watching wyoming. investors prepare for yellen and draghi's jackson hole speeches. will markets get any clues? againstsee parity single currency? we get the latest snapshot of the u.k. economy. can samsung's new smartphone restore its reputation and extinguish the memory of the note 7 debacle? this is "bloomberg surveillance ." let's check in on the markets. asset classes have been a little depressed when it comes to

politics and the turmoil in d.c. about trumps administration ability to enact the fiscal agenda on the back burner. stoxx 600 gaining 0.2%. a lot of the focus today and tomorrow will turn to the start of the central banks meeting in jackson hole. you can see the dollar strengthening. the one thing that i'm watching out for is possible parity in 0.915.und, currently at nymex crude at 48.26. u.s. crude stockpiles extended declines yesterday. that is your asset classes. let's get to the bloomberg first word news. nejra: the death toll from typhoon hato has risen to 12. it is the most powerful storm to hit the region in half a century. macau says it people were killed

in the gambling hub. another 153 were listed as injured. the city of charlottesville has covered two statues of confederate generals in tarpaulins. the decision came during a chaotic meeting and followed racially charged protests that left one woman dead. the u.s. is preparing another round of sanctions to punish the government of venezuela. according to people familiar with the deliberations, one would squeeze trading. this comes as president nicolas maduro and his socialist government moved to increase their authority among recession and protest. assured, under the leadership of president donald trump, the united states of america will continue to bring the full measure of american economic and diplomatic power until democracy is restored in venezuela. nejra: house speaker paul ryan

says he doesn't want to see a u.s. government shutdown. president trump threatened congress with exactly that unless it agrees to fund his mexican border wall. >> i don't think anyone is interested in having a shutdown. while we work on doing what we said we would do, control our border, i don't think you have to choose between the two. nejra: the pound has suffered its weakest close in almost eight years against the euro. it fell after a survey found companies were cautious on investing. britain will warn the european union next week not to make greater financial demands over its contribution to the investment bank. that is according to a person familiar with brexit negotiations. the u.k. contributes about 16% of the capital in the investment bank. in theory, prime minister theresa may could seek

reimbursement on its investment of some 10 billion euros when britain pulls out. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i'm nejra cehic. this is bloomberg. francine? francine: in a week of little significant economic data, all attention is on the jackson hole symposium in wyoming. investors will be focusing on any news flow from the key central-bank figures, including mario draghi and janet yellen. money managers will be listening for any clues about stimulus tapering. let's bring in gilles moec and john bilton, head of global multi-asset strategy at jpmorgan. thank you for joining us. how excited are you about jackson hole? please say yes. gilles: i'm not very excited about jackson hole, even to say that we probably gone full circle. lot from jackson hole to probably not expecting

anything at all. they will speak. they will say something. odds are that there will be some interesting stuff, or to be more precise, the market will want to .ead something interesting why draghin't see would want to be very granular just 10 days ahead of a scheduled policy meeting. and they should learn, in the used that when the ecb such occasions to send a very strong message, 2012, or 2014 about the possibility of qe, every time, it was about something binary. the market wanted to know if the ecb could take additional steps, didn't care about what kind of

steps they would take. now, things are much more complex. it is hard to transmit to the market what would have to be a very complex message. the risk of being too granular is simply to be misunderstood. i would expect a very guarded speech. francine: which is kind of what we are expecting by speaking to insiders. john, are you expecting at least a hawkish stance? i think you've got to look at a couple of things. first, what the market is expecting going in, and secondly, what janet yellen is going to try to achieve. there's a little bit of irony here. she's giving a speech on financial stability. the last thing she wants to do is disturb markets. the fed got their fingers burned over the taper tantrum.

what we've seen is a gradual evolution towards speakers from the fed telegraphing their intentions up front. they are saying what they mean and meaning what they say. francine: markets haven't really believed them. john: this is the point. what we have is a situation where the fed have followed a steady drumbeat, saying, we want to shrink the balance sheet, we will be raising rates again. inflation may be low, but it is the labor market we are watching. we're going to carry on gradually. markets have now got a 35% probability of the rates being hiked in december and u.s. 10-year yields a little bit below 2.20. the market is not praising even a matters -- a modest reiteration of that policy. if she does reiterate that policy direction, and markets

should be reflecting on the easy financial conditions, it is really just a followthrough, but it would be a modest hawkish surprise and could put a little bit of a tailwind behind bond yields. francine: we will talk more about the european central bank and the euro. is it the ecb and the unwinding of the balance sheet -- we have a great snapshot -- that investors will be watching most? gilles: yes, because the issue the ecb is facing is, there stands increasingly is going to be driven, or at least constrained, by their limitations. the limitations they gave themselves on qe. iswhat the market expects irrespective of macroeconomic conditions. the only thing i think that draghi and the council can do and deliver is simply to work on

the details, work on the timeline, work on what exactly the shape of tapering, the final decision is, which is not a very comfortable position to be in, when increasingly, whatever you say, everyone understands that your capacity for maneuver is very limited, which is very different from the situation in which draghi has found himself so far, with major capacity to invent new instruments, to surprise the market, to come up with new ammunitions. this part of this mandate is over. francine: gilles moec and john bilton both stay with us. let's get to the bloomberg business flash. nejra: dixons car phone shares have plunged after it forecast an unexpected drop in profit as an increasing number of britons opted not to upgrade their

phones. the electronics retailer expects pretax profit between 360 million and 340 million pounds. the average analyst estimate is 508 million pounds. amazons $13.7 billion whole foods deal has won swift approval, hot on the heels of the green light from shareholders. the approval indicates it doesn't think the tile will hurt competition. halved thenk has price of its fixed income and macro research as competition mounts. according to three people with knowledge of its plans, the german lender plans to charge asset managers 30,000 euros a year. a spokesman for deutsche bank declined to comment. samsung has unveiled its new smartphone as it tries to put the fiasco of its previous models behind it. like the note seven, which cost the south korean company an estimated $6 billion, the note 8

sports a big screen and advanced features. it comes ahead of new phone launches from apple and google. francine: thank you so much. china has ratcheted up its opposition to the u.s. investigation into intellectual property practices. it is accusing the trump administration of sabotaging the international trading system. chinese commerce ministry spokesman also said the two nations have more shared interests than disputes and stress that cooperation is the best way to address any differences. bloomberg's chief asia economics correspondent, enda curran, joins us from hong kong. what is the significance of these remarks? >> i think it does represent a ratcheting up of the rhetoric from both sides. china isn't going to take this lying down. that is consistent with what they've been saying. they warned back in january that

they had a big stick to shake. china can and will respond. as you say, they both have usually beneficial areas of interest. china continued to waive that all of branch at the u.s., perhaps signaling they could make some concessions. for now, certainly an area of confrontation. francine: first of all, how could china retaliate against the u.s., but are we there yet? it is still early days, but there are a number of channels. there are significant u.s. companies operating in china and there are significant u.s. companies winning big orders out of china. one of the favorite ones is the aviation sector. apple has big operations in

china. if it got to the point where china wanted to retaliate, they could hit american investment and american companies operating in china, and they could hit chinese imports of u.s. goods. i think china has plenty of options to respond if they want to. that would be at a point of a trade war and significantly heightened tensions. we are at very early stages in what could likely be a protracted process. francine: thank you so much. enda curran there. still with us, gilles moec and john bilton. he's head of global multi-asset strategy and jpmorgan. when you look at this intellectual property, given the turmoil in washington, d.c., what is moving the markets? do people care about this trade war of words? john: i think they do. we've seen that in the price action of the s&p.

anytime we see talk in washington leaning towards trimming taxes, markets like it. anytime we see it trimming trade, they don't like it. that has characterized price action. at the moment, it is not just china where we've seen the trump administration rattled the sabr. it has been around nafta, the wall, etc. anything which markets perceive as anti-free trade seems to be having a drag. any we have the talkback on, fiscal measures, tax trimming, markets recover quickly. i would characterize that as markets not focusing too much on this. there's not a lot of other news flow which is driving the s&p right now, so we may be seeing markets overthink this. francine: let me show you a chart on the broader economy. this is my favorite chart of the day. this is thanks to hillary clark. you can follow her on twitter.

