francine: scherzer of the german automakers site. opec optimism, iran softens its stance. we are live in vienna as the group meet. theresa may lead us to fight another day, and survives the parliament bill. brexit -- a hard brexit more likely? good morning, welcome to "bloomberg surveillance."

this is what your markets are doing, this is the dollar index. you can see the dollar strengthening, hitting the highest in almost a year. a lot of the focus is elsewhere amidst the straight wars and its impact on global growth. we are getting some sexual bank action.- central bank then that big opec meeting in vienna, currently at $65 and $.20. it was the first corporate to --e out, it's dying when this german automaker. coming up, we speak about theresa may and defeat in parliament, will also speak to a chief executive after saudi arabia engaged inclusion on the

index, and later today, we speak to thomas jordan, president of the swiss national bank. first, let's get bloomberg first word news. >> donald trump is planning to meet with vladimir putin. bloomberg has learned that two possibilities for the meeting are either before the nato summit in brussels or after president trump's visit to britain. the white house declined to comment. trump has reversed course on his controversial policies separating immigrant children across the u.s. border. he signed an executive order, directing homeland security to contain families together. he has been under intense criticism over the separation which saw around 2000 prison placed in federal custody. it is a problem that has gone on for many years.

we are working very hard on immigration. people having dealt with it, we are dealing with it. china has reiterated they are fully prepared to respond to any u.s. tariffs. ministers -- commerce has said they will hold a trade summit with the european union on monday. wilbur ross joins us after midday u.k.'s on. -- time. off aa may has fended rebellion within her own party. whether mays over should have a party to take the eu at the u.k. without a deal. rebels wanted parliament to have a meaningful role in the deal moving forward. in more than 120 countries, this is bloomberg.

francine: thank you. trade gets real. daimler delivers a 2018 profit , saying consumers will buy less as a result of tariffs. for more on this, let's get to germany, and to our bureau chief. how is the trade war expected to hit profits in europe and germany? chad: it is an interesting story. being a about daimler carmaker, so we wonder how this trade war is hitting them. but what they have said is that essentially because they produce most of their suvs for export around the world at a factory in the u.s., they are very concerned that terrorists on going into china

will hit profits and demand, because chinese consumers are less likely to buy their vehicles. and ultimately, that they want to be able to pass on the full amount of -- tariffs. but none of these auto tariffs have been put in place. so how can it already have an effect? is this an excuse or do you expect similar things? chad: that is a good question. to be honest, a lot of analysts have been skeptical about this morning -- warning. some are saying it is interesting that they are not mentioning the fact that their suvs lifecycle is asian --

aging. generally, the sales tend to go down. beis suggesting that might the real reason sales are declining, not the pending trade war. ourcine: that you so much, bureau chief chad thomas. -- the mosts the's part one central banking express their ideas on a trade war. >> what is the effect on trading, on experts, on consumer confidence? we think there are lessons from the past. they are all very negative. >> those concerns seem to be rising. for the first time, we hear about concerns to postpone investment and decisions. >> what is happening is incredibly disturbing.

can any of us think of a country that has made itself wealthier by building walls? probably not. i can only hope that this andlation can be rescinded that a normal trading relationship would prevail. francine: that was from sintra. so what does the uncertainty actually mean for markets and companies? joining us now, fixed income portfolio manager from jpmorgan. thank you both for joining us. simon, let me to kick off with you. is it now a trade war? should we worry about it more? simon: it is a trade war.

the reason is it is not a it is muchiscussion more multifaceted. as german carmaker talk about its impact on supply and means you cannot ring fenced countries and conclude it is going to impact consumers, you have to recognize that within an integrated supply see andhe boss you will the corporate warnings and you will see will manifest in areas where the dialogue is why separate. -- quite separate. have markets been complacent or they just trying to see what happens next? for markets, i think it means uncertainty. you have seen europe pn

companies not doing as well as the u.s.. businesses are going to be delaying investment. ultimately, what markets are struggling with is that we have been here before. with the u.s. administration taking a stance and quickly backtracking. not unfeasible to say they could actually very quickly deescalate. some more uncertainty. francine: do you have to take a bath of whether this is a play on the midterm election? if you think this is about winning support, ultimately the u.s. administration won't want to go into elections with a market that is correcting or dropping sharply. to the extent that this has not yet dented markets in the u.s., i think the administration is

likely to keep playing on that. overf we see that spilling , i think de-escalation could be in the cards. francine: this is also about a president who wants to deliver what he campaigned on. yeah, i slightly disagree, actually. base't think the electoral who will be key to midterms really care about the equity markets. bothered about the rhetoric of returning jobs to the u.s., america first. what has really generated some support is the top of fair trade, rather than free trade. i think that, more than where the s&p heads, will dictate whether the trump administration keeps this going. francine: you mentioned jay powell saying this is starting to have an influence on how

chief executives higher and see their company. -- the reparable damage repairable damage? will people start hiring again, or does it have a legacy? dent ai think this will degree of how businesses plan going forward. backtracking,cale and going back to the wto for negotiating trade, would restore full confidence. thishe u.s. has optionality on picking up trade war's. it is unlikely. -- unlikelyored that full confidence is restored. economies ofve to roughly the same size. when you start to game theory it , it is very difficult to see a

climbdown with two leaders who rhetorically don't like taking a back step. a lot hinges on the ability to come to an agreement where both premier xi jinping and president trump can be said to have won the dialogue. it difficult to see that scenario. stick around, we talked opec as the gathering gets underway in vietnam and iran -- the anna -- vienna. members are optimistic about the outcome. >> every minister i have met with agrees it is time for us to change course. and to respond to the markets.

and be the responsible producer we have been over the past 18 months. the market fundamentals have shifted. and there is a reality that the market demands more in the second halan what is required in the first half. alternativeseral for keeping the levels that they are today. countries are looking at this, and countries have different agendas. i think we overall have to look at unity of opec as an entity and make sure we come up with a solution that is good for everybody. >> we are optimistic we'll have a successful seminar.

