♪ five --: please killed police killed five suspected terrorists in barcelona. its tope house insists economic adviser is not resigning. says the fed needs to wait for the inflation rates to pick up. good morning. this is "bloomberg surveillance ." i am francine lacqua in london.

to check up ony the barcelona updates. european stocks are dropping. impact on some of the travel and leisure stocks. this after a terrorist struck a crowded street in barcelona exacerbating unease in the the mountingred by concerns over a dysfunction in white house. this is the dollar -- this is the bloomberg dollar index. 1.3.two-year yields, bob corker's says president trump has not yet demonstrated the characteristics needed to serve in his job. al gore went further saying that donald trump should step down. u.s. stocks suffered their worst day yesterday. , rex.s. secretary of state

tillerson and jim mattis says the reaction to north korea remains an option. option has been endorsed by the president. this contradicts the comments from steve bannon who said earlier this week there was no such option. the u.k. is prepared to give further details regarding its approach to brexit. according to three people familiar with the plans. the institute for economic affairs says a trade deal with the eu after brexit is desirable but not essential. there are more signs that china's property market is cooling. have imposed a series of curbs on lending. 62% injumped as much as a year in big cities such as

shenzhen. global news 24 hours a day powered by our 2700 journalists and analysts in more than 120 countries. i am sebastian sadly and this is bloomberg. francine: we start with the situation in spain where police have killed five suspected terrorists in a town south of arizona. the incident came hours after 13 people died and 100 more were injured after a van was driven down the iconic las ramblas avenue. i.s. has claimed responsibility for the attack. we are joined from the dreaded by bloomberg reporter -- we're joined from madrid by bloomberg reporter rodrigo. >> we do not have any profiling so far. we have very little information but the first impression is that it is a rather large network. not a lone wolf.

they are talking about at least two people dead. the driver escaped. people werewo killed and the driver escaped. they are looking for the support network. there were also two other people ortwo other cities about 100 200 kilometers away. a large area with a lot of people involved. what is: tell us about happening today. the search is ongoing. what are the authorities telling the population right now? have notthorities spoken much today but they have said that the -- the catalan interior minister said yesterday that the terrorists killed in the city south of barcelona were bombs.g out

but today, they clarified that those bombs were phony. is alsodia in catalan reporting that there have been other arrests. that is what we are expecting today. there is also a cabinet crisis meeting this morning until around 1:00 p.m. francine: thank you so much. former u.k.d by the security minister, polly neville jones. thank you for joining us. all of the hallmarks of similar attacks we have seen recently in berlin, and london. >> one of these is that the thatrities have agreed these kinds of attacks are difficult to revenge. the nature of the organization line behind them is the problem. they are low-tech, and locally organized. the chances of picking up much

of a trace of the organization, as things are taking place, is not high. that means you have to go behind this. what the authorities are what yourn is correspondent talked about which is the network. you have to know more about people who are not necessarily themselves -- who have not necessarily yet themselves committed an offense and yet they are known to the police. and police have to maintain some kind of surveillance. an ever enlarging list of people that you have to watch. and then your capacity to give serious attention to all of them as much reduced. you have to do some prioritization. in deciding who are the people you really need

to focus on. onlyou need for that, not good intelligence, but also high quality policing. policing is coming to the forefront. we talk about intelligence services but in many respects, as we saw today, in these incidents, the local police are key. they are key to dealing with incidents once a have occurred, but also key to preventing them. it is they, in the end, that have to do a great deal of the ordinary footwork that will actually prevent these instances from taking place. and that includes having good relations with the community. network means they have to talk, prepare, and organize things. and that throws out information. national security means all of us. it is no longer something the authorities deal with. it is the whole of the community. talk to us about the

difference in surveillance between the u.k. and a country like spain. spanish authorities are still trying to hunt the perpetrators of these attacks. is it much more difficult if you have fewer city cameras? pauline: the u.k. has been much criticized by libertarians for having so many cameras. a started off being security against perfectly ordinary offenses like robbery. but these days, they have become crucial in being able to track people's movements. u.k. does not cover the whole of the country but the urban areas, these cameras are of extraordinary use both for safety and security. i think we would certainly, as a community, and as the ordinary citizens, say that the disadvantages of having so much surveillance is greatly

help it givesthe us to prevent and to bring people to court. killingnd, shooting and is something you have to do in order to stop an incident. technique in a democracy for preventing terrorism, and in the end, making it obvious to people that it does not pay, is by bringing people to court and convicting them. and for them, you had to have the perpetrators alive. themo, being able to track and bring them to court is important. i am quite certain the spanish police will be watching all the frontiers, all of the communications and they will put in an immense amount of energy into tracking down what appears to be the driver. i think with that kind of effort, they will probably succeed.

it is made much easier, of course, if you have networks, technologies you can turn on and look very carefully at what it reveals. also, it helps you in the process of establishing networks. someoneave your eye on who you have reason to believe is up to something which could be very damaging, the ability to see what they are doing in their movements is a very important aid. that the of the prices greater freedom has to give way in some ways to some of these precautions that we need to take. francine: polly neville jones, thank you so much. the former u.k. interior minister. stay with us. the economic advisor for the white house is not resigning.

but the speculation regarding his future is unsettling to the markets. speak about the outlook for the rate hike. this is bloomberg. ♪

francine: this is "bloomberg surveillance." the white house says dear a cohen -- says gary in his position as drafter of the national economic council. that came after u.s. stocks had their worst day in months. rob corker has called for radical changes at the white house saying the white house --

the president has not demonstrated the characteristics needed to serve in his job. al gore went further saying that donald trump should resign. let us bring in our global business representative, stephanie. and thank you to nigel for joining us. stephanie, what do we know about gary cohn? overderstand he was upset the comments of the president regarding charlottesville. he wouldeople assumed be considering his position, at the very least, given the president's comments. he was the point person for a lot of these corporate ceos, as that unfolded as well. as those two panels were disbanded. i think he was having many discussions with those ceos

about whether he should stay or go. the nerves we saw in the market yesterday reflect the fact that many view him as a moderating, stabilizing force in the white house and with him not at the helm, it will be very difficult to get some of the reforms through congress including infrastructure, tax reform, or even raising the debt ceiling or shutting down the white house and passing a budget. francine: what do we know about his relationship with other white house staffers? >> speculation mounted because of the interview steve bannon gave yesterday that highlighted his constant struggle with gary cohn and treasury secretary steve mnuchin. that heightened speculation and worries that the risk in the white house had reached a boiling point. many wondered if gary cohn was

going to remain and fight it out with steve bannon. -- we arenigel chart that shows us how the market reacted to the news that gary cohn may have left the white house. were you surprised by the big reaction we had yesterday? >> may be so because we are left wondering how many people will be left in the trump administration. it seems in a state of permanent turmoil at the moment. gary cohn leaving would be a big problem because he is seen as a force for stability. he is a credible next chairman for the federal reserve. his leaving would be a another bad sign for the administration that is already in turmoil. francine: if we do have tax reform or infrastructure issues, will stocks rally? >> i think they would.

i think it is true to say that since the presidential election, the markets have moved from a touation of wild optimism one of either realism or probably a little too much pessimism. there is a chance for some upside surprise now. francine: what are we expecting today? there is all a weak -- there is only speculation about what will happen with steve bannon. on for has been going months. as with everything in the white house, it is difficult to predict what will happen. there have been reports that the president was worried -- he was butidering firing them worried about the implications of doing so. and crossing the breitbart media platform and making enemies. does he by his time -- does he bide his time or is he under

pressure from people like gary isn who are saying that this unsustainable to have such divisions in the white house? is john kelly, who probably worried about the ongoing media speculation about what is going on. francine: thank you so much, stephanie baker. nigel jenkins will stay with us. inflation pick -- inflation patients. there is a hunt for the 2% inflation figure continuing. we will discuss that, next. this is bloomberg. ♪

♪ francine: this is "bloomberg surveillance." be patient. that is the message to the federal reserve from caps on. he thinks the inflation rate should rise before rate hiking. progressd like to see on the fed reaching its inflation target before we talk about another rate increase. it is not so much affected by debt rate as it is about the economic fundamentals. i have said that i think we should begin the process soon of letting our balance sheet begin to run off. francine: with that said, nigel jenkins is with us. when you look at the fmoc, it says the market was going one says no, theed

other way. can they do anything before they get 2% inflation? or is it enough to think that it will come through when the wage growth comes through? >> the fed is pretty perplexed on why inflation has been subdued. and why the tightening in the labor market has not put on more pressure. in our view, they can still move. they have moved three times since the presidential election. that is not a rapid pace, but a cautious pace. they can continue with that. in the end, rates are still only just above 1%. they are not tight. francine: what is the biggest policy mistake? going too soon or waiting too long? haselcome arguably the fed waited a long time already and the fed would say they have been

right to do so because there has been no sign of inflation at all. the problem is once you see the whites of the eyes of some modestly greater inflation pressure coming through, it might be too late to do anything about it and you may have to hike rates more later if you do not move right now. we think they will continue with a gradual pace of hiking but, to be honest, it is glacial by historic standards. francine: do you even look at the phillips curve anymore? some has not worked for time now and that is a global phenomena, not only in the u.s. we see the same thing in other labor markets that -- like the u.k. and germany. francine: there is way too much inflation in the u.k. is not coming through anything but the exchange rate. what we would be looking for our

signs of self-sustaining inflation that needs to come through the labor market. and in that piece, it is not showing up anywhere. the phillips curve looks entirely flat or not working at all. i do not think you repeal the laws of supply and demand in the end, if there is a limited supply of labor and a heavy demand for additional labor, that surely must put upwards pressure on wages. francine: let me bring you over to our chart, a snappy way to look at the balance sheets. is there an asset class you are most worried about? fed likely to be very careful in the way it unwinds its balance sheet, and announcing in advance that it is taking it in small, baby steps, we are not worried at all. the initial $10 billion or so a month it said would be the

maximum amount it would let rolloff -- if they let that happen for the course of a year, it would be less than a 3% reduction of their balance sheet. ofis not a big deal in terms the pace we have talked about so far. we do not think it will have a great effect. but it is a sign that the point of maximum accommodation has been reached. francine: we will look at negotiating positions that the u.k. government has published this week. we will also look at sterling. and the boe policy. what does it mean for the inflation outlook? brexit have our weekly show on what is next. this is bloomberg. ♪ ♪

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amazing speed, coverage and control. change the way you wifi. xfinity. the future of awesome. ♪ francine: welcome to our weekly brexit show live here from the bloomberg headquarters in london. we will get to the roundup of the brexit news this week.

we did have the big story overnight that five suspected terrorists were killed after the attack in barrett -- attack in barcelona. the travel and leisure stocks are leading the decline of the stoxx 600. spanish police say they have killed five suspected terrorists after a confrontation in a town south of barcelona. this was just hours after the rampage down the streets of las ramblas left urging people that. let us have a roundup of the brexit news. regain momentum by publishing its outlined plans. they sketched out future customs arrangement with the european union. they also want to avoid a physical border as part of any deal. it calls for flexibility and imagination to design a arrangements for the free

movement of goods and people across the border. u.k. is also said to be considering the free movement of who are there to study or work. the home office plan is set to be finalized in a few weeks. written risks further complications by producing these position papers for the talks. the government in london suggests every day of another proposal and this is not meaningful in my eyes. they need to overcome the main problems especially the freedoms of the european union. let us discuss it. >> u.k. is preparing to give further details of its approach

to brexit next week. the institute of economic affairs says a trade deal with the eu is desirable but not essential. it reckons that britain should walk away if bad terms are offered. global news 24 hours a day powered by our 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine: nigel jenkins is with us. what do you make of what we have learned so far about brexit negotiations? our brexit negotiations advanced where we have a u.k. position or is the cabinet still discussing amongst itself? slowly. going very we are five months into the two-year withdraw period and not much has happened. i think the pace needs to pick up. francine: what kind of brexit

will be u.k. want? >> in the end, the u.k. will want a pretty soft brexit. personally, i think it will be a deal,er to have no trade no ongoing or transitional arrangements that get to a different way of doing business with the rest of the world. lookingwhat we will be for. a lot of the talk of the so-called hard brexit from theresa may prior to the election was political posturing and not much more than that. awacine: what will the the -- what will the boe or the pound move on? >> i think it will be an ongoing judgment of what the impact of the brexit will be. anything the bank of england does on the state of the u.k. economy. brexit is ais that big and goal by the u.k.

population and it will slow growth. that the bank of england can stand on the sidelines for much longer than it otherwise would regardless of the inflation. francine: where do you see pound? >> the pound has recovered quite nicely admittedly against a relatively weak dollar. we do see the pound weakening from here, particularly against the dollar, but a little more against the euro as well. 120ound dollar gets back to where we could see new lows. the u.k. economy would be a disaster if the pound went to parity with the euro. francine: this is euro pound. we have two big banks calling for parity. can that touch parity? >> i think it is unlikely.

a lot of the negativity towards the u.k. economy is already priced in, and by an equal token, a lot of the positivity towards the eurozone with president macron, and a more stable situation in italy, a lot is already priced in. i think we could get to 95 and probably not parity. francine: when do think we could have a transition agreement on what the shape of the brexit will take? >> i don't think the markets will be very impatient. and we gone five months have very little to go on though there was an election that got in the way of any further progress. i think the markets will be patient as long as they feel that in the end, a reasonable kind of common sense, my's will be found between the u.k. and europe. both the sides have a lot to

lose if this is not a consensual, sensible agreement in the end. francine: thank you so much, nigel. as the u.k. government outlines its brexit positions, we speak to the head of the -- why he backs the proposal of a customs union. that is up next. this is bloomberg. ♪

♪ back to ourlcome weekly brexit show live from bloomberg's european headquarters in london. let us check in on the markets. narayana: european -- >> european equities extending the global slide we saw in the stocks.

drop of theiggest year, partly because of the paralysis in the u.s. exacerbated by the geopolitical risks including the attacks in spain. a second day of losses for the stoxx 600 is still on course for a meager weekly gain. headingdustry group lower they'll. health care stocks and financials underperforming. travel and leisure stocks underperforming but we are seeing broad-based losses. volatility elevated. spike, ishe blue coming up a little from yesterday but the volatility staying elevated on the b stocks. although the level of swings not were on there we north korea geopolitical risk. dollar-yen. 109.08. i got this chart from the blog

where it is argued that below 108, there is not much support. where will we see this go ahead? the politics of the u.s. is a big driver. dollar-yen is heading to a weekly loss. the 10 year treasury yield, 2% yesterday. something to note that it is slightly higher today. oil is on course for a third weekly loss for wti. i'm looking at the brent premium. the spread at its widest since october 2015. going hasat brent pulled back on wti. others say that a wti discount to brent will call for more u.s.

demand for crude. it is backing proposals from the u.k. government to seek a customs union with the eu. it is vital to ensuring an orderly brexit and allows businesses time to adjust. toning us now, i am pleased say is the ceo of the city. great to have you on the program. -- you responded to the paper. >> from our perspective, this is part of a wider look at what we need. our priorities have been that there has to be mutual access and as little friction as possible. we have argued for recognition for our industry. the government has put forward a

proposal that is in the same space. and the speech from the chancellor and the governor from the bank of england in june when they recognized the importance of transitional's in order to get to this mutually recognized space. francine: no deal is better than a bad deal. >> i don't think we have seen it having to do with punishment. there has been much more of a case that the european capitals we have been in in brussels and elsewhere, is focused on getting a solution with the minimum amount of difficulty. is the job of the politicians. it is in europe's best interests and the interests of the u.k. and that of the economy, that we get to a point to continue to do this business.

-- and and a transit transitional period will help us get there. we have been having an ongoing and positive dialogue with the treasury department. it gets the importance of this. you see that in the comments the chancellor made in his speech. our frustration is with the sequencing of the current talks. people want to deal things with the movement of people, the issues around the legal obligations around financial issues. that is understood. we understand the need for sequencing and a process. but we cannot wait until the end of the talks. people tell us there will be a transitional period at the end of the process. companies are being asked, pratly by the fca and the on how they will service customers.

you end up with a paradox. we may very well end up with a high access brexit deal. cannot cross their fingers and hope there will be a good deal. francine: do companies need to assume for the worst and hope for the best? company,ll-regulated and the companies in this industry are that, will need to make sure they conserve their customers with the minimum amount of disruption on day one after brexit. that is what you have to plan for. that is what companies are doing. francine: are they planning that already? >> they are putting in contingency plans. companyill depend on a to company basis. if you are a lawyer, and accountancy firm, or asset management, there will be different ways you will do this.

your customers need to know that when they pick up the phone or walk into your branch, they will get the same kind of service they will get on the day before brexit. francine: are they waiting until september or are two over to feel relief? >> people are making the plans they need to make. i do not say there is a sense of angst, but of hope. the frustration here is that if move, there is no indication of a transitional is unnecessary. and entirely avoidable outcome. there is the possibility that the eu and the u.k. can make a statement that there will be a transition period. , after the do summer, if the will is there, to

guarantee, much like any other free trade agreement, that there will be a transitional period which will allow companies to decelerate. you think they are waiting for september or october to see if they need to accelerate plans? is there a time frame? >> it will depend on the company. the point is, that what needs to be done tends to be with a long lead basis. if you are an insurance company, the approvals you need typically take 10-20 months. will need to move staff, recruit staff locally. these things take time. you cannot wait until the last moment, cross your fingers and hope for the best. you need to have your plans in place. lossese: how many job could come from having no transition area agreement --

transitionary agreement? accessalk about a high brexit. to a low access brexit, something like wto. took 75,000 jobs out of the u.k. ecosystem. outside of the u.k., but many go to new york. businessesrange of -- there is a range of businesses that stop happening. is 10%act on the sector of the financial services activity in u.k. francine: we have to talk about inflation. miles, thank you so much. you will stay with us. that is up next. this is bloomberg.

♪

♪ francine: welcome back to our weekly brexit show, live from bloomberg's european headquarters here in london.

, thank you so much for sticking around. we are talking about the transition agreement. to treasury and various people involved in this. are the brits prepared to negotiate? do they have a strong enough team to head to brussels? >> we have engagement with the and the ministry of justice. because of the nature of our industry, it cuts across government. what i would point to is also the role of the regulators. the fca and the pra are the world's leading regulators. are headsh regulators and shoulders above everyone else in terms of the preparation and the thinking being done. the think that conversations that those regulators are having across europe, and with the central banks, is helping the broader

european system. francine: what has surprised you the most? was there a certain speed that members and dissipated moving jobs? anticipateders moving jobs? >> what has impressed me the most is the way the industry has gotten its act together and identified the key concerns. what it needs for its customers and its staff and its employees. it has identified those issues and come to grips with them. it has provided proposals and looked at the problems and suggested solutions. it has done that with the government, the regulators, and on both sides of the channel. but, it is not finished. we are not complacent. francine: do you believe that some of the members still do not believe that breaks it will

happen? >> i don't think that at all. the membergations to state capitals in brussels and from time to time, you do hear questions like -- is this going to happen? at the moment, i no longer make predictions about politics anywhere but, it is difficult to see it not happen. there is also a sense of -- once you are out, won't you go down the singapore on thames route. that is simply not the understanding we have of how the u.k. industry is. this is not where we get the sense that the regulators are. obviously, if there is no deal, which is not the outcome anyone wants, industry and government and others will have to look at how we are competitive. francine: let me bring you to the bloomberg terminal.

a simple chart looking at inflation, the white line going up compared to two basic wage growth. two members tell you they are concerned about rising inflation and having to pay their workers more? >> one of the big challenges is seeing able to bring the best people to the industry. wages are a part of that. it is also access to skills in the u.k. and in terms of immigration. we have focused on mutual access to skills. that is not just being able to bring someone from a large bank headquarters in frankfurt to london or vice a versa. right now, someone can do that. has -- we do not have

anything concrete for the internationals living here either. >> it is not just the people already employed here, but we also want to continue to bring people into the u.k. if you look at the areas that the industry will grow in, those skills do not just exist in europe. in silicon valley, 40% of the startups there were started by people brought in from outside the u.s. sources ofgest internationals are india and china. francine: does the government understand that? we have made that point very strongly. we launched a report in june that looked at the industry after brexit. after -- one of the key things we stressed was the idea of

being able to bring in people with a variety of skills. and we have been talking to government -- francine: we don't actually know the position of the government. that is fair? and in anpushing them ongoing dialogue with government and we would like cap clarity from the european side. francine: thank you so much, miles for joining us. "bloomberg surveillance" continues in the next hour. i will be joined by scarlet fu. and we will bring you any update on barcelona after spanish police killed five suspected terrorists. 13 people are dead after that terrorist attack. ♪

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suspected terrorists after a attack in barcelona leaves 13 dead and 100 more injured. we have the latest. the white house insists its top economic adviser is not quitting. says the fed needs to wait for inflation before raising rates. good morning everyone. this is bloomberg surveillance. scarlet fu is joining us from new york. good morning scarlet. we had a pretty horrific attack in barcelona which will get to. looking at interest rates in the u.s. as well. trying to look for normalization and policy in the united states but the news keeps reminding us this is an extraordinary time. a stocks are trading -- futures 500 extendings&p the biggest decline in several weeks. straight tot's get the news. taylor: authorities now say

there is a connection between terror attacks. aresort town, five killed in attack. after 13ened hours before killed when a van ran them down in the los angeles area. three suspects -- in the last las area.s -- las ramb has been said to not have demonstrated characteristics he needs to do the job. that he hasn't shown the stability nor competence needed to be president. the president positive search for policy and the war for afghanistan is taking him to camp david.

there is a presidential retreat today to try to resolve the role inf the u.s.'s afghanistan. in london the u.k. will set forward a more detailed vision of brexit next week. people familiar, theresa may's government will layout positions in three areas that they want to negotiate with the eu. said the-- critics government has not presented a clear that your of what they want to the brexit talks. 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. >> it is time now for a data check. s&p 500 futures have turned lower. they were modestly higher this morning but we could see it extending its decline. losing 1.5%. treasuries have turned around as well.

you're looking at the difference between the 10-year and the two-year. we've seen the 10 year moving higher so that means lower yields so safe havens continuing to get bids. higherdollar, moving today it is set for the biggest weekly decline since march. francine, i needed to point out the ibex in madrid. thanks are leading the decline there and we are seeing resistance from the utilities. they are higher. in focus here with equities in the united states, lower, the vix moving up to 15. they got above 17 last week. we will see how it plays from your. francine: this is what i'm looking at scarlet. very similar to what you are looking at. european stocks after barcelona, making investors nervous plus the u.s. policy paralysis and the u.s.

i also want to show you travel and ledger stocks. they are leading declines. of moreas people worry terrorist attacks in europe meeting more people will go on holiday less. watch out for travel stocks. the parent company of ba is down significantly. let's get back to the situation in spain. police killed five suspected terrorists after a confrontation following the deadly barcelona attack. according to an intelligence group the islamic state has claimed responsibility. we are joined from a trade by a bloomberg reporter. us through what we know so far. there is still a manhunt going on for the traders of the attacks. >> there is a manhunt going on for the tribe or of the van that plowed into -- going on for the driver of the van that plowed into the crowd yesterday. they arrested two people connected yesterday and then in , they killed five

other people who they think are linked to the attack in some way. for otherlso looking individuals who may be part of a support network that helped set up the attacks. francine: what can you tell us about the mood on the ground? spain is no stranger to terrorist attacks. does this one feel different? >> i wouldn't go that far. spain has a history -- they know what it is like to live with terrorist attacks. ,hey had their own domestic homegrown terrorism group for many years which has dwindled fortunately. they also had the biggest by an al qaedas linked group in 2004. that said, it has been a while since the last attack. people know how to deal with this, how to react. obviously the mood is down. we have heard from senate

saying theter, country is in mourning and in solid area -- in solidarity with barcelona. what will the response from spanish officials be going forward today? will it be any other comments given? do we expect local officials to be standing with him to speak further? >> we definitely expect atalaning from the cut th government. they have a meeting today at 1 p.m. so something will happen there. they spoke this morning and that -- that proves the quality of their local police. this proves they have the right to be more police. what we can expect from the national government and the royal house is that there may be more comments in decisions on how to show support or strength on how they will react to

hunting the remaining individuals of those who participated. >> thank you so much, roderigo. joining us to discuss more on this main terrorist attacks is josh would. thishan, when you look at type of attack, we have seen similar ones. the recent atrocities in berlin, and stockholm. our authorities getting smarter about these attacks or is it impossible to predict? >> at a basic level this is precisely the type of attack, the soft target location which is difficult to defend against. ce attack last year and a berlin attack, a lot of energy and thinking is being put into how to protect public spaces and in london we have seen anti-vehicle barriers going up on bridges.

will be athat conversation that many european cities are having over the coming weeks and months about how to better protect with physical security those types of locations. we are hearing from angela merkel, the german chancellor saying she condemns these murderous attacks in barcelona. she is also saying terrorism will never defeat us and they will not let terrorists divert us from our way of life. it is believed that the u.k. will have to confront islamic terrorism for 20 years -- could it be longer? >> it certainly could be. one of the main dynamics is the as ahat islamic state transnational terrorist group has influenced a new generation of radical and ideological a new including

generation of homegrown extremists who did not grow up during the age of al qaeda inspired terrorism in the 1990's and early 2000's. persist,egree do they the islamic state, with online propaganda. here in europe, the degree to which foreign fighter population which is quite large for many year here in western countries countries, taken families were raised families and locations, if they start to return to western european countries or if they have returned already, do they also become sources of radicalization and domestic networks in the future? so it is likely to be a long-term problem. policet authorities and are investigating considerably in one of those areas, comments from chancellor merkel go to that, is around european solidarity and improving intelligence sharing to this

threat. >> that is a long-term but in the immediate term you have, a driver that is still at large. there is an active manhunt. we expect border closure? how does this work between spain and france? and the open borders in europe right now? announced anyot such measures yet that i am aware of. it was the case after the brussels attack last year that border crossings and international ports and the , had experienced increase screening and were closed in an effort to establish a cordon's. in berlin, the attacker fled berlin and managed to travel through several countries before being intercepted in italy, those borders present a difficult security challenge. that requires substantial

cooperation internationally and interagency. in this case within spain. seen a london has suffered a series of attacks. france as well. do we presume, unfortunately, that spain might be at risk in the next couple of days? >> it is possible. certainly the potential for a that the incident security services are taking seriously. a network that was involved in , theseries of incidents explosion and the attack in barcelona, the network is unknown so there is a heightened short-term immediate risk of further actions. it is very possible that the explosion brought forward attacks that had already been planned and there are further elements of that cell still at large which could attempt to carry out further attacks. >> thank you so much, jonathan

wood. coming up we keep the spotlight on spain. we will be talking with another guest, after another -- after police killed five suspected terrorists. after -- after hours you can see live pictures there a barcelona.

>> this is bloomberg surveillance. i'm taylor riggs. let's get the bloomberg business flash. private equity firm energy capital partners has agreed to buy calpine.

the price is $5.5 billion in cash. calpine is one of the few publicly listed generator still selling wholesale. donald trumpgns of us ally robert murdoch is rebuking the president. condemned comments after the charlottesville violence. that is the bloomberg business flash. >> be patient, that is the message to the federal reserve from robert kaplan. he says he wants inflation to rise before he even thinks about hiking. >> i would like to see more , particularly in the fed at reaching its inflation target before i consider another rate increase.

it is not so much affected by debt rates for government debt as it is about the economic fundamentals. i've said i believe we should begin the process soon of letting our balance sheet runoff. >> this wakes off janet yellen -- this waits for janet yellen next week. to discuss this, our next guest. s. marvin, let's kick off with you. what have we learned from the fed? they realized themselves to what the market was saying. >> there was a downgrade in the number of members who were clearly on the path toward rate hikes. they have many of them. it is the core of the committee, people like dudley, i will be interested to see what chair yellen says.

that they clear case should continue to slowly and carefully remove accommodations despite inflation being less than they expected. ity still of forecasts for to pick up in 2018 and 2019, they still have financial stability concerns which they highlighted. the economy is still running at above capacity. >> sonia, what does it mean for equities? will they continue going higher as long as the fed does nothing? >> i would be careful about a statement like this because if you look at the general context, then clearly yes, there was a global synchronized recovery and this would support equities across the board. if you look at the quarter ahead, the question is, can we see an acceleration in the momentum? we are a trend growth globally but can we see an acceleration from here? with current valuation levels, can we really expect a dramatic boost from here? i would be careful in seeing

that happening. francine: if the fed is going to remain patient and listen to robert kaplan and get the increases pushed off, marvin, what does that mean for the trajectory of the u.s. dollar. that the dollar will weaken further in 2017 and 2018? >> no i don't think that is likely. is a broad range trade environment and the dollar is near bottom at current levels. this does reflect to some extent the heart of your question. a misperception about the relative shifts in monetary policy that we are seeing. we are seen an increase in hawkishness and other central banks but we would leave that as them removing the insurance policies that they effectively put in earlier. if you think about where the fed was three years ago -- the only central bank that is really in a is the federale

reserve. that will continue to support the dollar even though it is a bit overvalued in the longer run. >> if the federal reserve pushes off on raising interest rates what does that mean for the european central bank, the oe as well in their efforts to move away from accommodative policies? >> to some extent, this is part and parcel your question about the dollar. currencies are relative prices not absolute prices. if the fed is backing away because of a lack of inflation, you should also expect other central banks as well, because they are further away from inflation targets. there is a case for them to take back some of the extraordinary policy. move away from qe and negative rates. but that is not about the significant rise in policy rates. >> we are speaking with marvin and sonja.

they are both sticking with us. coming up in the next hour, we will speak with jpmorgan head of commerce. from new york and london, this is bloomberg. ♪

scarlet: i'm scarlet fu in new

york with francine in london. headlines now. china will be restricting domestic companies from investing in sectors such as real estate, hotels, sports. this looks to be an expansion of other recent efforts to stop chinese investors from moving money abroad to slow that outflow of currency. we've seen a crackdown on deals on some of the biggest companies da group.including wan you wonder how much further this goes. francine: this is important in the context of trying to restrict outflows. we had a story a couple of months ago saying they stepped off to ensure that their prolific overseas investors including hna wouldn't put too much money abroad. -- when youck now , what doess, marvin,

it tell you about the chinese government efforts to curb outflows? >> this is part and parcel of what we have seen for the last few years. attempting to control currency not only through intervention but increasingly trying to control outflows from their own citizens. last year there was an effort to curtail personal outflows. people pass purchases of property abroad and then they saw a big surge in companies doing the same thing on volume in particular. these are now a set of steps that we have seen over the last four to six months. to help them control the exchange rate. >> is there any reason to think this effort might have more success than previous efforts? >> i would say their efforts have been successful so far. we've seen less intervention on their part. it is a bit like, sticking your dam, as soon as you

stick your finger and one, another one pops up. but they are doing that relatively successfully. sonja, quickly? >> what they are trying to do is restrict the areas where one could park money. trying to keep the money in the country, to address issues internally. >> thank you so much. both stay with us. this is your data check, a lot of things going on. treasuries, overall stocks, are extending after this terrorist attack in barcelona. they are concerned about policy paralysis in the u.s. this is bloomberg. ♪

scarlet: i'm scarlet fu, in for tom keene. he is on vacation, i think. francine: he needs it.

let's get to taylor. in spain, police killed five suspected terrorists wearing bomb belts following a second suspected terror attack. the suspects'car broke through a through a broke crowd. this happened after 13 people were killed in barcelona during an attack. 100 people were injured and three suspects have been arrested and one is still being sought. the islamic state claiming responsibility. the u.s. and south korea begin their regular wargames next week. emerged as ahave key obstacle against north korea. warning that they could lead to an accidental war. there are talks of halting the exercises. u.s. has refused. officers on a navy ship that collided in japan,

being relieved of duty. seven crew members were killed in that accident which almost sunk the ship. president trump's search for policy and the war in afghanistan is taking him to camp david. he is assembled his team to a presidential retreat today trying to resolve the debate over the role in the future in afghanistan. u.s. troops have been fighting there for 16 years. china will restrict domestic companies from investing in sectors such as real estate, hotels, entertainment, and sports. to an overseasng investment report posted on the government's website. global news 24 hours a day, powered by more than 2600 journalists and analysts. i'm taylor riggs, this is bloomberg. you so much. five weeks of campaigning stand

between angela merkel and her opponent. she holds a 15 point lead between her challenger. defended her open borders refugee policy last night. this morning she opened up in berlin so let's get straight to matt miller who joins us from berlin. matt, first of all, run us through the main election campaign sticky points. what is immigration but also the divide on the economic cap between rich and poor. >> immigration was much bigger two years ago. last night at a rally, angela , more was -- booed than she has been in the last weeks. here, isight party -- there is a chart

here showing the polling results, that is a vocal 10%. and will go to the booths cast their votes. thatdu and the cds you, merkel is running, towers above everyone else. part of theiggest ftd still get 16 points left than she does. of has very little chance letting this immigration issue derail her candidacy. >> how many people are undecided and what will sway them? >> there is a large group of germans undecided. 40% to 50% according to focus magazine. the question is why are they undecided? is it because they cannot choose ?etween merkel and schulz

or is it because they are happy with both of them and they may not come to the voting booths? some see this as a done deal for angela merkel. some people don't see the difference. there is not a huge difference to be heard in the campaigns. the one issue that separates them is the inequality issue. germany does very well as a whole. the economy is strong. if you look at the medium income, it is lower than the median income in countries like rants or the u.k. in germany person isn't making as much as you would think if you look at the numbers on hole. whole looknations on better. stocks have recovered nicely this year. we have seen the european economy grow as well. to what extent are the old bugaboo issues coming up in this election? >> they won't come up in this

election at all at least from the two major candidates. they are both so pro-europe. angela merkel has built her legacy on european unity and her main challenger, martin schulz was the president of the european parliament. they will both be very pro-europe. this is one of the issues. voters cannot see the difference. if you are a pro-european voter you will go with one of these two parties. together they get 65% of the vote. pro-europeanll be as an sdc voter. since they are both theeurope that means alliance between germany and france will be prominent as well.

ratingsthat macron's are coming down a bit, is that hurting either candidate? >> i think those reports are really telling about what is going on inside france itself. on a pan-european scene or the global scene, is still an absolute superstar. he is seen as a success both politically and economically and i think anyone in europe, anyone in the g20 with the exception of donald trump, wants to be seen as connected. if you go to a g20 or g7 meeting -- they wantpeople to be seen as connected to him. those poll numbers are not an ever asian, they are more of a domestic thing for france. -- those poll numbers aberration, they are

more of a domestic thing for france. >> matt, thank you. ja annaet back to son martin, -- and martin. is there a danger that they are underestimating? >> i think germany is a special situation. had eight years of a grand coalition. the two parties have been in power for such a long time and what is clear now, it is a bit of a difficult to differentiate between the two. we only have one populist party and given that germany is a multiparty system anyway, you have less of a bipolar decision-making process. as we had in france where you had step one and you eliminate

candidates and it is eventually race between two. in germany it is different. being german, i would imagine that the market is not too complacent. martin, -- this is a i will putn blue, that out on social media for our radio listeners, but you have the euro dollars, bonds, the difference. you can see the diversions widening. >> this is one thing we are highlighting earlier, we do think that while the dollar is in a range trading environment, we are at the bottom of this .ange in terms of this chart, the top of the euro range. it is deviated from fundamentals. including interest rate differentials. to the are lira point, i would say that if anything, those differentials understate the

case. people are underestimating the fed and overestimating the ecb. >> marvin, i want to fold the ecb back in here. in your june 22 report you had mentioned that european political risk has eased off. nonetheless with this german election campaign going on, does the ecb hold off until after that election until it decides to give indication of what it is to do next? >> no. i don't think there is a need for them to do so. they have telegraphed a very well what their path is going to be. what we should expect in september, they will start to pull back forward guidance further. actual us for the tapering of purchases which began last year. that has been so well telegraphed, you wouldn't want to interrupt that. especially when, to some of

these points exactly. we don't expect anything significant. any chances of disruption are nil. >> thank you so much. coming up, we bring the spotlight on spain. in the meantime, this is what we know. there is a manhunt ongoing. spanish police killed five suspected terrorists after a confrontation in, south of barcelona. ramblass after las incident left 13 people dead. there was a nearby incident in the town of cambrils. we are monitoring police feeds and news conferences that they would get to assess the situation. this is bloomberg. ♪

>> good morning everyone. this is bloomberg surveillance. scarlet fu is in new york. scarlet, good to have you. the u.k. try to gain momentum in the brexit talks. the prime minister, theresa may's team sketched out a vision for future customs arrangement with the european union. they are saying they want to avoid a physical border and checks with ireland. it calls for flexibility and imagination, to preserve free movement of people and goods across the border. let's get back with our guests. pound, when you look at and the impact on equities, what are you most worried about?

that it will be volatile or the pound is on a john -- is on a downward trajectory? >> i don't think it is on a downward trajectory. i worry about the risk we face that any deal that is negotiated that goes back to parliament before the negotiating window ends. if you have a minority government you are not in a credible position to promise you will pass it. that is the disaster scenario. that you exit with no deal. >> when you look at equities in the u.k., everything has to do with a level of pound and inflation and wage growth. how do you see it panning out? >> we've seen the big adjustment happening and the first divergence. beneficiaries over weaker sterling and more focus on the domestic economy. that is been morphed towards ,ocusing on fundamentals

inflation leading to weaker and consumer related data. that is a followthrough process. now it is a bit of a vacuum because in the ongoing negotiations the market can't pinpoint where we are heading. i would agree we have seen the biggest adjustment and currency. from that point of view that is not a clear focus point. it is unfortunately about individual companies and how they see their own business trajectory. use thereign investors state of brexit negotiations as a proxy for sentiments on u.k. equities? does that dictate inflows to any extent? >> of course. if you're watching from the outside, this spectacle that is unfolding -- there is a clear division in the u.k. market between those that are currency sensitive and those that are focused on domestic economy. tos is what i tried

highlight, until now, foreign investors have played the weaker sterling in the u.k. market and now what is obviously materializing is the economy is slowly trending downwards. mark is a big question about u.k. stock value, ongoing headwinds, what that would mean for the economy or whether they are too cheap. if you are an international investor i am sure it is worth engaging. this model of negotiations going forth, i would expect there is a lot of noise on the way until we have clarity and i wouldn't surprised if there is a bit of a step back from investors to say, i don't know. to investse who have in u.k. equities, which sector provides the most value? currentocus is on the earnings season and the overall fundamental data. we're still looking at a pretty

--ent global synchronized they are well-positioned to catch that part of the equation. there are no clear focus points and it depends on the fund you are running in the area you're looking at of the market. >> marvin, are you expecting parity with the euro? risk that if mentioned, that is what i think is holding back sterling. recall, before the election we were extremely positive on sterling. we thought it had overshot. now it is hard for it to come back if you know there is a risk of this the nasser -- disaster scenario in 14 months. that is what would get you to parity in my view. you can see parity in cable. i know it is not your call.

that is quite an image. and we you stay with us will talk more about what it would take to have parity in cable. in the meantime, we hope you are watching us using tv . you loaded up using terminal screens and look at the really cool charts and analysis that scarlet fu is providing and then you click under the video screen and you can ask a question directly. this is bloomberg. ♪

>> this is bloomberg surveillance. i'm taylor riggs. it's get the bloomberg business flash. blackstone group is betting the demands for pipeline infrastructure will rise despite sluggish prices. bought,fund advisors is terms of the deal were not disclosed. toshiba's attempt and legal this view -- legal dispute have come to a halt. u.s. partner, western digital, is objecting to the sale and the two sides have not been able to break the impasse. toshiba needs it to shore up its balance sheets.

largestnavy chain, the apparel retailer in the u.s. said earnings beat estimates. the ceo has been investing in technology and more trendy styles. that is your bloomberg business flash. >> thank you so much, taylor. we need to talk -- if you look at dollar swissie, it is trading session lows. it may mean there is a technical level you could buy into it. terrorist attacks in barcelona this morning. this plane chart looking at suisse. we are here with our guests. when you look at them, marvin,

this is the haven assets that is not a haven anymore. internal political machinations as well. >> it is not only that but you have negative rates. a lot of people don't want to touch it after the fiasco from 2015. you've seen volumes drop off in suisse after that event. what is interesting here is we saw the negative rate policy start to play through here. they were one of the only central banks that said no, we will not play a part in this global hiking business. because they have a massively overvalued currency that is starting to flow through. >> this is my chart that i was -yening which is suisse looking at moving averages. do you like stocks at the moment? or do they look expensive? -- what youe about

find when you look at their market, you have a few of the pharma and other industries which would be classified as havens if you feel that the market is at a precarious crossing point. you might see those coming back a bit. post the fiasco, they are come back to more stable sideways trends than before. it is more about the companies than the currency at this point. >> i want to stay on this theme of havens. , tourope and outside europe asia and the united states, what are the most overrated havens and the most underappreciated out there? >> it is a very difficult one. i think you have to be careful to generalize. until the second half of 2016 where he had a massive rotation out of the

havens, to staples, tobacco, pharma, we had individual themes developing. they are on and off in terms of drug pricing. it is difficult to generalize. it is much more of a stockpicking environment. in this context about trend growth and below target inflation, this is a fragile set up. investors have to be nimble and identifying where there is potentially many cycles or other momentum and identify where there are still a few havens out there where to hide. >> marvin, the most underappreciated haven? >> the yen. suisse-yen.chart on

suisse is not as good a haven as patsst.in the yen is very persistent. >> thank you to our guests. the next hour, bloomberg surveillance, francine and i will be speaking with jim glassman. from new york and london, this is bloomberg. ♪

♪ >> spanish police killed a five suspected terrorists.

-- do germanttack, voters think angela merkel can keep the country safe? barcelona is holding a moment of silence to honor the victims of the terror attack.

>> that was a minute of silence held in memory of the victims that many have been laying flowers and candles for. that was barcelona, the prime

minister together with the king of spain, gathering in the plaza, then of course, we have many people gathering at the sites in barcelona to pay tributes to the victims. becauseork continues the police are searching for the driver of the van. the driver still at large so there is an active manhunt taking place. we heard from angela merkel early on. the first victims were named. >> let's get the first word news with taylor riggs. taylor: starting with other news, politics in the u.s. top republicans say that donald trump has not demonstrated charis dix for the job. for the job.stics he is not instilled confidence to be successful.

president trump's search for policy in the war for afghanistan is taking him to camp david. the president has summoned his defense team to a presidential retreat. to try to resolve the debate over the future of the u.s.'s role in afghanistan where america has been fighting for 16 years. a more detailed vision of brexit next week. plans, theresae may's government will layout positions in at least three areas that it wants to negotiate with the eu. critics have said the government has not presented a clear view of what it wants from the talks. domesticl restrict companies from investing in sectors such as real estate, hotels, entertainment, and sports. that is according to a state council guideline on overseas investments posted on the government pass websites. they will also ban overseas investments in the gambling business.

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. >> taylor, it is time now for a data check. let us take a look at s&p futures. they are changed. we have been all over the place. two-10 spreads coming in -- we are looking at the biggest weekly decline since march. oil is static. ibexing of barcelona, the is following more european markets. banks are leading the decline. off by more than 1% almost. i should say declining -- we have seen an overall increase in the last day. one thing i wanted to highlight was zinc. it is near a 10 year high as inventories run low. this is very interesting. the movement has been fascinating. >> i think that trend has been

pushing up. yesterday it was at the highest in 10 years. move on riske is a off because of the terrorist attack in barcelona. unease in the markets about what this means for future policy response. but also policy paralysis in the u.s., concern over the this functioning white house. traveln stocks down and and leisure stocks in europe declining the most. let's get back to the situation in spain. the prime minister just let a moment of silence after the attack yesterday. angela merkel condemned the attack but do voters think she is tough enough on terror? joining us now, alan, it was a , it hadvent similarities with recent

atrocities in berlin, london, and stockholm. what does this mean for europe and how they tackle terrorism? >> first of all, immediately capital securities are top of the agenda once more. it also refocuses the politicians mines on issues such on immigration. it is something we are seeing in germany. >> for the moment we don't know who the perpetrators are. is there a danger that citizens confuse everything? confusion over immigration and refugee concerns with these attacks? >> certainly. it feeds into a certain narrative that we see in europe and other parts of the world to conflate the two issues. , thew a earlier this year elections in the netherlands and france -- of course it was a big

issue with anti-islam or anti-immigration parties that were scoring very highly. they were ultimately defeated but in germany for example yesterday, we saw the chancellor heckled by anti-immigration protesters on the campaign trail. that hasingering sore yet to be treated in europe. >> it certainly is. i wonder alan, which european leader is seen as strongest on security? because of angela merkel's previous stance on open borders she may not be the first one. who would you look to to take the lead in discussing security issues across the eurozone? >> that is a very good question. angelathe leaders -- merkel for open-door refugee policy. she is criticized domestically and internationally, not least by donald trump on that issue. italy has its problems.

it has its focus on refugees. the u.k. with brexit is completely focused on that issue. i guess you could look to the new french president who was largely untested. but perhaps that is a good thing. france has been such a focus of terrorist attacks -- it is number one in his basket. >> perhaps because he starts with a blank slate. how much improvement have you seen in the cooperation of these european states when it comes to the sharing of intelligence? >> that was something that was a focus of an eu meeting at the beginning of last year. on the back of the attacks in france. they have been trying to make inroads. they still have a long way to go. >> we heard last week from a former head of mi five saying he believes britain will have to confront this terrorism for 20

years at least. our politicians across europe saying the same -- are politicians across europe saying the same? the commission found an anti-radicalization unit and it was making the point that because all of these young people went from european countries to fight with islamic state in syria and iraq, then these people are due to come back and that poses a large threat. >> allen, thank you so much. in berlin. associate joins us now over the phone. why are we seeing more and more of these attacks? that the islamic state is coming under more and more military pressure. syriame base in iraq and -- they are expected to resort

more to traditional terrorist tactics. as opposed to military tactics as it is forced to retreat in the face of the advances made by the iraqi army in particular. >> spain is no stranger to this type of attack, not from islamic terrorists but from a different kind. how can they thwart any future danger? unfortunately they have a long history of political terrorism. it is tempting to look at this 2004rough the lens of the al qaeda bombings in madrid. the circumstances today are quite different. at the time the attack was widely credited with leading to the prime minister ending his term. it was largely due at the time

-- it was tried to put the blame on nationalists rather than al qaeda. attempt to shift responsibility from the government's petition with the in 2003.iraq invasion lessission itself is much lower profile and less contentious than the iraq invasion 15 years back. in terms of what the government could do going forward, the options are limited. accustomed to these type of attacks unfortunately. counterterrorism resources are stretched already. the amount of manpower that is required to keep surveillance on the large number of individuals that seem to be a threat is quite often too much for spain to handle. >> a lot of people might presume

that they would be under threat of another attack. , is there aou stand difference between islamic andte -- the islamic state nice, and the way this current one seems to be? >> the differences scale. ,e have seen lone wolf attacks they can be quite deadly. using fundamental means. if there is a more extensive organization behind the attack, like this case, everything suggested it could have been worse in terms of explosives -- the impact could be more devastating. >> thank you so much, federico. these live pictures of barcelona. this is where we saw king -- the

king of spain together with the prime minister 10 minutes ago with that moment of silence honoring the victims of last night's attack did spanish police killed five suspected confrontationer a hours after a van rampaged down avenue leaving 13 people dead. this is bloomberg. ♪

>> this is bloomberg surveillance. i'm taylor riggs. let's get the bloomberg business flash. energy capital partners has agreed to buy calpine. the price is $5.5 billion in cash. with debt, the deal is valued at more than $17 billion.

they are still selling supplies directly to wholesale markets. there is been a shake off. the ceo has resigned after company founders. they had been criticized for acquisitions and executive pay. they've been going through a difficult transition. that is the business flash. >> i will pick it up. be patient, that is the message to the federal reserve from robert kaplan. he says he wants inflation to rise before he thinks about hiking. draghiellen and mario speak in jackson hole next week . jim, we had these comments from robert kaplan. we assess over every comment.

fluxolicy that much in that we do not know which way it could turn? what the idea is. with the economy doing well and unemployment low, inflation is not where they wanted. it is not a surprise they want to be patient. the problem is, policy rates and interest rates are artificially low. the economy has gotten back on its feet. history tells you the problem is, once we get back on our feet , we veer off the road again. one of the reasons, we get policy rates at the not the right level. the president of the federal reserve bank of austin has made the case, when you have an economy like this it is better to get policy rates back to normal so we don't cause problems that we may not be aware of today. that thereurprising

are mixed views at the fed and some want to be patient. inflation is the ultimate goal of the central bank. you have to use judgment to figure out what it will look like a year from now. with the economy in the shape that it is in, logic tells you you should probably try to get interest rates back to normal. >> with the fed, where it tonds, is it it's priority prepare for the next downturn? >> i think it is to sustain where we are and hold the high ground. there is good reason to believe that we will hold high ground. history books tell you, the things that cause problems are inflationary buildups or financial excesses. there is nothing very obvious around us to make you think you should be preparing for a new downturn. one of the things that could cause problem, if we keep interest rates artificially low for too long. you could argue, there is no

compelling reason for them to raise interest rates when inflation rates are low but the real logic is, make sure you do not cause problems a year from now. it may look different. if, you delayt too much, a crisis comes and you do not have the tools to deal with it? >> that is an issue but honestly i do not worry much about it. in the developed economies. people have sufficient tools with asset purchases. the problem is that is controversial politically. the best way to assure that we is to have new problems make sure we have policy rates at the right level that you would focus on keeping the economy on high ground. that is the best thing you can do. to raise interest rates so you have room to cut, that makes no sense to anyone in the central banking community. the best course for them is to

do what you think is appropriate for an economy. that is back on its feet. even if you have not seen inflation moving as you would think, there is time to adjust policy if it doesn't play out. your view about inflation should be based more on logic and the idea of what is going on. inflation readings are all over the map. >> they have been. keeping the economy at a high ground. i like that as a theme. sticking with us here, coming up later, china is cracking down. the country at limiting overseas investment in real estate and hotels. this is bloomberg. ♪

.> i'm scarlet fu breaking news. a takeover offer is going forward. successful so far as elliott management has signaled its onlingness fpr for the bid stada. it has come back a bit but we will continue to monitor stada shares. we are with jim here. this one is right up your alley. this has to do with unemployment, the job market, and wages. not leading to a meaningful pickup and wages whether you are looking at earnings -- the blue

line, the employment cost index, rising slowly, the white line, not enough to lift wages significantly. which is the more trustworthy? >> the employment content indexes the most comprehensive because it catches the bonuses and things like that. even that doesn't include incentive-based compensation. the real picture might be a little better than the employment cost index tells you. the big surprise here is, why are we not seen more of a pickup when unemployment is down? part of the reason is the official unemployment rate doesn't tell you the whole story. third and pockets of unemployment. 45-year-olds, people who dropped out of the job market and went back to school. in the recession there were 3 million young people who vanished. they went to school and now they are coming back in.

the you try to figure out picture, it is higher. wages and labor compensation is rising 2.5% annually. guess what inflation is 1.5% so real wages are doing better than they were. >> there is the question of how you measure this data as well. jim glassman is with us today of jpmorgan, we want to make sure we get you a check of european stocks and how they are trading. the ibex down 1%. one of the worst performers in europe. the vix currently at 15. from new york, this is bloomberg. ♪ francine: these are pictures of

watch -- washington dc. it looks like it's going to be a

beautiful day. the news.to police killed five terrorists with bomb belts. the suspects car drove through a check point and started running down pedestrians. that happened of 13 people were killed when a ramik red him down in barcelona. at least 100 people were injured. three suspects have been arrested. u.s. and south korea began regular wargames next week. can negotiations with north korea? there could he and accidental war. halt has called on u.s. to actions. refused to the

senior enlisted sailor on the uss fitzgerald is being relieved of duty. seven crew members were killed. the president search rate policy in afghanistan is taking him to camp david. he helped some in his foreign-policy team today. they will resolve the debate over the role in afghanistan, where american troops have been for 16 years. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. i am taylor riggs. scarlet: the foreign relations committee chairman became the first gop senator to directly question president trump's competence. he told reporters the present has not been able to demonstrate stability for competency needs to be successful.

we need him to be successful. joining us is kevin cirilli. that is some pretty damning words. what i am surprised by is the president has not responded on twitter. is the most damning words we've heard from a republican lawmaker. this is not attacking his ideology, but his confidence. that's a major development coming from one of the most high profile republican lawmakers. senator bob corker was room at one point to be on the shortlist for vice president. he is the chairman of the senate foreign relations committee. all of this is very much intertwined with how the president carries out his global geopolitical agenda. this comes in several prominent republicans including john mccain, mitt romney of all

lambasted the president over what they see is putting it mildly a completely tone deaf, un-american response to charlottesville. scarlet: is there backstory here to what happened with the president and bob corker? you said he was once a vice presidential candidate. if did they have a falling out? kevin: this is all about charlottesville. bob corker is very much well-respected on capitol hill. people like orrin hatch have spoken out. just in the last 24 hours, i is ok with several senior aides of republican officials, they are scratching their heads and confused at what the resident has done in the white house is trying to shift the focus onto a debate about statues. chuck schumer said don't take that political date.

keep this focused on the response to charlottesville. this is not going away. heading into the weekend, there are several other rallies planned by white supremacist. this country has not heard from the president. francine: how much does this hurt the president? these are top republicans slamming donald trump. will more republicans to the same western mark -- same western mark -- same? heard anyhave not calls percent your. republicans have been very critical and it's very unusual. ceos were you the sending a clear message. mike pence will be with the president later in the next

,ouple of days at camp david the nation is holding its breath in a. you have more rallies in the next couple of days. that is where the american consciousness doesn't transcend political ideology. that's where people are holding their breath. francine: how real is the fight with them the white house between gary cohn and steve shannon it? in put in doubt after rumors he may have thought about resigning. secretary treasury and gary cohn are going nowhere. at least as far as that actuation goes. there is an ideological difference between steve bannon and gary cohn. right now, the frustration is palpable inside the white house.

whatever you want to make of it, call it what you want regarding charlottesville, that is the focus right now, how is this going to play out in the united states over these next couple of days when you have hate groups that feel empowered as a result of the messaging coming from the president on charlottesville. scarlet: thank you for setting the stage for us. we want to pick up on this conversation and bring in someone from the workings institution. we heard how ceos of abandoned president trump. have corker also turning his back on the president. which is more damaging? loss of senator corker

is more damaging to the president during a the jobs council was in a way windowdressing. he was getting advice from these ceos, but they did not play a former role. senator corker has your ship on in --ay of issues are issues. scarlet: whether it's through my mike pencengress, -- or congress, though he be working with the president western mark -- president? john: in order to get through this president, you have to find whatever channel is possible. alienated thate direct relationship with the president himself, it creates a challenging situation.

it's a maze and it's like working with the child in order to get through to the leader of the free world. francine: who boards the president at the moment? he has been under attack by many sides and john: even if you have white house aide behind in registering their displeasure with the president supporting nazis, they still remain on his staff. he see a lot of staffers were still there. problem is losing the support in congress. you have some important leaders like senator graham and others standing up and suggesting there really is a problem in the oval office, and it can't be overlooked. president see the

this as a problem? john: he has a multitude of problems. fixedot there this can be there are communications issues. affectre all things that presidencies from term to term. the challenges, he never it's a mistake, never looks to correct, alienates himself more from the people who can help them through this. it's unclear if he has the capacity to ask the problems. scarlet: great perspective. thank you for joining us from washington and with us here on set, i like the way francine asked that. does he see this as a problem with. could this hurt the economy?

expecting a tax overhaul. good to be a ripple effect? storys is an important and lead a strong message about is theyigger issue worry it will be fragmenting the party even more. what we have seen from the health care debate is there are many different is in the republican harding greater i think you saw the market react yesterday, the fear is the problems in the white house are creating more fractures in the party. in general, these things tend to not hurt the economy. that is a lot of good congress can do. thank you so much for

now. next, beijing cracks down on overseas business is pretty this is bloomberg and ♪

taylor: let's get to the business flash. the demand for pipelines will rise. a energybuying investor. terms of the deal were not is closed. private equity partner is being targeted. in the takeover, is a

significant step which will or it to go through the that is your bloomberg business flash rate of francine: china will restrict domestic update from investing in real estate, hotels, entertainment. that was posted today. it's good to have you on the show. what does this mean? scent nerves out there. this is china killing big companies they can go on a shopping the abroad. >> good evening. this is the government making it clear what most people already know, there are certain types of investment overseas which are ok

and certain types which are not. categories.e we have overseas investments like gambling. we have restricted, things are not core to where china wants to go like hotels and clubs. that is very much strategic. francine: wire regulators doing this? are they worried about outflows? would it weaken the currency or create too much debt western mark jeff: it's all of those things. had capitale outflows from china. that is something we government has put a strong clamp on. money is going to flow out,

it needs to be for a good reason. the government says there are good reasons to send money abroad. put alle just going to clubs, we would rather money stay-at-home. is a desire to tie everything to the party conference the fall. is this a temporary measure? jeff: this would be fitting with the kind of economy the president seems to be creating or china. that is one that is very much under the banner of nationals dirty. everyone is on the same team playing together. company,ave a private

but you need to be moving in the same direction. that would suggest this is something that endures beyond the party congress. thank you so much for putting perspective on this important story. we are back with jim glassman. you just heard the boards. these chinese companies will be making acquisitions overseas. what does that mean for the economy? jim: there is a lot of control over how they are developing. people thought china is running into trouble. we forget they have a lot of control over this. if you are in california, you are dealing with us. i think that's a good thing. it brings order to a very complicated story. if this helps china manage their

way to more development, that's fine. i don't think this affects us as much in -- much. i don't think it's a bad story for the u.s. francine: you worry there is something ugly in china that we are not pricing in and it will come out after the congress and a couple of months? true, when you's were growing 9% and you're living standard is 10% of the u.s. or europe, there are going to be a lot of and happening area people talk about dark cities, if you are managing a development story, you've got to bring people from the farms into the urban areas. there are a lot of things going on that look like instability. the reminder we have had over the last several years, the

government has a lot of resources and ability to manage this. i personally don't worry about it. the future is more promising because of what is going on in china. scarlet: we are talking about reduced m&a in china. we have some news at home. they have struck a deal to buy a power generator. the prices $5.6 billion cash. investors will get $15.25 per share as part of the deal. as we look at these headlines, companies in the united states are still engaged in m&a. is there a reason to be afraid of prices being too frothy? jim: the question is always where we going. these prices look high relative

to reality. if we are going to hold high ground and continue to grow the next five years, that would be unprecedented, most recoveries don't last six years, i think it makes sense. it's about what the future looks like. there is a lot going on in the world. there is a lot of opportunity. with inflation low and banks supporting, there is no reason to be worried that something is out of line. somethingt reality is that matters to investors. francine: we are just getting some breaking news. than in.er, lower we see some sales down 4% over the remainder of the year.

scarlet will be leaving for radio. we see a little bit of pressure across the board. we are seeing a little bit of a response in gold and the end. this is bloomberg. ♪

francine: coming up shortly on bloomberg daybreak with david westin. good morning to you. david: good morning. we're going to have mohamed el-erian with us today. we have so much turmoil. we have to ask ourselves, is this a passing storm. who better than a wise person to give us respect. that is an important guest today. francine: thank you so much. that is david westin. u.k. tries to regain momentum in the brexit talks. let's get to our london euro chief. what did we learn this week?

we will have to wait and see how it's received. wantedearned what they to look like. ofy want free movement people and goods across the border. we learned about the transitional arrangement. week, wehead to next will cover more position papers. some will be secrets about what the ritz of learned about the eu and how that information remains secure once they leave. the week after than we had the neck round of. will negotiations start of the 29th western mark -- 29th? there is a holiday in the u.k. on the 28th. it looks like that will be respected. -- big question is if it progress will be made. they can decide to move on to

the next phase. a report saying no deal with the eu would he a disaster area that theyhave said is want a transitional agreement. they want to transition into something you -- something. francine: this is what we see across the board. selloff little bit of a on asset classes. gold and the yen are gaining. this is bloomberg. ♪

jonathan: global starts drop. five terrorists are killed by police after 20 attack in spain. islamic state has declared responsibility. republicans in the president look divided. from new york city, good morning good morning. this is bloomberg daybreak. alix steel is on assignment. futures are stable. at 11749.s firmer treasuries are pretty stable today. david: now let's get enough weight on what's making headlines. let's turn to emma chandra. spain, the connection between the two terror attacks. five suspe