francine: markets continue to react. volatility roars black. -- roars back. trump travails. the president's travels ban faces another court challenge as he comes under fire for a twitter tirade against a tv host. theresa may gets parliamentary approval for her program. gdp data inu.k. half an hour.

good morning. this is bloomberg "surveillance ." we have a lot to get through today. coming up in our weekly brexit show we speak with the u.k.'s shadow trade secretary. first things first. there is so much talk from hawkishness from the central bank feedings through to the markets. equity markets. now they're back up. we did see a selloff in u.s. stocks being reawakened. the quarter is drawn to a close. bonds extending some of the losses. central banks seem to shift towards a more hawkish tone. the picture for crude oil, above $45. you can see the vix, 2% higher. we will have plenty more for the market shortly but first let's get to the bloomberg first word news. andastian: donald trump --

vladimir putin will meet for the first time next week among heightened tensions between the u.s. and russia over the future of the war in syria and moscow's intervention in the u.k. and investigations into russian medley in the u.s. election. the revised travel ban is facing a new court challenge. a new set of restrictions on muslims began at 8 p.m. eastern time. half an hour before the ban started, hawaii asked a judge to clarify whether it violated the u.s. supreme court instruction. the justice department declined to comment. germany's parliament has voted to legalize gay marriage, putting the country in line with other european countries. u.k. prime minister has won parliamentary approval for her legislative programs, the first test of her new alliance with .northern ireland's democratic

unionist party . the dominated the agenda. oppositionn the main party were evident as 51 labour defied jeremy corbyn. to iment has fallen in u.k. its lowest level. as the rising cost of living and inconclusive election to turn britons from spending on big-ticket items. d biggest's second econom economy maintained its second quarter. non-manufacturing pmi also gained. global news 24 hours a day powered by 2700 journalists and analysts in 120 countries. this is bloomberg.

francine: we're just getting breaking news out of the boj. it just said a couple of seconds ago that it plans to keep the current pace of bond buying for july. there was speculation they would cut the amount. to further lift the yield curve. but actually, right now -- the boj says it plans to keep the current pace of bond buying. if you look at yen against the dollar, 1.11.99. in july, there was a little bit lower market volatility. i guess that is one of the things that may hinder it being -- getting the government on yield under control. a little - little reaction. just because a lot of researchers were expecting it to keep it unchanged. overall, we have more hawkish

tones from central banks and they are still driving markets. volatility which had been absent he debate onack as t normalizing policy intensifies after nine years of stimulus. that suggest some investors are growing concerned about the economy's ability to withstand a tightening cycle. we'll bring in the co-head of credit at hermes fund managers. and the head of global fx strategy at unicredit. what exactly happened over the last 72 hours? we're talking about the central bank, the hawkish tone is intensifying but it was not a game changer. >> i fully agree. i do not think it was a game changer -- but what -- it seems like a concerted effort. i'm not implying that it was but it was one central bank after another that pointed to increased confidence basically in the global economy.

going back to your question, whether the market is going to withstand it.a as long as it is gradual, and i do not believe that central banks hinted to anything faster than that, then the global growth picture remains quite solid. yes, i think the answer is it will be able to withstand it. francine: do you agree that it was a concerted effort or that there is movement? or whether it was actually instigated by markets? >> i think sometimes thing seems may be more of an accident than by design. to the extent it was considered, it was quickly dumbed down equally so. generally, it is unlikely to last. you have seen already today a bit of a pullback on vix.

generayesterday, i think some e moves you would've normally seen on the markets were down to the fact that you had a renewed -- relief on the oil market. so high-yield credit would have been -- they were relatively benign. you expectho d o the biggest this prize -- the biggest surprise to come from? >> what exactly we mean by surprise. i don't really expect a lot of surprises. although, it remains to be seen how inflation develops. inflation in the eurozone goes faster than the ecb expect, it is conceivable we get a surprise coming out of the ecb. where i think the least surprise is from the bank of england. it extremely hard to believe that the boe is going to move this year. francine: we have had a couple of significant analysis, but also we heard from the governor. this is the euro area inflation.

and you can see the concern of core inflation versus normal inflation. it seems that trend has started going up. it's now going back down. it is difficult to get inflation to be sustained. the ecb says this is because of the way the labor market is structured. >> there are lots of moving parts. theneither are -- i think of the point to remember is that it is really the global relative value gain. under the cover of the last few quarters you have seen a real narrowing in the spreads between the u.s. and europe. and as much as anything is keeping things in check. francine: why do you expect it very unlikely that the boe hike s? we're data dependent, so we could happen. >> let me take a step back and, first of all, what i said about

concerted effort i suggestive the market may have p perceived. out of all the central banks that might've been misinterpreted, i think mark ostney and boe was the m misinterpreted. it was very clear in his speech that he mentioned the possibility of removal of some removal of monetary stimulus conditional on business investment picking up and wage growth firming. we have little evidence to suggest this has happened. that markt think carney has changed his mind. francine: do you think he has changed his mind? was he misinterpreted the first time or the second time? it kind of goes back to the swaps. >> i totally agree. i think if anything people are not listening enough to his warnings on consumer lending, for example. if anything, he was more dovish than normal.

their areas of the market, like the u.s. housing market, which cannot take any substantial rising. i think you are going to continue to see the ping being taken by sterling rather than gilts. francine: they stay with us. etay with "surveillance," th president comes under fire for his tirade against a tv host and it moves markets. we also talked china and we approach the 20 the anniversary of the hong kong handover. this is bloomberg. ♪

francine: this is bloomberg surveillance. let's get to the bloomberg business flash.

shares sees one time negative impact from its brazilian crops business. shares rallied after the company delivered a rosy forecast and announced it plans to forge a closer relationship with shoppers. it expects sales to increase by mid to high single digits. nike also unveiled a project to sell shoes for is to graham and starting to offer goods directly via amazon. goldman sachs analysts are trying to figure out how they -- can get back into the commodities market. the bank that knowledge is some factors were unpredictable, including rising oil prices in libya and nigeria in the impact on the weather on the crops. the firm admits this leaves the question of how we did and how did we get it so wrong? and that is the business flash. francine: donald and vladimir

putin are to meet first time. the face-to-face next week at g-20's summit will come at a time of heightened tensions. meanwhile, the trump administration revised travel ban is facing a new court challenge. half an hour before it came into effect, the state of hawaii asked a judge to clarify whether the government violated u.s. supreme court instructions and defining who is covered by the order. then, of course, the white house defended the president's tweets attacking a tv presented. trump took to his platform to brand msnbc's mika brzezinski as crazy and claimed she had been bleeding badly from a facelift. criticism from republicans. the deputy press secretary said the american people got a fighter when they elected trump and rejected the idea the president should be held to a higher standard of conduct. so must talk about.

let's get a lot more on all of this with our congress reporter kathleen hunter. first of all, on the tweet. it surprised me and surprise many that when that tweet came out insulting a host for her thes and for a facelift, stock markets actually plunged. are investors getting more nervous about some of these tweets? >> absolutely. so highlyat, it's unusual to see a president focusing on these types of personal attacks. i think the particular nature of this one was shocking in that it was about her looks. it was quite graphic in the way it was described. and i think that certainly signals a degree of volatility, whiteow, within the house. that there is not a clear sense of what trump's going to do next. that would definitely destabilize markets. francine: because they are

speaking of tax reform and other things, health care, for example. what we know is the travel ban. are we any wiser about who it is affecting? >> i think, you know, the cruz x of the issue is how the government is defining family members. that is what hawaii is challenging now based upon -- you know, for instance, stepbrothers, stepsisters, they're counted as family members by grandparents aren't. the challenges based around the idea of whether the u.s. government has been defining family members correctly or, in a way that's legally permissible after the supreme court ruling. francine: talk to me about how investors look at the moment, at the trump administration. there are pretty sanguine in the past and now they are more nervous about this. why? >> a little bit.

probably the most relevant thing is it just takes attention away from some of the more economically pressing issues we should be concentrating on. if you take away his name and read some of the things he said, it sounds emerging-market like. it reminds you that sometimes an element of that sovereign or country later volatility should be price on the developed marketing side as well as emerging. francine: does this impact the dollar? this could be a president that's distracted, tweeting about looks instead of getting things done in congress. >> right. i think at the margin, negatively yes, because it does signal that the u.s. administration is using -- losing its priorities. but, you know, having said all that, even if these things were not there, the outlook for the dollar remains dour. there is a long-held overvaluation. francine: the president will be at g-20 next week.

>> the the question that people will be looking at during the upcoming meeting is their first face-to-face. hillary clinton during the campaign called trump a puppet of putin. the question is now that we know there has been russian meddling in the u.s. elections, the degree to which trump is willing to stand up to putin and, you know, stand up to him, i guess, and make the case for, press him meddling happened. and i think that is what people will look for. francine: will that move the dollar or anything else, euro? isas far as dollar-ruble concerned, i think right now the market is just reassessing some excessive optimism that was priced in the ruble. i doubt this would have anything of it can impact on the ruble. euro, we're living in a stronger euro world right now. so, i think -- it's higher.

francine: interesting. kathleen hunter. next, 20 years after hong kong was handed back to china, we bring you the latest data from the world's second-largest economy. this is bloomberg. ♪

francine: you are watching bloomberg "surveillance." china's official factory gauge,

proving the momentum is still robust in the world's second-largest economy. improved market sentiment and an export rebound for china's pmi, pushed up to 51.7, the second highest level in 2017. as china and hong kong prepared to commemorate 20 years since the british handed the colony over to the communist state. our guests are still with us. when you look at china, it seems there is quite a lot of optimism built in. what does it mean? >> i'm not entirely sure there is a lot of optimism. i think initially there was some pessimism getting built about the possibility that china may end up slowing down. now for three months, this pessimism has been shaved off as the data are proving to be quite stable. this is very important for

emerging markets, right? this is, china is going to be the anchor for emerging markets for now and the future. to the extent that chinese growth holds up well, even, you know, if you try to become more granular and looking at the data, if you look at house tier 3in tier 2 and cities, they are holding up very well. this is happening in an environment where global trade has picked up. it is not rising faster but at least it seems to be stabilizing. so, i think all of this is relatively conducive of emerging markets. of course, that will depend on what happens to yields. >> i mean, i would agree. as much as the numbers are impressive in the low 50's whether it be pmi or other recent data points, as importantly, the volatility of

those numbers has been pretty low. stability is what the markets are taking comfort in. and, also, for those that are more suspicious of numbers coming out of china, the second derivative indications are also pretty good. if you look at iron ore, we have hit 20% -- that's another indicator that things are relatively healthy. francine: what is your favorite play in terms of currency? overall, top pick. >> right. i think commodity currencies are going to start seeing a rebound on the back of ooil prices. plus, the fact we started seeing a policy shift. i like canada higher against the deollar. in emerging markets, i think near term that one is going to hold up fairly well. the back of's on strong exports in the general stabilization and data.

communications that officials have managed to halt the pace of capital outflows. in general, it seems like an informant that is a bit more conducive for china that it was 12 months ago. francine: thank you so much. next, jeremy corbyn faces brexit.- over we will also look at some of the trade you can maximize on when it comes to pound. and we'lll also talk about yields. . this is bloomberg. ♪ these days families want to be connected 24/7.

that's why at comcast we're continuing to make our services more reliable than ever. like technology that can update itself. an advanced fiber-network infrustructure. new, more reliable equipment for your home. and a new culture built around customer service. it all adds up to our most reliable network ever. one that keeps you connected to what matters most. francine: you are watching bloomberg "surveillance." this is our weekly brexit show european bloomberg's headquarters.

let's get to all of the big brexit stores. sebastian: let's start with the u.k. prime minister. she won parliamentary approval in the first test of her new alliance with the democratic unionist party. frexit dominated agenda passed by 323 votes. fractures in the main opposition party were evident as 51 labour lawmakers defied jeremy corbyn's orders to abstain. scotland's first minister pushback plans for a second independence referendum. nicola sturgeon vowed to revisit the possibility once the terms of brexit are no next year. the decision came after voters turned away from the scottish national party and this months election. three european official told bloomberg the bloc is willing to give grounds on the judges protecting the rights of e.u. citizens of the u.k.

the onus back on britain to increase the level of protection it's offering. sentiment among u.k. households has fallen to its lowest level since the brexit referendum. the consumer confidence index dropped to -10. as the rising cost of living in the income -- deterred britain's from spending on big ticket items. global news 24 hours a day -- and 120 countries. this is bloomberg. francine: we're just getting some breaking news. gdp, the final reading for the first quarter, and it seems there is not a huge amount of difference compared to what we found out a little bit earlier on. 0.2% for the first quarter. and year on year, it is 2% growth. this is the impact on the pound, not much. at 1.3001.

plays i haventacle been hearing more and more as if you do want to move on pound the best way to look at it is euro-pound instead of pound-dollar. when you look at the pound story, the gdp, it is exactly as expected. but is it a currency story more than -- i think the fact that sterling has taken so much pain over the alaska couple years is because it is the path of least resistance from the path o poinf view of carney. he knows if he should were to direct that towards the gilt market that would have big applications for consumer confidence. so, a lot of that now i think is probably known, but from here it's not that obvious. theresa may got through the votes yesterday.

you know, position he seems to be relatively balanced. s o-- francine: so, this is what the pros look at. this is sterling net positions. what does this tell us about the future of the market? >> i think it tells us the market is neutrally positioned, especially if you look at it from a longer-term perspective. you're not going to find any extreme positions. on that respect, they are going to be neither talilwinds or headwinds. from a pure perspective, i do not we can infer a lot. you mentioned euro-sterling. cable is affected by the weak dollar factor. so, it does not look -- tell us the whole story. right now we are going to a period that there is big

diversions between the eurozone and u.k. sentiment, politics and economics. francine: what is your level on the euro-dollar? euro-sterling, sorry. >> right, ok. forecast right now are very tricky, especially since the move we had over the past three or four days. for euro-dollar we have been calling for 1.14. however, risks to the upside of increased. euro-sterling we are looking at 90. risks to the upside are increasing. francine: and what is your take on what the u.k. can look like? marketg you buy in this how much is it affected by the currency and affected by brexit negotiations? >> you know, given the headwinds on the particular side, it's difficult to be overly optimistic for the u.k. but within that, there are sectors that either will benefit from or be heard by the moves on fx.

some of the relief on sterling will be welcome for the retailers, buying things and dollar and selling in sterling. conversely, the exporters will be hurt by that. francine: it is a mixed bag. i'm typing seriously because i want to get the euro-pound chart. it looks pretty great since it is one of your top charts. we've seen it go to the 2017 high. this, you know, we will see a lot of volatility? >> i think the volatility will depend on a large extent by how clear or confused the bank of england's communication is going to be. i am not talking specifically about mark carney. so, i think we are likely to see a bit m volatility. opersonally, any weakness

below 87 would make me definitely a buyer. going higher because they are pointing in this direction. francine: one final chart. thank you, hillary. this is a great spread between the u.s. 10-year -- >> it is difficult to say. you do not know how much of that is movements because of expectations of because of the this,nts -- i assay because a lot of people are telling me, how on earth on the u.k. yields so high? it is not just more variable expectations. it must be higher term peremia. not a good thing for the exchange rate. francine: thank you for joining us.

as britain confirms trade talks with the world's biggest economy, we'll focus on brexit and the future of u.k. trade. this is bloomberg. ♪

francine: welcome to our weekly brexit show live from london. i'm francine lacqua. it is time for the market check. mark: equities with a chance -- since 1998, the mscl normalized beatingup by 20%, commodities, the blue line. the barclays bloomberg global aggregate bond index is lower by roughly 1.5%.

the euro, the second-best performing asset. gold, dollar index, and brent crude fell into a bear market. draghi pushes euro higher. it is all about portugal. best quarter since 2010 euro for the euro. on the back of the more hawkish draghi. just sewing the probability of a rate hike in the u.k. in december. look how it's shot up since the 14th of june. 5%. 56%. more than a 50-50 chance in the wake of a more hawkish mark carney this week. and portugal, it was all happening in cintra. happening in japan, inflation, yes there is some for the fifth straight month. the slow rise means inflation remains far below the 2% target. inflation excluding fresh food.

that is the white line. 0.4%. as we said, a far cry from that 2% target. francine: thank you so much. three weeks after the leader of defied. labour party expectation is to gain seats. 50 of his lawmakers rebelled in a vote on brexit. three members of the shadow cabinet had joined rebellion by johnny to keep the u.k. in the world market. my guest is a key player in labour's top team. and one of the two people that would be negotiating brexit if the party had won. he is barry gardiner, the shadow secretary of state. especially in these kinds of very momentous times. recap for me, exactly what is labour's position on brexit? secretary gardiner: look, the

first thing one has to say is that the win, which the conservatives -- way the conservatives are approaching brexit, has struck the long-term and we see that in the way the issuement approached the of european citizens living in the u.k. and our citizens living and the rest of the e.u. and what we would have sought to muchdone is give them a more positive offer bright the beginning. and that has created a great deal of tension. the original offer came from europe. then there was a countervailing, lesser offer from the u.k. that was a mistake. that is the first thing. the second thing is we see the constant refrain coming from the conservatives that they want, t hey are prepared to walk away. they are prepared to be tough. no deal is better than a bad deal. in fact, what is structured into don'te 50 is that if you

actually managed to conclude a deal, then at the end of the two-year process you are eject it from the process under wto rules. no deal is not a trump card to be thrown on the table. it's actually a cliff edge over which you are pushed. philip hammond was absolutely right to say that no deal is a very, very bad deal. and i think there needs to be a good of honesty and reality and realism from the government about that. francine: would you negotiate differently, the division that labour has pre-brexit? -- for brexit? no deal is a worst-case in error. is it a negotiating tactic? secretary gardiner: in any negotiation what you have to do is be -- the outcomes you want are. not the structures but the outcomes. is, look,ve said

let's not focus on the norwegian model, let's not focus on the remaining a member of the eea -- what we want to focus on is the outcomes. these are the things that matter to people, to businesses to those who need to know where they are going to stand in terms of being able to access labor from other parts of the world, who are going to be able to ensure that their businesses can survive because they have got the skills they need. francine: what would it look like? access to the single markets? at some point would've be -- would it be rejoining the single market. secretary gardiner: you talk about joining the single market. francine: but not losing access. secretary gardiner: what we want is to make sure that we maintain free access as much as possible. now, you can either do that for your goods within a customs union, but that has a downside. the customs union would mean there is ace in a tree. you would be a next hurdle member of the union and that

asymmetry would mean that you would have to take on any of the trade agreements that the e.u. negotiate. but you would expose your market to liberalize your market to that third country without actually having the same liberalization of their market to your goods and services. francine: what would you be prepared to give up in order to retain that? a looser controlled immigration? secretary gardiner: look, there will certainly be under a labour, what we would want to see is we will want to see free otvement of labor but n necessarily free movement of people. we want fair and managed migration. we recognize the needs of our economy means we need to maintain the flow of people that come here to service our industry. francine: how do you do that? is it an income cap? secretary gardiner: no. look, it is about ensuring that in each sector of our economy we have the supply of labor we need.

if one were to say there is a certain skills level, that would mean that our farmers in east anglia who depend on migrant labor coming from europe every year to harvest their crops would not be able to do so. so, you have got to look at it sector by sector and say what are the needs? how do you make sure this is a fair system, fair to everybody? but it's properly managed. in that's the key thing terms of looking at what you are looking to do in terms of migration. francine: we saw a split in the labour party yesterday. is there a concern that if it split further, it would play into the hands of the conservative party that would then be able to get a harder brexit deal? secretary gardiner: i perfectly understand why colleagues look at the norway model, the eea model, and they say, you know, if we could be part of the european economic area, we would be able to gain access to the single markets.

the trouble with it is that the four objectives that most people who voted to leave the e.u. in th referendum votede for would not be met. so, we would not as a member of the eea have control over our borders. we would not have sovereignty. we would have a worse position in terms of sovereignty. because we would be takers of the rules and regulations instead of around the table making them. and we would be subject to the ruins of the european court of justice. francine: and all of that is clear. secretary gardiner: the people voted to leave the european union. we are the party that said we respect the referendum result. we didn't want it. we can't now go against the very objectives. francine: my question is how important is it that the labour party sticks together so you are real opposition to the conservatives, and splits like

we saw yesterday, does a peopleice -- to what the voted for which is a real opposition to a hard brexit? secretary gardiner: look, let's be clear. that the conservative party showed yesterday just how split it is in enforcing the changes to the queen speech the government had to concede. whereese are issues people feel absolutely -- i understand colleagues who say, all the benefits. i believe we can get all the benefits but we will not do it by focusing on the structure. we'll do it by focusing on the outcomes. and that's a matter for negotiation. so much forank you joining us. barry gardiner, the shadow secretary of state for international trade. skilled workers from the e.u. may be considering their own types of brexit. we discussed the findings next. this is bloomberg. ♪

francine: welcome to our weekly brexit show live from bloomberg's european headquarters in london. almost half of britons supply of

highly skilled workers from the european union are considering leaving in the next five years. according to report this week by deloitte. warning of the risk posed by brexit, 47% of such workers are eyeing the exit door. let's get more with the deloitte chief economist. why are people wanting to leave? they don't feel welcome or is there concern that the u.k. with suffer because of brexit? >> i suspect it is the latter. you'll remember the 20% evaluation instrument has quite a single begin effect on the repatriated value of earnings from the u.k. what i think is quite interesting about this is that, for people from the e.u. who work in the u.k., the u.k.'s become less attractive as a result of brexit. perhaps surprisingly, far fewer the u.k. arede of

worried about the effects of brexit. the other finding that comes out of this report is that and within the european union, despite brexit, which has had negative effects, the u.k. is seen as a good place to come and work. francine: ok, so, this study was 342 foreign workers. what surprised you the most? it does not mean these people will move for a certainty. it means they are looking at options. >> i guess, the thing that really surprised me, i was not surprised that brexit had a negative effect on sentiment. executive because it introduces uncertainty. last week, the government set out to try to alleviate those concerns but inevitably there is uncertainty where there wasn't uncertainty. the thing that surprised me was the fact that when we asked these people, and actually

people outside the u.k., how they rank the u.k. relative to the united states, australia and canada, as a place to work, i was staggered the u.k. was seen as the most attractive location. because i always thought that the u.s. or canada would be right at the top. francine: how do you explain that? people from the outside looking at the u.k. insane, i would like to live there. who havele been here for a while, because of brexit, i want to go somewhere else. >> you are here and you came based on the u.k. coming to the european union. and that has changed. i think if you are outside, you're looking at a set of qualities, most of which have not changed. when we asked these people, what is it about the u.k. that is attractive? job opportunities, cultural diversity, work life balance. these rate their he high.

london is seen as a big attraction, you know, to people outside the u.k. i think there are a lot of here a that had we been couple of years ago and talking about the u.k. is a place to work, we would have about -- the education system, the rich diversity of the economy. those things have not change. i guess what surprised me that attractive,quite as despite brexit. francine: was this survey before? >> it was. francine: so there's no indication on knowing whether, for example, some kind of identity card wants people to move more or stay. >> my guess is people would've been reassured. we asked the people what is it find reassuring and, actually, one of the things is a clear statement on the government on the rights of the e.u. workers in the u.k. francine: we need to know the date, right?

which would mean people may leave instead of staying here for the next five years. >> exactly. francine: thank you so much for joining us. bloomberg "surveillance" continues. we will talk to the chief strategist -- then we'll talk about the italian banks. an all italian team on bloomberg "surveillance." we will look at the currencies. a little bit of volatility on the back of more hawkish tones from central banks. i'm thinking boe. some analysts are saying maybe that was oversold. and you can see the pound-dollar 129.93. this is bloomberg. ♪

bonds extends losses

as a central banks shift towards a more hawkish tone. iron ore rallies. and taking on trump. angela merkel says protectionism is a big mistake. this is bloomberg "surveillance ." tom keene is in new york. we have a little bit of cpi data out of the eurozone. this is important because of the hawkish tone from a lot of central banks that has been filtered through the markets. so that inflation slowed to 1.3% in june but better-than-expected. something significant for mario draghi. tom: it is amazing how any inflation statistic will matter from now until whenever we got the pce deflator this mortar in 30, whichd states at 8: will give the same kind of touch we have right now. francine: if you look at what is underpinning the markets, it is definitely the change of tone. but investors want to see it in

the numbers now. first, let's get to the bloomberg first word news. taylor: the trump administration's revised travel ban has gone into effect. refugeesictions ban from six was an countries. challengers in hawaii have gone -- saying the ban goes farther than the supreme court allowed. prime minister theresa may has passed the first test of her new allies with northern ireland's democratic unionist party. may won parliamentary approval of her legislative agenda. eh had -- she had to make a concession on abortion rights. the official factory gauge in china rose more than estimated. new export orders increased to the highest level in five years. and germany has joined other european union nations and legalizing gay marriage. makers approve the

legislation after angela merkel unexpectedly dropped her party's traditional objection to same sex unions. she said members of her christian democratic led bloc should vote their conscience. global news 24 hours a day powered by 2700 journalists in 120 countries. this is bloomberg. tom: you finish the week strong with a great set of guests. let's get to o ur desk in london. the euro pulls back, probably off the data we just saw. with further curve steepening. a difficult day in the dow yesterday, 11.56. the vix goes up higher. i put the swiss 20 in there. i know canadian dollar doing better, obviously with the better oil market. stuart wallace will join us in the our pin francine: technology stocks are a little bit all over the place.

equities in europe now bouncing back after the biggest selloff since september. technology stocks are actually rallying. oil, because of the inflation continues to grind higher. there are concerns that there is oversupply. but overall it is about volatility and about the hawkish tones in central banks. i don't know whether this means they are ready to normalize or hike or what they want to give a warning sign to markets. that we'll be debating for the next two hours. tom: we will be looking for tea leaves. here we are below 2% on the bloomberg. deflator.e core pce this is something a lot of the pros look at. less so the public. it shows the recent rollover h ere in inflation. . an itty bitty rollover but nevertheless, it is going against the discourse in rhetoric we have heard since sintra. francine: we call it sintra pact, although a lot of people think there was no pact.

markets waited for it and hoping this would happen. let's look at the inflation data because this will be the next market/onto to see whether those hawkish tones were really what central banks wanted to send out. this is my inflation for the euro area. and the bloomberg updated itself. you can see the zero bound. we will put that on social media. core inflation is at 1.1%. and normal inflation is 1.3. tom: coming up on the first half, it's important that you understand in francine's agreement with bloomberg she must have an all italian our the end of the first half of 2017. she will bring in our esteemed guest from italy this morning. francine: we're doing it in italian. that was also in my contract. ciao. global bond yields have surged on hawkish central bank knows.

the move comes after a big week of commentary and mario draghi's signal the essential p bank may be looking towardsa paring asset purchases. all italiane, the cassis h ere.-- cast is here. you both for joining us. tom, thank you for coming along for the italian show. very realh tones are on the markets. if you look at swaps, the boe and ecb, they realize it. but what really changed is not really palpable and central-bank? >> i completely agree. first of all, these changes, it will be strange because, as you can see, actually inflation is -- if you look at the u.s. core cpi is basically flat. inflation is falling in europe

and japan. the u.k. is slightly different. eube with an exception in rope on the weak side. the perception of the market has changed. because markets have been so strong. and i think some investors want to have an excuse to make profits. and i think that is probably the reason why the market is now struggling a little bit. francine: does it not serve actually with the central banks want to do? if you have a psychological reversal, it means that you keep your options open, which means you are really data dependent. >> yeah, i think the central bank continues to be data dependent. but i think if you look at what the central banks, i do not personally see a major shift in the interpretation of the market. the feeling is that markets -- central banks are worried about -- and that's the message the investors got. that's why think everyone is getting more nervous. itom: this is been a huge

source of study. record native central-bank action. -- the idea of coordinated central-bank action. three years ago the international monetary fund studied coordinated action. does it exist or is it a myth? luigi: it is more of a myth. in many situations, elite we would be useful, but when i hear central bankers talk among themselves, what they tend to say is we wish we could do it. we can't. so, do not think there is this coordination. certainly, they talk, they look at each other, but i do not think they can coordinate effectively because everybody is very mcuh influence buying the current -- much and so the current economic and private. wordif you say the transitory in chicago, you get thrown into the chicago river. is there such a thing as transitory inflation? is saying, what luca

is interesting. the inflation is much softer than people sort of factored in in this stage of the cycle. so, it runs against the rhetoric that we should increase rates and the quantitative easing, europe should finish. so, i honestly i do not know but i think it is an interesting indicator to watch. francine: was this coordinated and do we care? fi you -- if you have four out of five central banks saying my message was not understood. is it very different to them saying, guys, let's all go to portugal and do it together? luca: it is not relevant. what we see is a synchronized tightening of monetary conditions. and this is for different reasons. just six-month ago, everybody was on a different, completely different kind of -- it was more like a dovish. now all central banks are going

in the same directions. i do not think they are going to do anything dramatic. with ramifications to all of finance and investment in economics. continue thiscaill discussion from london. we go to america. with unicredit. not only about the sintra pact. on the state of american consumption. from london and new york, this friday, this is bloomberg. ♪

taylor: but it to the bloomberg business flash. shares of nike are rising. it delivered a rosy forecast,

plus nike will let amazon and into them users by its sneakers directly. sales are expected to rebound in north america. bayer is cutting its sales and profit forecast for this year. high stockpiling of its crop protection products in brazil. it's consumer health division is not performing as well as expected. shares dropped by the most in eight months. and the securities and exchange commission is scrutinizing how hedge funds and other money managers handle hot ipo shares. according to people familiar with the matter, regulators are concerned a select few are getting access to highly profitable trades. according to bloomberg, a new listed share is gaining 60% on the first day of trading. that's your bloomberg business flash. francine: thank you, taylor. angela merkel has -- dismissed brexit and said efforts to fight climate change are irreversible. speaking to lawmakers in the

lower house of parliament, the chancellor predicted discussions about the direction about global policy will be very difficult, head of the g-20 summit. donald trump will attend the summit and have his first meeting with russian president vladimir putin. now, still does, the chief strategist -- and the university of chicago professor. luigi, when you look at g-20, you really have basically different regions and have a map , something looking at the countries that make up the g-20, that want different things. it seems the u.s. and the u.k. are more and more isolated and emergent markets what more trade but also germany is leading europe into more globalization. luigi: yes. i think there is definitely this change in which china is a leade r in the fight for global trade. so, we're not expected several years ago. and germany clearly has both a

strong interest in free trade. they are the biggest exporter. and they are picking up the leadership of the free world in the fight to maintain free trade around the world. so, think this is going to be a. celebration for angela merkel. she is playing at home. she is playing on her strong points. and most countries will follow. i think the question is what president trump is going to do. i think much of the anti-trade rhetoric was a rhetoric for the election. i don't think he means what he says but we will see. francine: do you think he means what he says? depending on the communiqué, will it move euro-dollar? luca: what is scary for us is this rhetoric about tirades and all of these kinds of things, especially -- you see also the decision, the european commission on google as seen as a part of reversal of globalization.

this is the main risk. it is very difficult to predict what will come out from the g -20. what we can see his we feel that we are -- in globalization. that is very dangerous because global growth is solid but trade growth is very weak. that is what we do not need right now. day you imposed google was a good antitrust policy. it was not anti-globalization. luca: the issue -- tom: go ahead, please, please. luca: but the fact it has become like a legal issue, that tells you something about this kind of level of tension. it's one thing to say it is good or not but the perception has been especially, and the u.s., this is something that goes against globalization. course google is trying to sell it is against globalization and it is not a monopoly.

francine: this is like a fight that tom and i have all the time. tom: got that right. i'm interested in, and you have got great perspective, where is the right level of euro-dollar for the g-20. theresa may gets to show up. what is the right euro level? is it 1.16? do we go back to 1999? luca: fair value, we should be around 1.25, 1.30. the european economy is doing better than the u.s. economy. there is potentially tapering hampering in the euro area. i expect the euro to go little bit higher, not too much, but probably 1.20. this is probably the level where everybody will feel accurate. tom: o we will come back with our two esteemed guests. coming up on radio, this is

perfect. dennis gartman. we'll talk about red wheat. dennis gartman on the markets, about being right and being wrong and new volatility. this is bloomberg. ♪

francine: this is bloomberg "surveillance." we go to italy because it is

time for the morning must read. today's comes from bloomberg -- writing on the italian banks. we were talking about this when we had news of intessa. the good stuff in two failing italian banks and that italian government was left with a rest. there is little doubt that the solution orchestrated last weekend by the government has -- avoiding financial panic but padoan is wrong in saying there was no other options. italy could have opted to resolve the banks o2115 months ago." let's get back to our guests. now, luigi, as soon as the news came out, you were very critical about the solution found by the government. thatmain bug is taxpayers are paying for something that is unfair? luigi: i have many. the first one is the government

waited for 16-17 months to act. this is not a sudden catastrophe. this is a slow motion film, during which, the banks lost 40% of their deposits. banks are very sensitive animals. if you do not intervene fast, they deteriorate in a. -- in value. the deal has decreased her medical because of government in action. problem number two, i think that they in my view found a loophole allowed -- around a rule. this is a terrible prec edent. offering to the german naysayers we do not want to ensure deposits because you italians behave that way. francine: how would you fix it then? luigi: i have been saying for the last 18 months, paradoxically, i was not a big

supporter of that and united states, but in italy, a version of tarp would've worked in the big difference is twofold. number one in italy, there is no real deposit insurance. the banks goof down at the same time which is not really insurance. number two is the bonds of banks are held by individual investors that were mostly cheated by the banks and into buying the stock. so, the reason why i think that bail-ins are good is because they make people who got a therd for the risk pay for downside. in this case, they never got a becauseor the risk, they were sold and a manon market way but -- in a nonmarket way by banks. making them pay twice. i think some form of intervention in equity

recapitalization, entire system, the good thing about the tarp intervention was that we could -- all the banks. then let the market figure out which one is less solvent. if you go one by one, you are always at risk of finding the 1 -- we do not know the next shoe to drop. francine: will this have political implications? luca: it is not the ideal situation. i agree that a tough solution would've been better but we have to be practical. it is a short-term fix. long-term, it is probably a negative. the good news of all of this, at least the authorities in europe can show they can be flexible. is probablyterm, it a negative, in the initial term, it is a positive. the political dimension of this crisis in italy is much bigger,

because it is a big involvement of retail investors. and the elections probably in fever-tree or march of next year. -- probably in february or march of next year shown bye flexibility europe is to some extent dangerous because it's political flexibility. dependingrules, but on who is in power in who is likely to go to power, i change the rules in order to make one or the other guy lose or win. i think this is not an objective -- it is not -- very quickly, does this have huge implications for what happens with german banks? this this a precedent that will be used by other nations? luigi: we know that german banks are under different rules. there are the small, local banks that are basically ensured by the. local authorities and this insurance is a lot

because they are state owned. and most of the german banking der europeant un supervision. tom: great conversation on some important issues. you wonder if we are going to see this again for italy. what we know every time the debt ceiling gets hit, alys rivlin is a good woman to speak to. alys rivlin has seen every debt ceiling debate. she will move forward as we move forward in the autumn. ellis rivlin in the 10:00 hour. stay with us in london, and new york. this is bloomberg. ♪

♪ francine: this is "bloomberg surveillance." we are finally hearing from president xi jinping from china talking about hong kong.

it has been 20 years after the handover. the tensions we have seen with china, some would say point to an identity crisis for hong kong. significant that the chinese president now starting his speech at hong kong airport, speaking to major hong kong officials, saying this is an important time. i was taken yesterday by your conversation with chris patten. saying the country needs to stick to one country, two systems. he was a gloomy on two symptoms. -- two systems. just a remarkable conversation yesterday, a great honor to speak to him. , they the new hong kong are building so many skyscrapers.

has aotel on the left brokerage of my choice in the top of it. it was an honor to speak to lord patten yesterday. in new york city with her first word news, taylor riggs. taylor: china is protesting the u.s. arms deal to taiwan. the trump administration has agreed to sell the taiwanese weapons. beijing says the deal runs contrary to washington's commitment to a one china policy. president trump's revised travel ban has gone into effect, and there is already a legal challenge. plaintiffs in hawaii have asked a judge for a broader set of exemptions. the new restrictions been refugees and immigrants from six predominantly muslim countries. there are exceptions for those who have relationships in the u.s. according to the congressional budget office, the treasury can find a government spending until mid-october under the current borrowing limit.

lawmakers could wait until after summer recess to deal with the issue. confidence consumer has not been discussed since the brexit vote. political uncertainty is making brits make less purchases. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thank you so much. youtravel ban, for those of in the global audience and particularly the middle is to, it was not as big of an uproar as we have seen. bere will probably protesters and lawyers ready to assist people. to assist us right now, our reporter in london to invest. this time is different with this travel ban and the news this

morning if hawaii is going to go right at it. what are you looking for from the action in hawaii today? is centereduestion around how you define family members. there has been back and forth about how the administration is divining that. -- defining that. that is the cracks of it. that is what we will be looking for. things like stepbrothers, stepsisters, stepchildren are not -- are allowed, but grandparents are not. tom: to get to heathrow, are they allowed to get on the plane at heathrow? >> my understanding is it will it depends onere, if you have a valid visa, which is different from the first time around. you were allowed to get in the plane print from what i have read, there has not been a lot , but things are

early. we are heading into a travel weekend. see howbe a time to well this plays out, but i think people are more prepared to handle this this time around in terms of lawyers and the information that has been put out there compared to january. tom: luigi, and italian loading -- wrote a book. how do you fold the social policy, immigration policy and a travel ban into the spirit of capitalism in america? i think this is not linked with the traditional view of capitalism. i think this is a political agenda of trump and wants to cater to some resentment in the united states against immigrants. if you are a true capitalist,

you are in favor of free trade and free movement of people. immigration, especially in america being a source of growth, is a competitive advantage. anything that gets in the way will slow the economy. francine: there was a tweet from a tv host in about the united states. the markets took notice of that. what are they worried about? kathleen: things like this latest tweet are going to distract from his overall policy agenda. i think there is also a base level of volatility question of, what is the president going to say next? the bar has been lowered in terms of what we might be able to expect or maybe bieber has been raised in what we are able to be shocked by.

one of the things i thought was oferesting, susan collins maine, a republican senator, was one of the senators who came out and condemned what trump said. she is pivotal, because she is one of the senators that republicans are trying to win over with the obamacare repeal legislation. this does not make that any easier when he says things like this. francine: does this translate in the markets because he may lose support in congress? this goes back to have care, tax reform, and the like. back six monthok ago, there was optimism about what trump could do for markets. now i think the expectations are so low that i don't think it will have a huge impact on markets. everybody seems to realize it will be doubtful. now zero.ation is

it is unlikely something will get done. if it does, it will be a surprise. i am surprised that the market is not more negative. luigi: i think that slowly they are realizing he is not going to do much. , andi look at all of this around the week of everything, the politics, all of this, that, and the other, i go back to one economic issue. the imf growth of two-putt .1% out 18 month, and i'll be central bankers are trying to

raise interest rates. ave you ever seen such dispirited view as what we have from the imf, and from others. we are facing extra neri times and i'm an -- and unexpected times. low growth is a problem. the low level of interest rates have been extra neri. the duration of that has been extraordinary. central bankers are facing the issue that sooner or later they need to raise interest rates. on the other end, they are worried about growth and productivity growth in particular. do you have a clue monday morning what you're going to recommend? what do you do with equities after the news flow this week? we have become cautious on

equity markets, but not so much in terms of because of policy tightening. we feel this fantastic increase in economic momentum. in the last six months, it has been good. we see a peek in the u.s. europe is slightly different. also, earnings momentum. earnings were up almost 20% globally in the first quarter. if you want to this combination of strong markets, economic , we are, and policy cautious but it is not the end of the market. francine: what is it mean for the fact that president trump and vladimir putin are meeting at g-20 for the first time since the president became president?

