june 24. We had the president , mike pompeo, and others speaking out over the weekend on the run. Alix brian hook also talking in a telephone briefing. Hes a guy you want to talk to. He says there is a clear diplomatic offramp for iran, im going to say if they choose to take it. David theres a question of getting it to the tae