morganleveling off, stanley ceo tells bloomberg he is bullish on china. stable,rship has been consumption is increasing. overall gdp is north of 6% and there has been liberalization of the capital market. flux. sterling state of polls pena mixed picture of the u.k. election, just one week away from voting. dallas fed his guns,

president robert kaplan said he will see two more hikes this year, despite declines in core inflation. >> i don't think this economy has run away from us. i don't think inflation is running away from us. manus: and president trump is said to lean toward exiting the paris climate agreement. his decision comes this evening. ♪ manus: welcome to "bloomberg daybreak: europe." it's our flagship morning show right here in the city of london. my colleague, anna edwards, is on a little bit of a holiday. now how do you look at the markets? stocks are all a little bit stronger this morning but how onequash a rebellious you

-- yuan? another lurch again today. .itting a seven-month high we rallied by 1.2% yesterday. we are adding to that again this morning. china is dishing out a tough lesson to those who want to bet against the currency. they ratcheted up the overnight borrowing costs. it's a rebuke to moody's downgraded last week when the authorities call that absolutely groundless. what are the consequences of the , they were yuan 710.nally worth banking and let's set that. for the indexe

was this, the shanghai composite a back .5%. may has been the worst month for chinese equities since 2015. the occasion of a lower contraction in the private numbers. a two-week low on the data from china. lowest since january, goldman sachs saying you will see a handle of 60's for the aussie dollar. that would be quite a crucifixion. the vicissitudes of what the polls say. interested --only theresa may, you've got to hand it to the team.

conservatives with a three-point lead. where are we on the polls? that is the question. a tiny bit.just we are waiting for the government dated today. we expect a rise of 3 million barrels per the eighth straight week. were still waiting to see what happens there. gold is off just a little bit. that haven status, is that really what you want to do with gold? lots of interviews coming up for you throughout the show. i will catch up with the peterson institute for economics. we have an exclusive interview

with the owner of the evening former --ewspaper and former chancellor of the exchequer. theie is standing by with first word news. >> over in the united states, president donald trump will announce at 8:00 p.m. u.k. time whether the u.s. will leave the paris climate accords. he has not decided whether to stay in the landmark deal but is leaning towards quitting. leading corporate backing for the accord and said he will resign from the white house counsel if the u.s. abandons it. and donald trump's longtime personal lawyer have been subpoenaed by the house intelligence committee. the panel is investigating russian efforts to influence the u.s. election as well as leaks of classified information and interceptstured by

might have been improperly amassed. the u.k. prime minister's decision to skip a televised election debate frightening to rebound on her as other party leaders said it prove she is unfit to lead britain. theresa may's place was taken at the debate by home secretary amber rudd. may decided to stick to her decision not to take part even though labour party leader jeremy corbyn announced earlier yesterday that he would appear. >> leadership is about understanding the people you represent. it's about being prepared to learn, it's about not being so high and mighty you cannot take it buys. it is also about bringing people with you. it is also about ensuring is your responsibility to protect the safety and security of everybody in this country and to lead a government that cares what everybody -- cares about everybody in the country. >> the central bank has kept the pace of ontario easing seen it

may not be as aggressive as rep -- amid a fresh political crisis that has rocked the country. 10.15%. the rate to global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top . , ine was plenty of data japan we had healthy company profits and capital spending helping boost the nikkei 225 up today. after the drop were seen in chinese stocks that are falling from a four-week high. pressure on mainland market there but the asx 200 is shaking up the drag, set for second day of gains.

despite exports growing for a seventh straight month. savior for were the the hang seng as well as the types. taiex.the checking in on other movers, let's look at what is moving in hong kong. shares plunging as the e-commerce operator is just the latest target by short-sellers. surging and ever grande reversing earlier losses as it managed to raise more than stateed in its second sale. shares jumped as much as they .6%. you are talking about the yuan earlier, the offshore rate at a seven-month high. the has helped bring up

rate so it now costs about 42% renminbi in hong kong as you can see from the spike here, the white line on this chart. manus: thank you very much for the latest on the markets. morgan stanley remains upbeat about china. an exclusive interview with the ceo, he told bloomberg while he's bullish on the world's second-biggest economy. >> a lot of people focus on the fact that it has slowed down from a few years ago to 7% and now maybe 6%. a focus on the size of the economy. the chinese economy is a $10 trillion economy. the rest of the world would die to have growth rates north of 3%, let alone 6%. so the economy is still doing well.

consumption is risen, which is an important domestic driver. obviously the leadership changes coming up for the end of this year, but leadership has been stable, consumption is increasing. north ofdp growth is 6% and there has been liberalization of the capital markets. etc. haveai connect been very positive and introducing capital flows in and out of china. more to be done, but good first steps. >> if there was one development you could push for, one thing you could change in china, what would it be? >> we have a joint venture here and we are increasing our ownership of to 49%. selfishly, the one thing would be to get to a majority stake in have a fully on business in china. >> or hearing from regulators? is there any suggestion that they're looking at changing the structure?

>> i don't want to get ahead of that, that would not be fair. pathact that we are in the of increasing our state to near 50% is a positive step. to clearly as this continues provide more transparency, these westernkinds of things corporations are looking for, greater control in the business is an equity that habit this market. >> oats a question of timing -- >> so it is a question of timing? >> i think so. it is hard to put the genie back in the bottle. welcome to the show, good morning. the official data is bullish. private data is showing contraction. pick a data point to back up your argument.

some of the data looks more upbeat. i think there are enough warning , thels out there manufacturing pmi is showing a lot of the bounceback we saw back in 2016 was probably led by the devaluation of the you want and if that is now stalled, will the manufacturing base be able to continue its growth? thes: about the movement in yuan. we will not have you bet against the currency. this is not a free flow currency. >> you can trace it back to the movies downgrade. in the fixing of

the rates, you have to say the weakness of the dollar is a big part of the story as well. it's taken the pressure of those who have gone short on the yuan. you have to look at the fed, when they meet in mid-june, to point to a more aggressive timetable in the market to see the dollar get a bit. manus: we will pick up in terms of what williams actually said this week. i want to pull a data point that you sent to me which is the credit numbers. this is the domestic reddit numbers going behind the gorman story. that, it has a one way trajectory on it. >> the question for market participants is, will the slightly softer data numbers out of china continue throughout q2

and into the second half of the year? will the chinese go back to the traditional playbook we saw in 2016? of course they still have room to maneuver. they -- we been quite bullish on china. they still have monetary stimulus they can throw at a slowing macroeconomy. be linking andld give any and. >> why would they not do it again -- it would be blinking and giving in. i suppose i'm just tortured with reading so much, that monetary policy has lost its impact. sorry, that is last year's argument. let's talk about the propensity for recession in china. christopher balding is one of our writers here on bloomberg. that it is the shift

, to youreld curve papers moving much more aggressively higher. the classic definition of yield curve inversion, how robust is this argument from balding? the first time ever that they're facing an inverted yield curve. >> they almost reached there back in 2011. but it has been a good signal as a flattening and potential inversion of the yield curve, but i think you need to take it in the context of the broader signals we are seeing in the bitcoin market, in support for gold. people who really understand what's going on are getting somewhat concerned in moving capital out of china. it's the culmination of those messages rather than a single

metric that investors need -- need to take heat up. manus: matt miller will join us a little later on. simon will stay with us. let's set up your day ahead. the st. petersburg international economic forum gets underway in russia. we will bring it exclusive interviews from the event. and the chinese premier europees his visit to with meetings with angela merkel. and we will get the gdp data. will bring you an exclusive with australia's prime minister at 10:30 a.m. u.k. time. coming up on the show, the pound fluctuates and the polls pain a mixed nature of the next election in the u.k. could theresa may's decision to skip a televised debate rebound

on her? this is bloomberg. ♪

manus: 6:19 a.m. in london. 1:19 in the afternoon in hong kong. .3%,ang seng index of rising this week. i will give you the exact amount. the hang seng up 1.3% on the week. it has been rising for 17 days. sophie is standing by. >> america's two biggest banks have said second-quarter trading revenue is on pace to drop at least 10%. jpmorgan cfo told an investor conference that market revenue is down about 15% in april and may from a year earlier, driven by a slump in fixed income.

bank of america ceo morning and said revenue for the business will be 10%-12% lower but first half results should be stronger. and selling nonperforming loans with the value of 2 billion , according to two people with knowledge of the matter. the sale was in line for the net value of the assets and had no significant impact on the italian banks capital ratio. mitsubishi motors may have to abandon one of its best-known models as it tries to recover from of fuel economy scandal. the carmaker ceo said he plans to increase spending on r&d while considering whether to keep making the likes of the pajero suv. >> whether we continue with the model depends on whether there's is a market for such a vehicle. we need to decide if it's worth

investing a huge amount of money in human resources to prioritize its development. >> that is the bloomberg business flash. manus: thank you very much, sophie. the pound is traded in jittery fashion. the prime minister theresa may's decision to skip last night debate. it was a televised debate. could it backfired on her as other party leaders lambasted her absent -- or absence, saying it's prove she's not fit to lead britain. >> she is taking you for granted . she won't turn up to these debates because her campaign of soundbites is falling apart. >> it's the most important election in her lifetime and then not even to be bothered to

come and debate the issues at stake. >> weaken wobbly is where we are. the leadership that we require. >> leadership is about understanding the people you represent. it's about being prepared to learn. it's about being not so high and mighty you cannot take it vice. >> politicians must show leadership. they must, without fear or favor and show that our way of life, our values, and our democracy is secure. >> she is not the prime minister. the prime minister's not here tonight. she cannot be bothered, so why should you? >> our government seems to be at its strongest to take us through brexit. it is only theresa may who can deliver that leadership. manus: she cannot be bothered. a wobbly moment, leadership being called into question. simon french is still with us.

they are all going after theresa may. she did not show up last night. i think it encapsulates the very essence of her house of cards. they respect you more when you show strength. just show up. hasn't harmed her not showing up for the televised debate last night? i feel it is unlikely to impact her polling. one of the challenges is the viewership numbers quite simply ofthese debates, a series entertainment shows have been attracting more than three times the viewership of the various leader appearances. you kind of wonder whether people are interested in the debates or in the underlying you get and i think very polarized visions for the u.k. economy going forward from the labour party and the conservative party, two major

players in the election. it's the underlying details that have energized the campaign and seen the polls, lot closer. the magnitude of how close they are depends which pollster you speak to, but certainly we've seen a closing since election campaign was launched. people are talking about 150 seats, that is highly unlikely now. yesterday a poll suggested a hung parliament. you have the 60 up and 80 majority.ve these are the polls of just summarize for the viewers. overnight in the last 24 hours -- so majority. these are the just a squanderedy leave. what would that do to policy in the u.k.? >> from brexit policy, fairly little.

i never really bought into the argument that a stronger majority would give a stronger negotiating position with european leaders. but i think for domestic policy it does question the version of ,onservatism that theresa may and it has to be said, it's her and her close group of advisers are pushing on a fairly reluctant political party and grassroots. she will not get the support for that if she doesn't get a majority of the magnitude to be able to push that through, the active role of the state is not traditional conservative territory. it's unlikely to be given that much credibility in her own party. could it change direction? growthould upgrade the trajectory of the u.k.. you could have a softer version of exit and you would see big infrastructure spending.

so potentially a higher growth forecast after the medium term in the u.k.. with there be another referendum? >> yes. manus: daybreak continues. ♪ referendum? referendum?

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delivers consistent network performance and speed across all your locations. fast connections everywhere. that's how you outmaneuver. manus: it's 2:30 in the afternoon at the emperor's palace in hong kong. one lady who is always ready for market nasa nations is here. >> were seeing asian equities heading higher, gains of more than 1% in japan, offsetting the losses we are seeing in chinese equities. of course we have the shanghai composite falling from a four-week high after the disappointing data out of china, the manufacturing data. chinese equities shrugging off the debt downgrade from movies

but they been tracking the data a little bit more. you can see how the stocks have been tracking what is been happening with the shanghai composite. yuan, heading for its biggest advance in almost four years. questions over whether this is about intervention. the pboc may be looking to prop it up and have that potential fed rate hike in june. this chart showing the onshore-offshore gap widening. it comes out a little bit there that's comes down a little bit but we have been seeing it rising in recent days. i'm looking at the aussie dollar as well. here we're seeing weakness, the worst-performing g10 currencies against the greenback in this session. after thee gains

china data. goldman said the aussie dollar is set to decline to around the high 60's, it's around 74 right now. it's all about the fed. the yield spread actually is around its lowest since 2001. back then the aussie dollar was below 50. speaking about the 10 year treasury yield, 2.21% is where we are all now. questioning whether at the dollar slide may moderate. manus: that is the debate in european stocks. this is the image you are faced with this morning. a very sad little polar bear. according to a

joint statement from china and the eu, they're going to commit to the paris climate act. a sweeping rejection of president trump's policies. they want climate change and clean energy to become the main pillar of their bilateral partnership, including in their economic relations. trump will announce his decision on the paris agreement later today. the state ofar say that withdrawal is moot. manufacturing data from a probabilistic back after april's aarch, but economists predict the finalading while data are due for france, germany, and the euro area. we focus on comments from our conversation with bally ceo

james gorman. it was an interview with one my colleagues in asia where gorman joined jpmorgan and bank of america, cautioning second-quarter trading revenue is on pace to drop at least 10%. he said investors are in a wait-and-see mode. about dallas fed president robert kaplan. he said he's sticking to his outlook for two more interest rate rises this year. he even acknowledged that the inflation. against unwinding thet balance sheet in conjunction with its rate policy. x i still believe the fed funds rate be the primary policy tool and letting the balance sheet runoff should be happening basically in the background. that, i'm sensitive

that in the early stages of this , there will be a lot of market sensitivity and will have to take that into account and manage the choreography of how we manage the fed funds rate as well as the balance sheet. in simonat's bring french who is still with us. another voice getting us ready to lock in. and 87.5% probability for a rate hike. so where we are in terms of probability for june, we are at 100%. do you think they will do that and then hold off? he did caution about the falling over of these inflation numbers. concern for the last week.

the degree to which is superficially tight labor market is failing to generate any wage inflation. a lot of the base effect we've seen pushing up headline stuck for 58 months currently about 1.5%. i think what is happened is the fed her in a state of having temporarily suspended state dependency and they no longer in 2017 we -- a say need to restore our credibility. the estimate of three rate hikes, in short of some fairly unexpected turbulence, they now want to deliver those three rate hikes and say you can believe in our forward guidance. mystery, why tight labor markets are simply not generating inflation, then you

have to call into doubt whether they are ever going to get up toward the long-term average of about 3.5% by the end of the decade. i think there is no chance is certainlyhere very little prospect if they don't understand the relationship between labor markets and inflation. manus: i'm not a federal reserve presents, in case you hadn't noticed. nor am i as qualified an economist as you, but i would put it send it to you. employers have the upper hand in terms of wages. it takes decades for that level of mental scarring in the employment market to hand any power back to the workers. the model is broken. >> am probably being unfair to my profession, but your right to say there is still significant scarring on balance sheet that

limits the corporate pretense of the two offer pay rises. the challenge of automation and robotics and the reduction of collective bargaining over the last 30 years. the relationship between the tight labor market and redistributing the gains of capital markets, how do we reap what we sowed in terms of populism? but collectively, though structural factors, with a lack of productivity in the global theymy, has meant that cannot afford to continue to provide unprecedented monetary stimulus. such point as the populist movements starts to shift toward

putting ideologues in charge of our central banks, to start to unwind what is widely dubbed as that's what manus: they're hoping is ultimately going to swing the rates. >> we've had a number of fed's talking about the fact that that relationship is back to its pre-crisis norm. you six unemployment, including those people who could add additional labor supply and demand increases is no longer a reason to hold back from rate hikes. i would argue that the inflation story, we're expecting 2% inflation. they have to come up with a narrative heading to 2018 of why we can expect 2% inflation in the u.s. economy, given the structural factors and the prevailing demographics.

manus: james gorman said the dirty little secret is that the u.s. economy is doing line. larry fink said not great, but fine. that sounds very mediocre to me. >> there's nothing wrong with fine. the question is, what is the policy response to find? -- is it maintaining a steady orh of monetary tightening the white house is targeting 4% gdp growth. manus: we can pick up on that theme with simon french. a reminder, you can watch the and followtv all of the charts and functions. you can ask simon french of question. it's on the bottom left-hand side. just click into a chart and the producers are ready to take your

questions. coming up on the show, it's been a tumultuous week hosting president trump. european leaders are now looking to the east. that is next. this is bloomberg. ♪

manus: it's 1:44 a.m. in the united states of america. you're looking at a live shot of the empire state building. it is a lighter day in terms of data releases in the usa. we are building up to the jobs report tomorrow. let's get the business flash from sophie who is standing by. america's two biggest banks have said second-quarter trading revenue is on pace to drop at least 10%. investorsfo told and

conference at market revenue was down about 15% from a year earlier. at a separate event, the bank of america ceo said the revenue fund business will be 10%-12% lower but first half results should be stronger. and selling nonperforming loans, according to two people would knowledge of the matter, the cell was in line with the netbook value of the assets and has no significant impact on the italian banks capital ratio. mitsubishi motors may have to abandon one of its best-known models as it tries to recover from a fuel economy scandal. beginning exclusively to bloomberg, the ceo said he plans to increase spending on r&d while considering whether to keep making the likes of the pajero suv.

>> whether we continue with the model depends on whether there is a market for such a vehicle. we need to decide if it's worth investing a huge amount of money and human resources to prioritize its development. >> that is your bloomberg business flash. manus: sophie, thank you very much for the latest business flash. .5%.timate for growth of let's reset the conversation and get to brussels ahead of the speech at the brussels economic forum. the president of the peterson institute for international economics. thank you for giving us your time this morning, great to have you on the show. let's start with an article from the new york times. donald trump, offending almost everybody. injured china, eager to talk. himla merkel calls unreliable saying the more

reliable man is mr. moody. outcries on both sides of the atlantic. are we facing and apocryphal ship in global relations between the united states and europe, or is it just politics? >> thank you for having me and i regret to say i think we are facing that kind of shift. chancellor merkel is very delivered in what she says. you can see it from their relations with the u.s. under obama. this is meant as a wake-up call to the u.s. my understanding is president trump's behavior and engagement at the g7 was horrible in the sense that it was just simply disengaged, not constructive, fromo the reports are true everything i've heard. i think chancellor merkel is

doing the right thing between allies and friends and g7 partners in saying you cannot treat us this way. manus: it brings to mind what -- he is say questioning nato, does he really care? you will know the depth of this better than i do, but it reminds me of that phrase back in the late 19th century, talking about splendid isolation. what are the consequences economically for me if that is the road he chooses to travel? >> i think you're asking exactly the right question. this is illustrated in the new genuinely notthey only don't care, they genuinely think everything is about the short-term bargaining advantage, and they are very suspicious of international cooperation, even

though it has worked for 70 years. they think it is somehow exploiting the u.s. it's a mistaken idea, but it is nonetheless driving them. economically?ean there will be trade divergent and occasional victories for that like the plan jobs disappeared anyway. then we'll have a world where one of two things will happen. either china and the eu and perhaps canada and others, defend the world order in economics that the u.s. bill, or we have a breakdown in trade and global financial flows, which is really pretty bad. manus: a pretty bad outlook. a market from perspective is, where waiting to see what changes are delivered. even a warning shot to capitol

hill saying the markets have they did in this big fiscal reform. how worried should we be about the lack of delivery on reform and consequential markets? we should be worried about the lack of delivery in the sense that it shows a dysfunctional relationship between the president and the congress that has its own party and majority in both houses and it shows a disdain for economic facts as voiced by the omb director mulvaney about the cbo scores on the health bill, for example. markets andss both responsible people of both parties are not going to stand up with that. , probably as negative surprise for equities that have been counting on some of these tax issues, but it also thes, to start with international aspect, there is a congress confronting the president and the trump

domestic taxn on issues and put some limits on it. but he can break a lot more things and that will upset markets in the coming months. macron made it into power, le pen was defeated. has europe been handed a temporary reprieve of four or five years to put its economic for --n order and drive further and faster to decry populism? >> i think it has been granted a multiyear reprieve. the cresting of populism in europe is real. when confronted by brexit and trump, the majority of european voters actually woke up and it is really important. they also have the wind at their back. economic growth is doing quite well throughout europe this

year. this is a big deal. this is a couple year window in which they conduce a serious good. manus: do you think the ecb will ship policy or should shift policy more aggressively than the market anticipates? where is the inflation? ship>> i think it is genuinely a debate. is not as evident what the right policies should be as in recent years but i would lean with mario draghi. there is no real impression. you've had the euro strength any backup, so that is good. there is no urgency for them to change anything except the open-ended bank lending, which they are going to do. manus: theresa may did not show up last night, we've had various polls showing the super majority dissipating here in the united kingdom, possibly even a hung parliament.

what would happen if we wake up next friday morning in the unit -- in the united kingdom and we have a hung parliament? what would that mean for brexit negotiations? would it be an opportunity for the u.k., or is it a huge risk? say i think ity is a huge risk. it should be an opportunity. it should be a wake-up call and be interpreted as a repudiation of the amateurish, confrontational approach the may government has taken with europe on brexit. it would be an excuse maybe not for a new referendum, but for a better deal. unless you truly get a hung or a labor s&p coalition, you're not going to reverse that. manus: adam, thank you so much

for joining us here on bloomberg television. thanks for joining us, good to see you, friend of the show. the head of the peterson institute. let's bring my guest host act into the conversation, simon french. you were just listening to adam there, some interesting warning europe puttingof its house in order. let's just start there. --we've had the condition this is the collective pooling of the debt across the eurozone into a product that can enable greater integration on the fiscal side to go with the monetary side. the reason why the window that adam referred to, the reason it's so important is because if we go to stage two of completing the fiscal step, it needs to be

followed by step three which is the political integration. if you do not get that, then it some point the fiscal monetary realization will come back to haunt eurozone leaders because of populace will take advantage of the fact that the german taxpayer can pick up the bill if in aopulist government particular jurisdiction decides --take a different path to ,he confrontational atmosphere you're looking for signs that 11 days after the general election when the negotiations will restart, if theresa may is leaving those negotiations, you'd hope that she's been emboldened by that can take a more diplomatic stance with the european leaders. undoubtedly she needs to play issuesl on a series of

that are important for the u.k., but it's the nature of that while all as colleagues attending a message to the business community here in the u.k. that's been sidelined in the debates. but actually wear on your site going forward to get the best deal. the best deal on ambiguously is not no deal. the claimsking up that no deal is better than a bad deal. how can that really stack up post the general election? manus: simon, thank you for being with me. he is the chief economist, and we have more for you. we have an exclusive interview with the european commissioner at 7:45 u.k. time. of next, we will be live to

russia at the st. petersburg .nternational economic or am erik schatzker is on the ground in russia. ♪

manus: china's manufacturing gauge contracts for the first time in almost a year. despite yesterday's robust official rating. morgan stanley's ceo tells bloomberg he is bullish on china. stable,rship has been consumption is increasing, overall gdp grew -- growth's north of 6% and there has been liberalization of the capital market. manus: polls paint a mixed picture of the u.k. election outcome. one week away from polling. sticking to his guns. dallas fed president said he sees two more hikes this year

despite declines in core inflation. >> i believe we should remove accommodation gradually and patiently. i do not think this economy is running away from us. i do not think inflation is running away from us. manus: and winds of change. president trump is a leaning toward exiting the paris agreement. his decision comes this evening. you're welcome. it is bloomberg daybreak. in thegship morning show city of london. you have rising tides, you have asian equities gaining despite the drop in china euro, manufacturing numbers will come later. london is up at .3 of 1%. the british pound is dealing

with a number of different polls. 128 .57. we are down on the british pound giving succor to the index. down a quarter of 1%. economic farm is underway. erik schatzker is standing by with a very special guest. to you.od morning i am here with a special guest, bank.o of russia's vtb good to see you on your home turf. let's begin with a brexit question. the british election is next week creative the conservatives a win a majority even though that is looking less likely today and brexit goes through, how does the bank respond? -- i made a of all mistake when i put on sterling before my personal money. i never thought that britain

would leave the eu but now it is happening. it will happen. my opinion is it is too early to see whether there will be consequences for any financial business. we do not know what brexit means . we do not know if we are talking about a different kind of possible solutions. eric: if it were a hard brexit, how many people would you need to move out of london? not focused on europe. the main focus is on asia and africa. brexit will not affect free much our business for sure. we are our own european infrastructure. in frankfurt and [inaudible] we will have to strengthen it because of brexit. we do not see much negative affect. eric: heading into the brexit vote last year you placed a personal bit on sterling and lost. guest: and lost.

eric: all you positioned in sterling now? >> no. if you do not know about politics you should not play with it. eric: gary cohn has ruled out any easing of u.s. sanctions on russia and said as you probably noted that the g7 meeting in italy over the weekend that if anything, though sanctions will be toughened. how would that affect your company? guest: i know him quite well from his years of involvement in goldman sachs. he is a great banker and a good advisor for mr. trump. what we see is that russia is sometimes the playing card in domestic policy. when the [inaudible] who opposes trump he is preventing him from performing his duty as a president. this relationship is

a hostage of all those. used to live with sanctions. there is other important things like fighting terrorism or syria or any of the of the things. they [inaudible] eric: the sanctions remain in place. if we take mr. cohen and his -- at his word -- guest: i do not personally believe that sanctions will strengthen because what was said is if the situation worsened in ukraine i do not expect this. they will stay as they are. said, we used to live with this, we know how to deal with this. we're not very much suffering nowadays because after three years we do not know what sanctions are. eric: what is the impact of

sanctions? three years it was -- ago it was terrible. can you quantify it? sanctionsare focused, areas, theers two new capital and the support of the government and the future relies in our profit. and secondly, there is a long-term funding. we are [inaudible] sanction we are comfortable. eric: do you think it is possible to have a warmer relationship with russia? guest: not warmer but a more constructive relationship. there is a good reason for this. the whole world would sleep better if russia and america would have a better relationship. his ability to conduct [inaudible] is under a threat.

eric: the whole world would sleep better why? guest: russia and america are the largest nuclear powers. world a much more dangerous place to live. eric: there is a risk of what -- of what?k a cold war.e in eric: you believe this is a new cold war? guest: absolutely. ambassador hasan emerged as a key figure in the u.s. investigations. you yourself was -- were a diplomat. should he have been more careful about his contacts with members of the trump team? guest: the more contact he has the better he performs.

it is very strange. i am meeting american ambassador but i am ambassadors not part of any administration. i do not know why this is treason in america. there's only one reason to have contact. itself, anyeting meeting he may have had is not -- does ittself raise suspicion of treason, it is the substance, what was discussed. guest: we do not know. and why it is bad. pearson way, i do not know. -- personally, i do not know. maybe someone in congress as much more than us. something wrong which was discussed between june -- or two gentlemen i do not know. eric: we're all waiting to find out. -- i worked very

long and staying with the the senate and congress it will last for quite a while. eric: with so many revelations russians having meetings and calls with and perhaps even making payments to members of the trump team, this is all under investigation. the easiest assumption for people in the united states to make is where there is smoke, there is fire. you say that is nonsense. how can you be so sure that nothing happened? guest: i cannot be so sure. our whole argument is show us, name us some names, show us what wrong was done. not just the leakage of something goes wrong. that is the -- show us the fire. suspect you are as surely or as i am with the public reports that congress made available about american concerning what

american intelligence learned about the election. d that the state meddled in u.s. elections, is that a conclusion you dispute? those are things that note that -- that we know. guest: we do not know. let's wait. frankly speaking i think american governments always are meeting with russian elections -- officials. the moment we do not see any reasons. believe russia can -- what dolections they have in these communications? eric: there is something wrong with hacking somebody's email, don't you think? guest: but who did it? show us.

witchhunt.is a it is a real witchhunt. eric: you agree with the president? guest: absolutely. eric: will we find out in the course of this investigation that either you personally or your company are somehow involved? guest: i will pay you $1 million then. bets i am not here to take . will those investigations uncover any evidence of meetings with our discussions that you personally or your bank has with any of the people who have emerged as persons of interest, mr. metaphor, mr. flynn. guest: no. eric: that is out of the question. thank you very much.

here in st.vtb petersburg, russia. back to you in london. manus: well done. you got him to loosen up his color at the end. collar at the end. a new cold war has broken out and being clear about no beingility of vtb involved in any way in regards to the investigations. the pair to take the pledge in st. petersburg as the economic form continues. eric is there and he will be joined by the finance minister and in a rare appearance, ivan -- glasenberg. you can run tv on your

terminal and have that in the top right-hand side. interesting to see what ivan will say about the world. a little bit of breaking news on barclays. yesterday you may recall that barclays is [inaudible] the goes up to 33.7%. sell, they are holding down to new 50%. they took a right down in the first quarter of 840 -- 884 million pounds. we understand or sky sources say that the south african government may well buy a large proportion of the shares. 33.7%, they have upped the at 33.7%.om 22% , what have we got for you? we will bring you an exclusive interview of the owner of britain's independent evening standard. this is bloomberg. ♪

manus: it has gone 8:16 a.m. in berlin. it is a beautiful day at the brandenburg eight. -- gate. let's get straight back to ergsia and st. petersb international economic form. erik schatzker is there. the publisher of the evening standard. the evening standard than an editorial the other day highly critical of prime minister theresa may and the conservatives. i take it that was probably the voice of george osborne, your editor. do you share that point of view? guess: it is the voice of the true journalist.

it reflects the mood which is switching toward labor in the last four weeks. this is what we say according to the polls. george osborne takes the line the only thing the standard is listening to is other londoners, their voices. discussed you and he the possibility of having the evening standard come out in support of labor for the election next week? guest: no. daily things that were discussed that we would reflect the mood of the londoners and we serve the londoners the best way we can. you will take no stance going into the election? guest: normally we would reflect. erik: the paper was against brexit. guest: we are very core minded. that is nearly 50%. if you can sway public opinion, what is the better public opinion, would you prefer

that the conservatives win a majority and brexit go through, would you preserve -- preferred the conservatives have a minority and corbin wins, however unlikely? thet: not to interfere into -- i follow what the journalist does and journalism falls with the people want and what the people want to hear and what the people think about the events going on in the u.k. think happensyou to brexit if conservatives do not win a majority? will: i think the brexit [inaudible] up. rather politee way from the british point of view. erik: will it be a softer brexit? guest: yeah. it might be. i do not think anyone coming to

power might change the point of view which was reflected in the brexit. you are a russian who knows london well. whether it is a hard or softer brexit or the variety we are discussing now, does that city become a less attractive place for russians and russian investment, more importantly? reest: russian investments a not something important to londoners yet. i hope that it will not affect -- london attractiveness from the foreign investor. there are ways into that. erik: let me ask you a question about what is happening in the u.s. free press the key institution of a democratic society, correct? guest: yes. erik: i take it then you must be supportive of that work that the u.s. media are doing to find

evidence of russian interference in the election. guest: i think that since the question has become so important, the media has to play its role in the reflections and investigations, clearly. erik: president trump himself has termed the revelations that we have seen in the new york times, the washington post, in some cases even bloomberg news fake news. what do you call it? i am more inclined to the proprietors position which is to take into account the seriousness of the media which trump calls this way. i would rather recommend to look at them in a more correct way. not that i have seen any real proof as regards the russian

involvement in the u.s. electorate process. why trump isstand using this is strong terminology. i followm not sure you. you understand that he is using that terminology to what purpose? guest: that reflect really his is reallyif he innocent. not that we have seen any serious proof yet. we might but not yet. i understand why trump is using the strong language. i might disagree because i do respect cnn and the new york times. biasedness from the point of view of the media supporting the democrats doing the election is also that. erik: is the bias still there, do you believe there is a bias? guest: it is a very interesting

phenomenon. which is new for the u.s. election process. the people working in the media to object in a sense when they have been reflecting what is happening. erik: it is a delicate question for you because of your position publisher, more delicate for the fact that you are a russian. what choices have you made about the kind of public profile you want to have? you hope we know that i used to support [inaudible] and two years ago i brought it to the point of giving back my shares to the group of beforeists which were controlling 51%. i am staying away from politics, only being involved in the business. this is the position i am taking

instead of regrouping my resources, if you want. i am not giving any serious interviews, not purchase a meeting in any political events and staying away from what is perceived as being even close to politics in this country. this is an official position i've been taking for war than two years. erik: thank you. nice to see you here. manus. are rolling them in. well done. erik schatzker there at the st. petersburg forum. back at the international economic form a little later on. we have the russian central bank avner, the finance minister, and founder of [inaudible] and a rare apparent coming through, we have the man in charge of glencore, mr. glase

nberg. atwill be on that panel live 1:00 p.m. the aussie dollar down. is under contraction. how much should you worry? and theie dollar down british pounds do not need any reason. the pound is lower. let's bring in a man who believes everything he saw when it comes to europe. it is matt miller. you are a european. climate change, will go to the rose garden. we will understand what the position is on climate change later today. theould be a moment overall derek times said in terms of your list-european -- u.s.-european relations. matt: donald trump is leaning toward quitting the paris accord but he has pressure from ceos to stay in, notably elon musk. he -- all six of his fellow

leaders, seven if you count the eu as a separate part of the g7, encourage him to stay in the paris accord. angela merkel on sunday night after the g7 was so disappointed she said, listen, we as europeans can no longer rely on this powerful ally that we have had since the end of world war ii. that was a turning point, a sea change as some called it. now you have seen merkel pivot toward other trading partners, india, narendra modi was there, will speak to her. there's a draft agreement from the chinese to say they parent -- favor the paris accord and fighting against climate change and also trading with europe. the next hour and a half. matt miller with the latest on what we can expect from climate

change from the u.s. that is it from the daybreak europe team. matt and the rest will pick up the bat. point 50.t 128 -- [laughter]

♪ matt: thursday morning, welcome to bloomberg markets, the european open where we bring you the first trade of the day. i am matt miller in london. a half hour away from the cash open. here's what we're watching. top line trouble free at morgan stanley's ceo tells us that second-quarter trading revenue is on pace to drop 10% echoing similar concerns from j.p. morgan and bank america. we will bring you to -- james gorman's outlook. polar opposites. president trump is said to lean toward going