francine: currency crisis. turkey surrenders to the markets , hiking rates and an emergency meeting of the market see the move as a temporary fix and the .ira resumes its nosedive stocks fall after the u.s. launches a probe into the vehicle imports. -- moreys this risks than 7000 jobs will go ahead of today's egm. ♪ francine: welcome to "bloomberg surveillance." i am francine lacqua here in

london. we are seeing a little bit of overhang on european stocks. asian stocks lower here in europe. the much unchanged. i see some good ones and bad ones. europe 600 stocks, -- stoxx europe 600 down. isalso understand the u.s. doing a criminal probe into bitcoin price rigging. something we need to keep an eye on as we get more news on that. i am also looking at the lira. turkish lira over the past five days. turkey's decision to boost interest rates was short-lived. you can see it resumed its nosedive. people saying -- resume its nosedive. people saying it is fixed. as soon as we know any news, we

will bring it. we were hearing more job cuts could go at today's agm. that stock price gaining 0.2%. coming up we have a pretty packed show. andrew bailey, the case fca chief executive -- the uk's fca chief executive joins us. we will bring you that lee's remarks. remarks.'s where live in st. petersburg. -- we are live in st. petersburg. let's get to bloomberg's first word news. -- turkey's central bank has raised interest rates at a meeting while president erdogan has pledged allegiance to the principles of monetary policy. unchanged. were kept the bank described the move as "powerful monetary tightening."

it will continue using all estimates. but has reversed losses fallen again this morning. haveal reserve officials signaled they are sent to raise interest rates next month but they said no clear message on whether they will take one or two more -- they will hike one or two more times this year. inappropriatey be to increase the benchmark rate." the u.s. has started an investigation into whether car and truck imports threaten national security. according to a person familiar, investigations -- imported steel and aluminum. they set an additional tariff on vehicles up to 25% is under consideration.

shares for major european carmakers are lower. deutsche bank has said it will cut jobs in it -- in its equity business by a quarter. 7000 as a partby of the new seals quest to cut costs -- the new ceos quest to cut costs. the announcement came ahead of deutsche bank's agm today. jumped.l it may not be up to service its debt after october 23 and less u.s. sanctions are lifted. that is the deadline washington has given companies. rose biggest aluminum producer outside of china said sections could -- said sanctions could profit -- u.k. businesses could be left up to 20 billion -- left up to 20 million pounds softer.

could --ps the plan would not solve the irish border question. partnershipthe new believed to be back by theresa may would cause the maximum tests cost and maximum of 3.4 a maximumunds -- cost of 3.4 billion pounds. global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. leinz.ley this is bloomberg. francine: thank you so much. these are your markets. a lot going on in the markets. the auto sector, the worst performing on the stoxx 600 this morning. this is on the back of one of our top read stories on the bloomberg terminal, the fact that the u.s. is starting a probe to consider tariffs on cars, but also truck imports. one of the stories you should be reading.

the announcement comes as republican lawmakers prepare for midterm elections in november. that will determine whether the party remains its geordie. -- remains -- retains its majority. depends on whether the rhetoric becomes more belligerent. this is what i am looking at, one of our other top read stories. deutsche bank saying it will cut 7000 jobs in this revamp. the agm is going on as we speak. it will take the jobs will be low 90,000. the lira getting crushed after intervention. let's talk about u.k. with our next guest. he has taken on some the most high-profile positions.

he became the chief executive of conductancial authority. esther bailey, welcome to our new home. -- mr. bailey, welcome to our new home. big newa very regulation. one of the biggest regulatory changes in european markets we have seen. our objective is clear. we wanted it to be introduced without affecting market stability. that was the key objective for us, the turn of the year. we were satisfied with how that happened. now it is a matter of making sure it is that in. -- it is bet in. i would emphasize it was market stability first. happy with the way

it was going. francine: one of the things we have been focusing on is the payment for research regime which seems to favored some of the larger firms. andrew: it is something we are watching carefully. you are right to say that if we find that there is an effect on small firms, and that is where we would be looking. we would need to be considering what to do. what we want to see is the detrimental effects. francine: do you have any evidence? andrew: we think it is too early. what we will do is once we got a decent base of evidence we will be able to answer that question. francine: the trading data, is it coming in as you expected? we heard noise from asthma -- esma. andrew: we work very closely

with esma on this. it is coming through. we are working very hard on it. i am not surprised. it is such a big change. is we have a stable trading market. we are sorting the data out gradually. francine: if you see problems, they are minor to the .verarching thing how fast can you rectify the mistakes or the kind of quirks? andrew: we do it as quickly as we can. we keep markets function day by day in a stable fashion and we are making progress. we are ironing out things that we are fighting quite quickly. -- that we are finding quite quickly. francine: defines the fca has been posing -- are you

frustrated by that? andrew: we always have to follow process. it is interesting. one of the things that we find is when we do investigations that we get a huge amount of evidence comes our way. a lot more gets stored in these days. we have to process a lot more evidence and that takes some time. i share the same view that we've got to look at this and say how can we do this as quickly as possible. the second thing i would say is, i would draw a dissection between the contemporary cases -- draw a distinction between -- theterbury cases contemporary cases in the long legacy cases. francine: was a blowing is more contemporary. francine:

whistleblowing is more canterbury. yes.w: francine: is it having a large amount of software? andrew: we are doing upgrades of our own systems. we cosplay look at the -- we constantly are looking at people and skills. we can use outside skills as well. this is something we are actively working on and looking at, because we don't want -- we share the same view that we don't want cases dragging on for a long time. francine: how long did expected tsb case to last? andrew: we don't know. he priority at the moment is the bank is -- the bank stabilizes its i.t. the fca coming through in saying we are going to do an investigation and customers come

first. francine: your front runner at the bank of england -- would you like -- you are front runner at the bank of england. would you like the job? andrew: i don't spend my time thinking about that. i don't want to because it is a fascinating job. francine: andrew bailey, thank you for joining us. let's go straight to mr. mark carney who is here in the building at bloomberg. curious. -- here he is. >> three years ago in the wake of a series of scandals and following a period were markets have become ever more connected to each other, but disconnected from the people and businesses they serve, the bank of england, the fca published the

recommendations of the fair and effective market review. femur was groundbreaking and ambitious in its recommendations. trust inive to restore markets. in today's events, policymakers will take stock of the progress that has been made in building fair and effective markets and will consider how to maintain focus as memories of the crisis fade and the temptation to turn inwards could return. we are doing so because all of us has an interest in real markets. we know that real markets are professional and they are open. they are resilient and fair and effective. they maintain their social license. intereststs serve the of end-users. we are here because we know real markets don't just happen. they depend on private actors

and public initiatives to ensure the quality of market infrastructure. that includes part infrastructure, the plummeting of markets that includes their mechanics. since the crisis, the u.k. has played a leading role in preparing that infrastructure to address misconduct in domestic and global targets. -- global markets. the city has a responsibility given london's position. what has been done? in the u.k., laws and regulations have been strengthened. there is a number of examples. introducing a criminal regime formulating benchmarks test for manipulating benchmarks and public authorities know that we cannot and should not legislate

for every circumstance, monitor every transaction or anticipate every market innovation. as femur recognized well fines and sanctions have a role, they will not bring about the cultural change that is needed. we must move from an excessive reliance on punitive exposed finds -- fines to greater emphasis on incentives and a more solid grounding in improved from culture. it starts with reducing opportunities for bad behavior by overhauling the regulation and key benchmarks. it requires compensation rules that align risk and reward. in the u.k., it is not the case that a significant proportion of variable compensations of people in this room was now be deferred for up to seven years. to address the ruling bad apples mechanisms are now in

place here in the u.k. so that when individuals move, their history will be known to the firms that are considering hiring them. firms will be required to share information on breaches of individual conduct rules, the fitness and propriety assessment and the outcomes of any subsequent disciplinary hearings. these measures are all very constructive but they are not yet sufficient to the task. that is why the bank has imported initiatives -- has supported and sisters to ensure that firms take greater responsibility for their own conduct. usedauthorities have convening powers to encourage market participants to established standards of market practice that are well andrstood, widely followed keep pace with market development. i want to stress how well industry has responded.

the banking standard board has -- is promoting standards of higher conduct and confidence across the u.k. system. the global standards board represent here -- represented here is establishing standards for their market. the global effects committees have published the fx global codes in the first globally consistent code of conduct -- and the first globally consistent code of conduct for markets. codes are for -- codes are of little use if nobody reads them or enforces them. theseive teeth to voluntary codes by incentivizing firms to develop and adopt them and invent them. that last word is most important. it is very welcome that the fca is currently consulting on proposals to recognize industry codes publicly under the fmr.

by -- by requiring identification, if fmr establishes the link between seniority and accountability, a sink this individual accountability and reinforces collective responsibility. ,s the fmr starts to bed in there is encouraging signs that it is making a difference. for firms, the fmr is clarifying is improving -- is clarifying accountability. for supervisors, it is helping us to identify weaknesses and pra to the fca, the encourage firms to make changes to improve them. we are encouraged to see adoption of fmr approach spreading internationally -- of the fmr approach spreading internationally. other jurisdictions are applying some features of the fmr and

elements of the regime are of thed as examples toolkit on governance frameworks. we know we can't eliminate misconduct. these measures should help. all of these measures should help reduce its scale and frequency. they will broaden the sanctions for bad behavior. this is part of the process that will help restore trust and financial markets so they can work as efficiently to serve the real economy. the three-year anniversary marks an infection point, one where he can and should celebrate the progress that has been made but also look ahead to future challenges and what needs to be done. because after all this spirit of fmr was a continual focus is required because markets continually evolve. that is why the fca and bank are taking a proactive forward-looking approach to

identifying vulnerabilities that could exist in hard and soft infrastructure. we see that this corridor institutional responsibility, this is one of our core strategic goals at the bank of england. obviously authorities cannot future proof alone. i think you would be disturbed if we were doing this and isolation we rely on industry -- and isolation. we rely on industry. again, we are encouraged by recent efforts. the fms be his undertaking scanning for future misconduct risks through behavior cluster analysis. global foreign-exchange committee which is responsible for keeping that global code alive has identified areas for future work on spot fx market practices. with the leaders of industry here today, we hope your discussions will identify other

emerging risks and challenges and explore how we can all work together to address these potential vulnerabilities as we continue to build those real markets. just beforet and concluding, i want to touch briefly on one of the biggest challenges we all face right now which is the transition to risk-free rates. libor is a prime example of critical, hard market infrastructure that is not kept up -- has not kept up with market develop its. libor is meant to measure the unsecured funding cost of banks but the reality is that since the financial crisis, libor really has become the rate at which banks do not lend to each other. bank funding markets, i think we all know, have changed enormously. banks no longer take sufficient short-term wholesale deposits to

form a basis for a robust transaction-based libor benchmark. as a consequence, libor is overly reliant on expert judgment, rather than actual transactions. global markets remain overly reliant on libor, a benchmark that may not exist beyond 2021. that is a reliance that is desirable -- that is not desirable of sustainable. benchmarksternative based on actual transactions. these are overnight rates, a relatively pure read on risk-free rates in each economy. in sterling, you, the market, has chosen a benchmark now administered by the bank of england. reforms, we implemented that was to the transactions captured a factor of three over 50 million pounds today. is turning to

transition. market participants in every sector that use libor not need to come together to identify and resolve issues, change business practices and adopt alternative that's marks. -- benchmarks. sterling, overnight institutions -- over 90 institutions are directly involved in this effort supported by the fca and the bank. bringtion to soanya will a number of benefits. market dispense can have the confidence that soanya faithfully presents conditions in a deep underlying market. they can also be assured that soanya's design is robust to future changes in market and money markets because if necessary, soanya's data inputs can involve -- evolve. we are fundamentally near risk-free rates like soanya are

better reflections of general level of interest rates that libor. libor is affected by fluctuations in the perceived credit quality of banks and as well by other technical factors. interest payments from benchmark asrs should be less volatile a result with soanya, especially in times of stress. products referencing soanya should provide a better hedge for duration risk. over time, we expect the private sector to develop a wider range of products referencing soanya. preachers contracts have been created. we can expect just future contracts have been created. the endpoint should be an ecosystem for markets which have a healthier foundation than at present. developing the infrastructure around the near risk-free benchmarks locally and assisting

market participants in dealing with legacy libor portfolios is a significant opportunity. firms in london represented in this room are well placed to take advantage. mentioned, international authorities have been working closer together and will continue to do so. in a moment, i'm but it passed the baton to bill dudley to talk a bit more about some of the issues. before i do, i want to say what an immense pleasure and honor it is to introduce bill. usis an honor for all of that he is here at this market farm to give his -- four on -- forum to give his last keynote speech as the president of the new york fed. -- supervise.

bill had the wisdom to appreciate quickly how cultural and ethical issues later the heart of an inch of issues. -- heart of financial issues. on behalf of everyone, i would like to thank you for your many contributions which extend well beyond issues we are going to talk about today. your many conservations through eventually exceptional period for financial markets and a global economy. on a personal note, i would like to say that i will greatly miss your deep technical expertise, your open-mindedness, your good humor, your wisdom and your friendship. but i would say today isn't really a goodbye, it is au we know thate whether it is in the financial system or with friends and

colleagues, the futures better if we stay connected. with that, i give you the president of the federal reserve, bill dudley. [applause] >> the one thing i am going to , david:at the meetings alphabetically by country so goes u.k., u.s. and also have -- during the long meetings. thank you for that kind introduction, mark. thank you to the bank of england for the opportunity to speak about this important issue of reference rates. i'm good to focus on reference rate reform in the united states -- going to focus on reference rate reform in the united states. i'm going to argue while much has been accomplished, we have a lot more to do and a lot more to

do within a relatively compressed timeframe. this is important -- an important point that andrew bailey underscored because of the great uncertainty about libor's futures and the risk to financial stability that would accompany a disorderly transition to alternative reference rates, i think we need aggressive action to move to a more durable and resilient benchmark regime. as always, what i say to flex my own views and not necessarily saye of the fomc -- reflects my own views and not necessarily those of the fomc. reform efforts are well known. that history highlights why alternative to libor are needed. it also illustrates the importance of continuing to focus on bank culture and making sure we have the proper incentives in place to support financial stability over the

longer term. at its core, the problem we face today is the offensive system has built a large edifice on a structurally impaired foundation . while many in the industry cannot recall a time when libor did not exist. it was only developed in the 1980's. since then, the use of libor has exploded as a reference rate with the size of financial contracts referencing u.s. dial-in libor today estimated close to just u.s. dollar libor today estimated close to 200 chilly in dollar -- 200 chilly and dollars. -- trillion dollars. corporate bonds and loans and other secure tech products. with new contracts ravaging libor still being written -- referencing libor still being written, the balance is still growing. reference rates are vital to have efficient market functioning.

that lowers transaction costs and increases market liquidity. robust reference rates can also introduce misconduct by providing a source of clear transparent, and independent pricing. unfortunately in the case of had somee finance -- serious flaws. libor is and was based on submissions from individual banks, based on hypothetical borrowing rates and not actual transactions. deficiencies existed in terms of regulatory oversight and the governance of the rate setting mechanism. these vulnerabilities enabled the manipulation of the rate for the financial benefit of individuals and institutions. amid profound breakdowns and controls and compliance, traders

conspired with their institutions or other traders to manipulate the setting of the rate to improve their trading result. during the global financial crisis, panel banks submitted lower borrowing rates that i could obtain and a marketplace to disguise their financial fragility at a time when uncertainty over bank liquidity and solvency was high. the resulting libor scandal was disturbing because of its scale and the flagrant see, including the fact that there was collusion by employees across firms. it did lead to billions of dollars of dollars in fines, jail terms for some individuals, and some reputational damage to the financial industry. the global financial crisis alongd risk taking and series of what gasquet long series of lapses -- a long

series of lapses in judgment. mind, that provides many cautionary messages including the way in which poor technical design can be exploited, the limits of self-regulation, the problems that arise when one's loyalty is to one's co-conspirators rather than institution, and the need for robust controls. it underscores the power of incentives to drive individuals and firms to do things that are prudent and/or unethical. the governance and control framework that the banks and libor administrator had in place proved woefully insufficient to prevent business conduct which stemmed from these poor incentives. one could say the whole libor situation and scandals was a situation that was ripe for exportation. the openness of the misconduct is captured and points to

serious deficiencies in bank culture. i havecolleagues and commented on the need for culture and incentive as a complement to effective regulation and supervision. the has been some prosit test progress in recent years. -- progress in recent years. the fact that we are seeing additional breakdowns at banks points to the fact that the work is not done, and i look forward to the discussion with steve mnuchin to talk about how we can improve culture in the fixed income currency and commodity markets. one of the key lessons from the financial crisis was that critical pieces of financial system infrastructure must be strong and resilient, and the libor scandal underscored that need. the essential problem with libor is the inherent fragility of having an inverted pyramid,

where the prices of hundreds of trillions of dollars of financial instruments rests on the expert judgment of a relatively few individuals informed i is small base of unsecured bank transactions. furtheris contracted due to many factors including regulatory reform and the fact that central banks have been embarking quantitative easing. to the vast sums of u.s. dollar libor contracts, $200 trillion roughly, the median daily volume of unsecured three-month u.s. dollar wholesale borrowing is very small. it is running about $1 billion per day and many days see less than $500 million in volume. this lack of market liquidity means these rates cannot be sufficiently transaction-based to be truly representative, and as we know, rates that are not transaction-based are at risk of

being manipulated. libore efforts to improve , and changes that have strengthened its administration and governance, we have to concede that point, the lack of underlying market liquidity for nearly all currencies and maturities remains a problem, and there is no obvious solution. the setting of libor depends heavily on expert judgment. ,ven for u.s. dollar liber actual transactions are the basis for only about one third of the rate submissions for tenors of one months and three-month. that is noteworthy because those are maturities referenced by the bulk of financial contracts. in light of the history of libor in the context of $320 billion in misconduct fines, banks are reluctant to assume the legal risks associated with submitting quotes based on what are very shallow markets.

that is why some banks have left the individual libor panels in recent years. this pointey honed in his july 2017 speech and explained the financial conduct authority had to press hard to persuade banks to stay in the panels and voluntarily submit libor quotes through the end of 2021. cessationtential poses a clear risk to financial stability and prudent risk management means all of us need to prepare now for a world without libor. in recent years, international and domestic authorities have worked with the private sector to address libor's shortcomings and try to find alternative reference rates. -- development has been the financial benchmarks, which was developed by the international organization of securities commissions in 2013.

these principles which include have emerged as the international standard. on tryingtly focused benchmarks more closely to observable arm's-length transactions. this represents an important step toward eliminating excessive reliance on expert judgment. the financial stability board which has been a galvanizing force at the international level , the fsb and its members have published proposals and timelines for rate reform and promoted the strengthening of the major interest rate benchmarks. fsb has been carrying out work on the introduction of alternative benchmarks and developing a plan to a cop is transition to new benchmarks. it has been encouraging work by the private sector on contract robustness and reporting regularly on the progress. the federal reserve has played a

ofd role in the involvement these regulations and how they would be applied to u.s. dollar libor. involvedrt has also coordinating with the official sector sponsors of similar efforts taking place around the world. in late 2014, in response to the issues of fsb and the financial oversight council recommendations, the fed group of market participants to establish more robust u.s. dollar reference rates that are risk-free or nearly risk-free, fit the needs of the derivatives market, and are compliant with iosco principles. similar ones in other jurisdictions are well-suited to local conditions and market needs and that includes the u.k.

group on sterling reference rates. it was tasked with developing a transition plan to facilitate the adoption of these rates in a voluntary and ordinary manner, and considering best practices in terms of contract design to prepare for the possibility libor ceases to be published. the ark has made important progress in achieving its mandate. it selected the secured overnight financially right -- financing rate. the broad measure for the cost of borrowing cash using u.s. treasury securities as collateral -- francine: that is bill dudley, the president of the new york fed. we will continue monitoring those comments this morning and bring you them as they happen. what we know so far, a lot of the talk we heard from mark carney a little bit before mr. dudley and they were talking about libor.

esther dudley said the problem with libor is the inherent fragility in a pyramid where the pricing of hundreds of billion trillion dollars rests within the expert judgment of a few individuals. they will continue discussing libor and probably move to the monetary policy. let's get straight to the bloomberg first word news. central bank has raised interest rate at an emergency meeting. while the president has pledged allegiance to global principles on monetary policy. the late liquidity window rate was raised by 300 basis points while others were kept unchanged. move as described the "powerful monetary tightening" and said it is prepared to use all instruments. the lira has fallen again this

morning. federal reserve officials have signaled they are set to raise interest rates at their meeting next month, but sent no clear message on whether they would hike one or two more times this year. the minutes said "it would likely be soon appropriate to increase the benchmark policy rate." officials expressed a range of views on the amount of policy firming that might be required. the u.s. started an investigation into whether car and truck imports threaten national security. an investigation would unfold under the same law they invoked for global tariffs on steel and aluminum. up to 25% isriffs also under consideration. shares in major european carmakers are lower. deutsche bank said it will cut job in its equities business by a quarter. it will also reduce overall

positions by at least 7000 as part of its new ceo's quest to euroscosts to 22 billion next year. the announcement came ahead of deutsche bank's agm today, and you can watch that on lives go. the u.s. justice department opened a criminal probe into whether traders are manipulating bit going another digital currencies. the investigation is focused on illegal practices that can increase prices such as spoofing or flooding the market with fake orders. the move genetically ratchets up -- dramatically ratchets up u.s. scrutiny. u.k. businesses could be left up to 20 billion pounds worst off if the plan favored by brexiteers is implemented. john thompson said the max fac huge charges for

customs declarations and -- the new customs union believed to be backed by theresa may man up having a net cost of zero or less. global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm kailey leinz. this is bloomberg. francine: thank you so much. let's check in on what is trending across the bloomberg universe. automakers in japan and germany are in the firing line after the trump administration is exploring the possibility of new tariffs on imported vehicles. on bloomberg.com, a different issue in the auto space is uber gearing up for an ipo next year and does it need one?

the most read stories on the bloomberg terminal, fears surrounding global trade hanging over the markets. global automakers taking the brunt on tariff concerns. more rhetoric on the geopolitical front as north korea threatens to cancel a summit with president trump. continues, deutsche bank will cut a quarter of equities jobs and reduce overall positions by at least 7000. let's focus on the u.k. prime minister theresa may. she is bringing her flagship brexit bill to parliament next month after a lengthy delay. it is sure to spark a showdown between the different factions of her party, testing whether she can deliver the outcome she has promised. joining us now is an x policymaker who warned before the referendum that a vote could leave the e.u. could cause an earthquake.

welcome to the program. you the mostd since the referendum? the economy is not doing as well as it could have but it was not the catastrophe many expected. >> it had an immediate effect on sterling, but there was not a huge shock. people waited to see and they are still waiting and obviously they will continue to wait. i would've thought several more years before we finally know the shape of the final settlement with europe. francine: what does that mean for investments? if you are the chief executive of the bank do you have to assume the worst? do you get jobs out of the u.k. before you understand the final agreement? john: if you are in a bank, you think, i may not be able to passport and do all the trade from london so i have got to set up offices elsewhere. -- you areng

staffing gradually and you will see how far you have to go and see how the ecb reacts as regulator and so on. if you are a manufacturer, you have stop start positions, while i put the new model in? for those, initially, they have tended to say for the next few years we will stick with the planetary guard. i think they will delay big decisions where they can in order to see what the customs arrangements are. francine: is it possible to tell with the customs arrangements will be? john: i think we will stay where we are for a couple of years. today's news is that the government is exploring a longer 2023, and period to that follows customs saying they will not be able to put in the new system until about then, so it will be a long transition. we are still arguing about what

we want to ask for, let alone what they will give us. we face quite a long period of uncertainty and a crunch point over the next six months. the has been no earthquake yet and mrs. may has guided her government, cap the government together. it looks like the next three months are going to have some votes which are very tight, too close to call. francine: are you expecting an earthquake, economically or politically? shock,t was less of a the initial referendum was less of a shock than i expected and i will certainly not for taste and earthquake. francine: if mark carney says brexit has already left households about 900 pounds were soft before it happened -- worse off before it happened, will that number increased significantly? john: yes, the economy has grown

less fast, investments have grown less fast, and there was a big squeeze on real wages because of the pound falling since the referendum. trendot see a change in in the next year or so. -- year or so while we work this out. this is a historic change so what is 1% or 2% between friends? it works out into each household. francine: to limit economic disruption, how would you negotiate with the e.u.? john: personally, i see a good sense of saying -- staying in the customs union. it ties us to european tariffs and regulations. is i think the first thing we have got to get out of our negotiation with ourselves about

what we would like to see and into the real negotiation with europe about what they are prepared to give us. they come a so far, have been offering a very clear choice between customs union, the existing system, or a canadian style third-party trade deal. we keep saying, we would like something in between, without being too specific. francine: we spend a lot of time talking about trades and tariffs on auto parks. -- hearts. -- auto parts. do you worry this is as good as it gets? john: i do not see that. i think the world looks reasonably well set. you have got a very unusual president who sets off bombs himself into the policy field.

he has just suggested they are going to have tariffs on autos and the possibility of a trade war is there. that certainly would shock the world. so far, he has threatened more than he has delivered so i think we just have to wait and see. changee: is there a sea in the western world? we see it with the governments trying to form as much more populist. you could argue brexit is part of that narrative. john: politics -- populist politics in the west is a delayed reaction to the financial crisis. there are always huge amounts of dangers in the world, always a number of things that could go wrong, and a trade war is one known. on the other hand, what we have seen in europe and the west and

worldwide is a fairly concerted recovery of growth over the last year. it would take a shock to knock us off that, more down italian politics or even brexit. francine: what if we learned from the financial crisis? are there more risks because we have such muscle memory for the financial crisis that we are trying to limit that from happening again and the financial crisis will catch us off guard for something we have not thought about? john: it is always worse taking the measures to not do it again, and i think we have done that. there are always unknown unknowns. last time we were taken unawares by the effect of the derivatives market on credit. i think we are guarded against that. where we are now is, especially in europe, we still have crisis level interest rates even though we have unemployment well down

in britain to its normal level. we do not quite know what the long-term effects of that are. we are in a new world as always. there is always a risk. you have always got to keep your eyes open. colleagues, former colleagues in the bank are doing that. i am certainly not forecasting disaster. francine: thank you so much. he is the former deputy governor for financial stability at the bank of england. russia's ruble is trading almost 7% weaker since the latest round of u.s. sanctions announced last month. one casualty was ip service company ibs which delayed a planned ipo. the st. petersburg economic forum. >> good morning. i am joined by the ibs ceo, the

head of a russian software company. about theo ask you solutions you provide for vendors of western companies like microsoft, dell, ibm. our u.s.-russia tensions affecting these companies? our promise to customers is that we provide smart choice of evolving technologies, so we are looking at the breath of technology around the world. we pick up the technology that best meets the needs of our country, so why not focus on u.s. technologies or other than --gies more technologies. or than 40% of our revenue comes from that so we did not see any tension from our business. annmarie: indirectly, sanctions

have been pressures desperate pressures on the market and you are delaying your ipo. svetlana: we believe the market is kind of recovering after the april events. we see that the sentiment of the investment community is getting better, but is probably not yet up to the pre-april level. we are waiting for the best moment. it 2018, 2019? svetlana: it depends on the investment and it is difficult to focus when it will get to the normal levels. annmarie: putin is urging at the digital push. how realistic is this? svetlana: it is a way for russia to move into the future economy and global growth. the push on higher effectiveness of russian business is getting higher and higher.

in today's environment, investment in the digital economy has proved the effectiveness of the economy. annmarie: you have been recognized for your work as a businesswoman in russia. you once said something like glass ceilings are people's .eads, not actually in effect is it difficult to be the boss of a major company in russia? svetlana: it is not easy to be the boss of a major technology company, and it does not depend on gender. the glass ceiling is your head and my career proved i do not have a glass ceiling. annmarie: thank you so much for joining bloomberg television. back to you in the studio. francine: thank you so much. we will have plenty more from the st. petersburg international economic forum. we will have plenty more of your market action.

look out for lira. the top three stories are deutsche bank and there is a little bit of news as the agm gets underway. look for deutsche bank, the turkish lira, and a nomination in the italian government. up next, guy johnson will join me. we will look at treasuries and what exactly happens next. we are following that deutsche bank annual general meeting, 7000 jobs may go. you can follow that 100% using live go. this is bloomberg. ♪

♪ francine: on the downside, auto stocks fall after the u.s.

launches a probe. bitcoin slumps as the doj is set to look into price manipulation. turkey surrenders to the market, hiking rates at an emergency meeting but markers view that as a temporary fix and the lira resumes its nosedive. more than 7000 jobs will go at result of agmas a but well investors be satisfied? this is bloomberg "surveillance." guy and francine in london. if you are a terminal user, you can look at live go. a lot of turkish lira movement and a little bit of a safe haven. guy: the fed was interesting last night. we were listening to what the bank of england had to say. deutsche bank is fascinating. big changes in deutsche bank already. i wonder how the fallout will

go. francine: let's get straight to the bloomberg first word news and new york. the u.s. government is dramatically ratcheting up scrutiny of red-hot digital currency market. the justice department has opened a criminal investigation into whether traders are manipulating the price of that going. authorities were a virtual currencies are susceptible to fraud. the trump administration started an investigation that could lead to new tariffs on imported cars and trucks. the issue is whether foreign vehicles threaten national security, the same argument invoked by tariffs -- four tariffs on steel and aluminum. in turkey, the president surrender to the market and has pledged allegiance to global principles on monetary policy, and turkey's central-bank

boosted interest rates to prevent a freefall of the lira. as you were mentioning, deutsche bank made it official, job cuts are on the way. they will cut equities jobs by one quarter and will reduce overall headcount by at least 7000. to cut costs and boost profits at the investment bank. restructuring charges will affect this year's results. global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. francine: thank you so much. this is your data, what markets are doing right now. if you look at stocks, they are a little bit mixed because now there is a worry about trade tension regarding auto stocks. let's get the markets up for you.

is downsee the sxap some 3%. 10 yeard on the treasury stabilizing around 3%. the euro up a touch. guy is focusing in on the lira. turkish, wengst in have uncertainty over italy's government. roundupkind of like a of the main tensions. guy: i cannot believe you let me talk about the italian 10 year. francine: i talk turkish lira, you talk italian. it is like a peace offering. guy: we are mixing it up. let's show you what the story looks like. the cable rate, a 1.34 handle. sales data was better than anticipated and you also heard the governor of the bank of

england. gold catching a bid and that is interesting in light of what the fed had to say. we get a move in the u.s. two-year, which is interesting. there is the italian 10 year, -- yields are up, prices are up, moving in different directions. we are watching that carefully. i am stunned you would let me do it. in your new role as -- francine: as what. -- as what? eye on anything to do with italy, including the ftse bid. the u.s. has started an investigation into whether car and truck imports threaten national security. for more on this -- on how this probe affects the wider tariff conversations between the u.s.

and china, we are joined by richard bravo. great to have you on the program . what is this about, a play for midterm or were there signals this could happen? richard: i do not think there were two betty -- too many signals, but this complicates ongoing negotiations happening between the u.s. and mexico and canada on the nafta agreement, and the u.s. and e.u. on steel tariffs that will go into effect on june 1. certainly, this new announcement will affect both of those ongoing negotiations and will certainly have a big effect on how those continue and the outcome of those. on the e.u. front, the steel tariffs go in next week so it really is coming down to the wire. francine: what can the e.u. do?

angela merkel is in china. is there something they can convince the chinese to do so that safeguards the e.u.? who is on the back channel and speaking to who? richard: publicly, e.u. leaders are saying they will not discuss any new future trade arrangements with the u.s. until the u.s. removes the threat of the steel tariffs. that the e.u. is willing to accept export quotas on steel to the u.s. as long as those are set at a level that is greater than historical precedent. cap their. agrees to exports of steel to a level that will not diminish exports, they are willing to play a game. guy: richard, can you please explain to me how car imports

represent national security issues? richard: that is a great question, and i think everyone is scratching their heads over that one. it was a lot easier to justify the steel imports because you can sort of draw a logical extension of how steel can be used in national security, but i am not sure critics are really buying this. emmanuel macron at a summit last week said point blank that the steel tariffs were not a matter of national security, and the e.u. does not agree that is the case. this is an issue that is being taken up by the wto and we will see how it shakes out. francine: richard, thank you so much. richard bravo oversees our trade coverage. we are joined by kallum pickering. how difficult is it to understand president trump's next move, given that we are

looking at midterm elections? they want to make sure their base is supporting them. kallum: it is virtually impossible. the overall strategy as far as i can tell is the trump administration is not happy with the way the global order is and it is building points of leverage so it can organize the .lobal players when it wants my guess is something happened in the last week that mr. trump was not happy with. i have a hunch and u.s. diplomats are saying that china would seek to reduce the export difference by 200 billion and then a chinese diplomat said, we do not recognize that comment, and two days later you have the threat of car and -- imports. francine: he could get a good deal on the back of it? he could argue that in north korea he got a good deal by playing the madman or whatever you want to call it. people think, i better give

something back or i will be on his bad side. kallum: the u.s. is a very strong partner of this. europe and china are much mark score -- exposed to global fleet dutch trade flows. washington as a whole is pro-free-trade. trump would need to see pretty big concessions before he would remove these points of leverage over the e.u. guy: the interesting thing is about national security and for the germans, it is also our national security. this is serious stuff. does germany get caught in the middle of everything here? this is not feel good for the german economy. merkel is probably worried about the fact that the u.s. and china are talking and germany is left out. there are plenty of things that must be worrying germany. exports, a major part of

that is autos. threat,onal security mr. trump knows that is how a president can introduce tariffs and prevent hurdles in washington, and it creates a problem with the wto. the wto cannot prevent any country from introducing tariffs or barriers to trade that are in favor of its national security interest. if they try to raise the question of whether it is in the national security interest, the wto will have to decide whether it knows better than the u.s. administration what is in their interest. this creates a sticky situation. guy: kallum pickering is going to stay with us. the st. petersburg international economic forum is underway, and -- joining us now

marie.. petersburg, and annmarie: i want to continue the conversation you were just having on trade. i am joined by jean-pascal .ricoire on trade, you sit in the middle of the u.s. and china, your two biggest, where you are most exposed. how do you feel about this threat to avert a trade war? _pascal: we do investments which are long-term investments and they are affected by those --isions, so what we want theyo the case of snyder, want the products according to their needs in a short time, so

our supply chains are low on the top of that. say we are would basis- on the original rather than the global basis. annmarie: you are here as part of the french delegation with emmanuel macron. what does russia mean in terms of business investment? do you think you will be investing more? jean-pascal: we have been here for a long time. the business from schneider energy management, it is a big country of energy. it is a big country of industry. there are big cities that need to be modernized and structures that need to be modernized. a lot of industry is digitizing, so that creates, we have been operating, supplying, helping, with local solutions. one thing here in russia is the

constraints of the country, they are the largest country in the world, the conditions of operation are very special. what we do here is unique. , we are originally a european company or we are very balanced so it is legitimate that president macron comes here because russia is our largest neighbor. annmarie: this trip was first criticized about macron coming to this form, but after the iran nuclear deal, europe seems to be trying to bring putin to that deal. jean-pascal: it is important to maintain a dialogue with everybody. when you look at what europe does together with russia, we are neighbors. we live together. the economies between the countries are important.

you have a lot of interaction with folks in russia in france. we are their neighbors. schemes likeger the initiative coming from china where russia is affected. we have to discuss that. when president macron was , acted, president putin normal and reciprocal meeting today. annmarie: are you worried about what sanctions from the west could do for business here? jean-pascal: we are operating in the context fixed by the politics. it is important that the political part of the equation is establishing the right links.

of course, it makes things complicated. annmarie: you announced a recent acquisition in india. where do you see potential growth in india? they will be perhaps your third-biggest in terms of exposure? jean-pascal: india is a great country, one of two countries that can boast more than one million -- one billion people. buildings, digital industries, india willwe serve, become our third-largest country in the world just beyond the u.s. and china. it is going to be a country where we have more than 25,000 people, so big on the industry base. i am very excited about the potential. annmarie: when you wake up in the morning -- i ask a lot of

guests this question because a lot of dark clouds are over this conference for steel tariffs, the iran nuclear deal, economy of trust is the theme of this forum. what worries you the most? a potential tweet from the president? a currency fluctuation? jean-pascal: i would not say where he, but what focuses me -- worry, but what focuses me is my customers. world. in a global andy wake up in the morning need russian gas and american technology produced in china, that is the reality of the world today. the economy needs politics --

predictable politics. let's say one thing positive about today, you speak about dark cloud. we live in a world where the economies are -- at the moment. on a large part of the new economies, this is been a long time. let's take this and build on that right environment to build a condition of stability for a better economy in the future. jean-pascal tricoire, thank you for joining bloomberg television. an optimistic view from st. petersburg. francine: thank you so much. kallum pickering is still with us. there are a million angles to this. it could be geopolitics or informed policy and what

sanctions mean for the russian economy. kallum: in 2018, we have a return of risk. this year, still above trend growth but it has lost the net because geopolitics is playing a bigger part in the way we make economic decisions and the way the market -- that has shown up in uncertainty and prices. if tariffs are increased, you will see that show up in import costs and this will take the edge off the pace of economic growth. it may not show up so much in the u.s., but we have seen that in europe and will see that in emerging markets later in the year. guy: what does that mean in terms of how we will see economies developing from here? does that mean from a sentiment point of view i do not make those investments i was planning? kallum: when there is

uncertainty about the future, you deal with long-term reliability. major economies are reaching capacity constraints and without higher investment you do not get the productivity gains to push on real growth further. guy: we have seen a tightening in financial conditions around the world and we are in a situation where you can see that beginning to happen with the fed. if you take a step back and think about how in the u.k., rules have changed the game so much. we have spent so much time focusing on how central banks have tightened policy banks -- policy, but it is the things on the fringe that have a bigger effect. what does that mean about the sentiment story and the tightening, what does that mean where we are in the cycle? people talk about late cycle. .t is a hackneyed phrase

how late in the late cycle are we? kallum: let's focus on the advance role. economical swings do not die of old age. they die because excesses have built up in prices and wages, and we do not see that yet. central banks can act as the buffer. if you saw uncertainty and higher import costs and oil prices, you would see a major central banks just signaling or delaying their policy tightening. fact --: apart from the who can hike rates now? kallum: the bank of england, but for different reasons as the fed. the u.s. demand growth is running well above potential. the bank of england needs to hike interest rates because supply growth has fallen after the brexit vote. this is the reason of trade wars. francine: it would be a very shy

rate hike in the u.k. and would risk hurting the economy. if you look at the world central banks and economic growth, you can say world growth has peaked. kallum: that looks like the acceleration phase of this upswing is over, but i do not see any major signs of excess that tell me you could not see an acceleration later this year. there are no obvious organic reasons to expect a recession. if you look at output gap estimates from the imf in the most advanced cyclical economies , they closed early this year, late last year. three --ou get it list at least three good years of growth before the output gap is closed. the pace of economic growth is just not there for economies to overheat in a major way. central banks will act as the buffer but whenever they can, they will normalize policy. francine: kallum pickering stays

with us. deutsche bank is cutting a quarter of equity jobs and reducing overall positions by at least 8000 as the new chief executive works to reduce costs and refocus the lender on its european home market. this comes as we are listening to the agm. shareholders -- >> today we look at the last morning saying you need to do better, you are a little bit in the last chance, if you like. it is not the right moment to call for more personal change at deutsche bank. at least because on the supervisory board, there is not anyone who could really step into his shoes at this moment. seeirst of all, we have to

an adaption of -- in investment bank. the strategy has to be going further. we see a relief of the balance sheet so all of our positive news. francine: joining us now for more on deutsche bank is alisa martinuzzi. we also have the agm going on. you can look at it using live go. what the new ceo is trying to do , can he do more than what is announced today? >> he does not have a lot of time and that is partly why he is racing through these announcements. he has only been on the job in a month -- four months and the job cuts could be one in 10. what investors are looking for is how these moves translate into the bottom line.

that will take a little while obviously. guy: this is what the market new it was getting. if you want to impress and take a step forward, you have to do more. elisa: this is part of the position, a very tumultuous reshuffle and change in leadership that led to him taking the job. there was pressure on him to come out with something very quickly. a lot of that had artie been pretty much what klein had been working -- already been pretty much what klein had been working on. guy: some people would argue -- and i talked to some shareholders -- that maybe this is the next area for change. on this timeframe, they have had a lot of change at deutsche bank. ,o you think investors management, and the business is ready? elisa: this is the problem may have had.

because they had a shakeup that was so deep within the management board and they are having changes within the it isisory board, potentially dangerous to bring in yet another new person in the form of a chairman. himself ay has won little bit extra time but investors are frustrated because he has overseen the change, and suggesting that the bank is going from strategy to strategy without cutting the border. francine: if they cut too much, they cut into the muscle. is this why they are not accelerating these cost cuts? they need to make some money? elisa: what we have not seen is a retrenchment in the equity space. one in four jobs, we have not seen a top global player yet. it will be interesting to see how that affects the other parts

of the investment bank like corporate finance. he has to strike a balance between cutting back and not hurting other parts of the business he wants to keep. francine: is there anything they can do to give hope to investors without doing too much? if you are an investor, what do you want to hear? is it action or can they talk the market up? elisa: initially, it will be action, delivery, and execution because we are hearing information about these job cuts being started. senior people are leaving the firm and i think investors will want to see more of that. francine: thank you so much. or a lot of what these banks are hoping for is more volatility on the market, good volatility. given where we are in the cycle, in terms of growth, and what central banks can do, how can we

say that is coming with certainty? kallum: you cannot say it is coming with certainty. the biggest balance sheet /2009on of all time in 2008 and central banks reinflate it asset prices to alleviate the pressure. ,he unwinding of those measures the legacy costs are still with us and that means confidence is fragile. as central banks go slow they need to take cues from the markets as to when to hike. guy: why does europe need deutsche bank? does it need deutsche bank? we are in a weird world where a lot of what europe needs is plain old vanilla banking. we do not -- guy: have a capital markets union in the way the u.s. does. kallum: as an economist, it is difficult to say what the banking structure of europe is.

guy: he can talk about the fact that europe is a very different place to the united states. kallum: we need a situation where all markets are contestable, which means overtime you would have the best firm structure for each market. the problem is with banks especially, and they are such systematically important firms, you have to be careful. francine: one thing we were trying to figure out as whether maybe there is consolidation that needs to happen because germany and other european companies -- countries are over banked. what kind of role can deutsche bank play? >> they would like to see the banks being stronger, healthier, and more competitive. i do not think there is too much appetite for banks to be getting much bigger, because two weak banks does not make a strong bank.

it is a combination on the firms need to be stronger but they have to be the right conditions. guy: if there is a refocusing on europe by deutsche bank, what kind of bank does deutsche bank need to be? elisa: they want to focus on europe and that does make some sense. it is difficult to compete with the u.s. and that they operate with an environment -- in that they operate with an environment that is more regulatory friendly. it will be helpful to europe to have strong european banks that can help that process happen and loansompanies use fewer and turn to security markets to fund their businesses. tight -- and that i want to ask about the german economy -- how tight is deutsche bank to the german economy? is it a champion or do they need

good exporters? elisa: they are tight with the german consumer retail market, which is very competitive, extremely cutthroat, and the margins are thin. until that market is up a little bit, they are going to be in an uncomfortable position because the top line is challenged. francine: six weeks ago, guy and i were talking about the german economy overheating and now we are asking, has it peaked? are you worried about the underlying strength for exporters? kallum: exporters in germany worry a lot about the global environment. the threat of trade wars will create more uncertain equities and more uncertainty for german firms that elsewhere in europe. if you focus on the domestic data, the headline was not very

good, namely because of a big drag from government spending. investment data was good, household spending was good. germany is fundamentally the strongest market in europe. that the actual effect of the trade skirmishes to the demand on germany will be quite low. i do not think donald trump will follow through with any of his major threats, but we have to worry the confidence affects could be pronounced. in the is furthest ahead economic cycle of the eurozone come -- countries. you need more investment to prevent future growth creating inflation, so that is the challenge now for germany, to enjoy that investment growth amid concerns vis-a-vis trade wars that could impact big industries. be: that is turning out to

harder than maybe we would have anticipated. kallum pickering will stick around. also.martinuzzi but get a bloomberg first word update. taylor: germany and china are promising to defend the global order being tested by president trump. they say they are committed to free and fair trade. the two met in beijing hours after the u.s. began attract -- a process that could lead to tariffs. there is a report that theresa may will ask the e.u. for a second brexit transition period to run through 2023 to cover customs and trade to avoid a hard border in ireland. she faces opposition from e.u. negotiators and brexit supporters. governor markd

carney says plans for improving the behavior of bankers and others in the finance industry are starting to make a difference. he highlighted one of those plans as a key to accountability. >> we must move from an excessive reliance on punitive ex post fines on firms to greater emphasis on x anti-incentives for individuals and a more solid grounding in firm culture. taylor: carney spoke at the boe's market forum in london. the u.s. government dramatically ratcheting up scrutiny of the digital currency market. the justice department opened a criminal investigation into whether traders are manipulating the price of bitcoin. authorities worry virtual concern -- virtual currencies are susceptible to fraud. in italy, the political novice picked to be prime minister has begun forming his government.

he has to form a new government that will satisfy the populist parties backing him. he is meeting with leaders of italy's political parties today. global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. francine: thank you so much. let's check in on what is trending across the bloomberg universe. more on automakers in japan and germany in the firing line as the trump administration is exploring the possibility of new tariffs on vehicles. company uberng gearing up for an ipo? do they need one? our most read stories, spheres involving global trade hangover the market. global automakers taking the

brunt amid tariff concerns. threatens to cancel a summit with president trump. the overall -- overhaul continues with deutsche bank, cutting one quarter of jobs and positions by at least $7,000. the world's youngest self-made billionaire cofounded stripe on a mission to grow the gdp of the internet. they help other startups get off the ground. caroline hyde is with him at the conference. good morning. caroline: i am joined by john collison, president of strike. you just met with macron yesterday. is this really now the limelight on the technology industry in

france as a good place to grow your business? john: it is nice to see a world leader who is optimistic about the general direction of the world and technology in particular. see thetarting to engagement. elisa: talk to us -- caroline: talk to us about your growth regionally. you are based in san francisco and you are from ireland, but you are a global company. john: now europe is a fast-growing market for us. the u.k. obviously, and starting to see more in france and germany. caroline: u.k. obviously, you say. john: it is such a large economy and a largely stable economy. of the french startups

funded over the past three years our platform companies. this would be the large companies like uber and airbnb. there is a huge amount of .ompanies going through they are going all over. caroline: you make revenues by the fact that you are helping them build their payment infrastructure, but you do more than that. if you look at the amount of administrative dealn a business has to with to operate online, traditionally it has been far too complex and we think that this has dissuaded companies from growing internationally. this goes into running an and

are net business that do not involvement -- involve payment, they would like to in source. caroline: how about amazon? you struck a big deal. how much money is coming through your platform? john: larger companies are realizing, and a larger company and more traditional industry, realize they will have to move at the speed of starbuck -- startup to stay relevant. if you are in the retail space, you are figuring out your amazon strategy. invented to be able to new business to keep up and stay relevant, so we are working with hotels, your travel marketplace. we are working with a lot of very established companies that realize they need to reinvent themselves to stay relevant.

caroline: you are not just a startup fuel are, you are for big corporate salsa. big do you -- you are for corporate's also. john: a lot of people tend to denominate in terms of how big is the e-commerce. when you look at the raw numbers , which talked about how 5% of the economy is online today. if you look at what a lot of customers are doing, they are not competing with other internet companies. look at the ridesharing sector, the e-commerce sector. diy brick-and-mortar retailers are often dealing with online companies. caroline: there are plenty of payments out there, paypal.

we have seen the local business grow. where do you see yourself grow with -- where do you see yourself within the ecosystem? john: apple and google are partners. we were a large partner for apple pay and we are excited about some of the new apps coming into the space. the friction of doing any kind of commercial interaction online has traditionally been one of the things holding things back. you compare how easy it is to buy a newspaper in person with all the hassle that goes with filling out the paperwork online. things like apple pay and google pay should make that easier as a result. caroline: where does your business go from here? today you will be selling shares. are you resolutely remaining independent? john: for sure. we have so much left to do i

would not want to put that in jeopardy. we have so much left to do in terms of abstracting the complexity that goes into a online business. , ourst launched radar online business, and there's so much more we can do in that space and on the international side. the u.s. and europe are quite big markets for us. there is a ton to do and we're just getting started. caroline: when will you go public? i view been talking internally about it? john: [indiscernible] theline: john collison is irish founder of strike which helps tens of billions of dollars get transacted on the internet. francine: that was bloomberg's caroline hyde speaking with john collison of striped. at the same conference i believe is emmanuel macron, the french

president, on the back of him meeting with the chief executive of facebook yesterday. when president macron took office, he said he will make france a startup nation. is it getting there? we are seeing less signs he wants to read it digitized the economy. we will see if that translates into investments. emmanuel macron has been traveling to russia to speak with putin about some of the tension with the u.s., and that is where we will be speaking with him. coming up tomorrow, the st. petersburg economic forums presidential panel. that moderated by our editor in chief john mickelthwait. watch for that live on bloomberg tv, radio, mliv .

-- and live go. ♪

guy: 10:35 in london. 5:45 a.m. in new york. i am guy johnson and this is francine lacqua. let's talk about the turkish lira, falling again this morning after the central bank making an emergency rate hike. the president said the country will follow global principles on monetary policy but the message was slightly different a little over a week ago when i spoke to the president. >> we have to give off the image of a president who is in on

monetary policies. guy: you will play a role in monetary policy going forward, is that the big change? >> this may make some uncomfortable, but we have to do it. erdogan speaking right here on the 14th. climbdown by president ogan? is he bowing down to the financial markets? he does not strike me as a guy who would do that. >> it is not a different reaction from what you have seen .arlier in the year we had a shot at depreciation in the lira and it needs to be more proactive, needs to preempt markets and raise rates ahead of market expectations, reduce the

current account deficit, and pretty much do what volcker did in the u.s. in the 1980's. guy: the president is saying once he gets an executive presidency he will be taking a greater role when it comes to monetary policy. his view is that higher interest rates lead to higher inflation. he wants to see rates cut. once he becomes an executive president, why will the market believe the central bank reaction function will be as orthodox as you describe it? ziad: because the central bank reaction function has been orthodox, but not orthodox enough. unorthodox view about the economy and how it operates. lirapisode we had with the -- the central bank credibility

has been reduced. how the economy operates has been extremely asked those -- exposed. he announced he will stick to global principles in monetary policy which does not tell you if you raise interest rates you will increase inflation. francine: what do international investors want to hear? , thethough the president central bank, or somebody the market believes in, can they say something to change perception? ziad: they need more action than words. they need to act. there are certain fundamental vulnerabilities within the turkish economy they need to address, including high inflation rates, a sizable debt in foreign exchange currencies. these things need to be addressed because this is a major vulnerability in the turkish economy.

if they continue without further action, the situation will continue. guy: it is a tough bunch of questions that need to be answered here. thank you very much for having a stab at it. the middle east correspondent joining us to talk little bit about this. we are in a situation where we are struggling to understand how an executive presidency will interact with an independent central bank which is going to interact with an economy that .as exposure into the oil story i'm trying to understand what is going on and it is difficult. i'm trying to understand, can the situation in turkey be stabilized i simply raising interest rates, or do we need to see a change to fiscal policy? kallum: i am not convinced central banks can do much with floating interest rates.

you cannot defend the indefensible. if you want the currency to stop following, you have to slap on capital controls. ,ven in the healthy countries politics has a way of destroying good economic policies. in turkey, it has a history of making bad economic policies even worse. he have a big current account deficit, major internal imbalances. the only way to fix it is to go for a conventional approach -- raise interest rates, fix the current account deficit, deregulate the markets. i do not see over a two year or five-year period much optimism. francine: there are more concerns surrounding global trade. it is taking the markets a little bit by surprise. this is bloomberg. ♪

francine: this is bloomberg "surveillance." let's talk about italy. yesterday we had a confirmation that mr. conte will be the

premier and he launched the search for his government. let's look at market risk and how key can -- how he can put a government that sticks together. if you look at my bloomberg terminal, we decided to use the spread between italian and , if there year bonds was not an ecb intervention, how much bigger what that spread the? kallum: it is hard to say, but much bigger i would expect. reformed country, spain and a half reformed country, italy, clearly it is heading in the wrong direction. francine: could we potentially further down the line talk about italy exit? is it like greece 2.0? kallum: i think it will be more

tame for the foreseeable future. are italy really expanding its fiscal deficit and unwinding the labor market reforms that renzi introduced. that takes italy in the opposite direction it needs to go. the second big risk is a euro exit. i think we will see a modest expansion in fiscal policy that italy will probably get away with for the foreseeable future. guy: is italy's debt sustainable if they were to change the pension reform? have you run the numbers on sustainability? kallum: growth is a problem in italy, and italy was hurt by the advent of china and other emerging markets in the early 2000's. you need to get unemployment down. you need the sort of macron reforms you see in france and the debt dynamics will look a

lot better. italy will run into problems, not now. when global growth is good, italy can get away -- get away with it. wait until the next downturn and recovery. penalized the economies in europe that did not do well on fiscal policy during the upswing. greece was the country who got hit first and then the peripheral countries, so that is what i would look for for italy. francine: kallum pickering. ating up on friday, we look the bank marking 350 years. watch it on bloomberg. ♪ our phones are more than just phones.

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enforcement. doj set to look into price manipulation. currency crisis -- turkey surrenders to the market, hiking rates and emergency meetings. markets see the move as a temporary fix and the lira resumes diving. says more than 7000 jobs will go. will shareholders be satisfied? good morning, this is "bloomberg surveillance," guy in francine from london. tom keene has the morning off. if you look at the market, there is anxiousness because of trade tensions, what happens with the autos, you're looking at the lira. headlines off on bitcoin. guy: bitcoin was trading down, it is finding a floor, a criminal investigation launched by the u.s. emmanuel macron making comments as well talking about the u.s. innovation technology model is not sustainable.

i don't know. look. 500, a quarter of the s&p it is a much smaller portion. i would throw that out. francine: emmanuel macron say the end goal is to have a common regulation, including tech companies. he met with mark zuckerberg yesterday. here is taylor riggs. taylor: the u.s. government is dramatically ratcheting up scrutiny of the digital currency market. the justice department has opened a criminal investigation into whether traders are manipulating bitcoin. authorities worry virtual currencies are susceptible to fraud for a number of reasons. the trump administration has started an investigation that could lead to new tariffs on imported cars. the issue was whether foreign vehicles that national security. that was the same argument the

administration and vote for imported steel and aluminum tariffs. novicey, the political to be the next prime minister has begun the search for a new government. he has to form a new administration that will establish by the popular parties backing him. he is meeting with the parties today. erdogan has surrendered to the market, monetaryallegiance to policy. he had repeatedly opposed rate hikes, calling them the mother of all evil. deutsche bank has made it official. job cuts on the way. the biggest lender in germany and cut jobs by one fourth reduce overall headcount by 7000. the ceo wants to cut costs and

boost profit at the investment bank. deutsche bank says the charges will affect this year's results. global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs, this is bloomberg. francine: thank you so much. this is your market, 11 a.m. in london, 6 a.m. in new york. abouts are worried possible tensions arising for the auto sector, since the news that donald trump is looking at tariffs. sxxp is down 1% in euro. the 10 year yield just about 3%, euro gaining. guy has the italian bond yields. guy: i feel honored that she has

allowed me to do that. earlier, it seems to have changed market expectations in terms of rate hikes. gold moved on yesterday, with the fed minutes. on the dovish end of the spectrum, we could argue this morning. we saw a move in the u.s. two-year, from where the fed minutes came out to where we are now, there has been a drop in yields on the u.s. two-year, more significant getting a gauge for u.s. rates going. there we are. italian yields, that i feel you should be doing. francine: you are so much better at it. the u.s. has started an investigation into whether car imports threaten national security. stocks have been hit across asia and european trade as a result. washington,rom

kevin cirilli. first of all, national security -- what is the argument? reconnect excuse to with the base ahead of midterms? can we expect more hip shooting? kevin: i think you can. every source i've spoken with has suggested president trump is going to continue to use national security arguments as their secret weapon they can play during the trade war, especially with china. i predict we will see it again. i think it is something that allows president trump to get around congress. i have been talking to sources week as well as allies on capitol hill. they feel, this is something, we have seen it with qualcomm and we will see it again.

the interesting part now is that there is a divide amongst republicans about whether the president should be able to do this. yesterday on the senate floor, marco rubio, republican from florida, railing against the president's proposal to lift restrictions against zte. that comes following a bipartisan amendment out of the senate banking committee earlier this week on a republican-controlled committee on a 23-2 vote. there is a divide amongst republicans about whether the president should be doing this. arecine: steel and aluminum used in military equipment. what are the chances of this going for autos? kevin: it is very likely because the president doesn't need congressional approval to continue. it is different when the pressure mounts from the auto sector or folks pressing him against this. a stateo to michigan,

heavily impacted by u.s. domestic auto workers and the auto force, that is a state president trump carried in the 2016 cycle and a very important state to his political coalition. -- theresn't be doesn't seem to be much impetus for him to change his mind. guy: who are they targeting? south korea or the germans? kevin: both. especially with regards to germany, you have seen a tense relationship between angela merkel and president trump. domestically, for the political theition, this fits into type of voter and worker he is really trying to target. you mentioned south korea. that is important. especially with the june 12 singapore summit with north korea, uncertain to say the least, about whether or not that will go through. the south koreans have made clear that they have concerns with president trump's trade

policy. they have also made it clear they are not afraid to work with china. the chinese, from the reporting in the past week, here in the u.s., there are concerns the chinese might be working to respond to president trump's trade proposals by working with the korean peninsula. francine: thank you so much. london, julian jessop, chief economist and jennifer mckeown. thank you both for joining us. when you look at these tensions, they are counterproductive compared to the relative calm after the u.s.-china partnership. can this go ahead? how much of a threat is it? jennifer: i think it is a significant threat. imposed of our amounts to a small share of

important exports for these countries. that looks like we could be heading into escalation. that would be a serious threat. particularly for germany which has been left out of this conversation so far. for germany, car exports are vital. spread, thereto would be wider protectionism, also in the u.k., that could be a serious threat. guy: does germany get caught in the middle? julian: there is a more general problem. since the crisis, countries have resorted to increase trade barriers. not necessarily through tariffs because that is hard to do under agreementse trade but lots of various have been put up for serious reasons. we're talking about security issues in the car industry,

health and safety issues in the agricultural sector. there is a danger that when economies are weak, populist measures are resorted to, that are counterproductive, unfair, because of poor people tending to suffer more than others, and they also have the competitive pressures that can make economies do better in the long run. guy: is your economy equipped to deal with this? it is interesting what emmanuel macron has to say this morning. julian: we should be wary of casting too many stones at the u.s. the eu has from time to time imposed tariffs against china when it has perceived china is dumping things on the european market. there is an element of everyone doing this. i would love to see one country, u.k. after brexit, acting as a champion for global free trade. instead of raising trade barriers, let's lower them.

we know our economy would be better off as a result. francine: thank you so much, julia jessop and jennifer mckeown, both staying with us. coming up tomorrow, christine lagarde, international monetary fund managing director, that interview coming up at 2 p.m. in london. this is bloomberg. ♪

♪ this is "bloomberg surveillance," let's get the bloomberg business flash. the fund led by paul singer confirms it is taking a stake in

tysoncroft. there is significant room for improvement at the company. they are looking forward to talking to the board. a dutch payment company backed by silicon valley billionaires going public. plans to sell shares in an amsterdam ipo, the company could be valued at $5.9 billion. processing payments between customers and big companies like facebook and ebay. speaking of uber, they have shown a profit, sort of. they reported a $2.5 billion first-quarter profit after accounting for the sale of the southeastern asian and russian units. without the windfalls, still a loss of $312 million. that is half of what the company lost a year ago. that is your bloomberg business flash. verytaylor, thank you

turkish lira under pressure. central bank making emergency rate hikes last night. currency gaining ground after the 300 basis point intervention, plunging more than 5% to a record low. the president says the company will follow global principles on monetary policy. different over a week ago in bloombergs spoke to him exclusively in london. >> we have to give up the image of a president who is influential on voluntary -- on monetary policy. guy: you will play a role? >> this may make some uncomfortable, but we have to do it. erdogan speaking to me last monday. bloomberg now, economy and government reporter, will the real president erdogan

please stand up? which one is it? the one in london a week ago talking about the idea he will play a greater role in policy or the one who spoke last night on television talking about his government adhering to economic norms? reporter: good question and probably the answer is both are different parts of president erdogan. he was adamant about his views on economy, interest rates and where they should be and the relationship between them and inflation last week when he spoke to bloomberg in london. yesterday, he was equally woulde, when he said he comply with global principles on monetary policy, just because of the fact that in between his speeches, the turkish lira came under tremendous pressure. turkish assets were dropping right before april elections -- right before elections for

.erdogan himself . he seems to have been forced to acknowledge that what he said about economy and principles behind the turkish economy might be different than what he thought a week ago. francine: let me just bring everyone up today to a story that just crossed the bloomberg terminal. this is the majority owned by they have understand, now agreed on a settlement with the european union that allows the gas giant to shake off a seven-year-old antitrust investigation playing out amongst political tensions with russia. we have the st. petersburg economic forum and the talk is on sanctions. after this seven-year probe, dodging that. guy: significant sanctions still exist on many russian companies and their ability to access finance. let's talk more about what is

happening in turkey. let's get back to ankara. how does yesterday's rate hike play into the upcoming election on the 24th? does the average turk pay attention? it was strange for many people to understand. is there a political impact of what the central bank did yesterday? is there a political impact of what the central bank did yesterday? reporter: there will certainly be a political impact. the turkish lira and where it trades against the dollar is something pretty much every ordinary citizen pays attention to and is aware of. it is usually considered to be a gauge of the economy's health in general, which is why the president himself, after the rate hike, he said he would be in compliance with local principles on monetary policy. he was careful enough to say that none of what has happened over the past couple weeks was because of the fundamentals of

the turkish economy, but it was because of global volatility. in that sense, is very careful about where the lira is and what the central bank did yesterday, will definitely have a political impact. it will have an impact on the political sentimentality of voters before the next election. francine: how are businesses lobbying government and policymakers to have more stability? the fact that he has stayed in power for so long is usually seen as a source of stability in turkey. we see what has happened in the turkish financial markets since last week, has a lot to do with the general attitude of the economy and the fact that it has played to such huge initial volatility is having an impact

on confidence and balance sheets. companies are short. liabilities are higher than assets, at least on paper. any wild movement in the lira, is having a huge impact on corporate balance sheets. thanks, our economy and government reporter in ankara. interesting times to be a political reporter in turkey. let's talk about tomorrow. the petersburg economic forum, russia's president speaking alongside the french counterpart and japanese counterpart. christine lagarde, also. watch it live on bloomberg tv. you can listen on radio and find it on tv go. this is bloomberg. ♪

♪ this is "bloomberg surveillance," and what we are looking at is the spread between italian and german yields. you can see it going higher. italian bonds bouncing back a premier,the new complies with the mandate, bringing political calm. markets anxious on the italian situation in the last couple days. with us, jennifer mckeown and julian jessop, jennifer, i look

at that and think -- the spread is widening but it could be worse if the ecb were not firmly there? jennifer: i think it could be. it certainly could be worse if we were not in an environment of general calm. yield 2.5% in italy, still very low, affordable. probably surprisingly so given the political climate. francine: what does it mean for the rest of europe wanting to hear from italy? they won't derail off the integration project? julian: it is an interesting contrast between italy and turkey. poor,, fundamentals are and there is a lack of credibility in policymaking. italy has outsourced that to the rest of europe, monetary policy of course, but if there is more

direct scrutiny, the markets would be weaker. in terms of what people are looking for, the rest of europe doesn't want another financial crisis, greece in particular came close to leaving and that left underperformance of the european economy compared to the u.k. clearly, they want to play by the rules. the political support within italy seems weak. guy: julian jessop, jennifer mckeown will stay with us. we carry on the conversation. stabilizing the russian economy in many ways, we talk about the central bank in russia next. this is bloomberg. ♪

♪ guy: puppy our -- off the hour, i'm guy johnson. tom keene has the morning off.

north korea carrying out demolition at the nuclear test site. the rumor was it happened earlier but officially it is being carried out. francine: i read about it. they were expecting to demolish it an expert saying, you also destroy the evidence of what has happened until now. keep that in mind and of course we will follow whether that meeting between president trump and the leader of north korea will happen. guy: the governor of the bank of england was here earlier. seen data out, 9:30 a.m. rallying on that. julian jessop and jennifer mckeown still with us. hikes, when do you think the next one will take

place? jennifer: august, followed by another in november. that will be depending on the flow of data. retail sales data this morning help to support that in august. they will be looking for confirmation that q1's weakness was temporary. is a firm sign of that and encouraging. guy: what are the hike spaced on? the idea that supply is tight and the central bank should raise rates or that demand is coming in and as a result of which, they should raise rates? what is the basis for the arguments for raising rates in the u.k.? jennifer: the economy is operating around capacity at the moment. there are signs that the man should pick up, real income positive. wage growth picking up, relatively positive. there are signs inflationary

pressure should be coming through more in the u k francine: how do you demodel brexit? there are reports theresa may may ask for another 23 month extension. what does that do to the economy? julian: the things i would be looking at in the bank of england would be outlook for inflation and what is happening to business uncertainty. brexit has had impact on both. the following pound has eroded real income, that has been bad. the future relationship, uncertainty with the eu, has held back investment. provided there is a form of brexit stabilizing the market and allowing inflation to continue falling and that businesses are happy and willing to invest, i don't think the bank should be too involved with the detail of that policy. francine: what form of brexit with that the? -- would that be? julian: i would like to see it

sooner than later. we end up with some awkward halfway house where we are stuck with many obligations of eu membership without the rights. my preference would be to get on with it. i think you can justify a transition period to the end of 2020 but it would be uncomfortable farther. guy: thank you very much. first word news update. taylor: germany and china promising to defend global order being tested by president trump. angela merkel and china's premier said they were committed to free and fair trade. this was hours after the u.s. began a process that could lead to tariffs on imported cars. reports that theresa may will ask the eu for a second brexit transition. to run through 2023.

the transition would cover customs and trade to avoid a hard border in ireland. this basis opposition from eu negotiators and brexit supporters in her conservative party. the u.s. government dramatically ratcheting up scrutiny of red-hot digital currency markets. the justice department has opened a criminal investigation into whether traders are manipulating the price of the coin. authorities worry that virtual currency are susceptible to fraud. in italy, the political novice picked to be the next prime minister has begun his search for a government. he has to form a new administration that will satisfy the two populist parties backing him. he is meeting with leaders of all political parties today. deutsche bank has made it official. job cuts on the way.

the biggest lender in germany will cut jobs by one fourth and reduce overall headcount by 7000. the ceo wants to cut costs and boost profit. deutsche bank says restructuring will affect this year. global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs, this is bloomberg. francine: thank you so much. sticking with deutsche bank -- we spoke to shareholders earlier. >> today, the last warning, saying you need to do better, the last chance, if you like. it is not the right moment to call for more personal change at deutsche bank, not least because

on the supervisory board, there isn't anyone who could step into issues at the moment. >> a step in the right direction. first of all we have to see an adaption of strategy in banking and what we want to see, the strategy has to be going further, we see headcount reduction, also a relieve of the balance sheet. positive news. francine: that is the latest. agm oflders, were at the deutsche bank. joining us now, our bank analyst, great to speak to you. we speak often about deutsche bank. , does heew executive need to do more? should he have done more today? he is really in a

position to do much more. clearly this announcement adds more detail to the measures first announced when deutsche bank reported first-quarter results at the end of april. face, isissue, they growing revenues. the cost a disappointed last year and that was one of the main reasons, the former had to go. cuts thanxecute more they already announced, 7000 is 7% of the global workforce. you run into issues of morale and revenue attrition, which is the key concern longer-term. francine: this is not enough for shareholders. what will be? reporter: shareholders have to realize, there is no quick fix in this case. clearly, one of the things management can control is cost. that is what these measures are designed to show -- that they

are going to meet the 23 billion euro cost target for this year and these numbers give investors more comfort. longer-term, we need evidence that deutsche bank is growing the core business, european fixed income trading and corporate finance. i don't think we have had comments out of the shareholder meeting today -- second quarter does not look great from a i thinkperspective -- this is going to be a long development, a long restructuring story. guy: is it too early to talk about a change of chairman? reporter: not at all. clearly, he has overseen a number of different ceos and over the course of his chairmanship, deutsche bank shares have underperformed. he is under pressure. he is running out of time himself.

if results don't pick up and coming quarters, he will continue to be under scrutiny. guy: great stuff. thank you so much. up, the bank marks 350 years in business. stephanie flanders will be moderating a panel at the event, fortune live on bloomberg tv. you can listen on radio and find it online. this is bloomberg. ♪

♪ is "bloomberg surveillance," let's get the bloomberg business flash. the fund led by paul singer confirms it has taken a stake in german steel and engineering

company, there is significant room for improvement at the company. looks forward to talking to the supervisory and management board. company is going public. they plan to sell shares in an amsterdam ipo. they could be valued at $5.9 billion. they process payments between customers and big companies like facebook and ebay. uber has shown a profit, sort of. $2.5 billion first quarter profit on paper after accounting for sales of the russian and southeast asian units. still,st $312 million just half of what they lost one year ago. that is your bloomberg business flash. francine: thank you so much, taylor. comcast ready for a bidding war with walt disney.

the cable giant confirmed it may make an offer for a wide swath up 21st century fox assets, which disney had already agreed to buy for $52 billion. joining us now, caroline hyde. over to you. reporter: thank you very much. i'm joined by matt hancock, the secretary of state of media in the united kingdom. we just heard about the fight going on between comcast and fox for sky. any updates? shortly, thise decision is a quasi-iq to one, taken within a strict set of legal rules. i won't be saying anything before the final decision comes

through. it will be coming shortly. reporter: june 13? >> that is the deadline. reporter: it has taken 17 months. is it the judicial elements? >> that is a very clear process that has to be gone through, decisions taken on the basis of objective evidence before the secretary of state and i will be taking that decision and announcing it shortly. reporter: stay tuned. meanwhile we are in paris, you have just been on stage, next to president macron, listening about investments in technology. are you worried? leaderu.k. is the clear in technology in europe. i am delighted, france is also making moves in that direction. after all, this is not a zero sum game. i stronger france leads to a

stronger britain. i like the fact that the french government is so determined to open up to new technology. that is a good thing for the whole of europe and the u.k. we must also make sure we stay ahead, make sure we are putting in place the environment and theystem, an ever deepening ability of british companies to start and grow, for people to come to britain to do that. with the partnership french. it is good for the european ecosystem as a whole. reporter: they are investing in ai, we are investing in ai. are you worried companies will leave and root in paris? want to make sure we attract people to start businesses in london.

london is thatn much richer and it is a generation ahead, in a way because the french have just got started on this agenda. one of the advantages of artificial intelligence by nature, the bigger the data, the more powerful. international collaboration, with friends around the world, is more positive than almost any other atmosphere of business. there is also making sure we get the ethical framework right -- best done at an international level, so the frameworks in place, the rules in place are applied not just different country by country but the standards are set across the western world. working with our french colleagues, american colleagues, and others as well is very important to get them right. reporter: talking about ethical

standards -- legislation taking effect on social media companies in the united kingdom. mark zuckerberg is here. will you be speaking to facebook, the ramifications? >> it is important for facebook, that we get the rules right so they are effective and people are kept safe online. i will be talking to my international counterparts. one of president macron's big pushes in his speech was the political accountability so that society as a whole makes the rules rather than the big companies themselves. that is so important. although facebook clearly is one of the leading social media sites, there is a large number that have very big numbers of people on their platform. getting the rules of the road right for a level playing field is important. reporter: to tech companies get it? >> increasingly. some do more than others, a big

point, it has to be society and that means manifested through the government, setting broad rules of the road, for the protection of children, and the prevention of harm. that, marksingly get zuckerberg himself has called for regulation in this space because he recognizes it is society rather than the companies that should set rules. we have to make sure rules are effective and we have to talk to the company's and our international neighbors. reporter: was it a lost opportunity for mark zuckerberg to not come to the u.k. parliament? >> he would have had the opportunity to explain himself, with good questioning, with nuanced questioning. i am not sure many people would learn much. hancock, thank

you very much for being with us. is the secretary of state for digital media in the u k much.hank you very we look forward to hearing what is going to happen with sky. minutes, we get the ecb accounts. what will we learn? julian jessop and jennifer mckeown, still with us. how will they guide us with these minutes? they saidlast weekend they had not discussed monetary policy which is peculiar. we may not get a great deal. but i think they will use the opportunity to hint, asset purchases are likely to end this year. it will be a long lag after purchases and. end. guy: will that be roughly the same time the ecb is thinking of

raising rates? jennifer: the u.s. cycle is going to turn at some point, assuming in 2019 and that is the point the ecb should hike rates. i think it should go ahead regardless. i am not expecting a u.s. recession -- just a slowdown. ecb interest rates are so low, you can have a slight increase without it becoming a tie policy. i think ecb will be keen to build up ammunition for when its own slowdown comes because at the moment, it has almost none. is maxed out on purchases, interest rates at rock-bottom. that will feel more comfortable. francine: you a great? -- you agree? jennifer: i -- julian: i do agree. these low interest rates are encouraging the misallocation of resources, reducing market pressures on company's to

restructure and get their act together, encouraging people to take on too much debt. pension deficits are larger than they need to the, discouraging the right sort of investment. a gradual process of returning interest rates is the right thing to do. central banks should not be buffeted by every piece of data. francine: if it is their fault we go into recession because they hike interest rates when trade tensions escalate -- that is a pretty big thing? jennifer: we are not -- julian: we're not talking massive increases. the new normal is lower than the past. if there is a perception that central banks err on the side of keeping rates lower for longer, it has negative long-term implications on the economy. francine: thank you both for joining us. julian jessop and jennifer mckeown. now it is time for the single best chart in honor of tom

keene. bitcoin. the cryptocurrency has slumped in today's trade but it did start yesterday, below 7500. growing regulatory scrutiny and we found out today, that coin manipulation may be -- bitcoin may be under a probe in the u.s.. added robinson, this feels they. robinson, this feels a. big. reporter: i would point out the agency involved, the doj, the trading commission -- this is not coming from the exterior the -- security exchange commission, which is already investigating fraud. markete the two capital

agencies both investigating these processes. when it comes to the justice probe, they are looking at the traditional fraud we have seen in the stock market. you are seeing spoofing, wash trade, all of those manipulative fraudsters stock like to reduce the price. that is very interesting. guy: how much jurisdiction do they have? reporter: any transaction that takes place in the u.s. that is a big reason why exchanges say, like many in london, and are asking to be regulated by the financial conduct authority -- they still will not accept business from anyone in the u.s. because they do not want to tangle with washington in any way, shape or form. guy: does it a lot the argument that -- does it pull out the argument -- that this is a

product not dependent on any single government or single entity around the world? that this is an international story? if everything goes to the united states, it is like any other currency out there? reporter: there is a paradox at work. bitcoin is decentralized, it lives on the internet. if you want to make a business in it, raise a hedge fund, in exchange, you have to do business in the u.s. if you choose not to, your leaving the biggest market behind. inyou want to make money this space -- if you are goldman sachs and you are going to set operationin trading you will deal in the u.s. and deal with the regulatory requirements. bitcoin is decentralized. francine: the investigation is

focusing on illegal practices, such as spoofing, flooding fake orders or tricking other traders into buying or selling. do we know where these are originating? reporter: very good question. we would have to look case-by-case, specifically at tradesransactions, which justice is looking at. we do not have that information now. once you see what they are looking at, they can trace the provenance of these transactions and i would wager many of them originated overseas but at some point during the journey of the transaction, it went through the u.s. probably because investors were buying in the u.s.. francine: thank you so much. in to lisa andne jonathan ferro on bloomberg

surveillance radio. they will go what we arein -- they will go over what we're seeing in italy and turkey. guy: is a massive day for tomorrow.to m plenary.idential clea it is an all-star cast tomorrow, fantastic events you will want to pay attention to. francine: tune in for that and plenty more throughout the day from the conference in paris but also, later on, we hear from a former central banker. we continue coverage on the markets, finance and politics. this is bloomberg. ♪

♪ alix: it is national security, stupid.

president trump uses national security to levy tariffs. swinging the acts at deutsche bank. cutting 7000 jobs, a quarter in equities. will it be enough? minutes,ut from the members could not agree on anything including if the economy is apple employment, taking the shine off the dollar and two-year yields. david: i'm david westin alongside alix steel. are you in the market for a new car? alix: my husband is. david: better by sooner than later. prices are going up. alix: it is not like they are cheap to begin with. in the market,, in the equity markets, going nowhere. euro-dollar up to tens of 1%. weaker dollar story after minutes came out yesterday.