-- and boris johnson. there is a lot going on in the markets we are also getting a little bit of news from italy with the new government being sworn in. can see the pound is what we are watching out for. overall, there is a little bit of a risk on mood when it comes to the markets. back to the italian government. the one that we need to watch for is the new finance minister. we're seeing the cabinet sworn in with the same prime minister, that is conte. let's get straight to first word news. china and the u.s. are holding the next round of trade talks in early october. that's according to the commerce ministry. they confirmed ministerial level talks in the next week but did not specify when. the two sides are trying to end the trade war but there is still skepticism on both sides that any real progress can be made. hong kong's chief executive carrie lam says withdrawing the extradition bill is only the first step to address the unrest in the city. she also says the decision will be made independently by the hong kong government. protesters have largely dismissed the withdrawals as too little too late and plan to continue demonstration. >> the people's government took the position that they understood why we have to do it. they respected my view and they supported me all the way. so whether it is in the earlier stages of processing the bill and suspension of the bill and withdrawing the bill yesterday, this is the same position. >> italy's choice of a new finance minister looks to be an all of branch to europe. he is a veteran of european parliament, known more in brussels man in rome. of the economic and monetary affairs committee and has for us change in the job will be negotiating a compromise with the eu on italy's 2020 budget. and hurricane and dorian is making its way up the u.s. east coast. it swept past florida and the winds has strengthened to a category three but has lost a lot of the force it brought to bear on the bahamas, where killed at least 20 people. the outer banks of north carolina could suffer from the hurricane. global news, 24 hours a day and on twitter, powered by more than 2700 and analysts in over 120 countries. this is bloomberg. francine: thank you so much. it has been another dramatic day here at westminster. boris johnson has suffered another serious defeat in from conservative rebels to block a no deal brexit they are derailing the government's strategy. later in the evening, the plan for a snap general election is also heavily defeated with the labour party refusing to back it. the offer of an election today is a bit like the offer of an apple to snow white and the wicked queen. apple or the election, but the poison of a no deal. >> you have become, to my knowledge, the first leader in the democratic history of our country to refuse the invitation to an election. speculate as to the reason behind. conclusion is i'm afraid he does not think he will win. francine: we have been following all of the drama. joining us to give us a market perspective is a market strategist at societe generale. thank you for joining us. first of all, you are boris johnson, what is your strategy? anna: good morning. he is going to address the people. the problem for tourists -- four what hehnson is that needs to unlock the chaos is a general election and that is not the people's gift to give. they play a part later down the road, but what he needs our two thirds of mps to back his election and that is not happening. they do not trust him to do what he says. at the moment, his strategy seems to be a little bit intense and yesterday, we did hear some voices suggesting it is part of the plan. this is all part of a necessary part of the party. but a prime minister just six weeks into the job being defeated three days in a row, it looks pretty cap. -- chaotic. francine: what are the chances of a general election? anna: they are increasing, but we are moving in baby steps. it is not happening tomorrow. we heard yesterday for the first time that -- the labour party does not want to. they are very focused on the timing. the noll have blocked deal brexit from becoming law, but that could happen at the beginning of next week. then, the conversation is on the date. they don't even trust boris johnson to pick a day and stick to it. so will it be before or after october 31 that seems to be key. francine: the markets were quite positive about it all yesterday after a bit of flip-flopping. what do we see/ -- see? anybody in markets is convinced there will be an election and it will be in early november. and if you can tie it up in ribbons so that you cannot undo this week, you can have an earlier. but that's ok. in the background, the nagging concern for everyone is twofold. one, what does an election actually achieve? does it unlike anything or do we get another minority government? bear in mind, the pro-no deal brexit camp, the adamant get me out of europe party, does not have a majority of anything. francine: ok so how do you unlock something? kit: you need a broader move. much in theto say meantime, the economy is rusting up quite visibly. but i think that is the concern for market, more about exactly that. how do we unlock if, without going back to another referendum , what that unlocks. but the moment, we have taken a various forms of legislation from various deals to parliament umpteen times and we are not able to get anything through. francine: if you do have a general election, is there a cutoff point by which you either have to have a royal decree for a vote in parliament? anna: the timing of all of this is up in the air. if we do get a royalist decree next week, then the house is not sitting in that causes some problems. know then that there are still going to be a lot of questions to answer about when this all happened. point, the polls don't give us any clues this will unlock anything. you have got brexit party at 10 or 11% conservative party 10 ,oints, one point above labor if have's suggests a tie up between the day, but they in themselves would not necessarily -- francine: so you can see some defections were tories adjoining the dems. i know it is unlikely compared to other countries among but they it always breakup and form new ones -- could always breakup and form new ones. kit: you could conceivably get one of two things. one is a conservative brexit , but whetheron that controls the house in practice to get policy through his hard to see. or you get one tiny up the scottish nationalists and democrats and labor that only has a mandate effectively for a referendum. and then you ask if that opens up anything else. let's have another referendum, and then what? anna: it interesting to see fraction -- fractures in the lines. francine: thank you for joining us. in the meantime, where following politics and italy. the italian government is being sworn in. we basically have a new altogether apart from conte, who was put there by five star. this is bloomberg. ♪ francine: economics, finance, politics, this is "bloomberg surveillance." let's get straight to your business flash in new york city. >> porsche has unveiled its first all electric sports car. it is a volkswagen's hope in unseating e-card pioneer tesla. the top version will be priced at $185,000. the standard version is expected to be priced below $100,000. >> we have to take initiative to start this infrastructure, and at the end, we could combine other companies like bmw, mercedes, and other brands. the infrastructure will grow with upcoming volume. >> norway's state-owned oil and gas producers filed billions in shares. it will start today as they seek to boost their share price. they have also announced production will start at its giant oil field among early. ceoa --s named a new nodea has announced a new ceo, looking to boost revenue growth. he was previously the head of personal banking at nordea. that is the bloomberg business flash. francine: thank you so much. as westminster wakes up to another unpredictable day, let's stay with our top story. following another heavy defeat for the boris johnson parliament and with uncertainty, how should investors approach the situation? kit from back to societe generale. trip datat going to that is slowly getting worse? -- drip data that is slowly getting worse? kit: we got pmi numbers that were all weaker than expected. the global trade downturn we know all about, everything else looks soggy. but it is just getting slowly worse with no momentum to anything. francine: what happens to pound? kit: not much. if you think of euro-sterling, this is where i think we will get to on no deal. 85 if we get a deal, 80 if we cancel brexit. give or take 90. data wasf the economic getting worse, i would think we are taking no deal of the table and we might drift lower. but what the data is doing is just preventing any kind of significant round. the market is very short on sterling, very bearish. francine: has a no deal risk been taken off the table? kit: in my mind, we are halfway come in terms of price. it is a what happens kind of thing. and bear in mind, that's where we are with the markets that has a huge short that we thought would start supporting the pound. francine: what needs to happen for the pound to be supported? a second referendum, that's not supported. kit: all the people who were short will have to start changing positions. likely, 49 to stay leave, that's last month, and look at what happened. we think it's a 50-50 bet. francine: what do you do with gilt/ -- gilt? if you have an economy drifting towards recession, you don't sell bonds. nobody sells bonds and a --ession that in a recession sells bonds in a recession. i was still belonged gilt rather --n guilt -- rather than rather than short. francine: let's get rid of the no deal scenario and say we will have some kind of withdrawal agreement. what happens to the economy in that scenario? kit: it drifts down because europe is drifting down. francine: a drifted down to a recession? kit: a drifted down to something painfully close. even on that case, that's my fear. if you say no deal gives you a point, justt this taking a really long time to get some sort of deal, we might have gotten to at least another quarter of negative growth somewhere out there before we have a deal. francine: are we underestimating on theacts of brexit european economy? kit:. i don't think we are. there is a lot of gloom about the european economy. but the u.k. is a huge trading partner, there's a lot of uncertainty that it is not help. it is a problem for europe. in a sense, and this something , thatn reasonably say u.s. data is as bad as the european data. yeah, but europe is growing much more slowly but they are getting worse at the same rate. the starting point matters in terms of how weak growth is. it does not need a negative shock from italy or the u.k.. francine: right, so it is exporting countries that will suffer the most. germany, italy? kit: germany is the one significant been more affected. francine: is there anything the ecb can do to help germany? kit: i'm not sure there's anything they can do to change the dial on european growth. negative rates did not do much about what another round of qe help. not doing it when it is priced in perhaps helps, but fiscal policy is the thing that can have an impact. and at an individual country level, all the more so. germany has got an account surplus that is way too big. spend some money. francine: thanks very much. kit from societe generale stays with us. up next, a european bank reshuffle. stephen engle's of commerzbank goes to danske bank. this is bloomberg. ♪ francine: this is "bloomberg surveillance." now let's talk about banks. dots bank is still reeling from the fallout of europe's biggest money-laundering scandal and has a new cfo. it is a name familiar to those who follow european banks. stephan engle has served as cfo of commerzbank since 2012. he will leave at denmark's biggest bank. let's get more from philip richards in our london office. to the latest reshuffles suggest more difficulties? >> i don't think so. i think it is the case of a new ceo and getting his own people on board. these are people he knows from the market, and as you mentioned , the former ceo has been there for seven years, so he has got experience. i think it's more of a case of chris to me and credit dots danske taking control going forward. francine: do you expect any change in strategy at nordion -- at nordea? >> i think it is positive for them. when the former ceo says it will retire, that takes away a lot of power so anybody coming in is a positive sign. and he is very well known, a former ceo. so i think that's a positive. he has also worked on the personal banking side on the retail aspect. he has struggled down in terms of wholesale banking restructuring. with that now done this could be a new great phase -- a new growth phase for them. much, ourthank you so bloomberg intelligence senior analyst philip richards with the very latest. up next, as emerging-market chairs get a pop-up will focus on south africa and growth numbers. where i live from cape town where manus cranny been having some great interviews. in the meantime, this is what the markets are doing. had a new italian government being announced. today, they are being sworn in. one person investors will be looking for is minister what kitty --minister roberto gualtieri. minister, now the new minister of finance. this is bloomberg. ♪ at comcast, we didn't build the nation's largest gig-speed network just to make businesses run faster. we built it to help them go beyond. because beyond risk... welcome to the neighborhood, guys. there is reward. ♪ ♪ beyond work and life... who else could he be? there is the moment. beyond technology... there is human ingenuity. ♪ ♪ every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. take your business beyond. ♪ francine: losing streak. boris johnson suffers his third major loss in parliament in two days. the prime minister says he will appeal directly to the public. it's better to talk. the u.s. and china say they will hold trade talks in the coming weeks. liu he plans to visit washington in early october. and taking a hike. we speak to riksbank governor stefan ingves as the bank still says they are raising rates at the end of the year. good morning, everyone. good afternoon if you are watching from asia. this is "bloomberg surveillance." let's focus on south africa. the central bank is forecasting the economy will expand this year. the country enjoyed a surprise rebound in the second quarter. cranny today, manus spoke to south africa's minister for public enterprise. take a listen. >> we certainly think that we transparency in the way we operate. verticallyl integrated company. there are parts of the world where these entities are separated. generation in south africa, although largely comes from coal generated power, we are announcing diversity of sources. as far as transmission is concerned, that is considered a strategic national effort in most countries. that is the great that enables -- grid that enables energy sources to move. each country has its own idiosyncratic way of distributing electricity at a local level. we have our own peculiarities in our own regard. >> are you behind that? >> absolutely. absolutely. that's why we are working harder. francine: manus cranny joins us from the world economic forum in cape town. what else do you learn from him? man has a major portfolio. supplies 95% of power in south africa. what we confirmed in the interview was that he intends to -- of transmission business. that is his priority. goingsence of what he is to do in that business is sort out the debt. i asked about the bondholders. that, 70%n worth of guaranteed by the government. that leaves $10 billion left by investors. he says the investors are not worried about a cut. the bottom line is that there are massive over staffing. he would not give me a number in terms of how many jobs he would have to cut. it is about moving this economy forward at a fairly tough time. they just escaped from recession in terms of the numbers. escog with -- dealing with m will determine that economic -- it is beautiful in cape town. francine: it is beautiful. do people talk about brexit of the world economic forum in south africa -- brexit at the world economic forum in south africa? >> can you say that again? francine: i was asking whether a lot of the focus, as you look at the wall of worries, i know south africa basically has to reassure investors that it is safe to go back in their emerging-market, but how much of the talk is around monetary policy and shocks that could come around brexit? are people talking about brexit in south africa? conversation,exit we had in the breakfast room in terms of ramifications and the implications, in terms of the shocks that people think could come. their perspective on what is happening in the united kingdom is a political system which they would say here is reflective of many emerging markets. it is just a lack of understanding of what is going to happen next. the lack of political stability in the united kingdom undeniably have issues. you think about the interview done yesterday with the norwegian sovereign wealth fund, which says they are committed, they are staying with the u.k.. the political hubris you are seeing their, there is a different form here. brexit is not the most pressing issue here in south africa in cape town. francine: thank you so much. manus cranny at the world economic forum in cape town. we will have plenty more from the emerging markets and south africa. first, let's get straight to the bloomberg first word news. >> china and the u.s. are holding the next round of trade talks in early october. that's according to china's commerce minister. the u.s. treasury confirmed ministerial level talks in the next few weeks but did not specify when. the sides are trying to end them more than year-long trade war but there is still skepticism on both sides that any real progress can be made. hong kong's chief executive, carrie lam, says withdrawing the extradition bill is only the first step to addressing the unrest in the city. she says the decision was made independently by the hong kong government. protesters have largely dismissed the withdrawal as too little, too late. they plan to continue demonstrations. >> the central people government took the position that they understood why we have to do it. and theyected my view supported me all the way. the earliest in stages of protesting the bill and then suspension of the bill and then withdrawing the bill yesterday, this is the same position. >> hurricane dorian is making its way up the east coast in the united states. it swept past florida. the storm sustained winds have strengthened again to a category three but has lost a lot of the force it brought to bear on the bahamas, where it. killed at least 20 people. . forecasts say wilmington or the outer banks of north carolina could suffer hits from the year came -- the hurricane. global news 24 hours a day and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am renita young and this is bloomberg. francine? francine: thank you so much. boston over brexit. it is not the first time we heard that headline. less than seven weeks after taking over as prime minister, boris johnson's brexit strategy is in tatters. a proposal to block no deal brexit easily cleared the house of commons. johnson's proposal for a snap general election was also defeated. john mcdonnell explain why labour refused to vote for him. >> we want a general election just as much as they do. i want to get rid of this boris johnson government as fast as we can but the date is absolutely key. secureset a date that our own overall policy objective of blocking a no deal brexit? francine: let's get some analysis from anand menon, the u.k. in a changing europe. still around his kit juckes from societe generale. an impasse. what needs to happen? how would you fix it? do we need to see lawmakers writ e a constitution? >> yes, it is absolutely staggering. we have a prime minister essentially in office but not in power in the sense that he cannot do the one thing he was elected to do. i am not convinced that we are at the stage of a full-blown constitutional crisis. brexit has shown us some of the vagaries of the british constitution. nobody knows what john bercow is allowed to do. i think the root of our problems are political. the numbers in the house of commons are dreadful. while the house of commons is pretty good at saying what it does not want when it comes to brexit, it has been absolutely unable to come up with a single thing on which it could find a majority on what it does want. that's why everybody is talking about the general election. people are saying we need a different house of commons. i was listening to a correspondent earlier from south africa talking about the political instability. this is not necessarily because the political system is failing. it is because we are a country that is deeply polarized. our democratic politics is reflecting that polarization. it may be uncomfortable, bad tempered. it is very democratic. francine: no matter what political party you are from or what you think, how's this this -- how does this end? it is unclear if you have fresh elections that you can break the impasse. anand: i'm not one of those people that says having an election will not make a difference. it will make a difference. they will bring in new candidates. the personnel will change, even if the numbers remain exactly the same. that matters because if boris johnson has a party that does what he says, his life will become a lot easier. the numbers might change. the beauty and horror simultaneously of a british politics at the moment is that nobody knows what happened -- what will happen if we have an election. we have six parties vying for seats in a system that is only used to two. kit: the markets want clarity. they want to know where we are going. they are looking saying, so what if there is an election? block then election theibility -- unblock possibility of -- we although at elections -- all vote at elections. can those groups hijack their parties in a position where they are in government? inthe moment, all we do markets is look at the moment and say, i don't see how you get a workable majority for a single all for a group. francine: the market has also had a lot of questions about boris johnson's stance. do we know if the prime minister would have wanted a no deal more than anything? if he were able to get that through parliament, would that be his favorite option? anand: the prime minister is desperate for it to seem like he would want a no deal -- would be happy with a no deal. brexity.to sound very weather and reality you want to be prime minister and take us out of the european union -- whether in reality you want to be prime minister and take us out of the european union with no deal, i'm not so sure. there's a lot of doublespeak in our politics. it's more true now than it has been in the past. if you list into yesterday's debates in parliament, what was both striking and slightly depressing was just the complete and utter absence of trust. trust between labour and conservatives, you could say fair enough, they never really trusted each other. and mentor note -- i've never known a time when there was so little faith. . in other politicians. francine: what's your base case now? do you think there will be an election? do you think there is an election early november or does it go another way? anand: yes, there will be an election. the timing is fundamental. we have a fixed term parliament pact. it essentially gives jeremy corbyn a veto over the date of an election. he willto decide when say, we will give you a two thirds majority. boris johnson wants it before october 31 so he can go to the people and say vote for me, i will give you brexit. after the set deadline so they can get -- wants it after the deadline. labour its best chance of winning. francine: what if there is an extension? how will the markets take it? kit: positively at the margin. if today we are priced more or less the same, we don't know if we are going to take sterling up 5% in value because we have a deal. i think what the markets are saying is an extension just keeps -- kicks the can down the road. know, are weis to staying in or are we leaving and on which terms are we leaving? another part of me thinks we have been doing this for 30 years since margaret thatcher out at the conservative party. francine: thank you both for joining us. professor ofnd european affairs at king's kit juckes stays with us. we will preview this month's fed meeting. this is bloomberg. ♪ ♪ francine: this is "bloomberg surveillance." i'm francine lacqua in westminster, london. china and the u.s. will resume talks in october. beijing officials plan to visit washington early next month to meet with their american counterparts. that comes after weeks of uncertainty and escalation with the latest round of retaliation resulting in both sides raising tariffs. still with us is kit juckes from societe generale. we have the u.s. jobs report on friday. if we have an agreement to at least not as lately trade war, does that change what we are expecting from the fed? kit: i think the fed is still trying to work out how it can deliver less than the market expects without hurting anything. i think the challenge from listening to all the people at the fed, the market is so far ahead of them and so far ahead of a nowcast of the u.s. economy. people like me will be looking for a global synchronized economic downturn. of course you will end up using more than you think. i think -- easing more than you think. the fed on average is not as far down the road towards easing. francine: is that a communication problem if there is a difference between what the market believes and what the fed will actually do? kit: yes. it's a communication problem but i don't know how we got all got to the point of being bullish on bonds. we are all getting ourselves into an intellectual pickle because yields are so low, dragged down by everything. i'm not sure it's that serious for the fed. let's go 25 basis points. there is not much inflation, was the problem? francine: if we have a resolution on the trade war and a resolution on brexit that is not a no deal, does the world economy snapped back? -- snap back? anand: it could. we have had these two recessionary cycles since the crisis. we pulled out. this feels to me as if the economic cycle is older. -- as theo me as if data cry wolf, the third time around the little boy who cried wolf was right. it's very synchronized. it's pretty deep-rooted. it's going to take a lot. i would have to say, we have had more forestalls on a workable solution to the trade problem. francine: good analogy. kit juckes, you will be invited back. coming up, boris beaten again. the losses are mounting for the new prime minister bausch of the opposition parties move forward on brexit? we speak to the liver -- leader of the liberal democrats in the house of lords. this is bloomberg. ♪ ♪ francine: economics, finance, politics, this is "bloomberg surveillance." i'm francine lacqua and westminster -- in westminster. we are talking about brexit. another heavy defeat for boris johnson in parliament yesterday. how should the country's party approach the situation? we are delighted to be joined by the leader of the liberal democrats in the house of lords, he is lord richard newby. -- how will the no deal proposal passed through the house of lords? tomorrow, the00 bill would have gone through the house of lords. francine: you want to stop brexit. how will you go about it? richard: the important thing is the bills implement. an extension will have to be filed. the prime minister at the moment is saying he will not do it. if he sticks to that, he has to accept that he will not be prime minister in october. francine: how? richard: the simplest way of that happening is that onrliament will be prorogued monday. it will be perfectly possible for emotion of confidence to go down on october 14, which the government would lose. the next day if we got our act together it would be possible to install somebody else as prime minister to act as messenger to take the letter to brussels and get that extension. francine: do you think boris johnson will extend? what does that mean? if we have fresh elections, that changes the game. araj will say you have to vote for me. richard: i don't think we will have elections before the end of october, because they would have to be triggered on monday and i don't think that will happen. if we have elections after the end of october and we are still -- conservatives are in a very big mess compared to the brexit party, but they in turn could be in difficulties depending on what our status is with the eu. once you get up beyond about a week from now, the number of variables gets so great, it's quite difficult being absolutely sure of where we are going to be. francine: i know it's difficult, but what is your base case? how do you see this playing out? richard: i think the sensible and quite likely thing is that there will be another prime minister to deliver the letter, but it won't be after an election. it will be after he lost vote of confidence. lost vote of- a confidence. once we get that, we will either have a referendum. it still gives you a decision. in a democracy, one vote is enough. referendum ore a you have an election, one of the two. my preference, my parties preference is to have the referendum -- party's preference is to have the referendum, deal with brexit. francine: who do you think will be a caretaker prime minister? richard: we have suggested some people. both of them i think will be acceptable to a majority in the house of commons. francine: thank you for joining us. from thehard newby u.k. house of lords. i am looking at pound, not as volatile as we saw yesterday. i am looking at the u.s. 10 year yield. we will be live in chernobyl for the economic conference. the results of that u.s. jobs coming up next. taylor riggs joining me in new york. we will be talking to riksbank governor stefan ingves. this is bloomberg. ♪ ♪ from the 5am wakers, to the 6am sleepers. everyone uses their phone differently and in different places. that's why xfinity mobile created a wireless network that auto connects you to millions of secure wifi hot spots. and the best lte everywhere else. xfinity mobile is a different kind of wireless network designed to save you money. save up to $400 a year on your wireless bill. plus get $250 back when you buy an eligible phone. click, call or visit a store today. ♪ francine: losing streak. boris johnson suffers his third major loss in parliament in two days. the prime minister says he will appeal directly to the public. it's better to talk. the u.s. and china announced that they will hold trade talks in the coming weeks. liu he plans to visit washington in early october. taking a hike. we speak to riksbank governor stefan ingves as the central bank says they are raising rates at the end of the year. this is "bloomberg surveillance." i'm francine lacqua in london outside parliament. taylor riggs in new york, tom keene with the day off. we seem to be back on track. a lot the focus is on brexit and if and when we will get general elections. >> great that you are outside in london so you can sort of break it all down for me, what a week it has been for you in london. like you just mentioned, within the u.s., trade talks, at least the markets certainly responding to that. this morning. . we know that we get a lot of headlines. the markets at least hoping that this time we could get a deal perhaps looking at october. francine: yes. we will have a look at that and the implications for the fed. let's get straight to the bloomberg first word news. here is renita young. >> british prime minister boris johnson has been humiliated in a series of votes in parliament. johnson will make his case for his brexit strategy in a speech to voters today. parliament has moved to stop johnson from forcing the country out of the european union without a deal next month. it has also rejected his appeal to a snap general election. the u.s. and china will resume face-to-face trade negotiations next month. there is still skepticism on both sides that any substantive progress will be made. both sides raised tariffs on sunday. the u.s. plans to add more in the next month. tona's vice premier agreed come to washington in early october. the chinese commerce ministry says lower-level officials will have talks this month to lay the groundwork. another sign that europe's largest economy is on the brink of recession. germany's factory orders fell 2.7% in july. that was worse than expected. german economy ministry said no fundamental improvement is in sight for the coming months. hurricane dorian is churning its way up the u.s. east coast, now approaching georgia and the carolinas. one forecaster calls for it to become ashore near wilmington, north carolina. it had strength into a category three hurricane with winds of 115 miles per hour. meanwhile, the bahamas it said the death toll from the hurricane is now at about 20 and expected to rise. large areas of homes are still underwater. global news 24 hours a day and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. ♪ i am an indian and this is bloomberg -- i am renita young and this is bloomberg. francine, taylor? francine: thank you so much. these are your markets. ofsee a bit of -- a bit more risk appetite at the moment. we look at the havens. you look at the havens including yen, gold, and treasuries, they are retreating in touch. european stocks are up mainly because we had a rally in asia after that american and chinese officials said they will hold some fresh negotiations on trade next month. week's.es erasing this events i am looking at pound because we are covering brexit from all angles. >> like you mentioned, it is all about the trade resolution perhaps over here in the u.s.. you see equities get a lift here. s&p 500 futures up almost about 1%. for me, it is all about the bond markets. 1.50 print onng a the 10 year. is all about that bond market volatility index. that is that move index you see with the 81 print now down to the lowest since august 12. the bond markets taking a bit of a breather today. onong dollar, weaker yuan perhaps some resolution to the trade fight. francine? francine: taylor, on to brexit. it has been another dramatic day and night at. westminster. the boers. .- westminster attempts to block a no deal brexit easily cleared the house of commons, derailing the government strategy. johnson's plan for a snap general election was also heavily defeated with the opposition labour party refusing to back it. >> the author of the election today is a bit like the offer of an apple to snow white and the wicked queen. what he is not offering is an apple or election but the poison of a no deal. >> i think he has become the first to my knowledge, the first leader of the opposition in the cratic history of our country to refuse the invitation to an election, mr. speaker. i can only speculate as to the reasons behind this hesitation. the obvious conclusion is afraid that he does not think he can win. -- will win. francine: joining us now, anna .dwards and rick lacaille there is like one million questions i want to ask about the markets but first to the policy. what are the chances of an election before october 31? seem to be moving gradually in the direction of an election. boris johnson proposed to the middle of october. he did not get the vote from the house to do that. he needs two thirds to back him. we edge closer to it. when it happens is uncertain. i spoke to john mcdonnell, the shadow treasury -- shadow chancellor earlier on. he was saying that they are still in discussions essentially with all of the other partners within that rebel alliance, the s&p, liberal democrats and others. they don't trust boris johnson to agreed date and stick to it. they don't want to risk no deal still happening even if they agree to a general election. francine: at the moment, we were just speaking to the liberal democrat leader in the house of lords. he expects the no deal bill to go through without a problem in the lords. does boris johnson have to agree to that? because he said he would not but then i guess you can remove him. .nna: it seems that the clearest path is for it to get through the lords we expected to have a fairly rapid path through the lords. that is sort of happening. on the other side, boris johnson been told he cannot have his general election but he's behaving as if he is in campaign mode already. is going to take his message to the people, as we know. will try to make this about a choice between him and jeremy corbyn. he senses jeremy corbyn is not as popular with electorate. he wants to make it about a battle between these two people. he is very much in campaign mode. we expect to hear more on that a little bit later. francine: what does the market want, apart from a resolution of some sort? is there some sort of scenario that they prefer? rick: a softer brexit. that does not look like it's in the cards at the moment. we would like a soft brexit. i think what we will get is very loose fiscal and monetary policy , almost regardless of what happens in the election. whether it is a strong majority or a coalition, we will be facing the same challenges negotiating either from a no deal back to something or into a long process with the european union. that uncertainty, businesses require government do something. >> given all the uncertainty, do you assume weaker sterling here on out? rick: sterling has rallied because people have put no deal off the table. i think that may be premature. boris johnson may be required to go to the eu and request an extension, but we don't know the ditions the eu my attached to that or if they will offer that extension. i think it is premature to say the worst is over for sterling, particularly when you think about the loose fiscal and monetary policy. we could see more downward pressure on sterling. >> talk to me about looser fiscal and monetary policy. anything mark carney can do to bail out the u.k.? rick: that's the kind of question all central banks don't like being faced with. they seem like the last resort. .he toolbox to use that phrase . is getting pretty empty i think mark carney -- is getting pretty empty. i think mark carney and the bank would do what they can to make sure we don't slip into deflation and make sure the economy has some measure of growth on they are not impeding it through monetary policy. francine: what are the chances the eu gives something at this point to boris johnson? will they just waited out -- wait it out? anna: it does not seem likely, does it? they thought this would be the way to make the eu back down. the trouble is, they have lost the majority. boris johnson has lost his majority in the house now. if you are in brussels, you are looking at boris johnson and thinking, why would i bother working anymore on a deal with this guy if he is not going to be able to pass through parliament whatever deal we reach? perhaps he is in an even weaker position that theresa may was. francine: would you be worried if we have a general election in the next 5-6 weeks that it would not actually unblock anything? rick: you could have a hung or a coalition government, which could go for a second referendum. that could be the resolution that many would see as being a way out. it could be a way out because the referendum could endorse the deal that is already there. mp's certainly don't want to endorse it. if you have a coalition government, it might be the moment where they can agree on something. >> talk to me more about how you think brussels will be reacting to this. do we expect them to weigh in? do they stay out and let the u.k. deal with their own mess, if you will? anna: we have heard from michel barnier, who has been talking about the lack of progress that has been made. brussels has set for a long time they will talk to britain more substantially about brexit but they need the u.k. to come forward with an alternative to the backstop. it is the backstop that caused lots of headaches. that is not the only problem for everybody, but for many mp's of voted against theresa may's deal, that was there big reservation. brussels has said we will come forward with alternative arrangements and discuss those. the brussels side says they don't seem to have been presented by the u.k.. no substantial progress has been made. talks have been happening at lower levels on procedure and that sort of thing but nothing substantial. as i was saying to francine, from brussels perspective, they look at boris johnson losing support and hemorrhaging mp's in the house and that does not give the europeans confidence that they are talking to the right person. that's why boris johnson has tried to call this a general election to decide who goes to brussels on the 17th of next month to talk to the europeans. remains. unknown. >> thank you. , we speak to felix hufeld. that's next. this is bloomberg. ♪ ♪ >> this is "bloomberg surveillance." let's get the bloomberg first word -- business flash, rather. danske bank shaking up its management ranks in the wake of that money laundering scandal. from cfo is coming commerzbank. they have also named a new head of wealth management and the current chief operating officer will leave. nordea bank has named a new ceo to try to restore revenue growth after years of restructuring. the biggest nordic lender has promoted its had a personal banking. he takes over immediately. the new ceo will be under shareholder pressure to cut costs and double the return on invested equity. ubs is preparing a sweeping shakeup of its investment bank. bloomberg has learned that the swiss lender will put a new management team in charge of dealmaking around the world. ubs will also combine its trading unit. the moves are a part of a bigger revamp that may automatically lead to hundreds of job cuts. that is the bloomberg business flash. taylor, francine? francine: thank you so much. we are just looking at pictures for those of you on radio, pictures of riksbank governor stefan ingves speaking right now. a little bit later on, we will of course interview him. that's about one hour and 15 minutes. what we have heard so far from the sweetest central bank is that they are sticking to their commitment to hikes but possibly at a lower pace. rick lacaille is still with us. i want to talk about negative rates and the central bank actually trying to hike when everything around them is going more dovish. will they be able to deliver? rick: they have had a few episodes like that in the past where they have hiked rates for domestic reasons and as had to be reversed. the conditions in the nordics are a little bit different. as germany slows down, they are going to look more german as the year unfolds. hiking rates at this moment is a tactic.ctic -- brave francine: i was having a conversation with a banker yesterday that was saying that we are not realizing that because negative rates are getting more negative, the search for yields mean either people go to cash or the investors look for illiquid assets or things like that. does that change the composition of markets? rick: it does not change but puts a massive supply at the hands of those who need more debt. we are seeing a lot of spread chasing. and a lot of cases, that's rational. i think the general trend of chasing spread is not a healthy one. it is solely by? -- lack of yield in -- >> we are taking a look at my chart on my terminal. it is all about negative yielding debt, at one point topping $17 trillion. is this central bank distortion or something much more scary that is going on about slowing global growth? rick: i do not think you can blame central banks entirely because they only control the short end of the yield curve. longer term,he it's really overdone. the idea that the cycle has changed so dramatically that long-term growth rate potential is so low i think is impossible. is.ink there -- implausible i think there is strong momentum. >> what do you make of negative real yield here in the u.s.? rick: again, real yields are driven by expectations of long-term real growth. thee was a time one i think new administration -- when i think the new administration said they would crank up the long-term real yield growth rate. there was a sugar rush. it has come back. real yields have come down. that is not necessarily a reflection of inflation. it's a reflection of the fact of pessimism and long-term growth rates. francine: rick lacaille staying with us. in the meantime, we are still following a press conference of the riksbank governor, stefan ingves. he is just talking now and later in about an hour he will be speaking to bloomberg. next, we talk about stability with the head of bafin, the german regulator. this is bloomberg. ♪ ♪ is "bloomberg surveillance." on francine lacqua in london outside parliament. taylor riggs in new york. a lot of the conversation is on banks, the negative rate, and what that means for banks. let's get straight back to rick lacaille. how much pressure -- we are never under pressure, but do we risk some of these banks flirting with financial instability? rick: i don't think they are flirting with financial instability at all. they have good capital ratios. their problem is many fold. you have an economic downturn, an inverted yield curve. they are priced for disaster. r-value team has found really interesting opportunities in european banks. i don't think there is a financial stability problem. >> talk to me about the price-to-book ratio. in the u.s., that number is above one. orthat a numerator denominator issue? rick: i think it is a numerator issue. what you're suggesting is the denominator, the book value is more challenged than the bank wants to admit. you have price-to-book ratio of much less than one. there is value there in terms of long-term returns. it does depend on in a sense economic conditions returning to normal. i don't know if they will return to normal in the next six months but in the long run, the european economy needs to return to a more normalized shape. >> the problem is, i think the ecb has made it clear that they are not planning to return to a normal yield curve anytime soon, as the ecb looks to cut further into zero. how do these european banks survive in the next six months if we are not even hiking, we are still cutting? rick: well, it creates a challenge in terms of the shape of the yield curve. increases theo is probability of credit issues in europe. you cannot have one without the other. you want monetary support in order that you reduce the chances of a harder recession, which has a different sort of impact on banks. i think navigating a path through for the ecb will be a challenge. the number one issue is, how they deal with deflationary pressures. francine: rick lacaille staying with us. we will have plenty more on financialulation, and stability of banks. this bloomberg. ♪ -- this is bloomberg. ♪ from the couldn't be prouders to the wait did we just win-ners. everyone uses their phone differently. that's why xfinity mobile let's 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. it's 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: this is "bloomberg surveillance." off.eene is turning to europe and german banks are feeling the pain as economic data continues to disappoint. felix hufield is the president of the german financial markets and has been outspoken on the environment for banks, urging them to tackle cost of repair for several years of low interest rates. he joins us now from the summit in frankfurt. good morning. when you look at some of the negative rates that we are seeing in europe that could be further pushed lower by the ecb action in september and october, what does it mean for banks? they have been saying it is too low, could we see it transforming into a financial stability concern for the german banks? absolutely. negative rates are already a strain on the balance sheets of european banks, german banks in particular. the relative impact on german banks is by far the highest. it goes without saying if such negative rates would be further lowered, for the revenues of the bank would evaporate just like that. the bank has to deal with that challenge. i am not sure i would put that on the level as a financial stability risk yet, but individually for whole number of banks, it is a matter of chance. francine: do you worry about deutsche bank particular? are we seeing a financial stability issue for them if we see further negative rates? well, i don't comment on individual banks. it is most certainly a challenge for all major banks in particular who have very large volume which have to be deposited with the ecb, so, yes, absolutely it does trouble all banks including deutsche bank. francine: are banks strong enough to weather the economic downturn? i am trying to understand from you about what is the turning point, how much more negative impact can they have? if we see recession, how will the banks cope with that? seeill, indeed, we already -- well, indeed, we already see risk cost, which tended to be a friend in the last couple of years because of the unusually positive economic environment where in many cases risk reserve were actually negative in the sense of enhancing the fee and no's -- pnl's. we see early signs of recession must tendencies. it is tough to see whether going into recession but most certainly we see strong impact almost all banks across the board, rightly so, have to increase the risk reserve and that is what we are seeing happening. it works like a double whammy on any particular banks balance sheet. at the same time, they have to increase risk reserve. they may have to pay a higher cost on negative interest rate with the ecb. they have to invest in new technologies and digitalization on i.t. security. so it is a pretty tight mixture of challenges the banking system has to cope with. francine: which is why in the past you said they really, really need to tackle cost. has deutsche bank done enough on cost? >> no. old banks, including deutsche bank, have to do more, that's for sure. but i suppose that it be deutsche bank, let it be most of the other banks, they have got the message. it is not just about cost in the very plain sense. it is as much about reviewing the setup of the business model. too much complexity in the new business model -- there are too many particular business minds being kept up which are really not profitable. the lesson we have to learn, these major banks can't stay in particular business lines if you don't move up to number three or five in the global rankings because you will make any profits on those businesses. there has to be more rigidity in reviewing the setup of the business models. so it is more than just doing what you do more efficiently. that is part of it. it goes deeper than that. it has to review how you do things to start with and how your business model is designed. taylor: talk to me more about that business model. do you slim down, focus on what you are really, really good at or bulk up and try to become a global player? is exactly my point. you have to be honest to your self, what exactly could do if you are local retail player you should review the range of projects you are offering. let's assume you are offering 100 products. quite possibly could serve your customers well with 50 products. let's not forget, there are many younger and new attackers and start up entrance into financial services who are exactly attractive to customers because they are simple. i don't think customers reward complexity, perse. depending on who you are, you just have to be quite focused on strengthening where you are good at and getting rid of what you can't support. francine: provisions are rising at german banks. as a because banks were just too generous with their loans? >> too generous with -- i'm sorry? francine: with their loans, in granting loans? were they giving too many loans out? >> i don't think so. is a high germany wage country. that's for sure. more byit is driven product lines, business lines. i don't think it is primarily and necessarily driven by the exact level of wages. but of course, to the extent you are really signing processes and you can create the same value with less people, you should do it with less people. but i don't think that is the lower that is the primary driver. francine: thank you, felix hufield. let's get to bloomberg first world news. renita: the u.s. and china will try to end their year-long trade war. the two sides agreed to resume talks in washington in october. that is according to china, which said the vice mayor will make the trip. but they are -- there is still skepticism there will be any breakthrough. u.s. has another round of tariffs set for october 1. british prime minister boris johnson cannot get what he wants on brexit for parliament, so today he will appear to voters -- appeal to voters. she will make a speech after lawmakers move to stop them from forcing the u.k. out of the eu without a deal next month. they also rejected his appeal for a snap general election. the federal reserve officials warn the consumer is alone in carrying the u.s. economy for now. new york fed president john williams said the problem is that other parts of the economy are slowing. dallas fed chief said if policymakers wait for consumer spending to weaken before taking action, it may be too late. africa, a surprise rebound in economic growth in the second quarter means the economy is on track to expand this year. but south africa central-bank does not have much more room to help sustain that. we talked to the general banks governor. stability is a balancey condition for and sustainable growth, but it is by no way a sufficient condition for balance and sustainable growth. we do believe from where we are -- money policy is still accommodative. renita: south africa's inflation rate dropped to 4% in july. that is the lowest in six months. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more 120 countries. this is bloomberg. francine: sterling posted its biggest increase in six months once after lawmakers voted to force boris johnson's brexit by three months. it pullback this morning as investors to just the latest round of the drama. the boe governor says there is a must no chance of intervening in the foreign exchange markets to control swings and pound. a circumstance we would intervene either for market functioning purposes, never say never on that, but i would at least on a personal basis say never for monetary policy reasons. cai -- rickqqa lacaille, how limited are the options of bank of england? first of all, you have no deal. whatf there is a no deal, does the boe do after? we would death to lessee sterling weaken at that point. we would have loose fiscal policy and a looser monetary policy. sure, they take some action, but it would be short of -- market. that might prop the u.k. economy up if you have a no deal brexit to some extent, but it will still be painful. there is a shop. they loosen. does inflation go through consumer prices? has not in the past. that is one of the interesting points about the inflationary shocks and fx rates movement in the u.k., they have not been persistent. i don't think the bank would necessarily worry about that. the number one issue is, how do we stop the harder economic downturn rather than inflation? thankne: rick lacaille, you. coming up, goldman sachs in newg fink at 6:30 york. this is "bloomberg." ♪ taylor: i am taylor riggs in new york, francine lacqua in london. tom keene is all. another story we're watching, hong kong. carrie lam said her decision yesterday to scrap extradition legislation was only the first step to addressing the city's unrest. a protesters called hong kong government to immediately meet the rest of their demands. lam resisted the demands for more action and said the decision to scrap the bill was hers and not made in beijing come although, she did at the chinese authorities backed the move. joining us. from bloomberg news, karen lee from hong kong. protesters not satisfied? >> not satisfied. this is the biggest concession that carrie lam and her government have made since protests began in early june. at the same time, there are a number of key demands that still exist, including independent inquiry into what protesters see as very aggressive police tactics in dispersing them, especially in recent weeks, which have become more violent. this could be too little, too late. taylor: strategists have been asking why this took so long. why did not carrie lam do this weeks ago? hard to know.t is by doing it a couple of months ago she very likely could have staved off some of the protests, if not a larger percentage of the protest and some of the violence we've seen a rep. people have been calling for this almost since the beginning. this is something that has rule -- fueled the protests for the last 12 to 13 weeks. at the same time, the timing of this could be too late to make the kind of mark that she is hoping it will make. francine: does beijing ever think of replacing her? i know there was never even any talk of that, but as the protests continue, what can they do next? >> it is a very opaque system. all we know is what she has told us, which is that she is not going anywhere. there have been calls for her to resign for weeks now, fairly widespread calls here in hong kong, but she says she's not going anywhere and intends to serve out her full term. we see nothing from her that would indicate otherwise. you, karen lee, from hong kong, talking about the latest in the protest. of next, we will talk to stefan ingves on the banks rate decision. we also look at your currencies. this is "bloomberg." ♪ dialogueappy that the is ongoing. -- i amade several happy with the progress so far we are making. stability is a necessary condition for sustainable growth, but it is by no way a sufficient condition for balance and sustainable growth. we do believe from where we are standing -- we don't have a lot -- monetary policy is still accommodative. those were some of the interviews. let's get back to our conversation with rick lacaille. we're talking alone about impacting negative rates and we're about to speak to the governor of sveriges riksbank, which is the story of ecb. he needs to look at domestic conditions but also be mindful of the spread between your policy in other peoples. particularly, the dynamics of the spread are going in the opposite direction, which may be a possibility the sveriges riksbank is pretty contrarian. aam not sure whether that is move that is going to be reversed at some point. francine: what is the one thing you must get right? is it the dollar call and a stellar strengthen? -- i think itngth inflationting you see in emerging countries is also coming down and down and down and that is going to compress yields throughout the world. the yields will come down and you're going to see less spread in monetary policy developments. everyone is going to come down. i do think the sveriges riksbank decision is going to be an interesting one. contrarian, i worry that is going to be reversed. you have to think long-term, not just the next quarter. taylor: full in the negative rates conversation into the world of equities. do you assume the reallocation from bonds to equities given dividend yields now look more attractive than treasury yields? well, with had a few years now where we have been overweight in equities relative to those safe havens, and we reversed that quite recently to be underweight in equities. if you look at the valuation metrics against negative yields, often they look pretty attractive. you have to keep in mind, you want growth or need growth. as we see that dissipating because of the bad soft data and now bad hard data, we are concerned we're not getting rewarded for taking equity risk. taylor: are you worried within the equity risk about the bottom line? or is their margins or sectors were you are not seeing margins as pressured perhaps as others? consumer in the u.s., very strong at the moment as williams related yesterday, we can't always rely on the consumer. but that is the only thing left. i think that is driving a lot of the valuations in u.s. equities. we are cautious about those atrvalued consumer passes the market. if we are going to go anywhere, we are going to look at value. that leads you to industrials, energy, little bit of tech we find interesting. but overall, we're underweight in equities. francine: where and when does the next recession start? 12 month? 18 months? >> i think there is no inevitability about a recession. this slowdown, which may turn into a recession, is at least partly driven by u.s.-china trade dispute dragging on. if that was resolved or partly resolved later this year, it would be too late to save 2019 but it certainly might prevent a recession in 2020. francine: if there is a resolute -- unit there is a resolution, how can you be certain it will not be overturned? how can you be sure it holds, basically? >> you can't be certain it holds. i guess the u.s.-mexico-canada agreement has helped with a few bumps in the road. i think people are putting their reputation on the line for signing up to a deal. i think it will stick. that's not to say there won't we noise around from time to time. francine: where would a shock come from? could brexit be a shock for the global economy or is it too small and domestic? >> we are experiencing a shock. andot the shock of tariffs business confidence in emerging markets and in china. brexit could be the thing that the it a bit further but shock is already apparent. look at the german data. that is a function of that shock. taylor: are you a buyer of gold at $1500 announce? >> we are. we think that safe haven is something we want to have in our portfolio. we're not overweight those negative yielding safe havens. we are quite interested in emerging-market debt because contagion risk is much lower than it has been historically. but we also like gold and we're overweight in gold. taylor: i notice you are looking strategically at em debt? do you do local? >> i think local currency is preferable because the dollar area tends to be rather crowded. in fact, in terms of liquidity, there's a greater liquidity story developing in local currency debt than there is an dollar debt. that's not to say dollar debt does not have its attractions, but weakens -- we prefer local. francine: what you do with emerging markets? >> we have the opportunity to kind of tweak from a quality perspective. we will be up a little bit in quality, so what in the most distressed parts in the least liquid parts of em. frankly, very well diversified portfolio works well in capturing the premium. thankne: rick lacaille, you so much. weing up in the next hour, are talking about brexit and the fed. a look at the markets. we are little more risk on mood to look at the havens such as gold, but also yen. this is "bloomberg." ♪ here, it all starts with a simple... hello! -hi! how can i help? a data plan for everyone. everyone? everyone. let's send to everyone! [ camera clicking ] wifi up there? -ahhh. sure, why not? how'd he get out?! a camera might figure it out. that was easy! glad i could help. at xfinity, we're here to make life simple. easy. awesome. so come ask, shop, discover at your xfinity store today. francine: boris johnson cypresses third major loss in parliament in two days. the prime minister says he will appeal directly to the public today. better to talk. the u.s. and china and as they were holed trade talks in the coming weeks. hold trade talks in the coming weeks. stefan ingves says the bank is still raising interest rates of the end of the are. good morning, everyone. this is "bloomberg surveillance." i am francine lacqua in london newtaylor riggs is in york. if you look at the bloomberg terminal, we have blog seconds your good indication on how busy our newsroom is. a lot of the focus is on the government backlash or the cabinet backlash against -- what happened in parliament yesterday against boris johnson. the other thing is negative rates. the new look at u.s. jobs back tomorrow. taylor: a great conversation on negative rates, folding that indus eight havens with rick lacaille the last hour. it comes down to the u.s. trade hoping atith china, least for some resolution in october. but as you know, these headlines, go pretty quickly. the markets hoping that turns out to be the case. yeah, a lot of the story is in the market because we had a lot of volatility over the last couple of days. now things seem to be stabilizing a lot more than maybe some thought they would. i'm looking at cable. let's get straight to your data check to see how things are panning out. if you look at the havens, a little bit of a -- actually, they are not bidding as much as they used to be will $1541.oking at gold at overall, there seems to be a little more of risk on mood certainly compared to yesterday and the day before. taylor: you are right. i hate to talk about the dow, but you are up hundred 40 points. of almost0 futures about 1% or so. that 10 year yield, this is interesting. this is the first time we are 1.50 sincek up above august 26. you have been hovering below there, so you're getting a lift up in yields and i fold that into the merrill lynch move index, a volatility gauge on the bond market. that is back down to the lowest since august 12. really sort of the bond market taking a little of a breather here today. we folded that into the dollar. it means stronger dollar, weaker yuan is refocused back to the trade fight. for me, it is all about bonds. if you come in my terminal at gtb go, we were talking about how real rates in the u.s., the white line, hovering still negative territory now right above zero as you see on the bottom part of my chart. that is phenomenal 10-year minus inflation expectations. that number very, very clear. i think that means jay powell will need to cut rates again. we will find out september 18. we will have plenty more on the great bond chart and more on brexit. joining us down to talk about brexit, whether we have a general election or what happens to boris johnson, what the eu will do is another angle we're not talked about so much this morning, our bloomberg european edwardspen anchor and wards and andreas utermann. there are like a million questions we need to figure out. what we know for sure there is not an election right now. >> much more than that, we can't really say. good morning. the political picture in the case looking incredibly uncertain. anis johnson called for election yesterday. he needs the support of parliament, two thirds, if he wants to bring that forward, and he did not get that. now he is going to go to the people. he seems to be in full election mode. he will be giving a speech this afternoon where he will be try to talk to the people and tell the people what he thinks is happening. is critical of jeremy corbyn and one to try to make us about him versus jimmy corbyn. it does include a conservative , and from even weeks ago putting together their cabinet, and the giveaways we heard from the chancellor and from boris johnson himself in recent weeks, they're fully in campaign mode and he wants to make this a choice between him and jeremy corbyn. francine: will labor only support general election? if this prime minister or another prime minister goes to seek an extension from brussels? isthe exact criteria unclear. all of these parts of the rebel alliance, of the labour party, the rubble tories, and others, they also be in conversation because they have slightly different takes. the s&p says the bill -- a general election has to be agree to before next week. talk about how they won't agree to a general election unless brussels has agreed to the extension. the labor position is they need the bill to be the u.k. law. all of that does not answer the question of when the general election will be or which side of october 31 it will fall. either side still looks possible. taylor: let me just all this over -- francine: -- the markets? sorry, go ahead. s, i can tell what is worse, the fact the market can breed of siebel a relief now that -- can breathe a sigh of relief or another three months of a waiting game. how do the markets respond? >> i think the markets will respond positively to the increasing certainty that there is no deal off the table. but that is not a given at the moment. i would have thought markets would have responded much more negatively to the trade war in the uncertainty we see in the world, but of course, with interest rates the way their position to pretty much everywhere, markets have not given despite the political uncertainty. i think this is a bit of a sideshow. francine: a sideshow, but is it not interlinked with the monetary policy? if you took away the threat of a no deal brexit or even a brexit, does it change how dovish central banks should be? because muchink so of the underlying economic damage is not dependent on that no deal scenario over the next few weeks. it is really about the uncertainty. you've heard me say this many times, what is worst is the uncertainty for markets and for people who put real money to work when they invest in industrial projects and others. we are seeing a pretty strong decline in economic activity in the service sector in the u.k., germany cannot activity is being impacted by the trade war -- impact activity is being impacted by the trade war. , theyne: some people really care about what is happening with brexit. to they want to know if a no deal is off the table -- do they want to know if there is a no deal off the table? is any chance the government says, no, we will just let it collapse? >> on the face of it, looks as if no deal has become less likely because we have seen this action taken by this rebel alliance to try to put it off the agenda. things are turning quickly in westminster them as we know they do. if we approach a general election, will the conservative party try to get more ties with the brexit party, either formally or informally, what will that look like? that could stand between forced johnson and the continuation of his residency at number 10. nigel farrell has said his greater for going in some way with the tories will be no deal becomes the policy. becomessense, no deal more likely if we go to a general election but it all remains incredibly uncertain. >> i think that is why the rebel alliance -- that is funny how it reminds me of star wars, those of the good guys. i think it is consistent they are weary of this. they want to avoid a no deal on october 31. interesting oh boris johnson has not said so far he will go to brussels, prepared to go to brussels. >> and he might say he won't go. concern assn't the soon as boris johnson goes to the eu say to ask for an extension, and the brexit party seizes on that moment on not delivering, you have to vote for us? >> that would look very bad for boris johnson. i think he said he will deliver on octobere brexit 31. this could be very damaging for the conservative party. taylor: anything mark carney can do to bailout the u.k.? >> well, i think his powers are clearly remarkable, but i'm not sure he on his own can bailout the u.k. francine: thank you rose, anna edwards and andreas utermann. coming up, common sex chief executive wolfgang fink at 6:30. this is "bloomberg." ♪ taylor: i am taylor riggs in new york. tom keene is off today. let's get the bloomberg first word news. renita: the u.s. and china will resume face-to-face trade negotiations next month, but there is still skepticism on both sides that any substantive progress can be made. both sides raised tariffs on senate and the u.s. plans to add more next month. china's vice premier agreed to come to washington in early october. the chinese commerce ministry says lower-level officials will have talks this month to lay the groundwork. another sign that europe's largest economy is on the brink of recession, german factory artist fell 2.7% in july. that was worse than expected. the german economy ministry said nope in a mental improvement is insight for the coming months. hurricane very and is churning up the u.s. east coast. it is now approaching georgia and the carolinas. one forecaster calls for it to come ashore near wilmington, north carolina. dorian has strengthened to a category 3 hurricane and winds of 115 miles per hour. meanwhile, the bahamas says the death toll from the hurricane is now at 20. that is expected to rise. large areas of homes are still underwater. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more 120 countries. i am renita young. taylor: china and the u.s. announced face-to-face negotiations aimed at ending the trade war will be held in washington in the coming weeks. this comes amid continued skepticism that any substantive progress can be made. joining us now is derek from singapore. "mistrustd for me is remains." is this time going to be any different? >> that is exactly right that mistrust does remain. these talks are supposed to be in september. now we're hearing from the chinese side they're going to be in october. i'm not sure how much i read into that little slip him a but i note it is there. the same problems that we have been dealing with between the u.s. and china, the same under mental issues between the u.s. and china have not really changed in the last several months. mistrust that has been there, it is still kind of their. getting back to the table is a positive sign. taylor: what are the key issues, soybeans? i.t. theft? >> i think i go back to the idea the u.s. considers a lot of the chinese economy built on fraud coming from the united states. infringement, the idea whether if you sign a deal that the chinese want necessarily honor it. and from the chinese side, they sort of look at washington and have expressed a little bit of the funnel -- beffudlement over the way donald trump does business and what are we going to get him to agree to an is he going to agree to something and then tweet something later? both sides don't really understand each other very well. it is a really difficult foundation on which to try and craft a deal. trying. are this is one of the key indicators we were looking for, even getting back to the table. this is progress from where we were a couple of days ago. francine: we have been here before, right? it is progress until it's not. do we really think that both sides, the trump administration and the chinese side, actually want a deal this year? vu in tradeis deja negotiations. i will tell you this. i am a big believer in looking at not happy talk, but looking at actual action. actual action was whether or not these talks happen at all. i am looking at october 1 when there are some tariffs that are supposed to increase. if those go ahead, then we are really not any further on then we have been. if they come back, get delayed, get canceled even, then that is a really big step. there are some indicators we can look at to see if we have actually done progress here on the ground. is other thing i point out hong kong. the trump administration said it was going to be a lot harder to get a deal if beijing reacted proteststedly to the ongoing in hong kong. with carrie lam pulling the extradition bill and saying it is coming off the table entirely, maybe if the trump administration had said that was up when possible escalation, it would be a fair inference to say that at the very least to prevent further escalation on that front, so that has to be seen as a good sign for this talk. as you quite rightly note, we are the business of not just haven't talk, but results. we have yet to see a lot of actual results from the u.s. and china in trade talks. .rancine: thank you so much let's get back to andreas utermann of allianz. alltarted the show saying the market cares about is what the central banks do. how much do use the central banks care about what the u.s. brings? >> i think they care probably quite a bit for a number of reasons. firstly, these type of trade directions increase -- disruptions increase uncertainty. they will have an impact on the economy, hence it must be thinking about what that means. i don't think was mentioned earlier, there are no more unt ariffed chinese goods. china has been granted a currency manipulator. it all has an impact. they would rather not have that. i think the central bankers and private have been pretty clear about that. francine: what does it mean for the u.s. consumer? >> very good question. point the wase electoral calculations will start to play a role, namely if it really is concerned the u.s. -- is makingetting more expensive purchases of imports, therefore consumption spending is slowing. leasthat make the u.s. at tactically more ready to do a deal to alleviate some of those pressures and get the markets up? taylor: andreas utermann of allianz global partners stays with us. coming up later today, kevin .ohnson, starbucks ceo this is "bloomberg." ♪ francine: this is "bloomberg surveillance." we're just getting some breaking news on brexit. it feels significant because it is an mp but also the brother of boris johnson. just minutes ago, joe johnson saying he has resigned as a u.k. minister an mp. he was the education minister. what is significant in all of this is this comes after three crushing defeats and parliament of boris johnson. we will have plenty more on this throughout the day. also looking at headlines. on my app they can alert me to what others related to brexit are saying. what i'm hearing from the spokesperson of boris johnson is they will continue on this and would bring you the latest. i'm struggling to see them with the light but we will get you those headlines in a second. we are back with andreas utermann of allianz global investors. -- you are a market participant right now. i know you say brexit does not really change the name or the game of central-bank policy, but where do you put that in your wall of words? from aink it is high up perspective of the rise of global populism, the undermining in the attack on parliamentary democracy and all of those topics. from the bark it perspective, other -- from the market perspective, other than the geopolitical perspective of the trade wars and the like, the other big topic is how is the real economy doing and what does that mean for earnings? i think that is what our economists and strategists are looking at. at the moment, it does that look so hot. if you take the fact that central banks assertive run out of ammunition and now looks like earnings are slowing down, will that finally, finally lead to more market volatility? francine: but what kind of market volatility? one of the things i've been hearing is a lot of investors looking for yields looking to liquid assets. maybe invest in private equity. that changes were risk. >> but yields have been compressed significantly and there is a limit. it is not so much of a demand problem, more of a supply problem. that is why these yields and returns have been compressed. ultimately, the wall of money is going to have to be liquid. you know him in the last in the markets were really under pressure it was because of interest rate action on the upside. i think of earnings slow down significantly, they will come under pressure again and we will have to see whether the low interest rate environment props them up again, which would be probably my assumption. taylor: wonderful. andreas utermann of allianz global investors, you will stay with us. later today, christine huber at 3:30 p.m. in new york. talking all things global equities on the hope of what could be a resolution in the u.s. trade fight. but then again, we have heard those headlines before. she will give us the latest. this is "bloomberg." ♪ francine: this is "bloomberg surveillance." tom keene is off. we have that resignation, which i'm certain will send shockwaves across westminster of jo johnson, boris johnson's brother, saying it is time for others to take on my roles as mp and minister. he tweeted that about five or six minutes ago saying it has been an honor to represent his constituency but in recent weeks he has been torn between family loyalty and the national interest. the backstory, i know everyone has been following this, i imagine everyone has been following this, but in the fact that last five days, stay government policy basically sacking anyone who votes against government policy. that explains the term jo johnson is gone through. headlines from the spokesperson of boris johnson, and another fight going on with the government including boris johnson saying the talks with the eu have been going very well, constructive. in the chief negotiator saying, well, maybe you're overestimating a little bit. , spokesperson for boris johnson saying, no, no, they have been going better than expected. taylor: i'm just glad you are there to break it down because, frankly, i woke up this week and all of the brexit news sort of congress all by surprise. there's certainly a lot of drama. thankfully, you were there on the ground to break it down for us. the meantime, let's get to bloomberg first word news. renita: the u.s. and china will try again to end the year-long trade war. they agreed to resume talks in washington in october according to china which says the vice premier will make the trip. there is skepticism in the breakthrough will happen. both sides imposed tariffs new on sunday. federal reserve officials warned the consumer is alone in carrying the u.s. economy. the new york fed president john williams said the problem is that the other parts of the economy are slowing. dallas fed chief robert kaplan says if the policymakers wait for spinning to we can before taking action, it may be too late. in south africa, surprise rebound in economic growth in the second quarter means the economy is on track to expand this year. both south africa -- but south africa central bank does not have much room doubt sustain that. we talked with the central bank's governor. >> price stability is a necessary condition for balance and sustainable growth, but it is by no way a sufficient condition for balance and sustainable growth. we do believe from where we are standing that we don't have a money policy is still accommodative. renita: meanwhile, south africa's inflation rate dropped to 4% in july. that is the lowest in four months. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more 120 countries. i am renita young. jetblue shares yesterday fell the most since january. the airline cut their outlook on soft demand. revenue per average seat mile is one of those to gauge. guy johnson spoke with the company's coo. >> associate with puerto rico softness following some of the government disruptions, along with about one third -- three quarters of a point within a two thirds is the impact of dorian. jetblue has more than 600 50 flight cancellations the last week. the remaining third, we describe it as microsoft us. when you dig into that, what we're seeing in terms of demand trend, solid demand and the domestic market. that includes our international footprint as well. remains solid. we are pleased with where it is headed, consistent with what the other carriers in the united states are seeing. but we felt based upon early trends in may, june, july, we expected 1% more in terms of increase and we just did not see it. you are saying you did not see any clearly defined trend in terms of demand and the united states. >> correct. jonathan: where specifically in the international space? based.dly there's not any specific pockets as we look at international. we mention puerto rico, caribbean. leisure in the dominican republic has had certain challenges and haiti has had some challenges and as though fully bounced back. as we think about overall demand domestically strong international we have some pressure points. but that is fairly common in that part of the world. jonathan: in terms of your expectation going forward from here and what the guidance looks like, do expect that u.s. demand a story to hold up at this point? beyondo not guide out this quarter. i want to because shows. i can tell you what we see, which is we are pleased with how septembers tracking and we hope that carries into the fall timeframe. what we're seeing is the same with consumer strength? >> that is a question no wish anyone of us could answer with a degree of certainty. ist we're seeing right now consumer demand strength in the airline industry domestically is strong. we are optimistic that trend continues into september. jonathan: he of a big leisure footprints -- you have a big leisure footprint. what about business? large leisure footprint. as we look at leisure and business, we're seeing fairly consistent demand story. jonathan: you're going to be joining us in the united kingdom very shortly. you're going to be operating a transatlantic route. the big question everybody wants an answer to, where my going to get on a jetblue plane here in the united kingdom? you talked about a range of airports. how close are you to making that decision? >> we are making progress with regards to the potential airport. we think the jetblue experience could work well at any number of airports and it could potentially work well at a couple of the airports. we're working to the regulatory progress -- process and working with our partner airlines. we think the jetblue experience as it comes to london could work very well at any number of airports. now let's get back to some of the negative rates in europe. final's bid and a stimulus is being threatened. the biggest push back in his eight-year reign. this just before christine lagarde takes over the central bank. for more on the european central bank, where back with andreas utermann of allianz global investors. when you look at what president draghi can do, will he do as much as he can so he gets a couple of months for christine lagarde to evaluate the situation before coming in with either more negative or something off the charts like buying etf? >> i think the four central -- i think before the central banks in more unconventional measures, and there are plenty one can imagine, the earnings to be a reassessment of the effectiveness of the quantitative easing policies in conjunction with what can fiscal policy do doubt the central banks reach their inflation target. that is the underlying issue. inflation isn't picking up. this is where miss lagarde comes in. i think she is very experienced, very well connected. i think these arguments will have to be made particularly in europe and with respect to germany. there is some movement i detect in germany toward looser fiscal stance. francine: the last time germany -- i think -5% when the was a recession. why would this time be different? >> maybe different political environment in germany. i think the mood is shifting. i think there's more questioning of this hard austerity. it is procyclical. that is not helpful. this is where mrs. lagarde has an opportunity to come in as a fresh face and make these arguments away from the public glare and try to shift the consensus in the eu or the eurozone. taylor: what is the bigger problem for the ecb, low inflation or slowing growth? one endcb only has date. low inflation. there probably will take the view if we get inflation, we're going to get growth. taylor: just in the last hour as we have been speaking, morgan stanley economists in europe have come out and reduced their expectation for the qe program as the risk that any new qe could be delayed. why the shift? >> difficult to say. i think francine mentioned earlier there is significant theback, particularly from bundesbank. maybe that is changing perception. maybe there is data coming out that we don't know yet that means in my bishop. i don't know. it is speculation. francine: the big worry is that we would enter a deflationary environment, right? have we gotten rid of that worry? >> i don't think so. i think bond yields will tell you know. francine: bond yields tell us a lot. >> underlying inflation is very weak. i've also said on the show in previous years that perhaps we worry too much about disinflation. francine: andreas utermann, chief executive of allianz global investors stays with us. .oming up, david bloom i know he will have a thing or two to say about south african rand and the pound at 11:00 a.m. in new york, 4:00 p.m. in london. this is "bloomberg." ♪ francine: this is "bloomberg surveillance." we're looking at brexit, the u.s. jobs data tomorrow. overall, looking at this big wall of worry. it is a good snapshot of things that investors worry about. brexit, hong kong protests, monetary policy, treasury yields, a couple of other things including the u.s.-china trade war. andreas utermann, if you folded into the big debate we have had, where to go from here? yields are,at where where treasuries are, talking about u.s. treasury possibly intervening on u.s. markets, where are we in 12 months from now? it is difficult. for regular investors, it is very, very tough. what most people are doing is according cash because the returns in the money they have are very little in their thinking about retirement thinking, "i need more money." that is not good for consumption. what professional investors can do is go private market. really try to go early stage private equity angel investing, that sort of thing because businesses are being created. fair is probably a still risk return rewards, and that is what a lot of people are doing. talking to a large, large pension fund here in the u.k.. the allocation and off public markets securities was over 50%. francine: when you look at portfolios -- >> many of our clients. francine: what does that mean? >> we don't go cash. but many of our clients are very, very interested in continue to be very interested in nonpublic market securities, that is why we have expanded their significantly. -- there significantly. break came out earlier this week and was talking about a bubble that is brewing in passive investing. do you believe as well that there is sort of a bubble of the next big short, so to say, is in passive investing or du still like it -- or do you still like it? >> it is not a question of me liking it or not liking it, but i don't think there is a bubble in passive investing. what worries me and other market participants is potentially people overestimate the and most in etf's the market today are passive, and maybe that is what he was referring to. i think there are some people who probably could be trapped for a period of time if the market dries up, but i don't think one can describe investing in liquid assets is a bubble. there is more of a likelihood of a bubble in nonfinancial debt. nonfinancial debt for use --porations is the highest u.s. corporations is the highest it has ever been. that is surely a consequence of the low interest rates we're seeing. taylor: how quickly are we seeing a race down to zero in fees given the rush in passive investing? >> well, it is been pretty significant. as you know, from many of our active strategies, we have gone to offering clients who are interested pretty much match the passive etf and move toward performance and limit model where we make money when we perform. that is difficult and challenging, but i think that is how this has been down for us and i think that will happen for much of the market as well. francine: thank you so much, andreas utermann, chief executive of allianz global investors. coming up, the two more from politics and we also look at commodities. program 1:00 p.m. new york, six a clock p.m. in london. this is "bloomberg." ♪ taylor: i am taylor riggs. tom keene is up today. francine, we are getting a lift in the equity markets. i wanted to show you what u.s. futures are doing. we are up almost 1%. you certainly have tech in the small-cap stocks leading the way. the most sensitive to any headlines that we get from trade, so very positive sentiment. for me, the key thing is we're getting the tenure above that 1.50 level, which we had not seen since august 26. that means the move index, which is a measure of volatility anhin the bond market, has 81 print. your cigna bond market really catch a sigh of relief. -- you are seeing the bond market really catch a sigh of relief. , i mention. the president is happy about that. still with us is andreas utermann of allianz global investors. i talked a little bit about the central banking environment. we talked about the swedish central bank still in hiking cycle, the ecb pulling back a little bit on qe announcements. what does the fed do now as we approach the meeting in september 18? >> it is going to get increasingly difficult for the fed. it has been under fire from the president. we are nearing the next election cycle. so whatever the fed does come it is going to be incredibly politicized. very, very difficult to predict. my guess is it will come down ultimately to hard data and their interpretation of the trade up between wages, inflation, unemployment. but i don't think there's enough the fed willst move significantly in the next meeting. taylor: is the fed too market-dependent? think they are principally data-dependent. of course, the marketplace a role. months, then the 12 back in a blaster, has been relatively benign, even though volatility increased. i don't think the market today plays a significant role in the liberation of the fed. it is more data-driven. francine: do they have a medication problem? >> potentially, but it is made much more difficult by the fact they have incoming all the time. yet to see not to respond to it but at the same time get your message across. it is difficult. francine: if there is one thing you are to get right, what is it? is it your inflation call or just or dollar call? think the fed will have little influence in the short-term on the dollar. inflation is the key variable now the central banks need to get right. increasingly over the past 10 was nothatever they did working. it does not work for 25 years in japan. 10 years plus were inflation targets have been missed in the major economies outside of japan. and that is going to be an increasing concern, so i think that has to be front and central of the central banks. how to get inflation up. one thing discussed is move toward an average target. that would give the potential to have higher inflation in the short-term. i don't know whether that is effective or not, but something needs to change, in my view. taylor: you mentioned the strong consumer. is the strong consumer enough to offset weaker business sentiment and weaker manufacturing? i don't think ultimately it willbe because the latter have an impact on consumer sentiment. i think, as we discussed earlier, so many imported goods are hit with tariffs. it will hit the consumer's pockets and disposable income as a result of that will start to be more pinched. slowdown.ee the that has been going to influence policy at the likelihood of a trade to with china, remains to be seen, but pressure on president trump and election chances. francine: are we getting closer to helicopter money? oh, come on. i saw a couple of -- >> i hope not. that would really give -- that would undermine the credibility of fiat money significantly and i think of rise to much stronger goals but also would make the alternative of cryptocurrency much more attractive. i hope that is not going to happen because that is really an extreme measure that essentially means that central banks have run out of options. francine: the central banks, are they coming to limit what they can do and could -- i am hearing such crazy -- i'm not crazy, but extreme their ease. -- theories. everyone can see the problem, but no one can figure out how it ends. the central banks, stepping out -- not >> as a said earlier, the central banks alone cannot fix it. it is a global phenomenon. there are too many things impacting the effectiveness of central banks and fiscal policy for the fiscal banks alone to build a fix it. taylor: what is the risk we talk ourselves into recession that the only thing to fear is the fear of recession? that is always a risk, as we all know. economists like to talk about animal spirits, and that is why economists -- including myself -- are challenged to predict. the recessions kind of come out of nowhere. that said, it has been a very had time since we've recessions and the major economies. therefore, just the current cycle is very long in the tooth. therefore, it does had not need animal spirit still run its course but just generally. francine: thank you so much, andreas utermann, chief executive of allianz global. this is "bloomberg." ♪ ♪ alix: the u.s. and china will hold trade talks in october, while china lays the ground for more stimulus. u.k. prime minister boris johnson's smack down by parliament. risk on big nights for a second day as a -- for a second day. is it trade, central banks, or geopolitical tension leading the day? welcome to "bloomberg daybreak." i'm alix steel. david westin is on assignment. froming on those gains yesterday, sb futures up by 9/10 of 1%. semis,hings like autos, industrials. the dollar is weaker for a second day in a row, providing some much-needed relief. if it's risk on, you are selling bonds. yields move higher yet.

Related Keywords

Norway , New York , United States , Georgia , Hong Kong , North Carolina , United Kingdom , Washington , Florida , Beijing , China , Boston , Massachusetts , South Africa , Cape Town , Western Cape , Togo , Brussels , Bruxelles Capitale , Belgium , Haiti , London , City Of , Germany , Puerto Rico , Rome , Lazio , Italy , Denmark , Dallas , Texas , Bahamas , The , Italian , Britain , Chinese , British , German , American , Theresa May , Nigel Farrell , Bloomberg Francine , Commons Francine , Anand Menon , Stephen Engle , Bloomberg Taylor , John Bercow , Bloomberg Alix , Philip Richards , Richard Newby , Taylor Riggs Tom Keene , Hong Kong Carrie , Boris Johnson , John Mcdonnell , Dorian Jetblue , Newyork Tom Keene , Anis Johnson , Commons Johnson , Karen Lee , Jeremy Corbyn , Tom Keene , Carrie Lam , Lagarde Hasan , Stephan Engle , September Jonathan , Taylor Riggs , David Westin ,