anna: welcome to the program. here are the top stories we are covering around the world. nuclear options, president trump aseatens wider sanctions north korea prepares for a another missile launch after the test this weekend. mario draghi speaks out on thursday to weigh in on euro strength and the ecb inflation forecast. bad news for bitcoin. china's central bank declares initial coin offerings illegal. bitcoin tumbles the most since july. to the program. it is labor day in the united states. ,aybreak americas will be back bloomberg markets for the next three hours, live from london. taking in the stories around the world. let's start with market

reactions from what we saw from pyongyang. you, thest i can give equity market, the stoxx 600 was down earlier. -- down by 4/10 of 1%. assetst sets -- haven after the testing. north korea is continuing to prepare for a possible intercontinental listed missile launch, reddening to raise tensions further. the stock is down. a good opportunity to look at the fear gauge. europe's fear index. , now it is up a mere 7%. the 12% gained it was the highest since august 18. last tuesday when north korea fired the missile over japan, higher index closed 9%

after rising an intraday 15%. trump's fire and fury comment in early august prompted it to rise to 19.3% on august 11. that was the highest since april. we were nowhere to the levels we were in april before the french election and the levels we reached before the u.s. election last november. those are the brexit levels we saw in june last year. that puts it in perspective. europe's fear gauge. index, given what is happening with the north korea story. this highlights the fact that money is moving into fixed income securities. last tuesday when north korea fired the missile over japan, we had the german 10 year yield falling to the lowest level in two months. yields over the entire week last week were little changed. on july 13, the high. highest since january

last year. apart from north korea tensions, investors looking ahead to thursday's ecb meeting. that is the big event this week. when it comes to currencies, money is moving into the haven currencies today. theng into the swiss franc, yen. look at the function on the bloomberg, rising eight of its 10, rising against all 10. according to the market slide contributors, the prospects for a clean resolution in north korea look slim. there is a risk for yen, pushing 108.13.ard this high of --h a move could's trigger could trigger a big squeeze. little to dissuade leverage players of the virtue of betting against the currency. tellss what this chart us. what garfield goes on to say, going against the yen is the third most popular that among

major currencies paired. things could turn ugly, he says, if there is a shakeout in the currency. wonderful chart, highlighting the fact, money moving into havens today. because of tensions increasing in north korea. absolutely. every time we get this geopolitical tension we have to revisit the definition of a haven. thank you very much, mark. let's check in on the news. here is sebastian from london with an update. >> tensions have been raised on the korean peninsula and they may go higher. south korea says the north is preparing for an intercontinental missile ballistic -- intercontinental ballistic missile launch. this after a powerful detonation. china says that president trump the threat to cut off

trade is unacceptable. says thenor of texas state may eventually need more than 120 billion dollars to recover from hurricane harvey. that is more than the u.s. spent on hurricane katrina in 2005, the worst natural disaster in the country's history. clearent trump made it that his request to congress for $7.9 billion is just a down payment. prince william and his wife, the cambridge, are expecting their third child. she is suffering from morning sickness today. william and kate have two children. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. anna: thank you very much. back to our top stories. u.s. defense secretary jim mattis shot back at north korea's nuclear test with a blunt threat. >> any threat to the united

states or its territories including guam or our allies will be met with a massive military response, both effective and overwhelming. anna: to bring us up to speed on beyond,st in seoul and yvonne joins us now. give us the latest, there has been activity on the border today, there have been testing by the south koreans. and news on what they think the north koreans might be up to next. the headlines have been dying down a bit. certainly in the last hours we heard tensions escalating, south korea had predicted possibly that the north is preparing for yet another missile launch. this time, the same class as an icbm.

hereve heard local media saying that the u.s. and south korea are desiderata -- are considering deploying a carrier unit as well for strategic bombers in the region. fourp of that, as many as anti-ballistic missile defense systems could be launched soon. according to the news agency after south korea conditionally approved a study about the concerns of locals and the president on whether this was going to further escalate tensions with china in particular. this seemingly as a united front between the u.s., south korea and japan. very close to the border in china. be too not going to thrilled with the latest developments coming out from seoul. anna: thank you very much. daniel,us in london, who is a global sanctions later.

great to have you on the program and get your thoughts today. give us your initial thoughts in response to what we have seen over the weekend and the expectation we could get further testing from the north koreans in the days ahead. what does this do for your sanctions universe? >> the sanctions universe has been upended. sanctions have created headaches for financial institutions for years. billion in$15 penalties for noncompliance with sanctions but the threat of additional secondary sanctions against all trading partners with north korea, is somewhat unrealistic since china is the u.s.'sss largest -- largest trading partner. the u.s.s doesn't mean stops trading with china if they do trade with north korea? >> i don't believe so. if you look at it historically, and how the russian regime has evolved, it was not a broad sweeping program that cut across

the entire country, it was targeted at certain environments and ecosystems within the country. i expect that is what secretary mnuchin's comments were about yesterday. they're working on a targeted sanctions packet against china. anna: we see the next that in the sanction story something taking in energy products between china and north korea? is that the next big one to go for? >> looking at oil between china and north korea is the next that. can't be a unilateral package of sanctions. part of why iran was so successful was because it was jointly issued by a number of different jurisdictions. institutions are waiting eagerly to see how the u.s. approaches this for what this means for business going forward. anna: what a business is going to be asking? they will want to see the details of what new sanctions are proposed but, what are the

broader implications? >> drawing the boundaries of what you can and can't do. april in my profession have had whiplash over the past quarter with north korea, venezuela, russia, changes to sanctions programs. oftakes a toll and adds cost compliance to the business which gets passed on to consumers. right now there is a wait and see about what will happen with respect to china and how that impacts u.s. businesses. chinese banks have a large footprint across the united states. they are a significant part of the u.s. economy. statements like yesterday, around ceasing trading, are relatively unrealistic. what is seen in terms of a next step could be likely a potential designation of a more significant chinese bank which has a significant impact on the u.s. economy. moore and the geopolitics and security issues, but from your experience, the sanctions remain the next line of

continual defense? that is thethat hope across a number of jurisdictions, the u.s., china, japan, south korea, rather than military, the enhanced sanctions package that appears to be the next at. , there haveoks like been messages coming out of the administration so it is hard to tell where this is landing. anna: thank you for your time this morning. coming up next, we will be talking more about the market reaction to what we saw from north korea. this is bloomberg. ♪

♪ welcome back everybody. this is bloomberg markets. i'm anna edwards. ,et's get into the stock market havens climbed as geopolitical tensions flared up on the korean peninsula. president donald trump weighed in on twitter saying, north korea is a rogue nation which has become an embarrassment to china which is trying to help but with little success. we started at the top of the program, why the flight to the yen made sense. though, what is happening in the korean peninsula could be seen as a threat to japan, flights to the yen still make sense. do you think that still holds true? >> i think we are at the early

stages right now because there something,ility of it is still low. , more ashe safe havens a reaction to the market itself. maybe the risk lies in that region but you still see money going into safe havens. japanese debt climbing, this is in japan, surpassing u.s. levels. some people point to this as where we are seeing concerns about japan as a result of north korean tensions. does that make sense to you? emad: definitely. it is all relative at this point because the possibility is low, they are playing a game of chicken, the market has to do something. , for it to have a spread

the same as the u.s. make sense. it should be up a little bit from where it was in the last few weeks. anna: are you advising clients to get into safer havens as a result? this is a game changer for you? the magnitude of this test was a norm us compared to previous. are going to an and estate with what donald trump is saying and what north korea is pushing towards. with south korea mobilizing. we have been out of south korea completely for the last few months and we have been coming back. buying protections because markets have gone up and they will likely take any excuse to pull back. anna: where would your haven of choice be? would you go to gold? the gold price up a tenths of 1%

in today's session. emad: this has been in a massive bull run. when you look it havens, you can go for uncorrelated countries, it depends on your investment mandate. and saudi arabia for example, the market is uncorrelated. countries like pakistan. , i'm uncorrelated markets not sure gold will be the best indicator. one interesting thing, we have seen flight to bitcoin from koreans. the exchange activity has gone up. they are not quite sure where to go. anna: there is activity about that and we will talk you later on the program. thank you very much for your thoughts so far. still ahead, ian bremmer of toasian group, will join us help us navigate this geopolitical turmoil and uncertainty. you can check that out 1 p.m. london time. this is bloomberg.

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♪ anna: welcome back everyone this is bloomberg markets. time for a bloomberg business flash, looking at the biggest stories in the news right now. drugmaker isargest promoting its global head of drug development to new ceo. turning to newer drugs. mario draghi is expected to voice concern about the strength of the euro this week. announcebe prepared to any updates to the easing program. they expect the ecb to wind down its bond buying over nine months starting in january. that is your bloomberg business flash. keeping focus on the

eurozone and the ecb policy path, we are joined by richard jones in berlin. very good to have you on the program. focusing in on thursday and what we are expecting, we didn't hear much on the strength of the euro from mario draghi at jackson hole but the expectation seems to be, they expect a little more from him on thursday. >> we could get more of a substantive pushback from mario draghi. the other thing to focus on is, forecasts. ecb since the previous staff forecasts were prepared in the middle of may for the june 7%ting, the euro has risen versus the dollar. we can expect to see revisions higher to those staff forecasts for the year dollar exchange rate. how does this feed into inflation forecasts? if it costs us -- if the cause

together withise, pushback from mario draghi might see the euro drift lower. it has been a strong run since the last set of forecasts. it will be interesting to see how those change and shift the inflation forecast as well and what it means for the euro. anna: it is been interesting to watch how the market goes around this. it would be one thing for him to mention it, another thing for him to mention it when questioned. we heard from his colleagues at the ecb today. both of them playing down the extent to which policymakers are concerned about a strong euro. to any of thee ecb governing council members, the hawks and the doves, i'm not sure the level of the euro right now is the big problem. i think it is the speed of the ascent. get as where i think you

nuanced view from the more hawkish members of the committee and from the more dovish members. address the pace of the move will be for what market participants are looking at. historically the euro is not at particularly strong levels against the dollar. it is middle range. the pace of the rise has been a problem. anna: richard, thank you very much. our market strategist in berlin. survey, the ecb has been a hot topic in italy. could phaseout this qe over the next months, starting in the year, and stay on hold for another six months. maybe starting to normalize. they could do sooner or later.

it will be a gradual process because already the talk about tapering has led to appreciation on the euro. they like to because this on how they communicate. emad, your thoughts on the euro? and then i want to move on to qe and where it goes. emad: it depends on which aspect you are coming from. ultimately, the eurozone economies are doing well. estimates not getting the usual downgrades. they need to step in with language, but i wouldn't be surprised to see tapering sooner than the start of next year. anna: i was going to ask you that. on the timing of the taper, when

do you expect it? we did a survey, nine-month seems to be the expectation. knows whate actually will happen once you start tapering. some will be pulled from the market so they will want to test what the market reaction is before accelerating it. i don't think they will commit to a full path at the start but they will start saying, it will likely be this time, and they will see what the market reaction is on the bond aside. bonds are still expensive. anna: they could keep it vague or give themselves room to maneuver? do you see is starting as early as january? emad: yes. divergencesing between eu and u.s. economic figures. anna: thank you very much. emad stays with us. much more to talk about on the program. raking the brexit deadlock.

the u.k. wants continuous talks with the eu after the third round of negotiations and in stalemate. news reports about the size of the brexit divorce bill and some of those have been rejected about brexit negotiators from the u.k. side. clarifying about teaching lessons to the u.k. during brexit. he wants to educate people in his own country about the benefits of eu membership. this is bloomberg. ♪

anna: welcome back, everybody. from bloomberg european" is an london, i am anna edwards per

markets down by .5%. it is u.s. labor day, of course. let's get first word news. defenseorea's ministry says kim jong-un's regime is preparing for a possible launch. on sunday, they said they had hydrogen bombs that could fit onto an icp and. south korea has conducted a live fire missile drill was north korea's test site as the virtual target. south korea clear the way for a new deployment of a u.s. missile defense system. china is north korea's biggest trade partner. president trump's may end the obama era rule to keep young immigrant migrants from being deported. they have six months to come up with a replacement of the dreamer's program. , david davis is

rejecting report there is an agreement for a $65 billion exit fee for the eu. prime minister theresa may is ready to agree to the payment, but trade talks just started. david davis calls the report nonsense. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. anna: sticking with brexit, the eu's lead to go shooters to missing reports he said he wants theeach brits about consequences of brexit. he said this morning, i said it is an occasion to explain single market and if it's in all countries, including my own. we do not want to educate or teach lessons. speaking to bloomberg tv over the week and is the eu economic affairs commissioner, discussing the latest talks on brexit. >> we are starting now the real discussions with our british friends.

we start also to know the positions on each side. positions are not fully compatible at this stage, and that is quite normal to it know this discussion will be long-landing. the eu and the 27-member states and thee principles, financial problems must be solved, first of all, and then we must be fully in agreement with friends on the citizens' rights, citizens living in the eu, the u.k., and their families alike. i think now we are exchanging views, exchanging positions. my friend is a bit worried about the progress of negotiations that have some time to go. i think it is quite a good deal of time to go. that anou confident

agreement will be reached in time? >> we have no choice. we know precisely what the timetable is. we know brexit must be sold by march 29, 2019. there needs to be a ratification before. we have a timetable for negotiations. we have to solve the problems we need to solve before looking at the future relationship, which decisive, important but first things first. anna: that was the eu economic affairs commissioner. joining us in london to discuss all things brexit is our simonerg brexit editor kennedy. and charles lichfield, a urijah group associate, is here in london, as well. -- a eurasia group associate, is

here in london. .hese numbers keep coming how big is the divorce bill going to be? the u.k. government is not going to say. close. are holding that the reports are nonsense and silly, according to david davis. they do not want to put a number down in the fears that will be shot out. they want the payment to be what they get. anna: on the subject of this divorce bill, i have seen a couple strategies mentioned here. have talked about arbitration, suggesting the u.k. have an independent arbitrator to get it off the agenda that way, externally. others have suggested that the u.k. wants to keep trying to tie this into the future relationship. >> there are all sorts of ways to make it seem acceptable to

the british government. me is that,lear to finally, the covenant in the u.k. has accepted that they will have to pay something. when the news actually hits that we will be paying something to leave the european union, they are trying to have some semblance of a trade deal or some transition that will tide the u.k. over until negotiations are over. the problem is that the eu wants to do this business, but for the u.k. to accept this, there needs to be some sort of idea that we are heading toward a transition. anna: the u.k. secretary traveled on a bus during the campaign arguing that money would come back to the u.k. as a result of brexit. >> difficult. but he does not have much to do with these negotiations and has on brexit,quiet perhaps for those reasons. looking at the u.k. repeal

bill, we will see that discussed again, aren't we, in westminster? this is an opportunity for those who want to rebel against the prime minister to try to get that into the legislation. willsolutely, and labour try to push that. newspapers over the weekend said diluteour might try to or amend that legislation to the question is whether they can draw in of conservative rebels. you have the effect of deputy minister saying if you vote you're labour, ultimately voting for jeremy corbyn to be prime minister. there are anti-brexit leanings there. anna: a lot of analysis over the weekend about just how much the office is going to get and how aggressive it will get over this

, and bringing conservatives into line to get them behind the prime minister. people during comparisons to other periods in history, the tory party, and how the ephesus had to play that role. -- how the office had to play that role. >> absolutely. there was a thought this would be a majority and no need to be concern. clearly, it is a concern for her. some to herull side. anna: charles, do you see ?ories repelling on this >> not necessarily in the public domain. they do expect rebilling against is fragile government makes it more likely jeremy corbyn one day occupies that it it is not what they want to happen, so they will do it more discreetly. i believe chief may is under

pressure. especially in the transition but perhaps even in the long-term. mp's can makeive it clear to her without rebilling in parliament. anna: you could see a situation with the conservatives, the leader of the conservative party, theresa may, the prime minister, after everything she said last year at the conference, she has to change her stance on the single market yeah, think she could? >> she can transition by talking about the transition. 2021, at --22020, 2020, 20 21, and perhaps opinions changed by then. she should have a softer position on the brexit transition. once we have left the eu and wellstone negotiated, it is likely we try to merit a lot of

the arrangements -- we try to mirror a lot of the arrangements we have currently. is leadingd this, not necessarily more from that members of the front then chu are not so keen on staying in much of the eu. >> but i think they understand that they are under a lot of pressure. they have good relations with the trade unions, but the trade unions see clearly that staying close to this single market maintains a lot of jobs in the u.k. there is a conference coming. there will be a vote. that might explain. anna: i pulled up a chart on the 5778.erg, gb tv shows the pound against the euro. this has been a rumbling story we have seen, the pound losing some momentum against the euro once again.

this go?s after we get the repeal bill this week -- >> with the vote next monday. anna: that is right. and for the rest of this month? >> another round of talks. there is a sense that the british would like more talks. they have been in an attempt to push the agenda on, with or the european is up for that, we will have to see. there are the party conferences. it is all heading to that mid-october summit. it was hoped that that would be the milestone at which the european union would say significant progress has been made on issues such as the bill and the irish border, so we will open trade talks. that is looking increasingly unlikely. either we have a delay in that conversation and other stuff theinues through the end of year, or theresa may tries to broker with angela merkel and other leaders behind closed

doors. they try to do a deal. anna: simon, thank you so much. charles, thank you very much. let's look at the markets. u.s. markets are closed. it is labor day in the u.s. european stocks down around .5%. as the two futures when the u.s. does open up also a's pressing a risk off sentiment. the dollar is falling against the yen. the japanese yen still acting as a safe haven, achieving proximity of japan to the concerns of the market around the korean peninsula. and gold up by .7%. this is bloomberg. ♪

anna: welcome back. live from london, i am and edwards. it is labor day in the united states, so we bring you all of the market action from around the world. time for our bloomberg business flash, a look at some of the biggest business stories in the news. antitrust file against intel. the european commission has molested big antitrust case in course in more than 20 years. if intel wins, that might encourage other companies to be more aggressive in appealing fines. technology companies to foreign takeovers, the commissioner said germany put similar rules in place in july. that is the bloomberg business flash. anna: chinese president xi jingping is hosting russia,

india, brazil, south africa at a summit with has been overshadowed by north korea pose it latest move your the country claims its excess week tested and detonated a hydrogen bomb on sunday. here is our reporter from china. >> north korea's nuclear test is a slap in the face for president xi jingping, who is hosting the bricks summit here. going to betion was about global trade and economics, but it has been overshadowed by what is happening on the korean peninsula. china condemns the nuclear testing calls for a return to dialogue, but washington is suggesting it will ramp up economic pressure on china to rein in north korea. washington could target enterprises like china's banks in an urging companies that have links to pyongyang. that could lead to tit-for-tat retaliation and for the trade tensions between beijing and washington. tom mackenzie, bloomberg.

anna: he was reporting from southern china. still with me on set in london is emad mostaque. thank you for sticking with us this monday, emad. one thing that tom was pointing to, the fact that this summit of has beeners overshadowed, understandably, by what happened in north korea over the weekend. to what extent should an investment strategy that covers the part of the world, and you conduct about asia or the bri cs, i guess, should it be overshadowed by this geopolitical threat? >> look, you are investing for the long-term unless you are a short-term trader, in which case , as a mentioned earlier, you have not seen that much evidence of a potential spiral from here. one of the key things investors want to watch for is these trade

sanctions of these tariffs that have been mooted but have not come as of yet. donald trump has been quite smart and deflecting responsibility onto the chinese leader. it is china's problem, they are doing the best. it has been a little bit of a slap in the face for them. they need to sort it appeared anna: entrance of the brics as a , some suggestion that has outlasted its usefulness, do you invest around some of the brics? we have a chart here, 3255. rics outperforming their world despite concerns about geopolitics. drivers these countries have have dispersed. you have india with things holding them back. but you have had reform. you have new technological

systems appeared russia has fallen 15% versus all brics.l it is a big difference. that is because of oil. brazil has ramped. massively china has done well because the banking sector looks a bit more support. interesting one is south africa. they are at that conference but not on the graph. a lot of the politics is negative there. but a lot of people say there is a bottoming out process, and you could see massive run there. anna: would that be one of you top picks, south africa? >> we getting increasingly bullish on south africa. we think they might be heading towards a bottom and consumer confidence returning. and we also bullish on india despite valuations. anna: what about a reform agenda

opening of various parts of the economy to outside money? >> the buildup of the country g, you have thest tax, but you have technological infrastructure that is being built. there are tiny amounts of money going into the asset management industry. client costs have dropped. there is massive support for the stock market, and the countries are benefiting from that. you will see issues being resolved. anna: will they have a domestic bias? will they buy into things they understand at home or will it be a new force in global asset management? are investinge locally or they are going to the stock market. that is why you have seen so much bond outflow from india, all made up by locals. anna: talking about china, investors cannot get enough of china property developed by bonds.

there was concern some time ago but not according to this issue. 6.3 times oversubscribed in terms of some of these orders in july and august. are you concerned about that part of the chinese building block? >> you have to look at china companies, and valuations are astronomical at the moment. you have liquidity grounding itself in various paces -- places, going back into properties. that is one of the easiest levels where they can get confidence back. anna: emad mostaque, thank you for staying with us. still ahead, bitcoin extending declines. we will hear from emad mostaque, who says these currencies are his number one conviction call. and what does he say about the latest chinese move? this is bloomberg. ♪

welcome back.

markets" liveberg from london. remarks from the german chancellor as she is speaking at a news conference on diesel emissions could community leaders agree on rejecting diesel bans. see theor 24 is when we german electrical to the polls -- september 24 is when we see torate gon elec to the polls. angela merkel saying, it's in berlin after the meeting with various mayors in germany, saying the government needs to toble the clean energy fund one billion euros. let's get back to our conversation around china. china says all initial coin offerings should be stopped. the ban on initial coin offerings will take immediate effect, as they are illegal and disrupt financial markets. bitcoin tumbled the most since

july on the news. is here ofue capricorn fund managers. you are a big fan of these currencies. wena untangled this a bit it have been covering this story today, initial quinn offering spirit that seems to be weighing on some it coins. -- some bitcoins. not all created equal, i am sure you will tell me. bitcoin is like 10 years in human terms. if you look a chinese's offerings, about 400 million this year to date, so 105,000 investors. they are too easy to dupe china are the experts in bubbles. anna: how does an investor differentiate between, as you described them, scams and a legitimate bitcoin investment? >> it is very difficult.

they might just pile into them. there needs to be more structure around it to avoid that. bitcoinmate success for and ethereum, it is about weeding out the bad. the good will feed back into the havem, which is what we seen. anna: you said you are going to be setting up a new bitcoin. is that correct? why do we need another one? this, it allows you to create brand-new economic systems. that is trying to model ideologies to combat extremism. it aligns a lot of groups and incentives. the lot of them do not have appropriate and analysis of

monetary systems, economics, and correct incentive alignment. ones that dong are ethereum at bitcoin. uni derivatives and structures. i cannot hold it in my hedge funds. can be bullish because it can be a small part of allocations, but there is a lot of money that has not come in. anna: fascinating to see the pboc making this regard to remove. emad, thank you very much. emad mostaque, capricorn fund manager's co-cio. of eurasiaa member group, e&p merck, will be with us. this is bloomberg. ♪

anna: 1:00 p.m. in london, 8:00 a.m. in new york, at 8:00 p.m. in hong kong. welcome to "bloomberg markets." i am anna edwards.

warm welcome back. top stories we are covering from bloomberg and around the world are nuclear options -- president sections ass wider pyongyang prepares a possible intercontinental missile launch after an atomic test this weekend. mario draghi speaks out thursday to weigh in on euro strength and deliver the ecb's inflation forecast. parliament.k. returns as david davis dismisses reports theresa may is set to approve any you payment of as much as 50 billion. to the show. a quick check on the markets. european markets -- geopolitics is the main thing. mark: it is, yes.

at this function to give you a feeling of how the markets are faring. these are the stoxx, all down today, falling for the first day the investors turning to haven assets before notice he does before north korea tested that nuclear bomb. north korea is continuing to prepare for a possible intercontinental ballistic missile launch, which could raise tensions further. these currencies are all raising against the dollar today. yields falling. so money moving into the haven that is fixed and then -- fixed income security. gold rising. a wonderful function. and this is a great one, highlighting the yen against currencies. all these currencies are falling against the yen today. only two currencies rising, the swiss franc in swedish krona. the swiss franc is actually rising against all 10 of its

eers today. all 10 major currencies are falling against the swiss franc today. this is a good chart highlighting were gold is and where it has been. anre it is today is $1334 ounce. gold rising to the highs level since september 22 after the biggest weekly advance since june last week. donald trump weighing new economic sanctions that could target china after that nuclear test north korea on sunday, which is bolstering demand for haven assets like gold. year,as surged 16% this investors weighing the possibility of conflict in asia regimem jong-un's pushing on with those missile tests. the fed is expected to go slow on for the rate increases.

low rates a boon to non-interest-bearing pressure -- metals. the monthly performance for gold, $1 -- $1334 today at mario draghi will express concern about the currency strength. that is the view of the bloomberg survey. 13% in thisup a year, best start of the year ever. as a whole, best year since 2003. 67 percent of economists saying he will do just that at a news conference on thursday after the rate decision is announced here at policymakers did sound the alarm about the euro's strength that the last meeting. we found that out in the account of the official ecb meeting. economists also expecting gradual reductions in purchases -month started in

january. 77% of economists predict the ecb will unwind kiwi by announcing productions in the monthly purchases one step at a time. that is up from 65% previously. most respondents expect interest rate increase to happen after 2018. this is the euro effective exchange rate versus the euro dollar exchange rate. last week, we did cross $1.20 against the dollar, highest since january 2015. we failed to break above that line since the beginning of last week. bring on draghi on thursday. anna: thank you very much, mark martin. of course, we will bring you all you need to hear from mario draghi on thursday. let's check on news outside the business world. sebastian: north korea may follow up its most powerful nuclear test by launching an intercontinental ballistic missile. south korea's defense ministry says kim jong-un's regime is

preparing for a possible launch. on sunday, they said they tested a hydrogen bomb that can fit onto an icbm at south korea has responded by conducting a live fire missile drill here at north korea's test site was a virtual target. south korea could the way for full deployment of the new u.s. missile defense system. china has called it a third to the region's alan's a power. china says president trump's threats to get off trade with countries that do business with north korea is unacceptable. the warning was seen as a message to china, north korea's biggest ally and trading partner. today, the un security council will hold its again emergency meeting on north korea and a week. six days ago, they condemned the launch of a missile that flew over japan. less than a month ago, it imposed the toughest sections so far. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. anna: thank you. sticking with high tensions on

the korean peninsula and what this means for future u.s.-china relations, joining us on the phone is ian bremmer, eurasia group's president. a complex relationship and a complex set of issues thrown into the spotlight by developers over the weekend once again. do you see is heading for further sanctions? what will those start to look like? what the trump administration is now claiming is that we have koreans offorth completely, make it really hurt. but we are getting close to the limits of what the chinese over -- are willing to do. for example, cutting off all energy exports to north korea from china, ceasing the north korean economic production, i think it is a nonstarter. impasselose to an between china and the united states over north korea. the question the markets should be focusing on is, do we now see

the beginnings of u.s.-china economic tensions, direct bilateral tensions, with flareups and the rest that would have a real market impact? it is the most important concrete thing that has come out of the escalated crisis over north korea. anna: so you do not see the extent of the testing we saw over the weekend changing the chinese position at all then? if anything, this continues to point to the u.s. and china being on different pages, because some have said that china does not want refugee flows in the country, but they do not necessarily want such a strong north korea either. >> that is right. they're not happy about it or the fact is, north korea is one of the few things we have been able to get a 15-0 vote at the siri -- security council on. on north korea, everyone is upset. it does not mean everyone thinks

there is a solution. i think the chinese are much more pragmatic than trump, surprise-surprise. they recognize the limits of their own influence to get the north koreans to do it they want. they also recognize that if they push the north koreans hard enough, that regime change becomes a possibility. regime collapse with north koreans lashing out. the americans are not the brunt of that out last. outlash.t trump saying this is kind of like obama saying "assad. must go" it is like a policy that sits there. if you do not have the tools to get it done, it should not the affecting people too much. whether it is i see p.m.'s, bombs, or earlier stage weapons, it does not lead to a change.

anna: let's listen to what you said was imported for investors. the relationships between the united states and china. the trump trade threat is unacceptable and unfair. a tension in terms of trade could this develop into then? >> president trump has been extremely frustrated at the his ownsts" in administration, like gary cohn, who have been unwilling to give him tariffs on the chinese economy. trump has a lot of grievances against china in terms of unfair economic practices, stealing american i.t., and a lot of american reparations agree that. i think the north korean crisis is what gets the trump administration over the hump as starting to level these concrete tariffs, not investigations, not further study, not angry, but saying we are going to hit you

on your imports, limit your ability to invest in a bunch of sectors that we consider to have national security importance. the likelihood is the chinese will return that fire. a we end up in a tit-for-tat skillet three trade spiral between the two most important economies in the world -- tit-for-tat escalation, a trade spiral. anna: we saw something take place between the chinese leadership and president trump months ago. >> but let's keep in mind that the golf course meeting was great, but he also had that evening, the chocolate cake for jingpingtrump and xi getting along very well, well mp's say i just hit the syrians with a bunch of missiles here at

trump has always wanted to have see approach. he plays nicely if he is in a deal-making mode. but if he does not get what he wants, he lashes out. his tweets about china over the last few weeks have continually focus on the chinese are to blame. south koreans are being stupid because they want to appease the north. but the chinese are not doing enough. they are failing to help get the americans to put the north koreans in a bo and the chinese are the ones with the influencex,. if it turns out the trump cannot stop north korea and he blames the chinese, he will have to take action against the chinese. happened but far, the best meeting trump has had in foreign policy since he has become president, the mar-a-lago summit with xi jingping, is really set to go in a very different direction. anna: ian bremmer, eurasia group president, joining us.

thank you. switching to the eurozone and more on what drug you might say on thursday. this is bloomberg. more on what girardi might say on thursday. this is bloomberg. ♪

anna: welcome back. live from london, i am anna edwards. the u.s. markets are closed for labor day, that we are here in europe. is stronger against the dollar as investors turned their attention to the ecb policy meeting this thursday. according to a survey, president draghi will express concern over the strength of the continent's

single currency. the same economists say mario draghi will not announce any decisions on the future of the central bank and the easing program. joining us from berlin is a market strategist, richard jones, and from brussels, a member of jpmorgan assets. there is expectation in the market that mario draghi is going to be suitably concerned about the strengthen the euro, so much so that he will mention it on thursday. >> we would be surprised if he did not say anything, given how far the euro has come in such a short amount of time. given that in the account of the july meeting and those meetings -- minutes, it was a concern. it would be strange if we do not hear something from mario draghi up it we want to look at what the ecb staff forecast have for the level of euro-dollar. it has moved up quite a bit since the last forecast in june.

and the impact this has on the ecb's inflation forecast. expecting mario draghi to be so concerned about the strong euro that we get an explicit, outfront mention of it or will he just be something he is pushed into talking about during the q&a session, do you think? >> i would expect definitely a discussion on this point in the q&a session after the meeting. hashe past, mario draghi refrained to be explicit about the currency, also when the euro was much stronger than it is today. will have to talk about the the strength of the euro has led to a tightening of the financial condition in the eurozone, something that could obviously have an impact.

it is definitely an area of concern for mario draghi, but he has always been very prudent and past meetings about the level of the currency. expected for the q&a session. anna: we heard from a couple members of the government counsel, the estonian members, that we should not baby worry too much about this, read too much into it. maybet we should not worry too much about this, read too much into it. looking at the qe program, what is expected? forecasts might give us an insight into exactly what mario draghi is thinking. forecasts ation ratcheted lower because of the strength of the currency, then i expect we might get doubt amongst investors about when the tapering will continue, what the length of it will be, how much it will be. i think it shows that little bit of doubt if those inflation

forecasts get ratcheted lower. anna: in terms of the qe program, economists seem to think that the qe taper will start in january and will take nine months to achieve, the wind down from where we're at the moment what are your expectations? >> we have exactly the same expectation for qe, definitely also seeing the technical constraint the ecb is facing at the moment in implementing the qe program. we have seen some divergence recently. 2018,ory, in february they may have reached the limit for germany, for instance. technically, they will face an issue. that the recent strengthening of the euro, strengthening of the financial condition, and the development of terms of

if anything with the past development around the currency and financial condition , i think it will probably take more time than we anticipated. but as mentioned by richard, the forecast in terms of inflation, growth and currency will be very key. qe ecb plan to unwind the program. we know the next step by the ecb will be step to tighten its monetary policy. that is more important than anything. and we see some change, would rather be prepared. that isat expectation tied to monetary policy, do you

think that could withstand in inflationkness figures or at least below target inflation? while the eurozone recovery seems to gain momentum, inflation in the eurozone is not where the ecb wants it to be. >> no, but it is not only the case in europe. is an u.s., there inflationary dynamic, and we are already operating at full employment. there is a similar issue in japan to which has a much lower unemployment rate than we have in europe. i was in switzerland last week, a country that is probably the most competitive in the world. -- not generating inflation or wage growth. it is a global issue, more than just in europe. i would like to remind that since two months, we have a stable core inflation. at this stage, there is already

a victory, in my mind. oils not dependent on the price, for instance. anna: stability is a victory. vincent, thank you for staying with us. richard jones, thank you for joining us today from germany. , how have markets been reading president trump's policy? one investor thinks the market is now becoming more realistic. more on this, next. this is bloomberg. ♪

marketsis is "bloomberg " live from london to u.s. markets have been addressed and -- underestimating the potential impact of president trump's economic policies, but now it is more realistic. that is according to new earlier roubini -- nouriel roubini, who

spoke exclusively to bloomberg from the ambrosetti forum. >> it is quite close to potential and the economy is close to potential growth. there is not much of a gap. markets were too optimistic, in my view, about what could be achieved, about fiscal stimulus, about infrastructure spending, , and taxes and tax reform about deregulation. some progress made but not significant progress here at even tax reform is going to be very hard to legislate. i think americans are also underestimating some of the potential negatives of economic policies, the impact of reducing inflation of the labor supply, micromanaging the corporate sector, and a fiscal stimulus forcing the fed to tighten more faster and sooner, pushing

interest rates in the dollar higher, something that has not happened yet. s will becomearket more realistic. the stock market is still strong because of the expectation of policies. they will squeeze even further labor and wages. do you think it will make a huge difference when past? >> most economic estimates suggest the impact of it, even significant tax reform, on potential growth will be 20 or 30 basis points. or 4%, butte of 2% the financial growth rate of the united states is between 1.75% and 2%. if you do everything on the tax side and revelatory reform side, you could get 20 or 30 basis points, which is close to nothing. so i think the markets are very

optimistic on this changes of potential growth. roubiniat was nouriel speaking at the ambrosetti forum. still ahead, merkel on the defensive over diesel-gate. less than three weeks ago go until the german election. more on that, next. u.s. markets are closed for labor day. on then stock markets back foot. u.s. features suggest a weaker start for trading having to do with geopolitics on the korean peninsula. money going to havens, such as the yen and gold. this is bloomberg. ♪

back from london. i am anna edwards. first word news now.

sebastian: tensions already raised in the korean peninsula, and other may go higher. south korea says north korea is preparing for an intercontinental ballistic lunch as soon as saturday on north korea's national day -- preparing for an intercontinental ballistic launch. korea has conducted a live fire missile drill with north korea's test site as that the gentle target. meanwhile, china says preston trump's friend to get off trade with countries that do business with north korea is unacceptable. china is north korea's biggest trade partner up in the governor of texas says his state may need more than $120 billion to recover from hurricane harvey, more than the u.s. spent on hurricane katrina in 2005. governor greg abbott says president trump made it clear in his request for congress, that

it is just a down payment. prince william and his wife are expecting a child. the duchess is suffering from morning sickness and was forced to cancel an engagement today. they have two other children. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. anna: thank you. angela merkel has been put on the defensive and her only televised debate of the german election campaign. her rival accused her of taking her foot off the pedal over diesel-gater. moderators suggest that the government could have done more. matt miller, you have been glued to this debate. not as compelling viewing is other international debates, but it made the news on this particular front. schulz sensed an opening, i

guess come on this subject. matt: you are right it compared to the type of debates we typically see in the u.s. are that we saw over brexit or even in the french election, this one was very tame. the candidates were very polite together. of course, the parties work together in government right now, so there is not a lot of mudslinging that could go on. but there was the challenge to angela merkel. she says she's a angry about the diesel scandal here in germany, the same erupted here way it did in the u.s. in 2015, but she has not really done much about it and does not seem to really want to do much more about it than has already been done. the german carmakers have agreed to software fixes. they do not want to go further than that because it would be costly. they have offered 2000 euro trade-in rebates for the euro

ford diesel cars. contracts in the u.s. were volkswagen gave $10,000 to each of one of their diesel cars and paid $15 billion in fines, germany has been pretty light on its auto industry. anna: angela merkel has been meeting today with the mayors of various german towns, perhaps this andher stance on , what they want to see out of this scandal. matt: she is meeting with 80 mayors around germany. the reason this scandal has gotten so huge is that so many cities in germany, mayors of most of those cities, have pollution limits that exceed the eu level. now we are seeing lawsuits starting to hit those cities. they are going to have to pay on massive amounts of money in

these lawsuits and figure out ways to get those pollution levels down. a lot of experts have said the only ways they can get those pollution levels down is to completely ban diesel cars from the cities. the problem is so many germans drive diesel cars. about half of the cars sold in this country. it really affects the consumers, the citizens, of this country, such a huge car country. anna: angela merkel saying she will meet for an carmakers to discuss -- meet with foreign carmakers to discuss this. matt miller joining us from berlin on german elections and diesel-gate. vincent, whok to has been listening in brussels. when you look of the german elections, with all the two lead contenders going head-to-head in yesterday.ate

is this something you are expecting, angela merkel will be reinstated as chancellor and everything will be as it was before? >> no, this is clearly an expectation -- i was talking with a colleague in germany this diesel-gate we see is an issue, something which is weakening angela merkel. not seem to concerned about this issue. it is more the record of angela merkel. looking at the latest polls, angela merkel is still ahead in the polls. that mr.it unlikely schulz would be able to form any coalition without angela merkel. we see the likelihood of having a new term with angela merkel is probably the most probable

scenario. anna: when you look at what will move the dial for europe, i know you are investing run european equities. do you think this is a crowded trade right now? for many months, it seems we have been hearing -- since the french election, since the geopolitical risk was removed for a time, many investors talked about getting into european stocks. is that not done yet? >> no, definitely not. you mentioned the election of emmanuel macron. since then, they have receded somewhat. investorsed a lot of that are increasing their position on europe. but in mind -- we have discussed ecb in this show, and there are many more elements that should be appealing for investors in europe.

you just discussed the election in germany. we should not have too much uncertainty there. and there is a port and reform from the labor market announced in france -- there is important reform from the labor market in france. in europe, i see the kind of program that we saw in the u.s. at the end of last year. tax reform, incentives. infrastructure spending. it all bodes well for the months already and this is reflected in corporate earnings. several quarters in a row of earnings growth in europe already. i believe it is not done yet. it is starting to become a more popular trade. but there is more to come. anna: there are a number of things you mentioned. lower taxes in belgium, reduced

red tape in france am a fiscal stimulus and very parts of the eurozone. you see that fiscal boost being most effective then? do you see the european investment bank continuing to deploy its assets -- a significant can that be? >> it is very significant. media do not spend more time covering these elements. i dedicate my interview time to this point. the european commission and the european investment bank has launched an investment a couple years ago in europe with very little public money and leverage. then, the fed was supposed to attract $300 billion of funding. it has been so successful, 200 billion, and financing has

already been -- they doubled in size last year. we are seeing in every country investing for growth, investing for helping countries to meet their engagement for the paris climate agreement, helping sme's to invest in new projects, do more capital expenditures. those will support. france will probably be a country which will consider some tax reduction. i have seen it in my country, belgium, for instance. it is huge for investors. 20 performance here is about on the belgium index versus ers,pean pe outperforming other markets massively. clearly approve of what is being done by the efs o

r thing more attention needs to be on it. will it get more intention us more public money were involved in it? is that the reason it does not give the coverage you think it should? >> maybe. there would probably be more scrutiny. many international investors do seen interest in the structure developed by the european investment bank. looking to invest long-term in europe, it is definitely a time where we expect the next move of .he ecb to be one of tightening there is still a lot of easing in europe. i am asked many times about the central bank, finally seeing politicians taking over to do their part for growth going forward, which is probably the

part that makes me the most optimistic about the future, especially with brexit negotiations. anna: vincent, thank you so much. stay with us. further topics to cover with him. u.s. markets are closed for day.or there is a risk off the vibe in the markets as a result what we saw from the on ning over the weekend, money going into the yen, gold, and the swiss franc. s&p futures point downwards. this is bloomberg. ♪

i am anne from london,

edwards.- anna time for the bloomberg business flash. sebastian: the eu top court will rule on wednesday on an against intel that they have not lost a big antitrust case in court in over 20 years, and if there is a big win for intel, that might encourage other companies to fight fines. .ednesday -- thursday economists expect the ecb to wind down bond buying over nine months. hollywood's worst summer and a end movie come to an stick.in an estimated $76 million at the box office over the weekend, the slows labor day weekend since 1996, probably because there is no big new movie opening. for the summer, just $3.8

billion in sales, the first time since 2006 the total has dipped below $4 billion. that is your business flash. anna: thank you. italy's finance manager says the oldest bank is on the path to recovery and sees economic growth for the country. aid from theal for italian government. there is a recapitalization plan. a guest spoke to bloomberg about how the government plans to complete the recovery process. >> we have just completed the injection into the bank. this comes at the end of a process that has seen a major restructuring plan being designed by bank management. paschi to bete dei contributing to the growth. this will complete the process in which eventually the

government will step out because the purpose of the injection of capital is temporary, for precautionary reasons. so we have to design a sustainable, temporary path to that. >> in terms of strategy, what will be the strategy? >> the strategy has to be driven carefully by the medium-term industrial perspective. >> regarding the market for monte dei paschi, what might be a concern for the investor? do you think it will be an opportunity? how do you make the stock attractive? >> the stock should be attractive because it is related to a bank that is now very solid in terms of capital requirements. it has been streamlined and made more efficient by the restriction plan implemented by

management. and it is a bank which also enters as a major driver of a growing economy. the macroeconomic environment favors growing banks. i am confident the market will match that. financeat was the minister of italy speaking to bloomberg at the ambrosetti forum. we're back with vincent. this year has actually been a year were progress has been made in dealing with banks across the eurozone, areas where there have been problems previously. spain and italy. it has been done with different strategists, but some economists say at least europe is taking 2017matter on board during . do you see opportunities in eurozone banks at this point? >> definitely. not only 2017.

looking at last year and the year before, the process of reforming the european banking sector starts immediately after the european debt crisis. the ecb to go over side of the whole sector and decided to let all big financial institutions in europe to go through stress tests to measure the strength in terms of capital ratio and also to look at nonperforming loans and we have seen many problems in italy. i am happy to note that the problem, in concert with this ise bank, monte dei paschi, finally improving. generally speaking, we are positive on european financials, both the economic side and the fixed income side.

we see improving is a big backdrop in europe. this is something improving interest-rate margins even in a low interest rate environment. in nordicd value banks, which are actually also returning more money to shareholders. dividends are increasing again in the banking sector. thind take, it is dust behind -- behind tech, it is a sector we were recommend. anna: looking at the ecb and how it links into the margins that things are able to achieve, you said the ecb have to move pretty slowly, the timing is pretty uncertain in how quickly they move in unwinding stimulus. how quickly before european banks note the impact of higher

rates or is that happening already? gradual stablend , but theyate margins have granted more credit. if the ecb were to move at some point, that would be the icing on the cake for the european banking sector, which has 1.7 trillion euro at the facility of the ecb, and on which it is losing at the moment 14 basis points. going forward, any move in terms of this would be welcomed by the european banking sector. i would expect this to be a tailwind for the european banking sector no matter when it takes place at we know that it will take place next year at some point at a slower or faster

pace. anna: ok, thank you so much for .our time today jpmorgan global market strategist joining us. still ahead, apple is gearing up for its most significant launch event to date. what to expect from the september 12 product launch, that is coming up next on bloomberg. ♪

anna: welcome back to "bloomberg markets" from london. apple announced that september 12 is the date for its most significant new product announcement in years. it plans to introduce three new iphone models and new versions of both the apple tv and the apple watch. joining us is our bloomberg technology reporter. adam, that is a bold thing to say, the company that brought us the iphone now planning the

biggest announcement to date. it covers a lot of product areas. adam: it seems like every year is the most important year for apple, but this would the first and sometime that they are doing a quite significant design change for the iphone. to think of apple, you need to think of it as an iphone company. it produces most of the revenue, even more of the profits. it sort of gives life to everything else within the business. business humming along, they need these innovative changes. anna: three new versions of the iphone -- is that right? what innovations will we see? our colleague has done a lot of good reporting about this. one new phone will lose the home button and will have facial recognition technology.

then there will be two other models that will be more similar to what we have now, which is with the home button. one will be a little smaller, one bigger, but it will have a faster processor, improved camera, and some other new bells and whistles. anna: for anybody who struggles with the home button to work, maybe the facial recognition will work better. pricing is always a hot button topic. how expensive will be be? adam: the facial recognition technology one, which has been hone,gly called the god-p that will cost over $1000. big price increase. the opportunity for apple is that this is a phone people will want because it will have a lot

more, so you can get more revenue and higher margins. even though the industry usually has been having tight margins, apple has enjoyed very big margins for some time. anna: they have enjoyed those big margins, but they're still very much reliant on this. they will be coming out with some other things, as well. adam: right, apple has been trying to get further into the living rooms. the apple tv is a way they do that. that is tricky, because television-like products are more geared around the content and less about the technology. anna: indeed. adam, thank you very much for joining us. this is bloomberg. ♪

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♪ anna: welcome to "bloomberg markets." nuclear options. president trump threatens wider sanctions as pyongyang prepares for a possible intercontinental illicit missile launch. charting the euro's course. we could hear away in on euro strength and a deliver on the inflation forecast. that governor greg said aid for harvey could cost up to $180 billion. welcome back, everyone. it is labor day in the united states. we will return to your screens with usual service tomorrow. i am an edwards joining you from edwards joining

you from london. let's take a look at the markets off of the results of asia. mark? there are two industry groups arising on the stoxx 600 today. 1.5% which isout slightly off the lows for today. this after north korea tested that nuclear bomb on sunday. koreans that the south army is continuing to prepare for a intercontinental ballistic mosque is -- listing missile launch is raising tensions higher. bond markets are benefiting and yields are falling. this is the german ten-year. last tuesday, north korea fired a missile over japan which sent yields on the german ten-year to its lowest level in two months.

the yield at the end of the week were little changed. taking a look at this chart wash goes back a year, it up about 60 basis points which is the highest since january 2016. we have come down to about 37 basis points what keeping one eye on north korea and our other eye on the ecb which meets on thursday. the sterling has risen for two weeks against the dollar after months of drops since october. progress on brexit talks grinding to a near standstill last week. this is pound-euro monthly change falling for four consecutive months. euroterling against the seeing its worst stretch since october of last year. this week, parliament returns after the summer recess. in the next few weeks, you have two more rounds of exit negotiation the for the big summit in brussels in october. sufficient progress will have to be made the for the two sides

move on to discussing an impending trade deal. someweek, we will also see u.k. economic data. tomorrow, we will get manufacturing. last week, it rose at the fastest pace. they are still shorting the sterling against the euro as brexit talks continue. the markets announcing the surprise departure of joseph jimenez after eight years at the biggesteurope's drugmaker. shares are down by 1.1% today. officer anddical global head of drug development will secede -- succeed him in february next year. seeng his 10 years, he has

a 13% return on the bloomberg pharmaceuticals index. he will be taking over the reins of a drugs giant which has a .truggling division geopoliticalon tensions. that is the big focus today. mark barton, thank you very much. let's take a look at bloomberg first word news. >> tensions are raising on the korean peninsula, and now they may go higher. north korea -- south korea says that the north korean army is preparing for intercontinental ballistic march -- launch. this comes after they turned out there sixth nuclear test. threatened tos m,unch a missile towards gua

a u.s. territory. south korea cleared the way for full deployment of a new, u.s. full deployment missile system. is north, china korea's biggest trade partner, and it is being called out for its trade. texas governor greg abbott is calling for more funds for hurricane harvey disaster relief than was given to hurricane katrina. in germany, chancellor angela merkel was speaking about diesel cars during a debate. her competitor suggested that her government has not crackdown hard enough on these of vehicles, and she warned about demonizing the car industry.

global news 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. this is bloomberg. anna: u.s. defense secretary james mattis shot back at u.s. -- north korea's latest missile test with a blunt threat. >> any threat to the u.s. including its territories or allies will be met with a massive military response. a response both effective and overwhelming. anna: in washington with the latest is alex. alex, good to have you on the program. we haveunderstand what heard from the trump administration so far. there has been talk of broadening sanctions. but covering who and what? >> the options remain bad for the trump administration. they could broaden sanctions to affect chinese companies and banks which help to prop up the chinakorean regime, but

has threatened economic retaliation of its own if we go down that road. i do not really see us doing that honestly. trump has also threatened to cut off trade with any country that trade with north korea. i do not see that happening either. he has made threats like that before and has not followed through. the nuclear -- the military options are unfathomable. they also do unbearably lead to the destruction of seal south , south korea.uel after his comes threats to cut off trade with countries who do trade with north korea including china. we do see china reacting to this. they are not just dismissing it as something that could never happen. >> china reasonably issued a statement today saying that they

do not really appreciate trying to resolve this issue while facing threats from the american president. that is put in much the expected response from china -- that is pretty much the expected response from china. anna: alex, they do so much. joining us now on set is john. it is great to have you on the program. every time we go through a great test a new geopolitical cris certainly captured the interest of many investors. we have heard that the real think we need to watch out for here is the threat to u.s.-china relations. how concerned are you about what we see? >> it is more of the same. more of the same is tricky, toause we are already used

more missile tests this year than we saw last year. north korea is really stepping up its game to put pressure on u.s. and china relations. we are seeing a short-term market reaction of risk off. that is what we are seeing today. the dollar-yen is lower. typical, normal market reactions. we have seen even cents last week is that the market does seem

the bar is pretty low on that. is thein, the key thing exchange rate being lower than where we are now. because of that, the rating that is the real focus

this time around. from there, i think investors will make the next decision. >> remind us why this is an issue, richard? 13% is again for the hero against the dollar. this might make life difficult for european exporters. richard: that is exactly the case. it is not so much the level of a year of. euro -- euro. we are not one million miles away from that now. it is the pace of the ascent that we have seen that really took off after the french election and a lot of the uncertainty from that. benefited from that. it is the pace of that aside -- ascent that is the problem. anna: thank you. richard, thank you. , jordan rochester.

give us your thoughts. the bar is low in terms of expectation for the qe side of things. let's go to the euro and how much concern mario draghi will express. >> we have had fortunate -- forging, so they euro is a center of this meeting, even though most people do not expect a tapering announcement. that is coming up in october. -- we have moved our call from this week to october's meeting. this update will have inflation revised lower. this is all just noise. the ecb will have to taper. eventually, they will own more than 50% of the issuances. also, the euro is rising for

good reasons. the cycle is picking up. labor markets in europe are tightening. for me, it is a clear trade higher. watched these ecb conferences, he cares prepared remarks and then answers questions. some of those questions promote big moves. you suspect he suspected the questions are coming and said something back for the culinary and when to deliver it. how do expect things to go from here? does he mention it up front. i think when he is mentioning the council. you have some members impacted closer than others. this is a concern for smaller countries, for example. at the meeting, i think he will say you have to lower the inflation forecast because of the rise of the euro. but we are revising our growth

forecast. i think you have a balanced message. 67% of economists are talking about the fact that he might talk down the currency. if the majority is looking for it, it is not a surprise if he job loans -- jawbones it down. anna: we spoke to a guest from organ earlier m on. are just thehem inflation forecast, will that be all to do with the currency or is it a bigger picture? jordan: it has a lot to do with the currency. i lowering it, it is because of this one year impact of the currency. but if you look at the output measures the ecb will turn to, it is clearly to the upside. to the otherove on

part of the conversation, about this week. andctations shifted around what we are sad to hear. set out what you are expecting this week versus the october gathering and later in the year. low inflation forecasts. maybe slightly higher in gdp. , thesaid, we expect them council, discussing the need to taper. maybe they announced that in october. the actual rolling rate of purchases declines. -- it six to nine months depends. i am more toward six myself. if the euro rises aggressively, they could do even more. anna: why would you say six, not nine? while i think this is all noise in the short-term, it is a goes too fast, the members

may agree to go for a slower decline. anna: jordan rochester of number international stays with us. let's -- of nomura international stays with us. markets in the u.s. are closed. it is labor day. willopean equity market take risk off feel because of geopolitical tensions in the korean peninsula. the dollar yen we have seen moves into the yen and into gold , as we discussed earlier. gold up 7/10 of 1%. this is bloomberg. ♪

♪ anna: this is "bloomberg markets ." i am anna edwards live in london. time for the bloomberg business

flash. a harvard trained doctor will take over as ceo of novartis. no big deal in the works for fiat chrysler. their ceo will push ahead with spinning off the components business. he has not achieved any approach or offer for all of fiat chrysler. the you -- if the e.u. antitrust regulators approved germany's loan to air berlin. the air carrier filed for bankruptcy last month. businessour bloomberg flash. anna: thanks. let's tell you what is coming up on the program. distraction from hurricane harvey could cost $180 billion. we dig into all of the angles

into what could be the most costly hurricane ever with tom hatchery -- tom petri. reaction from the tensions in the korean peninsula over the weekend. money going into the young and into gold. substantial move into the dollar-yen. the german ten-year year yield in there for you as well. north korea detonating their most powerful nuclear bomb yet, a hydrogen bomb they want to fit to an icpbm. the test by pyongyang six times stronger than a test a year ago. u.s. markets closed for labor day. this is bloomberg. ♪

♪ welcome back to you this is "bloomberg markets." live from london, i am anna edwards. let's get an update on the distance news you need to be aware of the at sebastian salek

-- aware of. sebastian salek joins us now. expected: mario draghi to voice concern about the strength of the year of this week. also announce a decision about quantitative easing. there will be a no-frills airline -- north korea's test site was a virtual target in a live fire exercise by south korea. china has called the missile shield a threat to the region's balance of power. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am sebastian salek. this is bloomberg. ♪ anna: thanks. a few days after your trump asked congress for $8 billion in hurricane harvey eight, the texas governor said hurricane

harvey could cost up to $180 billion, making it the most costly hurricane ever. the governor said that the president and congress made it clear this was just a down payment. let's not compared to a sandy, let's compare it to katrina. joining us with more is ryan collins, bloomberg's natural gas reporter who joins us from houston. give us the latest from houston. just how much has a life of their improved over the last week -- life there improved the last week? ton: we are getting back normal. it will still be a long road ahead. as far as power outages are lack ofd, it is kind of normal pdc people out in the

of back- which is kind to normal. ,nna: in terms of market impact how long-lasting is this spike in gas prices going to be? that is still the question. how long this will occur. the devastating effect of harvey ripped out refineries. suddenly, refineries are closed. you still have some closed in beaumont, but as far as poor are gasoline --arthur, it is returning. so gasoline futures are dropping to levels they were out before harvey of occurred. the effect seems to be coming to an end a bit. the real question is when will those refineries come back online in corpus christi, beaumont, other areas like that.

anna: ryan collins of bloomberg news joining us with the latest from houston. oil producers and refiners work to restore operations as texas recovers from hurricane harvey. joining us for a deeper look at how oil was affected, tom petrie. your thoughts on how long it will take to get texas oil infrastructure and energy infrastructure back to where it was before the events of harvey. tom: it is a difficult thing to address. let me try to come at it this way. if we think about this relative to katrina and rita in 2005, there was much more damage to the upstream capability of producing. the gulf ofmore mexico offshore production. this time around, the problems and disruptions are largely

transportation and networking. as the flood retreats -- as the flights retreat, the ability to overcome that will be in place. i actually think we will be somewhat surprised relative to some of the commentary of the last week. at the rate at which we get back to some semblance of normal. to that is the irma possibility. another hurricane developing in the islands. not clear yet whether it would come into the gulf of mexico or the east coast. either way, it would be disruptive, but i think it would be less disruptive over all if it came up the east coast, which is what they were expecting a day or two ago. now, it looks more 50-50. whether it will it hit landfall

or not, that makes it more like the -- more like katrina, where there was a two stage hit. pace forn that, the recovery is underway. in this case, the upstream produce ability is still in place. but the permian basin is largely in place. therefore, once flooding goes away, you go back to normal. i would say, in the course of the next two to three or possibly four weeks. the: leaving aside possibility that we could see further hurricane activity, then, what do you make of the earliest reports we have had from the various parts of the texan infrastructure so far? shall,es of exxon and telling us their early assessments. does this seem a kind of damage

that can be recovered from quite quickly? tom: i think it is. the big refiners have a powerful incentive to calm back as rapidly as possible. they do have to drain away the water. that to a fairly functioning transportation system so that trucks can get in, pipelines can get restarted, and so on. but it does not appear to be any -- but there does not good to be any permanent damage to the .ipeline infrastructure once you can get the trucks running and the highways open, the ability to get back to a semblance of normal can happen fairly quickly. it will be phased, just because of safety concerns. in and,rma coming getting things, i think these assumptions are more manageable than they were in the case of

rita and katrina. anna: looking at wti and where ourave in, how much development in texas still the forefront when it comes to oil prices? how much of this will be back into the hands of the broader shale industry and the opec story. previously, they had been keeping oil prices range bound. tom: they really have. unless we start to see signs of and that it -- and that it -- embedded decline, the issue of opec trying to work its way out of high inventory is still there . near term, the interruption of u.s. production would appear to be helpful. that i am not convinced it is very helpful. basically, we have not worked down the inventory. we have simply gone into a nonoperating state for a while. once we come back, we are back

with the challenges opec has and non-opec exporters have. i think that will, by october, be back to center stage. expectation is for an oil price that hovers just below $50? tom: yes, for wti and a little better for brand -- brent. but a struggle to it back to the levels that they would like for their ipo's, which is closer to and $60's.s thank you. coming up on the phone, u.s. congress returns to office tuesday after an august recess, and today is labor day holiday pay the latest on the debt ceiling debate, next. this is bloomberg. ♪

london, i am and edwards. time for the bloomberg business flash. let's get up to date. here is sebastian salek. sebastian: bit e.u. competition ministeru. competition spoke to bloomberg tv and said google must do more to promote competition in its shopping service. >> we have to see a change in their market here that customers get the chance to choose other shopping comparison services. if you have to go to page four in search results to find a competitor to google shopping, you're not to be found.

it will not happen to what we are looking for is changes in the marketplace. so we, eyes customers, are better served. -- as customers, are better served. afterian: bitcoin fell your what china described as an illegal offering. last july, monte paschi won e.u. approval to receive aid from the italian government. expect monte paschi to be a healthy bank, to contribute shortly to the growth of the italian economy. eventually, the government will step out of monte paschi, because the purpose of the

injection of capital is a temporary recapitalization. so we have to design a sustainable, temporary path to that. >> what is going to be the strategy for a replacement? >> the exit strategy has to be driven carefully by the medium-term spectrum. sebastian: hollywood's worst summer in a decade has come to an end. $76 million over the weekend, the slowest labor day in the u.s. that is your business flash. anna: thank you. u.s. markets have been underestimating the potential negative impacts of trump's

economic policies, but they are now becoming more realistic. a macro ceording to and chair. recently wereof underestimating potential negatives. the impact on protectionism and growth. micromanaging. and fiscal stimulus that would push the dollar higher. someday has not happened yet. i think the markets are becoming slightly more realistic, especially the bond and fx market. the stock market is still strong because of the expectation that there will be a pro-corporate fact or which will squeeze even further labor and wages. anna: still with us, jordan aochester from nomur

international. let's turn to the u.s. you noted recently that the debt limit was going to become more important to the mark fit -- market issuance in september. help us unbundle the debt limits, possibility of shutdown. jordan: quite a few things to consider when looking at the u.s. we'll have the budget. you need the ability to pay for bills. you need to raise the debt limit. the debt limit is the amount the u.s. can borrow. since march, they have been capped. the u.s. treasury is burning through remaining cash piles. when you get to the end of september, the u.s. triggered a secretary has said they need to raise the debt limit. if they do not, if the publicans

or democrats do not work this through in the house, then we te, theking at the x da date the u.s. runs out of cash. we have never actually gotten there. deal because eventually a has been done before we fall over the clip. jordan: it ranges between two hours before the deadline to six days before. usually see the market ignore, ignore -- you need to pay attention, and a spike in yield happens just before the day itself. now, we are seeing money markets reacting much faster. we are a good month away, and already, there are cheaper bills around. anna: is there a reason for the market to take it more seriously? is it the politics, does it have the lack of conviction that trump can do this sort of deal? more the latter.

all three parts of the u.s. altogether are saying we should raise the debt limit. but they are arguing about how to approach it. the president previously wanted to include order funding attached to the debt limit. that will get pushback from democrats. and he needs to get it through the senate. anna: over the weekend, steve mnuchin talking about attaching harvey to this. just by including an amount of money that should go directly to relief for those victims of hurricane harvey, that would not address -- that would not go anywhere it near addressing the rest of the problem. jordan: republicans do not really want to pass the thing without spending cuts. attaching harvey to the debt limit is something they have not like to do something before. for hurricane sandy, they fought against it when it was included in the same bill. this time, it is republicans versus donald trump.

of where the white house will go, it leaves the market guessing. anna: what is your expectation for when this starts to really matter to markets? jordan: it is in short and money markets, but for others, it will be the week before. a lot of people are expecting you to get down to the wire, maybe even the day before, like it happened under obama. anna: is this a weak dollar story, then? they should feature on your radar as things to impact -- jordan: it is one. not the driver, but one of the factors. anna: john rochester, nomura international fx strategist. still ahead, we check out what is on the table in the second round of talks in mexico. this is bloomberg. ♪

anna: welcome back. this is "bloomberg markets." labor day in the united states. : america's"aybreak will be back tomorrow. i have been keeping an eye -- i have been here for the last three hours. breaking news from brussels. this is the european commission representative for budget and human resources. he is making comments at a conference in brussels, talking about exit, saying the british are not ready to accept the economic reality of brexit. u.k. have tothe look beyond 2019. this is tighter around conversations around the divorce bill. how much will the u.k. have to pay out.

that is one of the current questions. let's talk about what is happening with the nafta conversation today they are set to resume in mexico city. to u.s. and canada want reduce the number of people heading north and limit the incentive for companies relocating south. joining us with the latest is eric martin. looking at some of the pictures to us from previous rounds, what is the focus on wages in mexico, on workers standards in mexico? the u.s. pushing for this. but it is not through a lack of self interest, i guess? >> the purpose and the goal of the u.s. and canada is simple. they want to make it more expensive or manufacturers, particularly, to produce in mexico. wageo has an -- average

and he will earnings of about $15,000 per year, compared to $60,000 in the u.s. and $48,000 in canada. what unions have inflamed about is the number of manufacturers that have closed their doors in the u.s. and canada, moved south of the border, and opened operations in mexico. we see a lot of these issues at the center of the nafta negotiation. it is an attempt to reduce the get from companies lower wages by moving assembly to mexico. anna: and a lot of the conversation will be around rules of origin. what is at stake? what will the u.s. push for? originidea of levels of is to try to make more of the investment in the industry that feeds the auto industry and other manufacturing industries to take place in north america. for example, small cars have a minimum content requirement of

60 to provide -- 62.5%. we spoke with the head of one of canada's biggest unions. he wants that to be raised to 70%. ross, theith wilbur commerce secretary of the u.s. ross wants that level even higher. the businesses need to be able to source with a get in terms of computer chips and technology that goes into these products. in some cases, that is best served from asia. they need to look at how to re-industrialize and push forward some of the investment in high and technology industries in north america that may have gone away previous years. cap those components from the region while, at the same time, not hurting the final product sold. in theseis interesting rules of origin conversations how it causes the company to actuallyhat is available in the supply chain

from the geography. government procurement rules and a bias for buying american -- that has been controversial. how is that set to play? >> it has been a goal of the trump administration, the buy american. but mexico and canada will not accept a mandate from the u.s. -- that u.s. companies can only thate-based from america, mexico and canada would not be able to do something was up a goal. so it is a slippery slope. the idea that the u.s. could adopt a rule them ethically that they would not want mexico or canada to adopt. where mexico is and canada see the possibility of double standards. anna: trump calls nafta one of the worst trade deals in history, but will it continue

on, even if in another form? jordan: that is a big question. we have seen trump begin the termination process on nafta. there is term -- speculation, and he seems to have signaled more -- d get that would get a lot of opposition from republicans. anna: thank you. eric martin joining us. a quick look at the markets. u.s. markets closed for labor day. european equity markets trading weaker. this is bloomberg. ♪

mark mark mark: welcome to bloomberg markets.

top stories we're carrying around the world. in space a save or higher south korea has a new missile defense drill. president trump will look at economic sanctions against the road nation. deflation is still lacking. will mario draghi try to talk down the currency? drenchedter harvey texas, how are oil and wrestling anthony's handling the situation? we will go live to houston for an up date. a thesea look at where are training. this is the first day in for.