francine: trump has reportedly completed a second list of tariffs on chinese good. beijing says all deals are off. bank of japan denigrates their inflation forecast, falling behind the fed and ecb. and argentina appoints a new central bank partner after their currency plummets to a record low. can policymakers wingback investor confidence and curve volatility? ♪ francine: welcome, i am francine

lacqua in london. you can see the stock's 600 is pretty much unchanged. i think a lot of traders are bracing for what could be a trade tariff tension. fluctuation, that overall, you can say the central-bank action was pretty smooth. but then you see this divergence coming out. that is coming through in the euro-dollar. and the fed definitely a little hawkish, yet markets taking it in stride. the stories in the emerging markets, without a doubt, is the argentina and peso. we have a new man in charge of their central-bank, and we are trying to figure out if the peso

weakness will start to affect other emerging markets. coming up, we talked harris, trade, and strategy with our guests. later on, we get calls on the euro after yesterday's ecb meeting. later, we also get a view on trade and the traits that with china. let's get straight to bloomberg first word news. japan has left their monetary policy unchanged and downgraded to their assessment of inflation. it maintains the settings on the yield control program. the central bank has also said it will keep the price index within a range of one and one half percent. it sees them fall behind their global peers at the end of a busy week for central banks.

even as the chinese government press ahead with a two-year campaign to curb property speculation. citiese prices in 70 gained 8/10 of 1% that is compared to a 6/10 of 1% in april. mentioned, argentina's essential bank is getting a new chief after they failed to stop despite plunged obtaining the biggest load in the history of the imf. the previous finance minister will take over the post following their some -- predecessors surprise resignation. they are struggling to maintain currency volatility. senior eu officials have formally discussed whether the uk's might need to stay past march of 2019 if brexit negotiations do not accelerate. talks have stalled on the irish border and trade deals, and

officials in brussels have questioned whether they can on-time -- finish on time. this comes as theresa may faces a another showdown next week. gettingworld's rich are a lot richer and faster. the growing ranks of millionaires and billionaires now hold almost half of global in 2012.p from 45% inbal news, 24 hours a day more than 120 countries. i taylor riggs, this is bloomberg. francine: thanks, taylor. let's kick off the show with trade. president trump has approved tariffs on $50 billion of chinese good. according to bloomberg sources, who says the u.s. will release an updated list of tariffs.

the white house is also preparing a second wave of tariffs. immediatelyhey will retaliate, and that all trade deals are off if the u.s. goes forward. let's go get the latest. tom, good morning. unclear if it's 50 billion, a second list of 100 billion. what have you gathered? know is thatwe do we are going to get this list published by the end of today on the $50 billion worth of imports. it is likely to be refined. initially, they said they would target about 1300 different products. they have consulted with different trade groups and have narrowed it down. the focus will be on high-tech imports from china. we are also getting

additional reports that they have drawn up an extra list, targeting $100 billion worth of tariffs. that at the end of the month, they are likely to come up with additional restrictions. so it seems like trump is coming out swinging having disrupted the g7 and dealt with the summit in singapore. francine: how much is this likely to affect the chinese economy? we already had data that was worrisome. on the surface, bloomberg economics say it will not have much of an impact. it won't scratch the surface in terms of china's trade picture. of course, if we get these tit-for-tat measures, a trade war becomes more worrying. the data out of china was hadously soft, and then we

that decision from the central bank to follow the fed, which suggests there is concern. so you have got policy concerns, stop data, trade turns. it makes it a difficult and complex picture for chinese policymakers. the question is if they start to relax this deleveraging campaign. , you have this tension when it comes to technology. be a number of parties coalescing around this idea that china's technology ambitions are a national purity threat -- national security threat. this is a more tractable area of tension. they have taken measures to suggest they can import more, but the question in technology appears to be a red line. francine: thank you so much as always. so how you manage risk in this environment?

joining us now is the portfolio manager at pimco. what do you worry about the most? we had the fed, ecb, boj this morning. and then a lot of politics and tariff talks. what is the number one fault line. >> good morning, francine. you just touched upon it. this trade war is still in a fluid situation. be suchillion would not a big deal if it was not for fear of escalation. is also happening in a backdrop where we have significant slowdown in europe and china. things are still accelerating in the u.s., having a tail wind from the tax reforms it would seem. but this is what we would have our eyes upon. francine: what does it mean for your portfolio?

anything to buy or sell? early,ne: it is a bit but one thing we have been telling investors is that save the duration still has a lace in a portfolio. especially now that yields in the u.s. have risen. is growth slows down and we see theattening of the curve, ambition of the fed might be curtailed. francine: talk to me about the regions you prefer. china? bearish on do you worry about u.s. growth or is it european growth that may have peaked? the place where political risk and potential uncertainty would be highest is europe. there is tension in a number of

economies and it is already slowing down. so should we have a slowdown globally? it would seem that one of region that is least capable ivory inflating things would be your. geraldine, where do you seen the may concern in europe? withw the possible selloff the eurosceptic italian finance minister. is it all about immigration? i think immigration might be something right here right now and creating tension. broadly,ld say more there is a high chance of a recession on the horizon over the next few years. when we look at the ammunition the continent has to fight

significant slowdown in growth, it is very little. transforms tried to this definition, and has promised not to hike interest rates for a long time. but cutting interest rates is not very possible on the agenda, and extending qe forever is also complicated. and the fiscal room is not there, even though a number of countries would like to use it. in terms of spare tires or ammunition, it is the weakest in europe. at a time when you see pmi's and production indicators, even france revise the gdp figure. it seems to be more than just a seasonal let. -- blip. francine: thanks so much. stay with surveillance.

a bumpy start, a prime minister has gotten into a spot with friends over immigration. and he wrote to rate hikes, mario draghi strikes a dovish tone. pushing the euro towards a key support levels. can the euro economy right that risk? we discuss that next, this is bloomberg. ♪

francine: this is bloomberg surveillance. let's get straight to the bloomberg business flash. rolls-royce said it should

exceed a target of one billion pounds by 2020, following the announcement of 4600 job cuts. the jet engine maker aims to produce more than one pound per share. up from 15 pence in 2017. according to analysts at morgan stanley, that puts annual cash flows the 2 billion pounds in five years, well above consensus estimate. qualcomm's acquisition of annex b is said to be approved by chinese regulators. clearance would remove the final regulatory hurdle for the purchase, which has been pending for more than 18 months. the decision would allow the transaction to be completed ahead of a july deadline which has said they would abandon the deal if it was not approved. decided --d nsb

declined to comment. at&t has completed their acquisition of time warner, the culmination of a 20 month battle to entered the media business. of the deal came just hours after at&t made a ,iling in federal court disclosing it had reached an agreement with the u.s. justice department that waved a waiting. . that's your bloomberg business flash. francine: thank you so much taylor. the international debut of italy's prime minister has not been a smooth one. since takingeks office, they have already had a diplomatic incident with friends and raised eyebrows with the rejection of the eu free-trade accord. today, he is set to meet residents of emmanuel macron. let's get straight to our correspondent from paris.

the biggest issue that could derail unity is over migration and immigration. absolutely, and this is what we can see in the headlines of french newspapers. the visit almost got canceled after italy did not grant access. the french president emmanuel macron calling the behavior of italy irresponsible. french president had to apologize on the phone in order to convince the italian prime for this lunche followed by a press conference later. recently,gly, until

it was european countries who had issues with the borders and closing their borders to migrants. remember when the eu tried to put in some quotas. countries like hungary, poland, the czech republic and slovakia refusing to join the quota system. but now you have italy rejecting. also, inside germany the issue is causing a major problem for angela merkel and her coalition. actuallyior minister now wants to turn away some of ,he migrants at the border putting at risk angela merkel and her coalition at the heart of your. francine: thank you so much. let's keep the conversation on

europe. joining us now is stephen gallo. and geraldine is still with us. let's start with you as we were talking about your. first of all, let me bring my chart up. one of my favorite charts of the month. if you look at what this means after currency hedging, treasuries have not offered higher yields for more than a year. do you like german bonds at this level? it depends on what you are looking for in a portfolio. if all you care about is carry, then why not? but i managed a multi-asset portfolio. safe duration, it is to have a diverse a fire of risk.- diversified

if something happens, which duration is going to rally. bonds, comes to boots -- it is very limited. in that sense, i think u.s. duration offers more of a protection. but in terms of carrie, it does not offer much. what is your take on euro from here? it seems like it moved on the back of a dovish ecb. my take is that let's look at the politics of what draghi did. i think he has created a bigger headache for the bank further down the road. it, there has been a convincing sign that rates are going to stay low. these elusive policies are fueling political tension in the northern part of the block.

i think the longer the ecb stays in this right, the more likely it will be that they will push for a hawkish successor. so i think there is a good chance within the next six months that that guidance will be softened. maybe even a bit sooner. we have had some discouraging figures from germany. be tariffs onto cars, germany would be the most hit. mix.en: that fits into the but in terms of how the market reacted, let's look at how it was priced already. barely one great height price in already. have moved very much, because there was virtually nothing priced it. so i think what happened yesterday was that the central bank played with the market psyche. i think it is easy to do that in a conviction was market. went in and did not expect

a specific timeframe, so they covered their long euro positioning. positioning was a big factor behind the move yesterday. i would not say you need to be aggressively selling it here. central banks often use that as a way to either aggravate the first move or walk it back. so there is some uncertainty. francine: what is your call on euro-dollar? stephen: we think it is going to stay below 120. is that draghi has removed a lot uncertainty from the picture. we know exactly what is going to happen. so you can't really puts on the taper or qe reduction trade in the euro. we think it stays below 120. geraldine, if you look

at what mario draghi was saying, it could coincide. it could coincide with the successor of draghi having to do it. should that make markets worry? no, i think what is more likely to move in the interim, because the ecb is anchored for a long time and it would take a big hurdle to move more hawkish or more dovish. so the changes should be looked at away from the eurozone, and most likely from the fed. boj is also in a touch and go situation. looking at global developments and if the fed can still remain sanguine or not have an impact on interest rate differentials. geraldine, will you be buying any periphery bonds? i don't know if spain or italy

are attractive because of the risk. despite the fact that yields have been going up, pimco is not recommending adding to the periphery currently. our stance remains because of all of this political and the fact that this is clearly having an impact on economic indicators and when things go wrong in europe, there is very little room for maneuver. that makes us on easy on the periphery in general. do we worry about things going wrong in europe? stephen: that is one example of things going wrong. what do you mean. [laughter] are we back to the greek crisis? because cut our 12

month view on the euro-dollar. resolutely, there is the view that europe will face another crisis. and what comes out of the next one or two summits on the european council is not going to be enough to complete the missing architecture of the block. maybe it will barely make it a bit more resilient to the next downturn, but not enough to complete what is missing. what is your take on boj this morning? geraldine: it was very much as expected. boj is stuck the in this yield curve targeting for very long and they deem it very sustainable. bank, veryentral little volatility to expects and therefore, all eyes turned back to the fed. geraldine, thank you

so much. portfolio manager at pimco. stephen gallo from imo stays with us. mo.bno -- b we talk argentina as the peso slumps to record lows. i am also looking at some european stocks. moment, a lot of back and forth to try and understand what shop has or has not approved. china saying they plan a payback. what that means for the moment is unclear, but will play out in the next couple hours. this is bloomberg. ♪

♪ francine: economics, finance, and politics. this is bloomberg surveillance. let's check in on what's trending across the bloomberg theaters. european leaders face off on the

image -- issue of migration. head to twitter for more on that. glencore says they will restart royalty payments to sanction israeli billionaire in a bold move likely to test the company's relations with the u.s. and the most read stories. place, qualcomm's deal to acquire semi conductors has been approved by chinese regulators, and trump is set to place tariffs on $50 billion of chinese goods. let's get straight to first word news in new york. >> we are starting with that story. to completingose a second list of tariffs on $100 billion of chinese goods. enact trump pairs to duties on $50 billion of goods

and beijing has reiterated that if washington improves -- imposes tariffs, all trade deals are often they will take appropriate measures. the bank of japan has left their monetary policy unchanged and downgraded their inflation assessment. they maintained settings on the yield curve and asset personages. they say they now see the consumer price index in the range of one half of 1% to 1%. fall further behind its global peers in a busy week for central banks. even asme prices rose the government press ahead with a two-year campaign to curve property speculation. prices in 70 cities gained 8/10 of 1% from a month earlier, compared to 6/10 of 1% in april. formallyals have

discussed whether the u.k. might need to stay in the block past march of 2019 if brexit negotiations do not accelerate. talks have stalled on the irish border and a trade deal, and officials in brussels have privately questioned if they can finish on time. this comes as theresa may faces another showdown in parliament next week with rebel pro-eu lawmakers. on tictoc and twitter, powered by 2700 journalists and analysts in more than 120 countries, i am taylor riggs. this is bloomberg. francine: thanks, taylor. argentina has named a new central bank chief after the surprise resignation of their final -- of their leader. the finance minister has taken over during the financial crisis. the peso has lost more than a quarter of its value and hit a record low. that is despite a $50 billion loan of the imf, the biggest in

the history of their art -- organization. justiceus now is carrigan, bloomberg's correspondent and stephen gallo is still with us. justin, is argentina running out of options? justin: it looks that way, doesn't it? they seem to have done everything they can. they got a $50 million loan from the imf. a 600aise interest rates basis point move, a major attempt to shore up the currency. change they have a head at the central bank, somebody who suffered a bit on the popularity front in terms of credibility from investors. francine: what do we know about the new guy in charge?

a previous finance minister. he carries the effects of having been one of the guys that helped argentina find its protracted this long legal case with private d faults following the -- default in 2001 and allowed argentina to access capital markets. he's in his mid-50's, comes from the finance ministry. he is hopefully seen as somebody who will be a steadier hand and communicate more clearly to markets. if we remindphen, ourselves what the economic situation looks like. the troubless to of double-digit inflation and account deficits. stephen: in the. -- indeed. that is what the crisis is.

there is no believe that there is any credibility behind economic policy. when the ruble was in freefall because of the oil prices , it was not as difficult for the central bank to get a hold of the currency and slow it down. the hike raise aggressively, and they floated it. but the issue is that russia runs very conservative and fiscal policies, but argentina does not have a history of that. then you have the unit labor cost, the wage situation. it is less to do with the balance of payments now, they have 100 billion. i think that puts import coverage just under 20 months. it's not about the external debt issue anymore, it's what is going to happen to economic policy.

how can they keep inflation low and persistently low, and how can they get out this protracted scenario where there is never any healing in the budget deficit. francine: how much time do you give them to come out with a signal strong enough to reassure investors and stop the slide? stephen: they don't have much time. i expect the next move will still be up. a handover in central bank governors is a big deal. not in athey are steady state, and that is the first port of call for currency stability. comes in andhe issues a fear reassuring statements, that will help. does this have the potential of risking contagion to other emerging markets. and at a time when we have heard a hawkish fed and dovish ecb. the answer to the

contagion question is no. it is a question we have discussed of investors going through the emerging-market universe and picking out the weakest links the chain. have heard, argentina has a lot of the conditions that make it exceptionally vulnerable. i think that is what the issue is. isphen: the issue for me that i would argue that it wasn't the fact that was driving this. if you look at their external get, it has risen, but it is not that high. turkey's is higher, south africa's is higher. there are more vulnerable borrowers, and has a relatively close economy. me this is about the domestic economy and the overhang of bad economic policy. when you look at what the fed said this week, they are closer to the end of the cycle rather than the beginning. one,ys to me that, number

the fed is in tune and in touch with the global conditions. this dynamite is not going away. -- dilemma is not going away. the dollar keeps it heavily linked in. argentina'ss about own domestic issues, not about an emerging market issue in the whole of the space. francine: thank you so much. stay with surveillance, plenty coming up, including coronas reality check -- japan's reality check. we talk economics. and brexit on ice. areor european officials talking about positing the divorce. currency, we discussed sterling, and brexit. this is bloomberg. ♪

francine: this is bloomberg, i am francine lacqua. let's get straight to the bloomberg business flash in new york. >> rolls-royce said they could exceed their targets by 2020, following the announcement of 4600 job cuts. its shares surged as the u.k. jet engine maker says they also aim to produce more than one pound or share in the midterm, up from 15 pence in 2017. according to analysts at morgan stanley, that puts cash close to 2 billion pounds, well above

consensus estimates. qualcomm's $43 billion acquisition has said to be approved by chinese regulators. clearance from china would remove the final regulatory hurdle, which has been pending for more than 18 months. this decision will allow the transaction to be completed ahead of it's a july deadline, which said the deal would be abandoned if not approved by then. theiras completed billion-dollar acquisition of time warner. it is a culmination of a 20 month battle of the right to enter the media business by acquiring the owner of hbo and warner bros.. it comes just hours after at&t made a filing in federal court, disclosing they had reached an agreement with the u.s. justice department that waved a waiting. cut hundreds of

jobs. chargeso said they took of more than $100 million, mainly related to cutting stuff. ceo has built up broadcom into one of the largest companies in the $400 billion; dr. industry by buying rivals -- semi conductor industry. the office building by brought gate was sold by british land and singapore's gic. that is your bloomberg business flash. francine: thanks. the bank of japan left monetary policy unchanged and lowered inflation assessments after raising it in january. there economics minister now sees prices down from around 1%

previously. that pushes japan behind its global peers as the fed raised trajectory and the ecb plot the end of bond buying. but keep the conversation on central banks. stephen, when you look at the boj, it seems like a rehash a lot of what they say. this time it feels different. where do you see value for the yet? yen.n stephen: they have extremely good fundamentals. they are all very good. the issue for me is not one of divergence. they have been arguing against this view of divergence for justifying this recent dollar strength for a while. we had plenty of divergence last

year, and the dollar fell roughly 10%. the only central bank hiking rates of the dollar fell last year while they were doing that. that thehe fact is trade went into reverse because there are doubts about global growth. within the g10 space, the dollar is a relatively high value currency, so it costs to hold these high positions. that to me, is the main issue. value, dollar-yen, fair when you look at the current account surplus and have economy has been performing, it is lower. francine: is there anything that kuroda can do? i don't think so, they have the same problem the eurozone has. many structural factors bearing down on inflation. the pace of shale production is probably going to have a bigger impact than the

central bank. i don't believe they believe or has ever believed this forecast for core inflation. it is just hoping it will trend higher. francine: will its? -- it? stephen: well it has stabilized. but when you look at europe's aging population, the impact of technology, relatively weak credit growth. lots of spare capacity in some economies. francine: we are also seeing elections in japan soon. what does that mean for abe and economics? i don't see that any central bank governor, new our current, is going to try a different strategy. i just know that japan's fundamentals are good. the amountlding back

of stimulus reduction that they actually believe is required for the economy, given how well it has been performing. i don't necessarily blame them for doing that when you have all this hype about a trade war, because japan is a bid -- big exporter. but where are they holding the currency, i would say they are holding it artificially weak. and i think that is more of a problem for the global economy then trump tariffs, if they are on relatively small segments. why? chelatingrmany is a this massive surplus and putting more pressure on politicians like trump to do something about the surplus. so i think it is a bad idea what mario draghi did. francine: stephen, thanks so much. we will get his take a little bit more on what draghi did yesterday, it was a bad move or not. and brexit next.

,utting the brakes on brexit officials are said to consider causing the divorce in progress does not pick up. we pick up a dramatic week for theresa may. this is bloomberg. ♪

francine: as the drama in westminster is part of everything, it is that brexit is only making life harder for theresa may. isjust four months, she meant to have reached a deal with the eu, but they have been hamstrung by domestic debates. that has led senior officials in brussels to discuss, informally, whether postponing exit could be an option. joining us now is bloomberg's resident editor and stephen gallo. anna, i have a million questions. are askingvestors themselves is first, does theresa may hang on to power, and does brussels really want to delay the divorce? what we have been

reporting is that the government does think they have the numbers. the government thinks that enough rebels can be persuaded to back the amendment that the government tabled. now, have a gun their math right? we don't know. it will be very tense. the scenes before of wondering which way they will vote, and i expect we will see that again. can theresa may survive? she has had many challenges before, she has clung on. the thing to keep in mind is that if the rebels win on wednesday, and there is a way that remainders could essentially block brexit or go for a very soft brexit. then the hard-line brexit backing members of the tory party could say this is the red line and then start a leadership challenge.

that is the risk, if you like. francine: could we see fresh elections? on this particular issue, the dup we don't have to worry about them. francine: could be pound move on wednesday? yes, if the government were to lose, the next reaction would probably the lower. francine: because the market would read it how? the markets is more concerned about brexit and negotiations with the eu on an indirect aces -- basis. the direct risk to the sterling is political risk. francine: so what the market worries about his a pro brexit prime minister or do they worry about fresh elections with jeremy corbyn? i don't think the

market is as concerned about a cliff and exit -- engine brexit. let's face it, if nobody is driving the plane, the most likely scenario is that talks adjust extent, the eu extends. so to me, not the biggest risk. francine: in our reporting, that is what we are hearing from brussels. does that mean they are softening the stands or are they just baffled? well they are certainly baffled and struggling to figure out what it means. what we were reported yesterday is that unofficially, eu officials are discussing, once again, the possibility that the coulde 50 deadline, this be extended a bit. and this is very good news for people like dominic greene.

because a few months ago we reported that one of the tools of the remainders are thinking of using is an extension of article 50. and what the hard-line brexit backers have always said is that it has to be unanimous, the eu would have to unanimously accept an extension of the deadline. and the government line has always been that that would be difficult to achieve. yesterdayas reported is that once again, this is back on the table and the discussed. not for a long time, but as a way of avoiding that cliff edge. francine: does an extension of the deadline mean it is more likely we have a referendum? emma: know it doesn't. but what it does mean is that the plot to reverse brexit, if you like, depends on the possibility that deadline could be extended. good news for the remainders

trying to avoid the cliff edge. francine: very quickly, your call do you look at the euro pound? stephen: euro pound for me is one of my favorite traders. you have political risks on both sides of the english channel. for me is noty tightening significantly one way or the other. francine: thank you so much. tom keene joins me shortly. we have another two hours of surveillance. we go through brexit, tariffs, and trade. this is bloomberg. ♪ what's a gig of data?

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and with millions of wifi hotspots included, you'll pay less for data. it's a new kind of network designed to save you money. click, call or visit a store today. francine: trumps green light. the president has completed a

second list of tariffs on chinese goods. beijing says all trade deals are off if this becomes a reality. the bank of japan downgrades its inflation forecast, falling further behind the fed and the ecb. argentina appoints a new central bank governor after its currency plummets to a record low. good morning. this is "bloomberg surveillance." i'm francine lacqua in london. there are reports if it is $50 billion or $100 billion but the chinese are ready to retaliate. tom: this is on $50 billion of goods. all it says to me is anybody who is questioning whether there is a trade war is not. -- is nuts. there is a trade war. francine: people want to

minimize it because it escalates quickly. let's get straight to bloomberg first word news. taylor: japan is falling further behind its global peers. the central bank left its policy unchanged. policy is increasingly out of step with measures taken by central banks in the u.s. and europe. it is a challenge for the new governor of argentina's central bank. the formerant finance visitor to lay out his strategy to curb volatility in the peso, which has lost a quarter of its value since the end of april. it is at a record low even though argentina is getting the biggest loan in the history of the imf. andalks between the u.k. the european union get messier one of the options could be .ostponement senior officials have discussed whether the u.k. might need to

stay in the block past next marches deadline. negotiations are at a deadline -- are at a standstill. it is day two of the world cup in russia. three games are on tap. it's a will take on portugal. for everything you need to know about the world cup go to the bloomberg terminal. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i am taylor riggs. this is bloomberg. tom: surveillance correction. for everything you need to know about the world cup, just listen to jonathan ferro. he says spain and portugal is an interesting day. francine: have you done your bracket? tom: i have done my bracket. i have france winning. i went with france because i like the color of the uniforms. the editor in chief went with france.

i said that is a wise choice. francine: this is no fun. i picked france. i wanted to at least have a fight with you on who would win the world cup. for once in our life we are on the same page. tom: it is a rare and beautiful currents. paying -- i am saying -- iceland and nigeria, i went with nigeria. so many of these games i have no clue. world cup go will be a lot of fun. , it isnd portugal today all about foreign exchange futures -12. substantial and continued curve flattening. the euro under 1.16. major ramifications of the mario draghi delay.

can we get to the second screen or do we have a glitch because you are worried about portugal? look at the carnage of the mexican peso. francine: we are definitely looking at the mexican peso. also the argentina peso after there was a change at the top of the central bank. this is my board. ,f you look at mario draghi deftly put the ecb on the road to raising interest rates. i am looking at currencies, which is why i am looking at euro dollars. falling, bonds gaining as trade tensions between the u.s. and china are escalating. investors figuring out whether diverging monetary policy can temper trade tensions. tom: let me look at the euro. .t is a trade weighted euro

this is a blend of the currency pairs. it is an ugly and elegant chart. this is very powerful. we have not broken through the support here. on a euro basis you have to believe this is back to a weaker euro parity-wise. i do not hear people are back to a parity call on the euro. we are not there yet. francine: this is a chart that shows after currency hedges, treasuries have not offered higher yields on german booms -- on german bunds for years. this goes back to what we have heard from a number of managers. i thought it was an interesting chart because of the ecb. good morning to our radio listeners. president trump has approved a tariff on at least $50 billion

of chinese goods, ratcheting up the conflict with beijing. bloomberg sources say the u.s. will resist it up -- will release an updated list of tariff targets today. the white reporting house is preparing a second wave of target on another $100 billion worth of goods. let's get the latest from bloomberg's chief asia economics policy. -- -- is it $50 million, is it $100 million? details we will get the on the planned $50 million for sure. sectorster technology in china which seems to be a stab at china's future industrial strategy. china has not been shy about responding. we had a spokesman making clear that they would retaliate if mr. trump goes ahead with these

tariffs. they have been consistent in these threats. it feels like we are headed to something of a new phase in this trade dispute. war,is the idea of a trade do the chinese think they are in a trade war? enda: they say they're up for fighting one. they have made it clear from the start using powerful language that they have a big stick and they are not afraid to shake it. they said if mr. trump and the u.s. want to fight, bring it on. they plan to retaliate through tariffs and other restrictions such as u.s. direct investment in china. whether or not they are using the language of calling it a trade war, they are certainly up for fighting one. francine: how much damage can china due to the u.s. economy, how much damage can it do to certain specific parts of the u.s.? if it goes after specific

orders in the agricultural sector, soybeans, we know it is a big importer for the u.s.. certainly certain sectors where china can cause quite a bit of pain to those in individual industries. hit to bothgdp economies is considered relatively modest but the bigger fear is the impact it will have on sentiment and confidence in companies in both of these nations. that will spill over to the rest of the global economy. even if the initial phase of the trade dispute was considered to have a relatively modest impact on gdp, the bigger fear is what kind of longer term hit it has because of dipping confidence and sentiment. much, ourthank you so chief asian economic correspondent. how do we manage risk.

joining us is the ubs global head of macro strategy. thank you so much for joining us. let me start off with you. if we look at the trade stead ,hould -- the trade tensions what will the markets go on the back of? here is thechanged behavior of certain central banks. the ecb as an example. to a lesser extent, the fed itself in the sense of not being as aggressive as you might've thought a few days ago. this is the marginal importance. the trade tensions have been lingering for a while. terms of thein signposts that they can expand the rhetoric around them so you

your is and dot cross your ts. for me the former is the more important and the operational factor. francine: do you agree? >> i think what we have seen from the central banks, we have three different attitudes. with the bank of japan it is steady as she goes in terms of what they are looking to do with the yield curve. they still have concerns around inflation. they had great numbers at the beginning of the year. ecb, draghithe managed to do something that is quite a feat. he announced that he will taper in september and finish off with qe at that end of the year, subject to data coming in.

that is his attention -- that is his intention and bunds are lower on the back of that. the third central bank this week was the fed, and they had more of a hawkish stance, be it in the description of the economy, they called it strong. that is a strong word for me. they announced that we were going to have two hikes over the course of the year. you've got this environment playing in the markets at the moment. on the trade tensions side, for me it is more of a sentiment play. the sentiment has been affected this year with what is been happening in the emerging markets, be it turkey, be it argentina, be at the flu we had earlier. we had episodes of volatility. francine: we will get back to emerging markets.

both of you will stay with us. coming up, which world are we living in? that is the latest edition of foreign affairs magazine and we speak with the editor at 6:00 in new york and 11:00 in london. this is bloomberg. ♪

taylor: this is bloomberg surrounds. let's get your bloomberg business flash. shares of rolls-royce are soaring today. the british engine maker says the job cuts should help with by exceeded target dad -- 2020. rolls-royce expects it will be allowed to increase its dividends. swiss commodity trader will

resume royalty payments. ties after heut was -- the company would not say if the u.s. treasury would say it would not pay sanctions. qualcomm has cleared the last of nxpfor its takeover semiconductors. chinese conductors have okayed the deal. it has been trending four months. qualcomm can means lessen its dependence on the slowing market for smartphones. that is your bloomberg business flash. tom: i want to bring everyone's attention to what is arguably the headline of the year in economics. yesterday with the release of to ecb announcement -- ecb keep rates unchanged until the summer of 2019.

that is as it comes across the bloomberg terminal. ubs andis yianos of henrietta pacquement of wells fargo. with the otherg criminals on morningside heights, you never saw a headline with that. how can a central bank aggregate decision-making out 12 months? yianos: i never see a title like this every day nowadays. , is the concept of forward guidance. we have to take a leap of faith. in the word of another academic which i will not name, one of the biggest problem central banks have had in the course of has beenfew years communication. it is hard to communicate what you are doing and how you unwind

policies that were hard to explain to begin with. in that context, you have to be a bit more intense in the way you communicate. this is the gist of forward governance. my personal opinion is a different chapter. let's leave that aside. tom: i want to go to what i see an interview after interview, which is economists during the financial ramifications of relatively sound economic theory. to banks,it mean finance, and the foreign exchange market if you have a headline like this that we are on a holiday until june of 2019? yianos: one could argue this gives you visibility. that is always good in terms of uncertainty. note, withic european banks, our equity analysts have made the argument

that the shape of the euro curve has been more important impact than short-term rates for european banks. it is not necessarily bad for european banks. it is good for italian banks and so on. corollary of this is is it credible? how should we contextualize this . for all intents and purposes, it is, for now, and that is how the market will try to absorb it. it has helped on the margin risk sentiment. let me pause at this point and come back to you. francine: henrietta, when you look at forward guidance is there concern that -- i know there is a concern that the boe has priced in too much, a hike or not a hike, and then they have to reverse it quickly. henrietta: i think the risk of having rates at these levels -- i speak to my american

colleagues, and that is there concern when they look at europe or the eu, the level of rates and the fact that they are so low and does that breed complacency. i think if you look at what draghi said yesterday, he was looking at the economic context in europe. there has been a bit of a slowing of the data we have seen since the beginning of the year on the european side in terms of growth. great, q2 a bit of a slow down as well. arguably for different reasons -- spain is looking good, italy has had its issues that may affect sentiment and growth. if you look at france you have the strikes going on as well and in germany you have supply chain limitations as well. he has taken that into account. i think that kind of information in terms of economics, the

volatility we have seen in emerging markets and to an extent in the equity markets have brought back an idea to investors that you cannot be too complacent in this environment. francine: henrietta, thank you so much. henrietta pacquement from wells fargo. week after at dovish tone yesterday, our coverage begins on tuesday. watch out for an outstanding panel. mario draghi speaks with his counterparts from the fed, the boj, and all of that is moderated by our own head of economics. watch out for that on bloomberg tv, radio, and on live go. this is bloomberg. ♪

francine: a dramatic week in u.k. politics left one thing clear -- the role of parliament in brexit is making life harder for theresa may. officials are said to have talked in private about the possibility of postponing brexit if negotiations do not pick up. joining us is the author of betting the house, the inside story of the 2017 election. henrietta and yianos are still with us. there is a vote in the lords on monday, it gets pushed back on wednesday. can theresa may survive the week? i ask you every week. tim: is a good question every

week. i think the government is convinced for now that they can get this incredibly important these of legislation through both houses in parliament. moved justthey have far enough to convince a few tory party rebels to back theresa may. francine: let's say they miscalculate, what happens? would there be a vote of confidence in theresa may or a new conservative prime minister? suppose someone lights a fire under the conservative party, you never know which way it is going to go or who is going to get burnt. the hard court euros 's -- the hard court euros -- francine: are they softening their stance? tim: what we have seen this week

are people -- european negotiators scratching their heads as a look at the u.k. political scene. they are now starting to talk privately about whether or not they might need to extend the negotiations for another couple of months of the talks do not proceed. in chaosis still mired and confusion. francine: we will see the market reaction on the back of that. betting, the author of the house, the inside story of the election. you will write another book, right? we will be back with yianos and henrietta. we will talk currencies and more trade. this is bloomberg. ♪

francine: this is "bloomberg surveillance" from london and new york. in the break we talked about football and the world cup but let's check in with what is trending across the bloomberg

universe. european leaders are facing up on the issue of migration. it is reshaping rivalries from rome to vienna. bloomberg.com, glencore says it will restart royalty patients -- royalty payments to an israeli leader. ck most popular stories -- holdings have bought ubs's office in london. qualcomm acquiring nxp superconductors has been approved. trump is set to put tariffs on $50 billion of chinese goods. let's get straight to the bloomberg first word news in new york. taylor: it is president trump's move to change the rules of international trade. the president has approved tariffs on $50 billion of chinese goods. the products focus on

technologies were china wants to become a leader. it is not clear whether tariffs will be imposed. retaliate withll its own tariffs. is preparing for a showdown with president trump on zte.-- on the president lifted sanctions. senators are on including sanctions and the defense spending bill. home prices rose in may by the most in months. that is even as the chinese government is pressing ahead for a two year campaign to end property speculation. chairmanump campaign paul manafort could go to jail as early as today. judge will decide whether he agrees with special counsel robert mueller's argument that paul manafort try to tamper with

witnesses while under house arrest. accused ofrt is money laundering and acting as an unregistered foreign agent of ukraine. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i am taylor riggs. this is bloomberg. francine: argentina has named a new central bank chief after the surprising resignation of the former -- a former finance minister is taking over an tasked with taming the currency crisis. the peso has lost more than a quarter of its value since april and hit a record low after a selloff is weak despite a $50 billion loan from the imf that was the history -- the biggest in the history of the fund. can the new bank chief gain the credibility needed to shore up the peso. joining us is bloomberg's managing editor for global emerging markets. still with us is yianos

kontopoulos and henrietta pacquement. i have a chart. his argentina running out of options? >> it looks a bit like they are. you are consider all the good things they have done in this current phase of the peso weakness. they got a standby loan from the imf. they raised interest rates substantially a few weeks ago. a 600 basis point moved to 40% and now there is a change of leadership at the central bank to somebody who carries with him the beneficial aura of being one of the people who helped argentina negotiate its way out inthe debt logjam it had 2001. look at theen you peso collapse, this is linked to double digit inflation.

this is an overall concern to argentina. how much time to they need to convince investors they can have a handle on the situation? the context is not help. there is definitely risk. i would argue we are probably right about the time we might see a change of fortune. we might have needed a sacrificial lamb, we got it, now the market needs to get slapped. $50 billion will go a long way, if you look at the numbers, and that is what the market ends up respecting at the end of the day . it is more than enough in terms of the short-term financing need. with a lot of money, you can do that in a fairly -- i would not call it a liquid but a less liquid market. now the odds are shifting in favor of argentina. you need to see it to believe it and i would say let's watch our screens. tom: here's the extension of the

chart francine had earlier. this is peso versus dollar back 15 years with the difficult time of 2002. what is so elegant about this is we are right on trent in this to 2016 and then we go three standard deviations plus. -- isume imf comes in this where the imf comes in like 1998 or 2002 and gets things fixed? i was the argentinian economist in the early 90's. history does not look at but it certainly rhymes. i think the imap has already common. -- has already come in. tom: do they need to come in again? they've made their first approach but it is safe to say it has not worked. do they need to make another

try? yianos: the argentine central bank got the bullets. they will have to start using them. i think we will see an impact. tom: henrietta, this goes to investment grade credit. it is macro economics, but there is a dynamic across the higher coupon credit space. you are working in the bbb space. does this knock on to your world? henrietta: two things. we talked about central banks early on. liquidity ice and will mention as well. if you look at what happened over the months of may in the european credit markets, you had a steep rise in terms of credit spreads. the lows this year we are at 74 basis points on investment grade credit. we moved up to 120.

that is a big move if you look at standard deviations. that was prompted by what happened in italy over the last few weeks. for me the move we saw on italian debt were also due to liquidity and liquidity in the markets. , how much oftin this is just a pure confidence game? the former central bank governor of argentina did not handle the intervention in the way the ?arkets wanted we are hearing from the markets that they want better communication from the president's team. justin: i think if you go back to january when argentina cut interest rates and a lot of people thought the rationale for doing so was not there. i think that sent a signal to some people in the market that the central bank was not in tune with the reality. that is coming home to roost

now. there are a lot of factors in play in argentina that have been working against authorities. that is what is taking in. yesterday thatg the peso came under so much pressure so soon after this imf standby loan. people were caught on the wrong side of that. today is going to be interesting with this new central bank chief in place and whether that is enough to stem the route at the moment. very low volumes. that could have distorted the movement yesterday. today could be interesting. see inat does our team south america in terms of contagion? his argentina discrete or can we break it -- or can we link it into the brazilian real? justin: argentina is an extreme wariness that is

sweeping some of the emerging markets. i think contagion is the wrong word. it is important to remember that argentina has this residence -- this residence because it was a default country in 2001 and we went through this period of renegotiation of debt. it is a very small part of the emerging-market universe. it is not even considered an emerging market. one has to retain perspective in terms of its affect on some of its peers. tom: thank you so much. greatly appreciated. we continue to see other currencies not unravel like argentina, but the mexican peso gets your attention. yianos kontopoulos of ubs and henrietta pocket mold of wells cargo. we will be doing -- of wells fargo.

william lee, formerly of perfect day to speak with dr. lee about a stronger dollar. this is bloomberg. ♪

francine: good morning. this is "bloomberg surveillance" from london and new york. the italian prime minister starts a european tour in france today. he will meet with president emmanuel macron hoping to diffuse tensions over migrations. meanwhile angela merkel is refusing to back down in a clash over migration policy with a long-standing partner of her christian democrats. bloomberg's joins us from

outside the palace in paris. another joins us from brazil. is nowting was off and back on between french and italian leaders. there is a lot of tension over immigration. >> this meeting almost got canceled yesterday after the french president criticized italy for being cynical and irresponsible after italy access to 630nt migrants -- in the end emmanuel macron had to apologize on the phone with the new italian prime minister, saying his comments were not meant to be offensive for italy and that he was going to seek new solutions to deal with the migrant crisis at the eu level in order to better share the burden with italy. francine: give us your take on

whether angela merkel's coalition can stay together? the fault line is immigration. a week a difference makes in politics when you think about the image that when around the world last week with the g7 with angela merkel at the front anding over donald trump now her bavarian partner, one of three parties in her coalition is threatening to bring down the government. is over migration tensions that stem back to three summers ago. in a word, i would not be writing angela merkel's political obituary but it is serious. who are the hardliners upset about? are they have said about migrants from the mideast, from africa, who are the bad guys?

alan: that is a good question. in this case, the hardliners would be the bavarians. germany, bavaria is in the south. -- theyrience experience the majority of migrants coming through. there has been a lot of issues related to islam in particular, but there is a split between coming from war zones in syria and economic migrants from africa. tom: what will you look for in the german press and the domestic debate about the future of angela merkel? alan: there is one significant development. been reported that angela merkel's former finance minister is very much behind angela

merkel. over theng to mediate weekend in talks between the bavarian party and angela merkel's own party. that is a significant development. francine: bloombergs alan crawford from person and caroline in paris. we are back with yianos kontopoulos and henrietta pacquement from wells fargo. we saw choppy markets in the wake of the time government formation, and now this. henrietta: i think it is something they are taking into account. it is not part of their remit. there remit is keeping inflation where they want it. if you look at the commentary yesterday and the question session yesterday, he did make political comments.

targeted -- in my andrpretation -- to italy more highly invested countries in the eurozone. they did not talk about .igration, that was not a topic it is a topic for the eu, it is a topic for the southern countries, and it is a topic for brexit. francine: are we going to start talking about the existential euro crisis? we had a week of that on the markets, now feels like everything is more comfortable. can it come back? yianos: i would almost say it is up to you. if we keep bringing it up at some point, the markets will take notice, i will not say you are causing it. it also goes the other way. or italian prime minister all prime's and ministers of finance react to the markets.

it is their incentive. especially new governments. they are inheriting the wind otherwise. in that sort of context, it is instructive for everybody that we have gone through what we went through years ago and the macro economic set up also helps in terms of buying us a bit of time without having an immediate reaction. otherwise, if politics get complicated, we cannot avoid it. i do not think we can make grandiose statements just yet. is an eu thatrop is still divided. what is germany's mandate forward in terms of the politics in the economic cohesion of europe? what does germany need to do next? yianos: germany needs to lead. that is the main component and the message that it gives to the rest of the union.

i think they have done a good job overall and i think they will continue to do so. that will be the primary objective as far as i am concerned. constraints, if we have solutions on the politics side, that will change things. it does not necessarily change things to the exact opposite. it depends who else is coming. kontopoulos with us from ubs and henrietta pacquement from wells fargo. tom: david westin, balance of power in the 12:00 hour. timely with president trump. ben rhodes. this is bloomberg. ♪

this is: -- taylor: "bloomberg surveillance." shares of india's largest i.t.

company announced it is buying back almost $2.4 billion of shares. tata issents about -- up 34% this year. at&t has closed its $85 billion takeover of time warner. the deal allows the telecom giant to enter the media business. the justice department waved a waiting period for the closing but the agency says it is still weighing whether to uphold the judge's ruling. that is your bloomberg business flash. yianos kontopoulos is with us from ubs and henrietta pacquement from wells fargo. plus debt.bbb how easy is it for you to manage for a coupon this year and can you manage for total return? henrietta: that is what we are trying to do. i think this year compared to

previous years is a tougher year. seen sincewe have the beginning of the year, our expectation at the beginning of the year is we would have rates edging up over 2018. for now, that has not been the case. we have had more of a spread move in credit market in europe. the total returns you get in the credit markets are going to be dependent on what happens on the rate side. on the spread side we have already had a decent move and i think yesterday mario draghi was clear he would take a gradual pace in taking the stimulus away. i think we are in an environment where we can -- and i think you need an active manager to get that coupon and get that return over time. francine: related to the markets

, what are the economic forecasts getting wrong today? yianos: not our economists. francine: other economists. [laughter] we have come out of a fairly rare set of circumstances in the first part of the year, whereby growth was almost tapering off and inflation picking up. that does not happen often, especially in the u.s.. it was hard for the market to digest this but it has digested this, with little pressure, and also it appears we are moving out of that type of set up quickly. is the thing to realize and possibly have a bit more openness to a better set of circumstances over the summer. having said that, it will continue to be a year for adjustment in terms of policies, but not necessarily a year of rupture. famous last words, but i think most economists would concur on some level.

tom: this has been wonderful. yianos kontopoulos, thank you so much and henrietta pocket mulled with wells fargo -- henrietta package mold with wells fargo. we are thrilled to bring you giddy and roads with his foreign affairs magazine. rose and bill lee will join us. -- a mustbe a much watch to set the tone for your weekend. stay with us in london and new york. francine and i working on our world cup brackets. go portugal. i think. this is bloomberg. ♪

♪ tom: this morning, mario draghi's speech. the ecb is on a holiday, as

friends and would say until would 2019 -- francine say, until summer 2019. it is a trade war. the president responds and threatens new tariffs. tariffs as it trump speak for new american taxes on consumers. versus portugal and the world cup at 2:00 p.m. wall street time. this is "bloomberg surveillance." we are live up from our world headquarters in new york. i am clueless on the world cup, as compared to francine lacqua. i am getting smarter everyday. francine: we picked the same team. 50%-50% on france-belgium. i wonder if there is a trade component to it.

china says if the u.s. goes ahead with these tariffs, they will retaliate. let's see how they retaliate if the tariffs go through. tom: good conversation to start with, gideon rose and william lee. >> the bank of japan is falling behind its global tiers. it downgraded its assessment of inflation. the boj is out of step with the taken by other central banks in the u.s. and europe. it is a top challenge for the new governor of argentina and central-bank. investors want the former finance minister to lay out a strategy to curb volatility in the peso. the currency has lost more than a quarter of its value since the end of april and is now at a record low, even though argentina is getting the biggest loan in the history of the imf. it talks between the u.k. and it messier, onen get

of the options could be postpone ment. officials have discussed this. brexit negotiations are effectively at a standstill. it is day two of the world cup in russia. it is the renewal of the iberian peninsula rivalry, spain will take on portugal. go,everything you need to -- need to note, go to the bloomberg terminal. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs and this is bloomberg. tom: it is worse than march madness. saudi arabia-egypt, i have no clue. let's go to something i know about, let's check equity bonds, currencies. fx is front and center today looking at the markets. further curve flattening gets everyone's attention.

.15 handle on euro-dollar. mexican peso just one indication of what we see off the mario draghi bombshell on holiday until summer of 2019, really getting out nearing 29 with us. umph on the- real dollar. francine: on the world cup, spain fired their manager just the other day, so it will be an interesting game. .ow to the markets stocks falling, bonds getting, and trade tensions between the u.s. and china rising. we have had some currency moves, which i would continue to keep an eye on. tom: very good. we want to get started before we dive into gideon rose's ever on

foreign policy with the domestic reality of president trump returning from asia. kevin, the president comes back. i know it is about tariffs today, but i am stunned by the many domestic legal matters that the president has, starting with his charity being under scrutiny by new york state. is he overwhelmed by the many legal disputes? sure that thet president trump is looking too far at the legalities regarding his trump charity, to be quite frank with you. i don't think that is too much on his radar. they think there are a lot of other things that they are focused on. i think the dominant story

reverberating in washington still comes from the press conference yesterday, and the blistering critique that the report offered against former fbi director james comey. if anyone is having a rough friday, it is james comey as a result of that blistering, blistering, unprecedented report. it fits with the narrative that the president has been arguing with the fbi. tom: on tariffs and the immediate economics that we look ohendoes the idea of gary c or a recovering silent larry kudlow, are they a lone voice anymore? have they completely lost the debate to dr. navarro? kevin: i'm not sure. i think there could be a resurgence. n has spoken publicly this

week saying he is against these tariffs. as far as the 100 million in tariffs that they have proceeded to look forward on, that was something the president had announced some of months ago. you have got these additional tariffs that the president is threatened to do, the 50. that is interesting because the president had worked with china on the issue of north korea, but is now seemingly doubling down on his rhetoric. mr. kudlow is recovering fine. francine: on to the tariffs. when doing exactly know what the package is -- when do we exactly know what the whole packages? is there going to be a formal communique? kevin: there should be a formal communique within the next couple of weeks. heard isine that we

june 20. before, i amen more interested in how congress is pushing back against it. the republican party is not on board with president trump and how he is trying to navigate this trade war at all. tom: kevin cirilli, take is so much. terrific -- thank you so much. terrific reporting in singapore. this is a particular joint you if youweek into -- joy have time to read. --s is world economic forum this is gideon rose.

the milken institute this morning. what does william lee get out of foreign affairs magazine? >> it is one of the best publications around. tom: gideon rose gets better and better. what is graham allison and what do you say that is under threat and washington right now -- in washington right now? gideon: it seems the trump administration has no interest in perpetuating what everybody else has called the liberal international order. trump is basically lighting a fire to all of that. the question of whether the liberal international order will survive is the big question of the day. what she argues is that the liberal international order was not some big, new think. it was -- thing. it was a way that america organized its cedar of interest -- sphere of interest. there was no big seachange in

what politics and get over yourself -- world politics and get over yourself. tom: was that liberal order a moment in time? or is it un-american theology we can drive forward -- an american theology we can drive forward? gideon: i would argue that it can be both. realized if you ran warcycle of war, poverty, again you have death and destruction and poverty. let's not have war, cap piece -- let's have peace. let's have an open trading system. they created that and it seemed to work pretty well for a couple of decades -- a few decades. the question is, are you going to get rid of it? if you do, what are you going to put in its place? i think it will last, but i

don't think this is its best day right now. what anybody responded to trump -- will anybody respond to trump? francine: right, will anybody respond to trump. he is the leader of the free world. he is the defender of capitalism right out -- who is the leader of the free world? who is the defender of capitalism right now? gideon: that's a great question. one a greek fighter is sulking in his tent and the others are telling him to come out and fight. -- the question is, you cannot win the battle with achilles on the sidelines. the world order cannot be sustained if the united states is falling asleep at the

sideline. tom: you are an expert on this. have we changed permanently our relationship, our dynamic with president-xi's china? gideon: i think president trump has made it clear that the new trade order is going to be a bilateralism. -- -- howing comes down to do we have a trade structure that guarantees all of the service trade that we want to have with these countries? the old order is fading by the wayside. services are going to be the future of tomorrow's trade, and it will be high-tech services. francine: does that mean world growth is going to be punished because of that? if you only have a bilateral trade, not everybody benefits

from that. deals always have better if you negotiate bilaterally. the multilateral trade package has been compromised, nobody really likes it. that was great when the u.s. was --ting the stage and a sense essentially tried to reconstruct europe and the world after world war ii. right now we have to get ready for the trade and modern technology, trade and by g services -- in 5g services. the developers of the patents have to guarantee that they will have the rights. for these developers -- who are these developers? it is china and the u.s.. tom: we will look at mario draghi's obama show yesterday. we drive forward the discussion at bloomberg. former ambassador to china will

join us. worldwide from london and new york, this is bloomberg. ♪

♪ this is "bloomberg surveillance." let's get your bloomberg business flash. shares of rolls-royce are soaring today. the 4600 job cuts should help it exceeded its target of $1.3 billion in free cash flow by 2020. rolls-royce expects that it will allow it to increase its dividends. will resume royalty payments. himcore had cut ties with

after he was sanctioned. qualcomm has cleared the last hurdle for its $43 billion take oval -- takeover of a rival chipmaker. lawmakers have located the deal, which has been pending -- okayed the deal, which has been pending for 18 months. and that is your bloomberg business flash. tom and francine? francine: mario draghi has said the euro area commune is strong enough to overcome increased risk, justifying the ecb's decision to halt bond purchases. bond purchases will be phased out by the end of the year, and he promised to keep rates at record lows at least through the summer of 2019. lee from the milken institute and gideon rose are

still with us. it is very clear that there is a kind of divergence play. ecb more dovish than expected, said more hawkish than expected -- fed more hawkish than expected. what does that mean for currencies? >> it tells you about the relative positions of these major currencies. the fed it normalization is as expected, a little bit more aggressive for some, but less aggressive for others. mario draghi is the mystery call. , butid we are ending qe will not do anything with rates or a while -- for a while. japan is still the back border. there is no inflation insight. the divergence in central bank policy is stronger than ever. is the european economy really recovering sufficiently to get inflation up to the target?

right now there is not a lot of convincing evidence that there is, and i think the markets are tried to figure that out right now. francine: the concern with the if you wait until the summer of 2019 to raise interest rates, by that time you may think of more qe instead of hiking interest rates. >> exactly. by 2019 we may need to have some aggressive stimulus. those are exactly the issues. now?re we ending qe does that knowledge give something to the hawks on the ecb council, or is draghi tried to say something to bring home to italy? tom: i thought yesterday was absolutely an extraordinary headline of holiday until the summer of 2019.

all the central banks flying high with an ad hoc effort? >> there is no coronation anymore -- coordination anymore. if there is coordination, it is the agreement that the economy is going in separate ways. we are living in a world of u.s. growth, and some may be following. the growth leader in general is still the u.s. economy. william lee, thank you so much. gideon rose with us as well. here is an important conference for next week. this really made global headlines last year. portugal, spain. portugal i have scheduled to win . we have a panel with the stephanie flanders. look for that next week. this is bloomberg. ♪

♪ ," a "bloomberg surveillance." busy friday as a get ready for the weekend. i love this. teresa kari a terrorist to shreds what kevin cirilli -- tears to shreds what kevin cirilli saw in singapore. the true have i should have been that the u.s. weakens its 70 year alliance with south korea.

the trump administration has been the gift that keeps on giving. gideon rose, a look back to singapore and what south korea needs to do here. gideon: the trump administration has taken the old reagan playbook and thrown out of the window. trust, who cares about verification. any of the previous presidents, and they could have had this deal, they chose not to have a op,, a summit for a photo because that did not really advance matters. by not advancing matters, you tell your allies and the rest of the world that you are not really caring about protecting them and their interests from the north korean threat. thedanger here is that united states president gets a headlines, and the rest of the world sees the united states as having gotten there he little -- a very

little. it could begin jurists. -- be dangerous. tom: what will be the response from the pentagon of the fact that the military exercises are curtailed? what will be the military response? gideon: you can justify doing this for a variety of reasons. it is not that significant in and of itself. it is all, what does it signify? what the world is basically doing, when a look at the g7 summit, the korean summit, the trade stuff, they are basically saying, is the united states bluffing or playing chicken, or are they trying to destroy the national order that they themselves have created? they cannot tell. we don't know yet because we have not seen the trump administration play out its hand. francine: all right, thank you

foreigngideon rose of affairs magazine. william lee of the milk and institute will be staying with milkeno can institute -- institute will be sanguine -- staying with us. a very big week when it comes to geopolitics. only been five days since president trump met with the north korean leader. we will get back and do extra asset checks right here on bloomberg surveillance. mrs. bloomberg -- this is bloomberg. ♪ two, down, back up!

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which could save you $400 or more a year. it's a new kind of network designed to save you money. click, call, or visit a store today. francine: this is "bloomberg surveillance." i am in london and tom izzo new york -- is in new york. let's get to the bloomberg first

word news in new york with taylor riggs. taylor: and president trump's latest move to change the rules of international trade, he has of $50 billions of chinese goods. the list of products focuses on technology, where china wants to be a leader. it is unclear when the tariffs will be imposed. beijing says it will respond. they want to keep tell sanctions on the company zte. senators are including the sanctions in the defense spending bill. home prices in china rose in may by the most in 19 months. new home prices in 70 cities rose 0.8%. the chinese government is pressing ahead with its campaign to end property speculation.

paul manafort could go to jail is earlier today -- as early as today. a judge will decide if he agrees with special counsel robert mueller's testimony. manafort is accused of witness tampering. global news 24 hours a day, 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, taylor. we have some breaking news out of russia. it is a central bank decision. for the moment, the central bank 7.5% -- the key rate at 7.25%. there is not much of an impact on ruble. they may think twice about the next cut down. tom: very good.

gideon rose is with us and william lee of the milken institute. bill, you spend a lot of times looking at -- time looking at rates. also, on where the money is moving now. you are an expert at this at citigroup. what are the capital flows flowing into the summer of this year? >> what is strange and great right now is that the u.s. is still a bagman it for global capital -- magnet for global capital. investment flows, even if you look at the number of listings of firms on the u.s. stock exchange, foreigners are more check it to hear than other -- are more interested in the u.s. than other stock it changes -- stock exchanges.

this is where the opportunities for investment are. if we are going to have dollar strength, what kind of dollar strength would be, given -- flows?e that flows >> we don't have the kind of productive investments we need. that is where the global flows coming in, they take the shape of equity flows and direct , it will givews managers the time to make the decisions to go into the right kind of investments that will enhance productivity. that is the high dollar that we want, because it reflects the strength of the u.s. economy. the high dollar is the fast money flows coming in, that just want to take a turn around, and go back to other emerging markets. that is the kind of flow want to discourage.

my colleague a showing that the number of listed firms in the u.s. economy for domestic firms is actually going down. a lot of them are going to private equity, but foreigners are finding it so attractive to come here. magnet because of the that the u.s. has become for global listings. francine: gideon, i'll be on the brink of a full on global trade war -- are we on the brink of a --l on mobile trade war global trade war? >> people -- gideon: if smokey the bear's lighting matches and tossing them into dry timber, nobody can quite believe that this is actually happening. is he going to stop doing it or does he really want to burn down the forest? the question that you just asked, is the global trade system at risk? or is this just jockeying for

position? we just don't know. if people are having a hard time interpreting what mario draghi just said, they are having an even harder time interpreting what washington is doing. to conform toem any particular national view of american national interest. it is clearly serving some american interest in some ways, but whose interests, in what ways, why, and how it is driving y.licy, nobody knows wh right now that uncertainty is weighing down on things, because the market cannot really believe that we are going to have a trade war. but then again it, the market did not believe we would blow up the g7 summit or pull out of the iran nuclear deal. francine: ok. if you see a trade war coming

on, do you think that there is kind of a plaza accord to deal with trade that can be put in place with the u.s. and china coming to the table? gideon: the basic question here that we do not know is, is there some strategy and and into this -- end game to this? nobody starts a war without knowing what you want to achieve, and how you are going to achieve it. the trump administration is starting a trade war, but nobody is quite sure what it really wants to achieve at the end of the day. we cannot figure out how it is going to play out. an: gideon rose, it is important book. war of these the tariffs. mike allen writes up a summary.

never is also the actual tarif s on a hundred billion dollars, 25%, or 10%. what is the number that matters to our viewers and listeners? to me it is percent of that tariff, and my right -- am i right? >> what we should be looking for is, what is the endgame here? the trump administration is loading the poker table with a lot of chips. it has chips from the meeting with kim, chips from the meetings with china, the tariffs are another chip. this is all going to a bilateral end gme -- and game -- ame. capital flows really determine everything. investors and

entrepreneurs are recognizing that the u.s. is where the global opportunities are. trade flows are going to reshape themselves to follow the capital flows. thinkooking forward and i everybody else is looking forward and the capital markets to where the trade flows will be tomorrow. it will be in high technology and services in the china and u.s. tom: where are the republicans in this debate? where are the post-world war ii republicans? gideon: that is a good question. many are either leaving congress or remaining silent. people are not necessarily showing all of their cards. there are a lot of republicans who disagree strongly with the trump administration, but know that their party right now does not favor their view. they are keeping quiet until the correlation of forces turns back in their favor. there are others who agree a lot

with the president and are keeping quiet because they actually agree. what the balance of power between those factions and parties will be at the end of the day, we don't know until this game plays itself out more. are they really trying to break up the alliance structure? we don't know. the g7 summit was handled as if you really were trying to break up the transatlantic alliance and the global alliance. that would be an insane thing to do. maybe it is just a bargaining position to go before making a nice deal or something. we just do not know, because these guys are not using a logic for their actions that anybody understands. we are reshaping the agreement to manage what the flows will be tomorrow. hopefully the trade in goods and services of can continue to

take place in a broader system that has basic roles, peace, and civility. to figure outgh economic management of opportunities at a corporate level when you understand structural flows and positions that keeping stable. if you are unsure of whether the basic arrangements will be stable, you have a double layer of adding uncertainty, and that is where we are right now. tom: this is just absolutely wonderful. gideon rose and william lee will stay with us. there is no surprise, february is so ancient. on volatility, the vix at 30. the new quiet and complacency in the market. bloomberg. ♪

♪ francine: this is "bloomberg surveillance." let's focus on a rift in the government of europe's biggest economy. germany chancellor angela merkel is refusing to back down in a clash of migration policy with s.u.c. this came to a lot people here in london as a surprise. this really is back to the future. this has a sort of been on the back burner in domestic policy in germany for the last couple of years. this a dispute that has started some years ago between the ,eader of the christian union

the sister party to merkel's christian democratic union, have been on the back burner. recently they have begun fighting again on the issue of border controls and germany -- in germany. aboutre very concerned potential gains from populous in --. of exploded sort within germany. there are people discussing whether this coalition can stay together, which consists of merkel's party, the social democrats, and the bavarian party. francine: is this just for more noise? >> that is really difficult to say. in the past, they managed to

patch things up. the leader of this christian union has threatened he will move forward with these controls at the beginning of next week. if that were to happen, merkel has a said she would not back that. it is anyone's guess as to how that plays out. there would have to be some sort of a no-confidence vote, etc. at this point we are going to have to wait and see what happens. , theteresting side note former finance minister has stepped in on angela merkel side. he is in the parliament and still very well respected in germany, and has offered to mediate. we'll have a better sense this weekend on how this is going to play out. francine: bloomberg's germany bureau chief bring us the very latest from berlin. let's get straight to the

bloomberg business flash with taylor riggs. tatar: shares of consultancy rose to a record high. 2% buyback represents about of the equity capital. yearroduct was up 34% this before today. tesco is stepping up on the -- pressure on its rivals. the company racked up its 10th straight quarter of growth. tesco is one of the industry's most reliable performers by cutting costs and prices. it is official. at&t has closed its landmark $85 billion takeover of time warner. the deal allows the telecom giant to enter the media business by acquiring the owner of warner brothers and hbo. the justice department waved a waiting period for the closing. that is your bloomberg business

flash. francine: thank you so much, taylor. newntina has named a central bank chief after the surprise resignation of the current one. the former finance minister is taking over and he needs to tame the currency crisis in the argentine peso. it has hit a record low after a selloff this week. that is despite a $50 billion loan from the imf, the biggest in the history of the organization. the question is whether any central bank chief can make a difference. gideon rose and william lee of the milken institute are still with us. how much time do investors give argentina to fix this? >> argentina has been the perennial basketcase. time and time again it comes into these global problems -- problems that the global economy has to bail it out of.

investors are tied to decide if it is worth staying in emerging markets because of the high risk , and the returns do not look like they are there in the immediate future. i think the massive capital inflows into the u.s. is shaking the emerging markets. market other has to decide how they can reshape their fundamentals to keep the capital there. that is a challenge that all emerging markets face, not just argentina. tom: what is the imf going to do? >> what they always do. they are going to give them blood money to float the economy until some kind of reform takes place. it has always been a hope and a prayer. time and time again, we see a little bit of progress, then progress stops. tot stop and go policy has change in this new world order we're talking about. tom: hope is a dangerous word here. we will continue with gideon rose and william lee.

bloomberg radio, coast-to-coast. this is bloomberg. stay with us. ♪

♪ ,"m: "bloomberg surveillance." with francine lacqua and me in new york. gideon rose will always chip in the sum wrote a motion -- some real emotion. how 9/11 is still works american american-- warps strategy. this is an essay on counterterrorism industrial complex. basically the last couple of years have been crazy times that have thrown our assumptions into the dustbin. what we have done in foreign affairs is we try to approach this in two.

one is to challenge our assumptions of what we thought that we knew, and the other is to try to scope out the future. there are some great articles about counterterrorism that essentially go back and take part in a series looking back at the previous assumptions and say, did we get it right? did the u.s. get played for a sucker? in counterterrorism, the point that they are making is that ever since 9/11 we have been obsessed with counterterrorism. tom: are we still obsessed? gideon: we are still obsessed and it is disrupting -- distorting policy. it does not deserve the dominant role to shape all of our policy. bush, obama, and trump are very different, but they are all basically obsessed with terrorism. tom: because of time we have to leave it there. this is a wonderful moment in foreign affairs magazine.

let's turn to the dollar with william lee of the milken institute. it is something to see the jump condition in the dollar after mr. draghi's efforts. you are not in the forecasting game anymore of dollar, but what is the character of the dollar launch here? do we get back to the strong dollar of two or three years ago? can youother conclusion come to accept that this dollar is headed upward? ist we have to watch out for how much tightening the dollar is going to do on top of how much tightening the fed puts in place. we talked before that the depreciating dollar for 13% over the last year has offset a lot of the tightening. right now the fed is going to have a put back in place some of the tightening that was discarded by the dollar. francine: we have not even touched on oil.

that brings me back to what the president we did two days ago about opec, saying it is not fair. what is your take on the opec meeting next week? and the role-play that president trump is going to have in all of this? >> the u.s. production of shale is still going to be the producer of the future. right now the do virgins between u.s. pricing in west texas and brent is about -- is one of the widest gaps in the history of the oil market. we need to be the swing producer. we will not be able to be affected in that role unless we can get the pipeline situation in place. i think the trump administration is recognizing that opec is becoming less and powerful -- less powerful overtime, and the u.s. is really going to be the future swing producer. tom: what is the difference between secretary of state pompeo and secretary of state tillerson? >> secretary of state pompeo has

the influence with president trump to maybe do something diplomatically, which unfortunately tillerson could not do. tom: thank you so much. gideon rose with foreign affairs, another spectacular issue. vision, jon ferro, i am going to surveillance radio. bloomberg surveillance on radio. i am going there to look at spain and portugal. stay with us. this is bloomberg. ♪

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billion of chinese goods. chinese equity at their lowest level since 2016. lost liquidity, recalibrating a world run by fed hawks and doves from the ecb and boj. and new pain, no gain, em equities sink, yields rise. is this time really different? david: welcome to "bloomberg daybreak." i'm david west and with alix steel. it is the world cup. this is himin, speaking at the opening of the world cup. saudi arabia versus russia. look at the hand gestures. russia won 5-0. you can see him saying, what are you doing to us? alix: vladimir putin saying, we are just better. they totally