inncine: tensions run high hamburg, as trump prepares to meet putin at one of the most highly anticipated summits in ye ar. timelobal selloff -- rcalls on the era of easy money. u.k. business leaders head for a country retreat to discuss the exit.y's good morning, everyone. this is bloomberg "surveillance ."

we have a packed and great show for you today. we speak exquisitely to the ceo of italy's biggest bank. jean-pierre mustier. in 10 minutes from now. and in our brexit show at 9:30 a time, and another exclusive -- and that comes from terra firma's justin king. breaking news out of china, on a day where we are seeing nervousness on the market spirit and this is what we are seeing on these china foreign exchanges. for the end of june, coming in 5 trillion, below what economists were expecting. let's check on the markets. overall, it's the selloff we were talking about yesterday that seems to be continuing. so, we're seeing a little bit of a repricing on some bonds. bund,-year german yesterday at this time we were at 0.49%, then we touched 0.5%, 0.57%.

that means there is a little bit of a repricing, for example in the italian. you can see this index at 12.52. let's get the first word news. is being seen as suspect behind the hacking of a dozen power plant. a nuclear facility in kansas was among the five targeted. the warning spark concerns the attackers were searching for all abilities in the electrical gird. rid. a u.s. led effort to condemn north korea's latest missile test has broken down. and u.k. werece unable to overcome objections from russia and china. it's a setback for the trump administration's top foreign ies.icy priority dohar's refusal to accept their

demand is proof of links to terrorist groups, citing a statement from the alliance. saudi arabia, the united arab emirates and egypt have pledged fresh measures against qatar. talking of the global bonds selloff, the bank of japan has 1/3 of control over the nation's bond yields, sending yields lower. no bids were tendered after the central bank offered to buy 10-year notes. the yen hit an 8 week low. british business leaders are heading to a 17th-century country estate for talks for the u.k. brexit secretary. the hsbcboss and among those attending. on the agenda is what more the government can be doing to ensure -- it and flex a minimal a minimal costs

on business. this is bloomberg. francine: thank you so much. thousands of protesters have clashed with authorities in hamburg ahead of the g-20 summit. [sirens] now, police fired water cannon and pepper spray as crowds set off fireworks. organizers of the welcome to hell demonstration are announcing the g-20 summit as a vehicle of global capitalism. this is one of the most turbulent meetings of g-20 leaders in years. matt miller is also there. the big meeting today is donald trump and vladimir putin. if you look at the three main topics, climate change, trade and you have how to handle north korea's provocation. what will the two leaders be talking about? know well, we don't yet

exactly when they are going to meet or what they will discuss, but there are a lot of questions as to whether or not the u.s. president will bring out the hacking allegations when he talks to vladimir putin, whether he will bring up north korea, the provocations there and it tends to deescalate that situation. that would be interesting as well. en't gotten an official schedule or it is not officially on the schedule as far as the time they will meet. the questions a lot of people in this hall are asking is whether or not donald trump is going to play into any of those topics that angela merkel wants to highlight, especially the climate change topic. they are going to try to leave out the term requirement change that talk about factors that affect the environment instead. but there is going to be a working session on climate at 3:30. everyone is going to be watching to see whether or not donald trump goes to that session. and see whether he participates as well.

francine: a lot of tensions overall. do you think this is the most explosive g-20, we have president xi, donald trump and a meeting between angela merkel and the president of turkey erdogan, which should be interesting. matt: yeah, it definitely has the potential to be one of the most explosive, well, i don't termto use the explosive, one of the most highly charged g-20 meetings in recent years. those two issues are far more important for the short-term political landscape than the trump-putin meeting. which long-term historically may prove to be a huge one but for right now, erdogan has said germany is committing suicide, his words, by not letting him speak at demonstrations on the sidelines of this g-20, for his own political situation in turkey. that is a real problem when you have leaders using language like

that. and then you have got the china situation. president trump yesterday met with shinzo abe and moon of south korea to talk about how they are going to try to pressure china to deescalate the north korean situation. of course, china has not done very much at all on that level, zero result because north korea has launched another missile. so, the china situation and the turkish situation are at least for the short term or the immediate term going to be much more hot button issues than any allegations of hacking with the russians. francine: i used to cover g-20 's. you have covered hundreds of these meetings. is this one of the first one where it is geopolitics that will be at the forefront. so, there is a danger that trade in the economy can take the back. mean, tradei is one of the first issues they are going to talk about after

angela merkel gives her opening remarks and 20 minutes. most of the world is on the same page as far as trade is concerned. only protectionist worries really are with the u.s., obviously. we have not seen a lot of actual legislation in that direction. there has been a lot of protectionist talk out of donald trump, but you have not seen congress move on that with a border tax. it is interesting to see how the e.u. will develop in this regard and what they will talk to the president of china about because the e.u. under the leadership in one sense of french president macron has started to worry about jobs being taken from important sectors and started to worry about takeovers of these important sectors trying to level.hem at an e.u. of course, the chinese are still buying companies around the world, majority stakes but not allowing other countries to buy majority stakes into their important industries. that will definitely be a

discussion, and one that affects the global economy immediately. francine: thank you so much. matt miller covering the g-20 in hamburg with some great insight. up next, we have the spotlight firmly on italian banks. we speak exclusively to the ceo of the nation's largest lender, the unicredit boss jean-pierre mustier. this is bloomberg. ♪

francine: this is bloomberg "surveillance." let's quickly check on your markets because there is quite a lot going on, little bit of a selloff. mark: showing signs this week of spilling over into stocks as well as other assets such as gold and silver. time simultaneous

declines occurred between stocks and bonds was during the taper tantrum in2013 when the fed hinted at reducing stimulus. it is a bit different. the stoxx 600 has returned 10% a year to date, every year since the taper tantrum. global equities are on course for a second weekly loss. gold and silver declining. higher bond yields pressure. that is a wonderful chart. as is this chart, the u.s. 30 year lead. the 10-year moving average, the recent selloff is a sign of more pain to come for u.s. bond bu lls, according to a legendary fixed income investor. and a hedge fund investor ofling time on the era central bank buys stimulus saying the global economy is heading to a new stage where markets will not that the same level of support from monetary policymakers. that's the chart to watch today. key moving averages. the boj was in the market today.

asserting control over the nation's bond yields, sending borrowing costs lower with its first big straight purchase operation since february after the global debt selloff this week. no bids were tendered after the central bank offered to buy benchmark 10-year notes of .11%. yields dropped to 0.85% from 0.11%. that is what is happening in japan. wonderful chart. sterling had for its smallest weekly reign in more than three years, versus the euro. investors are waiting for more certainty on the bank of england's policy and how brexit negotiations proceed. the wonders of the bloomberg terminal. francine: mark, thank you so much. mark barton there with the terminal. we also had overnight a little bit of breaking news -- for jeffrey gundlach, a couple of

interesting thoughts which may have sparked a little bit of these market movers. now, as european politicians digest the lessons from italy's belo, 17 billion euro two schools of emerge. what is at the rescue all less than idea, brought greater financial stability to the country. and then there is the german tow where politicians appear be competing with one another over who can sound the most outrage. let's get the thoughts from a major player. joining us for an excuse of conversation is jean-pierre mustier, the head of italy's largest lender unicredit. always great to catch up with you. good morning. francine: last night you won the prize of banker of the year. mr. mustier: unicredit won the prize. we have a wonderful bank. 25 million clients. we have an extraordinary team and they won the prize. francine: you are leading them and you have not been at the head for that long.

it is quite amazing you got the prize right now. does it feel good? do you think there are more challenges than you were expecting? or are in general on track of not exceeding expectations? mr. mustier: we have a plan. keep working and working hard. that is what the team is doing. francine: jean-pierre mustier, talk to me about the italian banks. do you feel that with the resolution, the system as a whole has actually gotten better ? mr. mustier: i think what happened in the past two weeks is a complete turning point for the banking industry in italy. our we raced -- raised capital in january we told the phoenician banks will be say. the risk premium for an tying banks should go down. and this is what is happening now. there is no more risk premium as far as italian banking is concerned. in addition to that, we are seeing that the nonperforming loans are going down as well. the outlook for the banking

center in italy is very good. and should not be a reason to be worried but more important -- more opportunity for investors to be positioned. francine: do think investors will buy more of the italian banks? mr. mustier: they already came on for our capital increase and benefit from that. italian banks today with the risk premium and more systemic issues, are a very good buy. francine: you are talking about loans, and they are coming down but they are still huge. a lot of banks are sitting on a huge nonperforming loan. what does it mean for the investors? mr. mustier: i think for the npl, we have to put things in perspective. if you want to bring on the npl ratio, a common ratio to the european average, it might be 150 billion euros. iss a large amount but it not a systemic amount. with the transaction -- 17 billion euro to investors we

have raised a lot of appetite for npl's. i think the market is there. this, issueo -- will be solved as well i have no doubt about that. francine: is there another bank that needs state aid? mr. mustier: i don't think no. we have an image issue in italy. the biggest issue -- and the rest will be easily digested. we look for what is very positive.. not only thepl, stock is being dealt with an increasing, but the -- the italian economy is excellent performing quite well. francine: jean-pierre mustier, analysts and investors see your main rival intessa as the biggest winner out of the two phoenician banks. -- ventiaetian banks. mr. mustier: the solution for the venetian banks was a major turning point for the country. it is good the solution was found. i just want to note that, since the veneittian bank rescues was

announced -- ourdoes not change i trie strategy. our plan is based on consumption and that is what we are going to do in italy or in venice. francine: how to respond to critics that you say -- that say the bes rescue plan puts the banking union dead in the water? mr. mustier: i do not think it does. it is very important to look at the letter and spirit of the law. tian banks had an original systemic problem, which could've been much worse. you have to look at the alternative. and the solution found by the government is a very good solution and a very good -- from time to time, you need to take pain and take it under two conditions. it does not mean that nothing happens but you have restructuring. and then competition is still going on. i think these two conditions are fully met. francine: we talked a little bit about your strategy, and you are saying there is a plan, a

marathon, three-year plan. you came in charge of body year ago. how, overall, is the execution going? are you comfortable? three-year: it's a plan. but in fact it is a 20 year exercise. the banking sector is going to a very large transformation because of technology, of client changing. so, it's an adjustment because it is a 20-year. known to a certain number of progress in terms of reduction of staff and balance sheets. and performance of the banks. and you have to wait -- francine: i was going to ask about the second quarter. expectations in the first. is the trend similar to the first, or our markets a little bit better? mr. mustier: good try, but i cannot comment about that. francine: talking about turkey, you have a huge investment in turkey. there have been issues but there has also the possibility of ingually, of stakes be

increased. what is your thought on turkey? mr. mustier: i'm a banker. so i do not comment about political issues. on the business side, our bank in turkey in doing quite well. they are the best quarter for the last quarter. turkey is a country which -- is well-educated, a young population. we are very happy to be present in turkey. francine: would you actually consider to review your partnership with the -- family to increase your state? -- stake. mr. mustier: that's truly happy to work with the family. they have a deep understanding of turkey. francine: how do you feel about the world economy? we were speaking to the south african finance minister and looking at g-20. does it feel a little bit better, or are you concerned that geopolitics make it much more concern? mr. mustier: the continental european economy is doing quite well p review should look at the figures, the eurozone grew by

2%. all the countries in the eurozone contributed to it. it's not concentrated. when i am looking at the countries -- italy, germany, bank ind largest germany, austria, we own the first bank in austria, we can see very positive developments. annualized growth in italy in the first quarter was 1.6%. i do spend a lot of time with italian entrepreneurs. what they have been telling me is the best quarters -- the last two quarters have been the best in 10 years. exports will improve and then consumption and then we have investment. the signs are there for a good economic performance for italy and for germany and austria and we see good growth. the outlook is quite positive. it does not mean that we need to relax. we need to push our plan and

implement it. francine: do investors understand that you are a global bank, or do they see you as an italian bank? is that an advantage or disadvantage? mr. mustier: we are a single pan european bank. it is understood by investors. let me give you prove. after the first round of the presidential election in france likely. macron was most to be elected, what was the bank which perform the best? unicredit. we were up 13%. see usved that investor css as a pan-european bank. francine: can i ask about the -- project? you are setting up the vehicle to securitize the loans. mr. mustier: the project, which is -- failure is not an option. is what it means.

we are going to close the deal in the next few weeks. it is working very well. we have a deal on one side with fortress. we sold more than 50%. we will keep selling the other half of the portfolio in the coming weeks. francine: would you ask the state to guarantee it? mr. mustier: in italy, the possibility for investors to get some kind of securitization, i t's not a guarantee, and we might use that -- francine: i think you have 49% of the stake. you want to divest? mr. mustier: we are going to keep selling the remaining part of the stake. buyers interested. it is a matter of closing the transaction. francine: would we have resolution by the end of the year? mr. mustier: we are willing to make sure that we can move and should -- raise even for the interest on italian nonperforming loans.

francine: you are very careful in what you say, and rightly so. talk a little bit about consolidation in your industry. there were rumors about softeng, unicredit. but do think there will be consolidation in general, because regulators may allow it. mr. mustier: you're absolutely right, the european regulars are calling for more pan-european consolidation which is proof that europe and a single regulator works well, which it does. pan-european consolidation is difficult because you need to find synergies and if you do not find it on that basis, you find it on a domestic races. consolidation my feeling is it would be much more on the domestic side. it's based on organic assumptions. -- we work on an organized basis. francine: would there be a need for a cross-border banks or would that -- i guess the pros is that you caould take on a u.s

. bank. mr. mustier: i think it is good for europe to have more pan-european bank. it is important we can prove that we can take a deposit in one country and lend and another one. -- in another one. there are only two so far. i think, you know, there should be a trend towards that you mentioned the u.s. we are not worried about u.s. because u.s. banks to not compete with us. they do not lend. we lend more than 400 billion euros to clients. u.s. banks do not lend money to europe or european retail. we compete with them only to access capital with investors. in this case, a bit more regulation is actually useful costse it lowers the -- of capital. the environment is favorable for

european banks. francine: thank you so much. a lot of the viewers are wondering why we have -- she's the mascot for the turnaround. mr. mustier: she's doing quite ok. i have a small present. she was our mascot for the capital increase. you have one with the unicredit logo. a little bit of advertisement is always very useful. thank you very much. it was a pleasure. francine: maybe we should send one to the negotiating team for brexit. mr. mustier: we can send them some. francine: up next, we talk brexit and speak exquisitely to the terra firma vice-chairman. this is bloomberg. ♪

francine: welcome to our weekly brexit show in london. i'm francine lacqua. we are just getting, i think, some live pictures of president trump arriving at the in hamburg.

we are expecting the president to arrive shortly. world leaders meet in hamburg. one of the most highly anticipated summits. trade andivisions on climate change and how to handle north korea's provocation. we understand and we know that angela merkel will chair the summit of g-20 because she is the person in charge. yesterday, we saw some violent clashes between police and anti-globalization protesters. now, i think you see the motorcade of the president. i believe that is what we are seeing at the moment. what we also understand is that this event, the g-20, we're looking at live pictures. if you are on radio, we're seeing a lot of black cars that look like police escorts. this event will be the first official meeting between u.s. president donald trump and the russian president vladimir putin. we understand that will take p.m. u.k.round 3:30 ti acts like, i think it is local time.

we will keep an eye on those live images as we see motorcades arriving at the g-20. now let's get a roundup of all the big stories from this week regarding brexit. nejra: the u.k. government changed his tune on brexit this week, citing a -- striking a more sober tone. chancellor philip hammond told business leaders they must help the government make the case to europe for a smooth exit from the bloc. the institute of director said the election result handed business leaders greater leverage to lobby for a faster brexit. as 2/3 of its members -- gave the rights of e.u. citizens in the u.k. as a top priority. in the main challenge was to negotiate a new trade agreement. deutsche bank as preparing to move large parts of the trading and investment banking assets from london to frankfurt in response to brexit. a spokesman for deutsche bank declined to comment.

meanwhile, barclays chairman john mcfarland says he is confident much of the trading and fund management activity involving the euro will remain in london. predictionsto dire of a mass exodus of bankers was at least the e.u. he spoke exclusively to bloomberg. a i think the issue is conflict between the politics and the economics here. to my knowledge, nobody has asked to move from a business standpoint. because it is actually working very efficiently the way it is. ritish british leaders are heading to a country estate for talks with the u.k. brexit secretary. according to a document, the barclays boss and the hsbc chairman and easyjet ceo are among those attending. on the agenda is what more the government can be doing to ensure the divorce of the

century in flaxman will cost on businesses. global news 24 hours a new 120 countries. this is bloomberg. francine: thank you so much. we're just getting breaking news out of the u.k. these figures that came out a couple of minutes ago. the industrial production. what we are seeing is i believe worse than expected because the main industrial -- may industrial production -- it felt 0.1%. we were expecting an increase. it is worse than expected. it is friday. this is why we are seeing a 1.29 handle of the pound. we are seeing angela merkel shaking hands with donald trump. that happened a couple of seconds ago. i can't tell you how much media attention that got, because remember when angela merkel went to the white house over a couple of months ago there was a little bit of awkwardness. so, because of that awkwardness,

she never got a proper handshake when she was at the white house. properay, she got a handshake and people were saying that maybe is a little bit of a softening of relationships. you saw donald trump arriving. now you see the president of china mr. xi. this will be a pretty interesting g-20 meeting because we had a lot of divisions ranging from everything from trade to climate change to how to handle north korea. we are keeping and i on those live shots in hamburg. matt miller is on the ground and we will also speed the south african finance minister. but knowledge was -- now let's get back to brexit. forguest is best known leading a supermarket. in that time he faced up to the challenge of german discounter and spearheaded a push into smaller convenience stores. firmaaw him join terra where he serves as vice-chairman. well, during the brexit referendum, the campaign -- you

campaign strongly for britain to remain and a e.u., claiming it would be catastrophic for millions of ordinary families. justin king, thank you for coming up. a year on, how do think negotiations are going? mr. king: not much. we have only started, and it is all early saber rattling, of course. what i do think is a good thing is we are starting to see a proper discussion about the type of brexit that we are trying to negotiate. you mentioned it is a year on from the referendum. it is extraordinary to me that head is taken a year for that conversation to start but it is a good thing that it is. those that believe in a hard brexit are doubling down. they think we should just get on with it, cut our ties. but we've seen the cbi just this start a verynk sensible conversation about being realistic about what we can negotiate in the time allowed and, therefore, talking

about transition arrangements because there is going to be a lot of things that are not going to get agreed and the time we have left. francine: who has the power to decide what kind of brexit we are going to get? is theresa may weakened to a point where she is not an charged? is it more likely to be a harder or softer brexit? i think weell, gosh, have seen people argue the opposite sides of that question with equal conviction. it's essentially a political question, which i do not have a quick answer, which is, do you think theresa may can survive fo throughout the whole brexit process? part of that answer will be hinging on the type of brexit negotiated. there will be those in her party who will have a particular view of the type of brexit and may feel it is not going away they want, they want to change. but that is a political question. in terms of our negotiation, we will -- as we're seeing at the g-20, i have no doubt that our

partners in europe will give the prime minister of the u.k., whoever that may be, appropriate respect, because they want a good deal for europe. and they don't want a deal which is about the u.k. just breaking its ties, because it will damage us and it will damage them. so, i think there is a mutual reason for why they should be constructive talks. francine: but do you think that businesses and the economy will get a better deal now then if they would of two months ago? mr. king: no, i don't think it's that. there has not been the opportunity. in the immediate aftermath of the brexit vote, brexit means brexit. and anybody that supported remain, if we spoke up and said we thought that some of the concerns we had were starting to be clear from the economic data, we were shouted down with the idea that we were going against the democratic will of the people. there was a question on question time if i can mention the bbc where someone said, is it

actually right that we just do brexit for the 52% of people that voted for it? the answer is no. it should be for the whole population of the u.k. we're now starting to see that conversation. i think it is very significant that the cbi feels they can join the debate. they have been silent so far. they're started to take a very strong position on behalf of business. francine: so, do you think there will be a second referendum on the type of deal that we get with the european union? mr. king: my personal view is that, although some would argue that the u.k. population new what it was voting for last summer, they clearly did not because we still vote no. there is a long road to travel. it may well come to pass that there is a deal agreed that we have a clear sense that there is a different view in the country about that deal. if that's the case, it would be appropriate, i think, to have another referendum, but that is

a question for another day. on your show was a day that tony player did his speech about that issue. it seems to me that that was early in the debate. the time for that debate is when what brexit is actually going to look like comes into view. then we will know where the population is or have a good idea about whether they -- francine: is there a danger the u.k. crushing out, because we cannot get it done in time? a transition or a proper agreement. and what will that do to inflation? mr. king: i don't htink we -- think we can contemplate that possibility we have not got enough time. 20 months is not enough time. the time we have got. it is not like we are going to arrive in march, 2019, and it is a big surprise pretty have to be focused on having some kind of compact at that time. i think crash out, not sure those are words i would use. it is not something we can contemplate. there will be in agreement of

sorts. but there are good agreements and there are bad agreements. and we have to try to make sure it is as good as it can be. justin king, thank you so much. he stays with us. we will talk more about retail and talking about, well, terra firma. we'll focus on the outlook for u.k. investors with our guest justin king. this is bloomberg. ♪

francine: this is bloomberg "surveillance" brexit show. let's talk about the outlook for private equities. there are media reports about terra firma will begin talks with investors about raising 3 billion euros. with me this morning is the

vice-chairman justin king. can you confirm that is the case? mr. king: i can't. anyn't possibly go into future intentions we might have about fundraising. i understand why the speculation is there, because terra firma has been through a period of quite significant activity. people are noticing the business, we're back on our game. we bought a couple of businesses and sold a couple. and just this week, a really fantastic refinancing. we raised 550 million pounds from our existing investors. i understand the speculation. toncine: so, if you were raise funds, this seems like a good time. said, if as i've just you look at the fundraising we did this week, 550 million from our existing investors is a pretty big vote of confidence in the new terra firma.

we have transformed the business over the last 18 months. guy, the founder of the business, has been with us for 22 years. but andrew gates and myself have joined to the top of the organization to provide the itsness, breadth to leadership at with what we achieved in the last 12 months, that is starting to deliver great results. francine: a little bit away from terra firma, but it is tough out there. mr. king: it is. we've got a number of what you might call legacy assets where my first job when i join terra firma 18 months ago was to focus on how we drove more value after those businesses or we sold them . you can't avoid affected if you have owned the company for 9, 10 years, it is probably because your original investment did not go well and you're trying to find a different value. and that is what we have been doing. it has enabled us to exit a couple of businesses. point about the

what we do, operational transformation of businesses, is that the more change there is, the more challenge there is, the more opportunity there should be for us. although, we take no pleasure in the fact that we are seeing really uncertain times, our european focus means we do see great opportunity. francine: are there industry groups that you think are more desirable than others because you can turn them around quickly? eally.ng: not r we are sector agnostic in our approach. we focus on businesses with good assets, businesses and industries that we think are fundamental industries. francine: what are those fundamental industries? mr. king: it is a very loose definition. if we look at the businesses we own today -- we have energy, businessnesses -- food and our cattle business in australia. of those are pretty fundamental parts of the economy. they are not going to go away quickly. we never invested in tech or

invested in particular innovative spaces. because we see the opportunity perhaps where others don't. we're looking for businesses that are unlocked, under invested. fore looking for space perhaps other things the opportunity does not lie. partly, i say this on behalf of myself and my operational interest init is my working business that terra firma is it is not just about the way we can support our businesses with very significant and creative fundraising. if you look at what we have done this week, some clear demonstration of the core terra firma skill set. it is also we use that financing to underpin the opportunity we see. francine: does brexit create more of an opportunity? mr. king: yeah. we have a european perspective. the last two investments we made our in germany and in scandinavia. so, our perspective is european

and we see the opportunity across the piece. brexit has the potential to be bad for the u.k. it also has the potential to be bad for good parts of europe, too. we take no pleasure in making that observation but if there are to be challenge businesses come we see that as our territory. so much: thank you justin king stays with us. we will talk more, this time about retail. now, this is your market when it comes to oil. now, you can see a great chart by hillary clark. this is the picture for brent, one of the biggest benchmarks. the world's benchmark, not wti, but brent. this is what the pros look at. in can see brent trading here at the 50 day moving average. as important ast 4%.t brent is down 2.

we need to keep an eye on it. yesterday we heard from the eia, 6.3 industries fell to million barrels. $13ext, will amazon.com's million move into groceries change the sector? we will ask justin king. this is bloomberg. ♪

francine: you are watching bloomberg "surveillance." i'm francine lacqua in london. amazon's $13 billion takeover of whole food -- could the foodiant's jump into revolutionize the sector? with me is the former ceo of sainsbury's and now vice-chairman of terra firma. the change about the way we shop and how and what we want. talking in the break, you are saying that actually you believe amazon bought whole foods because they want to understand the relationship that we have with food. mr. king: yeah, i think that is

right. i have not seen much commentary in the discussion about their purchase of whole foods. the question you ask is why whole foods? whole foods are famous for the quality of their food, and the fantastic in-store experience they deliver. why is it that amazon believes they need access to that knowledge? i think it tells you that they believe today they don't understand food supply change and they do not understand how to sort high quality food and keep it fresh. that's clearly part of what they have struggled with as they try to go into food. they clearly do not understand the resilience of the food shopping to shopping in store. they have been able to -- that relationship and many other challenge. in food, take the u.k., the most highly penetrated online shopping for food in the world. we have been shopping online for food for 20 years. every major retailer does it. 6% of the market.

and that is twice what it is anywhere else in the world. the consumer is still shopping in store for good reason. it is because, on the whole, it is a great experience, and we do have, i think, a different relationship with food than we do with many other goods we buy. you want it fresh and choose it for yourself, and smell. all the senses are part and process all big spirits. and also you decide what you buy in the moment. you buy something that you see that you perhaps have not eaten for a while. and then you guy four or five other things, because you knew that to make whatever it is you decided to make. i think that is what amazon are telling us by the purchase of a whole foods. supply chains and in-store experience. what does it mean for the big supermarkets here in the u.k.? do they need to actually invest a lot in their online

experience, or does it not matter because it will grow very slowly? mr. king: i think all the major supermarkets have invested very heavily. more sense in a slightly different way in their partnership -- morrison's in a slightly different way. so, we already have a big online operations. and one of the things all the major grocery stores have done is as they provide that service to their customers, they become more loyal in store. it seems to me obvious that, as a consumer, if you trust the brand in store, you are more likely to trust the brand online. and you become more familiar with it. and so, for the supermarket, they have -- in terms of in store pick models. and that will be the big question, whether we see significant productivity, because that is not the case today, in a central model that is operated by, on behalf of morrison's or whether that

in-store model which is the preferred model for tesco, can maintain a level of productivity that remains for them the best way to give service to their customers. francine: where do you see the biggest risk for supermarkets? ourit inflation, so that y customer does not have to pay more because of brexit? mr. king: inflation is a strange thing for groceries and supermarkets. you do not want to inflated on your customers. it impacts on their disposable income. on the other hand, when you have inflation, it is easier to add up your -- your p&l. one of the challenges with supermarkets is almost no inflation but your costs are still going up. ndges, energy, rent a building related costs, and all of those typically have been inflating 2% for as long as i have been here. u.k. supermarkets

have become so productive because they had to cope with below their growing cost. as it happens today, that is not true. we're seeing inflation ahead of that cost growth. although it is not great for &lstomers, it does make the p easier. francine: please come back. bloomberg "surveillance." tom keene joins me out of new york. we will talk to energy investment coe. eo. she was on set with me the day after the referendum. and we were looking at markets crash. . it feels a little bit different. we will talk about bond yields and sentiment ahead of that g-20 meeting. it starts in half an hour. this is bloomberg. ♪

