Good afternoon if you are watching in asia. There is a risk on mood in markets and looking at the stocks europe 600 gaining. 2 . Treasury gold and yen extending some losses. Eurodollar 113. 69. The u. S. 10 year yield with a bold call from Goldman Sachs. A lot more to say about the 10 year yield talking about centralbank dovishness around the world and some of the Economic Data coming out the next couple of weeks. Also up, we speak to david from Harris Associates, the chief Investment Officer for international equities. We will talk about commodity stocks. That conversation in around an hour but first, lets get the bloomberg first word news in new york city with Viviana Hurtado. Goldman sachs joining j. P. Morgan in slashing forecasts for u. S. Yields. The lender now sees the 10 year years and the carried that is down from the two point a projection as recently as last sunday. The new figures price index that patient of the prolonged trade war and a dovish shift by key Central Banks. There is a one million to one chance of the no deal brexit according to tory leadership front runner Boris Johnson. The shift comes a day after saying he would take the u. K. Out of the eu on october 31 do or die and come what makes her coat for the first time today cap come what may or code republic will exceed stockpiles on low grade uranium. European powers are trying to salvage the agreement. Tensions with the u. S. Have upped tensions against iran. Mark zuckerberg says facebook was too slow to respond to a doctored video of House Speaker nancy pelosi. It was edited to look like nancy pelosi was slurring her words. It took facebook more than a y to flag it as fake. That was an execution mistake. We will want to be improving execution, but i do not think we ant to so far as to say private company prevents you from saying something it says is factually incorrect to another person. Milestone for saudi arabia, removing and ownership companieslicly traded for foreign strategic investors. This paves the way for International Backers to take controlling stakes in listed companies. It ends the previous maximum limit of 49 ownership. Global news 24 hours a day, onair and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im Viviana Hurtado. This is bloomberg. Thank you so much. President trump says additional u. S. Tariffs would be placed on goods from china if there is no progress on the trade deal after his meeting with president xi. Lets get to oce soccer. Our osaka. Stephen, we are expecting World Leaders to start to arrive in an hour. Is the trade dispute overshadowing Everything Else . Stephen it is. Of course, iran will be discussed and a few other global issues but primarily with xi jinping and donald trump confirming they will meet saturday at 11 30. It is thursday early evening here in osaka so still a day and a half from the meeting and many World Leaders have already started to arrive. We saw mr. Erdogan of turkey arrive a couple of hours ago. Donald trump will be here later and having dinner with the australian Prime MinisterScott Morrison tonight. Xi jinping will have dinner with the host Prime Minister shinzo abe tonight. Two interesting bilateral dinners tonight, and a whole tomorrowilaterals including trump and Vladimir Putin. Surely the chinau. S. Trade war, whether they can get some sort of commitment from both sides to find a path forward on this impasse. Right now, they havent been having many facetoface talks. Ay they can chart a path forward and maybe the best case scenario, a promise not to continue titfortat responses in this escalating trade war. No one is expecting any detailed trade deal to be announced at the 20. G20. Francine are we expecting a truce . Is that the mood music at the moment . Stephen what exactly would constitute a truce. We got a 90day delay the last time the g20 met him whe in buenos aires. We also have computing comments. Steve mnuchin said we are 90 to a deal by the end of the year but there is the final 10 that is the hardest 10 yards to obtain when you are trying to do structural reforms. Then you had donald trump back pedaling away from that and saying listen, my plan b might and that is a, the implementation of additional tariffs. That might be in additional negotiating tactic. Weve seen this. One official will say this and donald trump will say we will put chinas feet to the fire continually. Francine Stephen Engle, our chief asia correspondent. Covering the leader summit and we will have coverage of the g20 summit live from osaka through the week. Scott field from blackrock is looking at trade truces that may or may not hold. What is driving the markets right now . In the near term, the g20 is critical. I would stress there are multiple players of this negotiation and geopolitical risks. Geopolitical risk will be a huge driver. If we get some relief, and the most we could expect is an agreement to talk on. Francine is that a positive for the markets . Scott that is what they are beginning to expect. I think you have that immediate relief will be important and obviously, more concern or thoughts about Monetary Policy easing, a very important factor. Francine how linked are the two . Our Central Banks around the world getting used to sluggish growth . Is an important question because it looks like the concern around geopolitics has transmitted into the real economy. That is the issue Central Banks are dealing with. How do we deal with that shift in sentiment in the asset markets and the real economy . That is the transmission mechanism . Francine is that in capex . Our chief executives not spending or something firmer . Scott both in terms of forwardlooking but things like manufacturing in the u. S. , we have seen a slowdown. In trade volumes, a slowdown. The question will be if we get relief from the g20 or a more acquiescence between the two parties Going Forward, does that relieve nearterm tensions . Francine we will talk about yields and a second, but we have some live pictures of osaka where the g20 arrived. Is there one leader particular away from President Trump and xi will change the economy . Is it saudi arabia meeting with Vladimir Putin on oil or Something Else . Scott the market is so fixated on the political situation between the u. S. And china and what is happening in the gulf. For the g20 specifically. There are two players. One is the tariff issue with the u. S. And china and second, this longer more complicated issue ofund strategic dominance technology and other things going on between the u. S. And china. Issue isespects, that the longest lasting one. Not the one in front of us, but one investors have to look at Going Forward. I would be cautious of being overly optimistic about the g20 outcome because issues will be prevalent for a while. Francine we are seeing a lot of dovishness from Central Banks. Scott a seismic shift. Vigilancel banks and ready to go, they skipped the vigilance. They are ready to go. It concerted . Scott i dont know if it is coordinated but it is contemporaneous. In the u. S. And europe, it is inflation. Francine we will get back to your calls, but 1. 75 for treasury tenure . Scott 2. Francine we will get back to scott thiel from blackrock. June 2019ay only be but the president ial race got into full swing last night with the first democratic debate and an attack on President Trump. This is bloomberg. I want to return government to the people and that means calling out the names of the monopolists and is i have the courage to go after them. We know not everyone is sharing in this prosperity and donald trump just in the white house and gloats. We have a system that favors those who can pay for access and outcomes. That is how you can explain an economy that is rigged to the wealthy. Dignity is being stripped from labor. People work a fulltime job and cant make a living wage. That isve a government of, by, and for the rich and powerful. You can have good Job Opportunities where do you live in a big city or small town and on january 20, 2021, we will say adios the donald trump. Francine those were highlights from the first night of debates. With more on the story, here is annmarie hordern. Annmarie the field of candidates is so large, more than 20, that last nights debate was just the first leg. We will have another set of debates this evening and while you might be thinking, do i need to memorize names and policies . I would say hold off for now. We are still more than six months away from the iowa caucus on february 23. If you will hone in on candidates, you should look at the top five leading the polls. We have former Vice President joe biden. Followed by vermont senator Bernie Sanders, no stranger to primaries. Elizabeth warren, rising in the ranks recently and californias Kamala Harris and south bend mayor pete buttigieg. Bloomberg has been tracking their tweets, 24,000, to find out what issues they have mostly focused on. Jobs, economic inequality, and the environment. Some hot button issues like immigration have been mentioned more in recent weeks but as it stands, the race could change dramatically before the dnc in july of 2020. Francine there is a second debate tonight because there are so many candidates. Watch for that later on. We will bring you more coverage from the second night of the debate with frontrunners joe biden and Bernie Sanders. Still with us, scott thiel from blackrock. A lot of the debates, away from immigration and health care, is on the economy. How is the economy doing . Scott more broadly in the u. S. , it is still very strong. We have record low unemployment, Consumer Spending which is healthy. Manufacturing has clearly slowed and that is part of the feedthrough from the trade negotiation but economy will be critical to the election process and particularly given the reelection process for the current administration. Francine the u. S. Economy, is it creating quality jobs . You cant deny the Employment Situation is robust. We see low unemployment, average Hourly Earnings continuing to be strong. Not abs market is question or drag in terms of Economic Performance so when the democrats and republicans talk about the issues, the broader direction of the economy is going to be very important. Francine scott thiel from blackrock stays with us. Jpt, Goldman Sachs joins morgan in slashing its forecast on 10 year treasury yields. Scott thiel, does that look a little too low . How low can they go . We discuss that next. This is bloomberg. Francine this is bloomberg surveillance. Im Francine Lacqua in london. It is sunny after three days of uninterrupted rain. London and parliament is under the sun. Some breaking news out of Boris Johnson. Yesterday, we heard more about the two candidates. Boris johnson actually telling about policies. There was a one chance in a million of no deal brexit. He has told the conservative notication that he does want to call a general election and there is only a small chance of a no deal brexit. Pound. , for scott thiel of blackrock, when , there is aassets lot going on and not much going on at the same time. Scott there are two ways to look at brexit pricing. One is the british pound up relative to the dollar, it has moved in concert with the basket. When you look at the euro, weve noticed it has the cheaper end of this multiyour range. Clearly multiyear range. The other thing that is interesting to note is if you look at volatility, the cost of buying and selling options over the october deadline, there is no real premium there. When we look at the premium we had in the first deadline for negotiations, there was some and now there isnt. I think the market is convinced we will get an outcome isnt convinced we get an outcome in october. Francine i have europe because it is still range bound. We have broken off a touch, but we were talking about parity. Does it ever go to parity . Scott to get that kind of move, which we saw around the initial referendum, you would need some pretty negative me news negative news, given strong growth in the u k and the general level of inflation being different than in europe. Yeartodate changes in treasuries, treasuries about 65 gilts arets lower and only 40. A lot of it is uncertainty about policy. If the situation is resolved, the central bank has been more hawkish. Francine Goldman Sachs has joined jp morgan in slashing its 10 year yield. The wall Street Lender sees the 10year at 1. 