,fficials warning protesters stepping up its rhetoric on that front. David one of the interesting things is how any people are demonstrating. One recruiter one reporter said it is fewer people, but they are more violent. Nejra we have seen this. Everberate through the markets youre seeing u. S. Futures negative now. They were positive earlier. The 10 year yield dropped 10 basis points last week. We are down to a 1. 69 handle. Session backodays about 1500 an ounce. David the one clear winner is gold for the last week or two. Morning brief. E we get cpi data, followed by china retail sales numbers. We get german gdp numbers. Thursday it is u. S. Retail sales for last month, and walmart reports earnings. Friday, the u. S. Reports Housing Starts for the last month. It is time for the bloomberg first take. We are joined by Brooke Sullivan in new york and Kristine Aquino with nejra cehic. Lets start with argentinas shock, a big defeat for mr. Macri in the primaries that suggests he may not get reelected. Brooke a real surprise here. I think people were expecting macri and fernandez to get into a runup situation. Now he may be looking at a straight outright victory, which is a real change in expectations. There was a really interesting Bloomberg News story about how this is another election pollsters have gotten wrong. Are we reaching a port where you cant necessarily predict to the outcome . We just dont know how this is going to play out. Nejra if we do see an ugly monday for argentine assets, is this actually a possibility that it could change the way voters vote, and doesnt necessarily we will see a loss for macri . Would be onet possibility, but at least in the short term, the main concern for investors and voters in general would be how much damage is there going to be in argentine markets, and especially at a time this year, the summertime, liquidity is not that great, so it is a dangerous time for big moves in markets, especially for argentina. We will see how that impacts things moving forward. Nejra the imf david the imf came in with a big loan target. At appears that did not work out. So how will argentina perform within the imf framework . Ristine there certainly changes on the prospects of reform now that his future is in question. We seen the reaction in eurobond, and he wrote bond is not great and eurobond is not great. That gives you a sense of how investors are taking it. We will probably see more pronounced reaction when markets open during argentine hours. Nejra we could see Something Like a 25 drop in the peso. We also have a lot of different threads to this story over the weekend. One thing we are looking at is firms rely on revenue from china seeing their worst fiveday run since 2016. Last week it was all about you on fixing all about yuan fixing. Is it still about that this week . Was the focalyuan point last week, but investors have had time to take stock of where that relationship is. It will probably go back to stocks in terms of the reaction mechanism. What happens next to assets and were sentiment if or when the talks get canceled in september . We have a whole host of opinions there. Most reaction that investors are walking for. Are looking for. David it appears that instead of following what the fed is saying were doing, we are really following what President Trump and the pboc are saying. Brooke absolutely. It is interesting the pboc is willing to allow the slow down to continue at the current pace. If we start to see sharp deceleration, maybe you could see them step in. But for my world and what i cover, that tells me the turnaround in auto markets and Chinese Markets that some companies have been banking on in the second half of the year is not going to happen. You are seeing weakness in those sectors at the moment. David it feels like neither side is in a big rush, which takes us to our third story. People now are starting to talk about the recession word. We had Larry Summers on air last week talking about Goldman Sachs has a cloud now, including fears that the trade war will trigger a recession are growing. I will put up a chart that shows an indicator based on the three month10 year, the morning of recession. The risk is the highest it has been since the great financial crisis. That is really troubling. Brooke what i found interesting is they are not expecting a trade deal until after the november 2020 election. That echoed comments last week that people will sit on the sidelines as far as investment until after the election. Then using i do Start Talking about a then i think you do Start Talking about a recession. Can you come back from that at that point . I think that is. The question for me. That is the question for me. Nejra how bad can this get . The fact that we could have gotten to a point in negotiations were neither side will step back. Brooke in industrial markets where you have seen the most pronounced weakness, you have seen growth, but it is decelerating. The Third Quarter will be really telling. If we start to see a sharp turn, people will be very worried. But this has definitely shifted from could we start to see a rebound, could we see tariffs rescinded, to this could get a lot more painful. Weve seen a downturn in manufacturing that could actually move to services. That point, things could get ugly. Kristine absolutely. In a lot of ways, i think the Consumer Sector this year was being held up as the last beacon of hope for global economies since we started seeing a downturn in manufacturing. In some ways it is kind of bad when we start those return in the forms of layoffs and lower wages, weight cuts wage cuts and all of that, that will drive the point home that we are heading towards major downturn, something the bond markets have been learning about more and more and been increasingly aware of, it seems. David thank you both very much for being with us today. Coming up, forget the economy. Now it is all about trade, stupid. We talk with peter tchir, Academy Securities head of metric strategy head of microstrategy. This is bloomberg head of macro strategy. This is bloomberg. David the ups and downs of the trade dispute with china have people increasingly worried about a slowdown in the global economy, maybe even a recession. Goldman sachs saying in part, fears that the global trade war will cause a recession are growing. Joining us in new york is peter Academy Securities head of macro strategy. Is that something you are worried about . Little morenk a about market volatility. The president caught a lot of people by surprise when he retaliated against china. I think we will fuel a lot more volatility. David what about the risk of recession . We have various indicators, potentially the three month10 year curve, warning us. Peter we had put that off the table because we werent expecting a deal until q1 or q2 of next year, but now theres a real risk we see a slowdown. I do think it is a possibility that a lot of companies slowdown investment ahead of that. We have a lot of factors acting is headwinds right now. David does that mean nejra does that mean youre staying away from risk assets . Peter we want to be very cautious. You want to hedge your benchmark and be slightly short because we dont know what the next headline would be. I would be selling into the strength we had last weekend, and i want to keep selling. We have not been talking about as much this morning, but i think we havent even started our own retaliation on the fx wars. I think theres a lot more to be cautious about than optimistic right now. Nejra for some people, the yuan is more critical for treasuries this week then the data. Will you be watching the yuan fixing closely