Transcripts For BLOOMBERG Bloomberg Surveillance 20240714

Watching us from the united states. These are your markets. We are seeing a bit of a lift to european stocks, actually, not so much. They were lifting, but now they are flat. About 56. 65 after that opec plus meeting. Gold is down a touch. Remember, because it is fourth of july in the u. S. , treasury markets are closed. Coming up, dont miss our coverage of the boston pops fireworks spectacular, it is a bloomberg special and starts at 8 p. M. New york time. So if youre watching from asia or europe, its definitely worth it. Lets get straight to bloomberg first word news. The tanks are ready to go and the fighter jets are set. All part of President Trumps changes to the traditional fourth of July Celebration on the National Mall. The present will speak from the steps of the Lincoln Memorial and critics say he is turning the event into a campaign rally. President trump warned iran against stepping up uranium enrichment. Iran says it will restart the model reactor if europe fails to offer economic guarantees by a july 7 deadline. The u. S. Is hitting back on to the lawallenge that prevented from selling to federal agencies. They say it is designed to prevent china from gaining a strategic foothold in the networks of federal agencies. China has accused the British Government in interference in hong kong. Beijing reminds the u. K. The territory is quote not what it used to be. Wordsscalates the war of after theresa may says to us shocked by violence after protesters stormed the legislature. Commission has decided against disciplinary action against italys debt after rome vowed to address concerns. They now see the 2019 deficit in line with eu rules. Switzerland has not singapore off its perch as the topranked destination for expats, ranked in the best place to live and work. The u. K. Sank to 27th, citing poor economic and political stability due to brexit. Global news, 24 hours a day on air, on tictoc, and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Francine u. S. And chinese officials are set to resume trade talks. Now, kudlow says that, for those discussions will happen over the phone. I dont know precisely whether, it will be on the phone this coming week, they will be scheduling facetoface meetings. Lots of communications. Francine and while there may be optimism over a trade deal, that has not stopped President Trump from leveling more accusations of currency manipulation. He tweeted that beijing and brussels are manipulating currencies and pumping money into the systems. Bloomberg economics chief asia economist joins us from hong kong. Great to have you on the program. Is china minted living the yuan the ulating the one yuan . If anything, the central bank is doing the opposite based on our model. The pboc has been setting the currency stronger than implied by market forces. According to the pboc statement, they said that should be fixing the rate based on yesterdays close. It is fairly based on market signals. It would have been much weaker. Using whatc has been is called the countercyclical. Actor to set stronger fixing francine give us a sense of what the outlook for the yuan is and what the pboc can do Going Forward. Going forward, they will still be under depreciation pressures. For example, the u. S. Comments about currency regulation and the fed have indicated an intention to ease monetary policy. Those would be supporting em currencies in general. And obviously, that includes the renminbi. But if you look at economic fundamentals, chinas Economic Outlook is not so positive. The economy is going through a doubledip. Monetary policy is expected to be ease further. Would be putting downward pressure on the renminbi. Is going to do is continue to walk a very tight rope. On the one hand, some currency depreciation is welcome. That would provide some support to the economy. , they do nothand want to see rapid depreciation because that would this anger would disanchor expectations and outflows. So what they could potentially do is focus on the rate of exchange in the currency, but not a particular level of the currency. Francine interesting, thank you so much. , joining us from hong kong. Joining us for the hour is the global head of fx strategy at rbc and mary owens thompson. Thank you both for joining us on this fourth of july. A pretty important date when you look at the brandishing of currency that glitters. What do the chinese do . To be honest, as her chief economist just said, theres not much to do. Market forces are pushing the renminbi weaker and the chinese are stepping in front of that. At some point, they will have to allow it to break seven. We heard a speech from the pboc governor, trying to steer people away from seven. I think that is laying the. Round for that eventual break francine if it touches seven, we have been waiting for this moment for such a long time, does it shifts the market . Mary it is exactly as you say. Matterse, psychology and it will have an impact on various other assets . Assets. But i would like to stress the fact that it is very hard to create competitiveness in the International Commercial arena through a policy set out to weaken the currency. When we look at countries we admire, they are countries with strong currencies. Germany, switzerland, these are countries that have strong currencies. It has in no way had a negative impact on the economic performance. And we look at countries that have a deliberate policy to weaken the currency and we see how that works out for them. Not very good. Francine what do you think the psychological level is at this point . This is that even if it touches seven, does not make that much difference. But are we going to see a Quick Reaction . That, given the importance people have placed on seven, that the first time we breach we might see a. Breach, then they might manage it back. They cannot run higher without stopping it, but at some point, they will bow down to the inevitable and manage that pace through ups and downs. Francine getting a bit of breaking news on the rand, reaching 14 for the First Time Since midapril. What is that . Global dovishness . Elsa this is really a story about yield. Those quite a bit of uncertainty heading into the elections and the choices made have been fairly reassuring to markets. More than anything, it is the fact that the yield is just so attractive. Francine you wanted to jump in on china. Marie often, the u. S. Talks but other currency movements. The causality of that move was residing with other countries. Whereas in actual fact, often it is a dollar move. So when you look at the volatility in the renminbi, it is often the same you can see in other major currencies. I often find a bit of a biased portrayal of what is actually happening. Thank you both. Elsa and marie stay with us. Plenty more coming up, including japan a vacation japa nification coming to europe. We talk debt markets. And as a uber eats looks to expand, we speak to the chief. Es companys ema this is bloomberg. Francine economics, finance, politics, this is bloomberg surveillance. Lets get straight to the Bloomberg Business flash. Boeings offering 100 million to the victims of the families of the two crashes. The incident killed 346 people and have led to scores of lawsuits. The money will go towards education, hardship, and living expenses. They are committing these funds over multiple years. Bain capital and carlyle have made a 3. 4 billion euro bid to acquire osram licht, the german lighting company. They will decide shortly whether to accept the offer. This company is falling sharply on news that the founder and chairman has been detained in shanghai. The news trickled an investor exit that you racing more than 4 billion of market value triggered an investor exit, you moreg more than erasing than 4 billion of market value. Francine countries have seen 10 year yields drop below zero for the first time. By one measure, these negative yields are worse in europe than in japan itself. When you have a Central Banks that are exceedingly dovish, you get this 13 trillion kyl of negative debt that continues to build up tile pile of negative debt that continues to build up. Numbers, itnto the is actually japan that has the largest stockpile of negative debt. But when we look at it in percentage terms, there are a few countries that have more in terms of negative yielding debt. 69 . Erland at the yield of 50 year yields are basically at zero. Germany is also higher with yields hitting new lows. Denmark, more than half of the debt is negative yielding. Anywhere you wanted to buy a positive bond, you would be out of luck. Entire curve is a subzero is subzero. Two year yields a dipping below zero, yesterday, the 10year at the lowest on record. The u. S. Is mostly escaping this phenomenon and the world at 24 . Thats 24 looks even more stark when you look at a chart. Last year it was as low as 7 . That is because the hopes for synchronized growth would spur inflation. And in another measure of how investors are gorging on these bonds, Long Duration is invoke. Investors in vogue. This index a here tells us basically how many years will it take for an investor to get some of the cash flow back. This is at 8. 4 years, the highest on record. Francine thanks so much, day burger with some great lumber charts bloomberg charts. Lets get back to our guests elsa and amarie. Maire. We were talking about whether this means we need to rerate banks. Marie it is obviously not easy for certain segments of the economy when we have edited and Pension Funds and Insurance Companies and so on. We all have a challenge of how to generate returns in this context, that is for sure. , it isthe same time always possible in any kind of market to still make money. Ares not because they negative it necessarily means it is impossible to generate returns. Francine let me bring you over to the yields we like. This is a spread between 10year btp and bund yields. When you look at the moves and the italian yield, it seems crazy. Elsa it is amazing when you think just 57 years ago, we were in the heart of the eurozone crisis. We were worried about the complete meltdown of these market. Now they are doing particularly well. But i think that in an environment where the ecb has signaled is open to buying more , you cant really Read Economic signals from these yields. Italian so this is the spread between italian and bund yields. What do you do with jgb . Elsa that is a market where you have a Central Bank Buying a limited quantity of assets. They are the single largest holder at the moment. And again, it is another one where it is so dominated by the domestic Investor Base that, for the most part, i dont think it attracts that much interest. Francine is europe becoming like japan . We keep on saying it, but there are stark differences. Marie right. Important to is remember that japan is a fantastic place. I dont think people in japan are suffering. You can have a high quality of life under these circumstances, that is for sure. And if we go to the fundamental issue that Central Banks are trying to stimulate more inflation and trying to do that with monetary policy, we have to ask ourselves why we have such low inflation. A very dominant factor is the technological revolution. Internet and everything is pushing prices down. Those are structural developments and you cannot fight structural developments with cyclical measures. I understand the preoccupation with Inflation Expectations, but i still think it is a little bit misplaced to try to fight structural is inflation with cyclical measures. Francine what do you do with the yen . Elsa a lot of debate at the moment. It has gone up a little bit as we price in those fed cuts. But now the question is how deep do you think the cuts will go . If this is a case of one and done, it does not materially change the hedging dynamic. Francine thank you both. Stays with us. Up next, italy and the eu race a truce in the ongoing deficits saga. We discuss that next. This is bloomberg. Francine this is bloomberg surveillance. 30 month low after the eu spares the nation. Freshas offered commitments to fiscal discipline but a tighter budget might come at the expense of the touted radical tax cuts. Still with us is elsa and marie. I dont really know what you do with the italian short end of the curve. What does this tell us . Should we go back to the japanification theme . I think there are always other things at play. How we analyze the drop in thiss from thinking expresses the markets view of an impending recession or whatever, i think that is an oversimplistic view on the to certainly look at a value between Asset Classes , given that stock markets are at record highs. It makes sense for many investors point of view to try to reduce those positions and go to the bond market. The bond market is like, what else . Francine you have to keep that in perspective. Christine lagarde, the freshly nominated president , what is she going to change at the ecb . She may be tougher on fiscal. She may be tougher or able to rally the troops. Will she lead to euro volatility . Elsa i dont think so. We had a lot of debates about what she may or may not mean. But at the end of the day, she is a diplomat, a politician at heart. After mario draghi, those are big shoes to feel fill. Not an economist in training, but you have a very capable chief economist. So i think we will see more of the same rather than a radical shift. Francine do you agree . Marie i agree exactly. Taking the words out of my mouth. And i have to say in these gender focus todays, i find it very positive days, i find it very positive to have a female leader. And the commission, that will be a from it will do a. Formidable duo. Francine a formidable duo both stay with us about we talk oil and iron ore next. Francine currency criticism. President trump accuses china and the eu of manipulation. The u. S. Retaliates by intervening in the fx markets. European bond yields on a tear. On the way, jobs report and trump revamps the fourth of july with fighter jets and an unorthodox speech in washington for Independence Day. Theave the boston pops, bloomberg spectacular, later this evening. Good morning if you are watching from america. Lets get straight to your movers on the markets. Lets kick it off with unicredit come up more than 4 unicredit, up more than 4 . Osram up 2 after they confirmed the 3. 4 billion euro bid from bain and carlisle. Down to the downside, among 3 . 113. Ore trading around there is some worry that they were having this pullback. Saying that the fundamentals do not match what is going on in the market. Francine lets get straight to the bloomberg first word news. Trump has resumed his attacks on china and the eu. He claims both are manipulating their currencies to gain an unfair vantage. He says the u. S. Should do the same. His comments sparked speculation that treasury could intervene to weaken the dollar. U. S. And chinese officials will talk by phone in the coming weeks to solve echoing trade war, according to larry kudlow to solve the trade war, according to larry kudlow. We spoke to mark mobius. The currency weapon has been on the table for some time. As you know, the chinese have used this weapon. Its interesting that maybe in preparation for this next meeting, the chinese about their currency to get stronger against the u. S. Dollar. Deutsche banks overhaul plan could reportedly cost as much as 5 billion euros. The Financial Times is reporting it could tip the german lender into a loss this year. The strategy may be unveiled as soon as this week. And familiar face is leaving the race to replace Christine Lagarde at the imf. 2to1arney is at odds to get the position. Global news 24 hours a day and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am Sebastian Salek and this is bloomberg. Francine . Francine thank you so much. Breaking news on oil. I dont know whether it is having a direct impact on the price of oil. Saudi and kuwait making a breakthrough in the neutral zone oil talks. This should add a limit to the market. Brett a little bit to the market. Brent barely budging. Iron ore hitting the highs level in more than five years after a disaster in brazil and oil declining as a smaller than expected drop in oil crude and gasoline inventories added to bear sentiment. Lignos, ands, elsa mary owens thompson. Mary comeau when you set some of the modeling in your mary, whenhat is you set some of the modeling in your forecast, what is your price . We are looking for an average oil price of 16 60 per barrel on the wti. Last year, the average was 65, which happened to be a prediction. Often, we imprint on the higher numbers. Thats why i wanted to mention last years 65. People may not be aware that the average was that low. Francine Going Forward, if you look at the last five recessions , they were either directly caused or impacted by a shock in the price of oil. Is this time different . I think fundamentally, the dominant factor in the oil market is obviously u. S. Shale. Therefore, this oversupply of oil is what we are focusing on the most. Although, of course, we are completely aware of geopolitical risks and things that could cause oil price spikes, but we dont think they will last. Francine what does this mean for your world of currencies . Currencies that have typically had a very strong relationship to oil has seen that relationship we can a attle bit weaken little bit. We have seen the Canadian Dollar year rate more on two spreads or the Economic Data in canada. Francine when does that change . As you begin to see more Pipeline Capacity coming online. It looks like it is likely to be a 2020 story. There are still petrol currencies out there. Rubel does well. At the end of the day, in the g10 space it is less of a driver than it once was. Francine this is not the kind of inflation that we are looking for but it is linked tenuous we to the price of oil tenuously to the price of oil, but when will we see inflation . Issue right is she right . Yes and no, a typical economist answer. It depends. The dominant factor in the inflation space is the technological revolution and the disinflation that brings about, which has seriously impacted the price of goods. I would think in the coming 25 years, it will feed into service prices. Fundamentally, i think that we are going to continue to live with, compared to history, very low rates of inflation Going Forward probably for some 20, 25 more years. That does not exclude the possibility of having a temporary pickup in inflation, but not much beyond the Central Banks target. Francine what does that mean for dollar . Is dollar too strong . It is something economics will tell you is supposed to be bad for a currency. In g10 space, we find it is good for a currency. When you see a pickup in inflation, you anticipate that the central bank will respond to it. The fact is, you still have a much better prospect of inflation or lower prospects of disinflation in the u. S. Than in the euro area, japan, or other countries. As a result, it is hard to see llar selling off dramatically if the fed is not going to slash rates. Francine thank you so much for joining us. Gnos andus is elsa li mary owens thompson. Next, devouring the markets. Uber eats battles for a bigger slice of the food delivery world with partnerships. Head, rodrigoemea arevalo, joins us shortly to talk about the companys growth strategy. This is bloomberg. Francine this is bloomberg surveillance. Im Francine Lacqua here in london. Revamping the fourth of july. The celebration in washington happens every year but was never includes president ial speeches on the mall. President trump will do Independence Day differently this time. On the days a military celebration with tanks. President trump will deliver a speech at the Lincoln Memorial and fireworks will temporarily close airspace and ground commercial flights at reagan airport. The show will not go entirely trumps way. Protesters have a permit to display an inflatable baby version of the president. Event that the president wanted to hold for veterans day was estimated at more than 21 million. How are americans celebrating . 74 Million People will be barbecuing, 750 Million Pounds of chicken, 150 Million Pounds and to wash it down, 5 of the annual beer consumption happens this weekend. Fourth of july by the numbers. Happy Independence Day, everyone. The fight for a slice of the food Delivery Market is heating up. Uber eats is one of the fastestgrowing competitors thanks to the advantage given to integration by integration with the ridesharing apps customer base. It is now hoping to add more by a mocking its technology to eateries with their own delivery stuff. Joining us now is rodrigo arevalo, heade of uber eats emea. Still with us is mary owens thompson. Uber eats is exciting. Uber eats has many ways that it can grow. Investors are worried youre trying to be too many things to too many people. Into o uber eats fits overall strategy hadubers fits into ubers overall strategy and portfolio. We are the biggest delivery food delivery at in the world app in the world outside of china. Francine what is your biggest concern right now . Is it regulation . The fact that the food needs to be properly sanitized . You give promotions as well. How does that but you under pressure . Rodrigo it is about focusrodrigo for us. We want to make sure we deliver on the plans. And vision for the company the first pillar is restaurant selection. The second is Customer Experience for leaders, but eaters, restaurants, and delivery partners. Francine do you think you will be under more pressure to be more sustainable . So reduce some of the packaging, but also deliver healthier food . Rodrigo when it comes to packaging, we already partnered with several companies that provide Sustainable Packaging. Given our platform, particularly in the u. K. , we already look for ways to facilitate that Sustainable Packaging to our restaurant partners. Francine the other question is on the fact that you may be under more pressure to deliver healthier food. I dont know if the regulators look at that or will look at it in the future. Rodrigo we partnered today with 220,000 restaurants globally. There is a vast selection, from every kind of meal from comfort food to the healthiest option, vegan, salads, etc. We believe in selection, consumer choice, and we are focused on providing that information, providing that option. Francine i want to talk about virtual restaurants. Some people may not know what they are, although they have probably consumed some of the food. Talk to was about virtual restaurants. Rodrigo virtual restaurants is an Interesting Initiative which by leveraging the data on a platform we can create cuisine types that only exist on food delivery platforms. It helps restaurants utilize their kitchen a lot more. The second one, it increases their revenue, their top line. It is an Interesting Initiative to improve choice. Francine a lot of people want chinese food in london. Kitchens withte chinese restaurants that will only deliver on uber. Rodrigo absolutely. If there is not a restaurant in a certain neighborhood, we will partner with the restaurant to make it happen. In the u. K. , we are already doing 200 virtual restaurants and expanding across europe. It is a hyper local exercise. It is going really well. We are excited. We are doing 200 restaurants in the u. K. Francine 200 restaurants in the u. K. You are definitely disrupting the way we consume food, the restaurant business. Does it make it a nightmare for you and Central Banks as an economist to figure out productivity level and inflation . Do we need to measure things differently because of businesses like uber eats . I think that is definitely the truth of the day. In this overwhelming information world, we still lack the relevant data. We have an abundance of data, but not necessarily the data we want. The way we calculate gdp and a number of other measures is not necessarily keeping pace with developments in the real economy. Statistics lag reality. This is an example of how i believe we will get more productivity gains in the Service Sector and more disinflation in the Service Sector. When you look at a technological revolution, it tends to take 100 years from the first innovation tool full maturity and deployment in the economy to full maturity and deployment in the economy. It has less to run until about 2050 legs to run until about 2050. Francine i ordered food monday. I would not be able to tell you on what platform i did. Is that a problem . Rodrigo we believe that it is about making sure that we are focused on the selection, the Customer Experience, and the technology. It is a crowded space for sure. Making sure that we are executing and focusing on providing the best experience is the one income nation the winning combination. Execute drives great results. Francine it does make it easier being a working mom. Thank you, rodrigo arevalo, head and maryats emea, owens thompson. A little bit of news from parliament in strasbourg. We will get you more on what the leaders are saying. The summit deal on the top jobs was called good. We have four new contenders, new nominations. Mr. Tusk hailing the gender balance at this eu summit agreement. Up next, topping the table. Saythe first time, expats switzerland is the best country in the world to live. We will bring you the story next. This is bloomberg. Francine economics, finance, politics, this is bloomberg surveillance. Im Francine Lacqua here in london. Is the most popular country among expats, according to a study commissioned by hsbc. 82 of expats who moved to the country say they see an improvement in the quality of life. It is the first time switzerland has made it to the top of the table, beating singapore, the winner for the last four years. Of hsbcdard as head expats and joins us. John, congratulations on a really important study. People love to read about it. You can talk about the economy and Business Decisions but it is also where people want to live. Why is it the first time that switzerland if the top place . John i think expats are increasingly looking at more things than just the financial returns they get from moving to a market. They are looking at worklife balance on the general environment they want to live in and bring up their children. They are looking at safety. Well in all ofs those different categories. Francine i am looking atfrancine switzerland knocking off singapore for the top perch. I am looking at spain. I am also looking at turkey, number seven but used to be at number 22. Whats going on in turkey . John turkey is probably getting a little bit of a bounce back. The environment is safe for now, or at least the headlines are saying so, then it was a few years ago. Expats destinations like istanbul offer a lot. They are seeing the worklife balance they get. The excitement of istanbul as a city is helping them to market higher. Francine is at safety, worklife balance, good night clubs . Expat,pending on the they will probably rank those in different ways. We look at the aspirational side, the lifestyle moments, and what it is like to bring up a family in that country. Francine the u. K. Has gone from seventh place to like 27th. Is that all brexit . John u. K. Has dropped down. It was actually in the early 20s. Francine it tumbled seven places. Number 27. John the u. K. Has dropped. We did not ask about brexit. I cannot tell you it is related to brexit. 67 of people that were asked hasn the u. K. Expressed some concerns that were expats in the u. K. Expressed some concern about political tensions. It has come out quite strongly that if you are looking to develop skills, the u. K. Is quite close to the top of that list. Most expats moving to the u. K. Are saying they see improvements in terms of their financial situation and the opportunities they get their work. Francine you lived in switzerland. Is there a match between the soft power we see in johns rankings and the economic prowess of switzerland . I think all of these things are key ingredients in generating international competitiveness. In our previous discussion, in spite of the strong swiss franc, the country is obviously very competitive. Its markets are outperforming many other markets at this point in time. If you manage your country well, you will do well, irrespective of where your currency is that. If anything, arguably the strength of your Competitive Position is reflected in a slightly stronger currency but that is not a handicap. They still managed to eke out this steady performance. Francine there was a study for switzerland and eu for the stoxx. It has not had stocks. It has not had much of an impact. Does it impact your world . Thatis is the equivalent the eu has usually extended to switzerland in terms of its stock market so that we could trade any stock market in europe. Treating switzerland as if it was part of the eu in this respect. All of a sudden, they have said they will no longer do that and i deplore that attitude from the europeans. Francine think you so much. More surveillance is next thank you so much. More surveillance is next. Francine currency criticism. President trump accuses china and the eu of manipulation. The u. S. Retaliates by intervening in the fx markets. European bond yields on a record tear. The u. S. Is closed for the holiday. Next on the agenda, a u. S. Jobs report. Trump revamps for the fourth of july. He brings tanks, fighter jets, and an unorthodox speech to washington for Independence Day. This is bloomberg surveillance. Im Francine Lacqua here in london. Tom keene is off for the fourth of july holiday. Unclear whether he is doing a barbecue are enjoying the fireworks. Lets get straight to the bloomberg first warnings and then we will come back to your markets. With the first word news, here is sebastian salak. There is growing concern that the 2015 Nuclear Treaty with iran is about to collapse. President trump is warning to iran not to it tehran not to increase uranium enrichment. The Trump Administration is expanding a crackdown on what it sees as unfair trading practices. The u. S. Will impose additional duties on steel coming from asia. China and the u. K. Are upgrading their war of words over the protest in hong kong. Beijing accuses the u. K. Of meddling and its former colony after theresa may told parliament she was shocked by scenes of violence when protesters stormed hong kongs legislative councils. Bank putting the final touches on an overhaul plan. A huge jobs cut being considered and a management shakeup and a new unit to house unwanted assets. In soccer, one of the alltime greats is returning to become a manager. Getting thet season team close to the premier league. He finished third in the premier league the team finished third in the premier league. Global news 24 hours a day and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am Sebastian Salek and this is bloomberg. Francine it is the fourth of july, so of course a lot of the markets, if not all of the markets in the u. S. Are closed. Treasuries is where we have seen some pretty big moves over the last couple of days. European equities are drifting. U. S. Stock futures also drifting. We had a little bit of a mixed asian session. Volumes remaining very thin because of the holiday the u. S. Gold slipping. I want to look at gold. I am also looking at oil. Oil is down. Vix a little bit low in terms of trade. Tomorrow is the key friday u. S. Jobs report for june. This is what i am looking at when it comes to negative yields. Japan negative yields now look pretty juicy. Certainly if you look at some of the other negative yields around the world. We had a great Market Participant in the last hour saying, where do i find yields. U. S. And chinese officials are set to resume trade talks in the coming weeks. Larry kudlow says that for now, the discussions will happen over the phone. Mr. Kudlow lighthizer and secretary mnuchin. I do not know precisely when. They will be on the phone this coming week and they will be scheduling facetoface meetings. Lots of communication. Francine while there may be optimism over trade deals, that has not stopped President Trump from accusing china and the eu of currency monetization. He tweeted that currency manipulation. He tweeted that europe and beijing are manipulating their currencies, adding that the u. S. Should do the same. Marilyn watson and Mike Gallagher. Will we see the u. S. Retaliate or is it just tough talk from the president . Marilyn it is hard to say. I think it is part of his overall messaging. He has been very direct towards the fed, the fomc. Overall, when you look dollar, or euro dollar, it is really hard to say that the chinese have been doing much. They have not been intervening too much. I think at the moment, it is rhetoric, but of course, it is hard to