Lets check in on your markets and see how things are doing in terms of yields. You can see the u. S. 30 year yield coming down further. 1. 96 . Yield at. 98 . R i feel like i must be seeing something wrong because that would be insane. It is actually 1. 47. Im sorry, italy, thats what got me off track. I thought i was looking at u. S. Treasurys, that would be nuts, dropping 50 basis points in minutes. That is the italian 10 year coming in below 1 . With stocks opening down and turning higher after we had some positive trade comments out of china. Lets get first word news in new york. We begin in italy, where conte will get a mandate to form a new government after the former alliance collapsed in chaos. The new administration will include the fiveStar Movement and the democratic party. Those rivals have little in common other than a desire to avoid an election. Country isa, the looking to extend maturities on over 100 billion of debt. They want to delay repayments to the imf after a collapse in the peso and its bonds. They will also postponed 7 billion and payments and is seeking a socalled voluntary reprofiling of 50 billion of longerterm debt. Boris johnson has been granted permission to suspend parliament. It sets a clock on opponents who want to thwart his brexit plans. The speaker called the move a constitutional outrage, suggesting he may facilitate operational plans to take control of parliaments agenda when it returns september 3. Banks aresays central losing the ability to reverse an economic downturn as the Global Economy enters what he says are the late stages of a longterm debt cycle. Essay, the billionaire founder of Bridgewater Associates says quote Interest Rates are so low that stimulate growth does not work. Hong kongs police band a protest scheduled for saturday. The move could anger demonstrators ahead of a planned 13th straight week of marches. The South China Morning Post reported police believed approving the protest was too risky due to safety concerns. 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. Matt . Much. Thanks very we have breaking headlines coming across the ticker on basf, the German Chemicals company. You are selling its colors and affects the business to a for 985 million euros. The fx and color unit is going to japans dic corp. Lets kick off the show with what is going on in the u. S. Steve mnuchin says issuing altra long u. S. Bonds is under very serious consideration. This move could mark a historic revamp of the 16 trillion treasuries market. Treasuryerview, the secretary said they would only issue 50 or 100 eurobonds quote if conditions are right, which is good to hear, because it would be bad if they issued them when conditions were wrong. To some, these comments may have been an attempt to drive yields higher, that did not work. Joining us as our guest host is the chief economist at behringwerke and the chief Investment Officer at barclays investment solutions. What do you think about altra long bonds ultralong bonds . I would take advantage of them if i were a government as long as i can. Yields are likely to stay low, but not that low for 100 years, let alone 20. However, i personally would not put that into my own portfolio. Matt you dont want to buy them as an investor, but if you are an investor. What you think . What do you think . From a government perspective, it makes sense. I was just saying on radio that i was reading bloomberg daybreak and cameron crees pointed out that the 30 year bond, if you are looking at its pricing, is now about close to 100 basis points below the current level. So we are looking at extraordinary times and bond markets. Governments should take advantage of it. Matt i want to point out, you can get daybreak on the terminal. You can also get cameron crees and all of his columns. What do you think about other moves here . Let me ask you about holger, helicopter money. It seems global is a possible we see helicopter money . Holger i hope never. It is much better for Central Banks to keep rates extremely low and let governments take advantage of that and let parliament decide how to spend the money governments can borrow. Rather than have Central Banks where actually does the helicopter fly, where do we drop the money. Come in my view, would almost be a perversion of what Central Banks are supposed to do. Matt it does look like something a lot of people are talking about. Possibilityt as a and what do you think about the efficacy of helicopter money . William it seems quite far off at the moment but to be honest. It has been tried before, reasonably successfully back in prewere japan. But then there were some problems weaning the economy off of it and that credit some political problems later on. So it is something we would rather not see. It would be stimulative, but i entirely agree, this has to be had the politicians. A big debate about where Central Banks stop politicians start in terms of responsibilities. It is a debate that has been raging in the last decade in particular. Following more or less successful extreme monetary ourcy experiments that, in opinion, probably averted much worse economic times. But now we got to have a rethink about where that line is drawn. Matt on the other side of the break, bill dudley argued that the fed may want to step into the election. Speaking of the fed and the rate conversation, not the field them trump not defeating donald trump, we spoke exclusively to marry daily. Mary daly. We were below the new full rate, stimulating the economy. Subsequent to that interest and rate hike, what we saw was that the mood and the data were becoming more pessimistic them of the data a little softer and the mood a little more pessimistic. That is partly because that strong headwind in testified intensified. The whole wind gust got stronger and blue against us. In these type of things, the global slowing, those things weigh on the economy. The neutral rate has been coming down a little bit. , thatsibrate policy why i supported the 25 basis point cut. To put the economy back in a good position. Back to where it was before. Tel me something as well but tell me something as well. This is a question for my colleague. If the ecb recalibrates and reenters quantitative easing, what do you take away from that and what is your reaction to it . Mary all Central Banks are responding to the fact they have got Economic Conditions that are changing. In europe, Economic Conditions have slowed quite a bit. That requires Central Banks to take action and they are doing that. In the United States to but we also look at our economy and we have to take our Interest Rate decision based on what we see from the domestic economy. There is the sense that Central Banks are being held hostage. The more Central Banks do, is this the new normal . Are you comfortable with how this is panning out . Mary markets move day today and find their own footing. Some of this is based on just try to figure out what is coming next from Central Banks are what i do is i take Market Information and financial conditions more generally. Financial conditions being tighter or softer or easier indicates howe well supported growth is. I factor it into my input, but its not a factor in my decision making. A nonvoting member this year, but still great to get her take. It would be interesting to see. Im sure we know what she would say to build a bill dudley. Conte is handed a second shot at rebuilding a stable governmentc, which in italy is an extremely difficult task. This is bloomberg. Matt economics, finance, politics, this is bloomberg surveillance. We are looking at live pictures of rome. Those centurions are waiting for conte, who is going to come out and speak about his new government. He is getting a new managed to form a new Coalition Government after the former alliance collapsed in chaos earlier this month. Jostled foralvini it for a spot. The new coalition will block that, but those two longtime rivals have little in common other than to want to avoid elections that would benefit salvini. , whong us is maria tadeo has been live in rome following these developments. What is the latest . Maria good morning. We are waiting to get official confirmation that conte will be allowed for a second term. This is pretty much a done deal. We have sources telling us it is a done deal, the question is just the choreography around it. Frankly, it is a spectacular con back come back. This is a man who was not a wellknown inevitably, not a wellknown politician. He did not have a political base. He was known by the Italian Press as mr. Nobody. He was seen as just a mediator salvini andcontain now has clearly emerged as the winner in what has become a personal fight between salvini and conte. And you have that tweet from president trump, saying he is hoping he is able to stay for a second term. It looks like he will. But it will not be easy. Fundamentally, you are looking at a country that is an economic stagnation. You had numbers today come out that the not look good. You are also looking at very high debt and a high public deficit. It is still a rocky picture no question. Matt maria tadeo in rome, ering the italian election the politics situation. They have avoided elections with this coalition, thats the whole point. So with us is william from barclays and holger from berenberg. I was surprised to see etps under 1 . What do you think about that . It made a lot of sense when it was still paper, but that spread is shrinking. What do you think about the btps . That opportunity is less obvious now, not one we are chasing. Italy is an interesting situation and there is an interesting point about where we are at now. You had some 60 odd governments since in italy, but only a handful of national elections. New, but italian political fluidity, lets say, is not new either. This is not something we were ever particularly alarmed by. It is business as usual to a certain extent. But we are looking for positive reforms on the italian economy. Think, hoger you holger . Interesting just to think italy could have this downgrade with different Credit Ratings even of a have the same centralbank. I guess that is part of the difficulty. You got your doctorate in economics before the euro was official the officially launched. How do you assess those risks . Holger i think the eurozone is working very well and we see is in italy. A year ago, when italy was on the wrong call, the result was that the fivestar moderated. What we are now seeing is a vicious circle. The league will dominate policy has receded a lot. As a result, bond yields are falling. In turn, it means italy has more fiscal space which then reduces the risk of a big confrontation with brussels. Positive, and instead of a self reinforcing affected italy, bond yields are low, yes, but they are low across the world. If the newment government administers italy well, then italy can continue to muddle through with acceptable Interest Rates, and with a little luck, to use the fiscal space with much lower financing costs. Use that fiscal space for a few reforms here and there. Matt Interest Rates are acceptable now, but if they get a downgrade, i think the picture will look very different. Are you worried at all about that possibility . Holger we always worry about italy. But if i were to race italy as i saw them do at the moment, i would not downgrade italy on newng the sort of government which, as always in italy, will be unstable, noisy, but significantly better than what we had. Matt all right, gentlemen, you will stick with us. Ander from berenberg william from barclays are our guest cohosts from the hour. We will talk Boris Johnsons big gambit on brexit and later, we speak to john mcdonnell. Dont miss that conversation. This is bloomberg. Matt Boris Johnson has been granted permission to suspend parliament, setting the clock on opponents who want to thwart his plans. The Commons Speaker called the move a constitutional outrage. So with us is william from barclays and holger from berenberg. I wonder what this does to asset prices. We saw, in a way, almost no reaction yesterday. Looking at the cable rate, a pound is Still Holding above a dollar. 