she is the queen of charts. october is in white. november second is in blue. getormal times, instruments progressively higher. this is all the worry about the debt ceiling. does this reverse quickly or is this something we continue seeing? john: you've already seen commentary out of some of the key u.s. figures. paul ryan saying they've got no interest in a government shutdown. there's effort to link the debt ceiling debate with other elements going through congress. we've seen a number of senior figures in the trump administration shying away from the idea that allowing the debt ceiling to bite is going to be helpful. the republican party have had their fingers burned in the past in terms of debate over debt ceiling. back in august of 2011, the

situation we saw then. something we it is will see a little bit of noise about. ultimately it is not credible to threaten to bring about a technical default in the u.s., and not something i think markets are going to take seriously. francine: what about the real people in the economy. we've been trying to figure out inflation and whether future expectation changes the real number. but all this noise in washington, does it hurt consumer spending? shutdowns,government we have prior episodes, and what we found is that the impact is very limited. it was very hard to find any kind of impact on spending decisions by firms or households. i think it would be a different

story if it was about a debt ceiling. is, inthink the issue the space of about six months, we've moved expectations from, the u.s. economy was doing quite well and it would do even better because we would get the mother of all fiscal stimulus, which was the case six months ago. now the news flow is, the economy is not doing that well and we are not going to get stimulus, and there is a terrorist that would get the opposite, which is the government shutdown. is it weighing on decisions? probably not yet. towards the end of the year, it could be a major risk. what we were expecting at the beginning of the year is to get a real acceleration in demand coming from the u.s., and we are not getting that. at the same time, since expectations are less positive,

our currency has been appreciating. we are not getting what we are supposed to get, and our exports are getting more expensive. francine: we have a whole block dedicated to the euro. gilles moec and john bilton. up next, winter is coming, but can the same be said for the stocks rally? we discuss next. this is bloomberg. ♪

francine: you are watching "bloomberg surveillance." let's talk about a period where european stocks perform at their best. autumn, paul for our american friends. new research suggests that while earning forecasts and politicals could support a rally, brexit negotiations and currency challenges could put a damper on equities. here to discuss is the author of the research. he's our senior equities strategist at bloomberg intelligence. still with us, gilles moec and john bilton. tim, thanks for coming on. we discussed how to summer tends to be poor. autumn usually is better. >> i think we all like to dismiss seasonality trends as something that should be arbitrage away.

if you look over the last 10 years, the markets have performed better, specifically the stoxx 600 and ftse 100, between september and may. they performed worse during the summer. sell in may and come back on saint leger day, or in the u.s., on labor day. we're talking a difference between -1% and plus 4%. it is not every year. the setup this year is interesting because of the relative enjoyment that we had in the autumn and spring coming into this summer. taking european markets to higher levels both from a valuation and it is an interesting point of reference from here. economics and earnings seem to be positive. things like currency,

volatility, geopolitics, present risks. francine: i love one of the charts you had. let's bring it up. what are the most important factors? >> it boils down to earnings and the economy. this chart looks at the stoxx 600 earnings relative to the msci world as a broader benchmark, as well as relative price. there was a long time where europe was lagging. it started to turn from an earnings perspective last year and performance did the same. if you look at the economy, we've seen a march higher in european pmi as an instance, and as those have marched higher from 2014 through early to mid 2017, earnings expectations have marched with it. there's other factors that play into that.

the underlying broad growth is supportive. francine: do you prefer bonds or equities? john: right now we have a preference for stocks over bonds, in large part because as previously discussed, we do think we will see a bit of balance sheet reduction this year, which will probably shift the equilibrium yield point, so bonds are likely to underperform. let's pick apart the stock case. first and foremost, the lens. secondly, what the global economy is doing. third, that interplay. let's look at the facts. if you had owned euro stoxx and you are a dollar-based investor, you outperform the s&p 500 by 7%. if you've done it in local currency, you've underperformed by 4.5%. it matters a great deal what the currency has done. that is important. let's face it.

are long,n investors who is going to buy next? you are going to get the currency effect as well as the equity effect. francine: we are running out of time. euro higher or lower? just a one word answer. .> probably a bit toppish francine: we need to get a better call from gilles moec on the euro. thank you so much, tim. gilles moec and john bilton stay with us. we talk about the pound hitting a near eight-year low. ♪

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across all your locations. hello, mr. deets. every branch running like headquarters. that's how you outmaneuver. francine: you are watching "bloomberg surveillance." let's get straight to the bloomberg first word news. nejra: the death toll from typhoon hato has risen to 12.

it is the most powerful storm to hit the region in more than half a century. macau says eight people were killed in the gambling hub. another 153 were listed as injured. the city of saw that smell has covered -- of charlottesville has covered two statues of confederate generals. the decision came during a packed meeting and follows racially charged protests that left one woman dead. house speaker paul ryan says he doesn't want to see a u.s. government shutdown. president trump threatened congress with that unless it agrees to fund his border wall plan. >> i don't think anyone is interested in having a shutdown. while we work on doing what we said whawe would do, which is control our border, so i don't think you need to choose between the two. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i'm nejra cehic. this is bloomberg.

francine: thank you so much. u.k. consumer spending growth slowed in the second quarter as -- i'm trying to go through the figures the cause we just had gdp, but i think it is because of car sales. business investment stagnated. however, that gdp number coming in buying in line with estimates for household expenditures. only 0.1%.e was it also meant that consumer activity added just 0.1% to gdp. gdp quarter on quarter coming in at 0.3% and year on year at 1.7%. little impact on the pound. let me just recap what we know so far. the consumer spending growth that has been dragging down economic momentum slowed in the second quarter.

the increase in household expenditure was only 0.1%. so with us, gilles moec, john bilton. this is in part to do with what has been happening with pound. gilles: definitely. what is going on is we have a double whammy for consumers and the negative impact of the sterling triggered inflation. that may fade gradually, but there is an issue with real wages in this country. that is disconnected somewhat from the brexit negotiations. last year, we had a massive merger coming from the bank of england with a lot of additional lending from the banking sector. this is getting to the end, trying to nudge the banks away from lending to much. in a situation where the ratio is close to zero, there's not much cushioning the households

can do. it is concerning and i think what is interesting as well is, divergence between the u.k. and the eurozone. what we have right now is basically a growth rate which is roughly half of what it is in the eurozone. complete reversal of fortune from where we were. unfortunately, we think that is going to continue into next year as well. under performance from the british economy. francine: just to put it in perspective, the dire predictions before the referendum haven't come to pass, but the growth phase is about half of what we had over the last four years. how much worse will it get? how difficult is it to predict? gilles: we don't have in mind a situation of recession where we 1%, growth slightly above quite mediocre by the british

standards without any catastrophe. on the dependent medium-term outlook for the brexit negotiations, a sense that things will be ok, that there will be a deal which will protect hiring in this country. quite negativeen on the negotiations, i think we may have reached the peak on that. the position we had from the british government, far away from where we need to be to get a quick positive outcome in negotiations with the e.u., but a lot of red lines have been blurred. we may get into a more constructive dialogue between london and the e.u. if we go through the thorny issues of the divorce bill and the northern irish border. there seems to be growing

relevance in the position from london. francine: i like that, peak gloom. are we over it? john: we've got a period of time where the underlying growth figures are probably likely to their down. regardless of where the negotiations take us next year, and 2018 is where the rubber hits the road for these negotiations, it is crucial that that is the sweet spot. until that point, momentum matters. pmi,e got eurozone composite of 59.8, that is pointing to eurozone growth ahead of which is well where the u.k. is likely to be given the problems around consumer spending and the uncertainty in the economy. if you look at the stoxx 600, it

is probably getting a bit of both. if you separate it out, it would call for a clear preference of eurozone stocks over u.k. stocks. francine: where do you see the pound? n levelthe europea yesterday. is this meaning we're going to touch parity? john: traders love round numbers. the idea that you could see opportunistic trading is certainly not unreasonable. the risks to the downside in sterling at the moment are probably greater than to the upside. while i agree that the position paper has blurred some red lines, between now and the end of the year, it is likely we could see a bit of disappointment, and that plus eurozone strength could weigh on the pound. francine: is this being overdone? gilles: i agree that the coming

weeks and months, the risks are on the downside. before we can get to the recognition, there are still so many thorny issues to go through. october are in unlikely to work nicely. before we get to more constructive terms on this, we might get to very complicated episodes. , moresymbolic changes than symbolic changes, from the london position, are important. francine: thank you so much. just got some breaking news out of the u.k. plus 246,000 in the year ending march 2017. far from the numbers theresa may was talking about when curbing immigration. we also got breaking news out of petrochina. this is a huge company. when it comes to petrochemicals,

the earning report is out, a beat for net income. petrochina says supply and demand is progressively moving towards a state of balance. renminbi -- i think cents of the renminbi. they say domestic demand has increased relatively fast during the first half while output climbed at a steady pace. that is petrochina. this is the stock price over the year. we will probably see a reaction to these earnings tomorrow morning. up next, shrugging off the strong euro. it policymakers has he isn't concerned about the currency's recent gains as officials prepare to discuss the path forward. this is bloomberg. ♪

francine: this is "bloomberg surveillance." we are going through petrochina numbers. first-half net income, 6.3 billion yuan instead of the estimated 10.4 billion we were expecting. sound financial position. chinese stock market closed right now because of the time difference, but watch out tomorrow morning. let's check on the markets with mark barton. mark: euro traders are gearing up for volatility, whereas those dealing in other currencies are anticipating little impact. one week euro volatility trades

about 47 basis points higher than two-week volatility, more than triple the premium on dollar-sterling and the yen. the white line is euro-dollar one to two-week volatility. draghi speaks 4:00 p.m. new york time friday. that is interesting, as is this, as donald trump threatens to shut down the government in october over border wall funding. in normal times, rates on fixed income investment go higher the longer the maturity. something unusual is happening. investors are demanding higher rates on those securities maturing on october 5, which is around the time the treasury estimated it won't be able to pay its debts. some are calling it a kink in the yield curve which is

becoming somewhat more pronounced, which leads us to the ability of the president to push through his agenda. wonderful chart showing us the most tax companies relative to the s&p 500 index. you can see how they rose relative to the s&p after trump was elected. he will be able to push through his tax agenda dissipate, we see those types of companies fall relative to the s&p 500. wonderful topic of conversation. euro-pound parity. of the 62 participants in our survey, only hsbc and morgan stanley see parity or above by mid-2018. morgan stanley is by march. hsbc is by the end of the year. , 90 by theforecast end of the year.

we are at 92. francine: thank you so much. policymakers has he isn't concerned about the strength of the euro. the australian central bank governor reckons the currency's rise against the dollar is a reflection of economic momentum. more, from frankfurt, team leader for our european central bank coverage. how hawkish is hansen? he's probably the most hawkish on the council, right? >> he leans toward the hawkish side. he's also a respectable academic economist and central banker of estonia. although that is a small economy, he does carry some weight on the council. jens weidmann spoke in a separate interview, giving the same argument, that he sees the

euro strength as a sign of recovery, and he is not concerned. they may well reflect the prevailing mood on the governing council. francine: the idea is that basically ecb needs to tie forward guidance told measures rather than focusing on interest rates and bond purchases. how difficult is that? >> very. he said he doesn't know exactly what design the stimulus package will look like, but it is not going to be easy. easingward guidance, the , is centered on the asset purchase program. he wants that to shift. he would like to see the easing bias linked to all ecb measures. wideis easy to say in a ranging discussion, but you need to pin it down into policy statement that tells the markets where the ecb is headed. that is the debate policymakers

will have. it is by no means resolved, it seems. francine: thank you so much, paul gordon, western european central banks team leader. still with us, gilles moec and john bilton. we heard from hansen. what does it mean about what the governing council wants to do? it is almost like they've become the npc now. gilles: many different views, but the point i was making at the beginning, we kind of know the direction of travel. we kind of know the growth state of qe. unless the economy turns sour, i don't think they would find the capacity to move away from the current limitations. qe would have to be adjusted down, even if inflation is not in line with where they want it to be. they have a conversation on how

quickly you do this. again, i think direction of travel is well known. i think there's a very interesting debate on what you do with forward guidance. i think it remains the ecb's main communication tool. it has a bearing on what you do with qe. the longer qe continues, irrespective of the quantum, the easier it will be for the ecb to force the market into pushing their first rate hike well into 2019. the current forward guidance tells us no hike. me, the time it is going to take for qe to be completely tapered, which is the more important topic, because it is very important to understand where they want policy rates to be, so i will expect a lot of

focus on this key question, how long. francine: john, do you like european assets? john: we do. i think it is interesting to look at the growth picture in europe and how that is translating through, but also in terms of where we expect the likely path of ecb policy to take us. we've seen european stocks do well in dollar terms. in local currency terms, there's a catch up to do. we saw earnings revisions turned sharply lower in lockstep with the strengthening of the euro. if we are entering a situation where we've done a lot of talking and we are now in a position where the euro has reflected that, the outlook could be a little more benign. if we look at the way in which the european economy is moving,

reasonable domestic strength, good participation in the labor market, strong consumer , so broadlygood pmi speaking, the picture is very good. it is a currency drag which has really hurt us. let's roll back a year. we were talking parity a year ago. now we are talking about parity between the euro and the pound. if we look at our long-term euro-dollar, we tend to agree with hansen's few, that the euro is not overvalued. i will projection is 1.31. what have we done over the past 12 months? we've removed the tail risks and that potentially gives us more upside momentum. francine: thank you for joining us today. moec.ilton and gilles coming up, we talk technology.

could samsung's new smartphone extinguished the painful memory of the note seven? this is bloomberg. ♪

francine: this is "bloomberg

surveillance." let's get to the bloomberg business flash. nejra: dixons car phone shares have plunged this morning after it forecast an unexpected drop in profit as an increasing number of britain's opt not to upgrade their phones. the electronics retailer expects pretax profit between 360 million and 440 million pounds. the average analyst estimate is 508 million pounds. amazon's whole foods deal has won swift approval. the ftc's approval indicates it doesn't think the tie up will hurt competition in the grocery market. that is the bloomberg business flash. francine: thank you. samsung is hoping to restore its reputation with its highly anticipated note 8 phone after the previous model's exploding battery fiasco which cost the

firm $6 billion. let's get more with bloomberg's managing editor for asia technology. thank you for joining us from tokyo. tell us about the phones. >> samsung unveiled the phone at an event in new york overnight. the note phone is there bigger line, bigger than the galaxy. it is bigger even than the other phones they put out so far. it is 6.3 inches diagonally. they've also shrunk the forehead of the phone, so you have more screen real estate. you can see emails and videos. they've added a dual camera so you get better depth perception when it comes to cameras. the big thing in people's minds is, is this going to help move past the fiasco of the note seven and try to sell more phones in terms of the note 8

now? they have this just ahead of apple's introduction of their next iphone. francine: how high are the stakes here? >> it is enormous for the company. they have had success with the galaxy line, but this note 7 fiasco was a black eye for the company. it hurt their brand all the way around. they want to show that they've been able to come back. they've been able to fix the problems. there was talk after the note 7 problems that they were going to end the line altogether. they decided to stick with the note designation, call it the note 8 this time, to signal they've been able to solve those problems with the battery, adding additional capabilities, to press the envelope in terms of technology capabilities and continue with this line. francine: how will this affect the competition between samsung and apple? >> these to battle it out at the

very high end of the market. in the u.s., apple has substantially higher market share, but samsung is the number two player. in the rest of the world, samsung is more competitive. it is the biggest seller of mobile phones globally. it has fierce competition in china, not with apple so much, but with huawei, xiaomi, and the other players that have been willing to put significant capabilities into their phones. francine: thank you so much, peter, bloomberg's managing editor for asia technology. "bloomberg surveillance" continues. david gura joins me out of new york. this is bloomberg. ♪ ♪

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hole speeches. china ratcheting up its position to the u.s. property probe saying it sabotages the international trading system. thespending growth slows in second quarter with business growth stagnating. i am francine lacqua in london. is in new york. there is a lot to talk about. jackson hole and a couple of things to do with brexit, and u.s. politics. david: michael mckee, and they , thehear from the hostess president of the kansas city fed, later this morning. taylor: china is accusing the the of sabotaging international trading system and warns that it will defend its if necessary.

this goes into an investigation into china's intellectual property practices. they will see if they are unreasonable or in discriminatory. the most powerful storm to hit southern china in half a century has started to lose strength. typhoon hato is blamed for nine deaths and 150 injuries. and wind of a 1090 miles an hour. in london the u.k. is warning not to play brexit hardball. the eu's position is that capital should be reimbursed. according to a person familiar with the talks to u.k. wants that eu not to take an aggressive stance. a new forecast winds health care costs could eat up retirement costs in the u.s. according to fidelity a 65-year-old couple

retiring this year with knee 200 and $50,000. -- would need to under $50,000. i am taylor riggs, this is bloomberg. thed: a quick check of data, starting with futures in the u.s., up, if only barely. a stronger dollar, about 1/5 of 1%. the yield on the 10 year as we go into the jackson hole meeting, 2.18%. francine: this is what i'm looking at, similar to yours, all about jackson hole. investors in europe are less stressed about what is going on in d.c. and are trying to focus on the central bankers' meeting in jackson hole.

oil still holding above $48. u.s. crude declining during a time of usually strong demand. the euro pound, are we going to get parity? i don't know. 0.9204. u.s. debt ceiling, this is a conversation that will accelerate as lawmakers make their way to washington in early september. in the 1940's, the size of the debt ceiling rising. is interesting to see this unfold via statements from the president. we just got a report from "the new york times" about the fraud relationship between the senate majority leader and the president. thatissuing statements they are talking, and anyone who doesn't know that is not part of the conversation. trying to make americans feel like there is progress on this

issue in particular. francine: it also goes through a 'sttle bit of the president impact on the markets. this is the difference between the october t-bill and the one that is on november 2. normal times, rates in fixed income instruments get aggressively hire the longer the maturity. money stayyou let there a greater the risk something could go wrong. we are seeing a kink in the yield curve becoming more pronounced because of what donald was saying about shutting in octobervernment over border wall financing. all eyes are on the jackson hole forum, which begins in wyoming today. investors will be focusing on the world's central bank figures, including mario draghi

and janet yellen, both who give speeches tomorrow. for the hour, we are pleased to welcome the pimco europe managing director and portfolio manager. ike, what are you looking at for jackson hole? mike: the two main issues are we got a tapering, and taste that it doesn't look like he will say anything given his speech earlier in the week. , who ist yellen supposed to be speaking on financial stability. we're looking to confirmation about how worried she is about the dip in inflation. francine: fishy going to give clues? -- is she going to give clues? mike: she will reiterate the steady as she goes, the economy is doing well. the game plan is a gradual tightening.

but they're trying to do is they are trying to give the message of slow and steady tightening without wishing to rock the boat too much. there is that debate about using monetary policy as a tool to slow asset prices. fednce conditions as the starts tightening, i would be surprised if she gets too involved. about the ecb? it could be the wrong forum. mike: there are 2 views on draghi. has these kind of events to signal policy changes. time, our expectation would be that he would wait until the governing council meetings in september or october and use those as a warm-up as a taper for next year. the focus is the tapering and how far it goes. our best to guess is that they do it until the second half of next year.

david: how are the currency markets appreciating what is happening in jackson hole? there is talk about an end to quantitative easing globally. mike: the key that everyone is looking at is the dollar against the euro. yet both sides of the trade. yellen on the dollar side, and how worried draghi is about the euro.th of the most of the rhetoric from the central bank seems to be fairly relaxed from -- relaxed on the euro. inflation is already low and the euro going up makes it harder to get to the target that much harder it. on the one side markets are worried about yellen, and on the other, draghi pushing back central tapering. is the conversation going to continue? do you see a logical extension

of what we discussed in portugal a few weeks back? janet yellen was not a participant there. this is the first time you have the 2 central bankers together. ,ike: our sense was that draghi that the economy is doing relatively well. our game plan is to taper over 2018. unless something strange happens, that is what we will do. i think that message is one able try to hold to. the true that the matter is that tapering and these kinds of actions, changing the shape of the central bank talents sheet is a relatively new tool. one thing that we have learned relative to the may 13 event is that policymakers are keen to ensure they do not create unnecessary volatility as they change the shape of the balance sheet. of thegiven the newness terrain, what can the council learn from the attention we had

in the u.s. a while back? mike: the most important lesson is getting the markets set up for it is a good idea and a drip feed of information is the best way to prevent a sharp market move. that is what you have seen from in the, and the fed, tightening cycle. there is a recognition that there is a high level of gross leverage in the global economy. slowly tightening seems like a good idea to us. francine: what is the best bet you have on the markets? distortionw if it is you want to play or something that looks attractive. mike: in the context of the debt ceiling debates, there is an argument that we think the u.s.

treasuries on a relative basis -- on a relative basis loo k good. we like the relative value of treasury versus other things. we have seen part of the rate cycle and they give a two-way risk. it can go either way. 35 basis points on the bond, 1% on the gilt. francine: coming up on bloomberg television and radio, we hear from the kansas city fed president at 7:30 a.m. in new york. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." let's get to the bloomberg business flash. deutsche bank responding to increasing competition. according to people familiar with the matter deutsche bank has cut in half what the fixed income charge in macro research to $35,000 he year. able force firms to charge for research separate from other services like trading. in the u.k., shares of the largest electronic retailer are plunging. an unexpected drop in profits. the reason is increasing numbers of britons are not upgrading their mobile phones, adding to to arns that it is exposed slowdown in consumer spending. uber'financial performances is improving in the second quarter. a narrowed losses to $645 million as investors revolted against the company's then ceo

over scandals. that is your bloomberg business flash. accused theina has trump administration of sabotaging the international trading system after the u.s. launched an investigation into the country's intellectual properties practices. tone followinger an investigation on friday from the u.s. trade investigator. , i don't know how you see this. if it is a straight or trade negotiation, trade war, war of words, or if it goes back to what we are seeing in washington and the impact that will have on t-bills and the treasuries. mike: this particular one, this is a trade discussion more than anything else. classicoment, this is

trade and foreign policy. you have a situation where at the moment it looks relatively manageable and like it will not flareup, but you have a level of uncertainty with all of the foreign policy discussions with the u.s. administration. we have lost clarity as to where it will go and tell the other entity is going to react. that is why these stories are weeresting to him a big as get a constant flow of foreign policy -- are interesting, because we get a constant flow of foreign policy. francine: did they do deteriorate, but asset classes will pay for it? currencies? bonds? mike: what you would see if you get one of these situations that would deteriorate, you will see

a higher risk in markets, and that would get you to bond starting to rally. then you would see volatilities come through in risk markets, maybe the vix. david: house and pathetic are you to the u.s. administration that they will learn something from these studies, whether it is the intellectual properties, production, will this yield new information that will be beneficial from a policy perspective? .ike: that is a good question at the moment, what we do know is that there is a limit to what well accept inks terms of trade from one another. you have seen various examples in the past six months. that is the message that trade is something all politicians are focused on. global trade from many years has been seen as unequivocally good

for the global economy. one thing that populism is based on is that maybe globalism is ood.an unequivocal g david: what are you looking at to judge how vital that relationship is between the u.s. and china? how much it has deteriorated. i look at the tweet from the president three modes after he met the chinese president in florida where he expressed disappointment with how much had been accomplished between china and north korea. we have a president that has been characterized as inpatient. how do you assess how strong the relationship is between the u.s. and china? mike: the clearest ways to look at the dollar and how the dollar is performing. the dollar has been classic, but

you can look at the dollar-yen as well. if you see a significant move in those crosses, that is something that would give you a warning sign. at the moment, those crosses are not responding to this rhetoric. that is where we would look for versus the asian currencies. thecine: coming up, conversation with the former walmart ceo and president about the fate of retail. look for that. yesterday, there was an interesting story on walmart and voice recognition. this is bloomberg. ♪

francine: this is "bloomberg surveillance." i am am francine lacqua in london, david gura is in new york. let's talk about investors and policy makers that have worried about the slide in stock volatility here they may have had good reason to do so. saysberg intelligence's near historical low volatility adds risks to european stocks and earnings and seasonality looks positive. , theng us is mike amey ando managing director portfolio manager. what is your research about? tim: we have looked at the

prospects for an autumn rally. we think there is support from the economy and earnings. we think there is risk factors, whether it is a translation issue or a challenge to export. it is interesting to take that historically near low current volatility. and near historically high valuations. it is the rubber band that is being stretched. for a long way until something causes it to snap, then it hurts. right now, you have geopolitical issues, whether it is president trump in trade, or the lack of progress on wings like tax, or infrastructure, or does brexit continue to be an issue. if any of those snap, it presents something that bites.

