>> president trump pledges an open-ended commitment in about turn from his campaign rhetoric. ireland's prime minister tells us he is confused and puzzled about britain's plans. the world's top miner finally caves in to months of pressure. this is "bloomberg surveillance" and i'm francine lacqua in london. there is a lot to get through and we need to bring you be data and stories. the region wealth fund -- the

norwegian wealth fund says it has returned from 2.6% in the second quarter. they must have had a big position. if you are looking at the way that the norwegian wealth fund is structured, they have a you look at when stocks, and then they have bonds. the real estate holding returns them 1.2%. they face many challenges. that is something we need to keep an eye on. let's get on to the rescue of your data check in. this is what i am seeing overall. the markets are on a little bit of a rebound, especially for stocks. it is august 22. european stocks are joining the rally across most of asian equities, following three days of losses. trading volumes, once again

depressed. even withreating, ray dalio saying he has reduced risk. reporter: the command review u.s. forces are confident in the ability to destroy north korean missiles. pyongyang threatened the united states with merciless revenge for carrying out annual military drills with south korea. steve mnuchin says president trump could keep the tax breaks for military, while eliminating it for others. trump highlighted it to during his election campaign, labeling some hedge fund managers as paper pushers getting away with murder. the u.k. government will publish its third position paper in two days on how it sees its future

relationship with the european union. the latest details focus on civil judicial operation. meanwhile, ireland's prime ministers as britain seems to be suggesting it wants all the advantages of being in the eu, but none of the responsibilities and costs. >> where we are confused and is, what trade agreement does the united kingdom want with the european union? at the moment, they have the best trade deal possible and imaginable, which is a customs union and access to the single market. reporter: and a total solar eclipse has wowed large parts of the united states. cast over the and swept the country from oregon to have carolina. millions of people watched the totality, and event that has not happened in the continental u.s. since 1979.

global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. i'm nejra cehic. this is bloomberg. francine: president trump has announced an open-ended commitment to afghanistan that will put more american troops into the nation's longest lasting conflict, and he pledged to keep u.s. forces there as long as it takes to bring about a foot ago settlement with the taliban. donald trump: america will work with the afghan government as long as we see determination and progress. however, our commitment is not unlimited. and our support is not a blank check. during the election campaign, he grudgingly big knowledge the need for the u.s. presence there, and promised to avoid military entitlements to focus resources at home. let's get more now with our u.s.

congress reporter, kathleen hunter. also joining us is patrick armstrong, who will stay with us for the hour. let's start with you. what was the press conference like yesterday? what does it mean for the gop? >> this is certainly a potential rallying point for republicans, who have been really divided over, you know, trump's response to the charlottesville incident. i think that we saw paul ryan doing a townhall after the president's remarks. the applauded the president. there has been a lot of widespread calling on the republicans. is definitely, when it comes to establishment republicans and republicans in congress, this is potentially a rallying point, but the interesting factor to watch is from the breitbarts of the world, the more conservative wing of the party that tends to

be more isolationist which was happy with donald trump's "america first," "we won't be doing nationbuilding," they were happy with that rhetoric during his inaugural speech. this is a dramatic departure from the. i think that will spark backlash we are already seeing from that faction of the party. francine: you mentioned paul ryan, the house speaker. speaking during a cnn townhall event, ryan said the president should have handled the charlottesville incident differently. >> he messed up on tuesday. he was right on monday and he was right about one hour ago. >> when he was reading from a prompter? francine: does the president need to apologize, loror is he more on track? >> the odds of the president apologized are probably pretty slim. we are seeing an effort my the

white house to change the conversation to make it more about foreign policy, the president, and other domestic issues. the president will be going to arizona and talking about immigration down there. that is another potential issue where we could see him trying to rally support among the republicans, where that support has been lacking since the charlottesville comments. it is wroth -- it is worth noting, with paul ryan, this is one of the many statements he has made about his handling of the charlottesville incident. each time he talks about it, it seems his comments are getting stronger, but still, some would say, maybe not strong enough. this is the first time he has said something as strong as "trump has messed up," but there are many, in the republican party and outside, that would like them to issue stronger statements. francine: charlottesville cost

trump some significant support and it seems some have not given him overnight. the goldman sachs ceo tweeted, wish the moon was not the only thing casting a shadow across the country. one, wet trhough will get through the other. kathleen hunter stays with us. when you look at this, what does it mean for the ability to get tax reforms? what will he look for, as to indications? >> he will need a sustained period where he does stay on message, where he does not create sideshows, where he is fighting the media. give then message will markets confidence that there is potential that we could get something through. his popularity ratings being so low, it is easy for the republican matters for not supporting what he does to talk out. if he stays on script, it is

much easier to get congress in line. it's a big if. francine: how much time does he have to stay on message for? i'm not being facetious, but is it two weeks, three weeks? >> he has never done three weeks. so, if he does three weeks, maybe they will think this is something sustainable. but you have to keep going, though. if we get to three weeks, maybe there is credibility he will stay on message. we talked about the possibility of tax cuts coming through during the next month. the markets think there is no chance of that. if you can't get health care through, you don't have any budget to fund the tax cuts. they were hoping to get some savings there. you can't get anything through that is budget neutral. you have the debt ceiling coming up at the end of september. right now there is no confidence that the infrastructure, the tax cuts, these types of reforms that were promised will even be

in a position to be discussed with any likelihood of getting through right now. francine: kathleen, what are we getting this week? he is speaking in arizona today, and then what is the timetable? >> he is back to work now. he had a working vacation in new jersey that turned out to be more working and less vacation, in terms of the news he generated. i think one of the interesting things will be to get some of the tales about this new afghanistan policy as those tend to leak out. one interesting point, as you were talking here, is the president talked about initially the need to withdraw from international commitments, or international entanglements, because it would -- because they cost so much money. it is interesting, i think some of the questions will become how much will this ever cost? we have already spent trillions of dollars and 17 years over there. money spent over there cannot be spent on things like giving tax cuts, reforming the tax code that will cost people less

money, or health care and infrastructure initiatives. that bears watching. francine: thank you, kathleen hunter, the u.s. congress reporter. patrick armstrong stays with us. plenty coming up. including, will there be action in jackson hole? plus, macron hits 100 days in office, but with his approval ratings plunging, is there much to celebrate? we discuss that next. ♪ francine: this is "bloomberg

surveillance" and i'm francine lacqua. let's get straight to the bloomberg business flash. reporter: bhp billiton has bowed to activist investors. the company has unveiled plans

assets its u.s. shale and will delay a multibillion-dollar investment in a canadian project. that came as bhp announced profit that missed estimates. anofagasta said profits gained by 42%. shares in provident financial have fallen by the most on record this morning. that is as the ceo stepped down with immediate effect. they forecast a full year loss. the plans to replace workers the technology backfired. that is the bloomberg business flash. francine: with little significant economic data out this week, investors are awaiting the meeting in jackson hole, wyoming. this gathering comes as central

exitingeep up towards years of unprecedented easing. yellen is expected to reiterate her plans to raise rates. but how will bond traders respond to this language of moderation? still with us, patrick armstrong. patrick, i saw a great bloomberg story that was basically arguing, the matter what janet yellen does, it is unclear if the bond market will listen to her. what does she need to do to be listen to? >> i don't know if she is in a position to be listen to yet. i think she will have to wait for a few more months. just with the economy moving in the direction it is, inflation is the missing ingredient. so, she probably won't want to be raising rates yet. i think the market is too complacent. we think that's probably more than 50%. i think the narrative will be

that financial stability will be the topic. and you need a fed that has some drive. you can't have interest rates as low as they are. if we have a slowdown were the fed must come to the rescue again, they are not in the position to do so. so, you think she will focus more on financial stability than actual inflation and argue inflation will at some point feed through? >> that is her view and there is a clear debate in the fed. if there's longer-term factors that will keep prices lower. you also have to wonder, should the fed be looking at inflation if the disinflationary forces are coming through, the amazon effect? but it's not coming from the usual negatives with disinflation. it is a positive form of disininflation. the fed should not be fighting

that, necessarily. you might not want to look at the headline numbers the way we have had in the past. francine: patrick, talk to me a little bit. the charts look at the 10 year yield in white and the cpi and the u.s. break-even. if you think the market is not well-positioned for a hike, what does that mean for the 1 10 yea r? >> i think the 10 year rates will move higiher. -- will move higher. i'm of the camp where the phillips curve is not dead. it is astonishing the things small businesses are worried about, about the quality of labor and the difficulties who fill job openings. those are leading indicator to higher wage growth, i think. once you have higher wage growth, inflation will be the followthrough. unemployment has dropped to levels, where people are arguing

the phillips curve is dead. i don't think so. i think we will see wage growth, and inflation as well. i think they will do another two or three rate hikes next year. ishink the cyclical backdrop quite good, as long as we have an administration that gets through some of the things we have talked about. they should be on track for one more this year and two to three next year. francine: patrick, when you look at what the next fed chair could do, do you think they will be less likely to look at inflation as one of the key measures? it is still a mende, but you could interpret. -- it is still a mandate, but you could interpret. >> i don't know yet. we will have to see what the backstory is. inflation will always be a key measure, whether it is the only

measure, that is open to question. it is a good question. undueic growth without price rises is what central banks are trying to do. muccine: patrick, thanks so h. patrick armstrong stays with us. up next, as emmanuel macron marks 100 days in progress, why his ratings keep falling. we discuss that next. this is bloomberg. ♪ francine: you are watching

"bloomberg surveillance" and i'm

francine lacqua in london. over in paris, emmanuel macron is marking his 100th day as france's president. the original market euphoria appears to have passed. as he grapples with a number of challenges. still with us, patrick armstrong, the managing investment partner at plurimi. my concern is, everything is closed in the summer. he's talking to a couple of labor market participants, that we need to see what is in the reform. is it too early to judge? >> it is too early to judge. the first 100 days for macron, he had the parliamentary election. his popularity has really fallen. i think it would have been hard for anyone to hope something

had happened by this point. there was a bit of euphoria on the macron win, but probably as much so as le pen was removed. we saw a relief rally from that. france underperforms until the middle of may. and that is the euro, as much as it is anything in france. a strong euro is a negative for france and germany, particularly. anything in you buy france? >> the french banks are very much attractive with 4% dividend yields. those are very attractive valuations. we have investments across the eurozone. we think europe's on a sustainable recovery right now, being tendered a little bit by a strong euro. any weakness in the euro, they will be another leg up in european equities. francine: this chart is looking at france. the gdp in white and the

unemployment -- i think it is the other way around. what does this tell us about what draghi can do? this is about the stress points in italy. >> what mario draghi can do? francine: yes. >> that's almost when he is going to try to do, to say the euro is too strong, without using those words. ia 4% move from the beginning of the year is quick for the euro and i think draghi will be in uncomfortable. but the eurozone's economic backdrop is quite good. there are structural reforms. in europe, nothing happens quickly. if you start the discussion moving towards september, discussing with the union, small steps. that's all you can hope for.

francine: do you think the french access will hold? what does that mean for growth? >> i think it will, there is no reason not to. it seems that merkel will be elected again. francine: thank you, patrick armstrong. up next, as the eu insists on an orderly brexit, the irish prime minister says he remains confused and puzzled about britain's plans. we have our interview with him next. we also have a nice little data check. 0.6%.s the ftse, gaining this is bloomberg. ♪

francine: this is bloomberg surveillance. let's get straight to the bloomberg first reviews. >> president trump has announced an open ended commitment to

afghanistan that will put as many as 4000 more american troops and to the nation boss longest lasting -- nation's longest lasting conflict. only grudgingly acknowledging the need for u.s. presence there. to focus resources at home. >> america will work with the afghan government as long as we see determination and progress. commitment is not unlimited and our support is not a blank check. nejra: the admiral in the pacific is confident in the ability to destroy north korean missiles. this comes after pyongyang threatened revenge for carrying out military drills with south korea. steve mnuchin says president trump may keep the tax breaks for firms that create jobs while in eliminating it for hedge fund

managers. the loophole enabled managers to pay a tax rate as low as 20%, roughly half the top rate for ordinary income on much of their income. trump highlighted that during his campaign, labeling hedge fund managers, as getting away with murder. the u.k. government will publish its third position paper in two days with how it sees its future relationship with the eu. they focused on civil cooperation ahead of a document tomorrow on the role of the court of justice. a total solar eclipse has wowed the united states. a huge shadow cast by the moon as it passed in front of the sun swept across the country from oregon to south carolina. event thattched, an has not happen in the continental u.s. since 1979 and had not covered as much of the country in nearly a century. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg.

the prime minister has told bloomberg he remains confused about the u.k.'s global trading plans after breakfast -- after brexit. the clock ticks down and the remaining 27 nations of the eu are not satisfied so far. i would be right to say on behalf of the european government, we are not satisfied with the progress so far. we will continue in talks. they are ongoing. we will allow those talks to continue. we hope that more progress can be made. that progress will be sufficient when we meet in october to allow the talks to continue to the next raise. to date it has not been sufficient. >> on particular topics where would you say is the most frustration on the lack of august?

-- on the lack of progress? >> citizens rights. italian someone who is or polish or french who has been living in london for years and paying taxes should be allowed to stay there. equally we believe that people who are british in spain or italy should be allowed to stay there too. there is not full agreement on that. also people who want to relocate and live with loved ones. --re is no amount of money pensions, paid to european civil service, many of whom are british. on islands there have been some programs. we're going to keep the common travel area between irish and england and the islands. i am also reassured with the ongoing commitment by the u.k. government to the peace process in northern ireland and

continuing to fund peace building measurements there. an area that i feel strongly about is that there shouldn't be a trade border on the island of ireland. say thatt no, let's the u.k. doesn't get the kind of trade deal it wants with the eu. how concerned are you that they say, we will put in a hard border between the republic of ireland and northern ireland? >> where we are confused is at the premise of your question. does thee agreement united kingdom want with the european union? at the moment they have the best trade deal possible. by customs at union and access to the single european market. what they seem to be suggesting all along for the last 14 months, is that they want to have all the advantages of being in the eu but none of the responsibilities and costs. that is not realistic. we are waiting to see what they would like to see. one thing that strikes me in

canada, a month from today, the canadian-european trade agreement will come into force. when britain leaves the union, it is leaving all of those trade agreements that europe has made with countries like canada and japan and south korea. it is not yet clear to us, what , thatese separate deals the british government wants from europe and other countries? more clarity would be helpful. francine: still with us is patrick armstrong. we were just hearing from the prime minister of ireland. if you had the questions for him what would you ask? >> there would be no answers to the questions. most sides are still setting out opening gambits. talking about what they would like. i don't think there will be movement for some time. 2019 i don't think there will be much progress. francine: you think the u.k. could crush out?

patrick: we will have 12 months to 18 months of frustrating, slow, nothing happening, establishing positions. not moving closer. there is no real incentive to move closer on a lot of issues right now. the u.k. would like to discuss trade. the european union wants to talk about individual rights. the brexit bill. , very difficult for anything substantial to be accomplished. i am worried that it is not going to be a catastrophe for the u.k. but it will be a subtle headwind. it is an area that you do face risks and the united kingdom. i don't see that anywhere else in the world where speculation has higher prices and deteriorating economic growth. we are in a funny position right now where we are short. it is toxic for both equities and bonds. francine: where do you see

pound? patrick: pound goes weaker because of the headwind. yep to discuss trade relations. not juste just seen with the european union but with the whole world. the united kingdom is not in the position to do that. it doesn't have enough people are time to do that. a transitory deal is likely. even with that deal you have that open uncertainty that i think is going to remain for a number of years. francine: how does the boe deal with this? in wage growth -- you can see inflation has gone up and leveled off. wage growth is painfully slow to accelerate. patrick: it is. it is very difficult. that is a negative omen for future consumption. you have prices rising faster than wage growth. that is symptomatic of the issues the u.k. is going to be facing for a number of months

right now. economic uncertainty. spending still very high in the united kingdom. consumers are spending what they make. weaktunately with a sterling, prices are rising faster than income. very negative for the u.k. economy. francine: it is quite hawkish. i don't know if we will hear more of that from the boe or whether they are thinking they could potential he hike this year? patrick: i don't think there is likelihood of hiking this year. it seemed to be with the coronation of central banks. francine:+ do you believe that? patrick: they all did it around the same time. the rhetoric became more hawkish. i don't think the u.k. economy is in a position where you can be hiking rates. with the level of uncertainty and inflation is high. structurally higher in this country than other countries. it is coming from the weaker pound. i don't think mark should be

hiking interest rates. until we have progress and clarity on the economic outlook. there are issues facing the u.k. that the rest of the world does not have to suffer through. francine: patrick, thank you so much. stay with us. next, digging into miners. we take a look at earnings. selling u.s. shale assets. this is bloomberg. ♪

francine: this is bloomberg surveillance. let's check in on your markets. here is mark. gainers inhe big europe.

up by 3% with talks of potential uys of u.s. shale assets. it will also delay a movement to potash after months of public skirmishes with activist investors led by elliott management. purchase $2.5 billion of bonds as the market takes advantage of rising commodity prices to cut debt. they used $12.6 billion of cash flow to reduce net debt last year and return $4.4 billion to shareholders. it went up a fivefold increase. propelling shares higher today. 100 days into the macron presidency. how is it faring versus the stoxx 600? that was the second round. the blue line is the stoxx 600 and the white line is the 40.

3.6% for the stoxx 600. if you look at the 40 since the thet round, francine, initial market euphoria has faded. it is back to where it was before the election. the stocks seen as the biggest potential winners. that is interesting as is, the spread. -- this iselection the weekly german-french tenure spread which in february reached 80 basis points. the widest since 2012. it is come down to 30 basis points as of now. though stress levels we saw in the run-up to the election have certainly dissipated. lovely chart. showing you have the euro has fared month on month going back to 1999. it is fascinating. it is on track on the 10 year,

the euro has never gained this through august. all of to the big event where mario draghi addresses the symposium at jackson hole. full-yearhp -- underlying profit. and itlook is positive announced a first-half revenue of $2.05 billion. i been speaking to us this morning feeling good about ivan speaking to us this morning feeling good about copper. >> this also talks to a good outlook in terms of performance. we had a good half of results in the first half of the year. costs are down 2%.

all of this has enabled us to capture the increasing copper price which we had in the first half of the year. francine: for more on all this we are joined now by the head of global mining research. great to have you on the program. what we learned? we had months of skirmishes with activist investors. they seem to be bowing to pressure. been looking at re-shifting their portfolio in oil and gas and potash was on a delayed course. the fact they are doing this speaks well to the board and the new chairman looking at engaging with shareholders and looking to extract as much value as possible. francine: what happens next? >> you will see bhp look to sell its shale business in the u.s..

we reduced our oil prices in line with where they have gone theylso with the extra cap have to spend to get the cash flow positive again will make it challenging to enact a sale especially in the lower oil price environment. there are always interested buyers and if it comes to the right price that will be possible. for now, it looks like there will be a bit of a time where we wait to see what they will do in terms of a sale. francine: talking about potash. elliott joined other skeptics last month in raising concern that one of the projects which is worth $30 billion in canada, depressing potash price prices? >> this is been for some time. this would add a significant amount of supply. as you get to the median term timeframe that goes away. getsrrent forecasts no one

to value this is positive right now. that is where the activists, rightly so, look towards making a pause on this. which is what they have done. they probably would have got to a similar conclusion anyways because the market has not developed how they want. that is another thing a wanted that looks like it is happening. francine: then they think of the options? >> it will stay within the bhp portfolio. potentially it could be spun out to another buyer or something else but for now, it is such a small part of the vhp business in the sense that it is capital expenditure that was down to $100 million a year. francine: you look at a lot of these big companies. how much when you look at them -- when you look at the zinc market, how much does it have to do with oversupply? >> a couple of dynamics that have shifted the market.

we reached a point where we have tight supplies in commodities. part of that is because we don't have enough supply, like in zinc, part of it is because of structural reforms that are moving through in china. the chinese taking out steel capacity and coal capacity has enabled cold to be undersupplied in the seaboard markets. that pushes prices up. -- and otherser that open up other opportunities. as we go forward with demand rates continuing to stay higher-than-expected in china, this will further exacerbate the problem. at the start of a strong cycle for metal prices. francine: if you look at diversified companies, what are companies that have a better mix? tinto looks promising for its mix.

the market is discounting iron ore than a current prices. we think structurally the market is improving over the next few years. tintos a big impact on rio which has a big impact on iron ore. that company is in a good position. all of them are. encore and the progress they are making on new equity investments and pushing back toward growth. anglo american is a company that was almost bankrupt a few years ago. now they are back to a position where we see significant value. we think there is room to run. francine: a lot of these companies, turned around and less than 18 months. thank you so much for joining us, tyler. up next, we look at the allegations facing a global head

of foreign exchange in london. he is said to be tried in new york next month. this is bloomberg. ♪

francine: this is bloomberg surveillance. let's get straight to the bloomberg business flash. shares in provident financial have fallen by the most on record this morning. that is the ceo stepping down with immediate effect as a subprime lender forecasts a full-year loss and scrapping dividends. coming up the plan to replace workers with technology backfiring. ordered johnson & johnson to pay 417 million dollars to a 62 year old woman who blames her own very and cancer on how come powder. they have lost four out of five previous jury verdicts. a foreign exchange scheme may have involved 11 bank employees beyond the two executives that have been charged with crimes. as the cashons come

trading case in london is set to go. susie, welcome to the program. give us some background. summerou remember, last after the fx scandal, no one had been charged. mark johnson was arrested at jfk and accused of being involved in a front running scheme. it was not directly related to the fx scandal but they had found certain reviews. alongside some colleagues who are facing extradition proceedings in october. they were accused of front running in order where they would sell a unit and then convert the prices from dollars to pounds. these individuals are accused of wanting to front run that

conversion so they could make a profit when the transaction happened. francine: how big can this be? it was just these two but they are saying there are 11 other traders involved. accusing johnson of tipping off the other traders so that they could all front run the scheme. are there will -- will there be witnesses? we don't know yet. francine: the trial starts september 13. how long does it last? >> we have the extradition proceedings starting on october 16. it will be interesting to see a verdict before or while it is going on. francine: thanks so much. we will get you back on very soon. covering that story, enforcement

and investigations. bloomberg surveillance continues in the next hour. david gura will be joining from new york. looking forward to those interviews. we go through what president trump will say at his rally in arizona and what he said it last night in regards to afghanistan. stocks rebounding but there is very thin trading. it is august. do not hold your breath. bonds retreating. this is bloomberg. ♪ francine: the commander in chief

pledges an open-ended commitment to afghanistan in an abourt turn

from his campaign rhetoric. chp bows. the world's top minor caves in to pressure. emmanuel macron passes a milestone, but can he passed much anticipated labor reforms? good morning. this is "bloomberg surveillance" and i'm francine lacqua in london. david gura is in new york. david: absolutely, and the big speech from the president here in the u.s.. he spoke at fort myer. generally some forceful remarks on pakistan and india as well. francine: we will cover those. let's get straight to the bloomberg first word news. reporter: we are starting with that speech. president trump has done a longn on america's 16 year struggle. in a primetime speech, the president announced an open-ended commitment that will

keep u.s. troops there to deny terrorists a haven. >> our nation must seek an outcome where the of the tremendous consequences that have been made. the president would not say how many troops the u.s. would have been afghanistan, but his strategy gives the green light to a pentagon plan to send about 4000 more americans to train afghan soldiers. another warning from north korea today. regime says u.s. will face merciless revenge. or three at -- north korea warned the u.s. it would be a mistake to take pn yang. -- to take pyongyang. an american warship collided with an oil tanker. the flooded compartments of the uss john mccain will be searched.

there is no indication the collision was intentional or the result of a cyber attack. the u.k. on to speed up brexit talks so the two sides can move on to discussing a trade deal. theresa may is releasing another linen paper. the u.k. is trying to rebut criticism from the eu that it is unclear what it wants. the negotiator for the eu made it clear that a trade deal is not its first priority. global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. this is bloomberg. david: let's take a quick look at the data on this tuesday morning. in the u.s., futures are up slightly. looking at the bloomberg dollar index. still going at 1.2851. i'm still keeping my eye on wti, 47.85 a barrel.

francine? francine: it is august 22. so, a special thanks to our guests for not being on holiday. bonds are retreating. he says he was reducing risk. david: i want to take a look at the bloomberg. i have a chart up a looking at the strength of the dollar compared to president trump's approval ratings. we see the dollar weakening a lot as president trump's approval ratings fall. we are looking at his approval in light of what happened with those protests and a thumping violence in charlottesville. -- and accompanying violence in charlottesville. francine: i like the parallels between your chart looking at the trump approval rating and i am looking at the rally, or not so rally anymore come of different stocks because the president macron's approval rating.

let me bring you to my chart, where we charted the cac 40 compared to the stoxx 600. another thing i want to mention, i do know if this was a relief rally because we did not see marine le pen win, but certainly, this puts into context the german-french access. we did have august investor expectations 10% below. david: president trump announced an open-ended commitment to afghanistan, that would put more u.s. troops in afghanistan. he promised to keep troops there as long as it would bring about a political settlement with the taliban. donald trump: america will work with the afghan government, as long as we see determination and progress. however, our commitment is not unlimited. and our support is not a blank check. david: this evening, the press holds a rally in phoenix,

arizona. elay, following the events of charlottesville. substanceget into the of this speech, let me ask you about charlottesville. it is not something the president mentioned explicitly, but he did say, "as we set our bravest to defeat our enemies overseas and we always win, let us find the kurds to heal our divisions within." -- let us find the courage to heal our divisions within." >> he did not specifically discuss charlottesville, but this is the first time the nation was hearing from the president following the press conference in new york city one week ago today. he clearly wanted to set the tone, in terms of trying to bring together the country, and then discussing national foreign policy. he will add about 4000 troops to the already 8600 on the ground in afghanistan.

this is something he had advocated against during his campaign, but he said he ultimately went against his instincts and decided on this after carefully studying the situation. david: we have to understand how he got to where he got to last night. after he was inaugurated, he went to james mattis and asked for a review of this strategy. the president did not mention the numbers last night. he said explicitly last evening he was not going to talk in numbers. he did not want to reveal that information. kevin: we have seen the strategy before, where the president takes one town and the generals and administration officials take another. the president is trying to say he did it from a political standpoint and went against what he campaigned on by giving away the strategy, because that is what he says frequently, he is not going to say or give targets to enemies overseas. but you know, you're right. privately behind the scenes they said they will add 4000 troops.

francine: what does this mean for donald trump's core followers? he has this open-ended troop commitment in afghanistan, where during the campaign he promised america first. kevin: francine, i think we should also note there is a core contingency of military families and military troops who voted for president trump during the campaign trail and a certain faction of the republican party that are very close to the military. we should note that this speech garnered praise from some of the president's most fierce critics, including senator lindsey graham , who said he was "relieved for the military strategy," particularly coming at a time when he was heavily criticized because of his response to chose a. -- his response to charlottesville. this also comes at a time when trump cannot be guaranteed to be the nominee in 2020.

this is a much more somber tone from the president as he spoke of for meyer. it was a much different president trump. whether or not this will do anything to garner some support and stop the bleeding, so to speak, for republicans as they head into the fall, we will have to wait and see. francine: kevin cirilli, thank you. you probably have not slept since the middle of the night. joining us now is richard turnbull. thank you for joining us. richard, we have a president trump that was off-piece last week. now he is trying to get back on message. what can he do to get the support back from businesses, and a guess have a rally in stocks again? >> it is interesting. markets have moved away from fundamentals in the last couple of weeks.

it has been quiet in august, as you have highlighted. they are focusing on three things driving short-term volatility. the first is focusing on what central banks will do. there is a focus on geopolitics, and president trump during the short-term political outlook. some of the short-term risks around all three of those, but particularly domestic u.s. politics and geopolitics, have increased and have the foot and have the foot dental to create short-term market volatility, particularly as we face issues around the republic and the debt ceiling. resolving those issues will be market'sto gain the attention back on the fundamentals, on the long-term drivers. francine: how difficult is it to gauge the appetites in congress, given what has happened in the last 10 days? >> i think the debt ceiling is a minor issue. the major one is corporate tax

reform and maybe infrastructure spending. we are very skeptical on a delivery this year of these projects. however, next year as we get closer to midterm elections, it is possible the republican party will get together and agree on something. as we get to the end of the year and next year, there is more of an incentive for the gop to agree on a plan. having said that, expectations are very, very skeptical of a trump delivery and also, they are very skeptical about any hikes from the fed. though the fed might not deliver anything close to the jobs, expectations are pricing in three hikes towards the end of the year. expectations could change. david: how much does the comprehensiveness of a tax review mean to you? does that matter at this point?

or, is anythign something? -- or is anything something? >> well, given where expectations are, everything helps. but let's remember the markets have become more and more short-term. given the decade of central bank liquidity we are in, and the fact that the central -- s are where will he end up if we decrease government debt? at some point, there will be another slowdown. the more temporary these reforms gets at these it next lowdown down the line. -- the next slowdown down the line. the markets are at the end of a long cycle here and we are trying to support the cycle, to little piecesith of sugar, like temporary tax cuts.

will stay with us. coming up, we speak with the former u.s. assistant secretary under president reagan. that is that 6:30 a.m. in new york, 11:30 a.m. on bloomberg. ♪ reporter: this is "bloomberg

surveillance" and i'm taylor riggs. u.s. prosecutors say a scheme at hsbc might have involved 11 traders. executives have been charged with a crime. mark johnson is accused of using

his knowledge to profit from a transaction. latests become the automaker to offer cash to get rid of the dirtiest cars. they will pay up to $9,000 to models,cars with newer targeting vehicles built before 2009. that is your bloomberg business flash. francine: august has been an unusually busy month for high-grade bond sales ahead of expectations for higher interest rates. sales for the year have passed $1 trillion. that is according to data compiled by bloomberg will step companies filed large amounts of debt in recent weeks. are waiting to hear from policymakers at the jackson hole summit. let's get back to richard turnill. richard, when you look at what we can hear from jackson hole, what kind of tone can janet yellen strike to move

treasuries? >> i think you are unlikely to get any significant change in policy coming out of jackson hole, even from janet yellen or draghi. the entire message we are trying to get from central banks is one of predictability, one where they are guiding markets. i think you are going to get the reinforcement of those messages, that the fed will be very cautious about raising interest rates. i do think you look at anything out of jackson hole which will shock the market and undermine what is a constructive economic market int he u.s. -- in the u.s. i think the fed will be very cautious about saying anything that will disrupt the positive background. francine: we are talking about qe infinity. it seems we have that a little bit longer until we figure out what is going on with inflation. >> it is very hard for central banks to exit. they tried in june, striking a

hawkish tone. that was not just the fed or the ecb, but also the bank of canada and bank of england. after a few weeks, janet yellen became dovish again. the euro started appreciating again and went up to 1.19. to exit, central bankers have to coordinate amongst themselves and with their own politicians that do fiscal policy. if that is not there, you will see a currency war, which means the central bank that is the most hawkish, they have their currency appreciating and that redistributes inflation elsewhere. the result is that they cannot hike anymore. so, we go back to qe infinity. it is a very difficult game. union coordination and in the real world, it is going to be difficult. inou need coordination and the real world, it is going to

be difficult. i do not expect a hawkish message, but if there is no quarter nation, it will be very hard to engineer neck said. -- if there is no coordination, it will be very hard to engineer an exit. david: do you see this subsiding anytime soon? do you think the appetite for corporate debt will continue? >> um, i think the appetite for qet, if we still have a environment, will continue. however, we are starting to see signs of little cracks in the credit cycle. particularly in the u.s., in some of the sectors around retail and energy. but also in the u.k., in the consumer credit sector. that is another hurdle to increase interest rates. as we get to a very high level of has a leverage, and in the u.k. we are close to the

precrisis levels, it becomes harder to raise interest rates. that means longer you keep interest rates low, the harder it is to get out. that is what we talk about qe infinity. central bankers should really increase interest rates, but if they are not coordinated, the trap will become even worse. that is the conundrum, the catch 22, they are facing. do i take some volatility now in the market, or do i wait and risk the volatility could be bigger when the time comes? david: richard, translate this into the equity space. he is talking about that trap. is that the same with equities as well, or is this earnings driven? >> one of the keys is taking risk where you are paid to take risk. when we speak to clients, we see huge demand for yield, for income. anytime there is a demand in yield, we see huge flows coming back into higher income paying bonds.

