francine: goldman sachs chief executive tells us that trumps tariff threats wondering about a devastating trade war, even as economists warn of devastating impacts. >> i don't think we are in a suicide pact. i don't think we will cause the economies to collapse. francine: opec collision course. iran rejects a potential compromise, putting the group on track for a clash at friday's meeting. and may stands for, the u.k. p.m. stands firm ahead of a crucial vote. ♪

good morning, welcome to "bloomberg surveillance." these are your markets. we're seeing a bit of edging sideways. we had a few earnings coming out, some guidance to look at. overall, the stoxx 600 you can see a 0.6% higher. at u.s. 10 year yield is 2.91, and the euro-dollar at 1.1573. basically, markets have take a guess on china to see if these lead towill retaliation, or if everything will lead to where they were a couple weeks ago, escalation of tension rather than things quite significant. we are also getting news out of the filipino central bank, raising key rates.

course, a response to emerging markets and what they can do to counter the fed. at wti over,look but those futures are retiring so maybe brent is the one to look at. of opec,t the back with iran telling saudi they do not want to compromise. we will see whether they can agree on something or if saudi arabia and russia will go at it alone. up, right here, we have loads of guests. we bring you an exclusive interview with the goldman sachs president, ben solomon. at 2:30 p.m., we bring you fed chair jay powell. that will be chaired by our own stephanie flanders. to opec. speak let's get straight to bloomberg

first word news. donald trump's threats to impose tariffs on another $200 billion of imports could cut as much as half a percentage point from their economic growth. signsarning comes amid the world's second-biggest economy is already slowing down as a simmering trade war spirals into a protracted trade war. iran has put themselves on a collision course with opec. as they reject a potential compromise that would see small oil production increase. saudi arabia is under pressure from donald trump and wants to unwind some output curves right engineering a moderate supply boost. things, opec is an independent organization and is not an american organization.

there is an important difference . opec is not the organization to receive instruction from president trump. north korea's kim jong-un does not appear to be in a rush to dump their nuclear weapons. president,th china's he reiterated his call for a gradual process. cited camate media saying that denuclearization will open up new prospect if both sides can quote implement the consensus of the summit." day,l news, 24 hours a powered by more than 2700 journalists in more than 120 countries. this is bloomberg. francine: thank you so much. goldman sachs chief executive tariff threats against

beijing makes sense as a bargaining strategy and will not bring about a trade war. ,hile china vows to retaliate he told bloomberg's editor in chief thahe has learned from doing business in the country. lloyd: the whole thing with the china is a lot of frustration, i know they are frustrated. has transacted with china appreciates the potential of china and has had good experiences and frustrating experiences. at various times, one or the other comes to the fore. ourselves, to be honest, 15 set up our joint venture, leading us to be able to own our own investment bank in china. it seemed imminent at the time. there had been a lot of suggestions that that would happen quickly, and in fact,

statements has said it was already available. often times, it would get announced at the seniormost level and when it gets to the ministries that affect these things, we found out recently later, ite many years would have to be capitalized at a level that would make it totally non-sensible for us to do it, so we are back at square one. but we areinance, advisers to other people in other industries. and again, this would not be the course i would have done. but i can see what happens at times. expressing toe publicly, this is a very typical thing. as americans, this is a bad thing. and publicly making these

statements, because they do business in china and you have to pay homage to your chinese clients and customers. at the same time, when you are not in public, could very well be going to the u.s. government and say what you are doing may not be such a bad thing. so i understand how we got here. you see the argument that that was maybe acceptable at 50 billion, but now you have 200 billion and the prospect of a full-blown. again, the game of chicken has gone -- lloyd: it is not my style. somebodyu want to give at incentive to see the world it doesr point of view, not help to remind them of your negotiation position being a better one. the fact is, going tit for tat, by the time you get to 100, they have run out of things to apply a tariff to and we do not. if you want to make that point,

you make that point. if you what you would do were crazy and really want to end free trade. that is what you would do if it was a negotiated position. you wanted to remind your negotiating party of how much firepower you had. do you think donald trump is a protectionist? he disliked nafta. who am i to say what he thinks? know what i would do if i was in his place, and i am certainly not sure what he would do if he was in his place. at if you ask me for narrative about how this was a i can't say to do,

this makes no sense at all. it does not make no sense to me at all. that was goldman sachs chief executive lloyd blankfein speaking to bloomberg. at president also joins us 11:00 a.m. u.k. time. today, we talked to him a little bit about what the succession plan is and what goldman sachs wants to be in the markets, where they want to position cells. now, our two guests. thank you both for joining us. larry, i guess you have to say whether the trump tariffs deliver a sizable hit or not, and that is what market participants are trying to figure out. all, whenst of chinese stocks were down 3-5%, that would be the read through. in truth, i think the impact is

not the direct impacts of tariffs or say. -- per se. these were relatively small impacts. impact onpotential business confidence and the underpinnings of global expansion, global and hiring. we have to be concerned at this escalates, but thankfully there is not much evidence this is occurring. francine: do you agree? richard: what we are seeing is markets grappling with strong fundamentals, but rising economic uncertainty. and concern about trade tensions adding to that uncertainty. important to emphasize that the measures actually announced are very small and having no material impact on chinese or global growth. the additional $200

billion is at this stage, a threat, not an action. are seeing is no evidence this is derailing growth. but we are in an environment of tit for tat. and i think markets will remain in a. of uncertainty for some time. toncine: is it not better take a worst-case scenario bet to hedge your position? richard: this starkly the opposite is the right thing to do. evaluations, the history teaches us that in the majority of tensions the right thing is to buy into that risk, take the long-term view. is concern, in this case, what is the one of risk that could derail the synchronized global economic expansion? it is the escalation into a trade war. but not we are seeing as. -- yet. francine: how likely is a trade

war? larry: we have to define what a trade war is. some see these as skirmishes, but i think we are past that. might be small-scale firearms at the moment, but that is slightly more semantics. i think we have to be concerned for another reason. what is underpinning this? it is about a president in the united states trying to make sure he makes good on campaign promises. and he is in full campaign mode. that means we have another four or five months of this thing. anybody looking for relief will be disappointed. francine: or you could say in election mode for the next presidential? which means this is a policy for his first term as president. larry: correct. you can see his opinion poll numbers are rising a bit. this tougher stance on immigration, on trade, these

actions seem to be invigorating the base. that is what he has to rely on. richard, some of the models showed that this initial round of 50 billion would shave percentage point, and with everyone hundred billion extra, it goes to -0.3, minus zero point right -- five. 10 they withstand this? -- can they withstand this? we have already seen them cut requirements once. we will likely see an easing of policy, particularly around leverage, to ensure the economy remains robust. growth has been surprisingly strong, i think it is important to recognize we are entering this. -- era of uncertainty with strong at -- economies in the

china and the u.s.. a full-blown trade war is in nobody's interest, but we are likely to see is an escalation of this tit for tat. i think on june 30 about potential restrictions of chinese investment will be the key milestone investors should focus on. francine: what does this mean for currency moves? our guests both stay with us. in the meantime, we also hear economists say that the euro against the dollar is where we'll see the euro. next, at live at the ecb form and will hear from another guest. we talked him about the possible franco german exit. this is bloomberg.

francine: economics, finance, and politics, this is "bloomberg surveillance." theresa may will take on pro-eu revels in her own party, as she battles to keep control. may is facing a revolt from conservative party lawmakers over whether she should have the power to take the country out of , or ifout a deal parliament should have a meaningful those in the way forward. for more on all of this, we are joined by bloomberg's david merritt. i feel like this is groundhog

day. vote for crucial theresa may, or will there be another big vote next week? >> well, there will be plenty of crunches down the line. but it is quite crunchy today. we have the final votes today on this big eu withdraw bill. it has been back and forth in the commons and lawrence. lords.lord some -- if defeated, that is it for the bill. it means it passes into british law, and it means brexit is a little more certain. if the government loses, there is everything to play for. we have a huge amount of uncertainty. a huge amount of mays exit strategy is destroyed, and the possibility of a leadership challenge. and she goes into next week's european council meeting very much weekend with her whole

strategy undermined. so traders and investors are very much looking at the result. of the other thing is it is a very close vote indeed. we have a number of tory rebels holding their ground, the government digging in, betting they will back away from the cliff edge. but the numbers are accommodated. don't forget, the labour party is also very divided over brexit , and a number of labor lawmakers are due to vote with the government. a germanic offer noon in store in the comments, with some potentially serious outcomes. -- a dramatic afternoon in store. the outcome expected sometime this afternoon. francine: so how much risk is in today's vote for the markets? with us, richard from blackrock and larry hammond. does the pound move today or just on boe?

larry: the key drive is actually political risk around brexit. we saw it and move on expectations that a deal could be done, and that political risk was declining. we have seen it falls are in recent months. the dollar has been stronger, but also concerns about brexit. the votes today is not critical. but it is increasingly the case that the base scenario is one of the uk's leaving the eu, but there is a lengthy transition deal in place. i think that will keep uncertainty on the agenda. i think that keeps the pound relatively low. francine: this is my longer-term chart that i brought. what happens to the pound on the back of the votes today and scenarios we can see from

brexit? richard: picking up on -- up on that point, i think we are looking at the dollar rather than the pound. , ite look at eurosterling is exhibiting the same kind of movement and reflects uncertainty. may,raphrase theresa brexit means we will get back to what brexit means, nobody knows what it means. even today's vote is not going to resolve the fundamental issues. and what other forms of exit may take place. so i think the trading community cannot figure this one out and does not willing to put much risk on the line to take a view. francine: but could the boe raise rates? richard: they certainly could. but i think you would end up with more reasons related to more important inflation

and then the need to have a policy response. short of that, the bank probably feels that neutral is best. francine: all right, thank you so much. both stay with us. but get back to the ecb form in portugal. bloomberg spoke to iceland's central bank governor in an exclusive interview, who says he is in favor of tighter monetary policy. monetary policy in the eurozone and u.s. is welcome news. foras been very difficult us to have significantly high interest rate, because we are a very small open economy. and an aspiration to be very financially integrated with the rest of the world. francine: so how will higher rates impact europe's economies? joining us is a new guest.

before we get onto ecb policy, i want to hear more about this macron merkel policy that was released. needs to act as a backstop to take on a bigger role, and the two sides agreed to set up a budget. what if you want to see that was not in it? the first thing is that it is positive that there has been a decision to move forward. there has been an agreement at the leadership level. that is positive, but the backup is still not clearly defined. size, to the in resolution funds, so that is 55-60,000,000,000. so we have effectively just doubled the size of the fund. moreover, how decisions are

being taken is still unclear. but it will most likely be a unanimous decision. in other words, by all member states of the eurozone. it makes it very difficult to activate it during the weekend. positive insurance is basically postponed, so basically the banking union package of the deal of yesterday is, to my mind, very weak. francine: what do you make of what the ecb can and can't do? you see in the franco german axis, but you also have the populists in italy and it seems like we can go back to a possible crisis. is it to scaremongering or is this a real possibility? i think the real issue is that ammunition for combating the next crisis is much more limited. -- ecb has done a lot

to stabilize the system. it is rightly ending their qe program, which i think was necessary and justified. if then the question is there is a next big thing happening, what kind of instruments do we have? of course, the ecb can do more. but on the fiscal side, there is no progress. yesterday, they came up with a little progress, some top of a eurozone budget, but is very small. the most significant point of this budget that was decided is that there is supposed to be some form of eurozone tax which directly is paid into the budget. that is a change, but things will be very small. years, wethe next 2-3 have an accident, we will still on the budget and

the ecb going to the limits of what can do. francine: we are running out of time. in 20 seconds, what are economists getting wrong at the moment? >> what economists are getting wrong. well, we don't understand why productivity growth is so low and we need to push growth and find the right way of increasing productivity throughout the eurozone and the world. francine: thank you so much. to short time, you have to come back into the studio. next, we will be at the opec form in vienna, as oil ministers gather around promises of a contentious meeting. just a reminder, you can watch speeches on the terminal. ♪

francine: economics, finance, and politics, this is bloomberg surveillance. let's check in on what's 20 -- trending.

the united states is being sued over splitting up families around the border. had to twitter for more on that. meets on friday, there is likely to be asymmetric and gap between the headline numbers and the amount of oil that can actually be at -- added. and our most read stories. in third place, general election has been kicked out of the dow jones industrial average after in having it for more than a century. theresa mayace, refuse to back down ahead of a crucial vote in parliament. and north korea's kim has returned to beijing, an illustration of how trump's terror threats could actually spiral into more than just a conflict over trade. now let's get straight to bloomberg first word news. u.s. president donald trump

to impose tariffs on another $200 billion of chinese imports could cut as much as half a percentage point from china's economic growth. signsorning comes amidst that the world's second-biggest economy and contribute her to global growth is already slowing down as a simmering trade dispute spirals. korea's kim jong-un does not appear to be in a rush to dump his nuclear weapons. in talks with china, he reiterated his call for a gradual process to carry out the results of last week's summit. kimese state media cited saying that denuclearization will open up new prospects if both sides can implement the consensus of the summit. minister willme take on pro-eu revels as she battles to keep control of brexit talks. today's clash could have far-reaching consequences for her future and the uk's

direction. whethers concerns over she should have the power to take the country out of the eu without a deal, or a parliament should have a meaningful votes on the way forward in the event that talks break down. day, inews, 24 hours a more than 120 countries. this is bloomberg. francine: thank you so much. iran has rejected a compromise on boosting oil production, setting opec up for a potential clash. speaking to reporters in vienna, the iranian oil minister suggested the summit could and without a deal for the first time since 2011. >> i don't think. because every decision in opec needs unanimously. and i don't think we can reach an agreement. like to declare that

opec is an independent organization and is not an american organization. there is an important difference between other organizations and opec. an organization to receive instruction from president trump. isncine: joining us now bloomberg's correspondent from the end. na.vno -- vien if there is no deal, he does not mean that barrels will be put on the market? >> that's right. i spoke to an energy expert and pumpingthey are already . saudi arabia and russia have already seen production numbers rise. there is no consensus, and that is the question.

the iranian oil minister coming in with a hard line, saying they will not reach an agreement. the unitedng out states, why should they be beholden to president trump. the question is not whether or not we will see an increase in production, that seems like it will happen. whether saudis and russia can get enough countries to go along to come out with a consensus. they can issue a separate communique even if iran decides to veto a hike on friday. francine: thanks so much. annamarie, live from vienna. you can watch the meeting on our terminal. our guests are still with us. richard, when you look at the oil price. there a sweet spot for oil that does not hurt consumer demands and so that exporters get what they want?

or is it just a fictitious number? the key number is that the market is tight. whatever comes out is unlikely to change that. possible, butl is it might perhaps lead to half a million new barrels a day. that itself is not even enough to replace the lost production we have seen from countries like iran, venezuela, and nigeria. on top of that, demand is strong , and is likely to accelerate. in terms of the impact on the broader market, we have not seen that leak to broader risk, too broad inflation. it is seeing is increasing pressure on high leveraged countries and companies, which are dependent on oil. and emphasizing the need for clients to have more resilience going forward. larry: i tend to agree. prince 80 andp at

potentially marking above there, we were getting close to an inflection white of oil being risk --nd eating at being at risk. if you couple that with euro weakness, if we think about where that spring is fully loaded in terms of global bond markets, it is european bond alleles which are well below equilibrium's, and would not take much to begin to change that perception and pricing. so there is a nexus there between oil, currency, and inflation. we have avoided that, and i think some increase in production is likely. i think that should be a very welcome thing. one of the more benign things would be for oil to settle in at current levels or drift a bit lower. francine: ok, but you are expecting the saudi russia friendship to last? larry: what i think is more

likely, and was alluded to, there will be some compromise, or cheating, if you like, on oil prices. as they go higher, there is an incentive for that to happen. whether almost opec members or not is less important than whether or not it trickles out. i would disagree with the notion of global growth. i think it is in question, because europe is clearly not rebounding. any event, let's say the acceleration of global growth was a 2017 story, we might regain some levels but are not likely to go beyond them. so i think the demand side is relatively subdued. francine: what does this mean for inflation? we have a narrative that inflation is coming back gradually, investors are focusing on this. oil is important, but not the key. the key is that we have synchronized global growth, led by the u.s., but with emerging markets contributing.

and you can see that growth accelerates. there is already evidence of that in the u.s.. consumer data indicating that rick celebration of growth coming through. labor markets are coming tighter. when we look in blackrock, we have propriety signals of growth and inflation, and they point to this gradual pickup in growth. it is led by the u.s., but it is global. will benefitrope from that pickup in the u.s., larry is right. but we think that u.s. pickup will help stabilize european growth in the second half of the year. and importantly, help drive growth in many emerging markets, whose exports are critically dependent on the u.s. economy. one point- larry: here on the inflation side.