francine: a chart that presents what you had in your research, the msci compared to the stoxx 600. tim: if we look at relative earnings from a euro european earnings, they turn relative to global earnings at the end of last year. that is going to dental saw european stocks do better in the same context versus the benchmark. that is following a long time where it was going in the opposite traction. -- in theis is opposite direction. part of this is the pmi progressively moving higher, earning expectations have moved progressively higher as well. all of that is supportive. are we gettingt in navigating the low volatility environment? mike: i think what we have

learned is that we have to be patient. valuation's ultimately do matter -- valuations ultimately do matter. the worst sin is to continually buy risk assets into a rally up until 2008. i think we should all make sure are at are aware that we low volatility levels. we have seen a strong rally in risk assets. don't look at low risk in your portfolio and say i will take more risk. the reason my risk numbers are low is because volatility is low and asset valuations have done well. david: you have worried about geopolitical wobbles. i wonder what we have learned about what a more seismic event would have on the market. tim: you can see where some of

those, geopolitics or some other event, do have significant consequences when volatility has been at low levels. or 2015.or 2010, 2011, those are all incidents where volatility was low and spiked. you think of today, and with almost gotten numb from trump's commentary and things along those lines. david: mike amey will stay with us. coming up a conversation with the former presidential candidate at 8:00 a.m. in new york and 1:00 p.m. in london. this is bloomberg. ♪

david: president trump back in washington after a two-day trip to the american west.

david gura in new york in for tom keene, francine lacqua and london. taylor: president trump threatens to shut down the government over funding for a board wall and causes more problems on capitol hill. congress has to pass the spending bill by next month to keep the government open. they also have to raise the debt ceiling. they have to package the two together and send them to the president for his signature. cleaning up legal behavior on wall street. bid to overturn his conviction in the biggest insider trading case ever. he is serving a nine year sentence raising legal tips to make 200 $75 million. in japan, a business lobby is urging prime minister abe to tackle the nation's debt. a corporate executive said japan's run of economic growth provides a now or never opportunity. twice japan has delayed a planned 10% increase in sales

tax. tar had withdrawn an ongoing 2016 after an assault on the saudi arabia diplomatic mission in tehran. now the saudis are leading the atar over of q alleged ties with islamic extremists. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine: spending in the u.k. is holding back the economy that only group 1% in the second quarter, the weakest since 2014. written warning the eu next week not to make greater financial the man's over the blocks financial bank. doubt watchers

the u.k. has done enough to make trade talks start. for more, we are joined by the head of international trade and former special adviser to david cameron, part of the team that renegotiated the terms of the u.k. membership in 2015 and 2016. still with us is mike amey of pimco. what do you make of the trading position? people wonder if the trade talks start in october or not. s: i think october might be optimistic to start a long trade talk. this will very much come down to money and whether there will be a principal agreement for money. it is almost impossible to get to a precise figure. if you get to a principal agreement around roughly how you calculate financial contributions that the you cable

have to put in here, then perhaps late autumn is my best guest on when to start trade talks in earnest. francine: is that enough time? people like mike have stressed that we start now. mats: it depends at what you mean by enough time. for this complex negotiation, which is not only covering that, but different issues are non-trade related and non-regulatory related, foreign policy, what have you, this is the mother of all negotiations. there is not enough time to do it in a satisfactory way. there are details you will have -- there are details you 2018.o solve post periodwill have a stable for businesses and trade of the next few years.

david: there do not been it was mentioned you were worried about crashing out. it is fascinating. if you look, there are two things. look ascy papers to us if they are showing some signs of a more conciliatory tone. the lack of the house speech of the hard brexit, no deal is better than a bad deal kind of thing. it looks like that is the good news. what worries us is that it looks like the negotiations over the bill look like they will take longer. politicallysuch a difficult one to get over. we both look at the bill as an indication as to how well the overall negotiations are going. that is why you have seen sterling is not reacting to the

more conciliatory papers. they're looking at it and saying if we can't agree the bill we don't get to the next round. let's get through round one before we think about the transitional deal. david: what we have learned about trade, are we getting more bone?n the are you learning enough about what this government's perspective is on what they want to trade relationship to be like? the papers have been helpful and allowed us to move the debate and discussion forward. theicularly beyond ideological shadowboxing that has marred the discussion to date. that has been helpful. on customs, the u.k. government goes in with a nationalist position saying that we want to have an invisible customs border

but we also want to strike our own traders. and thenout a position you try to get as much as you can. on the resolution and enforcement paper yesterday, i thought that was interesting. think on substance it was consistent with the lancaster house speech, but the content allowed people to draw the conclusion that the government has some idea of where it wants to go, a mixed approach to resolution enforcement. francine: i have a curiosity. we hear on the sidelines that you were part of the negotiation team 2015-2016. there is a belief that if brexit were not to happen and if u.k. said we want to renegotiate, bur

immigration, but remain part of it. that, to have a clear division around national welfare systems and we got roughly what we asked for. what people are asking for now under that scenario is to ask for some kind of absolute cap or break on numbers from immigration. that is difficult to get. freedoms, capital, people, service, and goods go together. that remains. is amazing. we're looking at parity watch, but we are talking euro-pound. months ago we were looking at pound-dollar. it is euro strength and relates almost certainly to euro

strength. a lack of willingness on the part of the markets to believe there is significant movement in the brexit talks to get us away from this. we all hope there will be a transitional deal but i know there is political risk around the negotiations. some, but not enough to move the pound of words. -- pound of words. -- pound upwards. eur unless we the get a breakthrough on the bill discussionso. that is what we're looking at as an indication of making genuine progress get the position papers are good, but people want to be shown the money. david: i am looking at a chart showing the morgan stanley hsbc calls. as you look at the data in the coming months, what are you most keenly watching about

indications about the robustness of the relationship between the u.k. and eu? mats: for sterling against the euro, you have inflation numbers or on the real activity numbers. so far we haven't had either. it seems bullish for the year so far. on the u.k. case, in the short-term the gdp numbers have been weaker than most would have forecasted. q1 and q2 have been weaker than most people expected. if you saw pickup in that data, that would help. the big one is the brexit negotiations. pancine: thank you tomats ersson. george hear from esther

at 7:30 a.m. this is bloomberg. ♪

david: in for tom keene, i am david gura in new york with francine lacqua in london. concernedcurrently about the strength of the euro, this comes as officials to discuss how to wind down the bond purchase program. the 12% gain is a reflection of the economic momentum, he says. we're talking about paul gordon. let me ask you how representative his views are. he blames this on the economy

more than anything else. is there agreement on that point? >> on the point of the euro, there seems to be some concern among policymakers of the future euro. he is not concerned at the moment, bundesbank saying the same in a second interview. it is more on the hawkish side of the spectrum, but the fed is not there yet. they are probably representative of the prevailing view. david: what have we heard from mario draghi in germany, he will be speaking in wyoming tomorrow about the currency, what has he said about the strength of the euro? had the opportunity to say something about it and basically said "it was discussed" and moved on. be playing this

down. whether he chooses to do so and jackson hole remains to be seen. is asro strengthening much about recovery in the euro area as anything else. the last time draghi got seriously worked out about it it was nearly 140. guidance it is forward , not just interest rates. how complicated is that? >> very complicated. there is no easy way out than a blunt statement. hansson's the human is easing bias to accommodation on the bond purchases. maintain ando easing bias our signal a level of accommodation, how do you do it? you refer to your measures. ecb has used a a lot of measures. how do you boil that down to a clear message? there doesn't seem to be agreement so far. francine: thank you, paul gordon

. all of our ecb coverage from frankfurt. still to come, mike amey. let me bring you over for a snapshot of the balance sheet. he is committed to tapering, now he has to get on with doing it. mike: that is the message from the recent central-bank rhetoric. ecb our calculations, the continues to buy at 60 billion a month through the middle of next year, they will run into a lack of bonds to buy unless they change rules of how much they are willing to buy in a particular market, 33% of the market. they want to reduce purchases gears they do not want to create unnecessary volatility. one way is to say we're going to put hawkish guys out there saying we're not worried about euro strength and give flexibility. they have pre-committed.

must-read,ur morning we're talking about the succession of mario draghi. he says the monetary chalice has been out of reach for berlin for little to do with merit since the world wars. there is a taboo in europe about giving that kind of power to germany. it is time to reconsider that taboo. the eurozone might not have survived without the commitment of angela merkel and the german political class. a hankering over you will get this, put someone in the council , then you have the governing council, how do you see this playing out? mike: what a week it a german president of the european central bank at the moment, it is not one we have great clarity on. our base expectation is that this will be one for later. until octobere

19. there's plenty of time. i think that it makes for interesting reading of course. at some point, of course, germany is the largest economy in the eurozone. by rights there will be a chairman ecb president at some time. -- there will be a german ecb president at some time. next 12 months, that is what we're focused on rather than mario draghi. david: 20 make of the comments that mario draghi made talking about the importance of forward guidance? are you sympathetic? mike: we're sympathetic with the view that when you have policy tools that you don't know exactly how they work that you when youead carefully

change your policy stance. i think that is right. forward guidance there has worked well. there are other examples where it hasn't worked well. one, when you are trying to precommitted to a fairly major change in policy, get themselves out of the bond buying business, forward guidance is a good idea. david: we were talking about what we have learned about tapering in monetary policy. what about communication? the way that the central bank has communicated? are they better at conveying what they hope and intend to do going forward? mike: i think they are. there are various ways to look at that. if you look at where markets have gone since the fed started to raise interest rates, markets have performed well. that should be reassuring. it means, if you go back a

couple of years ago, there was a debate over if any central bank could get away from the zero lower bound. the fed has retreated slowly and it has been a benign rate hike in the past. they have got away from the zero lower bound. that takes forward guidance. they have learned, yeah. amey.ne: pimco's mike this is for the picture of you watching us on tv . you can ask our guests a question by clicking under the video screen. this is bloomberg. ♪

francine: news is "bloomberg surveillance." i am francine lacqua in london, david gura is in new york. somen -- we'reg seeing some sun in london, but it is not as pretty as new york. taylor: quick approval to

amazon's takeover of whole foods. the deal was approved in a 30 determining itr would not hurt competition in the grocery industry. lawmakers argue that the deals that could hurt consumers are being approved to easily. the company sales beat estimates, but the forecast it profits for the quarter may fall short of projections. they have been dealing with sluggish demand for printers and personal computers since it split from hewlett-packard enterprise. tradedo a deal to buy bonds from guggenheim partners. .1.5 billion they trail blackrock, vanguard, and state street. that is your bloomberg business flash. francine: thank you. two of the world's biggest hedge funds may escape the brunt of --

they both got the recent licenses and operate under separate laws to have easier transparency requirements. lawmakers are faced with the task to close the gap between the two loss. we are joined by the reporter of the story who covers financial regulation for bloomberg. thank you for joining us. there is appetite to understand how this impacts various industries. what have we learned about hedge funds? several laws.nder this highlights there are lots of funds that will be under a different law than 2011. they will not necessarily face the full brunt. it is causing a lot of anxiety and planning before january. francine: how difficult is it to break it down to see what funds and classes are subjected to the

rules and the ones that are not. >> some of them are still trying to figure it out. plenty are regulated under the 2011 law. some, because they do different businesses, have been regulated niped. it has been around for years in its earlier version. francine: what does it mean for lawmakers? on both sides of the atlantic, are they working together or against each other? for this particular issue, it is primarily a european issue. if there are differences, the earlier 2011 one and the one in january, it is mostly a european issue. if there are important gaps, they should be closed, and how quickly could they do it? it could take years in brussels.

francine: it is not even that easy. it is one european role, and you have parliament saying it is complicated. >> there are many laws in brussels, sometimes they overlap, and sometimes there are gaps. david: thank you for the update. coming up, will be joined on set for the perspective on the market and the jackson hole conference in jackson, wyoming. this is bloomberg. ♪

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be markets get any close on monetary direction? -- totion to the interim the intellectual property probe with china. the white house has a crisis in the country threatens the whole western hemisphere. good morning, everyone. this is "bloomberg surveillance." jackson holeok at and there is currency movement as well. david: that's right. we will hear from the president of the kansas fed. we'll get perspective there are the next few days and western wyoming. china is accusing the u.s. of sabotaging the international trading system and warned that will defend its interests if necessary. the trump administration says it

'sll determine whether china actions are unreasonable or discriminatory. storm that has hit china in years has lost some strength. it was hit with heavy rain and pers up to 90 miles hour. the eu's position is that paid-in capital should be reimbursed, but negotiators have said there are additional liabilities. the u.k. wants e.u. not to take an aggressive stance on the issue. and health care costs could eat up retirement funds in the u.s., according to fidelity a couple retiring this year would need

270 $5,000 to cover health care through retirement. monthly premiums make up about a third of that. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. david: thank you so much. let's do a quick check of the data, futures up if only slightly. dollar index, a bit stronger this morning. goldower about .3% -- lower by about .3%. ten-year yield is flat. i'm looking at something very similar to yours. firm, this is without a doubt the very big .hing we are watching out for onto my bloomberg terminal, i watched -- i explain this in the previous hour, it seems that the

bond market looking at t-bills is getting very worried about the president's threats to shut down the government in october and you can see that pinning out .n u.s. treasury bills focus on the next few days will be on monetary policy, you looking at the u.s. debt ceiling over decades you see the rise of that debt eeded to we have n raise that. this is something the president to been alluding to on trips the west earlier this week and something lawmakers will have to race when they get back to washington on september 5. the economic symposium in wyoming today, focusing on the key bank figures including mario draghi and janet yellen, both scheduled to speak tomorrow morning/ .

.oining us now is ron temple at this conference year after intellectualthe point of view, what do you listen for? expectinge are not major announcements at this conference. we will all be looking for clues in terms of what they are looking for. there are a number of a questions central banks are worried about. in the u.s. we have had a recent dip in a flash in, i think they attribute that to temporary factors, wireless pricing, looking at our and now -- our analysis says it is more than that. trying to read the tea leaves fed maylen and how the be pausing.

for draghi, i think he is fighting a different fight pushing back against people saying it is time to start normalizing and tapering. when i look at inflation in europe, there is little to worry about. we will be looking at draghi's signals how resistant he is to -- at this point. david: how compelling a case is yellen making, do you buy what she is saying when it comes to how transitory inflation is in the u.s. right now? ron: i will give you both sides. on one side i do believe there are transitory factors and if we look at what is going on, we think we are at a cyclical point where pressure is building. we focus on the labor market and if you look at utilization, look at wage growth across the spectrum, starting around 2015

the dynamic changed and we started to see wage growth from the bottom to the top. was the top 30% back that all of the growth. what that says is you're trying to get -- you're starting to get to the point where the market is tight enough to widen the base. on the other hand we look across the economy and we don't see the inflation. the metrics don't show any elevated rate of inflation, so we think there is building pressure, but we think they are itittle too aggressive and may push us back into a recession. francine: let me bring you over to my chart and i will push it fedfor social media, the history of inflation under denver menke -- under ben

bernanke and you can see janet is,en, the concern what if we have a crisis in they don't have the ammunition to fight it? circular, wemewhat should raise rates so we can cut rates if there's a crisis, but i would argue that we will have a crisis if we raise rates too early. it is interesting, you would think after the election there was a reflation fear people were worried about. six to 12 months before that we were worried about sustained low-flation. eurozone, it is 1.2-1 .3%. in the u.s. it is about 1.5%. we still don't have sustained inflation, so i don't find it to be a compelling argument to raise rates. the other argument,

right, you say that inflation has been benchmarked, and it is a mandate, but if you look at the phillips curve shows you the health of the economy, what about the fact that we are always on our phones, then it just changed the way we measure the strength of the economy? ron: we have been trying to investigate that. the phillips curve, if you look at the relationship between unemployment rates and wage 2007h, over 20 years up to there was a nice circular relationship. unemployment when up and wage growth went down, very logical. then after that, the relationship completely changed. unemployment went from 4.5% to 9%, but wage growth didn't slow down like the past. had 2011 two today we unemployment collapsed by half

and wage growth didn't pick up. we are trying to understand what is going on there. this is a global phenomenon that leads to what you said, is there something structurally different in the global economy. we have not reached a conclusion on that, but trying to understand how technology and other factors could affect inflation, but there is no reason for the fed to attack inflation when we don't have a problem. happense'll see what out of this meeting in jackson hole, when you look at currencies in particular, how do you play that going into -- looking at the end of -- how do you look at your positioning when it comes to fx? ron: we take a longer-term view, typically a six to 12 month view. we would not trade an event like jackson hole, but we are trying to figure out how a stained -- how sustained that

will be. right now you have had quite a bit of dollar weakness, we have unwound the increase in the dollar, but in the five-year view, it is stronger than back in 2012. i think our base case is more of a neutral stance to slightly weaker. , a change ine that monetary policy might change the view, but right now we are somewhat neutral on the dollar. francine: we want to thank all of our viewers and listeners writing questions and, i have one and it says what is your view on the u.s. 10 year-30 year? ron: when you look at the ten-year yield, i will speak to that. the ten-year yield is trapped below a 2.5 percent to 3% range over the next few years.

when the reflation fears came back and we thought there might be legislative change including infrastructure, tax reform, then our view shifted to say if we do ,et stimulus coming out of d.c. then perhaps inflation risk would go up in you could see a higher ten-year yield. rangek we will probably down to quite low levels. on the 30 year i don't see any reason for there to be a major change there. somewhat of a neutral view on the spreads between the 10 and 30. that could change. all of my views on the u.s. at are point are must on -- premised on no major legislative changes. it could increase growth rates over the intermediate term, but right now it's not part of the base case. david: let's dig into your

thinking a little bit on the d.c. in the next block. this is bloomberg. ♪

francine: you are looking at live votto's of the sun coming up over beautiful new york city. we will keep you posted on other nice photos that will come in. let me get you to your bloomberg business flash. deutsche bank is responding to increased -- with regulations.

deutsche bank has cut in half the price it will charge for fixed income to $35,000 per year. -- separatelywill from other services such as trading. the u.k. serves as the largest isctronics retailers charging, the reason people are not upgrading their mobile phone , dixons car phone is responsible for a slowdown in consumer spending. by 5%,r narrowed losses that happened as investors revolted against the company's then ceo over a series of scandals. that is your bloomberg business flash. david: taylor, thank you.

about washington heating up over possible government shutdown. >> i don't think a shutdown is necessary and most people don't want to see one, ourselves included. congress has already done its work on the issue. kevin cirilli joins us from washington, d.c. and we were talking about the article in the about thetimes" relationship between the president and the senate majority leader, their statements are related to this -- the senate majority leader's office saying we have a lot of work ahead of us and we are committed to our shared agenda together. what are you hearing about the likelihood of a shutdown in washington, d.c.? we sought trepidation play out -- we saw trepidation play out.

said hehe president would be open to a shutdown. use all this from what speaker ryan: just said from the clip you just played, lawmakers don't want to have a shutdown, but given the political unpredictability, who knows. it is anyone's guess when they lawmakers get back in just more than a week from now, whether or not there will be one. they have to raise the debt limit and conservatives are divided on that. they have to pass a funding bill to avoid a shutdown. u.s.-mexico, security measures, could be included in that. you'll lose all democrats if you do that. that --ow much resident how much power does the president happier? here?w him give -- have

a speech, whene it comes to funding are they able to do work on those issues aside from the president? kevin: the folks i have spoken with make note that the president and his administration the wayoutreach compares to other administrations in the white house, is very different. i think on the standpoint of his ability to go up there in the next and say there could be a government shutdown with regards to the wall, that adds a whole to level of frustration folks on capitol hill working on the risk, because of the president saying that he wants the wall in there. that means that constituents across the country are saying it as well. francine: i want to fast forward to 2020. kevin: i want to passport, trust me. is there anyone named

possible for the election -- kevin: you have people like senator elizabeth warren, chris murphy as well, and then a host of other folks, senator cory booker. it will be interesting to see if warner, he is a democrat from virginia, really been at the forefront of what is going on with regard to the russia investigation, he is someone coming up a lot of support as well. it is never too early to talk presidential politics. it's not. i feel like we are back on the campaign trail, thank you so much. let's get back to ron temple. how you do it as an investor or somebody who looks at central bank competition, are they going to talk about d.c. in jackson hole?

it seems that the market is ignoring it and yet the potential for disruption is huge. anybody inot expect an official capacity to speak about washington, d.c. dysfunction. that would be unwise to poke the giant you might say, but i do think as it relates to markets, it is an interesting phenomenon, one of the things that markets are the worst at pricing are policy change.e geopolitics are difficult to price, because of you think about north korea, how do you price that risk? when you think about a government shutdown, it is hard to quantify what that would mean. the general accounting office did a study five years ago where they tried to assess the cost of 2012henanigans in 2011 and where they said at least one billion dollars per year of instrumental cost change related

hadhat, and that is when we questions about defaulting on the interest on the date. i cost, butthere is a it is hard to quantify. coming up a conversation with tim plenty. this is bloomberg. ♪

>> you feel a certain responsibility as a woman ceo to mentor other women and speak out on issues related to women? francine: this is "bloomberg surveillance," china has accused the trump administration of

sabotaging the international trade system. bloomberg's chief asia correspondent joins us from hong kong. what does that mean for the global trade system? is it a war of words or could it get uglier? >> good morning. they saidminder that before they have a big -- to retaliatory action. if it comes to that point it can retaliate, but we did also get commentary today around mutual self interest. at the same time they are alsong, they are oliveng and branch on the other hand. francine: how could china retaliate.

boeing and other large companies are operating there, they could also target import of u.s. goods, in the area of beef. by all accounts, i think it will protected -- a a protracted negotiation process. tensions are rising, not a trade war. coming up we talk about the white house and venezuela. we speak with shannon o'neil. this is bloomberg. ♪

david: i am david gura in new york with francine lacqua in london. francine: president trump's threat --

trump's threatnt to shutdown the government causes problems on capitol hill. it also has to raise the dead feeling. leaders may package the two measures together and send them to the president for his signature. prosecutors one to clean up legal behavior on wall street, portfolio manager matthew martone a lost a bid to over 10 -- to overturn his induction. tips to makeal $275 million. a business lobby is urging prime to tackle thepan nation's debt. their run of economic growth revived a now or never opportunity according to some. they have proposed a 10% increase in sales tax. building closer ties to

its neighbor, the saudi's are leaving the isolation of qatar over islamic extremist. iran has been providing qatar with air routes and food supplies. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. francine, david? david: venezuelan bonds are under pressure after there are rumors that the u.s. is considering another round of sanctions on venezuela. these socialist government moves to increase its authority. joining us is shannon o'neil, ron temple is still with us. shannon, what is the effect of what we have seen so far? the focus has been on

personality. there is a speculation we could see something with regard to oil and that. effect: we have seen the the past couple of days. what is interesting that the trump administration has threatened tough moves, but so far it has only sanctioned individuals. they have not moved further into the economy more generally. this potential move would actually start that. it would go into the financial sector and limit the ins and outs, particularly of bonds that venezuela depends on. david: mike pence has traveled in the region, he fired off a -- firedn he got back off a tweet when he got back saying let me ask about the venezuelan economy, the political situation, what does deterioration look like if not what we are seeing now? likeon: at home it looks

what it looks like now, people can't at medicine, children and others die of mounted trip -- now nutrition, it could get worse if money isn't coming in from oil. but you are starting to see venezuelans fleeing the country going to brazil, deion a, caribbean islands, and the like. you could see that increase dramatically and basically a refugee crisis in the western hemisphere isn't something we have seen for years. seen opposition leaders being seized from their homes, how unified is the opposition? shannon: the opposition is unified in their opposition to the government, there are a lot of personalities, they don't always get along, but there is a feeling that the government has to go. the problem is the opposition while it has a majority of

support doesn't have the guns. francine: talk about the possibility of default. i'm looking at a chart saying the odds of default in the next five years is 96%. shannon: yes. it is hard to imagine how they keep paying. the three plus alien dollars due by the end of the year, and probably they can. harder.2018 a gets much if we start seeing sanctions that they can't roll anything over, and maybe stop other types of transactions, then it becomes very hard to pay not just interest, but principle that will be do. you saying that basically with restrictions on oil, that could give the president a good enough excuse -- not to -- well, default. shannon: if you see sanctions on the oil sector, it gives him an out. if he defaults today, it is all

on him. puts in embargo in, he can say look, it is the united states that caused us to do this. cubahave a playbook from on the way to blame the united states. david: let me ask you about sanctions policy with this administration. we saw in expanded role with sanctions, it was use as a foreign-policy tool. is that something will see with steve mnuchin, what is the role with this administration? shannon: we are seeing it used as a tool. there is something attractive about sanctions, because you're not putting boots on the ground. you don't have to get others on board. buteems a pretty easy tool, it is a very blunt tool. if you see sanctions it's likely not going to hurt those in power, it will hurt the average venezuelans. david: all right.

stay with us. do check out this week " businessweek" looking at big players in the tech industry in europe and asia, the survival of global democracy. subscribe to assets in sets analysis. this is bloomberg. ♪

♪ francine: -- taylor: let's get your business flash. antitrust regulators have given to amazon'sals takeover of whole foods. there is a 30 day review.

w saying it wouldn't hurt competition in the grocery industry. hp has boosted revenue for the fourth quarter in a row, big companies sales and earnings estimates. but the current quarter may fall short of projections. they have been dealing with sluggish demand for printers and commercial computers. to buy fromn track guggenheim, $1.5 billion. placard, -- lack rock -- francine: president trump is threatening a shutdown if needed to get congress to pay for a border wall in mexico. threatss shrugging off

to scrap nafta. shannon o'neil is joining us also with us is ron temple. ron, when you look at trade overall, let me bring it to my bloomberg chart, looking at the peso compared to the turkish or , the potentialen of a trade war, it seems like they are ignoring what the president is saying. think one of the biggest topics is going to be populism and that will lead to more protectionism and could have inflationary impact here it back to the comment i made earlier about things that are different to quantify, i think populism is incredibly difficult to quantify. i am worried about trade becoming a bigger issue in-depth we want to be honest, i think cynical politician have blamed americans on trade

exclusively, when there are other parts to that story. it is easier to blame mexico, china, japan then having meaningful conversations about stagnation. seeinge: the market is president trump's comments on the nafta withdrawal as -- and will it work? shannon: we have seen this across the board. it comes out with big bluster and the technocrats negotiate the details. that is the way mexico and candidate are taking it today. the one thing like north korea where you see bluster, these have been running themes from day one of trump's campaign, a bit harder to let go of. right now it seems like bluster, but it is a question of whether he will do something down the road. david: you mentioned

technocrats, somebody who has been with the administration for a long time, the lead negotiator on nafta, we can talk about how the president is trying to spoil that with a speech in phoenix, , theow do you assess that renegotiation process? ethylene only needs an upgrade. lots of things didn't exist at the time. the internet was just at its inception. e-commerce wasn't in there, intellectual property rights have moved forward. people change the way they do these things in the world, the economy has changed so nafta needs to change, too. or thefta has provided united states, mexico, and canada. the world has turned to global supply change, region producing your nafta has allowed the united states to be competitive. i'm curious about the conversation moving to bilateral

that intos, translate the market space as well. houses it change your outlook? conversationitical is narrowing, does that change how you approach global investing? ron: if you end up with more bilateral trade agreements, you end up with a more fractured system. a multilateral trade is much better, i would much rather know there is a single blanket trade agreement with 30 or 50 other countries, rather than a different one with every country in my supply chain. we should be thinking about this as an an efficient approach to thinking about global trade, we would be much better with multilateralism. year, theota last look atip -- if you

latin america, where is the openness? the united states seems to look inward, many states and latin america are are looking outward. for the first time you see movement toward globally oriented presidents in brazil.a, peru, chile, a lot of these countries while we stepped away from tpp, they are continuing to negotiate and see if they can resurrect a deal without the united states. this is the time in latin america where you see a very open approach to double trade in comparison to our own. politically how did the leaders of countries in latin america have to deal with donald trump? do you invite him, shall him parades, are you friendly or do you antagonize him? shannon: seb: within the population --

he is unpopular, particularly in mexico. you see the general population very upset with him and suspicious. that said, the united states is still the largest consumer economy, there are a lot of ties whether economic, commercial, people, families and the like. so, they need to work with the united states. what you are seeing from particularly mexico and others is moving beyond washington and looking to others where you see, and interest. governors, mayors, businesses and the like, that is where there is common cause. david: thank you. that was shannon o'neil, think is a much for joining us. i want to flag a bit of news aom the white house, 31-year-old in charge of rapid response. he is leaving that position in

the white house, more staff changes at the white house. can watch you the interviews we have conducted this morning and speak more that person on the issue of u.k. e.u. trade. if you would like to ask a question of the guest you can do it right below the screen on the left-hand side. this is bloomberg. ♪

david: this is "bloomberg surveillance," denver tom keene this week. it is time for my chart, g# btv 7169, the chart that paul ryan, any number of republican politicians, are eager to get -- next up tax reform. most taxes relative to the s&p 500, they could compute the againsthat taxes have

your it wrong, let me gauge your optimism that we will see something happen here. i think speaker ryan: is making the case today. more specifics from the white house on what they would like to see if you're not optimistic what will happen in six months or 12, do you think it will happen in the meeting today? i think the probability of major reform is still quite low between now and election day 2018, but i think the singular focus of washington, d.c. should be if the goal is to raise loving standards and increase the growth rate we should find ways to increase is totivity and one way reform the incredibly, looted system. if you look at the statutory tax rate, -- incredibly convoluted

system. if you look at the statutory tax rate -- in spite of that we collect half as much of corporate tax as germany and japan. it is incredibly complicated. we should invest in infrastructure, human capital in terms of training, i would like to redirect to these topics to make a difference in corporate profits and growth. you don't do a lot of short term positioning, but what weight are you putting on change in washington when you plan your investment strategy? what tax reform be nothing more than a surprise? ron: we are always trying to assign probability. in terms of tax reform, i think we have a 30% probability of nextng tax reform over the 14 months. you may think of that as able ll caseenario -- a bu

scenario. there would also be dollars on the margin in terms of enticing investors on the market. francine: what is the probability of a crisis hitting the world economy in the next 24 months? ron: in the next 24 months? i am quite optimistic. think we have a runway for growth here it in the u.s. economy, the underlying foundation of growth is better than people realize. enthusiasm was misplaced, where it should of been was because the u.s. economy transition to the third leg of recovery where the middle class consumers started to get balancereases, home sheets started to recover. i think that started in 2015, combine that with the eurozone recovery is an escape philosophy and chinese growth is quite good for now. it is a very good situation,

synchronized global recovery, one of the top stories on bloomberg this morning was about. i do think that has been the story. in terms of eight crisis there are geopolitical risks that i can predict, but absent that, i think there is a low probability of an economic crisis unless central banks make a mistake and aggressively tighten. let's call it a 10% to 20% chance over a two-year period. francine: where do you see the best value in the market? ron: that is the top or question. if i look at financial assets in general, none of them are cheap. i see equities as less attractive than debt, but within the debt universe, emerging market that is more attractive been developed that hear it i think investors need to contemplate what the role of debt is in their assets allocation, it used to be an income source and diversification full. it doesn't play that role very well. i think there is a real place

for that. i think emerging markets on a long-term view are more attractive been developed markets. as farade on a premium as price to earnings ratio, but a smaller premium then europe or the u.s.. francine: do you worry about euro strength hitting indices? the ecb should be thinking carefully about that. we have had a sharp rebound in the euro over the course of the last year. we need to think about what that will do to growth. i have to say i have not been enthusiastic on europe in the last 10 years. what we're seeing in terms of gdp is domestic consumption and domestic investment driving the growth, not experts. -- not exports. we were talking about the strength of the euro, when you look at the euro, what do you see? ron: i think it is on the back

of economic growth and enthusiasm, but i think there is a little too much -- the probability of normalization that most investors are ascribing to europe is too high. i think draghi has learned the lesson of raising rates far too early. the ecb was very late to the monetary policy combination and basically in terms of 2012 and then going to negative rates in 2014. i hope you will delay tightening and delay rate increases. david: we will hear a while he is in jackson hole. is the scarcity of bonds in europe a concern to you? ron: i think it is a challenge to the ecb. there is a challenge, but they can easily change the rules. obviously they do not want a blocking on a ship, i am not

terribly concerned i think the ecb can work around it. david: ron, thank you for much for joining me on set in new york. he is going to join us on "bloomberg surveillance" and bloomberg radio as well. we will hear from esther george as we kick off the symposium in jackson hole, wyoming. at 7:30 a.m.ment and a new york, 12:30 p.m. in london. this is bloomberg. ♪

jon: jackson hole begins.

chair yellen, president draghi and other central bankers convene in wyoming. president trump's threat to shut down the government -- the trade war intensified. china says the u.s. probe into intellectual property practices and sabotages the global trade system. good morning. a warm welcome to "bloomberg daybreak." steele is on assignment today. futures positive. it has been that kind of week so far come up down come up down . stronger dollar going into jackson hole. treasuries -- yields up to basis points. best two basis points. -- yields up two basis points. david: michael mckee has an interview with esther george