Transcripts For BLOOMBERG Bloomberg Surveillance 20240714

A big market move yesterday that started with concerns surrounding hong kong and that means yen found a good bed yesterday. Argentinaocus was in after the selloff after the surprise primary where we thought it unlikely the candidate could make it. The second time of voting since october. U. S. 10 year yield that 1. 63 . Coming up, we talk with the chief executive of Steinhoff International holdings. Do not miss that interview after 4 p. M. London time. Lets get to the first word news in new york city. Viviana Senate Leaders in italy failing to agree on the date for a confidence vote in the populace coalition, leaving the deputy premier happy to wait before consolidating power in rome. Discussions in the Upper Chamber continue tonight. If there is a new election, the commanding lead means he will likely be the next Prime Minister. Global anxiety showing up in the treasury market. Yield on 30 year Treasury Bonds approaching alltime low as the 10 year yield also fell. That one point it was just at 50 basis points higher than 2year notes. The flattest that part of the curve has been since 2007. U. S. Fiscal deficit growing to over 850 billion of spending growth outpacing revenue, wider than the shortfall last year, 780 billion. Already the largest federal deficit since 2012. Keeping her options open. She would not have run for the vice presidency if he did not feel ready for the top job. She does not want the philippines to take sides in the u. S. China trade war. Could be more friendly with china or asian imports would friendship orour relation to the u. S. I dont believe in that. I dont believe the philippines should choose between the u. S. And china. Viviana 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. Thank you. Protests at the hong kong airport continue spreading to departures level. Flights ongoing. Check in slower than usual, after protests forced cancellation of flights yesterday, the biggest disruption to the economy since the protests began. In a rowdy news conference, the chief executives of the city was in a chaotic situation. I urge everyone here to put down their prejudices, try to calm down emotionally, think seriously and look closely at our city, home. Do we want to see hong kong fall into an abyss . Francine joining us from the hong kong airport, we are in the fifth day of sit ins at the busy terminal. Is the moon different from yesterday . Mood different from yesterday . People frome same the 4000 who showed up yesterday. There are less people. We have seen the crowds grow again. They are continuing to chant, fight for freedom, and liberate hong kong. They have moved upstairs to departures. We saw video passengers climbing through protesters. Checkin counters have been slow. There are some cancellations today. For the most part, most flights are back on track. More than 200 flights into and out of hong kong were canceled. Theyre starting to see, they were trying to reschedule 90 of them this morning. They could see cancellations today depending on the situation. Crowd control is bringing things back to normal. Is, if we see more of this, are airport officials going to have to shut down again . No sign of that and no sign a police either. Francine is there anything they can do to calm the unrest . [indiscernible] of majorms concessions, there was not anything new. She continues to back the police on their response to recent violent clashes. When it came to the questions, asking her whether she would resign, she dodged and did not offer in hong kong warnter she continues to about economic consequences if protests drag on. We did not hear any new developments in this press conference. It is only angering the crowds more. Where are hearing about another protest in march this sunday. Francine thank you so much. Joining us, roger jones, head of equities at london and capital. When you look at the turmoil in hong kong, people are nervous about the wall of worries. What worries you the most with this kind of economic set of numbers but also geopolitics and trade . In hong kong is where we see this. Ultimately this could go on for a long time. With neither side backing down. The accumulation of factors that came around yesterday were clearly seen as globally slowing growth environment which has been going on for quite a while. The deterioration seems to continue. Political factors are rising to the fore and causing difficulties for markets. Francine what does it mean for markets . Yields are in a bubble . Markets, terms of bond reprice very quickly. We have not seen a big retraction yet from the equity markets. That is probably not true elsewhere around the world apart from u. S. It still feels too soon to enter equity markets when you have this risk out there and potential reward for investors is slim. For equity markets at this point, it is risk off. Francine what does it mean for bond markets . Longer for lower u. S. Treasury yield. 30 year. At 1. 69 . Ear does it go to 0 . Roger if we do the simple peakmatical aspect, rates in the u. S. Not contingent they go back down to 0 at the bottom of the cycle. The midpoint lead you to 1. 2 . It is conceivable the tenure could continue to move lower in that environment. It depends on the pace the fed will move that and how Global Economy plays out. Francine what does lower yield mean for portfolios . Roger initially it meant Equity Investors a positive side, reducing capital, all assets rallied on the back of this and it was a post to move up in terms of equity markets. Now, it is growth fears for Equity Investors. As yields continue to move lower, we are past the insurance cut, to this is a growth concern cut. Francine you are ahead of equities. Are head of equities. So much money going into gold. This is my chart going back to 2017. Given it has worked well where the gold price moved. What worries me, it has had a great move, we are due to have a shortterm consolidation due to the rocketship move but now there is consensus, buyers of gold, people are calling on the next stop at 1600 and the next stop, there is no limit. We expected is what it to move at the rate cycle moves, now it is getting to levels where we think consolidation is possible. Francine roger jones stays with us. Argentine assets get crushed. We discussed the turmoil, next. This is bloomberg. Francine we are keeping a close eye on hong kong. Yesterday the main story from hong kong as we had flight cancellations, protesters for a fifth day, going through sit ins at the busy terminal and the embattled local leader early on saying it was sliding into an abyss. After the landslide lost in the weekend primaries in argentina, the market followed suit. Of tumble to a record low 60. Ever inx lost the most intraday trading. Justin, why are investors so scared of the Previous Administration returning to power . Justin because they represent, via the running mate, a return to the old ways that saw argentina, capital markets, not seen as a prospect where you would want to put your money for long, a country that adopted protectionist, polic populist policies, ultimately left the economy in the state it is today, a situation that most arisio would acknowledge m would try to attune around but with limited success. Could seeo that model the country isolated by international investors, not getting along well with the imf, which they have never had a particularly good history. The prospect of a debt restructuring one would like to think so, if you are an investor you might hope for that but the realistic assessment is probably not. Ultimately, what goes on in the bond market is not a particularly concern to ordinary argentines, people who voted so strongly against them in this primary. They are not looking at the stock market or the bond market. Pesomight be wary of the weakening and that may have a knock on effect in inflation but that will probably not show up for a few months yet, certainly not before the election. The country is already grappling with 50 inflation. Marginal extra a pain for ordinary argentines. I dont think really, the situation will be turned around by this Market Reaction. Francine thank you for the insight. Lets get back to markets and look at our wall of worries. Economic slowdown, global bond yields, protest, fears of earning recession are adding to volatility across asset. Should investors, how should investors be positioned . Us fromnes still with london and capital. We were talking about these concerns when we started. Are valuations attractive . Lets focus on what you see is a positive. Roger valuations, american markets getting to that point. The selloff in emerging markets generally, the lack of progress in em and covering them since december, does look, if we are at valuation levels, they are starting to do due diligence. The problem is the risks are still very high in these markets and there is little certainty for investors. Longerterm, longterm investors, nibbling at these markets. When they selloff, building positions for the longerterm. Francine are the best m artunities sector wide, or stable earnings . Roger it is resilient. Throughtill seeing, 90 reporting season in u. S. , earnings fall into a small amount, still struggling to see where this growth will come through, especially in the second half of the year, given the growth momentum. Companies that can produce stable earnings, resilient earnings, good dividends, share buybacks are still going to be in the forefront of investors minds. Francine where do you find that . Roger consumer stable sector. If you want seeing to be more contrarian in terms of what has performed, the Telecom Sector has been weak for over a decade. Area. T a stable thanks. come, we are back in hong kong as the fallout from protests grows. The latest from hong kong, this is bloomberg. Francine this is bloomberg surveillance, im Francine Lacqua in london. A lot going on in hong kong. Seng, Properties Index entered the bear market, down 21 since the first of april. We are monitoring anything luxury related, as this will have direct filter through economy. Hang seng down 2. 1 . Firei has hired a u. S. Law ehalf as on its b the Trump Administration pressures to blacklist. Huawei increasingly dragged into the trade war. London and from capital still with us. If the trade war, if there is a miracle cure, if talks resume in september, does the economy automatically snap back to pretrade war . Markets, theys of will be in that sort of outcome. They will see that as a positive forward indicator. I think we will get to a situation where if there is some sort of agreement, that risk off the table and economy reconfidence will build again. Francine do you like tech stocks or is it in bubble territory . Iser the risk intact regression. Techtively, we have seen be the leader of the last decade. There are good reasons behind that. If we see a blanket market selloff, we are fearful in terms of what that could mean for tech but that could be a buying opportunity for the sector overall. Francine what would you bite into . Chipmakers . We talk about tech but there is a multitude of companies very different within that. Roger chipmakers, we tend not to invest in given the short cycle visibility and in terms of volatility, it is far too high for what we are trying to do in terms of investment philosophy. Faangs have different characteristics to them in terms of businesses. In terms of nextgeneration tech, that is interesting for us. A lot of the cloud applications, whether that be hardware or software, are interesting as well. It is specific to what we see as where the future structural growth can come from. It is an area clearly for the future. Francine anything you like in Southeast Asia . Chipmakers . Roger in terms of those markets, we are getting to the stage where they are pretty bombed out. Valuations are attractive. We are looking at the domestic and export markets. Vietnam, indonesia, potential domestic growth still underappreciated by the market. Francine thanks so much. Up next, the u. K. Jobless figures and we talk about the british economy and brexit. 79 days to go until the october deadline. This is bloomberg. , carrie into the abyss lam warns the city is descending into chaos. Stocks slump as they face a fifth day of protests. Entina fears the president the biggest stock slump in the last 50 years. Itty yellow forces and no contest mode and the government. The hong kong airport has closed north and south departures halls. That has just happened. Yesterday, we had many flight cancellations, almost all of them. The north and south departure halls have been closed so if you are due to travel, check with your airlines. We are on the ground. It is the fifth straight day of protests. We heard earlier on from the local leader carrie lam, warning the city risks sliding into the abyss. Breaking news out of the u. K. , jobless figures for april to june. Basic wage growth has accelerated 3. 9 , a touch above estimate. Indication for the inflation forecast, and unemployment rising to 3. 9 . We were expecting a 3. 8 figure. Pound at 1. 2059. Our next guest has written a report on revamping economic measurements to have more effective policymaking. Coyle, us now is diane and with us though is roger jams from london. Thank you both. Metrics focus on the for the health of the economy, is this specifically for the u. K. Or worldwide . Worldwides is about for any economy, thinking about as business would always look at its Balance Sheet and profit and loss flow. Important but we also need to know whether natural assets or Human Capital are being run down. Francine how would you rate the u. K. Economy . Diane it is slowing on conventional terms and there is uncertainty about brexit. The shortterm prospects do not look fantastic. We have been depleting the assets that sustain growth. We have poor air quality, Climate Change, loss of biodiversity, the social capital, the infrastructure. It is crumbling now. The dam that is giving way now was built in the late 19th century. Francine this feels like a call to stop austerity. It seems like it is the way we are going with pledges from the current government. Diane that type of investment is important. You can see it as avoiding consumer booms that have driven shortterm growth. In the mid to thousands, the strong to thousands, the strong gdp growth. Francine many look at u. K. ,ssets, do they look attractive or because of the riches binary or three fold, deal, no deal, or no brexit, what does that mean for your love or not . Roger it is kind of binary, especially in terms of how domestic stocks will act. We will see a break in terms of the currency movement. We have not seen domestic u. K. Stocks continue to fall. It is fair to say and element of this is in the price. The u. K. Market looks attractive compared to Global Markets. In terms of if there is a better fears, than the market u. K. Stocks could well rally as they have been big laggards for years. Francine what is pound pricing in . Diane since Boris Johnson roger since Boris Johnson has become Prime Minister, we have lost a number of fights of the pound against the dollar, and it has been weak against the euro. The pound is pricing in a higher probability of a no deal brexit. Francine in the report where you are advising a switch to focus on gdp to loss economy, is could thatthe explain the productivity puzzle . Diane a lot of the things that are happening because of digitalization make it hard to interpret figures. Another example is the use of cloud computing. Compass sees Purchase Services companies Purchase Services and do not capitalize. Investment ine an gdp gets obstructed gets subtracted. It is getting harder to interpret gdp figures. Francine there seems to be more academics looking at these things being taken seriously by Central Banks. Our Central Banks realizing they are almost at the end of their firepower . What dohe question is Central Banks to if there is a recession now because they have already gone as far as they can come that there is the policy question. How do they understand what is going on . What does productivity mean in an economy that is based on services . There is a huge first of research how to think about the economy and progress generally. Francine diane coyle and roger jones both stay with us. The president hangs argentinian assets, the peso plunging to a record low. In dollar terms, stocks inc. 48 . The stock sank 48 . There are concerns of a fullblown financial crisis in argentina. The owners of kfc and taco bell add a new they may income chain. Onestors continue waiting news of the cbs and viacom merger. The media giants were expected to announce as soon as yesterday but talks have drugged on. The discussions value viacom at the current level. They would not get the premium they would have liked. Says about the timing of an Anglo American trade deal after brexit, he made the comment after he met Boris Johnson. He said washington is able to offer britain a sector by sector deal to help the country after ray no deal exit. Cathay pacific tumbling to a 10 year low, one of the biggest extendedom hong kongs protests. This adding to the woes from the company. Employees joined antibeijing protests in hong kong. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am viviana hurtado. This is bloomberg. Francine thank you so much. Lets check in on what is moving with the markets. Ere is Annmarie Hordern Annmarie Bernstein as talking about bookings which overshadows how the boeing fleet being grounded has been a big burden. Hang call one of the biggest losses. This is the biggest german laundry maker. They are seeing slumping sales in china and in the auto industry. Ry is down 2. 5 this morning, a straight play from what is going on in hong kong. They are a dutyfree operator around the world in hong kong is one of their posts. Francine thank you, Annmarie Hordern. This is what we are getting from hong kong, the airport has closed the north and southern departure gates. This is an Airport Authority spokesperson speaking to bloomberg. This is the fifth day of sitting at a busy eternal terminal. This will have Economic Impact, so we have to keep an eye on this. We will bring you everything from hong kong shortly. These are live pictures directly from hong kong. Hong kong risks the political prices risks becoming a financial one. This is bloomberg. Bloombergthis is surveillance. The fate of the populist government hangs in the balance. The Italian Government will set the date of a confidence vote after leaders failed to reach an agreement. League leaderr will likely have to wait another week before applying for the top job. Any clarity on the dates . Crisisthe government just continues. It has been a week since Matteo Salvini walked out of the coalition. A lot has to do with the timing. The senate just got back. There was no agreement on the noconfidence vote. Today, a date will be announced, likely august 20. The government will answer the question, but the big question is whether the president has the he willrd and whether try to call an election or find another majority in the senate . That is the worst case for salvini. Francine why does Matteo Salvini want to go to election so quickly . Maria he is polling at 40 and has a lot of momentum. The concern is if you get a delay in the vote he could lose the momentum. There are some big and difficult decisions to be made. We have the budget for next year and the hike for 2020. Cut taxess pledged to and put a flat tax in place. Hard to see how he will cut taxes and comply with the rules from brussels on the public debt and deficit. They want to do this quickly so he can move into office before he has to answer questions. Until now, he has been very vague. Francine maria tadeo in rome. Jones and us, roger diane coyle. Italy, doesk at anything look attractive . It is difficult to find yields. You can find evidence in equities, but overall, there is value to be had if you have the stomach. Roger it is quite difficult. The financials are difficult in terms of the political situation. If we look at some of the infrastructure stocks, they have come into problems. Was ar area where there was luxury goods. Overall, do you like europe . Italy could be a concern and we sure what the policy from the league will be. Germany is under pressure to start spending more fiscally. What looks attractive among european stocks . Ready lot ands a the price for growth teary ration. Deterioration. It is not saying there is a bottom in the stoxx, but in ares stocks, but there attractions. Andget cheaper evaluations we get a better growth environment and better bang for your buck. Francine you do a lot of work looking at the consequences of Climate Change and inequality. Is that directly to the populace of this world . Diane a lot of adverse underlying trends in europe, countries have demography that is shifting, population is aging. They have Infrastructure Investment needs. Everywhere you see these tensions which spill into crises, but polarization between people who have done well and people who have not seen their income go up and a decade or more, that is happening everywhere. Francine how is the central bank viewing this . Italy is one of the richest countries because savings is so big but unemployment is high. Is it Wealth Distribution in italy . Those questions have come to the fore everywhere. And therialization effects of the financial crisis. People who have not seen improvement in their living standards, there is always a political consequence when that happens. Francine you are measuring basically you recommend amending gdp to account for intangibles and remove unproductive financial investments. Is it almost like a happiness Economic Indicator . Would that make sense . Diane we certainly need to measure something else, the regional distribution, the income distribution, make gdp better, but look at indicators that give us a clear visibility. Francine do you worry that we are measuring things wrong . You are an expert and Balance Sheets but are we sometimes looking at the wrong thing . Roger this is a shorterterm, longerterm issue and i can agree that these longerterm issues are starting to affect the near term. In the shortterm, there will always be revit it relevance for more measures we see in terms of pmi data, gdp numbers. Over the longer term there must be a better way to measure it and the Lessons Learned could be significant in forming future policy for governments. Francine thank you both for joining us. Diane coyle and roger jones. We are still keeping a very close eye on everything happening in hong kong. We have live pictures. Hong kong facing a fifth straight day of protests at its airport as embattled local leader carrie lam warns the city is sliding into an abyss. The protests have forced airport departure gates to close. This is bloomberg. Francine economics, finance, politics, this is bloomberg surveillance. Protests continue at hong kongs airport for a fifth straight day. North and south departure gates have been closed. Carrie lam warns the city risks falling into an abyss as antigovernment protests continue. Hope towhat protesters achieve, close down the airport to get more time on the airwaves . We are trying to get our yvonne man on the line. We will get to her in just a second. The we have just heard as Airport Authority spokesperson has been commenting on the closures, saying that the hong kong airport has closed the north and south departure gates. Demonstrators are seeking the lam warns carrie the city is risking sliding toward the abyss. Afterdressed the media more airlines canceled flights amid the massive sit in. Demonstrators did continue to gather in the main terminal building. The airport closed its departure gates in the main terminal about 20 to 30 minutes ago. We are keeping and i economic situations. Thousands of black cloud demonstrators upper occupying the airport after protests that saw police fired tear gas and rubber bullets at close range. We will get to yvonne man when we can. Here is viviana hurtado. Viviana corn plunged by the exchange limit of 6 yesterday after the u. S. Agriculture Department Said American Farmers planted more than estimated. Futures capping their worst day in six years as u. S. Yields in production will be bigger than forecast. Cathay pacific tumbling to a 10 low yesterday, one of the biggest losers from the hong kong protest. The carrier canceled hundreds more flights, adding to the woes facing the company. China hit at it last week after employees joined protests. A u. S. Judge has reinforced in order for u. S. Airlines mechanics and ramp workers to end a slowdown, saying it had a devastating effect. Americans suit american sued the union, saying the group was using the slowdown to pressure a contract agreement. They saw more than 140 flights canceled. That is your Bloomberg Business flash. Francine lets get back to yvonne man from hong kongs airport. They managed to close the terminals. Is that what the protesters wanted . Yvonne the goal of these protests have been to add to the public disruption. This is something that has escalated. We are not talking about just blocking local transport, we are talking international travel, people flying into and out of hong kong. Being the regional hub it is, cargo ships are one of the biggest in asia. This development here has escalated from the arrivals to the departures gate at this moment. They have been sitting outside both sides the north and the south. Tom we will get francine we will get that get back with yvonne man. From the couldnt be prouders to the wait did we just winners. Everyone uses their phone differently. Thats why Xfinity Mobile lets you design your own data. Now you can share it between lines. Mix with unlimited, and switch it up at anytime so you only pay for what you need. Its a different kind of Wireless Network designed to save you money. Save up to 400 a year on your wireless bill. Plus get 250 back when you preorder a new samsung note. Click, call or visit a store today. Francine into the abyss, carrie lam warns the city is ascending into chaos. The airport faces a fifth straight day of protests. As the president triggers the secondbiggest sock stocks slump in seven years. It only delays a noconfidence vote, forcing Matteo Salvini to wait. Good morning, this is bloomberg surveillance. In the last 15 minutes or so, we saw the closure of both departure gates in hong kong. This is after carrie lam defended Police Response and warned of longterm consequences from the rest. Unrest. ,om yvonne man at the airport we will speak to her in a bit. We have to do more in the markets. I am stunned at the bond markets and the European Banks, you wonder what this august means for the European Banking system. Francine for all asset classes, but especially the European Banks. Lets get straight to the first word news. Viviana we begin with hong kong. It is facing a fifth straight day of protests at the airport and more flights were canceled. Demonstrators have gathered at the airport again. Carrie lam warns the city risks sliding into an abyss. One of asias most trade reliant economies is anticipating the impact of the u. S. China trade war, singapore cutting its Economic Forecast for growth to almost zero. Gdp shrinking at an annual rate of 3. 3 . In argentina, there are concerns of a fullblown financial crisis. The president s surprising primary election prompted a selloff of stocks, bonds, and currencies, leaving wall street wondering if they are heading toward a d felt. Default. In italy, the senate delayed a noconfidence vote could ring down the populist government. The Prime Minister will probably be invited to address the senate august 20 and that is likely when his fate will be decided. 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. Tom equities, bonds, currencies, commodities, we will do a lot of data checks. A better market over the last halfhour, 210 spread at six bps. Oil that is american finally getting a bid at 55 a barrel. Now. Right 210 yields, two basis points lower in yield. To me, the European Banks, commerzbank under five euros per share and Deutsche Bank from a 6. 15 anddle down to two good cups of german coffee. Francine i was thinking you were saying german year. Beer. Enjoyed,one column i john arthurs column arguing about the bonds. Meeting for criteria for a bubble. Stocks are declining because of the turmoil in hong kong and what is happening in argentina. That gave investors more impetus to be on edge because of the trade war. Dollar strength, gold advancing. We need to mention that is atw figure, pretty much in line with expectations. Tom we will have to tear that apart, one of the indicators of goods and services economies in europe. Right now to the bloomberg, there is like eight to show. I went to the knock on effect. All of this blather about economics, finance, and investment, what does this mean for banks. This is a 12, 13 year chart for Deutsche Bank and we have broken to new lows, six euros per share. Wesaw about a month ago and rolled over and we are approximating that weekly. Quickly. Francine i need to correct myself. Figure ink at the zew europe at a stable. The investment is 44 as opposed to the 28 we were expecting. This is my gold chart. You can see the metrics, it has been oversold. Gold is a haven which is why we have seen the trade going higher. Tom i want to go back over the german data. As francine mentioned, the survey with a 28. This is what we look at. You have these two huge negative numbers on expectations and current situation. These are extraordinarily grim numbers. Francine what is interesting is the german zew is the one we look at. I had read the euro area, which is not that bad, but the german zew has taken a bump in that could be related to hong kong or the trade war. We have a wall of worry. Number. This latest is there anything you are feeling positive about . Willem we are not looking for a recession. The major part of the weakness ist is reflected in the zew trade and manufacturing, and that is the reason we are underweight on german stocks. , asou are looking at manufacturing get so much worse because of trade that were going to get layoffs and that spills over into the Consumer Sector . That is a way it could spill over. Francine the answer to your question is what . Willem the Consumer Sector is still good. From a relative perspective, retail sales are better than industry data. Countries,as in some you see domestic stimulus and the obvious data is china stimulating it domestic sector. Tom the official line is the idea that i should maintain my longterm investment perspective. Right. What do you do if you are looking at the wall of worry and you have got to manage for longterm money . I do not buy that im supposed to remain calm. What do you do . Willem we currently have a minor risk. We have broke down our equity allocations to neutral but within the equity market we are defensive. We have been looking to buy volatility and we are overweight the u. S. Versus europe, all of that basically playing that relative risk. We go a little bit of underweight and the equity market. In the credit market, you have more systemic support because of the yields falling in a structural way. There is the risk of spread widening. As we discussed last time, the way we do that is by buying short dated bonds and holding them, and also trying to avoid the riskiest ones so we are in investment grade, not highyield. Tom what is hsbc on European Banking . I do not you to speak on specific banks, but do you do a cell or is it the mother of opportunities at. 32 and. 22 book value . Underweightre still in the equity market and the debt market has the equity cushion which is quite solid. In the equity market, we have the cyclicality of the sector that goes against you, the low yields, the links to the political arguments, et cetera, so still underweight on the financial stocks. Tom the deterioration of the tape with the 210 spread coming in. The yen has not moved stronger. The yen has not moved stronger. The news flow out of hong kong has been extraordinary, the opening and reality of the airport and cathay pacifics challenges. This is bloomberg. Viviana this is bloomberg surveillance. Pacifichares of cathay kept falling, closing down more than 2 a day after hitting a 10 year low. Cathay canceling hundreds more flights as protests continue at the hong kong airport. Protesters are waiting to see whether cbs viacom merge. Cbs and viacom merge. They have been in talks for years. The finance ratio has stalled latest negotiations. A deal could be announced today. Ther sign verizon is selling tumbler to automatic. Terms of the transaction were not terrio, suggesting tumbler sold material, suggesting tumbler sold for a fraction of what it fetched in 2018. Tom so much going on in argentina and the markets, but we need to stay on the hong kong story. Hours ago, the hong kong chief executive. At arch everyone here to put down their prejudices, try to calm down emotionally and think seriously about our home. Do we want to see hong kong fall into an abyss . Tom joining us from the hong kong airport is yvonne man. What is different today from monday . Yvonne size of the crowds are getting close to what we saw on monday. I would say thousands are out here again for the fifth day of protests. What we have seen as the protests have moved from the arrival hall to the departure. South dates into emigration and security have been shut down immigration and security have been shut down. We have seen passengers trying to check in at the counters. They are still able to do so, but are not able to get in. Of trolleys. Line it is a hectic situation. We are still seeing passengers land and arrive in hong kong. I have been talking to airport authorities about how they are diverting the passengers. No word yet on whether they will shut down the airport again. They are trying to divert passengers from terminal one to two, go through immigration and security there, and take a bus back to their plane. Francine are the citizens of hong kong still behind the protesters, or with every day that the airport gates are closed does it remove them . ,vonne that is the big concern some of the moderates, are they getting frustrated with putting the airport at a standstill . The moderate, even lawmakers are backing these protesters because they believe it takes a showing like this, disruption like this to get the worlds and governments attention. Notie lam this morning backing down and not offering major concessions. Man, joining us from the ground in hong kong airport. We will have plenty more from hong kong, and we have a great story on the bloomberg trying to figure out the Economic Impact as the protests continue. This is day five. This is bloomberg. This is bloomberg surveillance, tom and francine from london and new york. The impact of the trade war is impacting rippling across the Global Economy. Its forecastered for growth to zero. Asning us now from beijing London School of economics professor, and with us until is willem sels. When you look at the escalating trade war, what do we commonly miss understand about china . Misunderstand about china . Can they save face or is this titfortat . China is altering a bit its strategies compared to before. Tois appearing too eager want a deal and it has not worked with President Trump. They will play for a weight and see, is the u. S. Economy sufficiently hurt that President Trump will feel like making a deal. What does china need to make a deal . Keyu that there is true, genuine interest that there will changesanges, no switch , that the u. S. Has a firm stance. We dont know what goes on come on the negotiation table, but confidence is very important. Tom you are an exceptional student of what is going on in beijing and among the authorities in the u. S. Government. What is the nuance or distinction that you see that we should be observing now, of the leadership of china . Keyu the leadership of china believe they should learn from the mistakes the socalled mistakes of japan. , theyelieve the japanese are similar to what is going on between the u. S. And china today, they appreciated their currency and eliminated their exports with a harbinger for decades of lost growth. China does not want to repeat that mistake so that is in the mindset of the leadership. Tom was there a productive set of meetings 200 miles east of beijing on the shores of the pacific or ones that a sideshow for president xi . Keyu it is a national secret. Who knows . They have a united front outward. Francine when it comes to the swingiation or the wild in yuan, was this a warning shot from china . How should investors interpreted . Keyu a couple of years ago there was a massive scare about a further depreciation in capital outflows. The chinese economy is slowing down and you will see that as a symptom. Andtrade war has not helped it is probably a Market Reaction to increases in tears. As ald not characterize it manipulation of the currency. Not only are we going to talk about currency wars but maybe investment wars and tech wars. It is a Market Reaction and we need to be cognizant of that. Francine are we in a currency war now . Were we in a trade war and now it is a currency war and can we find an elegant way out . Willem the currency is depreciating because of the slowdown in the Global Economy. The market feels it is difficult to see a quick resolution and a quick change in the speed of manufacturing around the world. As you can see, the u. S. Dollar appreciates. U. S. In part also the dollar story, people going to the u. S. Dollar as a safe haven and that is where you can get yields relative to other currencies. Tom what do we see in the short paper market . Not only libor and the others, but what does hsbc and the short paper market, a indicator of stability or instability . Willem not really a big message. Basically, a lot of what is happening in the short paper market is driven by the expectations of the Interest Rates. Therefore, obviously around the world, we see Central Banks cutting driven by the more dovish message from the fed, which allows emergingmarket banks to cut as well. Tom what are you going to write into the weekend . It is only tuesday and we have reached august exhaustion. Are you thinking of a portfolio reallocation away from china and emergingmarket investment back to the u. S. , or is it an opportunity . Willem we are not yet buying the dip at this point in time. Allocationt neutral with a defensive implementation. You need to couple your allocation with how to implemented, and that is one message that you have to take together. We have more cash than usual which we can put at work, if there is a signal somewhere, to give us the trade and are trigger. At the moment, i think there is also technical stuff going on where that exacerbates some of the moves so we are not stepping in. Francine we did have a reading in july for chinas credit growth weakening. Should we worry about that . How much . Keyu the government has prepared a range of levers as an act against the negative impact due to the trade war and deleveraging profits. I dont think we should be worried because it has been a huge concern. This is kind of a regular adjustment. They will expand [ indiscernible] and think about financial risk at the same time. Tom appreciated, with the difficulties of skype from beijing. Suspendsnews, cathay all flights. This is bloomberg. 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For a fifth straight day, antigovernment demonstrators gathered at the airport. Officials a check in for flights have been suspended because of the disruption. There is a warning from china. Timestor of global says if the situation does not improve, he thinks asian will intervene. To the philippines, sharp words for the president from his vice president. Citizens are worried he is selling out to china. He wants him to take a stronger stand to protect the countrys rights in the south china sea. Could be more friendly with decrease ourean friendship or our relation to the United States. I do not believe in that. I do not believe the philippines should choose between the u. S. And china. Yvonne she says she is deciding wether to run for president in 2022. We moved to the u. S. But this the u. S. Budget deficit. In the first 10 months of the fiscal year, it was a 67 billion 867 billion. Republicans say the tax cuts will spur Economic Growth and left government revenue. In russia, radiation levels reached 16 times normal after a failed missile test that resulted in an explosion. Moscow says the test involved include a Nuclear Power source. Five atomic scientists were killed in the blast. 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. Lets get back to the markets and take a look at all of worry. And economic slowdown an innomic slowdown, protests hong kong, and turmoil in argentina adds to volatility in assets. This is what the stock market is seeing. The turmoil in hong kong and argentina adds to the worries investors have on the edge over the trade war on the dollar strength. There is a move. We will see how it develops. Treasuries study with the yen which, yen, which held onto gains. Joining us is Justin Carrigan. Justin, we want to talk about argentina. It adds impetus where markets are not sure how to read this. Justin that is right. The markety small of universe. Faithful of worries that haunt us with regularity. Argentina, here we are again. We have markets clearly under severe pressure. A little bit of stability today, but it is an early day. Lets see what happens. Everyone is looking to see what kind of soothing words may be off put by not only mauricio macri, the current president , as to what is going on, but also ,rom from the fernandes camp seen as the most likely next government in argentina. Can they offer some sort of soothing were to suggest they will address what is a serious situation . Francine we have great charts we will get to in a second. If you saw the market falling argentinians an voter, would you change your vote . Justin it is a great question. I think not, if one had to give a straight answer. Argentines do not care about the bond market. They are interested in the stock market. Our problem they are probably most interested in the value of the in their pocket. At the end of the day, given the serious Economic Conditions on the ground, they are more focused on getting on through the next few days and weeks, getting bread on the table and making sure they can make ends meet. There would be in effect from the pesos declining. It is unlikely to show up before the true election in october. The street answer is i do not think many people. Tooconditions are unpleasant on the ground for argentine. Tom we have a short chart. It is the only reason why Justin Carrigan will,. I will show you this further weaking of argentinian pesos. This is a 9 00, 9 20 wall street time repricing. Turkey weaken. What is the contingent effect right now fro . Justin there are several strands to this, tom. Can we at ac if it an not it a not at significant contagion point. Yesterday, it went through fall. Move. A 1 the same with the mexican peso. It is not showing up yet. Is backdrop, globally, negative. It is happening at a nerve in time for the Global Markets in general. What is moving markets at the moment. If things glover early if things, globally, turnaround a bit, quite clearly. Tom it will be interesting to see as we measure the idiosyncratic. Thank you, dustin. Thank you, justin. Is with us as well with hsbc private bank. This is a worry. You study initial history. Can you see it coming . Can you see when everything coalesces together . Is it hopeless to gain what it is . Usually offntina is the radar screen. It is why people were surprised. The polls have been giving quite a picture of the vote to the opposition for months now. It is a clear example of people ignoring it. Also, people looking for yields. Theields an ignoring idiosyncratic risk, not doing their homework, looking at fundamentals. It is very important. If you are starting off with a low yield and you have a loss on one of your bonds, you wipe out your return for the year. Francine when you look at argentina, how much of this makes you rethink of emerging markets . Strength. Ave dollar it would hurt them in 6, 7, 8 months. Willem exactly. Looking at which countries we have stabilization or improvement of the balances, countries with inflation coming down. China,e out with brazil, and tunisia on top, i would say. Tom in the equity markets today, we will look at domestic multicap nationals. Do you buy shares today . Do you wait it out . The normal reaction is to buy the big stuff. Yes, i would say more quality and resilience. Thes interesting to see shares that have been doing well. Price when we had inflation over the last few months, the shares have been doing well are a cyclical, quality stocks. When you have a correction, more worries, the message is reinforced. Tom i want to go to break. There are any charts to show the fragility. This is the global litmus paper. This is the japanese yen. We are breaking down over the next hour and a half. The yen Still Holding onto support. We will see as the morning continues. Stay with us. This is bloomberg. This is numbered surveillance. You are looking at live pictures of hong kong. Morning to our radio listeners as well. The comments of hong kong harbor is different than what we are seeing in hong kong airport. The airport is saying check and services for flights have been suspended after a fifth day of sittings. , the populistres government hangs in the government. The Italian Government will set a date or a vote in the government after leaders return on monday. Will have to wait another week before making his play for italys top job. Joining us is dirigible is Georgette Boele. Willem sels is with us. Think you for both joining us. Is the euro tied to this . Say the eurowould is holding on pretty well. The pressure from this morning has to do with the weaker than now, safe up until haven currencies are doing well. The dollar has been up this morning. The eurodollar is not doing so much, even though there is Political Uncertainty in italy. Francine what does it mean of what euro has become . Aoking at currency, is it funding currency . Georgette no, i would not say soapy or there are more currencies going toward lower yields. You have the yen as well, which has negative yielding currencies. You have the swiss bank, other currencies with low Interest Rates. People are not looking at spending currencies are they are much worried about the capital they have. They are looking more at safe with thethe moment uncertainty. The japanese yen currently with the most potential. Tom georgette, the stronger japanese yen, what is your critical level on yen for level yen level yen for the ecb . I would say they are not focused on the currency level itself. It is more the eurodollar which is crucial, which is not moving a lot. Looking at the yen, down pressure. The crucial level is the 105 and dollaryen. 105 in dollaryen. Tom it is due to your reading through the morning. It is deteriorating through the morning. Yields in germany, how do you correlate the negative yields and their gema, acceleration back into fx . See, peoplehat you looking for safe haven. They are not worried about the negative yields. They are not worried about the currency value. , it liquidity in the yen is a crucial market. 105 is a crucial level. If you go below it, toward 100, more important for the bank of japan. If you want to let it go francine i am looking at market things we are talking about when it comes to euro, euro funding, what euro does from here. Also, periphery bonds. Is there anything you are buying right now . Willem in europe . Relatively little, we foresee small weakness in the euro currency, which we take into account in our total return calculation. Are overock market, we ways on switzerland. The bundnd market market it is not going to materialize. Tom we will continue. The news flow extraordinary this morning. Willem sels is with hsbc. ,ridget, Georgette Boele thank you. The headline many have been waiting for hong kong canceling departing flights for as many flights in the air. They will be arriving through the day. Another day of constraint in hong kong airports. Yvonne man is there. Stay with us. More data check this morning. This is bloomberg. Viviana this is bloomberg surveillance. A federal judge reinstates an order against to end an alleged work slowdown. It has had a devastating effect on the busy Summer Travel season. The judge to delay aircraft repairs due to a contract dispute. United Parcel Service extending a push to higher outsiders. Cfo. Co veteran will become he is replacing richard, who is retiring. He hass repackaging added three executives to ups managment committee. Tellsrands David Bloomberg the company will consider partnerships. Globally, it has more than 48,000. Storyt has been a movable today on the markets and on hong kong. The headlines have been confusing. Right now, there is no confusion, hong kong cancels all departure flights. We are unsure on arrivals. On the flight chart, i see seven. Cathay pacific is landing right now. Activity with willem sels helping us with hsbc Private Banking today, try to figure out where to find the courage. Where do i find the courage on a difficult Tuesday Morning . Carrie assets, i would say. That is where you have long term structural support. Other asset classes, uncertainty in the shortterm market is still too high to jump in. There may be people who are very underinvested and may be looking at opportunities. At the tell them to look quality assets they want to buy, but thought the price was too high. Is too high. Ce what is the significance if we to10s. 210 spread 210d go to 0 two10 go to zero . Willem it is important because the market follows it. Systematically, it is important when it states the zero level. As we discussed, the consumer, retail spending, all of it is too strong to forecast a recession. What we the concern is have been trying to figure out, especially with germany. It is dire, we have negative rates. You do not pluck it out of the blue. It is an indicator. There negative rates is because people do not want to borrow. If you look at these are statistics you can look up government barring, corporateborrowing borrowing, it is not rising in china or the u. S. Centralit falling in banks wanting to put liquidity in the system and cutting Interest Rates, the economies do not want to borrow. Francine is that indicator of a recession . Willem it is an indicator the trends growth is slowing down. The recovery session increases. Im i do not want to call am turning over to data on the bloomberg terminal. Across too many equity bonds, we are at a precipice. This is a vanilla 210 spread in america. We are on five basis points. Any breakthrough would be critical. Yen confirms that at 104. At 104. Rms that you so much, especially with the distractions of hong kong. Francine, what are you seeing . Francine we are spending time looking at the fall in argentina. I have a terminal looking at the argentine peso. We are at two or three deviation. I sound like tom keene. We are looking at levels of what to do next when it comes to argentina and the spillover in the global assets. Tom i get that. That is a broadway play, cry for me, argentina. Gideons this morning, rose will join us. Another day of protests, another day of departures delay. This is bloomberg. Good morning. Tom this morning, there is no business in the stock market. Negative yields grind lower. European bank shares are sold. The fifth day we are losing counts of losing count of protests in hong kong. Cathay pacific another plane see partners see departures end. The canary is in the windows aires in the buenos goldmine. Good morning. This is numbered surveillance. We are live in new york. I am tom crean. I am tom keene. Francine, the knock out affect of this has to be the European Banks. They descend further this morning. Francine they do. Reading. E cw it was bad. We were expecting a 48. Hong kong is our top story. That. Feel anxious about we saw it clearly yesterday. We heard moments ago, the airport in hong kong has canceled all departing flights for a second day in a row. It will have an impact on the hong kong economy. It could have an effect on how china deals with the. Tom Kevin Cirilli will join us ponse hour on the u. S. res on what we see. Here is viviana hurtado. Viviana we stay with hong kong and the breaking news about protesters forcing the airport to cancel all departing flights. Demonstrators jammed the airport for the fifth straight day. Hundreds of flights have been canceled before authorities decided to halt remaining departures. Dozens of arriving flights have been canceled. The impact of the u. S. China trade war, singapore cuts its forecast for Economic Growth this year to almost zero. Second quarter figures show gdp shrinking at an annual rate at 3. 3 . Thereina, they are are fears of a fullblown financial crisis. Mauricio macri prompted a selloff of stocks, bonds, and currency. Let wall street wondering if the country is headed toward another default. In italy will have to wait. An Italian News Agency says Prime Minister a Prime Minister will be invited to address the senate in august 20. It is likely when his fate will be decided. 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 the data check is out. The 210 spread under five basis point at 4. 80. That is a huge deal to see the vanilla spread breakdown. It is a real sign of economic slowdown. Morgan stanley has been out front on. We will talk to them in a moment. Eurodollar ,1. 1205. The equityreen show markets, futures at negative nine right now. German yields really stasis, going negative. European bank we are showing European Bank because we have to. Francine i am looking at similar data. We are looking at gold as a litmus test. I am also looking at the vix. It is a good indication of what people are feeling. European stocks have been declining. The dollar edges higher. Old and silver gold and silver rally because of hong kong and argentina. About, 30 yearlk bond in the United States under 2. 01 . There are many other data points to talk about. This is a joy, Brian Weinstein is with Morgan Stanley investment management, head of global fixed income. Morgan stanley is at a house call of question. Brian will join us in a moment. Right now, the economy cannot be perfect. I put out on twitter, this is the first read of your autumn, ian rose and his team autumn, gideon rose and his team robert blackwell, and the giant, douglas erwin. These how do you full these politics . Gideon the world is starting to unravel or continuing to unravel. The strongest and dominant players in the world today are smash mouth, personalized, authoritarian dictators represented by the groups he saw on our cover x i, cover, erdogan. These are people who are leading the authoritarian turn. They have the motion. They have the wind at their back. They are dominant. In terms of china, where they are heading, it is not a good place. Xis tenure is to restore party dominance. This is evolving into a major challenge to party dominance. This is not something i think xi manages to stomach. You to take awant collective lap. Not so much at what did you get right, but reassess the Morgan Stanley caution and how your investment world folds into mr. Sroads mr. Rose political world. To grab andu have buy safety when you can. Francine you buy what you can, but we have a great story by john looking at the bonds. Our bonds in bubble territory . If they are, are we going to reprice . Then bonds are reacting to lack of upside growth risk. We are not placing growth. Excitations keep falling. There is no real inflation risk. Throwan certainty in uncertainty, people grab for it. Is it a bubble . We do not think so. It is a logical reaction to uncertainty. Francine is there any positive views . I am looking at Foreign Affairs, great cover, gideon. That coupled with risk and markets tentative, where is the good news . Brian Central Banks are on it. We have global, Central Banks even. Australia, the u. S. , may be the fed is a bit behind the curve again. Easing. Banks are equity spreads are not in panic mode. Uncertainty is here. It will stay. The good news is things are being done. You have to survive periods of uncertainty. Tom there was a beer commercial, the most interesting man in the world. The most interesting woman in the world is madame lagarde. She moved from International Relations to brians world. She does not get a honeymoon, does she . Brian not at all. The greatest risk factors are not at all. Ette the greatest risk gideon not at all. The greatest risk factors are not tom in your book, they go up to the resident. The president. What is the to do list for the people around president to get u. S. Backed on some u. S. Back on some sort of productiveness . Picking fights with absolutely everybody, our friends, our allies and nobody knows where anything is going. Nobody has a sense that trump is trying to make a deal and ratchet things back and walk it back. No one is sure if he will be able to do that. The background of his negotiations is to stir up trouble and try to profit from it. All we are seeing our trip seeing is trouble. Who knows . Like you could have had a korea deal, china deal, weather these guys will go from the set up to the deal, whether these guys will go from the set up to the conclusion, we do not know. Francine if we were to have someone else in the white house, even a democrat, it is unclear if they would go easier on china than this president. Have is a great question. There are a lot of longterm trends. There are a lot of stresses in the world and a lot of chinese roles in that we need to manage. The rise of china will be the nextdoor of the generation. Gideon the way the dominant power reacts could make it easier or more difficult. What we are doing right now is taking a real challenge and stirring it up big time, making things worse. Francine we will get back to both our guests in new york. Brian weinstein from Morgan Stanley and gideon rose of Foreign Affairs magazine. Stay with us. Throughout the hour, we will continue our updates on the latest in hong kong. A lot of other things have moved we heard they would close the gates. The protesters seem to have put some barricades. The protest is in silence. It has had serious repercussions on travelers. We will have a look at that and what it means. This is bloomberg. Merck surveillance numbered surveillance the 210 went to five basis points. Economic growth measurements show an indication of mobile slowdown. Brian weinstein and ian rose and gideon rose. Francine loves the artwork of our talker see no of aut ocracy now. Who is richardr, mcgregor. He is cool. Gideon a major expert on tom he was early. He was like dylan. He was early. Gideon his piece on xi, we decided to profile these leading crats and how they got there. Each seem to be driven by some personal. Xi, the dominant drive is restoring party rule and feel piety. And filal the entire term of his role is to reestablish of the Chinese Communist party of beijing and outside. It is something he has devoted his time in office to. Direct challenges to his role are probably not going to be accepted. Tom there is a partition here. We will talk about this with Kevin Cirilli. The Hong Kong Chinese is a discrete element. How discrete is Richard Mcgregor and china experts you have, how discrete is a Hong Kong Chinese . Gideon it is an interesting question here there are levels of this. If you go out to taiwan, beyond, there are different groups of chinese who have different relationships with beijing. The issue is the question of control. It is what we will see settled in the short term by the outcome of this crisis. Francine we will get to brian and gideon. Lets crossover to hong kong to the airport where yvonne man has been standing by for most of the morning. Has the temperature changed . This is the second day the airport has had to cancel flights. Our travelers mad . Are travelers mad . Is this what protesters want . Yvonne yes. Protesters have another victory in their hands here. The goal was to have a public disruption, whether it was subway stations or the airport, the international airport, the people traveling in and out of the region. It has been a gateway for china and the rest of the world as well. We are learning they are suspending or canceling remaining flights out of hong kong here today. I was talking to Airport Authority earlier. Incoming flights will be canceled. They close down immigration at terminal one. At first, they were diverting people to terminal 2. There are no longer doing that. The checkin counters have been closed. We got a statement from cathay pacific. They were saying, calling, urgent hong kong store law and hong kong to restore law and order. They are trying to get these flights back on as well as pressure from beijing after some of their employees were reportedly involved in some of these demonstrations as well. We are seeing another hectic day. At this point, no backing down from these protesters. Francine do the protesters have the soup of the of the citizens . Could you repeat that . Francine i was wondering if the citizens are still behind the protesters, whether they support the protesters. Yvonne it is tough to say. This is a city that has been divided, torn on how they view this right now. You see some moderate lawmakers backing these protesters. They are saying violent clashes and showings like this are the only way to get the governments attention. On the other hand, you have billionaires, the lovers who have billionaires, developers, who have been working with beijing. Thewon a big victory by suspension of the extradition bill. We are seeing the community voicing in on this discussion. Both sides, still hardening their stance. Tom thank you, greatly appreciate it. We will look for her coverage tonight. It will be in the u. S. Evening as well. A number of market indicators, i wanted to show the gema. Insists i talked in greek letters. 30 year bond, the long and indicates economic slowdown long end indicates economic slowdown. A 2. 10 on the 30 year bond. It has been abrupt. Stay with us, including our coverage of Foreign Affairs magazine. This is bloomberg. Extraordinary moment for the markets, terminal break downs, 210 and the 30 year bond at 2. 210. Gideon rose joins us. Weinstein of Morgan Stanley, you guys have had grief with a cautious call. Reaffirm the cautious call. What is most important is tension in the by market . Brian it has been on a big u. S. Cents september, october u. S. Since september, october of last year. Growth expectations are falling. The big rally has been happening since last year. Tom a global depreciation, argentina is an eu concert an idiosyncratic story. A level of inflation in the global system that pushes against the theory . Brian it does, not in the u. S. It will keep inflation down. It is problematic for emerging markets. Problematic. Though thena, even dollar is stronger, payback happening today. Francine where do you see dollar in 18 months . Maybe 12 months, is that the only thing that influences policy . Brian arguing the dollar will be frustrating. It looks like it should be lower. Calling for a big depreciation is problematic. A stronger dollar will keep the fed wanting to ease a bit more. It is a side story. Aboutnow, you can dog global problems. Theres no question can talk about oval problems. There is no question they went 25 last time. It is unclear how aggressive they want to be. Does it look like from the fed right now . Brian a policy mistake would be extension, the idea we do not know what to use. There are a number of camps in the fed of easing off quickly and not being too shy. It is getting more and more clear uncertainty will cause unease. Tom you have seen this before. What is an important factor in the yields . 1930s . 1950s . Brian we debate this all of the time. It is easy to jump in 2008. We wonder if this is something different. We wonder if this is an extended period of low Interest Rates the trend japan started a while ago. The Interest Rate is low. You have really uncertainty periods of risk assets that do not do anything for a while. Tom francine, i want to do a data check. Help me out. These are red on the screen, lowered yield. S. Francine, what do you see . Francine in asia, the original benchmark is headed for its biggest drop in a week. Equitiesint out, u. S. Are declining. European stocks are down some. Because of turmoil in hong kong, argentina, investors are wary to get back into the trade war. Tom gideon rose, one thing to watch . Yen, the japanese yen breaking down 105. We will do much more of this. More with gideon rose. Coming up, the chief executive officer. 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 this is bloomberg surveillance. Tom, lets get back to the markets. Lets look at the wall of worry. Global bond yields, protests in hong kong, and political turmoil in argentina are adding to volatility in assets, forcing european stocks down. Asian shares seem to be spreading here the dollar edging higher. The gold and silver are rallying. The japanese yen as the litmus test. Lets get to first word news. There is viviana hurtado. Viviana in hong kong, protests have forced the airport to cancel departures for the second day in a row. Hundreds of mistreat or sit down in the departure hall hundreds of demonstrators sit down in the departure hall. In the philippines, there are sharp words for the president from his vice president. She tells bloomberg citizens are worried he is selling out to china. She wants him to take a stronger stance and protect the countrys rights in the south china sea. She discussed the philippines ties with the u. S. To be more friendly with china, our asian neighbors would decrease our friendship, our relation to the United States. I do not believe in that. I do not believe the philippines should choose between the u. S. And china. Viviana she continues to say it she is deciding wether to run in esiden president in 2022. U. S. Deficit in the first 10 76 million. Was 8 cuts wills say tax spur Economic Growth and lift economic revenue. In russia, radiation levels reached 16 times normal after a failed missile test that resulted in an explosion last week. Moscow said it involved a small Nuclear Power source. Five atomic scientists were killed in the blast. 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. 26, a newp sharply, high. Cirilli, a really an oped , this is wrapped around what we hear from democrats and republicans. Should we do something . Are we going to do something about china . Economic liberties have created a new the Hong Kong Chinese. Exports are not currently subject to the president s tariffs. Extend itent should to hong kong. It would prevent china from using hong kong to end its tariffs while sending a clear behindu. S. Standing people yearning to be free. A brilliant read, kevin. What is the white house going to do about china and the linkage to the protests in hong kong . Kevin the white house put out a saying theysterday, stand with people who support democracy. They have been walking a very narrow tight rope in terms of their comments with regards to hong kong protests. Likewise, the situation that happened over the we in moscow with the protests. It has been interesting to see how they have walked this. From the perspective in washington, observers of the u. S. China trade talks argue increasingrgely political pressure as a result of hong kong. Hong kong and the u. S. Is letting it play out. Tom it will play out, but i also see images on twitter, i am not your how official they are or direct they are of military vehicles of Mainland China winding up on the border of hong kong. There is a point where this becomes a state department issue, right . Kevin absolutely. To that point, what you are seeing from chinas state run media is they are referring to this as a color revolution. Morgan at the state department put it well when she criticized forchina government criticizing a u. S. Diplomat for meeting with local hong kong organizers. She called the chinese put out and the names of the diplomats children. She called it thuggish behavior. A close watch of what is going on over there, but the chinese are going to have to be watching know the protests in hong kong have been going on. This dates back well before the Trump Administration. You are starting to see them make that realization. Hasu. S. , for their part, keeping a careful watch on this, but have been letting it play out. Francine at the same time, there is news on changes on immigration policy. Do we understand how much of the of it isinistration immigration policy and fighting with china . Kevin politicians here say they could walk and chew gum at the same time. The immigration issue, there are questions from the Business Community perspective that folks will be watching on. Last week, the nation captivated raises. Ississippi they are the location for the immigration mississippi raids. They are the location for the immigration raids. There is a polarizing divide between democrats and republicans on the issue of immigration with democrats saying to abolish ice. Some say to abolish the agency. Republicans take a more hardlined approach. Tom thank you. Ryan weinstein Brian Weinstein and gideon rose with us. Affairs foreign magazine on autocracy. A giant of International Trade the frome, they hair trade ear the from the trump trade policy to shreds. Naturalit is not just a death by causes. It is an assistant it is a murder. We are watching this play out in which a system unravels. The Previous Administrations have tried to get yields that worked well for everybody. Right now, the administration seems concerned to get a shortterm boost in individual deals, but does not care about the longterm systemic effects. Everybody is fighting with everybody. Francine asked about how the domestic agenda played into the china talks. The answer is fighting with china is part of the domestic agenda. It is another bogeyman internationally. ,om the heart of the matter douglas irwins famous line against the tide. All of the argument about a Global Trading system is pushing against the tide of mercantilism. Where is congress to lead the battle against this president . Congress has been absent for a few years. Play outexpect them to on Foreign Policy going forward. They have not been for a while. There is no reason to expect that now. Tom they alluded the article in the 2020 election, they may not change this global gideon when you have seen over the last couple of years in the next year and a half is one hold the Trump Administration the big question is what happens in 2020 and how much damage has been done or how much erosion has been done if trump has not been reelected to flip back . We do not know. It is hard to see the overall damage until we get to 2020. If trump is reelected, this is the new normal, not something we recover from. It rides on the 2020 outcome. Onncine everything rides the democrats choose. Someone central or extreme . Gideon i am not a domestic politics guy. I do not think the specific democrat, unless it is truly extreme, none of the squad is running. I do not think sanders will win. The others are relatively conventional democrats. I do not think any of those are a dramatic difference. It will be a referendum on trumps rather than democrats. That is not my area of expertise. Francine how much do we understand about ever becomes the democratic candidate will differ from President Trumps agenda . Or will they have to deal with the agenda . You could have the same agenda, going after china, but the endgame is the same. Gideon the phrasing matters a lot. They would not share the same agenda. The democrats or whoever the next president is, trump or a successor, will have to deal with the same challenges. The rise of china is a challenge. It is not necessarily an agenda. It is not automatic you have to suppress china. Challenge, the same thing with u. S. North korean missiles. It is a challenge that has to be dealt with. The modus operandi is to take normal problem, hype into a crisis, dissolve the crisis by group source, and move on to the next thing. The next person in office is going to have to deal with the crises that have drifted the last several years and need to be resolved in the next administration. Francine brian, given all of this uncertainty, what is the haven . What is the use of the dollar in treasury . Is it getting taken over by gold . Brian treasuries, you pick your safe Interest Rate, and it is working. Youll wounds yield bunds u. S. And Australian Government bonds, u. S. Has rally more. There room if uncertainty continues. Francine thanks, brian. Brian and eddie and and gideon. Lets look at what the argentinian peso is doing. Everything. Ed argentina is on the cusp of fullblown crying fullblown financial crisis. This is bloomberg. Bloomberg surveillance, thank you for joining us. An extraordinary day across markets and a fractured International Relations. We spoke on hong kong and argentina. There are many different ways to go. Union rose gideon rose as we throw out a chart with Brian Weinstein. Inflation induced coming out of world war ii, up 14 and 15 yields. With the courage of paul, down we go of a great inflation. Great deflation. Morgan stanley nailed this trend. How do you break this trend . Brian great questions. We do not see the trend breaking anytime soon. How do you break it . , a change inth demographics, the trend in inflation is entrenched. Tom the policy, gideon, all we need is more. We have been peaceful. It has been a peaceful era, which has led to the area to deflate. Gideon if you are worried about that continuing, you have good company. If that is what you need to get things going, you may get your wish. I do not expect it, but do not rule it out. Francine let me get back to gideon. Commentary iset not a wrong one. When you look at your Foreign Affairs magazine cover, what do these five men have in common . Gideon this is a great thing. These are the five current dictators. We wanted to delve into their personalities and individual career stores to see if we could get any methods career stories to see if we could get any methods to see what makes them tick. They are controlling their countrys destiny. We are talking about hong kong, for example. There is a possibility a cracked and could help xi if you want a crackdown could help xi. Hewants people to know enjoys killing people, that is a part of his image. Amhe says, bring it on, i determining Party Strength no matter what, it may show. Understanding the personal psychology of these leaders and what their own individual goals are is a crucial thing. Get to get we try to get that in the issue. Francine brian, an interesting point. Looking at these five people in big countries and you have yields in europe in the u. S. , where you put your money in this kind of scenario . Brian it is hard. We added a lot of duration this year. As the uncertainty picks up, there is opportunity. Highyield are wider. There are highyields are wider. Diminish, will overall, on and off. We think highquality fixed income will be an asset people seek out. Tom very good. This has been wonderful, gideon rose and Brian Weinstein. I will wander off to radio. Of the hongs out kong airport today has been extraordinarily convoluted and mixed. Bloomberg news will correct will correctews that hong kong is not canceling departing flights. Checkin has been halted. I have no idea what i just said. That is the headline flow we they are a correction still departing out of hong kong airport. Worldwide, this is bloomberg. Viviana this is Bloomberg Business flash. A judge has reinforced in order to end an alleged work slowdown. The airline says the workers have had a devastating effect on flights during the busy Summer Travel season. The judge ordered the Mechanics Union to stop encouraging workers to delay aircraft repairs due to a contract dispute. Isted Parcel Service extending a push to hire outsiders. Ryan newman will become cfo next month become cfo next month. He is replacing richard, who is retiring. David is repackaging the courier to handle the rise of online shopping. He is adding three other executives. The owner of taco bell, kfc, and pizza hut wants to get her. Yum get bigger. Says it will consider she jet strategic partnerships. That is the Bloomberg Business flash. Francine thank you. Cpi at 8 30 eastern time. Inflation. Ees u. S. Escalation of trade turmoil and market volatility still remains strong risk due to the indicator. Brian weinstein is still with us. How would you describe the u. S. Economy right now . Brian the u. S. Economy is the strongest of the slowing Global Economy. It is not in a bad place. The direction of travel is the wrong way. Francine we have a great viewer question. Keep sending them in. A turne assumptions of in the rates market . What is the probability of this . Brian what is the probability o . Brian the rates markets will continue to be a function of how much we think the central bank will ease. If the fed can get ahead of the curve, if they agree inflation is too low and growth is falling enough they should use 50 or 25 in the next eating or to, it is a next meeting or two, it is a good sign. It shows you the only thing that matters is the uncertainty, the fear this is driving Global Growth lower could drive it to levels that surprise people. Francine what happens when we have resolution with the u. S. China dispute . It would probably be a miracle. Come september, they sign, they move on. What does it mean . Brian they go up. The curve of police deepens, depending if the central bank is used a lot. It is uncertainty. If we do not know what the global trade rules will be, they will not invest. Does not matter how it is resolved so long we have certainty around what the policy will be and the noise dissipates. Francine canary in the coal mine, do you have a canary in the coal mine, whether it is the china indicator, business investment, chief executive spending, or traditional data points in the u. S. Economy . Brian that is more traditional data points. The u. S. Consumers have held up well, a big driver of u. S. Growth. We would watch domestic markets. It would be nice to see inflation pick up and Consumer Confidence they high. That is something, if it cracked, will exacerbate an already difficult situation. Francine do you look at 10 year chinese yields . Is that offtopic . Brian we look at them. There is not a tremendous amount of information in the, except to say growth and inflation there is minimal. Not a big deal if they should be higher or lower. Francine wonderful, what a great hour. Ryan, thank you very much brian, thank you very much. In the meantime, i am looking at the yields out there. The 30 year yield is lower. We will have a lot of time spending, looking at that. I am looking at Investor Confidence slumping. Germanys recession, risk off move. Stocks are declining in the turmoil due to argentina and hong kong. Surveillanceg continues on radio, they will look at yen movement. This is one thing tom wanted to focus on as the litmus test. This is bloomberg. David selling large selling argentina. Investors unload with fears of a possible default. Panic and chaos. Thats how hong kong leader carrie lam describes airport protests as credit growth slows in the economy overall. And buying bonds. Yields continue to drop, with the u. S. 30 year near an alltime low and european Corporate Bonds going negative for the first time. Welcome to bloomberg daybreak on this tuesday, august 13. Im david westin, here with taylor riggs. Alix steel is off today. Was off last week, and came in monday morning, and it felt like there was no longer a slow august. This news flow has really ramped up. You see those risks we talked about in the Global Markets play out in the s p market this morning. You have s p futures lower again