75 by yearend, down from a two point 2 . I have a chart i will put up, but push back against that. You think 1. 75 is too low . Scott lets look at the facts. 50ave a 50 chance of a basis point cut in july. Then for the rest of the rate cutting cycle, we get another 60 basis points so 110 basis points in total. In our minds, given what we know about the impact of the trade negotiations into the real economy and u. S. Economy, and what we know about the other facets of the economy which we discussed. Unemployment, Consumer Spending, rate cuts amount of seems excessive to us in the current environment, which would suggest you dont get a push lower if the 10year is trading above 2 . You dont get a push to 1. 75 this year. I dont think rates are exploding higher here because of the environment, but i think the amount of easing seems excessive given what we know. Francine this is the chart. Where do you see the u. S. 10year treasury . Chart where they could end up twoyear and 10year . Just below two . Scott i think we could mail about in the 2 to 2. 25 range. I am not calling for a huge spike in treasury yields but the market could be set up for disappointment in july if the fed cuts only 25 or passes altogether. They would have to give more information about passing altogether but the other corollary of this is europe, which is interesting. It is interesting because we had a push, the twoyear shots traded 75 basis points after the conference. The ecb president basically underscored what he said in the last meeting but said youve got to Pay Attention to what i am saying. Financing qe, operations are still on the table. Francine do you believe they can really do it . Scott one, they have some wiggle room with the Current Program for the balance of draghis term but if they did something simple like extended the maturity of the Purchase Program to more than 30 years, that would give the multiple years of more purchase power. I dont think the constraints are really that constraining here. What i would say is if we look at unlike the fed where we say it is too excessive, pcb pricing is about right because we have a fundamental chronic inflation problem. Francine what do bunds do . Scott they are a better buy than treasuries, even at 32. Francine scott thiel from blackrock stays with us. Next, the first major u. K. Company to sign worker directors to its board in more than 30 years. Francine trumps warns and billions more in china tariffs if trade talks to now progress, we will get the latest on japan. Goldman sachs joins j. P. Morgan with slashing forecast on tenyear treasury yields to 1. 75 . 2020, democrats talk about health care, immigration, with a second debate tonight in the early stages to win the nomination and face donald trump at the president ial election. You are watching bloomberg surveillance. I am Francine Lacqua in london. Let check out your movers in the markets. Bayer up more than 7 as an activist firm this close more than one billion euros stake and alley it says it wants to put to rest litigation about weedkiller roundup to unlock a more than 30 billion euros for shareholders. 9 , Second Quarter profit below estimates but markets focused on the fact they have a strong start to the summer with june sales up from 12 compared to last year and the biggest loser is christian hanson, a bioscience company, they missed Analyst Consensus in terms of sales and shares dropping the most since there 2010 ipo. Francine the very latest on your movers. Breaking news, pictures from japan where World Leaders arriving. Scars of thebthe o g20. Sunshinelittle bit of and expecting President Trump to land in osaka, japan in an hour and 20 minutes. Theresa may briefed reporters on the way. Vladimir putin could possibly talk about oil with the crown friends of saudi arabia. We will keep you updated on what is going on in japan but lets get to the first word news. Of trade talks with china fall through, President Trump provided promise more tariffs as he is not the white house announcing President Trump and xi jinping will meet at 11 30 a. M. On saturday. Could be ant what ominous sign in the fight to save the Affordable Care act with a federal Appeals Court asking why they should be allowed to defend obamacare if the Trump Administration will not. Many republicanled states question the Health Care Plan constitutionality as the u. S. Justice Department Says it will not defend it. More problems for boeing max, tests revealed a new safety flawed not related to fatal crashes. U. S. Regulators are ordering the company to make design changes. The airplane is boeings bestseller which has been grounded since march. Is wall street losing its lucrative spot as corporate matchmaker . Fidelity and t. Rowe price among the investing firms landing to independently arrange readings with Companies Second of as big banks have traditionally brought together funds and businesses. They charge big bucks for doing so. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Francine thank you. Ai has worked closer to the Chinese Military than previously admitted. Their employees have collaborated with armed forces on at least 10 Research Projects in the past decade including efforts to identify emotions and online video comments and analyze satellite images. Lets get the story from our Technology Executive editor in hong kong. Surprise . S this a it should not be a surprise at all. Big companies around the world often work with militaries in their countries to work to come up with innovation, with new technology to help the military and help the government. It should not come as a surprise. Why we think it is remarkable and notable is for the simple reason that huawei has gone to Great Lengths to distance themselves from the Chinese Military. This is a company that is under extreme pressure and scrutiny globally, particularly from the u. S. Which has alleged that huawei represents a National Security threat as it is too close to the Chinese Government and to close to the Chinese Military. Huawei said has downplayed connection to the government and connections to the military. Y have said they have no there is no substantial the militarywith but this shows there is a handful of employees who have done research in collaboration with the military. Even if this is something we should have expected, do you think the Trump Administration will latch onto it and it makes the u. S. Trade that worse . The problem with the u. S. Is it is really trying to convince other countries to come alongside it in banning huawei and saying huawei cannot sell into your network, they cannot supply your 5g networking infrastructure, right . There are a lot of close allies to the u. S. That have said, show me the money. We think huawei equipment, while there is a risk of them creating backdoor and maybe they are a little too close to the government, those countries have said to the u. S. Government and what companies have told us is that they still find huawei equipment reliable, valuable, and basically inexpensive and better than other things on the market. What this could do is give people maybe a little bit of pause and say this is a company that said it does not have close ties to the cap chinese employees have done this kind of research and this kind of cooperation, if they are doing this kind of collaboration, what other kinds of collaboration do we not know about . Nothing we found is top secret, nothing highly top secret, highly sensitive. We spoke to one professor that said to us, this is not very cutting edge. We do not know if there is stuff going on underneath the surface. That is the question we would like to know more about from huawei. Francine thank you so much. Tom giles. Is it important that employees are represented at the companys top table . Yes as they have contracts including the london congestion charge which provides services for the nhs and others, becoming the first u. K. Company to place worker directors to its mainboard in 30 years. Were selecteders from applicants as part of the drive from the chief executive to improve decisionmaking for a more diverse of options. After profit warnings. Their chief executive Jonathan Lewis joins us and scott thiel from blackrock is still here. This seems like a Great Initiative but not brain surgery. Why are you the first want to do this in 30 years in the u. K. . John it probably reflects attitudes towards a workforce among Senior Executives in many British Companies. Particularly at the most senior levels. I will tell you that the level of interest we have received from other companies, following our announcement, has been significant and this may not be right for all companies, you do not have to put employees on the board, many are looking at an Employee Committee or a colleague committee. This is right for us because of where we are in our transformation. We are going through a significant threeyear transformation and wanted to bring the Employee Base with us. It is incredibly healthy to have positive challenge of executive management and nonexecutives at the board from a different generation of representation on the board. Our youngest board member is 32 years old. Francine do you think politicians should take a more active role in encouraging this and have you talked about this with either conservative candidates to be the next Prime Minister . Jon we have not directly. As we socialize the decision to do this before we announced it, there was considerable support from all segments of the political spectrum. People feel this is a positive move. Lets be clear, unemployed director a generation younger, our average board ages 57, it is bringing a different perspective here. Francine have you had a Board Meeting and does it change the board room . Jon surprisingly not, our meeting first board was this week and if you did not realize the employee directors were not that you probably would not have recognized them. This comes down to the comprehensive process we went through, employees self nominated and we went through a Selection Process that was overseen by businesses in the community so we had impartiality and oversight. We have two different professional backgrounds, people who clearly are doing this for the right reasons. Francine doesnt make a company more attractive to investors . Depends, there are senior members of investment of thishe larry finks world who think it is the right thing to do but i am not sure people directly managing funds see this as a key variable. ,hat compensation is reflective that this would be reflected in competition. Compensation. 172 in the u. K. , which states that boards, chairman, have an obligation to reflect the interest of all stakeholders in the company and that includes employees. They are our most important stakeholder given the nature of our Business Model. Francine how is brexit impacting capita . Are parts of the government reluctant to outsource . Jon it is the lifting of contracts from government has slowed down and that has been over a number of years now. In terms of brexits impact on capita, we have planned a number of outcomes, i spent 30 years in the autogas industry and not long ago there is not like nothing like a strong Balance Sheet to protect you from uncertainty and we have a strong lsu today with 8000 employees in europe. They will not be hugely impacted by this. My biggest concern is our ability to attract overseas the Digital Talent we need, the tech talent we will need Going Forward. But also the future Prime Minister focus on making sure we are developing Digital Skills we need in this country. Francine you could argue that because of brexit which takes up a lot of the governments time, you need to deal with the rest because they do not have time. Beeni am not sure that has the case today but if we have a not,brexit, we hope we do there are a series of eu institutions that are serving British Society that will go away overnight, 250300, they will need to bring replaced by something be replaced by something and government will seek the support of the private sector. Francine would you consider m a to scale up . Jon not right now, some would argue capita are too complex and doing too many things, we have a strategy around simplification to succeed. We have simplified the business greatly over the last 18 months. There will be more simplification over time. Francine looking at the share price, it is ugly, went to ect a significant pickup when do you expect a significant pickup . Not u. S. Funds are investing in u. K. Domestic companies, i was in new york and chicago a couple of weeks ago and the Political Uncertainty not just around brexit, it is a factor, it is brexit, uncertainty and you can political situation and the fact where 18 months in a threeyear transition and until we print the proof points that demonstrate we are on track, we will not see the movement in the share price. Francine pictures from japan where World Leaders arriving, theresa may accompanied by her husband just getting out of the Royal Air Force plane that brought her to the g20. What would you ask of the next prime minster . Jon remove the uncertainty of brexit as a priority and avoid a hard brexit at all cost and make sure we invest and be prouder of British Business politicians of all colors have been in recent years. We will be an independent country, competing on International Trade front, then we will have to invest in skill sets and capability in British Companies and be proud of the capability we have in this country. Francine scott, what would you ask on behalf of investors by the next government . The Market Pricing in the possibility of a general election. No matter who is in charge, the arithmetic of parliament does not change. Scott certainty is what Financial Markets want. This lack of clarity around the leaving,te of the u. K. The lack of clarity around the plan, around the government, there is a lot of luck of clarity and that is very difficult for investors to digest. You can try to model it in terms of probability but with geopolitical politics and in particular with things very political specific, the electric election process, hard to do that without a lot of conviction and certainty is the thing we need. Francine thank you very much, scott thiel, stays with us and Jonathan Lewis, chief executive of capita. We are watching live pictures out of osaka, japan for the g20, a rainy japan where theresa may just landed and we will have plenty more on the trade concerns and what will be discussed the g20. This is bloomberg. Francine this is bloomberg surveillance. I am Francine Lacqua in london. Lets thought geopolitics, the Islamic RepublicAtomic Energy agency says it will exceed a cap on sock was of lowgrade uranium while tensions have spiked as risen sanction against tehran after the downing of a u. S. Navy drone. Lets be to our middle east lets speak to our middle east managing editor. And also with us is scott thiel from blackrock. A treat to have you in london. What do we expect to hear from iran today . Either theyve reached the stockpile limit of uranium and heading to breach the limits on enrichment, or they are giving europeans a chance, after they said yesterday they are finalizing the mechanism to conduct trade with iran despite the u. S. Sanctions, which may have given the iranians a pause. A member of Parliament Said they may opt to drop a voluntary agreement with the u. N. Nuclear agency on inspections, so it would be a lower level escalation that would buy some people some time. It is one of those announcements but we do not have the confusing thing is we do not have a hard deadline from the iranians, they will say by this hour, we are in breach, that is why we are watching the situation. Francine what do the other signatories of the deal do . G20 is underway and we expect iran to be a key topic as they tried as the other signatories, tried to rescue the deal. We know what the u. S. Thanks. Francine we sure do. [laughter] the whole thing about the deadline, whether the exit deal exceeds the limits, signed by their ratings to put significant pressure on europe to do something that would help alleviate the pressure on the iranian economy. I suspect this is what they will discuss in osaka. Francine is this just noise or does it have an impact on the market . Talking about sentiment around the world because of u. S. Trade tensions that what do we do with this more geopolitics that more politic concerns . Scott politic concerns is a big concern in the market and that is feeding into the real economy. The middle east, the oil price gets very affected in a parochial shortterm perspective by tensions in the middle east. If we look at the way Oil Prices Impact other parts of the market, other packs parts of fixedincome market, that has a large portion of the index focused on energy production. Higher price in oil will be beneficial for the subsectors. It is not only at a topline geopolitical risk on, risk off level but very interesting at the subtext and position for that, something we spent a lot of time looking at. Francine we will talk about subtext next. Scott thiel from blackrock stays with us. , 10 30executive director a. M. London time and before that we talk to david. This is bloomberg. Francine this is bloomberg surveillance. Live pictures of osaka in japan, a whos who picture today. We are looking at an airplane with the Prime Minister of italy on board. We saw the Prime Minister of the u. K. A while ago. If you look online and look at the bloomberg official data you can see what every nation chooses, either airbus or some have falcons. It is a fun way to look at the spending the countries do. Final thoughts from scott thiel from blackrock. Because the Prime Minister of italy is just arriving we should talk about whether you find value in european fixed income space. Does italy create by create value . Scott talking about negative yields, the 10 year yields, but the curve, the yield curve, the difference in yield between bonds is positive by quite a bit and the kerry associated with owning european fixed income is relatively strong despite the yields being negative and with the ecb pending volatility around Financing Rate and the potential reopening qe in buying corporate bonds, about more financing operations, despite the rally and despite the low level of yields come european fixed income is relatively attractive. Articulate attractive for u. S. Investors hedging back to dollars. Francine thank you for your scott thiel from blackrock. Tom keene joins me out of new york coming up and also, david herro of Harris Associates. This is bloomberg. Today, the country will probably on stockpiles of lowgrade uranium, putting pressure on european powers trying to salvage the agreement from u. S. Sanctions. Appears to have closer ties to chinas military than the Telecom Equipment maker acknowledged. Several employees collaborated on Research Projects with Chinese Military personnel. Huawei says those projects werent authorized. The Trump Administration has imposed limits on huaweis ability to do business in the u. S. Global news 24 hours a day, onair and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. m Viviana Hurtado lets get through it. There are nuances through the data today. 159 points. Up eurodollar 113. 70. Economic confidence for euro area dropping a little bit. One of those marker micro data of emp importance. Really, the single number which has to do with osaka is begin, weaker from a 106 handle getting to 108. Francine treasuries edging lower, a little risk on mood but you are right. That americaism and china will declare another truce in the trade war at the meeting saturday giving a lift to equities but if you remember, the last time we had a truce and it was reversed quickly after that. I would make sure we keep an eye on the markets in case something turns. President trump says additional u. S. Tariffs would be placed on goods from china if there is no progress on a trade deal after his meeting with xi. The leaders will meet at the g20 in osaka, japan. 10 minutes ago, we saw theresa may, probably her last foreign trip abroad, arriving today. For those listening on radio, good morning. Of umbrellas. It has been raining in london for a few weeks. We saw the airbus, the Italian Republic lending a second ago landing seconds ago. We cant see the Prime Minister but we see a lot of umbrellas. Lovely. Italians entered japan. We expect to see President Trump in the next hour. We expect to see the excellence of sting angle Stephen Engle. He is planted within osaka castle behind him. 300 miles southwest of tokyo. The difference between beijing and washington is noted, as well. It is the medieval castle harkening back to elizabethan england. How will the discussion be . Mr. Trump likes his nostalgia and all that. Is it going to be an ancient back and forth between xi and trump or can they be modern and get something done . Of faiththere is a lot face involved. Donald trump takes it seriously, but chinese invented the concept. There have to be facesaving moves for conversations to go forward. Al those umbrellas, there is typhoon coming in. We are going to get dumped on just as the leaders are going to be arriving. They will be indoors that getting around is already a security nightmare with so many World Leaders arriving tonight and tomorrow. As you said, donald trump should be arriving in the next couple of hours on air force one but the big issue dominating i call it issue 1a, with 1b being iran. Xiis the meeting between and trump. Scenario im seeing is we have a path forward for continued talks. There is no way they get any details arranged given the freeze they have had on dialogue, but at least they can send a signal they will be talking again. Francine is that a truce . You made the point it is a truce, but you cant really call it one. There seems to be a lot of optimism that the two countries will reach something. Is that misplaced . Yeah, it keeps going in fits and starts and i have been covering it from the asia side of the pacific since the beginning and i remember last may when the minister went to washington, d. C. And Steve Mnuchin said weve got a deal. He went back to washington, d. C. , told xi jinping i think youve got a deal. That was a year ago and then donald trump said no deal in a series of tweets. Weve had Steve Mnuchin come out and say we are 90 closer to a end, another 10 ago by the of the year for a deal but then donald trump in true fashion came out and said i think we are getting ahead of ourselves. He says the chinese economy is going down the tubes. It is possible to get a deal but i am happy with where we are right now. He says plan b is more tariffs. I underestimate japan, the size of the economy, their intertwining across all of asia. Oft is the triangulation beijing, moscow, and tokyo . How will mr. Abe treat mr. Putin, or xi . Stephen guess who is having dinner with xi jinping tonight . So thatbe is the host will be a critical one because japan is caught in the crossfire. It needs china, but the United States is really its sole treaty partner and shinzo abe has gone to ingratiate himself to donald trump. He was the first to go to washington, d. C. After the inauguration. They postponed tricky trade talks until after this upper house election abe and the japanese have called for july 21. Coming up in less than a month, so there are tricky things that need to be resolved on the auto tariffs front and a possible free trade agreement. Then abe and the Japanese Companies here need to china too. They are really caught in the rock and a hard place. Francine Stephen Engle in osaka. I know less about the palace but i know the reformation, which was around 1860, it created tokyo as a capital and took away from bostock a osaka the trade city. Tom it will be interesting to see. The history of osaka, it was a byway strapped doing southern japan and tokyo years ago and it has come along. There are two airports there where President Trump will be a landing and we saw the italian leader landing moments ago. Their domestic airport is a lot more central, it got a Big International airport planted in the harbor just like tokyo. Viviana we need francine we need to take surveillance on the road. Tom road trip. Francine we will be back shortly with more on trade and the g20 in osaka. We discussed that with david harro. This is bloomberg. Francine bloomberg surveillance. Lets go back to osaka, japan where we saw the arrival of theresa may and the rime minister of italy Prime Minister of italy. Like a red cover the event for geopolitical nerds. We are trying to figure who they will meet with and what they will discuss, trade between xi jinping and donald trump what the markets are looking at. David herro joins us on Harris Associates. Always a pleasure to have you. President osaka, the xi jinping and donald trump meeting, changing equities worldwide. Not necessarily just this meeting but the symbolism behind it that will perhaps they will put the trade deal behind them, it is winwin for both sides to get a deal done and in particular places like europe, european equities, this has been leaning on them and hurting the European Equity market in particular for over a year. This is one of the reasons that have lagged the rest of the world. Francine we have been here before, six weeks ago they wanted a deal, both parties did not have a deal and it got worse. They are looking after themselves, any deal can be winwin but people negotiate to nevere edge, things happen quickly as anything good takes time. On for well over a year and perhaps over the next few months we will get a resolution. Looks like we had one a couple months ago at the pentagon who you believe, did not happen but it is winwin for both and if something does not happen it is more harmful for the chinese. Tom you are magic is to follow multinationals, you keep track of what each company is doing, how are they responding to the loselose of this trade war . Impactwe are seeing the in share prices today of what loselose looks like. We have not seen it in income statements and cash flow statements because the Global Economy is still doing relatively ok. It is not booming. Europe is growing over 1 and the u. S. Is growing close to 3 . Globaltinationals multinationals still able to make money despite uncertainty around the talks. If the talks break down and we see a contraction in trait and the free flow of goods and services, this will impact those bottom lines and you will see profits fall and share prices fall. Share prices have fallen already in advance of this uncertainty but we have not seen yet a huge impact on companies profitability. Tom are you long japan . Some japanesehave stocks for we are under way japan but it is more micro reasons, it is hard for us to find Quality Companies at low find asquality to management teams building value for shareholders, earning good returns, Smart Capital allocation, this is very difficult to find. It is not impossible. We own some shares like toyota, very good companies, but on whole difficult to find shareholder oriented management teams, despite efforts being made from all over the place. Francine you find them in europe . David you find them in europe, more difficult than the u. S. But you find them in europe and saudi relations that are so valuations that are so overwhelmingly attractive compared to the rest of the world of multinationals, whether in the financial sector, materials, industrials, they are trading, look at a chart of european equities versus japan or the u. S. Versus the world, europe has been a huge negative outlier from a price perspective. Since earnings have not fallen, it means violations are attractive. Francine usually they are cheap for a reason . David for some reason, because all things being equal, a business is worth its return structure and ability to grow. Growth in earnings and the return on capital and return on equity, these things should determine the multiple you are willing to pay for a company. European stocks have been less so they shoulds, trade at discounts but i argued the discount is too high. Tom we will continue this discussion, welltimed with the International Events going on. This is a wonderful interview and important interview, Michael Mckee with the most interesting fed president , governor, vice chairman, the High School Dropout mary daly, has she made a career of it, of San Francisco with Michael Mckee at aspen. This is bloomberg. Look at a Business Model of insurance government, it is good bring in as many dollars insurance company, it is to bring in as many dollars in premium and payout as few dollars as possible for health care and medicare for all salts the problem. If you ares uninsured, we enroll you in medicare, if you can afford your premiums, we enroll you in medicare but if you are a member of a union it negotiated for a Health Care Plan you like because it works for you and your family, you can keep it, the choice is fundamentally you defend someone we should be the party of that keeps what is working and fixes what is wrong. [applause] we should give everyone in this Country Health care as a basic human right but also give them the option to buy private insurance. Tom this wall stretches across lexington avenue over above the gap store across the street. You have to be kidding me . Senator warren in the lower right and tonight it is Bernie Sanders, tim ryan of youngstown, ohio, i do not know who three of these people are. Mayor de blasio did well last night according to the pundits. Cory booker. There is the Vice President who looks chipper. Doh republican david herro, any of these people have a chance against President Trump . David you would think they becausetatistically, there has to be someone within that is a of 20ish serious contender or statesmanlike person, someone who actually believes in free market capitalism. Believes that capitalism elevates people, etc. If someone can do that even trumps issues, maybe someone can beat him. Tom you were on the g4 last night and lets go to what they talked about. It is like they were talking to herro. Post, the senator , when you have an economy that is great for those with money, mr. Orourke blasted an economy rate in corporations and the very wealthy, if billionaires can pay off their yachts, students should be able to pay off their Student Loans and the mayor of new york, what i say to them every single time is there is plenty of money in this country it is just in david herros hands. Is for thee what it next year and a half, bash the wealthy . David i hope not and i saw a quote from Bernie Sanders saying this is the richest and the best and the strongest country in the world, we could redistribute this income but how did the u. S. Become a rich country . I would assert it became a risk of putting through freemarket capitalism. Wherever it has been a limited, yes, we need simple regulation, any Economic System needs regulation. But half private Property Rights and freedom to exchange, free Economic Systems lead to Wealth Creation and feeds to opportunity and leads to opportunity for those most in need of it. Free market capitalism has lifted more people out of poverty than any other Economic System. If they will keep debating this, they will lose. Francine david herro from Harris Associates. Coming up, more about the oil price with the ia executive director joining us next in london at 10 30 a. M. , we will talk a lot about president Putin Meeting with the Saudi Arabian leader at the g20 in osaka, japan, and what it means for Oil Prices Going forward. This is bloomberg. This is bloomberg surveillance. Lets get the bloomberg first word news. Democrats taking the stage in miami for the first of two nights of president ial debates. They disagreed on immigration and confronting companies. They agreed the economy needs to be remade. Who is this economy working for . It is doing great for a thinner and thinner slice of the top. Not everyone sharing in this prosperity and donald trump sits in the white house and gloats about what is going on when so many people are having trouble affording college. This economy has got to work for everyone and we know it isnt. It will take all of us coming together to make sure it does. The fact that this is an economy that is hurting all businesses and that allows us to compete. Viviana tonights debate will feature joe biden and Bernie Sanders. China says its demand for a trade deal has not changed, a spokesman calling on the u. S. To remove tariffs, set realistic targets, and be sure the bill is balanced. Meetd trump and xi jinping in japan on saturday. Boris johnson is backing off his hardline stance on brexit. The favorite to become the Prime Minister says there is a million to one chance he would lead britain into a no deal divorce, but it is important to prepare for one. Lawmakers propose a no deal split because of economic consequences. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am Viviana Hurtado. This is bloomberg. Francine thank you so much. I wanted to go back to the first democratic president ial debate which seemed to expose ideological concerns and divergences amongst the democrats on the direction of the party. We are back with david herro. The policies and politics are getting so fragmented in the u. S. That come 2020, you could have a different economy. When you look at taxes and some of the policies, the both sides are trying to put in place. At the resultlook of the most recent policies, you have seen a positive impact to those on the lower end of the economic spectrum. You are seeing rising wages francine apart from trade. David trade is very important. It is important these trade tensions are settled because the Free Movement of goods and capital is like a lubricant that keeps an economy going. You must take away barriers. One of the positives of trump using tariff as a tool is all of a sudden you have the europeans and democratics so pro free trade and historically they have not been. If that is what it takes to get the opposition to be free trade. Francine given the policy President Trump has put on china, what a democratic candidate do the same . They would expect an easier time under the democrats. David they may even get a harder time. I think there is a consensus in our country that there has been an imbalance as china has grown. Growth, this is a good thing for the Global Economy, however if it is done solely because of an unlevel playing field, intellectual property theft, government subsidy of big industries, then it is not a good thing. China is at the level of gdp where we can take those things away. They want to transition more into a consumerbased economy anyway. I think a trade resolution will assist in that. Tom in wisconsin, sanders and cruz won in primaries. The president got 29 of the vote in milwaukee. Can he do that again . David it is possible. Wisconsin can go either way. This is my home state, the home of some of the best cheesemakers in the world. Tom tour guide david herro. Enough. Itid now, it can, because is one of the states that pivots back and forth. You have more leftleaning areas, especially madison, and traditional democrats in milwaukee, and the rest of the state is basically centrists or right of center. , and with great seriousness, he has been someone who has spent time supporting his party. He has also spent time looking at the banks. I know you are all watching to get a european update. Are you acquiring shares of European Banking today or giving it up . David know, we are not giving it up. No, we are not giving it up. This is one of the greatest opportunities for value. Banks have share prices of banks have been hit by these low to negative Interest Rates, slow economic growth, and with these macro conditions there is a belief that there would be a collapse in Bank Earnings in europe, and this has not happened. We have indeed seen a share price collapse over the last year. 25 , to 35 own from , but strong institutions have been able to maintain their earnings or grow them at a slow pace because they make money in other ways. They cut costs, have increased fees, have done things like increase their Asset Management business, and credit quality has improved dramatically. When you add this together, you see moderate Earnings Growth and most of the european financials. Francine who should merge with who . David there is not a case for European Bank mergers because you dont have uniform European Banking laws. Until you have that, i dont believe you should have these mergers. Francine europe is also overbank. David in certain countries, you can see more consolidation. You have seen it in italy and said youere they have are going to merge, though out of business, or refinance go out of business, or refinance. Local retail banks cannot earn money because of the competitive environment. There needs to be local consolidation in germany. Francine would you increase your stakes in Credit Suisse or julius baer . David we think both of those companies and they are not exposed to the commercial banking loan losses most of their income streams come from wealth management. , butcularly Credit Suisse both of them are top positions and strategies. , 8 , 9 early 7 ownership. Tom david herro with us from Harris Associates. The next hour from chicago big event this london, Francine Lacqua of the First Base Dugout off the First Base Dugout red soxyankees. Boston pops with bloomberg special coverage. Red sox and yankees will come back from london to greet and pendants day Independence Day on the river charles. Best day of the year. This is bloomberg surveillance. Today, shares of bayer are surging after investment Elliott Investment Management announced a stake in the firm. There could unlock 34 billion in shareholder value after resolving litigation. Struggling swedish clothing retail tennis and more its rising after coping with an inventory buildup. Back on at is cutting store expansion plan. H2o Asset Management plans to bonds he will put that toxic debt into a new fund. Assets total 31 billion, down almost 7 billion since april. Francine sticking with h2os debt debacle, david herro is still with us. I have to give sq given that hairs associates sq given ask Harris Associates you given that Harris Associates is part of natixis. David we have our own managing boards, so our relationships with affiliates, there is zero connection between Harris Associates and the affiliates other than we share the same owner. We are run and managed independently. Francine does it tell you about the liquidity mismatch in the markets or certain pockets of the market . David you get this time to time where people try to grab xos return and an exchange excess return and an exchange could be a liquidity test. If you have a long enough time horizon do not need the liquidity, it could be a good tradeoff but it depends on who the investor is and what you are getting into. Tom i believe we will go now to osaka. Airport where World Leaders are coming in. Air force one has appeared many times at osaka. It is a rainy day. Isfirst glance as maybe it not as rainy as the grading of the italian leadership. Greeting of the italian leadership. Francine, jumped in. Francine i think the president tweeted. You are comparing some of the Stormy Weather that previous leaders 20 minutes ago were experiencing. Stephen engle was telling us there is a typhoon. If you look at what President Trump has been saying and doing about tariffs and he says he is planning to up the ante, he is meeting with president xi on saturday, and we will figure out what that means. Number two on the agenda is iran. President trump in europe was trying to rally support. Tom the events on friday and saturday, the critical meeting with president xi and President Trump, Stephen Engle in osaka. Tom out of world war ii, it is an agreement of 67 years. Lands indent leans osaka. Hopefully, the sun will shine brightly on saturday when he meets with the president of china. Right now, he greets mr. He made commentsnd yesterday suggesting our relationship with japan is onesided. We will get perspective from Stephen Engle. It goes back to 1951. I am going to say macarthur, to 1952 and onto 1960 and forward. What is that special relationship of japan and the United States . Obviously, it has been the bedrock of peace, relative peace in the asian pacific, and also prosperity for the rise of the asia century. Soldiers 54,000 u. S. Stationed in japan. There have been some bumps and bruises along the way involving u. S. Soldiers who have strayed from their missions and that has wrangled many japanese, particularly in okinawa. It has been the bedrock of u. S. Japanese relations and we are hearing that donald trump perhaps is mulling possibly scrapping that. That could be a bargaining tactic. Donald trump has opened up another front on his trade war with japan, threatening auto tariffs and wanting to do a freetrade agreement with the japanese. Of theng that bedrock u. S. Japanese Security Agreement would have seismic consequences in the asiapacific and would perhaps be an opening for china. Japan, wewe look at must speak of their domestic politics. Havesupport does mr. Abe among the people of japan . If there was an election tomorrow, would he be easily reelected . Stephen he is going to be calling an upper house election he has called it, july 21. I will be here covering it. He is trying to shore up his support for controversial changes he wants to make, including revising the path of his constitution. Has bought 35 a fighter jets from the United States and he is converting a tanker into an aircraft carrier, helicopter carrier. He wants to make it an aircraft carrier. It would be the First Time Since world war ii japan would have technically an aircraft carrier. Will he get elected . He is shoring up the support to make those changes. It is a highly divisive issue in japan but he is pushing forward. Donald trump says japan needs to shoulder a bigger burden of cost of defending u. S. And japanese interests in east asia. Francine the president was tweeting a while ago saying, i look forward to speaking with Prime Minister modi of india. He also recently increase the tariffs even further. This is unacceptable. Are the other 19 leaders more or less used to President Trump lashing out at friends and foes alike for trade policy, or is this a real problem . Stephen that is why these bilaterals will take precedence or get more headlines than the g20 meetings, and the communique they will post at the end of the meetings on saturday. Donald trump has opened up trade war fronts on many fronts. He mentioned india, scrapping the preferential trade you mentioned india, scrapping the preferential trade, reciprocal tariffs, donald trump saying that is not acceptable. We have had issues with saudi arabia. There are possible sanctions on turkey. That is why donald trump will have a bilateral on saturday also with mr. Erdogan over u. S. Objections to turkey buying aircraft paraphernalia from the russians. Trade issues they have with the japanese, and i have not tensioned europe. Angela merkel mentioned europe. Angela merkel and Vladimir Putin have bilaterals with donald trump. He has so many issues to deal with, not just xi jinping. Tom we are expecting francine we are expecting the president to walk down the steps shortly. Herrord from david claiming chinas economy is going down the tubes. You own stocks blinked to china such as glencore linked to china such as glencore. Are you worried . Stephen it is slowing. Going down the tubes is a bit of an exaggeration. It is slowing. Western countries are investing in china. One of the things that has been disrupted and what china in particular has to watch for, as western companies Countries Companies start moving their factories out of china, you will see a halloween out of the industry. It is in chinas best interest to resolve this because they are at risk of losing their position is one of the key places to outsource to. Francine how sustainable do you think the size of glencores thermal code is . Stephen depending on your perspective, people keep welding building coal burning power plants. Japan is substituting nuclear for coal and china keeps building coal plants throughout southeast asia. This keeps happening. There will be a demand for coal mined by glencore out of australia and africa. If mr. Trump was smart, he would say do not buy this coal, by our natural gas because the United States is drowning in natural gas, which produces the same amount of electricity with no co2 emissions. Tom david herro with us. In london, we await the president as he willed to send the steps at the airport in osaka. Well descend the steps at the airport in osaka. Francine there he is. Tom quite a moving moment for the people of japan, and the president back for a business meeting with mr. Abe. Said manygle meetings, highlighted by a saturday meeting with president xi. That is a golf umbrella from maralago i think. Kidding. President ialrella, looks like something you would use on the par 5 knowing he is going to get seven strokes on the par 5. We have much more coming up. We are thrilled to bring you Stephen Engle from osaka. Francine . Francine it is clear that in the last hour or so, as President Trump was arriving in osaka, terrible weather. We have seen a lot of these umbrellas. Francine, we have to do a shout out for ivanka. No umbrella on her part. Francine she is tough as nails, absolutely right. Some of the things we have heard from President Trump, he was basically riled against these new indian tariffs saying they are unacceptable, he might put more tariffs on china, and the chinese economy is going down the drain. Lets get back to Stephen Engle. Isfeels like President Trump rising and firing on all cylinders. Is iran the biggest thing he will want to push through . Does he want more support . He going to get more support . All the dignitary signatories are here that signed the landmark deal. President obama signed it for the United States. We have heard from sources telling Bloomberg News that these World Leaders who will be here will have emergency talks on the sidelines of the g20 to make sure the rhetoric does not escalate into armed conflict. We are hearing, i believe it was from theresa may, her swansong on the International Stage is saying that she is going to make an effort, an allout effort to make sure the tensions involving iran are deescalated. That is issue 1b after the trade war, diffusing a run tensions. Iran tensions. Tom fit south korea in here. Korea. S looking at south how do they fit into the g20 calculus . Stephen it is going to be the next stop for the president. Donald trump will be heading saturday to south korea and have meetings with the president , moon jaein. The last time President Trump was in south korea, i saw the helicopters fly overhead, saying he is headed to the dmz. Because of the weather, he had to turn back. He did not make it to the demilitarized zone. There is an added twist. We are herring news that there is a possibility of a Young Australian man detained in north the first bilat donald trump will have is with the australian Prime Minister. Surely that issue will come up. Worry the u. S. U has become more isolated, when you look at the language coming from trump . He has managed to fire various tweets, taking aim at three countries, telling india to reverse their tariffs, threatening more tariffs on china, and threatening americas pledge to defend japan. Stephen he is trying to get the best deals he can for america. Perhaps a different approach would be to seek other countries to help in china. Maybe he should have asked the europeans to help with the chinese situation, but he is not happy with the european trade policies. Postworld war ii, we have had a tilted scale where the u. S. Has allowed more state subsidy and positive trade for western allies, and i guess we have waited a bit too long to even the scale. Mr. Trump has taken an aggressive approach. Francine do these tweets impact markets or are investors getting used to it . David i think they are getting used to it. You never know what you will wake up and read, or before you go to sleep and read. Some of them have meaning behind them and others just kind of fade away almost like fireworks. To react to every one of his tweets, to me would be a mistake because some of it is just bluster. With harriserro associates, appreciate your enthusiasm on e. U. Banking. To say good morning to all of you worldwide and early across america. A lot going on, including miami and the debate, and the president landing in osaka. , is this herr may final International Engagement . Francine methinks she is. A lot of people are saying she is a lameduck Prime Minister but you could argue she has been there for a while when you look at the concentration of power for negotiating brexit. It is in parliament. The two candidates to become the next Prime Minister, jeremy hunt Boris Johnson, and she will have insight into their policies and how Boris Johnson inks. We have seen thanks. How Boris Johnson thinks. We have seen zigzagging on his policy. Tom the former governor of the fed, Randall Kroszner will join francine. Here is Viviana Hurtado. Viviana beginning in florida where the first democratic debate exposed an ideological divide. 10 candidates on the stage for the first of two nights in miami , they disagreed on how to fix the economy and remake emigration. They agreed on universal health care but not how to do it. I am with bernie on medicare for all, and i will tell you why. I spent a good chunk of my life studying why families go broke and the number one reason is the cost of health care, medical bills, and that is not just for people who do not have health insurance. Bernie sanders and joe biden will be on stage. Iran is said time, to breach the landmark nuclear deal signed in 2015. The country will exceed a cap on stockpiles of lowgrade uranium, putting pressure on European Countries trying to avert a slide toward war. Closerappears to have ties toward Chinese Military then acknowledged. They collaborated on Research Projects with Chinese Military personnel. Huawei says the projects were not authorized. Sachs joining jp morgan in slashing the forecast for u. S. Treasury yields, predicting the 10 year yield will be 1. 6 . The firm cites the dovish shift from Central Banks and risks such as the trade war. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am Viviana Hurtado. Tom equities, bonds, currencies, commodities, a rningng data check chu data check. Churning. Ng, euro up one note yen is back big figure, from the strong yen enthusiasm of a few days ago. Francine looking at a very similar data check. Lower, gold extending losses. There is optimism america and china will declare another truth in their trade war, and yet President Trump arriving in osaka, japan saying new indian tariffs are unacceptable and he might put more tariffs on china, and yet the market seems optimistic they will have a truce. Tom it is everywhere. Bloomberg has it out three or four iterations. Lets do a chart of bitcoin. I havent done this since, i dont know. 300, 20,000. With the libra move, we come back above where these moving averages cross. Roszner sold here and went long here, that is all you need to know. Bitcoin is in search of blockchain exposure. Francine just keep attention simmering. I have an easier chart looking at yields after Goldman Sachs joined jp morgan in pulling down the forecast. Up. Me get my treasury chart the dovish shift by Central Banks. , do you liket that . Tom very much. He is giving you an a plus for that. Stephen engle is in osaka, Kevin Cirilli is in washington. We are thrilled to have shahav jalinoos with us from quite a Credit Suisse. London as as well in Randall Kroszner. She is our arch finance combined he isomics experts our arch finance combined with economic expert. Up as they gog it at the fed . Randall there is a clear theme, they are concerned about inflation not moving up. They were expecting it to be on a path to move higher than it has been. The economy is along the path they had expected with unemployment at astonishingly puzzledls, but they are by the inflation issue. They want to buy some insurance about the downside economic and inflation risks. They dont want to end up like japan. Tom they dont want to talk about the dollar and i know you do. The obvious dynamics, second and third order conditions. Can the dollar be stable . Shahav it has been stable for a period of time given that the u. S. Enjoys a rate differential with the euro and yen. Now that you have opened up the possibility and the markets mind of lower rates in the future in the u. S. , fed funds rate. Those differentials will narrow over time. If you take that back with the Strong Political news but seems to be coming through, the constant barrage on how the dollar is too strong and the currency is too weak, when you put these things together, the cell rally phenomena sell rally phenomena starts to move the dollar. Francine we have a great opinion piece by bill dudley, saying this is why trump should not want a weak dollar. It is better to be richer than poorer. What does he want . Randall it is a long run versus short run issue. Ultimately, the strength of the currency comes from the confidence in the u. S. Economy and the institutions. Shortterm issues about inverts issues, Interest Rate that is what President Trump is focusing on, that the dollar is stronger than he would prefer, which makes it more difficult to export. Are his concerns largely misplaced . Shahab if you look at the strength of the u. S. Economy in current gdp terms relative to the european economy, then maybe not. On the other hand, if you look at the metrics he looks at, the large trade deficit or the fact that inflation is actually well below where the fed would like it to be, then a strong dollar could be one issue. It depends on how you want to look at this. The key issue Going Forward is that it seems that the agenda President Trump is setting now is what the fed is beginning to veer towards as well when it comes to the issue of inflation and what that means for Interest Rates. If you look at this through that prism, the dollar may well be the key having peaked in on the verge of a downturn. Tom shaha jalinoos and Randall Kroszner with us. Coming up today, every path to the fed is different. In sane up the ranks francisco under the mentorship of janet yellen. Original is absolutely , Michael Mckee in the 1 00 hour. Stay with us. This is bloomberg. Not g7 or g8. Is decidedly a g20 and that makes for a different meeting. Always important in particular for the pacific rim, multilateral trade agreements including what did not happen in america was secretary clinton and President Trump, tpp. Andland is part of that japanese officials waiting for the Prime Minister of thailand to arrive at the g20 meeting. We wanted to underscore how extraordinary the g20 is with the gaza ring gathering. And a time when the president of the United States is decidedly not alltime lateral. Interesting when you say he is not multilateral. He is not multilateral. He fired many tweets in the last hour saying the chinese economy is going down the tubes and the new indian tariffs are unacceptable, and finally said something as he was arriving in osaka about japan, and he will not keep offending japan if they cannot defend the u. S. Defending japan if they cannot defend the u. S. Back. Shahab jalinoos and Randall Kroszner with us. I have been dying to show you this chart. You have had immense respect for the behavioral economics, all of the history of your chicago. This is my remorse chart. Remorse of 2007, 2008. It was a financial crisis. This is bank of japan Interest Rates, and in 2001 they had to do something. They raised rates and then they had to give it back. Theuld suggest this changed behavior of ever central bank. They learned a lesson, we do not want to be wrong about raising rates. Is that still true . Randall i think that is a very important memory that the fed has and does not want to repeat the issues japan got into because they had low inflation, have had low inflation. San comes in and says, im going to try to raise inflation up and has not been able to do that, and the fed is concerned that the fed is that lower levels than they expected. Y want to make sure francine if you look at thanks ands touch actions of Central Banks around the world in the last few weeks, is it concerted . Randall they are facing similar challenges, seeing global , global about slowdown concerns coming from the trade dispute, so that is hitting all economies. I dont think they are sitting in the room and saying, we are going to cut at the same time. I think they are seeing things. Francine coming up, the iea executive director will join us from london. We will talk about opec plus and whether that agreement can hold, and longerterm dynamics. This is bloomberg. This is bloomberg surveillance, tom and francine from london and new york. Iran is said to breach the nuclear deal for the first time today. European powers are attempting to salvage it. Tightening sanctions against the Islamic Republic after the downing of a u. S. Drone. Now. Birol joins us if you are opec plus, you are wrestling with effects from the trade war and dealing with the middle east conflict. What should the message from opec plus to the world the . Be . Many of the key opec members respond to these threats carefully and responsibly. We assure the markets that if there was a problem of lack of oil supply, they will be there to reply to the request of the customers. Position asct this reconfirmed, reiterated, and a second one of crucial importance is what happened a few days ago the straight of hormuz hormuz, this is a threat to Global Energy security with implications for the middle east countries, key producers, but more importantly, Asian Countries such as china, india, japan, korea, and that is only oil. There is about 18 Million Barrels of oil daily that flows , one third ofit the oil traded. Lng, one third of lng goes through this strait. I would suggest the producers look at the security issue. One of the key items on the table. Francine if you are opec plus, to say meet next week they are ready to renew the deal to constrain oil supplies while acknowledging there is uncertainty and they could reduce policy quickly . Expectedrst of all, we the Oil Demand Growth despite ofwdown, expected slowdown economic forces. Need oil prices to support new investments in the key producing companies countries. The current price at 65 and above are good enough to provide new investment and in line to support growth of the Global Economy. My expectation is from that meeting, from the meeting of the producers, continue to act muchnsibly, bring oil as as is needed for the market, and keep an eye on the oil security issue. Tom it is typical i would ask you the state of the cartel. Let me ask you the state of big oil. Carl icahn is going after Occidental Petroleum in the anadarko transaction. Where is big oil in five years . Fatih big oil is still moving strongly. They have a few troubles in front of them to identify new locations to put honey to bring in more prep put money to bring in more profits. The Bigger Companies are interested in the shale oil and gas in the United States, eating up the small ones if i may say so. The second challenge facing them in europe and the United States, dealing with the consequences of change. For climate the pressure from the stakeholders, these are the two major preoccupations of the executives of the international companies, but i do not see an immediate threat in both cases, forprofits and other iocs. There are challenges looming ahead. Tom fatih birol with the iea in london, thank you. Daniel juergen will join the 1 00 hour. Hey im bill slowsky jr. , i live on my own now ive got xfinity, because i like to live life in the fast lane. Unlike my parents. You rambling about xfinity again . Youre so cute when you get excited. Anyways. Ive got their app right here, i can troubleshoot. I can schedule a time for them to call me back, its great you have our number programmed in . Ya i dont even know your phone anymore. Excuse me . what . I dont know your phone number. Aw well. He doesnt know our phone number you have our fax number, obviously. Todays xfinity service. Simple. Easy. Awesome. Ill pass. Bloomberg surveillance, boeing slammed down a solid 6 off a new risk. This is quite a story. It is a little confusing, according to sources. Maybe is a software tweak that is needed as well, another new risk as boeing struggles with the 737 max 8. Let me bring up the boeing chart. This is the trading range of boeing back 14 years and it tells the price point now at 350. That should be a brighter red on the right, but nevertheless, a new challenge for boeing. In new york city, our first word news. Viviana china says its demand for trade deal has not changed. A Ministry Spokesperson calling on the u. S. To remove tariffs, set realistic targets for purchase of goods, and be sure the deal is balanced. President trump and president xi meet on saturday. Democrats got what could be seen as an ominous sign to save the Affordable Care act. A federal court is asking why they should be able to offend obamacare if the Trump Administration will not. Defend obamacare if the Trump Administration will not. Democrats taking to the stage for the first of two nights of president ial debates. Butgreements on the economy agreement that needs to be remade. I want to start this because i want to return government to the people, and that means calling out the names of the monopolists and saying i have the courage to go after them. We know not everyone is sharing in this prosperity and donald trump sits in the white house. Gloats. House and we have a system for the very wealthiest. We have people that work fulltime jobs and cannot make a living wage. We have a government that is of, by, and for the rich and powerful. You can get a good education and have good opportunities whether in a big city or small town. To donaldy adios trump. Viviana tonights debate will feature joe biden and Bernie Sanders. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am Viviana Hurtado. Tom thank you so much. Admiral from pennsylvania not at the debate, he has an ill daughter and will join the campaign later. I needed to see all these images and see the 10 last night to understand the countable number, including tim ryan and cory booker. Biden and sanders, front and center tonight. Was done must read beautifully by stephen stronger. That Video Montage we just heard captured the anticapitalism, get the rich guys tone we saw last night. Chiefcirilli, our bloomberg correspondent in washington, was that expected to become a huge theme in the campaign, to go after the rich guys . Kevin i think you saw it last night. Isator Elizabeth Warren really in the top tier of democratic candidates. She went after President Trump, big tech, big pharma, and business. T is the tight politicals political tight rope she is having to walk. She says she is a capitalist with rules. I caught up with her last night after the debate and said, what do you do on the one in terms of government regulations for these big businesses . She said she would remake the department of justice. All talk tonight turns to joe biden, how will he contrast with these more democraticsocialist . Contrast himself with senator sanders . On the issue of medicare for all , Elizabeth Warren and bill de blasio were the only two who raised their hands saying they would be in favor of abolishing private plans. Is all the punditry i saw that the guy who has been beat up the most, mayor de blasio maybe had the best night. Did he move up in the pecking order . Kevin i am a reporter, not a pundit, but most of the chatter inside this been room was that Julian Castro emerged as a breakout. Beto orourke really struggled. You saw him go head to head on an issue that has dominated politics, immigration. Booker, byent, cory of who talked the most, he talked the most and was perceived as having a good night. I look at it based on the reporting. Two different campaigns said they thought castro had a solid night. Francine i am reading some of the media reports. For me, i have seen a couple of morning must read articles saying the clear winner was probably joe biden because he was not there and no one took a swipe at him. What are we expecting from him today . Kevin joe biden has two things to do, to prove he has been able to move on task the political fodder that has followed his campaign, including segregationist remarks. He has got to show he can lay a contrast not just between democraticsocialists but between president jump, teflon joe President Trump, teflon joe as he has been reported by some pundits. There is 20 plus candidates and some are not even yet on stage. To emerge largely unscathed and emerge in the top tier. An aide to Vice President joe biden said he was watching the state debate and he is fired up and focused on tonight. Tom help us with a civics lesson, within the sleep approbation, when does anybody vote . Deprivation, when does anybody vote . Kevin iowa. The data analytics, iowa, we are months away. Look at metrics in terms of how many viewers this debate gets. President trump tweeted the they have boring. To condition themselves to go after 70,000 voters that we have talked about for years who voted for obama and crossed over to trump. Tim ryan ground zero of the trade war. Tim ryan making the case that trade and manufacturing workers and workingclass voters will have to be who the democrats are talking to to get back white house. ,om Kevin Cirilli from miami he will do it again tonight and tomorrow. Morning,aints of the Shahab Jalinoos and Randall Kroszner. On the state of the American Economy as we dash through this political silliness, jp morgan is running at a 1. 5 gdp. I know you will not comment on how monetary guessing powell monetary guessing, but what is the state of the economy . Randall i like being saint randall. Tom i like that. Francine that is my name. Randall this is where the questions are. A strong gdp headline number in the First Quarter but when you looked at some of the details, the strength was not as great as people hoped. We were thinking it would be in the 1 to 2 range for the Second Quarter, but things slow down for the rest of the year because of firms being concerned about uncertainty in trade and the economy more broadly, so they will be holding back on investment. At least so far we have not seen a major shift. That is what the fed is struggling with. When the economy is moving along, it is easy to predict the economy because it is moving along like it has been. When you get to the turning points, we are bad at doing that, whether it is the fed, privatesector economists, academic economists, and the fed is worried there could be a turning point. Dutch hasredits with Credit Suisse changed their view . Your head has got to be spinning. What is the view forward . Shahab i think the issue is the market already knew that economies like europe where weak. What is coming onto the table is the risk that the u. S. Economy, until now had been seen as somewhat immune to the issues President Trump has created like the trade war, maybe that is not the case, and Consumer Confidence will be hit. Fuels more consonance and the idea that the fed will deliver on the rate cuts the market prices in. From the dollar perspective, we may have hit highs for the time being. Francine Shahab Jalinoos and Randall Kroszner, both stay with us. Withg up, a conversation the former Democratic National committee chair. Look for that at 12 30 p. M. In new york, 5 30 p. M. In london. We have a great story saying why airtime in these debates does not necessarily translate into poles. This is bloomberg. Morning, everyone, bloomberg surveillance. A crazy day. We are in miami with Kevin Cirilli and in osaka with Stephen Engle. We have two great guests with us, Shahab Jalinoos and Randall Kroszner. Lets bring up a chart. Major radeweighted real broad, including an index of Dollar Strength as well. What i want to focus on is the weative knowledge nudge, have nudged higher in the dollar. The dollar is up a little bit as well, but nothing like the plaza accord excesses that we saw decades ago or maybe the rubinclinton excesses in 1999 and 2000. How strong is the dollar . Shahab one of the things to think about is the composition of the tradeweighted dollar has changed in that time so now you have the Chinese Renminbi having a key role, the mexican peso. That to some extent has reduced the extent to which the dollar can be volatile. China spends a lot of time and and trying to stop the renminbi against the dollar. The fact is that by the standards of volatility, the markets got use to in the current time, it is still a strong dollar. Tom the president loves to go after that strong dollar, but on a relative basis, is it important to the debate, is he correct to analyze the dollar . Randall it is a factor which has an impact on the ability and competitiveness to export from the u. S. Export is a relatively small part of gdp in the u. S. When compared with other countries, but in some sectors it is super important. For the overall economy, it is not as important as other countries. Francine what worries you about the state of the u. S. Economy . Are we creating quality jobs . Wedall the concern is havent seen as much of a revival of investment as was hoped for after the tax reforms and regulatory reforms in the first few years of the Trump Administration. If you want to see continued growth straight to the economy, you need more investment which product tip which generates higher productivity growth and wage growth. Francine are we in a currency war . Shahab if you look at some of the comments Central Banks have made, the bank of australia governor said when everybody is easing at the same time, the effect you get in terms of currency from cutting rates, the benefit of the currency disappeared. Essentially saying that, telling us in essence we are in a currency war environment. It is not the kind making headlines like a few years ago, but when everybody is cutting zero, in fact, the market is trying to think ahead and figure out what new innovations might come from the ecb and the bank of china and the s p. With the of arizona and golden state warriors, they were mr. Ated by the torontos, dolla he did great in the playoffs. This is bloomberg. Viviana this is bloomberg surveillance. The fight between Occidental Petroleum and carl icahn is heating up. Replace members of the board, arguing directors made mistakes in the takeover of anadarko. Credit suisse and initiating coverage on the electric car company with an underperforming rating. Tesla faces rising competition from companies such as volkswagen and is likely to become a niche automaker. More trouble for the boeing 737 unrelated to flaw two fatal crashes. Regulators are ordering additional design changes. That is bowings boeings bestseller and it has been grounded since march. Francine i want to talk a little bit about that coin, quite a lot of bitcoin, quite a lot of volatility. 1800. Tes at dropped this is against the facebook announcement of libra, the currency surging more than 200 in the First Quarter. You worked quite a bit on bitcoin and argue it is an asset but not a currency. What is libra . Randall we will have to see. They have not described what the governance mechanism will be. When we think about what is money, it has a unit of accounts, everything is denominated. It is a media of exchange and a store of value. Bitcoin is a store of value and libra is trying to stabilize the value of libra relative to a basket of currencies. Facebook of course has more than 2 billion users. If they can get to people, it will be more of an immediate exchange. I dont think prices will be expressed as a unit of account, but it is getting closer to being money than bitcoin. Francine what would have to happen for it to be here to stay . Staying away from money laundering, regulation . Who would regulated . Randall this is one of the thinkings, they were they were going to create a new currency, but there are a lot of challenges in regulation. They went firm on transfer organizations like money gram. Transferent for money organizations like money gram. It is not clear how libra will structure itself. Francine could it be a huge deal and disrupt the store values around the world . Randall it has that potential because unlike bitcoin, there will be much less volatility, potentially a large number of users. Francine it has a big name behind it. Randall this could be a challenge to traditional central bank currencies. Francine you are moving london in time for brexit. Randall the school of business is starting a larger campus and i will be moving september 1. Francine what are you working on for the moment . Randall recruiting people for our different programs, the executive mba program, executive education. We have a new class in. People are super excited about working hard, and they love it. It is so much fun meeting with the students. Francine i am excited that you are moving to london, a regular on surveillance, even more. In the meantime, we are looking at everything that happens at g20 in osaka. The indianrump says tariffs are completely unacceptable. They had imposed retaliatory tariffs on walnuts and apples. More tariffs on china. A whos who of the world arriving in osaka. The last leader to arrive was the italian Prime Minister. It will be interesting to see how they navigate the issue of manages President Trump to turn around some of the signatories on the accord to his side, and the trade terms that he wants, will he get them . That meeting that will potentially move the markets is on saturday, between president xi and President Trump. Bloomberg surveillance continues on radio. This is bloomberg. When you rest on a leesa hybrid mattress, bedtime is no longer simply the time you go to sleep. Its time to switch off and catch up. Enjoy me time, and we time. 40 winks or 8 hours solid. The leesa hybrid mattress combines two technologies to give you deeper rest and rejuvenation. 1,000 pocket springs provide edge to edge support, responsiveness and comfort. While premium foams relieve pressure, keep you comfortably cool and limit motion transfer. Leesas hybrid mattress is not only recommended by experts, experts choose to sleep on it too. Try it yourself in any west elm store. Or order online and well ship it to your door so you can try it risk free. The leesa hybrid is american made. Built to last. And, because Everyone Needs a place to rest, we donate tens of thousands of mattresses to those in need. Live healthier, live happier by resting deeper. Get 15 off, and 2 free pillows. Go to leesa. Com today. Sen. Warren i believe that we can make our government, our economy, our country work not just for those at the top. We can make it work for everyone. Alix the first democratic president ial candidate debates highlight the issues of the economy and corporate america. China unveils more preconditions freetrade deal. Als forecasts,s de highlighting policy changes, global risks, and centralbank easing. The bar will be high for the bank to stop easing once it starts. David welcome to bloomberg thursday, juneis 27, back with alix steel. I did not watch all two hours of the debates, but there was a lot of policy. It was not just zingers. Alix and not really attacking each other. And you know who was watching . President trump. David