Transcripts For BLOOMBERG Bloomberg Surveillance 20240714

Manipulator. China has been taking steps to shore up the movement. Stocks in europe flat. They were lower early on. Scene to be stabling. Less of aa little bit move then yesterday. Excellence. En par view ofp, we get the Anthony Scaramucci. We will ask him about markets and the Trump Administration at 5 30 p. M. London time. The new york city, here is viviana hurtado. Viviana the yield on benchmark 10 year treasuries falling earlier to a level not seen since before the 2016 president ial election. Recession signals flashing. The spread between threemonth bills and the 10 year yield has seen the most extreme inversion since the lead up to the 2008 crisis. Donald trump delivering his most forceful condemnation of racism and White Supremacy following the Mass Shootings over the weekend that killed more than 30 people. The president did not call for new restrictions on gun ownership, instead blaming the attack on Mental Illness, video games and other cultural depictions of violence. We must recognize the internet has provided a dangerous avenue to radicalize disturbed minds and perform demented acts. We must shine light on the Dark Recesses of the internet and stop mass murders before they start. Viviana High School Classmates arehe dayton, ohio gunman wondering how he was able to own a gun. They say he was suspended for compiling a kill list and a rape list. Police say there was nothing in his background that would have prevented him from buying the gun he used. China reiterating as the Financial Hub of hong kong cleans up following chaos and violence. China wont tolerate violent protests. Priorityong kongs top is to punish criminals and restore order. The wealthiest 500 people on earth, 2 of collective net worth as u. S. Stocks plunged the most this year on a slave trade tensions. This year on trade war tensions. Jeff bezos is still worth 110 billion. 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 viviana hurtado, this is bloomberg. Francine thank you. 110 million. Im trying to figure out how many countries gdp is less than that. I will figure it out. Currency manipulator. Yuan broke through seven against the dollar. Steps to slown the dissent. To prove it does not manipulate currency, it is giving moves to better markets. Battered markets. Thank you for both, for joining us. China will let it go to seven. What was it actually . Was it a fire call . Trying to antagonize . Put a stop to the antagonizing u. S. . Theyat could below seven, have been signaling for quite a few months. The former po bc governor has signaled that. Depreciate. We think there is longterm depreciation in the currency. Seven,ket took a below they have basically given up trying to appease the u. S. In the negotiations so it is a political move. That is letting the market take its course. Francine they did not manipulate it but it is quite a powerful signal. That suggests we wont get a big improvement to the situation anytime soon but this is an obvious response from the chinese. They have been preparing the ground for some time. They need the macroeconomics. Retaliation that works for them. It is well targeted at the u. S. Stock market, which they are trying to hit trump where it hurts. Francine how did they take a label . Miranda they denied it. They limited capital outflows. That has been trying to keep it above seven, not below. Into wees negotiations are moving beyond appeasing to a much more antagonistic relationship. Difficult tore find a way back out of here. The u. S. Is not going to back down. We had the xitrump meeting in june so what brings it back to a normal relationship . Francine do you see the u. S. Backing down . Is this President Trump calculating he can win the election if he starts to deal right before the election . Is it him really wanting a better deal from china or trying to force jay powell to cut rates . Rupert all of those things. Put is a longthat way away on both sides. Trump still needs a Strong Economy and stock market going into next year, he also needs to look tough on china. I dont know whether he would prefer to go into the election with a deal or with time shins or with tensions with china so he can look tough. Tolerate significant outflows. Both are sufficiently far away. Francine what does china do next . Miranda that probably keeps the currency about this level. Significant further depreciation, they are much limited in that, because they have to control it around this level. It depends what other measures are taken. Investment going into china is limited or measures like the japanese and korean firms where purchases of the u. S. Companies are more limited because that is where china could hit the u. S. On trade, it does not have any more options on the tariffs side. What does this mean for markets . Rupert the former designation is more important politically than specific next steps. We have got widescale tariffs from the u. S. This would have been more important 18 months ago as a precursor. We already have tariffs. Has e chinese broken the chinese currency is broken the seven level, they need to show they can control it. The cost now is much lower that they have breached that threshold. Francine do you agree . Miranda yes. Longerterm, you have more flexibility to adjust. You have depreciation versus lower trade surplus, lower inflows. The only thing keeping the overall balances Capital Market inflows. If you have much more of a neutral balance payment situation, youre not having that constant inflow support. You do haveome, longterm or depreciation pressures. Day. Ine the chart of the this brings it back to early 2018. Hong kong falling for the 10th they. Breaking news. 10th day. Is this a buying opportunity . Rupert the ripples from this have further to propagate throughout markets in the global economy. We will see the impact reflected in the next month or so. We have been expecting a gradual bottoming and slow pickup and the Global Manufacturing, global trade indicators that have been so weak. This could put in that. It may be early to step in. I dont think this is a situation where you want to go defensive. Stepping in now is brave. The newly married queen of charts is looking at this china currency manipulation label. Miranda and rupert, both staying with us. Heres a look what you should be watching this week. Later today, the st. Louis fed president speaks to the National Press club in washington, then disney reports earnings after markets today and tomorrow, commerzbank ceo after results reporting. We hear from uber, expected to post a big loss. Watch out for gdp on friday. More on that, next. This is bloomberg. Francine economics, finance, politics. This is bloomberg surveillance, in a rather rainy london. Im Francine Lacqua. Here is viviana hurtado. Ackman asello, bill the Pershing Square boosts for new investments. He decided to sell his United States rather than fight the takeover of raytheon. In june, he vowed to oppose the deal. A massive new deal taking on wall street. The private equity firm agreed to provide 1. 8 billion of Debt Financing to support new media investments. The deal would bring usa today and more than 200 other publications under the same roof. The loan by apollo is one of the biggest ever arranged outside of wall street. New payoff prompting Heathrow Airport staff to suspend their strike. Unionoposal was made to a representing thousands of ground staff. The labor group will have a vote and hold off on plans for a walk out. Jumping into the resort business. Than 800cost more million to build. The projects in the Dominican Republic and mexico are designed to help marriott stay competitive. Francine four former Federal Reserve chiefs are making a plea for fed independence. They commented on trumps recent attacks on the Central Banks. Guests onback to our the trade war. In ada and rupert, are we currency war globally . The sense that Everyone Wants a weaker currency. You have the u. S. , for macro reasons. Eurozone, boj, deftly going to fight a stronger yen. In the u. K. , we dont need much help for a weaker currency at the moment. Global macro weakness and trade tensions, no one wants to be the rising currency. That is where a lot of the risk stems from. Francine are we in a, does it matter if we have a currency war or is it a race to the bottom . Miranda they could turn uglier. China is using it to offset impact of tariffs. They depreciated 10 to offset tariffs last year, probably go down to maximum 12. 5 , which would set the 25 on the extra 300 billion. Limited trade war from china targeting tariffs. It is not actually in their interest to have a massively depreciating currency, because then you get capital outflows. That is far more destabilizing to a domestic economy then what is happening with tariffs. China is targeted. Once it offsets the current effect, it is not any race to the bottom that some of the other countries may be. Francine given what we saw in the last couple days, will we see a weaker dollar . Depends ont entirely the different forces driving. Yields driving dollar lower, expectations of dovish policy. Risk aversion flows make the dollar stronger. At the moment, they are roughly in balance. I would not expect another big move unless we get a strong risk off response in which case the dollar will rise. Francine what does it mean for periphery economies to china . We are focusing so much on chinau. S. What does it mean for vietnam, sri lanka . Impact ishe currency always negative for surrounding countries. Then you have this, the other aspect of the trade war is these countries are benefiting. Youre seeing a lot of companies now shifting production, and it is actually quite difficult to get factory space in vietnam now because the trade war has gone on so much that you are actually seeing all the Companies Shifting supply chains out of china, taking investment elsewhere. That has a knock on effect. Euroine is the role of changing . If you look at the stress, it seems to indicate possible euro strength. Does it change characteristics . Rupert it has become more of a risk off currency. Depreciations are not as strong as the dollar relationship. There is a little risk. We will continue to be in a narrowband for eurodollar. The macro fundamentals are similar enough. Policy expectations are not different enough. From the euro side, policymakers eak to euro that is too w prod the american bear and see if donald trump back with the threats he has lined up. Francine a little news from hong kong. The Hong Kong Police, live pictures from hong kong, have arrested 148 people yesterday. That was one of the biggest days of protests. Live pictures with Stephen Engle on the ground. To globalo go back trades, we have been trying to figure out whether chinese money goes into europe as the fight rages with the u. S. It is not as simple as that. Miranda you are seeing different elements. The trades of europe and other Asian Countries has improved. This realignment of flows and investment flows. In the last year, you have seen European Investments in china go up 75 . People have to check that number. Hang on. Surely it cannot be that big. China has loosened Foreign Ownership restrictions. U. S. Investment has plummeted by 20 . The european side going in, Japanese Companies investing in china and the u. S. Is in danger of potentially being isolated on that aspect. Youre getting other countries cooperating at the same time as the u. S. Is trying to throw wrenches into the Global Supply chains. Francine thank you. Coming up, china urges hong kong citizens to stand up to protesters. We bring you the latest live from the region. This is bloomberg. Francine dont underestimate beijing. Chinas message to protesters in hong kong. They arrested 148 people in hong kong yesterday. We also have the longest losing streak since 1984. Stephen engle is watching develop ands. Developments. Stephen a little sharper, more sinister tone. It is like a parrot who warns you once, then the second time it gets sterner. That is what came up from the Affairs Office in beijing. Up until last monday, this office had not given a press conference the entire time since 1997 and the handover. We have now had two in eight days. The warning was start. Chaoticg cannot be Going Forward, this has gone beyond the scope of freedom of assembly. The defacing of the national emblem, they said radical elements will have to face justice someday in the future for their shameless acts. Similar message but with a little bit sharper tone. Francine we are out of time but what is probability of armed forces from china being sent to hong kong . Is,hen the big takeaway after repeated questions about the possibility of the People Liberations Army coming in, he said Hong Kong Police are fully capable of restoring order in hong kong. That could alleviate fears that the pla is ready to come in. Francine thanks so much. Coming up, Boris Johnson and brexit. This is bloomberg. Francine markets roiled with u. S. Equities dropping the most , the trade war with china rages on. Ohio fall asian and european stocks take a beating. Do not underestimate beijing, that is what china is saying. Good afternoon if you are watching from asia. This is bloomberg surveillance. I am Francine Lacqua in london. 6 ,ivendi is up more than they are in euros. Fiat executive says Fiat Chrysler renault merger could still be possible with gains in renault. Metro ag is down 6 . One billionaires quest for this company is up against a roadblock was shareholders withholding their backing. It looks like it is taking a backseat. Francine thank you. Lets get to the first word news in new york city with viviana hurtado. Chana china is denying it is manipulate currency, the hoursbank of china after the u. S. Labeled the country a currency manipulator. President trump says beijing dropping the price of its currency is a major violation. For former Federal Reserve chiefs are making a joint plea for centralbank independence. Janet yellen, ben bernanke, alan greenspan, paul volcker commenting on President Trumps latest comment on the central bank and say the fed and its chairman must be able to act independently and free from the threat of removal or the motion for political reasons. President trump delivering his most forceful condemnation of racism and White Supremacy following the Mass Shootings over the weekend that killed more than 30 people but the president did not call for new restrictions on gun ownership. He blamed the attacks on Mental Illness and cultural depictions of violence. It has been six weeks since he took his first historic steps into north korea and spoke with kim jongun and they appear on the verge of collapse with north korea threatening to take what i called a new road in negotiations if washington does not compromise. This was after north korea conducted its fourth short range missile test in two weeks. President trump pressuring nicolas maduro, freezing venezuelas assets in the u. S. And adding immigration restrictions, the move putting venezuela on the same footing as countries such as north korea and iran that the u. S. Has tried to manipulate and isolate. 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. The u. K. And opponents of Boris Johnsons threat of a no deal them. Have plans to stop Jeremy Corbyn has signaled he will call a vote of noconfidence soon after parliament returns on september 3. Fellow lawmaker says conservatives will turn against Boris Johnson with his deadline for leaving approaches and he says in no deal Rupert Harrison with us from blackrock with unique insight into the conservative partys former chief of staff to the u. K. Chancellor of the exchequer. First of all, when you look at Boris Johnson and his team, do we think he really wants a no deal or this is a 3d chess game . Be willinghe would to go through with no deal if that was necessary, i do not think that is his first choice and i think he is telling the truth when saying he wants a deal and the strategy is clearly to set up no deal as a credible option and hope it leads to movement on the other side from the iversen europeans in a way that allows Orest Johnson to go through parliament, that is the preferred outcome. We need to tackle the assumption some people have on the european side that parliament will definitely prevent a no deal, i do not think that is a good assumption, 5050 at best. Francine what is a constitutional crisis look like . Boris johnson says the policy is a no deal or he would not say anything . Rupert it already is government policy. If there is no deal, the possibility of either legislation by parliament to constrain the government or a noconfidence vote. In either situation it is not clear that can be binding on government in time to prevent no deal at the end of october. The only way parliament can be absolutely sure of preventing in no deal is if it legislates and takes control and legislates in a way to force the government to revoke article 50 been put for no deal but the problem for that is for conservatives that may be too far. Francine lets assume that Boris Johnson wants to stay in power and here is a general election in the next eight months, what does he need to do to win . Rupert the majority is only one. We have to assume election by next summer. To win the election Boris Johnson needs to neutralize the brexit party, the biggest threat, not because the brexit party themselves whirlwind a lot of seed but they take enough votes away from conservatives in key seats and give them to liberal democrats or Labour Party Mps to take the majority away. Jeremy corbyn has many more coalition and alliance partners. He needs to be rock solid on brexit. If he is forced to an election this side of brexit, that is risky because he will take an extreme position to try to neutralize the brexit party and would much rather have an election once he delivers brexit , even if it means going over the edge of a no deal. Francine what is the possibility of a no deal brexit and the effect of Market Participants . But i hard to be precise say there are three outcomes with an equal probability, a probability of no deal, a probability he pull something off and gets a deal through lastminute come and a third probably parliament succeeds in preventing no deal in which case you have a decision from number 10 about whether an election or another referendum. Francine you would not be buying u. K. Assets . We look at lower bond heels. , thet four u. K. Assets news flow is unlikely to get better in the next month. Neither side is feeling sufficient pain to change course and not close enough to deadline for anyone to back down and we are left with negative on u. K. Assets, particularly currency. The range of outcomes we are facing is very wide. Francine if there is a no deal brexit, what does the bank of england do, doesnt have to cut rates and hike them because the inflation a couple weeks afterwards . Rupert they will be in stimulus mode. There is a concern it is a supply shock and demand shock and therefore inflationary. Go back to 2011, 2012, the bank of england look to high risk of inflation caused by a competition of currency and oil to support the economy and i think we would see that similar focus on stimulus initially. Francine well the picture of nbc change depending on the governor . We do not talk about that a lot anymore. That has been thrown wide open as we have had other names thrown in the mix, including pro brexit economists. I do not think anybody knows Boris Johnsons mind on this outside of a small number. I do not think that will significantly change the path of Monetary Policy and the mpc has strong minded individuals who will vote the way they want to vote and not constrained by wanting to show support for the governor and possibly new governor is outvoted in his or her first meeting if they take a different line. Not a change in direction from Monetary Policy but i think it is a potentially a change of direction for how the bank of england handle some of the positioning and response to the no deal process if that happens. Francine if you are a market participant, maybe foreign market participant, what do you look for into Boris Johnsons policy . It seems to be he seems to be campaigning across the country, do we wait . Rupert unlikely to see any significant developers during august. The first thing is parliament will come back for a couple of weeks in september before the Party Conference season and we moresee then a little bit information about how willing and able parliament is to take the steps necessary to prevent no deal. On the negotiations side, i would not expect any change of position from the u. K. Government or the europeans until we are well into october because there this is a game of chicken and neither side has been said to be the first to break. Francine Rupert Harrison from blackrock stays with us and italys de facto leader wins a key vote in parliament and we will bring you the latest live from rome. That is coming up next and this is bloomberg. Francine this is bloomberg surveillance. I am Francine Lacqua in london. Lets get to the Bloomberg Business flash. Stakein talks to sell 10 vivendi in talks to sell timber since they that stephanie Take Two Interactive is still reaping the reward from grand theft auto, the 22yearold video game franchise gets credit for helping their results Beat Estimates in the latest quarter with the game company boosting its forecast for the year hours after President Donald Trump criticized what he called grizzly video games. Luxury retailer barneys new for filing early today bankruptcy protection with rising that fewer visitors to its boutiques have squeezed the chain, it has been trying to avert that grabs the by finding a partner or a buyer everett bankruptcy by finding a partner or a buyer a bird bankruptcy a bird bankruptcy tingesvinis ,etween him and the fivestar the senior partner in the coalitions. Lets get more on this with our italian reporter. How likely is it that italy will face an early election or a government crisis in the next three months . Good morning, francine. Parliament and the government had entered summer mode. For a few weeks we should be quiet. Matteo salvini is headed for the hurdle, and the biggest has been clear for the government. Be different in september when talks between fivestar and the league will resume over the budget for next year which is likely to be a major source of clashes. Overall, does he still have a say over the budget or will he try to stay in power and given to what Matteo Salvini wants . Meio will try to show he is fighting hard and having a say that after the results of the elections in may the biggest decision from the budget will be , hisg Matteo Salvini biggest pledges to cut taxes and wants a flat tax. We will see a clash between the league, Matteo Salvini, their plans, and the european union. It is not clear what Matteo Salvini is thinking and he may decide if demaio pushes back to hard he will try to break the government seeking new elections. The Prime Minister is also a member of fivestar, he is siding with demaio. He is the Prime Minister and does have a say. Francine thank you to our italian reporter talking about politics. Lets get back to Rupert Harrison of blackrock. Buns for the tenure, places like italy . Rupert nice to talk about italy as an oasis of calm but there is a problem with the budget looming and the political situation is unstable when you had the league with this huge advantage, a temptation for Matteo Salvini to capitalize with an election and form a different kind of government that he has more control governt that he has more control of. Italys economy will benefit in the second half of the year from this relaxing of financial conditions we have had. Yesterday,he pmi revisions of for italy and we could see the Italian Economy come back. Ncine how difficult is it they the league is going hard on immigration but not clear what they would do in terms of reforms . Rupert i do not think expectations are low and you need to keep up the popularity, immigration being the key issue to do that, particularly enough of a conflict with europe on the budget to cement his position as standing up for italy against this unfair restrictions but will not want to push that immediately into crisis mode and undo economic gains. Francine are italian banks still a bargain . Rupert there is sometime a shortterm trade and i would be hard pushed to recommend it as a longterm investment. Francine report harrison from blackrock stays with us. We are seeing a little bit of a recovery in the markets. 500 atook at the s p what is happening in europe. U. S. Futures are rising. I am looking at what we saw so far. We did have hong kong and the pboc saying that the daily currency fixing is stronger than the fed expected and a sale in hong kong helping to shore up a little bit the flight we got yesterday and the central bank rejecting accusations it manipulates the you on. Yuan. This is bloomberg. The kurds immediately label is probably another form of escalation. Label iscy manipulator probably another form of escalation. Because china is not intervening. Like a chess game at this point and how china has been curbtime being tried to some yuan weakness. If they cannot respond in kind, i think we see is possibly a shot across the bow. They have shown they are willing to play with the seven level and the market does not have a firm grip on how far the currency could go. Francine that was the reaction of some of our guest to the u. S. Labeling china a currency manipulator and china reiterated support for carrie lam after a general strike with traffic chaos and mob violence and says hong kongs top priority is punishing criminals and restore order. Rupert harrison is there with us from blackrock. We do not know how it ends. I do not know how the markets will take it. Rupert a significant risk but it should be on par with the one breaking through seven as a risk for market because the potential of escalation is severe and that brings into the scope of the retaliation by the u. S. And the rest of the road if the u. S. Steps up steps of intervention in hong kong. Theave clear signals from chinese that civil disorder is potentially enough of a justification for them to take further actions, even if we do not get the military going we could get the police going in from the mainland which is a risky situation. Francine what you qualify as a geoPolitical Risk and doesnt automatically mean more stimulus from Central Banks . Rupert all of this means more stimulus from the Central Banks, donald trump is listening to the chair says global uncertainty and trade tensions and he is thinking, you deliver the loosening. The proximity to other risks in the region and if you get significant escalation in hong kong there has to be a response on the rest of the will and the u. S. Could raise tensions with taiwan and we have had north korea using this opportunity to say, you have so many plates spinning maybe we will try to gain ground by raising tensions on that front. This is a combustible combination. Francine what will the response from the west look like . Rupert sanctions and potential escalations the u. S. And others in relation to taiwan and the status of hong kong legally. This becomes a range of options with different pieces that could be moved around on both sides. Francine talk about the probability of President Trump putting tariffs on carmakers or going after german, europe . Rupert a reception in the middle of the year was normalization of tariffs is a tool of policy must raise the risk premium all around the world, not just by u. S. China but the mexico threat and now the japanese from korean interaction with tariffs. We have to put a high probability on this u. S. European digits escalating again, particularly around auto tariffs. Donald trump thinks this is working for him and you think there would be at risk coming down the line. Francine can you fight back . Rupert it will be difficult as europe is constrained to fight back through normal channels or want to be seen using wto and other routes. It can fight back with targeted tariffs and limited escalation but the european economy is very vulnerable and will want to take the heat out of this as much as possible. Francine thank you for joining us, Rupert Harrison of blackrock. Bloomberg surveillance continues in the next hour with a little bit of a reversal when it comes to some of these stocks. Early morning, the clear downside when it came to asian stocks but now futures are indicating in the u. S. A little bit of a reversal and in europe stocks are able to bit mixed with china moving to stabilize its currency easing some market turmoil. Advancing, a week long rally taking it about 12,000 for the first time in three weeks. More on the markets and on politics as we talk to Anthony Scaramucci later on. This is bloomberg. At comcast, we didnt build the nations largest gigspeed network just to make businesses run faster. We built it to help them go beyond. Because beyond risk. Welcome to the neighborhood, guys. There is reward. Beyond work and life. Who else could he be . There is the moment. Beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. Take your business beyond. Francine margaret roiled with u. S. Equities dropping the most this year after President Trump brands china a currency manipulator. Whilerompts up the yuan asian and european stocks take a breather. Do not underestimate beijing, chinas warning to hong kong protesters as it doubles down in support of carrie lam. This is bloomberg surveillance. Good afternoon if you are watching from asia, francine and tom from london and asia london and york. A lot of Market Movement as participants expecting Central Banks to intervene and we will see what President Trump and president xi jinping do next. Tom 9 00 p. M. New york time last night china steps in and fixes the new level around seven but in a much stronger level than what was expected, a rebound to be stability this morning we see. Onncine we will have more the market moves but lets get to the bloomberg first word news in new york city with viviana hurtado. China is asking to limit the yuan lunch after the u. S. Labeled in a currency make a with the central bank manipulator. It announced the sale of yuan denominated bonds in hong kong both helping to drive the offshore yuan higher and the Trump Administration action seen as a major escalation of the trade war. Goldman sachs expects the Federal Reserve to cut rates three times this year. In a revised outlook they cited rising trade tensions between the u. S. And china and the prospect of a hard brexit. The bank no longer expects a trade deal before the 2020 president ial election. China has made some of his strongest comments yet on the hong kong protests with beijing urging hong kong citizen to stand up against protesters challenging the government and officials described demonstrators as a small group of unscrupulous and violent criminals and they predict efforts to get hong kong leaders carrie lam to robot resign would fail. In the u. K. , opponents of Boris Johnsons threat of a no deal brexit are heartening their plan to stop them with Opposition Labor Party leader Jeremy Corbyn signaling he will call a vote of noconfidence next month with rebel conservative lawmakers saying more conservatives will turn against johnson. 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. Tom thank you. We have to the data and a terrific lineup of guests over the next five hours to frame exactly what we observed yesterday and where we are moving forward. Right now you have a big doubts in the market with dow futures up 193. This happened on 9 00 p. M. Last night when china set the renminbi as they do often, said it in a more stronger level than the gloom expected. The curve has steepened a little bit, to me the single most important data point over the last 48 hours. Euro is 1. 12. 60 a barrel and 1 brent crude under 60 a barrel at one point. The story to me is the german yield did not really move yesterday. The new low yields globally catch up with a big negative yields in germany. The dollar index, not nearly as gloomy as people would think an renminbi at 7. 04. Francine renminbi is the one we are watching for and looking at bitcoin. Around 12,000. When i, things smoother came in this morning with stocks mixed and u. S. Futures rising. Becauseselloff china fixed it yuan exchange at stronger and selling off a little bit and im looking at yen, always a litmus test with risk. Tom we really need a Historical Perspective of where china is. We will do a paul krugman mmr later, the history of 2005, fixed renminbi, the first climb 2008,leveling in 2009, the stability after the financial crisis and stronger yuan and the great weakening we have seen any new leg up, just above 7 yuan, getting us back to dollaryuan level. Forcine worst single day the stocks in 2018 since 2018. We go back to the very day, what does it mean for markets now that china has made a desperate named a currency manipulator. Now that china has been named as a currency new glitter. Is now currency manipulator. That is the title the u. S. The stowed upon china after the yuan broke against the dollar and beijing is taking steps in response to slow the yuan to send. Descend. D thank you for joining us. Our stocks oversold . Is it time to buy . We want to wake of the the longer, just wait a little bit longer. Wait a little bit longer. to hi we are still cautious. Francine what are you expecting in terms of the dollar to the end of the year . Weaker because of President Trump and the trade war . Soat least we can hope because the longer the u. S. Dollar stay strong the bigger will be the pressure on the fed to take measures to take down the dollar, in particular if the u. S. Has declared china to be a currency manipulator. They are not happy with the level of the west dollars and we expect they will find measures to find the bring the u. S. Dollar down. Tom what about leakages . Chinau. S. , u. S. China, chinau. S. , there are massive leakages within the Foreign Exchange market. What is the pear we should watch away from dollar renminbi . Clearly safe havens, dollaryen, but also the swiss asia fx market because of the drop off in renminbi we expect asian currencies to be under tremendous depreciation pressure and remain for some time as long as the trade war is unsolved. Tom when you look at the discussions of the last 48 hours and the carnage in the market, our politicians aware of the second and third order knock on effects . May be aware but they may not be interested because the focus now is on the u. S. And china politicians and they have a lot to lose. The Political Trust is destroyed and i do not think they will focus on the global impact. For Central Banks, that is something they have to look at. Tom Daniel Morris, yesterday, the vanilla to send spread in the United States, like a cocktail conversation, barely moved. What we saw yesterday was a bond back on economic slowdown. How much will that slow down the . Fare do not think so significant, much more about the impact on sentiment and how it plays for equity markets. Otherwise, if you get the 10 imposed on the rest of chinese imports we do not think it will have a meeting impact on u. S. Economic growth and should not change the trajectory from that point of view. It is the path from the fed and will be now be going from two hikes to three hikes this year, something we had put aside one week ago. Francine what does it mean for nowkets now has china that china has been named a currency manipulator, are we in a trade war . Not yet, china has avoided at in the renminbi weaker our opinion that is surprising because they do not want to much depreciation pressure on the they want stability at to signal they have control over the currency. The danger is that speculation about u. S. Dollar intervention increases and when we have that there are Central Banks globally who may think that they could also gain something from weakening their currencies. The danger has increased. Tom let us continue. We will look at the equity markets in the next hour with Christopher Brown seeing what the around seeing as former treasury secretary of the United States Lawrence Summers out with a scathing assessment comparing the carnage yesterday back to 2009. Larry summers in the 8 00 hour. This is bloomberg. The currency manipulator label is another form of escalation. To come up with u. S. Treasury and who argued that the manipulation is because china is not intervening as opposed to the past when they use to intervene is rich. It is a chess game and how china as we know has been over time been trying to curb some of the yuan weakness. China cannot respond symmetrically in kind. I think what we see is possibly a shot across the bow. They have shown they are willing to play with the seven level and the market does not have a firm grip on how far the currency could go. Reaction from was our guests to the u. S. China on the u. S. Labeling china a currency manipulator. At President Trump and his administration bringing up the heat on china, why do we think he is doing this . Ratesce the fed to lower or get a better deal from china, or to get reelected . I think it is all of those things and he sees himself as having time before the reelection pressure really comes at him. When it comes closer he will want to demonstrate he has a deal but he is playing the politics of escalate, escalate, look tough and he is failing to read the signals that china is not backing down and not responding how he wants it to to these escalating measures. He is not reading american domestic reactions accurately because the perception is beginning to be that the president is taking the u. S. Down a tricky path and it is not paying off economically. Francine i feel like we are that heder the metrics measures his success five, is a stock market, how much is based likes it . The stock market matters a huge amount for this president and the agricultural move is interesting because that part of the population has been critical to, states important to him, that may lead him to rethink his current game. But he has some time before he needs to demonstrate he wants a deal but if it hits growth we will see some changes. Tom lets talk to somebody with a nobel prize in international economics. This is Paul Krugmans wheelhouse. The news flow has been extraordinary. A little bit dated over the last 24 hours. China is clearly signaling it is not canada or mexico, it is too big and too proud to submit to what it considers bullying with china a major currency minute later seven or eight years ago but these days if anything it is supporting its currency above the level it would be at if it were freely floating we may have to wait for a new president to clean up this mess. That would be a new president of the United States. Leslie, translate the International Relations definition of what a currency manipulator is . Out, i didfigured it not know 10 years ago or 20 years ago until clinton came up with this phrase. It is interesting because the reaction has been quite a let a surprise from those who are following this closely within the u. S. It is seen as a very dirty work and a nasty term, a bad form of Economic Management and a significant label to apply, highly symbolic and deeply political. It is perceived as ratcheting up tom what is the so what of it . , maybe chinae imf has to sit in the timeout chair at the imf. I have had a lot of emails, what does it actually mean . It does not have a hard meeting you are looking for meaning you are looking for but it is signaling to china after donald trump the American Public and his base to china that this president will not back down. Go back to what paul krugman said, china is too proud, canada and mexico are very proud of what they do not have that china does have is the scale and Economic Significance for not only the United States but for much of the rest of the world. It is a signal. Tom i like what john wrote in and ourbout the flows need to have china by our marginal debt. Buy our marginal debt. Speaks with later the former White House Communications director Anthony Scaramucci and we will have lots of market coverage. This is bloomberg. This is bloomberg surveillance. Vivendi is in talks to sell 10 in universal music to tencent, a deal that would value the Worlds Largest music business has a. 6 billion, tencent oneyear option to double that stake at the same price and vivendi plans to find other partners to buy more minority stakes. Wall street bonuses will take a bonuses the trade for equities traders could fall as much as 15 from a year earlier with the fixed income counterpart could see a 10 drop. Luxury retailer Barneys New York filing for bankruptcy protection with rising rents and fewer visitors to its boutiques have squeezed the chain. They have been tried to upper avert bankruptcy by finding a buyer or partner. Tom i want to show you the market. I want to recalibrate after we have seen since the fed meeting. Dow, this is a correction in bear market charts and here is the carnage of december and the slope of december and the correction of april was ever so slight. The sudden plummet. It is truly a plummet over the last number of days. We are halfway to a correction and we will see how we do with the stability. Dana morris of bnp paribas Daniel Morris at b. N. P. Paribas. What have you changed in the last 24 hours in your market calls . The question we have been asking ourselves, if we look at the u. S. Economy, you saw what still is steady growth, very good corporate profits. The results for the Second Quarter earnings season and that was quite high. Does your outlook change because of the last couple of days . No. The most part things have clearly changed and much about sentiment as economic drivers. Tom what is the bet on the street . How exposed people have been over the last three and for days . One thing to take comfort when you look at how much the equity markets could correct, we have had outflows from equities for most of this year and not like people have a massively long equities will because by surprised by all of this. From that point of view the market from positioning is relatively supportive. It is more what we think about the outlook and how much does the receding prospect of a trade deal with china affect your valuations . Francine what does dollars do from here . To thehave two sides trade, tariffs strengthen the dollar, what they are doing in terms of the currency pairs. Depreciated 10 , as much as the tariffs have gone up. ,ou expect the fed to cut more should weaken the dollar and finding the balance and we are more on the dollar weakness side. Francine leslie, we were talking during the break, does the president s i tax on the fed and the way he does diplomacy, does it change the way he was operates . There is a serious concern with respect to the fed and a number of other of americas core institutions, whether the federal courts, whether the way the president is playing politics on institutional independence will have a lasting effect. I am optimistic in the mediumterm, i think it is very hard to undermine longstanding norms but the significance of the threat is not something we can take for granted. Francine will the president s attacks on the fed and independence change anything longerterm . Visit changing anything now . That is the key question, why did the fed cut 45 basis points, because they are worried about growth or inflation or because donald trump wants them to do that . Who knows what Jerome Powell dreams about at night. The justification is about inflation and a bit about growth as opposed to political pressure but we do not know what the longerterm implications will be. Francine plenty more on the fed policy and dollar dynamics. Leslie and daniel both stay with us. China urges hong kong citizens to stand up to protesters, next, the latest from the region. Stocks are mixed with u. S. Futures still rising and the yuan advancing. We will talk about bitcoin shortly. Bitcoin up taking it above 12,000 for the first time in three weeks. This is bloomberg. 