francine: risk on returns. stocks gain while the yen and gold slide. all aboard the trump tax reform bus. the president said to kick off his overall campaign. and draghi's euro-dollar dilemma. pressure mounts on the ecb president to say something. good morning. this is "bloomberg surveillance ." we have quite a busy day for you as we look at the trump speech, at all things going on in korea, and everything going on with hurricane harvey. let's get on to your data check.

we are seeing a little bit of risk removal. this is what we are seeing in european stocks. they are joining the rebound as we see tensions surrounding the north korean country and peninsula easing. the yen dropping, gold dropping. gainingor haven assets a touch. let's get to the bloomberg first word news. here's nejra cehic. nejra: north korea's leader says the testfiring of a missile over japan yesterday was a meaningful prelude to containing guam. kim jong-un added that he will continue to watch the response of the u.s. rex tillerson has agreed with his japanese and south korean counterparts that the test was an escalation of provocation while the un security council has condemned the launch. president trump has praised the emergency response to tropical storm harvey as he and the first

lady visited texas. at least 15 people have died in the wake of harvey while thousands more have been displaced from their homes. early estimates put the economic losses at $100 billion. the u.k. wants to squeeze in more hours of brexit negotiations. an october deadline looks increasingly unattainable. there are two more rounds penciled in before an e.u. summit. the u.k. has been told to get serious or risk deferral. the u.k. prime minister is in japan as she start a charm offensive on the world's third-biggest economy. may will attempt to convince the country to use its trade deal with the european union as a basis for future agreements with britain. in saudi arabia, pilgrims have begun the hajj pilgrimage. islam requires all pilgrims perform the pilgrimage at least once in a lifetime. saudi arabia has spent billions

of dollars to improve safety. thousands of people were killed during a stampede in 2015. $452,000 onearned the floyd mayweather conor mcgregor fight over the weekend. mayweather won the bout by way of a 10th round technical knockout. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i nejra cehic. this is bloomberg. francine: stock markets are bouncing back after being rattled by north korea's latest missile launch. the yen and gold are coming off risk appetite returns. donald trump says the u.s. will consider all options on how it deals with pyongyang's firing a missile over japan. lueck, us now is martin chief investment strategist for germany, austria, and central europe at black rock, and

francesco garzarelli, head of research at goldman sachs. francesco, you have some interesting calls in terms of what you like, what you don't like, yields, blends. what is the most distorted market out there? francesco: the distortion resides in fixed income. suchombination of having depressed inflation expectations out there and such a view that inflation will stay low, plus all the buying that central banks have done of bonds has created a big departure of government bonds from their theoretical or macroeconomic relation. that is affecting the whole asset class. that is still central. francine: martin, on the back of that, what is moving these bond yields? martin: the expectation that

central banks are going to change policies very soon. this is both the fed, which is four to five years ahead, and the ecb as well. the fed has already started hiking rates again and is ready to move and to reduce its balance sheet. the ecb is going to follow. at least it is what the market is expecting. right, thists are will have an impact on bond yields. usually, markets start playing this a little earlier. francine: i guess the concern is that bond yields have largely ignored what the fed has been trying to tell us. talk to me about correlations, francesco. the old model seems to be broken. francesco: as i like to put it,

it is a tug-of-war. you have the boj holding the 10-year rate at zero and you've seen it at zero in many market phases over the course of this year. that depresses global fixed income because the regional players look for yield outside their region. hiking, talking about balance sheets, so under the surface, treasury yields want to go higher, but they are pulled down by these global forces. bonds continue., to rally in the face of brexit uncertainties, and bonds have been very volatile. the ecb has changed course of policy. the market is very skittish about what that will mean. the market has been made in europe. francine: we will go back to ecb and some of the concerns

surrounding this euro strength. euro-poundyou expect parity? if you look at this trend, you could see parity, something that i think hsbc and i think morgan stanley is calling for, but not other banks. martin: that was one of the first calls we made after the brexit referendum. sterling really has the potential to go to parity over the medium-term. since the brexit referendum took place in june last year, we can talk about this medium-term trajectory. this trend seems to be still underway. we have always said how the implications of brexit will be long-term. consequencesll the in the long-term trajectory. one consequence will clearly be a loss of welfare for british

citizens. that is also the devaluation of the currency. francine: francesco, you see gilts expensive overall. francesco: we think gilts are even more expensive than jgb's at zero. that is because of inflation being higher and growth being in check. the currency is acting like a safety valve. they will follow their own dynamics, and the currency, a bit like euro-dollar, is where you see these movements occurring. francine: do you see the boe not being able to do anything this year? they talked about it. it seems highly unlikely, given what researchers are saying, that they can move this year. francesco: i think they're bigger brothers are moving this year. i think they will want to see how that plays out in this complex world of financial

markets and currencies before taking action, which could come earlier than the market anticipates in the first quarter of next year. francine: martin lueck and francesco garzarelli, stay with us. stay with "surveillance." president trump prepares to kick off his campaign to overhaul the system. will the market be listening? plus, will mario draghi the forced to say something as the euro hits a high against the dollar? this is bloomberg. ♪

francine: this is "bloomberg surveillance." let's get straight to the

bloomberg business flash. nejra: it is official. dara contra site is the new boss of uber. the expedia outgoing ceo concludes a monthlong search to replace travis kalanick. although he calls his new job the opportunity of a lifetime, he's facing a long list of challenges. they include two department of justice investigations. united technologies is reportedly nearing a deal to buy rockwell collins according to the "wall street journal." the companies are discussing a price of no more than $140 for each share. the deal would create one of the world's biggest aircraft equipment makers. porsche says no decision has been made on whether the company will continue to produce diesel vehicles. matt miller spoke to the carmaker's chairman. >> porsche has always built

relatively few diesel vehicles. for that, you need to make millions of diesel vehicles. we don't do that. porsche has used diesel in some models, but mostly in countries in which diesel is taxed at a favorable level. we are not a diesel brand. nejra: that is the bloomberg business flash. francine: president trump will kick off a campaign in support of tax overhaul today. according to an administration official, his trip to missouri will be the first of several stops around the country. trump's national economics director says he believes the legislation can be written and passed by the end of the year. we get crucial u.s. economic data this week with gdp, personal income, and spending figures tomorrow. still with us, martin lueck from blackrock and francesco garzarelli from goldman sachs.

francesco, how much does harvey impact consumer spending or gasoline prices impact some of the things the fed is looking at? apart from the human tragedy which i think needs to think history i shows that these things are transient. they show up in data, particularly consumer spending, as you said, for a short time, then there is usually a bounce pex orriven by the ca rebuild. we are not changing anything as a result of this event. francine: what about you, martin? does it play at the margins? it is unconvincing to me to see

what stress points the market is looking at. martin: it is hard to say how much of donald trump's announcements were really priced in by the market at that time. one was tax reform. elementsnk all these have been gradually priced out. the question that remains is to what extent that is correct. after the removal of steve bannon from the white house, it is possible that the administration changes to a more rational path and puts some of that back into place. it remains to be seen to what extent what you just said is realistic and if tax reform can be passed by the end of this year. if there is any trace of that coming, that could be bringing the trump trade back on.

francine: do you worry about the debt ceiling? i think for how low the confidence has gone, i think the odds are we get this tax reform and it looks decent and the market takes a cue from it. connecting your weston to the previous one, i think the fact that we've had this terrible event in texas decreases the chance that we will see a shutdown of the government. extensionrobably an of the federal appropriations. then there's the wildcard of the law, which we don't know how to factor in this consideration. i would say on balance, the answer is no. francine: let me bring you over to my chart. this is for the u.s..

in the blue, you have workers hired, then you have the unfilled job openings. what does it tell us, when you look at the u.s. job market? do you take a bit that the trend is strong or wait for 2% inflation? francesco: i take the former. i think what we're seeing is stuff that we don't fully understand. market,arly in the jobs ,e are seeing less productivity but we are seeing depression of labor costs. technologieso with . insurance, housing. i think that is a force that is playing out -- it should be a transitional horse. at some point we will run out of

workers, then there is redistribution policies. on balance, our view is that wages will pick up, probably more gradual than in previous recoveries. when these transitions are taking place, when growth is healthy and there are financial considerations, that is probably the wrong thing to do. my impression is that central bankers have got this. francine: francesco and martin, stay with us. stay with bloomberg. we've got some big interviews. we have a live conversation with warren buffett at 4:00 p.m. u.k. time. we will be joined by brian moynihan at 8:00 p.m. london time. after the euro's rally against the dollar, pressure mounts for mario draghi. in the currency too strong?