kathleen: we have these special counsel investigations, the congressional investigations russian meddling that happened in the election and alleged trump campaign collusion in that. during the campaign, hillary clinton labeled donald trump a puppet of vladimir putin. the question we will be looking for in this meeting is the extent to which trump seems willing and able to dispel that label. tom: kathleen, thank you so much for the briefing this morning. we will continue with luigi zingales and luca paolini. july 4, i will be off. ♪ ♪

tom and francine from london and new york. the commodity is on course for the tickets monthly decline since october. goldman sachs this week joining other major banks including j.p. morgan and morgan stanley, cutting its forecast for wti. is a bloomberg reporter. our guests are still with us. what does this tell us about the strength or not in commodities? >> it tells us about the strength in china, not

commodities. he china is the key want to look at. if you look at the factory index, it was better than expected. but that has meant is a little bit of a spark up in steel production. we have poor visibility at the mills and that seems to be what is sucking in the extra iron ore. francine: when you look at china that why thed, is demand for some of the still products is coming in? rhubarb,e look at which would be on the construction site. tom: let me bring up the inflation-adjusted bloomberg economy -- commodity index. it is exquisite.

it is about 20% hydrocarbons. if we get a reflation commit a coordinated central-bank -- reflation, a coordinated central-bank response, is that related to the commodities? stuart: it should be. for natural inclination to be could do -- would be to buy gold. copper seems to show better returns. that is a month argument. i will probably get a lot of hate mail for that, but you can .ook at the commodities tom: ken chair yellen and the rest of the central bank crew save brazil? do you link a better brazil economy to what happens in central portugal? stuart: it is a tricky thing. tom: i agree. stuart: in terms of the

commodities play, brazil is commodities. what we are seeing at the moment is the oil prices coming down. that has an impact on the sugar market. there is this affect across the whole complex when you're talking about brazil, particularly now in iron or. you would anticipate that given the backup into a bull market there has got to be -- they have got to be thinking about producing more again. it is only commodities play. francine: what is your take on where commodities go from here? is it a supply-demand measure of the strength in the world economy? luca: the correlation between inflation commodity prices is a correlation between oil and commodity pricing more than anything else. down, not actually up.

at this stage of the cycle, you would expect commodity prices to rise, because you have a global economic recovery. we have seen the opposite. the main reason was optimism was to hike in terms of global growth. now with the indicators weaker. that is why commodity prices have been struggling. having said that, any indication that the central-bank of china will ease policy will have an impact on price. commodity price is related to global economic activity. tom: we will continue with our two guests. stuart wallace, thank you.

♪

♪ taylor: this is "bloomberg surveillance."

blue apron may need to raise more money after smaller than expected ipo. the company has cash and credit for only a year. blue apron collected $300 million in its public offering after slashing prices of its shares. onic linked to the deadly fire in london this month. familiar to people with the matter, about 30 engines were recalled from the company. a university is try to turn around its lagging performance. that is your bloomberg business flash. francine: central-bank policy has been a source of confusion for some investors.

yesterday, a chief economist said the central bank needs to re-examine the possibility of raising rates after suggesting rates should stay on hold. still with us, luca paolini and luigi zingales. thank you both for staying with us. when we look at the boe, and this is a probability of rate increases by 2017, we are fromng at swaps, we heard whatcarney contradicting he said a few days ago. a change in tone to make sure repricing occurs. luigi: the contradiction is in the data. curve, thatind the the uk's economy is weakening. in this difficult situation

where they know they are behind the curve, but they are high, i think the growth would be the most critical factor. in 2011, the inflation was different. there should be no hike in the u.k. this year because of brexit and because the u.k. economy is weakening. it is not the kind of growth that would allow a central-bank to raise rates. deutsche bank has had an eventful week. .here has been a radical shift there is writing about the jump condition. you run into a jump condition. a 120 eurosorry would be a jump condition for mario draghi where he will not get what he hopes for.

is there a risk or fear of a to strong bureau? luigi: there is, because europe is turning around, is growing, growing better than the united states. it is not growing as fast as most with mike, and in particular, italy is doing better recently. i don't think the situation is so great that an increase in the euro -- i'm sure everybody will look at the exchange rate in the dollar. tom: was this a week of physics envy? is this too much physics run amok? market, there is a lot of sentiment that is not as easily translated into an

equation like in physics. there is a lot of reading of tea leaves. i think the speech that mario draghi gave, i did not think it was pushing in the direction of tightening of rights. the market took it that way. has becometral pack the way of looking at things. much into what the central banks are saying. i think we should focus on growth. growth is strong. tom: very good. this has been fabulous. they do so much, luigi zingales and luca paolini. we will drive it forward this

conversation and get you ready for your weekend reading. it will be interesting to see. more coming. we have the fact that i am working. i can't remember. central parks, it is gorgeous. there it is. this is bloomberg. ♪ ♪

tom: central bankers with audacity.

they say disinflation is transitory. we get important inflation data at 8:30. grandparents, they need not apply. the travel ban is in effect. a why he says, give me your tired, poor, i will take your grandmother. with interest rates higher, will we see an m&a frenzy? good morning, everyone. this is "bloomberg surveillance ." francine, what a week. extraordinary pageantry in hong kong. what a privilege to speak with lord patten yesterday. 20 years on. the body language of this event in hong kong. francine: maybe the president himself is wondering whether he can send his grandmother over to you or not.

the president trying to reassure his divided hong kong of china's continued support for the former british colony. we heard from activists calling for protesters to demonstrate the city's desire for greater democracy. this is the president saying, we support you. just extraordinary. we wonder where we will be in 20 years. in hong all of our team kong, shanghai, beijing for all of our support. right now, taylor riggs. taylor: the trump administration's revised travel ban has gone into effect. the new restrictions banned refugees and immigrants from six predominantly muslim countries. there are exceptions for those who have relationships in the u.s. challengers in hawaii have gone to court must saying the supreme court allows. and southtrump

korea's new resume talks at the white house today. last night, the president tweeted they had a good meeting. to reassure the trump administration he will coordinate on the north korea threat. in the u.k., prime minister theresa may has passed the first test of her new alliance. she won parliamentary approval of her legislative agenda. she had to make confession on abortion rights. germany has joined other european union and nations in legalizing gay marriage. unexpectedlyr dropped her parties traditional objections to same-sex unions. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. how about a friday data check.

curves a steepening for the most part. 90 basis points, way away from a 79 basis points we saw on monday. a little bit of angst out there. nobody remembers what a bear market is. francine. i am looking at what -- eddie little bit of generosity on european stocks. at a little bit of generosity on european stocks. although continuing to grind higher. oversupply --nd concern over the oversupply diminishing. tom: thank you so much. butredit is a smaller

really smart house with eric new thing in europe and harm bandholz in the u.s. he has done eclectic research, including a piece years ago on saudi arabia and oil. this morning, we talk a bombshell that would change american politics. you were looking at the unemployment rate to drive lower. why? we have a solid employment gains. what we have seen of the labor supply side, that keeps slowing down. we are talking about break even employment gains. that pays will slow down to below 100,000. tom: bring up the chart. last week, talking about 3.5%.

my correct that you look at this vector wandering down. stunning level of 3.0%. is that feasible? harm: it is. assuming payroll growth will slow down. the phillips curve has flattened. we are still in the flatter area. change, butrs have i am convinced the phillips curve still exists. we are getting into a number in your area, -- into a nonlinear area. a lot of people do not believe you. they think the phillips curve is no longer the way to look at this. what are they looking at? harm: i think they are looking at history.

his -- it is right parameters have changed, but we can look at every wage measure and core inflation measure and we see they have accelerated. the phillips curve relationship still exists. it is just not as steep as it has been some 10 or 20 years ago. the narrative -- the negative correlation still exists. there is a nonlinear area. it has been driving the fighter for the last several months, because as we get towards the lump -- the low implement rate, the cost-benefit ratio is increasing. that is why i think the fed is correct in continuing to normalize policies. thisine: do you believe in central pack? banksct that central calling to the rep in a

corrugated message? --in a coordinated message? onm: what we can all agree is that only central bankers field the world is a better place than it has been a couple months ago. global growth is doing better. it is about time to gradually prepare markets. the policyization of in europe is on the horizon. i think they want to be even more cautious than the fed has. 2013 -- maymade 2013, the ecb giving an early warning.- there are a lot of questions in the u.k.. signalsis giving early

that at some point next are they start lowering. francine: does that mean they are behind the curve or they believe the market was not pricing things right? harm: i did think the ecb is behind the curve at this point. i think they have a clear strategy. summer next year is the right time to scale back accommodation. -- somewhere next year is the right time to scale back accommodation. you are above the imf. you surprised by not 2.1%, but 2.1% out to the end of 2018? for the u.s.? lowered mye just u.s. forecast for this year. -- 2.2 this year and 2.3 next year. we have some momentum.

it is still benefiting from better growth in the second half of this year. i am not too surprised that the imf is lower. threehere do we move from to the gloom i am hearing? is it that consumption will not happen? --m: contention growth consumption growth continues to be the main driver. tom: what is that happening in the american economy? harm: productivity growth. have some pent-up demand after the extreme weakness. that banner is the game changer for the week. and a lower u.s.

jobless rate. cap, robert will be with us to talk mergers and acquisitions. this is bloomberg. ♪ ♪

taylor: this is "bloomberg surveillance." shares of nike are rising in free market trading. rosyompany delivered a forecast. nike will now at amazon and instagram users of why it makers iraqi. byes -- and instagram users directly. sales are expected to increase.

bayer has dropped sales. regulators are concerned that a select few are getting access to highly profitable trades. newly listed shares gained an average of 15% on the first day of trading. that is your bloomberg business flash. one thing we know here is that we have a global audience. for our global audience now, we are going to discuss the last 24 hours in washington. here is a article that says all for our global audience. a -- it is a crestfallen eagle with the word humiliation.

with us now from washington is kevin. minutes, mr.0 scarborough and mr. raven ski have published a detailed essay of this upper over the president's tweets yesterday. how has the beltway reacted to this and how does it change the washington debate as we go into july? they took out an object saying the president has an unhealthy obsession with the show. regardless of whether he is the president or just a regular citizen, to attack a few more reporters face, there is no words. yesterday i interviewed the chairwoman of the rnc, she defended it, but there are many other prominent republicans who are pushing back against this. doesn't -- there are no

words for it. i would make the point that this is a president who has received criticism from those within his own party for not being engaged on issues sausage -- such as help your policy. why the twitting about the looks of someone? -- why is he tweeting about the looks of someone? you link this over to a senator or congresswoman saying, that is it, i am not voting for anything this guy wants? alaska, republican from someone who has been frustrated increasingly with the policy specifics coming from the white house, or lack thereof, tweeting yesterday that, is this somebody that wants to be known for his policy or tweets? that is the question that several of the more moderate republicans are asking now. it is a bizarre destruction. tom: let's move on from the destruction.

the agenda. what was -- what will we see from the hawaiian court? is that today or does that go over into next week? kevin: whether or not hawaii takes a position today or whether it goes over into next week, there is no question that a at the white house feel they were able to receive a victory. the department of homeland security issuing new guidelines yesterday. ban taking effect last night. many republicans feel this is a winning policy. , buts received criticism for the most part, there has not been much of a backlash as there was during the first 100 days in office. francine: what will be president talk with vladimir putin about next week? kevin: i would love to know that. back-and-forth in terms of

the political optics of this are going to be in overdrive. the white house is under pressure from the senate to back off in the house to let the house pass a russian section bill. we did not hear anything specifically from steven mnuchin in yesterday on russian sanctions during his briefing. that is something to watch for as well. if you look at health care, tax or from, and the russian sanctions, what is going to -- and the travel ban. four things we are watching for and the impacts on investors. what is the one that will less likely to him go on? in terms of why all of these issues matter, it is because it frames the debate for the 2018 midterm elections. with that and the republican majority and without a significant republican majority,

that significantly impacts deregulatory policies that investors care about, including financial deregulatory matters. this is an administration that likely will appoint the next fed chair and reshape the board. in addition, the house passed dodd-frank reform, but the senate has yet to do so. tom: kevin is our chief washington correspondent. we have much to talk about with harm bandholz. alice rivlin will join us. this is bloomberg. ♪ ♪

francine: just moments ago, president xi jinping toasting the assembly in hong kong. , thewe understand president urging hong kong and its people to believe in themselves. was to reassure the divided hong kong of china's

continued support for the former british colony. it is a little bit of dancing around foreign policy. he reiterated that he is for the city's desire for greater democracy and for the different china. iron ore riling back in a bull market at the end of a surge driven by melvin china. the commodities on the biggest monthly decline since october. a broader commodities downturn. thanks cutting forecasts for wti. -- banks cutting forecasts for wti. great to have you on the program. when you look at iron ore, is this the best of look at the strength or weakness of china?

>> that is right. in a couple weeks, we are over $60 a ton again. that is driven by the amount of chinese steel mills. they are turning about a decent amount and restocking inventories. if we looka, data -- at economic data, we have -- if we look at economic data, we have stronger pmi. francine: what is the longer question you have? it is the strength of china? >> that is always a concern. or, there is an issue around a supply at low cost supply. we have a new mine started in brazil recently that is turning out low-cost iron ore. hp improve investment in more capacity in australia and the last week.

there structural oversupply is in the market. low commodity prices, is that a first order condition for better economic growth or is it a second order condition that mucks up investment? we saw it in the past when lower oil prices hurt the u.s. economy. it has a positive effect, but a negative effect on investment spending. is with us.ndholz bill kennedy with us as well. we are going to drive forward this discussion on radio. dennis will join us. wheat is elevated.

we will talk to dennis garten. -- dennis gartman. hong kong, a beautiful view, and president xi jinping there for the 20th anniversary. we go into the celebration of the nation's fourth of july. from london and new york, this is bloomberg. stay with us. ♪ francine: it is sunny in london.

we will take it. we are looking at inflation

figures. the readings are coming in at expectations. you can see the pound. this is "bloomberg surveillance." here is taylor riggs. taylor: the trump administration degree to sell taiwan weapons. beijing says it runs contrary to watch its commitment to a one china policy. president trump's travel ban has gone into a fact and there is already a legal challenge. the new restrictions been refugees and immigrants from a six predominantly muslim countries. there are exceptions for those who have relationships in the u.s. been badconfidence has since the brexit vote uncertainty is keeping britain's for making big purchases.

global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. tom: thanks so much. are part off you global wall street and part of investment and finance, this is the interview for the second half of 2017. is hes great about robert does warren buffett in all of these big megadeals. he grinds it out with his team. he is also affiliated with deals including staples and the drugstore right aid. he joins us now from. i want to get into the nitty-gritty. do we get a new effervescence, a

new higher interest rate regime, how do cfos react? robert: there is an assumption that rates are going up. maybe i ought to do something now. there is a sense of it. was a lubitzf lower slower than people like me would like. i think there were a lot of factors. one was the uncertainty in washington. tom: are we close to where money is not cheap? it at 225 onok at the 10 or whatever it is today. that's awfully chief. -- cheap. globally,ou look there is liquidity and interest legs are very low. -- rates are very low. , the headlinesld came out.

is it a merger, a non-merger. is that what we are going to see in the second half of this year? ramy: right aid had been put to the obama administration. it's too early to tell for sure. the assumption is the regulatory review under the trump administration, it had ramped up to a level that i'm not sure i ever saw in my career. there are some businesses that need to consolidate. you take staples and office going to block those from merging? easier,ted it to be money continues to be cheap. with lower growth rates, what are you going to do? francine: that is the main question people are trying to get to. when you talk about the uncertainty in washington affecting m&a, what are people

worried about? they are concerned that tax reform doesn't get pushed through? are they expecting something worse? street i know that wall has written off some of the more revolutionary ideas did it's harder to do if you're looking at a business that would be significantly affected by that. until we get some greater certainty on that, there is a lot of stuff on the table that makes long-term valuation very difficult. francine: do you expect a sector ,o pick up in terms of m&a either because of valuations or because it's the quickest way to go? robert: retail going through all sorts of changes. look at the headlines in the last couple of weeks.

the tech guys are coming to retail. all sorts of stuff. tom: it's a huge international company. on googleur comments and competition in europe. this harkens back to microsoft. one -- or member that one headline? is google going to see that? is a tendency to go after the most successful guy. is that this? i don't know. i'm not specifically involved in that. it goes back to rockefeller and standard oil. if you get too big, the regulators come after you. tom: your perspective on this? the competitive capital of america, the individualism of america is way different than what we are observing out of russell's.

brussels.s -- forces,e of the driving people asked me why germany is going so well. , in the u.s.nies you have probably traded companies getting bigger and bigger and sometimes innovation and the entrepreneurial dynamic is lagging. tom: this is a critical moment for merkel with the g-20. his germany becoming more anglo american? harm: there is an election coming up in germany. some puts going on is election contained. it's not like what we saw last year in the u.s. theave talked about different situation in washington.

it's time for someone to fill that gap. some western countries don't think china has the right new leader. merkel is stepping up and with provide leadership for the western world. francine: i like that. i haven't heard that in a while. and probably exit protectionist trump administration. these the boundaries of different regions around the world. when you look at what the fed can do, what the ecb could do, prevent ceostones from going into m&a because of funding? 275,t: if the rate goes to that will impact the multiple. it's not going to impact the fundamentals. the fundamentals are still there. grow,ticular, the need to

to support your own multiples. you've got to buy something and synergize and make it more effective. points, whoasis cares? in otherorrow money parts of the world if you need to. it's going to affect m&a very much in the intermediate term rid -- term. francine: we have a question from of your. he said it is cheap. can you clarify why you think that it what you would consider to be fair value? robert: the market is what the market is. i'm just talking about historical rates. i know there is an argument with the amazon he and affect that there will never be inflation again and rates will be low forever.

i'm not so sure i would declare that are in when you look at other rates, they are historically low. tom: let's do facebook live. let's bring up this chart this is the answer to the viewers question on the 10 year yield. we use this as a metaphor for what you're thinking, adjusted for inflation. we are nowhere near where the 10-year real yield was precrisis. minus cleveland cpi. chair yellen has miles to go. fair, this is correlated with real gdp growth. it makes sense that real yields stay a little bit lower. -- we have never

agreed with that. that's what we see right now. i agree that 50 basis points is a difference between the real economy and financial markets. it's not a big deal. don't do it anymore because they are prepared. that does not change anything for the economy. in some instances, 50 basis points up and down and nothing happened to the real economy. tom: over on the left are the old days of volatility. thank you so much. robert, thank you so much for starting your day with us. he is with jones day. at least fireworks will be displayed. pops,hem in the boston 8:00 tuesday. ♪

tom: somebody's up at 1600 pennsylvania avenue. are one is important and we fortunate to have him with us. this is about the x axis of political economics. if republicans are unable to pass what they are working on now, they should immediately repeal and then later replace at a later date. i don't know which. gdp and17% of american we want to get rid of the policy we have now and wait to do something later? we can't do that. no.:

tom: we will come back to this. we will be on this throughout the day with the dynamics of the senator mcconnell. here is taylor riggs. taylor: blue apron may need to raise more money after a slower than expected ipo. they have cash and credit for only a year. they slashed the price of shares. , 737 becauseblow of a flaw in an engine part made by our conic. recalled to fix the parts. harvard university is close to selling more than $2 billion worth of real estate holdings. that is according to people familiar with the matter.

the largest endowment is trying to turn around its lagging performance. that is your bloomberg business flash. francine: the german chancellor -- dismissed exit and said the chancellor also predicted that part -- discussions about global policy will be very difficult. this comes out of the g-20 next week. we know that donald trump will attend the summit and will have his first meeting with the russian president since becoming president. more from john fraher. he always makes us smarter. you for joining us. , willill vladimir putin they talk about russian sanctions?

john: that's one of the big fears. when you talk to hawkish republicans in washington, that is one of the concerns people have is that trump will put an offer on the table about sanctions with russia. not go down very well. think russian side, i there is apprehension in moscow about this. they are not wild about the fact that they are on the front pages of newspapers every day. i think from the moscow perspective, they want to establish something and they can try to normalize relations after that. francine: merkel is positioning herself as the leader of the free world. can she assume that role? john: i think she can. this could be one of the most significant global summits we've seen in decades.

if you look at what she is trying to do in the runoff, she is trying to get the chinese on her side on things she wants to get done with trade and climate. when the president shows up, he is going to see something no u.s. president has ever seen in the sense that he is going to see this alliance between germany and china, to unlikely partners. that is something we haven't seen in the postwar era. tom: that's very interesting. one of the things that interests me, i believe there is a difference between the secretary of state john kerry and the secretary of state rex tillerson. hasrts that mr. tillerson had it with the white house, a lot of anger and shouting. how will tillerson be greeted at these meetings? be people wholl

are keen to bend his year. this gets to one of the america'sns that allies has with the trump administration. they have no real sense on how you get a message to the white house. you used to talk to the secretary of state and that would make sure your message got to the table. at the moment, there is no clear consensus on how to do that. if you talk to the people around merkel or especially, we don't know how to top to the sky. -- talk to this guy. nobody really knows how to deal with that. i think what you saw yesterday is pretty remarkable, this growing sense of frustration on how to deal with it. tom: thank you so much. allcine: he will be leaving

of our g-20 coverage and will be back. bloomberg user, this is the easiest way to watch us. charts.see the questions about how to communicate with the present. this is bloomberg. ♪

tom: it is a friday. we celebrate write a here in new york. we are getting ready for the weekend. robert is with us with jones day. we are looking at the single best chart which sums up the central pact. on u.k. inflation. it is elevated off brexit. the euro is behind. this.ere, we have we are nowhere near where the central bankers want us to be. harm: no. i think in the u.k. we are too

low and the u.s. is not that far away. i know they are looking at the core cpi. we have a variety. the market based inflation expectations, they have some issues. i think some central bankers are looking too closely at them. they like to quote them if it justifies the policy stance. to the single best chart, we are talking about tonight in kingdom coming down in this vicinity and for europe to come up to this vicinity. nation, no quarter nobody is that coordinated. right western mark -- right? harm: it still works. we are getting close. we are expecting the strongest growth in a decade. that closing gradually and

pushes up inflation. numbers, coreon inflation is ticking up. that's what we should -- what we should focus on. tom: are they going to have the big version of folgers coffee? are we going to have megamerger frenzy? robert: when you are making a deal, you are looking at a 25 year proposition. you're not looking necessarily at next quarter. i think there is going to be a lot of activity. if you're going to this can gete time, if we some stability in washington it could make a huge difference. i don't changes in outlook in terms of inflation or interest rates are going to drive this until the become really significant. do coo's overall, worry about the next crisis?

what do they worry about? robert: the continued worry is about growth. it depends on the business. if you look at these charts, it's hard to think about growth in these environments. is this forever? maybe there is going to be a long time of very low gdp growth. if that is the case, you've got to do something to keep your multiple up. you can't have a decent equity price. francine: are you expecting more volatility from now until the end of the year? we just heard from one of the executive board members of the ecb saying it's going to adapt communication. harm: it's coming up very early. they could call it a trial balloon. it was given a fairly -- very early hint.

we don't expect any action before early next year. they are starting to adjust the communication. they can't do anything better than that. tom: this has been great. thank you so much. will continue with mergersr an interesting and acquisitions week. let me do a foreign-exchange report. the yen is quiet this week. at 114. is resilient thanks so much to our team in london and new york. york,ful new york, new home of hot dogs, hamburgers. ♪

jonathan: a turban and to the

second quarter. money drains out of stocks. it returns to the european market after bonds deliver one of the worst weeks of 2017. the u.k. gears up for a hard exit. corbyn pushes for a single market. good morning. this is bloomberg daybreak. anna edwards is join us this friday. futures are big. we are firmer by a quarter of 1%. technology stocks are on better footing. still, we are headed for one of the best quarters since 2010 for the single currency. yields were at 217 his.