for the directionality . Peter definitely watching that. What we have not heard is what china plans to do with their own holdings of treasury. Do they use that as a weapon in the trade war . We talked about that last year. Maybe that comes back. I think fx is really key right now. The president had a meeting a couple of weeks ago on the way he valued the currency. Nervous about fx, and thats what i would be watching. David please stay with us. We want to turn to the question of u. S. Trade and where it is going. Friday, President Trump saying september talks may be delayed. The pboc sending signals to indicate it once a more stable yuan. We welcome now the National Foreign trade Council President and former Deputy Director general of wto. Should we take President Trumps admonition that we may not have any talks in september at all . Theres a big chance now that these might not happen. Like we are sort of digging the trench is deeper for a more sustained struggle. Real signs ofy potential breakthrough here in the shortterm. David what do you see from the chinese side . I think he thought he would make the chinese nervous. They are sure not showing it if they are. Talk to anybody in business, and they will say these tariffs are not good for anyone. Its going to slow down both economies. It hurts business, hurts investment, and creates big uncertainty in the marketplace. They thought if we pylon enough of this, the chinese will changeste and make yielding to u. S. Demands. I dont see evidence that that is working. The biggest is the notion that we could go it alone against china, impose enough pain on them while our economy was strong. The real problem is trying to do that without the support of the other Major Economies in the world. I dont think that strategy holds much promise. More likely, the chinese are going to start making deals with a lot of these other countries in the u. S. Is going to suffer. Nejra especially if china is willing to celebrate these having him the anniversary celebrate the 70th anniversary. They will want to show some strength. What probability do you put on any kind of meaningful deal before the november 2020 elections in the u. S. . Out thatwont take it far. I dont think theres much probability of a deal this year. Closer to an election, the Trump Administration might say, look, lets put together some kind of deal even if it wasnt a great one, and i can still sell that to my constituencies, but i wouldnt see that happening until probably the spring or summer of next year. He wont eve a lot of time for his opponents for looking into whats behind the deal. I think theres very little chance now that hes going to get everything hes expecting from the chinese, and hes going to have to make some compromises. That probably isnt a very exciting prospect for him. David we expect to get a specific list of what tariffs go on what goods today. The white house has said they think it is not going to hurt the u. S. Consumer. What does urinalysis say . These 300 billion dollars of imports they hadnt yet imposed were largely consumer goods, so i think this will have a medium impact on consumers, certainly retailers are very worried about it. My Retail Companies are extremely concerned that they cant swallow all of these price increases that the tariffs will impose. I think theres going to be some kind of consumer impact. The bigger danger is he decides to ramp it up further and go even higher. 10 would beyond significant pain. I think the bigger problem is the unmount is the amount of uncertainty out there for companies manufacturing in the u. S. , for exporters, for farmers. It doesnt look like they really see the end of the tunnel here. David its clear the president himself is the key person in this. At the same time, who around him . Is he listening to Bob Lighthizer, who you know well . Do we know what Bob Lighthizer thinks . Rufus i know he believed we had to take a firm stand against china, and that we had to be prepared to accept some pain. Whether he believes we are on a winning path now, i cant tell you. The president is his key advisor when he comes to trade. He firmly believes tariffs are a good thing theyre going to help justconomy, and that is not how business sees it at all and not how most markets see it. David thank you. That is rufus yerxa coming to us from washington. Coming up, barrick gold reports earnings in line with estimates. President andthe ceo, will be joining us next. This is bloomberg. David barrick gold releasing earnings this morning, boosting its fullyear production forecast. Joining us from toronto is mark bristow, barrick golds ceo. The main thing we are looking at is how much gold you can get out of the ground. You are at the upper end. Why . We did a joint deal in updated our forecasts. Generally, the business has done extremely well. Weve really come out of the tried tost and deliver. At midyear we are trading about 5. 4 4 million ounces. 5. 1256. Ance is weve got a second half with nevada being the tailwind. David you have a lot of restructuring going on at the same time. You have the acacia deal, buying out shareholders. That is a lot to chew up. Mark people were worried. Weve done that. Weve got very competent teams m. Oking after the those three teams have jelled well, and they are all making good progress. Im very happy with where we are today. David your continuing nejra your continuing to target 1. 5 billion dollars of asset sales next year. Will there be enough appetite in the market for those assets . Mark these are really valuable assets, and it is not a case of sticking up a for sale sign. We work without stakeholders, whether we work with our stakeholders, whether Company Partners or governments, and we hope to achieve that by next year. Nejra we seem gold performing very well with the concerns around the trade war. What sort of price are you targeting by the end of the year as we said above 1500 an ounce right now . Mark thats good for us, as you can imagine. We got very profitable business. Ive never been one who speculates on the gold price. We have a longterm price of 1200 in our plans. We are very happy where we are. Theres a lot of downward new goldons on supply in the market. Also, the gold industry itself as got to start producing the market it produces. So i am bullish on gold longterm. David talk about your capital investment. What is it going for, and would you be better off if you had invested more. Mark no, i think we are very well invested. If anything, we want to become more efficient with our sustaining capital. Weve got our biggest investment , pb in the dominican republic. It will take us to the 20 40s at around 800,000 ounces a year, and at the bottom half of the cost curve. We continue to invest in argentina. A lot of our investment is around field expansions, making sure we continue to use the minds that we have. David thank you for being here. That is mark bristow, barrick gold ceo. Hong kong markets drop as protesters shut down the airport. We will have more live from the airport in hong kong. Meantime, this is bloomberg. Nejra this is bloomberg daybreak. Yuan fixing today giving a bit of a lift to risk assets. Turning negative, the stoxx 600 giving up gains as much as 1 earlier. This as the unrest has been growing in hong kong. We hear from President Trump a september meeting might not be happening. We dropped 10 basis points last week. Still a bit of relief after basis points were down in the italian market. The dollar is weaker against the yen. Gold higher. Wti down more than 1 . David one place we are waiting for the markets to react is in argentina. President macri suffered a primary. Loss in the we welcome now bloombergs jonathan gilbert. It was stunning for us. Was it equally as surprising in argentina . Is a massive surprise. We were talking about perhaps a percentage difference of 7 to 8 for fernando, we are looking at nearly 16 points difference. David what do we expect the markets to be a protector for us . Jonathan carnage. We have stocks falling in predigits. We expect the peso to go double digits as well. That is really bad news for macri, especially because he will not get any more votes if the government doesnt back him through october. Of tvwith us, peter tchir securities. Of td the pollsters were sort of ahead of the polls. These weaknesses and negative surprises seem to be adding up. Nejra how high is the risk of default . Peter it is probably too early to say. I think countries can use that as a tool. Weve got to go through a lot more of the elections. Spike the headlines today on argentina, it is not the Biggest Issue facing Global Markets. David does this mean we want to explore emerging markets more broadly . Peter turkey is another country where there is a lot of political risk, but i think it is underwhelming how money people are considering that they are cozying up to russia. Im avoiding certain emerging markets. Turkey, to me, is a bigger problem than what we are seeing in argentina. Academyeter tchir of securities stays with us. Lets turn to italy. Byhave read today a standing. The deputy Prime Minister Matteo Salvini is on the campaign trail after calling for an election that would hand him a majority in parliament. Maria tadeo has been following this for us. An election could happen, but what sort of timing are looking at if it is highly possible . Air. it is all up in the i was with Matteo Salvini yesterday, whos very much on the campaign trail. He was taking pictures, shaking hands. He wants to win here in the south, an unlikely place for a man of the north, but salvini is and wants to get that majority. He told me he wants that vote to happen in october, but the final decision and tires. Ompletely on we could see the opposition toming together just stop Matteo Salvini having this election. We have some very strong incentives to get this election done quickly. Nejra that conversation between the democrats and fivestar movement in talks for a new government, how likely is that given that those parties have traded insults for years . It is very early days. Thatave one side of this seems like it could never happen, so the two sides of this story have traded insults, but anything could happen in the election. It is unclear whether this will happen. It is very early days. Idea as acribed his horror show. In italy thatment. E may have out, that would mean the official end for this administration. David thanks so much. Still with us in new york is peter tchir of Academy Securities. In thatall precipitated the yield is down five basis points. With all of their problems, it only cost 1. 75 to borrow 10 your money. Peter i think you are supposed ep twoe to buyl buy on that recent roundup. Draghi never had that power. I think we will get a slightly different mandate out of lagarde. You mights that mean be attracted to certain parts of europe based on that outlook for the ecb . Perhaps Corporate Credit among some of the risk assets . Peter i like the italian bond market. Corporate credit market i think is a little tight. I do like the Banking System there. I think the Banking System will benefit. I think thats going to be swingingty coming into into q4. Nejra would europe be one place you want to deploy money, or would you rather look at emerging markets . Peter i would stick more to europe. I think european banks are going to offer up some opportunities. Any perception that the ecb is going to be supportive ofs fiscal stimulus. Nejra peter tchir stays with us. Turning to hong kong, we started the show with the update on the turmoil. Authorities canceling flights after protesters swarmed the terminal building for the biggest disruption yet to the citys economy since demonstrations began in early june. Joining us from the hong kong airport is bloombergs yvonne man. Great to have you with us. Just give us an update of the latest because this is been an incredibly fast moving story, even today. Vyvonne we just heard that yvonne we just heard that they will try to resume these flights tomorrow morning. That screen you are seeing here with bright red, most if not all of the flights this evening have been canceled, so the earlier flights were able to fly out. In terms of incoming flights, we are still hearing that some flags are landing here in hong g come but things c signs have calmed down here. A much different scene from the violence we saw over the weekend. David it seems to be regular now, every weekend there will have been demonstrations. Is it Getting Better or worse, the same . Are there more people going to the streets . Less . Yvonne i would say there are less people showing up come up with these crowds are getting angrier. It seems at this point, the government tactics are working. They are going to wait for these to fizzle out and not offer any major concessions. The thing we have seen that is different is that things are getting a little bit more violent from both sides. We saw over the weekend protesters using these flash mobs as surrounding Police Headquarters sometimes petrol bombs as well. Police officers themselves getting more aggressive in their tactics, firing tear gas inside subway stations for the first time, and at some point we saw , imitatingrs as well some of these crowds of. Rotesters and arresting them and this one, they say they are seeing the signs of terrorism. Thank you. Still with us in new york is peter tchir of Academy Securities. This is having some effects on hong kong as a business place. Theres a hong kong etf, and people are taking their money out. One area weve liked is singapore real estate. We think that its going to be an interesting place globally as people look for a safe havens. I want to tie this back to what we were talking about for trade. We cant forget that we label. Hina china a currency manipulator. China is a strategic competitor. We are on bad terms with them on a lot of things. So we are really torn between what i think is bad for markets today and what might be good futureserm nejra u. S. Might be good longerterm. Nejra u. S. Futures are coming onto pressure. That shows how fragile sentiment is, and that is also demonstrated by the latestbulls bears latest bulls spread. Would you be looking to perhaps redeploy money into the u. S. Equity market at any point . Alix i think i want to wait peter i think i want to wait a bit. Thursday. I think youve got to play the ebbs and flows, see that theres got to be a little more washed out before we can kind of a firm base. Cash . Does that look like peter i think you want to have a little but of cash. As an individual investor, the one thing you should be doing is looking at your mortgages. Can you refi . Most of us have two sides of a personal Balance Sheet and think about what to do with our portfolio. The liability side is just important. If you signed two years ago you might be able to extend right now. What are you going to do on your liability side . I think you see a lot of corporations who at one point this year were concerned about what was going to happen with higher yields. How do we rebalance our deck . Good stuff comes out of this ultimately. Many thanks to peter tchir of Academy Securities. Great to have you with us. It is one of the most secretive families in the world and probably the richest. Live from new york, this is bloomberg. Viviana this is bloomberg daybreak. Coming up in the next hour, ubs Wealth Management global cio. This is bloomberg daybreak. Blackrocks private equity unit striking its first deal, spending to become the largest shareholder in authentic brands. The company manages brands and likenesses such as elvis presley, sports illustrated, and juicy couture. The deal is valued at more than 4 billion. The ceo of Swedish Company saab is leaving after almost a decade. He says he would like to face another operational challenge in his career. He plans to stay until theres another ceo. Soft shares have had an annualized return of almost 18 , beating industry peers. The boards at cbs and viacom working over the night to determine a price for their longawaited merger. The Media Companies were hoping to reach an agreement in time to announce a deal today. Viacoms ceo would lead the new company. Im Viviana Hurtado. Thats your Bloomberg Business flash. David of course, ive been watching cbsviacom, but ive been watching it forever. Its surprising it took this long to get it done. The question is, what do they do with the combined firm . We are now with cinelli bostick to cover 3 with asak to cover three things worth talking about. First, the deputy ceo of Natwest Holdings is the next choice of rbs. R and Saudi Crown Prince mohammad bin salman ons wealth is thought to been in the mohammad bin salmans wealth is thought to be in the billions of dollars. Will have happens, we the first woman to run a major london bank. Shes been there putting much since the beginning of her career. She is wellrespected by regulators, which matters because so much of the government still owns the bank. Remember, last year the cfo left for hsbc, which cleared more of a path for her to rise. David the cfo was trying to get down to the reserve bank of australia, but shes got a tough job ahead of her. Rbs has not had an easy time of it. Sonali it is not great. They did return to special dividends and profitability, but if you read the breaking news story today, it is pretty harsh. Its good that it is an insider, but they are pretty strapped for ways to grow from here on out. David one place it is not growing is jp morgan. They said earlier they would get out of new credit card business, but they forgave every run their credit card debt. David these stories are pretty hilarious. One consumer tried to pay his credit card bill and couldnt pay it. My other favorite one in usa today, one consumer said i stopped paying my bills five years ago. I feel like im being rewarded for being irresponsible. David why did they do it . Do we have any idea . Sonali we dont know, but chase looks like the good guy here. We dont know how much this is going to cost chase. Usually you would sell a business like this. David we are talking about it in a favorable ways, so maybe that is part of the benefit. Finally, this is fascinating thet the house of saud, family more generally, and how much they are worth. Sonali it is also amazingly conservative, this estimate. The writer used the monthly stipends paid from the house of the royals, and got to about 100 billion, which would make them the fourth richest family in the world. If you account for inflation or the price of oil, this might be over 1 trillion for the 15,000 family members. David nice work if you can get it. It is interesting thats mohammad bin salman on, when asked about this mohammad bin salman, when asked about this, said yes, im rich. Im not going to apologize for the fact that i have a lot of wealth. Sonali the whole world has been watching. There were incidents at the end of last year with the khashoggi incident. Remember, aramco might be going public. They are also trying to make new cities. Between investment and any other kind of business they are willing to invest in, the whole community is watching. David one of the things i hear increasingly criticized things done under his name, hes also done some real reforms. If it werent mohammad bin salman, who would it be . Would that be better or worse . Sonali who knows . Two generations in, now in charge of the kingdom, and their wealth shows for it. Thanks so much, sonali. Good to have you with us. , after epsteins death over the weekend, the battle over his millions of dollars in assets is just beginning. Nejra if you are jumping into your car, tune into Bloomberg Radio on sirius xm channel 119 or on the Bloomberg Business at. This is bloomberg. David this is what im watching this morning, it is Jeffrey Epstein. Obviously, everyone was talking about his apparent suicide. We will have a postmortem out today. Theres a lot to be said about what is going on, a lot of conspiracy theories, but one question is what happens to all the Legal Proceedings that were going on while he was still alive. Probably doesnt go away. Prosecution against him goes away, but there are also potential proceedings sickens to those around him. Womencivil cases by those that will go forward against the estate. Nejra that in particular was one thing i picked up on over the weekend, the fact that they might go against his estate. I am wondering how a case like that could be successful because the law youre the alleged victim saying they still need to get that compensation. David at least one of those lawyers has written to the trustee of the estate, saying do not dispose of any assets. Hold onto them so that there will be some pot paid out to any victims who prove their case, which may be harder. Witnessthe primary around, it may be harder to prove the case. Nejra it is definitely something that scott attention. There are some conspiracy theories, some being propagated the president himself. David the one thing you know is this story is not going away. Coming up, mark haefele will be joining us. 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. David u. S. China trade tit for tat takes a breather. Calms thepboc waters, but the u. S. Tariff list is due out today. From ubs is going to be here. And argentine stock. Majorent macri suffers a loss in primary elections, pointing to a major loss to come. Welcome to bloomberg daybreak on this monday, august 12. Weve been watching hong kong all morning, and that dramatic scene particularly at the airport, where they shut it down. Nejra it has been quite shocking the escalation we have seen today. We are hearing from the authorities now is that we might see the hong kong airport working to reschedule flights from 6 00 a. M. Local time, so 6 00 p. M. Eastern time. Sites flights to the city were canceled prior to that. David perhaps even more than the rhetoric, we talked to yvonne man a bit ago, and she said she thinks that theres violence on both sides, from both demonstrators and police, which is disturbing. Nejra nejra absolutely nejra absolutely. Whats been really interesting is it seems to have hit the markets as well. We were seeing u. S. Features in positive territory throughout the asian session. What seemed positive was the pboc fixing. Then we get the escalation in hong kong. Futures turned negative. European equities move into the red. Dollaryen on the back foot for another day. Gold again above 1500 an ounce. David looking at the week ahead, tomorrow we get u. S. Cpi data for july, followed overnight by China Industrial production and retail sales. Wednesday, macys reports last quarter earnings and we get german gdp numbers. Thursday is u. S. Retail numbers for last month and walmart reports earnings. Friday, the u. S. Reports Housing Starts for last month. Ride in markets last week, and left investors puzzling over where things are going, with some cautioning that the growing trade war could tip us into a recession. We haveachs said, increased our estimate of the growth impact of the trade war. We welcome now from zurich mark ubs global cfo. Thank you for joining us today. We want to get your stance of where we are on this because until now, people said it is not going to tip into recession. Well put up a chart which basically gives us the warning. Igns what it basically shows to the right is it is the highest its been since 2008 or 2009. . Re we overreacting mark i think this shows a wider range of outcomes as the trade dispute between the u. S. And china has increased. We see a 50 chance in our base case that the tariffs, the 10 goes on in the market is pricing that in now. Enough to tip the economy into recession. In that scenario, we would put may be a 25 chance on recession showing up. But if the terrace increase, the risk the tariffs increase, the risk of recession goes up as well. Goldman says they do not think there will be anything close to a dispute of the trade until after the 2020 election. Think it is certainly feelthat both sides still like the other side has more to lose, and that the chance of a real sediment occurring a real settlement occurring rose lower by the day, but that is different from what we see as something of a step function towards higher chance of recession, which is the 25 tariffs on all chinese goods being applied, and the president hasnt gone that far yet. What makes this such an interesting period is that we do have some of these decisions really sit with the president of the United States for now, and secondly, the Central Banks around the world, but particularly the fed, are willing to take policy action that should reduce the chance of there being a recession, so markets are trying to wade through those data points after last week. Nejra great to speak to you. Will the fed be able to protect against any more downside equities. Markets are price for the implementation of the 10 in tariffs, but not necessarily 25 . Yes, we think if it is just an extension to the 10 , the fed action can certainly ameliorate the high probability that we have a recession, but to the extent that the policies out of the white house ratchet up in lockstep with what the fed intends to do, that would make it much harder. Nejra does a strong dollar make it harder for the fed easing cycle if we get one . Do you predict Global Growth as well as u. S. Growth . Well, the dollar has been strong for a while. Risks both forre the United States and for the globe. ,hen it puts some questions on but i think that to the extent this is a problem that has been raised on all sides and to the extent the fed is willing to cut , it could take some real aggressive easing, say on the part of the ecb, before you really see the dollar take another like higher. David where you see the dollar going right now . It has been in a strong position. I will put up a chart that shows people are building short positions in the dollar. Some say that makes it harder to sell off. Positioning is certainly a shortterm phenomenon. We see that as well, that the dollar is probably overvalued on a purchasing power value basis. Ultimately, we think it is more , but on a shorterterm basis based on positioning, we are in for a volatile period. The dollar is the one currency where the more the u. S. Government does to create uncertainty, it is the one currency that actually benefits because it is such a safe haven. Is going tohaefele be staying with us. Now lets turn to Viviana Hurtado with first word news. Viviana in new york, an autopsy has been performed on disgraced financier Jeffrey Epstein, but the medical examiner says more information is needed before causes can be determined. The federal bureau of prisons calls the death, an apparent suicide. Epstein was jailed on sex trafficking charges. A 20 aramco is taking stake in indias reliance ustries and oil and can reliance industries. Over to argentina, where markets are in for a rough day after a shocking primary election defeat for president mauricio macri. He lost to the opposition candidate. If the results stand until the election, macri would outright lose the presidency. Global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im the ve or tonto. This is bloomberg im Viviana Hurtado. This is bloomberg. Nejra thank you. Still with us is mark haefele of ubs management. We are expecting a punishing day in argentine markets following the results of the weekend. Declines. Had in the u. S. Onfident dollar now . Mark we still see it as the source of kerry. I think if the the source ofcarry. I think if you step back, that is the theme we see most in this spirit of volatility. To support what is a weaker Economic Growth picture, that andks to looking for carry looking for yield in this market. That very often points them toward the emerging markets, where they are finding yield and in a basket of em fx, in those bonds you talked about. Nejra david how safe david how safe is it to invest in dollardenominated em debt now . As more people have it on their Balance Sheet, they are at risk. Mark the specific bonds we are , we think it would certainly be one of the things they would look to payback first to maintain borrowing in Global Markets, even if we had a shock scenario, so we think it is relatively safe in that regard. Of Ubsmark Haefele Wealth Management stays with us. Coming up, feeling the heat. How europes recordbreaking temperatures could add to Renewable Energy momentum. This is bloomberg. Viviana this is bloomberg daybreak. The boards at cbs and viacom working through the night to determine a price for their longawaited merger. Bloomberg has learned the Media Companies were hoping to reach an agreement in time to announce the deal today. The chairman would be sherry redstone. Ceo would lead to the new company. Shares of Cathay Pacific falling to their lowest levels in a decade. The Chinese Government ordering employeese to ban all who support the hong kong working in the mainland. Blackrocks private equity unit striking its first deal, spending eight heard said 75 million spending 875 million primaryto become the shareholder for authentic brands, valued at more than 4 billion. That is your Bloomberg Business flash. David thanks so much. Scorching heat in europe this summer has helped lead to record high derived temperatures around the world, which puts investment in Renewable Energy at the top of some investors agenda. With a still is mark haefele of ubs. You have a note out on just this. At the same time, you refer to a bloomberg report that said the investment in dollars was down this year. I think this is an important message, particularly for u. S. Investors who maybe dont have exposure to sustainable investments, but then also to investors around the world who are, as you said, looking for longerterm ideas that we are seeing now out of europe, perhaps in response to a variety of things. The hot summer hasnt heard the moretowards funding a much Climate Change driven agenda. We even saw some talk that germanys potential stimulus efforts would be driven in part through more issuance of green bonds. So we do really think this is a longerterm trend that investors increasingly need to Pay Attention to. Mostso see one of our stable areas of investment is that investing. Yield ise hunt for becoming ever more difficult. Class, youany asset have to be selective. One of the most interesting things coming out of europe as a regulatory drive to make sure that bonds are avoiding greenwashing, people just labeling things to say green. But there are areas where we see opportunity to pick up yield for relatively low risk. That is around some of the Multilateral Development which in some cases is karen tied is guaranteed by multiple sovereign governments. So there is an opportunity to get some yield pickup and safety. David give us a sense of how big this opportunity could be. We will show that same chart that shows wind and solar growing dramatically compared to the other fossil fuel alternatives. Mark we seen this thing come out of nowhere to be a very large opportunity in the past decade, and we expect the expansion to continue. That we are seeing governments come on board and in europe, this regulatory push driving assets in this direction. David china has made a big push on this overtime. You talked about germany may be having green bonds. Which are ahead, and which are behind . Mark its hard to answer in terms of Investment Opportunities because it doesnt like that. Up but the most interesting thing we see is the drive for this both from government in asia and , and europe and the u. K. To some degree behind given how the agenda is moving forward, that also creates less urgency for companies and Fund Managers to really provide solutions that fit. I think that europe and asia have been partnering to push this agenda forward much more so than the United States. Nejra let me pivot, if i may, to the heat of the sicilian beaches where Matteo Salvini was campaigning over the weekend. The latest Political Developments in italy, does this put you off wanting to invest in European Assets at the moment . I know you havent made any big changes to capital allocations, but you are waiting for opportunities. Weve been underweight in european equities relative to things like the United States, and part because europe had a great run in the first half of the year. The european economy has been slowing, and that does give us some concern. When you overlay the politics and the need for politics to heat up for we get a resolution, it makes for a scenario where europe is probably one of our underweights on the equity side. Asset mark haefele of ubs management, thank you for joining us. Coming up, todays bottom line. This is bloomberg. David time now to look at three Companies Worth watching this morning. First of all, viacom and cbs. The boards were working through the night, trying to announce maybe today that they will put cbs and viacom back together again. Both companies are having a bit of trouble. The question is, what do they do when they get them back together . Nejra what a Long Time Coming this has been. The Second Company we are looking at is aramco. Heres the cfo on the companys up and downstream. The perspective of the market conditions, oracle within the country in upstream within the company in upstream is to maintain our position as the and crude producers increase the petrochemical production. Nejra so a 12 drop in the , tot six months of the year try and diversify away from saudi arabia. David a very rich valuation, it seems to me. For our third company, we are looking at for saatchi. Dan at verse saatchi at versace. Joining us now is brooke sutherland. These countries that are cities in chinas mind, hong kong and taipei, this latest issue lists taipei as a separate saatchi by versace. Luxury brands have made similar mistakes. David it seems like we dont need much excuse for the chinese to be angry with us at the moment. Brooke of course, this is happening while you are seeing protests at the hong kong airport, closing down those flights today, so this is stirring up tensions. It just shows the difficulties for some western retailers operating in china. I also think back to the airlines. They also have this problem with how they list their flights to these various different cities, how you define them. It is a delicate walk. Nejra how painful will this backlash be for the retailer . What has been their response . Brooke china makes up such a significant portions of luxury sales, and that has been an area of strength for retailers as they have been struggling, especially overseas. I think it is going to be really interesting to see how much this impacts their sales. Theyve come out and said they apologized. Merchandise has been not only shelves, buthe destroyed in some cases. When you have local spokespeople distancing themselves from the brand, that undercuts the inroads theyve made in china. David part of what brought this to light, you had a prominent celebrity actress, a chinese actress who said publicly i will not be associated with you anymore. Brooke she is walking away from the brand. A similar thing happened with coach, which is owned by therery inc. , where local spokesperson said i dont want to be associated with this anymore. This has been a key part of these Brands Strategy to boost sales in china. David brooke sutherland, Bloomberg Opinion columnist, thank you for being with us. Coming up, the latest on u. S. China relations with the peters institute for International Economics senior fellow. This is bloomberg. Nejra this is bloomberg daybreak. Alix steel is off today. U. S. Futures the negative territory. Still seeing red after they were in positive territory throughout the asian session. European giving up gains of 1 . The sentiment after installation of tensions in hong kong and an extrapolation of what that might mean for u. S. China trade tension. The 10 year yield low 170. The 10 year yield below 1. 7. Dollar strength is the story in fx but weaker against the yen. Oil on the back foot but not as much not as big of a loss as you are seeing earlier. Speaking of hong kong, the turmoil escalating. Authorities canceling flights following violent protests. The airport announcing it is working to reschedule flights from 6 00 a. M. Local time. Airport isfrom the our reporter. Talking about rescheduling flights, does that mean people have started to take a turn for the better or at least stabilize . Stabilize is a good word to describe it. We are seeing thousands of protesters, but the crowd haslinda amin. The crowd has dwindled. People are leading the airport and head into other areas like the Police Headquarters and certain districts around the city. Things have called down, relatively speaking. The question is are the people endre the police going to of using tear gas to clear out the crowds . They have not ruled that out. To see what a big deal this is, most, if not all, of these flights have been canceled. Hong kong is such an important transport hub, not just for tourists visiting but 120 airlines that fly through the airport. They fly to more than 200 destinations. It is also impacting not just forests but your business travelers. People traveling through the region as well. A lot of questions on what comes next. For now, we are seeing things calmed down a bit. David expand that out. It is a business in the Financial Hub as well. I wonder the extent to which we are seeing concrete effects. I will put up a chart that shows hong kong etf and the outflows. Are we seeing any concrete results that are hurting hong kong, or is it just a news event . At this point, it is early to tell. We have talked to economists during our shows, talk to analysts that are saying even before these protests, hong kong was reeling from this u. S. China trade war, so this adds to the headwinds for the economy. Carrie lam spoke of the weekend and talk about the outlook for the economy after the violent clashes we have seen for 10 straight weeks. There have been Retail Stores that have closed. She says she foresees the economy could suffer more than , asng the sars outbreak well as the 2008 Global Financial crisis. We are seeing businesses reeling as well. Shares of a company tumbled to a 10 year low after several employees were fired over their involvement in some of these protests. Beijing as pressure on businesses, as well. David driven reporting. That is bloombergs yvonne man from hong kong airport. The world hangs on every tweet from President Trump and every announcement from the pboc for some signaled where the u. S. Trade wars headed. , Peterson Nick lardy institute for economic senior fellow. Thank you for joining us. On friday we heard maybe we will not have this talks china after all. Should we read much into that . We were hoping they would at least keep talking. Nick it unclear whether there will be any talks. If there are talks, the chance for making significant progress at this point is extremely low. I do not think we will get an agreement anytime soon. David anytime soon. We had Goldman Sachs saying we do not expect a resolution or anything resembling a resolution until after the 2020 election in november. Is that your expectation as well . Important. Lection is the key thing is china has established red lines it must cap in any agreement. If they can get those terms from President Trump, i think they will take them. If they can get them from a subsequent leader, they will take them. If not, the trade dispute will go on. Nejra the escalation in the past weeks has been quick. You expect the same magnitude and speed of escalation from here . Both sides still have levers they can pull. Nick there are. There are positive signs. The panic over the Exchange Rate was overdone. It is clear the chinese do not intend to significantly depreciate their currency to affect trade flows. That is not their objective. They are leaning against the wind. The additional tariffs go into effect, we should expect small additional depreciation. China is showing a lot of restraint. Remember they thought xi jinping and President Trump had an agreement not to impose additional tariffs, and then out of the blue President Trump announces he will put 10 tariffs on the last 300 billion of chinese imports. The chinese must wonder whether or not they can reliably negotiate with President Trump. Nejra right. And at the same time, some say china needs to display a show of strength, particularly as we look ahead to the celebration of the cindy of the 70th anniversary of the founding of the peoples republic. How likely is it we will get in a position of 25 on 300 billion. That is the line where the u. S. Recession risk increases significantly and global Recession Risk as well. Nick i think it is a tough call. Hopefully President Trump recognizes that if he goes to products,s last group which is mostly consumer goods, consumers will feel the pain. Not helpful for his redirection reelection if you were to implement that. It is not helpful to assume the tariff policy will be rational going forward. David rational or not, one of the things the president is concerned about is farmers. The president said they had a promise china would start to buy more Agricultural Products from the United States. Isnt the president committed to doing whatever he needs to do before the election to get this product spot again . Nick i do not think it will happen. President trump insisted yet agreement with the chinese, but one of the problems when you have leader to leader negotiations and no notetakers, no joint statements, no press conference, each side heres what it wants to hear and President Trump comes away thinking he has a commitment from the chinese to buy Agricultural Products, and the chinese insist they never made such an agreement. It is a he said, she said situation and reflects the weakness of this approach where you do not have staff, you do not have notetakers, you do not have joint statements or press conference. Each side is free to make up whatever they want. David no question this is messy and painful, although a lot of trade negotiations are messy. Is a big game worth the candle that people in the United States and around the world leave things have to change in the way china conducts its trade policy, particularly with intellectual property. Is that the president after bigger fish . Are problems with chinese trade policy, intellectual property protection, and so forth. The question is whether or not tariffs are the right way to make progress. When President Trump started down this road, he said these trade wars are easy to win. He thought the chinese would be a pushover. Here we are more than a year later and is hard to see any progress has been made. Nick lardy of the peterson institute, thank you so much for being with us. Now lets get an update on what is making headlines outside the Business World with Viviana Hurtado. Viviana the next trauma involving Jeffrey Epstein may be over his mysterious estate. The disgraced financier died saturday in what authorities called an apparent suicide. His death happening at a manhattan jail where he was held on sex trafficking charges of underage girls. Epstein owned mansions, a caribbean island, in a private jet. Lawyers representing victims of his alleged crimes what the estate frozen. Winner over the former first lady promising a crackdown on crime. He also promises to boost Economic Growth and crackdown on migrants fleeing to the u. S. In the u. K. , Boris Johnson is being accused of spending for votes. Johnson says he will spend up to 3 billion on prisons as part of a crackdown on crime. He has also announced multibilliondollar Spending Plans on brexit prep and the National Health service. All of this is leading to speculation he is planning for an early election. 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. David . David thanks. Coming up, getting a regan retail. Well preview getting a read on retail. We will preview the results coming out this week. Now cansers can interact with the charts shown using gtv. Keep up the charts shown and key analysis all from your terminal. Live from new york, this is bloomberg. Viviana this is bloomberg daybreak. Im Viviana Hurtado in the hewlettpackard enterprise greenroom. Power,p on balance of peter sullivan. Here is your Bloomberg Business flash. Today shares of Germanys Commerzbank falling to a record low. A roller coaster ride thats all the stock more than double after the ceo announced a turnaround plan. Over the last year and a half, all of those gains evaporated. Germany is set to get rid of socalled solidarity tax that helped finance reunification. In 2021 the 5. 1 income tax will be eliminated for most of those paying it. There is growing pressure for increased stimulus in europes largest economy. Last year the tax raised 21 billion. The ceo of the Swedish Company leaving after almost a decade. He says he would like to face another operational challenge in his career. He plans to stay until there is a new ceo. Annualized had an total return almost 18 , beating industry peers. Im Viviana Hurtado. That is your Bloomberg Business flash. ,avid time for all of the lead a deep dive into stories making headlines in moving markets with insight from industry veterans and insiders. Today our focus is on retail, with retail sales due out thursday. Retailers walmart and jcpenney reporting earnings. Joining us is there a house that from washington and dana telsey on the telephone. I will start with you, sarah. I will show a chart that shows they have been all over the map for the United States in recent times. What we expect this week. You have any sense . Sarah i think they should be strong. Consumer sentiment remains good. We have had a good jobs report, and even some of the indicators out of restaurant earnings results, where they saw improved traffic at starbucks and chipotle, that is an encouraging sign about where the u. S. Consumer is an event where we should see retail sales this week. David is that where you see it as well . Dana i think the numbers coming out from the companies will be mixed. Overall, we have seen a second quarter, whether greater strength in june with what we saw in may and now we are getting into backtoschool season. That should be a help, but it is a help at certain price points. These retailers are better able to absorb any impact from the terror . Dana when it moves from the terror of from the tariff . Footwear haveand low exposure to goods coming in wehina, and companies are seeing some of the Accessories Companies have less exposure. Even a company like levi strauss has a singledigit percentage of goods in from china, along with lululemon. It is more the Department Store impact that it is for some of the individual brands. , how much Pricing Power to these companies have to push down on their suppliers so the two not have to raise their own prices . Sarah that is a good question, and it is also about how much more room to suck and tumor have to bes least. Weve been seeing to be squeezed. Coke and pepsi raise prices, Procter Gamble has been raising prices. You have faster so, when consumers you have to ask your self, when consumers are starting to feel that squeeze, how will that change their behavior . Will that encourage them to start to look for more bargains . If they do that, that does not bode well for Department Stores like jcpenney or kohls. David lets talk about walmart. That is the big behemoth. They have been able to squeeze down their suppliers and keep costs down. Are they going to as we see the potential 10 tariffs september 1 . Dana certainly walmart has the buying power more than anyone else to be competitive. I think the overall, you will still see everyone diversified faster and that is still going to come into play for next year. What we have heard from walmart is they have the Global Supply chain to handle the tariff situation and they have the flexibility to adjust sourcing across their vendor base. Two thirds of the walmart u. S. Product already has high domestic sourcing with fresh and consumable items purchased from producers near their stores. Sarah, what sort of amazon impact might we expect to see in the earnings, not least from walmart . We will continue to see the kind of Competitive Pressure we have seen from amazon. That was brought into focus in july when they had their prime day sale. There is a lot around that. It draws a lot of consumers to their site and to sign up for prime membership. I think amazons impact will be the biggest for walmart and target. That is their closest competitor. Amazon is still fairly weak on payroll. Their private label offering does not compare to target. Their clothing selection does not compare to offprice or is like t. J. Maxx or ross or burlington. If you look at amazons impact, look at bigbox Stores Like Walmart and target. About sarah was talking whether we would start to see consumers trade down. Is this something you are preparing for with these retailers . Dana one of the things we have seen is inventory levels, some have been higher coming into the quarter as Many Companies have brought goods in early in advance of higherpriced goods given the tariffs. Second have expectations will be key to watch, because given the first cap had challenges, there is an expected pickup in the second half of the year. Product innovation is definitely out there. The promotional levels seem similar to last year, and if anything we have had the reduction in tourism that is impacted everyones business, although mainly in urban areas, not more suburban or rural locations. That is something to be watched carefully. Consumer is healthy. ,hey have the ability to spend especially when theres so much more choice on experiences versus the buying of goods. David you pointed out the difference between Department Stores and walmart on the other hand. We had a Credit Suisse analyst late last week saying the holidays would be rough. Named macys, jcpenney, nordstrom, and kohls. If we have a rough holiday frank, theyvee got have an easy time already. Dana 2019 has been a challenging year. We have six fewer days between thanksgiving and christmas. Time inthe shortest terms of number of days we have. What will help to move the needle . What is the excitement in terms of product, in addition to the fact that it these tariffs get put into place, how each company deal with the inventory levels and the pricing . Iny all watch each other terms of being able to gain the pricing. The Umbrella Companies that are able to price more competitively happen to be the offprice spurs. The t. J. Maxx, the ross, the burlington. They are 20 to 60 last close of Department Stores. Less than the Department Stores. It is a challenging 2019. David if the Department Stores cannot make it up in excitement and they get hit in the holidays, is there for the room for consolidation . Sarah there is a lot more store closures is what we will see. Macy still has over 600 stores. To my mind that is too many. Jcpenney has had some store closings, but not nearly enough. If they do not have a strong holiday season, it will be hard to make the case that their current portfolio is sustainable. That ripples through the mall ecosystem. A lot of specialty retailers like cap need Department Stores to be healthy to keep their shopping destinations fire ant. If they are not, that ripples destinations vibrant. If they are not, that ripples through the sector. Nejra thanks to both our guests for joining. Coming up, argentina primaries raise risk of contagion. More on what im watching, next. This is bloomberg. Nejra here is what i am watching. Argentina. Weve been seeing a reaction in assets in terms of stocks and pretraining but also an International Bonds tumbling after the shocking primary election defeat for the president. This was not a kneejerk reaction. Something we could see a 25 decline in the peso. It is already the worst performing against the dollar, down 17 . That is the kneejerk reaction. The bigger question is whether there is any contagion risk and whether there is any default risk for argentina. Alreadyoint is there is es already called carnage expected. Nejra the question composed in some of our commentary is if we do see a bad reaction and markets, whether the people in argentina might react in some way. We might not see as bad a result when we do get the election later this year. A lot to look for, but certainly a big reaction on the back of the results of the primary. David not too much to say they were reacting to the argentine people through the austerity required by the imf. That does it for us today. Coming up on the open congo Lisa Abramowicz will be looking at the unrest in hong kong. Flights are due to be running again at 6 00 local time. This is bloomberg. Our from new york city for viewers worldwide, i am Lisa Abramowicz in for Jonathan Ferro id the countdown to the open starts right now. Up, Global Markets remaining on edge with mounting unrest in hong kong adding to the global wall of worry. With a surprise outcome in argentinas election sparking contagion concerns and more calls for caution. A fragile mood dominating Market Sentiment with Goldman Sachs adding fuel to the global recession fire. 30 minutes until the opening bell. You can see that saudi wall of that soggy wall of worry hiding over s p futures. Euro is flat against the dollar. 10 year yield down the lowest since 2016 as people assess what the Growth Prospects are for the longer term. Markets making a sharp reverse on concerns of the latest protest in hong kong. Adding to a growing wall of worry. A lot of things wry
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