♪ >> tensions run high in hamburg

as protesters clash with police ahead of g-20. putinmp prepares to meet at one of the most highly anticipated summits in years. central banks tightening talk deepens -- the u.s. payroll number exacerbates the situation. unicredit says it is on track with its three-year plan and there are no more systemic issues. this is bloomberg surveillance. i'm in london. tom keene is in new york. it is friday and it has been a long week. pictures ofg at your president arriving and we saw that handshake with angela merkel. we're seeing movement on the markets. tom: markets are front and center though g-20 takes the headlines. we have great charts on that. that will have an oract on the central banks

how investors look at that. let's get to the bloomberg first reviews. >> in hamburg protest resume ahead of the g-20 summit. police used water cannons on protesters who oppose globalization. new york city mayor bill de blasio, one of president trump's sharpest critics. -- yesterdayicans mr. trump said it could be russia who meddled in the election but also said it could be others. meanwhile the president plans to raise the prospect of partnering with russia to resolve syria possible war. broke intoently computer systems at a dozen or more u.s. power plants and according to people familiar with the investigation the chief suspect is russia. current officials say one of the plants targeted was the wolf creek nuclear facility in kansas.

they warned that the hackers could be positioning themselves to disrupt the u.s.'s power supply. a setback for the trump administration on a foreign-policy initiative, brokering a united nation according tocil -- two officials, the u.s., france, and the u.k. were unable to overcome russian and chinese objections. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. bonds, currencies, commodities you see all the information in the fixed income market. spread it, 96his basis points which is way above weeks basis points of two ago. massive curve steepening, almost a little flatter by a percentage point. that difference in yield between twos, steepening as

firmly, oil a little bit weaker this morning. onto the next green. , weakerugly yesterday -- put, the dow 21,320 the 30 year up there, francine. much higher yield, lower bond prices, same thing with the german 10-year, vaulting. yesterday,ed this you will have that -- where we see it expressed in the currency market is stronger euro -- 1.31. yen out to a this is away from geopolitics. i put the german 10 year because we were watching it yesterday. it went up to .5.

the yield is staying elevated. we saw a selloff in debt this week. a number of central bank stepping up the talk of policy conditions. on a note, comments from central banks signaled that stimulus will be tapered. --t exacerbates it exacerbated the movement. i wish i put oil. tom: a little weaker. francine: europeans stocks down half a percent. tom: julie coronado joining us in the next half hour. this is a cool chart. francine.s pretty for it is friday and it is a lovely chart. it is wage growth minus the painful service sector inflation. this is what i call a construct. it is not something that is

mathematically correct. what if you look at wage growth minus expensive inflation, like tuition, medical care, all the things that kill us day-to-day? it is amazing how negative we are. what is interesting is the duration from 2011 to 2017. this huge arc from just before the crisis of really subpar inflation adjusted wage growth. that is one indication of the pain americans feel. francine: what is going on? i have an employment chart for you. we are in sync today. what i am at is something that hillary clark made, a ratio of u3.to stands at 4.3% but the

u6 stands at 8.4%. we will also have a debate on whether we are creating quality jobs in the u.s. onto the g-20, thousands of protesters have classed with authorities in hamburg ahead of the summit. police fired water cannon and pepper spray as violent crowds through projectiles and set off fireworks. organizers of the, welcome to organization, say this is the most turbulent protest of g-20 leaders in years. matt miller, great to have you back on our show. this is what we're looking at. change, and north korea. all three issues have tension surrounding them. of course there is tension in hamburg as well. we saw loads of troopers marching by.

you can hear helicopters. water cannons rolled out. they are expecting protesters to come right up to the g-20 media center here. all of that which normally would grab the headlines away from anything else could be overshadowed by the meeting between president trump and president putin later today. tom: how is chancellor merkel doing? dazzle meant, on the boston pops, i'm sure that will come up. what is she focused on? is it domestic or is she playing to a european audience? matt: i think both. the interesting thing is her office says she does not want to frustrate or embarrass president donald trump too much, so she will take out references to climate change in the communique , on the other hand she is

making a play for her voters. the threenging up subjects he does not want to talk about, trade, immigration, and climate change. even if she calls a by a different name -- she is becoming the anti-trump here. that is preparing her well for the september elections. will always be the beatles for those of us of a certain vintage. it is a magical city in our memories. what is the difference between the other cities where you gallivant about? hamburg is an anglophile city. everyone here seems to wish they were british though i am not sure how they feel now that brexit has been voted. munich and berlin are much more german cities. british styles worn around hamburg. francine: i promise that i will get tom keene a map and i will

quiz him on germany. tom: i need a mascot. francine: thank you matt miller. joining us now for the hour, we are welcomed -- we are pleased to welcome anne richards. we have xi jinping meeting the president and we have vladimir putin meeting the president and a lot of movement on bond prices. for the two related or is it still in the central banks? we are living in a time of turbulence. that is true politically and on the bond side. feel there is something in the movement of the stars that is giving angst to people. if you look at the broad sweep of markets over the last five years it is hard to notice. we focused on the micro but actually the macro is much smoother. when you look at bond markets in

particular it is about central banks. they are immune relatively to what is going on in the geopolitical world right now. i think actually to an extent, you could say they have remarked -- they have the haber remarkably well. we've just had a major -- they have behaved well. i think it is about central banks. bond markets don't know what good looks like or what they want. do they want to a growing global economy so they don't have to worry about recession? inflation? do they want the world to become more normal? or do they just want this continuation of easy money regardless of the consequences? it's almost like bond markets cannot work out what good news is. way ofe: that is a great thinking about the dichotomy but does that mean there's a danger, if there is a policy mistake that the system crashes?

anne: there is always that risk. but i think the momentum in the global economy broadly speaking is in the right direction. provided there is not a major misstep in a rapid set of rate rises -- that is less likely. i think bond markets will get through this. that they are having adjusting to the stronger global economic climate. tom: this is important. we will come back to the bond market and dynamics. you link higher yields to the greater good of economic growth? anne: i think you can. we are seeing inflation coming through. the challenge for markets in a way -- for bond markets is they are seeing higher inflation. they are seeing a squeeze in the labor market. , we arelow unemployment

waiting for more data in the u.s.. we are not seeing consumer confidence coming back through. we're not seeing wage growth come back. bond markets are having a hard time reconciling these things in terms of how you put them together. i think that is the major driver of what is behind the concern worried --. bond markets will be taking on board good growth, in the long run, provided we don't get too aggressive a rate rise. francine: thank you. anne stays with us for the hour. later on we will be speaking with the finance minister of south africa. this is from the g-20. we will be asking him about emerging markets. also in south africa,. this is bloomberg. ♪

♪ this is bloomberg surveillance. i'm taylor riggs. let's get to the business flash. warren buffett is betting he will succeed in an energy takeover in texas where others have failed. they have agreed to buy a in cash.zed company this will be the third company to ask texas regulators to approve a sale. two others were rejected. samsung has posted its best quarterly profit ever. due to the popularity of the galaxy s eight smartphone. income and revenue beat estimates. ,illionaire hedge fund investor calls at the end of the stimulus area. is headingeconomy

for a new stage in markets want get the same support from policymakers. that is your bloomberg business flash. francine: thank you so much, taylor. the bond rout has pushed german yields to an 18 month high. stimulus tapering was sooner than we thought. u.s. treasuries have sold off stocks suffering. with&p 500 saw the most europe following suit. .et's get back to anne richards we were talking before about these market moves. you are saying it is about central banks because despite the uncertainty on the longer-term, markets have been comfortable. where with a major policy mistake come from? would it be the fed? the tipping point was 2016

rather than this year. we saw that mindset shift where there was a realization that that we had moved on from the world where central banks were running the show. we it started to see traction in the global economy that other things were starting to match. we are talked about that the past. 2016 was the shift, not 2017. i think it is unlikely that we too aggressive a rate rise that would cause that dislocation. but i think what is shifting his bond markets, in terms of supply and demand, have been supported by huge central bank buying. the policy mistake might not be in the direction or speed of interest rate rises, it could be inough too rapid a change

some of the ways the central banks have been engaging with the central markets through the buying of bonds. a mistake would be in that transition. you could see that from the fed or the ecb. electricalgo back to engineering. look at the slew rate of the bond market. it has been tangible. bring up the chart. this is different. we usually quote yield. this is a price chart of the german bond. here is 100 over here or a par go 3%along year, down we in price. you know there is a shift that also occurs at portfolio houses when you shift from yield analysis to price analysis. ?re you there yet at mng anne: what you raises an interesting point in that, if you are buying a bond, you are

buying one typically as an individual, because you believe that it is a safe asset. if you start thinking you will buy a bond at one price and sell it at a lower price, that does not have good faith. end you are at the bottom of the range, you are dead right on that. there is a perception shift. we could see these moves which are sharp, which come from the appetite and balance of demand and supply for central-bank reasons and the reason you pointed, that people might start to realize they might not get their money back if they are buying overpriced bonds. debate in there, what is the relative safety of a bond asset, not because of default, but because of price action worrying. it will find its new stability.

we are going through a. of turbulence. tom: anne richards thank you so much. after the jobs report, it is jobs day. we report on this with william gross, look for that after the 8:30 a.m. our. stay with us, from new york, this is bloomberg. ♪

>> from new york city, our viewers worldwide. you about the are trade war? >> we have been in the trade war for decades. >> they have been front and center in selling assets to help

their debt. now it will be about growth. ♪ good morning everyone. from london and new york,

bloomberg surveillance. mr. putin will meet with mr. trump today in hamburg. now a more important meeting, anne richards, the electrical engineer from edinburgh as she m&g.nds let's go to game of thrones. winter is coming. a bond-bear market is coming. people are saying don't worry about it. baloney. it always happens. how are you protecting your assets from the wall in the north? to sayt is so tempting you know nothing, tom keene, but i would never dare say that. of how you protect a portfolio, the things we feel most on the about at the moment

-- the longer-term stuff is hard to predict. i don't mean short term duration but the short-term moves that you have at different points in the yield curve. for us, the more flexible the mandates we have in order to be able to go long or short and to take the currency positions against that is our dynamic tool in the kitbag. interesting,it is one of the ways you can protect yourself is getting the currency move right, not just the yield curve. tom: when the yields compete with dividends, this occurred someplace in the distant past, like the first meeting with mr. putin, when the yields compete -- when do yields compete with dividends? since weis 10 years last saw on interest rate rise in the u.k. which is quite that if youy, but

last couple years, investors have made nothing and equities have made 80% to 90%. the difference is staggering. to correct at the other way, there are pretty big moves that have to happen. i am putting a number out there -- tom: this is wonderful. anne richards, thank you so much. matt miller in hamburg, that is an important discussion happening there. we will have discussion -- we will have coverage of the putin-trump meeting there. in the next hour julie coronado joins us on the low employment rate. ♪

♪ withoomberg surveillance tom and francine from london and new york. has been asking great

questions. if you want to ask a great , look at tv , and steal his charts. we will be back with anne richards and plenty more guests throughout the day. video screen to ask the guest a question. 17 billion euros to rescue banks, the minister says there are no further hotspots. earlier we spoke with the head of italy's largest bank. he says he is on track with the three-year plan. the takeover of the venetian bank means there are no systemic issues for italian lenders. >> what happened in the past two weeks is a turning point for the banking industry and italy. capital, the venetian banks will be saved. the risk premium for italian banks should go down.

this is what is happening. there is no more risk premium or systemic issue as far as italian banking is concerned. francine: let's get back to anne m&g ceo. anne: i think you have to hand it to the italian authorities when you think that three banks ,hat have been sorted out you're talking about size and scale. you have to hand it to their credit. there was pragmatism in developing this. through the greek crisis. this was a job well done. francine: thank you so much. let's get straight to the bloomberg. here is taylor riggs. germany, it is

another day of clashes between protesters and police as the g 20 summit gets underway. demonstrators fanned out across the city. police used water cannon on one group. president trump will have his long-awaited meeting with russia's president vladimir putin. thewhile the leaders of u.s., japan, and south korea cap that the pressure on china over north korea. they met in hamburg and had a aboutdiscussion responding to the north korean missile launch. president trump has signaled his frustration at the pace of china's efforts to rein in north korea. isaudi led coalition threatening new sanctions against qatar. rejectn by qatar to sanctions, strengthens this position. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm taylor riggs, this is bloomberg.

francine: thank you so much, taylor. british leaders are heading to an estate today for talks with the u.k. brexit secretary. according to a document obtained douglas flintews, is among those attending. what is on the agenda is what the government can be doing to ensure a minimal cost on businesses and the economy. fondly, youmber were with me on the day after the referendum, june 25, i remember when everything felt like it was collapsing. now it feels different. geopolitics or the politics have softened. do believe now that businesses will get a better deal when negotiating brexit? anne: i think there is more hope that this will get a better deal. in the u.k. there has

been a sense of more engagement with the discussions that are happening within the government. nonetheless, a year on, we still have no more clarity on the whiches -- the framework business will be operating in in this new world in 18 months time when it is delivered. because of that uncertainty, the challenge for business, is if it cannot wait for the white rabbit to be pulled out of the hat, they have to act. to make sure we have contingency plans in place. business can't wait. we have more debate and we have had for some time. tom: business has to talk to labor. mr. corbyn is doing better in the polls. is this a new conversation where business has to admit another party exists? anne: good question. i think to be fair, the relationship between business

and the labour and conservative parties in the u k for the last 5-10 years have been evenhanded and well-balanced. i think when mr. corbyn became leader of the labour party we have been exploring new territory. he is starting new conversations. the point that businesses trying to make it the end of the day is we work with ever -- whichever government is in power. it is tono doubt that the benefit of both parties to have a strong economy. you need a robust business sector. that is the message. us of mr.ine, remind corbyn yesterday? they made news. what was the lead thing that caught your attention? --: jeremy corbyn said francine: jeremy corbyn said he

would meet with the commission side. from the labor standpoint -- there seems to be the hope that he may become the next prime minister and that the eu is taking labor seriously. they have a crucial role to play in this. tom: it is interesting. be -- where are we going to be in one year? anne: an interesting question. one thing on the agenda now is the fact that, at the moment the discussion has been all about the u.k. and what happens to the economy there. , the other 27 member states are going to have to adjust. they will reshape their own spending. some economic consequences to the eu block from that.

that has not been part of the conversation. that will be it big part -- that will be a big part of the conversation. tom: are you going to move to hamburg or warsaw or dublin? how many jobs are you going to move? anne: i can tell you at the moment we have no plans to move any jobs. we have created around 10-20 jobs within the eu to launch the new legal structures we need to have in place. they are new jobs that are not moving. you could make the case that they are jobs that may not have been created otherwise. that is the point. not jobs being moved, where the job growth happens. that is what business is wrestling with. francine: breaking news. when you look at currency, is

that an opportunity for investors? does it make a difference on how you manage money? anne: the landscape around stir ling, that is important to us -- the margin we think is on the weak side. there is no doubt that the last 12 months have been helped by the strong weakness that we have stirling. that is helped investment come in. money coming in at 15% lower price points before the referendum. smoothchanism has helped sentiments. probably we are at the limit of what that might do. we are going into a world now where we don't get that additional tailwind -- it may turn into a headwind. it is not the help that it was. francine: what does it mean for

some of your appetite, investments in europe? does brexit play into that? or is it because we are seeing growth in europe it is a separate issue? anne: the recent strength of the euro has the resort -- the richard burr -- the reverse effect that we saw from sti move. i think the currency in isolation is not enough to make a significant difference to the relative attractiveness of those assets at this stage. that could change. at the moment probably not. we still find interesting opportunities in europe but clearly as the economy recovers there will be more. francine: thank you so much. she stays with us. coming up next, christopher granville joins us. we will be talking about the g-20. the difficult meeting between

president trump and president xi jinping and president putin. this is bloomberg. ♪

>> this is bloomberg surveillance. we are looking at live pictures of the capital in washington dc, for our regular viewers, whatever you need to know, it seems like a gorgeous day out there. everything is blue. the sun seems to be rising. everyday a little bit earlier than the day before. tom: astronomy with francine. too much. francine: it is time for our morning must-read.

we are discussing the threat posed by north korea. one option is off the table -- now is alan wheatley and anne richards. g-20,ou look at this there is much more uncertainty now than the last one? how unpredictable with the next six months be? >> we're seeing more risk from opportunists. the risk from hamburg is that we get a g-20 which is disunited, unable to send out the positive signal that global investors are hoping for on trade and climate

change. i would say it is best to hope for the best -- that president trump is not as unpredictable as he has been. but we should fear that he doesn't send the right signals that markets would like to see about his willingness to turn down the talk on protectionism and embrace the free market, helps thede, that u.s. and the global economy so up. it seems like it is donald trump and resident xi jinping, to deal with north korea or is it more important about russia. ? is the first it time in quite a while that the french-german access has gone back to the strength that it had when eu project was building its momentum.

we are back in a situation where you have the sovereign governments of europe, the two biggest continuing countries within the eu, who have much greater alignment than we have seen for a long time. that is changing slightly the balance of power within the eu but it is also strengthening the euotiating position of the versus china and japan and russia and possibly the u.s. decades.ollow this for how do these two leaders meet? quietly over a cup of coffee? general mcmaster will not be there. how are they supposed to meet? one-on-one or with an entourage on each side? trump has brought his special red button with them and is going to press for a diet coke.

they will go behind closed doors and the interpreters will be there. optics youthe mentioned, how many people are in the room, we need to be looking for what sort of follow-up comes out of this meeting. what is the mood music like? are there any arrangements made to follow up after it? president who couldn't get a hotel in hamburg. that is how unorganized. we are treated like dirt. has nine of 100 24 slots filled in the state department, how is he supposed to do a dialogue with putin? i don't get it. >> if you don't get it i don't get it, tom. you make a good point that it seems putin comes into this very important summit holding all the

trump cards. all the important cards. he is been at this level for many years. he is a widely strategic operator. trump is unpredictable. is that putin maneuvers trump into a position that he does not want to find himself in. , risks from this meeting. i hope they strike up a good relationship but then -- let me ask you a question. supposing there is a good, positive relationship struck up, could that bounceback on trump in washington because people will feed that back in to the controversy? tom: that is for kevin cirilli. i'm not smart enough to this -- for this. francine: what i am trying to understand better is that he

to be put in a situation that is awkward from vladimir putin, what kind of situation is that? >> he flatters the president and tries to pursue some sort of a on ukraine, for example. which trump might be tempted to explore in the initial meeting and then finds afterwards that there are pitfalls in going down that road. tom: alan, we don't care what you think. now we go to all that matters. republicans and democrats talking about the first lady's. let's go to the bloomberg terminal. t.ank you, style bo this dress is from spain. give me the whites -- the wide

spot, of the first lady stealing the show. -- this says m&g board meeting. a reasonable price for mrs. trump. from astronomy to fashion. i think we digress. let's go back to live pictures. less fashion and more content from the g-20. there is angela merkel, you can see all the leaders together. you can see theresa may, angela merkel, the president from china on the right. when you look at all of these g-20 leaders, is there one you would like to meet with to understand the markets better? is there one single leader that actually has the potential to change markets? meet thisuld love to year my chrome -- president

macron. he is done something remarkable. presidency and taken the party from zero and taking control of the government . i think understanding how this untested politician is going to impact and deal with the structural issues in france and the consequential effects of that, that will be interesting. in contrast, the market is relatively immune to mr. trump. even if he says something with mr. putin, it doesn't matter. francine: alan, thank you. anne, we will talk about asset managers.

load up tv and you will get graphics and charts and ask the guests a question. this is bloomberg. ♪

tom: good morning. the festivities of g-20. bond markets on the move. management, anne richards with us. passive being outperformed in the last 12 hours? anne: i think it is a passivetal point about debate. there'll always be a role for passive but there will always be a role for active. if you look at what active management is it is about the allocation of capital. if you believe in the free market economy you need efficient allocation of capital. capital thatave discriminates between good and bad companies. fundamentally that is what active management is. there is been not so good active management and we have to drill down and deliver good active

management. francine: what does all this consolidation in your industry mean for m&g? we see companies consolidating because they believe there is economy of scale. big our side we see a economy a scale -- there is not a big correlation between em.fitability and in terms of what we do we can see the world is changing but nonetheless we see the demand for the core of what we offer is still there. one of the reasons is we are seen as a stable business. one cannot rule out anything in this world. stability is very important to us and the margin may be a benefit and we see companies going through a big upheaval around us. francine: when will the industry

change? with central-bank policy? to invest inave driving down the cost of manufacturing. we have to embrace and take advantage of clever technology that can help us do what we do and manufacture what we do off a lower cost base. that will not happen overnight. there is a big challenge there. that is the holy grail. we have to do that internally. how do we drive down unit cost of manufacturing? for our customer base. anne richards, thank you for joining us. let's get to hamburg and the south african president. five weeks after surviving a attempt to unseat him from power. dissented its bid to change the mandate of the central bank, trying to force it

to target growth rather than inflation. . the financeow minister now joins us from the g-20 in hamburg. minister, thank you so much. i think tom and i spoke to you in washington several times. a lot has happened in the world is moving away from some of the commodities, some of your biggest exports. how does it feel out there? from a world growth point of view?

+++ complicated because as you know, contraction in the last quarter of 2016, we are in a tight situation, but we are hopeful about the aspects of positive growth. we are working hard to ensure that we have an action point in the future for structural reform that is going to provide policy. also will draw confidence in the anticipated growth in the global economy, particularly in sub-saharan africa. we are going to do our best as an economy to make a positive contribution to africa's growth story as well as global growth. there are been calls for coordination by g-20 countries and it seems like everyone is trying to take care of themselves. leaders are inward looking and fighting domestic battles. what can be achieved at the g

20? >> we will continue to raise our voices as members of the g-20 but also as an african country. mindful of the fact that we represent an important constituency. --had a meeting this morning where all reiterated their commitment to greater coordination among the g-20 itself. with regards to anticipated growth. we do note that the issues of coronation among g-20 member states remain a challenge. given the increasing tendencies among countries to have greater protectionism and anti-globalization. we need to keep trying. there are various programs that are being implemented at this level. to havewhich are going

a positive impact such as the germany led compact with africa program. with greater consultation with africa and greater alignment, there will be positive results. we need to keep working hard. is under career domestic affairs with the infrastructure investment. in the financial markets, we see higher interest rates across the board. central yellen if banker to the world, could be higher interest rates and the united states derail the south african recovery? concerned about higher interest rates, and cost of capital around the world,

especially given the domestic challenges of the downgrades we are experiencing both from -- the downgrade is related to our direct denominated debt. impacts.are of the especially to raise money in the capital markets to be able to find infrastructure. these are issues that continue to drive our efforts to intervene in the economy by implementing structural reforms that are going to raise business confidence, boost household consumption over the medium-term. we can recover. concerned about the need, the effort to provide greater policy and political certainty in south africa so we

don't suffer any further downgrade, but we can be able to implement the problems -- implement the programs to drive the economy. tom: one of the things we have seen from global multinationals is they are picking where they are going in africa. what is the best practice you need to do to get multinational foreign direct investment? there is a greater need on the african continent for more cooperation, especially in improving the infrastructure capacity because the infrastructure like on the african continent is estimated gdp growth.-of invest in need to infrastructure capacity development. theeed to strengthen

financial framework on the african continent. toneed to implement programs byvent illicit capital flows tightening our administration. and we need to ensure that we coordinate our efforts, especially in engagement with investors. there needs to be an important intervention by the g-20 countries. we need, as an african continent, to work together with the g-20, to consult on those programs, online them with programs of infrastructure development, and maximize and optimize the benefits that can be achieved from it implementation of such programs on the african continent. to leave tangible benefits in the form a technology,

industrial capabilities, and of the benefits of that nature. francine: minister, last week, you said the country may have to seek outside financial help. when do you expect to make that decision, and how much will south africa ask and need? malusi: no, no. what i said last week was that if we do not intervene in the south african economy, and implement programs the need to implement consciously to affect the economy, and the main -- we'rendicators going to find yourself in a situation where we might have to see foreign assistance. what i was trying to do by that is impress the stakeholders -- business, government, labor -- the need for us to understand

that the south african economy at the present moment is in a bit of difficulty. we need to intervene urgently in that situation so that we can avoid to seek outside assistance. francine: i understand. today. we need to act francine: it is very clear that you did it as a call of action. when will we have more of the ideas behind the so-called action plan that you will use to trigger and -- you used to trigger a recovery and can you give me your top two priorities in the plan? malusi: we are going to make the announcement hopefully by next week. withve been coordinating the police department. the specific interventions will require a timeline that they

will comply with. foreed an action plan policy,olicy, mining broadband telecommunications policy, on land reform policies and very us other aspects -- and various other aspects. one set is finalized, we will revisit it. we are almost completed with the action plan by 98%. now that the policy conference should be able to release the action plan by next week. and we should deliver against the timelines we set for ourselves to boost business confidence. francine: minister, thank you so

much. i am expecting another review when you release that next action plan. that was malusi gigaba. tom: and is in full friday morning. jobs today, we will get to that in a moment. in hamburg, germany, matthew miller is there. we are waiting for a conversation between the president of the united states and mr. putin of russia. let's get to the data. the bond markets are moving. i want to get to julia. screen if the next you will. i waited for equities yesterday within a range. euro-yen showing weak yen. the red should be green. that is a higher yield on the 30 year. francine, what you have an data

? francine: i have the german 10 year. we are seeing movement on oil, but overall, bond yields fell off. not only central banks, but also there is comments. tom: we are going to go to matthew miller with the news of the g-20 meetings in the protest we have been seeing. but on jobs david bill gross joining us later, julia coronado with macro policy. a weaker u.s. economy. can you reconfirm that, the idea growth in that the obvious gdp growth will not happen? julia: we have seen a real disconnect. the hard data has not followed through, neither hiring, nor

consumer spending. if tom: bring up this chart. this is a really cool chart. it is not an official chart. this is wage growth minus service sector inflation. not good producing. happening, julia. will we see wage growth and today's report. julia: when we are learning is that the labor market, despite the unemployment rate being low by historical standards, maybe there is more slack. maybe the natural rate of unemployment starts with a three a set of a four. even in sectors doing very well, like construction and manufacturing, there is not upward pressure on wages. skillsw, there are some issues and mismatches, but we can see higher wages if we let the labor market go. it would be cool if we could do back-to-back charts. [laughter] tom: let's go to the bloomberg terminal.

is what dr. coronado is talking about, the natural rate of unemployment. you will explain this in a moment. down we go. 10% down to 4%. 3.5% down there. what is that not rate of unemployment that gets us to our -- julia: there is a lot of factors are going to thinking about what the natural rate is. that is the rate that is consistent with full employment. one of the things that might be depressing it is demographics. older workers don't turnover as much. that would put a downward pressure on the natural rate. also, higher education means less job turnover, lower natural rate of unemployment. both of those things, age and education, are much higher over the past to a dose cycles. the chicago fed has said that

takes .5 percentage points. tom: higher bond yields. do you know if higher interest rates are good or bad? julia: it has been a bit of a mystery. we have seen delayed tightening in financial markets and the fed has been telling us all year, even last year, that they are coming, they are tightening, they are taking the punch bowl away, and the markets have just been ignoring them. but i think the chickens are coming home to roost. .om: 1.4%, to year yield julia coronado will continue with us. william gross of janice will be by. we will have him look at the jobs reports after the 8:30 our, particularly higher yields. in washington, they wait for the return of the president. from london and new york, stay

with us with matt miller in hamburg. this is bloomberg. ♪

♪ >> this is "bloomberg surveillance." hackers broke into computer systems at a dozen or more u.s. power plants, and according to people familiar with the investigation, the chief suspect is russia. current and former officials say one of the plant target was the wolf creek nuclear facility. they warned the hackers could be positioning themselves to disrupt the u.s.'s power supply. president trump is being urged by democrats and republicans to get tough with russia's president vladimir putin and hamburg. yesterday, mr. trump said it could be jump that meddled in the election, but said there

could be others. the president plans to raise the prospect of parting with russia to resolve syria's civil war. in hamburg, germany, protests resume before today's start of the g-20 summit. police used water cannons on demonstrators who opposed globalization. there will be an unexpected participant in the demonstration, the new york's mayor. day innews 24 hours a more than 120 countries. i'm taylor riggs. this is bloomberg. francine: taylor, thank you so much. with more on the g-20 in the process that taylor was talking about, let's go straight to hamburg and matt miller is there. you are outside, but you have moved back inside. how close are you to the protests? matt: the protests were approaching the perimeter of the g-20 convention center. the noise was just too love to be outside. you had -- the noise was just

too loud to be outside. there were police on or spot -- there were police on horse back. there were helicopters above. of policehundreds officers here. tom: what is the backstory away from the protests and trump and putin, there has got to be a buzz. what is it? cool sellmain buzz is the leadership vacuum -- the main buzz is who will fill the leadership vacuum? he is concerned because major developed nations have been significantly backtracked on issues of climate change, trade, and other issues. one hedership vacuum is

says china is looking to fill. francine: thank you so much, matt miller, on the ground in hamburg covering the g-20 conference. we have julia coronado. we have chris. when you look at the g-20, it looks like it is very uncertain, but some they could come out of it because you have all of these world leaders that have a lot of tension amongst them, but they can agree on something. what do you think will be done? chris: i am one of the general skeptics. they really matter when there is a crisis to be fixed. the g-20 came immediately after the global conflict. when there is no crisis, the form does not count for very much.

but it is a chance to get a hearing to the big sources of tension. the signals that come out are important. tom: christopher, good morning. it is wonderful to have you with us. you have decades of experience, public service with the united kingdom, and i can sit -- julia and i can do the toast thing. those of the silly myths and stereotypes that we have about meetings. you are the pro. what is different this time about putin, trump, versus putin, reagan? what is the fact now versus the myths and stereotypes that we have? chris: it is not what is different, but what could be the same. , and theirnd reagan

first meeting or two, they changed the global agenda and introduced new themes, new avenues. remember the summit between reagan and gorbachev introduced the idea of real nuclear settlement into the cold war. the opportunity exists when the top leaders meet. trump, putin for the first time. is there going to be any give and take? or will it just be ritual really -- ritual reaffirmation? i don't know the answer. i normally have strong opinions, but i am waiting for 3:00 p.m. u.k. and 4:00 p.m. u.k. when the meeting starts. mccrone goes to the -- mr. macron goes to the g-20. julia: there is the economy in the political all comes in europe going in a good direction lately. there is a good energy and the european recovery at long last.

they are in a very good place. backjobs day, we will come . coming up, bill gross will join us. on bloomberg radio, david guerrero will have kruger with us. hamburg, in in london, and a note ♪

what has happened in the past two weeks is a complete turning point for the banking in italy.

, montee rate our capital paschi on one side, the risk premium for italian banks should be good now. francine: that was the head of italy's largest bank, speaking to me, talking about the 17 will in euro bailout -- the 17 billion dollar -- the 17 billion euro bailout. brought greater financial stability to the country. into this means there is no more systemic risk in equities? >> no more systemic risk is a bit too optimistic. there are at least one

medium-sized bank that we know on the coast of italy that is doing a capital increase shortly. we will see if the market want to give them funds. but i think the market has answer that question, francine. equity and bond masters come in and his twin pillar of resolving the banks and monte paschi, hopefully. that is lowering risk coming yes. whether it is the end of this chapter is too optimistic in my view. francine: there has been more and more criticism from germany. what does this mean for banking? dan: lots of questions have been raised about was it the letter of the law regarding situations like this followed? italy, and the case of these two

banks says there was no other solution. in fact, if we want to reduce the risk of the italian banking system, there is no other solution. so far, it seems to have worked. francine: so far. we will have to continue to keep an eye on this. dan, thanks so much for the updates. coming up, conversation with the former u.s. ambassador to south korea. discuss the north korean missile crisis, how mr. trump, president trump can get their president involved? this is bloomberg. ♪

♪ tom: so much going on today. francine in london, i'm tom keene in new york with matthew miller in hanover, germany -- hamburg, germany with the g-20

conference. >> in hamburg, germany, another day of clashes between protesters and police as that g-20 summit gets underway. anti-globalization protesters fanned out across the city and police used water canyons -- cannons. president trump have his long-awaited meeting with russia's president vladimir putin. leaders and the u.s., japan, south korea kept the pressure on china with north korea meeting last night in hamburg and had a vivid discussion about responding to north korea's missile launch. president trump has signaled his frustration at the peso china's efforts to rein in north korea. a saudi led coalition is threatening new sanctions against qatar. the block says that qatar's decision to reject its demands demonstrate that they have links to terrorist groups. qatar has denied this.

in the u.k., british business leaders gather today to give the government advice on how to deal with brexit. among those attending the conference, executives from barclays and rolls-royce. company say they have momentum after prime minister's theresa may's for showing in last month's election. global news 24 hours a day in 120 countries. i'm taylor riggs. this is bloomberg. francine: joining us from hamburg is bloomberg's executive director for international also in new york, julia coronado. we have a full house. john, great to have you on the program. g-20's soovered 150 far. it feels like it is the new world order and there are three

dashing -- new world order and there are different debates going on. leaders are divided. the first two issues, there is one major country that disagrees with the rest of the world and that is the united states. on free trade and climate change, there is a broad consensus. mostnly snag is that the powerful country in the room disagrees. deny the fact that many countries are committed to free trade. north korea is a different one. you might see more of an opportunity that it will be reversing and you will see more countries -- you have to do something about north korea.

you are right when you say most global summits, most international summits feel pretty predictable. but this is different. this is a summit that really matters and where real things are being discussed and divided. francine: you could be the real winner out of this, john. thatve someone saying major developed countries have backtracked on trade. merkel that has been supported? i think they are all aligned on this. this is something we have not seen and the post cold war era. united states is showing up on the other side of the table. the other superpowers, all fundamentally disagree with how the world economy should be run. you know, winners and losers, too early to talk about that. trumpe the putin and

meeting coming up later today. but there is nothing really so far to suggest that the u.s. will leave hamburg in any position other than the one in which it arrived. tom: yesterday, we saw the pageantry of central and eastern europe, lonnie a trump speaking to her -- melania trump speaking to eastern europe. how was that speech received in germany and in france? with i think all speeches donald trump, the reaction was slight bewilderment, but respect. that this is the most powerful person in the world. basically is getting the measure of donald trump now. there is -- there are certain things i want angela merkel and donald trump are not going to agree. but if you talk to merkel's people and her people around her, they do not want to the

labor that point too much. there is an active effort to spend not too much time with it are going to disagree. angela merkel does not want this to be a divisive summit, but it might end up that way in the end. but she does not want to overtake that point. for looking at trump's beach yesterday, it was remarkable being that most of the things he said about liberalism and religion, angela merkel would strongly disagree with a lot of those things. tom: john, thank you for the respect. , 150 g-20ade a joke meetings. go to our single, best chart. it does not go back to 1848, but julia coronado knows this well. eisenhower in the 1950's, the reflation, the apex, if you will.

great, great moderation that you study at the university of texas. here's a financial crisis. my headline off this chart is that we are still in the great moderation. are we? julia: firmly so. let's put it in perspective because they are historically low yields. growth is moderate. even if we put a little risk-premium, it is not like we are going back to the 1970's-era regime. tom: one of the highlights was adam pozen speaking. when you were at the fed, and john writing about economics, markets matter, business matters, reform matters. which is it? which will win the day? julia: i think orthodoxy has fallen short on a number of fronts. that does not mean you throw the

baby out with the bathwater. tight labor markets do matter and they need to be taken into consideration, but there are a lot of forces. ,nother one is global structure economic change, the effect markets and inflation processes, and are things that are changing as we speak. these are forces that need to be folded into the framework the central bank is used to think about the world and how they affect it. francine: how should central bankers look at the g-20? julia: a lot of the political issues are well out of their control. fromalways step way back those particular issues, but they do matter right now. the degree of uncertainty about policies that affect health care, trade, tax policy, these are heavy on the minds of businesses and consumers. therefore, you saw a lot of discussion of that in the minutes from the recent fomc meeting. they are front and center for the direction of where the

economy goes next. francine: christopher, what is the g-20 need to show for markets not to be spooked? i know you are not a market participant, but is there anything that the g-20 can do in the next two days to get people confidence that there will be less turmoil is that a more turmoil? >> i would agree with julia that protectionism is the key indicator and driver, which central banks care about and which medicine the real economy. the best thing in which the g-20 protectionistd pressures. the lack of obvious friction, as we had at the g7 conference, the lack of friction would be reassuring for markets. but the bottom line, there is more demand than reflation.

the chinese real exchange rate is less weak. europe is going the same way as the ecb is looking to respectively to taper. and the euro is appreciating. this external demand will be good for the u.s. and u.s. jobs. that is the organic way to relieve protectionists theories. tom: julia coronado with us. jobs report,er the bill gross of janus will join us. how is he managing higher yields and lower note prices? stay with us through the day. this is bloomberg. ♪

♪ francine: this is "bloomberg surveillance." taylor: qualcomm inspired the later shot in a long-running bitter fight with apple. to chipmaker accuses apple of infringing -- that covers mobile phone technologies and once u.s. regulators to stop versions of the iphone that are not made with qualcomm chips from entering the country. apple says it has tried to negotiate with qualcomm for years without success. for the first time in seven years, walmart has gone to japan's bond market. yen sold $1.5 billion of denominated that obama took advantage of falling fundraising costs in japanese demand for securities issued by well-known u.s. businesses. of unicredit says there are no more systematic issues for italian banks that is after the rescue of two banks and the -- banks in monte paschi. >> i think we have to put things

in perspective. theou want to look at common racial used by investors, it might be 15 billion euros. it is a large amount. of the transaction of 17 billion think thenvestors, i market is in full supply. this issue will be resolved. taylor: that is your bloomberg business flash. francine: thank you. president trump is being urged by democrats and republicans to get tough with vladimir putin today in hamburg. yesterday, president trump it could be russia meddled into the election, but also said it could be others. we are back with christopher and julia.

christopher, will we ever know what president putin president trump will tell each other when they meet at g-20? christopher: we probably will come in yes because washington is a leaky place. even in russia, they talk a lot. it bloomberg -- bloomberg is good about getting word out of the kremlin. francine: i read everything from he needs to be friendly, but not too friendly. one of the big worries is that president putin out maneuvers him by being too friendly. christopher: i think that people remember the famous first meeting between president putin and then recently elected president george w. bush pennsylvania and 2001 when president bush famously said he saw and to vladimir putin's soul and liked what he saw.

i saw some blooper reporting yesterday, some speculation that mr. putin could exercise his wild once again over the president. we should take that with a pinch of salt. tom: the protesters are having an effect. this came across the bloomberg wire from a good source. mrs. trump cannot leave her residence because it was an uproar a few days ago about the trump administration not having hotel rooms in the four seasons, or other traditional hotels. i am not sure what the first lady is, but she cannot leave her residence according to these reports because of the protests. we will have more on that. the phrase used is due to security reasons. francine: that is something we need to keep our eye on because we saw a huge protest overnight. i think there were water cannons involved. i was digging into some facts of hamburg. it is one of the biggest trading

cities, not only in germany, but in europe. 40% of the trade goods between china and the rest of europe comes through -- comes through hamburg. anyone who not met has not loved it. they love, love, love hamburg. it is a g-20 meeting. was this -- how will this g-20 meeting fit in with the others? will it be of substance, or it is another communique, another photo op? i don't think that substance. the diplomacy industry is overrated, and i say that as a former service official from way back. i stress again, it is the meeting of the world leaders, the signals they give about the great questions of the day affecting the global economy and markets.

of their do meeting individual exchanges, either one-on-one my president trump or for example, the group meeting the president of south korea and japan, they are important and interesting moments, which these summits get a state for. that is i would put it rather than the summit itself and its formal deliberations and communicate and so on. tom: thank you so much, christopher. francine? francine: i just wanted to bring a security update from hamburg. police seem to be struggling today actually clear some of the roads. they have dispersed two blockades with water cannons, one north of the summit venue, but despite their best efforts, struggle to contain this. the protesters stand across hamburg and torched cars to disrupt the start of the gin -- cars to disrupt the start of the

g-20. francine: michael mckee, rumored to be within the building in washington. i don't know where he is. here is what you can do with tv . in the at tv protesters, or you can come over here, and look at our previous, single best dressed report, and check out the first lady's dress , and francine lacqua's careful so.lysis of the del po stay with us. this is bloomberg. ♪

♪ tom: what a busy morning. francine lacqua in london, and matthew miller in hamburg, germany were protests are heating up. the first lady cannot leave her residence in hamburg. we will have much more on that in a moment. we are looking at the jobs report at 8:30 and you get lucky when you have a hat trick of this expertise. joined us from bloomberg intelligence good wages, wages, and wages. julia coronado will discipline the troops. mr. mckee, let me go to you.

how do you look at wage dynamics? see wagesou want to rise at a faster clip. there are those who say the data doesn't fit the models, and we need to have a new model because we don't want to let things get away from us. the laws of supply and demand of not been repealed. the unemployment rate keeps going down. we're going to see wages right and we do not want to be behind the curve. pedro, a business insider. carl riccadonna, how do you measure wages on how you look at wages? it is confusing. karl: mike is bringing up the right notion to throw the model out and recalculate it. when we are seeing is some breakdowns in the traditional relationships. it too early-- is

for linear regression? tested what is driving hourly earnings, and an appointment has collapsed as a predictive tool. tom: what is the tool on wage growth? u-6 has drifted. it that is the employment population ratio. instead of the unemployment rate, it is the in-employment rate. that is telling you there is still more time before we see a flareup in weight pressures. francine: carl, this is my ratio. about u6.you talked when will we create quality jobs? carl: we are creating high quality and low quality jobs. we can see evidence of that when we look at the unemployment rate

with those with high levels of education, presumably, they are getting the best jobs. cap creation is really across the board -- job creation is across the board, but in the to call the i hate lower quality jobs, but these types of seasonal and summer employment, the jobs that have high school and college students and seasonal workers getting for the summer. but some of that hiring has shifted from may into june. june's again will stem from may's gain. francine: what will it take in the figures today from markets to reprice and start believing in fed hikes for real? julia: the market is expecting a pretty good number of wage growth said it, and there are calendar quirks and reasons why that is the case. i am on board with that. we will see a good solid number of wage growth. it will lift the monthly number and the annual pace. it will not break out into a new range. it will take us to a new regime

of upward pressure on wages. but for the markets, it will provide a little bit of relief on the deflationary data readings we have had the last few months. you may see reaction out of that. tom: the employment of population ratio, michael mckee, is way down from 2000. do we still have slack in the economy? michael: we do have slack, the question is how much? it is not a question of how many people are available. we have rough ideas of who is not in a labor force. can be enticed to go back to work? there are, going back to school, going on disability. that is what the fed has to try to figure out. tom: michael mckee, looking forward to your 8:30 report. carl riccadonna, thank you as

always. i will steal the employment to population ratio. julia coronado, thank you so much. continuing on radio. really appreciate dr. coronado's perspective this morning. francine, thank you for taking my vacation days. francine: i am on assignment on the beach in italy. [laughter] tom: looking at italian banks. she will be reading about italian banks. later today, 8:30, william gross after the jobs' report. stay with us this morning, including in hamburg, germany. this is bloomberg. ♪

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stabilizes. more pain ahead for the funds. of the most highly anticipated g-20 summits in years. it is payroll friday in the united states. consensus looks great. from new york city for our viewers worldwide, good morning. this is bloomberg daybreak. to get you set up for the market action today, the one thing you need to know is the on market route stabilizes a little bit yields are growing up higher by two basis points. the euro falls back by .1%. futures go nowhere, but we go toward a second straight week of losses. alix: crude is getting pummeled did you get the june jobs numbers.