Transcripts For BLOOMBERG Bloomberg Surveillance 20240714

We are seeing green on the screen in terms of equities and u. S. Futures. We finished unchanged on the s p 500, so the markets are a little bit risk on. We are seeing that reflected in the bond market. The 10 year has backed up. We have a number of regional president s pushing back against further rate cuts. The dollar is on the front foot as well. Coming up, we are live from jackson hole as investors take positions on how fast and how far the fed will ease. We have a host of stellar interviews first up, James Bullard. And then watch out for robert m Robert Kaplan and patrick harker. , that iser it takes what new Zealands Central Bank governors says he will do to support the economy. Thef says he will evaluate impacts of this month on expensively large rate cuts before considering further easing. Forward, we were saying everyone is telling us we needed to be lower. Everyone is telling us Global Growth is slowing, so lets get ahead of this. Lets move and reduce the probability of having to do a lot more later. So we are pleased with where we are. Japans Prime Minister accused to south korean counterpart of damaging the relationship between the two uluntries after soul seo pulled out of an intelligencesharing pact. Said he wills now work with the u. S. To maintain security. There is no doubt that the shared interests are important to the let states of america. We hope to the United States of america. We hope they can put the relationship back. Emmanuel macron is calling on g7 to discuss what he describes as an emergency. In the last few days, brazils policy towards the rain forest is under scrutiny. 84 year on year increase in forest fires but Jair Bolsonaro criticized the decision to discuss the issue, showing a quote colonial mentality. The battle to host the worlds biggest Public Offering is heating up. Global exchanges are stepping up their courting of saudi aramco. We are told senior officials have been actively pitching the saudi oil giant. Global news, 24 hours a day on air, on tictoc, and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Nejra . Nejra thank you. Investors waiting for jay powells speech today. It will be closely watched for clues on if the central bank chief sees july as a midcycle adjustment the start of something bigger. The chief Economic Advisor at allianz says the cycle may not be what the economy needs right now. For markets, it is really important. They are looking for a cycle that goes 75 basis points. Some argue even further. But the reality is it wont do anything for the economy. The reality is it may boost asset prices in the short term but increases the risk of instability down the road. Nejra investors have priced in a 25 basis point cut next month and three policymakers have voiced resistance with a fourth saying he wanted to avoid further action. One dissenter is Kansas City Fed president Esther George. As i look at where the economy is, it is not yet time, im not yet ready to provide more accommodation to the without seeing an outlook that suggests it is getting weaker. Hiring has slowed but is still healthy. Are they working or limiting hiring . The reports we get our that businesses are still having a hard time finding people. Still wrestling with wages and thinking about how to compensate a workforce they need to be productive. That is still one of the largest concerns, keeping the workforce and figuring out how to compensate them. My next question, where is that wage pressure you have been looking for . I think we are seeing higher wages. Its true that we were not seeing a pickup in wages for a couple of years. Over the last couple of years, you have seen that pickup. I think that as productivity has gotten stronger, the recent releases around that suggest inflation is not going to pop up in a way that will undermine the workers ability to realize some gains. Let me ask you how you look at Monetary Policy. You were an advocate of raising rates to get ahead of inflation. If you are not ready to cut, are you happy with where rates are , given that inflation is lower than anticipated and would you be happy to leave them at this level . So i think that is a process of judging how the economy unfolds. Where rates are right now relative to unemployment, it suggests we are at an equilibrium. I would be happy to leave rates here, absent some weakness or some upside risk. That was Kansas City Fed president Esther George speaking to bloomberg that the jackson hole symposium. Lets focus on the fed and jackson hole. Joining us is the cio for International Wealth management in the global head of economics and research at Credit Suisse. Great to have you. How much of a turning point for the Jerome Powells speech be . Anette really, all eyes are on the guidance that will be offered by Jerome Powell. In the most recent days, there has been an interpretation that he has perhaps been on the hawkish side with some members of the Federal Reserve not seeing the need immediately to cut further rates but there is this a normals influence that fed and Monetary Policy has on markets and a lot of expectations built in. So i believe the markets will and ivery sensitively believe there will be a loss of focus on jackson hole overall. Will powell pushback on Market Pricing . Nannette it is a very thin line he will be walking here. To be honest, the Manufacturing Sector worldwide, including in the United States, is undergoing a period of weakness. The more protracted and the uncertainty is, the deeper it will affect sentiment in the sector. And when this starts to have an ,ncident from the labor markets then the Federal Reserve has a good ground to consider Monetary Policy further easing. Nejra so what is your strategy around fixed income . , i think that, at the moment, Interest Rates are bound sustained low. To stay low. I am coming from a country were government bonds are close to 1 . Everybody in the Institutional Investor world will have to think about a long time of low Interest Rates. But then again, when you think about total returns and upside risk, trade talks could very well end with more than just a truce. In fact, some sort of agreement, and then yields could quickly move up from where they are, destroying returns. To cut it short, on government bonds, we think there are better ways to get kerry and income in a portfolio. We have underway to those in a multiasset strategy to the benefit of credits that are getting a little bit of spread. Nejra makes sense. If you are under waiting bonds in favor of credits, does that mean you are adding to equities . Nannette we have been quite happy to have Strategic Asset allocation, which is already quite high. Yes, when we that, have Monetary Policy and increasingly fiscal policy economy, thenthe it is positive for risk assets and equities absolutely are comparing more favorably than Investment Grade and highquality bonds. So we do have a preference for that in multiasset strategy but we are not overweight the asset class. We are happy with our generous, Strategic Asset allocation. Nejra and within equities regionally, you have a preference for the u. S. Does that mean you prefer the dollar over other currencies . An area the dollar is where you have had to think very hard about what it means when the Federal Reserve is cutting Interest Rates. Cut,er it is just a small as it was framed, or the start of a series of Interest Rate cuts. It is apparent from previous easing cycles that the dollar can actually stay quite resilient in the next 36 months that follow such an adjustment. , often times,that capital flows are much more influential in terms of the currency movement. At the moment, capital flows are flowing in to the United States. This is creating demand for the u. S. Dollar, so we have to change a little bit our views around the dollar. We now think it is going to stay resilient for quite a while. 1. 08,asts are 108 1. 1 in 12 months. Nejra our guest from Credit Suisse stays with us for the hour. And plenty coming up, a gloomy to do list for the the leaders of the worlds biggest economies as they head to the g7 summit. Plus, is germany headed towards recession . We discuss that later in the show. This is bloomberg. Nejra economics, finance, politics, this is bloomberg surveillance. Lets get the Bloomberg Business flash. Bank is paying over 16 billion to the u. S. Sec to settle allegations it hired relatives of over seas government officials to boost business. The suit focuses on the asiapacific region and russia. The frankfurtbased lender agreed to settle the case without admitting or denying wrongdoing. Goldman sachs is getting the Cold Shoulder in upper darby. Last year, adnoc hired the lender, but has not invited back for the second round. We have learned that is due to the 1mdb scandal. Goldman has struggled to win business in abu dhabi since earlier this year when the emirates wealth fund suspended activities. Hasbro is setting its sights on becoming a media giant. The toymaker is spending 4 billion to buy Entertainment One, a studio that makes tv shows and animation. They are getting big children brands including peppa pig, which will help to expand into international markets. Their stocks surged on the news. That is your business flash. Nejra thank you so much. World leaders gather in Southwestern France this weekend for the g7 son of summit. It will provide a chance to address some of the days major worries, including tensions between the u. S. And iran. Joining us now is bloombergs maria tadeo. Great to have you with us. It looks like a contentious g7. What is on the agenda . Good morning. It could be contentious, it could be unpredictable. What we hear from officials is that the bar is very low when comes to any kind of agreement to the extent we will probably not get any communique by the end of the event. And they worry a lot about trade, about the state of the Global Economy and a recession in germany. Of course, there are the politics which look shaky and unstable ready much everywhere. The europeans are waiting for President Trump to tweet. He likes to do this before big events, he likes to set the agenda. And of course, the risk of a no deal brexit is unclear. In the meantime, there is a lot happening here but it is unclear whether we will get any kind of agreement by the end of the session. Nejra thank you so much for joining us. Still with us, and that nan nette from Credit Suisse. What are you going to be looking out for most . Nannette i think that one of the important topics of today in this world of multilateralism coming to a change, perhaps not to an end, but also recession risks in some countries, particularly in europe, is going to really put the limelight back on Economic Policy by and large. Policy, monetary because when Central Banks have arrived at the socalled zero bound and considering quantitative easing that has favored asset inflation over real goods or service inflation, leaders around the world have to think about fiscal policy again. , alreadyhere will be now in the making, but perhaps after g7, more openness to use a fiscal policy as a very important instrument at this time. In countries like germany, there is obviously a slump in the industrial production. Economy and the eurozone as a region has given much more weight to industry as opposed to technology. So i have been very interested to see that at the European Union level there has been talks of creating a Sovereign Wealth Fund that could aim to Fund Technology or leaders and national champions. That is a topic that we at Credit Suisse have been engaging in with quite a while. For quite a while. We think there are strategic areas in a number of countries and there is a focus on supporting that with private and public cap. Capital. Nejra with the precipitous drop we have seen in yields, is it a sign that investors actually want this as well . But they are saying there are limits to what Monetary Policy can do . Nannette the bond market is really mirroring something or reflecting Something Different then perhaps the rest of the Financial Markets. Time,uld argue that, over bond markets have been having a more pessimistic read, generally speaking, then equity markets on the same situation. So i do believe recessionary risks are reflected in bond yields. Andstory that bond yields curves are telling at the moment. Leaders around the world, including both political and economic leaders, are paying great attention to that. Certainly, when i to markets have helped Financial Markets have helped decisionmakers to come to the right decisions. Very briefly, have we got to a point where it is actually too late and fiscal action wont save us from recession . Nannette i dont think so. For example, Infrastructure Investments are so necessary whether this is in the area of transportation, whether urban or cross region, just the fact that there is no rail that goes from north to south come from sweden , from swedensouth to sicily. Generation,y power it does imply water. It does imply Affordable Housing. All topics, by the way, which are so important to citizens. When you see how much dissatisfaction is prevailing at the moment, i do believe there is absolutely an impact to be one,with fiscal policy for and secondly, infrastructure. Nejra much more to discuss. Nannette hechlerfaydherbe from Credit Suisse stays with us. And stay with us, we will bring you live updates from g7 and todays most pressing issues. This is bloomberg. Nejra this is bloomberg surveillance. Cuts are inflating a dangerous bubble in bond prices, the view of scott minor. But he says that like all bubbles, the end is not easily discerned. Still with us is nannette hechlerfaydherbe from Credit Suisse. Are we in a bond bubble . Nannette i dont think so. Clearly, yields are not attractive, but they are reflecting a reality. When we try to estimate yields we can explain with the current set up, then we end up not far away from the current level. So there is no indication of factrance, but it is a that there is also a lack of alternatives, frankly. Investors, if today they are worried about the Economic Outlook or perhaps risks that are broadly around, they do not have much more alternatives than piling in two toeady unattractive in already unattractive government bonds. Nejra nannette hechlerfaydherbe, great to have your thoughts. Up next, we bring you stocks on the move. The owner of pepe, shares are starting peppa pig, shares are soaring. This is bloomberg. 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 buy a new samsung note. Click, call or visit a store today. Nejra jay powell needs to find a balance at jackson hole today. G7 leaders gather, and the issues of brexit and a new Italian Coalition loom large. Indecision in berlin. Germanys this bank says it is not time for stimulus, even if sentiment sours on its Manufacturing Sector. I am there which a pitch in london. Lets check in on the biggest stock movers now. We do that with amory hoarder boosting the shares of pepa pig nearly 30 , boosting 4 billion. It comes on news of potential merger. The still unit is in concrete germancreating an steel giant. Secondquarter revenue came in 1. 9 percent above estimates. Balancing European Software companies after sales forces, a pretty big beat yesterday. Nejra now lets get to first word news with viviana hurtado. Three fred three president s will only take action if we have to. That only puts them at odds with the market if fully pressing at a quarter production in september. Today chairman Jerome Powell could provide more guidance when he speaks at jackson hole. If i look at where the economy is, it is not yet time. I am not ready to provide more accommodation without seeing an outlook that suggests the economy is getting weaker. Viviana italy post centerleft democrats have the countrys president says he was giving the president matamela holding the power to appoint the expert minister or call early elections. Hong kong pops political crisis pressuring the local economy and could trigger a global recession. That is according to harvard economist Carmen Reinhart, citing the city turmoil among her main concerns along with the u. S. China trade war. The antigovernment protests have been going on for nearly three months. Not segmented regional effects, these have really global consequences. What could be a Tipping Point that could trigger a very significant global slowdown, even a recession. Viviana global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in i am than 120 countries, viviana hurtado. This is bloomberg. Most developed Central Banks show caution, the reserve bank of new zealand surprised the market with 50 basis point in cuts earlier this month. Exclusively with her and jackson hole. Everyone is telling us we need to be lower and that Global Growth is slowing, so lets get ahead of this lets move now and reduce the probability of having to do a lot more later. So we are pleased with where we are. On the downside, you have the bank of new zealand manufacturing index, first drop below 50, feeling contraction now. Without doubt, there has been a lot around it is hard to ourahead of because government fiscal position is very strong. The government is outstanding, global globe are the trade is heading back to investing. It is Business Confidence and investing that is the anomaly here. And i think that is globally. When you look down the road, because people are already talking about the next cut, maybe not 50, but 25 basis points, are they on the right track . Is that the decision you have to make, went to cut rather than if to cut . Notnow, we certainly do hold out from doing anything. We will do whatever it takes. We like to think we are in a positive position where our Exchange Rate has come off. We are relatively competitive, particularly against the u. S. , and we are in a position to say how much of this global slowdown actually benefits new Zealand Economic activity slowdown. We have low government debt, so we are in a good position. , wait,afford to watch and observe what is happening. We have already taken a preemptive double cut. A double cut with 50 basis points. Buthat surprised people, the forward curve was there. Every economic commentator was there, 50 or 75 points. And they are all surprised we went there. What are you watching now . What is going to be the trigger that you say, we have to go, another 25 . Inflation expectations are important because it is much harder to lift Inflation Expectations if they are declining. As long as we can keep people inflation expecting and see it passed through to wait costs, that is a good thing for the central bank. Likewise government not being able to spend as quickly as what they are projecting to be able to do. So the fiscal impulse being slower or later. Was the reserve bank of governor of new zealand speaking with kathleen hays. Germany plus central bank does not see the need for fiscal stimulus right now. They expect the economy to shrink again this quarter, triggering a technical recession. Still with us, nannette hechlerfaydherbe from Credit Suisse. Calls from germany have been getting louder as the weeks have gone on. Do you expect any action to be taken, in not the near term, at least in the mediumterm . Nannette i think so. In germany as in other countries, there are parts of the population that are discontented with just generally the economic backdrop, but also perhaps the number of social questions. For example, the access to Affordable Housing in a number of cities in germany has become difficult over time. I do think that there are issues that can be addressed with fiscal policy, with fiscal spending. There are also areas where, frankly, germany did not invest very much. It is a country that is looking very much toward renewable resources, but it does mean that the whole Power Generation set up and grid has to be upgraded. So many instances where the Monetary Policy alone, especially when it is set for the whole of the european area and region, the euro zone, rather than just solely for germany, is just impositions. What islicy is taking necessary for a specific country at a specific moment. Nejra how should germany approach this . A lot of people have been given the advance of 2009 as when they could approach fiscal stimulus. Should there be a big bang, or just selective moves the echo nannette i think it is likely to be selected and targeted. I do think that the environmental aspects are going to be, for example, driving some of these selected measures. Not the least because of the political currents that are currently in place in germany as well. The green party is coalescing at the moment more and more support because voters, especially young voters, are concerned around environmental issues. So there is, in my view, a very good chance that we maybe see fiscal incentive, tax rebates, provided that they are helping the agenda on the environmental side. Despite the fact that you have said there are limits to what Monetary Policy can do, like many other people on the show have said, you expect more stimulus from the ecb. I am wondering what that means for your investment strategy. Do you buy italy . A lot of people think it will be a big beneficiary if we see more qe. Nannette for sure, we have in the past been quite doubtful, for example, on european equities, but on the back of now this turn in Monetary Policy back toward more easing, it has made us a little bit more sympathetic to european assets, and even in equities. If you have a central bank that is in some sense following what the u. S. Is doing, it also means that the euro is perhaps not going to strengthen that much, and that is helpful particularly to those european sectors that are heavy in exports, and hence very sensitive to the currency outlook as well. Nejra interesting stuff. Nannette hechlerfaydherbe staying with us. Is it time to buy the pound . Street and uvp says further declines in sterling could bring out bargain hunters. We will talk about that next. This is bloomberg. Nejra this is bloomberg surveillance lets go to viviana hurtado. Viviana Societe Generale is considering for its Asset Management benefits. It oversees about 150 billion euros. The process may kick off the fourth quarter. Socgen has been cutting costs and setting selling assets as the bank shores up its finances. Bloomberg learning that german automaker wants to secure assets in key tech in the Worlds Largest car market. Vw is interested in firms using technology in electric vehicles. Hps chief executive is being replaced by the head of the companys printing business. The new boss is looking to make changes at the world plus second largest personal computer maker. He has been working on a global renewal of company strategy, set to release in early october. That is the Bloomberg Business flash. Nejra thank you so much. Floor at pound find a 117 . The currency may be close to a level where value hunters are waiting. Not yet timeit is to make a bet on the pound recovery, but further declines could add to its appeal. Still with us, nannette hechlerfaydherbe from Credit Suisse. Poundart shows the breaking above 1. 22. You also have bluebay removing the short that it had on sterling for the past three years would you now say it is time to start buying the pound as the no deal risk has receded a little bit, or at the very least the market is pricing a no deal too aggressively . Nannette a couple of things. One, certainly the pound is cheap on many measures and against many currencies, and certainly traders will always have an eye on a currency that is in some sense undervalued. But there is i think the last few days have really shown the connect that exists at the moment between what the pound goes and the political news flow. Really, this technical breakup there has been entirely driven by hopes that there would be an but therein october, is a risk. The question of timing becomes now an important one. To beieve it is too early set for a longerlasting recovery. Ruleeason being, we cannot out the possibility of general elections, frankly. The political deadlock between government and parliament is not one that has evaporated overnight. That wes very possible thisually come closer to possibility ofe general elections. A lot of scenarios are possible with that uncertainty, and they are not favorable to the pound. We believe at the moment it is a tad too early, but for sure the pound has quite some possibility to rally once uncertainty is out of the way. Nejra what about other u. K. Assets, how would you position around those . Ts, or equities the echo gilts, or equities . I think gilts are not attractive. We are of the opinion that the government wants altogether not offering a very compelling proposition. But then when it comes to other assets, equities, for example, they benefit even when the pound is weak because a number of sectors are export oriented. Of all the assets, the equity market is the one we would be most favorable to. Dependent ons very what part of real estate, whether residential, commercial, or retail, for structural reasons that make us quite doubtful on retail as real estate and perhaps commercial is the one. Nejra all right, thank you for joining us, nannette hechlerfaydherbe. Now up next, trade wars and the Global Economic slowdown, looming for the list of leaders of the Global Economy as they attend the g7 summit. This is bloomberg. Nejra economics, finance, and politics. Lets get a quick look on the markets. We are seeing a bit of risk on today with european equities but also the u. S. Futures. Jackson hole, the head comes off the table 1 after today plus recession, the yield backing up. Trade wars and a Global Economic slowdown is the background to this years g7 meeting in a french resort. Adding to worries and increasing chance of a no deal brexit and disagreement over how to deal with iran. Ahead of the summit, lets get the view with some of bloombergs experts around europe. With me onset is our Senior Reporter for international affairs, mark champion, and allen crawford. Mark, let me start with you. What is the importance of the g7 this time around . Bloomberg put out a great story recently talking about how multilateralism is on the wane if not dead. We are hearing it might not be a joint communique. Is the g7 still of the same importance this year . Mark there is to a lot of questions about what the relevance still has. When they have their first meeting in 1995 to deal with an that hascrisis changed. China is not there, india is not there, brazil is not there. That has been a question. They created the g20 to deal with a less financial crisis. It is a question, and now since then there has always been the thought, at least this is a place where the big democracies cant get together and create a position of their own, show unity can get together and create a position of their own, show unity. With the election of President Trump in the u. S. , that has not worked either and they are trying to survive their way through these meetings. Nejra what will be Angela Merkels survival tactic at these meetings . Certainly, her priority will be to try and maintain some form of unity, at least among the six other countries, and she will be Standing Shoulder to shoulder with emmanuel macron. Despite any lingering differences between germany and france, it is in their interest to present a united front, and as far as possible with italy and the u. K. In the face of what can only be described as an onslaught from donald trump in these different fields. In policy terms, she is most concerned about any kind of respite in the trade war, given the fact that germanys economy is so export oriented. Nejra to alans point about President Trumps onslaught, is he likely to see that again . Mark absolutely without question. We saw his comment on denmark, he blew up the trip there. Then we started then we saw twitter saying that the allies are not paying enough for nato. Then that germany is not spending enough. I think we know what is going to happen. In particular, merkel will know that she is kind of in the crosshairs. She is the big trading country that runs a surplus with the u. S. We know that donald trump is allergic to those. On top of that, germany is facing a recession. Germany is reluctant to pump money into the economy to deal with that. The u. S. Economy is doing much better, yet trump is in a fight with the fed where he is trying to get it to pump more money into the economy. He will try and use the german stage at the g7, to use germany as a foil for his debate with the fed. Nejra interesting. Alan, it is Boris Johnsons first big summit as well. How do we expect the dynamics to play out, both with the u. S. U. K. Relationship and also in terms of any deal on brexit . Exactly. He has a high wire act to pull off. On the one hand, he wants to be as friendly as possible with donald trump, and of course we backed know that trump him even before he entered downing street. He wants some kind of commitment deala u. S. U. K. Trade after brexit, but at the same time he cannot alienate the likes of macron and merkel too much. So it will require an extremely delicate diplomacy, which orest johnson is not ever which Boris Johnson is not ever too known for. Nejra mark, we talk about communiques, and that germany and france will need to present a united front. The economy will be mark the economy will be at the center. Trump has said he wants a special session on monday. What trump wants will probably be the focus on stage, no matter what anybody else does. It is just the nature of the event. So there will be that message. But i think the other will be then theabout the g7 nature of these events itself. As you mentioned, this would be the First Time Since 1975 that one of these events did not produce a joint communique, and that would be a big change. A big derrico a big change nejra a big change at the head. Stay with bloomberg for full coverage of the g7 meeting this weekend. We will be live with World Leaders including President Trump and Boris Johnson, as they arrive to attend the summit. Bloomberg surveillance joins me in the next hour. Scarlet fu joins me in the next hour. Stay tuned for our coverage from jackson hole. 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. Nejra shouted from the mountaintops. Fed chair jay powell needs to find a balance at jackson hole today. But will he make a september cut . Big problems i the issues of brexit and the new Italian Coalition that loom large. And the end of an epic rally. The next changer risk asset model in government bonds as global yields reach new lows earlier this week. This is bloomberg surveillance. London,ra cehic in scarlet fu is in new york. Great to be back with you. What a day to be back together as we look ahead to jackson hole, the big question being whether jay powell is going to push back at all on Market Expectations and further cuts. Scarlet absolutely. Ncine and tom went francine and tom are on vacation for the day. What i got surprised by is that draghi will not be there. You will not get the global perspective we have gotten in the past, although plenty of their underlings will be attend ing. We got a taste of it earlier this week. Nejra lots to look forward to throughout the show. Lets get first word news with viviana hurtado. Waiting investors are to hear what Federal Reserve chairman Jerome Powell says about Interest Rates today. Powell is speaking at the feds conference. Three free regent regionals are already coming out against additional Interest Rate cuts. Investors have priced in a cut at the next policy meeting. The white house says the u. S. And china had a productive phone call on trade. Economic advisor larry kudlow telling reporters there are still plans for a chinese delegation to visit washington next month. Administration officials have warned there are significant structural issues with china. The to italy, that is where president of italy has given rival parties till tuesday to form a coalition of fivestar movement is now in talks with the center left democrats. Matarela is beingmacron pressured to take care of fires in the amazon forest. Internationald an crisis, the brazilian president is angry. He says that discussing the fires without brazilian involvement shows a colonial mentality. Global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more i am vivianantries, hurtado. This is bloomberg. Investors are on tender hooks as we await the start of the jackson hole symposium, and no one is trying to get of the to get ahead of the fed too much, that we have a mild open. Gains across europe. Oil and gas are laggards. We are seeing some of yesterday plus surge, looking for a sign that the pound has bottomed. Indicates ar decline in price, moving the yield up. The 10 year yielding 1. 64 . Curve we have seen the moving back this week, especially with the fed she back on Market Expectations. We did invert yesterday again. The twoyear yield sitting on a 1. 64 handle, up three basis points. Bund deal. Scarlet bonds may be falling, stocks may be rising, but no one is putting too much stock in any of the moves because it could all change once Jackson Powell Jackson Powell . At jacksonspeaks hole. Volumee bars indicate has been steadily falling over the last couple of days. Overall across major u. S. Exchanges. That is down near almost 30 from the previous three weeks. So perhaps we will get a pickup. It is late august after all. Not beeninly there has too much participation in the lead up to this widely anticipated speech. Nejra you are looking at equities and i am talking about rates. Indexterest rate trend hitting a record. The question is how much of a move lower in yields . We have seen a backup in the last three days, but how much of the europe being lower in yields is due to momentum and therefore how vulnerable the mobile bond rally, particularly in treasuries, is at the moment . A lot of people are reporting that Jerome Powell a speech could lead to big moves in the markets as well. Powells job jay is harder today when he gives a speech today at jackson hole. As i look at where the economy is, it is not yet time. What is the point of announcing today what you think will happen to Interest Rates when you know that there is a lot of data to come . We should not expect the fed at this time to have their hands on magic switches that are going to affect the broad economy in very short term. The turmoil in hong kong, i think, has quite possible consequences for growth. We cannot afford we can afford to watch, wait what is happening. We have already taken a preemptive double cut. Nejra joining us now is a allianzconomist from Global Investors. Hadng given that weve fed speeches, not so much the dovish side of the fomc, but some are pushing back on Market Expectations, does that make Jerome Powells job a little bit easier when he speaks . It is not for powell to say what the fomc will decide at the next meeting. What the market will be looking for is a promise of liquidity if uncertainty in the political issues increases, and powell cannot deliver that. There are things that are completely outside of the agreement. Trade wars. They cannot do anything to help industrial exporters. When you look at the u. S. , the domestic side is doing fine. Why waste all of that ammunition you have built up over the last three years just because markets panic about trade. The financial point is if we worry what happens with the mexican economy and the market tanks, then the u. S. Economy has problems. What we will probably get is one more hike this year, one more cut, excuse me, and then a promise of data dependence and 2020. Nejra someone was telling me early that it was going to be powell to not sound hawkish today. Do you expect a pullback in u. S. Equities . We are slightly in the green today. Co. Certainly expect a more than just another 25. Equity markets have really just been recovering this year because of what the fed has done. And despite what has been happening with trade. So that has been the big support rerating,ad a big early, and that is Holding Prices up. Ofrlet we had a lot dissenters this week. There were reports when comments indicated that there is a reluctant to there is a reluctance to keep cutting rates. I think that anything the fed does is by design. What does it mean that these guys came out and spoke first . This was a deliberate decision, wasnt it . Kallum you might say it is a coordinated effort to bring up Market Expectations. What you dont want from a Monetary Policy perspective is to promise so much liquidity to markets that they rally even when there are risks out there that should be reflected in asset prices. What you do is you set up for a cliff edge. If markets are rolling because there are genuine risks out there and it does not it it does not present a problem to the economy, why should the central bank do anything about that . It is actually worse if you say to the markets, go back and rally. That is a much worse scenario. Feds not for a for the to make a decision on asset prices. So far there is not enough justification for the fed to take a big step beyond what it has already done, and probably a further small step this year. Scarlet if you look at the evidence of the companies, lucy, especially in the u. S. Where retailers came out with betterthanexpected numbers, it looks like u. S. Retailers are doing fine keeping profits rising. What do you make of the results we have seen so far . Do they paint a uniform picture on the u. S. Economy . Consumption is still very healthy, and youre seeing that in the top line of those companies. But in the industrial sector, you are seeing a slowdown because of what is happening with trade. Whole of thet the corporate season, that his been went has been happening with the forecast, with their outlook. I think it was nearly half of them that we are talking about tariffs and trade with an outlook statement. Spending beginn to slow. So it is a very different picture if you are looking from the consumer to what is happening in the corporate sector. Scarlet Lucy Macdonald from allie on, and kallum from Kallum Pickering. We continue our live coverage from jackson hole. First up, we have James Bullard at 1 30 p. M. U. K. Time. Then you will want to watch for Robert Kaplan later today right here on bloomberg. From new york and london, this is surveillance. Viviana this is is bloomberg surveillance p lets get the bloomberg is this flash. Hasbro is becoming a fullfledged toy company. They spent 4 billion to buy Entertainment One. That gives children bands like peppa pig to expand into foreign markets. It is hasbros biggest deal ever. Bank the u. S. Sec is accusing them of hiring overseas officials to win business. The hiring taking place in russia and the asianpacific region. Deutsche bank is neither denying nor admitting the regulators claims. To german automaker once secure assets to Key Technology in the world plus largest car market. With interested in firms an interesting electric vehicles. Scarlet lets get to our morning mustread. It comes from scott minard, who up hethat who heads is discussing the epic bond rally. He said cutting rates may contribute to a dangerous asset double. I hate to admit the ugly truth, but the bubble, in particular, the sovereign debts around the world. The category of suppose it riskfree assets has risen to prices which aaron tease a loss in many countries around the world. Kallum pickering from bloomberg, Lucy Mcdonald are still with us. Lucy, you still wonder if the 30 weekfund option this marked a Tipping Point. From your perspective, from an equities perspective, what did you make of the demand from the 30 year bund . I think the market is trying to get its brain around what the Interest Rates mean in the longer term. And so far people have just been staring at this sort of growing percentage moving into that territory without really thinking what it is going to mean, how long it is going to be there, and this is going to be the new normal of how we will have two value Financial Assets have to value Financial Assets because it turns everything on its head. I think we are still in that zone. Theyf you just think that are moving from one to zero and then zero, there is no difference except a seven ecological except a psychological difference, then things should be no different than they were before. Kallum, a lot of people think that a rally in bonds reflects concern about the economy. But what does the move toward negative rates in the developed world and other parts of the world mean for the economy . How does that affect the economy . Kallum it is a good question. I would hesitate to reason from a price. This is always the wrong way to look for things. The question of whether there is a bubble, it is a question of, do the prices reflect fundamentals that we can justify what do we capture in bond yields, Inflation Expectations for real growth and productivity. Both of those are low and for good reason, so it makes sense that bond yields are low. Adjustt abstract for Inflation Expectations, yields are negative, but it is not unusual before real bond yields are negative. I am pretty relaxed about bond markets. I think they reflect fundamentals which can easily be explained, and there is a good check of whether we are in a bubble or not. When you jump in a cab, when you go to the shop, the people there are discussing bond markets like they would be discussing bitcoin as they were in 2001. The question is, no. They have no idea what is going on in bond markets. From an economics view, it is hard to make a case that we have a bubble in bond markets. Nejra i love that. I am going to listen to my cabdriver talk about bond markets. I was talking with david riley earlier, and he said that where reasonable investors fears are in an inflationary downturn, also about the efficacy of qe. Some say governments are pushing more on the fiscal side. Would you agree . Kallum there is an emil and there is an element of that. The central bank looks for guidance about expectations in the bond market, and the bond market if the central bank is worried, they will buy bonds. So they could potentially cycle bond markets down per fiscal policy can always help. If you throw money at the bond market in the short run, things look better. But the problem we have is structural. Nejra at what point do bond yields start to worry or rather than providing support to equity markets . Lucy around these levels, as i say, it is causing quite a few concerns, and it is one of the reasons we have high volatility in the market. That is the one thing we have been expecting, high volatility, relatively flat returns. And also uncertainty about what is happening with trade. That seems to be where we are. Nejra great to have you with us, Kallum Pickering and Lucy Macdonald. Stay with us. And a quick check on where the euro is trading as we had to break. We are discussing the euro zone next. Just. 1 . Ollar off 1. 1067. This is bloomberg. They have the dreams, we have to bring it to reality. Between the three of us, we can do anything. Nejra i am nejra cehic in london, with scarlet fu in new york. Sentiment is souring on germany plus Manufacturing Sector. Kallum pickering from bloomberg and Lucy Pickering from Allianz Global Investors are still with us. The mostermany is export oriented of the big economies, so it makes sense that when we worry about the global cycle, when industrial producers are weak, when trade is weak, germany will show more weakness than your average ager economy. Bundesbank is saying fiscal policy can stimulate the domestic side of the economy. If you have weakness in the external side and push up the domestic side, it looks better, but you are not treating the problem you are facing, you are boosting one thing because you suffer from another. Weak inmers get germany, the argument for fiscal stimulus would be stronger. For now, there is not much use of that. Nejra so for now, hold off on a 2009 style stimulus. Kallum certainly. Much more than that, it is not very politically viable in germany either. Scarlet if germany wont embarq on fiscal stim is because it is not time yet, yet countries outside do, and here i am thinking President Trumps policy, his productions to cut income taxes or payroll taxes, and china and barks on stimulus, morermany expecting resistance from the u. S. Or from china . Kallum germany has export oriented indices that are exposed to china and east asia, especially on the input side, soy big stimulus in china would help germany a lot. The u. S. So big stimulus and china would help germany a lot. We all benefit from a u. S. Fiscal stimulus. For the you hey for the u. K. , which will probably embark on fiscal stimulus, too, and the longterm you have to correct that with higher taxes or convince markets that you do not have a debt problem. For germany, it typically takes a more german approach a more prudent approach, and the long run more structurally a sound. Nejra are there any lucy industrials in germany and in europe are widely more interesting because of the because of what you have seen due to the trade concerns. That is not a bad starting point, but you want to see china stabilizing first. That, on the pmis in china, it is not great but flattening out of it. I think you would like to see some stabilization recovery there. That will help with the exporters in germany. Ofrlet lucy, Larry Fink Blackrock has made a point that the ecb should consider buying equities at its next move as its next move. What is your take on that . Logical nexts the move, and they look better than some of better quality in some cases than the other assets they could be buying. Pickering andm Lucy Macdonald are staying with us. Coming up in the next hour, dan at 6 00 a. M. In new york, 11 00 a. M. In london. This is bloomberg. Segmentedre not regional effects, these are global consequences. What could be a Tipping Point that could trigger a very significant global slowdown, even a recession. Scarlet that was Carmen Reinhart talking about the crisis in hong kong, how it could be a Tipping Point for a recession. Aaron rosengren also cited hong kong. Lets get to bloomberg first word news. Viviana traders are looking to Jerome Powell for guidance. Three of the Central Bank Policymakers made it clear they are opposed to lower Interest Rates. At a speech in jackson hole, powell may make it clear. Markets pricing in a quarterpoint rate cut. The new tariffs donald comp trump is threatening could drag the to the lowest ands 1990. That since 1990. Economists say gdp expansion could be cut by half a percentage point. Japans Prime Minister accusing south korea of undermining trust between their countries. South korea will withdraw from an agreement as japan does not consider export agreements. U. S. Aviation regulators looking for a few good airline pilot. Experiencelyers with flying the boeing 737 max. The pilots will come from around the world and some will be seasoned captains. The faa wants those with as little as nine months of experience. 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. Nejra thank you so much. World leaders gather in a french city this weekend for the g7 summit. It will provide a chance to address Major International concerns including tensions between the u. S. And iran, the trade war, and the risk of a global recession. Joining us as maria tadeo. Lots of different issues that could intentionally be brought up. What is the top of the agenda . Here there is many issues , and everyone is looking at their phones expecting a tweet from President Trump. This is something he likes to do before a big event to set the agenda. There is many issues that on the sidelines officials worry about. They worry about trade and the global state of the economy, and germany. The politics looks so shaky and unstable everywhere. Perhaps a no deal brexit, President Trump always unpredictable, and utterly could be headed italy could be headed for another election. We are not expecting a communique by the end of the session. Nejra what can we expect in terms of communication and if we are not expecting one communique, the host country france, perhaps will they encourage many communiques minicommuniques . Maria the french are saying there is no point to put down a watered down statement that says nothing. We should have a debate in get to mini agreements. They want to focus on the diversions between the United States and united kingdom. One of the concerns as we will see a g5 versus g2. There is a meeting planned between Boris Johnson and donald trump, one everyone is curious about. Brexit, there was no breakthrough in the meeting with president macron and perhaps not by the end of the session. Europeans are skeptical about negotiations. Scarlet maria tadeo joining us from france where the g7 will be taking place. We want to welcome stephanie , and lucying us mcdonald is still with us. Give us your thoughts on g7 and what it means for how you view the political when blowing. Wind blowing. Doesnt move the needle or give a window into how leaders are positioning themselves . Stephanie it gives us an indication of what we already know, we are in a world where relative to five to 10 years ago , the g7 and g20 were big opportunities for leaders to come together and find solutions. Yes, the Economic Data is worsening but we are not close to crisis, so we have political crisis around is there a space for politicians to get together . My expectation is you will see politicians you will expect to see work together, germany, france, european leaders. You will be fascinated to see how Boris Johnson and Donald Trumps meeting goes, but we kind of know their relationship. This is the reality of having a twitter sphere where you see the relationship playing out. The idea that trump would be supportive of johnson pursuing an aggressive line on brexit and johnson would be complementary to the u. S. President in terms of a trade deal, not surprising. I am expecting a reaffirmation of the fact that we are in a more fragmented global and political economy. Scarlet the Prime Minister of italy is on his way out so we dont know what will happen for leadership. Talk about this effort to find a new government, a sustainable coalition. Will it come to anything . Stephanie it is italian politics so never say never. There are incentives in the short term. They dont want to go to elections because their polls have been very poor so there is an incentive to work together. Bear in mind, not even a month ago you were having communications from renzi saying they will never work with the fivestar movement. They are rivals for the left wing support base so it is not the most straightforward coalition to build. If we get a coalition, i would be surprised if it lasts very long. The rest risk is that the fivestar loses votes to the league. Side, yousounded, have politicians working with the fivestar movement and they dont speak to the same values as a more centric pd voter. There are risks with forming a coalition. Nejra we are discussing the future of multilateralism. A piece outd talking about multilateralism is dead. What you be watching for out of the g7 . Do the sounds going into this meeting in terms of competing views, the lack of one communique, make you more concerned about the escalation of trade wars . Lucy the most recent thing we have had is a slight cooling of the situation with trump pulling back a bit during one month, so from putting tariffs on to extending the period before they are put on. That is going to be of interest to see where he is in his that. Ng about more. The other thing that will be of interest that trade war. The other thing of interest will be brexit, to see how johnson manages to tradeoff between europe and the u. S. In what he is doing. That is going to be quite a fine line. Nejra i want to ask about President Trump because expectations are high he will come along and be disruptive as he has been. Given that we have that ,xpectation, will investors markets wake up and be concerned if we see an isolated u. S. Talk . Terms of what are investors looking to, china is the key risk investors see with the u. S. Approach hardened its and if we are looking for risks and that relationship, it is that the u. S. Is forced to take a strong stance or deescalate a lot. China has redlines it has stuck continue, negotiations and you get a state now and then , but there is Downside Risk to that relationship and in terms of a deal getting done, i dont think you will get that until 2020 when you have another election. Stephanie calley and Lucy Mcdonald are sticking with us Stephanie Kelly and Lucy Macdonald are sticking with us. We continue with our coverage of jackson hole. This is bloomberg. I am near a chariot in london with scarlet fu in new york. Nejra cehic in london with scarlet fu in new york. Pound traders were encouraged they did not rule out the chance of a breakthrough, but any final agreement will look like any existing one, giving little hope of compromise. With us still are Stephanie Kelly and Lucy Macdonald. We saw the pound move quite a bit yesterday, up 1 , raking through shortterm tech breaking through shortterm technical resistance. Should we be more optimistic that the chance of no deal is receding or is this because people are short sterling . Stephanie probably the latter. It is striking if you read the European Press versus the u. K. Press. Coverage of the merkel meeting was so difference different european leaders are changing their minds. If you look at what merkel and macron said, they are consistent that the Withdrawal Agreement is what it is. That is exactly where may was four months ago. It is frustrating to see the extent of optimism that comes through sometimes. Even ine thing, but terms of the media coverage, there is a tendency to say there will be a breakthrough. Cannot rule it out, but in the world of how european leaders having european leaders soften on brexit, that is not likely. Nejra how do you approach the u. K. Equity market . Value undervalue quality stocks . Lucy there are decent quality stocks in the u. K. , fewer as m a moves along. A quality stocks within the u. K. Are not so cheap. They are valued against the unilevers of the world, are not excessively cheat. Cheap. There is a bifurcation in the u. K. Market between those which are global and domestic. That is partly because of brexit and partly because things have slowed down generally, and also because in some cases they are seeing negative impacts from sterling. That thereme benefit will be more impact from importing. About as been a concern seriously left wing government. That seems to be receding slightly, but we could have an election. Scarlet if there is an election, is there any sector or group of stocks that would be a better place to hide out . Lucy global stocks, it is why they are valued where they are. I think they will maintain ,aluation if we get an election one of the scenarios we could be facing. Although the labour vote appears to have shrunk, it is possible. Those areas which are specifically impacted by that are the banks and domestic assets. Scarlet how does Jeremy Corbyn fit into what you are looking at . Is he changing the discussion . He has offered to be head of a caretaker government. Do they take them seriously . Stephanie this is the crucial issue in terms of looking for solutions to avoid no deal brexit. Who heads a unity government if one exists . Corbyn is so unpopular with conservative mps you would need to build the antino Deal Coalition, so his willingness to step back as an indicator as to whether that no deal brexit risk as falling or rising. He is part of an antino Deal Coalition that is currently very loose. Short term, that unity government has potential, but it will be very shortlived, just to get an extension and go with general election. A general election is coming in the u. K. And that just postpones brexit. Scarlet Stephanie Kelly, thank you so much. Lucy mcdonald is staying with us. Lucy mentioned mna. Hasbro dipping into the childrens media market with a purchase of its own. Much, much bigger. If it needs to be big, that needs to be concrete. Scarlet they reach a deal with hasbro, mark coverage on that. This is bloomberg. Delivery for daddy pig. This is bloomberg surveillance. Vmware is expanding. They have agreed to by pivotal forware and carbon black 4. 