, and today, markets the central bank has closed deals for deposits with the nonprivate with private,onresident institutions whereby in the second half of august our reserves were upped by 1. 4 billion, to reach 38. 6 billion. The governor also said lebanon has no plans to restructure its debt. Warming ocean water is taking its toll on the Worlds Largest coral reef system. The Government Agency that manages australias Great Barrier reef has downgraded its outlook for the coral condition from poor to very poor. Todays report finds 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, onair, and tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. Im ritika gupta. This is bloomberg. Live from bloomberg World Headquarters in new york, im vonnie quinn. Amber im amber kanwar in toronto. Welcome to bloomberg markets. Here are the top stories we are following. Weighing the risk of recession. We will speak to malcolm night from the London School of economics, former vice chairman at deutsche bank. Tradeing a week of optimism, another round of tariffs on china still set to hit on sunday. It is the next escalation of a trade war between washington and beijing that will hit u. S. Consumers in the wallet. Hurricane dorian is set to become a category four storm and barrel into florida ceased coast, causing potentially 10 billion worth of damages. All of those questions in the next 30 minutes. Lets get a quick check on the n the major averages. The Dow Jones Industrial average holding onto a gain of. 1 . About. 4 . Down given that we got the university of Michigan Consumer sentiment for august today, im looking at this chart. It is the widening gap between the two measures of u. S. Sentiment. It has signaled past recessions. Its been elevated back in the early 1990s and 2001, 2008. Look at this, the widening gap is once again widening. Another thing to look at, if you are looking for potential harbingers of recession here. Amber that is certainly not something that President Donald Trump wants to see but it is obviously concerning. This morning, tweeting about the currency, saying the euro is dropping against the dollar like crazy, giving them a big advantage, and the fed does nothing. The dollar is now the strongest in history. Sounds good, doesnt it . Except for those manufacturers that make products for sale outside the u. S. Even though we have seen the euro pullback, it arguably has not benefited an economy like germany, obviously very manufacturingled. Industrial production is at the lowest level since 2017, so not getting a lift from the euro, largely because of the weakness in demand from one of their key end markets in china, which has slowed down as a result of this tariff war. Of course, questions about germany itself tipping into recession. Lets dive deeper into recession risks. Our next guest has held some of the most important jobs in global banking, including as the head of the bank of international settlements, vice chairman at deutsche bank, and vice chairman at the bank of canada. Malcolm night joins us to discuss his view on the global economy. Thank you for being with us. Recession is very much top of mind. Front and center when the yield curve started to invert in the united states. Deepmebody who has seen and terrible crises, now that we are in the longest expansion in the u. S. In history, why are we so terrified of a recession, which is supposed to be the normal course of an Economic Cycle . I think the reason there was a lot of concern is, first, there is a lot of geopolitical uncertainty. We dont need to talk about that, but the trade war is a major element of it. Althoughd element is, the u. S. Economy is going strongly, growth in a lot of other parts of the world is rather weak. Particularly in europe. China is pivoting away with a somewhat Slower Growth away from the kind of heavy imports of capital goods that it was making in the early part of this decade. That said, the Financial Markets are really priced to perfection. Low Interest Rates, high equity markets. When investor positions are long like that, there is always a lot of concern. Amber one of the things investors look to increasingly over the past decade has been central bank support. That is something that donald trump is trying to encourage to an even greater degree, banter the fed. As somebody who has been in banking and Monetary Policy, are you concerned about Central Bank Independence . Am. Olm yes, i would say i , actually some time ago, reached the limits of what Monetary Policy can do, in terms of underpinning the strength of the economy. Zeroe now at essentially Interest Rates in europe, very low Interest Rates still in the united states. With the u. S. Economy so strong, and it is strong, i would have expected a gradual increase in u. S. Policy Interest Rates. Because when a problem comes we dont know when it will come or where it will come from it would be a good thing if the u. S. Federal reserve and other a higheranks were at policy of Interest Rates, so that they could lower quickly, to limit the damage from a negative shock. And that is not where we are now. If there were a significant, strong recessionary Central Banks would have to go back to using unorthodox monetary policies. Vonnie the future for banking within developed capital markets, what is it . It feels like everywhere we look, banks are under pressure, whether defined revenue you or staying alive in individual countries. Even in the u. S. It is difficult. What do you see as the major problems the Banking Community internationally has to solve . Malcolm that is a good question. Crisis, the global, inemically important banks 2008, 2009, were very much at the center of the crisis. They were overleveraged in very complex structured products. Since that time, the authorities have really done a lot in terms of strengthening the capital of banks, improving the quality of in capital, and also improving the liquidity of banks and their risk management. So i think the banks are a lot stronger than they were before. Hold morethey have to capital than they did in the past, since their activities in proprietary trading and in Investment Banking which were quite profitable elements of their businesses prior to the they are involved less in these businesses, the banks have a lower return on equitys than they did in the past. That gives scope for nonbank players to come in and compete with banks in sectors like mortgage lending and other forms of financial activities, payment system, and so on. I think that is a very important change in the competitive structure that the banks face. Have you seen any Good Solutions to this . In germany, the banks are in trouble for various reasons on both levels, whether it is the big National Banks like commerzbank, deutsche bank, and the same in italy, spain. What have you come up with in your various roles that may actually help . Malcolm i am not catching the last vonnie is there a solution im sorry. Vonnie perhaps you can take it, amber. Amber given what you have laid out as your overall view, is there some kind of structural solution that needs to take place to remedy that . Malcolm in the united states, the banks are really in fairly. Ealthy shape all of these changes are described have taken place. Weredition, the banks given significant capital injections early on. So i think the Banking System in the united states, and canada for that matter, is fairly healthy in these conditions. Is, europethe issue has a very extensive system of banks. Some of them, for example, in germany, are owned by the state governments. It is a situation where the Profit Margins are lower, and they have more to do, i think, in adjusting their Business Strategies to the new market conditions. Knight, looking forward to having a longer conversation on the solutions to these problems. The visiting professor of finance at the London School of economics. Coming up, ketchup, mustard, and plastic plates, all about to be 50 more expensive, and just in time for labor day. Another round of tariffs looming over the holiday weekend. This is bloomberg. Vonnie this is bloomberg markets. Im vonnie quinn in new york. Amber im amber kanwar in toronto. The u. S. And china trade war is set to turn up a notch over the labor day weekend, another round 100 12 billion of chinese imports will go into effect this sunday. Many Consumer Food items, household goods, and apparel are about to get pricier. Anda is calling for calm more talks ahead of the escalation. No details have emerged about a call between officials that President Trump was said to have had on thursday. For more analysis, we welcome Jeffrey Wright, analyst at the eurasia group. Thank you for being with us. Up until now, the round of tariffs had invaded the pockets of american consumers, but as we were just talking, this will be the real test as to whether the u. S. And american citizens really do support an escalation of tensions between china. Am i right . Jeffrey this first set of tariffs will be an interesting test. The vigor what i think is probably the ground that the administration delayed into december, exactly for that reason. That second round will include many more of the Consumer Products that consumers are apt to notice price increases on. Tablets, laptop computers, telephones. Vonnie was todays confidence data impacted by tariffs . If it was, it is the first time we are seeing the consumer slightly dented. Jeffrey i think its a possibility. Difficult to tell the feedback loop what is coming from the lived experience for paying for certain products. As we get data after this increase, particularly after the money in december, if it goes into effect as scheduled, we should start to see a pretty substantial effect on Consumer Confidence from these tariffs. Amber the tariffs collected, thus far, donald trump has said exceeds in the billions. Where are they going, to what extent do they remedy the issues for people that are suffering as a result of the tariffs . I think particularly about farmers who are not getting the agricultural purchases, for example, that there used to. As a mechanical and practical question, the money goes into the treasury. The idea that there is special new money with which trump can make changes is not quite accurate. They are going to keep doing more to support farmers, particularly next week, they are going to roll out some changes to ethanol policy that should be helpful for corn prices. But all of that is at the margin. There is no replacing china as a market particularly for u. S. Soybeans. The size of the market and the consumer demand is unparalleled anywhere around the world. Without a resolution of the core dispute, these are bandaids essentially. Casee what is your base as to whether september talks actually take place . Jeffrey our view is talks will probably go forward. We see some room to benefit on both sides. Trump stands to benefit from the Market Reaction to a round of talks. The chinese are interested in the stability that could come out of a round of talks as well. We expect very little actual progress on any of the issues currently dividing the u. S. And china, even though the talks go over, they probably dont produce much. Progress seems ok for the markets as long as people are talking nicely to each other. What is your base case with respect to the next wave of sentiment around these talks . Do you expect further escalation . Jeffrey no. Our view is the escalation is already baked in here. You have the increases coming on the first of september this weekend, the first of october, and then december 15. Our view is your get all of those imposed with a small chance of a mini deal that would put off the imposition of some of those tariffs, but that is not our base case. In general, we have seen the market narrative around these talks with pretty quickly between things are improving when they talk, and when they happen and nothing gets resolved , then you see the markets wingback the other direction. The rally we have seen in this week, for example, is mostly aspirational. Markets reacting to something that is not there. Vonnie how much of the positive will be dependent on whether we see a market selloff or not . If markets continue to hold up, there is no incentive for President Trump to come to a trade deal, isnt there . Jeffrey thats right. The domestic politics in america and china make getting a deal difficult. That will not change regardless of what the market does. But it is clear trump is focused at least on how the markets react to these moves. The comments he made at the g7 nthw that for the umptee time. The Trump Administration tends to react to market swings with cosmetic moves, they send an official out on tv to talk the market down, or trump does the same. But the substance of the dispute is not changing much in our view. Vonnie thank you, Jeffrey Wright of the eurasia group. Florida prepares as dorian gathers force. The category four storm will be the first major hurricane to slam into the states east coast in 15 years. We will get a live look next. This is bloomberg. Vonnie turning to miami, florida preparing for Hurricane Dorian set to make landfall sunday or monday or tuesday. Jonathan is with us from miami, florida. What preparations are underway given there is a state of emergency . Indeed. Folks are trying to bend down the hatches. 2000overnor has mobilized troops from the national guard. It is possible we will have double that amount by tomorrow. Other than that, you are looking at folks securing cranes, stuff of that nature. Amber what have we seen in terms of stocks out . Are people rushing to stock up on supplies given the uncertainty, severity, how long they may be shut out of stores, the forced to stay inside . Absolutely. This is a state where people are prepared for this sort of thing, you have officials constantly getting out in front of people to get your stuff ready. Nevertheless, we have seen fairly long lines at supermarkets and so forth. Empty shelves where they keep the water. People are taking this seriously. Vonnie you are obviously in miami, the buildings are pretty sturdy there. On the outskirts, which hours will be most dangerous for people . Im sorry, what are the hours . Vonnie what hours will be critical between now and when dorian leaves . There is so much uncertainty about the storm and one of them is when the storm will arrive. Its been a fairly slowmoving storm and theyve been moving back to schedule a little bit. We are now looking at some time on labor day. Amber florida, and important state politically or donald trump, as well as personally, where maralago is. Do we know about whether his own estate may be hit . Absolutely. At this point, the latest projections have it putting it almost at jupiter, which is only about 30 miles north of his maralago estate. A golf course in west palm beach, another property in doral. Has justn fact, dorian been upgraded to a major category three storm. Thank you. You can catch all of our interviews on the bloomberg with the function tv. This is bloomberg. Lets get the first word. Florida is bracing for Hurricane Dorian. The storm is expected to make landfall as a category four hurricane early next week. Desantisovernor ron urged residents to be prepared for what could be a multiday event. Floridians need to be prepared. The bad news of the storm going slower is that could potentially have negative impacts when it reaches landfall. But you do have time before it reaches to prepare if you have not done so. Havege all floridians to seven days worth of food, medicine, and water. Dorian has already caused massive blackouts in the virgin islands. Moments ago, the National Hurricane center upgraded dorian to a major category 3 hurricane. The brazilian president might get help from the u. S. To fight the wildfires scorching the amazon rain forest. Highlevel brazilian officials are in washington to discuss possible aid for the south american nation. Bolsonaro banned most fire intended for