tell. Francine how do you look at that Going Forward . Bi touchesthe renim seven, what does it actually do . Mike i think the chinese are astute enough to make sure that does not happen when the trade talks are going on. I think this is trump trying to strike out to his base. He is already, in his mind, campaigning for 2020. He needs to try to win on the economy. He needs to try to make progress on trade. He has got a difficult fight versus democrats on both health care and climate change. Francine what does that mean for some of the Investment Strategies . Are we going to go back to trade wars and trade concerns after two days of peace . Mike i do not think it will be that quick. Within 36 months, i think you will see trump once again raising the stakes against china, threatening to increase tariffs again. There is a bit too much optimism around tactically at the moment for a sort of threemonth basis. You have also got, from our perspective, the market too optimistic in terms of fed. It means a rotation lower in bond yields and a rotation lower in equities. Francine when you look at where you find value, it is a little bit of a crazy world. The world, you can argue, in the investments space has gone a little bit crazy in the last 10 days. Marilyn thats right. If you look at about a quarter of the bond market is negative yielding. It is tough to find value. There are definitely pockets if you look at the long end of something called european rates. We think you can see value there and further compression. Likewise, if you look at some variants of some of the Higher Quality Corporate Bonds in the u. S. , i think you can find value. The insatiable appetite for yields will not go away. Francine which means Interest Rates will go more negative in europe . Marilyn in europe, certainly the market is pricing in a cut this year. It is also pricing in that we will see some sort of Asset Program being started. They could go lower. If you were to be the ecb restart an Asset Program, or Something Like that, if you were to see some form of rate cuts after that, then it could go lower. The 10 year is pushing against the negative deposit rate but that will not necessarily be the lower bound forever. Francine when you go to some of the currency threats President Trump tweeted about, what the u. S. Actually taken it would the u. S. Actually take any action . Mike i dont think we will see intervention. I dont think we will necessarily see any strong action on the u. S. Part. I think it is all words. There is a point, however, that the dollar is overvalued. Francine is it . Mike yes, it is overvalued quite clearly over a number of currencies, whether you look at individual bilateral. The dxy, currently around 97 right now. In 2008, just before the recession, we were at 71. The dollar has appreciated substantially. Renimbie is manipulated . Mike less so. I think it is a factor of wider dollar overvaluation. Francine do you think dollars overvalued dollar is overvalued . Marilyn i certainly agree that in the mediumterm, we will see the dollar depreciate. You saw the rest of the global Central Banks becoming more in an easing stance. It was hard to see. Certainly over the mediumterm, i do think you will see the dollar depreciate as well against a range of currencies. Francine thank you so much. Marilyn watson and Mike Gallagher but stay with us. Ident trump has stoked fears that the 2015 nuclear deal will collapse. This is bloomberg. This is bloomberg surveillance. Another sign of how tougher regulations are forcing banks to change their business models. Rid ofibas will get the majority of its Asia Research staff. It is partly due to pressures brought by european regulations. Bloomberg has learned that the u. S. Justice department is on the verge of a probing tmobiles merger with sprint approving tmobiles merger with sprint. The Justice Department wants to get enough concessions so that dish could be a strong fourth competitor in the market. Has confirmed a 3. 4 billion euro takeover from bain an carlyle. It issued its sixth profit warning in a year. That is the Bloomberg Business flash. Francine . Francine there is growing concern that the 2015 Nuclear Treaty with iran is about to collapse. President trump took to twitter yesterday to warn to iran tehran not to step up its uranium enrichment. He warned them to be careful. This comes after president rouhani said the Islamic Republic would step up enrichment if europe fails to offer economic aid by sunday. Joining us now is bloomberg internationals government executive editor. Marilyn watson and Mike Gallagher are still with us. This is something that we have seen the president do before. I threaten, then i get back, then i threaten again because he things he gets a better deal out of it. Should we take this as a serious threat . Marilyn this is donald trump threatening iran in response to irans threats. Tehran is seeing how far it can push things right now. Even as donald trump and says i want to have talks to threatening action, it is clear he does not want a conflict. That very public announcement that he authorized airstrikes and walked them back is completely telling. That said there is a key deadline coming up july 7. Iran telling europe it needs an economic guarantee or it might restart construction work on a reactor. Francine that is like three days wait. What does europe do three days away. What does europe do in all this . Europeans have been on the fence. Marilyn what they can do right now is very little what they can actually do right now is very little. Iran is limited by u. S. Sanctions, by the Global Nature of the u. S. Financial system. The u. S. Is saying to european companies, if you provide aid or trade with iran, we will come get you as well. This mechanism they have set up can do very little. What iran is saying to europe is , you need to help us somehow facilitate trade in oil. Francine what needs to happen for this renewed uncertainty to turn into something dangerous like war. It does not seem like either side wants that. What we are getting is an escalation of threats. Iran saying they will perhaps restart construction on that reactor. Is o that is happening efforts to stop tensions from escalating. What we need to do is get to the point of having those negotiations. While there are such sanctions on iran, is very hard to see them being willing to restart formal negotiations. Francine what do you do with these flaring up of tensions in the middle east . Mike first of all, you take the view that we are likely to see sort of export waivers become more restricted. That means less iranian oil exports. In any case, and the second half into 2020, that titans the oil market tightens the oil market a little bit. You watch the situation closely in case a mistake is made. It certainly is the case that neither the u. S. Or iran wants a conflict. Ending upnot stop with one mistake. If you did see a mistake and you did see some conflict, you would then see a substantial spike in oil prices. Who wins in a currency war . Bonds. Is at the same answer with who wins in the markets when there are tensions, geopolitical tensions . When you seends the risk aversion, the rush to save haven assets. Some current is benefit, some bonds benefit some currencies benefit, some bonds benefit. It depends. The overall general level of uncertainty, as you say, if you see a rampup of tensions, more risk around the middle east, then i think it will add an extra layer to the already quite highlevel of uncertainty we are seeing in the markets. When you look at this talk and bond markets, they are compressed when you look at the stock and bond markets, their complete when you look at the stock and bond markets, they are bifurcated. Francine thank you so much. Marilyn watson and Mike Gallagher both stay with us. Will hear from the veteran em bloombergs he tells where he is putting his money. This bloomberg. This is bloomberg. Size have got problems with low Interest Rates. Of course, People Holding higher rate loads will be doing well, but others who are trying to get in are going to have problems, which is why i believe that you will see a move into emerging market bonds. The currency weapon has been on the table for some time. As you know, the chinese have used that weapon. Its interesting that may be in preparation for this recent meeting the chinese allowed their currency to get stronger against the u. S. Dollar. That i think eased tensions somewhat. Francine that was mark mobius, founder and partner of mobius capital partners. For more, lets turn to Marilyn Watson of blackrock and Mike Gallagher of continuing. Um. Continu are we in a currency war . Marilyn not at the moment. I think we are in an environment where we are seeing a huge focus on Global Growth decelerating. We see data coming out from a range of different regions is also decelerating. It is weak in the eurozone and u. K. In japan, it is struggling to get accelerated data and a grasp on inflation. I dont think we are in a currency war at the moment, certainly when you look at the past. I dont think we are. At the moment, we are reengaged in and rebalancing read gauging andre rebalancing whats happening in the markets. Francine do you worry Central Banks will be too accommodated . Accommodative . Mike i think the markets are pushing the agenda in terms of Central Banks. We talked about the fed and the fact that it will probably be later on the and sooner. Same thing with the ecb. Matter mudguard does not want to lagarded give madame does not want to do qe and give the credit to draghi. There is a change of team going ecb. The court ecb core all the market will get is some adjustment Forward Guidance and maybe a deposit rate cut as a signal. Deposit points off the rate is nothing in macroeconomic terms. Francine we spoke to someone from the cleveland fed yesterday and i asked this question. Are the markets pushing Central Banks to take action . She said absolutely not, we are data dependent. Do you believe them . Mike i do believe them, both in terms of the fed. The fed has not seen enough in data deterioration to pull the trigger in july. That is why for us it is later rather than sooner. Same thing with the ecb. I think we will have to see more bad data before the ecb really pulled the trigger substantially. I dont think looking at forward indicators, whether those are short leaning or long leaning indicators. Francine how do you view Central Banks . Expectation or 85 of a cut this month. Is that too much . Isilyn our core view that the fed will cut rates this month. We do still think the fed will cut rates at the end of the month. I think that they went to great pains to signal that. I think to roll back from that would be very difficult. I think in terms of the ecb, if you look at mario draghi speech in sintra or the Market Reaction in the past few days, i think the market might be pressing in too much in terms of what the fed might do. It is also pricing in too much in terms of what the ecb might do. I think both Central Banks are very data dependent, focused on the economy, but also very well aware of the Global Environment we are in. I think we will see further easing in some form from both of them. Francine thank you both. Marilyn watson and Mike Gallagher but stay with us. William hill made an announcement on the website, send 4500 of their colleagues are at risk. This is probably because people are betting online more and more. There is a little bit of difficulty. We will focus a little bit on that, but also disruptions from online. Up next, sticking with the u. K. , we will talk pounds. We will talk to one of sterlings most accurate forecasters. This is bloomberg. Xfinity mobile is a Wireless Network designed to save you money. Whether you use your phone to get fit or to find the perfect gift, youll use less data with a network that automatically connects to millions of wifi hotspots and the best lte everywhere else. So you save hundreds of dollars a year on your wireless bill. Xfinity mobile has the best network. Best devices. Best value. Simple. Easy. Awesome. Click, call or visit a store today. Year. T day of the 3, 2 francine finally come of the fourth of july, the moment we have been waiting for. The boston pops tonight. A celebration in washington happens every year but almost never includes president ial speeches on the mall. President trump will do Independence Day differently. On the agenda, a military celebration with tanks, trump will deliver a speech at the Lincoln Memorial, and there will be jet flyovers. The show will not go entirely trumps way. Approved to have an inflatable baby version of the president. Estimated at more than 21 million. The french think it is all because of them because he was invited to the july 14 bastille day celebrations. How are american celebrating with their meals . 74 Million People will be barbecuing. Million pounds of chicken and 190 Million Pounds of beef, and an estimated 5 of u. S. Beer consumption comes this holiday long weekend. Happy fourth of july to our american viewers. Trade talks between the u. S. And china have resumed by telephone, according to larry kudlow who says the sides will be scheduling facetoface meetings. President trump and xi jinping agreed to restart negotiations and trump would hold off on imposing more tariffs. Over whether to ask a Citizenship Question on the census resumes. The Justice Department is looking for ways to king include the question. The number one destination for expatriates is switzerland. Earning top marks for earning potential. Singapore was the runnerup. The tanks are ready to go and the fighter jets are set to fire as part of President Trumps changing the fourth of July Celebration. He will speak from the Lincoln Memorial. Critics say he is turning it into a campaign rally. 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 Sebastian Salek and this is bloomberg. Francine a little bit of movement on the german tenyear. We saw a big movement yesterday in u. S. Treasuries. Because of the fourth of july, the market is closed. Ecb deposit rate of. 4 and we saw a similar mood move yesterday at the italian 10 year. A quick thought from Marilyn Watson, german tenyear dropping to the ecb deposit rate . Marilyn the market is pricing in a cut from the ecb. He also saw the reaction to Christine Lagarde potentially becoming the president to the assumingthe market is she will continue where draghi left off with an easing bias. Townu look at the risk off in fixed income markets, tone in risk fixed income markets you could see more to come. The markets are really saying, we expect more from the ecb. Euros on growth is not great and we expect yields to go lower. Francine theresa may will call in her successor to protect the union, warning a no deal brexit risks splitting up the u. K. And hinted she could join the conservative rebels in the house of commons. This comes as leadership contenders prepare for an event in scotland tomorrow. We are joined by david merritt. For the international audience, explain hostings. David these are events whereby the two candidates have to face the audience or an interviewer, and it is a process to give them a grilling. Mr. Johnson has been ducking some of the more public events, so debates on television for instance, has not done one of those yet. These are the ones speaking to like, oftorate, if you conservatives choosing the next tory leader. Francine how far ahead is Boris Johnson . David it is hard to tell. 160,000 people voting will be hard to pull. Poll. Mr. Johnson has been out with quite a Good Campaign and negative headlines, but he is never less favorite nevertheless the favorite. Conservative,000 members, the demographic is more prono deal. David more than the country at large. Malerwhiter and mail than the population at large. It is very probrexit. Candidates have narrowed in on the same thing, not being afraid trying to, and really stare down the European Union to get a change to the deal that eluded missus mrs. May. Would you describe jeremy hunt, more moderate . Boris johnson wanting to go the other way . David the question of how do you force no deal through is the question. Neither has an answer and it will be hard to do that. Mr. Johnson is saying he would even consider suspending parliament over that deadline to get this done. Mr. Hunt said, we need parliament as sovereign. That is a slightly less extreme version. No deal will be bad for the economy. Nevertheless, it has to happen. That is the big difference with theresa may. She used to say no deal is better than a bad deal, and she is warning this could break apart the united kingdom. Prospect that the Prime Minister could vote against her successor. Francine i have questions on labour polling. Where does this go as you look at the impact on the economy . Mike we are already in a situation where q2 and the u. K. Minus 0. 2 or to be 0. 3. Q3 is likely to reverse that or be stagnant, so we could already be close to a recession, technical recession and the u. K. In the u. K. However, looko forward to lets say it is he going to is negotiate with . Nobody in brussels in terms of the new commission will be there until november, so this idea that they will go to the commission in august and persuade them, it is nonsense. It is more likely that the limbo will continue and johnson will do a uturn and end up delaying in the autumn, and then we get the crunch whether it is the end of the year or march, we will see, but more limbo. Francine marilyn . Marilyn the timeline is incredibly tight. We have yet to find out who will be the next tory leader and Prime Minister. Then we have to wait until september for the party conferences. Then we have the e. U. Summit after that and you have end of october when the u. K. Is due to leave the e. U. It is incredibly tight and i dont see how anything can be resolved. Francine october 31, do we assume that gets pushed back . Mike timing is any everything and there is no time to get these changes done. Minister, the prime they will not be able to get anything through this parliament , which points to an election. Where do you fit that in . They would have to be called back from their august recess to have time to get that election done in a new government in place, and then ask for the inevitable extension to brexit to get a deal renegotiated. Francine i saw a paul that poll that about 18 labour has about 18 . David disastrous numbers. You would expect the position to be making hay at this point, and questions are being asked again about Jeremy Corbyns leadership in their brexit and their brexit process. Course touch of course, Nigel Farage Brexit party. Could there be a big have it happening pivot happening for the leadership at the labour party . Francine thank you, david merritt. Marilyn watson and Mike Gallagher sticking around. Tomorrows u. S. Jobs resort does report may make the fed report may make the fed case to have an Interest Rate cut or take more drastic action. This is bloomberg. This is bloomberg surveillance. I am Francine Lacqua in london. Tom keene is off enjoying his fourth of july. The stock and bond markets are closed today along with government offices, but tomorrow could see volatility with the jobs was report. Report could make case for the Federal Reserve to hold off on a cut or take more directed drastic action. Iere just a concern know you are expecting a cut but even if we have a number that would not support a cut, are you uneasy with the fact that the market is pricing it in at 87 . Marilyn i think the messaging the market took from all the communications from the fed has been Crystal Clear that i think it is hard to roll back from that. A lot of the discussion at the moment is around if they cut, will it be 25 or 50 basis points . If you were to see the data go one way or the other in terms of being worse unexpected payrolls, you could see the market move toward 50 basis points, but at the moment our core view is at will be 25 basis points and more of an insurance cut rather than something more aggressive in terms of facing down uncertainty in the market, and higher headwinds. Francine what happens to treasuries . Thatrday, the 10 year is 1. 95. What needs to happen for it to get to 1. 75 . Mike they will need to cut in july which cements the next fed cut as early as september. That is the sequencing you need. It is three events the payrolls, which is very important because it gives insight into many aspects of the economy. Although the fed has tried to deemphasize it, it is more communication trying to deemphasize it rather than economists. They also look at the gdp, but critically next week with the semiannual testimony has to be the real factor that either confirms they will move ahead or actually plays down some of the market expectations. We think they will dampen down the expectations, because if you look at the u. S. Economy, we still have got enough momentum. We do not see a disinflation problem with the u. S. And we think the fed will want to reserve their powder for later on. Francine how many cuts are you expecting . Marilyn potentially 50 basis points of cuts, very data depending, but at the moment around 50 basis points. Francine that is assuming you do not see a deterioration in the trade war. If you look at u. S. Domestic numbers, they are ok, but what about the rest of the world . Ise the rest of the world partly a function of the sentiment spillover in terms of u. S. China trade tensions. The fact that we have gone to a trade truce, which is likely to last for a few months before trade blows up again due to trump, that will mean a degree of stabilization for business and consumer confidence. The picture by the end of the summer in terms of the Global Economy will look reasonable. It will not be a picture that prompts Central Banks to ease aggressively. Francine Christine Lagarde nominated ecb president , will she spur more euro volatility . Spur inadvertently. How do you see her changing from mario draghi . Mike she is politically astute, and that is really important if you look at the fiveyear view rather than the 12 month view. The critical question is more to do with the next euro zone recession and how the ecb deals with that. Tinkering around with the deposit rate is not enough. Effectiveng qe too and she has to think in that direction. She has to work with politicians. Francine too effective or will only be effective with fiscal policy . Marilyn the Market Reaction to her announcement was that you could see she could attend chile drive through she could potentially drive through more fiscal policy. She does not have a background and monetary policy. Works look at how the ecb and the press conference as, she was very wellversed in the imf but it is different when you are in a live environment and you need to hone the message you send out to the market. There are so many unknowns, and even in terms of her policy stance, all the market is expecting her to be more dovish following in draghis footsteps, we dont actually know. Francine thank you so much for joining us. Marilyn watson of blackrock and Mike Gallagher at continuum economics. Truceand the e. U. Reach a and the ongoing deficit saga, but will the populist government stick to its fiscal commitment . This is bloomberg. Sebastian this is bloomberg surveillance. The u. S. Is heading back at huawei. The government says the law protects against china gaining a strategic foothold in the agency networks. British Bookmaker William Hill will close 700 betting shots and 4500 people will lose their jobs. They have been hurt by a law that limits bets on poker and roulette in an effort to curb gambling addiction. Francine italys 10 year yield low. To a twoyear the decision comes after rome ered fresh discounts radical tax cuts. Milan, us from elon, great to have you with you. What is going on in italy . Are they trying to get along . I think this is the finance minister in the Prime Minister having the upper hand, as it were, within the coalition. Position which has always won to seek compromise has in a moment of tension with the commission. Of the populist leaders fivestar movement and leak are clearly letting the two technocrats win the battle. The question is what will happen in the autumn when it away will need to find savings for more than 20 billion euros or else, let it increase by the same amount, discarding any plan for a tax cut which salvini has been talking about. That is when we see who is really in charge in italy. Ncine who is in charge with a new person in charge at the ecb, he had a great column on this yesterday the nomination of Christine Lagarde, she is good at politics. Is that would the ecb . Front italy, that is good news. Suffered with a more hawkish fed ecb president. Draghi has turned the ecb into the most Important Institution in the euro zone and has done wonders for the monetary union. Lagarde is a former politician and we see evermore former politicians joining the ecb. Over whetherstions the ecb is becoming too political and some may ask about independence. Cv,rde is an extraordinary managing director of the imf, she can be her own woman but she will need to prove it. The reputation of the ecb has been built strongly, but these things can come and go. Francine thank you is always. In the next hour, neil shearing will be here in london. We will talk more about Christine Lagarde, treasuries, and the jobs day tomorrow. This is bloomberg. Currency criticism, President Trump accuses china and the e. U. Of manipulation. U. S. Intervene in the fx market . The u. S. Market is closed for the holiday and next on the agenda is the jobs report. Trump revamps the fourth of july, bringing fighter jets, tanks, and an unorthodox beats speech to washington. Happy fourth of july, happy Independence Day to our u. S. Viewers. I am Francine Lacqua in london, tom keene enjoying the fourth of july off. Asely, we will hear from him he tweets throughout the day. Lets get to the bloomberg first word news. Sebastian growing concern that the 2015 Nuclear Treaty with iran will collapse. President trump is ordering them not to increase a rainy him and uranium enrichment. The Trump Administration expanding a crackdown on what they see as unfair trading practices, imposing additional duties on steel from china and vietnam. Area and the u. K. Escalating a war of words over the protest in hong kong. China accused u. K. Of meddling after theresa may said she was shocked. Deutsche bank ceo putting the final touches on a sweeping turnaround plan. The board meets to make a final decision this weekend. Page job cuts focused on the Investment Bank and a new unit to house unwanted assets. 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 Sebastian Salek and this is bloomberg. Francine thank you so much. This is what i am looking like an markets. It is a quiet day. The volumes are much thinner than usual because of the fourth of july. Stocks drifting a touch, german yields falling below the ecb deposit rate. A similar move on the italian 10 year, stocks pretty much drifting. Dollars steady, bold flipping but staying above gold flipping but staying above 1400. I know tom keene missus being on being on air, japanese yields continue to decline so maybe they look attractive. Officials are said to resume trade talks but larry kudlow says they will happen over the phone. When. Ont know precisely they will be on the phone this week and scheduling facetoface meetings and lots of communication. Francine while there may be optimism over a trade deal, that has not stopped trump from accusations of manipulation of currency. Joining us now from singapore is derek wall bank, bloomberg senior editor. He was on the breaking news desk for years. Thank you for coming on share your insight. Are we in a currency war . Does it change pboc . Is china manipulating the currency . According to the u. S. They are not. The u. S. Has a report that labels currency manipulators and he keeps stopping short of finding china a currency manipulator, but you have difficulties, existing problems with donald trump in the fed that keep cropping up. In president wants changes the policies. The president has vacillated a little bit. You have seen some question as to whether or not he is committed to a strong dollar. The dollar seems to be weaker against its major peers, particularly for some of those trade angst. This is things. This is an important metric for him and a wellworn point, so im not surprised he turns to it even though he said in osaka we are on the right track. Francine are we in a currency war . Derek not yet is the easiest way to say that. Lets wait and see what the u. S. Does. There has been some speculation that there could base him steps the Treasury Department might take if the president is not thrilled with what the fed does. Unlike the sanctions lobbed back and forth, you have not seen much outside of pressure from donald trump to other people to do a certain thing. Francine overall, what does that mean for dollar . If we look at what President Trump does and says, i dont know whether we can be sure he is biting or barking but not writing. Do you not biting. Do you expect them to take action if they think china and the europeans are manipulating . Derek i think that is a great question. The question of whether or not trump is talking or acting is critical, and its lines across a lot of the things the u. S. Is doing. It is too early to say with certainty what the president is going to do, but right now it is talk. We have to look and see what the fed does at its next meeting. We have to see if the dots are signaled that there will be more easing, if the president winds up being mollified by that sort of thing. We will have to see where these talks with china go, whether the trade deficit starts to come down. There is a lot left to play out before we say there is a trade war, however this is donald trump. He can do things that surprise you. Some of the attention the market has no, it is a fourth of july holiday, but the attention the market has is not misplaced. You never know when bark turns into bite. Francine thank you so much, derek, and thank you for wearing a bowtie because i feel much more at home. Derek happy Independence Day. Francine happy Independence Day to me. Joining us on set in london is neil shearing. We will talk about currency wars and trade and many other things. When you look at what the pboc is doing, what china has been argue it is difficult to they have been manipulating the yuan. It is not going the way the u. S. Wanted to go, but can they be blamed . Neil neil i dont think they can. China is trying to prevent the renminbi from weakening by pushing it lower. Beijing is slightly concerned if the can see does currency weakens, itcurrency will increase pressure on the currency and they will lose control. For sensible reasons, they are prevent the currency from losing control. Willit reach francine it reach seven and what will happen if it reaches seven . It feels like such a big deal. Neil the key thing is it is highly psychological. My sense is they will try to do everything they can to prevent hitting that level while there is a trade truce going on. While there is still some sense in signs they might make progress on trade talks, i think they will do everything they can to draw a line on the currency and prevent it from weakening. If those talks sour, there is no breakthrough, it is clear that some of the more intractable issues around tech and industrial strategy will not be resolved, one contemplates it will be a weaker currency over the next six to 12 months. Francine is the u. S. Dollar overvalued . Neil if you look at the Macro Economic metrics, overvalued is a strong way of putting it, but it is certainly not cheap. I would say it is a bit overvalued. The current account deficit is not as big as it was in 2008. Trump, all ofat this, the tendency of the dollar ,o react to how trump tweets appreciates, as soon as he tweets about other countries manipulating currency he sets in certainty sot to he inadvertently strengthens the dollar. Francine will it weaken a week from now . Neil i think the bond market on balance, if we are at the global can weekend we weakened, that props up the dollar for the next six to 12 months. Thinkhe next six years, i it will be weaker. Francine coming up, japanification comes to europe what some 13 trillion of bonds yielding less than zero. Where next for the debt markets . This is bloomberg. This is bloomberg surveillance. Francine lacqua in london, tom keene off for the fourth of july holiday. Focus on bonds, investors say eating easy writing policies are breeding a world of low yields. Yields drop below zero for the first time. Japanification as defined by negative yields is worse in europe then japan itself. Dani burger has more. We have bets that low inflation will continue. There is a 13 trillion stockpile of negative yielding debt, most of it from europe. When we look at the numbers, japan has the largest absolute bio with about 6 trillion worth, but when we take it as a percentage of total Investment Grade debt, switzerland, germany, and finland have higher percentages. Bonds,zerland, 50 year the yield is basically at zerob. Yieldslds bund heading alltime lows. If you want to buy any positive yielding debt, you are out of luck. Buty is only at 8 , trending the way of others as we see two year hit lows. The world is a 24 , but trending upwards. 11 ,18, it hit a low of now the hopes of synchronized growth have largely disappeared and that stock bio, a quarter of investment great dad grade debt is negative yielding. Francine joining us from amsterdam and neil shearing is still with us. Thank you both. I dont know what to do with this negative yield. How much lower can yields in europe go . Tom our expectation is for yields to go even lower than they currently are. Ratepect an ecb interest cut this year and next year. Although it is below zero, there is no lower bound spread. A lot of tightening has been priced into the bank market. In, a bitt is priced like we saw preannouncement with cs bp. The market is pricing in further stimulus from the ecb. Francine what does it tell us . Is this a lost decade for europe . Tom not necessarily. It is trying to push for inflation, so the biggest worry is bank profitability. The comments that the ecb will work out a way as further Interest Rate cuts help out market profitability, our base case is not deteriorating. Homogenous bank sector like switzerland and japan. We could look at other t ltro options but in the end, you can get growth and inflation and life does not have to be impacted so negatively. Francine do you agree . What we should do is separate out the cyclical from the structural. The cyclical move over the last six months has been a collapse in yields. The bond market is worry about growth and worried about disinflation and deflation. We think the central bank will have to act and that has been behind the drop in yields. I think it is justified. There is potential spillover consequences for that. Stagek we get into the where if yields fall much further, at will create more problems than it helps. And it is a structural issue, why we are in a world where we have struggled and gone through an Economic Cycle where yields have struggled to get into positive territory. That takes you back to the secular stagnation argument. If we look 10 years out, i suspect we will get a rebound in yields, but in the next 12 months i expect the risk further to the downside. Francine thank you both. U. S. Jobs tomorrows report could make the case for the fed to hold off on Interest Rate cuts or to take drastic action. More on what is at stake for the fed, next. This is bloomberg. This is bloomberg surveillance. Francine lacqua in london, tom keene off. U. S. Stock and bond markets closed what the government offices, but tomorrow could see volatility with the jobs report. The forecast anticipates a rebound from the dismal 75,000 increase in may. Neil shearing and tom kimmonth are still with us. What needs to happen for treasuries to go lower . They were 1. 15 yesterday yields. Tom we continue to see rhetoric that there is currency manipulation going on, if Interest Rate cuts followthrough we will continue to see rates drop in the u. S. Our biggest worry is with the u. S. Dropping rates, sterling suffering, europe is struggling on that front and that is one of the reasons why the Interest Rate cuts is more far currency perspective rather than inflation perspective. Francine how does that change with the u. S. Jobs report . What kind of a print we need for the fed not to cut . Tom i think it will be hard for them not to cut now, after the signaling that has been done. They need to follow through with a small cut regardless of the jobs report. Francine do you agree . Neil i think he is right. It will be difficult for them not to cut and july. I think there is still some softening of language in july and then we have jackson hole in august and september, but the key is, are we in a phase where there are three 25 basis point rate cuts or is something more systemic going on . Francine does it matter to the markets that it is 87 priced in . Are the markets too short . Neil i think it might be. I think they are more likely to cut the not, but my point is more cut down not, but my ot, but my point is are we in a cycle that cuts,es two or three rate or is there a bigger Recession Risk and a harder landing down the line . Francine is there too much bullying or conviction on the markets . Are the markets trying to dictate to the fed what they want them to do . Tom it is a tough one, because the Central Banks come out and speak the rhetoric of trying to estimate where we will go. 50 basis points was the expectation, then 25 was priced in. We see generally that Central Banks will do speeches and try to make the market more aware of what is going on so when it occurs, they can forecast it easier. It has been signaled that a bigger cut will come shortly. It is more about how long the cycle will be and in the shortterm, we see the cut coming. How will that impact growth . It is definitely now how many cuts rather than when will the first occur. Francine what is your take on when you see inflation coming back . We had a great conversation with loretta mester, president of the cleveland fed, who said inflation will come back. She was against a cut last time. Tom we think inflation should still be strong, compared to other regions where inflation is a worry. The u. S. Has a lot of ammunition. Issuing a austria is 100 year bond at 1 . It shows the difference the u. S. Has any ability to cut quite a lot. The impact on the Banking Sector will be nothing like we see in europe indicates we will get to inflation, it is just when. Francine tom kimmonth and neil shearing stay with us. Talking about the pound. One of the most accurate forecasters projects the currency will rebound. We will talk about Boris Johnson and brexit next. This is bloomberg. Most of us dont know how much data we use, but we all know were paying too much for it. Enter xfinity mobile. Americas best lte with the most wifi hotspots, combined for the first time. When youre near an xfinity hotspot, youre connected to wifi, saving on data. When youre not, you pay for data by the gig. Use a little, pay a little. Use a lot, just switch to unlimited. Get 400 back when you buy the new lg g8. Call, visit or click today. Francine this is bloomberg surveillance. Tom keene has the fourth of july holiday. I am not sure whether he is cooking or watching fireworks. I am Francine Lacqua in london. Lets get to bloomberg first word news. Sebastian trade talks between the u. S. And china resumed by telephone. Larry kudlow says the two sides will schedule facetoface meetings. They agreed to start negotiations last week. Trump said he would hold off on imposing additional tariffs. The battle over whether to ask a citizen question on the u. S. Sense and has resumed. The Trump Administration said was dropping the matter and now the Justice Department is looking for ways to include the question. The number one destination for expats in switzerland. It was judged the best place to live and work with top marks for earnings potential. Singapore was the runnerup. Jets are set for the flyover as part of the celebration on the National Mall in washington. The president will speak from the steps of the Lincoln Memorial. Critics say he is turning it into a campaign rally. 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. Im Sebastian Salek and this is bloomberg. Francine thank you so much. Prime minister theresa may will call in her successor to protect the union and warns a no deal brexit risks splitting up the u. K. , and hinted she could join the conservative rebels in the house of commons. This comes as tory leadership contenders prepare for an event in scotland tomorrow. We are joined by Emma Ross Thomas and neil shearing is still with us. If we think about it for a second, this is a Prime Minister who has been charged from dutch in charge for many years, saying and charge for many years, deal no deal is better than a bad deal and it seems like every politician in power says something different. Emma they may start out that way, but when she got her deal she said, this is a good deal, the only deal that is on the table. There was a shift when parliament voted against no deal and at that point, may started to come out with the argument that no deal posed a threat to the union. That is what we will hear later today. Scotland voted against brexit. That would bring the argument of acai current scottish referent a second Scottish Referendum and a question over the irish border. May has not said she will join the rebels but she has hinted she will fight a no deal outcome. Forquestion is going to be, all these conservative rebels, when push comes to shove, when all the other tricks to Parliament Fail and they have the only tool they have left is to bring down the government with a vote of noconfidence, which could be the only way to bring a no deal, will somebody like theresa may bring down the government and usher in Jeremy Corbyn . That is another question. Francine is it a done deal for Boris Johnson . If he comes into power he may want a general election. Emma it is not a done deal. The ballots are going out this weekend. Who is voting, 160,000 conservative Party Members who do not reflect the population. Francine older. Emma older and more male, overwhelmingly pro brexit and pro no deal. Francine Boris Johnson is there guy. Emma presumably. We have seen front runner stumble before, but certainly he is the front runner. Jeremy hunt has been toughening his brexit rhetoric and he started off saying that no deal would be political suicide and the tories would lose. He is now saying he would set a deadline of september 30 and if he did not see signs the e. U. Was willing to compromise, he would put the country on no deal footing. There has been a shift in his rhetoric presumably in a bid to win the vote. Francine how many options do we have . A general election . Neil if there is only three, it will be easy. If there are 103, it will be easy. If you look through the Boris Johnson lens of the world, the problem with negotiations, she took no deal off the table too quickly. Brussels always knew that at the end of the day, that ultimate threat of we will pull out with no deal was taken off the table too quickly. He is clearly going to keep that on the table as long as possible. I think that remains a credible threat. Will the commons vote to stop that, including three general election . What is the brexit party doing in the polls . The latest polls suggest they do not have a majority but could be the Largest Party in parliament. Fundamentally, there is three ways this goes no deal, some form of a deal if not on october. 1, some form of mays deal vote this through and we can save the tory party and the union, or there is a general election. Those are the three ways we are heading. Francine if there is a general election, labour polling in 18 . What does that mean . Emma that is an argument for having a general election but the brexit party is doing well. He saw what happened in the european elections. A general election is a massive gamble. Francine what do the lib dems do . Emma they did rather well in the european election. Not particularly favor them in a general election, but if there was it would become in a way a referendum on brexit. One cannot rule out that after a general election you might, the situation of another referendum. It is still ambiguous what they think about a second referendum, and labour said yesterday by the time of recess in july, they intend to have a definitive position on the second referendum, another factor in the mix as we go into a possible general election. Francine what will it do to pound . And the pound will ebb flow throughout these negotiations. It would not surprise me, as long as we afford some sort of avoid some sort of no deal, the pound will go up. Continues to have a structurally weaker pound, and along with the brexit noise, it would not surprise me if we get a bounce over the next three to six months if we afford a no deal avoid a no deal. Poundwhat happens to the and a no deal . Neil i think it will weaken. It is a lot weaker now than it was at the time of the referendum in 2016. You could make the case the thed needs to be weaker and brexit referendum was the trigger for it to adjust. Fundamentally, the pound does not look weak but not overvalued. We should expect the same size of adjustment back then. Francine thank you both, emma russ thomas, neil shearing. A move by the Nigerian Central Bank to ramp up growth, more on that in a moment. This is bloomberg. This is bloomberg surveillance. Happy fourth of july. , where theto Nigeria Central Bank has set a minimum of a loan to deposit ratio for commercial banks. To furtherattempt stimulate the economy as they recover from the 2014 oil crash. What does that mean for the sector . This could have a big impact on the sector, and some of the biggest banks have to deposit ratios of less than 60 , so if this goes ahead as announced yesterday by the central bank, they will have to up their lending substantially. Some of the main banks in nigeria have seen shares fall today, guarantee trust bank, zenith bank, two of the main ones. They are down today. They and other banks have made substantial profits buying Nigerian Government bonds that yield about 14 . If they are restricted from buying these, they will have to go into riskier lending to businesses, which some analysts say could cause nonperforming loans to rise. Francine basically, the banks got a letter saying these measures are designed to ramp up growth. Will they have an impact . Paul they argue it wouldnt. The central bank has long complained, and the governor has said the banks sit on these juicy yielding tbills and government bonds and do not do enough lending to the economy, which is growing slowly at about 2 , quite a bit low the rate of population growth. They have not fully recovered m the 2014 price and oil crashed in oil prices. Government bonds are a lot safer for them and safer for the Financial System if they do that then massively increase their loan books and start lending to Small Businesses at rates of 20 , 25 . Francine run us through that. 11 , son is running out the banks are saying they do not want to lend much because this could engender a financial crisis. What is the probability of that happening . Paul we will have to see. There could be some pushback from banks. There might be some fudging of the numbers that they end up hitting the ratio, which the central bank has said they need to do by the end of september. We have not heard anything from the banks or the banking association, so we do not know what their formal reaction will be. The central bank has presented complit. Ait de they are just saying this is what happened and the banks have no choice but to go ahead with this. Francine paul, thank you so much for this reporting. Paul wallace covers nigeria. Thats get back to neil shearing. We talked about treasuries and the fed. A dovish fed is a gift to emerging markets. What happens to emerging markets in 3, 4, five years . Help if thea loosening policy with the u. S. Is growing. If the fed is loosening policy because it is concerned about the direction of the u. S. Economy, a possible downturn and recession, that creates a different backdrop. We are in a goldilocks period for emerging markets, where the fed has been indicating they will be dovish, yields are coming down. Bond yields across the world are coming down, but we are not seeing growth slow in earnest. If that starts to change, the picture could sour substantially. Francine if the dollar weakens, that could be a help. Neil the question is will the dollar weaken from here if we go into a world where the Global Economy is slowing . Normally that means a stronger dollar. Francine thank you so much for joining us, neil shearing. Close and tmobile could their 26. 5 billion dollar merger as early as next week. What the u. S. Justice Department Requires for their final blessing, we will discuss that. This is bloomberg. Best day of the year. 3, 2 [applause] francine ourcine do not miss that, boston pops extravaganza tonight. July ing the fourth of washington happens every year but almost never includes president ial speeches. President trump do Independence Day differently. On the agenda, a military celebration with banks, a speech at the military tanks, a speech at the Lincoln Memorial, and military jet flyovers. Protesters have a permit to display an inflatable baby version of the president. The event the president wanted to hold for veterans day was estimated at more than 21 million. How are americans celebrating with their meals . 74 Million People will be barbecuing. Hotdogs, 750illion Million Pounds of chicken, 100 90 Million Pounds of beef, and an estimated 5 of u. S. Annual beer consumption happens this holiday weekend. That is the fourth of july by numbers. Lets get straight to the Bloomberg Business flash. Sebastian the u. S. Justice department is on them on the verge of approving the tmobile and sprint merger. The Justice Department wants to get enough concessions that dish can become a competitor. A german Lighting Firm received a 3. 8 billion dollar takeover offer. The board will meet to vote on the agreement. They issued their sixth prophet warning. Profit last year they scrapped a planned ipo in two years ago they rejected an offer to buy the company at up to 15 billion. That is the Bloomberg Business flash. Francine earlier on, sebastian was talking about tmobile and sprint nearer to this antitrust approval for its 26. 5 billion merger. More as ourith media and telecom leader. This feels like a big deal. They tried it before, and they could get approval next week. Rebecca it is a major hurdle. They have the fcc approval already and we expect the doj approval next week. They are close to an agreement centered around the conditions being set up for a strong fourth competitor to be created with dish. This is the third attempt with sprint and tmobile to merge they are almost there. Francine why is it different . Rebecca theyre being willing to create a fourth competitor anticompetitive concerns. They are setting that up. They cannot give so much a way that it reduces the synergies with their own deal to merge. One key point to mention is this is not the final hurdle. We will not see executives at Deutsche Telekom popping champagne. They still face lawsuits from state attorneys general worried about competition. That will come to a head in october when they hear the case of the state attorneys general. What this hurdle next week will give them as a seal of approval from the Justice Department, which could help them build a case to counter the state attorneys general. Francine if it goes to plan and these lawsuits do not come to anything, they will be able to drink champagne and celebrate november, december . Rebecca you know how these Court Hearings go. I am not sure how long it will drag on, but they will start in october. Francine does this merger make sense . Rebecca that is a great question. The companies, need to combine their forces to offer the coverage needed to power things like remote surgery and driverless cars. That would be their argument and i think investors buy it. Francine i am looking at telecoms in the media space in europe. What am i looking out for . Or trade spat with huawei mergers and consolidations . Rebecca Deutsche Telekom is the biggest european carrier by some metrics. They are looking to the u. S. For growth. What you see in europe is very little growth in revenue. No one is talking about crossborder mergers. No one sees it making sense. Huawei has been a big topic of conversation as to whether it will be allowed to play an Important Role in the u. K. , germany, france markets. Francine the regulators have not been following in trumps footsteps and have been careful criticizing huawei. Rebecca we have seen potential restrictions. They have left the door open for restrictions as needed, so they want to vet the equipment and make sure it is up to snuff and the security requirements are ok. In the u. K. , we have yet to hear a final decision but they might limit huawei from the most critical core of the network. That would open up business for huawei. All of the u. K. Carriers are planning to use huawei on their rollout. Penty there. Ecca coming up, do not miss more coverage of the boston pops fireworks spectacular. The extravaganza starts at 8 00 a. M. Tonight new york time. This is bloomberg. Wanna take your xfi to the next level . Now you can with xfi advantage. Giving you enhanced performance and protection. When devices are connected to your homes wifi, theyre protected. Helping keep outsiders from getting inside. And if someone tries, well let you know. So you can stream, surf and game all you want, with confidence you can get coverage where you need it most. Thats xfi advantage. Make your xfi even better. Upgrade today. Call, click or visit a store. Anchor european stocks in u. S. Futures tread water on this fourth of july low volume trading. 1400 asks above investors wait for u. S. Jobs data. Core inflation, global yields continued their downward slide. What Inflation Expectations and weak data mean for central bank policy. And crude awakening. Tensions linger in the middle as forcesltar in gibraltar sees a tanker. We break down everything impacting oil and Energy Prices this hour. Welcome to a special edition of Bloomberg Markets on this thursday, fourth of july. Im anna edwards here in london. Markets closed in the u. S. , but over here in europe, heres a data check