this is bloomberg. ♪

francine: this is "bloomberg surveillance." as mario draghi going to step up or step in with a verbal intervention about the strength of the euro, foreign-exchange strategist think the chances of him doing so have increased as the currency climbs to its strongest level in 2.5 years against the dollar.

the ecb will outline a stimulus scale back this autumn, and the latest policy update is due next thursday. still with us, martin lueck and francesco garzarelli. martin, when you look at euro strength, mario draghi had a platform at jackson hole where he could have talked about it, but he chose not to. what does it mean going forward? martin: it is a difficult situation for mario draghi. last time he talked a lot about the exchange rate and the euro being overvalued. of 2014.in the spring then he had some ammunition. that worked. this is why the euro then depreciated over the next nine months. this time around, he had very little ammunition.

if he talks about the euro being too strong, what is he supposed to do? can he further weaken monetary policy? probably no. i think that the main reaction on the part of the ecb will be to keep the announcement of tapering, which is probably going to come in september, october, in a combined communication, as dovish as possible. for example, a statement that goes like, we have decided to extend our monetary policy measures beyond the end of 2017, and then say, we might decide to reduce monthly purchases. that would be quite a dovish statement. martin, what is fair value for the euro? you could argue that 1.20 for germany is not that high. martin: this is a one-size-fits-all currency.

it is very difficult to handle. for germany, the currency is not high at that level. for the south of europe, it is. that is a problem we need to solve. if you look at the fair price of the euro-dollar exchange rate, parity is at 1.29. the euro is still undervalued on this measure. the question is to what extent this measure is relevant for markets. francine: how do you think mario draghi will handle it? francesco: tough balancing act. i completely agree with martin. value, 1.29, the number you quoted, the sea level is rising because the equation here is lower than in trading partners. so you need repeated action to

keep the euro low. i think a combination of things can change the picture. one we discussed earlier, the fed and fiscal policy becoming more expansionary. i agree with you on the ecb. they have scope on the short-term range to possibly keep the tapering longer. positioning will do the trick at the end. francine: thank you so much, francesco garzarelli and martin lueck. partyt, is the far right about to shock germany in the coming elections? we discussed that next. ♪

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across all your locations. hello, mr. deets. every branch running like headquarters. that's how you outmaneuver. francine: this is "bloomberg surveillance." let's get straight to the bloomberg first word news. nejra: north korea's leader says the testfiring of a missile over japan yesterday was a prelude to

containing guam. kim jong-un added that he will watch the response of the u.s. before reciting -- deciding on further action. rex tillerson agreed with his counterparts that the test was an escalation of provocations. the you and security council has condemned the launch. president trump has praised the response to tropical storm harvey. he and the first lady visited texas. at least 15 people have died in the wake of harvey while thousands more have been displaced. some estimates put the economic losses as high as $100 billion. the u.k. wants to squeeze in more hours of brexit negotiations as an october deadline looks increasingly unattainable. there are two more rounds penciled in before an e u summit. the u.k. has been told to get serious or risk deferral.

the u.k. prime minister is in japan today. theresa may will attempt to convince the country to use its trade deal with the european union as a basis for a future agreement with britain. william hill says one gambler earned $442,000 on the floyd mayweather versus conor mcgregor fight after they placed a bet on the fight. mayweather won about by way of a 10th round technical knockout. arabia, more than 1.7 million pilgrims have become the hajj pilgrimage. islam requires all muslims to perform the journey at least once in a lifetime. the saudi government has spent billions of dollars to improve safety. more than two and a half thousand people were killed in a stampede in 2015. 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. a far right party could take seats in germany's parliament for the first time since the second world war. the populist afd stands as the third strongest party in the latest opinion polls. bloomberg spoke to one of the party's leading candidates. >> just to highlight this once again, it is our view irresponsible that a developed country like germany would insist on denying itself the security of its borders and allowing people to enter without passport controls, people without any identification papers, who also have multiple identities. francine: we are back with martin luke, chief investment strategist at black rock. this is more of a question on populism in europe. are we discounting too much the fact that a populist party that has closed borders and this

anti-globalization sentiment could come through? martin: this is the problem that will stay with us for a long time. a lot is changing in the world. if you look at, the population of africa will probably double by 2050, and the wealth of the country's will not be sufficient to keep people where they are, so many people will be moving. this is a big challenge for all societies in europe. the problem of populism will stay with us, and the election of macron in france, or other votes that have gone in a benign direction, this should not make us complacent about this phenomenon. if you look at afd, now at 10% in the polls, and entering the german bundestag for the first time, this is a telling example that populism has arrived.

francine: what does it mean for an investor? i don't know if there's a linkage between donald trump's election and the populist policies that he is maybe putting in place and brexit. martin: certain bouts of volatility will be more the norm than it has been in the past. we will probably see more sudden and unexpected market moves that will probably move back to the longer term trajectory. we are in a very low volatility environment and we have seen certain spikes of volatility, which have been short-term. vstoxx, theat the somer-term average is 24, of them triggered by political events moved the volatility to areas around 20.

what this means is that once you have a regime of volatility which is low, triggered by a very benign monetary and economic environment, then also volatility triggered by more volatility are likely to bring volatility up for a time, and then right back down. it is the pattern that changes, not the underlying picture. francine: the germans go to vote on september 24. do you treat it as a risk event or the start of ecb board member negotiations? martin: it is certainly not as interesting from a financial markets perspective as the french election was this year, or even the election in the netherlands. it is interesting from a markets perspective.

if a continuation of the current administration of the conservatives and the democrats were to come into our, this would mean that probably germany could turn towards a more lessous and austerity-oriented approach, especially if the spd were to come in stronger, and maybe shoot for the finance ministry. they are saying, we would go into another grand coalition, but only if we will be in place for the next finance minister. in that respect, what would that mean for markets? that would bring european spreads down. there's also a slight chance of a government coalition by the cdu of the conservatives and the liberals, and this is much more of a business-oriented, market-oriented approach, and the liberals are saying, we want

greece out of europe, and you can't imagine what that would mean. there are some outcomes that would have potential to move the market. this would create some political volatility. longer-termand trajectory, i would not expect any big impact. francine: do you worry about italy? if you are mario draghi, you have not enough german bonds, so you need to do something. he's going to give a dovish message while reducing some of the balance sheet. how does he deal with italy? martin: the big threat is not just that the ecb runs out of bonds to buy, but also that a too sharp tapering has a unwarranted effect on yields and spreads. what i think is that the ecb does not want to think about

overall bond levels, but more about the spreads between italy and the german bond yields. this is why i believe that the market is now looking for a pretty swift tapering. the market is looking for a tapering that will end between june and september. i can imagine a tapering procedure that lasts much longer. francine: thank you so much, martin luke, chief investment strategist at black rock. up next, emmanuel macron gets back for his labor reforms. are the french people behind him? this is bloomberg. ♪

francine: you are watching

"bloomberg surveillance." l'oreal says emmanuel macron will be able to pass his labor reforms by the end of the year. the french president is preparing to unveil his plan tomorrow. a recent poll found that french people don't think he will be able to deliver it. --an exclusive interview, said the reforms were just the beginning. she asked him if he was worried about the strength of the euro. >> we are not concerned. we have been used to seeing the euro go up and down. he went up to 1.60 a few years ago. there are highs and lows. that is life. our business is very global. it is very balanced. it is not helping, of course, but we are not concerned. caroline: it is still going to have an impact on some of your

businesses. globally, it is perfectly manageable. caroline: you are here to talk about the business confidence and the first 100 days of the new president, emmanuel macron. [indiscernible] >> not at all. it is only 100 days. the president has been elected. he is starting now the first real important measure on thursday. he has five years to implement them. it is just the beginning. we are very confident. the macron government are really the team we need for france, for the business, for the economic recovery. i'm very confident. caroline: is the labor reform that we are going to see the most important reforms for an

executive of a large company like yours? >> it is important because it will be a signal of change of spirit and mindset in france. adapting to the situation. clearly, globally, for the french economy, it will be a very important move, maybe even more for small companies. caroline: so you are not expecting any major strikes over the next couple weeks in france? >> i think people will understand. they have voted for mr. macron. they know what we have to do. i think they understand what the country needs and i think it is going to go ok. french say3% of the they have no confidence in macron delivering this reform.

we've seen the popularity going down more than 20 points over the summer. do you not agree with it? >> know, because i think if you it isls every two weeks, not really important. the really important thing will be the real measures, the impact on the economy. we will see a decrease of the unemployment. we will see an increase of the gdp. off if theare better economy is better. i think that people will forget all that. caroline: provided that this reform passes without major strikes, are you going to renegotiate some agreements? >> it is too early. we don't even know what the measures will be. we will see.

francine: that was caroline connan speaking with the l'oreal ceo in versailles. we are back with martin lueck, chief investment strategist at blackrock. we were hearing from junkball. how dangerous is it for these exporters? do they need to look to their politicians for relief or are they still looking at the european central bank? martin: i think it depends on where you look. if you talk to somebody from l'oreal, it is not a company where the demand is quite elastic. people in china are not buying l'oreal products because they are cheap in euro terms. chain of the product range, this is the same kind of question. you need to look at it more from a regional perspective.

strong euro is much more of a problem in southern europe where you have issues with competitiveness. that it will play out that the euro in the longer term will probably move to the trajectory where it was before the old disturbance and distortion. i think we are pretty much there. the largest part of that appreciation is now in the price. having said that, it is very important for europe to get back on track. more spending on investment. that is certainly one of the contentious issues in the debate between germany and france. of course europe needs to invest more, and it needs to invest more in the countries that can afford it. francine: is there a concern

that the eurozone is too overcrowded? if you look at the strength in euro, a lot of strategists say euro is the place to be. does it become too expensive? martin: i think it is not too expensive yet. if you ask, is something too expensive, this is a valuation question. if you compare the valuation of european stock markets to the longer-term average, the answer is probably no. we live in a different world. in thewth part industrialized world is not as steep as before. we are in a world of lower interest rates going forward. we have aging populations. all this will keep growth and inflation and interest rates down. real assets will be differently priced in the future. our usual measures do not hold

the same value. europe is not expensive, just like u.s. equities are not expensive in that kind of new reality. francine: does it mean we need to fix unemployment? are we always looking at the right measures? martin: what we need to think about is, what is the future problem of unemployment? unemployment as a measure of central bank policy, the phillips curve, has weakened. that is almost dead. we do not know to what extent this can normalize. we do need to think about the world of work and what workplaces will look like in the future. that is the question we need to solve. and also the question of redistribution. that brings us back to the

question of populism. even in very mature industrialized companies, even in these societies, we do have the problem of populism which arises out of the income distribution and the wealth distribution, the fear that people have getting out of their jobs. this is a very urgent question to be tackled. francine: thank you so much, martin lueck. chief investment strategist at blackrock. up next, tensions over korea calm. we will check in on all of today's market moves. this is bloomberg. ♪

francine: this is "bloomberg surveillance." let's get straight to the bloomberg business flash. nejra: it is official. dara khosrowshahi is the new boss of uber. the selection concludes a monthlong search to replace travis kalanick. although khosrowshahi called his new job the opportunity of a lifetime, he's facing a long list of challenges. they include quarterly losses and department of justice

investigations. united technologies is reportedly nearing a deal to buy rockwell collins. according to the "wall street journal," the companies are discussing a price of no more than $140 for each rockwell share. it says the deal that would create one of the biggest aircraft equipment makers could be struck this weekend. russia's central bank is bailing out the nation's eighth largest lender. it has been taken over by a government fund to consolidate the sector. the move will place at least 75% of the bank in state hands. the rescue has prompted the central bank to provide funding for other banks. porsche says no decision has been made on whether the company will continue to produce diesel vehicles. matt miller spoke to the carmaker's chairman. >> porsche has always built relatively few diesel vehicles. for that you need to make

millions of diesel vehicles. we don't do that. porsche has used diesel in some models, but mostly in countries in which diesel is taxed at a favorable level. we are not a diesel brand. francine: that is the bloomberg business flash. francine? francine: thank you so much. let's check on your markets with mark barton. mark: president trump's measured response to north korean missile launches from kim jong-un suggesting geopolitical tensions will ease off. stocks are rising. one industry group is lower, utilities. the euro temporarily crossed 1.20. the ecb may make references to the exchange rate that could halt the pace of appreciation, but a meaningful reversal remains unlikely. upside risks are forecast.

next year. 1.2167 is a key level. this is the fibonacci chart. the bottom is net longs in the euro. we are near the halfway point of depreciation from may 2014. on the flip side of the coin, mark carney, is it time for him to talk about sterling weakness? we are near the levels we were back in october, when carney said he and his colleagues weren't in different to the exchange rate. watch out for future comments. they are willing to look through the depreciation of the pound, but any further depreciation, they test their tolerance against the euro. sinceng near the weakest 2009. theresa may is in japan through friday. figures show the u.k. hasn't had a good trade surplus with japan

since at least 1988. it is all in red. this deficit increasing in the last year or so. the problem is that japan's priority is to nail down an agreement with the e.u., just as the u.k. negotiates a deal with the e.u. as well. tricky time for theresa may to try and hash out a trade deal with japan. francine: thank you so much. "bloomberg surveillance" continues in the next hour. tom keene joins me. we will be talking to the ceo of suez. he's at a conference where caroline connan also spoke to mr. agon of l'oreal. this is bloomberg. ♪

francine: all aboard the trump tax tourbus.

risk on returns. stocks gain as tensions over korea come. and draghi's dollar dilemma. pressure mounts on the ecb's president to say something. this is "bloomberg surveillance" and i'm francine lacqua in london and tom keene is in new york. we will see how the president will position that tax speech later on. of course, we are keeping an eye on hurricane harvey and any euro-dollar moves. tom: i really also note, francine, september is starting early this year. the news flow for late august is extraordinary. francine: people say that all the time. tom: but this year it is real. francine: 43 years it has been busy in august. for -- for three years it has

been busy in august. reporter: floodwaters keep rising in southeast texas, and so does the death toll. at least 18 people are dead from the storm that has been pounding the houston area since last week. more than 50 inches of rain have fallen. long forstmann says more than 13,000 people have been rescued. one analyst estimates damages could hit $30,000. the storm is expected to come ashore again today near the texas-louisiana border. harvey has unleashed plenty of devastation on texas, and that includes power outages. -- 335,000rs in the customers in the state have lost power. the storm is estimated to make only a slight dent in the u.s.

economy. flowt efforts will boost later this year. the estimate gdp will be lowered by 0.2%. global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. i'm taylor riggs and this is bloomberg. tom: one datastream this morning, the news here is how calms the markets are, and that is headline itself. the euro, 1.20. oil turns here with a weig ht to it. $45 on houston oil. francine, my headline is, quiet data this morning. francine: this is what i am looking at. there is definitely a risk on mood, with european stocks

falling and equities high. demand for safe havens in general are beginning to fade, though gold and swiss franc seem to be holding to the gains we saw yesterday. nordvig will join us in the next hour. i'm looking forward to that conversation. right to the bloomberg right now and this is my korea thermometer. this is obscure. this is the yen-yuan. this is the korean won. this is the four standard deviation fear we did not get to during the height of the fear. here's the reality of the markets, rolling over to a more quiet market, even with the rhetoric and job owning we have seen over the last few days. francine: here is what we are

looking at. the output gap in theu. u.s. versus europe. i like super court inflation because it excludes package holiday. showing signs of life. this gives us a good sense of what we can expect from mario draghi in his positioning of inflation. i will push it out for our radio listeners on social media shortly. president trump outlined his vision for sweeping tax reform in a speech. he's expected to pitch a vision of the american economy that will see cuts for corporations and middle income earners. white house officials are split on when that bill will be completed, with suggestions ranging from a few weeks to next year. .oining us now, stephanie bake . and peter also joins us.

what are we expecting from thsis speech. there are many reports on who wrote this speech, which was not gary cohn. positioning tax reform as a populist message and he will keep it broad, not get into the weeds on what kinds of loopholes will be closed. at this point it does not look clear that they have worked out what that plan will be. he does not have a lot of specifics to outline as it is. it looks like already they have backtracked on some of his initial promises. you remember back in july trump came out with this very brief outline of what they wanted to do on tax reform, which included reducing the corporate tax rate from 35% to 15%. now it looks like they are targeting between 20% and 25%. but there are so many details that remain unclear, including, this push to get corporate to

repatriate profits from overseas. what's the rate going to be there? i think tonight donald trump will outline the big, broad outlines. we want to push through it corporate tax cut, you want to bring corporations back home. time of thisl the speech be important for his base, or is it more important to get it right with congress? >> i think he is trying to get support among his base, to get them to put pressure on members of congress to push this through. i think that is his focus. we've seen, from the last few weeks and months, that he is not shy about targeting members of congress he feels are not on his side and he is positioning this as they are to blame. that's an easy one for him because if you look at who is more popular, it's actually -- trump's popularity is higher

than congress. he is well-positioned on that. tom: both of their popularity is are around us on -- are horrendous on a historic basis. you have to help me linking the verbage to getting somebody's vote. are we at a point where he has messed this up so bad that he will not get a john mccain or jeff flake -- that they will not vote for him? >> he has not done himself any favors in the way he has treated congress, especially senators. they has singled out senators like jeff flake and john mccain, who he needs on his side for tax reform, let alone getting democrats to support anything he wants to push through. tom: how is harvey playing in europe? i understand it is an american thing. we saw over 50 inches of rain in

houston, which were america is absolutely original. how is hurricane harvey playing across the european continent? >> it is getting a lot of play and attention. i think the scale of the disaster is hard for people to get their heads around. tom: i agree. >> they do understand how big of a city houston is, how much has been impacted. it is not the kind of natural disaster europe is used to. america has these extreme weather patterns that europe does not really have. francine: peter, we will get onto hurricane harvey and economic data a little bit later, but what are you expecting from this kind of speech, if anything? does it change your models? >> i think i have been here last time, two weeks ago and you asked me more or less the same question. a different topic. francine: i'm not original. [laughter] >> when we do our forecasting,

what we typically do is we try to forecast what we think is forecastable, and we add that to our models. when the new administration came in they said what they wanted to do. we estimated what potential impact that would be, but did not incorporate that into our official models because we thought, let's wait and see what they can achieve. 20-20.ht is always currently, no, we don't change our models on this. if and when the realities on the change, if and when they get the senators and congressmen on board to implement something, we will take a look at what that is an factor that into our models. for the time being, not really. francine: how do you look at the debt ceiling? >> that is an issue that comes up now and again. for the time being, we look at the impacted might have on short-term instruments.

but whether or not that will ultimately kick up a bigger fuss is debatable. tom: i want to make a point that is critical and i have not seen this in the news yesterday. there was an important note yesterday, where it was said debt ceilingorate machinations are gone with hurricane harvey. he said everything changed this weekend, and the debates of september will be radically changed because of the scale of the harvey aid effort. francine: yesterday we had a guest that said this completely changes, but it could make it more difficult to pass the debt ceiling. there is a direct impact from hurricane harvey and the way congress works. >> i would even go far as to say that if we have a catastrophe of that scale, obviously, the government is going to help out.

we have been here before. it would be very strange to see congress not approving these types of things. francine: think you so much to stephanie baker for updating us on this tax reform speech and peter schaffrik stays with us. coming up, we interview warren buffett at 11:00 a.m. in new york and 4:00 p.m. in london. this is bloomberg. ♪ reporter: this is "bloomberg

surveillance" and i'm taylor riggs. it is now official. ceo tos named expedia's be the new chief executive, concluding the month-long search to replace travis.

khosrowshahi called his job the opportunity of a lifetime. this is for more than $20 billion. according to "the wall street journal" a deal could come by the weekend. makes aechnologies variety of airplane parts, including engines. tom: so, the ones paying attention to uts rockwell is airbus. this is a huge deal for airbus. honeywell went after it a while ago, and they got thrown aside. ats is nine times bigger than rockwell. atx is a true conglomerate, think otis elevators and pratt & whitney aircraft engines. for airbus, this is not a small

deal. francine: if you think about this consolidation, it would give the aerospace manufacturer is greater heft at a time when boeing and airbus -- it is not only airbus, it is also the suppliers for price reductions amongst the production increases , so it basically means if you have a stronger counterpart, you negotiate more. tom: absolutely. now, markets are displaying mixed messages. we see a weaker u.s. currency and chinese demand helping maintain the broad-based metal move higher. bond yields hover near lows. let's get back to peter schaffrik. when you look at the markets, the correlations are disjointed between the data and some of the

commodities are not working out as they used to be. do we need to look at different models? >> i'm not so sure. that we need to look at what is happening here, the underlying fundamental data. if we just look at the data, it is pretty strong, pretty strong in europe and across the board. on top of that, we have the two political tensions. -- we have the geopolitical tensions. we see that in the risk-on and risk-off rallies. it is look at the metals, interesting how gold is behaving. it is one of the assets that in this tension phase is performing well. that's clearly something that plays a role. francine: if you look at gold, in the pastyo you bought the yen and the dollar as a haven. is gold now replacing the dollar as the go to haven when

geopolitics, like north korea, happen? >> i would not go so far. i'm pretty certain that particularly the yen, but also the dollar, if something really bad were to happen, those two currencies would still be strong faitsafe havens. but gold is one of those assets that would perform in either of these circumstances. even if those the currency is more replaced, gold would perform and if they are not, gold would perform, too. in a portfolio context in particular, i think in times like these, it makes sense to have a bit of gold in there. tom: let's look at a chart of gold. folks criticize me for not throwing up gold on a daily basis, which we really don't do here. nonetheless, peter, it is a fascinating chart. is this chart directional? do you have a vector up or

vector down out of that long-term bear market, and the range we are in right now? >> well, i reckon that currently, we are on the upward trajectory. but what we have to see, in contrast to going back a couple years, is not the goldilocks scenario for gold anymore. ofk in the day we had fear inflation, superlow interest rates and the fear of something bad happening. this is not the case anymore, particularly the inflation picture is not there. with interest rates being low, that is helping. clearly with the geopolitical tensions, we are on the way up. in your charge, if we take out some of the technical levels there, i think we could go higher still. tom: with a breakout to 1400, that would be true. the royal bank of canada rbc has a mining heritage, which goes

back i will say well over 100 years. idle think i am making that up. -- i don't think i am making that up. can you correlate gold over to other metals? is that a safe thing to do in analysis? >> well, gold clearly has some other features that some of the other metals don't have. when you run correlations, there is an underlying correlation there. but particularly in those times that were discussed, gold has an element the others don't. tom: send your love notes to francine lacqua in london and i will take the heat this morning as we look at gold. peter schaffrik will continue with us. an important interview this afternoon. it is a perfect time to get your september started. the new year for banking. the conversation with moynihan

. this is bloomberg. ♪ francine: this is "bloomberg

surveillance" with tom and francine from london and new york. texas is still being lashed by rain. thought thatmp the response hurricane harvey would serve as a model. the flooding has crippled the heart of u.s. energy production and has put as much as 30% of

america's mining power at risk. let's get more on all of this from the business perspective, without forgetting the tragic loss of life. our energy correspondent is with us. still with us is peter schaffrik . javier, first of all, let me go into the chart you very kindly showed me. this is a spread between gasoline prices for october and november and you see a sharp spike up. >> that is indicating the market is expecting a very strong tightening of the gasoline market in the united states, particularly in the new york area. that is happening because the united states relies on gasoline produced in texas and louisiana and the refineries had to shut down because of flooding related to harvey. the situation will get worse as harvey just made landfall near the border between texas and louisiana.

that is the u.s.'largest refinery. tom: i look at hurricane harvey. this is the latest chart from nws. we put this into the bloomberg hurricane function as well. javier, it really goes towards southern louisiana. is your world right now away from the tragedy, as francine --tioned the rescue efforts is it about the texas coast, the louisiana shoreline, or both? >> it is absolutely both. the hurricane is heading to louisiana, but it is close to that border with texas, where we have significant refining capacity. refineries are suffering from flooding in the area of houston. it is both areas that are a big concern for the energy market. javier blas.d,

thank you. greatly appreciated. much more coverage on this, particularly out of washington. we will be joined from the bureau of the white house in washington. the organization already has dozens of shelters up and running, but it expects the crisis to grow exponentially. thousands of texans will rely on the red cross. donations will go to www.redcro ss.org. stay with us from london, from new york. this is bloomberg. ♪ tom: good morning, everyone.

i am tom keene. let's get to first word news with taylor riggs. taylor: a testfiring of a

missile over japan was a over guam.prelude he is urging his military to conduct more missile launches over the pacific ocean. rain is coming to an end in houston, but problems are not. less than an inch is forecast for today, but led waters are still rising in texas. at least 18 people have died and 13,000 have been rescued. a second landfall near the border of texas and louisiana. it is a victory for the case involving former alaska governor sarah palin. he said she failed to show that it wasspaper to

publishing false statements. theresa may is headed to japan with a single goal. she wants to convince japanese leaders to use the trade deal as grounds for a future agreement with the u.k.. the u.k. is breaking away from the block. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. francine: thank you. after weeks of courting france macron'srful unions, rating drops. joining us now is san luis --

how would you rate the presidency so far? it actually seems to become more and more unpopular. trend? a reform >> i think that the election of president macron has been very good news for france and for business, for europe. he wants france to go back and take the lead in several directions such as climate .hange and what can be done i think it is good news. support in theme polls, but it has always been the case in france after three or four months of governance. the question now is not whether he is popular or not, the he do thes will reforms he said he will do. i think it is important to bring additional confidence.

how do you rate the reforms, the government is tax, you are new cutting taxes, but adding something out your is a blurring the visions for companies and corporate friends? we don't know exactly what will be the full reforms. it would be difficult for me to give you details on that. i am sure at the end of the day we need to reduce corporate tax level in france. macronit is what mr. said during the election. we will see what comes in the next i've years. have you seen an impact on the animal spirit of france since the president was elected? >> sorry, can you repeat? presidentyou said

macron was good for business, how can you characterize that? brings freshat he air, he brings additional entrepreneurial spirit. want to have growth, if we want to speed up the growth and france, we need to have positive feelings here i think macron is bringing that. other ceos,ak to everybody agrees he brings this additional little less that gives more willingness to invest. , he bringsyes something important, confidence. tom: a question on a broader scale with your work in

engineering and -- is continental business becoming or is ito-american, still distinctly a european model? jean-louis: that is a very interesting question. in fact, i feel the business is becoming global and therefore i am not sure that the business we -- in is a more angelo anglo-saxon or european. at the end of the day we combine the engineering french spirit to global business approach of the u.s. the how me with the idea of excellence of french technology and the french experience. drive awardhow to

french engineering excellence, what is your formula for mr. macron? that frenchi think people are known for their engineering excellence. i think that we need to continue in france to develop engineering capacity. the people who believe we need to continue to produce and france. engineering productions is very important in that country if you want to stabilize it and give enough jobs to the population. think for france it is a really good asset. in addition, today, you see in of new starter

companies and people want to start new businesses. there is a lot of because systems to promote small companies and develop them. i think all of that, echo ecosystem, is positive. you are developing everywhere including the u.s. for finance. francine: you went through the water.tion of -- is anything happening in texas because of hurricane harvey? suez, no, 4gour water, yes. closing three or so of their production sites. there are no cash, the most important.

for the time being, i do not know when they will restart production at full capacity, but i will see for the timing -- for the time being, the problems are limited. haveine: because you don't -- yes, sir? like to addi would of course we are following those situations very closely and of course we have with the american ,eople this very big disaster which in my view is something unbelievable and really strikes -- hearts in france when we see and the suffering of american people. francine: thank you so much. let's get back to peter

schaffrik. when you look at this, we talked about europe and the ecb, but do you believe we will see many more megamergers? is it good reason that a lot of these mergers are happening, or just because of financing costs? both really. and one thing you typically see as the economy picks up you see more m and a deals coming on screen. the european economy has been picking up. that makes the company's more attractive for external takeover, but also gives them more clout in international takeover. francine: thank you. peter schaffrik from rbc europe stays with us. david westin has a

conversation with warren buffett. this is bloomberg. ♪

francine: this is "bloomberg surveillance," with tom and francie. here is the eurozone. mario draghi may be forced to show his hand after his reticence at jackson hole. analysts predict there is a high draghi's -- let's mark gilbert and still with us is peter schaffrik.

thank you so much for sticking around and coming on. jackson hole, the question was beforehand if mario draghi was going to -- is that cheap? >> go back a decade. he talked about brutal moves, unprecedented for central bankers. another 8%.n moves i'm not sure that intervention will do much, because as the ecb -- in the reflects eurozone. it is not a currency driven outlier, it is a stone facts. -- it is based on facts. relative value basis you would expect the euro to be rising. peter, you argued that

the euro is not high, all the others are weak. peter: yes. we run a model where we gain where we gauge the intrinsic strength of the euro. the u.s.ticularly dollar weakening, sterling is a big component and then there is the dollar satellites that go down with the dollar together. that is a lot of counterweights to the others. there is some element of euro strength, but it is not the only thing. may add one thing on draghi in particular, when you look at where the ecb was really concerned about the strength of the euro, why were they concerned? the external part of the economy was the only thing europe had going for it. now the situation is different. strongertic economy is

, so if you have a little give, we can live with that. let's go with gilbert gadfly, he always goes macro on his charts. inflation, -- the czech republic doing better than good. there is a leg up on inflation. is there the same kind of leg up feel that chair yellen has? is it for real? place we have seen it is the u.k. that is leaving the eu. it will be 1.4% may be 1.5% tomorrow. --sign of consumer

tom: we can do this with gilbert, because he has a tattoo on his left arm. followthe forecast we predict a higher inflation, i higher interest rate. when does the show gamestop -- when does the shell game stop? >> it is like looking at a picture of a mountain range. it is up and down, up and down. it suggests the market doesn't know what the ecb is going to do about tapering. because it is stuck below target, it will be hard for draghi to introduce tapering. francine: peter, your take on it? how does a draghi position himself having to do something,

while also sounding dovish. in my opinion, if the ecb hasn't put in these technical levels of we wouldn't be having this discussion about tapering. the european economy is better, but there is no inflation. draghi may that absolutely clear. the economy is firing up, but inflation is not there. reason, i think the only we are having this discussion is because of the technical limits your i think they are going to play around bring monthly purchases down, but also with technical levels. -- asark gilbert, let's you mentioned, the germany tenure, the white line and the two-year is at negative yield. this has widened from where we were last summer, where we were in 2015, may be on the edge of

2013 kind of gap. what does it say to you? deflation signs are over. sign ofe is no inflation, you will see that in the negative yield. easing, of quantitative the fact that germany is running out of bonds to buy, it is the mix of qe that has to between going forward. that could go wrong. to get its message exactly right if it is not one to spark a selloff in bonds that could increase borrowing costs across the region. it is crazy that we were talking about euro-dollar parity and now were talking about pounds. the thing that is driving us

steep compared to every other yield curve is because central bank is one of the few ones around the planet that says we are going to stick to that superlow front end interest rate. y have. and canada the been moving. going back to your question on the pound, clearly one of those elements i mentioned, the pound is weakening in its own right, we all know why. obviously because of brexit and that implies that against the euro, the euro looks strong. we think they down set risk for the pound sterling is clearly still there. francine: interesting. thank you so much. and the meantime, if you have obscure questions you want to andpeter, go on to tv you can see charts.

this is a good one regarding inflation. using i.b..age us this is bloomberg. ♪

♪

let's get the bloomberg business flash. lost anuffett has investment gain in bank of america and more than $11 billion. buffett invested $5 billion back in 2011 in exchange for her bird stock and the right to buy common shares. in china we have heard from three of the country's biggest banks, the largest one posted profits that the bank curbed bad loans. reported profits better than expected. in france, president macron's popularity ratings have plunged into the basement. still they are confident that he will perform in economy boosting reform. it is a good team we

need for france, for business, or economic recovery. macron willrrow reveal a five-point plan to overhaul the labor market. that is your bloomberg business flash. we are back with peter shaffer and let's continue the conversation on the european central bank. let me bring you over to your favorite chart looking at euro. what does this tell us about where it goes next? peter: as you can see we are back at levels when the ecb was really concerned about the euro. ,his brings us the back to the earlier, yes, they are concerned. they said what they want to avoid is undue financial conditions tightening. i think compared to the last time we were at these levels, they domestic economic situation

is so different that this is not the prime concern. onemust,, this is masking very crucial element, different countries have different exposure to the euro. germany will not export less cars because of the euro, but some economies are impacted a lot. one of the ecb policy steps hopefully does entail helping the southern -- tom: francine, bring that up again. that is a fantastic chart. that is an amazing to standard deviation move, strong euro. what are the ramifications if you break through where we were 2014, the ever stronger trade weighted euro? part of that is the weakness of the main -- tom: i know, but what does it

mean for suez? at -- analysis shows nor northern european countries are less exposed. because of stuff exported from germany, france, is less -- to the price year it however, the southern economy is quite the thingscause of they are exporting is very exposed to the -- tom: we have to go. thank you so much. yen snored big -- bloomberg. 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. tom: this morning, markets are calm. korea fears even as north

korea's fearless leader speaks of muscle flexing, it is a wrong call of 2017. clarity, jens nordvig in this hour. it is the biggest strain in the history of the continental united states, the remnants of hurricane harvey making landfall again, houston and president trump deal with a biblical deluge of more than 50 inches of rain. good morning. this is "bloomberg surveillance ," i am live in london. .ith me is francine lacqua so many stories this morning you don't know where to turn to other than where they rescue effort continues. it is first and foremost a human story, but also a business story. we have to figure out how it

impacts insurance and refinery and gasoline prices. the impact of is the federal government, charts on that and that last few days. first your update on first word news here at taylor: we will cover all angles. tropical storm harvey is taking aim at louisiana making landfall today in the western part of the state. that is after dropping more than 50 inches of rain on texas. it is blamed for more than 18 debts -- it is blamed for 18 debts. aths. costliestsecond disaster in history. abouttors estimate 340,000 customers in the state belowost power, but well

blackouts from previous storms. the biggest threat to houston was rain, not strong winds. the storm is estimated to make a slight dent in the u.s. economy arereconstruction efforts likely to be substantial enough to boost growth this year. they estimate the storm will lower gdp by .2%. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. riggs.lor this is bloomberg. -- francine? tom? curves steepening seem to the morning and 24 hours ago, -- and oil nudging toward the 25 handle. asian equities higher,

yen dropping, overall demand for --e haven begin to say that tom: this on korea. , i use it as a benchmark of normality. here is the fear, a stronger yen, weaker korean yuan. down we go with some calm here, the markets clearly conveying a calm versus the rhetoric from leaders. francine: you were talking about havens, i changed mine as quick as lightning to reflect something you are talking about, gold. we had a conversation with peter schaffrik about the role of gold

. we are looking at gold another way because of easing of tension with north korea. tom: we could speak for an hour with this man following every activity of the president. good morning. does the president and his team consider the trip a success? there were no major gaps and that is a low bar, but it is something they were happy about. he was able to get there, expressed his support, talking to local officials. he was able to get down there. he spent a few hours on the ground, hitting two cities without making any major's -- major mistakes. tom: is he going to make major mistakes in springfield today, will teach her lead or introduce tax reform? usthe white house is telling

this will be an event where he tells us why tax reform is important, not so much how they will do it or lay out the details of a plan. he will talk about main street in getting tax relief for the middle class. this will be a high-level speech, not talking about the -- how to getess into the nitty gritty. he will just be the cheerleader, champion of the effort and talk about why middle-class americans need tax reform. do not expect specifics today. does this feel like a campaign? there is a lot of media saying this was a speech crafted by steve miller not gary cohn, what does that tell us about the tone of this speech? when he getsnge is in front of these adoring

crowds, he goes off script and talks about things that are not the issues of the day. that is the fear that a number of officials have. the tax reform issue is something the white house once the president to be focused on -- wants the president to be focused on. they are hoping he will be able to stick to the script and focus on tax reform in a way that will galvanize the american people in support of what he is trying to do in congress. francine: congress needs to deal with relief efforts for hurricane harvey, how can they deal with the debt ceiling, and what is the president's message on that? >> there are tons of pieces of legislation they will have to work on including lifting the debt ceiling. the president believes harvey aid funding will be able to get through congress quickly, but we

are not sure that is going to be the case, because there is a whether to payt that kind of funding. is the relationship of the secretary of treasury with the president? tillerson,ious with how is it with mnuchin? recentave seen more statements from steve mnuchin expressing support for the president, but he has come under large amounts of pressure about whether or not to resign. we have not seen the break we have seen between others like the gary cohn. so far, steve mnuchin continues to have the president's back. they are on the same page for the most part. tom: think is so much. own shopvig set up his

at exante data. are you surprised that dollar weakness? jens: i think last time we were here we talked about the trend change in the euro, we think that was around the making of the french election. i think there were euro forces that were clear, but if you look at the extent of the dollar weakness, i think that is a big move. the big question for investors is how long will that continue. tom: i want to bring up the chart now, we're going to show this eight times this hour. this is a spectacular set of math on a blended dollar index. teaching of thise course, this -- is

surprising to the president? jens: and that perspective he is getting what he wanted, but i also think you have to keep in mind what is driving this, there is the usual interest rates, but also political risk in the united states. we are not used to that and that is not a good thing here a. francine: when you look at euro, who has the toughest job, the fed or ecb in convincing the markets that what they want to do is right? has ano doubt the ecb fine balancing act in store for the next meeting. they even said so in the last minutes from the july meeting. it is a tough balance. growth is better, on the other hand the euro has moved a lot and is threatening the inflation forecast. how they balance that, i think they will calibrate finally how

they extend into 2018. it may be such a fine calibration, they will not have all information they need at next week's meeting and they will push it out into the future. for the fed you can see yellen spoke in jackson hole and didn't have to say anything about monetary politics, because she was happy what is going on. i don't think they are worried about pricing or anything at this stage. francine: what can mario draghi do to top-down euro, you could argue that are a lot of europe 120 is fine? were trading 140 when this all things started to have quantitative easing. it is a different level, but they are focused on inflation. what can they do?

i think that is important to think about for next week. iserest rates are so low it hard to enhance the fall guidance. we have an issue of scarcity of bonds. i think really the aspects of the press conference that is going to be most important is actually the specific words on the currency. he was very relaxed at the last very conference, not -- much at all. whether he steps up the rhetoric , that will be important for trading. aboute were talking particularly his wisdom on political and financial dynamics of europe. coming up, an important conversation with david westin and warren buffett of berkshire hathaway. hour.or that in the 11:00 from london, new york, stay with

us. this is bloomberg. ♪

bloombergt's get the business flash. and russia, the central bank is trying to keep a crisis from spreading. banks have been bailed out, month ago the largest private lender. uber has named its new chief executive. 'long search tos

replace travis kalanick. in an and a rio, he called it the opportunity of a lifetime. sells for more than $20 billion, a deal could come by the weekend here at united technologies makes aircraft parts including engines. that is your bloomberg business flash. tom: thank you so much. francine, this is a nostalgic deal for the aerospace industry in america. this goes back to collins in cedar rapids, they made the radios for bombers that blew out in england in world war ii. it is one big further rollup of a national industry. francine: it is and we saw -- in europe we saw similar -- countered the price pressures we are seeing from the

lights on the people on the other side negotiating prices. tom: it is an extraordinary merger. we will see if that is affected. hurricane harvey, let's look at the national weather service's idea of a storm that is on taxes, off texas, and back on landfall right now. we wanted to bring you somebody that really knows oil and gas in texas. jaques lehigh, joc russo with clearview energy partners. >> i think what we are seeing is this is a more of a gasoline story than a hurricane story. more oil, because there is more oil being produced in the gulf of mexico at that

point. let's look at the chart, if we could quickly. migratinge latest over to louisiana and it is easy to see here, for those of you will wide, here is the texas, louisiana border. where will the biggest threat be. to the west in texas or east in louisiana? ues: there is more in texas, and that is what has happened over the last few days. -- are seeing up to 20% and impacted in some way. texas is more. francine: much further can gasoline prices actually go up? jacques: what you need to do is take a look at where we are in terms of gasoline and majorities peered we have 24 days of demand cover. ofre is a fair amount

gasoline, it will depend on how long the refineries are down. francine: i am looking at a spread and this is the price difference, the spread between gasoline futures for october and the one compared to november. talk to me about wti, prices haven't gone not, because gasoline goes up but you also have demand being hit. that is exactly right. i think what you are seeing being more of a gasoline issue than oil, we are losing more demand than supply. there is a lot of oil, not i a lot of gasoline. we willh the damage see, is it correct to say the various energy assets are shut down in that when the sun rises and water clears, they just start right up again, or is there damage that will take weeks to fix? jacques: if definitely not a quick turnaround.

the big issue is on the electric systems that could have been -- flooded and take some repairing. it will take weeks before refineries are back up, could be longer. at aine: we are looking map people can look at on the bloomberg. it seems like the energy market is in disarray, because you don't know how long it will last . it is also disrupting gasoline from pipelines. jacques: great point. the colonial pipeline brings a significant amount of the coast and that is what people are worried about and why prices are jumping here at taking a look historically, inventories are high, as long as there is no major outages. we are seeing in a month or so thing should be back to normal. tom: thank you so much. i appreciate it. hyper detail on assets along the

gulf of mexico. it is still a crisis and rescue effort with death tolls and injuries rising. of organization has dozens shelters running, but the american red cross expects the crisis to grow throughout the day. thousands rely on the red cross for food, water, and a place to stay. your donations help here it 02 red cross.org. this is bloomberg. this is bloomberg. ♪

>> do you feel i certain responsibility as a woman eeo to mentor other women and speak out on issues related to women? >> you always wanted to be noticed and rewarded for what you did, your contributions.

tom: in london and new york, an interesting day. we are following hurricane harvey, a quieter korean dialogue. jens nordvig is with us. for years on wall street, it has been the debate on wall street. it is out of london, but across global industry, how will intellectual content be compensated over the years? you were talking yesterday, you were someone who has lived the mifid.sor to metho there is a new way of every analyst for themselves. who will win? is risingan see there coming from the banks where certain research packages have a price and the prices are going

down. ande is a search going on the banks don't know what the rules are. that is what is going on now. and i had an ammo conversation with the client this morning and there are no clues what to do at this stage. we are trying to figure it out. they will lose the most in all of this? jens: i think if you are an investment bank without a top class research department, i think it will be hard to justify eating a big research operation. i think there will be demand for high-quality research, so i'm not worried about that. it will be like weeding out the less high-quality stuff. do, what are we going to

get paid by the word? how are we going to get pa id? jens: you have to have unique concepts, unique perspectives. there are different ways to have a special angle, but you will get paid for uniqueness. francine: coming up later today, brian moynihan sits down to talk about season bonuses. look for that at 3:00 p.m. in new york, 8:00 p.m. in london. this is bloomberg. ♪

a ♪ francine: this is "bloomberg surveillance." let's get right to taylor riggs. taylor: harvey is louisiana's problem now.

and is in early today expected to drop substantial amounts of rain before going north. the rain has ended in houston, but the trouble has not. at least 18 people have died and more than 13,000 have been rescued. floodwaters still rising in parts of southeast texas. a victory for the new york times in a high profile case involving sarah palin. a federal judge tossed at her defamation suit against the newspaper. he said she failed to show that the newspaper new it was publishing false statements in an editorial, before quickly correcting them. no comment so far from sarah palin. theresa may going to japan with a single goal, she wants to convince japanese leaders to see their trade deal for a future agreement with the u.k. she is in the final stages of thetiating with the eu as u.k. is breaking away from the block. kim jong-un says the test file

was a meaningful prelude to guam. he says he will watch the response of the u.s. before deciding on further action. he says the military will conduct more missile launches into the ocean. 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. tom: thank you so much. the response to korea, the bluffs and the bluster, you wonder how it plays across america. rockford, illinois shall distance to wisconsin in the paul ryan. -- and paul ryan. now head of the korean economic lo joinse, donald manzul us this morning. i have always been told south korea is the most american asian economy. do you buy that? donald: i think so.

the english is taught as a second language in korea. toh year probably close 70,000 korean college students come to the united states to study here. so it is a very western country located in northeast asia. tom: we talk about missiles, the navy, and military and geopolitical response, so it's a south korean need from washington and from president trump? what do they need? itald: south korea needs, has, but it still needs the continuous assurance that the u.s. is going to stand behind south korea in the event of any encouraging by the north. the south koreans are very durable people. they appreciate the fact that the united states is standing

shoulder to shoulder with them. and they have grown up on the assumption that if anything happens to them and south korea, the u.s. will be there with troops in south korea and japan, ready to repel any invasion from the north. francine: does the u.s. need to be there, or do they need to convince china to be there? donald: it is both. china has really been lackluster earize attempt to denucl the north koreans. they have voted until recently against sanctions in the u.n., now the u.n. in the sum of round of sanctions against north korea, which are not doing a much good except that china controls the energy into north korea, most of their energy. and china is north korea's largest trading partner, so

china could easily turn off the stick it -- spicket to the energy and actually stop allowing them to use a banking system to converge -- convert their sales into hard currency, which is being used for their nuclear system. francine: but will they? donald: we do not know. it has only been the last couple of months that china has stopped buying coal. the latest statement from china is north korea has meant -- has reached a tipping point. whatever that means. if you recall the launches in july, by the north koreans, china said look, if north korea starts a war with the u.s. and japan and south korea, china will remain neutral. but if the u.s., china and south korea started war with north korea, then china will intervene

on behalf of north korea. then they made the curious comment that said, in any case china wants to make sure that the sovereignty of north korea continues. so we do not know what that means except if north korea has any indication that china does not have its back because of crossing the tipping point, then we could be into a different scenario. tom: donald, thank you. donald with the korean economic institute. you take a look at the dynamics. with foreign exchange as a litmus paper for asia, we have separated out the strong euro, can you also say a strong asia versus the dollar? will we see the strong korean won and a strong yen? jens: we have seen some changes this year. we had a time when there was

very much concerned about the trajectory of china. that concern has moved in the background of the capital flow situation. and the trend of reserves down in china has stopped and it looks more stable there. the other thing going on, which i think is interesting, countries such as south korea and taiwan have a long track record of being aggressive in the market and stopping the currencies from being too strong. one thing that the current administration in the united states might have been successful at is scaring these countries into not doing that anymore. so there is more room on the downside. if it was not for these korean intentions, it would be different. themdo you still look at as asian tigers? region these countries are different, and they are at different stages of the development. japan had a boom in the 1960's

through the 1980's. korea a little later. now we have high developing countries like the philippines. it is a broad spectrum of levels of development. i think to use the tiger term for the whole region is not appropriate anymore. tom: ok. jens we appreciate your perspective. coming up today, david westin with warren buffett of berkshire hertha with -- hathaway. andthing about warrants brian moynihan. only on bloomberg. ♪