from the sessions this morning, people are very upbeat, very optimistic. my colleague has mentioned it will be 1.5. >> that is one of the most aggressive ones. they are also talking about 300-600,000 barrels. is that enough? for more, let's head to vienna and one of our reporters on the ground. annamarie, great job, he spoke to many people. saudi is proposing a plan for higher outputs. will opec work together on a deal similar to what society wants -- saudi arabia wants? don't worry, manus is all over this one.

he is saying on the record that one million barrels a day is what the market need. t it isreiterated about keeping the angst of the consumers to a minimum. there is clearly some pressure from china, and others. but most importantly for the united states, not just is he tweeted, but we do know that washington has been asking saudi arabia and other opec reducing countries for the capacity to increase reduction -- production. it seems like they are getting closer to a deal. will it be a deal when they say they are increasing production? this is where it gets interesting. they might be going back to 100% compliance, because right now, they are cutting more than they need to. thank you so much.

, our guests. diana, when you look at oil and , do they just automatically look through fuel? don't, because ultimately there is a feedback between -- feedback. for emerging markets, oil prices do matter a lot for domestic consumers. it is not something they look through. i think what comes out of this meeting and impacts oil prices going forward will be key. same time, some emerging markets benefits quite significantly. simon: yes, and their increasing role is quite interesting.

on the fact that there is more volatility and headline inflation that core inflation. core inflation very benign. we have seen it in the u.s. in recent years, but also in the eurozone. the ability of commodities driving up towards 2%. while i do think what goes on in vienna will be headline inflation, most of the central bankers we are talking to are focusing on that core numbe which is quite impervious to emerging markets dynamics. francine: thank you so much. both stay with us. up next, a close call. theresa may narrowly wins a key brexit vote, giving her the power to take breaks out of the eu without a deal.

this is bloomberg.

francine: welcome to our weekly breakfast show. theresa may has fended off a brexit revalue -- rebellion. the group had in pushing to get more of a say in negotiations.

319he end, lawmakers voted 23032 rejected the amendment to may's flagship breakfast bill. -- brexit bill. joining us now is our political reporter. still with us are our guests. thank you all for staying around or joining us. what happened yesterday? the vote was very narrow. it does not have to go to , but theresa may may have done some agreements on the side. >> they have made an explicit promise. they have acknowledged that in the event everything goes horribly wrong in january, parliament will get a say. of these you had one weird moments where both sides sort of said i don't really know what we are arguing about.

robert: he said you don't need a plan for what happens if you don't get a deal. it's like having a plan for window headquarters is overrun, you don't need one, you just run a way. if there is no deal, parliament will have a say. francine: the point is, does it in the brexiteers? robert: i think it does. wing has been urging made to have a showdown with the pro-eu way. they said they haven't got the numbers, you should take them off, she has been saying no, we have to go gently. and they were feeling pretty chipper. they were publicly magnanimous, say the whole party has come together. but privately, pretty smug.

francine: overall, what does this mean for theresa may? the she survived until brexit? robert: one day, she will stop being prime minister. francine: and then what will be -- we write about? [laughter] robert: we keep thinking maybe she can't make it through the week, maybe through the speech, i have thoughts on occasion. she comes back time and again. somehow, she managed to get herself through the vote, playing both sides against each other. there is a school of thought that once legislation is out of the way, they can throw her away and get someone more to their liking. but they have been saying that for a while. francine: what does that mean

for economies? let's start with the boe, that is the immediate focus. that, formeans is now, we will probably see them giving themselves more optionality. they will signal a hike some point this year, but try not to be as explicit on the timing, because they have been here before. for the u.k. economy, more uncertainty. but the results show that there is at least leadership and a captain at the helm. so a little bit more uncertainty , perhaps more negotiation. you might see that pickup in investment to that we need once we know what is coming through. francine: simon, the chance of a rate hike? simon: less than 50%.

very little core inflation went and next export growth. boe can afford to sit tight. francine: thanks for joining us. our guests stay with us. we talk about sterling and euro pound. labour, we speak to party veteran and what it means for brexit party talks. we are seeing movements when it comes to not only pound but currencies. this is bloomberg.

francine: welcome back, let's get straight to the bloomberg brexit bulletin. theresa may has fended off a rebellion from within to win a

crucial vote. whether shes over should be able to take the u.k. out of the eu without a deal. dozens ofet to hand companies a pre-brexit bombshell. they say this controversial tax rate could lead to an excess of one billion pounds. some groups have warned of potential costs are writing. foreu leaders have called preparations in case no deal is reached. that is according to the first draft of a statement to be delivered at next week's eu summit, and say they are concerned over the lack of substantial progress, and warned there will be no transition. if no deal is reached. this is bloomberg. francine: thanks.

let's get back to our top brexit story, theresa may has fended off a rebellion from rebels within her own party, winning a vote to take britain out of the eu without a deal, if necessary. joining us now is a political veteran. policy the government's units before being elevated to the house of lords and serving as transport secretary more recently, he has been a vocal proponent of brexit. ,alk to me about what happened where does it leave the brexit spectrum? like most drama, it was so complicated, most people could work out precisely what -- state -- stake. ultimately, theresa may's stance has been strengthened, for two

reasons. firstly, parliament did not insist there has to be a legal parliamentary procedure in the event of no brexit. the second psychological thing is that the conservative rebels will be crucial if brexit is to be derailed and if there is to be a second referendum. group of them voted with the government, because they did not want to weaken theresa may, and crucially, that included dominic greene. we have the spectacle of him moving his own amendment and then to vote with the government. have a lot of market participants and chief executives watching we just want to know if they should get out of the u.k.. it more likely that theresa may stays in appraisers have more power going forward. that they could put more pressure to negotiate a harder brexit.

andrew: yes. it notably strengthen theresa may's hand. policy, and she is trying to find a hard brexit that works for the next 3-4 years. she wants a hard brexit with a longer transition. is now this thing called the backstop, which would continue this. for another year. concerned that you don't need to do anything in great haste. but it is still very uncertain what britain's relationship with the eu will be. francine: does it mean she wins the next one? yes, the problems keep mounting up. what is the eu's next step as well? we have talked about the uk's

position, but we have not seen whether they will throw what seems to be a unified position back in their face. your question on investment professionals, u.k. assets are keenly value versus global asset. there are discounts across the board. theyetings i have had, asked is this the opportunity to get back in on a. valuation ground? knowroblem is, you don't how much the currency will have to pick up the slack if you get potential government change. horizon, what the does this mean for the likelihood of a reelection for the current government, or indeed, the threat of the labour party seizing power. i will also bring euro pound up for you. the negotiating

position, is it in their interests to push this back? their interest is in having a stable trade relationship. the problem they have had until now is that the most stable relationship will be for them to stay in the single market. but the british government has refused, that that is somehow tainted by being eu. difficultygenuine settlementou reach a which has access in terms of trade but isn't membership of the customs union single market, because there isn't anything else on offer. they try to agree on a legal construct, what then happens is the right wing of may's party vetoes it on the ground it is to federalist, so she has to make all kinds of declarations.

about have a customs union has become a partnership, we have to keep inventing new terms, hoping the extreme brexit don't notice this means will be paying contributions to the european budget. francine: how does she deal with ireland? andrew: ireland is difficult. the policy is not to have a hard order. the only way not to have a hard order is to be in the customs union single market, because everything else requires something else. the rhetoric says there will be no hard order -- border. saidrish foreign minister he does not see the basis for an agreement, and he calls upon the british government to raise his game. what does it mean for when we have more clarity on what type of brexit the government wants?

thate moment, if we assume theresa may is just flying -- trying to make the party survive, it is unclear. simon: she is not a visionary. she is trying to come up with some sort of solution that eases not just two wins but multiple within her own party. the problem is they have been working on this for almost two years and no such elegant solution has been found. francine: she is a survivor. she is, it is useful until the point that brexit is delivered, and then somebody will remove her, somebody who is more collect orally appealing. -- politically appealing. francine: what is the chance of a second referendum? well, a whole set of votes will take place in autumn.

those will be the single biggest both they take this generation. having been in parliament for a long time, when these big votes every member of parliament knows their entire time will be defined by how they vote in this treaty. comerucial thing is, november, does the treaty look like a disaster? that investment decisions will suffer, that national wealth will go down. will create the referendum and will win it is the following statement, did you vote two years ago? the question is is that line credible? i think the treaty would be rejected and we could have a second referendum. but why would you call a referendum because her job is on the line. if you have a second referendum,

it would bring everything closer. as simon said, she has no vision at all. there is no way she will call a referendum, she does not have a majority. even despite everything that happened, she only has a majority of 16. that could change, and she could lose it. the crucial thing about the british constitution is that if we have a referendum, it does not reire a general election. referendum, she could lose it, and we could stay in the eu. would be labour party be happy to go to fresh elections? andrew: the labour party badly wants it. once it -- only a referendum at the moment could stop brexit.

that would be part of the dynamic in parliament. simon: there is also another point that it requires two thirds of mps to approve a general election. given what has happened in the 2017 election, and the squandering of a 20 point lead, i can see many conservative mps voting for a general election. is probably an overstated risky given that no tory and he would vote for it. andrew: it is very important that investors understand the big threat is not jeremy corbyn, it is the heart of nationalist right which is taking control of the conservative party and pushing brexit through. those people have influence on the british government, and think brexit is wrong. they should be making clear to the british government that the right course is to stop brexit, and at the very least, to have the softest possible brexit. francine: i am looking at the

polls, and it is very complexing. that ifyou reach your there is a second referendum that people do not want brexit. it could be so close we could have a repeat. andrew: democracy is democracy, i cannot tell you what will happen. but there are two telltale signs. 47% think brexit is a bad thing. do you think brexit negotiations are being well handled? , amongst both levers and remainders -- remainers. accumulates, i think people are realizing the knock on effect on their jobs could be significant. francine: do you want a third referendum? is there a concern that you can't keep asking the same question until you get the answer you want. reason we had a referendum was because david

cameron called it and we agreed to it. the one thing i am certain of is that whatever happens, no prime minister is: -- calling another one. francine: thank you so much. arabia withdi emerging market status will speak to chief executives. that's coming up next, this is bloomberg.

francine: this is "bloomberg surveillance."

's check in on what's trending across the bloomberg universe. president trump reverses course on his policy of separating children from parents. he signed an executive order that he said would end the practice. on bloomberg.com, theresa may has dodged yet another bullet, avoiding defeat over her flagship exit bill. story over thead past few hours. . -- has place, daimler cuts profit. and u.s. regulators have spent much of the past decade trying to get a better handle on deutsche bank, and a wild trading day shows how hard that will be. let's get straight to bloomberg first word news. trump is planning to

meet with russia's vladimir putin during his visit to europe. -- learnedas your that two possibilities are is after the meeting in brussels or when trump visits prisons. the white house declined to comment. the white house were has reversed their policy of separating children from parents who cross the border. he signed an executive order to keep families together. trump has been under intense criticism from congress, the public, and business leaders, which saw around 2000 children pace in federal custody. it is a problem that has gone on for many years, with many administrations. we are working very hard on immigration. they had been left out in the cold. china reiterates they are

fully prepared to respond to any u.s. tariffs. they would also said use a commendation of qualitative and quantitative measures. they have also announced they will hold a trade summit with the eu on monday. wilbur ross joins us after midday u.k. time. global news, 24 hours a day, and on tictoc, powered by more than 2700 journ, in more than hundred 20 countries, this is bloomberg. francine: thanks. let's bring you the latest on the automakers. wasbureau chief in germany bring us up-to-date with what was happening. becoming the first prominent company to cut its profit outlook due to these escalating trade tensions. chineseim that customers will now buy fewer cars after beijing slapped tariffs on u.s. auto imports.

it was interesting to look at the market impact. down 4.4%, volkswagen also down and bmw down. let's get into the middle east and saudi arabia's efforts to mobilize its stock market. analysts estimated this decision will lead to billions of dollars of inflows from money managers. -- joining us now is the man in charge of that stock exchange, the tadawul chief executive. thanks for joining us. what is your forecast of inflows following this decision? khalid: thank you for having me. announcement of 2.6% of total emerging markets, that dollars -- 40.s.

billion u.s. dollars. we estimate the passive funds to be around 25%, around 10 billion of the passive fund to be of cash inflows next year. francine: what happens after that? the timeline of the implementation, were there any surprises in it? indeed. the size of the saudi market is not small, and taking it into pieces is appropriate sector for implementation. ofjust make sure the inflows the money that transfers to saudi next year and the market is adequately implemented.

so we totally agree with that decision. we believe it is going to help, for better execution. while inflows to saudi stocks have been evident this year, foreigners account for very little percentage of total ownership. for ane any production increase in ownership, and how much by way -- when? khalid: following ftse inclusion last march, we have seen an increase in foreign participation in the saudi market. we expect the same for msci active funds. between now and next may. we forecast the ownership to increase until the end of year.

we targets to increase the 5% ownership of foreign institutions of the saudi market to 10-15% in the next 18-24 months. we are, of course, hoping to hear about the aramco ipo. are you aware of any listing or the timing? know, we are waiting for the decision to be made by aramco. but as we speak about to support the success of its ipo, regardless of the time. francine: how much time does tadawul need to prepare for that, given that there is very little it varies with will

listing -- dual listing? we hl: options, all scenarios. overve spoken to many their experience, and we believe we are ready with all of the necessary experience to execute such a thing. it is not going to be very difficult. the challenge goes mostly to the second mar rather than the home exchange. francine: what you expect -- when do you expect to ipo? khalid: we are making progress. we are taking into account all of the reforms that have been taken, as well as becoming

reforms. so, during the second half of this year, we will announce what is the timeline. francine: that do so much for your time. chief executive of tadawul stock exchange. and i hope to see you in the studio . -- next time. topping 200 dollars, as investors say they will continue to boost advertising revenue. toward $600lly billion, making it the fifth biggest company behind apple, amazon, alphabet, and microsoft. so have investor concern eased over the social networks privacy troubles. paul, great to have you in london. it's nice to have a conversation face-to-face.

is facebook on track as it was a couple months ago before we had these concerns? paul: it seems to have blown by a little bit. any times you are asked to step in front of congress, that is a change in tenor of regulatory oversight of your in the region. tech has always had to deal with european regulation, you going back to microsoft. so it is something they have always had to deal with. but it changed a little bit when congress asked facebook to come in front and testified. therere was concern that was a significant see change in. have been so much news, this seems to have taken a back burner. what is left is the fundamentals of the industry, of the companies. mentioned, they continue to perform very well and put up strong numbers. francine: especially instagram.

it is really doing well. what are they doing? paul: they recently announced just yesterday that there are going to have a longform video option to his -- to instagram. they will essentially go after youtube. is significant is because advertising on digital video is actually the fastest form of advertising growth on the internet. it is better than display or search advertising. if you are in the digital advertising business, you have to be in video, and this is another step for facebook. francine: while significance, is this taking market share from other people. is it just people wanting more social presence? in terms of user time, users are spending more time with online video. the dollars are coming from traditional television. $70 billion are spent on ads in the u.s., that is the pie

youtube is going after and its rim is going after. -- instagram is going after. they are making inroads. francine: bloomberg surveillance continues in the next hour. tom keene's joins me out of new york. it will be graced to get his take on these trade wars in the u.s. and china. reminder, daimler is the first european corporation come out saying they have to lower their predictions and forecast because of trade war. we talk about that and brexit, this is bloomberg.

francine: counting the cost. daimler cuts its output, the

first company to see the u.s. china as a threat to profit. iran softens its stance on any output. we are live in vienna as a group meets. theresa may lives to fight another day. she survives a vote in parliament over her brexit bill. welcome to "bloomberg surveillance." i'm francine lacqua. we look at daimler as the first company in europe citing trade war's. we also look at brexit. tom: the daimler story is interesting. you have to believe there'll be a lot more these coming on. is the idea of china going directly after companies. that is percolating below the trade debate. francine: it certainly is.

let's get straight to the bloomberg first word news. >> the chances of opec agreeing on oil production chances appear to have improved. iran edged away from a threat to veto any deal that would increase output. it is optimistic that saudi arabia wants to increase production. we spoke to i rock -- we spoke to iraq's oil minister. as i said -- [inaudible] >> a formal decision will come tomorrow. president trump has reversed himself on the policy of separating families who cross the border illegally. he signs an executive order he says will end the practice. previously said only congress will halt the practice.

the order does not say when children will be reunited. president trump plans to meet with vladimir putin sometime next month. it coulde place before the or afterit on july 11 president trump goes to the u.k. on july 13. president trump has made it clear he wants to restore russia's place in the international community. british prime minister theresa may one of vote to prevent lawmakers from having a vote over the final brexit deal but the authorities are far from convinced the vote will make the process any more smoothly. everything you need to know about the world cup, get on the bloomberg terminal and go to w cup. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. ♪ tom: let's get to the data.

equities, bonds, currencies, commodities. churning right now, the curve flattening, where it has been. euro is weaker. screen. vix, 13.30.the new dollar strength. jpmorgan, emerging market. gold cannot get a bid. i am watching gold. it is a strange data check today, francine. francine: is a strange and all-encompassing data check. tom: look at sterling. francine: emerging assets are sliding. stirling is to do with the brexit vote. overall i think treasury yields is where i look at the fault line.

china reiterated threats to retaliate against the proposed american tariffs. european core bonds drifting while peripherals fall. tom: let's get a chart on fx. this is asia fx without japan. this is called a dxy 1997. we talked to the finance minister of indonesia. strong asia recovery. here's the new rollover. this distance is mainly -- is maybe the distance of gain or maybe dollar strength and asia weakness. you're wondering if that is the path that will get us to real angst in fx. francine: what i am looking at is the pound/dollar. it is sliding closer to pound euro. this is why the chart matters.

overall, theresa may survived to fight another day on brexit, but what we need to ask ourselves is at what cost? we understand the prime minister's promises could have him bolder brexiters in her party and some of the risks are that the remainders are angered because they lost the vote and there will be more votes to come . the situation is fluid. tom: i understand it is a parliamentary system. is this normal? is this taken within the domestic press as normal british politics? francine: normal is a difficult word because we have never done this before. if you look at history, the first time the u.k. wants to extract itself out of the eu, this will be a president for the future -- this will be a p recedent for the future. let's get back to our top story.

daimler is the first corporation to blame tariffs on lower profit outlook. in london we have dan morris, senior investment strategist. let' get straight to india. what do we think india will do? they seem to be following the steps of europe in retaliating? hiked tariffs on chickpeas, apples. this is clearly retaliation to the trump administration increasing duties on aluminum and steel india believes hearts domestic industry and it believes violates global trading rules. this cannot have, at a worse time for india. oil prices are increasing we see on the economy.

a global trade war and a war with united states is not something a can afford at this juncture. benedict, if you look at daimler becoming the first to predict their profit will be hit by a trade is this an excuse or will they be hit? : the timing of the announcement is strange. they gave a fairly up -- we have had analysts asking about the timing. in the whiteised flag even before the trade war has kicked off. are they using this as an excuse. trade is not the only you should -- not the only reason they mentioned. iscould well be that this business not performing as it should be in china and it may have preemptively come out with this today. if we see the other carmakers following suit, for the time

being it is unclear what is behind it. francine: thank you so much. dan, if you look at the trade war's, how will this end? will he get more ugly? you mentioned the midterms. that is the key factor in trump stock elation's of when to step back. supposedly the tariffs are popular with his constituents because he is defending factory workers and steel companies. at the same time, a declining stock market, which we have not but if the market started to decline and we see signs of slowing growth. that will probably not be popular. we stick to the view will be able to find a negotiated outcome. the pain, even if it is greater for europe and china than for u.s., it would be bad enough for

the u.s. for trump to worry about the republican election prospects. if daimler mercedes-benz is the announcement to come for corporations, that has to adjust corporate investment. continent andthe in america with corporate investment? dan: this place to trump's hand. we have seen strong recovery in business investment in america. this has been as much based on the tax codes from last year. the u.s. growth is 2.7% or 2.8%. this is where trump perhaps thinks even if there is a modest growth, because of trade tensions it is not going to be enough compared the momentum we have. -- no changerade in the outlook. if we get further escalation the outlook will be different. europe, is trade

coalesced within the department or is it every nation for itself? has been the difficulty for the eu in terms of the response to trump, even if they are trying to put on a view.hat shows an eu-wide we are aware that within the eu there are differences of opinion. germany more concerned about the and wouldauto tariffs be much more exposed than france would be. if things escalate, i think the risk -- you will see much more division in europe with how to respond to trump. daniel morris, thank you so much. he will be staying with us. conversation with wilbur ross, not only on trade, on immigration, but on his finances as well after a forbes

magazine article over the weekend. stay with us. this is bloomberg. ♪

>> this is bloomberg surveillance. let's get the bloomberg business flash. comcast is deciding its next move in the bidding war for 20 century fox's entertainment asset. $71ey has offered more than billion. comcast may have to offer more than $75 billion to have a chance. a wild trading day. deutsche bank is raising questions. traders that the bank's u.s. unit suffered a one-day loss that was 12 times what estimators thought it might lose. those losses were offset by

gains in london. investors are trying to get a better handle on the banks operation. a flashing green light on emerging markets. developing nations look sound even though their assets have been beat up lately. it favors local emerging markets. that is the bloomberg business flash. francine: theresa may has spend it off a brexit rebellion from pro-eu rebels within her own party. pressing tos been give parliament more of a say in negotiations that backed off after peace talks. 303 tors voted 319 to reject -- does a result mean more battles could be on the horizon. columnist dan. hanson is here and dan morris looks at everything to do with the markets. what happened yesterday?

does theresa may become weakenedhe emboldened? the rules are theresa always comes out a little bit weaker. is capacity to absorb damage -- francine: increased. >> yes. she has this weird thing where weakness is sort of strength. nobody can work out how to replace her. the rebelsreasons backed down yesterday was because they were worried about damaging her. someone said to me last night that if people were tuning in to parliament to watch me destroy the government, they were not going to do that. there is a way in which the week theresa may is also a strong theresa may. will she deliver a

weaker brexit or stronger brexit. i think the people who want a harder brexit are feeling happier today. they think the tide is going in their direction. they might be wrong, but that is what they think. francine: let me bring you to my chart. this is gdp, u.s. dollar. what does this mean for the bank of england? there is that bank of england meeting today. dan: the bank of england will be looking at that chart quite closely. back in may their forecast saw inflation back on target in two years time. there is a trade-off for they have to bump target inflation. they also have any comment -- an economy that is potentially weaker and the data has been mixed. in terms of the brexit negotiation itself, they are going to wait and see.the way ts

if it starts affecting the data, if it comes through, then they will do something about it but they take a big gamble if they take the government at its word and they condition the vernment -- they condition the deal on the government getting the deal. tom: is a soap opera. what is the next battle? bill.: the trade that is the next battle in parliament. white paperow about on what kind of customs relationship britain wants with the eu. that is supposed to be before the european summit at the end of the month, now is coming after. it has not been confirmed yet, but we are expecting next month we will get the trade bill coming back to the house of commons. there is a strong argument that you get a much bigger rebellion on that because the rebellion

there is about whether or not britain should seek a customs union with the european union and there are a lot of tories who feel quite strongly about that. , andi'm absolutely baffled i understand there is a parliamentarian different purposes a u.s. legislative difference. is parliament getting this done? is there a path to some form of domestic tranquility for the united kingdom? dan: i think rob would be better placed answer that the me. you see how the eu are behaving. they are worried and they're asking their governments to start preparing for this scenario. as an observer, you cannot help but think it is continually being kicked down the road. they can is being kicked down the road that it is worrying that these big decisions cannot be taken. francine: went we have a paper

that lays out theresa may's vision, if we get it? were promised one before the end of the month, now we think it will be early next month. we promised it would take a decision -- i would not be surprised if it did kick the can down the road. that has been her strategy all along. francine: we will get to dan morris on the impact on the markets shortly. bloombergs rob hutton and dan houston. blanchflower, a dartmouth professor of economics. he is talking to us at 6:30 in new york, 11:30 in london. this is bloomberg. ♪

surveillance." i am tom keene in new york. is it time for recalibration? coming up on june 30 and of q2. dan morris with us. bring up the chart. , theis the great unspoken distraction of trade, the distraction of immigration. the gap between the 10 year german and the two year german. ecb induced negative interest rate, the yellow line the negative interest rate. what is the price of this? what is the price for european finance? dan: it has been and will continue to be a challenge for

financial sectors in europe with negative interest rates but that will not change. it sounds like autumn for next year. they have never less learn to live with it and can live with it for a bit longer. tom: there are two people here. there are people running banks who say this works and economists to say everything is fine. respondas a strategist to the economists who say negative interest rates are no big deal? you look for the benefits of the negative interest rates. the argument of the central bank has been we appreciate negative interest rates have consequences that are not always helpful, but fundamentawe are lowering interest rates. you look where the beneficiaries of that growth is. looking at cyclical sectors that are benefiting from the low rates which are being hurt -- as opposed to the sectors which are

being hurt by them. francine: dan, what is brexit mean for asset classes in the u.k.? dan: if you look at the sterling dollar rate and the sterling euro, most of the movement we have seen in the last couple months has been versus dollar where sterling has been fairly stable. it makes a point there is not necessarily so much that is going on on the sterling side. it has really been the dollar. upcoming votes we do not want to attempt to call, much more cautious on sterling and thinking about what the dollar is likely to do and with the hawkish comments from the fed we think it will continue to strengthen. tom: i want to interrupt with breaking news. taiwan keeps their interest rate unchanged. i know it is like ok, it is a thursday, big deal. but what these em banks do is

important. step-by-step. francine: it is. we also heard yesterday from the philippines. it is all to do with dollar strength and trying to fight the fed or not. i think we will spend a lot more time in emerging markets. arabia -- it would suggest there will be a lot more inflows. tom: really interesting. this is likely to ripple out through the week. it is not a small issue. it catch yourrief morning briefing with francine lacqua. you can moot -- you can mute me, do not ukraine seen. this -- do not mute francine. this is bloomberg. ♪

and this is extraordinary steeped in the history of the protestant reformation of europe. the pope travels to geneva,

switzerland, to the switzerland of john calvin and others to speak to the world council of churches. their 70th anniversary. far more than that, the pope attending an ecumenical moment to look forward to combining christianity. this is exceptionally symbolic that was, switzerland the heart and the crucible of the protestant reformation. extraordinary, francine, to see this this morning. francine: it is quite extraordinary. something we have been following quite closely, not only the pope but all religious leaders across the world. tom: i remember seeing at the windsor ceremonies of the duke and duchess of sussex, the cardinal standing just outside the edge as the church of england service was had. it shows some of the challenges that are still there. pope francis with the world council of churches in geneva,

switzerland. right now looking in a fractious america, a fractious germany on immigration. stephanie baker is bloomberg senior writer in london. stephanie, it has been an 72raordinary 48 hours, maybe hours. we have lost count. what is the next step for the president to find common ground with congress? stephanie: he needs to come to some sort of agreement with congress to deal with the issue of families traveling with children. reversed course after saying that he cannot do anything to prevent the separation of children from their parents. an executive order asking the justice department to challenge a 2015 court ruling that mandates that children traveling with their parents or adults cannot be held in

detention for more than 20 days. that is a court ruling. it is unclear how that will play out. if you recall, that was a court ruling in 2015 when obama had this issue with unaccompanied migrants. about how complaints unaccompanied children as well as families with children were held in the conditions they were held. --hout a change to this without a legislative change, it will be hard for him to push through any change. we will see continued children being detained with their families. there is no change to the zero-tolerance policy. they will continue to try to criminally prosecute the migrants crossing the border. tom: for our global audience, this is just a window into the emotion in america. this is the "new york post" with its own voice. ok fine, i will fix it.

below, the president says he will not rip apart families anymore. withwe have in new york "the new york times" talking about a settlement in harlem that has to deal with these events. they are taking in children off the plane as well. , to what good politicians of both parties have to try to accomplish. i cannot figure out what their goal is. do you have a clue what the goal is of congress? stephanie: what was remarkable for me is that what we have seen over the past few days has actually united a vast -- a big chunk of the american public, which had been quite divided. it has split the republican party and now republicans are trying to do the dance between pandering to the trump base, which is anti-immigration, while not alienating the more moderate wing of the republican party

that finds this episode horrific and said. -- and sad. what they have to do is come to some sort of agreement that deals with both of those challenges. i think they are far off from reaching some sort of settlement. there are bills floating around the house and senate. some of them deal with the issue of separation of parents and children. without a wider immigration reform package i think it is hard to see how this is not going to continue. francine: i do not know whether this is an unfair question, but does this hurt trump with his base? has it hurt him? open the: it has laid split within the republican party. i think you are seeing the base, the hard-core base back him despite viewing what we have seen and the images we have seen as appalling.

is certainly going to hurt him in some swing states. it is hurting him with women women swingicularly voters in suburban areas. there is no doubt this is a vote loser in november. tom: stephanie baker, thank you for that briefing this morning. right now you need a morning briefing. here is sebastian with first word news. sebastian: the global trade fight got worse. china accused the u.s. of trade abuses and reiterated it will hit back if new tariffs are actually imposed. india has joined the european union in imposing retaliatory a tariffs on u.s. goods. the trump report administration will propose merging the education and labor department. post said the plan will also include changes to the weight low income americans get benefits from the government. republican senator say they have

made progress with president trump towards a compromise on chinese telecom company zte. a defense plan would reimpose a ban onoing business. crudepelines that carry and new basin in texas mexico are almost completely full thanks to a production boom. the number of wells that are drilled but left unfinished have soared by 90% from one year ago. will have to shut down wells that are actually pumping oil. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. ♪ saudi arabia's efforts to modernize its stock market are paying off it. the kingdom has one emerging market status. decisionpredict the

will lead to billions of dollars of inflows. justine on all this, carrigan, bloomberg's managing editor for global markets joins us and we are still with dan morris. justin, how does this work? we are expecting inflows to get better. i was speaking to the tadawul chief executive early on, one of the major decision is that when it gets better, the -- justin: i can understand that concern because that is been the pattern displayed by several other countries that have bee upgraded in the past. if you look at pakistan, that it sacked phenomenon unfolded. you see a lot of money flowing in in anticipation of the decision. this decision will kick in and about a year from now. they have the upgrade.

the upgrade is included in the index for another 12 months. the flows will take effect and you might see some people taking money off the table. justin, thank you so much. bloomberg managing editor for global emerging markets. henry fernandez joins us at 1:30 p.m. have a million things to talk about when it comes to emerging markets. it is a story of what happens to argentina and we have the msci inclusion. are you bearish or bullish with emerging markets? with debt, we are concerned about the dollar and u.s. interest rates. this is putting significant pressure on emerging markets. not all the central banks are

hiking in response to the fed, but opposed to the story last year where you had emerging-market central banks lowering rates, now they're are on hold, argentina and turkey being the obvious examples. still expecting dollar appreciation, the fed planning the high rates. even if the fundamentals remain good, it is a bit like the european story. tom: daniel morris, we have all seen this before. they are separate indiscreet within e.m. and then they are not. what is the factor that gets you to e.m. crisis? what is the thing that ends up correlating things together? factor iswing investor sentiment. this is something that applies not only to emerging markets but the high-yield. if we think about the impact of quantitive easing over the last decade pushing investors and ever riskier assets as they look for yield, at what point with treasuries back near 3% on

the 10 year do they start coming back to that -- to less risky environments? do those flows start to feed on themselves and do we see in emerging markets a bigger retrenchment? if that were to happen, we would be much more concerned about a crisis. we have not seen significant signs of that yet. we do not anticipate it, but that is the key thing we are watching. francine: how do you differentiate emerging markets? is it the ones that denominate debt and dollars? is it the ones that did the structural reform? dan: dan: that is exactly the population. none of this is new. we know to look at countries that have the current deficits or a significant amount of debt issuance in dollars. those are clearly the ones that will have problems when the sentiment changes. those are what we are looking at. we have seen a few victim so far

and perhaps we will see a few more. francine: if you have a trade war between china and the u.s., which now we are calling it a trade war, does it hurt global trade or does trade it redistributed? dan: it will hurt the overall amount of trade and it is something people need to appreciate when we are talking about china and asia. a lot of the exports of china to america are actually exports from other countries. the more malaysia. -- vietnam or malaysia. chinahose exports from fall, what are really falling our exports from the rest of asia. that is the broader risk to global growth, even if you think it is only the u.s. and china. it will touch everyone. tom: appreciate this morning. we will continue. coming up, we will dive into the u.s. economic dynamics. kevin cirilli will join us for the morning briefing. david blanch power -- david

this isower -- bloomberg. ♪

francine: this is "bloomberg surveillance." tom and francine from london and new york. let's check out what is trending across the bloomberg universe. president trump reversed his policy of separating immigrant children from parents who cross the border illegally. he signed an executive order he said would end the practice. theresa may has dodged yet another bullet, avoiding defeat over her flagship brexit bill. the narrow result indicates there are more battles to come.

on thet read stories bloomberg terminal over the past few hours, and third-place, daimler has cut its profit outlook citing global trade tensions. globe and -- goldman sachs says emerging markets fundamentals are stil strong and finally u.s. regulators have spent much of the past decade trying to get a better handle on deutsche bank. a wild trading day earlier this week shows how hard that will be . find out more on the terminal. let's talk opec. the meeting is underway in b&r. .ran easing off its threat the cartel is looking to reach a deal on relaxing alpha curves tomorrow and investors are optimistic. a bloomberg news reporter joins from vienna.- what are the odds we find a meeting of the mines and saudi arabia does not have to increase production alone?

>> optimism is what is happening. a complete transition to what we saw 24 hours ago when iran was taking a hard-line. it looks like they could come to the table. is -- the saudi oil minister left the hall about five minutes ago. he was in a meeting with his venezuelan counterpart. he has to get everyone on board. narrowing the gap is what is important here. getting iran to the table and also keeping russia happy. their proposal was for more than one million bottles -- one million barrels a day. what he said to me was the consumers are what is important, keeping the angst of consumers to a minimum. francine: what we know about the saudi deal? basically what was set

on the stage behind me is that it would be nice if it happened in 2019, saying it is going to happen but reiterating what he told us in the past, that the timing is not necessary. the ipo will happen, it will be nice if it happens in 2019, but the kingdom is not worried about the timing of it. i seene: i see -- tom: vienna as another meeting. what is the distinctive difference? the difference is president donald trump. a man he used to work for the bush administration told me that the biggest person missing is president donald trump. it is clear the saudi's are under pressure from washington to boost production. not only from donald trump diplomacy on twitter but we know

