♪ anna: good morning from bloomberg's european headquarters in this area of london. i am anna edwards. >> and i am manus cranny live from vienna. here is a look at today's top stories. anna: trunk shows no signs of a backing down from his trade war with china. bloomberg that the threads are just a negotiating strategy. >> at a thick we are on a suicide pact. i suspect we will not cause the cut -- i don't think we are on a suicide pact so i suspect we will not cause the economies to collapse. anna: iranians oil minister rejects opec's decision to increase output.

leaders of the ecb, the fed and the bank of japan and australia. . don't miss the conversation 2:30 p.m. united kingdom time. ♪ anna: good morning, everybody. this is "bloomberg daybreak: europe." plentyyou are expected of news of the next couple of days. we will see just how much production will see from opec and friends this year. absolutely. if you think about it, anna, the meeting of great minds managed to bring an 80% rally in oil prices. would have gone from harmony to dysfunction, from unity to a

fractional. relationship iran put their stake in the ground and made it very, very clear. they might even be prepared to use their veto. that would unseat their ambition for unanimity in terms of delivering them increases in production. ae message from a run and number of others behind the hallowed closed doors of the habsburg palace is that "we are not the whipping boy of politics from the white house in the united states of america are: we will hear more of that message from me run later. anna, take it away. anna: absolutely, let us look at radar.k a day after we saw the dramatic selling in global equity markets as a result of the trade issues. this is what it looks like on the msci asia-pacific. we are positive. that chen's market is still coming under pressure as big questions remain. but we see a mixed picture coming through in asia with chinese markets underwater this

morning. how will they respond? will they make life difficult for the u.s. in china? all those options potentially open to authorities over in china. will receive them take the nuclear option? possibly not. what i mean is will they start selling any of their treasuries? lots of the opinion pieces i have been reading of the next 24 hours or just that now, that it would hurt with parties. they play to the u.s. favor and increase exports from the united states? we are at 2.89% on the u.s. 10 year yield. thedeadly and t offshore -- they run signal that they may fail to agree with regards to oilora conversation, can they come to one view on oil prices? let us check out where futures are with all that in mind. they look a bit safer than there

were yesterday. no great shakes of the. story, theinating last 19th-century member of the dow jones industrial average leaving in a matter of days. program.ng on in the we will be speaking to societe generale's chairman joining us at 7:00 united kingdom time to discuss everything to do with the eurozone. he is certainly thinking about that. markleyes, and angola and macron, the server that we read last night in terms of their ambition in regards to a cohesive european budget, is it the beginning of more federalism? -- with the french and italian, would it allow two major institutions to combine?

let us go to deborah marsh with the first word news this morning . day.nus, good iran has put itself on a collision course with saudi arabia at this week's opec meeting as it rejected a potential compromise which would see a small oil production increase to appease energy consumers. saudi arabia is under pressure from the u.s. resident donald trump as he wants to unwind some output curbs by engineering a moderate supply boost in the second half of the year. >> i would like to declare that opec is an independent organization. it is not an american organization, and there is an important difference between opec and the other organizations. opec is not an organization that receives instructions from president trump. >> north korea's kim doesn't

appear to be in a rush to dump his nuclear weapons. in talks with china, the chinese and to the chan's president, he reiterated his call to carry out the agreement ,ith president trump last week saying that denuclearization will open up new prospects if both sides can "implement to the consensus of the summit." the united kingdom prime minister will take on pro-european rebels in her own party as she battles to keep control of brexit talks. today's clash in parliament could have consequences for her future and the direction of the brexit. on is facing rebellion whether she has the power to do the country out of the eu without a deal or whether parliament should have a meaningful vote on the way forward in the event that talks break down.

the trump administration withdrew from the you and human rights help, a buddy that it has long accused of hypocrisy and israel--- anti-israel bias. -- the un's human rights council. business leaders and lawmakers on both sides have voiced opposition to removing children from their parents. globaglobal news, 24 hours a day, on air and at tic-toc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. you can find more stories on the bloomberg at top . anna: thank you very much, deborah. checking on markets in asia, a bit more mixed than yesterday and calmer. bit calmer.le original markets snapped a five day decline, led the seoul and

sydney. the nikkei 225. as well as the topics are now in green. check out indonesian markets though, having a tough first day back after having a seven-day break. weeks. the most in three despite the pboc's attempts to calm nerves, china's markets are tense. over in hong kong, consumer and health care stocks are leading gains and tencent, the backbone of the hang seng, rising for the first time in six days. zte shares in hong kong jumped as the company said the u.s. senate defense act that six to reinforce penalties on the company has more hurdles to go through before becoming law. 15%.s rising as much as we are seeing crypto stocks

exchangescrypto exchange continue to suffer from robberies. manus: thank you very much for the roundup there from hong kong, sophie kamaruddin. donald trump's threat to impose tariffs on another $200 billion of chinese imports could take away as much as half a percentage from the nation's economic growth. the bank of china governor pledged to use monetary policy to comprehensively support the economy. that is go to tom mackenzie who is in beijing. good to see you this morning, tom. a very small from the pboc. what exactly does this tell us about the level of concern about the amongst china's policymakers? tom: it is significant that he came out and made these comments

at all. as you said, it is a message of, don't panic. that the market moves yesterday and today were sentiment driven, that investors should be rational. saying that the pboc has the tools at it disposal to protect the markets and the economy from the continuing trade headwinds. that the pbocay putting liquidity into the economy, the most liquidity in the month of june that we have seen since december of 2016. it highlights that steps they are taking. there are also views from many economies that you will see cuts , that may come in the short to medium term as well. there were also hints at changes to the de-leveraging campaign. that raises questions about how china tackles its debt. but as he said, this is a

message from the central bank governor to try and soon the nerves particularly amongst china's market participants as the trade tensions continue to move ahead. anna: we are watching what they do with the medium term lending facilities. what they do with the chinese currency as well, of course. how are these tensions impacting european businesses operating in china ? is really interesting. i had a conversation with the president of the eu chamber of commerce in china, he said that the tariffs are having an impact ground.the european companies are deeply concerned about the impact on global supply chains. there a meeting every day to draw up contingency plans because of these trade tensions. he also said that one side effect they noticed was that european firms are starting to win contracts. which may be because china is referring them over the u.s. counterparts. take a listen to.

mats. is anecdotal evidence that some companies seem to have benefited. but we don't want to compete based on getting advantageous from a trade war. firms also have many concerns about our shared with the trump administration around market access, the environment. in fact, according to the chamber of commerce, they expect the regulatory environment in china to worsen over the next five years. 6% of those surveyed said that they had in any material improvements. those are concerns shared with the concerns highlighted with the white house. that jim ross, are saying that there needs to be a different approach to tackling some of these issues. -- the chamber of commerce saying that they need to be a different approach to tackling some of these issues. they said that for the first time, european firms see their chinese competitors are equally or more innovative at and they

are. those are a number of issues that european firms are facing here on the ground. and certainly come a trade tensions are starting to have a material impact. manus: thank you very much, tom mackenzie our chinese china.ondent in you can follow the latest developments on the u.s.-china trade story and market reaction all they are on tliv . he is the head of the chinese investment desk at his company. they have two things it can work with and china. bonds and currencies. the yuan could be a weapon of sovereignty destruction. -yuan, dooking at dolla thing they could use it as an mike?ment, >>? >> the answer is no on both

accounts. i think the pboc is well aware that that might bring more harm a mystically compared to the international area, it would start to generate capital outflows which is more from destabilizing. it tightens liquidity offshore and you would see that at this point, they prefer to leave it to the higher-ups negotiations with the u.s.. at the same time, i think everyone, perhaps in the u.s. included, they just want to know what the hell -- what the white house wants their we had anna: what about weaponize and treasury holdings . geoff: if you compare that to less.ficacy, it is than yuan currency is something that you can sort of contain, but the fed can absolve the .reasury relatively easy considering the significant amount of experience accumulated over the past few years. i think there will be less

effective even if they tried it. then he would have less reserves for pressing issues up ahead. eoff, i have seen writing saying that these markets are not about trade wars, that we are overreact think end of the volatility was anything to go by, it is not saying that we are in some kind of suicide pact to quote lloyd blankfein. are we on the scale of cataclysm? 10 four suicide, and one is no risk, where are we . geoff: certainly not 1. relations, at trade the tariffs of these days, the impact is diminished compared to the regulatory side. that is where european companies

are talking about were china, that china cannot retaliate with numbers. if market access tighten further, that could complicate things up ahead. but the broader picture is that data is strong. emerging markets probably -- hopefully turning the corner up ahead. anna: that suggest to me that you do not agree with all krugman. we have a quote from him saying that he has been amazed by the complacency of markets as trump marches towards a trade war. fascinating thing, that the next thing might be product regulation, things that are a little bit more difficult for us to track than percentages? geoff: i think it will be a things.ion of those services and regulations, perhaps for international firms to get access to chinese market. that has already been strained in the first place. china could also take a approach. they could take a protectionist approach, they could wants to

liberalize more as well. china's ultimate aim here is to maintain a multilateral framework. as an manus mentioned, the eu has concerns over china's ip issues and they are wto.g china to the that is the whole point, if you have a grievance, go to the wto, maintain this framework. anna: thank you very much, head of the united kingdom investment office at ubs wealth management. manus, we have some breaking news from last last few minutes, regarding m&a in the media space folks. . fox is said to be leaning toward starting negotiations, saving the way for a bidding war over its entertainment asset. this according to people with knowledge of the matter. sell board agreed to access to watch disney in an all stock deal. the board computing today to consider comcast's all-cash

proposal. will there be another move on fox? buy them out? that is the question. is a beautiful day here in vienna and we are just getting started. the oil ministers have arrived throughout yesterday here for the opec meeting. the 174th meeting of opec as a run rejects the compromise -- a iran rejects the compromise deal, -- >> oil management -- in the oil delicate. oil management should be focused on supply and demand and market fundamentals. week withy tuned this

more from vienna with myself, anne-marie and the entire team on the ground with the very latest from opec. this is bloomberg. ♪

♪ anthe morning, everybody. this is "bloomberg daybreak: europe." the chinese equity market now .8%.edging in, of about a big change from yesterday. . but as get our bloomberg business flash from debra mao in hong kong. >> thanks, anna. this company has said it is proceeding with its attempt to take over sign-up to ask, seeking to cut its heavy dependence on apple. it says it is conducting due diligence on the deal. synaptic's with a market value of $1.7 billion, would help

dialog sell at different products like sensors, touchscreens and other products to leading smartphone makers. ge has been kicked out of the dow jones industrial average, where it has been a part of since the 19th century. once the world's most valuable company, it will be replaced by alliance.blue star ge has lost 26% of the value this year, making it the worst performer on the dow. thelong-running joke about starbucks on every quarter may market.g in its home and plans to close 150 stores in the next fiscal year, after a forecast of sales to rise just 1% globally in the current quarter. that is the worst growth in about nine years. that is your bloomberg business flash.

deborah.ank you, a run has put itself on a collision course with saudi arabia at this week's opec meeting. the islamic republic rejecting a compromise to see a modest production increase. the oil minister. spoke to reporters yesterday right here in vienna. because everynk decision in opec deeds in unanimity, i don't believe in this meeting come of that we can reach an agreement. the important thing that i would like to declare is that opec is an independent organization. we are not an american organization. there is an important difference opec.n the pia and opec is not the organization to receive instructions from

president trump and follow them and implement them. manus: so those were the very iran aseadlines from they arrived last night. we have our previous guests still with us, geoff. setup here fore the oil markets, it is going to be a contentious week. how important is it that some oil supply comes to the market iran and allr the other production outages? a marketything from reaction point of view, and how markets react to central banks. it is extremely important. . if the central banks forecast and inflation outlook, the outlier will be if oil prices are much higher than where they previous conditioning were.ions

they could view this as transitory and not react to aggressively, but that is probably the g10. and the emerging markets, that would make their currencies weaker. so it is critically important on how they react to currencies as well. anna: we have a chart here showing the emerging markets fx volatility. where does your concern around focus?g markets idiosyncratic stories or brought concern? geoff: i would say focusing on broad concerns right now. i think that is pushing it to some extent. the oil story will be broad-based, especially for the oil importers. reverse theoing to effects of their currencies. anna: no's comments happening

just before hand. head of the united kingdom ubs, thankoffice of you very much for joining us. coming up, if interest rates rise, every instrument in your portfolio will drop in

anna: this is "bloomberg daybreak: europe." are turning around rapidly in the u.s. futures. about futures up by 0.25%. that is a more positive picture than a half hour ago. let's check out the broad market accident -- now. >> we are seeing a more positive picture compared to the last five days. we are seeing a fair amount of green. seen a lulle have

in the rhetoric when it comes to trade tensions between the u.s. and china. mighte question of what happen with the u.n. in terms of negotiating. a strongert i -- fixing on that than expected. asian equities gaining. we can see some risk on and some of the fx trades. i was talking about the aussie dollar dropping to a 12 month low yesterday area some are that.ing 70 on aussie yen is rebounding a bit today. fromchart is normalized the month of march. if you compare it to dollar-yen, it is interesting. some people have said, it has not moved as much as much as you might expect in terms of this safe haven yen being big. look at aussie yen as this chart shows. these trade tensions have hit

aussie yen harder. the 10 year treasury yield dropping quite significantly, hitting a three-week low. what we see is a part of the yield curve that is not as is the watched, that seven tens. it is close to inverting. that has been a harbinger of other parts of the yield curve inverting as well. we all know what that can signal. we are seeing further curve flattening. taking a check on oil, we are seeing it higher. manus in vienna for the opec meeting. we are seeing oil gain a little bit today. iranose comments from the oil minister. volatility is beginning to rise. highestty now at the since the end of may.

manus: thank you very much. let's get your first word news now. deborah: north korea's kim jong-un doesn't appear to be in dump his nuclear weapons. chinese state media cited cams saying that denuclearization will open new prospects in both sides can implement this consensus of the stomach -- summit. she battles to keep control of brexit talks. today could have are leaving -- far-reaching consequences for the british exit for the eu. lawmakers are voting on whether she is the ability did remove the ok from

the eu without a deal. the governor of iceland central bank has welcomed tightening of monetary policy. the comments were made in an exclusive interview with bloomberg. it is very well for us. it has been difficult for us to have significantly higher interest rates than the rest of the world because we are a very small economy. have an aspiration to be very financially integrated with the rest of the world. deborah: global news 24 hour a day powered by more than 2700 journalists in more than 120 countries. you can find more stories on the bloomberg top . manus: thank you very much. we are in vienna. it is opec 2018.

the headlines are coming from this time through a russian news agency. they say they want to discuss with russia before the june 22nd meeting. in anants to take part opec monetary committee. opec didn't reach a consensus on the optimal output. this goes to the heart of what they were talking about last night, we are not going to be whipped by the united states of america. they don't support an increase in production. not least because they are not in the best position to benefit from that. these are unidentified people, this is a task munication. these are unidentified people on the technical committee. let's talk about one man what always had a -- has a big

opinion on world affairs. he says he has a lot to worry about, the goldman sachs chairman and chief executives discussed what this means for investors. it was at the economic club of new york. >> when i got out of school, short-term government interest rates were in the teens. also abouttion was 10% and unemployment was above 10%. these things can happen. everyone is debating. lips are quivering, is the fed going to raise three or four times this year? i remember sitting in 1994 and they raised 50 basis points between meetings. i don't think people are braced for what the potential lists if the fed feels against the long -- if it gets beyond the curve.

every bond that has been bought since interest rates have been so low, everybody wants higher interest rates. forget, every instrument in anyone's portfolio will drop in value. it will be worth less. think of all the assets in the world that are priced up of a discount model. how about real estate? to think what will happen the finances of the world because you had a germanic and andpected -- dramatic unexpected drop in real estate prices. it would have even a more germanic, is this my base case? i'm on the business of risk management. i'm forced to spend 98% of my time worrying about the 2% of the things that would go wrong. i could occupy more than the

time you have here to tell you about. chairman and chief executive of goldman sachs in conversation with bloomberg's editor-in-chief. he joked that he lives in a state of terror about the 2% of things account round -- can go wrong. we're going to hear from mario draghi and jay powell. guest is still with us. with his words ringing in our ears, are central banks taking away the punch soul -- hezbollah and it is -- is it too fast? >> without any prospect of inflation rising, we wouldn't be having this discussion. happenssuming what rather than discussing what are the drivers behind this. orit is something organic

driven by improving underlying fundamentals, we could see a rise in productivity and potential growth. i don't see that as an issue that we have be worried about. if interest rates are high and there is a supply shock, we may have an issue. at this point, it is a consequence of national -- national economic growth. is the message that jay powell wants to give to the world. when we look at the global balance sheets around the world, the bank of japan is going to continue to add global they will not be higher than 1.5% next year. rememberoyd warning us 1994? i'm happy you mentioned that

balance sheet. if we look at the forecast around the market, it is all about rates. are we talking enough about the size, where is the fed's balance sheet going to end? let's be clear on this. the fed is going to keep liquidity. that is going to be the security blanket. that is going to provide a lot of comfort. we are not talking enough about that yet. there is going to be a big reduction in risk when the fed communicates- their balance sheet projections over the long-term. anna: one commentator was talking about how this is the elephant in the room for the fed. fed putback for equity markets? >> i think that is going to be the new normal.

it is going to come hand-in-hand with economic growth. the level at which short-term rates become sensitive to changes at the balance sheet, that level is going to be enormously high compared to where we were in 2006 and 2007. that gives us a lot more room to work with. the fed can adjust it to market operations. it is something we are not concerned about this point. , i'm going to show you a curve. it is the you curve. it called for previous inversions. conversion --

inversion fatigue? can the fed deal with this curve? we have to consider what is the curve pricing and right now. 2020 -- theyin will be back in the market. they will be buying treasuries to the tune of $20 billion a month to keep the balance sheets stable. that means there is not going to be the sudden disappearance of a natural buyer in the market. the fed will be there. that market is pricing it already. ,f there is not much demand there will be more savings generated and that has to go somewhere. the dollar is the world's foremost reserve currency. that is not going to change anytime. it is not an economic story.

manus: thank you very much. our guest stays with an and myself. up, from the ecb for him, mario draghi speaks alongside his counterparts from the fed and the boj. you can watch that live on bloomberg, you can listen on bloomberg radio. price and wage setting in advanced economies, what will the have to say on that subject? coming up, the battle for brexit. parliament votes on a crucial amendment. we bring you the latest. this is bloomberg. ♪

"bloomberg daybreak: europe."

this -- anna: this is "bloomberg daybreak: europe." skies overs -- london tonight. the asian equity picture looks more positive today. u.s. futures also look more positive. let's talk about the u.k. political scene. theresa may battles to keep control of brexit talks. they will decide over whether parliament you have about over any brexit deal. today's clash could have far-reaching confrontations -- implications. let's talk to the head of the u.k. investment office. that showsart now how the 5100 under pressure lately. perhaps due to brexit or the staff -- stress on the economy. what he watching for? marketsain thing in the

thehether this does impact premiership of theresa may. a government stability point of view is essential for any market. if we clear this hurdle, what happens afterward? talking like people are about october as a final deadline for this. overall, it seems the market consensus is for some kind of agreement needs to be reached so that no one wants to see a hard brexit. that is the base case. is interesting to see the reaction in the u.k. assets to all of these twists and turns. a separate question for you coming off of a report that the labour party in the u.k.

the idea that the bank of england could have an inflation target. they talked about adding new targets. is a productivity target something you would look at with interest? is this something that can work for a central bank? >> i can see economists pushing back against this. if you set a productivity target, you are starting to target growth itself. demographics, you can't ask the central bank to target that for now. if it is just productivity and then a natural demographic break, are you targeting growth? even if they wanted to, there are a lot of things that could prescribe. they say, we can do this. physical adjustments or

investments. do you want to an elected bureaucrats be doing this? anna: they suggest that there is a packed done with fiscal authorities. think you for your thoughts this morning. but of the u.k. investment office at ubs help management. changingm going to be euros into pounds soon. let's suck about the global currency. put itself on a collision course with saudi arabia at this week's opec meeting. it says that iraq will help it luck any increase. -- block any increase. it is a great battle that is taking place, chasing

dignitaries. securities analyst at jpmorgan elevated today. has put their stake clearly in the ground. it sounds as if they are prepared to use their veto. as ais quite aggressive bargaining position for day one. >> it is a bargaining position with an increased number of stakeholders. sideou have rush on one for increased production and the other side you have a customer, the chinese and indians, or mower -- who are more vocal about what they want. was justich -- anna chatting about brexit with our guests. that they is it -- did a tremendous job 18 months ago. he has to hurt the cats.

who has the real belt rich -- leverage in the room? >> if they stick to their guns it is that they will stick to production. is about who has what to offer at the roundtable. those who have the spare capacity will be able to shout louder in terms of what they want in the negotiating positions. manus: how dangerous would it be if they ran went with -- if iran with -- went with their veto? >> it almost appears predetermined. russia and saudi arabia are increasing production. they have made the decision that this needs to happen. the fundamental support is increasing production. this is what this week is about. do ishey will be --

different than what they say. in terms of the narrative around production. from where i read, it is 600,000 on the bed. that is a small spread. what is realistic? bydi up to their production 140,000 barrels. hat can the market except -- accept? >> our numbers suggest there is a deficit in the second half of our happen million barrels. that, thetext of market is willing and ready to take 500,000 barrels. range ofe it into the one plus, that sounds more bearish. i would not expect that to happen this half of the year. i wouldn't be surprised if what you see is a range that has a

timetable around it in terms of restraint instead of just an open-ended. ofus: what is the opec fudge june 2018? 300,000 a be around day. russia has artie made agreements to themselves that they are going to be increasing production. this is about opec following and coming to some sort of agreement. i don't think there will be consensus. with an increase in production no matter what. the world is not in a suicide pact yet. in regard to trade wars. are we talking not about demand? >> the reason we are here is because demand has been rampant. ultimately -- manus: is it really that strong?

>> yes. having said that, we can get complacent around what we think demand growth will be in the medium-term. you have tariffs and heating up economy. all these are risks to demand. adjustsmarket production against a demand growth that is at its peak. we see more barrels coming up to the market at the top as opposed to in a more healthy medium-term range. the fudge is 300,000 barrels. what is, have we found the floor? >> oil price is pricing in between 500000 and 700,000. if we see production of a one million headline on the table,

oil prices will come down. timeve expecting for some that opec will ship this policy the summer of this year. is that is a price to the market? above a million would be bearish. manus: thank you so much for being with us this morning. that is the very latest view on the ground here in vienna. it is a beautiful day. has the haggling just begun in the great bazaar that is the palace in vienna? anna: lots more on the oil story to come. stay tuned. our guest joining us to discuss eurozone reform. just after 3:00 p.m. u.k. time,

our guests will be joining the bloomberg family to talk about the oil price and the haggling over increase production. does he think the production should go up? does he think the prices are too high? let's see what patrick have to say on that subject. this is bloomberg. ♪

manus: good morning from vienna. this is "bloomberg daybreak: europe." anna: these are today's top stories. shows no signs of backing down from his trade war with china. goldman sachs tells bloomberg that the threats are just a negotiating strategy. >> i don't think we are in a suicide pact on this. i suspect that we are not going to cause the economy to a collapse -- two collapse. on a collision course with saudi arabia. his oil minister -- it's oil minister rejects.

pendulum -- anna with the leaders of the ecb. don't miss the conversation at 2:30 u.k. time. ♪ manus: welcome to "bloomberg daybreak: europe." it is a beautiful day here in vienna. the schizophrenia that head -- hit the market yesterday in regards to trade war seems to has abetted. it is not a suicide pact, it is the business of the deal. you are seeing rising equity markets. all you'll managed to get itself off of the ground.

do you believe that you are in a new ratcheting higher of trade wars or will there be a compromise? that is the fundamental question. asl the chinese use the yuan weapons of economic destruction to hit back at the united states of america? did you paying and trump are friends. anna: indeed. let's see what that is doing to the asian equities session. future forwith the europe you just talked about, u.s. futures pointing up as well. i will china respond? -- how will china respond? he thinks they have other tools, around what they do with deleveraging policy in the chinese economy. u.s. 10 year, a touch higher

than it was. i big focus on oil markets. you are in vienna for that oil making. -- oil meeting. will iran stay in the way of the saudi's and the russians as they try to increase production? let's talk about something that is coming up shortly. joined in a few minutes time to talk merkel and macron agreeing to a number of measures to sure up the eurozone yesterday. what does he make of those? that is one of those lines of questioning will be talking about. he was our first word headlines. threatensonald trump to impose tariffs on chinese imports. it could cut as much as half a percentage point from the nation's economy growth. the world's second-biggest economy and biggest contributor to global growth is already slowing down.

it risks spiraling into a protective -- projected trade war. rejected a potential compromise that would see a small oil production increase. wants to outline some curves by engineering a moderate supply boost in the second half of the year. i would likething to declare, opec is an independent organization. an american organization. there is an important difference . organization to receive instruction from president trump. deborah: north korea's chemchina does not appear to be in a rush to dump his nuclear weapons.

his call for a gradual projects -- process. chinese state media cited him saying that denuclearization will open up new prospect if both sides can implement the consensus of the summit step-by-step flawlessly. powered by more than 2700 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg top . anna: thank you very much. with ongoing political issues from brexit to germany, what are the biggest risks for investors in the eurozone? is posing the most pressing threat along with the eu's immigration woes. lots to talk about. joining us now, the head of the future of europe conference in paris.

a former executive board member of the ecb. a real pleasure to speak to you. involved inre in -- organizing the future of europe conference. we saw macron and merkel to agree to set up a joint budget for the region. is that something you would welcome? >> absolutely. andpe has been evolving strengthening their reforms after the crisis. it is an important next step that they have been discussing for months, waiting for the german government to liq. between macron and merkel next week in the european council, they will make a final decision. that is a very important step. we have to realize that europe ofmoving forward in spite all of the challenges and environments coming from across the atlantic and from brexit. europe is moving ahead.

manus: very good day to you. it is manus in vienna. let's take the discussion about the busted -- budget a little bit further. isancial transaction tax potentially one of the funding aspects of this. wouldn't that be like shooting oneself in the foot? given that the aspiration for europe to win financial markets post-brexit. we will have to see the details. itself -- the tax in itself will go against the need for a continental europe to have its own financial market. this would be it shooting into its own foot, i think we will have something much more

what -- and similar to like a stamp tax in the u.k.. anna: macron and merkel agreed to increasing the role of the european stability mechanism, the esm. questions about who will decide win this backstop can be tapped. do you think this is moving in e right direction for europe? when should that be used? >> we know that one of the important elements of the european banking union was a fiscal backstop in case of a major crisis in all countries. this will be one of the main tasks of the esm in case of crisis. there are other issues to be discussed. the key element is how quick and effective this fund can be.

in my view, trying to avoid veto rights and decide quickly in case of a crisis. lorenzo, what did you make of mario draghi's communication to the market last week? rates will remain low until the summer of next year. was that a smart communication? do you think that is the right way to communicate with the market? >> if you go back and look at the way in which the federal the qb, it is not that different in the end. the exit,communicate then you tell the markets that 's for someuse -- time, waiting to look at the data. and then you start thinking about bringing back rates to normal. it seems to be very similar.

it went well in the case of the fed. there are no reasons why it ecb.dn't go well for the the markets always ask, what's the next move? they try to get ahead. attempt todraghi's calm things down is the right thing to do. anna: germany and france are calling for eu trade deals with emerging economies. can the latest trade tensions between trump and china galvanize europe onto the same pace with regards to trade? shouldar respond -- europe respond? >> europe is the largest trade area. it has to take its own responsibilities, in the end. that was the big challenge after trump's election, moving away

from a multilateral trade deal. he wants to move to bilateral deals, fine. europe will do the same. since we are bigger, emerging markets and other countries will want to have good deals with europe. i think that is the way that europe will start moving. many of the end, the u.s. will come back into multilateral trade tables. just to continue that theme, germany and france calling for trade deals with emerging markets. everybody is talking about brexit and the possibility of a no brexit deal being put on the table next week. is that really the vortex that we have reached with these brexit negotiations? do you think it is as bad as some of the pressure making it out to be -- press is making it out to be? >> the risk that we are facing is that everybody is saying, it

is not reasonable not to have a deal. everybody is going to be reasonable. we are confident that in the end things will happen. there is the risk of a confidence bubble building up. we may find out that the last minute -- at the last minute and there was no agreement things may turn out to be much worse than we expected. that is what we don't want. we want to have a clear agreement between the regulators, and between the authorities of the two sides. just saying that there will be an agreement does not make it happen. we need things to be announced much earlier than just at the last minute, as this strategy seems to be. just waiting for the last minute. anna: a lot of the drama seems to revolve around migration.

merkel under pressure because of the migration story. this matters because of eurozone cohesion. can germany and france get to the same place as italy, hungary , on this question of migration? >> migration is the big issue that is moving things in europe. we are finally realizing that this is a major issue that is had an effect in italy and greece. it has an impact on the whole of europe. european solution. borders,ng, i close my like the intern real -- internal minister in germany, it will just cause tension between countries. merkel is right to say we need a european solution and to find a compromise. if we work together, we will find a solution which is

acceptable for all. it is not going to be easy. i think the move between macron and merkel is a sign that things are moving in the right direction. it is no secret that you said, we are going to see big cross-border mergers. i can't let you disappear off of our screen without asking you, are we nearly there yet in terms of the ability of regulators to orerate of franco german franco italian deal? in my view, i won't comment on specific issues because there is no point. i think that the ball is in the hands of regulators. the regulators have said that we need more integration and we have had less integration since

the banking union has been realized. the ball is in their hands. they need to remove all of the regulatory obstacles for the creation of pan european banking rules. regulations at the national level, we need to complete the banking union. if it goes through, it will be a backstop for the single resolution from, it is important step forward. a also need to move towards common european influence, that would be another major step. if we move in that direction, the markets will take the opportunities to create these pan-european banking groups that levelmpete at the same and efficiency with the american

banks. anna: thank you very much for your time. we appreciate it. they are co-organizing the future of europe conference. left to talk about. some of that may get into the conversation at 2:30 p.m. mario draghi speaks along with his counterparts, moderated by bloomberg's head of economics. you can watch that on bloomberg tv. these are live pictures coming to us from a beautiful summer morning in portugal. this is bloomberg. ♪

anna: good morning everybody. 719 here in london.

it is 2:19 in new york. things are looking more positive this morning. the ecb form is underway. flanders is standing by and getting ready to moderate the panel with heads of the ecb, the fed, and the bank of japan. you're going to be talking about prices and advanced economies. i'm sure will be hard to contain into the available time. what is on the agenda? is true that the subject of this forum is quite close to the central banks main job, which is not always the case. get into how they ,re thinking about the recovery things about normalizing monetary policy. there has been a lot of discuss it in -- discussion about that this week. not just about the billiard to

get inflation back up but this lack of wage growth. even when you have tight labor markets in the u.s. and elsewhere. it is another puzzle. the real challenge is to get them to say something natural and interesting when they will start with those prepared remarks, which may not be so interesting. bigs: that is a really thing. about thee discussion meeting between merkel and macron? budget, howy important is that conversation? there was a lot of discussion last night. you have the people here in the you have people who are currently senior officials across europe.

or in the european central bank. names familiar with you, a lot of them were discussing the franco german talks and wondered what will happen at the summit next week. one of the things that is looking on the edges of this meeting, people know that the economy is doing quite well but they are aware that they have not got a lot of room when the next downturn happens. the central banks are not going to have much room to respond. it is important to have this capacity for governments to do something on the fiscal front. that deal last night did not give enough of that capacity. there was some concessions from her go but you do not have that large eurozone budget he wanted. not have germany ceding control over that stability mechanism. a little bit of concern about that. anna: thank you. stephanie flanders life. -- live. tariffs, dona trade

they make sense as a bargaining strategy? >> the whole thing with china, there is a lot of frustration with china. i know that china is very frustrated with the sudden of aggressiveness in u.s. policy. hasody who is transacted -- transacted with china appreciates china and has had frustrating experiences with china. or theous times, one other comes to the floor. ago, setves, 15 years up our joint venture in china that let's was being able to joe -- to own our own investment bank in china. there has been a lot of suggestions that that was going to happen quickly. that said statements it was artie available and then oftentimes that gets into the

ministries that have to affect these things. infound out recently that order to own our own entity, it had to be capitalized at a level that would make it totally not sensible for us to do it. then we were back at square one. we are advisers to people in other industries and they have similar experiences. this would not be the course i would have done or recommended. i could see what happens to china. a lot of the people who are too publicly, this is a very difficult thing. day, publiclythe making these statements, you have to pay homage to your clients in china and your customers in china, at the same time, when they are not in

tolic, it very well go the u.s. government and saying, what you are doing is not a bad thing. i can understand that we got to the place that we got. billion of have $200 tariffs. the game of chicken -- >> it is not my style. to giveant to show, somebody an incentive to see the world from your point of view, it does not help to remind them of your negotiating position being a better one. if we go tit for tat, by the time he gets a 100, they run out of things to apply to a tariff to, and we don't. would do if you are crazy and really wanted to and free trade. that is what you would do if it

was a position and you wanted to remind your negotiating of just how much firepower you have to bring to the negotiation. which one is it? >> do you think donald trump's protectionist? he dislikes nafta. >> who am i to say what he thinks? i don't know what he would do, what i would do in his place. i'm certainly not sure what he would do in his place. if you ask me, can i give a narrative about how this is a useful thing to do, i can say, with respect to almost everything he does, this makes no sense at all. it does not make no sense to me at all. anna: that was the goldman sachs chairman and ceo.

solomon joins the bloomberg family later. lots more coming up. this is bloomberg. ♪

>> good morning. open i ame european alongside guy johnson -- i am alongside matt miller, in portugal. matt: markets are bouncing back. haven assets are giving up the gains they saw yesterday, ahead of this important panel with the fed, ecb, and bank of japan leaders this afternoon. ♪ guy: