francine: a hike in 2016. stanley fischer says the central bank is close to meeting its targets. investors look for more clues at jackson hole this week. india's central bank names its new governor, a quiet commentator with a hawkish view. can you pick up where rajan left off? rbs as negative interest rates -- sir howard davies. this is bloomberg's "surveillance." tom, we have a lot of market is. look at dollar, stanley fischer the only game in town today. then we have to look at what governor kuroda said.

friday, theellen on first real day of summer. if you get all the way to august after the drama of brexit, where i walked in and said, what's the news? we will drive that forward to chair yellen on friday. francine: we certainly will, four days to go. let's get first of the bloomberg first word news. taylor: tokyo has been hit by a typhoon. more than 300 flights have been canceled, stranding thousands of passengers and more than 100,000 homes are without power. the japanese government is warning of possible landslides and damage from strong waves. the leaders of germany, france, and italy will meet at sea today to discuss brexit, economic growth, and the threat of terrorism. on the merkel, france le monde, and -- and another of their concerns is the eu dealing with turkey to send migrant flows being in jeopardy because of the

attempted to. -- attempted coup. members of the opposition labor party began voting on the leader. incumbent jeremy corbyn is favored to retain his job despite losing the support of many members of parliament. have accuseders him of failing to keep the u.k. in the eu. says the u.s. position on -- is overshadowing the country's strategic partnership. he plans to complain to joe biden when they need this week. u.s. has said it needs evidence that he did something criminal. and the summer olympics in rio are over, and japan's prime minister, shinzo abe, dressed as super mario, was at the closing ceremony for a preview of the 2020 summer olympics, held in tokyo. the final medal count has the u.s. winning 121 metals, 46 of

them gold. china at second, great britain and third. global news, 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. i'm taylor riggs; this is bloomberg. tom: thanks so much. let's get to equities, bonds, currencies, commodities. a pretty dead market. you can see it there, euro-dollar. nymex actually a little off the bid. on to the next screen. , dollar index a little bit of strength. we make note of that would begin weakness. francine: i don't want oversell it, but the dollar is rising. the fed outlook is impacting emerging stocks. we see a little bit of pressure on commodities. overall i wanted to show you pound-euro at 0.86. there is one we don't look at

often, but i want to put in there -- india's rupee. they did name a new central bank governor to take over, and china's yuan at the weakest among. tom: i do not make a chart, thank you. i will try to show the depreciation we have seen in the indian currency. let's look at the most important chart of the week. this is the great unspoken. -- we have the great moderation, 1994. so howard was charming, with a little bit of leveling. vedanta 2000, less charming. then we got to the zero bound we have been. this shows the unorthodox economics that i would predict is an unorthodox jackson hole. francine: you know what, i like the fact that you pick that. i picked something similar, but

on a much shorter term. this is my bloomberg terminal, the fed signals we have had over the last five days. the dollar, the first box, all the way on the left of your screen, is when the fed sets up a september rate rise. when fed minutes show the split on the need for a rate hike. here, last monday, when the rate increase was to be sooner rather than later, and here is stanley fischer. i am not sure if it is missed medication, too much communication, we just don't have the data. to help us understand we are joined by sir howard davies. sir howard, great to have you. you have some great insight into what monetary policy should be doing or isn't doing correctly. if you are janet yellen, what is your number one prescription for jackson hole? to try and give more indication of when you raise rates, or is

it to cool the markets? if we see another downturn, we can deal with it? >> i think it would be good if she were able to produce a clear and coherent message, but i fear she will have a problem, because the fed has now moved into a position quite unlike what we used to see in the greenspan years when the different members of the fomc are behaving more like the british monetary policy committee, which has always been set up that way, with independent views and votes. for the longest time, under greenspan, there was never any sense of -- they chatted, and the chairman told them what they would do, and occasionally there would be a dissent. but now there is a spectrum and i don't think she can put that genie back in the bottle. that there is too much noise that can be damaging for markets. i think where it gets particularly damaging is where

we have had occasions when the governor of the bank has been in the minority, which happened was are twice, and then the markets can get seriously confused. but i think commentators will have to get used to the fact that we are going to get different messages from different members of the excellent, -- of the fomc. remarks, there's are some people who were optimists and somewhere has missed. he gave reasons and one was i am an optimist, i think the u.s. economy will pick up. i can't prove it but i'm an optimist. whereas lael brainard is on the other side. francine: if you look at the hard data, unless they are , they should be ready for a rate hike. >> they should be, yeah. but of course they are also looking at, and this is old-fashioned economics, is the

impact of the rising dollar. well,e stan fisher say, in many ways i would see an argument for raising rates, but i have had a tightening of monetary conditions or an appreciation of the dollar, and in this country, we always think that way, we tend to look in combination of interest rates -- that is what the feds are starting to do. good morning. vice chairman fisher addresses productivity -- i'm sure you were looking at it stop this is an early candidate for chart of the year. there is a massive fall off and productivity in the 1980's, that's an extraordinary, four-year average.

sir howard, this is front and center for each and every economy. is this just because the technology? can you state that the diffuse meant of technology across all our economies causes a drop in productivity? >> it is a very big puzzle. i am somewhat influenced by those who say that as our toward an evenant of greater dominance by the service sector, and of course by the government sector, productivity measurements become more problematic. productivity is very easy to measure in a car plant. it is much more difficult to measure in a bank. in some cases the productivity measures in the bank are a sign of inefficiency toward, the more transactions that you achieve, the better. but some of that may not be particularly useful. problem inre is a

the way in which productivity is calculated. however that has not changed hugely and we must be seeing something. i think we may be seeing a position where the impact -- this is the robert gordon type we had a big lead in the greenspan era, and now that has leveled off. tom: vice chairman fisher coined the term altra accommodative. as we go into jackson hole, the basic idea -- does the orthodox formulae, do they work now? or do the leaders of our economics have to come up with new and original thinking? >> i think the latter is probably true. i think once you get to zero bound you need to about what

impact you are having interest rate. we don't know what impact to on the scale of it has been implemented. i think there are some interesting thinking coming out of the fed. they talk about the need to change the monetary policy framework. targeting a higher level of inflation as the central rate, which blood chart also said. i think that is also up for grabs. i think we are entering a period where some of the previous certainties are no longer quite so certain, and we need to rethink the monetary policy. tom: let's bring up the zero bound, a chart we don't show enough. this is the chart of the decade. chairman yellen and chairman bernanke looking at the zero bound that goes that far before janet yellen, in february of 2014. howard davies with us on this monday, to get you prepared for

an interesting week of economics. coming up, we will continue to thatss the many decisions will need to be made at jackson hole and beyond. we are with sir howard davies. stay with us worldwide, this is bloomberg. ♪

francine: this is bloomberg "surveillance." tom, we have to howard davies for an exclusive interview, and we have to talk about rbs, which has said negative interest rates to some of its biggest trading clients. they will have to pay interest on collateral, but this comes as a consequence of low central bank interest rates. we are back with sir howard davies. thank you for sticking around. this had quite a lot of press in the u.k., but you are the first

bank to do this. you got a lot of press because -- >> well, i think we got a lot of press on it because two or three weeks ago we wrote to quite a lot of clients, changing our terms and conditions. i'm afraid this was a bureaucratic exercise that got misunderstood, but hey, perhaps we should have reckoned it would be. but this was to put our terms and conditions in line with others, who typically have the provision to charge negative interest rates, which we didn't. the more recent one was to put us in line with a lot of banks in the trading areas. this is big accounts of collateral deposits for short periods of time. you have to protect yourself against a position where you suddenly have a large inflow of cash and you aren't charging anything. afraid that's a rather

mechanical point. francine: you have unique insight because you are a banker but also an economist. are you uneasy with negative rates? mark carney honesty would never go negative, but he may have to. >> yeah. i guess he will search a long way to find a banker who is enthusiastic about negative interest rates. i don't like the idea, either. i'm afraid going back to our conversation five minutes ago, i am personally in favor of trying to lift over time the level of inflation that we target, because my concern is that negative interest rate set up all kinds of perverse incentives to hold excess cash, which is , and they alsog mean that the central bank is not really in control. once you reach the lower band you don't know how the economy will respond and you are pushing on a piece of string the banking system.

i think what we really need to learn from this is that we probably got used to trying to target an inflation rate which is so low that for quite a large period you may find yourself at the lower end and out of control. tom: sir howard, you know as anyone the idea of momentum and inertial force. i look at negative rates as a chronic x-axis. it is not that we are at negative rate, it is how long we have been here. bring up the chart, if you would. this is two-year and 10 year german. and i'm sorry, but this is getting old, particularly when you look at the short term space. don't we just have to clear balance sheets? isn't that what all this exercise is about, the denial of the need to clear and reset balance sheets? >> yeah. -- what we have seen is the crisis of two little

deleveraging. -- in spite of that zero interest rate, the debt position has not been clear. there is still quite a lot of people and i think you are right that unless we clear off some of the steps we are going to be ofed with a chronic position negative or zero interest rates for quite a long time, and that has a bad consequence in that when people look at uncertainty in the economy they say, supposing we face a recession, what will the central bank do? we can't see what they could do, because they have to lower band already. that feeds back into a problem of confidence, in that you are not sure that if you do run into trouble that the calvary can ride the hill and rescue you. they don't seem to have any any mission left. tom: without getting you in

trouble with the queen, prime minister, or the governor of the bank of england, is the only solution in that balance sheet combination mergers and acquisitions? is that the only place we are going, that europe has to be more like the anglo-saxon model and get an urge to merge? >> well, that is one possible. i think that also, unfortunately, the fiscal position still has to be addressed. i know people are now worried about austerity, but i think personally that taxes have to rise. flatd it difficult in conditions but i can't see how governments will deleverage otherwise, because public expenditure seems very sticky. maybe some m&a activity in continental europe with help to some extent, but i doubt it will

help the banking system great deal. francine: thank you so much. howard davies. and a disclaimer for british viewers, we know that the queen doesn't look at the balance sheet of the banks. [laughter] francine: i will be joined by tom for a conversation at 8:00 a.m. in new york, 1:00 p.m. in london. this is bloomberg. ♪

tom: bloomberg "surveillance."

we welcome all of you worldwide. morning must-read -- this is a smart discussion on our economic politics, which is really getting front and center as the leaves begin to change in the central park. discontented voters are already vividly and parent in britain; and the rest of the eu and the u.s., mr. trump. unionpean political without strong popular banking might test democracy's destruction." withoward davies with us rbs. shirley a leader of european academics.what is your need to do as they want -- what does europe need to do as they wander through these elections? >> well, i rather agree with clyde; perhaps not a surprise, since we worked in neighboring offices in the treasury 35 years ago. we conceived the same views

then. i think he is absolutely on the the european leaders have not paid enough attention to pop in. large part ain failure to capture the imagination of voters in europe, participation rates have been low and in many cases falling. i think the european parliament needs to be read on -- my own view was a mistake to have a directly elected parliament and that we should have built on with peopleliament identify to a greater extent. maybe that should come back on the agenda. meetingthe leaders today should ask themselves that kind of question, not just technical issues about when to begin article 50, because that is not the biggest problem they face. francine: thank you so much.

the dollar is strengthening, emerging markets up a touch. this is after we have comments from stanley fischer, the vice chairman of the fed. he seemed it to boost speculation that u.s. interest rates will rise this year. i also wanted to show you the rupee, on the back of the new governor. what does that mean? we understand he is a little more politically -- but investors are hoping he will steady the ship. this is the picture for european stocks. this is bloomberg, and we are back to london. ♪

,l tom: good morning, everyone. bloomberg surveillance. before jackson hole, janet yellen's speech.

right now, first word news. taylor: rush holt. using asus till launch airstrikes on rebels. defensetoday, iran's forster adults denounced it lunch strikes. a child suicide bomber killed at least 54 people and wounded at least 74 others at a turkish wedding party. u.s. vice president joe biden is traveling to turkey this week to president.the the new poll shows that hillary clinton is extending her lead and one of the battleground states. the poll has her with a lead over donald trump in ohio. it also shows that they are tied in iowa.

global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. francine? francine: thank you so much, taylor. shares in italian banks are rising today. by sir howard davies. we have a great bloomberg story, basically putting the numbers through. we are eight years into financial crisis and some of the biggest investment they hold assets that are extremely difficult to value. should we be more worried that we are? >> i think the issue is that so hard to value, but the find. is is it possible to exit if you want to?

a lot of them, unfortunately, some of them with 20-30 years of life have difficult structures that are very difficult to exit. they may be performing as intended, but they are .mpossible to realize if younly a problem cannot liquidate them. you must look below that. overecent income streams for a bank that ms. prices them, absolutely a problem. francine: it has been a week since we voted to leave said eu,

hasn't had any material impacts? >> very small so far. some of it is seasonal, but it has fallen somewhat. is off, a very little. and, in the retail sector, it has been buoyant. ist the market has looks at if there is a recession rate, the rates could be lower. that has been the biggest impact, the market section of earnings in the future. that of course depends on whether we do slip into recession, which at the moment is completely unclear. we could see some bounce if we don't face recession.

that has been the impact on us, not current operations. francine: is there anything the current transfer can do to alleviate these problems? >> either the rather conventional camp believing the government needs to complement the activity of the bank of england by some expansionist policy in infrastructure spending, in particular, which i think would take since. if monetary policy is left to do all the heavy lifting then you thata financial sector struggles. people cannot fight help banks can make decent returns in an environment of negative interest rate. i think we need to see some complementary action by the chancellor. i ami would be rude, and rude, to put up the rvs chart. here is the royal bank of scotland, the challenges of scotland, and challenges moving

forward. you carry the grace of 89,000 employees with you. my guess is there will be fewer in five years at rbs, and for that matter, and other bank. for you, what is the number one task of global baking in the next five years? i think simplification of the business model would be the best headline terror to that question. what the market is telling you is the market does not like very banks impositions all across the world where they don't have a comment market position. what we have to do is get back to the basics, to what we do well. what we do well if there's u.k. customers. we understand them. we have an hour call over the country that understands them and their deeds. if you could refocus yourself on the businesses we have genuine

defensible positions, then eventually the market will come to looking you in a different way. when cannot afford to be is a subscale participant in a lot of complex markets that you don't understand as well as you should. tom: thank you so much for getting our week started here on bloomberg surveillance. willg up, jeffrey degraff join us. this is important. his thought is simple. if you are in the cold to cash crowd, you may be wrong. this is bloomberg. ♪

francine: this is bloomberg surveillance.

i am in london. it is time for another morning must-read. this is actually, it comes from a bloomberg news article. the bank of japan governor says there is a significant chance that the central bank will add ing.ts eas he says the boj will not hesitate to act. .et's get more with our guest great to have you on the program. this is a huge concern. they had is weakening a touch. everything is put in place. just to cut -- say, tes -- itlicy ra leads to a higher yen. they are in this very difficult

place. he seems to be saying it very clearly. it is despite the world questioning his policies, he is willing to go forward to negative territory. i think he's willing to combat criticism, trying to target that is very head-on. the question is will they do enough? deliver in need to order to not being further stranded again. francine: since june 3, the here below 103llowed times. can it go below 95? >> you see the again kind of bouncing back. thererket is considered will be intervention. i asked a think that if you are playing the dollar, people are very hesitant to play against

the yen hearing pc this area in the high 90's as an area of potential intervention. tom: what is your outlier called now? beer all recovery from the call of the significantly weaker pound-sterling. what is the standard charter surprise call now? >> we are calling for further downside in sterling. however, i have to say, you have to be a lot more attentive to what is going on right now. you do, sterling positions are stressed on the net basis. it is the second biggest short out there. we continue the rates market. are we pricing in as many rate cuts as fear buying? the, we have not really see

full loss in u.k. data. we have not seen any kind of , whiche free you assets will be what kind of businesses are making the strategic decision. either relocated or buying. francine: do you believe what mark carney says we are not going into negative territory? he made us have a choice. point. see the i believe he will concentrate on qe. i think he has come to even before present happened, he has been very hesitant to go into negative territory. i think he is very much focused on what impact it has on bigs. be quitet would

adjusted move. tom: i do not want to get you in trouble, but we like to do that. you are from dublin, you were to school and dublin. with bowtieespond people say they are not going to move to europe, europe is going to move to london. you believe they will pick up and move to ireland? dublin, where i'm from, could be one of the biggest beneficiaries. i think there would have to be a strong reason why you would have to leave. you know, there will have to be a video of operations. template areimate

the most obvious choices. this is a big question. the question.s of i spent my weekend thinking about where one would have to move if they have to move. it is tax, but also language. a limited baker, you stick your own language there. is ai supposedly which huge issue. what is your euro call? pricingink it is not at enough risk. we have the referendum coming up

in december. tom: i have to make some news. it is monday. oh we go through parity chec? >> we are calling for an q1, but not in+++

tom: good monday. .rancine the quad here right now, to the bloomberg business flash. u.s. national security officials have cleared a transaction. the deal still has to be okayed

by antitrust regulators from around the world. investors from uber said they would not pay more than $2 billion for its rival, lyft. cap in gauging interest from prospective buyers. it was said privately that they pricenot buy lyft at any because of antitrust concerns. the largest real estate broker in the u.k. predicts the housing nextwill come to an end year. housing prices will drop a little more than 1% in 2017. that would be the first decrease since 2009. that is your bloomberg business flash. francine? francine: thank yo so muc. india's central bank has a new governor. he has been named as the man to take over as chief next month. as less outspoken that his predecessor and more

politically aligned with the prime minister. first of all, how much do we know about him? he was of course number two. how much do we understand about how he will ally himself with what they do, steady as it goes. >> the fact of the matter is they are seen by the market as a bit of an inflation hawk. remember, the markets have been very common. he is likely to keep bond yields lower, which is good news, as far as the market is concerned. francine: is it going to be

difficult for the next governor to continue the trend? you could argue that they have almost peaked. >> there are two interesting to elements that have developed. the headway that he enjoyed to go ahead and cut interest rates, he does not enjoy anymore. he is operating in an they come intore india. also, there is a panel that will decide interest rates. francine: should they have chosen a more pro-goes governor? >> that is a good one. it is always a tight rope walk between growth and inflation.

tom: he has a wonderful resume at the london school of economics at oxford. he has worked at all of the responsible places like the brookings institution. does he have the same mandate to use policy as a weapon? different context. under3, the ruby was immense pressure. at that point, when he came in as governor, he had to take care of the currency. that is not the case anymore. variables aremic far more stable today than it

was five years ago. the real concern, as far as , and the is concerned only tool they will use to manage it are interest rates. the question is whether he will be forgiving of the government if it goes ahead and strengthens on the fiscal side. the float matters. you see the challenges for india and the recent appreciation. with all that said, what is the run rate for the economy versus china? can make it back to 5%-7% per year? >> i think typically the numbers are looking good. of lack a certain level of confidence. catholic investing is not coming

through. you are not sick of the headline into jobs.slate the government has done enough to go after manufacturing. results are not yet showing. interest rates are lower, yet you are not seeing manufacturing that can lead to more jobs. growth is happening in the agricultural sector which has been suffering from a time. thank you so much. you know what, howard davies -- he wrotethat being earnest., what is your best bet? >> it is a tough one to call.

, the sterling-yen could be a good place for the upside. we also call for an outright rate cut in the next meeting. good one. be a tom: i look at the game right now. we will talk about this in the next hour. boring?world as what are you waiting for if it is as poor? >> we see low volatility at the moment. we believe that markets will .ome back and i should say, the moment that moment,ggest -- at the

the pulls suggest clinton as the front runner. very good. the you so much for the comments on your ireland. on the radio this morning, we will be joined. what a perfect time to talk to david harold. it has been a challenge for mr. harold. it is good to get him on the mid-better emerging markets. francine: it has. let's not forget, he has huge exposure. we want to really drill into what he is buying and selling. tom: we continue worldwide. this is bloomberg. ♪

tom: it is the morning of summer quiet. before janetday

yellen speech in jackson hole. was summer quiet this weekend. mr. trump stayed, for the most part, on scripts. wendy, everyone. this is bloomberg surveillance. we're live on monday, august 22. it is my anniversary at bloomberg. it was 142 years ago that i walked in the door. francine: what has changed? we are still with you, we have not gotten out of the crisis. tom: right now, let's get to bloomberg first word news. hit i thekyo has been first typhoon in three years. thousands of flights have been canceled.

the leaders of germany france and italy will meet today to discuss brexit. angela merkel, france well a lot, -- francois hollande will be other french aircraft. in the u.k., members of the opposition labor party began the partys weekend on leader. jeremy corbyn is favored to retain his job. pro-european lawmakers have accused him of failing to campaign effectively to keep the u.k. in the eu. turkey's president is the u.s.ng about position, over starting the country strategic --

overshadowing the country strategic partnership. rio areer olympics in over. that is japan's prime minister dressed as a nintendo game character, super mario. he was happy closing families for a preview of the 20 20th olympics, which will be held in tokyo. the u.s. took the most gold medals with china is second and great britain, third. this is bloomberg. tom: thank you so much. ands look at equities commodities. maybe we will see that through the speech on friday. the euro, 113, back a little bit. oil, lower. on to the next screen. there is where the dow is.

down of it. telestrate this morning, not back to 95. what you have? dollare: the strengthening. growth, her says believes, will pick up. i have a little bit of pound action against the euro. tom: i thought that was a great discussion moments ago. let's go to the bloomberg. this is a chart that all must pay attention to. be don't show this enough. rateis the fed fund target with skyhigh inflation. we go to bed to 34. terrible stability.

none of them preparing us for what we have been doing. you can see the rate increase. what you have? have -- whenlso you look at the dollar, itsy-bitsy moves. this is a three-day chart of the dollar index. red one. chart is the it basically shows the rate hike possible for the fed. in greed, showing there was a split in the red. then, towing around with inflation. this is stanley fischer. the moves are quite big, depending who talks.

tom: let's do a summit. before janett yellen. ofning us, jon ferro bloomberg . and look at where we are right now. the absolute foundational issue is the new orthodox foun economics. where are we? when it wasned said we need to clear balance sheets. >> we can go from productivity tool a lower turbo rate because output has been damaged. the debate is just how we get to the lord terminal rate. what will the journey look like? would with a hike? up with the fed officials say that the therapeutic gold. athink the market, if it has

message for mr. fisher, it would say, you have done nothing to secure the market. the markets response is, yes, we have heard it before. francine: the million-dollar question is, on friday, janet yellen shows up at jackson hole. last year, i think she did not even show up. what indication will she get the markets? or come with she not talk about immediate monetary policy and try to reassure the market that they have the tools to deal with the next crisis? >> i think it is a really difficult task. is newk of the symposium monetary frameworks to deal with the future. that sounds like a very thing take sort of thing coming down on friday. tom: when you look at world

productivity, how it mimics what we do in the u.s., you looked at last hour. the i have to get my -- give my hat trick a plug. down we go in productivity. i would suggest this is confronting every single g-7 nation. francine: it is. it brings us back. i love talking about productivity. we have a great story by jeff blackout on the bloomberg terminal and on the web saying we are just measuring things wrong. does gdp even count anymore. becauseasuring things of what we are selling. tom: do you want to jump in? i do not think -- i will give you the point, francine, as not accurate. i don't know how much it is. >> i think the bigger one for

the fed is what role does productivity have? there is no role for monetary policy. you can put the long-term rate lower and lower. you will get a lower rates. how do you address productivity? that has to come from the government. . francine: you have to say, gdp, whether you get rid of it, or it differs,measure it is extremely suffering to keep up with the pace of the economy. i guess the question is what comes next? that is skewed by the monetary policy. >> it is kind of like gdp, what do you change it for jack tom? brought it up.

i'm sorry, this is the story at jackson hole. the bread line is miles from .here the fed is clearly all central bank's will have to come in. may be the central bank is ahead. it is extraordinary, as we go to friday, and janet yellen speech, and how far the vigilantes are from the academics. pushed backhave for some time. i think the academics have much more of a role to play. this is the jeff black story. they do not buy streaming service for months. what are we measuring? tom: i agree with that. there is a big debate last week, the idea of productivity and the diffuse bit of technology, how we use capital, how we use

labor. we do not even know with the technology fits in there. >> no, we don't. i would go back to the. plot -- the dot to summarize. you wake up on wall street, once again facing another big week from the fed, if you see that line at the bottom of the plot. the question i would ask is this . i had the condition to know that if the green light comes down towards me, why should i pivot towards them. i have been right, they have been wrong. tom: why don't you pivot towards the makeup room? really an interesting one day to get your week going. we will continue that. we will be joined this morning in the data clock hour. what a wonderful time to speak about the unorthodox economy and

markets. this is bloomberg. ♪

francine: you are watching bloomberg surveillance. i am francine the plot in london. before we get on to politics, and of course, macroeconomics, let's get some corporate news. taylor: pfizer is supposed to complete a blockbuster deal to buy levitation. an agreement could be announced today. if the deal goes through, pfizer would be acquiring of prostate cancer drug, already available in the u.s.

an unprecedented dispute with the supplier that has halted deliveries while the company that is it out in court. fei vice-president, stanley fischer, indicating that a rate hike this year is still be considered. he said that he expects growth to take off in the coming months. that is the bloomberg business flash. tom: thank you so much. to the global audience now, this is a great image. already shaker is not only my number one advisor, he is onset set with us. he has been very focused on what is going on with the president shall election. this was the first weekend that was almost normal. >> it was relatively quiet.

sort of like the calm after the storm. things will pick up this weekend. tom: this is a delicate issue. in "the washington post" an article scathing about hillary clinton's health, and donald trump's health. >> people say that hillary clinton is fine, the same with donald trump. normally turn presidential records aredical released. that has not happened yet. with donald trump, one never knows. he has not shared his tax returns. tom: what does the campaign start? is it this traditional william mckinley first tuesday of september, or will we wait for the debates? >> for me, september toy six,

the first debate. tom: that is my date. are sillythey editorials on this. how much do we understand whether donald trump is in it to win a? does he want to be president or is he just increasing his brand? to behink he does want president. he is finding it difficult to define himself. ofsome ways this reminds me the yankees of the vacant 70's, when there is constant turmoil. strikings within distance of the polls. if you remember, the yankees o won. francine: do we believe the polls that he could turn it around, or do we action not believe the polls? >> the polls have been relatively good so far this season. you have to believe them.

just remember, we still have quite a distance to go before election day. tom: we never mentioned the .readed yankees that was a faux pas of a high level. the republicans are anxious, like the yankees are inches right now. there is the house, the senate. to be, it is more than that. what do they do, win or lose, in november? >> it all depends obviously all the result. a lot of the polling shows that the down ticket people, the center races, are not the affected by the polling numbers. tom: in the senate as well? >> right. that suggests that people are being discriminated.

tom: what does the reporter want to see from speaker brian? here is a guy, everyone has him in their crosshairs, but i see confusion and silence from the speaker. >> i think everybody has to bets through election day. francine: i was confused at some of the things that came out from the campaign managers. as far as i can tell, he has always been himself. maderunk, does it just running on fear? think we have seen days, sometimes as many as five days, when donald trump has stayed on script, working from a prompter, tried to moderate his language, then something happens, and he blows up.

we have the root national committee working now much more closely with the trump campaign. we'll see if he can stay on message. tom: is there a trump campaign kids?is it him and his >> it is him and his kids, but now there are many more voices of a professional nature. we will see what happens. tom: we will continue this discussion on 5:00 tonight. on the campaign, with all due respect, 5:00 tonight. this is bloomberg. ♪

francine: this is bloomberg surveillance. i am in london. intervieweally great in the last hour. this is our morning must listen. we spoke to sir howard davies about the banks and negative rates. setegative interest rates up all kinds of incentives in society. they mean that the central bank is not really in control. francine: let's get more now on rbs. let's remind ourselves, it is government owned. today, they came out saying they need to pass on negative rates.

it is only collateral with trade. how is the likelihood that this is broadened out? >> there is some likelihood here. i think there are two distinct sections here. won is that they charge negative interest on collateral deposits. .hat would be about 60 clients however, they did right, about two weeks ago, to the commercial clients say, if they need to, they will change the conditions on interest rates. they say they have noted should to do so at this point, but they will set the groundwork. tom: i thought sir howard was brilliant on the timeline involved. how much more pain on the ?alance sheet does rbs have

have sir howard and his team cleared the market? >> not at all. they're not quite there. there is an expectation that the bank of england will probably cut rates further, down to zero. that has a bad impact for the u.k. institutions on the interest that they earned, the loaves, and all the other products that they have. it will make the return for profitability for the royal bank of scotland. they have to cut costs in this low allergic environment for them. francine: we spoke about the liquid assets. difficult to value level three assets that the european banks are holding. >> exactly. the royal bank of scotland has the leveraged. they have only about 4.2 billion innds of assets, very small

relation to other banks. they are extremely sticky and difficult to get rid of. they are around 30 years duration. if you have low levels of capital, as perhaps deutsche bank or barclays have, it makes it difficult. francine: thank you so much for joining us. the resident expert on rbs to expert onng up, -- rbs. coming up, we will be talking the dollar. this is bloomberg. ♪

worldwide. of you finally, in new york, and is crystal-clear.

you can see it in that gorgeous view, the empire state building, citigroup holding in the center and in the lower left the freedom tower and onto the statue of liberty in new york harbor. staten island and new jersey in the distance. we have not seen that at least 10 days. inorgeous summer morning this new york city. in new york. francine lacqua in always gorgeous london. taylor: russia will quit using bases in iran to launch airstrikes on syrian rebels according to iran's foreign ministry. earlier today iran's defense minister criticized russia for you -- calling it kind of show off and ungentlemanly. turkey is blaming islamic state for the deadly terror attack. authorities say a child suicide bomber killed at least 54 people and wounded almost 70 others at

a kurdish wedding party. turkey is really from last month 's failed coup attempt. joe biden is traveling to turkey this week to meet with turkish president. president obama travel to louisiana tomorrow to get a look at the devastating floods. the president was criticized for not cutting his vacation short but john bell edwards says he suggested president obama not come until the initial disaster response was over. donald trump's campaign may be wavering on whether he will call for deporting 11 million immigrants in the u.s. illegally. according to the washington post trump made it clear to a news panel of hispanic advisors that his position is not final yet. trump's campaign manager says his stance on mass deportation was to be determined. a new poll shows democratic presidential candidate hillary clinton is extending her lead in one of the battleground states. the cbs news survey has hillary

clinton with a 46 -- with a lead over trump in ohio. clinton and trump are tied in iowa. global news 24 hours a day, powered by our 2400 journalists and analysts in more than 120 countries. tom: thanks so much. it is finally almost a normal summer monday, which is a really good thing that will heat up moving to friday and janet yellen post speech. what a shock to finally have some summer calm. we saw that with marty shanker talking about the presidential campaign. now, to help us with the summer calm, robert cinch, with decades of experience. bob cinch, without question, the outlier call on sterling is sterling. on

don meyer and team looking at a 110, much weaker sterling versus the zeitgeist of 120. the yellow circle and maybe were consensus is right now. the important question to you is what will be the outcome for everyone else if we get a 110 sterling? sense this is less of a macro issue and more of a micro issue when you think about the global economies. i think it's really related to what's going on in the u.k.. i think that is an extraordinary decline. on a trade weighted basis the pound is down over 10% from where it was just for the vote. and actually has fallen about 7% or 8% on trade rated basis at the end of last year until the vote. a trade weighted pound down over 15%, that is a massive

adjustment. a big stimulus for the economy. i don't think there's a lot left in the downside for the pound from here. tom: that is a really important idea mr. cinch talks about, blended train weighted -- trade weighted currency. i find in the media we always want to go to the drama like the hsbc call. francine: we want to get the drama at the end of the day. let's remember what economics is is people traveling, going on holiday, buying things. i would argue we need to look at a bit of both. give me a sense of how much pressure you are seeing on n devaluation. yua we have been ignoring the chinese currency for the last couple weeks but we should not should we? robert: no. i think we talk about a 4% or 5% move in the chinese currency

versus the dollar and other currencies i think a lot of that is actually going into corporate profit margins back into china rather than a deflationary effect into the rest of the world. one of the things china is concerned about is the magnitude of their corporate debt. corporate profit margins have been squeezed by the rise in the chinese currency versus everything else other than the dollar. when the dollar touched longer chinese currency got dragged along for the ride. that put enormous pressure on the corporate sector in china. i think a lot of what's going on is going into profit margins. it's not really going into lower prices coming up to china but rather allowing corporations to actually increase their prices a little bit as currency weakens. francine: going back to what we are seeing in europe, purely -- pure sterling parity. is there anything the boe can do

to preempt that? robert: i don't think the bank of england really wants to fight the downside. weaker currency is doing part of their work. if you look at overall monetary conditions, a function of both the exchange rate and the interest rate. i think mark carney does not want to go anywhere near negative interest rates of the u.k. i think he is look at negative interest rate affects in the believes that is not appropriate for the u.k. given the magnitude of the financial sector. in a sense, the weaker currency is helping them by easing overall monetary conditions. we need to let this work through the system. wehink as francine noted, did see an impact of the weaker pound in recent retail sales data which was much stronger than expected. that is the tourist sector, doing a lot of buying as the pound got cheaper.

it's going to take some time for these effects to work their way through. these are big shifts that have taken place. i think it's going to have an impact on the economy and it's really getting late in the process prefer the downside for the pound. tom: i want to curveball that you are single best chart. an oddity pair for those of us in the west. the idea of the estrogen dollar beleaguered -- the australian dollar beleaguered. en strength, australian weakness. bob sinche, the great rollover is basically all of abenomics taken away. he see that first in a much weaker australian dollar versus the japanese yen. does that signal more to come of abenomics as a failure? robert: a lot of us have been skeptical of abenomics all along. the main effect of it was to

weaken the currency and that is unwound now. this is a combination of those cofactors. the australian dollar down on weaker global commodity prices over the last few years. it's also fortunate japan's current account surplus and the fact that australia used to be one of the destinations for a lot of their global investment. you had very high relative interest rates in australia often 5% or 6% higher they were in japan and that would take capital out of japan and australia, health finance australia is current account deficit and keep the yen bit weaker. as we have compressed global interest rates we are really not getting capital flows moving around the world the way we used to. one of the effects of that is that countries like japan, with a big current account surplus, has difficulty keeping currency from going up. .om: thank you so much

francine, i was looking at chad on economicok growth. in 1870, australia was the richest country in the world per capita. 1870. francine: what dear saturday nights look like, that is what i wonder. tom: it is sick. and i were in the office on sunday pounding through economic growth and productivity. . david arrow does the same thing. -- he has had a brutal move year in emerging markets. we'll talk to david harold about the new enthusiasm for emerging markets. this is bloomberg. ♪

francine: this is "bloomberg surveillance." key approval for its $43 billion takeover of syngenta ag. officials have cleared the transaction. the deal has to be okayed by antitrust regulators around the world. the head of italy's dni oil companies says he hopes opec can agree on a freeze. have twothat we still integrate into mass amounts. the righty can find decision to have -- without increasing further production from the previous months.

taylor: opec plans to hold informal talks on production next month in algeria. kobe bryant is now a venture capitalist. according to the wall street journal today right will unveil a $100 million fund that will invest in technology and media and data companies. .artnering with jeff's legal tom: lavonne henry is the most interesting economist out of hartford -- out of harvard. dr. henry ran the shop at the cincinnati fed. the cincinnati fed. directly responsible for the recovery of the cincinnati reds as he exited the washington and he is with the national association for business economics. dr. henry, congratulations on your work at the cleveland fed. greatly appreciate that work in cincinnati. does the cincinnati economy say about the and abe survey?

dr. henry: the cincinnati economy is very reflective. the fact of the matter is cincinnati has been on expansionary attack for the last four of -- four to five years. tom: i was really taken by the political aspects of the survey. a heavy skew toward clinton economics versus trump economics. i've never seen the nabe more polarized. dr. henry: let me give you a little bit of background quickly and then we talk about it. what we have is a survey of 414 business economists that represent broad collection across industries in the united states the in the fire industries, construction, manufacturing, retail, this represent american business and what we found in our most recent survey taken during the put to convention is that by a margin of four to one secretary clinton was preferred as being the

candidate that would be best able to manage the american garymy, followed by johnson at 15% in donald trump tom:. within this is the idea of business economics connecting to the academic theory you studied at rutgers and harvard. how unorthodox is our fed economics now? are they detached from business economics and business leaders? dr. henry: the fed is not detached at all. a lot of what i did at the federal reserve was to go out and engage with industry and business leaders. one thing the fed does is survey the real world and bring it back to make policy. one thing that chair yellin has said is that fed policy will be data dependent. the data continues to come in good but it's an issue, is it good enough to make the next move?

a significant number of business economists are saying that now we need to start moving forward. one of the findings of our that policy has become too stimulative. francine: congratulations on your survey because it makes for a good read. also, i think i need a radical pause but i know how to put cincinnati on the map, which is a londoner is no small feat. you're an economist, you understand this stuff better than most. is there one thing that just does not really fit with what we are being told and what we're seeing in the numbers? dr. henry: i would say there are many things. one that does truly stand out, -- soss economists pro-trade and pro-immigration and we're not hearing that in the political ecosphere.

what we are hearing is let's stop immigration, pull back on trade. 80% of surveyed respondents know we need to have higher skilled immigration come and help our economy. that is the basis of what makes america great. immigration and trade. so from that standpoint, that was counter to what we're hearing. tom: dr. henry, greatly appreciate it with the economic survey of the national association for business economics. this is a really interesting transaction, not what you would expect from pfizer. a cancer acquisition, medivation, 628 employees out of san francisco with the usual 67 of the 81. david wilson will have this in a number of hours. medivation would've popped this morning, it is not dilutive it appears and also it will be an all present cash transaction with no additional financing.

this speaks to the roll up of pharmaceuticals and it speaks to the idea that money costs next to nothing nowadays. francine: really desperate for this asset. they tried to buy it at pfizer came in with a higher valuation and sanofi shares are not doing much. it will be interesting to see if sanofi sites to go after another asset. it's probably happening in health care the most. maybe what we saw in mining six or seven years ago. tom: it is something to see the change in our big pharmaceuticals. in london and new york and worldwide, we hope you'll stay with us. international relations, economics, finance and investment. this is bloomberg. ♪

tom: "bloomberg surveillance." left it right to the foreign exchange report. , 139 yuan,uities

storm -- sterling. . threw in their mexican peso weaker emerging-market currencies. mexican peso, little stronger today. that's a pretty much on the forex. they were -- the ruby all over the emerging markets. coming up shortly it is bloomberg with jon ferro, alix steel. and i you have a packed show and you are looking at currencies. x: everyone talking about stanley fischer over the weekend. it seems like the market interpreted fisher coming out we have a hike sooner than later but in theory he never said that. he also made a case for weaker productivity which you could make a case as a more dovish statement tobacco for rate hike tom:. i agree with the splash of his speech and the idea of everybody

's jawboning higher rates. i think we are on board. we just want to create reflate tension. alix: any kind of move is going to see volatility. we will hear from yellen. your to think they will not say something so drastically different from what yellen herself will say on friday. tom: i give kearny major credit for coming out with a single headline and saying there is no inflation. that was the end of the discussion in europe. francine: no inflation and now he's overshooting inflation. we also have a 2% target that he says we will look through it. it's amazingly look at inflation. ,ou look at germany, the u.k. when you look at all of this inflation targeting it really seems there is a national dna. germans freak out when there is inflation, u.k., more cool

with it. look at back to breaking news. we are joined by memo goree. company thathis sanofi really wanted. >> that is the big question now. there is all kinds of speculation going around what the next target will be. honestly, there are not that many sizable targets especially within this particular area. it's going to be really hard for sanofi to find something similar to medivation. francine: no one can come back with a higher offer? very unlikely. all the feedback i'm getting. -- a deal that has been anonymously agreed by the two company so it is really hard. tom: are the american drug companies becoming more like the

european drug companies? you guys figured out the script a decade even 15 years ago. the u.s. companies more like the european companies manuel:? that's a great question. i don't know whether it is going to be similar or not for what i know is that a target like medivation which was really coveted aggressively pursued by itofi and now they see foaming into the americans hands , that is pretty remarkable. move for the french company. they are really confusing for -- they're assets really competing for these price assets. tom: the company pfizer is acquiring. anuel, thank you so much.

it's amazing how we got from fisher to yellin on friday. michael mckee will be there. alix was saying , if you look at what stanley fischer was saying you could interpreted either way. he's worried about measuring things, that is dovish, or near the targets, that is hawkish. tom: we will get sir howard debbie's conversation out on our itunes podcast this morning. we continue with mohamed el-erian. must watch and listen worldwide. bloomberg surveillance. ♪

one healthy

acquisition. pfizer will buy medivation for $14 billion, 20% premium. d stanley fischer says the central bank is close to meeting its targets. investors will look for more clues at jackson hole. oda says: governor kurdo there is a chance of easing at next month's policy meeting. we are live, of course, from new york city. the vice chair, giving us an appetizer. alix: it is so interesting how the markets interpret it. hikehawkish, he wants to sooner than later but he said none of those things. the u.s. growth is not going to be as bad we thought. he spent a lot of time talking about productivity. jonathan: he said the