22 about 1. 22. It does not look like it is even falling to a oneweek low, let alone a onemonth low. What do you think that means . Not much has changed from yesterday. Parliament has got a few days less. Situations for these with investors, when youre having hardball negotiations conducted entirely, how much, how literally do we take the words . , the latest move reduces the time to thwart hard brexit. It also allows them to get a manifesto out there, but it may also be a bit of messaging to europe. Take me seriously, these guys cant stop me. The thing with sterling though, its fascinating. There is hardly a measure where sterling already looks quite cheap. One of the difficulties here, maybe a career risk on the part of investors out there. There are some trades where if they go wrong, its too damaging to do it. You may find a lot of Institutional Investors here are short sterling already. What moves that, we are not sure. But starting to get to a level where it could be quite interesting. Matt right, right. Great to get your take on that. Dont worry, we will have more time to talk about brexit. 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. Matt good morning. Welcome to bloomberg surveillance amerco i am here in berlin, covering for francine lacqua. You are looking at an italian officials getting ready to hand back the government to italian Prime Minister, who will continue to be Prime Minister, giuseppe conti,. He president in italy, matarella, has officially tap conte to iron out the differences between the five Star Movement and the democratic dirty, a coalition that hopes to overcome their longstanding differences to avoid having new elections and to avoid having this government fall apart that they have sort of cobbled together to defeat Matteo Salvini, who gained a lot of power and support after the european elections. Markets. Ck in on we had a turnaround in terms of the equity indexes. Lets look at the individual movers with annmarie hordern. Annmarie this company has been trading on top of the stoxx 600 all morning, saying they saw a robust growth in their telecom unit. This company is up nearly 3. 5 this morning, their Earnings Growth was the highest, strongest in seven years at for not record. They also announced a one billion Share Buyback. Mcro plunging 27 after they cut the 2019 guidance. They talked about sales not rebounding and wanted to a deterioration in the macro environment. Matt annemarie, thank you so much. Looking at some of the individual movers including Pernod Ricard after a 1 billion buyback. Lets get to the bloomberg first word news in new york with viviana hurtado. Viviana the u. S. Is considering issuing ultralong. According to the treasury secretary. The remark sent 30 year yields higher but much of that was reversed today in early our trading. 50 or 100 year bonds would limit the cost to taxpayers of plugging the budget deficit, annually. 1 trillion china indicates it will not immediately retaliate against the latest rounds of tariffs. Beijing saying it is more important to discuss removing the extra duties, after treasury secretary Steven Mnuchin told bloomberg in the interview that chinese negotiators will visit washington, but not saying one. South koreas retrial of the samsung vicechairman over bribery charges. The Supreme Court is voiding a suspended sentence and sending it out to the lower court. This company is hoping to extend maturities over 100 billion of debt, hoping to do a repayments to the imf after a collapse of its bonds. The government will also postpone 7 billion in payments on shortterm notes and is seeking voluntary or profiling, a 15 billion of longterm debt. Hong kong now, police are a protest onbanned saturday due to safety concerns. It could anger the most it is ahead of another week of prodemocracy marches. Police believe approving the protest was too risky. Global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. I am viviana hurtado, this is bloomberg. Matt thank you. Viviana hurtado with your first word news. Ubs is making big changes. Tanker isit suisse creditg the firm an ex suisse banker is joining the firm. Joining us is one of our bloomberg reporters. Run us through the changes at the top. The changes at the top of the isncipal is that iqbal jhan finally joining after weeks and months of speculation, taking over the Wealth Management business, the largest in the world. The caveat is that he is only the cohead, he will lead with tom naratil, who is leading the u. S. Business. Then you have the ceo at the adaptive management, the bank is renewing Strategic Options for it. Also, there is also another lady, suni harford. And there are other potential ceo successors. Three big changes in the executive board. People have been long waiting for it. At the beginning of the year, we wrote a story that ubs is intensifying succession planning and you have to see that in this context. This is part of the banks succession plans and iqbal khan is a top candidate. Matt is this part of the ceo lham, oron plan for are there a number of successors . I think he was not shy about his intention to become ceo at one point. Ultimately, he would have to prove himself to a did a very good job at credit suisse, increase profitability, but his idea to create a international Wealth Management unit was. Idjane thiams he will have to find new ways at ubs to change things strategically. He was given a lot of loans and selling structured products at credit suisse, and maybe he can boast that kind of business at ubs. And he probably will have to think of the structure of the business as well. If he gets it right, and this is a complex environment for wealth managers, he might be the guy for the top job one or two years down the road. One person not to underestimate calabuzza. Matt john, thank you for joining us. I am excited, it is an exciting story. Great to have you on television with us. Anheinrich forrester joining us from zurich. Back to brexit. If you want to be excited, bring back brexit. Boris johnson has thrown down the gauntlet and the queen granted his i a request to suspend parliament, giving him two weeks to stop leaving the e. U. Without a deal on october 31. His opponents went to try to stop britain from leaving over all. Francest back to finance minister and have a listen to what he thought about the possibility of a Nodeal Brexit. Scenario is, the today the most likely scenario for the u. K. , the nodeal scenario. Matt that is what they are saying officially. We dont know what they are saying unofficially, but a lot of e. U. Officials think this may be a chance to clinch a deal. Joining us from london is Francis Anthony aylmer maude, former trade minister, former chairman of the u. K. Conservative party, and is now a member of the house of lords. Hobbs withe will us as well. What you think of the prorogation of parliament . I think a lot of the reaction has been using language which is very colored, talking about suspending parliament makes it sound like some kind of c oup. What is happening is a process that used to happen every year. Kind of an is medieval convention, nothing radical about this. Leaves for aways recess in the second part of september, the three major parties often have their Party Conferences without parliament intruding. So there is nothing dramatic come anywhere near as two medics about this as has been laid out. I think the judgment about this makes ideal potentially more likely is correct. You have to accept that as has been the case for part some time, every outcome is significantly less than a 50 likelihood. All outcomes are relatively less than 50 . But i think it remains the case that theyre being a deal or some concessions made by the e. U. 27 which parliament could coalesce around and support has become a little more likely. The is there a way for e. U. To get around the backstop . This is a line that Boris Johnson will not cross, and it doesnt look like the e. U. Is willing to either. Francis i think both sides have been using the language just in the last week or 10 days, as being very important, because i think neither side have said things which make it impossible for there to be some clampdown. I always thought the landing path for a deal is around having the timethe method unilateral , connected to a backstop after a certain period. Boris johnson has said the backstop has to go. He would be able to argue that if it was timelimited, it was no longer a backstop. The e. U. Would have to say that the backstop still exists. , is that the backstop is not there in order to present the possibility of there being a hard border separating Northern Ireland from the republic of ireland. Re,n having it in the which has made Parliament Rejects three times the deal theresa may negotiated, would moreleaving without a deal likely, which means that you would immediately have to erect a hard border. Matt i have always found that ironic as well. As former minister for trade. Avoidingsee any way of postbrexitr in a world . Is there a need for a border . Here francis there needs to be some form of check. The au will legitimately say that if britain is outside the Single Market 30 years ago i was negotiating for single ,arket arrangements for britain preserving the integrity of that Single Market is very important for the continuing members of it. So some kind of checks need to be in place. Does it have to be all the paraphernalia of checkpoints and all of that, it doesnt. There are lots of ways of doing this. The technology isnt entirely the area but we know that if you deadline in place, people start to create the possibilities. So i am confident that this will come, that this can come about. One of the things people have not focused on is that if the backstop came into existence, it is extremely disadvantageous for the e. U. 27 and very advantageous for the u. K. , because the u. K. Will have full access to the Single Market without making payments and without any of the many of the obligations. So the backstop is very onesided, in favor of the u. K. , which is of course one of the theisms and paradoxes of whole situation. The e. U. 27 allowing it to continue before the beneficial time, the chances are vanishingly small. Matt what do you think about johnsons move to suspend element . Supporters will tell you that it is only a next her three days, since parliament was going to be on hold for Party Conferences anyway. On the other side of that, you have john bercow saying that it is a constitutional outrage. How do you feel about this, Francis John Bercow has made his remarks before he knew what was being announced. Francis he was told that the government was going to make an announcement about prorogation, which as i said, is something that has been done every year that parliament has sat with a few rare exceptions. The unusual thing is that parliament has not been for a since theued 2017 election. Parliament reassembles with all the rigmarole and paraphernalia, and that has not happened for the last two years. So there is nothing close additionally outrageous about proroguing parliament. I think john bercow assumed parliament would be prorogued beyond october 31 and does prevent parliament from debating brexit at all in the runup to the cutoff date. That is not the case. The idea that parliament is being prevented from debating brexit come out when a contender that the months and years that have been spent debating it is endless, it is a bit of a nonsense really. There is plenty of time for it brexit to ber debated, for the government to be held to account, and i hope there will be. Deal too you expect a come about . The e. U. Seems to not want to go into talks again at all. How do we overcome that impasse . They have dont think said that. Again, the language that has been used to last 10 days when there was johnson engaged with chancellor merkel and president macron and then had conversations at the g7, i think the language on both sides was carefully calibrated to ensure that these kind of outcomes were not excluded. There are ways of shading this agreement, the Withdrawal Agreement that addresses the principal concerns, which is the backstop, i backstop without any time limit. That could be done in a way that gives the e. U. 27 and the Irish Government which is really important here, and ability to say yes, we have the protection we need, but gives Boris Johnson the ability to say that without an endless, permanent potentially backdrop that is not really a backstop at all. So there is a narrow landing path where a deal can be struck and agreed by parliament, but both sides will need over these coming weeks to be incredibly careful with the language they use. Boris johnson has been extremely careful with his language, some might say ankara stickley so and Kirstie Alley so some cight say un curren harestically so. Matt thank you so much for your temp today, we appreciate you coming. We have our two guests still with us, and they will stay on for a little longer. Also coming up, argentina struggles to roll over its treasury bills after a brutal week of declines. Acri asks m creditors for more time to pay off the countrys debt. This is bloomberg. Matt still with us, William Hobbs from barclays, and holder. Holder, i wanted to take your opinion on brexit. We have the suspension of parliament makes it interesting. Thettle bit of a move in pound as well. Though not much of one. Hang on, looks like we have live pictures of Giuseppe Conte to death to suspend brexit discussions for a moment i think he will speak in italian, we dont have to listen in, but as you see, he has been handed a mandate by Sergio Mattarella to keep running the government with the coalition there. Holder, back to you and brexit. What do you think and what do asset prices . M holder more of the same, significant uncertainty with sterling remaining seriously undervalued and at a Downside Risk and less there is positive move. What we havent seen recently is any significant positive movement. The news yesterday was that parliament has a few days last to stop Boris Johnson, but also, the very moved to provoke parliament by longer than usual has inflamed russians among the tory moderates. Hence, for them, the hartle to do something about it might be lower. Not much of a change is coming the marginand accentuates the brexit risks. On the european side, what we have seeing is not any move on substance. The e. U. Has basically told johnson, that if you can find something avoiding the backstop, something that theresa may and we havent been able to find for more than two years, if you can find that, please show us, but so far, we in the e. U. And in dublin dont have any hint of what that might be. Amerco to the logical solution which all of a sudden of the available by the end of october, not having been available the last two years on the european side is basically more of the blame game. It is up to you to show us something is possible rather than the general softening of the negotiating stance of the e. U. Matt reminds me of something i heard some antinuclear people talking about in france, on related, but i think that metaphor was like taking off in a plane when you havent built the runway to land. What do you think the chances are of a hard brexit here . Can you put odds on it . Riskoff,obably 40 or slightly higher we have seen some hope that there might be in the end a compromise in the sense that the backstop largely stays and a gets a new name. Everybody into a you will say, this is different from what we had, though the substance will not differ, then perhaps johnson can get it through parliament. But the probability is lower than the other events of either getting serious political change in this country, which is possible, or having the hard brexit accident at the end of october. Matt ok, you will stick with us. More to talk about with the chief Investment Officer of barclays. The outlook for u. S. Growth ahead of gdp data. This is numbered. Would have nothing to fear about recession except for the fear of recession. I dont see a recession. We have a slow down the risk of recession is there, but some of it is also politics. We will have a Strong Economy through 20 and beyond with a bull market. Maybe that is the way to get trump out. Maybe that is the way we get him out. I dont even think that would work. Matt a lot of talk about recession for an economy growing at a 2 clip. We will get the second reading of secondquarter growth out today. Expect it revised downward. It was 2. 1 in the First Reading and they expect to percent now. Bloomberg surveillance continues in the next hour. Tom keene in new york with nejra cehic in london. And Turner Ricard reports its first is for no ricard reports is fastest growth in seven years. Tom after the firestorm tuesday and wednesday, this morning is quiet. Relative stability in the markets. The s p 500 4 from a record high. It is trump derangement syndrome. The move upward continues. Thisnce summer suggests summer is the best seven days in may. And Prime Minister johnson needs the clean skin them to september 12 and beyond. Good morning, everyone. This is bloomberg surveillance, i am tom keene in new york with nejra cehic in london. The last two days have been asked ordinary. We need a quiet day this morning, dont we . Nejra we do. Let the markets certainly are not quiet. In terms of brexit, we have actually heard from the e. U. Side saying the prospect of a Nodeal Brexit might not increase, it might actually have receded. I will be keeping an eye on the long and, too. Tom on twitter, rob hans wonderful summary of the wonderful last hours 24 hours of the u. K. , we will get to that. But first, the first word news. Viviana china is indicating it will not immediately retaliate against the latest round of tariffs saying it is more important to discuss removing the extra duties. This coming after Steven Mnuchin told bloomberg that chinese negotiators will visit washington, but he will not say when. Police have been a protest in hong kong for saturday based on safety concerns. It could anger. Demonstrators for a planned 13th straight week of marches. It was reported that police disapproving their protest was because it was too risky. And a fresh mandate to form a new Coalition Government in italy. Giuseppe conti will now start talks trying to cobble together a government backed by the five Star Movement and centerleft democrats, after the former alliance collapsed in chaos earlier this month. Argentina, the country wants to extend maturities on 100 delayn loss of debt, and repayments to the imf. The government will also postpone 7 billion in payments on shortterm notes, and is seeking the socalled voluntary r profiling of 15 billion ofe that. Global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. I am viviana hurtado, this is bloomberg. Tom thank you. Let us do a data checks. As nejra mentioned, there is still occur in version, and the major story is euro and yen weakness with functionally Dollar Strength. The euro is substantially under 111. To the next screen, oil with a bid, equity markets down, closing above 26,000. We make note of that. The mexican pass so is maybe our emergingmarket proxy now nicely above 20 pesos, a weaker peso this week. Tom, a firm splash of green on the screen for european equities after some weakness. The 10 year treasury yield is back above 1. 50. The 30year also went back up after mnuchins comments to bloomberg, and there we are sitting just below 2 . Cable also extending losses from yesterday. 1. 2189. 10 year of th btp yield, heading for a record low close. Tom and i want to go to a chart this is important to frame, where we are with all the politics in the u. K. It goes back to john major, it really speaks of him and his for rogue of 1997, which led to the blair government. Lets get the chart up now. We have got the chart here of john major on the left side, the 1982 upial weakness of to the miracle of the 1990s and the 2000s of the u. K. Look how close we are to the lehman low by jordanned rochester of nomura and William Hobbs. How week is upon sterling on a historical basis . We close is the were lower . A couple of weeks ago, but there was a margin of error in the currency market. We are talking fresh historical lows is the story of a probability of a Nodeal Brexit rises. It is currently at 40 on books. Ers if it goes up to 50 or more, it could get worse. Tom trade weakness would be something. Jordan, in your notes published moments ago for nomura, you talked about a light at the end tunnel. How shimmery are we this morning . Jordan i am an optimist. I talked about the no deal risks, but mps have options available to block this. Either through legislation or by a vote of noconfidence. Looked at the markets and said what if when parliament returns, if there is a vote of noconfidence and what it means for the pound question mark it opens up the possibility that a Nodeal Brexit is not the case. Thee it is uncertain what outcome would be, the pound would go up on that headline alone. So there is issuer of hope, but i am a realist and if it goes pearshaped and mps fail, and we go into recess, the prorogue period with nothing done Nodeal Brexit risks, go back up again and the pound goes down. Nejra how do you price of a general election . Jordan if you ask look makers, it is about 60 to 70 . It is basically a tossup of the first year. The best way to answer that question is, how does brexit get resolved . And because no one has the mandate of anything, you need to go back to the people to get much easier to have an election, so basically any times in. Nejra the uc you see the potential of a bounceback . We think there is so much uncertainty. The risk is more to the downside because i think there is still quite a high chance of a Nodeal Brexit. I agree with jordan, anything could happen at this point, but i dont think we will take any risk on directional trading in sterling at the moment. Tom janet, heaven asked this question in days. What is 12 months forward Economic Growth looking like for this beleaguered nation . The odds are our assumption is currently still in delay in brexit. Looking for brexit next year, perhaps march. We have to assume that we have a transition deal being agreed upon. Think scenario, we u. K. Gdp growth will be about 1 or 1. 2 . But if you talk about the potential of a hard brexit, we look for it to fall below 1 . Tom but still, that is not recession, is it . Is it held up by the financial parts of london . Jordan consumption has been much stronger than all the uncertainty. Business investment has been dreadful. Then he have spending. The government might use 1. 2 of gdp a year, they have leeway to work with. The main thing is the bank of england. They say trendy is about 1 year on year the stranding growth. If you look at the survey measures in the global context, we are not going to those levels anytime soon. There is a slowdown in germany, the europe and the u. S. The u. K. Growth is also below trend. Tom janet will be with us, jordan rochester as well. Overlay theally technological revolution affecting all the United States ,e can do that with our guests paul romer will join us on Bloomberg Radio at 8 00. Stay with us, this is bloomberg. Nejra i am nejra cehic in london with tom keene in new york. Recent pronouncements on trade have left investors and businesses jumping as they await trumps next move. With the latest moves on offices from both sides due to be staggered, one Company African but it uncertainty is electrolux. The us affected by the uncertainty is electrolux. The ceo, Jonas Samuelson joins us now. Thank you for joining us. Lets start with the trade theme. How is your business likely to be affected over the next six months with the latest escalation in the trade war . Jonas we have been through various stages of tariff increases the last several quarters and so far, we have been able to pass them on through higher pricing. Of course, the impact at the end of the day is a slight decrease in demand overall. A good effect, but it is something we are able to manage through. Nejra able to manage so far, but if the escalation continues how else will you be preparing to offset the risk . Jonas we continue to look at our manufacturing costs, our supply base and our competent costs. But at the end of the day, since it impacts the entire industry, we have no choice but to pass on the increase in cost in terms of higher prices. Tom i am absolutely fascinated by how electrolux shifts over the next hundred years. Look at 2015 or 2060, i know you do that every day at electrolux, how desperate or how needed is it for electrolux and other Continental Companies to be more angloamerican . How much is it important to start generating doubledigit shareholder returns . Jonas you know, we are in a fantastic position. Electrolux is touching about one billion consumers on a daily basis through our products. The way we live our lives today as consumers is not sustainable longterm. That is why we are launching our Better Living program, an action plan for more sustainable and enjoyable living for the next hundred years. We see amazing opportunities to innovate. Tom i see the innovation, but i also see singledigit shareholder returns granted is a special substantial dividend. What is the urgency in electrolux to develop a better Financial Performance . Jonas i think it is definitely urgent, and it will be driven by innovation and productivity. I think we have been able to weather some very significant headwinds the past few years with tariffsm increase in material costsm, and continuing to provide strong returns. We continue to drive innovation, and we should be would to provide substantially better returns. Nejra how are u. K. Retailers preparing for a Nodeal Brexit . Are they stocking up on your products . Jonas they have been. When we look at the last deadlines at the end of march, we saw significant increase of inventory levels both at our inventory and an hour retailers. We expect that to happen as you come near the deadline. Nejra you were saying earlier that you would have to pass on the costs of the trade war in if weof price increases see a further slowdown in the Global Economy demand decreases what do you do then . As i said, the Cost Increases impact the entire industry, and there is no other way to deal with it beyond ongoing productivity measures than to pass on the cost. I think that is true to all players in the industry. We hope these tariffs are a temporary issue that we will manage. But at the end of the day, we will continue to pass on Cost Increases through pricing. Nejra thank you so much, samuelson. Ceo jonas congratulations on the 100year anniversary again. Coming up later today, exclusive interview with the uber ceo. This is bloomberg. Viviana i am viviana hurtado, lets get to the Bloomberg Business flash. A bubble of passive investing as money pours into products. Smallerlyst says business stocks are being neglected. Few active managers willing to take advantage. Pernod ricard is planning to buy back one billion euros of shares after reporting the strongest years, inwth in seven an industry that is already outperforming. The revival of Cocktail Culture has boosted sales of highend products, but for note a pernod sees a slight slowdown in growth of this year. Tom thank you. The grandson of the founder of , hasd ricard, alexander driven forward a company into a diversified set of brands. Jim, you know beefeater but far more, american whiskey. Lets stand start there. I know that you had american whiskey at wharton business school, what are you buying american whiskey now . Two key reasons. It is a segment that is extremely dynamic, we believe in the dynamism of american whiskey and second, the u. S. Is a clear and very important strategic market and we were back to increase our footprints are. To dos what has led us our partnership and acquisitions in the u. S. Tom there has been the relay of it doubledigit shareholder returns, with substantial Dividend Growth as well. Walk us through the Families Strategy to develop those kinds of financial returns to return to shareholders. I think porn Turner Ricard i think Pernod Ricards excellent results are the direct consequence of the investments of yesterday, and what we invest in today will deliver the results of tomorrow. It is a very Virtuous Cycle which gives us the number topline growth to reinvest and also allows us to give back returns to our shareholders, dividend increases and share at the same time investing in the longterm. Nejra that one billion euro buyback you announced today, will that become routine . Alexandre now, i believe what we wanted to do was just clarify our financial policy for the mere reason that our cash flow reserves are excellent. There were some expectations on behalf of our Investor Base as to what we wanted to do from a financial policy point of view, and this is what let us to accelerate what we had already announced a year and half ago regarding dividends and to also start a Share Buyback for the next couple of years, then we will see. Nejra fish how sustainable is the Margin Development you have this year . Are here to do two things. First of all, growth. You would ask me what my three number questions are, one, gross, number two, growth, number three growth, and second, to drive profitable growth. This is what led us to increase our operating leverage this year to 28. 9 of sales, up five basis points. Tom i see the margins you are developing, and it goes to the battle of scale. I would be honored to understand how you perceive scale in the beverage and in the greater foot industry. Is scale your friend, or is it your enemy . Alexandre i would say that it is our best our best friend in the industry and specifically for Pernod Ricard is our distribution platform, our worldwide distribution route to markets where we can acquire great brands with Great Potential and distribute them and activate them to consumers. This is clearly a big asset. Tom give us a window into what the chinese want, what south wants. Wants, what kansas. Gives us a window into one discrete product. Alexandre i will tell you, we are activating a wedding for is in china, we will activate that wedding around martell, if we are activating a wedding in cambodia, it will be around chivas. In many markets in europe, it will probably be champagne. In south africa, we will have jamison and so on and so forth. Tom . Tom did you learn this at wharton . How do you activate a wedding . How many zeros go to the left when you activate a wedding . What consumers really want today is good brands that have strong quality intrinsics and also experiences,. What we do add Pernod Ricard, we have these brands, we bring them to consumers around the world and basically develop experiences around them. Tom well, this has been wonderful. Thank you so much, visit quite interesting. I want to know about activating a wedding, is the decision about a cash bar. You cant do a cash bar anymore the wedding, can you . [laughter] nejra tom, we will be looking at italy next. 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. Tom good morning, everyone. Surveillance. Tuesday, crazy, wednesday, crazy. Thursday, there is a calm. The markets are turning. Right now, your first word news. Itiana china indicating will not immediately retaliate against the newest round of u. S. Morefs, saying it is important to discuss removing the extra duties. Ms. Coming after Steve Mnuchin told bloomberg chinese negotiators will visit washington but did not say when. Elon musk says he has never seen anything built as fast as the new factory and shanghai, speaking at the opening day of the ai world conference. Teslak the chest chinese team has done an amazing job, really mind blowing. I am just astounded at how good the job is and how much progress has been made. I really think china is the future. Viviana musk was at the conference despite the mans from donald trump demands from donald trump American Companies not do business in china. Is not interested in meeting with washington until they stop terrorism. Aal run says the sanctions iran says the sanctions are hurting regular citizens. He would trump said meet with the president if the circumstances were right. Hurricane dorian moving out of open waters after doing limited damage in puerto rico and the virgin islands. The storm is gaining strength and probably will grow into a category three as it heads toward the northern bahamas and floridas east coast. 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 so much. Equity markets continue to advance, futures up 25, dow futures up 233. Lets roll it over to bonds, every day history being made. Janet, i love in your Research Note how you talk about bonds fully priced. What you do . You have a history of dealing with High Net Worth within the sophistication of your lse economics. What do you do when it is price down yield up this much . Janet there is extreme volatility in the market so we think the move is unjustified. After the move, we are saying bonds have become even pricier and we are not keen for bonds despite the uncertainty. What we prefer as a hedge is to add gold or defensive income streams. Tom this came up in a conversation i had yesterday on 1987. Do you maintain fixed income and hedge against it to protect your activist are you more and do Something Different and bonds . Jordan we live in a crazy world. With all the negative yield, we live in a world where you buy bonds for Capital Appreciation and if you want yields, you have to go for equities. When it comes to hedging, it is difficult because bonds are your hedge. Risk off, you buy bonds. It is all leading up to this and you out on top of that, the ecb and fed cutting rates, you buy bonds. We have trend followers, active managers rethinking it. Starts, and becomes a bit of a cycle, you could see when the ecb does its package. When they ease, they typically under deliver. I think we are going into a global slowdown. Recession income chances are increased and you need to own fixed income. Tom i am fascinated by derivative strategies into september. I do not know how you hedge given that panel we just put it put up. Nejra i am not sure i can and night new. I want to pick up on what jordan says. You do not necessarily want to hold duration, you would rather hold gold. If the trade is going one way and the Capital Appreciation perspective, maybe there is some value. Under what circumstances if any way any might you concern consider holding 50 or 100 year u. S. Bonds . Janet in the u. S. , there is more of a case for owning bonds because you still have some decent yield. Structurally much slower Economic Growth, much lower inflation. There will be incentive to own this long bond. Nejra we have given the reasoning why the yields have dropped, but are they reflecting the economic reality in terms of how quickly we are heading for a recession . Jordan we dont see a recession this year, but it is in the cards next year if everything continues. It is hard to be short fixed income. It is coming to a place where it seems unreasonable. Anyone talking about a 50 or 100 year bond, anyone who sold the australian bond would regret it. Tom listen to you. This has been a raging debate forever. Peter fisher with his work in nowsury and now are myth dartmouth talks about this 50 and 100 year duration. Are those constructed for society . Jordan i do not have a strong view on that. Tom fair. Answer the question. Jordan when rates are so low, you might as well take advantage. Tom janet, i want to do jump in on the gamma we have seen for this negative yield. The germany to year and 10 year, the 10 year with a vengeance coming down. These are unusual times. What does someone do that has got a normal 40 exposure in fixed income . What is there to do . Been underweight fixed income for a while. We are very longterm investors. To justify buying fixed income at this level for longterm clients, it is hard to do so. These levels are unattractive and have become even more unattractive, especially in europe. Tom i am going to say five years back that we talked about a u. S. 100 year perpetual peace. As mr. Rochester noted, the 100 year austrian note. We will drive forward this conversation. You talk about duration. There is no one more qualified to speak about the challenges of actuarial assumption then mr. Alman. This is bloomberg. Inflation in the United States has been under running our 2 goal for seven years and we need to be thoughtful about achieving the unemployment mandate and our inflation mandate. All of these moves will get ahead of the data and could become a selffulfilling prophecy that makes it harder for us to sustain the expansion and achieve our goals. We have to factor in how the headwinds will affect our ability to achieve full employment and price stability. I am looking at those factors and seeing how they will weigh on the u. S. Economy, and considering how to offset those headwinds to cyst attain sustainable growth. I do not consider political issues, only the congressionally mandated goals we have been given. Nejra that was mary daly in an exclusive interview with bloomberg. Janet, we had a conversation with peter chat well yesterday who said the fed is so behind the curve the mutual rate is below 4 . Would you agree with that, that the fed is that behind the curve . Janet what the bond market is telling you is the fed is way behind the curve. At the last meeting, Jerome Powell did not sound too concerned about the trade uncertainty. He just thought the cut would be an insurance cut, so he could be behind the curve, but the next meeting he will probably sound more dovish. We are expecting a cut in september and december, and two more in 2020. What the bond market is telling is he is behind the curve. Nejra how will this sort of cut affect dollar dynamics . Jordan you would affect lowering expect lowering rates makes the u. S. Dollar weaker. It means you are going into a slowdown recession and investors are going, what is my safe asset . The dollar has always played that role. You will see dollar doing good against emerging markets, but if you do not want to buy dollar, so dollaryen. I would say dollarswiss but the s p is intervening snb is intervening so it is becoming less interesting. Tom a morning must read harkens back to 1961, the upper of the Kennedy Administration and the acclaimed movie of 1964, Lawrence Summers and a series of tweets. , seven dayss oped in may at the Federal Reserve. That is a loaded statement for those who remember the sweat of the missile crisis. Has the world gone mad . Bill dudley is opted might be the least responsible statement by a former financial official in decades. Is that what we will see, or will Central Banks have to address the dudley oped . Jordan they have mentioned they dont react to politics, they react to data. Politics influences data so there is a connection. Directly responding to tweets from the president , i dont see this Federal Reserve doing that as they have already stated they will not do. In the bank of england, interesting choice by Boris Johnson. If he chooses a political candidate, you might see a central bank that does that. The fed is still independent. Talk about the idea of longterm investment. What are you hearing from your clients who are wedded to longterm investment but have to pull up put up with bill dudley opeds . How do they deal with the shortterm . Janet clients are concerned about the risk of impending recession and so far, we dont see a risk of a recession in six to 12 months. We are neutral on equities because we see that growth is slowing and the road Downside Risks, but overall we have the support of Central Banks globally. Some of the Recession Risk is being overdone as we see the moves in the bond market, which may not be justified. If the fed were to cut four couldand the ecb cut, it be powerful easing from the Global Central Bank which may restore confidence and growth. We are uncertain on the trade front. Markets are pricing in the fact that we are not expecting trade anytime soon. There could be an upside surprise if there are any positive developments on the trade front because the markets have priced a negative scenario. Nejra equities looking more optimistic than bonds. Has given aident mandate to form a new government. We will have a check on that, and also take a look at what yields are doing on the 10 year btps. Down 11 basis points heading for a record close. This is bloomberg. Bloomberg surveillance. This is confirmation of news floating about yesterday. She is the scottish conservative leader, ruth davison, with all the weight that rings to a more remain scotland, ruth davison resigning. In her terse letter she wrote. This goes back to that sense of tory, that sense of conservative scotland. Nejra we also keep an eye on italian politics and Giuseppe Conte will start talks with all groups to form a Coalition Government after the former iance collapsed in collapsed last month. We need to exit the uncertainty we find ourselves in, caused a political crisis. We are at a difficult economic juncture that presents problems. The Global Economy is slowing down, and also because of commercial tensions brought about by the trade wars, particularly between the United States and china. Nejra joining us now is maria tadeo live from room. Rome. Give us an update. Maria it has been three weeks of political confusion, but the prices is over crisis is over. Giuseppe mandate has given a second Giuseppe Conte has given a second mandate. The social will replace the league and Matteo Salvini has been kicked out of office, and a very humiliating way. The Italian Press going wild about conte, someone who up to a year ago no one had heard of. They used to call him mr. Nobody. Funny how the tables have turned and he has become the master, if you will. Tom you are doing some important reporting beachside in sicily. Why did that strategy fail . Maria everything that could inie gone wrong for salv went wrong. He read the whole story wrong. He called the election too early. It was a bank holiday. Everyone was at the beach and the opposition got extra time to put together a game plan. One thing he did not expect was the fact that the pd and the fivestar traded insults for a long time, what come together. He underestimated that the opposition did not want to go into a new election, and the fact that they wanted to block salvini would prove a powerful force. Tom maria tadeo, thank you. Italy, i see yields in under 1 . That has got to be because of Economic Growth. Have strep is italy with strapped is italy with the reality of a 1. 11 euro . Jordan that crazy considering you have everything rallying. There is the global context. If you remove the uncertainty about euro skepticism and the budget plans come up the market has to deal with this budget in late october. If that goes well, the rally can continue. It makes it easier for the ecb to go on to quantitative easing because the an italian politics the italian politics are calming down. The question is how much qe will be done. An election will happen at some point and we will revisit this. Nejra would you be attempted to join this rally in btps . Janet that is a pretty big move already. A lot of the news has been priced in, not just possible political outcome and affection has afforded. Potential ecb easing. I am skeptical of joining in the rally. Nejra you are seeing the ecb priced in as well. Is that the case with the btps and the euro . The easing, we get we will have to see if it matches expectations. The ecb meeting, people just take profit on these trades. You will see a bed of selloff on the day, but when qe initially continued tos rally and i think there will be rally. D the second tom is there anything out of whack where i can be opportunistic . Jordan i trade starling against euro. Desh sterling against euro. Starling against euro. Euro. Rling against if i want to do a negative, you go dull long the dollar. Nejra what is your view on european equities . Are you more negative on europe than elsewhere . Janet within the global context, we are neutral but more negative on the euro area. The current Economic Data is poor because of trade tensions, and what we see is a spillover from week manufacturing to Services Weak manufacturing to services. All the leading indicators of the euro zone are following so and implies the future may get worse. That is why we have been a bit more negative on the euro. Nejra a bit more negative on european equities. Rochester. Nd jordan tom we have a most interesting bloomberg surveillance throughout the morning, uproar over William Dudleys opinion. The real news is stability in the markets after an absolutely crazy 48 hours. Futures up 26. My headline this morning as some tangible Dollar Strength as well, seen with the xy. St of citigroup, we will do that next. Tom this morning, after the firestorm of tuesday and wednesday, quiet, relative stability in the markets. A dollar bid and gold too. It is trump derangement syndrome. The door lee dudley uproar continues. Hutton calls a deal on the cliff edge. Prime minister johnson leads the disunited september 12 and beyond. I am tom keene in new york, nejra cehic and the relative calm of london. Today difference between and tuesday and wednesday. Nejra it does not feel like calm here because of all the fallout we heard on the brexit front, and the developments in italy. Big moves in bond markets. Tom i am going to get rob huttons article out on twitter. It is an extraordinary summary of what we saw with her rogue yesterday prorogue yesterday. Oniana china indicating it not immediately retaliate against the latest round of u. S. Tariffs, beijing saying it is more important to discuss removing the duties. Steven mnuchin told bloomberg chinese negotiators will visit washington but did not say when. Protest forband a saturday in hong kong, they say due to safety concerns. This before a planned 13 straight week of prodemocracy marches. In at only, the president gave the recently resigned premier in italy, the president gave the recently resigned premier that is after the Pharma Alliance collapsed in chaos earlier this month. In argentina, they want to extend maturities on 100 billion dollars plus of debt and delay repayments to the imf after a collapse in its bond. The government will postpone 7 billion in payments on shortterm notes and is seeking a voluntary repro filing of 50 billion repro filing reprofiling of 50 billion in debt. 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. Bonds,uities, currencies, commodities, Dollar Strength. Dow futures up 249 points. Curve inversion, euro in stronger. A little bit of a yield snapshot rather mexican peso. We are watching em currencies, they are fragile. Nejra you know what is not gile, the european in big rally in european equities. We are seeing a bid for risk assets and a backup in yields. The 10 year treasury yield went above 1. 50. The 30 year yield just a whisker below 2 . Yield,plunge in the btp and cable extending losses. Tom it will be the crown on october 14, the queen of england will speak open a new government. She will Pay Attention to the union of wales and scotland and Northern Ireland. Here and scotland, ruth davidson, tori is resigning from the government, davidson making her statement with the conservative and unionist party. This is a delicate moment for scotland, to say the least. Let me go to the delicate history of tradeweighted sterling, a chart going back to john major in 1992 up to the success in the United Kingdom, the lehman low. Many do not realize how pound sterling is back near the lehman lows of 2009. As jordan rochester said, to break down the john major weakness would be an extraordinary event. Nejra we have both fixated on sterling the past few days and fixated on the 30 year yield. That yield slipping below the s p 500 den yield. Dividend yield. You can see that shift related to the 10 year yield. Equities versus bones. Bonds. Tom my most interesting person within the Federal Reserve system is the leader of the San Francisco fed, here is mary daly. Inflation in the United States has been under running our 2 goal for seven years and we need to be thoughtful about achieving not only our full employment mandate but also our inflation mandate. If all of these moves will get ahead of the data, it could be a selffulfilling prophecy that will make it harder for us to sustain the expansion and achieve our goals. We have to factor have a i willwell will see how they will weigh on the u. S. Economy and considering my decision is how to offset those headwinds so we can obtain sustainable growth. I do not consider political issues. I consider congressionally mandated goals we have been given. Tom we are geography centric at bloomberg surveillance. You have to drag out and economist from ucla and berkeley, and we can do that working with catherine man and dr. Hollinghurst dr. Hollenhorst. Has it adjusted the citigroup view . Andrew it has not changed our view yet. What is coming out of the fed is less important than the data and what we are seeing out of trade. We will move between these forces and we think it means they are likely to cut in september, it may be cut again later this year, but they are in the mode of can we provide insurance and stabilize things . Tom i can bring in the rest at berkeley. Here is Lawrence Summers, former secretary of the treasury in three tweets. Mr. Dudleys bloomberg dudley is a berkeley phd the oped is the worst case of real donald trump derangement in the financial world. Young tost is too remember the uproar in 1964. Its seven days in may at the Federal Reserve. Has the world gone mad . Be thedleys oped might least responsible statement by a former financial official in decades. What were the parts of what bill dudley said that mattered, away from 2020 . Andrew the most important part of that statement is the idea that the fed needs to think about when it is providing accommodation, is it creating a moral hazard by providing that . This is something we have heard the ecb think a lot about, usually in the context of fiscal stimulus provided by governments. If you provide more monetary stimulus, does that make it easier for the government to provide less fiscal stimulus which is the more powerful tool . That is a wellknown problem in central banking that goes back decades, so it is not surprising to see a highlighting of that tradeoff. A central bank should be actively participating in democratic politics, that is where people have some issues and face criticism. Nejra could the cost of further accommodation from the fed in terms of the moral hazard you are referring to, cut the cost of further accommodation outweigh the benefits . Andrew at this point they probably dont which is why we are seeing the fed move towards more accommodation in the market expecting and the market expecting more accommodation. We heard that from president kaplan and just from president daly. In the words of president daly, there is no free lunch with Monetary Policy. The cost of providing more monetary more accommodation is possibly sowing the seeds of Financial Stability risk. Things you lot of need to think about in terms of potential downsides to providing more accommodation. Given the way the outlook is changing, the upside to providing accommodation are probably outweighing the downside. Even when inflation is low, there is still a tradeoff. Nejra if you believe the fed is behind the curve, is that in relation to the neutral rate or just in relation to the fact that it has to keep chasing the market . Andrew if you take a look at the yield curve, something fed officials are watching, you talk about 10 year yields almost back to 1. 85 and 30 year yields on at 2 , these are low and that is sending a marketbased signal that orchids think the longterm new arc its think the long markets think the longterm rate of neutral interest is much lower than where overnight rates are now, or somewhat lower. Opinion, yous could argue Monetary Policy is restrictive. That might not be true from an economic perspective, but in terms of the market pricing, it looks like fed policy is restrictive and that is a sense in which it is hard for the fed not to follow through with accommodation being priced by the market. We have this inverted yield curve or flat yield curve. If you do not provide cuts, it will invert further. Nejra great to have you with us. Lets get a check on sterling extending the losses from yesterday. We are trying to get our heads around how high the no deal risk might be. Below 1. 22. This is bloomberg. Andpeech on the economy instead to bring forward a spending round to next wednesday. This is obviously to be ready for a potential general election in october or november. Wholew it takes a exercise to a new level of political fast, that they have the cheek to refer to the peoples priorities and their latest press release. As someone who from the very beginning are watching bloomberg surveillance. Sony agreed to sell its 5 stake in olympus back to the Health Care Device company for 760 million, one move dan loeb suggested they make. A 1. 5, he disclosed billion stake in sony and encouraged them to spin off their semiconductors and focus on the main entertainment is this. South koreas highest court ordering the retrial of the sony chairman. Hisdecision to suspend sentence and send the case back to the lower court. The company has suffered from falling profit. Shares of micro focus falling after the company cut its outlook for full year. Month, micro focus says it was maintaining its fullyear guidance as it continues to struggle with integrating the 8. 8 billion dollar Software Assets it bought from hewlettpackard. That is the Bloomberg Business flash. Nejra ruth davidson, the scottish conservative leader credited with turning around the party, resigned, dealing a blow to Boris Johnsons hopes of winning a general election. We are joined by anna edwards. With this resignation, is the basic take away that it is getting harder for boris to get a majority . Boris johnson to get a majority . Credited was widely with delivering 13 seeds for theresa may in 2017 in scotland, which means she was able to hang onto power. This is a big loss for Boris Johnson, but she is not taking shots at him. She is citing personal reasons along with some comments around brexit. She is urging those who want to stop no deal to say they would back a deal and sees that as a way to open negotiations with europe. Nejra what can the Rebel Alliance of mps do to stop the no deal . Anna they have less and less time. Legislative,h is trying to extend the date of the brexit deadline. Whether they have time and whether the e. U. Will say yes are the questions. The other option is the nuclear option, a vote of noconfidence. Whether that whether they have the numbers for that is unclear and whether that would 10 would ben number a big reservation for those in the tory party. 1997 led torogue in the labour victory of tony blair. Are we looking at the next general election . Is there a labour party after mcdonaldr and is john the next leader . Anna im sure Jeremy Corbyn thinks this is his turn. General election has always been his first preference path forward. He has always said, i stand ready to go to general election and he was surprised by 2017. No doubt he will go for it again. The party is trying to coalesce with other opponents of no deal brexit to go down the legislative route. We could be heading for a general election. Many options remain open. The conservative party is acting as if we are what the number of headlines. Tom you are the expert on this along with rob hutton. Are you telling me john mack donald is John Mcdonald is going to get on the same page with mr. Hammond . Anna this is why they dont want to have a vote of noconfidence. This is why they want to go down the legislative route, push the deadline out and block no deal that way. That avoids the thorny issue of trying to get these people with different views around the same table. Philip hammond speaking out against Boris Johnson and John Mcdonald also speaking out against what Boris Johnson has done. Whether they can find Common Ground is the question. Nejra what have e. U. Officials been saying . Anna they have been pretty quiet. The finance minister of france is suggesting that no deal is becoming more likely. There is no time to open up the Withdrawal Agreement, no intention to do that. Away from the g7 that the e. U. Was willing to soften and that does not seem to be the perspective of e. U. At this moment. Mellonming up, bny investment director liz young at the 7 00 hour. This is bloomberg. The storm clouds of recession over washington now, a beautiful shot as everyone back to school. The capital and the library of congress in the background. Andrew hollenhorst of citigroup. I just want to go how you model recession. You have a classic economic recession. As the major differential about recession or just about the American Consumer . Andrew the American Consumer is the starting place. You are starting from a scenario of strong job growth, wage growth has picked up. That is feeding through to strong consumption. You have a strong bedrock part of the economy with the American Consumer and all kinds of Downside Risk. Tom is the vector of jobless claims legitimate . Does it really matter if we get an uptick . Andrew we will bounce around from week to week, and we dont get too concerned. If we see that moving upward in a trend like fashion, we will get concerned, but right now it is very low. Nejra what might hit the u. S. Consumer that everyone is pointing to as being the one strong point in the u. S. Economy . Andrew one thing we are concerned about is the volatility in the economy and Financial Markets and globally, will that feed through the consumers . We are surprised with the Consumer Confidence numbers that have held up pretty well. Maybe we should be less concerned, but watching confidence closely. It is more external threats that will affect the American Consumer because the domestic story is strong. Nejra at what point do you change your view and say, there is the trigger, the external threats have hit the u. S. Economy . Andrew looking at forwardlooking indicators weakening in a material way, so if we were to see Consumer Confidence coming off in a significant way, if we were to see equity prices significantly lower, that would be a hit to the consumer and something we would worry about Something Like ism services. Manufacturingsm and the sector has been soft. If ism nonmanufacturing starts to soften, we will get concerned. If we start seeing those things we will think more about recession. Tom andrew hollenhorst, i have a wonderful gold chart coming up. Lots going on in london. The Brexit Debate continues. In america, that are markets two days in a row, dow futures up 265, on the cusp of record equities. This is bloomberg. Surveillance, dow futures up 267, s p futures up 28 points. Our first word news. Viviana we begin with Federal Reserve bank of San Francisco president mary daly, keeping an open mind about the meeting next month but says the u. S. Economy faces heightened uncertainty. Inflation in the United States has been under running our 2 goal for over seven years and we need to be thoughtful about achieving that fullyear mandate and inflation mandate. Viviana she adds the fed has the tools it needs to sustain the economic expansion. China indicating it will not immediately retaliate against the latest round of u. S. Tariffs , saying it is more important to discuss removing extra duties. Stephen mnuchin told bloomberg chinese negotiators will visit washington, but will not say when. Says he hason musk never seen anything built as fast as the electric car factory near shanghai, speaking at the ai conference alongside alibaba chairman jack ma. Teslak the ciesla china team has done an amazing job, mind blowing. I am astounded by how good the job is and how much progress has been made. I really think china is the future. They are very impressive. Viviana musk is at the conference despite demands from donald trump American Companies find alternatives to doing business in china. Iran is not interested in meeting with china unless washington stops its economic saying u. S. Sanctions are hurting ordinary citizens and dropping the sanctions could help salvage the nuclear deal. President trump said he would meet with the iranian president if circumstances were right. Early today, Hurricane Dorian moving out onto open waters after doing limited damage in puerto rico and the virgin islands. It is gaining strength and probably will grow into a category three storm. On the bloomberg terminal, you can see this by going map cyclone go. It will head to the northern bahamas and floridas east coast. I am viviana hurtado. Thankyou so much tom you so much. I want to show an important chart, a feelgood chart of the moment. How would you like to make 94 or 100 in a bond . You can buy the austrian 100 year bond and beautiful and good things happen. Knows, thellbank price of a Long Duration bond could go the other way. He joins us from singapore, a little bit of experience on the washington ballet. Price can go down and yields can go up. Is that the ultimate risk of 50 and 100 year paper . Derek the other risk is that nobody buys it. Honestly, the treasury is said to be considering this, seriously considering this, Stephen Mnuchin told bloomberg yesterday. I think it took markets by surprise and you saw some movement after his comments as a result. Tom it went from surprise, and this goes from what i will call more measured republicans of administrations ago, front and center peter fisher with his advice to treasury, and certainly democrats as well. Who wants a 50 year u. S. Peace . Piece . Derek it is not clear. The Trump Administration is thinking about it, given the returns you get in terms of shorterterm issuances. There is a little bit of a push toward the, but this is an idea that has been explored for a little while, at least since mnuchin has been treasury secretary. They have said they are not going to do this. It is unclear what is prompting this reevaluation, but i think it is a surprise they are considering it. Nejra some market watchers said mnuchins comments were an attempt to steepen the yield curve and we certainly saw that, although it was shortlived. Could it have been an attempt to steepen the yield curve . Derek maybe. One of the funniest things with the yield curve is people are all over. I was hearing from a senior Trump Administration official on another network that were interesting, i will go with interesting while aim onair. While i am on air. Basically saying the yield curve moves are a sign of booming sign of a are a booming economy. I dont know this stuff. Nejra Stephen Mnuchin has said the yield curve is not that great venice session a recession not that great of a recession indicator. Moveld bloomberg and a would be coordinated with the fed and global allies. Is he trying to put aside speculation on dollar intervention or a call to help to the fed and allies to weaken the dollar . Derek i think it was a sounding out, let me say a sounding out. If he wanted to be direct, he would do it more in private. There is some question about whether or not the treasury would have any backup if they made this move. Keep in mind, recent interventions have been in tandem. There has been a bipartisan agreement to do it and it is not clear the fed would intervene in a similar way. It is not clear they would have a dancing partner. The u. S. Does not have unlimited reserves, so you are looking for more of a signal and you have to have everybody on board. Tom Derek Wallbank in singapore, thank you. Andrew hollenhorst is with us. Back is fiscal policy. Pieceoes a 50 or 100 year for the United States of america mean for our fiscal structure . Are we becoming french like . Andrew when you look at the yield curve and see higher yields at the front end and lower yields at the long end. Tom opportunistic. Andrew when you look at the fiscal situation of the u. S. And the longterm cbo projections, debt Service Becomes one of the largest items the government is spending money on. If those interest costs are lower, you significantly tom what is our social reticence on this . ,t is the question for to long harold james, other economists. What is the social reticence to not be like the friends and issue a 50 french and issue a 50 year . Ofrew at is more a question , is there a market . Is this something investors want to go out and buy . You think of the longterm pensions, they like very Long Duration. There is some potential. Nejra in terms of the yield curve is a recessionary indicator, we had someone contacted and say, does it create a false scenario about recession because all the indicators are not there. The other thing we do not have that has preceded previous recessions as high oil prices. Is that Something Else we need to see before we see the yield curve is a reliable recession indicator . Andrew the fact that we are seeing the yield curve move on thoughts about what we be issuing 50 or 100 year debt, this is a reminder this is not the best indicator. Whether we issue 50 or 100 year debt has little to do with whether the u. S. Goes into recession. In terms of oil prices, it is different than it has been historically. The u. S. Is a major producer of oil and when prices go up, we see more investment. The implications of a Higher Oil Price for the u. S. Economy are different now than they were back in the 1970s or 1980s. Nejra how different might the reaction function of the dollar be to previous fed easing cycles . Andrew we are seeing a bit of difference in the sense that we have a yield curve that stayed relatively flat even as they start to bring down rates, because the rates are so low in the rest of the world. Maybe the dollar will not weaken as much because accommodation has been provided globally, the ecb is thinking about providing more accommodation. This is putting downward pressure on currencies globally, meaning there is less room for the u. S. Dollar to depreciate elective to those currencies. ,ejra coming up later today more great conversations. Our exclusive interview with the birth ceo. Uber ceo. This is bloomberg. We have nothing to fear about a recession except for the fear of recession. I dont fear recession. The risk of a recession is there. Some of it is the politics. We will have a Strong Economy through 2020. You people want a recession, maybe that is the way we get trump out, but i dont think even that would work. Tom one of those indications of the fear is gold. Andrew hollenhorst is not supposed to talk about old. Gold. 27 years ago, a book changed the discussion of economics. Fetters. When you are at vertically, does he force you to read it . Andrew i did read it. It is a great book. Tom gold is back in. Commodity guys are all talking about it. How do the guys at citigroup fold in gold . Andrew what is always puzzling about gold, yes, it is shiny, but does it offer a return . Why would you buy gold when you can buy Something Like tom a high coupon 30 year bond. Andrew we do not have that. If you think valuations are high and there might be Downside Risk to the economy, gold starts making more sense. Or you can do it in dollars we shall do it in euros is what Dennis Gartman would say. The white line, gold in dollars or euros, in believe, or any other currency. You can see an advancement in a depreciating euro has been extraordinary, up 41 since 2014. It matters which currency you are playing with. Andrew it matters if the currency is weakening or strengthening relative to global currencies and that goes back to this discussion of what will happen to the u. S. Dollar . Nejra you said gold will make sense in an environment where yields are low and there is so Much Negative yielding debt. How much sense does the amazing amount of negative yielding debt make to you . Andrew another thing that is puzzling to economists, yield levels so low with negative yielding debt, he would have had more potential stimulus, longerterm issuance that would have supported yields and brought them higher. Some of that has not happened or not to the extent that it would be necessary to increase real returns. For that reason, gold looks attractive to some investors. Nejra what are the unintended consequences on the real economy of negative rates . Andrew we have had some unintended consequences in europe and the sense that it becomes very hard to generate a return for some savers. That is one of the tradeoffs we think about when we think about lower rates versus higher rates. Lower rates are stimulating the economy but making it hard for savers to get a rate of return. That can lead to issues with disintermediation. If the bank is offering a negative return, you will be incentivized to leave your money in cash under your mattress or gold, and that creates issues. Tom do we unwind ourselves from negative rates with stability and reaction functions that are continuous, or is the view that great discontinuity is to come . Andrew the outlook is for rates that are moving only lower in terms of front and rates, policy rates moving lower. Tom you sound like an economist. What is your call on the 10 year yield . Andrew that could move a little higher. We could get back to the 2 level, very low levels historically. The general idea that longterm yields are low persists. When we go into the next downturn, we are thinking about more quantitative easing that will depress the yield. That is not clear that will pray out layout this time. Play out this time. Tom really looking forward to speaking to paul rumor about the technology overlay we are all living now. Not the iphone 11 and the new camera that will be razzledazzle. What is technology doing to your children and grandchildren . Stay with us, this is bloomberg. Tom bloomberg surveillance, morning. Good morning. Futures up 28 now. Of thehe definitive sum day, everyone in the United Kingdom writing up the Historic Events of yesterday. Rob hutton has done it. The date calendar forward, do i s speech . The queen speech . H the kings rob least interesting part will be the queens speech, which are not exciting. She is held hostage and must read a statement by the Prime Minister. What is more interesting is what will happen in the next two weeks as mps try to block a no deal brexit. Nejra we have been hearing from the shadow chancellor John Mcdonald saying they will work cross party against a no deal brexit. That no deal it brexit will be blocked . Robert i think they have the votes. What johnson has done by announcing this suspension is he has can severely constrained the time they have an parliament to act, which in theory makes it harder for them to act. It is quite helpful to the rebels because the argument for getting people over to their side is, this is your one shot, we have to do it now. You cannot put it off until next week because there will not be time. He has certainly wound up the speaker of the house of commons, who matters because he will be the referee. What we will see you next week as parliamentary rules changed and it will be barco changing them. It is critical now that all the normal rules, the government decides what parliament discusses, those will go out the window. Nejra great to have you with us , our u. K. Political correspondent. With us on set is Marcus Ashworth. There is a whole world beyond brexit. European equities higher and a backup in yield. Beingt risk on tilt driven by china saying they will not immediately retaliate on trade . Marcus probably. There is some interesting stuff going on in the u. S. Treasury market which has caused yields at the long end. Principally, it is risk on, risk off in relation to u. S. China. Nejra in the bond markets, we are not seeing quite a move. 1. 50, the 30 below year at 1. 97. What is priced in that gravitational pull on longer and yields . To 1. 90 andot down it has gone up substantially as they have talked about having a 50 or 100 year. They primarily do not like it because it takes liquidity from the 30 year. Interest, inkind 100 years they are not coming back and buying stuff. There is that liquidity issue. This is a fabulous time to take advantage and perhaps create a whole new world, a final frontier of people taking super risk. People need to get more instruments to express their views. Tom greg valley a greg valley air just published what he calls the bond crisis. It is a field good feelgood crisis. When does the pain said in . Set in . Marcus if yields go lower, there will be a substantial hit and potential bankruptcies all around. The way that phones work with this positive convexity where prices bonds work with this convexity where prices this is a beneficial effect. People can take low yields as part of the front and and match them with long ended bonds. They can create a barbell and match the u. S. Treasury. That is what investors are looking at. You,on short notice, thank Marcus Ashworth of bloomberg opinion. This is really important for our american audience. Yns is mr. Corb assistant, John Mcdonald. He is what you think of when you think of a labour leader. He needs mr. Hammond to go against Boris Johnson. We are looking at comments from mr. Mcdonald in a bit on bloomberg. Stay with us. 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. There only the congressionally mandated goals weve been given. When i approach my job, those are the things im thinking about. Alix San Francisco fed president mary daly focus on inflation and employment. China steps down. The country says it wont retaliate at the United States latest round of tariffs. And u. S. Treasury secretary Steve Mnuchin looks at the positives of longterm borrowing, and says the government has looked at ways to counter Dollar Strength. David welcome to bloomberg daybreak on this thursday come august when he not. We have some best buy thursday, august 29. We have some best buy news just out. Alix it looks pretty good. Fullyear adjusted earnings now on the highend of 5. 75 per share. David it beat on Second Quarter earningspershare. Alix i guess the downside is that, if you took a look at comp sales on
comparemela.com © 2020. All Rights Reserved.