Transcripts For BLOOMBERG Bloomberg Surveillance 20240714

Attacked by armed, masked men. We are live in the city. Welcome to bloomberg surveillance. Lets check in first off on the markets. We see gains across European Equity indexes. That should show through in terms of u. S. Futures, as well as s p futures. Oil is down. You will see the big majors weighing on the stoxx 600 index. Maybe a turnaround of the gains we saw oil take yesterday. The u. S. 10 year yield is currently up for basis points to 1. 54, so investors feel less concerned and are selling that that. Lets get bloomberg first word news in new york. We begin in argentina. S P Global Ratings cut the Credit Rating to selective default after the nation said it would delay payment on more than 100 billion of debt. They says criteria, constitutes default, but the new terms for shortterm debt came in immediately and they will lift argentinas rating to triple c minus. Boris johnsons suspension of parliament will get an early test. , saying are ruling courts, saying it is an affront to democracy. The cases will may end up before the supreme court. Projected hong kong dropping the controversial extradition bill. Thate lam made a proposal china instructed her not to yield to any of the protesters demands. And the u. S. Could face resistance to issuing altra ultra long bonds. It probably will not get the backing of the elite group that advises the treasury secretary. We learned they previously recommended not issuing and these bonds and its views have not changed. 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 . Matt thanks so much. Japan said it is going to cut its purchases of benchmark bond this as yields near record lows. We are seeing the september 510 year jgb auction size reduced. Been 300650,000,000,000. So they are lowering the buying range under the september plan. Lets kick off with the latest on the trade war. The first of september, new u. S. Import tariffs on thousands of chinese goods take effect. China has said it wont immediately retaliate. Meanwhile, the trade war is hitting american companies. Abercrombie fitch is racing to reduce its dependence on chinese suppliers, saying the trade war will hurt profits. Joining us is the founder and cio of latitude investment management. , let me get your take on where we stand. Yesterday, trump said the u. S. Is already talking to china. Now, we hear the chinese will not immediately retaliate. Are we getting closer to a ceasefire . Freddie it is so hard to tell. This is clearly part of trumps tactics to confuse us. It does seem to me its dragging on, but that seems to be an trumps interest. That i amof the view not convinced will reach an ultimate, grand agreement. I think the trade war is likely to rumble on. Now,ps a ceasefire for but not a grand resolution and a peace deal. Matt how do you trade around this . When every tweet or statement that comes from the president or out of any Chinese Government institute, you can really see major swings in stocks. August is typically a volatile month, but this has topped other augusts. So had a trade around all this noise how do you trade around all this noise . Freddie there is a simple peace of analysis where someone looks at the cogs within their business, take the proportion they buy and adds a tariff rate based on the cost of goods and take that off the share price. I think that is naive. Lee overlyr to aggressive. These businesses have done a lot to mitigate buying intelligently. Two, it can offer a great opportunity. If you see businesses that are getting hugely outoffavor, they are changing around a lot, or half that gives you an opportunity to buy a business that does have china exposure. It may be dented about what is certainly not permanently impaired and it is unlikely to suffer dramatically. Matt interestingly, interesting. We had a story a couple days ago that said passive investing is turning into a bubble. And because of that, investors are overlooking small or Medium Companies that offer value. Do you agree . Freddie i do. Whether it is a bubble or not, im not sure. But i think it is a rational to invest in index funds. You buy every stock at the price it is currently trading at. There is no sense of valuation or analysis. Managers getactive it wrong and underperformed those indices, but it seems a naive way of investing. When the flow is moving in to larger cap and higher momentum stocks and people are buying , that meanstfs other areas of the market, whether midcap or domestic. Economies, industrial stocks or traditional retailers, they can have their day in the sun. But it does take the fundamental , individual managers to be buying those for that valuation gap to close. Matt we have not seen the value stocks perform well versus growth stocks. Even though there have been a number of points where managers would have wanted to get in. Is that going to turn around . Freddie good question. At latitude, we always take the view of buying some growth and value at all stages of the cycle. Our value stocks, weve got three or four, are doing terribly. The prices are performing very badly while the operations continue to improve. Our view of value is going up and up every signal year. At the moment, it does not feel like it will change and it feels principally to be based around two things. One is lower bond yields slightly driving the discounted flow of cash and quality stocks higher. Secondly everyone in this market is nervous, everyone is bearish, everyone fears uncertainty and uncertainty is rising. As that happens, the value stocks investing in changing is far less attractive than something you feel you have got nailed on. I dont think it will change yet. Matt fortunately, you are a longterm investor. We will be talking more about this low rate situation and how long it stays with us. Freddie lait, chief Investment Officer at latitude investment stayement stays with us to to cover all these things and more. Ecb hawks warn against resuming quantitative easing just weeks before the central bank meets to discuss bolstering the eurozone economy. Todayday it was knot, another. Plus, the latest from hong kong. The police are giving a press conference as prominent activists are arrested before weekend protests. Others are attacked and beaten. Follow that conference at all the latest on bloomberg. This is bloomberg. Matt economics, finance, politics, this is bloomberg surveillance. Lets get the Bloomberg Business flash. Ubers chief executive says it sure looks like levandowski took information from google. This week, prosecutors charged levandowski with stealing trading sequence secrets. We spoke with the companys boss dara. I was not here when we brought anthony on board. But what i do know is that we went to incredible depths to make sure that any information anthony acquired from google, and it sure looked like he did, did not make it over to our company. A handful of people who havetedly use juul devices triggered the probe into whether ecigarettes can cause seizures according to documents from the fda. The head of Tobacco Products emailed the commissioner saying quote no proof of causality, but at a minimum, in association with juul. Tesla is raising car prices in china in response to trade tensions that have weighed on the countrys currency. The basic price of an imported model three will be more than 2 higher. Tesla is amongst automakers most hit by the dispute between washington and beijing. It has no local production and is being directly hit by any increase in tariffs. That is your Bloomberg Business flash. Matt thanks very much. Wary of moreers monetary stimulus have fired warning shots. In an exclusive, the dutch governor said the outlook is not weak enough to warrant the resumption of bond purchases, echoing comments by germanys governor, and today, we heard another governor say basically the same thing. Meanwhile, Christine Lagarde offered a clear sign that she is ready to follow in Mario Draghis footsteps. In her First Comprehensive comments on Monetary Policy is winning the job, she said the ecb has the tools to tackle a downturn and must be ready to use them if needed. Still with us is freddie lait. We are hearing its not time yet, what is your view . Freddie the european economy is in a pretty run state. Keys not doing much and indicators like German Growth and car production, youth unemployment, are still are bad still at bad levels. Basically, i think they should do everything they can to try and stimulate the economy. But will it actually work and do we need more fiscal stimulus . Theres only so much more quantitative easing can do to stimulate an economy without the demand side and animal spirits that fiscal stimulus might help inspire. At a moment where everyone seems to be asking. Erlin for fiscal stimulus this is from whence it would come. Do we make that bet . Do we say this is where i think fiscal stimulus will help my . Tock freddie it is quite difficult to predict where it will go, but any insight will be good. Sense, fiscal spirits coming from germany would be a great sign in a change from regime. This trying to keep things and zero or better. It would be a broadly positive for european equities, in my opinion, and would drive capital flight into europe have a nice, virtuous circle. Either way, it would probably be positive for assets across europe. Not only do they have a gdp, theus at 2. 7 of surplus this year, but they could get paid to borrow money. Do you expect germany or governments to start boosting issuance . Freddie it seems likely to me. It is probably likely when the economies are taking a long and doing all right. U. S. Growth is slowing but still positive German Growth has been negative for one quarter, maybe two. But the situation is this. Comes along that stalls Economic Growth and we enter a recession, surely we will see more easing. Especially if you can borrow at zero. Issuance will rally. And any government that does not do that will be replaced with a populist government who does. It seems like that cat is out of the bag. I cannot see a scenario where, over the next five years, dont see a huge amount more government issuance. It depends on timing and how strict people want to be. Done hugealready fiscal stimulus and he will do another. It does seem like germany is going to bite even without further economic weakness. Matt what kind of exposure do you have to those kind of activities . Do you have, for example, german exposure . Freddie we dont. I have very little exposure to europe. For the last 56 years, i have found the economy less exciting than the u. S. And have tended to invest more in the u. S. Obviously, we by global businesses with exposure to europe in a proportional way but we are not investing heavily. But we are looking at it. If this does trigger some sense of recovery and once we are through brexit and solve the italian situation, there may be more clarity and stimulus that gives you a few years of runway. There are chief stocks in europe, thats a certainty, its just what the Growth Potential is that matters more than pure valuations. Trumpclearly, donald would be more excited about another fiscal stimulus them than Angela Merkel would be. What about the u. K. . I know you have a u. K. Grocery stock, for example. Are you concerned about u. K. Businesses . Freddie there is going to be volatility around. I am tescos, as you allude to allude to. Os, as you and im aware of the mismatch between all of the stocks. But in general, u. K. Stocks just arent performing well you and if businesses are doing well. You have got a cushion of valuation for some of that uncertainty. The biggest swing will be what happens with sterling and the immediate aftermath of brexit. That could hurt businesses for a quarter or two, but id of see it impacting the longterm prospects of a business with 35 share, taking 10 pence in every pound of u. K. Spending, etc. It will chew through this problem and in five years, be irrelevant. But in the shortterm, it could cause some consternation. Matt thats not the only place we see volatility. August has been pretty volatile. Freddie lait is going to stick with us. We are going to talk more about the ball days of august vol days of august. This one stands above the pack. We break down the month that was. This is bloomberg. Matt welcome back to bloomberg surveillance. Hong kong police say seven have been arrested thursday night as we prepare for another weekend of protests amidst reports they have been banned amidst protest leaders being arrested and other leaders. Eing attacked and beaten august is nearing its end and price action has been astonishing. No more sleepy currencies and tiny swings in bonds. Though it is historically the most volatile year month of the year anyway this august stands above the rest. Here is dani burger. Dani summer trading does mean price swings are usually exacerbated. Over the past two decades, we have seen the vix have its biggest move in decades. But i want to compare this august to prior. We had conte survive as Prime Minister, the u. S. Floated the idea of longterm bonds. That meals yields on both assets tumbled to the lowest in records. So compared to historical august moves, for btps, it was the biggest since 2011 and nearly four decades when it comes to u. S. Yields. That means traders have rushed it, trying to hedge some of these moves. This august was its biggest august move since 1998. Currencies were not immune to fluctuating, especially the pound. The brexit risk continues to loom and traders went into three months volatility. The biggest august rise on record. Trouble is also seeing with the trade tensions. The jpmorgan fx volatility gauge head of the august rise since 2007. Maybe this is one of those months where you just want to get away from the screen and not Pay Attention or you risk coming back into what was a very turbulent month, matt. Matt thanks very much for showing us the volatility that has been. Volatile of the usual august. Live in hongre kong as retail sales figures are due to show the impact of protests. They are expected to be bad, obviously. We will get them to you. 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. The trade war, u. S. Tariffs against chinese imports are set to go live on sunday. China says it will not immediately retaliate. Warning against stimulus. Rise asng kong tensions key activists are arrested and attacked by masked man. The Hong Kong Police are discouraging anyone from going there live in the city. We are waiting for retail sales out of hong kong as well. Clearly after over two months, almost three months hang on over three months of protests, we are expected to see some negative numbers for retail sales. Indeed, we see retail sales falling 11 point 4 yearoveryear. That is a little better than the estimate. We were expecting a drop of 12. 5 . 11. 4 in retail sales is quite horrible. If you look at the chart, let me put together some let me look at something that hillary put together. You can see the drop here, 11. 4 . The white line there, the forecast is the yellow line. They trail each other very closely recently. But it has not been this negative since the beginning of 2016. Otherwise, it is the worst it has been in recent memory. Lets get to bloomberg first word news before we go to hong kong. For that we visit new york and viviana hurtado. Viviana President Trumps decision to cancel a trip to poland comes as a sharp blow to the countrys populist government. The president is sending Vice President mike pence in his stead while he stays home to deal with hurricane dorian. Polish president andrzej duda saying he considers trumps trip postponed and not canceled. S p global radiance cutting the countrys Credit Rating to selective default after the nation said it would delay payments of more than 100 billion of debt. Under its criteria, s p says this constitutes default. The new terms for shortterm debt immediately came in immediately today. The u. S. Could face resistance to issuing ultra lung bonds. It probably will not get the backing of the elite group that advises him. It previously recommended not issuing ultra long bonds. It is its views have not changed the bank of korea hinting at further action to support the economy, risks continue to rise after leaving its key rate unchanged. Board members dissenting, calling for an immediate rate cut. It is an indication of growing concern after the Central Bank Says more must be done to prop up growth. E. U. Foreign ministers will meet today in helsinki to try to keep the Iran Nuclear Deal alive. Challenges include protecting commercial shipping in the persian gulf, europe trying to salvage the deal with terror on with with tehran. Global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries,i am viviana hurtado. This is bloomberg. Much, vivianaery hurtado there with first word news. Kongnrest in hong continues. Authorities are clamping down on demonstrations and have arrested at least three prominent protest leaders. As many as seven possibly have been arrested. That is after police band a rally organized for saturday. Reuters is reporting that earlier in the summer, china rejected a plan by carrie lam to withdraw the controversial extradition bill to appease protesters or this would have happened months ago, and they are citing sources. For more, our editor, ian marlowe, joins us from hong kong. What is the latest with these arrests . What is the tally . It seems Hong Kong Police have arrested seven people there there are quite a few prominent people among them, including joshua wong, who is the subject of a recent netflix documentary, called teenager versus superpower. It is quite significant in the city. Everyone has been worried about a crackdown on free speech. Police have been banning peoples right to march, not approving certain rallies that have been happening in the city. There was a big one planned for tomorrow, and now we have numerous arrests today, so the city is on edge. Quellis this likely to the protests . Or are they going to continue on . Is not clear. Every time the government has come out and done something, or the police have launched a new effort to arrest or detain people involved in the movement, it tends to spur more protests, more actions from the protesters. At the moment, there was a big rally planned for saturday. The organizers didnt get a permit. They appealed, they were denied. So they canceled their planned rally for saturday. But it is not clear that protesters will stop going out, and there are already plans for people to hold a socalled socalled religious gatherings, which do not need permits. And creative ways to get around it and gather. It could be the people who gather are those who are ready to engage in the socalled illegal protests, so it is not clear exactly whether that will lead to more violent clashes, the kind of which we have seen in the last few weeks. Matt what kind of Police Presence is in hong kong and surrounding hong kong . I mean, what kind of forces does china have prepared should things get out of hand . Iain yeah, the Hong Kong Police force is 30,000 strong. They have several hundred people who could do that. All of thisoughout that they have been able to keep control of the situation. You have to remember that when you see those violent demonstrations on camera, people throwing bricks and molotov cocktails, those are generally a diehard group. A smaller number of protesters, it is not the mass million strong rallies that we have seen in the city in recent months. The peoples have armed police over the border in shan jen and the Liberation Army is staffed in and around the territory of hong kong. At the moment, the Hong Kong Government is not requesting assistance from china. China has sort of fan rumors that they could get involved by putting out these social media videos and videos of chinese Mainland Police and others conducting ryan control riot control measures, so that has spooked a lot of people in hong kong. But at the moment it is not clear if beijing will get involved because of the shockwaves that would send around the world. We are already in the middle of an intense trade war between beijing and washington, and for the moment they are willing to let the Hong Kong Police try and handle this. Matt thank you very much for your time, iain marlow, bringing us up to speed on the latest on these ongoing protests. We are at the end of another week of news and it has been an inventor one an inventor for one an eventful one. A constitutional move at westminster tuesday, phil dudley called for the fed to stop enabling trump. He even said that the fed should get involved with the 2020 election. A Bloomberg Opinion piece by former new york fed president dudleye president chair drew criticism for suggesting that that central bank should ditch political neutrality. This week italy left us with unlikely winners and losers. A Coalition Deal at the 11th a winanded Giuseppe Conte at the 11th hour. The former deputy Prime Minister wanted a snap election and has ended up in the opposition for the foreseeable future. We learned a new word this week. Prorogation. Tois johnson asked the queen suspend parliament in an apparent attempt to prevent rebel mps for passing legislation to block a no deal brexit. That is what his opponents are accusing him of. Meanwhile, his suspension of parliament will get an early test today. Two courts are ruling on challenges from opponents who say the decision is an affront to democracy. Lets stay with brexit here. I want to get back to freddie lait from latitude investment management. Not on the political side, freddie, because that is not your thing. But in terms of the effect on the pound, i thought when boris maderequested his his request, the pound would drop. I think it plays into this thing we were talking a moment ago about certainty and uncertainty in how people in the market are dealing with that. When we really have no idea when brexit is going to end. It has gone down from sort of 1. 40something not many months whichll the way to 1. 20, is its lowest in history. I believe a lot of the uncertainty is priced in. There will be more of a shock if we go to a wto deal on october 31. But at least there we can start to plan for the future and we will have more clarity because we will have left the European Union in some form, and i think that gives traders and investors a look at value again. Sterling is incredibly cheap at 1. 20 on just about any metric you can look after that is not to say your production is not right. It could easily drop sharply further on worse news, but i think the next 12 months will more than likely be higher. Matt what do you see when you look at the europound rate, freddie . The European Union had its own issues. Brexit will be difficult for the European Union and for the euro zone as well. Does that continue to climb up to parity, or does it stay does it hold steady around 90 . Freddie i think sterling should rallying sterling should rally against the euro as well. It could go either way shortterm. There could be increased volatility. The technical volatility and the Options Market around fx in general, pretty much record highs. There will continue to be a lot of realized and implied volatility around these pairs. But i still believe sterling will move higher once we have left the European Union hopefully on october 31, and hopefully we will have some clarity which will drive sterling higher. Matt when you look at october 31, are you concerned that there could be major issues, and how do you think that is going to hit the price action . Freddie there will be some issues. They are very unpredictable. There are unknown unknowns. From talking to the businesses i have dealt with, and thinking about our own industry, i have spoken to financial regulators a lot. The bridge between preimposed exit is mostly builds. You start with the status quo in the vast majority of cases. That is not true for some trade. When you move wto, in terms of operating your business on the monday after brexit, most things will stay the same. And i think it is not quite a fair analogy to refer to it as the millennium bug where Nothing Happened post, but i think something similar will happen. Very little will change immediately after brexit. Matt freddie, it has been a pleasure having you with us today. We hope you are right about that y2k comparison. Ofddie lait, founder and ceo latitude management investment. Uber, the ceo of the ridehailing giant. That is next. This is bloomberg. Matt you are watching bloomberg surveillance. For matt miller, here Francine Lacqua this year. It is two years since the ceo took the reins at uber. At that time in that time it has gone public and posted billions in lost us. In losses. Emily chang spoke exclusively to the ceo of uber. He says he is happy with the companys evolution. All of theresolved governance conflicts that the company had. There were many legal issues that the company was involved with as well. We have softbank as a partner and we want softbank to be behind you. We have a great investor base. We have taken the company public. And the company revenue, gross bookings have grown 75 since i joined. We now have a path to profitability, i believe, so while we have had bumps in the road and every adventure has bumps in the road i like where we are and i especially like the position we are in now for the next few years. Emily despite the negative lyft anduber and lif Rideshare Companies have been transformational. Successful and the next decade as in the last decade . I think so. What uber has done is bring transportation to a small section of the population. 4 million drivers all over the world, which is a huge number. It is unparalleled. But we want uber to be available to everybody. What we are doing is going into the next step of introducing other transportation choices to bear. In cairosting buses now to bring the price of uber a dollar, 1. 50, et cetera essentially anyway that you want to get around your city, we are going to be there for you. It will be mostly uber goods, but we will have other third partners,ransit, our anyway you want to get around, uber will be there. If you want food, local commerce, think we will have you were and other services that will be there for you. Uber bean transformational and stop moving money . Can you create a Good Business where prices are one dollar, 1. 50 . Yes. Our cfo talked about it this last quarter. If you look at our rideshare business, it covered our less about 100 million dollars. So the rideshare business it self turning quite profitable, and we believe the prophet of the rideshare business will not only grow topline, but we will delete we believe you will grow bottom line as well. There are other businesses eats, autonomous these are extraordinary opportunities we are funding. I believe we will prove to investors that we can take on a serial basis, turn it profitable, use those parts of the business to fund in other areas. Theso there are big stock has been trading below its ipo price more often than not. Investors seem to love shorting it. You have higher increases on teams. Believe uber can be profitable, but how confident and how quickly can you better can uber be profitable . I am very confident. We had a 5 billion dollar loss from the accounting perspective. If you live in an accounting world, that is a big wasp it i live in the real world. Areebitda was lower and we lower than we were in q1. But you are right, none of this is going to be easy. All of this will take excellent execution from all of our teams, andting technology, etc. We will demand our employees to do even more with less and to execute incredibly effectively in order for us to grow the top line and the bottom line as well. Ceo, that was the huber dara khosrowshahi, speaking exclusively to emily chang in san francisco. Coming up, we speak with Deutsche Banks chief economist. That is not an interview you want to miss david folkertslandau. This is bloomberg. Bloombergme back to surveillance. We are getting breaking news, confirmation that former Prime Minister john major is joining a legal case against the u. K. Government over the suspension of parliament. He had previously said he would do this. He has previously suspended parliament during a controversial time himself. Did so in 1997 to avoid the commissioner report on the cash for questions affair. At the time i am sure it was aprecedented and called threat to democracy. The list is fairly long. Come this sunday, china is slapping a 5 tariff on u. S. Oil, and while china can find oil elsewhere, it is already disrupting the physical trade flows. Annmarie hordern is here with more. Start withi want to the numbers behind anne only 1 of chinese food imports come from the u. S. In 2019, according to the general administrator of customs. China does not depend on the u. S. For crude oil supply or the buyeroes need to find a for increasing exports, which is very important for president Trumps Administration p however, the u. S. Oil china has already purchased is becoming a headache, especially for the oiling arm of chinas state company. According to people familiar with the matter, at least 4 to five vessels come as you can see here, scattered around the map, are carrying as much as 10 Million Barrels of oil, and route to china. Makes oil three dollars more expensive per barrel for china. The problem is finding a buyer. Oil just to sell u. S. Highlights how the trade war is disrupting a global Commodity Flow. I expect a hurricane could disrupt the global Commodity Flow as well it how is dorian going to affect oil . Switch it up,we you contract dorian. This could be the first major hurricane to hit the area in 15 years. The path for now, as you can see, avoids the infrastructure crucial to the oil market in the gulf of mexico. Florida, unusual supply situation. We have to get the oil in by boat. There are no pipelines. If the ports are closed, that could cut the state off from fuel, and we are already seeing gasoline in florida drying up. We are almosth, 22 out of fuel. That is where President Trumps famous maralago resort is located. Matt hopefully he has enough gas down there. Annmarie hordern showing us the and dorian. Bloomberg surveillance continues. In the next hour, tom keene in new york, nejra cehic in london. 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. Tom this morning, it is the end of a summer of discontent. A trade war and a failed experiment of ever negative Interest Rates. In this hour, david folkertslandau in hong kong. Folkertslandau. In hong kong, protesters are arrested. Edinboro, the in protest over the Prime Ministers suspension of parliament. Good morning, everyone. This is bloomberg surveillance. I am tom keene in new york. Nejra cehic is in london. We will go to hong kong and both hours of television and radio this morning. Extraordinary news flow out of hong kong, almost overwhelms what we are seeing in the United Kingdom. Edinboro,otland, belfast doing about what is going on in london . Nejra it had been such a whirlwind week. See anything different come out of the end of this . Just the list that we are getting in the lift we are getting in the markets today. A market kind of overshooting on the headlines a little bit, that we have not really backed away from the biggest escalation recently. Tom the euro is grinding lower in the last 24 hours. We need an august briefing paired with first word news, here is viviana hurtado. Viviana three leaders of the hong kong protests have been arrested a head of planned rallies this weekend. The moves are a part of a broader pushback by authorities against the monthslong demonstrations. It comes a day after authorities decided to ban protests on saturday. President Donald Trumps decision to cancel a planned trip to one comes as a sharp blow to the countrys populist government. Lawmakers were counting on the visit for a boost ahead of their october elections. The president is sending Vice President mike pence in his place while he stays home to do with hurricane dorian. Polish president andrzej duda says he considers trumps trip postponed and not canceled. Ukraine denying a report of a much prisoner swap with russia is underway. About the prisoner swap have been circulating. Several highprofile ukrainian prisoners were transferred to moscow. Ukraines new Prime Minister made getting ukrainian prisoners home his top campaign pledge. Warming ocean water taking its toll on the Worlds Largest coral reef system. The Government Agency that manages australia Great Barrier reef downloaded the condition from poor to very poor. The greatest threat to the reef remains climate change. Other factors include coastal development, water runoff, and human activity. 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. Tom lets head to the data right now. Equities, bonds,. Equities, bonds, securities, commodities. The 10 year is supposed to be higher than the twoyear. It is not. At 1. 1037. When i walked in the door. A big showing, the resilient equity markets. Maybe that is a dfl distortion right there. 30year u. S. , 1. 99. I noticed trend shields, they seem to be all negative. Nejra yields are catching everyones attention right now. I have the 10 year yields on the treasury back above 1. 50. Generally more riskon on these markets on trade then on the stoxx 600. I want to show oil because it has seen softness in todays session. The hurricane dynamic and that perhaps. But it is heading perhaps for its best week in seven on trade hostilities, tom. Bloomberg as well, i had an interesting discussion with a guest from Goldman Sachs in terms of what they are watching for Recession Risk. You have ape to curve you e a to risk as you take a look at how that spread has widened, really spiked every time during a recession, right now you could read that chart and say that things are looking ok. Tom very good. We want to introduce a chart before we get to our guest, david folkertslandau of Deutsche Bank. This is the chart of the summer, and it may be my chart of the year. The amount of negative yielding debt out there, and the great debate is the negative debt efficacy, the battle between economics and finance, which david folkertslandau will so aptly discuss. We see improvement to negative debt to the end of 2017, end of 2017, and of 2018, and with a vengeance, it turns. Chief economist for Deutsche Bank joining us, david folkertslandau, to finish the summer. Thrilled to have you with us today. I love your paper on the many distortions of negative Interest Rates and your lead distortion is real growth will be reduced. Do we see that now . David thank you, tom. Pleasure to be here. Negative Interest Rates to finance is what a World Without gravity is to physics. It is so unusual, so andboggling distorted unusual, it is difficult to get your head around it. It does not mean that it is a that it is not a profound phenomenon. It is a huge burden on the Banking System. To 4an banks pay close billion and 6 billion in tax for u. S. Banks get close to 40 billion in terms of interest on deposits. It is a huge tax on the Banking System. Supportslso does, it Zombie Industries in the sense that it removes the discipline of having to repay back debt and having to fight to keep your Credit Ratings and things like that. It removes all of those, so it is an incentive to be complacent, so it does not stimulate that part. The other thing is, we have done some very detailed numbercrunching, and effectively 160sts european savers billion a year. So at some point that is going to translate into a tax on independent and central banks. It is a profound story throughout all of finance. Tom you begin your paper with the courage of galileo to push against greek mythology in how our astronomy was structured. Where is the modern galileo for negative Interest Rates . Which institution, which set of individuals are going to get us out of this mess . Was to thereference dogma that is currently driving monetary thinking. Particularly as embodied in the ucb in the ecb. Sooner or later, they twist around and they go out and they spend. I have spent enough time with ceos of german and European Companies and i always ask a question. If the ecb were to reduce race reduce rates by another 20 business points, would it matter to you . And they say no. Quite the opposite. Likewise, if my 90yearold mother was going to change her savings behavior, if she has to pay if she gets negative rates, no, she will save more in order to make up for it. It has the reserves it has the reverse effect. The observations do not fit the theory. The dogma is there, and central it will particular give way. It is a question of time. Nejra do you get a sense that perhaps that dogma is shifting and the ecb is accepting that more unconventional measures might need to be used in this environment . David i think we are in for regime change. , am a fan of Christine Lagarde who ran the imf, my former place of employment. She has done a tremendous job. She is not a dogmatic economist. My view is, that is a great thing. You want to get away from these these dogmatic economists. Leaders who understand what situationse volatile do have. I think she will be much more inclusive and much more flexible and much more driven despite what economists say. She will be much more driven by debt of than she was in the imf. Nejra what do you think of the idea of a dual Interest Rate policy, you get a lower rate and it is conditional on banks lending to corporate and consumers . Is that something that might work . David i think that is right. A specific Lending Program is important. The problem is, there is an intraeuropean solution here that benefits very much the southern banks, italian bank most of all. It does not benefit german banks, not even french banks. That issue of political legitimacy in doing that. On then the hall whole have been stabilizing p my view forward is that we will get a further reduction in the depth of rate. I cannot quite see the consensus monthly qellion purchase. We will get there. Is going down faster than most people think. We were among the first ones almost a year ago to say that the German Economy was going into technical recession. Tom i want to bring up a chart which thunder struck me off your wonderful essay, and this is average maturity of all this negative debt. All you know is the experiment for a while, it had a life of its own. Moving thists forward, and then it changed and we went from a maturity of three years out to six years right now. What are the ramifications, david, that this experience that this experiment breaks out of average maturity over six or seven years . David the length of maturity is generally a good thing in terms of financial stability. For instance, in italy, it is the right thing to do. In the end, it is not change the underlying fundamental situation because it is too slowmoving. Tom very good. We will come back. David folkertslandau with us. We want to address the china u. S. Trade as well. We will talk about negative Interest Rates and the distortions of them as well. For those of you waking up, it has been an extra ordinary evening and end of the day in hong kong, with protesters arrested and reports in the last number of minutes of bail received. We will go to hong kong. This is bloomberg. Tom it is a hong kong briefing, it is a daily affair but takes on a certain importance today after protests have been seen, protests through the week, and arrests overnight. Let us get a briefing on this. We can do that with iain marlow, our Bloomberg Asian government reporter. He had a story around midnight, 1 00 a. M. New york time. 3 00, three or four of the major protesters are arrested. Is it true that they are out on some kind of bail . Iain there have been reports they are out on bail. They were rounded up this morning and quite dramatic fashion. Joshua long, subject of this netflix documentary, joshua won, the subject of this netflix documentary, his Political Party says he was pushed into a private car on his way to the subway. So quite dramatic events coming with all these people arrested, a total of seven now. Tom it is speculation, but you are very good at speculation. There are military or whatever over the border. Is there an assumption that they will be in hong kong at some point in the coming days . Is there any evidence of something new in deploying those forces . Iain not really. I mean, these rumors have been around the city now for a couple haveeks beijing themselves fueled those rumors by putting out social media videos of training scenarios and Armed Riot Police putting down protests and things like that and crashing in and doing operations. T there are a lot of arms trips across the border in parts of southern china. It always remains a possibility, but i think people here think it would be too devastating to the citys reputation, and the local police in hong kong have consistently and today they repeated this that they have the situation under control, they have the manpower and the equipment. They are trying to throw a little bit of cold water on those rumors at the moment. Nejra phyllis and as well on some of the other voices and commentaries we have had on this. On today specifically and also on the taiwanese president. Was at a rally in support of some fired workers just the other day. They had up flyers with the cafe logo, dressed up to look like the chinese flag because of all the pressure beijing has been putting on the company. Taiwans leader has also she has been a faded that she has benefited from the she has benefited from the situation hong kong because many people have fears about encroaching influence from beijing that the people in hong kong dupe or there are regional dynamics that are afoot. Nejra thank you so much, iain marlow, our Bloomberg Asia government reporter. A scottish judge refusing to block Boris Johnson plan Boris Johnsons land to suspend parliament. We will discuss coming up. This is bloomberg. Viviana this is bloomberg surveillance. We begin with the bloomberg scoop a handful of people who reportedly used devices trigger the u. S. Probe into whether ecigarettes can cause seizures, according to document from the u. S. Food and Drug Administration per the efts head of Tobacco Products in mill the mother commissioner saying, no proof of causality, but at a minimum an association with juul. Tesla is raising car prices in china in response to trade tensions that have weighed on the countrys currency p the basic price of an imported model 3 will be 2 higher. Tesla is among automakers most hit the dispute between washington and beijing. It has no local production and is directly being hit in increase in tariffs. Being hit by any increase in terrace. Nejra thank you so much. Lets get back to the brexit debate. We have breaking news in the past few minutes. U. K. Lawmakers losing the bid to block Boris Johnsons parliament plan, this starting with scottish lawmakers. Thats get back to david folkertslandau, Deutsche Bank plus chief economist. The latest developments in terms of a suspension of parliament and the scenarios that could play out, does it make you worried about the impact of a no deal brexit . David it doesnt, really. Our view has been for some time, and i have said on the show before, a no deal brexit is not the end of the world. There will be some spectacular failures here and there that will be blown up by the press, the economy is over the mediumterm, the economy will do well. There will be a hit shortterm, but mediumterm it will do well. To go for an inadequate deal or a deal that could strain the u. K. Would for me be a secondbest solution i belong to side of hard brexit than most other commentators. Atra we are stable today 1. 21. Once we get closer to a no deal there will be a lot of volatility. In the longer term, i would say over a period of 18 months or so, we could easily going back to quantitative these without any doubt quantitative easing, without any doubt at all. So the shortterm volatility and the mediumterm of tom what is the knock on effect of Continental Europe . If we get a david folkertslandau United Kingdom, some form of workout with Prime Ministers johnson anointed king or whatever, it actually works out, what does it mean for europe . David that is a profound question that is not being asked very often. Europeans tend to be quite relaxed about the u. K. Leaving i believe the u. K. Leaving. I believe the u. K. Leaving the aropean union is going to be catastrophe for the European Union. It will be much more bureaucratic without the e. U. Driving free trade. Tom this is really important what youre saying, sir. Let me cut to the chase. What does mr. Macron do to provide young leadership so that does not occur . Reforming the French Economy would be a good step forward, and he is obviously doing that. But he cannot do it too fast without pushback. We are in the middle of a technological revolution. We have ai coming on stream. We have a huge amount of applications across all industrial sectors. The world is going to look very different in the economies then today. Than today. I think we are tremendously worse off without the u. K. And facing those challenges to the upcoming revolution. That i believe is completely underestimated within europe. There is a selfsatisfaction, a sort of laid back attitude that is destructive to making this work out right. Folkertslandau, Deutsche Bank chief economist is joining us for the hour. This morning, we hear from the Lebanon Central Bank governor. 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. Surveillance, nejra cehic in london, i am tom keene in new york. Your first word news in new york city with viviana hurtado. Viviana an Iranian Oil Tanker is headed for turkey but the vessel the United States is not convinced. Earlier it claimed to be headed to greece, carrying more than 2 billion barrels of Iranian Crude Oil. Released by gibraltar, fueling further tensions. S P Global Ratings in argentina cutting the rating to collective default after they will delay payments of 100 land dollars of debt. S p says this constitutes camelt but since new terms in immediately, there rating will be lifted to triple c minus. After leaving its key rate unchanged, several dok Board Members dissenting. A sign of growing concern that more must be done to prop up growth. Shows no outbreak signs of slowing. Cases are showing up in uganda. Infected whatd the virus crossed the border from congo to uganda, triggering fears more people. The out rake has killed outbreak has killed more than 2000 people. 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 President Trump has said that the u. S. And china are scheduled to have a conversation about trade today, but Little Details were given. Would notcated they immediately retaliate against tariff increases. Tariffs are expected to kick in on sunday. Do you draw line between the u. S. China trade war and the prospect of recession in the u. S. . David trade is the issue. The impact of tariffs now are beginning to undo some of the benefits from the tax reform that we saw, so it is important. Uncertaintys of that it brings with it, it is the key issue if you look ahead in the u. S. Economy. Nejra is fed policy going to be able to offset the impact of the tariffs on the u. S. Economy . Confidently. It will do some of that. It is in a position unlike ecb of having ammunition left in terms of rate reduction. Offset theentirely impact is a question mark, because the lower you go with rates, the less effective reductions will go. Will be. Chinaow does the flow of fold into hong kong . Deutsche bank has had a presence there since 1958. How does hong kong fit into the trade war calculus in the next china calculus and the next china calculus . David hong kong is still very important with significant flows going through before ending in china. It is a way of signaling to the world by china that it is supporting its Financial Center that is liberal and independent. In all respects, the flows through hong kong and the importance of hong kong to the chinese economy cannot be underestimated. The outcome of what is happening in china from a geopolitical point of view is the most important issue we are facing, far more important than iran. If something goes wrong and hong ong, it could have an impact the chinese economy and it will tip germany into recession if it is a serious blowback into china. It is a very connected story, and it is a global story. Was written byma you 15 years ago. President trump thinks the currency intervention periphery as everybody else. Is it feasible we could have a unilateral United States currency intervention off the president s perception of china, xi, and the trade war . David that would be most unfortunate. Any talk of currency intervention, you would need an awful lot of it would be awfully distorting and on a peripheral country in asia. I think it is a nonstarter and it does not matter what you think about trump and tax reform and tariffs. To go for a currency intervention to counteract depreciation of the chinese currency is a nonstarter. I dont contemplate that is being a serious possibility. Most does europe have the to lose economically from the trade war because of germanys place . Is there a risk at could be more irrelevant with u. S. And china rising as the Worlds Largest powers constantly at a loggerhead . David it is often forgotten that the trade war with china and u. S. Has a huge impact on europe. Europe,ent downturn in particularly in germany, is driven by china. What is more fundamentally important is europe is falling behind the tech story. The u. S. And china have seven tech giants. Europe concerns itself with how to control them. It is the wrong attitude in the wrong way of going about it, and the implications for the large ecommerce platforms that will be missing in europe is phenomenal. We have done some calculations as have others about the benefit ofthe first tech advantages china and the u. S. , over 17 billion a year that is lost to the european economy. The europeans are facing a major problem. The trade issues in the shortterm. The ecb really does not have a good tool kit left if germany and the e. U. Slide into a recession, and we believe it will in the second half of 2020. And then to have pushed rates 100,rom 40 two 80 four it is something that will not work. The issue is not so much the financial crisis but the gradual deterioration of the economy and the situation. It is very serious. I have not been as worried about this as i have since the Global Financial races. Crisis. Nejra every time there is a sign of a truce the markets move. Your biggest worry of where we end up in this trade war escalation . David there is only so far you can go with tariffs. You cannot completely stop trade , so that will come to an end soon. I also believe trump has the advantage over china. It does not seem that way, but he does. China is in a precarious situation. There are domestic problems, the economy is not as strong as the numbers tell us, and there is hong kong. Trump does have the upper hand. The trade war is ultimately about tech, not about trade. The u. S. And china will emerge as the two leading powers in this and they will have to figure out how to divide the spoils. Tom we mentioned galileo early. Because these are negative, i cannot go log rhythmic. Folkertslandau, you said we will see a full negative percentage point on some of this debt. That has got to be a nonlinear process. Force,expect an inertial strengthening of these distortions as we go ever lower, or is it a smooth glide path that madame lagarde can work with . David i think it is one of the most profound insights to arrive nonlinearity, economists tend to think very linear and gradually there will be a response. Nonlinear, as with small move will soon trigger large effects somewhere else. We do not understand too well how that will work. We do not know. All i say is that to go to anywhere near 100 basis points or anything like that for bunds, we would be in totally unchartered territories. Icebergs, lots of rocks and reefs we do not understand. The one good thing, the Balance Sheet of the banks is not bad in the sense that Capital Improvements and liquidity improvements, so you will not see a blow up in the financial system. It will be a grinding down, lost equityties, a removal of capitals from the financial system. Where it leads us is anybodys guess. Tom what do you say to the austerity crew . I mean that in general, people ano want to take a non burki conservative approach to finance and economics. Do they hold out and continue their theme among ecb hawks . Can they maintain a societal austerity . David it is a mischaracterization to characterize weidman as somebody who wants austerity. There is a question of discipline, and over the last decade much of the fault of where we are today lies with the ecb. The ecb should not have built up italy with policy. They should have left that to the governments to take that risk, but draghi was very quick to step in and go for a calm what may. Tookme what may, and that the hook of italy and other periphery countries. Ecb have way, the over extended themselves into supporting the economy, and that was the fundamental and profound mistake coming to haunt us now. Tom we will continue with david folkertslandau, chief economist at Deutsche Bank. An extraordinary conversation. You will see this on all of our Digital Product coming out today. It is more optimistic than we are hearing from dfl, Greg Valliere on the resiliency of american economics and politics. This is bloomberg. Viviana you are watching bloomberg surveillance. Baidu mostg its value on chinas valued internet countries, booted out by a much younger arrival. More thanup is worth baidu after shares surged more than 9 . Pushing to fitch reduce its dependence on chinese suppliers by more than 40 , as it becomes clear the trade war will hurt profits. Tensions could have a direct impact on the cost of merchandise. The chief executive says the move as timeconsuming but necessary. That is the Bloomberg Business flash. Go to mere going to right now. We are thrilled to bring you david folkertslandau of Deutsche Bank. I want to center back to the efficacy of central banking. We are supposed to talk about the ecb, Deutsche Bank, german continent, but it has been an extraordinary week including the noted oped of William Dudley in Bloomberg Opinion. Give us your perspective on the view forward of politics mixed into central banking. David there is something very profound going on. One of the big accomplishments over the last 40 years as the independence of central banks. I fear that independence will be coming under attack. In europe, when you have 160 billion transferred from savings to debtors, someone will say who enabled the central bank to make that kind of fiscal decision . Number two, i believe bill dudleys commentary was so far away from what and a central bankers should say that it is mindboggling. To say publicly that the fed should be thinking about the outcome of the u. S. Election and try to influence it, is a born abhorrent. Is this just bill dudley . I cannot imagine someone would write an oped without passing it to his colleagues, and im surprised no one stopped him. This plays into the trump conspiracy stories that there is agreement within the top of the house and the fed that trump has to be stopped. That will be dangerous. Tom how does the academic Richard Clarida to reassert independence . What does the professor from columbia do . David very easy. The fed has to make a much stronger statement than it did. It made a statement about being a political but it has to distance itself in no Uncertain Terms from dudley, who made such a serious misstep he should be completely outside the circle of central bankers. Must have been positioning for a job in the next administration, and we need a very strong statement from the fed that this is not the way to think about this, or we will seriously jeopardize the independence of that institution. That will be a loss of unimaginable proportions. Nejra have these developments made it difficult for the fed to except to do anything embark on a rate cutting cycle . David we are all grownups and we know people make stakes, so i think mistakes, so i think the fed will go on to do what it injected lisette out to do. This. K they will get over they need to dispel the view that people like me have, that doubly could not have written this alone. Someone must have seen this. Why did they stop him . Didnt they stop him . Nejra how does the fed reassert independence from the markets . Elerian thinks it is held hostage by the markets. David that is an astute observation and the president is holding the markets. The fed is in a very difficult position. It has got a statutory obligation to look at the economy and inflation and fulfill that. On the other hand, you have the press, and they interpret everything as being a reaction to trump, which it probably isnt. It is a very difficult situation in my heart goes out to them. Nejra we will get more from david folkertslandau, staying with us. Lets get a check on sterling, 1. 2194. Reen, tracking all the headlines out of the u. K. And working out where we go from here in terms of blocking a no deal brexit, this is bloomberg. Bloomberg surveillance, nejra cehic in london, tom keene in new york. In hong kong, protest leaders were arrested last night, discussed by our iain marlow. They are awaiting the release of these three or four protesters as we go into friday 6 00 p. M. In hong kong. We will bring that release if we get it, in the coming minutes. It has been an extraordinary hour with david folkertslandau. Thank you so much from around the world for watching. I want to go to the arch issue not only of negative Interest Rates which is theoretical economics, versus the people of finance. How do the people of finance explained to the economic elite what these structures and solutions, the inability to clear markets, what it is doing to our system . David good question. I have the advantage that many of them perhaps do not have, i have spent a fair amount of time talking to clients around the world, german and french cfos. It struck me over the last couple of years, when you ask them what influences your investment behavior, is at lower rates . The answer is no. We need competency in economic policymaking, and that is rapidly dwindling. When you look at the central ofk that is being accused , at seemsial to italy to be insensitive to the plight of the Banking System and negative rates, and not going for tiering when you have talk of additional q. Week qe. All this projects, these guys dont know what they are doing, and they can sympathize with that. What Business Leaders want is economic competency and stability going forward, and that will not be achieved by constantly manipulating Interest Rates and doing massive things. The purchasing of equities as happen andmay well would be extraordinary. You have to find a way to go back to the times when there was more confidence in the system and the policymaking. Nejra how do you get that andtics confidence back who will drive it . David folkertslandau. Tom we will do everything we can to get this conversation out on our Digital Products. We will do that with locks at achuthan. Lakshman this is bloomberg. Tom good morning, everyone, bloomberg surveillance. Iain marlow in hong kong reports on the release of these protesters. , three live in hong kong or four protesters arrested. Chen. Ng and ms. Jen he is associated with the 2014 protests and ms. Chen very visible in the recent weeks. We will have much more on this in the coming weeks and hours. It is simply a summary of ms. Content discontent. We speak about the linkage of american politics to mr. Trumps trade war and the economic cycles of america. No rest for the weary. London, edinboro, and belfast, the judicial battle over the suspension of parliament. This is bloomberg surveillance. Nejra cehic in london, extraordinary images from week 12, week 13, week 15. Where does hong kong go next . Nejra david folkertslandau was saying that this is important, more important than a run in terms of the potential impact on china iran in terms of the potential impact on china. Tom we are trying to determine the audio from these two leaders of the protests. To review, last night, the , iain marlow gave us a color of that. In the last 90 minutes maybe was there the discussion of bail, and the rapid release into friday evening. Nejra we will keep an eye on all of this, so much action we are hearing. Two of the protesters arrested are speaking, giving this speech to the media after being released on bail. We would listen in, but at the moment we are not getting that through in english. Tom my chinese will fail me. These are serious matters. What a joy to have taken david folkertslandau with us in the last hour, focusing on the linkages of hong kong to the new china. Right now, we will leave these images and go in new york city to our first word news. Viviana u. K. Lawmakers have been dealt a blow in their efforts to block Boris Johnsons plans to suspend parliament, a scottish judge rejecting their arguments at will not leave enough time. They say next week there is time to hold hearings. Decision tos cancel a visit to poland comes as a sharp blow to their populist government. The president sent the Vice President in his stead while he stays home to deal with hurricane dorian. The president says he considers the trip postponed and not canceled. Araine denying reports that prisoner swap is underway with russia. Reports about the intending impending swap have been circulating. Ukraines Prime Minister made getting prisoners home his top campaign pledge. 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. Monitoring the conversations of joshua long and agnes chan speaking in chinese. Released moments ago. Lets go to the data. It is friday. It has been an extraordinarily nuanced week with data, with equities rising. Bear market lamb. Gloom. The market grinding lower. A weaker pound. 30 year bond under 2 . Nejra we might see a weekly gain for equities, the first in five weeks and the stoxx 600 is up eight tents of a percent. The bloomberg dollar index looking flat but holding near twoyear highs. Oil might have a touch of softness today, but rallying on optimism on a truce in the trade war. Tom we welcome all of you. We need a trade update because we have not had one. There has been so many distractions, and we are not up to speed. Jack fitzpatrick with Bloomberg Government will bring us up to speed. Into the weekend, who do we need to hear from next, mr. Trump or mr. Xi . Jack in washington, they are looking to hear from both. The question is if this is just talk in response to a shakier economy, because we have heard little bits of news from the president saying he is hoping to continue talks. There has also been some conflicts in which we have heard a little bit here and there about him hoping to cut taxes to make up for tariffs. Washington are waiting to hear for some clarity on both sides, which is lacking from the white house. Hours, thehe last 24 Peterson Institute with adam posen put out a spectacular chart of the tariffs of china and the United States. Is there any understanding of that dynamic forward, or the likelihood of these tariffs being put into place . Jack limited understanding, especially when we talk to lawmakers who are looking for a more steady path forward from the white house on what to expect. The expectations of exactly how this will play out are to be honest, not clear, from some of the critics from the white house of the white house and people looking for more stability and a clearer message. Nejra we are extremely close to september 1. Is there any sign at all they could get any walking back on any of the tariffs . Jack there have been no promises from the white house on that that we have heard of. That is why i mentioned, some of the more specifics have been walked back when the white house said they would like to cut taxes to make up for the tariffs , something they have not followed through on. Largely in washington, we have heard concerns and criticisms of ,he tariff policy, but again increasing sense of urgency, calling for the white house to provide a little more certainty. Tom jack fitzpatrick, thank you so much. We monitor and hong kong the fed the comments of mr. Long and ms. Chow after their release of and hour arrest mr. Wong ms. Chow after their release of a 12 hour arrest. A call for a possible recession and definite economic slowdown, he nailed that call with Cycle Research. What has changed . You have now got three or four pages in his article on china as well. Have you ever done ecri work on china or is this a new focus with a lot of information . Lakshman ever since dr. Moore was working on tom jeffrey more. Jeffrey moore. Lakshman in the late 70s began developing national indicators, not fitting them with models but using cycle indicators for the major market economies around the world. We have the first indicators for china going on 15 years. We have been working with the chinese Statistical Agency to get a handle on what is going on with cycles. What is interesting is if you remember all the way back to q1 2019, the hope story was that the chinese were pushing at a trillion dollars and this would lift things. They indeed did. Tom have you seen that . Lakshman what happened is that went to plug a whole and what we call the chinese rest dealt, rust belt, which has had a structural shift over the last five years or so. You have have contraction in many of those provinces where ip is falling. This is where the Big Industries are, state owned enterprises, and you have had job losses. ,he money has gone to plug that which has huge implications for us. Tom i want to bring up this chart. All you need to know is blue is good, less decline in Economic Growth, and this industrial belt is not doing well. Nejra really interesting points you are making, you are about to say about the implications for us i guess the u. S. Talk more about that. Lakshman if you think about it, these are enterprises, big, Industrial Enterprises trying to make a longterm shift away from industry to services. Second, there is a global slowdown slowdown which predated the trade war. The trade war is a big negative but it is coming on top of the cyclical downturn that began before the trade war. Industrial these big state owned enterprises sitting there which do not have enough demand and are contracting and there are job losses, you will put your money there. They have propped up much of that capacity, what we might call zombie companies, and that capacity is pushing out disinflationary impulses around the world. When you look at our cycle work on separate cycles in inflation including the United States, it is to the downside. Tom we will come back on the american economy. Right now, the images from hong kong have been extraordinary. We will go to hong kong, agnes chow speaking right now in chinese. In the background, two protesters picked up overnight, now on bail, and are speaking to hong kong. This is bloomberg. Joshua wong, agnes chow, two activists released on bail. Agnes chow speaking in chinese. We heard from joshua wong earlier saying he will face trial on october 8. For mark, we have iain marlow for more, we have iain marlow. Chow joshua wong and agnes are two prominent activists who were detained in a move that shocked the city. They have confirmed the charges and say there will be a trial on november 8. Both of them have vowed not to give up their fight. Joshua wong said we will not surrender and sent a message to president xi jinping not to send in any troops, that is not the way out. He had a message for the Hong Kong Government as well, encouraging them not to invoke these emergency measures that have been subject to some rumor in recent days, powers that would grant the government power to censor or make sweeping arrests. Very dramatic scenes indeed. What has chinas response been so far . Iain china has not formally given much of a response to the arrests, but their general response throughout the unrest in hong kong over the last few months has been Resolute Support for the Hong Kong Government, standing behind them as they decline to concede to any of the protesters demands. Police and the city have faced increasing in the city have criticism. Asing question. A difficult how are these images being received by the people of hong kong . Are they all for the protesters . Is there a mixed set . We are looking at these images in new york and london. How are they being received by the people of hong kong . Iain ed is kind of funny. It is kind of funny. A strong roleayed in the occupy Hong Kong Movement that shut down hong kong for 74 days. This has been a leaderless movement, so joshua wong, even though he is an activist and a key leader in the prodemocracy movement, he is not behind the protests. People from the prodemocracy activist camp were saying he is one among many, and they are trying to say that the arrest of him or agnes chow, despite their prominence, will not dampen anyones enthusiasm for the protests. There is a decent contingent in the city, a more moderate or proestablishment figures who want to see an end to the unrest. We are going into the 13th week of weekly protests, sometimes daily protests. Aboutis a sense of unease the more radical tactics of the protesters. Tom an eventful friday evening in hong kong, iain marlow, thank you so much. ,e are going to come back Lakshman Achuthan with us. We want to talk about the quality of the 2 Economic Growth and the Cycle Research forecast into 2020. Worldwide, this is bloomberg. Years, this iske not a shortterm game, but i think we can demonstrate progress. Revenue net growth accelerating the second half of the year, usually Companies Like ours you do not see Revenue Growth accelerating but i have talked about Revenue Growth accelerating beyond 30 . We have always been consistent in saying the bottom line ebita will develop in a positive manner. The growth of the company is such that we will be resistant to any macro slowdown and we are not seeing any slowdown with the u. S. Consumer yet. Nejra the uber ceo speaking exclusively with emily chang. Lets get the Bloomberg Business flash. Viviana a handful of people who devicesly used juul triggered a probe into whether e cigarettes can cause seizures. The fdas head of Tobacco Products says no proof, but at a minimum an association. Tesla is raising car prices in china in response to trade tensions which have weighed on their currency. The base price will be more than 2 higher. Tesla is among automakers hit hardest among the trade tensions and is being directly hit by an increase in trade tariffs. Achuthan and we are watching hong kong and those two protesters. Right now, not so much on the american economy. Researchu in cycle deal with negative Interest Rates, Interest Rates of the 1930s . What is mean . Lakshman at certainly is telling you something about growth. It is growth and inflation expectations. Aboutnow, we were talking the global inflation cycles and watching 11 future inflation gauges all plunging. The forward looking 10 year breakeven expectations are at 2016 levels which were superlow for the u. S. And germany, and for japan even lower. Tom the german twoyear at present, at present are they a leading indicator or is there first derivative the leading indicator . Lakshman those are short leading indicators. The shortterm inflation gauges anticipate inflation concerns and they are downshifting. The key takeaway is that notwithstanding the tariffs, the price will go up for one month but at will not be an ongoing event, so you have disinflation continuing for all the major economies. Nejra if negative rates are telling us we are headed for a disaster, what does that disaster look like . Lakshman i dont know if it is a disaster and i dont know if a recession is a disaster. And we had 47 of them are here. Maybe this weaves into dudleys oped, the disaster is that it reveals, it exposes that the plan, the central banking plan dessertnterest rates, rates,e low interest it is not the solution and what ails the economy. We have a structural issue around demographics and productivity growth, and every time you have a cyclical upturn there is some hope that we have normalized. That has been exposed, that is not true. Nejra can we make up for policy delay . Lakshman more does not make up for being late, and that is a proposal that does not work that way with recessions. The Recession Risk is very much alive. It is not a done deal. It is certainly live and on the table. Nejra Lakshman Achuthan stays with us, lots more to discuss especially with the u. S. , playing russian roulette with Recession Risks. Coming up, the Morgan Stanley head of fixed Income Research at 9 00 a. M. New york, 2 00 p. M. London. 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. Nejra Bloomberg Tom bloomberg surveillance, we have been focused on hong kong where we have seen images of two protest leaders released and speaking to the Chinese Press in hong kong. Right now, your first word news. Viviana sticking with breaking news out of hong kong, joshua wong will face trial in november. Chowd agnes try agnes were released hours ago after being arrested. Police worn more arrests could be coming in are banning a , a day afterst they say armed gangs in the city attacked them. An Iranian Oil Tanker in the Mediterranean Sea says it is headed for turkey, but the crew cannot input any destination so the United States is not convinced. The tanker is carrying more than 2 Million Barrels of Iranian Crude Oil worth 120 million. Fueling growing tensions between iran and the u. S. Argentinas bonds extending their declines after s P Global Ratings cut their Credit Rating to selective default after they say they would delay payments on 100 billion of debt. While the delay could relieve shortterm pressures, it raises the prospect of default. The bank of korea hinting at further action to the economy if rates continue to rise. Two of seven Board Members called for an immediate rate cut that much concern more must be done to prop up growth. 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 that was really smart, the disinflation in the koreas and argentina, i want to emphasize the separateness of the bond price reduction yesterday in argentina that got global headlines in em debt. Headlines isaking Greg Valliere. We will do a jobs segment in a moment, but we have got to go right now back to what you are dealing with in the beltway. David folkertslandau of Deutsche Bank just toward bill dudley to shreds. He had the most visceral comments i have ever heard and said the fed has to aggressively rebut mr. Dudleys bloomberg essay. Is that the zeitgeist . Greg absolutely. You do not want to rise to the bait and the fed and dudley look politicized. That is the last thing you want to see. Lets getrump trade, an update going into the weekend. Jack fitzpatrick says it is exceptionally fluid. Greg i think the devil is in the details, and even though there they are talking, there is months to go to iron out details. One wildcard is hong kong. If this weekend is messy, it could be a negative in getting a deal. The democrats, chuck schumer, Elizabeth Warren, Bernie Sanders want a really tough deal with china and want to crack on chinese thievery of intellectual property. Trump has to worry about a deal that could be perceived as too because the democrats will howl. Nejra we are seeing u. S. Futures pointing higher and it seems to be on optimism of a trade truce. Could that rally continue through monday . Greg it is hard to predict when the volume is this thin. We have been down this road before. Charlie brown and the foot all, football, it looks like there will be progress and they bogged down on details. We have months to go before there is a final deal. Tom i am not sure that miss Charlie Brownbout and the football. We will talk about linus and Charlie Brown and lucy and a moment. Nejra i know exactly what you were talking about. Pq i dont know what blinders is an faro was tearing me and ferro was tearing me a new one. We talk about Charlie Brown and the schultz magic. Does your cycle work in greg 2019 like politics in it worked in 1960 . Greg 100 , and we have hard evidence to back that up. What were talking about is getting the vector right. Cyclical upswing or downswing . Tom i am hearing negative. Greg we have been in a slowdown for a year. It is slowly dawning on everyone and that is the vector. The question is, does that culminate in a soft landing or recession . Trade tweet, maybe there is a soft landing, rates are being cut so values go down but if there is a recession, the Interest Rates will overwhelm rates will overwhelm the rate cut. Tom does a diminished vector advantage the incumbent or the democrats going against him . Greg i think for the incumbent, in my world, you have Monetary Policy and fiscal policy on steroids. There is so much stimulus. People often overlook the pig out we have had on spending, the fact that there might be talk about a tax cut next year. In washington, we are in overdrive on stimulus and that should help the incumbent. Say, we i was going to are totally on steroids, and not only here. In europe, there is an expectation of more and more, and also in japan which led the way decades ago, and in china. Lots and lots of credit creation , debt creation, stimulus of various kinds, yet we keep having growth downshift with these cyclical upturns. It is very confusing for the markets and policymakers to deal with that, because how do they reconcile each of these cyclical upturns with a structural deceleration . Every time there is a cyclical upturn there is a hope that chapter has closed, and of course it has not. Each time we are lower and lower. , i agreedudleys oped with the comments everyone has been making, but i also see that what is at risk here is if there is another recession and that is an open risk then it really exposes how bad the policy has been in dealing with the structural issues. That is the rub. Nejra one thing you point out in terms of a recession, because a lot of people we speak to say of all the things to be more certain of is the u. S. Economy is in a good place and not heading for recession, but you have talked about the reaction function of the fed and how quickly it starts a rate cutting cycle. Have they started too late and is a recession and inevitable . Lakshman they definitely started 2 too late. Maybe wesee now is will do some catch up, but it is difficult looking in the Rearview Mirror at stronger employment data. You have to wait until the data falls a bit weaker to ease a bit, but that is not helpful because Monetary Policy works with long and variable legs, as people sometimes forget. Tom i want to come back on the american jobs report and Greg Valliere knows jobs is about votes. On tuesday, lucy will join us talking about charles brown. There is lucy and charles brown. Max baucus of montana. Nejra i feel like that is you and me in that picture. Tom keep it up. Tom never a dull friday. Near j it in london, i am tom keene in new york narrative a it in london nejra cehic in london, i am tom keene in new york. Greg valliere and Lakshman Achuthan with us. This is the vanilla Unemployment Rate and all you need to know is it is eisenhower like, it is lbj, vietnam war boom like as well. We got a bit of a disagreement. Your work says it is over. Lakshman our work says the vector on jobs growth which is separate from overall growth and inflation, has turned down. Our leading Employment Index is at its weakest growth rate in 10 years, so directionally the call is in. We can discuss what are the details in the construct, but directionally decelerating jobs growth is what you should expect. The socialant is reality of getting qualified workers. That is a washington distinction. About three or four weeks ago i was in michigan where the Unemployment Rate is 3 and they cannot find more skilled labor. They add that a lot of young people cannot pass a drug test, so you have to limit in terms of job growth. You have a president who not only imposed opposes ilLegal Immigration, he is not crazy about Legal Immigration and to get the productivity and growth he wants, you need immigrants. Businessesare thetion functions with difficulty of getting those . Greg if they just flunked a marijuana test, we will hire them. We are on a slippery slope in that regard, but a lot of businesses are not growing as much as they would like because they do not have skilled labor. Lakshman go ahead. Nejra go ahead. Lakshman we have a long expansion, so it is definitely part of the reason why it is soaking up so much of the available workers over those many years. But there is a skew. If you are highly educated, your Unemployment Rate has not toroved as much relative past cycles, but if you are less educated, you find pretty darn tight labor market. That is one characteristic we are seeing now. The other switches over to confidence. You see ceos, big businesses, the confidence is very weak and small businesses, it is a bit better. When you get down to the butumer, it is kind of ok, when you dive into what is going on with the consumer, that is the leg holding growth, those with a High School Diploma or less are confident. It is people with higher degrees that have the real purchasing power. Nejra are you saying when people point to the u. S. Consumer holding up the economy and they say, this is a big positive point and we are waiting to see when that might change, as you look at labor market dynamics, is it giving a signal when we could see a shift in Consumer Confidence and spending . Lakshman i am looking for it now. When you have a deceleration in jobs growth, in spite of everything we have said, which i agree, that is going to undermine some of the Consumer Confidence, in particular for those who have more purchasing power. Tom we will come back, Lakshman Achuthan is with us. Greg valliere will continue with us and we are trying to figure out why there is not three or four debates coming up. Upures up 18, dow futures 169. The Credit Suisse chief u. S. Equity analysis, the courage in this market to start to september. This is bloomberg stagger to september. This is bloomberg. Are watching bloomberg surveillance car baidu lost at spot among chinas most valuable internet companies, booted out by a much younger arrival. The startup is now worth more than baidu after shares surged more than 9 . Fitch pushing to reduce its dependence on chinese suppliers by more than 40 , as it becomes clear the trade war will hurt profits. The tensions could have an adverse impact on the cost of merchandise. The chief executive says the move is timeconsuming but necessary. Concerns about frexit are weighing on the u. K. Brexit are weighing on the u. K. Housing market. Consumer sentiment is at its lowest level in six years. That is the Bloomberg Business flash. 14, september 12 or constitutional crisis in the United Kingdom over brexit. In america, there will be a constitutional crisis in houston where there will be a debate. Us analliere to give update. There is lots of nos. Well this be a better debate . Greg it could be. We are down to 10. There is growing anxiety among democrats that joe biden is good for a gaffe a day. , it will focusue attention on whether he has lost a little bit off of his fastball. Tom what i remember in the summer is a collective memory of america, looking at the war hero robert dold of kansas, is we do not remember how we could not campaign me nationally. Is senator warren the democrat bob dole . Greg if so, biden fades a little bit more. She and Bernie Sanders could become cofavorites and that worries democrats who think they are to polarizing too polarizing to win. Nejra what would that mean for the markets looking at the next escalation in the trade war . We keep asking whether there will be any solution before 2020 and a lot of people say no, but that does not mean anything will change with sams dems. Greg there are a lot of democrats who want tough action against china. Most of the democrats favor punitive policies against wall street to pay for their expensive agendas. I think the markets would look with tremendous apprehension at sanders or Elizabeth Warren if it looked like they might become the nominees. Nejra the other thing you have been saying is there is no sense of urgency incredibly, as the bond crisis deepens. What do we need to see on the policy front . Greg more stimulus. I am not sure i believe in modern monetary theory, but this is a time you need more stimulus. Tom we are going into a trillion dollar deficit. At the margin and this is the critical point does stimulus so in michigan and wisconsin cell in michigan and wisconsin . Greg maybe not, but i would argue this is the time to stimulate more. Mohamed elerian said you got to percent money, spend some money on infrastructure. Maybe have a 50 year treasury bond and get a little creative. Tom the silly season starts. We are coming out of the summer of our discontent and will launch into autumn and the war of 2020. What should the democrats have learned about how secretary clinton campaigned in those important states . Greg for biden, dont take the nomination as an entitlement but something you need to fight for. Impeachment will not so. Sell. Focus on issues people care about like health care. About theey care economy, stupid . Nejra mentions the trade war and i dont buy it for a minute. Is it about the culture . Greg i am not smart enough to give you the definitive answer. It is either about issues or trump personally. Even among his supporters, they dont like the tweets and think he has gone too far. Nejra on your comments on health care, i was reading that Health Care Insurers stocks have become a political battleground and market proxy for next years election. Is that something market watchers should take a look at . Greg they should, but a key point gets underappreciated, the senate. All of this stuff dies at the hands of Mitch Mcconnell and the senate. The this tenant senate stays republican and even democrat, his is or her agenda will die in the senate. Nejra how much more erratic behavior get . Behavior get . Should we brace ourselves . Greg for me, it is background noise. For the markets, it is irritating. People do not like it, does it affect earnings or gdp . It doesnt. People need to focus on the fundamentals. Tom this has been superb, greg noteere within with a talking about price up, yield down, calling it a bond crisis. It has been an extraordinary day. Thank you to iain marlow and our team in hong kong for those important images. Nejra, thank you for a great week. It has been fun. Nejra what a whirlwind week, developments in italy, developments in brexit, and the 30 year yield hitting a record low. The markets up slightly in the u. S. Based on these headlines on trade. Tom coming up on foreign exchange, we will look at foreignexchange and a weaker euro. And i will drive forward the conversation. 1 00 p. M. , jonathan ferro, real yield. 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. Alix time to buy stock . Bank of america bullish on risk as trade remains a wild card markets suffer a volatile august. Argentina in crisis. Selective default is the country bleeds reserves. And dorian set to strike. Arricane dorian has become category two storm, set to hit floridas coast and because billions of dollars of damage. David welcome to bloomberg daybreak on this friday, august 30, the last working day of august. Alix thank goodness. Its interesting to see we are getting some calls to buy stocks. Bank of america, j. P. Morgan had something similar. Some say it is just the end of month rotation. Thats what weve seen this week, because of the end of month. David the bullish calls at bank of america are mainly because it is so bad, its got to get better. Alix in the market, lets take a look. Yesterday you did see the biggest gain