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. Francine lacqua in london, tom keene in new york. What you need to know, bounce and the markets. Nightas 9 00 p. M. Last when the chinese set the renminbi at a stronger level than what many market disciplines expected. Does a cat bounce . Upures up 28 and dow futures 240 points, curve steepening. Francine officials from china are urging hong kong citizens to stand up to protesters challenging the government. Force carrie lams resignation will fail. The ms ci hong kong has fallen some 10 days straight, the longest losing streak since 1984. , we have all watched the briefing and saw and heard what beijing said and we were reefed by the chief of police in hong kong briefed by the chief of police in hong kong. Is china going to send in armed forces to deal with the escalating protests . Enda it was a harsh message from the press conference. Certainly in terms of security, they made the point that police are able to get a grip on the anuation but it will remain openended discussion what happens next. Both sides seem to be digging in. Office and liaison the protesters standing by their own demand. There is no minimum middle ground and there was no hint of a compromise from the hong kong government. The rolling uncertainty is continuing to unnerve and play through the markets with similar impacts on the economy with no end in sight. Francine do we know how much of beijing is worried about hong kong or do they see it as a hong kong problem . Are they waiting to intervene . Enda i would say they have to be quite concerned. All indications are they are. Communication by the Liaison Office is unusual and they have been given twice in two weeks but have not given any since 1987. China is not the economic driver that it once was but it is a useful gateway of capital and a source of capital. Accounts china is still values hong kong. Whether this current round of protests can be resolved amicably, at will take some time before that comes clear. Tom the communist party in china watching is always a sport and that they are real noninformation. Who is ethereal noninformation. Who is calling the shots in the trumperms of tariffs and currency manipulation . Is it coming off of president xis desk . Enda i would not want to pretend to have the inside track. I think we can take, by all the signals from china, that the president is in control and has consolidated his power. When the pboc made the decision yesterday, it probably came from the top of the government. The indications are that china is getting harsher in its rhetoric and are signaling to the u. S. They are ready to fight back if necessary and they are not going to let trump run away with things. The music has turned turned sour. There is no sign of a nearterm circuit raker insight. Breaker i raker in n sight. Tom is there any understanding in the Hong Kong Press of what the next response from china will be . Enda they are probably quite happy to have sent a signal about the yuan weakening. Even if the fundamentals merit weakness, it was a deep appreciation rather than a devaluation. I dont think they will be too bothered by the currency manipulation tag. If thereoing forward is no resolution to the streets back and if the u. S. Implements additional tariffs, china will find ways to respond to make it more difficult for american businesses operating in china. Tom enda curran, our chief asia correspondent. Here is viviana hurtado. Viviana china is responding to a major escalation of the trade war by the u. S. The administration formally labeling china a currency manipulator. Beijing taking two steps to keep the yuan from plunging further. They plan to sell you on nominated bonds in hong kong. Fedfaa four former chiefs come together to make a plea to donald trump to quit threatening the current fed president. They wrote an oped in the wall street journal and affirm the fed and its chairman must be able to operate without political pressure. It has been six weeks since donald trump took his first steps into north korea to talk with kim jongun and talks with kim jongun verge on the threat of collapse. The warning coming less than an hour after north korea conducted its fourth shortrange missile test in two weeks. 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. Joiningrence summers bloomberg in the 8 00 hour. We are thrilled the former secretary of treasury will be with us after scathing tweets yesterday. Christopher verrone and Gina Martin Adams are scheduled to join us, Daniel Morris with us fromlso leslie benjamuri chatham house. I think you are advantaged by your distance from the insanity in washington. Do you look at what we have seen in the last 24 hours is a singularly trump policy or a white house policy . Leslie i think the white house policy is clearly driven by the president so it is a trump policy, and he keeps people around that are willing to back him. Currency manipulation avenue a el not having a great deal currency manipulation a label not having a great deal of impact in china. That, but all of china has to participate in playing tough. As krugman said, the bullying is not there. If china does not respond or just go radio silent, what does the president do . Leslie we are seeing, it looks like a titfortat managed escalation. The more recent move by china to control its currency suggests it is not all out war, but there is not a lot of backing down on either side so it is hard to see how this gets resolved in a way that is productive for the u. S. , china, or the world. Americas partners are largely this, thee stakes of u. K. Is significant. Difficult to see how anyone is having any influence on u. S. Policy. Francine let me ask about the u. S. Economy. If President Trump gets reelected he needs an economy that has not slowed down to a point where it is almost recessionary. The inverted yield curve is inverting ever more. Are we looking at impending recession . Daniel we do not think so. Inverted think the yield curve is a meaningful signal. We are looking at the labor payroll,onfarm unemployment, when they turn that is a good indicator of recession and we do not see any signals of that. We think the recovery can go on for quite a while. Francine it is difficult to find the words to talk about the massacres over the weekend. As President Trump going to be judged on gun control for 2020 . Will he be blamed . Leslie this is a tremendously tragic and traumatic time. Understatecult to the devastation people are feeling. This president and previous leaders have not successful on that question of gun control. Americans have not seen their president make gun control a key issue. Seeing this leader make a threat of a White Nationalist movement linked to access to guns, not really fully taking that on. I think that is going to continue to mobilize people. People are on the streets. People in ohio are saying to their leaders, we want something to happen now. Americans are tired of the gun violence. It is extraordinary and is not going away. The demand for a response is significant. Francine thank you, leslie. Daniel morris stays with us. We are looking at your markets on the back of china being called a currency manipulator by the u. S. Markets are stabilizing somewhat. European stocks and the yuan gaining. This is bloomberg. Titfortat as Leslie Vinjamuri just told us, a response from china is a fixed or banded Exchange Rate at a stronger level, a little bit of a rebound instability in the markets. Stability in the markets. President trump tweeting this morning. Daniel morris with us. When i was watching the carnage yesterday, i watched german yields, a knock on effect of europe. They are removed but they are not as well. Are we at a Tipping Point on the size of negative yields . Optimistic. Ave been if growth in the u. S. Were to slow down further, there is no reason treasury yields could not drop another 50 basis points so we are not there yet. We would have said that german yieldsng yields bund could never go negative. There are plenty of scenarios where you could see much more negative yields across the space of europe. Gamma,ts bring up the acceleration of yield. This is something Daniel Morris and the quant group know well. The 10 year space is extraordinary. What does that mean for Equity Investors when we see price up so much in this full faith and credit paper . Daniel now we think it is a risk off move which will be bad for risk assets. As long as that does not persist, should see a selloff in treasuries and a recover ultimately and equities, we think more about what has happened in treasury yields last year when we were 3. 