♪ francine: this is "bloomberg surveillance." taylor: let's get to the

bloomberg business flash. warren buffett -- and bank of america of $11 billion. this is 7 million shares of the bank. he invested $5 million back in 2011 in exchange for preferred stock. a reminder, bloomberg tv space with warren buffett later today. and in china, we've heard from for your the country's biggest banks. icbc posted third-quarter profits at these estimates. the same thing happened with agricultural bank of china. mean lock my bank of china reported profit better than expected. and in france, the president's popularity ratings have plunged into the basement. still, -- is confident he will push the economy to perform. >> we are very confident. i think that is a signal of his is really the team

that we need, for business, for economic recovery. taylor: tomorrow, he will reveal a five-point plan to overhaul the labor market. that is your bloomberg business flash. francine: thank you, taylor appeared apple plans to transform the way that people use the iphone by limiting the concept of a home button and making other adjustments to the flagship device that has become almost obscuring. that is according to people familiar with the gadget. our bloomberg tech reporter joins us. adam, this could be something we've never seen. adam: it is the 10th anniversary of the iphone, so there has been a lot of expectations about there being a design change and this is one of the biggest changes you can do, get rid of the home screen and change it so that it is more of a gesture-based movements to activate the phone. the phones are becoming more a

piece of a glass as a way to get to the sophomore -- software underneath it. had been,the button this is a valuable piece of real estate. francine: what does it mean going forward? i see the plans and we have a good story on the website and bloomberg terminal. will there be backlash? we have seen the plans, so will they actually go through or do you think they will change them last-minute? adam: i think they're based on images that are cali cap bloomberg in people familiar with the matter -- that our colleague at bloomberg has seen and are familiar with the matter. this is something where apple tries to make a difference. they make a hardware change, but they also integrate it with software and it is the integration of the two of them where they will be trying. so this new gesture-based thing will be sliding it up and opening the phone. tom: i will be blunt. nobody wants this. it is the bottom of our

wonderful story. they agree they will keep doing the iphone 7 with a faster engine, so what is your research, what will people want to buy? adam: i think a will be controversy oh. -- controversial. i think it will be a trade-off. they had a lot of deliberations i am sure internally on whether or not getting this bit of screen real estate at the bottom is worth having to teach people how to use the funds in a new way. phones in ae the new way. tom: is this new phone samsung like in a way that it threatens thier margin dynamics? iphone or it threaten apple dynamics? tom: is the new phone so much like a samsung, do we know yet?

adam: i do not think we know it yet. i think the price will be much higher. in that respect, if it sells well then it could expand margins and you could see him bump in that respect -- you could see a bump in that respect. the point you raised is whether or not it will be a seller we are going to call one that is more expensive, or will people stick with a model, something that they know. tom: exactly. this is interesting. the story is really complete and it really discusses the attention of two technologies where apple is heading. now we are going to the attention of this chart, i think we have shown it eight times today. let's review this. jens, the idea that everybody got this wrong. parity this. all of a sudden we have a weaker dollar. this is something i would teach in a college course. how do you break a weaker dollar trend? jens: i think the way i would look at it is we had a very nice

large historical dollar from the summer of 2014. until january of this year. it was composed of different phases, it had to do it fed tightening, the last leg of it, the trump administration where there was a lot of hope around it. when that starts to fade, we have the turn. i think we are in a sort of environment where we had a really big, one of the biggest since the 80's, now we are turning around. the question you want to ask yourself right now is is this direction going to continue, or will we take a breather? i think there are tactical considerations that the just we will take a breather. but it does not mean that we are going to go back to an epic dollar trend. tom: bring up the whole chart. let's look at the fx market as well. there is the 210 spread. over we go.

this is a massive flattening chart. what does that mean for the u.s. dollar? jens: this has to do with the hope. hope coming out of the equation. tom: i am going to lose money with the word hope. what gets me away from hope? hope let's call it false because it cannot sustain itself. i think you have come to a point where the expectations are low. tax reform is being discussed, but expeditions are very low, so at this point in time we have essentially unwound all the optimism in now we have to look at the reality, and if there is anything on tax reform it could actually boost the dollar. the other thing i would point out is on the pricing, that related to what you are showing their, we have less -- there, we have less than one hike by the end of 2018 for the fed. think about it. they have hiked three times and

we look a year ahead and we have less than one additional hike price. that tells you something about the optimism coming out of the equation. francine: what is the one thing that actually people misunderstand about this market? perhaps onek what thing it would think about from a big picture perspective is the fed kind of made a mistake the last cycle. they hiked too slowly and it led to asset bubbles. the fed still has that memory. there is uncertainty about whether inflation will be there. i think the fed wants to rake higher if they can and i think therefore we have to be careful about pricing the fed too cautiously. francine: jens, if you look at the regions, do you see concern about inflation of course in the u.s. and how it will end up similar in europe? who has the toughest job among central banks? jens: i think in the short-term mario draghi have to probably be

thinking carefully about the specific words he has to say on september 7, whereas the fed they are in an easier spot. the tightening cycle is on its way and it is not about sending a big new message. tom: very good. jens, thank you so much. i will run off and get ready for bloomberg radio. we will do that worldwide. francine will join me later in the next hour. and tv go, let's take a look. you can look at it. for more importantly, you can come on down and he can pick out any given chart. here is a good one from francine. it is a hockey stick chart of the oil refineries. you can steal it from bloomberg. good thing as well. let me bring up the report. 10984. there is euro sterling.

that is something to watch through september. stay with us. this is bloomberg. ♪

♪ francine: this is "bloomberg

surveillance." embarking -- theresa may embarking on a departure to japan. she will be meeting with shinzo abe and business officials. the goal is to use the free trade deal with the eu as a basis for a future agreement with the u.k. traveling with the prime minister is alex. first of all, you were on the flight to japan with theresa may. how do we expect the japanese to greet the prime minister? alex: well, the u.k. and japan have long cordial relationships and the prime minister has already met shinzo abe several times. he visited recently to the u.k. at her country house. so they know each other. and it is a relationship she has worked hard on since becoming premised are a year ago. francine: what is it she actually expects to get out of

this? japan is in the final stages of brokering a free-trade agreement with the eu and the u.k. is about to leave the eu. alex: she very much values the trading relationship with japan and she is hoping, she is trying to force through the eu deal so it is in place before brexit, and once brexit takes place she sots to roll over the deal britain can continue to benefit from the new trading a remake -- trading arrangement has already forced with japan. francine: that sounds crystal-clear. anything short of a commitment from the japanese, will it be seen as a failure when she comes back to the u.k.? so.: no, i don't think i do not think we are at the stage where the japanese can commit to anything, because a deal with the eu is not yet complete. until that is known, until the final terms with the eu is

known, we do not know if there is a deal to roll over post-brexit. the japanese also want to have some sort of sketch of what the u.k. will do with brexit, because the terms of trade that they want with the u.k. are heavily influenced by the u.k.'s trading relationship with the eu. francine: think is so much alex morales who is traveling with the prime minister. now, this comes after a difficult week. quite. this is a very big deal for theresa may, because japan has huge interest in the u.k. and has made many investments in the past. causeis could effectively job losses in some areas which are the most sensitive for theresa may in the north. francine: will we see the prime minister going around trying to

broker these kind of commitments with different countries? svenja: she will try her best. at the moment, they are not allowed to forge new trade deals so anything she does will be mainly pr for the u.k. until they sign on the dotted line you have no guarantees. you can be sure that the japanese will be pushing very hard to get what they want. you have seen their companies do that. an agreementve us on what we want or we are out of here. she will be facing that with a lot of countries who have big interest in the u.k. francine: does the prime minister have better control of her cabinet? >> i think the cabinet is more united, which is not the same thing. i think what we see is some of them coming together on the idea of a transition agreement. it is not being necessarily pushed by her. some of the cabinet has been instrumental in doing that. there is also a sense of the

clock ticking, because the u.k. lost a lot of time with this election and they have now realized that to get what they want they need to really knuckle down and start talking and bashing the deal out. francine: thank you for the update. now david westin later on will interview warren buffett at 11:00 in new york, 4:00 p.m. in london. in the meantime, a lot of asian equities are higher and tensions around north korea have been theng, but i am looking at german swiss franc holding onto gains. this is bloomberg. ♪

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makes landfall again, this time southwest louisiana and the oil market braces for more disruption. the war of words with north korea continues. the u.s. agree council condemns their outrageous actions, but holds big on that hold back a more sanctions. and regaining a stronger floating -- footing. good morning. good morning from new york city. this is "bloomberg daybreak." i am jonathan ferro. alongside alix steel. futures are solid. up a 10th of a percent after erasing losses yesterday after the session on tuesday. and f market, who wants to be aggressivelyx long on the euro? the confidence numbers are outstanding. economic sentiment at a decade high end a week away from the ecb meeting. treasury yields unchanged on the session, but near the lower end of the range. alix: