francine: fire and fury. trump's answer to unprecedented missile. >> let's not make any more threats to the united states. they will be met with fire and fury like the world has never seen. francine: north korea fires back, saying it is considering a missile strike at the u.s. base on guam. plus, cutting up the middle man. disney plans to pull movies from cable and seldom straight to the

customer. -- and sell them straight to the customer. a decade after the financial crisis, is the world ready to be taken off of financial and support? this is "bloomberg surveillance" and i'm francine lacqua in london. we go to a suburban paris, where six people have been hurt after a car rammed into them. police are still searching for the driver and the car. this is according to police reports. place aftere sentinel operation since n was declared to remain until it is no longer useful. this occurred in the northwestern suburb of levall ois. we will keep an eye on that. on to geopolitics and the impact

on the market. we see a very clear movement into havens. this is what we are seeing the gold-yen gaining on the tensions in north korea.. european stocks, slumping following declines across most of asia. the vix is up. does get straight to the bloomberg first word news. reporter: the south african rand has led declines among major currencies after president jacob zuma survived another bid to oust him, crushing the prospect of reviving the country's economy. he has been mired in+++

weighed on investor minds. a commanding lead in the country's presidential elections. according to independent electoral data, he leads the former prime minister by 55% to 44% with more than 80% of the votes counted. he failed on three previous attempts to win the presidency. china's producer price gains held steady. the producer price index rose 5.5% in july, just shy of the economist estimates. demand remained resilient. at the same time, the consumer price index increased 1.4%, way below the government feeling of 3%. oil has extended declines for a third day in speculation that the protected game in u.s. ops profitsl offset -- u.s. will offset. the meeting in abu dhabi came

after several nations faltered in their pledges to reduce output. disney has outlined plans to sell some of the premier content directly to consumers online, starting next year. the anderton company will offer animated films, including "with to pay providers, like comcast. keylix is moving a supplier. >> my guess is the distributors will look at this more as a threat than anything else. it's not intended to be that. we are reacting to marketplace conditions and taking advantage of the quality of our brand, the passion of the project we create and the technology that enables us to reach consumers directly. reporter: global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. i'm taylor riggs. this is bloomberg.

francine: thank you, taylor. north korea is examining a plan to fire missiles at a u.s. military base on the pacific island of guam. that is according to state media. apologies, it's obvious. -- it is august. trump ratcheted up his threat s to an on presidential level. >> north korea best not make any more threats to the united states. they will be met with fire and fury like the world has never seen. francine: will those comments cause volatility to spike? the korean yuan we can buy the most since march and asian equities slid. peter.et the latest from ,lso joining us this hour geraldine sundstrom.

what do you know about what north korea will do next? >> they telegraphed that they will do something, but we don't know what that might be. they talked about launching a missile that would head toward guam, where the u.s. military base is, and whereb-1 strategic bombers flew out of ended a fly south korea. beyond that, not very specific, very similar to donald trump's comments of fire and fury. we do not know what he means by that, nor does north korea. north korea has responded with a very unspecified threat of a very similar line that if there is any kind of preventative attack by the u.s., in their words, they will be merciless annihilation of the u.s. francine: peter, who is the right person to de-escalate? thes these tensions?

is it china, another country? >> china has most of the economic leverage, most of the trade with north korea is with china. they might have the most control over the situation. as to how they will respond is not clear. that's the reason why trump is probably pushing or prodding china more than any other country at the moment. francine: it is having quite a lot of impact, first of all, on the currency. we're looking at a chart looking at the credit default swaps and the price of korean's bond protection has risen. it is not the huge rise that you might have expected. what is the modod like out there? were sose the comments unclear, they rattled the market, but not to the extent that other news events here have had. tehe kind of provocation, the rhetoric we hear, both on donald trump's side and north korea, is

similar to what south korea has heard over the many years. the allusion to fire. sea of fire is the common term north korea uses when it talks about making threats against the u.s. and south korea. very few people here are rattled. the markets were somewhat because they could not figure out what the heck donald trump was talking about when he said there would be fire and fury. francine: it does seem like it is a little bit business as usual. little bit of a risk off mood, but nothing huge. how much is it that the market does not know how to rand, and how much is it that they don't find it concerning? >> north korea has been playing these games for a number of years. the nature of the fed has

changed in the last couple of months. trump also, in his reaction function, is something new for all of us. in the past, the strategy was deny and neglect. we always did pretty well with that. now, given the nature of the stress, and now also that the players are new, it makes the situation a little bit unusual. minor events like this, it is very hard to trade, very hard to have a position for this. we need to look at how much korean risk you have in your portfolio. safe havens are always good to have in your portfolio. francine: are you concerned that short positions in the vix futures are at a record? what does this tell us about the rhetoric? >> on the one side we look at

economic data globally and we have very good growth, the best we have had in a number of years. bullisha relatively central bank and there does not seem to be a recession around the corner. at this point in the cycle, typically volatility is very low. on the other hand, you have the political risk and the fact that asset valuations are stressed. we are between a rock and a hard place. we have erratic moves. volatility eventually has only one way to go, up. the problem is the timing. volatility has been a costly position in the last few years. francine: peter, we put out a story today saying that the finance ministry official told reporters by phone that the south korean government is watching the markets closely. is this suggesting that they

could intervene? >> definitely, think that is the suggestion, that they would do something to step in. this is a common comment that is made every time north korea makes a provocative mood. this time it was donald trump's comments. that was very unusual. that's the reason why they had that kind of response. but so far, the markets have indicated there was no need for any type of intervention or some type of action from the government. francine: peter, thank you very much and geraldine sundstrom stays with us. stay with "bloomberg surveillance." plenty coming up, including jacobs them a narrowly -- including jacob zuma narrowly surviving a ano contest vote. and disney cuts out the with then as it changes t

digital world. ♪ francine: this is "bloomberg

surveillance." let's get straight to the bloomberg business flash. reporter: eon has underlined the profit outlook and the plans to boost investment. germany's largest renewable energy generator says the standard debt reduction will allow more spending. the share prices rose more than 30% this year, making it the fourth best performer in the dax. we speak to the company's cfo in half an hour. it gained from the disposal of the private banking assets. net income rose to 960 million

euros, beating estimates. the bank booked a euro gain after completing the sales of its asian and middle east wealth operations. second-quarter earnings beat analyst estimates as sales improved with inflation returning to the u.s. the company reported an increase of 34% and underlying operating euros,to 626 million beating estimates. that is your bloomberg business flash. francine? francine: the south african president, jacob zuma, has narrowly survived a no contest motion in parliament.

party members cheered as the motion was defeated, 198 votes to 177. the south african rand strengthened against the dollar against the vote, but lost ground after the victory of the 75-year-old president. we are now joined from johannesburg. what does the closeness of the vote actually tell us about the fragility of the zuma presidency? >> well, it is certainly waning. ever since 2015, we have seen numerous motions of no confidence. as a whole, we have seen eight against the president, all unsuccessful, but this is the closest we have seen between the motion for and against. as you said, 198 to 177. the ruling african national congress has 249 members in parliament and only 198 voted in favor of keeping the president in power, clearly with an his

own ranks there is a lot of weakness. the confidence in his presidency is not the level it should be. the approval ratings are certainly much lower than they should be. francine: could we see another attempt to oust the president, or is that it? >> know, you certainly could. remember what they say about cats, they do have nine lives. of course, we don't know that for sure. but opposition members of parliament have said they will continue to go to the court to lay out impeachment proceedings. they do believe the corruption charges against the president, the fact that he frivolously spent millions on his homestead south of the country means that he certainly is not respecting the country.

he has not allowed the country to grow at the levels it should. we are in a recession and have been downgraded to noninvestment grade as well. francine: thank you. still with us, geraldine sundstrom, portfolio manager at pimco europe. when you look at south africa, does it mean investors will be more cautious, or is it a done deal? president zuma stays until he retires in 2019? >> might be another chance for him going away earlier in december. then again, the situation is, who will succeed him? this is the question everybody wishes they had the answer to. there are two obvious candidates to the succession. one is the deputy president, who would be market friendly, who has been pretty vocal and would lead to a rally of south african

assets. the other candidate is his ex-wife, which would mean the influence of zuma would continue, even though he is not the president anymore. i suppose the question of the succession is really what we would want to know because south africa is, after all, a country that has significant structural issues on the fiscal side. a lot needs to be done for this country to perform. and the right politics is necessary. francine: what does this mean for investors? do you have any portfolios in there? i'm looking at -- this is the real deal for the 10 year. you could also look at volatility, charting the rand. how do you play it? >> at the moment, not much of a view when it comes to south africa. when it comes to pimco,a neutral view. rate cuts are already priced in. francine: geraldine sundstrom

stays with us. up next, mickey is on the move. bob iger tells us why he is ready to pull disney from netflix. ♪

francine: this is "bloomberg surveillance." disney is cutting out the middleman, outlining plans to offer films and tv shows directly to viewers online, sidestepping partners such as netflix and comcast. bob iger explained his plans to

bloomberg. >> my guess is distributors will look at this as a threat. it is not intended to be that. we are reacting to marketplace conditions and we are taking advantage of the quality of our brand, the passion in the product we create and the technology that enables us to reach consumers directly. if you look at disney businesses , by the way, except for the themepark business, virtually all of our products touch the consumers through third-party distributors, everything from big-box retailers to the motion picture theaters and i could go on and on. this is an opportunity for us to reach the consumer directly, an important step for the company in terms of growth. reporter: help me make sure i understand this correctly. if i sign up for this app the moment it is available, it is available early 2018? >> yes. it's the espn app. reporter: but i will not get all

of the programming unless i order through my cable provider? >> that is correct. there is one app that exists today. you can watch the linear channels on that app. this gives you the opportunity to buy access to the other 10,000 live events with this so scratch and, with subscription, which should be very user-friendly, as far as i can tell. i guess you will predict you can watch the linear channels in a similar fashion, but we don't have plans to do that right now. we will watch the marketplace and see how it revolves. reporter: is this the beginning of the end for the bundle? >> i think that is a little bit too strong. i don't think it is the beginning of the end. we have seen erosion of the bundle. but no, first of all, it is

still highly profitable. secondly, it is still a good consumer proposition. there have been incursions on the bundle, whether it is new providers, youtube, hulu, a couple of them. we are an owner of hulu, so we know about that. there is more competition to reach viewers with multichannel services. i think it represents a continued shift in consumer behavior and the opportunity that technology provides us. francine: up next, the inflation situation. will the numbers out of the u.s. ease the fed? will the fed breakeven? this is bloomberg. ♪ who knew that phones would start doing everything?

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see how much you can save when you choose by the gig or unlimited. call or go to xfinitymobile.com. xfinity mobile. it's a new kind of network, designed to save you money. francine: this is "bloomberg surveillance." let's get straight to the bloomberg first word news. here's taylor riggs. taylor: north korea is examining a plan to fire a missile toward

the u.s. military base on guam according to state media. president trump ratcheted up his rhetoric to an unprecedented level, warning the regime will face a devastating military strike if it continues threatening america. >> north korea best not make any more threats to the united states. they will be met with fire and fury, like the world has never seen. he has been very threatening, beyond a normal statement. taylor: in france, the mayor of the paris suburb says an incident in which a car rammed into an antiterrorism officer was deliberate. police say they are still searching for the driver and car. earlier, a police spokesman said six people were injured. the south african rand has led declines among major currencies

after president jacob zuma survived another bid to oust him, reviving the country's economy. zuma's will has been mired in corruption and mismanagement that has weighed on investor sent the economy into recession. disney has outlined plans to sell some of its content directly to consumers online. the world's largest entertainment company sent the y into recession. disney has will offer animated films, sidestepping partners from netflix to comcast and directv. disney shares fell in extended trading, as did netflix. >> my guess is the distributors will look at this more as a threat than anything else. it is not intended to be that. we are reacting to marketplace conditions. taylor: global news 24 hours a

day powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. francine: thank you so much. investors are looking to friday's u.s. inflation numbers with bated breath. so our officials at the federal reserve, where the plan for three rate hikes in 2017 looks dead as the bank struggles with persistently low inflation. the market sees a 42% chance of another hike before the year is out. still with us, geraldine sundstrom at kimco. if you get inflation right, i guess you get all your trades right. asset managers are betting this way. which way are you betting? geraldine: for this friday number, we think the consensus is probably close to the right point. this inflation has been absent. we have been waiting for it for a number of months. at the moment, the market is

telling the fed, you are a liar. there is no inflation. the fed is still consistent in thinking they might hike rates. so depending on the inflation number, a lot is at stake. either the fed is right for the market is right, but not both of them at the same time. francine: treasuries will move on the back of it either way. i'm looking at inflation through the breakevens. you have the 10-year rate in white, the 30-year rate in blue. what do you see? geraldine: the market doesn't believe the fed is going to achieve the mandate. i would say there's a technicality thatfrancine: treae on the back of it either way. the number is not to percent, but slightly higher. the market is saying there will

be a significant undershoot for years to come. this absence of inflation is definitely priced in the market, which means that if global growth continues to expand as it does and unemployment rate continues to go down, chances are inflation is going to create higher rather than lower. yield can goe see a little higher, but we are still in the new neutral that pimco has been talking about. we're going to be in a range and there's no point crying wolf. when you have multi-asset portfolio, i'm still pretty happy owning a fair bit in the united states. francine: what happens to dollar, and is the dollar the new way of looking at the vix? it seems that if you look at the fear gauge, there's much more

movement in dollar than there is in vix. geraldine: that is true. we've been talking about currency wars. it went a little bit quiet after the shanghai g20 meeting. it looks like we're back at it again. i'm not saying anybody is doing this willingly, but this is happening. we have the ecb. are they going to announce some tapering? andle look at all of this the weakness of the dollar is not so much weakness of the u.s. economy. it is the rest of the world finally looking healthy and catching up with the u.s. growth momentum. it has moved very fast. one would expect that now, given positioning, and given the move we've had tactically, we should see a pause. i'm kind of stretching a little

bit on that. francine: what does it mean for euro? i have people saying they want to buy euro against anything. is it going to be the overbought currency? geraldine: the euro looks a little cheap on fundamental models. fair value is probably closer to 1.20. we have reached that level. for the euro to really go up again, we need those negative interest rates to go away. if the euro is too strong, this is a lowering growth expectation for europe and the ecb might have to keep negative interest rate for much longer. it is really like a snake trying to bite its tail. this is what we call the pivot points at pimco. it is kind of moving one direction, then another. you have to see how this moves. you are right. fx is really at the center for

everything, from duration down to companies' earnings. if you look at currencies, looking at european versus u.s. economic surprise, inflation and employment, it seems that maybe they are breaking off. in europe, a lot of the surprises are to the downside, and yet euro is still higher. geraldine: we've seen pmi also reflect that. when it comes to the euro, structurally the world is very underweight euro. latest one was the french election. now that a lot of this has gone away, people feel they are deeply underweight and they need to buy euro. at the same time, there is a very large trade surplus in the eurozone. likeng the euro week is

keeping a football underwater. the fundamental evaluation is also pushing the euro higher. together, thegs french election being over and the outcome being reassuring, has allowed the euro to rally. we know they are running out of bonds to buy and it doesn't matter if inflation is below that target. they will have to taper somewhat. the next question for the euro is a question of the negative interest rates. the euro can go a lot further. francine: thank you so much. geraldine sundstrom from pimco. plenty coming up. as e.on deets on private growth, we speak to the manager of germany's largest renewable energy generator. this is bloomberg. ♪

francine: this is "bloomberg surveillance." e.on has underlined its full-year profit outlook. let's talk profit growth. germany's largest renewable energy generator says its substantial debt reduction will allow more spending in sustainable growth. e.on's share price is one of the best performers on the dax. we are pleased to be joined by the company's chief financial officer, marc spieker. thanks for joining us. how will you grow? you are looking at your growth strategy because you've managed to reduce debt. what are the priorities for your company? marc: good morning, francine. i would like to stress that all

of our businesses have performed remarkably well in the second quarter. 25% in are up almost operating profit. that just underlines that all of our businesses are not only stronger, but have the prerequisites for future tangible growth. opportunities in all of those segments. we see growth opportunities in the energy networks across europe with an increasing buildout of renewables, increasing buildout of mobility, organic growth opportunities. segmentmention one where we see tangible opportunities for stepping up our investments, but not only that, but also leeway for increasing our dividend.

francine: i know you will update on your growth and investment strategy. can you give us a flavor of what you will be focusing on? marc: today is not about talking numbers, but what i can tell you is that it will be focused predominantly on organic investment and investment in our existing core businesses. the next network is going to be the global renewables buildout, where we focus on secure revenue streams, interesting pipelines in the u.s., europe, but also our customer solutions business, which focuses on increasing demand from our customers for energy generation. all of those fields would provide increased investment. francine: can you update me about your plans to sell 47% of

the stake early next year? is it going to plan? marc: there is no news. availablee any venue and our restrictions on the shares will be removed from january 2018. there's nothing in addition to say. francine: do you feel under more pressure to be sure the dividend is there because shareholders are getting more difficult? yesterday, weid see a significant leeway in our ongoing capacity to produce free cash flow, to step up organic growth, but also to provide higher payout for shareholders. ambition top our minimum 65% and the emphasis

lies on minimum. that will provide not only for a higher payout, but for continued growth in our dividend. francine: thank you so much for your time, marc spieker, chief financial officer of e.on. let's check on your other markets with mark barton. mark: the yen is rising, gold up, u.s. 10-year falling after president trump ratcheted up his rhetoric against north korea. the south korean won down as much as 0.8 today. the cost of insuring five-year from nonpayment climbing as this chart shows. the kospi 200 volatility index jumping as much as 30%. this giving us an idea what is happening to risk assets and haven assets. this is a chart tracking volatility, the blue line versus the yen.

global volatility has risen 4.5%. investors have sought security in havens. tying into today's geopolitical news, staying with politics, the yellow line is rand volatility year to date. the intraday volatility yesterday rose to 39, highest z zuma november after survived that bid to oust him. overline volatility just giving a little bit today. on the s&p 500, it hit four yesterday, even lower today, the lowest level since electronic trading was introduced. the 1920's,back to the only time it was lower was in the 1960's. the stoxx 600 has seen volatility rising. there you go, francine.

francine: up next, a decade on from the start of the financial crisis, is the world ready to be taken off stimulus life support? this is bloomberg. ♪

francine: you are watching "bloomberg surveillance." let's get straight to the bloomberg business flash. here's taylor riggs. taylor: e.on has underlined its full-year profit outlook and its plan to boost estimates. germany's largest renewable energy generator says its substantial debt reduction will allow more spending in sustainable growth. it is the fourth best performer in the dax. amro says the gains from the disposal of private banking assets in asia and an expanding dutch economy has helped it more than double profit in the second quarter. net income rose to 960 million euros. the bank completed the sale of its asian and middle east wealth operation. delays has reported second-quarter earnings that

beat analyst estimates as sales improved with inflation returning in the u.s. the company which was formed by last year's merger reported an increase in underlying operating income to 626 million euros. revenue increased to 16 billion euros. that is your bloomberg business flash. francine: thank you so much. this week marks 10 years since the start of the financial crisis. that is when bnp paribas suspended redemptions from three hedge funds. a year later, lehman brothers collapsed. central banks have pumped trillions of dollars into financial markets in an ever to keep the global economy afloat. now they are looking at unwinding the stimulus, but how careful do they need to be? let's get more with bloomberg gilbert.lumnist, mark

geraldine sundstrom is still with us. mark, refresh my memory. i thought it was a blip for no one really saw it. we moved on and then lo and behold lehman collapsed. the ec intervened quite quickly. mark: the money markets froze in those funds. overnight dollar lending rate jumped about half a point to a six-year high. we watched the libor fixings and everything spiked. the ecb offered unlimited liquidity to the market. the market ended up taking 95 billion euros. money markets never recovered from that one off jump. ,rguably just before that burst the u.s. authorities intervened. they backstopped jpmorgan. arguably that was a mistake. if burns turns had been allowed to go bust, financial darwinism

would have come into play. lehman brothers would have found a buyer instead of continuing to pretend everything was going to be ok. the system could have cleansed itself. in said -- francine: what does it mean in terms of the probability of something happening again? you argue that risk spreads, which could reflect the changing environment, actually don't and didn't. mark: investors have been chasing yields for years. i'm sure geraldine knows all about this. the current environment is different. because the credit crisis wasn't spotted, there's a tendency to jump at shadows, to try and predict the next crisis, like economists predicting recessions. valuations have stretched in equities. they stretch in european high-yield credit. the economic backdrop is better.

the banks are much better capitalized. they are less reliant on money market funding, which is borrowing short and lending long. that is where the liquidity mismatch really killed the financial markets. the central banks stand ready to do whatever it takes. they are about to start unwinding qe. qe is there forever. qe will always be available as a backstop, as a way of intervening if the bad thing happens again. i'm a lot more confident that we won't see a repeat of the crisis. francine: geraldine, you are chasing yields. what are the metrics to basically decide where you invest? is it all macro? geraldine: macro is important. the problem is that we don't have a spare wheel. if there's a big shock to the system, qe might still be around, but there's no room in

more developed market countries. central bank toys with the idea of negative interest rates. we kind of noticed it doesn't really work. more fiscal stimulus is very complicated and more monetary stimulus is also very complicated. the economy is doing great, but the moment there's a bump on the road, there's a puncture in the tire, there's generallywe'll. -- no spare wheel. francine: it should be the stepping stone maybe of pushing banks to normalize quickly? geraldine: the fed has been the first one to do that. they created a little bit of rim. but when you think about the rate cutting cycles that the fed would typically have when there's a shock to the system, having rates around one and a little bit more is not enough room to create enough stimulus on the downside, let alone europe and japan, which still

have negative interest rates. in that sense, we are still far from recovered. francine: mark gilbert will be back with us. ,e will talk about jackson hole happening on august 24 and 26. thank you so much for now. geraldine sundstrom, thank you for joining us for the hour. "bloomberg surveillance" continues in the next hour. tom keene joins me out of new york. we will be talking to the ceo of crescent petroleum. then we deal with geopolitics and look at dollar. this is bloomberg. ♪

francine: trump threatens north korea with fire and fury, while

they hit back, saying they are considering a missile strike on guam. the deal is done. hear our iger plans to embrace the viewer. kenya's president defeats a secret ballot that could have ended his administration. good morning. this is "bloomberg surveillance" and i'm francine lacqua in london. tom keene is in new york. tom: the yen is strengthening, but strengthening in the last 20 minutes as well. francine: let's get straight to the bloomberg first word news with taylor riggs. reporter: starting with geopolitics, president trump told kim jong un's regime it

will face a devastating military strike if it keeps threatening the u.s. donald trump: that's not make any more threats to the united states. they will be met with fire and fury like the world has never seen. reporter: north korea now says it is considering a missile attack on the american military base on guam. that is in response to united nations economic sanctions. an anti-terrorism operation participants were injured. this happened in a paris suburb. police are now searching for the car and driver. as you mentioned, in south africa, president jacob zuma will remain in power until the end of the year. he survived a no-confidence vote in the national assembly. that could backfire on his ruling national congress party. they could argue the anc had a chance to remove zuma and take a

chance against corruption, but didn't nist. nissan agreed to pay to settle the settlements over the takata airbag recalls. global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. i'm taylor riggs. this is bloomberg. tom: equities, bonds, currencies, commodities. looking into currencies, the litmus paper for the g little do political system. -- for the geopolitical system. yields have not really moved. the curve is flattening, but not as much as i thought. i saw the euro move into 1.17. the next screen, if you would. 19 is averageand

over the 29 year period. 109.90, nowat 109.71. francine? francine: this is what i see in my data book. european stocks are down. the vix is up. it is clear there is a risk off mode. as tom said, tensions between the u.s. and north korea is keeping investors on edge. european stocks slumping, following these declines across most of asia. tom: two ways to look at the korean won. one is the yen-won. one is the more visible dollar-korean won. i do want to oversell this, media hysteria we don't need. we need news and information. this is the stronger korean won. here is the come back as well. it is just a two standard deviation move.

i will give you a heads up on the yen-won, a bigger move. dollar-won. i'm going to call it relatively calm. francine: that is a good way of putting it. almsee a risk off mood, but c compared to what it could look like. i picked something that is simple, the vix index. we will put it out on social media, but it shows the net short positions on the vix futures and they do seem to be at a record. that is quite significant and important because there is not that much panic on the field, on the ground, but there is all this underlying concerns about what happens next. let's get back to our top story, north korea is examining a plan to fire a missile at a u.s. military base on guam. that is according to state media. the threat comes after president

trump ratcheted up his rhetoric, warning of fire and fury. let's get the latest now from peter pae. peter, who is the right person to step in and be the intermediary? a country or a person? peter: well, i definitely think it will be china. specifically because they have the most influence and control. though they might disagree on the word control. the bulk of the trade that north korea engages in is with china. and they have the most economic leverage. as a result, and that is the reason why, donald trump has continued to prod china to press north korea to de-nuclear ize. francine: has it ever been this bad? is the mood different than in previous crises? peter: not really.

the mood here is almost business as usual. there is a bit of a callousness to this type of provocation or rhetoric. what is unusual this time of course, is the rhetoric, this fire and fury, that kind of talk normally came from a korea. for the first time, it came out of the u.s., specifically from donald trump. that might have rattled the markets a little bit. they were not quite sure what to make of it. the markets, as you saturday in korea, there was a modest dip. the volume was pretty low. you know, everything has been taken in stride. tom: here is a quote from senator mccain, obviously with an affiliation to korea and the ivietnam. he has been previously ill with cancer.

i take exception to the president's comments because you have got to be able to do what you say you are going to do, that sounds like mccain. i don't know what he is saying and i have long given up trying to interpret what he says. the key to this is china. peter, what do the south koreans want? do they want the bluff and bluster of president trump? or do they want the quiet diplomacy of senator mccain? peter: i think the latter. s, contrarysident ha to the prior former president, has been pushing for military engagement with north korea. i think because of his popularity, that pretty much indicates that the public, at least here in south korea, is looking for talks, open engagement.

basically, the escalating -- basically, de-escalating the tensions on the peninsula. tom: what we've the koreans want in -- what would the koreans want in terms of military force? we have all the movie stuff that is unfortunate and not a good thing here. what is the actual military response that korea would desire? is it just exercises? country, northe korea and south korea are still at war. in 1953 they signed an armistice. along the dmz there is this feel of a war. koreans have lived with this for 60 years. that said, there is, on both sides, a significant amount of military buildup. moon jae-in, even with his

consolatory gesture toward north korea, talked about beefing up and reforming the military forces, specifically creating mor powerful weapons to counter north korea. right now there seems to be a sort of a military weapons race that's about to start, it seems. francine: thank you, peter pae. our guest host for the hour is john normand. great to have you on the program. it is a strange feeling day. it feels like something has happened that is an extra bigley linked to the future of the world. is this a market function you don't know how to trade, rising tensions between the u.s. and north korea? or is it something the markets should not be concerned with? >> it is difficult for market

participants to take what is happening now, the clear escalation of tensions, and taking that to a breaking point in this crisis, which could trigger a military response. nuclear tests are nothing new and have been going on for 10 years in north korea. we have had a u.s. the ministration that did not make good on a lot of threats internationally. francine: what is priced into the markets at the moment? >> nothing. francine: cheap cash comes from central banks. is that priced in? >> what is priced in is business as usual. you have a very low threat of inflation. tom: john, how quiet are the markets? forget about the korean geopolitics, which we will discuss. is this a normal august, a quieter august, or is there some bustle to it? >> it is a normal august in

that we typically have shocks in the summertime. whether that is random more a function of people on holiday, i don't know. a shock occurs, and we start to get normalization. francine: we will look at the vix index next. normand stays with us. coming up, disney goes direct to consumers. bob iger tells us why he sees a future without netflix. this is bloomberg. ♪

>> my guest is the distributors will look at this more as a threat than anything else. it is not intended to be that. what we are doing is reacting to

marketplace conditions and taking advantage of the quality of our brand, the passion of the quality of the product we create in the technology that allows us to reach consumers directly. francine: that was bob iger speaking yesterday about the big plant t to ditch netflix and sell content directly to consumers. they will offer lifve sports, as well as animated shows. both netflix and disney shares fell in extended trade. with more on this is john normand an dian whittaker. this is not really a surprise. the timing is maybe unexpected, but this might just be the way things are going, isn't it? >> it is the way things are going in terms of the direction of travel, but the timing is a surprise. i think most people would have

assumed the status quo would have continued for several years, that the contact companies would have been happy to deal with the distributors, like netflix and so forth. bobrdless of the comments iger said yesterday, still wanting to work with comcast and directv, potentially, this is seismic. if you look at pay tv companies, they are intermediaries between content providers and consumers. thenisney is doing this, other content providers will be looking at this as well. if disney says, we think it might be better to go direct to the consumer, the question then becomes, where is the place of the distributor? francine: this is something we have seen in the music industry. can you draw parallels, and where does it leave distributors? >> the slight difference in terms of the music industry is if you look at what has happened in terms of music, the consumer

does not think, i will go direct to universal music and a look at the playlists. they think about the artist. a central, they want one spot where they can get their music. -- essentially, they want one spot where they can get their music. pay tv is different. the content providers -- in a pot of cases, the content is easily recognized. what disneyows provides. so, those content producers, in those circumstances, actually have a brand that is identifiable with the consumer. tom: ian, thank you for coming on. i agree with you that this is a bombshell. is this simply the failure of disney television, the cable tv network that disney has, and frankly, even epsn, where two mplys out they are si getting out ahead of tv.

>> you have interesting trends in the u.s. the question of whether pay longer-term has a future or not. there is an element here with disney thinking, on a five to six year view, is it better to strike out now, filled our brand with consumers? if you look at what they are doing, there was a timeline element here. they are not taking that film content -- and the tv content remains on netflix. they are not taking the content off of netflix until 2019. we have got a two year window here. if you take it in terms of their streaming services, it is more of a generalized streaming service here. i think disney is definitely testing the waters. if you look at the likes -- again, an interesting question,

what about something like at&t? it has content and distribution. the general direction of our travel seems to be content providers are thinking -- if you bear in mind why content providers did the deal with the distribution companies, it was because it was difficult for content providers to deal directly with consumers. tom: this is about distribution, as you mentioned. bring up the chart, netflix and disney. granted, it is apples and oranges or apples and broccoli. there is disney getting along and then going flat. what will be the response of the other players, and particularly those linked in the distribution, comcast and warner? what is the game theory in the next six months? do they climb on board the iger express? >> if you were a distribution company, you would be thinking, we are an intermediary.

so, the obvious response to that would be, go out there and own content. if you have content, it gives you something to bargain with an something to offer exclusively to your own customer base. that's increasingly what we will see from these companies. we already see this. if you look at sky, they have been talking about producing their own drama shows. you already start is the distribution companies that want to own content. it is not a coincidence that you have seen the disney announcement in the same week you saw netflix announce its first content acquisition. tom: yeah. >> that will be the trend. tom: we have to leave it there. thank you for joining us this morning. this is a bombshell story. we have paul sweeney later.

up, brian weezer, we will talk to him from pivotal research and that on :00 hour on television and radio. he 9:00tal research at t hour on television and radio. ♪

tom: good morning, everyone. i am tom keene in new york and a forever young francine lacqua in london, looking exactly as she

looked 10 years ago in august of 2007. there was a hiccup at bnp pari bas. then, there was a public later, a four standard deviation move. john normand spilled a cup of coffee that morning. he joins us. john, the one outcome of these 10 years has been the negative real yields. this chart comes from john at bank of america. this is the fed funds target rate with a moving average down below. john normand, the solution has been negative rates. we have the draghi induced negative yields in germany. our negative yields a solution to get us out of this, or are they the problem? >> they were a solution to get us out of the financial crisis and a recession, but you would think part of the consequence of that is financial repression and

artificially low levels of rates, which are inconsistent with an economy that is growing and should be generating inflation. in the same way we went to the extremes of negative rates during the crisis, you should think we are going to positive real rates over the next couple years if inflation reemerges. as a question, do you know where the risk free rate is, where was in 2012, where it was in march of 2008? >> well, the term implies that we think of treasury bills as having zero risk. for a while, people thought of that as the norm. i think people are less comfortable with that idea, especially as we go towards this debt ceiling deal in the u.s. it is a floating target. francine: who is right, the market or the fed on inflation? >> i think the market will be proven right. rather, i'm sorry, the fed. meaning inflation has surprised

the downside in tehe spring. as we see the fed's view play out, which is that market rates will have to move up over the next several months. francine: i'm hooked. that's a tease, tom. learn from john normand. oil is fighting the global glut. we speak with the crescent petroleum ceo. this is bloomberg. ♪

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tom: good morning. "bloomberg surveillance" worldwide. koreal do much on north across all of "surveillance" on radio and television.

now, an update on first word news. here is taylor riggs. taylor: president trump is warning north korea it will phase fire and fury if it keeps threatening the u.s. he ratcheted rhetoric when unprecedented level. it iskorea says considering a missile attack on the military base in guam in response to a new sanctions. and the trump campaign has begun turning over thousands of documents to a senate committee. donald trump jr. and former campaign manager paul manafort have provided documents. the senate judiciary committee may hold public meetings next month. america is holding a stand against the constitutional amendment in venezuela. 11 leaders have called out president maduro. what do wrote said the -- maduro

said they will establish h fruit committee. -- establish a truth committee. the five-year general obligation index is -- the state is benefiting from silicon valley's boom. in france, six soldiers deployed in anti-terrorism operation were injured when a car rammed into them. the mayor called it a deliberate act. police are searching for the car and driver. 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? francine? -- francine:oil it oil is climbing after three days of declines.

for more, we are joined by majid jafar. family built the company into the largest in the uae. give me a sense of how your oil operation in iraq are going. we see opec trying to cut production and complied, are you ramping up? majid jafar: with iraq, what you are seeing is a recommitment to opec despite the need to increase production after the wars and other sanctions and they are heading 5000 barrels a day. having said that, opec as a whole is not including all opec members even though there were question marks over compliance and that is the first time since

the cold war we have seen countries like russia on a board. operations, the challenges are not at the cost of production but above the ground security challenges, there is sometimes lack of clarity on policy and compliance with contractual terms by governments or payment delays. despite of that, we are committed to the country, both north and south, and we expect production and operations to expand. francine: do you worry about the price of oil? some people set we have reached peak oil and other say shale is in control? majid jafar: i think the peak oil came after the shale revolution. what is more improved is important for producers -- what is more important for producers

is the seesaw and now i think the market has kind of adjusted. for us as leaving investors in some ways, the $60 level is more comfortable. is $100 a barrel, a lot of strange decisions can happen on spending and priorities. now they need it more than it is commercially reasonable. also the service companies and the cost for contracted services and the industry are a lot more reasonable when oil was over $110. francine: give us a sense of where you see the price of oil going? years andopec for 10 it is change significantly. the marketd: i think forces are balanced, acer amount of compliance by opec standards over the summer months -- you

have a fair amount of compliance by opec standards over the summer months. and at some point, if production continues to rise in the u.s. and use the noncompliance or less compliance under the opec side, prices fall $10 a barrel. i think that is stable for the moment and i am less coveted six months out. tom: wonderful to speak to you. i look at your work in cambridge which means you are the only one who can answer the question, do you know how much oil is out there? and iis a huge mystery would suggest a distrust of the actual oil of the middle east is . do you have an approximation? ared jafar: i think you quite right. a lot of the figures are hangovers from the 1970's and iraq is one of the few countries that have been updating. it is price dependent. in the middle east overall, we

have proven 60% of the world's oil and 40% of the world's gas knifing i think it is massively underreported. oil and we still have national oil company monopolies and a lot of major resources and little room for private sectors. that is starting to change. true reserves will be much higher that is known as some countries like iraq, which is just going. the middle east will continue to be a very important the provider of the world's oil and natural gas. tom: you and your family have an interesting politics in place and your family is from iraq. place of thethe united arab emirates and the new calculus? how will uae tilt between saudi

and iran but all of the gcc? majid jafar: that is a big question. the uae's policy has been consistent in having a good relations with everybody. non-interfered on with each other's affairs and at the same time, a policy against islamic extremism of what ever for or shape -- whatever form or shape, despite the geopolitical tensions not only in the middle east, but worldwide we are seeing. when it comes to oil and gas, countries that may be politically opposed have shown an ability to cooperate and we iran war in a the iraq- in the 1980's and we are seeing that with countries like russia joining in and possibly brokering the deal like last year in the opec. tom: what do you need as a businessman in the middle east

from the u.s.? if we are in search of a new foreign policy, what is the best for the jafar family? region, was for the quite pleased to see bigger engagement by president trump and that the region than we had a scene from the obama administration in of the latter -- we had seen from the obama administration and the latter. a policy that combines engagement of the political and ,ecurity side with economics what the region and really means is an lot of investment, reconstruction is particularly job creation for the next generation. we have a highest youth unemployment than any region and the world. major challenges that need to be addressed for political stability. francine: what is the one prescription for the middle east at the time needs to be?

we look at commodities and seems to be fluctuating the veritable. in terms of: something that brings more macro stability, more diversified economy and you see it a priority of the government of saudi arabia. it is an initiative that probably requires 10, 20 years. do we notwhat understand about qatar about the qatar deal? the tensions with qatar? john normand: the tensions -- tensions, theye go back a long way, something recent and it is about the different views of the region, particularly post arab spring's. there are concerns, legitimate concerns about a lot of extremist groups in many countries in the region whether syria or libya.

i think having a compact in the region going beyond and focusing in particular on economic cooperation is necessary. i think that is what the region needs to see from the outside. tom: mr. majid jafar, thank you for joining us. majid jafar, crescent petroleum and john normand will continue with us from jpmorgan and wants to talk about ford exchange. a busy morning for "bloomberg surveillance" with geopolitical duchy geopolitics and north korea -- geopolitics and north korea. stay with us. this is bloomberg. ♪

francine: this is "bloomberg surveillance." tom, and softened inflation in the u.s. -- insolvent inflation in the u.s. and will have more on friday. it depends on who you believe on wage growth will be filtered through because jobs will get better in the u.s. straight back to john normand of jpmorgan. we were talking about inflation and you believe the fed will be proven right. talk to me about this u.s. break even a chart. we'll push it out for radio listeners for you that 30 year in blue and the 10 year and white. john normand: part of that is driven by what we saw in the spring. part of this chart what match up well against the oil prices for what was seen and the period of -- there's at has

still decent case for oil prices to lift and whether or not labor market pressures take over and generate the kind of wage increases that can left broader measures -- lift broader measures. tom: look at the worst a nightmare, not that we would want to be gloomy on an august wednesday. the chart francine was talking about. this is the united kingdom growth after inflation. i know you will tell me it is brexit induced and sterling conduced. i don't know. --s the fear for the united this is the fear for the united states. why will of the united states avoided this after inflation? it is because of the structure of the economy have not changed fundamentally are you can have is cyclical low on unemployment and no resulting increase in wages. fullis the relating to the

of scarves and the evidence is clear the phillips curve is much flatter -- phillips curve and the evidence is clear the phillips curve is much flatter than it used to be. that is the argument. it is a model does not work as well as a used to. francine: is at the phillips curve completely broken and you abandon it? if it wered: no, completely broken, you would see a disconnect between unemployment and wages. it is a looser correlation but you have not seen it go to zero. the model is less reliable but not considerably useless. say ise: if what you right and inflation is going to pick up and the fed hikes in the market is not expecting, how much of a correction will we get? john normand: moderate, closer and not 50.points

you will have some rebound by special factors. if you have a move down and oil price later this year on the back of noncompliance by raising -- rising shale input. tom: how does the dollar linked in? november 9, everybody was calling for a strong dollar. i thought you were more measured out of jpmorgan. everybody getting of the weak dollar bandwagon. the jpmorgan dollar guests? -- guess? john normand: what it does over the next few months because i think you will get normalization of inflation and u.s. rates for i can see the dollar stabilizing versus most currencies. the dollar is in a bear market. even though the fed is tightening, a number of other central banks mainly in europe

normalizing policy concurrently. when that dynamic takes place, it is difficult for the dollar, you see the occasional fits of strength versus selective currencies. not that you'll see new cyclical beats versus any currency. tom: very good. we will continue with john normand and will migrate to the european continent. our bloomberg business flash. taylor: disney ceo sees a future without netflix or directv. it showed it is ready to embrace the court carter starting next year -- cord cutter starting next year and will sell directly online. they recorded lower sales. hsbc is cashing in on the britain's brexit. in june, a 20 3% increase in demand for hsbc currency

accounts, in the u.k.. that is the same time that core made a strong showing against theresa may. francine: south africa's resident jacob zuma survives another blow, then back to leader will remain in power after narrowly the feeding a no-confidence vote. cancloseness of the vote backfire. -- after narrowly defeating a no-confidence vote. we are joined by john fraher, or international executive editor is still with us is john normand of jpmorgan. let's start with our john at the bloomberg. when you look at africa, is unlikely president zuma will have a vote of no-confidence or is it that eat? -- or is that it? it out fornever rule you so much unhappiness not only

in the country but his own party. also, he survives eight of these challenges so even if there is another challenge and the immediate future, not necessarily guaranteed it will be defeat. the key date is the party leadership election in september full top -- in september. francine: what does it mean? john fraher: it raises the stakes for the election and december. -- in december. behind the scenes, a massive power struggle. his opponents and the main one what if the -- and his opponents and the main one would be -- and that's vote, that election will have huge ramifications. thecine: is there someone

market investors and international community would like in charge? john fraher: -- would be the favorite. the reaction of the randy yesterday it in italy -- rand yesterday and it was clear they certaintykind of about the agenda that will follow him. somebodyreplaced by close to him, that will likely continue to be bad news for the rand. francine: to thank you, john fraher. we will be back with john normand. in the meantime, if you are a bloomberg customer, you can see john on tv . goal to tv and steal some of tom's data checks. we have standard deviation of what we are seeing on rand and you can ask us, ask the desta

question. this is bloomberg. -- ask the guest a question. -- this is bloomberg. ♪

francine: good morning. tomomberg surveillance"

will join us later. francine lacqua in london and i am tom keene. the euro with john normand. 01, which isrmand 1 going to be dominant in your call on the euro? john normand: it is interest rate differentials and we -- relativeould be to the resin has to be with the ecb at a much earlier stage off policy normalization cycle then the fat and i think that -- than the fed and i think that's a way to think of it. at this chart, difference between economic surprises in europe versus the u.s. we will push it out on social media. it was very clear in europe was doing better than the u.s. due to employment and inflation and you have pmi going to back down. does it mean the euro can correct? john normand: i think it means

people need to be on guard on either a slower economy in europe or inflation. if that happens, you will not see such a rapid pace of policy normalization and also see some reduction in the flows tom mentioned in the equity market. the reduction of equity flows is evident in the data. i do not think we're hat a -- we are at a high enough level of start offor the tapering, this is something to monitor over the next few quarters. tom: do have an optimal level of euro for germany? we interview and most people tend it up. where are you at? john normand: my guess if the euro at 125 would not matter at all for germany. high one 20's or were 30's, i think the economy would be performing close to -- 120's or 100 30's, i

think the economy would be performing close to trend. the ecb would have to markdown inflation numbers they might delay qe. for into may not matter germany for the inflation calculus in the ecb. tom: john normand, thank you for joining us. and at the next hour, north korea and we will look at the disney-netflix bombshell. dwyer dwyer -- bricklin will join us. more as the inflation structure. it is a beautiful new york this morning. partly august. stay with us. this is bloomberg. ♪

got you outnumbered. the dinosaurs' extinction... don't listen to them. not appropriate. now i'm mashing these potatoes with my stick of butter... why don't you sit over here.

find your awesome with the xfinity stream app. included with xfinity tv. more to stream to every screen. tom: the yen strengthens and gold advances.

markets and adjust to "fire and fury." 3800 miles west of honolulu. in this hour, the council of foreign relations and later this morning general wesley clark. netflix.ys no to good morning. this is "bloomberg surveillance" in new york. imo am tom keene. francine lacqua in london. -- i am tom keene. a bombshell from disney yesterday. this is a huge deal that content is king. francine: yeah, if you look at all the major industry groups, music industry was disrupted and they were going exactly that way when the jay-z and the arts

market, that way with a big artists here. the natural next step is tried to cut out the middleman. control ofck distribution. distribution, distribution, distribution. here's taylor riggs. taylor: president trump warned -- has never wanted north korea before. face a at they will devastating military strike if they keep threatening to the u.s.. president trump: north korea best not make anymore threats to the united states, they will liket with fire and fury the world has never seen. taylor: north korea said it is considering a missile launch in guam. in france, counterterrorism prosecutors are investigating an attack on soldiers. six soldiers deployed in an anti-terrorism operation were injured when a car rammed into

them. the area where the attack took place is home to france's main intelligence agency. in south africa, president jacob zuma will remain in power until at least the end of the year. votervived a no-confidence and could backfire on his ruling national african congress party. the opposition may argue that had a chance to remove xoma. unit have the america a greater to settle a claim in the takata airbag suit. -- 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. the korean news, let's go to commodities, futures

deteriorated, -12. down futures, -36. you would think dow futures are down, but they are not. i know francine has a good london perspective. 109.8 before the trump luster. is up a good $11. francine: we have a similar data because the only game in town is gold, japanese yen, bonds rising because of the u.s. and north korea. tom: very good. let's begin coverage with kevin cirilli and an washington but first peter pae joins us from korea with a bloomberg news. wonderful to have you and your evening in korea and tell me about the leadership of south korea. who are they and how do they respond to the bluster like we

have never seen before? : well, we have a new administration, a new president elected in may after the former president was impeached. the former president was a conservative, hawkish particularly toward north korea. the new president elected on a platform of more conciliatory. even with today's fire and fury and other provocative talk, he hisbasically stick with two-pronged approach as said he would continue to press for negotiations, talks while also pressing for sanctions as in the united nations approved over the weekend. we have a leadership that is a bit more open to north korea's talk,and what all of this

the latest escalation of talks and what it means to the administration remains to be seen. francine: it seems the president is taking a try everything approach. oil is the right person or entity to de-escalate -- who is the right person or entity to de-escalate? much everybodyty thinks china, is a hold of the bul -- pretty much everybody thinks china with control and influence. the bulk of trade is china. tomp has been pushing china do something, to do more with north korea. tom: we greatly appreciate your attendance. peter pae is our bureau chief. we never appreciate the attention of's of -- of attentiveness of kevin cirilli.

i wouldn't suggest a changed washington in the last 24 hours per how will capitol hill in washington respond to the president's bluster? cap ed: and the past -- kevin: in the past few weeks, a growing concern of a nuclear north korea and as peter said, all of this has to go through china simply because of the economic ties to north korea, more than 90% of exports and imports linked to china. that is why you saw secretary mnuchin announcing sanctions against chinese institutions. the rhetoric yesterday not exactly j-roll and praise from all members of congress, including peeper -- not exactly praise from all members of congress, including senator mccain the. tom: this is a brilliant must read. everybody knows he is supporting of "bloomberg surveillance,"

here is the admirable. i would believe mattis, kelly 'sd mcmaster get to stavridis sake, does the president understand he needs to listen to the generals? bank yes, if you listen to a statement about fire and fury, that is something folks are looking at. -- kevin: yes, if you listen to the statement about fire and fury, that is something folks you are looking at. ,f you look at the north korea

looking at missile launches not only during the trump administration a button the end of the obama administration, it is great -- but also added the end of the obama administration, it is brazen. of bute very isolated china has a huge role to play in further isolating of them. francine: is it possible that the u.s. president think a strike is possible? kevin: the administration is saying all options is on the table. this president said he never wants to broadcast what his military options are and he used to say it on the campaign trail and it is a very different style than we have seen from previous administrations. i think this kind of rhetoric "fire and fury", that is something that he feels as part of his presidential style.

francine: we do not know how north korea will react, it could lash out. isn't there somebody the president listens to to keep it in check? kevin: he lashes out unpredictably. that is why washington is watching general kelly with the vital role of chief of staff. this is somebody deeply, deeply trusted in the military so his role with relation of with people like secretary tillerson very much in play. and the president speaking with the leader of south korea while on vacation yesterday. tom: i hope you reported next from guam. i had to look up exactly where it is on the map. he is our chief correspondent. patiently listening to armor geopolitics is bricklin dwyer, economist.

politicians can intrude on markets as well i know they do not dampen gdp, if something terribly happen, it could boost gdp. what is the state for economic growth? 3% or so part? 3% andn dwyer: trumpian we are on an average base or slightly above average. unimpressed, nothing to get too excited about in terms of were growth is. tom: do you follow geopolitics? does that fold into your analysis or removed from it all? bricklin dwyer: this scares the living daylights out of me so we try to stay out of it. it is the tail risk that bad things happen in changes the story completely and not something you can incorporate into your baseline scenario. francine: what does it mean for the markets? i know you are economist, but

the market do not seem able to happen -- price it in. bricklin dwyer: where do you put equities? how far do they fall if you have a north korean a disaster? the answer is a whole lot. it is difficult to price in and handle that in your risk book but it means some of the upside in how excited you get about where the economy or market is going is going to be fairly limited. thankne: bricklin dwyer, you. he stays with us. disney sees a future without netflix. while ceo bob iger said -- and why he is ready to embrace of the cord cutter. this is bloomberg. ♪

taylor: this is bloomberg surveillance. there is a huge deal in the e-commerce business payment. business processor has agreed to buy uk's group. it is buying that $1.4 billion. consolidation is increasing in payments sector. softbank is close to making a $1 billion investment according to people with familiar. towould increase the value $4 billion. they sell licenses for apparel. in germany, the largest renewable generator underlined profit outlook. growth that beat estimates and the company said debt reduction will allow more spending. that is your bloomberg business flash. tom: thank you so much for a

bombshell announcement yesterday by disney, unexpected by those in the know. our david westin could always crowbar information out of mr. either and maybe on the idea -- theiger on the idea of people who consumed this. here is bob iger. seen ar: we have dramatic shift in the way media is consumed and more more apple-based as it relates to your 15 year old son and i see it with my kids and grandkids. a lot of the consumption is direct consumer services. tom: looking at the idea that content is king or maybe distribution is king. this is a huge deal. perspective, paul sweeney for bloomberg intelligence. this is a seismic announcement, why is that? paul: bob iger is recognizing he

has to go direct consumer and we of theen that netflixes world, the greatest disruption and the media world in the last 30 years and he knows he has to do that. the challenge for bob iger is they make so much money with the current distribution with comcast, it is hard for them to win themselves off and pivot. it is something he has to do and they made a bold statement. tom: we will talk to michael and brian. the first thing i talked about does i thought about is the 15-year-old kid is it cut out the ads. paul: the question is can you make it up on a subscription fee and what is the right price point to bring the millennial's in and the younger demos to make sure you can pay for the sports rights you have to pay for weather football or hockey or baseball.

francine: i am not sure how i am looking at this disney video service. where will i see it? directly on my television? think about it as the netflix for sports. simply an app and espn will be an espn app and their content, live sports programming. this is a way for disney and espn to reach those consumers whether cord cutters, cord thers, which is been primary distribution platform for espn and the other cable networks. the is a move we have seen and espn is the big player in cable television needs to be there. francine: are other people going to follow disney, the same trend? what does it mean for netflix and comcast? call: we -- paul: we will see a

lot of content owners go direct, we have seen hbo and cbs with the bs all access. "game ofnow, you go to thrones." how do they adapt for 2019 to this bombshell announcement? paul: sir martin was on yesterday, advertisers have to figure out new ways to get consumers. short, six second commercials and a lot of advertising going to facebook and google. sir martin said some of his biggest clients are facebook and google as more clients are putting more money on it goes. tom: how does of the nfl reply? paul: they already have a deal with directv. they have lots and lots of media partners vying.

continuinge the nfl to participate in streaming platforms whether espn in the future or verizon or somewhere else or facebook or google. when nfl rights, up, do not be surprised google and facebook's of the world and apple with cbs and fox. tom: policy swinney with bloomberg intelligence. sweeney with bloomberg intelligence. advertising,t on truly a bombshell announcement and we will continue with bricklin dwyer and problems are with pivotal research and the 9:00 hour. stay with us. weezer -- and brian wieser with pivotal research in the 9:00 hour. -- stay with us. ♪

francine: this is "bloomberg surveillance" with tom and francine. to's look at the markets and the friday number of inflation cpi out of the u.s., significant because we not only heard from neil and other fed president and the fed credibility. we are back with bricklin dwyer, a north american economist. let me bring you over to my chart. a you as break even 30 year in blue and in white is at the 10 year break even. year in aak even 30 blue and in white is the 10 year break even. where do you stand? it is almost binary.

bricklin dwyer: even if the fed is starting to not believe inflation is coming back right now. we have seen 4 disappointing inflation and all row and that is too much to ignore. the last bit word from the fed was a that inflation is transitory and we shouldn't see it come back. you get shocked four times in a row and you take signal. signalket did not take from the first and saw the second time, they got scared and third and fourth, more scared. here we are a month later and looking at the possibility of a fifth one. francine: is inflation is better than expected, what does it mean for treasuries? bricklin dwyer: it would be a good sign but breaking a for trend is not heartwarming. it would be a good sign and a bit of relief but i do not think it would be a game changer.

tom: you went to yellen columbia a you had to pass by the robert shiller room. what about animal spirits of america or much more a story of equality? bricklin dwyer: i do not buy that for right now. we have not seen a lot of changes of word trend growth is going and average growth is going. we needed to see productivity that or inflation pressure really starts to, back. we are not seeing that. tom: i used the chart and i will get it up before the hour and the idea of service sector inflation up here and deflation persisted down here. all of our viewers and listeners are miserable and looking at service actors, inflation, should they? bricklin dwyer: if you look at the basket of what consumers take in every month, they do

consume a lot of services, but they pay attention to a couple of prices, things like milk and ask -- eggs and gasoline. tom: you do not put tuition in there, did you? bricklin dwyer with us and august, tuition month. b.n.p. paribas. we will continue with mr. dwyer. our kathleen hays in conversation with a fellow of the regime, sample letter. -- sam bullard. -- james bullard. this is bloomberg. stay with us. ♪

tom: bloomberg surveillance worldwide. francine lacqua in london. i'm tom keene in new york. right now with the first word

news on korea. >> president trump is warning north korea it will face higher and fury if it keeps threatening the u.s. the present ramped up his rhetoric to an unprecedented level. it iskorea says considering a missile attack on the american military based in qualm. counterterrorism prosecutors in france are investigating attack in a paris suburb. six soldiers were injured when a car rammed into them. police are searching for the car and the driver. the area where the attacks to place is home to the main intelligence agency. the trump campaign has begun turning over thousands of documents to a set committee investigating russian meddling in the election. donald trump jr. and paul manafort have also provided documents. the senate judiciary committee

met old public hearings next month. latin america is taking a stand against a new constitutional assembly in venezuela. 12 countries have called on nicolas maduro to close the assembly and say they won't recognize any decision it takes. he says he will establish a truth commission. seven years ago california was considered to be the next greece. now it is trading better than aaa. it's five-year general obligation index trading at yields below aaa counterparts. global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. i'm taylor riggs. this is bloomberg. chart tont to go to a show the measured tension right now. .his shows you the distance

this is a chart we have never shown before. won.is yen korean here's the trend of stronger korean won. and here's the latest weakness around the bluff and bluster in this leg up this morning. this is four standard deviations out. we are not there yet. we are not at a point of any kind of determining tension this morning. nevertheless there is some real tension this morning. councillden is with the on foreign relations. this book is wonderful. failure to adjust. reacts? china >> china clearly has an interest in trying to calm the situation down. it was quite noteworthy that

china and russia signed on to the rather extensive u.n. sanctions against north korea. it remains to see how faithfully they will implement that. i think china's interest is to to to pressure north korea walk back from the rhetoric. having president trump firing back from the other side doesn't help all that much. tom: how much within the trade of china is there military position? weemember 1989 where misjudged russia military might. we misjudged the power of russia. do you know the military might of china? it is significant. obviously still well behind where the united states is militarily. andink this is where trade defense overlap. china has midterm long-term ambitions to be the dominant technological power in the world

and modern military might comes from sophisticated technology. believes the chinese can't catch up with us on the military front is not paying close attention. tom: tell us about south korea trade. loopeally go around the country by country. is south korea a country with buoyant export or is it challenged? >> since it signed a free trade agreement with the united states exports to the u.s. have been very strong. that angered candidate trump. the u.s. korea free trade deal is one of the deals on the firing line. hastrump administration said it wants to renegotiate the arrangement particularly with respect to auto trade. with everything going on politically, diplomatically right now in the region, clearly the trump administration is going to have to do some thinking about how hard it wants to press of korea on the trade

issues. is it possible is north korea much more intimidated than they let out and that would actually get them to freeze their nuclear program? >> the united states has been trying for many years now to persuade north korea to freeze its nuclear program with no success. i think the best outcome would be some sort of re-engaging in diplomatic negotiations. we seem to be pretty far from that at the moment. the best news is there seems to be some unity in the united nations on pressing north korea. anyone who says they have a crystal ball into how north korea responds to this kind of pressure i don't think is being fully truthful. it's a very difficult place to understand. francine: what if these tensions don't get diffused?

what does it mean for president trump? does he go back on the rhetoric or does he think a possible strike is a workable option on north korea? >> i have to hope he doesn't think it's a workable option. nobody that we speak to in washington thinks it's a particularly workable option. i think both north korea and iraq states will have to find ways to climb down from the rhetoric. john mccain saying that trumps words were not helpful. states has toited lead from a position of strength, not from a position of bluster. one hopes the president will catch on to that. does general mcmaster have your support? he has written books about the advice during vietnam that u.s. generals were not giving enough

advice to politicians at the time. do you think he will be the right person to talk through the real risks of this first strike if it were to happen? pay veryleagues who close attention to the u.s. military speak extremely highly of him. he's clearly the right person in that job. general kelly taking over as chief of staff to be helpful. general mattis is wildly -- widely respected. inmp has very good people the right places. the question is whether he will listen to them or not. he seems determined through his twitter account and press comments to communicate directly on the issue. i doubt what he said yesterday was what general mcmaster was telling him to say. really looking forward to failure to adjust out in paperback.

august brooklyn maybe the month of north korea and south korea and geopolitics. september has already taken. it's about the debt ceiling and such. this atical is this? is different dip ceiling debate than the other 822 with hot before -- we have had before? it's a very serious outcome to talk about the u.s. defaulting on its debt and shutting the government down at the same time. it's a pretty dire consequence. it sounds like the administration is ready to play along. it sounds like the administration is ready to extend the debt ceiling without any strings attached. think the debate is a bit different right now. can you manage forward your view of the economy, your models of the economy with a continued

pausesor do we get the every two or three quarters? think those are something of the norm now. we continue to get scared whether it's a china crisis on the potential china hard landing story or whether it's a commodity story or a north korea geopolitical story. ofre tends to be cycles scares in the markets seem to be immune to the step of scares at this point so that's a good thing. the markets are looking at the long-term trajectory where things are going and that's kind of the tone we are getting from where things stand. tom: bricklin dwyer. was first in his class west point 1966. later on a conversation with a -- supreme supply allied commander. this is bloomberg. ♪

says aey ceo bob iger future without netflix, comcast owned directv. starting next year disney will sell live sports and animated films directly to consumers online. the company reported lower sales because of weakness in the ceo of hurts is touting her turnaround plan after the company posted its third straight loss. she says hurts is making progress. the company posted a second-quarter loss that missed estimates. .sbc is cashing in on brexit

there was a 23% increase in demand for hsbc currency accounts. that's the same months corbin's party --ty -- labour that's your bloomberg business flash. francine: today marks 10 years since the start of the financial crisis. financial banks have pumped trillions of dollars into markets. our morning must-read today comes from mark gilbert. he saysbrilliant piece slow and gradual withdrawal is the message. the direction of travel is changing after almost a decade of unprecedented stimulus. reflect the to changing environment.

mark joins us now. i love your piece today. you basically go back to 10 years ago and recount the story of these hedge funds owned by pnp barakat -- bnp paribas. the banks learned need to be better capitalized. we have learned that central banks have a much bigger toolkit than was previously expected. we have seen negative interest rates. we have seen negative yields on bonds. trillions of dollars in euros and pounds and he ends pumped in -- yen pumped into financial systems. we have seen very tight spreads in yields in european investment grade. on not as worried as i was 10 years ago. think the central banks have shown they are willing to do whatever it takes to get the financial system together. the banks are in a much

healthier place they were 10 years ago. constant proposing debt obligations. seeing the same amount of leverage in the system as 10 years ago. francine: tom always asks about the risk-free rate. you argue the 10 year yield is still the closest thing to that. is.t we compared the spread on european high-heeled with the yield on european 10 mark. you don't normally compare spread and a field. it's a bit apples and oranges. it's a guide to different credit risks. european high-yield spreads her back down to where they were 10 years ago and that didn't end so well for european high-yield's. the spread bounced and spiked up.

the central banks are going to start taking their foot off the accelerator. i don't think that's reflected in risk assets. you should see more of that coming back. it's a speed that we get to a more normal environment that matters. francine: we will find out more at jackson hole. >> mario draghi is expected to put in front of investors the prospect of the european central bank tapering its quantitative easing program and i think it's a good opportunity for him to do that. it means instead of keeping the foot on the accelerator they're going to take it off. not slamming the brakes on. the ecb will be very wary of unhooking the financial system off the life-support system to quickly. the ecb learned a valuable lesson from the fed's taper tantrum. tom: to me the keyword we got wrong 12 years ago was

amplitudes. we didn't see the size of the wouldnt and the impact we learn to live with over a ten-year crisis. what is our knowledge of leverage right now? >> i was looking at a chart of interbank u.s. lending. the amount of money that banks used to lend to each other. there was a massive reliance on cross subsidies. the market borrowing short in the market, lending long. that kind of maturity transformation. banks are now much more capital based. they've got much better ratios. i think the system itself is on a much better footing than it was. the credit crisis was a liquidity problem. it wasn't really a solvency problem. froze 10 yearss ago today and the overnight dollar rate spiked by half a point to its highest in six years. that signals a banks were no

longer willing to rely on the money market for funds and that liquidity is what killed it. mark gilbert, thank you so much. we'll continue with bricklin dwyer. you about tv . always available on your trading desk. we didn't have this 10 years ago. really critical. you can come over here. move on to a netflix disney chart and you can take that from tv and ported over to your bloomberg terminal. good morning. ♪

francine: this is bloomberg surveillance with tom and francine from london and new york. coming up shortly as bloomberg daybreak: americas with david westin and alix steel. i know you are focused on oil and you have a great guest coming up. alix: jeff currie, head of goldmanies research at sachs. it's going to be multifold. the first conversation is going to be about oil as well as compliance with opec and u.s. independence. companies who are drilling in shale. what do we learn from their earnings season. and we will be talking china,

reflation and aluminum prices very key to the global reflation story. tom: alix steel, thank you. b.n.p.n dwyer is with paribas. the size of their economies, you've got the id with japan having miles to go to get back to normal. get backthey've got to to normal something like that. the u.s. has got to get back like that. the clint bowyer -- bricklin dwyer, is this going to take a long time? >> it's going to take a really long time. he will tell you something like the market is fully priced in. our expectations are that we will go super gradual and have basically no signal effect in terms of markets. even though they're going to go very slow is like a grocery

store. your biggest customer leaves you, it hurts. that's what we will start to feel toward the middle of next year. francine: this is the beauty of doing things transatlantic. where trying to give each other precedence on what we do next. what is the next thing that scares you in the economy that you can't really quantify that could lead to a recession? >> the qe and the corporate sector has been taking a lot of dead. there's an interrelated scare that comes from equity markets and repricing and i think we don't just have the qe coming from the fed. also the ecb. potentially next year. certainly in our view. the financial flow fact is something people are couldstimating and that

have a significant reversal in terms of where markets think they should be priced right now. francine: what about china? the people's congress is there a danger they loosen up the economy a little bit and something ugly like a possible financial crisis? that's always a possibility. china tends to be like a cool pair of shoes. you wear them everyone's in a while and you put them back in the closet and not look at them for a while. that's the china hard landing story. financial crisis is certainly real, it's coming. we don't know when and trying to predict that is a terrible forecast. tom: productivity. some people are beginning to talk about gdp up. we get a little better productivity. do you buy that angle? that's a fairy dust idea. certainly it sounds great. tom: there's no evidence of it.

those gains are tough to come by. we have been trying to do it for a very long time and her nativity growth has been slow. i don't see a game changer right now. tom: do you know where the labor share is right now? where is labor share? share of income has been declining quite a lot. trade-off beene quite prominent in terms of where people are. you need to hire more people, invest in more capital to produce the same amount of output. tom: bricklin dwyer, thank you so much. greatly appreciated. got a lot to talk about through the morning. the disney netflix bombshell as well. you see the market

movement off the geopolitics. that is really front and center. we have a stronger again this morning. euro-yen swings. hugely. two big figures. 12894. that's a big 1.2% move. much to contemplate in washington. coverage through this morning. don't forget, kathleen hays with james bullard later this afternoon. an important interview at an important time for the fed with james bullard. stay with us through the morning. this is bloomberg. ♪

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alix: north korea threatens guam and president trump warns of fire and fury. equities drop. fixed jumps. safety ofs into goals. disney cuts ties with netflix and embrace of cord cutter. welcome to bloomberg daybreak. i'm alix steel alongside david westin. today.n ferro is off it is your safety check of the day. s&p futures off by eight points. a nice boost. dollar-yen down .4% and gold getting a slight bit up by six dollars an ounce. david: the war of words between united states and north korea escalated yesterday with trump warning the north koreans of dire consequences if they kept up their threats. >> north korea best not make any more threats to the united states. they will be met with fire and fury. like the worl