now we have a situation where you are being paid relatively little compensation for risk in the credit market. and valuations, while there is a downside, you get a significant return. we think we are in the middle of what could be a potentially long cycle. in the environment, over the medium and long-term, you have a much greater return in equities than you do with credit. stayine: thank you, both with us. coming up later this week on we are in jackson hole and we will be speaking to robert kaplan. there is more to go through to figure out what happens to treasuries next. this is bloomberg. ♪

francine: this is "bloomberg surveillance" and i'm francine lacqua in london with david gura in new york. the sun conglomerate has got plans to purchase a land plot in london amid beijing's growing scrutiny over overseas investments. been restricted from investing in certain sectors. richard, how much does this have to do with some of, i guess,

regulations put in place by china last week, which is once again, trying to prevent outflows by limiting how much their domestic companies can invest in a broad? >> if you go back one year ago, one of the big risks facing them was a hard landing in china and a big depreciation valuation of the renminbi. you have seen consistent data showing chinese growth is holding at much better than most people expected. last week the imf upgraded the gdp forecast, closer to 7% than 6% over time. the chinese productivity has been incredibly productive, limiting upload, reducing pressure on the renminbi. the spread has been incredibly tight and we have not seen the escalation of currency pressures that many people feared. one of the features that has been supporting the markets more broadly and emerging markets were generally has been the decline in currency risk around

china and that is likely to continue. francine: even after the people's congress, because there is a concern that could change after that? >> will be on the people's congress. if you take a long-term view, china faces significant issue about access debt. that needs to be addressed. but that will not be addressed in terms of a hard landing. is not inminbi anyone's interest. david: coming up on "bloomberg daybreak," the conversation at 7:00 a.m. in new york and probably p.m. in london. -- and 12:00 p.m. in london. 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. ♪ david: this is "bloomberg surveillance." i am david gura in new york. francine lacqua in london. let's get a first word news check. taylor: trump offered a new

strategy for the longest war in u.s. history. the president announced an open-ended commitment to keep forces in afghanistan. >> we are not nationbuilding again. we are killing terrorists. haver: american soldiers been in afghanistan almost 16 years. the presidents said the consequences of a rapid exit would be unacceptable. a pentagon plan calls for 4000 more americans to be sent there to train afghan soldiers. a court terror cell has been this man told after last -- a core terror cell has been dismantled after last week's terror attack. of the 12 people in the cell, eight are dead and four are in custody. in philadelphia, a commuter train slammed into another train parked at a station.

at least 30 people were injured. the collision happened just ,fter midnight in upper darby pennsylvania. talks are underway in seoul, south korea. the president wants to cut the trade deficit with south korea. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. david: thanks for that update. bhp billiton is in talks with potential buyers in u.s. shale asset, including elliott management. this comes after a french energy giant announced its purchase of .arist oil and gas

-- are they blaming this on elliott management? >> yes. activists,sponse to in particular elliott, who has been asking bhp billiton to forget about expansion into the oil business. bhp is not complete we getting out of the oil business. they are not invested in australia oil. the company announced it is looking for a sale of u.s. onshore or shale assets. those assets came together in a series of deals around 2011. sell it for aill fraction of that number. david: this is a company that has been caught ham-handed, especially when it comes to the jansen project in canada.

how hard will it be for bhp to get out from this? whether oilepends price does in the next few months. looks for at how 2018 oil prices, it does not look particularly brilliant. we will probably be in a of oil prices above $100. bhp will be selling at a moment when oil prices are below $50 a barrel. it will not be easy at all. who sayseen some banks that kerry over value could be as low as $5 billion. francine: is it a general trend that shale units are being sold off? javier: i think it is a different story. that is -- you have a traditional shipping

line with containers. they want to come back into the core business. in the case of bhp, what we have seen is a movement to concentrate on mining. shale,s a point here on which is for some companies, the best on shale has not -- the bet on shale has not worked. ought on companies b shale at the peak of prices. francine: talk to me about potash -- politash. elliott management suggested heavily to bhp that they think it is over supplied. javier: the market is over supplied. mining ineloping canada, call jansen. billionspent over $2.5 on the ground. today, they said they will not move forward on that mine for

this year and next year. and they are talking about -- aps richard, i know you cannot talk specific stocks, but story,, one is a china and the other is oversupply. richard: what you have seen is demand is picking up for many material stocks over the last year, particularly driven by china. dragging the overall mining sector down is this persistent concern about excess supply. so although demand is picking up, there is concern about supply that creates concern about the sustainability of dividends. mores, it means we find a

attractive investment opportunity in other areas of the market, including technology and financials. atid: on the point of china, what extent is china driving movement in mining worldwide? javier: it is the biggest driver. consumption rates have come down, but the base of the consumption is much larger over 10, 15 years. differentoving to commodities. probably not much into iron or, because a lot of infrastructure more of what into i call the second expansion phase. but china is still a big player. david: thank you, hobby or blasts -- javier blas. about france, the 100 day mark of president

emmanuel macron coming up today. coming up, we will talk about the president's speech last night. stay tuned for that. this is bloomberg. ♪

francine: this is "bloomberg surveillance." the first 100 days of emmanuel macron's presidency have passed. the country and investors are waiting for him to unveil his plan for labor reform. rally since the election , -- we will finally be able to preview legislation between some

oncoming protests. let's go over to our beer chief -- bureau chief in france, geraldine. let's talk about his popularity. it has steadily declined. >> after a series of mishaps, the fact that he announced cuts, the fact the army chief of staff resigned over defense cuts. attacks on gate companies. at the same time, nothing happening in labor reform. all of the small companies are eager for reform coming through. sacrifice know that will be involved. if you want to lower the budget deficit below 3%, as he pledged. it involves public spending cuts, it involves a lower

emphasis. cuts to lower income households. francine: what do you think will be in this labor reform plan? do you have any idea of how aggressive it will be? geraldine: the unions have been discussing with the labor minister for months, and the prime minister as well. it is unclear if it will be a reshuffle of labor. what people will be expecting our small amendments here or there. the major outcome would be that the unions would be bypassed. an employee would be at liberty to discuss his or her contract directly with the employer without going through the union representative seen, without going -- scene.

this is definitely a huge threat for the unions. there was also a cap on the amount of money an employee can expect if fired. this is important for a a lot of employers in france. they also expect more flexibility in the ability for employers to fire people, to cut jobs. right now, it is really strict. everyone is expecting that. a lot of street protests are expected as everyone is back from summer recess. david: in the u.s., there is discourse about the relative difficulty of doing health care reform versus tax reform. we are talking labor reform in france. after that comes pension reform. we have a sense of how difficult it will be for the president? geraldine: it will be tough. the french are really -- the french are the french.

these my career, i saw street protests. another one coming up -- --s time, the french looks it looks like the french know what it entailed voting for macron. macron knows that. he pledged to reform the labor system, and they voted for him. mislead them in that sense. you still have the minor on the side. one of the threat is that the unions will be bypassed. the unions are fighting tooth and nail to prevent this. it will be a tough one. areepends if the french happy to make these sacrifices and to wait and end their --

endure several weeks of street protests. francine: thank you, geraldine amiel. that's get back to our guests, all bets are go -- alberto gallo and richard turnill. how much does france have to do with a stronger euro and how much does it have to do with labor and structural reforms? alberto: the stock market is pretty much about the euro. going up.t but if you look at the economy, there are reforms needed in the labor market, in pensions. these reforms and france have never been easy. there are a couple of differences this time around. not doing reform means that in two to four years time, france will be less competitive.

the alternative is you may have , like ast choice left le pen situation, which would be worse for the future of the eurozone. that is the stick. the carrot is you have more integration. european leaders are refocusing on integration. after german elections, you could see a more pro-european mandate towards fiscal stimulus. potentially, a credible juncker plan. atch means there is a carrot the end of the journey. with more reforms, you get more flexibility on the fiscal side and a boost towards investment in europe. that is a dynamic that has been working for spain, italy. not just mean sacrifices, when you do reforms, but it also means you have some benefit.

francine: what does it mean -- first of all, the tax 40 versus the stoxx 600. what is your that on euro -- bet on euro? can it move on the back of jackson hole? richard: first of all, there are behind therivers strong performance in european equity markets. the first is a decline in perceived political risk, led by france. in addition, it is important to recognize what is strong economic data through europe. we have seen more evidence of that in the last few weeks. the third factor has been the global environment. many people forget how international the european stock market is. to theighly exposed

market price. if we look forward, we remain positive on europe. some -- we have seen some challenge around politics. we are optimistic we will see labor and tax reform in europe. and we have the potential of a strong german-french axis to develop in europe. the most important thing is sustained expansion in europe and the positive exposure european stocks give you towards global growth. currency, in the short run, has been a headwind. investors need to look beyond short-term headwinds and towards long-term fundamental drivers of the european market. when they do that, we still see many stocks trading at attractive valuations. we believe investors have just realized there is less stale risk, so less chances of a

european disintegration. but we have not fully priced in the upside from a german-french integration with more spending and reforms throughout europe. compared to other markets, europe has upsides. and until a few months ago, for equity and bonds, remember that greek government debt used to trade in 9% yield, which is the same as sub-saharan african countries. so markets are starting to reap re-price thek -- risk. we have seen the europe continuing to go up, potentially above 1.20. even equities should overlook the fx appreciation, at some point. the fx appreciation is the biggest factor, if the trump

administration does not deliver corporate tax reform. growth fundamentals in europe continue to be well supported, which means lower peripheral spreads, euro upsides and equity upsides. francine: alberto gallo of algebris and richard turnill of blackrock, thank you. if you are a number terminal user, take a look at tv . look at the charts we have put up and some other data points. and you can go back and ask a direction -- ask a question directly. this is bloomberg. ♪

♪ francine: "bloomberg surveillance this is. -- this is "bloomberg surveillance ." coming up, we will be in jackson hole this week. market positioning ahead of jackson hole. we are back with richard turnill of blackrock and alberto gallo of algebris.

all, how do you position your self -- does it have anything to do with trump trade? chart -- this is what we are looking at overall. central banks have talked hawkish. there is a chance we will try to likeinate another exit they did a couple months ago. the key is to understand which central banks can hike rates and which central banks are bluffing. the fed is ahead of other central banks, but it is still behind the curve. however, their chances of continuing to hike depend on fiscal policy. the lower trump approval gets, the tighter and lower u.s. treasury yields get. because that means less delivering on fiscal reform and

less fiscal stimulus means a more dovish fed. so we are skeptical on trump to deliver tax reform and on the fed to hike. but market expectations are already low. so we are not going along u.s. 10 year treasury. steve -- seehat we is still strong growth. there is also the issue of running out of bonds. there are no more bonds the buy in germany. so at some point, they have to taper. uffer ofest laugh -- bl central banks is england. carney will not attend jackson hole. are talking a 20% hike in december in the u.k. that is not going to happen. david: if we do not get the kind of coordination alberto was describing, where do we see the

movement happening? -- how willon your you position yourself ahead of jackson hole? richard: the market has been focused on the euro. what we see historically is currencies have a short-term impact on equities. they have an immediate translation affect. doingnvestors should be is looking through that probability and focusing on longer-term fundamentals. when we look at how you should position for jackson hole, we see far too many investors who are still crowded into perceived safe haven assets, including cash and u.s. treasuries over time. u.s. treasury yields are depressed not just because of concern of fiscal policy but a huge excess of global savings. over time, we see that declining. in particular, we see sustained economic suspension -- expansion.

and the risk within international equities and emerging-market equities. volatility,t we see this is still a market where we are in a low volatility regime. driven by short-term concerns about monetary policy, that is the opportunity for investors to add risk to meet long-term goals. david: richard turnill of blackrock and alberto gallo of fromris speaking with us london. this is bloomberg. ♪

♪ francine: presidential reboot. the commander in chief pledges

an open ended commitment to afghanistan. bhp bows. it is in talks to sell u.s. shale assets. macronpresident emmanuel passes a milestone, but can he passed labor reforms? this is "bloomberg surveillance ." i am francine lacqua in london. david gura is in new york. do not get too excited about some of the swings in currencies. david: a big speech from the president last night. we will talk about that throughout the day here on bloomberg television. setting out a new course in afghanistan, pakistan, and india. francine: let's get straight to the bloomberg first word news. taylor: we are starting with that speech. on hisas made a u-turn stance in afghanistan.

he announced a commitment to keep u.s. troops there as long as it takes to deny terrorists a football -- a handhold. >> the consequences of a rapid exit are both predictable and unacceptable. notor: the president would say how many troops the u.s. would have in afghanistan, but his strategy gives of green light for a pentagon plan to send for thousand more americans to train afghan soldiers. another warning from north korea. the u.s. will face merciless revenge for its annual drills with south korea. and three navies are searching near singapore for 10 american sailors missing after a u.s. warship collided with an oil

tanker. flooded compartments of the uss john s. mccain will also be searched. to speedonce -- wants up brexit talks so the two sides can talk about a trade deal. prime minister theresa may's government is releasing another position paper, trying to rebut criticism from the e.u. that it is unclear what it wants. 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. david: let's do a quick check of the data, starting with futures. futures up slightly, up three, looking at the bloomberg spalding index at 11.38. 47.51 a barrel.

francine: overall, thin volume. and you see gold bond sliding. a little risk off, but nothing huge. this is what i am looking out for my bloomberg. about ourk to you bloomberg of the last couple of months, if not the year. this is trump trade. we were talking about it with alberto gallo and richard turnill. is the onegine, thing every asset manager across the world is looking for, especially ahead of jackson hole. it looks at reflation trade that petered out. the 10 year here in blue. let me stick with that theme. looking at trump's approval

rating in lockstep with the spalding. right now, his approval rating at 38.4%. that obviously went down a little after the events in charlottesville. trump announced an open ended commitment to afghanistan that will put more american troops into the nation's longest lasting conflict. he pledged to keep u.s. forces there as long as it takes to deny terrorists. >> america will work with the afghan government as long as we see determination and progress. however, our commitment is not unlimited. our support is not a blank check. discuss theng us to remarks is kevin cirilli. about-face wasan is for the president? i was struck by one line -- my

original instinct was to pull afghanistan. kevin: complete 110% turnaround. but this is a president who had consulted with military generals, that he was not going to say what the strategy is. knowld himself to specifics in terms of benchmarks for how the united states will eventually withdraw from afghanistan. but privately, generals saying there will be an additional 4000 troops added to the 8600 troops already overseas in afghanistan. trump said one thing on the campaign trail, but he is a new reality. david: the speech last night was focused on this one issue in particular. on another hand, a lot of commentators saying this is a

point of reset for the administration. what do you hear about that? kevin: personally, i am sick of commentators talking about this risk that. this is the commander-in-chief talking about adding 4000 roots to afghanistan. but this comes at a time where , wheres facing criticism republicans, like senator susan collins, saying they are not sure that he will be the nominee in 2020. trump will be in arizona to talk for a campaign style rally. this also comes after criticism for his comments in his firing ofe, steve bannon, and his comments on afghanistan. you make ofat do paul ryan's comments? he had strong words for the president.

kevin: two big takeaways from the cnn hall bill from paul ryan. first, he was critical of trump's response to charlottesville, joining a large majority of republicans who criticized the president on that response. he also said he supported trump's decision to add troops in afghanistan. other critics of the president's -- ins in challenges go charlottesville have praised him for his decision on afghanistan, including senator lindsey graham, who said he was relieved by the president's comments last night. david: thank you. joining me is conrad dequadros. there will be a rally in phoenix, arizona tonight. i imagine tax reform could, up. when -- could come up.

of ayou take the pulse quiet washington, where do things stand when it comes to tax reform? what will you listen for? conrad: the question is if we can take this u-turn on afghanistan and say is there a potential of something similar on economic policies? one of the positives we can take onhe had an instinct afghanistan, advisers told him something different, and he went with the advisers. he has advisers who push back on .is topics, including trade the question is will he now rely a little more on their advice? and stevery cohn mnuchin pushing him on tax reform, pushing him to focus on that. the hope is it becomes something the at ministers and focuses on, because it is obviously an extremely important topic. david: in this white house, you

see a more cohesive, unified national security team. you mentioned the principles of the economic team. conrad: you do not see a lot of divisions in senior leadership. another aspect of that is on economic policy, leadership can also come from outside the white house. we have congress that can take the lead on tax policies. but they have a group within the white house and gary cohn and mnuchin that they can work with. of them saying the odds getting something fast is high. i do not believe that to be the case. you can see that in markets. but it is not impossible that we see something. -- issuesve it shoes that need to be addressed, first with the debt ceiling. if you get that off the table quickly, that would be

encouraging. francine: i know this is a bit of a tricky question, but how do you calculate the possibility of tax reform really being pushed through? for example, if they reach an agreement on the debt ceiling, is it a good omen for tax reform, or are we creating links where they should not be? conrad: quantifying that possibility is difficult. i will say that the timeline on the debt ceiling is relatively short. the timeline on tax reform is, if not as short, but as we move into 2018, and the treasury department set an aggressive timetable on tax policy -- probably too aggressive -- but they have a few months to make progress. in 2018, things become more difficult, because the focus of lawmakers, particularly in the house, shift to midterms. getting people to do things that they may not particularly agree with -- that will always be the

case with tax policy. not everyone will agree with all facets of that policy. getting them to agree to things that may not be their first instinct is difficult when they are facing an election. there is a little more window when it comes to tax policy, but it is not a very large window. quantifying the arts is itficult, but many -- maybe is not as low as what the markets are priced for right now. francine: what do you expect in terms of inflation in the u.s.? conrad: right now, we have inflation running around 1% to 1.5%. we are likely to see inflation grind higher to 2%. we talk many times about idiosyncratic factors. they're always seem to be new ones that pop out -- there always seem to be new ones that pop out. those factors are likely to

wane, so inflation will grind higher. some more immediate measures are higher than that, calculated by regional fed banks. some are closer to 2%. but i am not that concerned about 1.5% versus 2% inflation. david: coming up on bloomberg radio and television, a conversation with former secretary of the army, air expanding -- eric fanning. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." bhp billiton is giving into activist investors. but the mining company revealed plans -- the mining company revealed plans to sell u.s. shale assets. that comes after a meeting with investors. u.s. prosecutors say a foreign exchange front running scheme -- hsbc may involve foreign traders. there is a trial next month offo -- ford has become the latest automaker to offer cash to replace older diesel powered cars and vans with new or

models. that is your bloomberg business flash. francine: thank you, taylor. august has been unusually busy high rateick bond -- bond sales. we are back with conrad dequadros, rdq economics' senior economist. when you look at jackson hole and the expectation of corporate america for rates going higher, it is not what you are seeing and treasuries, is it? conrad: no. a lot of it has to do with the topic we were talking about previously, where the initial related reflation trade to the potential changes in fiscal policy. i think markets have gone down significantly. part of it has been the pullback in inflation. it is something of an adjustment

in inflation breakevens. but we probably get a few more hints at jackson hole related to quantitative easing and the normalization of the fed balance sheet as people look ahead to announcements that may, out of the ecb. there is some chance of moving in the other direction. francine: when you look at the bondhat treasuries and markets are reacting, what does janet yellen need to do to move the yield curve? conrad: the question is how committed is she to the one rate hike that the fed has in the sep's? my feeling is the majority of the committee still thinks it would be appropriate to hike rates one more time this year. if her feeling is that is the appropriate path, the question is how strongly does she want to signal it? we have had interesting swings in opinions about draghi, on a

similar question. when it was first announced he would speak he -- he would be speaking at jackson hole, people wondered if you would signal a tapering announcement from the ecb. then it was announced by the ecb that he would talk financial stability, and markets went the other direction. the question is do draghi and yelling consider these moves top either normalizing the balance sheet or beginning that process on the ecb in terms of not adding as much, are those policies that relate to financial stability? my feeling is it does. so what we will probably hear is there is this process of normalizing the balance sheet, which is expected to announce in september and start in october. it relates to the topic in jackson hole. we could hear something similar out of draghi. praised foras been

-- will that go away, and what is the consequence of that? conrad: i do not think it will go away. the fed recognizes, as much as economists and markets may focus to much on the swings in the data, the fed has to take a step back and focus on the trends and the qualitative feel to the data as well. i think that is important to the fed. that will always be important to the fed. the signal we are getting in the labor market. job creation trending close to 100,000. is that sustainable when the unemployment rate is true to what the fed thinks of it. so those are broad views that are important to yelling and anyone also comes to that position. francine: -- david: conrad dequadros here

with me on set in new york. and we will talk to robert michael mckee headed out to jackson hole later this week. this is bloomberg. ♪

♪ francine: this is "bloomberg surveillance." i am francine lacqua in london. david gura is in new york. let's talk commodities. the hp billiton is in talks with buyers of its potential shale

assets. energymes after a french giant also took down expensive shale. joining us now is bloomberg's chief energy correspondent, job the abbas -- javier blas. what did we find out about bhp billiton, after months of skirmishes with -- javier: they like their decision on short u.s. shale operation. this was a condition that was asked of bhp billiton. when elliott firms first hp billiton, the reaction of management of the company -- approached bhp billiton, the reaction of the

management of the company was no. that they are not just a miner, they are diversified commodities company. today, with little expedition, bhp billiton announced those assets are for sale. i think one of the positives today has been the sale and that everyone likes it. whethertion is investors will like it or not. david: what will you save for the environment for mergers and acquisitions? are things beginning to turn to be more favorable for mergers and acquisitions? javier: in the oil industry, you will see more m&a activity. the last two and a half years has been about cost-cutting. investors are beginning to turn around and thinking how these companies, who have been doing a lot of cost-cutting, will grow in the future.

the message is a rising to board of directors and management. the reaction of companies is beginning to think about what we can buy. what we think, particularly outside the united states, so i will not be surprised if we see more m&a. blas they, thank you. coming up, trump's u-turn on afghanistan. michael rubin will join us. this is bloomberg. ♪

♪ i am: in for tom keene, david gura in new york with francine lacqua in london. in spain, authorities

say they dismantled the core terrorist cell behind the attack last week. police shot and killed the man suspected of driving the van that mode down -- mowed down pedestrians. in suburban philadelphia, a commuter train slammed into another train at a station. 33 people were injured and four of them, seriously. it happened after midnight in upper darby, pennsylvania. ireland's prime minister isn't sure what the u.k. once in a trade deal after brexit. u.k.lls bloomberg tv the wants the advantages of being in the union, but none of the responsibility. >> where we are confused and puzzled is the premise of your question, what trade agreement does the united kingdom want with the european union? at the moment they have the best one imaginable, the customs union and access to the market

and economic area. europe did he wants no border but northern ireland and the republic of ireland after brexit. the u.s. and south korea started revising the trade deal president trump called a job killer. the president wants to cut the trade deficit with south korea and says u.s. automakers should have a fair shake to sell more cars there. global news 24 hours a day, powered by more 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. david: thanks very much. president trump has offered a new strategy for the longest war in u.s. history. he announced an open-ended commitment to keep american forces in afghanistan and up to 4000 more troops to train soldiers to fight the taliban. joining us is lawrence korb and michael rubin. morning mustwith a

read on bloomberg surveillance from opec -- from "the washington post." write -- let me start by asking you about the last point, did we learn anything from the president about the way this war in afghanistan ends? michael: we did not. he talked about how he would have a conditions based approach, but didn't say what the conditions were other than the defeat of al qaeda and the islamic state. we also didn't hear a great deal about logistics. it's all well and good to bash pakistan, but the problem is with afghanistan landlocked, we have been forced into that situation and i haven't heard

how we will get around that is president obama -- i am sorry, it president trump once to reorient our position from neutrality to a pro-indian position. you, about thesk numbers. i mentioned to the 4000 figure. is that enough to make a difference to turn the course of events in afghanistan? lawrence: it's not going to change the situation very much because we are not only dealing with the taliban or trying to come back into power -- who are trying to come back into power, you are dealing with isis and al qaeda and is a real issue is will you ever have a government in kobul that has the support of the majority of people in afghanistan and that is part of the problem because you have a corrupt government and people keep chart -- turning to groups like the taliban, al qaeda, and isis. francine: how powerful was the messaging? you have a u.s. over the last

seven or eight months try to retrench from the world and it was very messy when the president came in nato. brussels. this seems more outward looking, is that a good or bad thing? lawrence: i give the president credit for going back on his campaign promise to sort of pull out with no conditions and no preparation. i do think that he showed he has grown up in office. i think he also didn't pick up on the proposal of steve bannon to hire contractors to do the job. i think that is a step in the right direction. however, he raised an awful lot of questions which he hasn't .nswered as michael pointed out, it's one thing to criticize pakistan, but you have to realize you have to go through pakistan to get the material in there and he talked about getting more contributions from other country -- countries

-- are they going to send more troops -- is nato going to pay for our operations? those are questions he did not answer last night. francine: this is a president taking ownership of a very difficult conflict. michael: you are absolutely right but here is problem, when you have a hornet past -- hornet's nest, you have two options, get rid of it or lead it alone. if you -- leave it alone. talking about 4000 additional troops, i am not sure whether that will be enough to get to the victory which president obama talked about. osama bin laden once said everybody loves the strong horse and momentum matters. beyond the rhetoric, i do not hear that last month -- last night. david: the president spoke about principled realism, that seems to be his new approach to conflict around the world.

there seems to be a movement toward some sort of political solution that would require getting the taliban to the negotiating table, is it a mistake to not engage or offer that olive branch? achael: i do think it is mistake. we try to do this before even during bill clinton's negotiation, we negotiated with the taliban on up to 30 occasions. we try to do that in the early obama administration when hillary clinton was in power and it was not successful. we approach negotiations from a standpoint of sincerity, how to get to yes and the taliban look at it as weakness to exploit and we come back to the problem of momentum. david: the president said micromanagement from washington, d.c. does not win battles. we have watched this conflict

play out, how big an issue has micromanagement -- as the president put it, been? lawrence: i don't think it has been that big at all and the idea that somehow you let the commanders in the field make all the decisions really risks creating more problems because with people on the battlefield, you want to win the war. the fact of the matter is you might kill some enemy and kill innocent civilians and you create more terrorists. don rumsfeld said for every terrorist you kill, you create six more. that sounds good and it's great in theory and i have a great deal of respect for the military, i served in vietnam. the fact of the matter is that you need civilian control to make sure they take into a fact -- into account all the aspects of the situation. francine: i don't know how much this will cost or if you have any idea.

the afghanistan conflict so far has cost $7 billion. how much does it mean that the president will have to scale back on money given to other departments or within the defense ministry in two other units? lawrence: it's interesting you to -- you mentioned that because he said he wanted the other government agency to be involved in the state department. in order to fund the war and increase defense spending, he cut the state department budget by about 30%. he has not appointed the state department coordinator for the area that existed for several years. are going to do these things, you are going to have to fund them adequately. one moret me ask you question about the role of pakistan and stability in the region. how worried are you about stability in south asia at this point? lawrence: i am worried about it

because pakistan asked somebody said, they are with you wednesday -- monday, wednesday, and friday and on the other side tuesday, thursday, and saturday. i think afghanistan will be settled by all the countries in the region that have a vested interest in the state of afghanistan. russia, india, pakistan, we have a coordinating group now and the russians need to get involved. david: michael rubin, the president says he is moving away from a time-based approach and focusing on conditions. what are the top two conditions the president will be looking to to get met in the near term? michael: he basically talked about how he needs to the feet al qaeda -- defeat al qaeda. basically, this was consistent with president obama and president bush before him.

we want an afghan government that can monopolize the use of force within its own territory, but i am not optimistic that will happen anytime soon and would we go into training programs, our record of training programs in iraq, syria, afghanistan isn't great and until we have an honest assessment within the pentagon come we don't want to throw good money out to that. michael rubin was in the george w. bush administration critic coming up on bloomberg radio and television, more on that speech. eric fanning will join us and we will get his perspective in the 8:00 a.m. hour here in new york and the 1:00 p.m. hour in london. this is bloomberg. ♪

♪ taylor: this is "bloomberg surveillance." i am taylor riggs. new york city pension plans are on the verge of agreeing to kkr,t $3 billion with that's according to people with knowledge of the matter. the pension money would be invested in private equity, credit, and real estate deals. it's a big loss for johnson & johnson. a jury in los angeles ordered the company to pay $417 million to a woman who claims her -- blames her bavarian cancer on cash -- blames her ovarian cancer on the company. withook has a problem american teenagers. in this year, the social network will see a decline among teen users for the first time. there's a bright spot in the

report, teenagers are migrating to snapchat and instagram, the app that facebook owns. that is your bit -- bloomberg business flash. ♪ francine: the first 100 days of emmanuel macron's presidency have passed and the country and investors are waiting for him to unveil his plans for labour reform. the cac 40 has slowly declined letters -- numbers. already warning of protest. let's get more with our bureau chief in paris. always great to have you on the program. how worried will -- will the french unions be because they are about to get this preview from resident macron about how he wants to change labour? >> i think they are really concerned. one reason could be that macron

might actually make it happen. we don't expect too big of a crucialut minor changes. one of which would be the freedom to set the contract term between an employee and employer. weekthe end of the 35-hour and the end of the need for union representatives. should be the unions worried to say the least. francine: this comes at a time where has personal popularity has plummeted since he was elected. does this have anything to do with reforms or is it as expected that he could never continue staying that high? >> the reform is part of it. he was elected against a far .ight candidate he did get the majority of

voters, but not so many of the people were actually in favor of his program. he knew that to make france great again it would have sacrifices and they already had a summer recess. it cuts in public spending and notably, the army funding. tax on big companies looming up and the labour reform. .eople are bracing as soon as the labor reforms will be in place, the unions have already planned protests. david: how important it -- is this 100-day metric? how much patience doesn't seem like the french people are willing to give somebody that is , admittedly, new to governing? isaldine: 100 day, this interesting. it's more of an american thing than a french one. what matters here is what we call the end of the summer recess.

it is in september and everyone is back at work and this is when basically all the protests happen and the strikes start and people basically are disgruntled. rather than the 100 days, which don't mean so much, it might be a bit too quick for the union, for instance, and for a lot of people concerned when you think about the labor law reform. they wish to have more time to look into it and discuss about it and negotiation it. 100 days might be too short for the french. david: thank you very much. dequadros is here once again. talk to us about the political realities in france versus what we see in the u.s. do you see a lot of similarities? conrad: there are a lot of similarities. what we see is the realization of political realities that the

theories are all strong and that france needs labor market reforms. the u.s. needs tax reform. trying to get that through with various interest groups pulling in different directions is difficult. the -- that even though theries are very strong, prospect of getting things done is difficult and particularly in the u.s. on tax reform, i am very hopeful. this is the same as the case in france and hopeful they get those reforms done. another aspect is there has been a transfer from -- or handover from monetary policy to fiscal policy and i think that is part of the story, but maybe we are reading a little too much about it when we think about the near-term policies on them on -- monetary front whether normalizing balance sheets in the u.s. or tapering asset purchases in the ecb. does it require these reforms in

france or tax reform in the u.s. question mark the answer is no. those policies were put in place as sort of an insurance policy against tail risk. those tail risks are gone whether we get tax reform in the u.s. or the labor market reforms in france. david: we see some fumbling with the baton as well. we will be back talking about the u.s. and go to single best chart. we will flag tv and you can see the interview like we just had with larry corbett and michael rubin. you can -- lawrence korb and michael rubin. more bloom -- more "bloomberg surveillance." this is bloomberg. ♪

♪ david: welcome back to "bloomberg surveillance." i am david gura in for tom clean this week. -- tom keene this week. this portion here you see the honeymoon period when the 10-year in blue and the s&p 500 were rising altogether and now we see a decline in bonds,

stocks, and the dollar as well. dequadros is here with me. -- you mourning the loss, how much optimism that -- do you have that things are going to turn around? conrad: strictly in the sense of the dollar, there are two aspects of the movement, there is fiscal policy and the odds of getting something past are still quite low. the other side of it is monetary policy and i wonder whether the markets may be placed too much on the monetary side and i think that the most likely outcome is the fed raises rates one more time in the markets don't have that priced in. i think we get the announcement on the balance sheets and although the markets are comfortable with the view come i don't think we have seen adjustment in the dollar or the components of 10-year yield that would be sensitive to balance

sheet normalization. if we look at risk premiums, they don't seem to have adjusted to this likely reduction in the duration the fed has taken in the market and we will start to revert that -- reverse of that. i think some of these markets may have gone too far and when it comes to the dollar, it's a reflection of expectations for policy here and policy abroad. what we up early scene is markets get a little -- got a little ahead of themselves on policy adjustments. david: we haven't talked about trade yet today. we had the first round of nafta negotiation's wrap up last week. ross, the policy in place, gary cohn at the white house talking about trade policy with more of a unified voice. is it still a risk factor for you? conrad: i think maybe now less of a risk than before. on trade policy -- with many policies in the trump administration, we have two pulling aamps

different directions. i think it is encouraging the in -- the president had an instinct and listened to his advisers. there are advisers within his administration that don't have his extreme views on trade and acknowledge that it is not necessary -- necessarily a zero sum game. who's making negotiations on his side? the early indication is they are taking a much more negative view toward trade and the risk is there, but as trump has shown, there's the odds that he will listen. francine: i want to talk to you whether you worry about the market mechanics. we have a great story on some of the things you can do looking at that to play the markets, but more broadly, there are fewer players in the markets because of passive investment. how does that skew everything? conrad: when we have unexpected events, we can get much more

sharp moves in the markets, i think. this also plays into this trade thing we have been talking about and that is i don't think there is an expectation that there will be a real crackup on trade policy, but the risk is still there and we could get violent moves in the market and now we have an extreme level of common markets and the question is whether or not back and be maintained when we have small plays. i don't think it's appropriate to judge things now given how thin trading is. david: thank you very much. we will make our way over to bloomberg radio. coming up later, the economic summit in jackson hole. complete coverage here on bloomberg television. this is bloomberg. ♪

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delivers consistent network performance and speed across all your locations. fast connections everywhere. that's how you outmaneuver. jonathan: another campaign promise wilts in the over

losses. the president promises an open-ended commitment to afghanistan. ray dalio says he is tactically reducing risk and activist investors turn up the presser on the biggest miner. its shell unit. alongsidehan ferro david westin and alix steel. futures this morning up firm or by about .1% after yesterday's marginal gains and the euro is weak or after german investor confidence drops for a third straight month. a stronger dollar in the fx market and stretch off, yields up about two basis points alix: a big selloff in europe and the bond market. italy getting hit hard, yield up by about seven basis points. a big selloff underway in italy and the vix relatively stable. my chart of the d i