conditions these richard alluded to is inflation expectations. that's where things like energy can play a role. there is a general feeling amongst workers and employers that inflation is now, , probably higher than that and moving back to that 2% level. much begin to change the way in which wages and prices are set in the economy. that is the risk, that leads to more acceleration based of what richard has correctly identified. ecb dovish, fat hawkish, what does that mean for markets? so far that has meant weakness. but the growth that versions we have both talked about between europe and the u.s. and the

monetary policy implications of that. but if it does look like it is headed back to the ecb targets, and as world activity is , thenting european growth i think you could see that resetting of expectations. a lot of people are pushing out that rate hike into well into 2019. forward, it could change dynamics of global government bond markets. richard: we believe there is a divergent story going on. growth, and wey are seeing a real acceleration in the second half of the year or the u.s.. looking at europe, we think growth is stabilizing, but it is an a different stage of the cycle. that means that though inflation is no longer falling in europe, and it wasn't so long ago we were worried about deflation. the prospect of inflation

returning to the ecb's target is a very distant one. we think we have enough evidence in terms of growth, inflation, and expectation to support the fed continuing on this once a quarter past, the ecb will be much more cautious. francine: cautious, less cautious. this is good, will continue this conversation. our guests both they with us. just a reminder, the opec seminar takes place today. up next, macron and merkel's plan, we have the details on how the french and german leaders plan to move the eurozone forward. we talk about the euro's weakness. this is bloomberg. ♪

francine: this is "bloomberg surveillance." let's get straight to what we are talking about, the franco german axis. angela merkel and emmanuel macron have agreed on a plan to strengthen the euro area. the two leaders have agreed to set up a eurozone budget. the size and conditions of the budget were left open. our guests are still with us. larry, are you bullish or bearish on europe? we have to ask ourselves whether the european growth story has peaked. larry: rights, a couple things. first, they are not generating -- exhibiting recovery from the soft patch. i think the jury is still

somewhat out, though it is hard to imagine there is a great deal of restraint on that recovery story, that is, financial conditions have tightened and oil prices should not be holding back the story. so some recovery here. bullish orthan being bearish, somewhere in the middle. not plus is maybe the way to say it. but just one or two comments. i think it is a big departure from germany. up fore still signing some neutralization of obligation, if not outright, of debt. that is a big departure for germany. behind it, not much substance. typical european advance of one step forward with tiny steps behind it. we have to ask, why now? it could be that this is a way of buying french support on this issue, in return for angela merkel desperately needs, a european initiative on

rest theon, to put to conflict she is having domestically. so i think there may be something in the timing of this that is very much related to her domestic political fortunes. francine: we are getting breaking news. we now understand that china mobile and qualcomm are also possibly in talks to invest in mei shell may ipo -- xiao ipo. we needof evaluation, to keep a close eye on this. going back to this franco german you believe larry, how should the markets view immigration? we worry about markets leaving the euro, but it could be immigration on the frontline. richard: if we look at where investors should be putting their money, we see the most

attractive opportunities in the higher growth areas of the world, typically like the united states right now and emerging markets, particularly in asia. and europe is lacking. although we see europe stabilizing, we're seeing slower earnings growth, and it means we should look elsewhere. that, it means we have seen a significant rise in risk within europe. and whilst yesterday's ,nnouncement is a positive step and one of the few positive steps we have seen over recent months, the broader picture continues to be one of germany stepping away from integration consistently over time. and increasing risks associated with italy. those are twofold. the first is fiscal. concerns about how europe copes with the next downturn as fiscal discipline curious have become much more acute. secondly is around immigration.

the italian government has demonstrated their autonomy through immigration, having affects across europe. if we take these two things together, we have the risk of a crisis in europe. 20%.ps as high as that is simply not in the market price. francine: is it a crisis that would put euro cohesion in jeopardy? a crisis which would require action to keep it together. the key point here is that when you look at valuations spreads, for example the level of french bond yields, a are simply not reflecting that increased risk. larry, the think the risk is so high? larry: not really. think there is a european immigration crisis and security issue that must be addressed. it will be or else

very problematic for the entire concept of your, including what it implies for monetary union. but i do not see in emergent. when i listen to the most extreme case which people bring up, italy. if you look at their budget, they have a sort of cap. public, theirir hiest debt is not so high. what people fail to recognize is that unlike the united states, or other countries like the u.k. or switzerland, italy's long-term demographic dynamics around obligations for pensions and health care is one of the best in the world. i thinkt perspective, there is often a a lot of hyperbole about the debt structures in italy. when i look at the united states, i think they are running a profligate irresponsible way at a moment. it makes little sense.

so i'm not sure i would apportion the blame fiscally, the way it is commonly done in the european case. i think europe's problems like elsewhere. francine: thank you for joining us. i wish we had more time, we need a four hour surveillance show. up next, we talk a lot about corporate news. in the meantime, let me bring you what the ftse 100 is doing. when you look at european markets, it is gaining 1%. it is going to be quite a big day when it looks at pounds because of the votes in the comments on theresa -- commons and theresa may. we spent some time talking brexit with tom keene. next, live in hong kong with the latest on this chinese smartphone maker listing. we just heard about possible investors and are still trying to figure out exactly who they are talking to and when the ipo could be planned for.

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francine: economics, finance, and politics. this is "bloomberg surveillance."

china mobile and qualcomm are set to be in talks to invest in ipo.i may ipo -- mega which could raise as much as aliens of u.s. dollars. let's get in with our bloomberg tech editor. what comes next? how much demand is out there? edwin: that is why they brought in these cornerstone investors, to prop up demand. speak withthey will institutional investors to find out where they should priced the ipo. soon after that, we will see, thentially, what will be second or third largest ipo since alibaba in 2014. francine: thank you so much. larry, if you look at the

implications, is it brave? you talk about a big idea like this in the middle of escalating trade tensions, or is it a signal? that may be a signal about this company, whether they are ready to take the step. , what thisder sense can serve as an illustration of is the global capital. global capital will be part of that idea, you can see it in the expressed interest of seeking institutional investors. that money will come from different sources. number two is that if we think about mobile telephone, it has an interesting view long-awaited supply chain and value chain, and this comes back to speak to the basic issues we are confronting with the market about protectionism. the kind of rhetoric discussion, tit-for-tat, feel so yesterday, so 19th century in terms of

their mercantilistic nature. but also its lack of understanding about the integration of the world economy in both senses, supply chains and finance. is kind ofike this the reminder of the modernity of economics, not the antiquity of the rhetoric we are hearing today. francine: larry, thank you so much for joining us. bloomberg surveillance continues in the next hour. we will be hearing from david solomon, president of goldman sachs, who joins us from an exclusive interview. we are also looking at brexit, looking at a couple indices on the move. the ftse gaining 1%. this is bloomberg. ♪

francine: economists say president trump's latest tariff

threat could deliver a sizable blow to the country. iran rejects a potential compromise on reducing oil production come on track for a clash at friday's meeting. and theresa may refuses to back down ahead of a crucial vote that could block a no deal brexit. good morning, everyone. this is "bloomberg surveillance ." tom, quite a lot going on. a lot going on with opec. for now they do not have a compromise. we are looking at the impact it can have on the world economy. tom: uproar in america over the mexican mortar -- mexican border. this vote today actually matters, doesn't it? francine: it does, but you are going to have a lot more votes

that also matter. i don't know whether the pound moves on the back of it. we do have a bank of england decision later this week. hopefully something that will give us an idea of what theresa may can negotiate or not. coming up, we speak with goldman sachs president david sullivan for an exclusive interview an hour from now, 11:00 a.m. in london, six clock a.m. in new york -- six a clock a.m. in new york. let's get to the -- 6:00 a.m. in new york. let's get to the bloomberg first word news. reporter: the u.s. leaves the u.n. human rights council for being biased against israel. in the u.k., prime minister theresa may refuting to back down before a crucial vote on brexit in parliament today. it is over whether mehsud have the power to take the u.k. out of the eu without a deal.

20% three fox is paving the way for a bidding war over its entertainment -- 21st century fox is paving the way for a bidding war over its entertainment division. six months ago, fox agreed to sell the assets to disney. to comcast offer is better, disney will have five days to make a new bid. starbucks is tapping on the brakes in its home market, closing about 150 stores in saturated u.s. markets over the next year. starbucks expects comparable sales to rise just 1% currently -- 1% globally in the current quarter. russia is now in good shape to advance to the knockout round. game,st won their second beating egypt 3-1. for the latest on the world cup

come alone to the bloomberg terminal. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. tom: thank you so much. equities, bonds, currencies, commodities. we go through the data off of the drop yesterday. dow futures up 116. curve flattening still. on to the next screen if you would. gold up there. gold is really interesting, actually. it simply can't find a bid. sterling has my attention. dollar canada wondering to what to 133.

francine: the dollar edging higher, the euro falling, and oil up, of course. futures expire today. tom: very good. let me look at sterling very quickly here. this is number of dollars per sterling. brexit here in the summer, this today move. surprisinge up here people. what is interesting is we are really back almost to where we were essentially the morning after brexit. francine: i like that chart. looks at accelerating losses in the china currency probably questions about whether policymakers will use it as a weapon in the trade or with u.s. -- in a trade war with the u.s. ,his is why this chart matters

because of course we are talking tariffs. let's talk a little bit more about tariffs. this is what we've been finding out over the last couple of days. youon't know how exactly ariff andhe t trade exploration. how do we know how china will react? reporter: good morning. i think the indications are that china will certainly react as quickly as any terrorist -- any tariff that the u.s. implements. any concession put on the table will be quickly taken off. after that, the question becomes how exactly do they react? to the go down the tarriff

route? or do they go down the route of nontariff barriers? they've done that before. much remains to be seen in terms of the details of what specific tariffs. tom: i love where you are going. it is simple, do they go after apple? it is simple as that. the short pass here is to go after apple. what do they do? reporter: that is exactly did temptation. 1-wood us -- that is exactly the two tatian one -- exactly the temptation. assume that they go after apple. there are also significant chinese orders for jets made by boeing. you see starbucks planning -- [indiscernible]

who in the government is making these decisions? this goes, we would assume, right to the top. reporter: all indications are this goes to the very top of the chinese government. is just how clear or if any negotiations are progressing. we had some delegations go back and forth between beijing and washington. in recent days it has seemed they have gone very quiet. that report became out of washington, that scathing report on china's economy and how it got to the point where it doesn't suggest there is a near-term solution. francine: thank you so much, as always. by the chiefined european economist at barclays.

thank you for joining us. let me start with you. billion onke the $50 goods that the u.s. would impose tariffs on, if it went to an hundred billion dollars, europe to $100 -- if it went billion, europe would be at the crossroads. guest: [indiscernible] that is an issue.

it is reaching a point of final decisions with china. i think you seen already the fears in europe. you seem policymakers reacting to this. there is a lot of dovishness in draghi's speech. francine: people don't quite believe it if you speak to chief executives. they say this is just rhetoric, just negotiating. >> you have to strip out a lot of the negotiating stance and look at the facts. frankly, i would expect that the corporate sector response to this with a significant lag. you think about any kind of tends tot materializes only feed into the corporate sector with the lag and then the real economy was a further lag. six to 12 months is the sort of

horizon i'm thinking of. it is probably right that the corporate sector doesn't show too much alarm at the moment and waits for these real measures to hit, but i would also think that some of the market reaction is showing signs of being slightly incorrect, really focusing on the growth dimension and not the inflation dimension. i think that is important when we are thinking about extrapolating these moves, thinking about how it is going to pan out in future. tom: within the microanalysis in your notes, there is one simple idea. market analysis is separated from all this noise. how do you do it every day? how do you remove yourself from the international relations exercise we are all going through? >> what we do is focus on the signal rather than the noise. if we are looking at these trade whatfs, we think about is

do the major actors actually want to achieve? we try not to listen to the detail too much. it is about focusing on what do they want to achieve, where is the compromise in this. and the compromise, i think, on trade war is really about delivering the rhetoric, but then ending up with a final solution which probably is not as harmful as the rhetoric sounds. this is what we think about when we talk about trade war's. we try to take a similar approach with exit and europe as well. francine: thank you both for joining us this morning. you will both be staying with us. coming up, goldman sachs' pres ident joins us for an exclusive interview. that's about an hour from now. this is bloomberg.

♪ reporter: this is "bloomberg surveillance." the last remaining member of the dow jones industrial average for the 19th century has an kicked out. beeral electric will replaced by walgreens food alliance. it was the worst performer last year. will be supplying fedex with two dozen cargo planes, 12 12 of theters and larger 777 planes. fedex wants to replace older planes for fuel efficiency. an ipo in hong kong could raise up to $6.6 billion.

they want to start kicking orders from institutional investors as soon as tomorrow. china mobile and qualcomm are said to invest in the ipo. that is the bloomberg business flash. francine: thanks so much. crunch time for theresa may as she battles the key control of exit talks -- of brexit talks. clash could have far-reaching conferences -- far-reaching consequences. for more on the significance of today's vote, our brexit editor joins us. is almost make or break for how theresa may can negotiate, how far she can push the negotiating with the eu. the worst fear for the soft brexiters, but those who

want brexit would quite like theresa may would have the negotiating tool. in the long-term, what this means today is that probably come january, if there is a deal, parliament could insert itself in the process. of course, they would have to ask the eu for an extension of article 15. it would not be a clean process. it would be pretty chaotic. but that is what they are trying to do. plotre-brexit camps see a campst -- the pro-brexit thwart brexit. ,s the rebels do prevail today and thereby the option of no deal is off the table and is increased,ower at the very least you will get noises from the pro brexit camp

about possibly outing theresa may. we have predicted her downfall many times. she has come back from many a crisis. i would predict that they would -- that there would be noises from the pre-brexit camp. francine: how close is the vote going to be? reporter: talking to reporters in parliament yesterday on both sides -- because of course, this is not just the tories who rebel, but labors who rebel. votes tohe labor --port prime minister may for audiences in america, this is like democrats supporting the republican president -- who are these people? reporter: we talked about how the conservative party is divided over brexit, but the

labour party is also very divided over brexit. the rebels are very pro-brexit. they see in this attempt to get parliament more power basically as an attempt to thwart brexit. they are pro-hard brexit. tom: who are their constituency? as aro-brexit leftists general statement. who do they represent? reporter: it varies, but basically a lot of labour voters voted to leave, and memberre, as a labour of parliament, if you're constituency voted to leave -- and if you look at a map of england, huge swaths of the country voted to leave. it is just the sort of a urban areas, london, where they voted to remain.

-- youember you get remember nigel farage's party that pushed brexit and delivered it to an extent. tom: thank you so much. emma ross thomas, always brilliant on this important vote. we will have coverage of this through the midday in london, and worldwide on bloomberg news. we are going to continue with our guests. he is truly a founding father. we are thrilled to bring you ought marketing -- bring you ssing, now at the center for financial studies. he was there at the outset of the ecb and the euro. this is bloomberg.

♪ francine: this is "bloomberg surveillance." we were talking about brexit. now let's get back to what it would take to actually move the pound maybe on the back of the vote a little later in the house of commons. peter, when you look at pound dynamics, how doesn't move depending on -- how does it move

depending on what the outcome of the vote is? >> is the rebels win, if the government is defeated here, it will probably first of all knee-jerk go lower. what i think will be the enduring reaction will actually be rising. , if that takes out the possibility of the u.k. leaving the eu without a deal, it means that we accept any deal that is on the table. that means that the financial markets and the corporate sector are just thinking about existing trade relationships, broadly speaking, remaining in place. what sounds like a difficult outcome has political risk, but it doesn't have so much economic risk. that is what the pound ultimately will care about. francine: the you agree with that? >> i think removing the crash out scenario is important.

the crash out, i think, would be a very poor economic results for the u.k.. however, the political risk will also pick up. what does that mean for the government? for the prime minister? increases,ability that will be a problem. obviously the currency is the first asset that react. i think we need to balance this, too. it is not straightforward. short-term, i think it will be quite a bit of a problem. backthe idea of bringing an empire, a united kingdom that could set up its own trade relationships world why -- relationships worldwide.

is that a theory that can actually happen, or just a hopeful wish? >> i think that was the story that brexit was telling, but it is very difficult. look at canada, that tried to change a little bit away from the u.s. in the early 2000's and managed to strike a lot of trade deals in an unprecedented way. it was just a handful of them over less than two decades. now the u.k. is trying to do that in a clash out scenario. imagine what that will entail. tom: we've got to leave it there. we were would turn -- we will return. stay with us worldwide. this is bloomberg. what's a gig of data?

well, it's a whole day's worth of love songs. 300 minutes of baby videos. or, it's a million chat messages. a gig goes a long way.

that's why xfinity mobile lets you pay for data one gig at a time. 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: good morning, everyone. this is "bloomberg surveillance ." let's check in on what is trending on tictoc.

new york plans to sue the united states over the issue of splitting up families at the border. governor andrew cuomo says he is taking action. when opec meets friday, there's likely to be a significant gap between the headline numbers and the amount of oil that can actually be added to the market. follow our coverage live from vienna. and our most recent stories on the bloomberg terminal over the past few hours, general electric has been kicked out of the dow jones industrial average. theresa may refuses to back down ahead of a crucial brexit vote in parliament. and north korea's kim has returned to beijing in a demonstration of how tariffs could spiral into more than just trade. stephanie baker, there's so much to talk about here,

including a fiery speech by president trump. i want to go to what i have heard from people i think three times last evening in an america riveted by this debate. ok, we are going to get the children and parents back together. ,hether we are in germany italy, or trump's america, what do we do with them? do we send them back to guatemala? reporter: this is the question this whole policy has raised. by separating children from their parents or who they come to the u.s. with, they are creating this massive bureaucratic mess where you have parents, mothers looking for their children who have been separated. i heard of one case where a mother was trying to find her seven-year-old son, didn't know which detention center he was in.

this is impossible for the u.s. government to manage. at the same time, you have trump basically telling lies that this is a policy created by the democrats and only by passing legislation in congress can it be reversed. this is a president that has used executive orders widely. he could easily instruct the department of homeland security to stop this policy. it remains to be seen whether or not congress can actually act and push through legislation, and how quickly it will take. this could drag on for months. we are looking at the specter of thousands more children being detained in these horrible detention centers. tom: to be clear, there is a real mystery about the size of this problem. in june, august, or december. what can mr. trump and america learn from the migration/immigration refugee experience of europe? inorter: it is a huge issue

europe, as well as the u.s. we just had this boat that italy refused to accept. , the frenchn president, and german chancellor angela merkel meeting yesterday to talk about immigration. it is a big challenge facing merkel, as we know. eu has works -- the tried to work together to come up with a common policy on this. , notng refugees away following international law in the handling of refugees is no way to response to this crisis. it only makes it worse. francine: we have to be careful not to confuse what is happening in the u.s., where you also see some pretty harrowing footage of wailing toddlers, which is different to what is happening in europe, where he are not seeing that at the moment. what does it mean for the

republican party in the u.s.? you either stay with the part ist's the party line, which -- the party line, which is zero tolerance on immigration, or side with the majority of americans who object to this policy of separating the youngsters with their relatives. reporter: it is a policy that appeals to trump's base, but only a fraction, because you even have evangelicals who have come out against it. prominent members of the republican party has come out against it and worry about what it might do to the november midterms. have seen polling about how popular this policy is. a slim majority of republicans agree with trump. the vast majority of americans oppose this. it sets up a situation whereby the democrats could sweep and

gain control of congress in november. tom: to your expertise on cyprus and mr. manafort, i believe he is back in jail. what does it mean? reporter: they have piled pressure on paul manafort by taking this action and putting him in jail. it doesn't look like he is willing to change at this point. whether or not that indicates that he believes whatever happens, he will be pardoned by , it is unclear to me whether or not he has anything to offer robert mueller that would allow him to cut a deal. he is obviously sticking to his guns and believes he's got a strong case. we will find out when his first trial begins in july, but the pressure has been piled on him. francine: thank you so much, stephanie baker.

antonio and peter are staying with us. let's get to the bloomberg first word news with sebastian. reporter: the trump administration is ramping up pressure on china. the white house is accusing beijing of hijacking electoral property and threatening u.s. security. a scathing report was released as the u.s. considers whether to impose tariffs on another $200 billion of chinese goods. kim jong-un is in beijing for , carrying xi jinping out the results of last week's summit with president trump. the head of iceland's central banks his life will be easier now that the u.s. and the eurozone are normalizing policy. >> normalization in monetary policy in the eurozone and the u.s. is very welcome news for us. things have been very difficult for us, to have significantly

higher interest rates and the rest of the world. economy that small has an aspiration to be very financially integrated with the rest of the world. reporter: it is too early to say of interest rates can come down in iceland. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm sebastian salek. this is bloomberg. tom: thank you so much. with us as our guest as we wait antonio andng, peter. peter, let me go to you on these markets. i want to set up germany here. how separate is germany from the rest of europe right now? >> it used to be quite distinct, but actually the date of the past quarter has shown it kind of crashing toward the eurozone average. ishaps now it's momentum

becoming so negative that it could be seen as showing some signs of distress. we would contend that the reason for this is really that the growth in exports was superstrong, the strength in the euro that accompanied that just meant it was a small bubble that popped. i don't see anything majorly concerning their. certainly is coming down to earth. the president of the united states makes a big deal about trade deficits. inform our audience of the german surplus dynamic in their trade. >> it is still a big issue and will continue to be a big issue. ,ilaterallveus the u.s. when you look at the surplus, we 3% oflking north of 2%, u.s. gdp, half of that is the

auto industry. going back to the theme of trade wars, if the u.s. were to bring that back to the table, the impact could be quite significant for germany and the rest of the euro area. , it is not just a german issue. issuealso an important where they are highly integrated in the european union. it would damage severely the euro area. francine: do you think they are complacent about these trade tensions? >> to some extent, yes. this is an issue that is on the table. when i look at the european policymakers, i am not sure they are taking the trump administration sufficiently seriously. initially the hope was maybe trump will be gone after some period, but what the administration is there for six years? we will have to deal with it in

a serious way. it is difficult because of changing views from the trump administration, but i think this is not just talk. deficit, is the trade and in particular auto. they will have to think about coming up with some agreement, because the issue is coming up. francine: do you agree with that? >> i would agree there is signs of complacency, really driven by not being seen as wanting to inflate the rhetoric. i think that beneath the surface , the fact that it is manifesting itself in ecb policy statements shows that the concern is there. but i think it is not quite being expressed correctly at the market at the moment. francine: thank you so much. you will both be staying with us. draghi speaksio

with his counterparts from the fed, the boj, the rba, all moderated by bloomberg's had of economics, stephanie saunders. p.m.is coming up at 2:00 london, 9:30 new york. this is bloomberg.

♪ tom: good morning, everyone. stephanie flanders was an today.nt panel ssing is one of the founding forces of the euro and the european central bank.

he has a collective history inng of germany. there is immense turmoil injure morning -- in germany. we see it in the battle over immigration. merkel learn from the past leaders of germany? guest: i think there is no comparable event which could be a kind of benchmark for chancellor merkel, but i think she had to learn that it was one thing to decide to open the doors in 2015 for the immigrants, and then to meet the challenges which are connected with such a flood of immigrants. germany is still suffering from that. there are many schools in which the percentage of foreign pupils

is very high. there are genetic consequences for the school system, the , in terms oftem the immigration policy. andakes it even more clear leads to a kind of uproar the german people. tom: you and i spoke once in dubai about your childhood in the degree of world war ii and hitler. germany need to learn about this linkage of populism in a strident political debate with a better economy? how does germany adapt to this

new populism? guest: it is quite interesting that you go back 20 years. i should go back even longer. we see populism that only emerging in germany. it has become a global phenomenon. but germany, with its past, it is very exposed to the dangers of populism. i think so far there is no threat for democracy, but we have to be very careful. populists have to be taken serious. one should argue with them, not ignore them anymore. they are too strong for that. but good economic performance so far works like medicine calling the people -- medicine calling the people -- medicine calming the people. but in case we have a recession, we could have a new chance. francine: what are the chances,

professor, that the u.s. starts a recession or that europe starts a recession in the next two to three years? i think any recovery comes to an end. in the past there was a saying, no recovery dies by itself. it is killed by the fed. that means it is tied to monetary policy. i think the easing of monetary policy committee by the fed was very appropriate. on the other side, we have strong fiscal stimulus. i think overall there is balance already for a very strong economy. how long this can last, we will have to see. francine: is there a danger that the ecb is so far behind in the global cycle that it will still

have loose policy when a recession hits the u.s., and therefore will not have enough tools to deal with it? this is a risk, but if you say this recession in the u.s., if it comes at all in a rather short period of time, two to three years, the ecb still has a long time to prepare for this moment. i think the decision last week to announce the end of quantitative easing was highly overdue. if we coulding, turn to mario draghi and the stunning headline last week that he would basically delay of interest rate rise for at least 12 months, maybe even 14 months, i don't believe that is in the issing ecb playbook. is this a new policy?

is this a new creative solution to the monetary economics of now? do you support the idea of a verbal delay of 14 months? guest: [laughter] the playbook, as you call it, was a kind of general textbook .f monetary policy since 2008 we have a different game, and monetary policy is played according to a different playbook. i think this is appropriate. is the euro area economy still needs stimulus, but does it need such a strong

stimulus then at the peak of the crisis? tom: i guess we should all 116 euroate you on a setting years ago. is that where it should stay forever? i am not anymore a central banker. this is the greatest risk for the reputation of any person. francine: we've heard casting economy, that the market was complacent in this tit-for-tat trade war between the u.s. and china. are they right? i don't think anybody is complacent about this risk. this is the biggest risk not

only for the global economy and individual countries and germany . it is extremely exposed, for example, to higher tariffs on cars set by the u.s. but in the end, they will be only losers if we embark on a trade war. it can still be prevented, but the situation is worsening almost every day. francine: what do you think economists or economics are getting wrong in germany, but also on the world stage? guest: i didn't get it. francine: i was asking you what economists get wrong, what they misunderstand about the economy today? guest: i don't see that. i think the understanding is more or less uniform, and i think it is correct. on how onediscussion

