7.09 offshore. spread between offshore and onshore is particularly wide. 106.10.trading at if we look at the s&p 500, it is semiconductors, copper stocks, casinos and gaming with exposure to china, asia, and all of that area. one bright spot, tyson foods after a whopping quarter. guy: european stocks are down. they followed asia, down by nearly 2% on the stoxx 600, and it is on big volume. the german ten-year, -50. we are now -52. see a haven bit attached to the german bond market. talk over the weekend is that brexit cannot be stopped, and that we are headed for a new deal brexit. that was the message coming from the chief advisor now to prime minister boris johnson. the pound on the move as well, but coming back to flat. vonnie: china of course pushing back after president trump's tariff threat, allowing the yuan to cross seven per dollar for the first time in a decade, and instructing company to suspend imports of u.s. agricultural's. we are joined now by charles robinson -- charles robertson, renaissance capital growth chief economist. this particular move, how does it continue? how much does the selloff continue? how much do we see yields go -- go down and currencies fluctuate? charles: i've been saying that if the trade war problem intensifies, you can see that the brand, benchmark e.m. currency, hits 15 per dollar. it's done a massive move in two weeks, so it is basically already there. , worst get a weaker e.m. trade numbers, and a weaker story for the countries i care about most. vonnie: is there a tipping point if the yuan were to touch a certain level? would either side back down? charles: it's very hard to see president trump backing down. what we've done is been looking at what resolved the trade wars between the u.s. and japan in the 1980's. the trade deficit with japan just got bigger and bigger during the tariff wars. what changed the story was massive yen appreciation, from 240 to the dollar to 120 to the dollar in three years. it would be like the chinese currency going from seven to three and a half in the next three years. china is terrified of that story because they believe that eventually led to japan's blowup in 1990. but if there is a halfway house where trump calls off the trade and japane europe will agree on some sort of plaza accord for 10% weaker dollar. that takes us to a better place. that would probably be my best case scenario right now. guy: at the moment, it doesn't look like that is going to happen. it looks like we will see further escalation. you therefore wonder where this is going to go. let's talk about how china is now reacting. china looks like it's gone from trying to deal with the cause of the trade war to managing the effects of the trade war. that looks like increasingly what the beijing game plan looks like. we are seeing that in the chinese press. how does that change the nature of the outcome you're looking for? david: charles: it feels today --charles: it feels today like it is pushing it out further and further until we get a resolve. that doesn't set up a more positive outlook for 2020. you just find the little idiosyncratic stories, the egypts that don't really threaten anyone, pakistan or even turkey. turkey doesn't look quite as bad as it does usually against this global backdrop. people saying, who benefits from globally lower interest rates? that's going to be these three .ountries, pakistan, egypt think some are relatively not hurt as bad as others. guy: you talk about what could happen and what could depreciate the u.s. dollar. lawned, can i now nail another 25 basis points? should i nail lawn another further 25 at the beginning of next year? the fed's reaction function looks like it's changed, and looks like it is focusing on the trade war. if the trade war is going to get worse, i can only assume i'm going to get sequential trade cuts from the fed. charles: i agree. look at another 100 off by election time of next year, and another 25 in the next couple of months. i think that is quite likely. vonnie: with the 10 year yield at 1.75, does that take down inflation expectations with it? charles: that's going to be a bit of a tougher call. you've already got some evidence the tariffs are adding a little bit to u.s. inflation. the whole point about trump wanting these cuts of interest rates in the states is that it is not so badly affected by everything else among on and the rest of the world economy. i'm not the best person to give you an answer on that one, i'm afraid. vonnie: what about agricultural commodities? they are obviously the ones going to be immediately hit, with china asking state companies not to buy from the united states. how much does that hurt the farmland states? charles: presumably quite a lot. all we are seeing is every direction of global trade, where brazilian soybeans will be sold instead of u.s. europe ends up being another player in this. all of this redirects global trade, which takes time. it does hurt trade in the short term, and is costly, and slows down the world economy. guy: did you expect this reaction from the chinese? i am wondering whether president trump has miscalculated here. charles: we saw a little but of this the first time around when he started kicking off the trade wars in the middle of last year. you saw the chinese react. at that time, they thought they would not be that badly affected. then we saw the chinese currency appreciate again, and there was talk of the trade war ending in march, april. once he decided to re-escalate the war after that point, it has been belated, but that chinese reaction, we have seen it before. i guess it is signaling that they are not hopeful. guy: given what you said about the plaza accord, given what the president has indicated in terms of his focus on currencies, the chinese have pegged presumably the purpose of the currency channel deliberately. they know. is speaking -- they know what they are doing here. the president is speaking, so let's find out what he says about this and also the shootings this weekend. pres. trump: good morning. my fellow americans, this morning our nation is overcome with shock, horror, and sorrow. this weekend, more than 80 people were killed or wounded in two people attacks, one saturday morning in el paso, texas. a wicked man went to a walmart store where families were shopping with their loved ones. people and murdered 20 and injured 26 others, including precious little children. then, in the early hours of sunday morning, in dayton, ohio, another twisted monster opened fire on a crowded downtown street. he murdered nine people, including his own sister, and injured 27 others. the first lady and i join all americans in praying and grieving for the victims, their families, and the survivors. we will stand by their side forever. we will never forget. these barbaric slaughters are an assault upon our communities, and attack upon our nation, and a crime against all of humanity. we are outraged and second by this monstrous evil, the cruelty, the hatred, the malice, the bloodshed, and the terror. our hearts are shattered for every family whose parents, children, husbands and wives were ripped from their arms and their lives. america weeps for the fallen. , and ourloving nation children are entitled to grow up in a just, peaceful, and loving society. together, we lock arms to shoulder the grief. we ask god in heaven to ease the anguish of those who suffer, and we vow to act with urgent resolve. i want to thank the many law enforcement personnel who responded to these atrocities with the extraordinary grace and courage of american heroes. i have spoken with texas governor greg abbott and ohio governor mike dewine, as well as mayor dee margo of el paso, texas and mayor nan whaley of dayton, ohio to express our profound sadness and unfailing support. today, we also send the condolences of our nation to of mexico anddor all of the people of mexico for the loss of their citizens in the el paso shooting. terrible, terrible thing. i have also been in close contact with i-30 general bar -- with attorney general barr and fbi director wray. authorities are on the ground, and i have directed them to provide any and all assistance required, whatever is needed. the shooter in el paso posted a manifesto online, consumed by racist hate. in one voice, our nation must condemn racism, bigotry, and white supremacy. the sinister ideologies must be defeated. hate has no place in america. hatred warps the mind, ravages the heart, and devours the soul. we have asked the fbi to identify all further resources they need to investigate and disrupt hate crimes. -- disrupt hate crimes and domestic terrorism, whatever they need. we must recognize that the internet has provided a dangerous avenue to radicalize, performminds, and demented acts. we must shine light on the dark recesses of the internet and stop mass murders before they start. the internet, likewise, is used for human trafficking, illegal drug distribution, and so many other heinous crimes. the perils of the internet and social media cannot be ignored, and they will not be ignored. decades since columbine, our nation has watched this rising horror and -- watched with rising horror and dread as one mass shooting has followed another, decade after decade. we cannot allow ourselves to feel powerless. we can and will stop this evil contagion. in that task, we must honor the sacred memory of those we have lost by acting as one people. open wounds cannot heal if we are divided. we must seek real, bipartisan solutions. we have to do that in a bipartisan manner that will truly make america safer and better for all. first, we must do a better job identifying and acting on early warning signs. i am directing the apartment of justice to work in partnership with local and state agencies, as well as social media companies, to develop tools that can detect mass shootings before .hey strike for example, the monster shooter in parkland, florida had many red flags against him, and yet nobody took decisive action against him. nobody did anything. why not? second, we must stop the glorification of violence in our society. this includes the gruesome and grisly video games that are now commonplace. it is too easy today for troubled youth to surround themselves with a culture that celebrates violence. we must stop or substantially reduce this, and it has to begin immediately. hard, buthange is each of us can choose to build a culture that celebrates the inherent worth and dignity of every human life. that's what we have to do. ourd, we must perform mental health -- we must reform our mental health laws to better i defy mentally disturbed individuals who may commit acts of violence, and make sure those people that only get treatment, but when necessary, involuntary confinement. --il illness and hatred mental illness and hatred pulls the trigger, not the gun. greatpeople who pose a risk to public safety do not have firearms, and if they do, those firearms can be taken through rapid due process. that is why i have called for red flag laws, also known as extreme risk protection orders. directing theo department of justice to propose legislation insuring that those who commit hate crimes and mass penalty,ace the death and that this capital punishment be delivered quickly, decisively , and without years of needless delay. these are just a few of the areas of cooperation that we can pursue. i am open and ready to listen to discuss all ideas that will actually work and make a very big difference. republicans and democrats have proven that we can join together in a bipartisan fashion to address this plague. last year, we enacted the stop act into law,e providing grants to improve school safety and enable critical background checks for firearm purchases. the department of justice banned bump stocks last year. we prosecuted a record number of firearm offenses, but there is so much we have to do. now is the time to set destructive partisanship aside. so destructive. and find the courage to answer hatred with unity, devotion, and love. our future is in our control. america will rise to the challenge. we will always have, and we always will win. the choice is ours and ours alone. it is not up to mentally ill monsters. it is up to us. if we are able to pass great legislation after all of these years, we will ensure that those who were attacked will not have died in vain. may god bless the memory of those who perished in toledo. may god protect them. may god protect all of those from texas to ohio. may god bless the victims and their families. may god bless america. thank you very much. thank you. [indiscernible] >> -- on background checks? vonnie: president trump delivering remarks in the double medic reception room at the white house. he did not -- in the diplomatic reception room at the white house. he did not take questions. he said that the country must condemn racism and white super missy, -- and white supremacy. he then laid out a five-point plan, during which he called for real bipartisan solutions like, for example, calling on social media companies to spot red flags on people, stopping the glorification of violence, including through video games. he also talked about reforming mental health laws. he talked about red flag laws, which would allow guns to be taken from people with mental illness. he called for the death penalty on these types of acts to be delivered decisively and quickly , without years of delay. he said it is mental illness and hatred that pulled the trigger, not the gun. once again, he did condemn racism, bigotry, and white supremacy, but said that mental illness and hatred pulled the trigger, not the gun. for more, we are joined by kevin cirilli, bloomberg's chief washington correspondent. a lot of talk about unity. what were the surprising things in these were marks? kevin: first and foremost, president trump saying he has called upon the department of justice to make legislation to work with congress to enact the death against any individual who acts in mass shootings, and that that would be carried out "quickly and decisively." the president also calling on big tech and social media companies to raise more red of posts thatssue could lead to clues about potential mass shooters. third and finally, the president suggesting he would like to lump immigration reform with passing bipartisan gun reform legislation. pose of course, would significant political challenges, but either way, the president out this morning and calling on a national discussion regarding gun safety laws. vonnie: all right. our thanks to bloomberg's kevin cirilli. once again, the president speaking out about the murders over the weekend, talking about the nation condemning racism, bigotry, and white super missy, and laying out a five-point -- white supremacy, and laying out plan two's -- a five-point . we will see how this all pans out. let's get a check now on markets, guy. guy: absolutely. we are down globally on the equity market story, and trading lower on big volume. let's get the details with emma chandra. emma: we are very much in selloff territory. red across the board, across the globe. the s&p 500 down now more than 2%. the ftse 100 also down more than 2%. our cousins over in asia also closing down more than 2% today. for the s&p 500, now looking at a greater than 5% loss since that record high we saw last month. of course, it is all down to those trade tensions as that fear grips the market as china chose to retaliate over the weekend. tech is getting really hit hard in the u.s. the biggest laggard sector wise on the s&p 500. within that, we are looking at major drag, down 3.8%, down for the third consecutive day. in the prior two days, it closed down more than 2%. also, chip stocks doing pretty badly. amd down nearly 4%. take a look at deere. agricultural machinery makers not doing well either. looking at a 3% loss for deere. it is down the most since may. the trade war was supposed to help farmers in the u.s., also manufacturers, but we are seeing that perhaps that isn't really the case. meanwhile, the global bond rally continues at pace. we are looking at the index that shows little bond yields, seeing that we are now at a low since november. of 2016 that is back when -- dissents november -- since november of 4016. oft is back when -- november 2016. that is back when president trump was elected. hong kong stocks matched their longest losing streak since 1997. that's when we saw the handover from the u.k. to china. falling deeply into oversold territory. guy: thank you very much indeed. joining us from renaissance capital, charles robertson. let's talk about how this trade war ends, or where the next step is. america has a big current account deficit. tariffs don't appear to be changing that at this point in time. the president has talked about of" thethe hell out chinese. are the radical pill risk kind of solutions that investors increasingly need to talk about -- radical tail risk kind of solutions that investors increasingly need to talk about? charles: we had an article from "the washington post" last week talking about a bipartisan proposal from the senate, suggesting the fed has a third prong to the mandate. not just unemployment and inflation, but also current account balance. in order to achieve that, there should be a tax on short-term foreign portfolio flows, so anyone buying equities in the states would be taxed to try and deter money from going into the u.s. this is really unconventional stuff, and i think it would make it extremely difficult for market participants and economists like me to try to get our heads around where that would take us over two to three years. we have already seen the president go after his fed governor that he appointed and suggest that he is getting policy wrong. we've already seen a shift towards unconventional talk. the risk is that we end up getting unconventional policies as well. guy: you bring up the treasury markets. , now it appears they will use their currency market as a weapon. what about the holdings of u.s. treasuries? charles: i would be surprised of that. thatisk of doing that is they hurt themselves. that is a bit of a ballistic approach to this. i think going in for a wholesale selloff of your treasury holdings is -- you can imagine a gradual rundown such as the russians did. a shift into gold, euros on bonds, and so on. that could be possible. or into yen bonds as well. vonnie: where in europe looks attractive these days, given we are waiting on the ecb to make some concrete decisions? charles: not a huge amount. i focus mostly on emerging markets. i debate whether anyone is taking the risk on getting involved in turkey again. europe is likely to continue to suffer as germany suffers, and i think on the bond side, there's a story. on the equities side, it is harder to find the exciting stories. vonnie: our thanks to charlie robertson, renaissance capital global chief economist. more on the markets next. in the meantime, let's have a quick look at how markets are performing. some of the quick gaining companies are down. activision blizzard one of the worst performers now, after the u.s. said -- after the president said he would call on the downplay of violence in society, including from the likes of video gaming, after the shootings of the weekend. the president also talking about social media companies. those not reacting as much. this is bloomberg. ♪ ♪ vonnie: live from new york, i'm vonnie quinn. guy: from london, i'm guy johnson. this is "bloomberg markets." vonnie: several stories intersecting today. the president just having spoken moments ago on the mass shootings over the weekend. we have trade tensions escalating. the s&p is down 2.1%. we have the yuan trading very much higher than seven. offshore, it is trading at 7.0954. the 10 year yield is at 1.76. the vix is close to 22 right now. areral gaming companies slowly plummeting to the bottom of the s&p 500 after the president talked about reforming the presentation of violence in our society, after he actually condemned bigotry, racism, and white supremacy i believe for the first time. guy: absolutely. it was fascinating to listen to a very different kind of address delivered by the president a little earlier on. disruptions in hong kong are entering a ninth straight week. thousands of protesters have moved to shut down the asian financial hub, leaving traffic stalled, subways and operable. over 1 -- subways inoperable. over 100 flights were canceled earlier on. asiaore, bloomberg's chief correspondent stephen engle joins us. it looks like there were a bigger and different group of people taking part, and different tactics as well. , anden: that's right really bringing a city of 7 million plus to its knees. one, they called for a general strike. strike at work, strike at school, strike at commerce or the markets. all the while, keep the pressure on chief executive carrie lam to withdraw that controversial extradition bill, which kind of kicked off all of these protests because some nine weeks ago. as you mentioned, the flights have been canceled. the subway system has been interrupted. cases of civic disobedience, is what they have been calling for. on the other hand, you have the hard-core protesters just beyond me here on the other side of the central government offices. earlier this evening and afternoon, you had pitched battles between hard-core protesters and police. there was tear gas fired. we could hear it, pop, pop, pop, being fired. there were said to also be rubber bullets, as well. protesters moved to other parts of the city. they've adopted the slogan, "be water," a saying from bruce lee back in 1971. they want to stay ahead of the police crackdown. the police obviously want to maintain law and order. that is what the embattled chief executive carrie lam said in her press conference this morning. however, many of the protesters we have spoken to who were here much of the day said that infuriated the more because she does not supply any solution to end this nine week old crisis. vonnie: what is the endgame here? does beijing retract its forces? that is the endgame, the big question right now. the battles keep getting more pitched. they are evolving, definitely. this is a movement that is not slowing down because they feel that the government is not listening to them, and they point right to the chief executive, who again, had been quiet for two weeks until she had the opportunity this morning to speak to the people of hong kong. however, instead of offering a solution, she ran down a litany of what we all know, the different alleged crimes that the protesters have committed. that did not sit well with many of the protesters, and again, the police have been taking a harder line approach. they arrested another 82 people today. in total, nearly 500 protesters they say have been arrested over these last nine weeks. that, again, is hardening the hardline protesters. so what is the endgame? more pitched battles, more of this flash mob guerrilla tactics , and we really don't now. guy: we will wait, as you say. it is hard to see a way out of it at this point in time. stephen engle joining us from hong kong. thank you very much indeed. let's continue our coverage of what is happening in hong kong and may be link it to what is happening in china, and maybe pulled in the trade narrative. charlie robertson, renaissance capital's global chief economist, is still with us. in beijing, they are looking at what is happening with the trade story. they are also looking at hong kong, a direct threat in some anyways to their authority. these are middle-class people, well educated people, dare i say rich people protesting in the streets of hong kong, and they are bringing more and more people in. how does beijing handle that, and could this be the genesis of something bigger that china has to deal with? charles: i think so. the work we have done on democratization around the world was interesting because the country that became a democracy at its richest point was taiwan. it became a democracy because they couldn't agree on things like how to manage environmental protests. the ruling party broke apart into two because there was no one clear answer that everyone knew was right. you end up leading to greater political discourse, or varied political discourse. that is what potentially hong , a virus ofg to be democracy for china. it is going to be a problem for them to manage. guy: so is what we are seeing the startrocess of -- of the democratic process in china itself? charles: it is how difficult it one-party state to manage its independence. we have a bigger story here of trump putting pressure on one-party rule in iran, and venezuela, with oil sanctions in both of those countries, economic pressure. i don't think that is his goal in china. i think it is just about getting rid of the trade deficit. but certainly spoiling economic activity doesn't help regimes survive. vonnie: so what is your forecast for how long the u.s. can withstand all of this turmoil, charlie? charles: well, it can easily last until the next president joy election -- next presidential election, and then he's got a choice. the only thing that is consistent in president trump's views and, policies is the trade war rhetoric, which has been unchanged since the 1980's. i don't to get matters whether he wins another term. i don't think the trade war's will be over permanently, even if he calls a cease-fire at some point. in the meantime the u.s. -- some point in the meantime. the u.s. is going to have to get used to this and suffer in the meantime, possibly with eager interest rates. maybe there ends up being some escalation of the currency wars in a bigger way as well. vonnie: what would be your biggest piece of advice to clients right now? would it be to wait out all this turmoil? or, as it sounds a little opportunistic, take advantage of the situation? charles: we say to clients looking at emerging markets, do still think about those egyptian or turkish exposures, or russia if you want to go somewhere where monetary policy is orthodox, or potentially, if you want to take a little bit of risk, but not as much as the rest of the global economy, maybe pakistan if they can sort out the cash problem coming up over this weekend. guy: this is another major geopolitical -- so there's a bunch of trade wars happening at the moment. we focus on one of them, but you've got a whole load of other ones, particularly in asia, affecting south korea, japan. then you've got kashmir, india and pakistan and either side of the fence. as we focus on the u.s. and china, are we missing a bigger picture unfolding? more geopolitical instability. charles: looking at the data from the last few days, basically every company has its own issues. germany has the diesel issues with diesel cars, japan has the semiconductor. each country has problems for itself. this is what we normally spend our time thinking about, but now we overlay it with the huge trade war story which keeps on adding pressure. guy: we see data, particularly in the soft data points, the pmi around the world absolutely knows diving. they look really crunchy at this point. how much do all of those city -- all of those idiosyncratic factors add up to one story? aarles: i think that is possibility, that as some of these temporary factors fade away, we see pmi's pick up a little bit and markets get more confident. i think that is possible. right now, all we are seeing is a big draft of negative news all at the same time. it is impossible to disentangle. vonnie: is this a healthy turndown, though? we have been waiting for something to happen, and maybe this was the catalyst that knocked out a few of these bids. charles: in developed markets, there's been a case that developed market assets have been expensive for some time. when i look at the emerging-market space, this is the last thing that emerging markets need. many of them have not recovered from the 2015 hit to commodities. unemployment rates have spiraled. over 20% in nigeria, maybe 30% in south africa. we need to see stronger growth to get people back into jobs, and to see the stronger world economy benefiting more countries. in this regard, it is a real shame to be seeing this trade war having the impact and the hit it is doing. vonnie: charlie, thank you so much for all of your time today. that is charles robertson, renaissance capital global chief economist. we are seeing deterioration since the president's speech in u.s. markets. the nasdaq is down a full 3%, , and&p 500 down about 2.3% the 10 year yield at 1.75. gold futures are a bit of a haven today, at $24. today, up $24. the vix trading above 22. it is those exposed to the trade story, but also activision down afterd take-two the president talking about changing the way violence is pretrade in society. guy: european markets down on big volume today. we are seeing london underperforming. the pound has come back a little over the last hour or so. take a look at where the haven bid is today. take a look at, for instance, the german ten-year, now trading -52 basis points. remember, the euro zone deposit rate is -40. the market is getting way out in front of mr. draghi. what is he going to deliver in september? european equity markets under pressure. european bond markets strongly bid. this is bloomberg. ♪ ♪ guy: from london, i'm guy johnson. vonnie: from new york, i'm vonnie quinn. this is "bloomberg markets." let's get more on what we are seeing now with this market selloff. luke s now is bloomberg's kawa. what is the main concern from markets today? luke: certainly the policy angle related to the tragedies we've seen over the weekend. this is very much all about having 2016 flashbacks, the idea that the yuan can be a catalyst for severe cross asset contagion. there's all this talk about so many traders have never seen a rate cut or a recession. everyone in this market has seen what happens when the yuan gets out of hand and it affects other risk assets. that is really the main episode and danger we are playing today. guy: why is bad news not good news? the markets already nailed on a september from the fed, and it is increasingly looking like there could be more to come. why is the market not taking that as a way of helping out dealing with the china situation? luke: i think you just answered your own question two effect. the idea is the market, completely without bad data since trade tensions have escalated, we were still going to get a cut in september. we are still getting a cut just because of trade, so we go into a trade dispute and have to think, that global or to domestic backdrop in terms of economic conditions was even weaker than we thought, and we are still going to get these cuts. this is really the first time markets have had to say this looks like a shock coming on quickly enough and will hit the consumer expediently enough that monetary policy will not be able to effectively offset. vonnie: what is the argument for the fed doing anything? why move? luke: they've got to do something, right? as fed chair powell said in the press conference, they don't set trade policy. essentially, all they can do is take the economy they are given, the conditions they are given, and deal with it. essentially, a higher dollar probably means a lower neutral rate. also, just with the weakness you are seeing and financial conditions over the last year, financial conditions have not eased. they have tightened. the fed needs to move the dial and the other direction, and the really only have one tool right now to do it with. guy: is the central case a recession now, luke? luke: i don't think yet. however, if you see these anyffs go into effect and sign of weakness in the u.s. consumer, i think people's calls will start to shift in that direction. however, very important to remember the shift in revisions we got to gdp data. those were showing that the consumers were in better shape than we thought. there's more dry powder. we all know business investment has looked bad, but this is more reason you might be able to withstand more of that industrial slowdown. vonnie: there are assets that are really moving off the back of this, like bitcoin, which you may not have expected to be a safe haven, yet somebody clearly think that is. classic cases the of when you see the chinese currency weaken, this is a vehicle you may be able to use if you have money denominated in you one-run mb -- in you one -- iner -- in yuan ri renembis -- in yuan rim be be.n yuan rim and that is bad news, i guess. sense that the a trade war is going to become more difficult to understand from here? thus far it's been a tit-for-tat in terms of putting tariffs on this and that. lately, it is you put tariffs on this, we are going to we get our currency. i wonder if the market is therefore finding it more difficult to understand what the next step is likely to be. luke: i think it is a little bit of that, just the idea that based on the trade situation with china, there's always tit-for-tat that was always going to run its course. even in the beginning of trade. now we are getting to the end of the road, you have to deal with those practicalities. i've been talking to strategists and economists this morning that have been going, so american companies operating in china, what is the deal there? wouldn't you really going to see worse conditions for them operating in the mainland? that is a question that is definitely starting to get raised. is it tougher to understand? 10% but the main thing is hitting the u.s. consumer at the end of the month. is there anyway way to walk away from that? i think we are still worried as much about the risk in front of any other negative permutations this could take. it just something that china lets the markets do for us? luke: i think that is what distinguishes this from the 2015 scenario. it was a one-off, very clearly guided. this is essentially what we've seen whenever tariffs have been frightened and then come into effect. this is the release valve for china. to a certain extent, they do not want a currency that is two-week. that is not good for financial stability and for all of the chinese developers that have a lot of obligations denominated in dollars. that is a very important sector for the chinese economy, so finding that balance is very tricky for china. the fact that this is something the market would do if the market were able to do tells a lot about where the risks lie and the potential for the deflationary spy world's -- the deflationary spirals we worry about to materialize again. vonnie: thank you, luke kawa, cross asset reporter here at bloomberg. coming up, plenty more on how the trade war is weighing on markets. futures are in focus next. this is bloomberg. ♪ vonnie: live from new york, i'm vonnie quinn. guy: from london, i'm guy johnson. this is "bloomberg markets." let's go to chicago and the cme and get a sense of what is going on. eible joins us. give us a sense of what people are talking about down there and the order of magnitude they are seeing this weekend's events from china falling into. phil: we've got a lot of action going on in the pits today, everything from equities to agricultural, and interest rates plummeting. bonds are up over two handles. everyone is talking about trade tensions escalating and how it will impact the global economy. we do expect retaliation from president trump to increase those tariffs up to 25%. i think that is his next move. it doesn't matter where you are at right now as far as asset classes. the only one really holding up gold, moment is the silver, platinum, palladium. they are all pushing higher on this news where investors are trying to find safety. even bitcoin is up over 10% today. guy: we were just hearing about that. maybe that is part of the chinese story as well, as people may be look to move money offshore. talk me through what is happening in the oil markets. we saw a big reaction last week in the crude market. i am just wondering, does brent get down to about $50? phil: i think so, and i think wti will be the first one to cross through $50. by 2021, u.s. oil production should be at about 15.5 billion barrels a day. we are seeing demand come off, especially because of tariffs. u.s. pipeline production is also going to expand as well. the only wildcard is iran. ere, its a put in th could be somewhere in the mid 40's, on oil. 20% of that oil flows through the strait of hormuz. you could see, if these things escalate, they could try to shut that off. that could send oil back into triple digits. guy: one final quick question. rates come of the treasury come down. the yields have come down. the price is being bid. how much lower could those go? phil: it still could continue to move lower. we've seen the inverted yield curve go on for about five months now. if it travels for about six months, the probability of tipping into recession nine to 24 months out is quite high, and we are already in the federal reserve trying to prevent that. i expect one more rate cut in september and another into 2020. guy: we are going to leave it there. thanks for joining us, phil rjoible of r.j -- of futures, joining us from the cme. coming up, we will speak with hans reddick are -- hans stanley.f morgan this is bloomberg. ♪ hey! i'm bill slowsky jr., i live on my own now! i've got xfinity, because i like to live life in the fast lane. unlike my parents. you rambling about xfinity again? you're so cute when you get excited... anyways... i've got their app right here, i can troubleshoot. i can schedule a time for them to call me back, it's great! you have our number programmed in? ya i don't even know your phone anymore... excuse me?! what? i don't know your phone number. aw well. he doesn't know our phone number! you have our fax number, obviously... today's xfinity service. simple. easy. awesome. i'll pass. ♪ guy: 30 minutes left in the european trading day. from london, i'm guy johnson. vonnie: from new york, i'm vonnie quinn. this is the european close on "bloomberg markets." guy: european equity markets down hard. mining stocks coming off. big names like nestle, lvmh, companies that have exposure into china, are coming down hard. at -50 in germany. 50 in the united kingdom. we are where we have never been before on both of these bond markets. we have seen a violent search for yields and safety today. the british pound trading down again. it came up a little earlier on. the dollar catching a bid. british politics still front and center as well. vonnie: over the weekend, what we

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