8 billion dollars. Vmware is majorityowned by dell technologies. Huawei will pay the price for appearing on a u. S. Whack list. Black list. Cost the company 10 billion in sales. Ed granted an exception to allow u. S. Customers to can send you continue receiving support. Blood is becoming a full fullfledged entertainment company. Will help expand their foreign market such as china. It is hasbros biggest deal ever. Scarlet joining us now with more on hasbros acquisition is benedikt kammel. With cap ay familiar but explain about mediaone. Benedikt Entertainment One is a company where others have sniffed around over the years. Another company made a bid in 2016. Kkr was also interested. What is the appeal of Entertainment One, that brand of peppa pig. It has global appeal. People watch it from germany to china where it is a huge hit, and hasbro is trying to break into the market of content to stabilize their ties and become a farce and that kind of market. Force in that kind of market. Scarlet there could be competing bidders. What are you hearing . Maria they have other come benedikt they have other companies that have looked at this and it may become a real opportunity. We are not hearing anything yet, but i tv was one of the suitors. This might attract private equity companies. They are on a roll and buying a lot of assets. This might not be over yet for hasbro. For hasbro, this has been a long hedged dream to move into content to become something more like disney. They have the transformers, the toy business, my little pony. They have managed to franchise those out to Media Companies and with peppa pig they can keep it in the house. Nejra thanks to benedikt kammel. Lucy, you pointed to u. K. Appetite. Globally, is this a Good Environment for mna given low borrowing costs . Lucy there is a sign. Up more than 7 in globalized terms, mostly in the u. S. We have seen chevron for anadarko and a couple of withergers in health care bristolmyers and allergan. Within the u. K. More specifically, the weaker pound has meant there are assets that somecularly which have got domestic asset backing, that far Global Investors could be seen as a hedge against concerns elsewhere. Green king was certainly hedging some asian risk with u. K. Probablyink we will to bere of, but you need very sure of the assets you are buying and have a longterm view of things. Scarlet you need to have a longterm view and the pound and the pound makes things more attractive for overseas buyers looking at u. K. Assets. Lucy macdonald, thank you so much for joining us. We have a lot more coming up, including kate moore with blackrock. We will talk about the fed, g7, and get her takes on which sectors she likes think tech and health care. Futures pointing to a higher open today after a mixed trade. Wos andead between the t crude little changed. This is bloomberg. From the 5am wakers, to the 6am sleepers. Everyone uses their phone differently and in different places. Thats why Xfinity Mobile created a Wireless Network that auto connects you to millions of secure wifi hot spots. And the best lte everywhere else. Xfinity mobile is 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 buy an eligible phone. Click, call or visit a store today. Powell takes center stage. Will he reset Market Expectations . G7 leaders gather in france. Brexit and a new italo dutch Italian Coalition. Scott miners sees a dangerous asset bubble in government bonds sees a dangerous asset bubble in government bonds. I am scarlet fu in new york, nejra cehic in london. There is a lot going on, jackson hole followed by g7. I dont know which imr except dutch excited for which i am more excited for, interpreting words or body language. Nejra the question is whether Jerome Powell will push back on the expectation for rate cuts. Some of the hawks coming out make it easier. Scarlet perhaps less pushback from the fed chair. Lets get the bloomberg first word news. Viviana traders are looking to Federal Reserve chairman federal Jerome Powell for guidance three centralbank polity makers are opposed to lower Interest Rates. Powell may make it clear where he stands. Markets have priced in a quarterpoint rate cut. The new tariffs donald trump is threatening could drag chinas growth to the lowest since 1990. If the tariffs on 300 billion dollars of goods are imposed, gdp expansion could be hot cut by half a percentage point, pushing growth to below 6 . Shinzo abe accusing south korea of undermining trust. South korea will withdraw from an intelligence sharing agreement if japan does not consider export restrictions. Japan has taken south korea off a list of trusted markets for sensitive exports. U. S. Regulators looking for a few good pilots with experience with the boeing 737 max 8. The pilots will come from around the world and in some cases will be seasoned cap and. Captains. The faa wants those with as little as nine months experience. 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. Hurtado. Ana this is bloomberg. We have s pht now, 500 futures higher. As anyuld change as soon of the high profile officials begin speaking. Gains across europe with technology and basic resources leading the way. Some ofd giving back its surge. Higheryear yield creeps as the treasury rally takes a bit of a breather. Seeing steepening on the 210 curve. 210 curve. Now. E up two basis points the dollar on the front foot ahead of jackson hole. A backup globally in yields. Fedlet several policymakers have said the u. S. Should not cut Interest Rates. Starting with Esther George, who says it is just not time. As i look at where the economy is, it is not yet time. I am not yet ready to begin to provide more accommodation without seeing an outlook that suggests the economy is getting weaker. Scarlet joining us is michael symposium in the jackson hole. Upk to us about the set going into jay powells speech. You had Eric Rosengren and Esther George speaking to bloomberg and making their case why they dont think a rate cut is necessary. Michael a couple of other fed officials were speaking yesterday including pat harker of philadelphia, suggesting he is not ready to cut rates. He is not a voter like the others. Wall street is beginning to question whether jay powell can deliver another rate cut. There will be a lot of attention on his speech. Markets are pricing in a rate cut because markets are pricing in a rate cut. What does the fed think . Why do they think there needs to be another reduction . If they get a cogent expectation it will be easier to make a bet going forward. Scarlet jay powell speaking is not the only big event. Mark carney will be speaking later on. Markignificant is it that carney and governor kuroda will not be attending . Michael it is august and europeans like to be on vacation. Several members of the governing council are in jackson hole, including philip lane who will be speaking later on saturday. The more interesting question is kuroda. He has been here is a fairly regular attendee but decided this year not to come. Perhaps he is more focused on the g7. Deliversey is here and the saturday Keynote Luncheon address. It will be interesting to hear what he has to say about the economics of brexit, given that it looks like a hard brexit is coming. Nejra just to go back to jay powell, given the fine line he has to tread there is the possibility he does not give any strong message at all to the market. , givensual would that be the history of jackson hole at a moment where central leaders give strong signals about Monetary Policy . Ben bernanke was noted for doing that during the financial crisis in 2010 and 2011, announcing kiwi qed again. Qe again. The problem with jay powell, i dont think wall street will let him get away with that. There would be a reaction if he doesnt say anything. He may try to soft pedal it to the extent he can and stick to the script he has put out for, that the fed will do what it can to prolong the economic expansion without mentioning the words rate cuts. Scarlet thank you so much. Joining us in new york is dan katsive and kate more kate moore. What does the bond market want to hear from jay powell versus the stock market . The stock market wants a consideration of growth, but they are more focused on trade and consumer data and whether we will have easing growth. A lot of investors will be watching jackson hole and we expect the speech to be technical and not tell anything new. Stanceficant reversal in would scare the market that is unlikely. Maybe a little less focused on some of the trade stuff than the equity sectors are. If there is any indication we will not be on the path the market is currently pricing, we will see more volatility in the equity market. Scarlet what does that mean for the dollar . Dan probably weaker dollar. The fed the dollar has held up better than expected. The dollar is coming into the speech pretty strong, so i would expect things to swing in the other direction if he supports the case for further easing. Nejra how long with that move sustain . Dan the next focus will be the ecb meeting, and all indications are they will deliver a substantial package of measures. I would not expect a big momentum move lower the dollar following this jackson hole speech because the ecb is the next big moving part for the market. Nejra how difficult will it be for Jerome Powell to sound anything but slightly hawkish . Kate i think the expectation at this point is that we will get a continuation of a lot of the phrasing and language we have had from statements and minutes. If there was a significant departure, it is possible risk assets get focused on one word or two. In the last six to seven trading days, the focus has been on the growth and the trade side. That is where you see growth in the equity market. Totever the fed does, it has underpin the growth dynamic and we have to make sure the fed put is still in place. Fed watchers who are more wellversed think they will back away from the support and verbiage around the support they have offered. Scarlet is he going to save midcycle adjustment again . Kate it is possible. Dan we might hear that. We will be looking for more focus on financial conditions or reasons for easing. Scarlet dan katsive and kate moore stay with us. Loretta mester will be joining Bloomberg Television and radio at 9 00 a. M. New york, 2 00 p. M. London. This is bloomberg. Viviana this is bloomberg surveillance. Hasbro is becoming a fullfledged entertainment company. The tour maker agreed to spend 4 billion to buy Entertainment One. Brands to helpro it expand into foreign markets. It is hasbros biggest deal lever. Will payk well 16 billion to settle the socalled princeling case. Hiring taking place in russia and the asiapacific. Deutsches is neither admitting or denying the claims. You probably heard this song a million times. It is the opening riff from stairway to heaven. They are asking a federal Appeals School to ask that those cords do not infringe on the copyright. Agrees, they may have to go to trial a second time. That is the Bloomberg Business flash. Nejra World Leaders are in france for the g7 summit for a chance to address the big threats to the Global Economy including tensions with iran and the trade tensions. Lots of issues on the table. What is top of the agenda . Maria it is very tight security now. This is a city that is in lockdown. Emmanuel macron has had a difficult year politically and the french are not taking chances. , everyonef the agenda is worried about trade, the global state of the economy, perhaps a recession, and in europe they worry about the German Economy and the tariffs from the United States on the france on france and german vehicles. There are many points of tension. We understand the bar for an agreement is so low the french are not expecting a communique by the end of the session. Scarlet that marks a departure from what we have seen in the past. We mentioned the wall of worry and how reomitting rid admitting russia is on the list, ething president trash readmitting russia is on the list, something President Trump proposed. Maria president macron has been vocal about the idea that maybe russia should bg considered reconsidered should be reconsidered into g7 to move back to g8. Europe feels it is better to keep a relationship with russia than to see an isolated russia who turns to countries like china. When you look at dialogue, it is a better way forward. Europeans states and seem to agree to one condition. The e. U. Will tell you they have to respect agreements when it comes to peace in europe and they have to engage with the new ukrainian government. Nejra maria tadeo with us. Dan katsive and kate moore are still with us. We were discussing what a big is. Et at jackson hole how big of a marketing event could g7 be if we get discussions of fiscal stimulus . Kate stimulus would be welcomed by risk assets but there is skepticism of whether they will come through. We have promises and discussions of stimulus and then modest followthrough, or programs that have taken longer to implement than many would like. And has to be targeted towards the consumption sectors people think are weak in places like europe. 5, 10not be longrange year Infrastructure Projects that take a while to get cash flowing. Investors will be encouraged by talks of fiscal stimulus, but there has to be a concrete plan and shorter timeline to affect how people feel about earnings and equity returns. Scarlet we pretty much described brexit there. You are 50 50 on a risk of a no deal. Will we get body language comments that tips the scales . Dan we could get some positive body language. Everyone wants to be seen as sounding or looking constructive. Does that mean things are changing . Probably not. You can see in the price action yesterday following the meeting with macron, how sensitive the market is to signs anything could be moving. Chancek there is a 50 50 of no deal, but where our pricing is in terms of sterling is closer to the no deal scenario. Anything on the optimistic side tends to see a bigger reaction. Scarlet dan katsive and kate hour stay with us. We are live at jackson hole, speaking to patrick harker. It is all part of the set up for jay powell speaks. This before jay powell speaks. Nejra i am nejra cehic in london with scarlet fu in new york. It is notbank says time for fiscal stimulus. A spokeswoman from the government reiterating the country is not in a recession. Dan katsive and kate moore are still with us. How much more pressure could we see the euro, under if we get our stimulus from the ecb based around these recession fears and Inflation Expectations . Dan we think the euro is that a weak level. 1. 10 asdip below possible but we would not stay short or think there is a lot of room for further downside. Nejra earlier you were saying fiscal stimulus if fiscal stimulus is implemented that needs to be more shortterm. Are you a buyer of european equities . Kate we are taking a long, hard look. We had Strong Performance on the back of the expectations around german fiscal stimulus, or the hopes that that would lead a charge for a site change in mindset that would support consumption and growth. Economic data across europe is disappointing, and as we look out to 2020, earnings expectations are still lofty. We have this push and pull where we expect policymakers on the fiscal side or from the ecb to stimulate and support the market. The data right now is quite soft so we think there are opportunities. We want to be more select live. Selective. Scarlet i want to go back to germany, because a slowdown in germany will prompt the ecb to act as opposed to weakness in the periphery. What does that mean for the euro . Dan it makes the slowdown worse because it is a bigger economy. Germany has a lot more ammunition on the fiscal front and no difficulty in borrowing for a financial expansion. It provides a bit of a Silver Lining for the market. The weakness in germany, the more chance of a fiscal response which could be Game Changing for the euro. Scarlet what did you make of the german bund auction where not enough buyers showed up . Dan i dont see that is meaningful or indication of concern in terms of ability to deliver fiscal stimulus. Scarlet dan katsive and kate hour staying with us. Kate moore staying with us. We will be speaking with robert york, at 8 00 a. M. New 1 30 p. M. New york. London. That is before jay powell speaks. Open,head towards the futures pointing to a higher open. The 210 spread back in positive territory. Nymex crude losing 2 10 of 1 . This is bloomberg. 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 buy a new samsung note. Click, call or visit a store today. Morning, scarlet good i am scarlet fu in new york, nejra cehic and london. The president has trade wars and fed stimulus at the top of his mind, but the white house as abandoned has abandoned the plan to ask congress to abandon spending. It would be a conciliatory move ahead of the deadline to fund the government. Give us more context on this. Jack this is a somewhat conciliatory move on spending ahead of negotiations to avoid a shut down and somewhat of conciliatory move on Foreign Policy, where trump has taken a tougher stance against foreign aid. It is not necessarily a sign that september is going to be an easy month on spending negotiation or necessarily that congress is going to back the president up on everything he says and does on Foreign Policy heading into g7. It is positive news as he dropped a request that looked like it would be about 4 billion of cuts to previous years funds. Scarlet if you are a deficit hawk, the news from the cbo should be alarming. Is anyone alarmed in washington . Jack that continues the trend of lawmakers on both sides of the aisle alarmed about the debt and deficit. The problem is there is no agreement between democrats and republicans about how to solve that republicans largely stand by the tax cuts that look like they have added a significant amount to the deficit. Democrats want to boost domestic spending, so to be honest, and congress that looks like it would take more of a debt crisis then we are seeing now to get any sort of unified action on that. Fitzpatrickk joining us from washington, thanks for the date. Lets get the first word news. Viviana investors are waiting to hear what Jerome Powell says about Interest Rates. Powell is speaking at the annual conference in jackson hole. Three regional president s already coming out against additional cut. The markets have priced in a quarterpoint cut. The u. S. And china had a productive phone call on trade, larry kudlow telling reporters there are plans for a chinese delegation to visit washington next month. Administration officials warning there are significant structural issues that remain. In italy, the president has given rival Political Parties until tuesday to form a new coalition. The fivestar movement in talks with centerleft democrats. The president can appoint the next or call an election. Onanuel macron is calling seven other leaders to take on the issue of amazon fires, calling them an international crisis. Brazils president is angry, colonial shows a mentality discussing them without brazil present. 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. Hurtado. Ana this is bloomberg. Scarlet as we await jay powells speech from jackson hole, fed officials viewed the Interest Rate cut as insurance inflationflation and with us still are dan katsive and kate moore. The president sent out conflicting messages on the economy that it is great, strong, never been better, but at the same time we need emergency stimulus from the fed. Do that without jeopardizing confidence . Dan there is no easy our answer. The fed is committed to preserving the expansion and that gives confidence. The business side of the economy is soft. Consumer spending is strong. And administration are worried that while the consumer ,s Holding Things up now it could scarlet what is the plausible narrative of turning into a recession in 2020 clinic 2020 . Kate it is and the confidence measure. That will be a concern. We dont see great corporate spending. Capex andent investment have been down. In general, companies are not rewarded for spending on capex. If you look at their stock price or how boards treat their team, disciplined spending is what investors want to see so i dont think we will see a big pickup in that even if we have a trade resolution. Consumers and dump getting cautious around their own end up getting cautious around their own spending. Consumer Balance Sheets look healthy relative to where we were during the last downturn. We are still confident about the economy, but i worry about the confidence channel and the effect it could have on activity. Nejra when we saw the reaction of the bond markets to the fed and its, markets perhaps saw it is not dovish enough. At bnp paribas you had a dovish interpretation. Took ar Economics Team different view from the market. They pointed out there was a focus on financial conditions and the feds role in keeping conditions accommodative. They are committed to preserving the expansion and recognize that keeping conditions accommodative is part of that. Story. Ert that it seems it is a fed that is very much in easing mode and the burden of proof is on the data to stop easing rather than the other way around. Nejra would you have a preference for usa days over u. S. Equities over the rest of the world . Our preferences companies that generate Free Cash Flow no matter where they are listed. We are looking at some european equities. Adding been selectively two places in asia, particularly some of the blue chips and china that have sold off. We see opportunities in a lot of different areas even though an aggregate u. S. Market is probably quality. Scarlet small caps have been significant laggard for the past 5, 6 years. Time gettinga hard enthusiastic about the small caps space. We have different sectors, different representation, and different places in the supply chain. Smallcap companies are not immune to the trade stuff. They have perhaps less power and control when it comes to pricing. If there is a significant pulled out pull in demand, they will be pullback in demand, they will be in a tough space. Scarlet no leverage when it comes to pricing . Kate it does not feel like they do. What differentiates countries at this point does companies at this point is whether you have technology and are being innovative. Small caps do not have the capital to make the investment to be industry leaders. Scarlet hands off small caps for now. Kate moore sticking with us along with dan katsive. Coming up, live coverage from jackson hole all morning as investors await fed chair jay powells speech. , thene James Bullard watch out for robert cap brown Robert Kaplan, loretta mester, and patrick harker. This is surveillance. Viviana this is bloomberg surveillance. Expanding its cybersecurity and development tools, agreeing to buy Pivotal Software and carbon belak. Vmware is majority owned by deltek allergies. Dell technologies. Huawei says this year, the Trump Administration van may cost its consumer unit 10 billion in sales. The u. S. Put huawei on a blacklist that has granted an exception to allow customers to continue. Disney finding another way to cash in on the star wars franchise, planning a multiday experience at wild side walt disney world. It is called star wars galactic star cruiser and disney is calling it a space cruz. That is your Bloomberg Business flash. Nejra it is time for single best chart with dan katsive and kate moore. I picked this chart from one of membersets live team and what it shows his growth relative to value stocks is growth relative to value stocks in the u. S. Rising, and the flattening of the 210 curve. Of an opportunity is there in growth versus value stocks . Kate the composition has changed. We are seeing Growth Companies with better Balance Sheets and unless we get an acceleration or change in expectations for economic growth, it will be hard from a sentiment standpoint for investors to take risk on the value signed. You are having to bet on Business Models that are higher levered. We are seeing in parts of the world and the industries that do not have the same Dynamic Earth opportunities. Growth opportunities. It is difficult to take that risk with so much uncertainty around the future. We were trying to figure out what the future of capex and investment looks like. If you have a Company Generating free cash, that makes sense to stay focused. Nejra what would be your preferred safe haven currencies . You were saying we could get some dollar weakness. Is that your preferred safe haven or the yen or swiss franc . Thinke like the yen and there is more room for appreciation. Governor kuroda will not be at jackson hole. He does not have a lot to talk about, in our view. They are in a Holding Pattern and do not have a lot of additional firepower. The bank of japan stands out as the central bank that is not able to counter the easing. Japanese have big exposure to foreign currencies and they start to see that cost of hedging going down because rates are going down. They can protect themselves and exit that risk. We are bullish on the yen. Scarlet when you mentioned the euro and easing, i thought of kate moore and perhaps the next move is to get into equities. What would that mean if the ecb started discussing that . Dan that would be complicated because the size of those operations may not seem that large. At the same time, he would get an improvement in Financial Market sentiment which would help the euro more than hurt. Perspective, we dont see that adding downside pressure, but a huge qe package which we expect will keep euro heavy versus dollar. Scarlet a headline from the global times editorinchief, a chinese sponsored paper. China will take further measures likest the u. S. , sounds measures against the u. S. Tariffs. Wean did we can to 7. 1 to 7. 1. Eaken what happens with the yen . Havechinese authorities made clear they dont want to make this into a big part of the trade drama, and we dont think theres a whole series of devaluations coming. Most likely it becomes a background fact. Nejra how would you play that around other currencies in asia . Perhaps if you are not expecting a weaker yuan, are there proxy currencies that would weaken or that you would want to buy . Dan the dollar is quite vulnerable, so you have offsetting week this is which even weaknesses which even though a lot is going on and volatility is low, not a lot of net movement. Australian dollar has been low and likely will stay on the weak side. That is a currency that is already at levels that are pretty cheap. Even though it seems like there is a lot going on in terms of political development, sometimes the fx market will look like there is not much going on. Nejra trade and weakening chinese consumption are what you classify as your top risks. Do you expect chinese policymakers to offset those risks . Kate we were talking about fiscal stimulus earlier and perhaps around the world. China is the company where we have the greatest conviction and targeted stimulus. There were hopes some months ago that china would unleash a stimulus plan that would see through to the rest of the world and lead to Global Growth. The message we have been getting from policymakers and companies is that stimulus will remain very targeted, and targeted at domestic consumption and businesses they feel have the best prospect for leading the economy into the next stage. It may not have the global repercussion it had in the past, but it will have continued support in Key Industries in funding and for the consumer that will put a floor to the growth. Scarlet one final question. If see the dollar weakening jay powell expects says what is expected of him. Mean the president inevitably jumps in . Dan i think the market is expecting a dovish message, maybe it is priced for that. Many are expecting he will fall short so if he comes in dovish, the market might react. That might be more of a surprise then implied by the prices. Scarlet we might get a meaningful move . Dan possibly. Scarlet dan katsive, thank you. Kate moore is staying with us. Marketrs to go until the hours, under three futures pointing to a higher open. We have a lot of fed speakers coming up, including jay powell. This is bloomberg. Scarlet i am scarlet fu in new york with nejra cehic in london. ,utures rolled up a little bit pointing to a higher open but off their best levels of the session. In considering Sector Performance this year, i have the group ranked returns on the s p 500, Technology Leading the way at 28 . Energy barely changed and health care another laggard, up 5 . Lets talk about tech and health care. Of the sectors out there, you Like Technology and health care the most. Kate it looks like a bar mail strategy on that chart but we are interested in companies that generate Free Cash Flow. Cash flow is king, particularly in these Uncertain Times around geopolitics or growth. You want to focus on companies that can generate cash in all stages and are not dependent on stimulus to grow. There is so much noise underneath the surface in all of these sectors. Within tech, you have cyclical semise the sammys, innovators across many sectors that are outperforming even if there sector is ranking in the lower part. An interesting tie in is the regulatory side, something we are thinking about as well. While we see these things on the horizon, tech and Health Care Companies have the means to navigate regulatory pressure and are getting on the front foot. We dont see that being a major impediment to earnings, and something Country Companies are doing a good job of communicating. Scarlet Political Risk is one reason why health care has struggled so much this year. Fromind of pronouncements the democratic or republican side seems to sink Health Care Companies. The Campaign Season will only heat up. Kate we are just going into the Campaign Season in earnest, so the headlines are putting it very low. Willdoes not mean this be a great opportunity for us to add to the largecap and mega areglobal players if they facing pressure from the news flow, tweets, or campaign promises. We dont see anything changing and their underlying demand and the demographics will lend support to growth going forward. Nejra in terms of seeing opportunities to add, tech is a big and varied sector. Which bit you prefer . Kate we have been adding to and software where we have been underweight, and we are looking at highquality Business Models and saying, what is getting sold off but still has great fundamentals . We love the idea to continue to the companies exposed to we see this coming through, regardless of what happens with huawei. Scarlet kate moore, thank you for joining us today. From new york and london, this is surveillance. 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. Alix powells main event. Fed chair jay powell takes the stage at jackson hole. In the real black hole. We speak to larry summers, former u. S. Treasury secretary, about blackhole economics and how the u. S. Is one recession away from negative rates. Chinas retaliatory tariffs plan. The g7 the stage for this weekend. Welcome to bloomberg daybreak on this friday, august 23. Im alix steel. David westin is still off, over it in italy. Buy equities, sell bonds. Thats what we saw earlier in morning. You have global times saying china is looking at retaliatory tariffs, setting the stage for the g7. Time now for global exchange, whereby take a look at all the news this morning. Joining us now in hong kong