should react to the recovery in the economy, to potentially higher inflation in the future, how to stimulate the economy. i think there's more basic commonannderstding than before. francine: thank you so much. there, the former ecb chief economist. 21st century fox will consider comcast's bid today. we've been told it will discuss the proposal. joining us now is bloomberg's paul sweeney. what do we know about what will happen today? is there a way that this will likely go? reporter: i think the 21st x board must consider the comcast offer, a

superior offer from a credible bidder. you absolutely must entertain this. the real question becomes what does disney do. how quickly does disney come back, and at what price? tom: rupert murdoch is 80 whatever years old. he wants to do the right thing. what do the kids want? hasrter: one of the sons decided to go with what is remaining at foxconn and the other side is going to go out on his own and do something on that front -- at fox, and the other son is going to go out on his own and do something on that front. i think the murdoch family has really decided they cannot be a player in the global media telecommuting patience technology game. like time warner, which sold itself to at&t, rupert murdoch and his family have decided they

cannot be long-term players in this game. therefore they are looking to sell. tom: on the long-term trend on , what is taking so long here? guest: what is taking so long here for the fox deal is simply that there is a huge amount of assets here. you've got insider ownership in the murdochs, two credible factrs, and despite the that rupert has negated he would rather sell to disney, if you are the independent board you must entertain and give full airing to the comcast bid. i think that is what the board will do today. francine: i know we talked about regulators in the past. have we heard from them? has anything changed in the past couple of weeks on how regulators would view this? guest: the big change in the

last week or so has been the at&t deal getting essentially approved to buy time warner. that really opens up the for comcast to pursue 21st century fox because you like the at&t-time warner deal, if 21stst were looking to buy century fox, it would also be a vertically integrated deal. that really give confidence to comcast to move forward aggressively. francine: in terms of how does this -- whatever happens and whoever will get it, how does it change the landscape overall? does it have an impact, for example, on the chinese? guest: what we are seeing here is comcast and disney both saying we think we can be long-term players in a business, and entertainment and media business, that may come to be dominated by the technology companies. google. amazon,

if they are going to be players in that more global entertainment play, they have to bulk up on content and their non-us businesses. the 21st century fox assets take off both ofs tick those boxes. paul, safe travels in london. coming up in our next hour, a timely conversation on asia and finance. david solomon of goldman sachs with our stephen engle in beijing.

crucials morning, a

vote for prime minister may. sterling weaker. a new goldman sachs, david solomon speaking in beijing. outrage continues over separated children and parents at the mexican border. the senate has one planned, the house another. the president wants to "secure our border." we are live from our world headquarters in new york. i am tom keene in london. this is an interesting brexit vote today. or twoes are down to one parliamentarians. we can't figure out whether theresa may will win this or not. can crash out of the eu

or go to parliament, so a different negotiating power theresa may would have after this vote. tom: let's get to first word news in london. >> the trump administration has carried out its threat to leave the united nations human rights council, calling the group of human rights abusers. the u.s. has singled out the council for being biased against israel. prime minister may is refusing to back down before a crucial vote on brexit in parliament today are battling pro-european rebels in her own party over whether she has the power to take the u.k. out of the eu. 21st century fox paving the way for a bidding war over its entertainment assets. the company is leaning towards starting negotiations with comcast.

six months ago, fox agreed to sell the assets to disney. starbucks tapping on the brakes, the chain will close 150 company-operated stores over the next fiscal year and expects comparables sales to rise just current quarter, the worst performance in nine years. -- is in good place to advance to the knockout round. cup,he latest on the world log on to the bloomberg terminal. global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. tom: thanks so much. looking forward to the world cup.

you and i still at the bottom of our rankings. we have to do better. francine: i know. need an economics world cup, or something different. tom: i like that. i like that. equities, bonds, currencies down two-day churn. 12.75 on the vix. a bid, neither can sterling, dollar candidate weaker. that is an important level. is europeanis stocks rising with futures, tracking gains in asia. andt of the anxiousness yesterday was on trade concerns escalating, treasury yields, and dollar higher. oil climbing. tom: this is a sterling chart.

there it is with this important brexit vote. down we go, up we go, strong sterling against consensus. i don't have a strong opinion here, but where we are right now is where we were 48 hours after the vote. francine: this is my chart. and is renminbi and china how the trade war could spillover, accelerating losses in the chinese currency prompting questions about whether policymakers could use it as a weapon in a trade war with the u.s.. you so much. in the chaos of the american debate and culture wars, people are reading, thinking, and listening as hard as they can. they can go is mr.

brooks at the new york times, who wrote a cogent political essay. there are 11 million unauthorized immigrants in this nation. every past administration has used some discretion on targeting whom to deport. today, discretion and humanity out.eing steppe stamped people like stephen miller are not steeped in conservative thinking and do not operate with a conservative disposition. we go to the conservative thought this morning of our kevin cirilli in washington. an extraordinary debate. what will kevin cirilli try to listen for today in our culture war? duen: what will paul ryan to unify the republican party in terms of getting a legislative fix through congress. there was a remarkable scene last night about dinnertime in the united states when president

trump to meet with republicans on capitol hill, walking arm and arm with house speaker paul ryan. is no question that despite president trump's that republicans have all the power. a super't have majority, but they have all the power on capitol hill. democratic members of the hispanic caucus on capitol hill standing in front of tro' president trump as he exited come up asking him to do something on behalf of these migrants. secretary nielsen running the cabinet office. how much would speaker ryan's district in southern wisconsin, north of chicago, southwest of milwaukee, what would you guess his constituents would like the speaker and the republicans to do? think he is an outgoing

speaker. i will never forget when canada and havepaigned there the crowd booing paul ryan for not being conservative enough. you have that dynamic. the second dynamic is that this is a district that has a plant operated by boeing, and many folks are employed by the supply chain of boeing, so they are not too thrilled with what is going on with regards to the trade policy. paul ryan is in lockstep with president trump on ,is trade policies, that notion i was on a call yesterday with officials who doubled down on their notion of trade and will keep going with this. they are citing national security concerns the spite the pushback from global leaders and from republicans. francine: how much time does the to sort thise immigration scandal in many ways

before it starts affecting the midterm elections? kevin: i think it has started impacting the elections. you have seen democrats united against the proposal. you have centrist republicans practically begging to vote on some type of legislation that can get them on record against this policy. the more and longer this goes on, especially in the summer, that, again, if conservatives are able to own the issue of building the wall, democrats are able to own the issue of separation. tom: thank you very much. up, a with david solomon of goldman sachs with stephen engle in beijing. this coming off the lloyd blankfein conversation yesterday. blankfein first, then david solomon. this is bloomberg. ♪ loomberg. ♪

tom: in china, or stephen engle. the interview of the day. >> hi. we welcome our audiences on bloomberg television and radio president with a the of goldman sachs, david solomon. thank you for your time and having us in your offices. what is your take on the brewing trade friction? some are saying it is getting into a bit of a war. what is your perspective? >> thank you for having me. it is nice to spend time with you this morning. the relationship between china and the u.s. is a hugely

important economic relationship. thelevel of friction around trade discussion has been escalating. that is leading to some question about where this will go. obviously hard to predict. market participants are watching morely, but to escalate significantly, it would be bad for china and the u.s., so my hope would be the rhetoric is put aside and a constructive solution is worked through. >> what are you getting from your chinese clients? what is on the top of their list of concerns? >> everyone is talking about it. would mean escalated implications in china and u.s. clients, so people are interested in seeing how this unfolds. is hopeful because this relationship is so important that there will be a

constructive solution and we will move forward. thisoyd blankfein saying was a negotiating tactic from of white house, and either both sides will not be conducting mutual suicide here. >> it is in the interest of both parties to find a constructive solution. if people do it economically, and there are medium and long-term interest, we should get a solution. thatw concerned are you this could spill into financial services? the chineset reforms to allow foreign banks have full ownership of joint ventures. getwould like, i assume, up to 100%.rhaps do you see there is a potential for this happening? >> we are encouraged by the messages the leadership has conveyed. that is something we will accomplish over time and are

continue tot, so we invest in our business here. we see the opportunities in china to be quite significant. we announced they significant higher in our partner banking business in china, so we continue to invest and grow. we will be here for a long time. in a broaderings perspective, we are confident this will move forward appropriately. newou referring to your head of your china business in beijing. what signal does that send as far as the amount of capital and the emphasis on banking going getard, if indeed you do wholly-owned control of the joint venture and how much you can allocate with capital? investing a long time with a joint venture structure. we invest today and are encouraged we are moving towards 51% ownership, and hope we will

on 100% of our business here. stopping us is not from investing and putting us in position to serve our clients and provide the services that are so important to them. you getting signals from the government that they might delay applications or reviews of applications? the people's daily did have an op ed in april saying nations wto rules or engage in trade force will not benefit from the liberalization policies they are enacting. >> i will not speculate if there was an all-out trade war. we are moving ford on the basis that it is constructive to continue to invest in our business, with the application process, and looking to file as quickly as can't, so we are optimistic about the process. >> what is your view on the u.s. economy right now? there are concerns that may be

the fed is tightening too fast as the yield curve is flattening. if it does turn to trade war, it could also limit growth in the united states? >> two separate issues there. we are watching the normalization of interest rate wallace it closely in the u.s. the u.s. economy is doing quite well. if you ask me to wager a guess, i guess that will continue for some time. what could upset that is a change in sentiment. one thing that could change that sentiment is if the change in monetary policy happens more quickly compared to what the expectations are right now. right now there is an expectation for a certain number of hikes into next year. if that progresses in the same way, i think markets will react positively. if sentiment changes, that can affect markets. impact onnother sentiment. if we have a further escalation,

that could affect sentiment and ,arkets and economic activity so you have to watch those things. those have the ability of slowing this down, but unless we really escalate to something more severe and more significant , the u.s. economy is in pretty good shape. >> are you seeing investment flows slowing? maybe money will go to the sidelines? >> i say that is too dramatic. significantlyit escalates from here, i think you might see that, but up to this point, and we would all agree the rhetoric has increased the last few days, it is not enough time to see if that is affecting investment flows. >> how about your plans for private bank and wealth management. see the growth of the private bank in particular in asia? >> we are very excited about the

opportunity to expand our wealth management business all over the world. ,e see with the growth in asia opportunities continue to expand in asia. the growth of our consumer business is mostly a focus on a deposit platform in the u k and europe, but technology is allowing us to go and build a platform and provide products to consumers in a different way to solve their problems are pain points in a different way than traditional providers. these would not have been businesses without access to without buying or building an enormous traditional retail banking and broker infrastructure. productou can provide a or service to a slice of the addressable market that is differentiated, and we are focused on doing that.

it is connected to other products and services we are prepared to offer, ridiculously wealth management. that come with building that platform and we but excitedon that, about the opportunities to serve a new group of clients with a differentiated product. that will have to be proven over time. >> is that something that could work in asia and something you would like? >> we are a u.s. company. andave in all its access footprint in the u.s.. there are people that compete in those businesses over here that don't compete in the u.s. and so for the moment we will be focused on building that business principally in the u.s. serveso something that consumer needs and build the next router platform, there will be opportunities to expand over time. a goal of $5s billion in additional revenue. which mainline will be given the biggest booster? >> the $5 billion of growth

initiatives we outlined last fall touch fixed income, equity, investment banking, incorporates growth and investment in this consumer platform and our wealth management is this and investment management business broadly. we set those growth initiatives out a year ago to start to talk about some of the places that we were invested in and growing that is not the limit of our ambitions. investing in a variety of places and driving growth. those are moving forward appropriately, but we look for productsities the and use technology and our footprint to expand the services we provide. aboutasia, we have talked the securities joint venture to a fully owned entity eventually. employees, roughly 300 in

total, do you see significant hiring? >> our business in china will continue to grow over the decade and we will add resources to the business. the higher today is a senior higher an indication of our continued commitment to investing in growing the business here. as the business scales, we will add to it. we believe as markets open up and liberalization of the capital markets here, that there will be a broader opportunity here. they make a lot of pledges, but often times it is the implementation that is the question. msci has happened and we will get china depository receipts as well, but it is a slow process. isthere is no question there progress, but it is a slow process. as you think about building your besence in china, it will

important for us to stay committed and we are patient. what i'd like it to move faster, of course i would. and we will dod what is necessary to move forward in the appropriate way. >> i assume you won't give me a date on when lloyd blankfein retires -- >> if he gave me one, i could give you. >> how are you shaping the goldman sachs you would like to lead? >> lloyd is the ceo and running the firm. there is a succession process in that context. i and the president and ceo of and we shape the direction of the firm together as the firm moves forward, so i am in a position to have a strong voice with lloyd in driving the organization forward. i'm looking to make sure we do that in the best way possible for our shareholders, stakeholders, and clients. goldman does not

change, but may be the strategies and emphasis change of little bit as you are going into consumer banking? bitcoin, we know lloyd is not a fan, but you have started derivatives trading in cryptocurrencies. do you see avenues where you would take the bank that lloyd would not? >> one of the things you have to recognize about any institution, and goldman sachs will celebrate its 150th anniversary next year, organizations have to leave all. it is evolution, not revolution. it will be important for goldman sachs to continue to involve the a 10-15 your with view come at will continue to see goldman sachs evolved. we of the things we have is operate globally at scale a number of businesses, and that gives us opportunity to add other businesses to that portfolio of services we provide. we are focused on that and continue to be focused on that.

are their businesses we are not in now that we make it in? we will see. we are always looking at new opportunities. you mentioned cryptocurrency, we are cautious, but exploring those activities. selling futures around bitcoin, talking about doing some other activities there, but very cautiously. we think blockchain is extremely interesting, but we are also going to be cautious and we are listening to our clients and trying to help our clients. >> thank you for your time and views on goldman sachs and the road ahead. >> thank you very much. tom: thank you so much. i appreciate that conversation with mr. solomon. that with a conversation yesterday with lloyd blankfein. is ofo back on today's

interest to all global wall street. right, dashcam i francine: last year we heard from them one after the other come up a couple of days we have been talking about whether there was some coordinated action. seeing where the fed is going, it will be difficult to have that impact. in the context of that new budget that germany was willing to go at it with france, that question could be significant. in this panel that stephanie flanders will drive, i suggest something could come out of that panel. francine: i agree, especially when you get them to talk about divergence. it is amazing to have such a star panel with the governors kuroda, governor powell, and mr. draghi.

it will be interesting to see have a difference it themselves and talk about currency dynamics. tom: please look for that at 2:00 p.m. london time and into the late morning in new york. a lift to the market today. down off that trade news, and up we go this morning. i am watching gold. and tom keene, finance, investment, and the relations of washington, the brexit vote of london. please stay with us. this is bloomberg. ♪ ♪

tom: good morning. looking at the terminals, futures up. to london. here is first word news. trump administration

ramping up pressure on china, accusing beijing of hijacking international property and pursuing policies that threaten economic and national security. report was released while the u.s. considers another $200 billion of tariffs on chinese goods. president trump hardening his stance on the family separation policy, saying the alternative "s "totally open borders. the president is facing a backlash of both parties. kim jong-un is not in a rush to get rid of his nuclear weapons. he is in beijing to talk with president xi jinping. he is interested in a gradual process. life will be easier now that the u.s. and eurozone are normalizing monetary policy matt miller spoke with him at the ecb form. u.s. is goodne and

for us because it has been difficult for us to have significantly higher interest rates than the rest of the world , because we are a small, open economy that has an aspiration to be financially integrated with the rest of the world. still too early to say if interest rates can come down in iceland, he says. global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. tom: thanks so much. we need to look at trade and fold it into what you need to do in international investment. oppenheimer funds with a strong international component to what they do 24/7. is your outlook with all the news flow and trade flow?

how do you adapt and adjust your outlook? >> we will focus on our long-term perspective. we will be dealing with volatility around the trade issues. both china and united states have a lot to lose and a trade war. ar view has been that you had recession in the emerging , and we had a015 nice recovery off of that. weeks a strongnt dollar amid fears of fed tightening and a trade war, but the last time the united states saw stimulus of this amount was 2001 and 2003, a lot of that leaked around the world to the emerging economies and account surpluses went up significantly, and that was boom times for emerging markets. it has not worked out for the last 5-6 weeks. tom: look at the chart.

this is why brian has aged is so much. this is why brian has aged is so much. stronger emerging markets. here is why he has aged. down we go. what do you do about currency emerging-marketersio international investing, hedge it or go with it? >> on fixed income, you would want to consider what kind of currency exposure you want to take. to be driven by rates, credits, currencies. a lot of these countries are hedging the currencies for you. over long-term it is awash that plays out over time. in some periods, better to hedge, and others not. over the long-term it does not matter. it adds cost and complexity to the portfolio. francine: what does the dollar do in all this?

>> if the dollar were to get stronger here, we would have to start considering the prospects of deflationary impulses on the u.s. economy and a potential recession. our view is the dollar is still overvalued and our view is the 90 states running twin deficits is going to lead to a long-term weakening or at least eggless so wet of the dollar, need to be cautious about over extrapolating significant strengthen the dollar, because if the dollar get stronger, the fed will have to back off amid inflationary forces, so our view is that the stimulus, again, hoping that this trade rhetoric does not heat up significantly, and our base case is this does ,ot lead to a all-out trade war

that money gets reinvested to fund the u.s. deficits. that would not be a strong dollar environment, but of course that is considering that these trade war's do not become significant, or this trade rhetoric does not lead to a trade war. francine: let's say the rhetoric does become more significant. is that deflationary or inflationary for the world economy? ins up happening is you get some insulation or impulses in the united states in the short term. stimulus and prices going up, but that leads to fed tightening, strong dollar, and long rates come in come so it would ultimately be deflationary to the united states and potentially lead to a recession. i don't believe this is going to happen. when you are the united states and you need to fund large deficits and you are china and

sell a substantial amount of goods to the united states, it is not in your interest to go down this path, so 25% on the first 10 billion, 10% on the next 200 billion dollars, large, but not catastrophic. ultimately what the trump administration is attempting to do it is gain access for businesses and prevent intellectual property theft, not to create a full-blown trade war that leads to a collapse of the global trade order. tom: we will turn to central banks in the moment. your briefing on radio coast to coast is hugely popular. the news-driven bloomberg daybreak, look for that. we do that in new york, washington, boston, and on the west coast. on sirius xm channel 119 worldwide. this is bloomberg. ♪

francine: we are getting , 2.8ing news that the eu billion in imports as of friday in tariffs and retaliation for what the u.s. has imposed on europe. i'm trying to find a breakdown of what goods. for the moment, we don't have it. the headline probably coming out of that european commission speech. pdf off of may come a click through of what was released moments ago. this is what we do with. i don't know what that is.

it is not cheese. , bourbonown here whiskey in containers holding less than two leaders, and i am stunned that bourbon whiskey in containers holding more than two leaders is involved as well. that is an example of the on eu trade, now let's go to our business flash. >> president trump will pressure after the senate voted to restore sanctions on zte. president xi jinping asked president trump to back off the company. still begnaling it may having problems shifting to the cloud. it projected profits in the current quarter that missed estimates. oracle has expanded cloud offerings to beef up sales them

up but there is concern the company has not moved fast enough. the central bank and the philippines is following through to curb inflation. they raise the benchmark rate for a second month in a row. to 25 basis points to 3.5%. regionalhas balked a trend by keeping interest rates on hold. francine: thank you so much. stephanie editor flanders has an all-star panel at 2:00 p.m. london time where stephanie will be joined by jerome powell, mario draghi, and -- that taken first of all by the markets are complacent when it comes to trade concerns. marioo you expect to see

be?hi's message to will he try to reassure the markets the ecb is not so far behind the global cycle they would not have the tools left? >> i think we have had a lot of emphasis from mario draghi this week building on what he said last week. on optionality, flexibility, he keeps underscoring that they have laid out this path for gradually tightening policy or at least removing that extremely , but keepsng pointing out we are not stuck on an end of the year target on when we raise interest rates for the first time, on when we start reinvesting. all these things could be changed in response to global conditions. some people say you talk about the little flexibility you have, but i think that will be the message. the central bankers

look at possible trade war's? like most people looking at the global economy have said that kind of tariffs we are talking about, the share of global imports, even the share of u.s. imports, is still relatively small. as you start to get the retaliation, whether canada or have anthat starts to effect not just on current activity, but the effects on confidence. if you have a chilling effect on investment, that could be worrying for the recovery down the road, because this is when you want to see investment ramp-up. tom: is anybody worried about strong dollar, or do we have room to move before it becomes an issue? >> i think it will be interesting. there has been remarkably little talk about currencies. they have been talking about

prices, wages, and the phillips of current monetary policy dynamics and less on currencies. i suspect we will get into that come up that it is unpredictable with a cast of characters like that, but the questions about the impact on emerging-market reserve bankt the of india has race, the combined impact of loser fiscal policy in the u.s. and the shrieking balance sheet, i think we will get into that and the implications for the dollar him a maybe. charm, i'mour usual sure it will be an adjusting panel. thank you very much. there is the panel. that is 2:00 london time, 9:00 in new york. oppenheimer funds with us. this research.

the curve flattening we are seeing needs to be adjusted for balance sheet dynamics. explain why the unwind of chairman powell's balance sheet affects curve steepening and takes us away from recession fear. >> what the fed and central banks have done was to buy up longer duration bonds with the intent of compressing the term rhenium and risk premium of these longer lawns. this is the policy the fed and other central banks had to turn to as we got to zero interest rates. estimates suggest the balance sheets is still compressing the tenure term premium by 80 basis points. even the low end of that estimate is 40 basis points, so if you were to adjust for the

fact they are compressing, you have a steeper yield curve. tom: do want to guess the length of balance sheet unwind, or is it still a mystery? >> it is still a mystery, but an interesting question of the past weeks. it waslier review was going to last until 2022, but there is uncertainty about the equilibrium level of reserves in the system, and people are adjusting that expectation upward and bringing in the time period where the balance sheet drops, 2020, even as late as 2019. francine: matthew, when you look at this issue, is the fed the central bank to the world? others orink about take care of the u.s. economy? that setave to send monetary policy to domestic conditions.

jerome powell had a speech on this where he was worried about, talking about spillover from the fed policy into emerging markets. he said we have to take care of what is happening in the u.s. economy and environment where you have above potential growth, the labor market below full employment, and inflation near target, so we expect the fed to continue to raise rates. it will affect financial conditions, but we expect them to set policy for the domestic economy. francine: brian, do you agree with that? >> i do, but it is all interconnected. if we think about the first rate hike, the dollar rallied, the tenure rate went down, and the fed had to back off, so it will be connected through the currency markets. the dollar is the game investors should be watching. if the federal reserve gets too tight, here come the deflationary impulses and the

fed will have to back off. about price stability in the united states, but the transition mechanism for that will be through the u.s. dollar. tom: matthew, thank you for joining us. , you have a meeting with brian today. you have to dazzle him with your knowledge of emerging markets and fx. this is a chart over which brian has aged, or maybe it is sterling weaker, or maybe the yuan tumbling again. go to gtv and you can steal those charts for your morning meetings. stay with us. this is bloomberg. ♪

francine: this is "bloomberg surveillance." looking to that opec of energy lot ministers arriving and speaking to reporters on the ground. iran saying absolutely no compromise. they don't want to go along with the plan russia and saudi have.

the saudi minister saying there will be an opec meeting on friday, but we had that terrific briefing this week saying they have three options. if no compromise, it does not mean extra barrels of oil will not get onto the market. that is the latest from the saudi energy ministers saying there will be an agreement on friday. tom: it is the single best chart of the edison motor works of schenectady, new york ages ago of, edison and general electric. all 30 iomponents, have highlighted here, general electric at the bottom with a massive under performance since 2007 and the crisis. -- visaapple and fees a . with this is brian from oppenheimer funds. ge goes out the door, replaced

by walgreens. stock selection still matters come it doesn't it? >> it does. this has been a long environment of outperformance by growth stocks. that really comes down to what is global growth. in the post-financial crisis world, this has not been a period of robust growth globally. growth-weak in a world, so investors are willing to pay for growth wherever they can find it. tom: back to the chart. in the land of etf's and index funds, everybody is in this area with a massive investment in passive. the math shows it is tough for active. >> i don't think a lot of money is following the dow.

what you have seen in this environment, low rates, pe expansion, a good run for passive strategies. i think it is cyclical like everything else. rise rate, you are seeing is specifically an active managers favoring growth investments. that investors will be most surprised by the next period when not be the outperformance of passive strategies. francine: are there any classes,s or market anything bond related in europe, that you would stay away from at this moment in time? >> right now investors want to .e cautious i believe strongly that emerging markets and growth assets are where we want to be. that was our call at the

beginning of the year. performed,ts have emerging markets tripped up over concerns of trade wars and some idiosyncratic events, but to me this is an employment where we need to favor growth where we can find it, in u.s. companies and em equities. francine: when you look at em , does that depend on dollar, so goes back to your initial reaction on dollar strength? >> yes. if you are a u.s. investor and the dollar gets too strong, investing in non-dollar assets will not be ideal. the u.s. dollar is already overvalued and we are running big fiscal deficits and likely to run big trade deficits. to me that portends weaker currency, good times for

emerging markets, a trade war could disrupt that, but that is not our base case. tom: thank you. much more to come. look for a replay of our conversation with lloyd blankfein, and david solomon of goldman sachs as well in beijing. up up another important set of conversations with mario draghi, powell, kuroda. this will be really timely. the markets churning higher today. in washington with the news as well. this is bloomberg. ♪ this is bloomberg. ♪ retail.

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u.s. accuses china and a new 35 page document. market jitters take a break. again, a voten, will determine the path of brexit negotiations. deal or no deal, iran rejects any output compromise and will leave the opec meeting early. oil prices are caught in the middle. david: welcome to "bloomberg daybreak." welcome back. big day tomorrow. opec. >> i am into it. right? questions as to what it will mean for oil prices in terms of how much capacity they can add back. saudis get tohe decide? alix: they kind of do, but how much market she