francine: america first. and non-opecopec members gather in st. petersburg. the market needs more oil output than nigeria and libya. bank had its best term ever. lizette the 10th of the european banking season? -- will this set the tone for the european banking season.

we are getting figures out of the eurozone. the euro is growing at the slowest pace in six months. the figures disappointed on every count. manufacturing, 66.8. anything above 50 still indicates expansion, but it is lower than what we were expecting. 56.8 and seductive be 7.2. is stillsite overall off. the euro-dollar 1.1640. this brings us to the rest of your data. we have two of our favorite guests on, especially paul donovan. we get his take on the imf. overall, the stocks are mixed. on wednesday we have the federal reserve rate decision. all remaining below $46 per barrel. that is before the opec meeting.

now let's get straight to the bloomberg first word news. the u.k. trade secretary will meet his u.s. counterpart to repair down for a transatlantic trade deal as soon as possible after brexit. talks will be held before meeting members of congress during a two day trip. >> it will be a difficult discussion. we have got great support from the united states and the administration, as well as congress, to push the agenda forward. reporter: limiting oil output from nigeria and libya will not be on the agenda when opec and nonmembers may in st. petersburg today. -- meet in st. petersburg today. they will need to keep pumping at a higher level until they join the global effort to stem the supply glut. the trump administration supports the bill to sanction russia. boss huckabee sanders'

would not guarantee that donald trump would sign it. >> he is not made a decision yet to sign that bill. when you make that decision, i will side with him. i am his medications director and his advocate. reporter: in poland, mass protests have continued across the country after parliament passed legislation, giving the leading party more control over the judiciary. the president was urged to veto the legislation, which they say is a threat to poland's democracy. global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. this is bloomberg. francine: it is no longer a case of america first, as far as the imf is concerned. they said the world is relying less on the united states to sustain the global recovery of eurozone play

more prominent roles. we get a rate decision from the fed this week. traders are watching for clues that the fed will ease up on the tightening path. the largest impediment for staying on track for three rate hikes is the core consumer price index, whose growth rate has struck the lowest level since 2015. let's bring in paul donovan and viraj patel. thank you for joining us. what will underpin your forecasts, paul? is it the fed? or do you rely on the imf forecasts as well? >> we do not rely on the imf forecasts, they are typically six to eight months behind the market. this is old news. focus for thee

near-term, and a little bit beyond. the unusual thing about the federal reserve, with the indications they have been giving is the passive quantitative policy tightening, the scaling back of the bond holdings is a program which is a commitment for multiple years. they are pre-committing to policy several years in advance. that is very unusual, but i think will be significant for markets in shipping expectations about where we are headed. francine: on the fed, you say it is their job to communicate longer-term incentives without giving investors too much of a panic on a day-to-day basis. >> absolutely. the fed is trying to influence where the economy is going in 2019, not today. they are trying to consider were inflation will be in 2019. you have inflation which is not far off of its long-term averages. we're hovering around the 20 year average, including on the core pc deflator.

monthso nothing, in 18 time, we will have a problem. we need to start tightening, but not aggressively, but let's do additional tightening on the quantitative side and the monetary side. francine: how much tightening from the fed are you expecting this year? >> we are expecting one more rate hike this year, potentially december. we are looking for the fed potential this week to insert the clause that they will be starting on the balance sheet relatively sent. markets are well priced for this. they are 50-50 over the december rate hike. we think the could get some uplift this weekk. francine: paul, is the risk that they act too quickly or too late? >> at this point, it is that they act too late. real fed funds have not budged in two years. the rise inflation has offset the monetary tightening. there has been quantitative

tightening. the balance sheet have gone through organic tightening, but it is limited in terms of what has haven't. -- what has happened. we have clear evidence of wage pressures coming through. i'm not saying you will get runaway inflation, but the risk is that over the next two years inflation comes in on the upside. francine: they point to inflation as being one of the reasons they have not done what they promised in the last couple quarters. at the same time, raj, how do they look at this observance surrounding the trump administration? -- how do they look at the concerns surrounding the trump administration? >> it will be difficult for them to explicitly .2 a certain risk on the political scene -- for them to explicitly point to a certain risk on the political scene. up quite wellg

in terms of easing financial conditions, but the fed will be concerned that the u.s. 10 year yield is trading much lower than it was, despite two rate hikes. that is another argument to start the balance sheet process sooner rather than later. >> one of the issues the fed will not be too worried about is the impact on normal people. we're not seeing a collapse in consumer confidence. the consumer is not really reacting. that is because normal people aren't like us. we get obsessed about politics. we watch our bloomberg terminals all the time for the latest thing. normal people read one newspaper, maybe, and that's it. they don't have the same focus on politics. basically, as long as they have got a job and can afford to buy what they want to buy, they are happy. francine: you are right when it

comes to consumer confidence. let me bring you over to my balance sheet for the fed. it shows you the sheer magnitude the concern could have on the markets. if you are a ceo, you do look at the terminals on a daily basis. the ceo's don't have these spirits. where does this leave u.s. growth? >> the ceo's are running large companies and i don't care about large companies because they are only about 30% to 40% of the overall economy. themom and pops are backbone of the economy and it is the engine of growth in the u.s. the large companies, the ebbing and flowing, that masses to the equity market. francine: is that not where wage growth comes through? >> the wage growth we are now looking for is coming through from the smaller businesses. uys thate the g

everything will they are saying, we are finding it difficult to find staff. these are the guys who are hiring lower skilled workers because they cannot get the workers they need. they are driving the medium-term income story. francine: we are getting breaking news out of the saudi oil minister. he says there have been reported cuts, but they have not been matched by the exports. i think he is trying to say that opec has done their job, russia as well. i want to remind our viewers and listeners that there is a huge opec meeting in st. petersburg at the moment. what we understand is that limiting oil output from nigeria and libya do not seem to be on the agenda when opec and other producers me today. al-falih also says there is a buildup in oil industries, but that seems to be reversing. the oil inventories are only 215 million barrels above the

five-year average, pointing to the fact that we think it could rebalance before investors meet. i'm not really seeing this in the share price, to be honest. i guess we see on a willingness for saudi arabia to cut further productions. stay with "surveillance." plenty coming up. the third biggest private bank, coming up next. plus, all eyes on oil. we are live in st. petersburg, where production cuts are under a spotlight for opec and non-opec members. this is bloomberg. ♪ francine: we are just getting

breaking news out of poland. we understand the polish thisident will veto part of judiciary legislation. remember, this follows mass protests against the polish parliament, which was looking into changing some of the supreme court's backed protesters that marched peacefully yesterday. we understand on the back of this veto, that means tightening. we have a longer-term euro chart. the weakness we saw over the last couple days was a little bit of concern on what would happen. we now understand, though we have not heard it from the president himself. plenty to keep an eye -- we need to keep an eye on what he'll s ay. we understand the president will veto part of this legislation. is this comparable to what we are seeing in europe?

part of this go back to the geopolitics? -- or does this go back to the geopolitics. >> what we have got is like what we have in russia or with abe in japan. people are regarding this as political noise in the background. the political issues we have here, which could potentially damage relations between poland and the rest of the eu and great complications there, that matters for the longer-term, for trend growth, but it does not matter in the shorter term. economic activity can carry on in the short-term regardless, as we saw after the u.k. vote. the markets are focused on the economy and this is noise. the one area where the noise theps in a bit is investment markets. that is because international investors hold off a bit, treating noise in the currency

markets. -- creating noise in the currency markets. francine: now, let's get straight to the bloomberg first word news. reporter: manus: bmw has denied that german automakers refused to install the emissions standards. link on thes a prices of crucial technology, the first attempt at damage control since the european commission said it is investigating illegal collusion. innair reported a 55% gain first-quarter profits, 397 million euros, beating estimates. however, pricing will be very competitive through the remainder of the fiscal year. phillips has reported a 15% rise in the second quarter profit

amid strong performance in western europe, north america, and china. they also said the plan to buy back 1.5 billion euros of shares starts in the first quarter. that is the bloomberg business flash. hascine: julius baer surpassed its target. it set the tone for the european banker. manus cranny has been speaking boris julius baer ceo, collardi. >> i think this was our best half year ever. net income is above the target range, exceeding our expectations. that is on the back of 30 good momentum on -- of their he good hirin -- of very good momentum on hiring. francine: it doesn't seem they have had some strong inflows,

especially in the regions where they hired more private bankers. >> asia and monaco did very well for them. you saw 700 million swiss francs added on the open. the promise to the market was, i will grow 46%. when it comes to the momentum in the marketplace, there was a rallying cry, and it went up. it was equities. k in thelients are bac markets. we are hearing bids from central banks. it bodes well for banking and client activities. we should see clients in the market. an indicatione clients are ready for more volatility? >> absolutely.

volatility has been historically too low. people were worried for a while that volatility was not there. this is one of the many indicators. the main one is the market sentiment. everywhere, clients are getting positive, on average, more than what we have seen in the past. manus: they are getting more positive. is that just on the likes of equities? are they looking across the asset classes? where is the most prevalent interest? >> in equities. at fixed income, they are looking. our position in fixed income is huge in the market. they are looking at performance on the fringes of the market, all the way to private equity. manus: let's hope those rallies continue. of course, it is about getting those private clients to move from cash, which is still too

high. i will hist my cost-income ratio next year. for now, the market handsomely rewarding collardi. francine: what did he say about client activity, manus? this is a great first half for them. the client's activity was subdued. that is because they can get new money in, right? manus: yes. by the way the strategy they have employed at julius baer is organic growth. we have ubs and credit suisse at the end of the weekk. -- of the week. ,t will be much more aggressive offering it to the uber rich of this world. will credit suisse take away from some of the good work that collardi has done? china is still incredibly

important to this story. and we have the conversation on brexit as well. francine: i'm looking forward to hearing that. manus, thanks. dhe oil market will bnee more crude from libya and nigeria. spec and non-opec member are meeting in think petersburg. we also had headlines from the saudi oil minister. .et's get more from javier blas still with us is viraj patel and paul donovan. javier, thanks for joining us. what should i be looking out for today? >> we are looking at two things. one, and a question we have had has already been answered by the saudi oil minister. anding at whether opec non-opec producers were

discussing deeper production cuts now. and al-falih said there was no discussion whatsoever. the other question is what opec will do with libya and nigeria, the two countries that are outside the deal. the production is increasing dramatically. and so far, what seems to happen is that opec will take a wait and see approach with both countries. they need to continue to produce at high levels for a few more months before opec can include them into the production cuts. here's why the market is taking a negative reaction with brent down 0.5%. francine: first of all, it seems to suggest the oil minister of saudi arabia believes there will be a rebalancing of the price of oil because of inventories. if they want to get back control of the price of oil, do they have to cut more production? >> he is right that the market is rebalancing, that inventories are coming down. we have seen that in the u.s.

that has been happening this summer because refineries are running very high. the key problem for the saudi minister is the oil market today is looking ahead. it is looking very well into 2018, what is going to happen. there is when you see the market is not rebalancing and if opec was to continue producing at cover levels, 50 million barrels a day, then we have inventory for 2018. francine: anything short of full production cuts, will the market be disappointed? >> i think the market will be disappointed if opec does not signal it is prepared to do more. they need to send a signal that they are considering deepening the production cuts. so far, opec is not even sending that signal. francine: we are back with paul donovan and viraj patel. what do you make of the price of

oil? it is quite difficult to guess whether it breaks to the range we have seen so far. >> there is probably some upside within the range. we are not looking specifically for dramatically higher oi.l pri ces, but moving to the top of the range around $55 per barrel. that is feasible in the latter part of this year. as we see the demand continuing -- and we had good growth coming out of the u.s., one of the least efficient oil consumers in the developed world, pretty good growth coming out of china, one of the least efficient consumers in the emerging world -- it gives us upside into the second half of this year. francine: raj? >> there is this idea that there is the structural breakdown in the correlation between oil movement and petrol currencies. you need to see a topside breakup for it to be a catalyst. equally, the focus for global

economies is elsewhere. we need the proxy trade right now. the other currencies are not showing the sensitivity. francine: i grew up being told that if the price of oil goes down, it would mean that consumers spend more. so, it is beneficial for the economy. we have not seen that. >> part of the issue is the relationship between oil and the economy is not what it was. because we have periods of high oil prices, people become energy-efficient. 10 years ago, people would purchase a new energy-efficient boiler for my house. now, i would not go back and repurchase my old boiler. price has become less of a factor for the consumer. the other thing to keep in mind,

the lowering of consumers are far more exposed to oil. more of the budget goes to energy, in all of its forms. this could be something that helps lower income consumers overtime. that lower income consumers tend to be less important to overall consumer spending than our television producers, should we say. francine: that is probably wrong. thank you. up next, the u.k. trade secretary is in the u.s. for what he calls difficult discussions. can the two sides soften the brexit blow? this is bloomberg. ♪ these days families want to be connected 24/7.

that's why at comcast we're continuing to make our services more reliable than ever. like technology that can update itself. an advanced fiber-network infrustructure. new, more reliable equipment for your home. and a new culture built around customer service.

it all adds up to our most reliable network ever. one that keeps you connected to what matters most. ♪ francine: this is bloomberg surveillance, let's get straight to the bloomberg first word news. >> poland's president said he overhaulo a bill to

the country possibly in court passed by the parliament saturday. the move came after eight months -- eight nights of protest over the legislation. the bills said threatens poland's democracy. limiting oil output from nigeria and libya will not be on the agenda when open meets today. both african nations have said they will need to keep pumping at a higher level before they can join a global effort to stem a supply glut. the world is relying less on the u.s. to sustain the recovery. the global prediction was unchanged. percent of drivers are changing. u.k. asres the u.s. and less crucial with china, japan and the eurozone and canada playing more just higher roles. the trump administration

supports the current version of a bill to sanction russia's actions during a 2016 election. sarah huckabee sanders and anthony scaramucci would not guarantee that president trump would sign it. >> he hasn't made a decision you to sign it one way or the other. the decision i will side with him because i'm his medications director and i'm his advocate on a show like this. news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. the u.k. trade secretary is meeting with his counterpart in washington later as he lays his own work for a transatlantic trade deal after brexit. he says the discussion will be u.k. tries tohe set up a deal as soon as possible after leaving the eu. >> our trade is worth about 167

billion pounds. another be worth over 40 billion in that by 2030 if we are able to remove the barriers to trade we have. it will be a difficult discussion. all of them are to one extent or another. we have support from the u.s. and the administration. francine: with us, paul donovan --viraj patel.l viraj: for the pound to move higher, the next catalyst is a signed transition deal. now there is a slowdown in u.k. economic activity and on the flipside what you've got is markets pricing in potentially 30% for the bank with a rate hike. we think that's probably

mispriced. debate if that. that's probably where some markets are. a downside risk in the short term. francine: is the boe rate hike --? if it is, why did the governor go through the pains of pricing in an? paul: what the governor is trying to do is explain we've got a series of things we need to look at. he's representing a monetary policy committee that is divided. and talking about is that potential round of inflation coming through? what sort of threat does that pose in the medium-term? the government doesn't want him balance is building now which will explode in 18 months. they will have quite enough to deal with without trying to fight fires with imbalances. what will it take for inflation -- what happens from here?

it's unclear what kind of brexit the government wants so how is it for you to not only make pound calls but also gdp forecasts? it's not that difficult in as much a relatively hard frexit you don't -- brexit. , fairlytill got trade similar or identical regulations in europe. the issue about the exit and the policies of this, it's not about the short term. do we cut trend growth in the u.k. or do we cut it by .3? that is what the deal will determine. francine: the concern is just a look at a day to day to understand the long-term implication but we may be wrong in negotiating tactics? viraj: i think short-term the wage inflation has an impact on the pound especially when you .ave banks sounding hawkish

but where's the equilibrium? we havew based on data they're are probably stuck in --130's.0's francine: even away from brexit do we even know this country will be pro -- in the future. it's a difficult thing. one of the things that comes with currency markets, policy -- politics of a headwind. it acts as a limiting factor. francine: what's the number one unknown? your jeremy corbyn change prediction? here isthink the issue unless you have a general election, which is not on the path at the moment. if the conservative government were to fall and you get a labor

government coming in, what can that labor government get through parliament? what of the policies being talked about would actually be implemented? we have corbyn coming out over the weekend and saying when we said we would cancel student debt, we didn't really need it -- mean it. we may not be able to afford to. this was one of the key pass of the manifesto and this discrete apparent backtracking. that is all hypothetical, but still. it's not something investors can be confident about. francine: where you see pounds? paul: we would look for them to move somewhat higher against the dollar. perhaps a bit more cautious on the dollar. in that situation a slightly higher exchange rate. we are not going to 140.

francine: we will be back with paul donovan and viraj patel. plenty coming up. how will france's youngest president react? this is bloomberg. ♪

♪ francine: you're watching "bloomberg surveillance." let's check on your markets. >> the worst run in july. the two day fed meeting and the stoxx 600 down. large speculators ramping up that's against the dollar.

the double down wages for the japanese currency to slide. roughly 279,000 contract, the most in early 2013. the parish slant on the jury -- japanese currency surging. below $46. trading opec members meeting to discuss supply cuts. hedge funds adding the most weekly wages on rising wti prices since february with short sellers on a steady retreat. .ig gainer, julius baer switzerland's third-biggest private bank exceeding its target. the next new money in the first half up by 6.1% to about 10

billion swiss francs. strong inflows from areas where the bank has stepped up improvement. net new money was held by strong net inflows from clients in asia, the middle east and monaco as well as a substantial recovery in the hit flows from latin america. 7'3" percent leads in shares. francine: thank you, mark. french president emmanuel macron has seen his approval rating sink as well as a dispute and a new set of changes. to 54%, that the second-biggest decline for a president so early. acron's lack of a political base makes his position franchise -- fragile. thank you both for sticking around.

you look at france and gdp it was always going to be a difficult job. when he was elected it was unclear whether france wanted to be reformed. paul: this is one of the issues. was sort of the antiestablishment establishment candidate. , thatsn't marine le pen was his defining characteristic in many ways. wasn't quite hold your nose was at le pen, but there sense that wasn't overwhelming support. we look at the turnout by historical standards a very low turnout in the national assembly elections. there is a sense of apathy around what macron is suggesting. we are now seeing some of the more traditionalist established positions, the military, the unions, oppose various aspects of his policy and that i think

will be the challenge the defines the next couple of years. euroine: we are seeing the on a rally. it is continuing because of dollar weakness. can politics in france possibly change that?: viraj: the big question is will it break out of his two-year range? when it comes to this story what we are seeing is a bit of a reality check. portfolio inflows have supported the euro, there's been a strong link between them. equally if we do start to see stocks corrective it, that could stem and consolidate. francine: do you agree or is easy be on the matter what happens? viraj: with -- paul: with regards to ending quantitative policy accommodation, absolutely. i think that is set in stone. frankly should've been there this year. slowly seeing mr. draghi

admits he has an easing addiction and he needs to dig a 12 step program. francine: by who? paul: the governing council. germans are in an economy with strong growth and inflation pressure. others are concerned as well about the extent to which he is extract -- extended this policy and perhaps provided accommodation which isn't entirely necessary when viewing the eurozone. i think we get some tightening from the ecb. that is not necessarily going to have a huge impact. i would argue that the euro probably does have an upside from here. coming from the fact the

european growth is still particularly strong. it doesn't have the political problems and doesn't have the dependence on international capital flow with the dollar has. we of the story of a weaker dollar from an overbought position and we of the euro which isn't throwing up a reason not to buy. the counterargument to paul's thinking is that i've heard some guest, program and say the ecb as a whole would like to stay as accommodative as it is, they just don't have the germans into next year. they may ease off accommodations. viraj: that's one argument. in part that may be an issue. animal spirits in the eurozone which requires taking foot off the pedal at least when it comes to qe. the problem with the currency is

having to move too fast too soon for the ecb's liking. particularly when you're a strong euro it doesn't come without any economic costs especially inflationary downside risk. morewe need to see is stable signs of inflation in the eurozone. francine: you think that staying as it is will create damage? i think they need to make clear they are going to be tapering next year. francine: paul donovan and viraj patel. can earn a one --erdogan stop a crisis? ♪

♪ let's get straight to the bloomberg business flash. >> bmw has denied the german carmaker -- that german carmakers agreed amongst themselves to install equipment inadequate to do the job. claims they held on prices for crystal technology. it's the first attempt at damage control since the european

commission said they would investigate accusations of a legal collusion. ryanair has reported a 55% gain in first-quarter profit as strong summer bookings swelled revenues. in the three months to the end of june, beating estimates. europe's biggest low-cost willne cautions pricing remain competitive during the remainder of its fiscal year as overcapacity crimps fares. phillips is reported a 15% rise in second-quarter profits amid strong performance in western europe, north america and china. to buyso said a plan back 1.5 billion euros of shares in stocks in the third quarter. that is the bloomberg business flash. francine: turkey's president of blendspresident erdogan --

over the weekend the u.k. foreign secretary joined the u.s. in calling for an and to the boycott of qatar. we are back with paul donovan and viraj patel. why is there not so much of an impact when it comes to economics in geopolitics? thomas onlyorea tensions with russia. paul: for the most part until something dissolves -- disastrous happens, markets do not pay attention. markets in the short term tend to be concentrating on do people have a job, are they spending money? that's what grows the market in the near term. bearing again on longer-term trends and if you get that tail event happening

then it becomes potentially a lot more significant. for the most part, look at the oil prices. they barely reacted to this. look at the israeli shekel over the years. if any contest currency was going to be vulnerable, the that. we are getting these huge shifts coming through. francine: is there danger that at some point the market turns quickly? viraj: it's an uncomfortable market backdrop. were is cautious optimism are seeing for emerging-market currencies and risky assets. when you're global tightening around the corner, all these sort of negatives that are hanging over markets. you need to see actual bad news -- turn into negative events. francine: the want to get back to the turkey -- turkey's president. story -- is

what does he actually hope to achieve from this visit? >> from the people we spoke with basically they say it is more about balancing turkish interests than just mediation because turkey has sent soldiers food and weapons to qatar since the crisis began. we are seeing and the analyst said, we are not a threat. we want to keep our trade ties together. while he is trying to mediate this, but few expect he will actually have a dent in terms of changing the course of where this crisis is heading. francine: what does it mean for a possible breakthrough? are we closer to that or is there just political machinations? cutterave seen the -- of

-- qatar say he is open for dialogue as long as his nation's sovereignty is respected. the reaction we got from the uae was less than warm. basically saying you need to take action before we talk. however, you have the u.k. and and praising qatari efforts calling for the embargo to be which makes people? there is anything actually happening, if we are going to get some token of good faith. francine: investors seem to be largely ignoring the oil. is that a fair assessment? largelys seem to be ignoring these coming and going in this. >> investors focused on this crisis. we saw a reaction on cbs.

right now investors are basically looking back to what affects the entire region which is oil prices. in saudiok at cds arabia they are converging back because they are seeing oil prices below $50 a barrel and that's still the biggest threat for the region. francine: thank you so much. when it comes to qatar are there any direct influences in the region? viraj: i think we have seen pressure in the currency markets, especially with forward points. when it comes to geopolitics it is contained to emerging-market currencies, especially on a regional basis. is quiteover effect limited. we do not see that cross-border affected we saw which is quite optimistic. have already seen with

the oil price where it is a lot of the middle east have been because theey back fiscal deficits with the oil price where it is means you have to repatriate. they also happen to get into their overseas savings, but we were argue there. this flow by the oil-producing companies sustain their domestic fiscal position has been in place for over a year. francine: thank you both for being with us. patel.novan and viraj bloomberg surveillance continues in the next hour, i'll be joined by tom keene out of new york. this is bloomberg. ♪

♪ francine: mixed messages. the white house strikes

different towns over the russian sanction bill. the polish president says he will veto part of the roger marshall overhaul of the judiciary. oil trades lower. good morning. this is "bloomberg surveillance." happy monday. i am francine lacqua in london. tom keene in new york. we are looking at banks, opec, and politics in the u.s. and poland. tom: politics is front and center. today, asianss strength as well. hans redeker this hour it is a good time to brush up on what foreign-exchange is telling us. francine: i am looking at the impact dollar weakness has. let's get to first word news.

taylor: the president of poland says he will veto part of a judicial overhaul that is threatening the independence of the court system. the legislation has led to eight straight days of antigovernment protests. the eu has threatened sanctions over the issue. in st. petersburg, opec and its partners meet today to discuss oil pumping cutbacks. one item that will not be on the agenda, production limits for nigeria and limit. imf sees the u.s. fading as an engine for the global economy. the world economy will expand 3.5% this year. according to the imf, the world will rely less than expected on the u.s. and u.k. and more on china, japan, the eurozone, and

canada. the new press secretary sarah huckabee sanders says the trump administration supports the bill that would prevent the president from acting unilaterally remove russian sanctions. communications director anthony scaramucci says he does not know if president trump will sign the measure once congress passes it. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thanks so much. equities down. currencies and mondays, currency front and center. hans redeker joining us in a day. much morechange visible. euro churning. tepid friday. three dollar 9594 weakness. you see stronger yen and weaker

euro. francine: what i am looking at is a lot of the margin moves you mentioned. the euro heading for its first decline in three days. stocks dragging lower for a second day i carmakers. i would point to opec, which is why i put oil out there. still below $46 a barrel. we heard from the polish president he will veto part of the overall of the judiciary. bloomberg, wehe get a little lost from central bank news and mario draghi, what we heard last week. we see the two-year jumping up here. a grinding move higher with different fed meetings through 2017 on to the changing of the guard resumed early next year.

-- presumed early next year. pardon then might market vigilantes. we will say pardon a lot today. francine: i like that word. huge complications when you look at that from a presidents point of view. this chart is looking at gold. it is pretty simple. basically you have the price of gold and the 100 day moving average, 50 day moving average. it seems gold is surging above moving averages because of the dollar. tom: thank you. cirillid to have kevin begin our surveillance coverage. he is our chief washington correspondent. kevin, begin the week with the

idea that the winds changed over the weekend. without question, something shifted this weekend. what was it? >> good morning. happy to be here. of course, the legal battles continue for this white house. later today jared kushner will testify behind closed doors with the senate intelligence committee. tomorrow he will also testify before the house intelligence committee behind closed door. wednesday donald trump jr. and paul manafort will testify as well. tom: is it testimony? are they going to be under oath? what is going on? live to illegal to congress-- to lie to when you are testifying. it will not be public.

there will not be that media circus. political optics standpoint, they will not have that option. the investigation is still very much ongoing. some sources are suggesting that this does not mean they will never testify publicly, just that at this together juncture it will be private. tom: how close are we to more resignations? >> i don't think we are close in terms of their being resignations as a result of the investigation. i think the white house wanted to turn the page. increasingeen frustration within the inner circle about chief of staff reince priebus as well as now former communications director sean spicer. as a result of that, you saw sean spicer resign last week. francine: good morning.

there isnderstand basically a japanese official saying if donald trump curbs steel, this will spark of global trade war. how is the administration viewing this? >> in terms of the steely industry, part of the reason we saw talks lastly between the treasury secretary as well as his counterparts in china, and i think later today u.k. officials and u.s. counterparts in washington will begin post-brexit talks. steel in particular, this is something the steel industry has lobbied significantly for andy auto industry has lobbied against. the administration has kept its cards close to the vest on that

front. francine: is this linked to politics? is the administration going to do something like this to detract from the political concerns of these testimonies. >> yes and no. the president wants to get back to focusing on the economy. the president will be in a blue-collar town in ohio tomorrow night. he wants to be talking about things like health care, tax policy, and infrastructure. health care is likely to fail in the senate tomorrow. in terms of tax policy, these hearings are ongoing. the groundwork is underway to have some compliment at the end of the year. looking fort is in some type of policy with. right now he does not have one. francine: we're joined by hans redeker. thank you so much for coming in. what does this mean for the

dollar? dollar iseans u.s. going to stay under selling pressure. that into aput broader context. we are talking about political instability in the united states. it is about the inability of this administration to stay with its promise. the promise was they would increase the growth potential of -- u.s. economy the top was economy. the talk was 3%. the deregulation of the financial sector according to when youy strategist, have any combination between deregulation but you do not increase the growth potential of

your own economy, that means the financial sector is going to become an exporter of capital. that is effectively happening. financial sector. ocean at the same time the growth potential of the economy is not lifted. what that means for the u.s. dollar outlook, as long as you have this imbalance in place, you have the dollar staying under selling pressure. the next step must be an increase in the growth outlook of the united states and the economy. francine: what can the president do at the moment to increase gdp for the u.s.? hans: at the moment he is distracted by the investigation by mueller. if you were to have credible tax reform, it would make a significant difference. he has to acknowledge that in the united states we have rarely seen in non-recessionary times

so sure decline in the capital stock as we have in the last four years. the ratio between capital and labor is very low. that means it does not take a lot to get going in the united states. going in theex united states. ot to dive into this morning. thanks for being with us. this is the election chart. this is the trump election. up we go with the dollar strength. for those of you on radio, it is a persistent decline on dollar. we are below where we were on november 8 of last year. is the dollar nothing more than a yield curve proxy? is it correlate the directly with what we are seeing on rates and inflation expectations?

dollar the drive certainly increased. people are trading much more the outlook. the fits perfectly into analysis i mentioned before. the is as long as you have financial sector looking for business opportunity but not finding it in the united states, you see that exporting. the guidance of that is provided that the financial sector does believe the yield curve is giving guidance concerning the outlook of the u.s. economy, therefore that relationship. redeker with us from morgan stanley. we will be focusing up until the fed meeting on currency dynamics of the global system. scarlet fu leading our coverage.

the fed decides. a great set of guests lined up. smart discussion. 2:00 p.m. on wednesday. this is bloomberg. ♪

♪ taylor: this is "bloomberg surveillance." let's get to the bloomberg business flash. ryanair reported that 55% increase in first-quarter profits. europe's biggest airline says strong summer bookings boosted revenues. higher sales and profits in the second quarter. the dutch health equipment maker maintained its outlook for revenue growth.

bank and j.p. morgan have agreed to pay $140 million to settle claims they conspired to rate interest rates. investors including hayman capital management and the california public teachers pension fund had sued the banks. that is your bloomberg business flash. francine: thank you so much. the imf estimates u.s. growth at 2.1% this year and next. meanwhile the fed dominates the macro outlook. investors will be looking for the rate decision on wednesday. imf forecasts are quite backwards looking. --y just serve the purpose of what you saw in the last six months.

what are you expecting from the fed? hans: the fed is in a dilemma. on one hand, you see prices are undershooting. growth is ok. there is something new in town. financial conditions are improving. some of the financial conditions reading,he chicago which has reached a multiple year high. when you are accommodative with your monetary conditions, you see your domestic prices are not rising, when you see you are not reaching the targets of price stability, you wonder where this liquidity is going to pop up. that is on the financial side. you see prices for bonds rising. be leaningms to against that. they will continue to do that.

they will leave us with this impression that they will look through what they call this temporary undershooting of prices. they will continue to lead --inst -- lean against tom: i love the phrase lean against. morgan stanley is way out front on fed delay. is the quality of the delay going on out the same as two years ago. is the character of delay at the fed changed? hans: when you compare the situation with two years ago, i guess two years ago we did not see this exuberance in financial conditions. we also have this analysis of the imf.

this was released in their annual report. i think any central banker or analyst that reads 150 pages, we have to acknowledge there is a new way of thinking in town. this new way of thinking is when you have too much of financial condition improvement, you store up future deflationary pressures. you don't want to end up liking the nasdaq bubble or subprime anotherhat produced deflationary shocker into the system. you try to avoid that. you are leaning against that. that doesn't mean you are breaking financial conditions. you get a situation where the fed is delivering according to the dots but at the same time risk remaining supportive. tom: these nuances of language

are important. there is a whole body of history in central bank policy on leaning. we will continue with hans redeker. westin's00 hour, david conversation with the retired daniel tarullo. he was that sort of governor, sort of regulation, former governor of the fed. this is bloomberg. ♪

♪ francine: this is "bloomberg

surveillance." we must talk about poland and focus a little more on the polish zloty. we did hear in the last couple of hours, this is movement we are seeing. the polish zloty strengthening after we heard the polish president saying he would veto part of the overhaul of the judiciary. that brought tens of thousands of protesters into the streets over the last couple days. let's get back to hans redeker. this is partly due to the protests. it seems the president may now be listening to some of the protesters. story, ofcurrency what next for europe story? hans: absolutely the context is much bigger. today's news is very significant. if the president does not sign

the bill, it is dead in the water. if it is dead in the water, you will not have any retaliation from europe. that is off the table, too. that will place documents back in the lets fly -- back in the polish zloty. the growth and interest rate differentials are suggesting to be long the zloty against a number of currencies, even the euro. francine: what does that mean? for our global viewers, this goes back on giving the ruling party a lot more control. what happens if it all goes pear shaped? hans: that was obviously the fear on friday. we saw the significant selloff in the polish zloty.

come, it would be quite a harsh measure, and you have to that are the other implications for investment into poland when that type of situation would develop. it would not be good. the market was cautious on that. it is important how the president has decided, and therefore it is significant that the polish zloty may have to increase further from here. francine: thank you vermont. hans redeker of morgan stanley stays with us. if you want to ask him some questions, go on to tv and click on him under the video screen. this is bloomberg. ♪

♪ tom: "bloomberg surveillance" from london and new york. the fed meeting on wednesday. lots going on, including what francine was just talking about in poland.

that really gets my attention as well. washington is front and center with first word news in new york city with taylor riggs. taylor: president trump has a warning for senate republicans, warning if they do not repeal and replace obamacare, the repercussions will be far greater than any of them understand. mitch mcconnell is making a last-ditch effort to provide health care this week. it is still unclear if his bill would repeal and replace the affordable care act. the u.k. is making for a quick trade deal with the u.s. as soon as brexit is complete. removing barriers with the u.s. could lead to an extra $45 billion in trade with the u.k. by 2030. president'she popularity has taken a dive after just two months on the job. his approval rating fell 10%

points in the last month. voters are confused or unhappy andt his plans for taxes upcoming labor law performs. jordan spieth won at the british open. he won the third major championship of his career by three shots. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thank you so much. let me editorialize this a little bit. i am an embarrassment on the course. british golf is the only golf. there is something about the british open that is the terminal. like the masters is all too perfect. the grass is too perfect. the british open is like gnarly old golf. i like that a lot. francine: what i like about

jordan spieth is he went from hunter andto the back again. tom: it is my favorite of the year. onto oil, and oil trading flat ahead of an upcoming opec conference in st. petersburg. they will make recommendations on oil output based on compliance. >> we are pretty sure the regulatory process may be going on at a slower pace than we projected, but it is on course. it is on course, and it is bound to accelerate in the second half. francine: joining us from london as we await that news conference is -- and with us in the studio is hans redeker from morgan

stanley. from, does anything apart of all production cut disappoint traders? >> i don't think there are a lot of expectations going into this meeting. it is not the type of meeting that would have attracted that type of decision. i think some form of statement along the lines of taking whatever action is necessary to balance the market will be perceived pretty well. francine: jason, what is the one thing we know about the price of oil? 55?t stuck between 45 and >> given what we are seeing in terms of production in libya, nigeria, and the u.s. that will keep a lid on prices. unless opec takes further action or something unforeseen happens. year, back half of the

demand is accelerating. we will see inventories drawdown at a much more rapid pace. you,every time we speak to there is a lack of hysterics. bring up the chart that shows the jason gammel view. i use the 200 day moving average. all you got to know is we are right back to where we were at the beginning of 2015. that defines to me a range boun d. are we at equilibrium in the oil market? jason: i think for the time being, we are. we are seeing rice in the mid to high 50's due to price in u.s.. within that range, is that a good thing for the physical demands -- fiscal demands of traditional opec oil,

particularly saudi arabia? can they survive and prosper? jason: they can for a while. therefore and reserves have been drawn down significantly since the oil downturn. billionagnitude of $250 they have had to spend out of their reserves. it is not a comfortable position in the medium-term. they have the ipo of saudi aramco, we think they want the price of the little higher for that to be successful. francine: we have the saudi oil minister say he believes in rebalancing, is that enough to contain the price of oil? jason: if we see inventories drawdown, you can talk a little bit more about political risk premium, but the issue now is even though there is conflict in the middle east that would usually result in that type of risk premium, the high level

than the tory presents that -- high-level inventory prevent that from happening. francine: thank you so much for the insight. jason gammel there. let's get back to hans redeker. when you look at the commodity rich currencies, they have not followed the price of oil. it seems they are looking at other things. hans: the commodity market is a split market. industrial material prices have gone up significantly over the last weeks and months. have oil trading in lackluster environment. i think that has a lot to do with two factors. one is much more long-term. that goes back to the paris climate conference in the year 2015 in which it was suggested if we are going to burn on all

climate was not sustainable. is question we have to ask what is the price of two thirds when one third is useless? at the second lack of reform from the u.s. administration, that is energy reform, we are seeing substantial funds moved into the oil sector, shale price production costs are declining. between 35 and 39, you need to get below 39 hbefore you see a significant impact on the rates. the u.s. dollar has converted

into an oil currency. we should not forget. america has become a significant oil producer. it is now the third biggest oil producer, soon to be the second. you have seen the oil imports of america have drastically reduced. from 11 billion barrels down to 7 billion. it's time oil is coming down, the u.s. dollar goes down. francine: given that, what would it take for opec and russia to take back control of the oil markets? tos: if oil prices go back $55, what would happen to the united states? would that not go up further and encourage more show production in the united states? for a non-trust environment in

america, there are antitrust laws in america, you see dave producinged oil more. that is impacting the marketplace. tom: tell me about dollar canada. we have seen canada on a tear. i am sure mr. judo wants to -- takerudeau wants to responsibility for stronger loony. hans: they are much less oil dependent. ale, you canan oil s look at the cronin. relative to the canadian dollar, you have a central bank nervous about the leverage in its country.

it is leaning against that. that has an impact on dollar canada. we think it is going to scale back to something like 1.21. is canada not one of the countries that is highly leveraged, where asset qualities -- and you have the oil problem, and you come to the conclusion maybe next year the canadian dollar will be one of the weaker currencies. visitne: in the meantime, businessweek to stay ahead of the competition. this is bloomberg. ♪

♪ the view from the castle. underneath there is dragon stone. no, that was game of thrones last night. i was thinking of dragons and dragon stone. it is new york. it is a foggy new york as we enjoyed game of thrones last night, episode two. not as big as episode one. nevertheless, the fog continues on the soap opera known as game of thrones. francine: this is what we need to know, we have threatened kicking tom out of the show for any spoilers. tom: no spoilers. --ncine: joining us surpassed a lot of its rivals and its targets for net new money in the first half.

the really sets the tone. we have been speaking to their ceo. haveus through what we heard from julius baer. it is in the regions where they have hired private bankers that they have had good results. in fromoney has come the middle east, monaco, and asia. that is where the new money is from. that is driving this forward. in the stock price, we are seeing a rerating. he has hired senior bankers into the institution to drive this forward. we got into the brexit conversation, and i put it to him that what happens when ceos like him make decisions to leave

london and head into the heart of europe, what are the risks of ever bringing that business back? >> it is nearly impossible. it will take a decade if at all and a perfect constellation for this to happen again. moving jobs is not just about moving physical tasks, but it is moving people, investments, infrastructure. in any reasonable company, you have to have a playing cycle. i don't think these jobs will go back anytime soon. >> it is a bit like your kids when they have flown the coop, they will not come back to mama. francine: the share price is actually up significantly. there are still concerns about how much you can grow by just hiring private bankers in certain parts of the world. >> absolutely.

market he about the said equities, equities, equities. still s are concentrated. it is a perfect constellation of business in china. out this isinted actually opportunity for them to get in there with good governance and good product. china is going to be an incredibly important part of the story. instead of using the word acquisitions, he said organic acquisitions. francine: it is clear they want to extend the bush in asia much like their other rivals, they're bigger rivals. julius baer did better, so the other two should do better as

well. optimism that up the numbers we will cover this ch.k in zuri just how aggressive was credit suisse in terms of offering more aggressive lending. was there strategy to nip and tuck at the ubs money and the julius baer money, they are aggressive in pitching to millionaires and billionaires. francine: thank you very much. hans redeker with morgan stanley is still with us. when you look at banking in general, and i am not asking you to be a banking analyst, but how much does this have to do with growth around the world and how much is this just with what the fed and central banks are doing? hans: you see another sign of

global liquidity. it is coming up everywhere. when private bankers are increasing their activities, or using etf inflows continue, and that money goes at a record pace ato emerging markets, that is lot of liquidity around the globe looking for return. yield moment we are in a pickup place. people are looking for additional yield because they believe in the or currencies you're not getting adequate yield, so you push money into this direction, it goes into equity and emerging markets where there are yields and especially real yields. 10-year real yields 3.1. that's in mexico.

francine: thank you. coming up this friday, look out for our interview with the credit suisse ceo. we also have the ubs ceo. both banks released earnings on the same day. this is bloomberg. ♪

♪ taylor: this is "bloomberg surveillance." let's get to the bloomberg is this flash. -- is this flash. -- business flash. concerns to defuse that they colluded with other german automakers. eu and german authorities are looking into the matter. grab iseast asia, getting help in its battle to fight off uber. uber andetes with markets from malaysia to thailand. more trouble from wells fargo. regulators are asking about a mistaken data breach.

a lawyer for the bank accidentally released information on 50,000 pounds belonging to wealthy customers. that is your bloomberg business flash. tom: thank you. francine lacqua in london. edeker with morgan stanley. we showed a chart earlier on bbxy. let's revisit it again. we need to remind post that the lift we have seen in the dollar since 2011, is that lift broken? nd ofou say the tre strength has been broken? hans: we are at least writing the trend. over the next three to four weeks, the u.s. dollar may be at 2.5% to 3%. this may be something to write home about.

as long as you come to the conclusion that assets are failing to increase growth potential, what you need to look at is for capex in the united states to pick up and cyclical productivity growth lifting real rates and yield in america. that would be positive for the u.s. dollar. at the moment, we don't see that. at the same time, we see optimism in europe and emerging markets, and that leads to capital outflow. tom: ken chair yellen move the dollar? i don't buy it. hans: the central bank did take a very delicate view on the u.s. dollar. i remember in february 2016 when the fed was underlying is international view on matters. when you compare the u.s.

from 2011 tonce earlier this year, that was driven by primarily deflationary things outside the u.s. picking up. capitulatehe fed to and led to a situation where rate expectations in the u.s. had to come down. this environment is precisely the opposite. the dollar is weak and the market is betting against the fed. francine: there will be discussions about whether they need to cut in 2018. i believe we are seeing pictures from the opec press conference that is supposed to start any minute in st. petersburg. will they have to cut production in 2018? hans: i think it is required to stabilize the oil price. francine: how much more reduction?

you have iraq or example with private cuts. hans: the importance of opec has become smaller because you have non-opec producers increasing their oil production. that makes it difficult for opec to control the price of oil. muchrice of oil will be more controlled by the availability of capital heading into the u.s. market. francine: do you think oil prices will ever recover above $60? hans: that looks like a good thing at first glance. if you stabilize oil at $50 or slightly above, you see the inflow of the u.s. shale industry, will that increase, i think it will? you have the u.s. grabbing share from opec, and the question is

how to deal with it. francine: we're just hearing from the saudi oil minister. let's have a listen. economy is perhaps going through the best phase since the financial crisis of a decade ago. we see it in global gdp numbers and also in distribution, global gdp growth. growth.il demand the oil markets in terms of demand are very healthy, and it is broad-based as well. non-oecd.in oecd and in terms of developing countries, china and india have been developing well, and we

forecast them to grow for the remainder of 2017 and 2018. the u.s., the world's largest , isand oil products market picking up. we are seeing help your numbers and many have -- healtheier numbers than many have anticipated. there have been unexpected developments, which i will talk about in a minute. if we look at the 24 countries that are obligated to comply with the agreement, over the last six months conformity levels, not self-reported but sourcesdary representing the press as well as industry experts have reported overall aggregate

conformity of 98%. that is as close to 100% as anyone would expect. that is aggregate over six months. some countries have done more than others. since two days ago here in st. petersburg and+++

fading as the engine for the global economy. they left their forecast for

growth unchanged, saying the world will expand 3.5% this year. there are mixed signals from the white house on russian sanctions. the new press secretary, sarah huckabee sanders says the trump administration supports a bill that would support the president -- prevent the president from using -- acting unilaterally. doesny scaramucci says he not know if president trump would sign the measure. global --global news 24 hours a day, powered by more 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thank you so much. good morning, everyone. get right to the data check. we are watching foreign-exchange. we will drive forward the conversation in a minute with the euro turning yen much more active. onto the next screen, we want to get to mr.'s are really -- mr.

cirilli. the dxy number, 93.90 is absolutely stunning in this drop-off. indicatinghe euro stronger yen against euro. francine: overall, stocks were dragged down by carmakers. -- the eurog heading for its first decline in three days. seeing a little bit of disappointing data in the region economy or the eurozone saying the economy has cooled somewhat and then i wanted to show you the price of oil. you can see below 46 and gold up a touch. tom: very good. it is an 11-page statement for those of you keeping score. the news flow out of washington is extraordinary and i would say with a little bit of historical knowledge that we jump the shark over the weekend. i'm not sure where we jump the shark, but we did it. helping us with life preservers

on an floaties around his arms, kevin cirilli. mr. kushner, according to the associated press, i don't even know if you have seen the article, just announced the release of a statement, an 11 page statement and it's the usual i did not do this, i did not do that, i had only this, only that. marty shanker is calling it a conversation and interview, a chat. what exactly is going to be the dynamic between mr. kushner and the push-up senator from iowa, i -- senator grassley? kevin: mr. kushner will meet with the senate intelligence committee later behind closed doors. this new breaking story of an 11-page document just released moments ago and it says, according to the associated press, that jared kushner only had four contacts with russians during the campaigns.

willis developing and we bring you new details as we dissect that document. it is and should be noted standing in the place of what would have been a public submitted testimony. should jared kushner had testified publicly before the senate intelligence committee. this, of course, is being done behind closed doors. it comes following friday's development that he followed -- filed additional amendments to financial disclosure forms and drawing criticism from democrats and republicans as well who want to know why all of this was not disclosed earlier when he had been looking to get his security clearance in joining the administration. tom: i read, acutely, the reading over the weekend on the pardon as well. i thought the smartest article was no a feldman out of harvard and the bloomberg view basic idea from professor feldman is mr. trump has every

right to pardon people around him. can he pardon mr. kushner? kevin: the administration is pushing back on sunday shows about whether or not he is even considering pardoning despite the president himself tweeting about it several years ago. column abouteat this on bloomberg buse adjusting this is taking away from the policy agenda. question that later today all news flow out of washington will be dominated by jared kushner's private meeting with the senate intelligence committee. we should note the president had really said he was going to have jared kushner be a central role in middle east peace talks and everything, all the development out of israel this morning and over the weekend, the administration sending its envoy over there to help broker some of those peace talks good will be here in washington. do we have these

closed-door interviews for paul manafort and also trump jr.? after jared kushner testifies before the senate intelligence committee, he will be meeting privately tomorrow with members of the house intelligence committee and on beingday, paul manafort, the former campaign manager, they will meet behind closed doors with members of the senate. all of that being done privately to avoid public testimony. i am hearing it is because the investigation is still very much ongoing and a lot of these lawmakers want to get information without the political theater of it all. lancers --or of the lannisters in "game of thrones" here is professor feldman. here is goldman of harvard. as early as 1311, parliament forced the king to promise he would only pardon "by process of law and custom of the realm."

we have a name for an elected leader outside the law, dictator. the courts would simply ruled that the pardon was ineffectual. have we jumped the shark of watergate? i know that is a loaded question, but did we move on this weekend to something new? kevin: i think in terms of the timetable that washington has accepted the fact for quite some time that this is going to be a storyline in developments of such a are going to continue for at least several more months and that it will impact the utilizet's ability to the bully pulpit in terms of how he will be able to respond to things on his legislative agenda. tomorrow night he will be in youngstown, ohio, a blue-collar town and a battleground political state trying to restore some of that message from his campaign rallies. polling suggests the president's

base is still very much behind him despite this bevy of negativity in headlines against russia. tom: we appreciate you saying on script what people are actually doing in washington. kevin cirilli is our chief washington correspondent. an important conversation now on oil. francine: certainly an important conversation because we still have the news conference of opec and non-opec. you can hear the saudi oil minister briefing reporters and we are seeing a little bit of movement in terms of what brent crude hitting a two-day high -- a day high at 48.58 as we had the opec comments. we understand they want to monitor crude exports from producing nations along with production figures and of course the minister is continuing to talk us saying oil demand is healthy, but also broad-based. i am pleased to welcome on the the energy minister of the

united arab emirates. great to have you here on bloomberg surveillance. do you believe opec will need to cut production in 2018 again? >> i think it is premature to talk about cuts prior to seeing the effect of the decision we took two months ago i think we need to monitor the production. we need to an sure that the isort levels of production also part of what we look at as theed and i think expectation for the second quarter from a demand point of be positive, therefore we are expecting to see more market recovery and we stoxxwer -- lowering the

in the next quarter. francine: you are talking about market recovery. wind you think they will recover to $60 a barrel and is that an important psychological level? minister al mazrouei: i think talking about a certain price would be a bit dangerous. is fitting two challenges. some ofhe challenge of the countries are trying to recover their production and were not part of the deal. the second issue is the historical -- the historical storage that we need -- we need to reduce and at the same time, some of the production is coming back. is toe try to do in opec cut the production to allow the market recovery to become faster. long -- i think it would

drag us into 2018 definitely? . is it going to be the first quarter or second half of 2018? we need to monitor that with those two parameters. we need to see more stocks need to see, at the same time, some control of the production from some of those countries which were not part of the deal. francine: are you talking about , do and to put it bluntly you believe at some point you will have to have a frank conversation about iraq -- with iraq about complying? minister al mazrouei: i think all the countries which are not complying, we need -- the committee is having that serious discussion with them regarding that and they are sending them letters of compliance. i am talking about primarily the countries that were not part of the deal, such as nigeria and

libya for the special status of those two countries, they have status anda special i think they have reached -- increased production at the same of athat we need to think mechanism of how we control data production from those -- daily production from those two countries. tom: to go back to your work at the university of tulsa years ago in petroleum engineering, has the technology caught up with opec? is the basic blunt simple rule that the technology has changed so much particularly within supply dynamics that the rules have changed? minister al mazrouei: i think the technology is helping all of us. -- to allf production

the producers. we have producers in the shale oil and producers at the conventional oil. i think we need all kinds of production. what we need is the right price for everyone. that price, the market will make it. opec -- at opec, we are not trying to reach a certain price that makes more money. if that price is not the right price for producers like shale and the unconventional and other sorts of production. we are benefiting from that, but we have also called lots of industries in the past few years, especially the services. we have seen some of the -- some companies losing jobs and that was not

healthy. tom: are you -- francine: are you absolutely convinced that cutting output was the right decision last year? if you look at it, you haven't really helped price recover and you kind of helped u.s. shale producers. minister al mazrouei: i think -- i would disagree with that. first of all, if you look at the average price of 2016, it was around $43. far, if youprice so take the first half of the year since we made the deal is at least $50 of rent. if you compare those two, you will see obvious the we have helped the market recovery and we have reduced around 90 million or more from the level high stocks. it is working. it is working fast enough -- is it working fast enough? no. i think it will need a little more time.

that's why we pushed the deal for more than 6 months to the first quarter. it looks like we may need to consider as well, expanding, expanding that time horizon, but that is a decision that is going to be discussed probably in our next meeting in november. francine: very interesting, the fact you may have to discuss the extension of production cuts. minister, thank you so much, great insight and very clear .iews from the energy minister we are still hearing from the saudi oil minister saying opec and not opec, there will be a new joint committee to consider monitoring crude exports from producing nations along with export figures. it's clear from the oil minister of the uae. he says they have done well and the market will start rebalancing. right at the end it was

significant when he said the one thing they can look at is extending the time frame for production cuts. that was significant. tom: very good. joining us in new york is caleb henderson. for years with standard chartered bank, truly expert on the pacific rim. global market research for eurasia. more importantly, has a perspective on pacific rim dynamics second to none and joins us on our new york set this morning. >> good morning, tom. tom: we seem to be adrift. we have all the washington politics going on and it feels like asia is almost slipping away. if you look at weaker dollar and the political economics and the dynamics of pacific rim. you are one of the generations' great watchers of this. should we be concerned asia is slipping away from the united states of america? >> the political and economic dynamics between the west and the so-called developed markets and developing markets have fundamentally changed throughout

the last year or so. you have had political risk and eventual risk coming out of the developed markets weather in the u.s. or in europe, where as some of these so-called emerging markets now seem on a relative basis, safe payments -- safe havens. that's a different dynamic. tom: we talk about stability with the fed and taper tantrum's and unwinding of balance sheets, is there stability within the financial system of the pacific rim and stability with market indicators of that system? callum: there is much greater stability within the financial system from the point of view of relative years ago during the asian crisis. it did not have this massive that the u.s., u.k., or europe had. could it be impacted by a developed market crisis?

absolutely because the developed market is still the largest holders of private sector capital and that goes home. mike in foreign policy published in the last 48 hours -- is adamant there is no u.s. presidential policy on asia. president obama wanted to pivot. what do you perceive president trump wants to do with the dynamics of the pacific rim? callum: in the immortal words of joanne "it is too early to tell." tom: fair. callum: from the point of view that there have been various attempts at policy and a number of people have thought to to determinesought whether -- is continuing or not. there doesn't seem to be a consistent line whether the under thehighlighted obama administration is continuing. from an investors's point of view, the investor looks at huge quantitative easing in the u.k. and the u.s. and looks at week

growth and sees better spouse -- better prospects in the emerging markets. tom: it must be fun switching from a bank house like standard chartered over to ian bremmer. trading singapore dollar off of what you think? callum: we certainly don't trade. it is a very educational environment. you ofe positive marrying politics and markets, it's a natural setting for us because what you have seen over the last two years is two fundamental disciplines that had diverged somewhat coming back together. year, our headis of u.s. research made a crucial call, the trump administration is basically going to top -- passed nothing. that was the call in terms of treasury yields not going up, in terms of emerging markets on the

market side from our point of view. francine: a crucial question i imagine when you look at politics, when you look at what tom calls pacific rim and what i call may be tensions in north korea, what will -- when will that translate into market nervousness? callum: that is a great question. north korea is a huge potential risk for financial markets. the problem for investors is how do you price it in? if south korea is the second or within thest weight emerging-market equity index and the korean stock market is also going up, have you hedge> how do you price in that risk? perhaps your mandated will not allow hedging or if you are a hedge fund, you could go short, but timing has to be everything. in the absence of perfect timing, most investors simply either sought to ignore the issue and keep to a benchmark weight or to go with the flow, which is that korean stocks have

rallied sharply. on dollar dynamics and maybe linkage into politics, the international relations eurasia group sees in london and new york. exited the fed stage right or maybe stage alight in the words of david tarullo -- daniel tarullo. david westin in conversation with a former fed governor. let me look at the data right now, very quickly futures at negative three and oil not really moving all that much. i would note, currencies dollar weaker against yen this morning. there is the dxy, 93.92 is a surprise.

♪ you can see the opec and non-opec presser, the news conference is still ongoing in st. petersburg.

we heard from the saudi oil minister and now from russia and this is what we are hearing from mr. novak. he says saudis would support the opec deal extension beyond march if needed. we are also hearing him say there is big potential for oil markets in the third quarter. i imagine he is talking about rebalancing. i think that is mr. novak. if not, mr. novak just finished speaking. what was interesting is with us and our interview with the uae oil minister, -- energy minister, he mentioned they are not looking at increasing the amount of production cuts, but they may look at the time links these -- timeline these are in place for. we will have plenty more from opec. this is a picture of rent. if you are a bloomberg tv lives, just go on to and continue to listening to those opec producers paid let's get to bloomberg first word news. taylor: president trump's

son-in-law is denying any improper contact with russia. jared kushner will be questioned by the senate intelligence committee behind closed doors today. kershner says he had four meetings with russians during the campaign or after the election, but said they were a memorable -- president trump has a warning for senate republicans. the president wrote if they don't repeal and replace obamacare, the repercussions will be caught -- far greater understand.them mitch mcconnell is making a last-ditch effort to revive health care legislation this week. it is unclear whether his bill would repeal or replace the affordable care act. the u.k. is making the case for a quick trade deal with the u.s. as soon as brexit is complete. british trade minister will be in washington for truck -- for talks with trump administration officials and congress. removing barriers with the u.s. could lead to $45 billion in trade with the u.k. by 2030.

president emmanuel macron's popularity has taken a dive after two months on the job. his approval rating fell 10 percentage points in the last month to 54%. voters are unhappy about issues, including his plans for the taxes and upcoming labor law reform. global news 24 hours a day, powered by more 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thank you so much. i want to explain this to people. i don't see the news before you see the news and i want to thank taylor riggs and our jim morris for bringing up the macron news. i was thunderstruck over the weekend that -- of this news of the ratings. what the hell happened? francine: first of all, you have to look at some of the skirmishes that happened over the past couple of weeks.

the head of the military resigned because of austerity and then you look at labor laws and what he wants to do, but there is a more underlying concern, which is a lot of the measuring was france while -- reformed.ts to be if you look at the turnouts, they were really low and a lot of people are saying maybe it wasn't the plan to reform, it's just that they didn't want his rival in. tom: absolutely fantasy -- absolutely fascinating. it is never a dull moment. wisdom to theives crew after tors of duty serving the nation with the house financial services committee where you heard -- let's talk policy and how strange that would be. let's get to the blunt instrument. his health care dead in the senate? >> good morning. i think it is mostly dead, but

we have a very low probability on it today. i would not put it past senate majority leader mcconnell to resuscitated. tom: i don't have wisdom back to movedn how policy was forward. with all the ballet we see now, how does that change the committee dynamics and the testimony and the quiet meetings ,ou have been to, those $100 $200, $300 dinners? how does the dynamic change for tax reform? my view is that republicans in the president are both going to continue to focus on tax reform and try to drive it forward. the parameters may look very different as everybody knows, the republican strategy was to do the affordable care act first in part to drive budget waistlines down between fiscal

2018 -- 17 -- 2017 and 2018. you can still do tax reform and i think there is a lot of will to do that. at the same time, you are going to have very different sorts of parameters and the big question is going to be, to us is going to be how much in deficit do you actually want to go? tom: i look at that and that is where i wanted to go, the deficit. the cbo score tax reform like they does cbo score tax reform like they scored trumpcare? terry: the question is what kind of score they will use and the subsidiary question is whose score will they use? will they use the congressional budget office static score or a dynamic score, which is more likely particularly in the house . they are not constrained to use a cbo score. they could use a's or from some of the --a score from some of the else. francine: you don't think tax

reform is that in the water, but you think the odds of tax reform is down to 50%? hints at a path forward, look under hints are there? terry: thank you for that. two things, one is we have tax reform odds at 50% today. i realized that doesn't sound like the call. parts.re two component we think you need a fiscal 2018 budget first great if that happens, tax reform is 70% like he. even though we are 50%, think we are marginal -- marginally odds-on today. fundamentally what you need is some really good idea of where the economic growth is going to come from and what form it takes. what they are talking about now deficit neutral tax reform which does give them a path forward on this. tom: terry haines, thank you so much. on policy, how quaint was that,

an actual discussion on policy instead of drama and the shakespearean in from out of washington. callum henderson is with global markets research at eurasia group spearheading their effort. i want to look at yen in safe haven. her me, right now -- for me, it's right now strong yen. is it safe haven characteristics or is it unique to their domestic economy? haven: the yen is a safe because of the balance of payments. the other is being a low yielding currency, it is a funding currency. when you have risk off, money goes home and japan is one of the biggest investors in the world behind the u.s. it seems odd to consider japan as a safe haven when you look at their gdp. safewithin that is also

haven of switzerland and i have noticed a little bit of swiss franc weakness. are we having a recalibration with all of our central bank chat and brexit chat and in washington as well? are we having a safe haven recalibration? andum: absolutely right some of the emerging markets are looking safer than developed markets. tom: i don't buy it, but go with it. callum: japan has always had a that tagline and so has switzerland. sitting in singapore, that looks pretty safe relative to some of the so-called developed markets. francine: what doesn't look safe at the moment? callum: we discussed korea earlier. there are huge risks there. many of the political risks and the economic risks continue to come as the so-called developed markets. if you look at that to gdp -- debt to gdp and potential

growth, all of those are focused .n the g10 it's not just in the emerging markets that we have economic or political risk. francine: the emerging markets seem to be decoupling from oil? what are they focusing on, is it all back to fed? callum: one of the main drivers this year has been carry. just as tax reform has failed, health care reform has failed, so there hasn't been a huge need for the federal reserve to offset a fiscal easing that has never happened and that has been a huge positive for emerging markets. also china, chinese growth has been relatively strong. we expect a modest slowdown in the second half which could take some of the shine off emerging markets. generally speaking, it has been a good risk seeking environment with some select countries you need to stay away from. francine: is one of those -- tom: is one of those he the united kingdom -- one of those the united kingdom?

we have not heard from mr. bremmer, but where is eurasia group on the confidence that brexit can move forward? callum: we are certainly not confident the timeline will be met in terms of the two-year timeline and indeed, progress so at best.een muted i will put it diplomatically. our view on the market side has been bearish on sterling and the dollar and so far, so good. we don't think either of those are done by any means and you happen actually seen the brexit yet. tom: we will come back with callum henderson. i have a superb single best chart that really encapsulates the tensions we can see here expressed through foreign exchange. i will be honest, i am hearing rave reviews from younger readers on bloomberg businessweek. anecdotally on the streets of new york city, people are reading this rag. i have -- i don't know what megan murphy and her team did, but they did something this week. a spectacular article on the big

tech names. the great cover says it all of the cacophony of facebook, amazon, and the rest and a more political story on sinclair and the conservative angle, the will ofation if you conservative tv in america. people are talking about this. stay with us. ♪

♪ taylor: this is "bloomberg ," i am taylor wakes. there's more trouble for wells fargo. regulators are asking about mistaken data breach. a lawyer for the bank accidentally released data for 50,000 accounts of wealthy

customers. they are still dealing with the fallout from the fake account scandal last year. tore will be no big changes the oil production cuts crude oil oil has been in a bear market and there is skepticism the cutbacks are working. producers are betting that rising demand and the existing curve will deplete oil stockpiles that is your bloomberg business flash. tom: thank you so much. we have a chart taylor riggs would love to do this is a great chart. we do this in honor of the great career of callum henderson. these are called kleinman moving averages after george kleinman. all you need to know is i have taken out the short-term moving average and there is the dollar index and that is teach the --rt in a college export textbook perfect. that is the bloomberg dollar index and down we go in a persistent dampened nonvolatile move. you say this wonderful trend we

have seen, this you to flee orderly trend and dollar will walk into an ocean of volatility coming up. why will we see this break into more volatility? callum: we are going to see a lot more volatility in the second half for two reasons. the economic cycle is positive in the first half led by china and also some of the western markets and we are likely to see a modest slowdown. also, we continue to have elements of political risk. a south korea is one of them, but certainly not the only one. those type of flashpoints coupled particularly with a modest downturn in the cycle which makes markets more sensitive to political risk, that is why we see a pickup in volatility. tom: can you predicted the directional on that? dxy orok at the asian the bloomberg dollar index, can you do vector off of increased volatility? callum: volatility is asymmetrically skewed. tom: what is that me?

and ieans flip it over will take it with french fries. what does that mean? callum: -- goes up when the dollar goes up. when volatility goes up, capitals go home and that is why the dollar rallies. the dollar collapses up and when the dollar rallies, you see a higher level of volatility. tom: i look at the volatility and the bounce around in such and that assumption of strong dollar has been crushed that -- crushed. we saw a little bit of strong dollar, but it has been a symmetric. it has been euro dynamic, continental dynamic and back to the pacific rim, i would suggest the pacific rim is the thing to watch. callum: absolutely you are right. strong dollar was very much the consensus and also, in other consensus was the global economy

on want end, there's the typical pattern whereby the u.s. is the area ofength -- strength. that's no longer the case. the eurozone picked up to some degree. u.k. is the concern, but in the pacific rim, growth has been strong. china was strong in the first half and you have countries such as india and indonesia which continue to grow strong. the believe hedge funds are having a greater influence in the market and therefore, if there are fewer people in the markets, is that concern for distortions? callum: i would not necessarily agree with that. they are the biggest source of capital in terms of client by mandate. real money funds or wealth of return funds dwarf in the size of hedge funds. hedge funds have had a challenging year in terms of being able to beat the returns you have seen in benchmark indices.

some have done extraordinarily well. where the real flows are going into emerging markets, those are largely being driven by relative return funds. tom: very good. callum henderson we will continue. francine, the president is awake and we have tweeting occurring. i have no idea if we will see the plethora of tweets we saw this weekend, just simple here we are draining the sewer, not tweet kindhe usual of thing. it is a news item with this new form of communication. we have a good new form of communication. this is a jewel. particularly those with you from global wall street and we welcome all of you, tv is a sleeper. you get to look at my ugly face and the beauty of francine lacqua and you get to come over here to a featured chart and if you click on that puppy, you can pick up a chart that you can steal with george kleinman's

claimed moving averages on it. the is the popularity -- likely survivability of king's landing. that is what that is. ♪

♪ francine: this is "bloomberg surveillance." coming up shortly, it is "bloomberg daybreak: americas." david joins us now. i know you have an exclusive conversation with the former fed president david: we are delighted to have daniel tarullo -- former fed president. david: we are delighted to have daniel tarullo. we will talk about his banking expertise in what the government should and should not be doing. he will also speak on monetary policy. we will talk him where did inflation go and that is oil, which is something you have been talking about a fair amount. francine: we will continue that conversation. thank you so much, i am looking forward to that conversation, david westin. opec and not opec oil ministers are holding a meeting in st.

petersburg. joining us is bloomberg's chief energy correspondent, holly are blessed. you always make me -- javier blas. you always make me smarter. what did you learn from the news conference? takeawayscouple of that seem quite appointment -- quite important, first of all, the saudi oil minister said saudi arabia will continue to lead by example. i took that as they are going to try to bring production below the level of the quota they went at last month. also, he said they have been told refiners worldwide that there will be deep export cuts from saudi arabia. we were expecting that, but it was interesting to get that confirmation. also interesting that -- one of the consensus of the market has

been whether the exit strategy for opec. the response from the ministers was what exodus strategy? we don't need one because we may extend production cuts beyond q1 of 2018 and i think that was key. francine: i think we have the opec president speaking to us. -- contributions. successful and we are looking at the second half of the year. as you reported this morning in your show, i watched you this morning. >> in terms of some of the -- those who have not held -- pulled their weight, what kind of executive power to you have to get them back in line? >> this decision is based on one

of three initiatives or contributions, if you like, of countries who decided of their opec inish and to join order to restore the of their to bullish and -- volition join opec in order to restore. we have agreed on the framework and the mechanisms to ensure and theall fully comply framework is working very well. as part of the meeting today for severalt time, we had ministers throwing their attention to what the data is

showing and to correctly key into the meeting and share with us the challenges they are facing and how they intend to overcome these challenges in the shortest possible time. it's a you can see really -- monitoring of exports, how will that change the game once it is put into place? monitoring exports in addition to production? >> we always look at different parameters, but the decision related to production for a variety of reasons, what was decided was, in addition to what was agreed upon in the framework is to look at other parameters. because of the changing dynamics , sometimes,t

depending on the structure of the market, it may not be relevant. sometimes because of other factors, the migration of companies, and the structure of we are adapting to changes and we are trying to be ahead of the curve. there was a figure for .igeria there was not really kind of a solid recommendation for them. affordedcountries were a special status, if you like, in algiers accord. asre are different levels countries are facing changes.

nigeria is on course to achieve its reduction of 1.8. the short answer is the government is determined in recovery, sustain which is slow, but on course and they want to be able to achieve the reference point of 1.8. freeze at thatto level depending on market conditions. francine: that is mohammed barkindo, the opec secretary-general speaking to osef. not the president like i mistakenly called him. ofier: i think that was one

the most important things. one important thing he just mentioned is opec is going to start monitoring the export levels, not just production levels of their countries. there has been a lot of complaint particularly from hedge funds that opec would say it is capping production, but throwing their own domestic high n.l.keep exports is not the problems. very interesting comments on nigeria ready to cap when they reach 1.8 million barrels. francine: thank you so much. if you want to continue watching those headlines, you can watch mr. barkindo and other things from st. petersburg on tv live go. this is bloomberg. ♪ ♪

jonathan: jared kushner appears before congress. some eurozone enthusiasm. data shows that economy started the third quarter of the weakest pace in six months and opec and partners meet to discuss the progress of cutting supply. saudi arabia says it would make deep cuts to august export. from new york city, good morning, good morning to our audience worldwide. this is "bloomberg daybreak." i am alongside alix steel in new york and david westin in washington, d.c. today let's get you up to speed on market action. futures down about .1% after three straight week of gains on a benchmark in the united states. the euro kicking off the week weaker following that data over in the eurozone. seven -- 1.1647. treasury is unchanged. alix: