We have to look what equities did yesterday in the United States. Germany much better than expected. Italy, much less than expected. Tom there is a lot of Economic Data coming up. I look at this friday as a reset onto jackson hole. We have incredibly smart guest with us today. What i like about it is this is the week where we have moved on from brexit. I dont know what we have moved onto, but we left june 23 behind. Francine i just had a 30minute special on brexit, so i havent moved on, but i know markets have. Lets get straight to the bloomberg first word news. Taylor we will move on to russia. Russia is ratcheting up the threat of retaliation against ukraine. Ukraine put its troops near the region on alert and the ukrainian president says russia is looking for an excuse for further military threats. Froma seized crimea ukraine in 2014. A series of bomb attacks have impacted thailand. The government does not know who is behind the attacks. Hillary clinton says it is a myth that donald trump is on the side of the little guy. She urged voters not to believe that. In a speech in michigan, she laid out her economic plan and ripped trump. Linton she called for a he called for a loophole that would allow him to pay less than half the current companies. Half his he would pay a lower rate than met aliens of middleclass families millions of middleclass families. Taylor at the summer olympics, Michael Phelps made history. He won the 200 meter individual medley. Bilesnastics, simone lived up to several years of expectations and won the gold for all around. Aly raisman won the silver. The u. S. Is on top in the medal count. China is second, japan is third. Im taylor riggs, this is bloomberg. Tom thanks so much. Equities, currencies, bonds, commodities right now. , as francine mentioned. A trifecta of equity performance yesterday. Onto the next screen. , 11. 59. I thought it would be lower, but there it is. Im watching sterling in the negative rate value continues. 0. 10. Francine, what do you have . Francine overall, this is what i have. Stocks are taking a little bit of a pause. Pound below 1. 30. It is a little bit of a friday fun. It is actually not that much fun. That is the currency i picked. Surveillance is such a nerdfest. Francine i take it as a compliment. That is awesome. We get evidence that negative rates will be passed on. Bankis the name of the that is having you pay to give them your money. How do you pronounce that . Raiffeisen gmund. We will talk to jet black in the hour. Francine this is my bloomberg terminal. This is Consumer Confidence. Morgane line is the roy china Consumer Confidence total. What this highlights is a contrast between official and incidental data. I found a chart for it. Lets welcome Stephen Gallo. We have about a million ways we could look at today. I will start with china. That the juanned has been steady for little bit, but it is fictitious . We see the trade weighted rnb. Would we have in the backdrop for china is an increasing number of her per default. More Balance Sheet deleveraging for banks. We like rnb lower. Francine we will talk about china a little bit more later on. We have so much centralbank action. If you look at dollar, are you expecting if it hike this year . Stephen fed hike in december, Dollar Strength at the end of the year. For the time being, we think is going told grab weigh on the broad belly of the dollar, so there will be very limited if any Dollar Strength. Positioning in the dollar is very light. The dollar cant fall very sharply. September and october, were worried about. Rate hikes for the fed wont get priced in significantly in september and october. Tom i want to take a friday broader view. This is a theme for surveillance. The battle for inflation and disinflation. Is your world of foreign inflation a struggle . Is that what we are doing . Stephen i think reflation would be something Central Banks are happy with. Particularly the type that affects asset prices. Britain is going to get some fairly significant things passed through. Debt burdens in britain are relatively high. Whether or not it will last is a different story. I think you are on target. I think reflation is was Central Banks want. Inflatesstimulus also asset prices which leads to other complications. The world of macro is not over yet. I love how you say that the duration of the effort makes it evermore complex. Francine mentioned stagnant italian gdp. I think we forget what stagnant is when you talk about italy. This is real gdp with a four year moving average. This is the level of gdp. Italy has never recovered. Back to roughly 2002. 14 years ago, the level of italian gdp. Chart, the worst single worst chart in the g7. Chart is the worst when you look at italian unemployment. It makes you realize how many people lose their jobs. You look at whether matteo renzi can even stay in charge. We have eurozone, not bad figures, germany powering ahead, italy falling behind. Stephen and it is structural, italyularly in italy area is a very serious problem for the eurozone. Burden issector debt something that i dont think the Italian Economy can grow itself out of. The issue is not only one for. He ecb i think the scope and scale is really important. Oil. About the level of minsky adam sky on the state of supply and demand. From london and new york, this is bloomberg. Francine live pictures from hong kong. We are talking china, we are talking some of the credit that we are seeing. Im Francine Lacqua. Tom keene is in new york. Growth grewermany, less than predicted. It is a signal that europes largest economy may be Strong Enough to handle the u. K. s decision to leave the eu. Italys economy unexpectedly stalled. The jobless rate is above 11 . Jpmorgan as liquidating a fund focused on japan after significant redemption. Dipped to about 17 million last week. Chinas recent economic stability faltered in july. Factory outlook, retail sales fell last month. That is your Bloomberg Business flash. Francine taylor was just talking about china credit growth. What does that actually tell us . That the authorities are on top of it or that there is a problem from lending with lending . That is the big take away from todays daily should data. Deluge of data. Bait there has been a debate going on for some time. Arning of the deadly risks , they want tome hit the 6. 5 minimum growth target. We saw the industrial output slowdown. We know that the Manufacturing Sector continues to be under pressure. Francine what can you make of what we heard this week . We understand what the ultimate game for the Chinese Authority is. Is there a handle on this . I think it tells us that they are concerned and worried , but theydebt story cannot really step back from a similar side of things. We are seeing a reality check on the stabilization narrative. Factories are softer. Private sector is not spending money. As long as the private sector is not spending money, they are going to keep tipping cash in. They may want to think they have a handle on things. Mentioned the ultimate dilemma for the chinese leadership. Moving people from the rural landscape to the urban landscape. Does that dilemma still exist . Enda it is one of the biggest a lummis for them. Another biggest dilemma is making sure that they have jobs and rising incomes for them. There are a lot of dissolution migrants in china and a lot are moving back in 2015, we saw a big uptick in social unrest at factories around the country. The great urban dream in china is being challenged. Tom weve got to do a whole mother section on that. Do that. To that is brilliant. The great urban dream. Brilliant there. Stephen gallo with us this morning. I look at e. M. And we are going to talk about this later. Is their strength in e. M. Or are they tilting toward their own kind of recession . Stephen i think from a flows perspective and given the underweight position that many investors had after q1 in e. M. That the dilemmas faced by the developed world basically have triggered strength in e. M. We expect that to continue in august. It may fade during risk off, but we dont expect extreme moves lower. Francine, i think this is one of the key issues from august into september that we are debating on surveillance. It is a real mystery. Francine again, there are so many questions left unanswered on china that we seem to have forgotten about because we have not seen the volatility we have seen in january. What is your favorite play . How do you play into renminbi . Stephen china. Implied volatilities are cheap currently. It is relatively cheap to put that on at the moment. In the very short run, the dollar is not poised for any particular strength. That is a good way to play. Tom Stephen Gallo with us. In our next hour, what an interesting hour. Gideon rose, David Goldman will join us. What you want to know. The dynamics of global disinflation and deflation. Really looking forward to that. This is bloomberg. Francine welcome back. Im Francine Lacqua in london. Tom keene is in new york. This is what i picked up from my morning must listen. I spoke to the former italian Prime Minister and we talked about brexit. I asked him about his take on the italian Banking System. Thathave the impression italys Banking System is a problem, but i also have the impression that it is the anglosaxon world, that that problem is being slightly exaggerated maybe also to inadvertently seek to divert the attention from brexit and other major problems. Gallo. E stephen when you speak to italian politicians, they say it is blown out of proportion. If you speak to investors, especially anglosaxons, the word about italian banks, could italian banks be a bigger concern than brexit. It creates political headwinds and tension. From the perspective of the euro , the contagion risks, the balancing and relet urging over the years. Cause said that, it could the edb to ease policy more. Largeste of europes economies. Francine it is the first time ive seen german banks pack on negative rates. Stephen it is not as big of a negative impact on the euro going forward, but our friend friends preference is taking advantage of it to sell. Headwinds and so forth. Francine thank you so much. We have plenty more to talk about was Stephen Gallo. Is it time to invest in emerging markets . We speak to the head of research. From london, from new york, this is bloomberg, where equities are pretty much flat. I want to draw your attention to some of the currencies. If you look at kroner, it is being boosted. Ever look at some of have a look at some of the crude numbers. Pound is below 1. 30. Tom good morning, everyone. Bloomberg surveillance. It is a friday, it is august. There is a lot of interesting stuff going on. Here is taylor. Taylor the fbi has high confidence that the russian Government Act the Democratic Party hacked the Democratic Party. Thatindings underscore russia has its eyes on the u. S. Election. They believe hackers also act billionaire hacked george soros. Yesterday, 14 turkish lenders had cut their rates. The president thinks they should be about 9 . China may put more pressure on south korea not to deploy a u. S. Missile defense system. Limits on south korean exports to china are being considered. In canada, authorities confirmed a man who planned a terror attack in the names of Islamic State died in a confrontation with police. They got a warning from the fbi and went to the mans home in ontario. The man detonated a bomb that issued injured a taxi driver and he may have died from the blast, as well. The National Oceanic and Atmospheric Administration said the could be eight hurricanes before the season ends. Global news 24 hours per day. Im taylor riggs. This is bloomberg. Francine . Francine thank you so much. Emergingmarket stocks headed for a fifth the weekly advance. Fed. Really all about the jan dane. Ome we are also back with Stephen Gallo. Jan, as long as the fed does not tighten, they are going higher. If the fed surprises and hikes, are we going to see a temper tantrum . Know, we are not. Emergingmarket currencies were up versus the dollar. One is relative and absolute valuation, yields were higher than when the fed had Interest Rate at 5. 38 . That is set to continue for the next five years. People like to have their money invested in current these that go up. Francine this is based on fundamentals or just week as they need to find somewhere to put their money because they are not getting any retold returns and yields . It is a strong fundamentals story. The technical position. Everybody and his dog as left the asset class since 2013. Dips. Ensed by on you have very little downside. You have not seen the institutional money coming back in. I would argue there is very little downside and potentially a lot of upside. Tom within the apocalypse or a greatm, and you have article about the optimism online america, we have seen , we about latin america have seen this and we have a chart. I stole this from jan. Different than the previous one. I think what is really key is that the dollar has become a problem for the u. S. Economy. That began to happen around the Third Quarter last year. The u. S. Does not want a stronger dollar. The chinese do not want one. Nobody wants a stronger dollar. Once the dollar stabilizes, people start looking at relative. Ield in latin america it is even more extreme. Tell me about the gauchos. Give me something i can be a yield hog on today . Emerging markets were heavily beaten up by the taper tantrum. That led to an enormous amount lating on african equities are 36 this year. Valuations are still well below in the developed markets. It is a very compelling story. Within that is the structural shift. Korea is and that fan of capitalism in asia. Where is the fault of capitalism among the gauchos . Jan the three largest latin american countries, argentina, brazil, venezuela, are in the process of transitioning or will transition to much more technocratic reform minded governments. In argentina, the new administration has done more reforms in the First Six Months of this year than in the past 10 years. Brazil, we are about to see a very significant constitutional reform that would limit public spending. It is likely to have a change of government in venezuela in the next 12 months which should offer a more investor friendly environment. Most populist governments being replaced by orthodox and reform friendly ones. You play the oil card which is related to emergingmarket and you go into something. The kroner is being boosted by the gain in oil. Stephen i broadly agree with what jan said. As we move into september and we see pitfalls, particularly for the developed world, i think what you probably need to do now is look for opportunities to sell the more ponderable vuln erable currencies. I do believe that is the fed moves forward, there will be diminishing marginal impact. Francine do you like norwegian krone . Stephen no. Francine it is such an oil play. Stephen we have the average oil price moving up slightly. We dont have a bearish forecast, but we dont think it is going to recover very much ground. There is persistent competitiveness problems. External adjustment is handled in norway. There is a new normal for oil in the this will result bank staying very loose for a very long time. Unless the fed were to reverse policy altogether. How do you look at oil . Oil isview it that likely to be between 40 and 50. Saudis are not going to cut back if the iranians are producing. That should keep a stable around current levels. Tom what do you do with u. S. Equity prices . How does an em guy like you perceive the nirvana of the blue chips . Jan i think you can do better than chasing the consensus trade for the last four or five years. The valuations are now so stretched compared to fundamentals that it is running out of steam. At every moment in trade is that people are looking for value. This is the equivalent of 1999 and the end of the dot com bubble. Instead of buying that company with no income, i think im just going to buy utilities. That might just turn out to be the best trade youve ever done. Tom brilliant. Greatly appreciated. E will continue with mr. Gallo and our next hour, he is out with a brandnew magazine. Affairsse of foreign looks at the future of the executive branch of the United States. This is bloomberg. Francine im Francine Lacqua in london. There are loads of Asset Classes we are looking at. Negative rates have arrived in the real world. A german conference of saving it will start charging retail customers to hold their cash. Bloombergsd by economic reporter. How big a deal is this for the savers . Good morning. It is not the end of the world, but in the little savings bank at the foot of the else alps it is a significant enough thing that the taboo was broken. Namely, you dont pass on negative rates to consumers. Francine negative rates filtering into the real world. Thatis just the first bank we are going to see many more to follow . On, the longer this goes the more chances weve got of seeing banks saying, you know what, i dont see why we shouldnt past this on to the customers. Toy are not really going take their money out in cash and put it under the mattress. Tom i think this story is incredibly important for the delete ofrmany the germany the elite of germany. This is chronic. The red circle is when the yields when negative. Now you are leaving out the 10 year yield down to a negative rate. If there are more little itty ty jeff, help me out how did i do . I nailed it. Do . Are the elite going to if you have another 200 banks to do this . It is a serious problem over the longterm. Theyre having to take increasingly extreme measures. Mon