Transcripts For BLOOMBERG Bloomberg Surveillance 20240714

Good morning, everyone. Good afternoon if you are watching from asia. This is bloomberg surveillance. I am in italy for the ember city ambrosetti forum. Lot to do with the economy, the trade war, with no end in sight. Although the two sides did decide to meet her we go back to our wall of worry. What im looking at. European stocks were up at the open a touch, now they are down. 1 . A lot will have to with the number we get from u. S. Jobs. Looking at treasuries, they are slowing some of the declines we saw yesterday and we shot a sharp selloff. Im also looking at gold. It is probably the perfect litmus test when comes to risk on or risk off. And wti, there is little change their. There. So we will get back to the markets and great interviews, but first, lets get straight to london and first word news. Hong kongs Credit Rating has that is as months of persistent protests and violence continue. Fitch says it is testing the framework that governs the relationship with china. Carrie lam says she disagrees with the downgrade. Trade policy uncertainty is holding back Global Growth and may weigh on the World Economy in 2020, according to a Federal Reserve research note. It was hard numbers on the argument the bank has made for months, saying the trade tensions led to a decline of. 8 in global gdp but the First Six Months of this year. Barrelingof dorian is towards North Carolina where it may briefly make landfall. Coastal areas are forecast to get 612 inches of rain and storm surge as high as seven feet. Battered Charleston Harbor with 92 mileperhour per hour winds and killed 30 in the bahamas. And oil is headed for its biggest weekly gains since july as american stockpiles shrink. Inventories slipped by 4. 8 million barrels, more than double what was expected as the trade war escalated. But they are getting some rest bite respite. Robert got a has died. Mugabe has died. A controversial figure in his later years, he has been accused of economic mismanagement and human rights abuses. 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. Francine . Ray dalio, billionaire founder of the Worlds Largest Hedge Fund Says there is a 25 chance of a recession this year and in 2020. He adds that when the downturn comes, Central Banks wont necessarily have the power to reverse it. 2007, it was pretty easy, i think, to calculate that there were these debts that would come due. That there was not an adequate amount of funding. Crisisthat sort of debt is something we anticipated and were positioned well for. When i go through those calculations, its not the same. In other words, the amount of maturing debt and that whole problem is not the same. It looks more like a gradual squeeze having to do with quite a lot of debt of a certain type, but with that, pension liabilities and health care, particularly as that produces a greater squeeze. And so larger deficits the amount of promises that we have our large, but theyre going to be coming at a more gradual pace and it is going to produce a squeeze. , when you dont have Monetary Policy, being able to be effective, what kind of Monetary Policy we will have we will have more than likely a lot of debt monetization. Francine so that was ray dalio founder of bridgewater heard bridgewater. Joining us from the ambrosetti is the global head of economics and market strategy, the previous chief of staff to the former italian finance mr. Minister. Thank you for giving us a half hour of your time. I know its busy and you want to get back to the workshop. Overall, you hear ray dalio say theres a 25 chance of a recession. Can this be avoided or is this beingnomic slowdown brought forward by the trade war . Eventually, we will have a recession. This year, it seems unlikely to me. 25 , its a lower probability. But we should not be too optimistic according to the weather. [laughter] mr. Dalio has a point when he says there are limits to Monetary Policy and what Central Banks can do. But i would make a distinction between europe and the United States. First of all them a they have a much healthier economy in this moment and the data has been mostly positive. There are some contradictions, but mostly positive. Europe is quite different. We are seeing a technical recession in germany and in italy as well. France has been in a healthy position. There is also difference another difference between the u. S. And europe is the margins Central Banks in u. S. Have are much wider where in europe they are negative. My short answer is, eventually, we will have a recession. I dont think its likely in the next month. Francine but Central Banks may not have the tools. Are we creating an environment which may be risky because investors are taking too much risk . Recessionconfound a because we are creating bubbles their monetary stimulus . Or is it just that, if we have a recession, there is a limit to the ability of Central Banks . Fabrizio i dont see investors taking too much risk in this moment. The lessons of the past have been learned, for the moment at least. But there is always that hazard. From my understanding, we are not there. The other point you are making is much stronger. The fact that you have certain things which Monetary Policy cannot do although, we are moving to a more Creative Space for Central Banks. If i may sayming, so, even more important and imaginative in the way they are intervening. Francine are they too important to let to imaginative important, to imaginative . Fabrizio it is risky if we dont match what they are doing with the right fiscal policies and the right structural policies. We needed to make this link which has not happened yet between monetary, fiscal, and structural. It is particularly true for europe. Mario draghi 7 25 to his press conference. Said it 25 times at his press conference. Fabrizio that is a good point. But people may be more interested to listen as we are indeed closer than we were in the last five years, particularly in europe. Is there anything Central Banks are politicians can do to avoid a recession . Fabrizio i think we need fiscal stimulus. We need fiscal stimulus in the u. S. Its an election year, so there may be political interested doing that. In europe, we need the coronation of fiscal stimulus, particularly in those countries which have the room to do it. But also, we need a fiscal stimulus. Fabrizio stays with us. Up next, Boris Johnson repeats his call for elections but opposition parties are not playing ball. We discussed the u. K. Next. Plus, repairing relations. Es government looks to patch things up with brussels so we focus on the future of italy. More to come, this is bloomberg. Fixed Term Parliament act 2011. Can you make a promise today to the British Public that he will not go back to brussels and asked for another delay to brexit . Yes, i can yes, i can. I would rather be dead in a ditch. Francine rather be dead in a ditch. Boris johnson ending that look back with strong words. He made the comment after a speech at a Police Academy in northern england. Use of the events to double down on his plans for a general election before the European Council meeting. Opposition parties, meanwhile, are set to try and figure out what they will do next. They will possibly discuss an election date near october 31. All of this will come to a head on monday. Monday is a huge deal and monday is when we will figure out a couple of things on whether Boris Johnson will tend to treat with the election or not . Fabrizio is still with us. When you look at brexit, its quite a story. It is one that we cant stop watching and the way things work. Economically, what to that mean. Or the u. K. Are we underestimate or overestimating the impact of this . Of art ifthey sort the u. K. Crashes out. Risk, itssystemic something that can really disrupted the european economy. But it contributes to uncertainty. But if you add president to the trade wars and some other uncertainty to the fact that there is a break of investment all of that contributes and leads to the continent and the u. K. Possibly closer to recession. Systemic, bute altogether would be a big economic risk. Francine is it a Financial Stability issue, a deficit issue . ,t is now so fiercely political have you look at it through an economic lens . Fabrizio i would look at it more as a trade risk. As at not exclusively trade risk, but a trade and butidence risk their disruption in trade, disruption in the confidence of doing business in a normal part, its a major part of Continental Europe there europe. It does not provide the confidence necessary for business. In terms of banks, i dont see a major risk. I think people in the banking and Financial Sector have taken and are taking all the grip cautions that all the precautions necessary. Taking all the cautions necessary. Francine fabrizio stays with us. Up next, we focus on brexit but from the other side. What impact will it have on europe . And italy gets a new finance minister. And with slowdowns across much of the euro area what should policymakers fight back with . This is the word. This is bloomberg. Negative rates should not be overused and there is room to tweak the room to tweak or go down is small. Banks would have to reflect that, and that of course would create a big backlash. That was the former Vice President of the European Central bank speaking exclusively to bloomberg a little bit earlier. Lets focus on the euro area and its economic slowdown. Fabrizio is still with us. Were talking about negative rates and the pressure of this puts on european banks, especially german banks. Germany need something else, but you kind of wonder whether Interest Rates are good things. It kills savings and that is very negative. Fabrizio it is kind of a two edged tool. The ecb signaled the possibility of having a twotier system. We see what the decision will be and alsoxt meeting what madame lagarde think that i think that there are indeed some limits that the Central Banks have. Its not only a question of Monetary Policy alone, as i said. We to make the link between Monetary Policy. Francine we have a new government that was sworn in yesterday or the day before. People are doubting what it could hold, people say yes. What would you do to make sure italy is on the right path . First of all, this government has been welcomed by the markets. You saw the spread went down quite dramatically. 1 ,ear btps are below thats absolutely at the lowest level ever. Is that more because you think we would not have the turmoil we were expecting . Fabrizio thats true. We dont have an italy exit risk anymore. Right . Big element, [laughter] it was a big risk. Indeed, now there is an opening by the market to the government. The government cannot waste this opportunity. There are three elements we should consider when we look at what the Italian Government could do in physical terms. One is indeed the covenant of policy by Central Banks. The second is the fact that there is a new commission. It is a Commission Led by very strong leadership with an agenda and a personality which can make a change and bring change to europe. Brought incan be various at the different ways. Not necessarily a formal change to treaties or regulations, but one that can be done in the environment you create. That is very important. Also, we will see who will be the commission in charge of economic and financial affairs. That wed element is could have stimulus in the United States or another part of the world. In these environments, the Italian Government should not be shy and should go for a package which makes sense which is well thought, which has vision and intelligence, but which is expansionary. Francine such as what . Infrastructure . It is a comprehensive package people have asked for four years but has never come, and how do you fund it . Fabrizio i think we should gain some margins in terms of deficit. The moment is now, if not now, when . Italy, you need things in measures which are automatic. We have a system in the Public Administration in the machinery of the country which is very complex. It is very difficult to spend through this machinery. So you need to get stimulus measures which automatically are either used by companies or used , thetizens, for instance incentives must be taken directly by business. Or at tax rates. If you cap tax, that is stimulus. Francine and italy can afford that . Fabrizio i think they can. Francine thank you for joining thisom ray ambrosetti morning. You more couple bring about interview with the former ecb Vice President constantia constancio. We will talk about negative rates and the u. S. China trade war. This is bloomberg. Francine ray dalio warning of a 25 chance of recession this year and says the fed has limited power to fight this. The Opposition Party looks to outmaneuver Boris Johnson. The Prime Minister says he would rather be dead in a ditch than not have brexit. Speak to the former Prime Minister this is bloomberg surveillance. I am Francine Lacqua here. Work onetting hard to economics and finance. A lot of the working groups have investors from around the world. Lets get to the bloomberg first word news in london. Hong kong Credit Rating cut by fitch to aa. After months of protesters and violence continue. Hong kongs chief executive carrie lam says she disagrees with the downgrade. Billionaire ray dalio says there is a toy for percent chance says there is a 25 chance of recession next year. He recommends the Federal Reserve cut rates more cautiously than the markets are pricing in. Right now we would like to see cutting slowly, maybe 25 basis points, not as fast as discounted in the curve. s cuttinge bank salespeople and its Global Fixed Income unit. The business was spared in the overhaul two months ago. Hurricane dorian is barreling towards North Carolina where it made reflate make landfall. Coastal areas are forecasted to get six inches to 12 inches of rain and up to seven foot storm surge. It previously killed at least 30 and the bahamas. Zimbabwes expresident Robert Mugabe has died at age 95. Mugabe was a controversial figure, accused of economic mismanagement and human rights abuses. Global news, 24 hours a day on air and at tictoc on twitter, powered by 2700 journalists and analysts in more than 120 countries. This is bloomberg. Francine thank you. Lets get the latest on a busy week for brexit watchers. Boris johnsons opponents are looking for ways to outmaneuver him. The Prime Minister has doubled down on his plan for a general election before the European Council meeting october 17. Joining us now is sir christopher pissarides, professor economics, London School of economics political science. And winter of the nobel prize in 2010. Parallel the between brexit and economics, there are so many worries about negative rates and Monetary Policy. Thing your the worst could do is bring in uncertainty on top of what you mentioned, which is brexit. The uncertainty is getting worse. Do we see months from now . I do not know. All and whatng of where there is enthusiasm for what the European Union union is doing across so many dimensions i was just in a meeting where there were agreements with singapore, vietnam, japan. You think if there is a hard lose our free trade agreements . Trade with japan and singapore subject to wto rules . We have to check rules of origin and Product Description . It is a complete disaster for companies, trying to find their way in this world. And then there is the u. S. China trade war. Is the biggest concern eventually the unintended consequences of Monetary Policy dealing with political shock event . We have the u. S. China trade war and we have had interesting discussions were we do not understand where it is going. We have tech wars which is more important. Central banks are trying to find their way, but more importantly is at thean union head of regulation for technology, and it is trying , find ay to balance balanced view of the economies of the world. When you put it together, it is about the size of the United States and bigger than china, it is gravitas, it can push ahead. Do whenbritain going to it gets out of there . How will that deal with the situation . Has a hugeurope also problems. We are seeing a technical recession in germany and italy. What does europe need to do to avoid real recession and a prolonged down threat . Christopher i think what it needs to do is new infrastructure tied to the digital economy. The future is digital, no doubt about that. We have to push ahead with green energies because the environment and Things Companies need. Has a big role to play. Surpluses especially in some countries, when you spend on infrastructure you get a return in the future. Have a high level of education, we need to get together as a continent and see what is needed. The Artificial Intelligence dimension, we need a lot there. Orncine do markets economists understand what is going on given the shift . Christopher do we understand precisely what is happening . Liket hit by a downturn 2008 and it takes us by surprise. We do not know. The idea is to Work Together and try to understand what is going on across all dimensions and sectors. Economies need to get together with scientists and work science. To do pierce pure science. You need to adapt your technology to the conditions of the economy you are operating in. Borders to have open and cooperation with each other. Francine why is inflation so stubbornly low . Rid ofpe, have we gotten the risk of deflation . Christopher in my view, we got rid of the risk of deflation, but i wish we had more inflation. Expression, ited boils the engine it oils the engine. We do not have fiscal deficits because of inflation. Open as economies and there is foreign competition keeping prices low. Labor is becoming less important, wages have become. Ess important in production it is not necessarily a good iselopment because it shifting the quality. Low because you do not have this costplus pricing. Francine do you worry europe is becoming like japan, and how much would that be a concern . Christopher it will worry me if it became like japan, and it could if we do not handle it well. I do not think we are at risk, though. Europe doesremember not put as much emphasis on the pure number. Environmental, the social state with this. Inevitably take away some of your potential. , it is a broad measure of wellbeing and development. Look at the happiness indices that you see more. European nations are on top and the United States is way below. This push for p are growth and the value of goods, it is an oldfashioned idea. Thank you for joining us. Sir christopher pissarides, professor economics, London School of economics political science. Coming up, more of our interview with the former ecb Vice President. Bloomberg. T, this is francine this is bloomberg surveillance. I am Francine Lacqua. Zimbabwegabe who ruled for 37 years has died at age 95. He began as a hero of the countries independence, but he soon became a villain. He plunged zimbabwe into economic chaos. Joined what did mugabe do for zimbabwe . Complicated, he will be remembered as someone who led his people to freedom. He educated his people for harmony. He lost his way and destroyed his country. Economic been in an meltdown for 20 years. What state is the country in now . The country is in its worst state since 1980. The economy is incomplete collapse, and i was triggered by mugabe. He cut off all the exporting. The infrastructure has collapsed. Francine what impact does his death have, if any . I do not think it will have a huge impact as he has been very ill for the last few years. From power in november, 2017. This removes a shadow over the country and will allow zimbabwe to move on and rebuild a completely shattered economy. Have morewe will throughout the day. Outlook and that we will talk this is bloomberg. Francine economics, finance, politics. This is bloomberg surveillance. I am Francine Lacqua. Lets bring in more of our exclusive interviews. Expect tood markets much from the Central Banks. Rates should not be overused, and the rule there to tweak and go down is small in my view. Limits if oneinly thinks about the impact on banks and the financial system, which is probably working well with negative rates. Also if it continues more negative, banks would have to reflect that on deposits, and that would create a backlash. I do not expect that will be until a possibility can emerge. Francine what do you see as the limit . Do you have a figure . No i do not have a figure. Somersonal view is can be imagined. Francine is there something Central Banks can do for negative rates . There is nothing else. If they decide to tweak the it is difficult to do that. Francine for the european economy, what do you worry about u. S. China trade war or brexit . The u. S. China trade war, no doubt about it. It is creating a slowdown in a significant way worldwide. Everybody is nervous about what can happen. It has totally hampered the outlook for investment everywhere. Francine if we were to have a deal between the u. S. And china, does that change the outlook for the fed and centralbanks . Yes, i think if there is a deal there will be a burst of optimism, spirits will change, and the whole mood will change with reflection in the financial markets. The situation would change a lot. That was the former Vice President of the European Central bank. After political turmoil, some stability. Since the announcement of a new Coalition Government and the appointed to the veteran suggests a break from tense relations with brussels. Joining us now is valerio de molli, ceo managing partner, d europian aus ambrosetti spa. Us to uglys bring places. Valerio sorry about that. Francine italy seems to be stabilized a little bit. Italyl, what place does have in the wider world . I am pretty sure we minister. N important i do not know which one, but it will be an important one, that is my guess. And thet nomination finance minister coming from European Parliament fully aware and integrated within the european institution, i am sure the europeans of italy will increase drastically. That is an important thing for italy as well as europe. Italy is domestically, looking at a technical recession, germany is looking at a technical recession. Does the government have the courage to push financing or fiscal stimulus or reforms . Valerio that is a good point, it remains a challenge to be faced. That is the same in the recent government, and we need to do our work at home and do the right reforms that we need. No doubt about that. I am confident and i hope they can arrive to an agreement about the priorities to be implemented. I must say the mood among the entrepreneurial system in italy, we measure that with an Important Survey among the top mood isgroups, the mildly better than it was before. Francine enough for chief executives to spend . Valerio yes, we need to increase Investment Private and public. The good point is the spread, the minimum of the last two euroswill save a billion in public spending. That is one good point about it. Sure thecher pretty new government will immediately stop one of the decisions of the greenyellow government about the top 100 pensions, that will save billions to read i am pretty sure they will find out soon enough, flexibility to start with new investments. Hillary you have clinton here, the Vice President of turkey, are they talking about brexit in the corridors . Valerio we also have the minister from brexit talking about the brexit issue. Being an italian, i was believe we arei fighting for the first place. Francine thank you so much for joining us. Valerio de molli, ceo managing partner, d europian aus ambrosetti spa. We will have plenty more, another two hours, and we are just getting started. 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. Francine Billionaire Hedge Fund manager sees a 25 chance of a recession in the fed has limited power to fight it. Writtens britains Opposition Party argues over the brexit timetable. We are here in italy for the forum at day after the countrys government is sworn in. Good morning everyone, a good afternoon if you are watching from asia. I am in italy for the 45th anniversary addition of this form. I am happy we are reignited. I know it is beautiful behind me, but we still have to listen to what we say. So the wind is picking up, i do not know if that is more headwinds for the Global Economy. Tom really a mystery about jobs day in america. I have seen really Interesting Research notes in the last 12 hours looking for an ok or a mock an ok jobs day or a mock debt markdown. We will get back to those things, let us get straight to the first word news. The u. K. , opponents of Boris Johnson are looking for ways to outmaneuver him. Ae latest plan is to hold general election. The opposition, labor, and scottish nationalist parties have discussed a vote on october 29. His opponents want to make sure that he is blocked from taking the u. K. Out of the European Union without a deal. Hurricane dorian has weekend to ed to aory weaken category one storm. Dorian could make a direct hit today on the outer banks. The hurricane has been the bet has been battering the carolinas with fierce wind. In the bahamas the death toll is now up to 30. Health workers expect to find more victims. He was the longtime hero of zimbabwe who eventually turned into a villain. Robert mugabe has died. He was one of the drivers of the 1970s war of independence that ended white minority rule. His years as president were marked with political and economic chaos, and he resigned after the military siege seized control. 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. This is bloomberg. You so much, we greatly appreciate that. Let me do a data check. A better market and a better take off of yesterdays news. We move up seven. Near 2070s up 62, not 27,000 yet, but getting there. With a little strength. We have a good equity marketing, and the vix a ton chander 1680. A huge relative difference in negative. Ey big francine . Let us go to my data check. It is a lot to do with the jobs report and trade at the margins. Remember that jay powell is talking at an Economic Outlook event, which could also influence markets. I am looking at equities a little bit volatile, but not changed. Overall, it is kind of a risk on mood, and i am looking at pounds. Boris johnson is set to make another call for an early election. Aboutk we need to talk ford. Widelyis has been anticipated after the decision in scotland. The Prime Minister loses another court ruling. He loses now. Johnson loses the English Court ruling on the suspension of parliament. What is so important here is the onendar is taking ticking, the ability of comments and lords to come up with any idea of a general election, that is a mystery on this friday, mid noon in london. Francine i think the ruling appeal will go straight to the Supreme Courts. As borisescribe it johnson not having the best of weeks. We will talked talk about brexit and what it signals about the state of the economy. There are growing concerns that there are headwinds, and that is what we are watching out for, and a downturn may be on the horizon. Person is a dr. Doom he joins us from he joins us here. When you look at ray dalio saying 25 of a recession, is that farfetched or likely . The recession for next year is higher than 75 . There is already a contraction in manufacturing. The trade sector is contracting. There is an option value waiting. To build a new factory when there is a fullscale trump trade code moral war with china a fullscale trade cold war. Been what has been sustaining global economies . If the u. S. Was to continue with these tariffs that will hit the u. S. Consumer and slowdown consumption. The only thing that is holding is sharplyeconomy down. Seaside,ave the quiet what we have got across all of the world is confusing about frexit confusion about brexit. I will place a correction. I have a slew of headlines and i want to be careful. ThePrime Minister wins english ruling on a parliament suspension. We said he had lost, that is wrong. Very fluid at this moment. Formeranother one, the Prime Minister loses the ruling on parliaments suspension and then confirm seconds ago that the Prime Minister wins the prime the court ruling. Iu are better at this than am. He won the ruling against the former Prime Minister and in scotland, correct. Francine that is what we think. Things are fluid. I think what we can be certain for at the moment is that there is going to be an appeal to another court, but let us see what he sends out. You have infighting within the labor party and the tories. We will see if we get an election whether it is mid or at the end of october. What to do with brexit, is this a u. K. Or a global problem . Brexit is a hard brexit, many economies are very dependent on trade the united kingdom. The eurozone is already down. To the the shock business sector will be the most important shock and a contraction of the economy and even even if the shock is bigger for the u. K. Than the euro zone. Tom u. N. Die spoke before the Great Recession, about the idea of a slowdown. You and i spoke before the Great Recession about the body of a slowdown. You were pressing enter. Are we miss judging the amplitude are we misjudging the amplitude of the instabilities, or the size of any decline . I think the markets are complacent, there are still negative supply shocks it is the trade war with u. S. And china, and the hard brexit. In the gulfhe wore a war in the gulf. Banks and put central fiscal policy in a bind. Central banks would ease and they would be a fiscal stimulus. Response is not easing or financing, it is not accommodating. If you accommodate you will get people inflation. I think the markets are complacent and there is a wide range of matters that are wrong, and supply shocks. The policy response to a permanently supply shock is not easing, but accepting the fact that there will be lower potential growth, whether you have brexit or eight u. S. China trade war. Tom tell me about the financial side. Were right about the shock into 2008 through through 2009. The potentialing amplitude from negative Interest Rates as something new and different. Side negativee negative interest negative interests implies a slowdown in trading. Why is there a leverage of loans or fallen angels in the Investment Grades. There is a wide range of excesses. Risk of a the then credit spreads would what would widen. Occur therecks could be that could be a Tipping Point. Next time around, i will say that corporate crisis be the next debt crisis. Francine that would be a freezing up of the markets . , then theretially would be a widening of spreads, and then a high grade, high yield. That will lead to a credit crunch and that will exacerbate the situation. Francine it would be uglier than 2008 . Nouriel i do not think so, it depends on the situation with iran,s. And china, and and what happens to brexit. If it occurs it could be as bad, or milder than 2008. Can see shock, we never it coming. What is the element that you worry about, is it a pacific rim issue or something within the populism of europe . The most important thing is that if there be a fullscale trade currency cold war and tech war, we will have the process of vulcan and asian the globalation of supply chain and fragmentation of the Global Economy. We have gone to 30 years plus of globalization and there is an increasing rate in objects and information and i think that will be a major regime change from greater integration to deglobalization. People are underestimating that. Tom thank you so much, greatly appreciated. Boris johnson ought to make clear that he has a victory against john major on prorogation. The bbc has come around off of the earlier correction. Andson has a second victory moved to the Supreme Court. We will move to our jobs day coverage. Important. S this is bloomberg. Bloombergmorning, surveillance, Francine Lacqua and tom keene. I will join francine next month. Last year, what was it . Ice comingoming off of our noses. Francine it looks great on camera, and it is like gale winds. You are a light whether broadcaster. Was last year, march excellently absolutely hilarious. We are trying to be collected and francine was the coldest i have seen her, why do not pick it up . Francine let us get back to ready to givey its budget to the European Union. Will it be enough . Domestically and internet we are joined by i have a million questions, but what i want to know is whether this coalition will hold and it is good news for them . It looks like the new government is reducing uncertainty so far, and i hope that this will continue, not only because it will open investments, but supportive economic growth, but also because i believe a lot of money is blocked. On confidence by consumers and producers will show where it will unfold. I hope that not only the italian new government, but the start of the new European Commission will move in the right direction. Francine if you had to give a prescription to save italy and grow domestically, does this country need structural reform or fiscal spending . Should the government do it now instead of six months . Enrico i would say both. But not in the usual sense. Italy, forarket in example. What we need is a transition of sector towards sustainable development, towards energy efficiency. The latest data for the largest year. The latestms data for the largest italian inms have a 15 increase productivity. This is just to say that there is a huge opportunity for the Italian Economic sector. Francine italy is a g7, international, open economy. Europetain a downturn in or even brexit . Needo it is clear that we an International Environment which fights against the slowdown that is happening because of commercial war, and uncertainty at a global level. Unfortunately, i do not think this will disappear soon, and that is where europe and italy need to invest more on domestic demand. Said thattries have those countries who have more fiscal space must invest more. Francine mario draghi has been saying that for the last five years and we have had nothing. Enrico that is also in germany and the other regions and countries in europe understand that if nothing changes than the tospective is that any way get slow growth for the continent as a whole. I believe that is not only a that is not only because of a change, but because of the worries that i share. We will see a change in fiscal policies in europe. Francine thank you so much for your time today. Up, we have plenty more. Mario, the former Prime Minister of italy joins us. This is bloomberg. Is a colonial history from sessile roads north of south africa to rhodesia, and then onto zimbabwe. Was a part of that transition. We are joined from came to out from cape town. How will this be taken . This is truly a tragedy. This was a liberation hero, a struggle hero that the nation has lost. Although some years under his tenure were difficult for zimbabwe, nonetheless he was a struggle hero. At the World Economic Forum Meeting in south africa, and some heads of state have left early, all of them sending condolences on the passing of Robert Mugabe, the president of zimbabwe. Tom thank you so much. We will have to leave you because of news. Thank you so much. And is moving target centered around 6 gdp the breaking news is finally hinted to a few days ago. China will cut their reserve ratio by a substantial amount. 0. 5 points. Is 7. 12 andim nimby you wonder where that will go. Theeaking story into saturday of china. Please stay with us. Here, it all starts with a simple. Hello hi how can i help . A data plan for everyone. Everyone . Everyone. Lets send to everyone [ camera clicking ] wifi up there . Ahhh. Sure, why not . Howd he get out . a camera might figure it out. That was easy glad i could help. At xfinity, were here to make life simple. Easy. Awesome. So come ask, shop, discover at your xfinity store today. Meeting on china and wednesday signaling stimulus. But i are getting uglier have the right tools to deal with it. They called for a faster lowering of the real borrowing costs for businesses to channel credit. To enda straight curran. Great to speak to you. Is it a surprise. Is it a surprise . Enda it was expected they would add support to the economy. We had a signal they were willing to do this. They are continuing to use this channel of cutting the ratio requirement for banks because there is no guarantee at will have an impact. You can encourage banks to lend more but that does not think businesses will are. Well borrow it. They are steps willing to take steps to support growth. Francine the same measure reversed for some lenders in may. Can they do more . Enda it will be critical to see if this credit is taken up by companies on the ground. We have seen a pickup in spending on infrastructure and at is likely we will seem our measures on this see more measures on this. It points to the authorities taking more steps than they have recently to ensure growth remains at 6. 5 , and credit starts to flow through small and Mediumsized Enterprises, particularly projects underground. Tom speak to our global audience about what he assumed is the norm we assume is a normal conversation about degrees of freedom of chairman powell, the ecb, the bank of japan. Are those discussions normal for the pboc . Do they worry about degrees of freedom . Enda thank knowing exactly what they are doing. They answer to they own authorities their own authorities. There measures have been disciplined compared to previous cycles. They are keeping an eye on the total debt story, but this latest measure points to a global trend that Central Banks and fiscal authorities are coming to the party to support probably will not the last measure in china or globally. Tom i agree. We are seeing a trend of great accommodation. Was this a lick with acacian for the elites a lick with quification for the elites of shanghai or an accommodation for the people of rural china . Enda they have been talking about offering support to smaller and Mediumsized Enterprises and taking steps to make sure the economy gets credit. You can take this as a step to get money into the economy, get honey on the ground, and ensure they get get money on the ground, and ensure that they get growth. Francine that is enda curran. Reminder, the breaking news we had in the last couple of minutes, china cut its reserve ratio by 0. 5 percentage points. We did have a little bit of market expectation because we had a Cabinet Meeting in china on wednesday where they talked about extra stimulus. We will have plenty more on china. It has been less than a month after being forced from power. Giuseppe conte finds himself head of a new government coalition. Investors rallying behind his second term, but there is a history of bad led between the debt blood between the two parties. To talk about italy and the World Economy and anything in , manyn is mario monti years Prime Minister of italy. Thank you for joining us. We just had the news about china, cutting the reserve ratio some banks. Are you confident that no matter what happens in the u. S. China trade war, the chinese can handle their economy . Mario they will try, but we must not underestimate the impact of an ongoing, and possibly deteriorating trade war. There is not so much that individual countries will do, only so much they can do. They better become more reasonable on their interactions rather than relying exclusively on domestic policy weapons. Francine do you see the world coming together like they did in 2008, if something bad were to happen . Record if a plow vote the race to the bottom continues . Change inr can bring attitudes. Certainly, it is the first time that we have big tensions in the economic and financial sphere. U. S. , whichf the does not believe in coordinated multilateral government, so it would have to be through despair that a plasma accord is reached, not out of can plaza accord is reached. Francine given germany and a technical recession, what does it mean for this new government . Is it a new alliance . Do they need to go strong with structural reform or do fiscal spending . Will they do anything . Mario the government has a tall order because they should undo part of what the previous government did. The Prime Minister is the same one of same, one of the two parties is the same, so they will have to reconverge there thinking about. The Prime Minister has given clear indication of this. They cannot do like the previous government which virtually did nothing to prepare italy for a more distant growth rate. This will imply more Structural Reforms, more openness to competition, and this is certainly not in the mindset of the fivestar. It is in the mindset of many in the democratic party. Prime minister conte, much more leadership than he displayed in the first government to come together. Certainly, he has matured. He has shown more leadership. Renewednewed the good climate with the European Union will be an important component. Tom we see a little bit of strength in a in the china strengthening in the chinese renminbi. Tom keene in new york, thank you for joining us. I am fascinated by the italian or peripheral urgency to get negative Interest Rate solved. I understand negative Interest Rates as a debated switzerland, germany, and others. How can they solve the conundrum of negative Interest Rate . Mario it is there also for italy. Most people do not realize it. It is there in a slightly different way than for traditionally strong currency countries like germany or switzerland. Continued flood of liquidity has in a country like through declining spreads and low Interest Rate, has deli nked financial variables from the quality of economic policy. Let me express it more completely. Traditionally in these last seven or eight or nine years, the famous differential between government bonds in at only and germany in italy and had become a household name, and something followed every day by the people of italy. When the spread was rising, that meant something wrong was going on in economic policy. And the prospect of that thee, it is clear of high high bell Interest Rates and spread does not bring in a more ring anymore. That is bad for the willingness of policymakers to do more Structural Reforms and put Public Finance under more stable and persistent control. Francine will that change, given what we are seeing in the World Economy . Mario this will have to change. Central bankers are puzzled about what they should be doing in the future. Matchupemember the andod of Alan Greenspan then something happened, the financial crisis 2007, 2008. Monetary policy has done a great made thehas actually actors tooer policy easy by taking away the constraint of finance and money. Francine thank you so much for joining us, former Prime Minister of italy. Tom thank you so much. There are any number of stories out there now. One is clearly the continuing story into the weekend and the critical days next week for lords of brexit. Joining us now is tony aarons. Johnson land for scotland, victory for johnson, but is there a big so what because it has been loss after loss parliament . Because we have two courts that do not want to get involved and parliament, we are staying out. When they ruled in favor of gina miller that the parliament had to have a say on article 50, it is the opposite here. Courts do not want to get involved. The interesting thing is the Supreme Court will hear the appeal september 17. That is about a week after the prorogation of parliament is set to start so there will be some downtime. Tom we have got to get that the critical hours of this friday into the debate over the weekend , across the united kingdom, and a few critical days next week. Dateis the tony aarons calendar for today and forward . Courts, we have the appeal and the scottish case. On monday, there is the belfast case which has not. Has not. The supreme ruled. The Supreme Court will have to decide. They will vote on a new election on monday and if they decide, it goes out the window and parliament will decide. Francine if you look at the legal challenges, there are a number of other legal challenges, but is it all about politics or can make a difference . Challengeshe legal can do is allow parliament to sit four to six more days. It is a political issue that the politicians have to get a hold of. ,rancine thank you so much bloombergs tony aarons. Head of with the global this is bloomberg. Day in america, good economic conversation on economic relations. News is also so much other as we launch into september. To give us perspective, Marcus Ashworth joins us. We have just seen china blink. This was widely anticipated. Is there a correlated market bet of more china more china to the rescue . Marcus i think so. Reasonably well known, and this is a steady easement of pushing liquidity back into the banks, around 900 billion yuan. They are staggering it so there is a further percentage point next month. Iss is coming when the yuan at 7. 20. It looks like it will head for 7. 5, so with the trade talks back on, this is a sign that key point for trump is the chinese economy is weakening and showing signs of weakening further. The chinese are aware they have a big problem with their economy and are trying to make this calm, and column peaceful move. Tom how do you interpret and i we use the equity market as the marker but we can go to any other asset class we have a range bound august in the case of equities, punching up now against resistance, what do you make of that . Range,n a latesummer how do you break out of that . Marcus it was important for the world that the hong kong situation looks like it may be calming down. That is what the markets risk on took after in august of nothing but ever lower bond you. That took some steam out of the equity market. Clearly the china trade talks back on has fueled that. The summer is over, everyone is back, a lot of bond issuance. At looks like a good chance to get equity risk on. Tom Marcus Ashworth, thank you so much. Hambro of now, evy blackrock. And expert on breaking news. Which to bring up a chart is inflationadjusted commodities. Tear, gold has been on a but this is a remarkable 40 year chart and the recent log descent of commodities which continues through 2019. We have just seen accommodation from china. Oreis this linked into iron and the dynamics of commodities with our great manufacturing nation . Evy nice to see. What we are seeing in china is art for the economy and the measures that support for the economy and the measures that have just come out are classic tools they would use. We have seen accommodative policy all year so we are taking this as positive in regard to commodities demand, which some people were nervous about given the Global Economy. From the good morning erbanks of late, play, when you think about the trade war and the downturn in the economy, will the demand hold up . Evy the measures like china has just announced, continued measures to support that, measures to increase availability of capital. We will see support for infrastructure projects, and some of the measures coming through will have an impact on commodities demand. We are not seeing weakness in demand and that is a key factor. The other side of the equation is important which is supply. That is keeping that side of the equation is a supportive factor. If we were going into way period of weak demand and had rising supply because of investment that had been committed to, we would have the down trending Commodity Prices like 2011 to 2015. This situation is easy manageable. Francine how much do you worry about the u. S. Economy and the impact on commodities . Evy we have seen the start of Interest Rate cutting and moving away from quantitative tiding tightening. That is a sign of support for the economy. I am not saying we have a Global Economy that is raring ahead, but the key for us is thinking about the balance between supply and demand. Francine if you were to choose a commodity now, and we will talk about more global themes, but a commodity that will outperform the others in the next 12 months, what would it be . Evy we have seen a Strong Performance from Precious Metals. If you look at the macro picture, we have been talking about the Global Economy, but some of the measures coming into place, we have in excess of 17 trillion of government that trading with negative yield debt trading with negative yield. Gold, as an investor in when we see the opportunity cost of owning and holding gold move into an opportunity carry, that is a positive environment. Similar supply and demand characteristics in other commodities, though stronger demand for gold than other parts of the commodity spectrum. We are seeing the supply picture being supportive as well. The bias is toward Precious Metals and gold. Outside of that, we have seen strong moves in nickel because of the indonesian man on exports ban on exports. I think those commodities look well set to deliver strong boss profitability. Longterm to 8 30 this morning to the jobs report. Lets go out 10 years. You have the courage to think about some of the theme of the next decade. A lot of people are saying in the chaos of 2019, how can i look out is, five years, or 10 years . How do you commit capital to get three or 10 years out . Evy it is an interesting dynamic, the whole area of thematics. I was in germany yesterday and i was amazed to see the f ration proliferation of the mobility starting to arise, scooters on the street and the number of people using them. , was speaking to my clients asking how many own cars and there was almost a zero response. We are seeing this transition. It is these major changes in the Global Economy that we are trying to capture in our thematic fund, and it is funds, and it is going over well with our clients. The report of growth in the auto space and that is what we are trying to capture. Tom can europe catch up to america on the innovation of these themes . Evy one of the benefits of being a thematic investor as you look locally that he is you look globally is you look globally. Throughout the chain of production, and as a result of that we get opportunities coming through. You have the global Auto Industry in a downtrend for many years, but strong areas of growth going from the shift away to the Combustion Engine from the Combustion Engine. Banks andany of the high growth rates coming out of immersion Market Company emerging market companies. Francine is there a worry in this depressed environment you lose innovation because companies do not spend enough on r d . Evy absolutely. There is a battle going on. You have the established players like banks that have huge market share, ownership of customers, and have enjoyed decent margins for years. We are now seeing the disruptors trying to take market share away and they are spending to invest in the products of the future. Tom thank you so much for being with us. Evy hambro of blackrock. It is jobs day. And Carl Riccadonna , this is bloomberg. Tom this morning, and is jobs day in america, and america changed by a trade war. Our two americas, one fully employed and some say underemployed two Boris Johnsons , one in search of a general election and one in search of a vote in parliament. The great globally commendation. China cut rates stabilize and promote the domestic economy. This is bloomberg surveillance. Francine lacqua on the shores of lake cuomo for the second coldest day of the year. That is an iceberg in the background. What is the site diced zeitgeist this september . Francine there is loads of headwinds. Overall, it is a lot to do with the trade war. Tom the voice is going as well. We were there in march and it was freezing and it is even colder this year. We will let her get a break. Right now warmer in new york, here is renita young. Isita Chinas Central Bank giving liquidity. The pboc is lowering the required reserve ratio by one half of 1 to release 126 billion of liquidity. In the u. K. , opponents of Boris Johnson are looking for ways to outmaneuver him. The latest plan is to hold a general election. Vote one discussed a october 29. Johnson wants an earlier election but his opponents want to make sure he is blocked from taking the e. U. The u. K. Out of the e. U. Without a deal. Robert mugabe has died. He was one of the drivers of the 1970s war that ended minority rule, but his years as president were marked by political and economic chaos. He resigned in 2017. Robert mugabe was 95. Tom this is president xi speaking after the accommodation either central bank. China will do as promised in opening up. That has got to be an interesting dynamic given the out in the market yesterday off constructive trade war news. A further headline from the leader of china. Let me do a data check, jobs day data check. Interesting nuances which we will speak of. Futures up 11. Euro pretty much stasis. The chancellor of germany meeting with president xi right now. The negative Interest Rate in germany coloring the conversation. Renminbi stronger over the last 7. 12 or four days, down to yuan per dollar. Francine there was a little bit of a reversal on european bonds, mostly rising after disappointing german industrial data. Pound, trimming some recent gains. To begin a going discussion and we will speak of the American Economy and jobs day. We are thrilled to bring you bank. Hooper with deutsche you will recall our fiery conversation with david focus and focus landau also Carl Riccadonna. We can wrap up the script. You have the advantage of Michael Spencer and a Deutsche Bank commitment to china for decades. Do they have the degrees of freedom other Central Banks have . Dynamics in aislm totalitarian regime . Peter Monetary Policy is more centrally controlled in china than the u. S. The central bank is not as independent. Chinaief economist for has been telling us to expect some easing, so this is no surprise. China is feeling the negative effects of trade uncertain. Uncertainty. They are committed to keep growth in the low sixs. It take a little more stimulus. This was not unexpected at all. It is obviously driven by the central bank which is driven by prior authority. Lectureso not do mmt on friday, but once again it is Monetary Policy to the rescue. As you look at the physical structure of the world, can ofcal fiscal structure the world, can fiscal assist . Carl Central Banks are not out of ammunition but are running fiscal next downturn, will have to play a more impactful role than recent economic cycles. Francine what does the recent action from the pboc and the reserve ratio mean for the fed . Peter i think francine what does it mean for the u. S. . Peter china continuing to grow close to 6 is a plus for the Global Economy and the fed. It is a minor part of the overall picture at this point. The fed is a lot more concerned about what this uncertainty about trade affecting china is doing to the u. S. Economy. It appears more serious than we had been inking previously. Thinking previously. Chinas action on the margin, perhaps helpful. The fed has bigger fish to fry at home, given what we are looking at, particularly talking about the labor market. , if you juster look at the difference, this is a rising rate differential what the u. S. Allowing pboc to do so much. When does that change . Peter pboc is obviously feeling the pain of a rate differential and feeling the need to cut rates a bit. This is going to have implications for currencies. We have seen the rmb slide, in part reaction to the trade policy front. That is a trend that will continue. Tom we talk about an aerospace guy, smooth functions. Are we seeing the dynamics that are smooth functions or is it every banker, every nation, every corporate officer for themselves . Carl it is devolving into the latter. We having a we are having a slowing growth environment. China will have the slowest environment in 30 years. The u. S. Is slowing. Manufacturing ism dipped below 50, signaling things are slowing. Every time an economy moves at a slower speed, it is more susceptible to exogenous shocks. Tom this is really important. I know mathew lose eddie can speak everyonly month or so, but what is the dynamic of the American Economy between this odd Service Sector . What is the dynamic . Peter it could be on a Tipping Point. We are looking at a Manufacturing Sector that is clearly tom this is unusual for peter hooper to say this. Continue. Peter the Manufacturing Sector is beginning to flash red alarm signals. The ism is weak. Orders, a in export pretty good indicator of where the broader series will be going , the weakness in orders suggests what has so far been isolated to the Manufacturing Sector risks spreading over to the service side. One thing we are concerned about in the employment report as aggregate hours. In manufacturing, you have seen that dropping off and now it is spreading to the Service Sector on the hours run. If this continues and begins to influence consumer perception, and the most recent michigan surge a showed survey showed a pretty significant drop in consumer sentiment. As the fed says, the economy is holding up because consumers are doing reasonably well but we are starting to see some cracks. If we dont let up on this negative from trade policy, i think we are at risk of recession. Francine that is exactly where i wanted to go. Carl, you are here to talk about the u. S. Jobs number. Peter hooper put his finger on the thing that worries everyone the most. At what point does this trade war impact the consumer . Are the indicators going to be lagging . Carl certainly Economic Data can respond with a lag. We are seeing consumer strength. Motor vehicle sales surpassing expectations. Connecting the dots, if we are seeing a slowdown in aggregate hours worked we are likely seeing a slowdown in total paychex collect it. Collected. S slowdown,checks spending slows down. We are basically looking for the economy to slow down to about 1. 7 or 1. 8 growth. In the aerospace analogy, stall speed is about 1. 5 so we are not that far. We have hit solve stall speed and managed to avoid recession because the fed followed through with aggressive accommodation. That would be a problem if we are looking at on. 5 wrote into 2020 1. 5 growth into 2020. Question imber one get is when you tell us it is a fully employed america. Carl it is fully employed when you see significant labor inflation in the economy. There is a modest uptrend in average Hourly Earnings, up slightly from q3 last year and the year before, but not accelerating higher to a significant degree. Tom Carl Riccadonna peter hooper from Deutsche Bank. Accommodates as many expected. That will adjust and adapt with an important speech by Jerome Powell at the university of hour. In our noon we go beneath the headline data at 8 30. This is bloomberg. Bloomberg surveillance. Jobs day in america. Italy, tomcqua in keene in new york. We are greatly advantaged with peter hooper, on the Global Economy. We are speaking on the chinese economy and now we look accommodation and now we look at the American Economy. Benefits,ges and adjusted for the inflation of so many of our listeners and inflationel, not core but Service Sector their inflation. This is how people feel. Gainseel even with wage they are not there. How do you parse Service Sector inflation with blended inflation but says we are doing better than we feel . Peter prices are rising at a faster price faster pace than goods. The point here is that Wage Inflation in real terms has not done much. We were talking about how tight is the labor market. It is not that tight because you are not seeing the kind of increase in Wage Inflation that normally comes. We are beginning to see average Hourly Earnings pick up. We are expecting to remain sluggish. My sense is that this is a labor market that is approaching somewhere in the neighborhood of full and ointment full goloyment, but has a ways to to see inflation pressures build. Tom bring up the chart, morning 2004, 2010. 003, this stretch from 2011, seven years when we are not getting it done, adjusted for inflation. Is there a social policy that fixes this for the broader part of america that does not feel they are participating, can a policy affect change . Peter the policy is continuing with where we are, with low Interest Rates and with an economy we have to get rid of the trade uncertainty. If we get past that and start to grow again, with unemployment below 4 and headed lower, i think the natural rate of unemployment is lower than we were thinking historically, probably somewhere in the mid threes. All good reasons to expected to have fallen, and a world of monster. Com, we have better information flow. Labor markets operating more efficiently. We need to tighten further. Tom i have about 12 questions from dust for peter hooper and a run rate for peter hooper and a run rate below 4 . Mr. Kudlow has a different view which links supplyside economics into better economic growth, in the 9 00 hour. Bloomberg. This is bloomberg. This is bloomberg surveillance. Francine lacqua in italy, tom keene in new york. Parliament is continuing at business until it gets prorogue next week and they are trying to outmaneuver each other. Boris johnsons opponents want an election in late october. We just talk to a Boris Johnson spokesperson saying he wants an election soon and may put a vote in parliament on day. Monday. The labour side will not agree to a vote unless no deal is taken off the table. We are continue to follow the titfortat, which will get their way and parliament. Boris johnson has had not a great week. Tom we will continue to monitor those headlines. We will continue to monitor washington with cheryl baldwin. Policy. Nvolved in i would suggest that washington is policy free except for one thing, infrastructure. Will seeany chance we infrastructure from the white house and capitol hill in the coming months . Butyl hope springs eternal i would not put money on it. It has been infrastructure week every week for the last two years. Infrastructure, what is the urgency to do something here . Is everyone saying to do something but do not want to get to with or is there a story beneath it . Cheryl congress has been trying to come up with a plan, looking mostly at ways to pay for it. That continues to be a sticking point. Everyone agrees that needs to get done. It could be a bipartisan accomplishment, but is not something anyone can agree to pay for. That is why infrastructure week continues to be the longrunning joke. That coulda topic possibly be discussed at the houston debate that is coming up . You would think we would want to talk about infrastructure but it is not on the radar. Cheryl you nailed it. Policy is tough in this town. There is so much politics, so much tweeting, so many bigger issues coming to the fore that some of the traditional issues like infrastructure have been buried. Someone may try to bring it up, but it is a tough sell. Tom thank you so much. Francine, extraordinary news flow. What do you see . Thinking whether President Trump will tweet about what we saw from the pboc and the reserve ratio, whether he will put pressure on the fed to do something. I will have plenty more from world leaders. We will speak to the Vice President of turkey. We will speak about the trade war and brexit. Do not miss the Vice President of turkey 10 30 a. M. New york. This is bloomberg. I want everybody to know there are no circumstances in which i will ask brussels to delay. We must come together to stop no deal. This week could be our last chance. I dont want an election. You dont want an election. Lets get on with the peoples agenda. Right nose to the left, 321. We got a good start. Who goes to brussels on october 17 two sort this out and take this country forward. First,the bell through through get the bill first, an order to take no deal off the table. The first leader of the opposition and history of our country to refuse they invitation of an election. Like a bit like the offer of a nafta apple snow white. It does not retain the majority required under the fixed Term Parliament act 2011. Can you make a promise to the British Public you will not go back to brussels and ask for another delay . Yes. I would rather be dead in a ditch. Francine that was the week that was. We have news that Boris Johnson has won a second legal challenge over plans to suspend parliament. Three judges ruled it was not a matter for the court and it will go straight to the Supreme Court. With all of the situation is tony ahrens. Are we focusing on this prorogation too notch . Too much . If thes politicians could get together and decide what will happen with the election or no deal brexit, the legal stuff will become superfluous because there would be a resolution. The legal action is secondary to what is going on in westminster. Francine from a legal point of view, it is really incredible to see these various motion. Need forransform the the u. K. To have a constitution . Will the u. K. Be forever changed . Tony coming from an america where we have a written constitution, seeing the british wasitten constitution, i initially surprised or unfamiliar with the. Over the years i have been this job i have come to appreciate the british constitution, something that has come to fit the need of the situation. I am always leery of saying one incident requires a wholesale change of something that has been around for centuries. Tom i look at the headlines coming out as mr. Johnson speaks in the united kingdom. Party and the scottish agenda is to break up the united kingdom. Mr. Johnson is confident of getting a brexit deal at e. U. Summit. All of this is great, but do we have any more clarity into this friday and next week than six months or two years ago . Tony i think the political battle lines have been drawn clearly. Seem to bee persuaded to vote one way or another. In the long term, there is no more larry than a year clarity than a year ago. No one knows who will win the election and when that will happen. Francine certainly, no one knows. Tony ahrens from our legal team aarons from our legal team. Isita Hurricane Dorian battering the coast of North Carolina. It may briefly make landfall with high wind and heavy rain before marching up the east coast. It has been downgraded to a category one. Top sustained when is 90 miles an hour. In the bahamas, the hurricane is blamed for 30 deaths. The number is expected to rise. President trump and Emmanuel Macron discussed irans Digital Sales taxes on a phone call, agreeing it is imperative to curb actions threatening commerce in the persian gulf. They will agree to create continue negotiations on frances new sales tax. The Trump Administration is preparing to battle with california over auto efficiency regulations. The epa would revoke a waiver allowing them to be covered the administration wants to roll back Current National standards. The mastermind of what prosecutors called one of the Largest Hedge Fund Insider Trading rings in history is out of prison, freed after eight years. Hisas mostly confined to manhattan apartment for the remainder of the sentence. He was convicted on a sevenyear plot to trade insider information. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in over120 countries. I am renita young. This is bloomberg. Tom we continue our discussion of negative rates, but now on the global and American Economy. With me in new york is peter hooper. To get the conversation started, you mentioned a Tipping Point on the labor dynamic. Give us a color on the type of Tipping Point it is. Thet because we raised minimum wage and we are seeing less overtime . Peter the Tipping Point now is the elephant in the room driving this negative sentiment about the Global Economy, trade policy. Years in i spent 26 International Finance the fed put out a nice paper this week, the degree to which trade policy uncertainty has risen and the impact on the economy. We have had a couple of bouts over the last six or nine months and there has been enough to cut gdp by a full percentage point or more. That could be conservative, given the signs we are seeing in the Manufacturing Sector and the risk that spreads to consumer. The Tipping Point of the labor market is a story about which way do we go on trade policy . Tom are the tariffs folded in . Are we beginning to feel the impact . If they are not linear, is there a wallop to come . Peter over the last year, we have seen a jump from an average u. S. Tariff of 2. 5 to 6 . We have almost undone the reduction in tariffs over six decades, multilateral tariff negotiations. This is making its way in. The ones that will be most visible are those announced for december when we final when we get the final slug on consumer goods. U. S. Producers are feeling the pain now. Francine as we await the u. S. Jobs number, the World Economy is doing worse than it was, but has not fallen off a cliff like it could have . Davide today, we have the highest percentage of countries with negative pmi and as a result, on a global basis we are clearly entering into a soft if a, likely a recession trade war gets out of control. It is a loselose and the u. S. Will pay the price because we have an election next year. That depends on how much damage we will do. There is no winner in trade wars. Francine President Trump might go to the limit but as soon as as anrts to the consumer, economist, you believe he will to startt not too far a recession . Davide not too far. We went from a cold war to a trade war to a tech war. There are issues that china has been stealing ip content and refused the change policies over so many years. Sad to to say, say, stop it. President trump preferred to delay tariffs on consumers after christmas. Christmas shopping will not be as nice as it used to be. It is in the interest of everyone to be fair and frank on ip being tough, but on trade wars, putting up tariffs. Trumps election trumps election, xi jinping, not really. Level of 7. 5 e. U. Unemployment. Has europe finally escaped double digit unemployment . Europe,yes, i think despite the rhetoric, is doing ok. In particular, at this junction, you have seen capital interest in Development Christine Lagarde as the new president of the ecb called for fiscal stimulus. At a time when the ecb needs to keep Interest Rates low, while at the same time another way to , thethe competitive euro u. S. Has a very high deficit. Europe does not have it so the only way to compete on a global scale is to do what the other global nations do. If you run a deficit, you run a deficit. If you dont, you dont. Secondly, europe is thinking of investing one trillion euros in technology. Europe has fallen behind in terms of platforms and we need to catch up. As a result, there is a way for europe forward. We think brexit is adding pressure to this. Ultimately is make it or break it. Francine we will get back to that. Davide serra and peter hooper stay with us. It is jobs day. We speak to Lawrence Kudlow. Do not miss Jonathan Ferro in conversation with Lawrence Kudlow and mohamed elerian. Later, look out for the fed chair, jay powells speech from the university of zurich. This is bloomberg. Rates should not overused. Down is to tweak and go certainly very small. If it were to continue more and more negative, banks will have to reflect this on deposits and that will create a big backlash. Francine that was the former ecb Vice President speaking exclusively on bloomberg. We are back with davide serra and david peter hooper. You have followed the banks for quite some time. Which european banks can survive the move . Interest ratesg more negative could be a policy mistake. Push thel be forced to rights and to climbs. Eventually, this will have to pass through. I think eventually the ecb policy will be stopped because it will be revolt in the street. As a result, i dont think they can go further. You need to consider that right now what the european swap curve negative across the term structure, there is a massive timebomb in pensions. The average pension plan is close to 5 and there is no way you can deliver. We are creating a pension gap in the years to come. Secondly, we are creating misallocation of resources so i think Christine Lagarde did well in calling for more stimulus and less negative rates. Francine we have heard that from draghi the last several years. If you are a german bank and mario draghi cuts further, Christine Lagarde cuts further, is there a concern about the stability . Davide absolutely. They are mandated for Financial Stability and they are creating financial instability through side effects. Side effects are, you have seen companies which are borrowing at a lower rate, at a point which some companies are basically paying nothing. There is a risk for the bank that is lending. There is misallocation of resources because whoever is managing money before saying, sorry, we cant, we will give you the money back, but you will get paid negative rates in your bank account, you might take more risk. Negative rates are like antibiotics you take them for five or six days. Years,take them for two you run the risk of dying from antibiotics. Tom that gets us to a single best chart and what could be a twohour conversation. I was stunned. Of the single best chart maturity of negative debt. We have exploded out from a three and a half year run rate well over six years as we dive into negative rates. Underweightnomist the world of davide serra . Are they affecting the policy blind . Peter negative rates, it is impressive how far this has moved in europe. I agree with the questions about the effectiveness. It is a huge negative for the banking sector. You can use tearing to offset tiering to offset some of that, but this is an indication Monetary Policy, we are rummaging around at the bottom of the barrel for things to do. This is an indication we need fiscal expansion to get things going. Tom explained the urgency. Landau wasrts incendiary on the failure of this experiment. Peter it is a huge negative for the banking sector. It can have some nearterm effects positive. If you are concerned other Central Banks are cutting their rates, you need to offset the impact on the currency. Yes, it will have an impact. No question, the antibiotic analogy was a good one. This is something that is clearly having a longerterm negative impact. Europe is more dependent on banking than the u. S. The u. S. Ng sector in is struggling. Exit forhere a smooth commercial banking from chronic negative rate . Davide i think there is. The point i make is in europe as you have seen, they have been flexible over the last new years. There was a debate whether they could engage in quantitative easing and now they have done 50 more than the fed. There was a debate on flexibility of rates and we are the first ones to apply negative rate. Europeve a compromise in will facilitate Capital Market unions and there will be an expansion of the u. S. Model in terms of financing and the bond get, and there will be a reactor live. Reequilibrium. Leadership ofof the ecb in the next three months, i would expect the only tool would not be more negative rates. Let me ask about the new Italian Government. How much will it spur confidence in the market . Does it mean we will have ipos . Of anke away the threat antieuro status. Davide the last government really destroyed domestic confidence. If you see the domestic confidence of entrepreneurs, it collapsed because there was an antieuro, antibusiness, anticommission. Whatever it was, the answer was no. If you are an investor and entrepreneur and the only answer you get is no, you stop investing. Domestic investors will increase. Euro, which is basically out of the tiny minority, 70 of italians will always stick the euro because they have saving. We have a government that is proeurope. As a result, this will facilitate. If you had to tell me confidence in investments will be up next year, it is positive for italy. Francine thank you so much. We will have plenty more. We also have Hillary Clinton and later was speak to the Vice President of turkey. Bloombergthis is surveillance. Thomas in new york and i am in italy. We will have a lot of good discussions about negative rate, Interest Rates. , and thelinton is here Vice President of turkey, we will be speaking to him about geopolitics and syria. Tom it is jobs day in america. Good morning. Devices are like doorways that could allow hackers into your home. And like all doors, theyre safer when locked. Thats why you need xfinity xfi. With the xfi gateway, devices connected to your homes wifi are protected. Which helps keep people outside from accessing your passwords, credit cards and cameras. And people inside from accidentally visiting sites that arent secure. And if someone trys well let you know. Xfi advanced security. If its connected, its protected. Call, click, or visit a store today. Alix canary in the job mine. Economists expect the headline job number to be solid, while analysts worry about average work week. Speak to one of the largest payroll managers. Bonds take a big break after the biggest today rally in yields since 2009. And Investment Grade Companies Borrow 74 billion this week, the most in over 45 years. David welcome to bloomberg daybreak on this friday, july 6 6,on this friday, september jobs day. We still have dorian coming up the coast. Alix its been such a slow storm, yet the losses on a monetary basis might be less than what many had thought, which i thought was very interesting. David you can see it ranked according to other storms in history. Still 100 mile an hour winds, which is nothing to sneeze at, and they got a lot of rain. They are not through it yet, im