75, how much of that move is driven by risk versusurance of growth disappointment and inflation. If it is the former, which is what you have heard from the fed, that has to be bad for equities because you need growth for equities to go up. If it is about disappointing inflation, that can be supportive for risk assets. We have a battle between these two factors driving Global Treasury yields and we will have to see which wins out. Francine my chart is much more simple but basically shows the yieldsing, bund and gilt hitting lows. Daniel we go back to the hunt for yield which occasionally we had said that strategy was over, we would normalize, and that keeps getting pushed off. Looking at emergingmarket debt and highyield debt as Pension Funds need to find some kind of income, but you ask yourself what is the risk for that return . Is it commensurate . You probably would say no but you do not feel that you have alternative. Francine what is your take on emerging markets . Daniel we are conscious on equities and you have seen soeads come in quite a bit there is some recent widening. Francine Daniel Morris stays with us. Jeremy corbyn signals he will bring about against the Prime Minister when parliament returns next month. Could a general election be around the corner . This is bloomberg surveillance. Ubs is finding a way to get more fees out of wealthy clients. They will charge individual than 560,000 worth of euros and cash. Banks are preparing for a longer than expected of lower Interest Rates that are putting pressure on margins. Intercontinental hotels is feeling the impact of the protest and hong kong and the china trade impact. Reporting a slowdown in business in china and saying first half revenue fell marginally in hong kong. As the demonstrations began, we did not see a Material Impact in hong kong but as they have grassed we have seen a slowdown progressed we have seen a slowdown in business. Goingill have an impact forward but it is a small portion of our overall business. Saidna intercontinental it would boost its dividends by 10 . Reaping theeractive rewards from grand theft auto, the 22yearold video came franchise results Beat Estimates. They boasted their forecast for this year, hours after donald trump criticized what he called games. That is the Bloomberg Business flash. Francine now to the u. K. And isours Jeremy Corbyn suggesting he will call a confidence vote when parliament returns. Has until loses, he september 18 to show he can command a majority in the commons. George rafael. Is if we get the main question out of the way, do we think Boris Johnson really wants no he does, does parliament have in a way of fighting back . Boris johnson is quite serious when he says he will take the u. K. Out without a deal. It is the only realistic option. Can parliament lock him . That is the 64,000 question. Mpsu ask one of the tory working so hard to stop they needed no deal brexit, he will say, yes, we can find a way. Jeremy corbyn signaled a noconfidence vote but we do not know if parliament can stop. The johnson government has suggested, good luck with that. We can leave without a deal before it would be possible to change the government. Francine if you have a working majority of one, lets assume we will have a general election. Is it in Boris Johnsons interest to do it with no deal or before . He is thinking of how to win against nigel farage or not get his votes taken away by him. Therese a vote is a different proposition than the election afterwards. It would be a defector referendum and the liberal democrats de facto referendum. Johnson will want to avoid that at all costs. He has said, we are not looking for an election. What he would probably like to do is lock in a general mandate after brexit because a majority of one, how will they get lost past in a finance bill for the budget . Desk and a finance bill for the budget . Before we see the pain of trade frictions and no deal kick in. Tom do you just assume that if he gets his wish, brexit will follow Prime Minister johnson, the brexit party will follow the Prime Minister . Therese if he gets his wish on a no deal exit, that would neutralize the brexit party. Entire rise to power is predicated on this idea that the conservatives are facing an existential crisis and the brexit party has parked their tank on conservative ground, and if they do not find a way to put andge back in his box deliver brexit, they are in trouble. Johnson is redefining the party to retract brexit party voters and economically in a more left wing operation. Tom what are you going to do at the office today . Daniel we are going to be looking at where are going to be the consequences of the increase in tariffs, as well as the losers. If you are a Consumer Discretionary exporter in china to the u. S. , you will lose, but if you are a competitor who can offer your goods at a discount, that will be an opportunity. You soniel morris, thank much for your wisdom this morning. Thank you to Leslie Vinjamuri lnd therese roth fail raphae joining us. We are thrilled to during bring you somebody with decades of spirit ins. Experience. Liz ann sonders, stay with us. Tom this morning, it is the most dangerous financial moment since 2009, so says Lawrence Summers. Secretary says china is manipulating their currency to harm the United States. Markets are stable. Yields lower but the curve is not flattened, signaling economic contraction. Gina martin adams and Christopher Verrone will not go to cash. Volcker, greenspan, bernanke, and yellen served six president s in say President Trump, leave chairman powell alone. This is bloomberg surveillance. Francine lacqua in london. An extraordinary market and we have a little bit of stability starting late last night u. S. Time. Francine the story definitely is on the market, so we saw a lot of mark should market fluctuation and downside yesterday. When the u. S. Said china was a currency manipulator they tried to shore up the yuan. Monetary policy comes into play. We could see a reversal so keep and i on the markets. Tom also on communication from the white house. Now, first word news. Viviana we begin with chinas attempt to limit the yuan plunge after the u. S. Labeled it a currency manipulator. It announced the sale of yuan dominated bonds denominated bonds in hong kong. Seenrump administration is as a major escalation of the trade war. Goldman sachs expects the fed to cut rates three times this year, citing rising trade tensions as well as the prospect of a hard brexit. They no longer expect a trade deal before the 2020 election. China making some of its comments yet on the hong kong protests, beijing urging hong kong citizens to stand up to the protesters, calling them a small group of scrupulous and violent criminals. Over to the u. K. Where opponents of Boris Johnsons threat of a no deal brexit are hardening their plans to stop him. Jeremy corbyn signaling he will call a vote of no confidence next month. More conservatives will turn against johnson. 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. Lets go to the data check and some charts to get started. Futures off the carnage of yesterday, around 9 00 p. M. Yesterday with chinas setting renminbi well. Brent was under 60 at one point yesterday and we have curve steepening. Out well at over 20 over 20. The yield in europe are something how they have not moved. There is renminbi at a 7. 03. Francine i am looking at a similar data point, because the market is ceasing to stabilize. Stabilizingsomewhat and yuan gaining. I am looking at japan as a litmus test. Tom lets look at the picture backmb nimby renminbi 40 years. Yuan ands, a stronger then a weaker yuan and down we go, we have breached the seven down to 2008. That is a snapshot of renminbi. On the equity markets with what we saw yesterday, we can give you perspective with christopher adams, and gina martin who has the courage to participate in this great goal market. Did anything change for you yesterday . Gina the technicals did break down substantially yesterday. You do not normally see a 3 correction amidst a healthy uptrend. We did have significant breakdowns. The correlations between what is happening with the chinese yuan and Global Stock Markets are off the charts, so there is sensitivity to trade, but fundamentally did anything change . I would have to say your outlook for growth is questioned more. We see a further decrease in our expectation for business investment, but the sources of stability are still there. Tom what is the thing that stands out in terms of support and resistance . Christopher we look for what conditions present themselves at lows, extremes in price and sentiment. We are starting to see both of those. There was a spike input calls yesterday. When you are in an uptrend, you tend to get good, viable opportunities. Tom are you deploying cash . Christopher the problem is the calendar. We need to get to midnovember. Francine if there is a correction and not a big take away, are you assuming the trade war does not escalate . Christopher no, but when we look at the chinese yuan breaking down, there are three big differences from today with august of 2015. The path of the fed is very different. It is important to know, currency reserves in china are more stable than they were three years ago. Internally, the u. S. Stock market is in better technical shape than it was august 2015. It is hard for us to get too bearish. Francine what does this mean for dollar . Are we looking at weaker dollar . Gina it depends what happens with global Central Banks Going Forward. You could see the ecb enter into this game and weaken the currency. The takeaway over the last two years is the Dollar Strength as a byproduct of the trade war. When we have this uncertainty, capital flows into the extreme defense currencies such as the butsie and japanese yen, generally the dollar is still benefiting from the global lack of risk tolerance and until the trade war is eliminated or the risks died down, the dollar is probably the default strength currency. Loves the longa term charts. What is the longterm bull market now . How close to critical support are we . Christopher we have to hold the june lows. That will be an important level. You do not want to go through the year making a lower low. Bold highlights is the biggest race. Base. Tom i am not a fan of value analysis. What did you see yesterday . Christopher we had capitulated of volume. Setting, the stock will go down, that was upwards of what we saw on the december lows. You have that indiscriminate cell yesterday. Tom on a log basis, the slopes we have seen as more aprilish. Sh than what is the positioning on the street . Christopher despite gina you havehe facts things like utilities and Consumer Staples and real estate stocks that continue to get a bid, became more and more expensive. The value cyclicals have been left for dead. Christopher i am going to add to that. When 10 year yields trade back at 1. 75, they are not aching new highs taking new highs. The markets you have expected to get paid in might not be rewarding you the way you expect. Tom francine has a question. Francine what does being called a currency manipulator mean for the market . Orthere something automatic is it more politics . Christopher that is more politics and headline risk. When you look at the headlines over the last 48 hours, it feels capitulated. It feels the type of dire bearishness you see toward trading lows. From a sentiment standpoint, the environment has flipped. When you look at where the excesses have been in this market, it has not and in the cyclically driven or low risk group. It was in the cyclical sector revolves vols. Francine gina . Gina i think it is very symbolic. It is very political. It opens the door for the u. S. To go to the regulatory bodies to try to implement strategies to force change in china, but that is a longtailed process. The announcement seems to have had some sort of overnight affect. I do not to suggest there is causation, but once the announcement came in, you saw china intervened to stabilize the yuan. I would suggest it is more symbolic and political than practical or impact of impactful. Tom we are going to come back and talk to our guests about this. Hsbc has been lights out on their bond call for three years come off the desk of steve major in london. Of thislished their end 1. 50 anddown to their 10 year germany. 80 . Those are extraordinarily odd numbers for a major house so we will talk about those kind of calls we are seeing in the market. Lawrence summers is really quite adamant there are elements of 2009 to what we saw yesterday, the former secretary of the treasury in the 8 00 hour. Bloomberg surveillance. We are going to turn to our chief washington correspondent kevin cirilli. The known world is waiting for the president to respond. Many people including paul krugman suggest the chinese will not be bullied. Expect use expect you from the president . Kevin the Exchange Stabilization fund within the Treasury Department would allow the treasury secretary to intervene into the currency markets. Cicely the what label of currency manipulation means, at large precisely the currency label of currency manipulation means, at largely is symbolic but it gives the United States the power to go after china in the trade negotiations. When will that happen . We do not know. The domestic politics surrounding President Trump are increasingly complex. This is not a republican and democrat issue. There is nuance on the right and left. Tom we know the president watches the stock year stock market. What does he do when he sees a day like yesterday . Kevin in terms of what his strategy will be, he is getting various advice within the administration on whether to continue onward with tariffs. The fluctuations in the stock market coupled with the ineffectiveness of tariffs at this point to yield a major breakthrough poses a significant Political Risk for the president into 2020, especially at a time where republicans are not necessarily united on the front of the president s negotiations with china and other countries around the world pertaining to trade. Francine the president ratcheted up the trade war to make sure the fed did the policy that he wanted. Kevin the fed has the president has been increasingly critical of chairman powell. The president was saying the was not as significant as he would have hoped and the president is going to continue onward. From the president s perspective , xi jinping has an arsenal President Trump not have, the pboc. Francine kevin cirilli, thank you so much. As theing must read former fed chiefs, paul volcker , ben bernanke, janet yellen we are united that the fed and chair must be permitted to act independently, free of shortterm political pressures and without threat of demotion of fed leaders for political reasons. I do not know whether that will add fuel to the fire. I heard fromine Market Participants today. Tom it is truly unprecedented and it goes back to 1951 and William Mcchesney martin up against harry truman, and it touches upon Richard Nixon and arthur burns. It was a moment in this debate yesterday when the wall street journal published that. Please stay with us. With ginaate cut martin adams and Christopher Verrone. This is bloomberg. Viviana this is bloomberg surveillance. Vivendi is in talks to sell a stake to tencent. Tencent has a oneyear year option to double that stake at the same price. Vivendi plans to find other partners to buy minority stakes. Wall street bonuses will take a hit this year. Bonuses for equities traders could fall as much as 15 from a year earlier. Fixed income counterparts could see a 10 drop. Barneys new york filing for bankruptcy protection. Rising rents and fewer visitors have squeezed the chain. Barneys has been trying to find a partner or a buyer. That is the Bloomberg Business flash. Tom extraordinary moment in the last few days, and now we see a major off hsbc who has been dead right about low yields. They go even lower. I want to go to the equity markets and what lower for longer yields mean. If we sustain sub 2 yields i have to flip the reciprocal which means value stocks should be trading with a 40, 50 multiple but that is not what is happening. Gina it depends on the equation of where is growth. Tom we did not see growth forecasted forward. Gina we did not see a rise in inflation expectation. That will increase interest and create an upward sloping curve for the first time in years, which is what we have been craving. You are seeing a persistent downward sloping curve, yields that go lower, and the result is the persistence of this growth and defensive trade where values lie in the real estate utility staples and technology. What is driving this longterm deflation pressure is advancement in technology. Of thepetrators disinflation are beneficiaries in the market. Tom pull all this mass and inertial force into what it means for trend. If you get long lower rates, what does it do to equity trends . ,hristopher the question is are they overdone in the short term . I would suspect they are. When you look at the spread between the 10 year yield and the three day moving average, these are the lows since 2016. Tom everybody is on board this trade . Christopher everybody is long bonds, short rates. Tom he mentions that 2 is the norm. Christopher we have to be careful of pressing the bet and the bet that people have pressed is lower bond yields. When he put this in context for stocks, does it reinforce the idea that there is little alternative to the groups you talked about, bonds or stocks that look like bonds are still very much in vogue. Francine you dont think that negative yields will become even more negative, is that right . Christopher in the shortterm term we have seen extremes and there is a lot of areas around the world i think bonds are one of them where i would be careful pressing the long side of the trade. The extremes you have seen in price and flow set us up for some type of a squeeze. Francine does that assume that qe will work in reversing disinflation . Christopher when you look at the message of gold, gold knows something about the future that we do not know. What does gold know about inflation . 1997, 1998,r to that there might be some inflation in our future several years in front of us. Tom Christopher Verrone and gina mark adams. We have a viewer and listener, one mohammed who says, welcome back. How could a buffoon like you take yesterday off . As my family could tell you, i was glued to the bloomberg on the cell phone for the entire day. Mohamed elerian, please call in. Francine lacqua in london, tom keene in new york, this is bloomberg. This is bloomberg surveillance. For the First Time Since the 1990s, the u. S. Treasury department has labeled china a currency manipulator after the currency weekend to more than seven per dollar. Steps,as since taken pledging it will not depreciate the currency to be competitive. To discuss more of this is enda curran. Oneshot thatof a they had to say, we mean business and do not want the u. S. Doing this because we will let the currency lose . Does it mean china will retaliate or cool off . Enda i think you are right, it certainly was a warning shot from china. Trade talks appear to have gone somewhat ok. There is talk of another meeting thatptember but the idea President Trump leading the rhetoric prompted china to respond with the currency. The move was a depreciation rather than a devaluation, but the symbolism of crossing the seven level was a warning shot that the china can respond if they want to. They could possibly let the currency slide further. It was an example of where things could go if we do not have a resumption of trade talks. Francine president xi is dealing with a lot. He has protests in hong kong and the trade war the u. S. What is he worried about most . Enda both issues really are quite entrenched. The hong kong issue, both sides are digging in, under no signs of a middle ground from either. Conferenceern press from the chinese authorities today, and protesters have reaffirmed their own demands. Is ae trade side, it different order of magnitude. It is a challenge to chinas ambition. Onna suggested and pinching its own sovereignty, impinging on its own sovereignty, some of the demands the u. S. Is making. When you consider the rhetoric, hard to see his circuit raker. These are two pressing issues for the Chinese Government that likely will not go away anytime in the mere term nearterm and will weigh on their economy. Tom is china alone or do they have a conversation with other pacific rim currencies about what to do . Enda the yuan is something of an anchor for emerging markets around the world. That depreciation would have unnerved their neighbors. We saw that in their currencies. They would say, we have to compete with china in price, do we have to deliberately weaken our currencies . China responded by stabilizing the yuan and that backs up that all they were doing is letting the market push it a little bit. The stabilization will be welcomed by emerging economies, and it will be critical to see if china stands by that Going Forward or lets the yuan we can materially. Weakenan materially materially. Tom thank you so much for staying late in your hong kong evening. With our first word news, here is viviana hurtado. Viviana chinas response to the major escalation in the trade war, the Trump Administration labeling china a currency manipulator. The move is seen as largely symbolic but beijing taking steps to make sure the yuan does not plunge further. They plan to sell the yuan denominated bonds in hong kong, helping drive the offshore yuan higher. Four former Federal Reserve chiefs have made a plea to donald trump to quit threatening the job of the Federal Reserve chairman. They wrote an oped in the wall street journal, affirming the fed and its chairman must operate without political pressure. It has been six weeks since donald trump took has historic first steps into north korea and talks appear on the verge of collapse. North korea says they will take another path if washington does not compromise. North korea conducted their fourth missile test in two weeks. Mass shootings have republicans. Oncerned s supporters warned republicans need to distance themselves from the nra. They are headed for extinction in the suburbs. 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. Tom i am pleased to announce that steven major of hsbc will join myself and jon ferro on Bloomberg Radio at 8 00. Single best chart with Christopher Verrone with a shard out to Gina Martin Adams, who has had shout out to Gina Martin Adams, who has had the courage to stay in the market. Ugly, andapril, may, here we are with a pullback. What is the difference . Christopher there are more stocks in uptrends today than 12 months ago. Tom up 13 year to date. Christopher we are correcting from a position of strength compared to 2018 where participation was waning. I am willing to view pullbacks as viable. Tom did you agree on a fundamental basis . Gina the pullback was a lot like may. It has different characteristics. It has been more vicious in a more rapid move in the yuan, but it looks like another gut check in the long term bull market. Deckwhat charts in your explain your optimism . Christopher when we look for what conditions show up at , you get bigws spikes in fear. 140 on the equity put call ratio. The fiveday day rate of exchange on the vix has basically doubled. You are seeing the expressions of fear that are at or near market lows. Tom i did not get a 30 vix yesterday, did i . Gina you got a pretty strong surge in vix, considering and may we did not go nearly that high. Francine something that tom picked up on social media yesterday, may be the new funding currency is euro. What euro is used for is changed. Christopher what is notable is usd has given back its postfed gains. You are below last tuesday or wednesday. Currency markets globally, the biggest outlier or biggest risk of a squeeze is sterling. You are approaching the 118, 119 1. 18, from early 17 1. 9 lows, from early 2017. Short sterling looks crowded and short euro has been crowded all year. Francine euro is a surplus funding currency . Christopher it certainly looks like that is a case, in a departure from the past. Tom you do not do you buyholdsell. The banks are completely unloved. How can they be loved given the low Interest Rate regime . Gina it is tough with the story of the last several years. When we look at our sect allocation sector allocation, the sectors that keep ranking at the top are the interest paying sectors. Tom the new york yankees. Gina the yankees in the market. The value cyclicals are toward the bottom and you need a catalyst to move them. That has to be a revival in inflation expectations. You have a shift in the yield curve that creates more optimism for these value centric sectors. Financials behaved better this summer than they have in some time, possibly because the fed started cutting Interest Rate. The fed dampened the optimism last week by suggesting this is not the first cut of many. Pushd the fed continue to toward more Interest Rate cuts, we might see optimism emerge and more rotation. Making, youents im need to wait for the catalyst to emerge before you get excited. Tom Christopher Verrone with us, Gina Martin Adams on bloomberg. Later, steven major will join us on Bloomberg Radio with his call for lower for longer rates. That dovetails with the stagnation Lawrence Summers has talked about, and the 8 00 hour. This is bloomberg. Tom bloomberg surveillance, Francine Lacqua in london, tom keene in new york. Stable markets off the chinese response in setting the renminbi. My team came to me and said, who is the one person you want to talk to who understands the fear and retail portfolios, in peoples portfolios . Schwab, lizcharles ann sonders has been here before and we are thrilled she could join us. What do you do the day after . Liz ann what we tend to do the day of at the close is put out a broad communication about our perspective on what happened during that day, and reinforcing the longerterm perspectives. We started to get a bit more cautious about two years ago and from a tactical Asset Allocation perspective, went to neutral across equity classes. We wanted to focus on large caps at the expense of small caps. We have had a defensive sector position as well. We have a message that this is late cycle and there are risks, and you do not want to sell everything and run for the hills, but this is not the time to take undue risk related to your longterm strategic allocation. We have positioned our investors for this market volatility and hopefully they stay disciplined. Tom John Templeton was one of the original Global Investors and i remember the crisis of 1987. Give us your update on the Global Investment world. Do you have to stay u. S. Centric . Liz ann we think correlations across Asset Classes and within Asset Classes have been coming down. We have exited this environment where all risk assets perform the same and lower risk assets perform the same. With a breakdown in correlations , diversification may pay some rewards. We are neutral across emerging markets, developed markets, u. S. Market, but you want diversification across those areas. We have a weak Global Growth story, 15 consecutive months of declining global pmi. We are in a Global Manufacturing recession if not an overall global recession, which looks increasingly likely the u. S. Will fall into that trap, more stridehe manufacturing side. The risk has clearly risen. Francine what does this mean for bond yields across the board . Will they go further into negative territory or lower for longer . Liz ann lets hope in the u. S. We dont go into negative territory. Trillion andt 13 change of negative yielding bonds and there has been chatter that the u. S. Will consider that. I dont think any place central bankers have experimented with negative yields has it been the elixir and hopefully we do not have to head down that path. You are looking at multiyear lows in the 10 year. Athink the 10 year bottomed 1. 35, but the fact that bond yields have continued to sink has kept the yield curve in inverted. Francine thank you for joining us, liz ann sonders. Here is a look at what else we can be watching for this week. The st. Louis fed president James Bullard speaks to the National Press club in washington. Disney reports earnings today. Tomorrow, we will speak with commerzbank. Thursday, we hear from uber. Watch out for u. K. Gdp on friday. More next, this is bloomberg. This is bloomberg surveillance. Ubs is finding a way to get more fees out of wealthy clients. They will charge wealth clients for holding more than 560,000 cash. ,000 euros worth of banks are preparing for a longer than expected spell of low or negative Interest Rates, which put pressure on banking margins. Intercontinental hotels feeling the impact of protests in hong kong and the u. S. China trade. First halfental says revenue fell marginally in hong kong. As the demonstrations began, we did not see any Material Impact but as they have progressed, we have seen a slowdown in some of the meetings, events, and business. That uncertainty will have an effect overall, but it is a small portion of our Global Business so hopefully those will be resolved in the near term. Woulda intercontinental boost its dividend by 10 . Take two interactive is still reaping the wards from grand theft auto. Helped taketwo Beat Estimates. Taketwo borst boosted its forecast this year, after donald trump criticized grisly videogames. That is the Bloomberg Business flash. Tom we are going to rip up the script with Gina Martin Adams, head of equities for Bloomberg Intelligence and paul sweeney will join us in the 9 00 hour. We were going to speak with disney but we have to go bigger and broader. You invented Bloomberg Intelligence with 300 employees. What did yesterday due to those employees . Paul that makes them go back to their models and revisit everything. The trade war seems to be here. If it is with us, it is not going away, and the multinational businesses need to rethink their models and assumptions. Tom the number of Conference Calls we have been on is too large to count. What does it do to those people on those Conference Calls . Ceos, chief technology officers, how do they change . Paul at looks like the uncertainty related to u. S. China trade and globally will be here longer than we thought. Your capital spending, research and development expenditures, do you build the new planned or not plant or not . Rightfully have some concerns. Francine if you are looking at disney or someone like that who is more of a Services Company in china, it does not really change anything, or does it . At does not change supply chains it does not change supply chains. Paul disney has made a big investment in china. Aboutuilt Shanghai Disney five years ago for 5 billion. They made a big investment in Mainland China and it has been a great investment. Bob iger and the other media moguls recognize china is a huge market. Disney has made a big investment with Shanghai Disney. Francine if you look at the tech companies, do the supply chains come back to where they were in china or do they benefit the satellite countries or neighboring countries . That to the extent companies can move operations and supply chains, they will. We are seeing that throughout the supply chain intact knology, goods in technology, goods that are sensitive to the tariff process. To the extent they are stuck, they are stuck, but most of the Global Supply chains are flexible and can be moved. To the extent that companies are moving, i think they will continue to do so and flee china. The ongoing risk will not and. The faster the companys move, the more benefit they get. It is more expensive in a time where earnings are suppressed, so it is damaging in the shortterm. It is for longterm gain. Francine is it that consumer goods that will feel the most pain . Gina money has been moving out of china for years. I think it is mostly technology. Techfic companies, specific to semiconductors in the early stages of the supply chain all the way through to phones. You see it in every segment of technology, especially semiconductors which are the most exposed and going through a massive inventory crunch. If it goes through to the end, consumer goods. Tom thank you so much for joining us so early on a tumultuous day. 2. 02 off thep bounce of yesterday. We have a lot to talk about in the frame of new lower yields. Jon ferro and i are thrilled that steven major will join us in the 8 00 hour. What jp morgants is talking about, lower yields for longer. Stay with us throughout the day. This is bloomberg. At comcast, we didnt build the nations largest gigspeed network just to make businesses run faster. We built it to help them go beyond. Because beyond risk. Welcome to the neighborhood, guys. There is reward. Beyond work and life. Who else could he be . There is the moment. Beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. Take your business beyond. The u. S. Strikes back. The u. S. Label china a currency been up you later a currency manipulator for the First Time Since 1994. Markets is taking a break from their selloff, the yuan fixing below seven, combing the currency market. And brace for more rate cuts. The fed may cut two more times this year. David welcome to bloomberg daybreak on this tuesday, august 6. There are so many extraordinary things going on. One of them is this letter from four former heads of the in the wall street journal. Alix all of them coming out and saying, we are united in conviction that the fed and its chair must be permitted to act independently in the best interests of the economy, free of political pressures and without the threat of removal or demotion of fed leader for political reasons