washington has been asking opec members like saudi arabia secretly to increase production. we have the midterm elections coming up. gasoline prices in new york and the rest of the country are rising. i say new york because my dad was complaining about them when i was home. they are under pressure from consumers. it is not just united states, it is china and india as well. francine: thank you so much. daniel morris is still with us. daniel, how difficult is it to predict the price of oil? do you have to do a range, and does that impact inflation expectations or do central banks just look through it? impact does expectations. why did oil prices today to you what prices will be five to 10 years from now? it does matter and the central banks are definitely thinking

about that. higher inflation which in the eurozone is something we want, but on the other hand slower growth, especially when we have prices close to 80, that is a level where you think the negative impact will offset the benefits from inflation. generally people would like to see lower oil prices because they're more concerned about growth. tom: dan morris, thank you so much. your morning brief, close to close on radio. look for that on "bloomberg daybreak." we do that out of washington and boston, the bay , and new york. nationwide, serious xm channel 119. this is bloomberg. ♪

sebastian: this is bloomberg surveillance. let's get the bloomberg business flash. the parents of mercedes-benz is cutting its outlook and blaming it on global trade tensions. daimler says it's earnings will be lower than last year. many of the stands and crossover vehicles daimler cells in china are made in the u.s. it is getting tougher for americans to buy a home. drops forailability

the lowest since late 2008. the national association of realtors says the previous price of homes are -- average wage owners would have to spend 31% of their income to buy house. that is above the historic average. tom: daniel morris is with us talking about trade, maybe the politics of immigration, but on investment strategy it is just a free lunch. mergers and acquisitions -- you are not a technology guide, but you and i can look at an old news model of 17 times the book value for fox. i do not know what the new model is. have we reached a silly season? tech as a whole i do not think so.

valuations are higher in the tech sector than other sectors of the u.s. market. there are expectations that there is a growth that is warranted. it is quite interesting if you look at earnings revisions over the last year. the last end of the year you had a big jump because of the tax cuts and earnings revisions continued to rise at the same rate as before. for tech, after the first quarter you had another big uptick. that is what is different about tech, that is what is supporting price gains. within that is free money. it is still free. the real interest rate is there. within that is one day money will not be free. what happens to these transactions will we get to real interest rates that are tangible? dan: when we get closer to the end of the cycle there will be not only a decline in mergers it will betions,

bonds that suddenly come under threat become -- because cash flows will not be quite so easy. that is something we can anticipate but we see that is a distant prospect. francine: when you look at facebook, instagram, do you assume there will be winners or are we going towards more of a monopoly? dan: it will depend on the sector. technology is one of those areas where looking at it as an index investment as opposed to stop taking, for the average person it might make a bit of sense. knowing who those winners will be and whether it will be winner take all or not is quite challenging. the pie growing for technology and that is what people want to try to take advantage of. tom: daniel morris, thank you so much. it will be without question the interview of the day. the secretary of commerce wilbur ross.

there are issues to speak of including trade, but far more after the forbes magazine article, the wilbur ross finance story. the unwinding of wilbur ross is investments and transaction. wilbur ross on today in the 7:00 hour. let us not forget and at you medical moment in geneva, switzerland. pope francis meeting in the heart of protestant reformation. that is going on in the world council of churches. we continue with our kevin cirilli in washington. this is bloomberg. ♪ what's a gig of data?

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opec meets in vienna. family separation becomes family detention as the immigration wars continue. will republicans respond to a presidential executive order? deutsche bank marks the end of an era. good morning. this is "bloomberg surveillance." i am tom keene and london. wonderful to have daniel with us. francine: i'm really looking forward to having him on. forhere is an optimum price producers and consumers of oil, the politics and whether this russia and saudi accord holds. our guest from bloomberg on a huger bombshell

trading error at deutsche bank. opec agreeing of iran edgeduction, away from a threat. the country's oil minister is optimistic. he says it is time for opec to change course. has reversedmp himself on separating families who cross the border even legally. he signed an executive order that he said will end the practice. the order doesn't say when or how children already taken from their parents will be reunited with them. plans to meetp with vladimir putin next month. a meeting could take place after july 11 or president trump visits the u.k.

on july 13. vladimir putin says he wants to restore russia's place in the international community. here the uncertainty over brexit will get worse. authorities are convinced the result will make the process run more smoothly. , australia versus denmark, croatia versus argentina. everything you need to know on thehe determinan tournament bloomberg. 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. i just looked at my rating. it is embarrassing. francine: not too bad. peru. got france over god, i better get that or i will slit my wrists.

equities, bonds, currencies commodities, interesting em stuff. arie hordern, driving oil down in vienna. next screen. dollar strength getting interesting. the j.p. morgan em spot index. that is a new data point. gold can't find a bid. francine: dollar strengthening .nce again investors trying to figure out the outlook for global trade. treasuriesg, gaining, pound weakening before a rate decision from the boe. we forget sometimes the buck mark carney's world. tom: the emerging markets story, j.p. morgan index. this is pacific rim ex japan. strength,in 1997, em

weakness, and here is the recent rollover. simplee: i have a pound-dollar chart. it is sliding closer to the pound-euro's fall. yey, concerns because theresa may won the vote that she would face more votes in parliament and emboldens brexit ers. it changes day by day. don't put too much into it. tom: we begin a discussion on immigration. not only the culture war of europe, but the culture war of the moment in the u.s. is our chief washington correspondent covering this 24/7. the president's discussion in minnesota, what happens today?

there is a lot of uncertainty, particularly because the divide remains the same. republican members were breathing a sigh of relief that the president is taking executive action. they were hoping this would move forward and avoid a legislative fix. fields congress will have to get something done to bring this to a conclusion. tom: to a conclusion is the basic idea, whether liberal or conservative. people are coming in, now together. happens to theat children who were separated in the days and weeks. do they go home? i see no discussion of an outcome. kevin: there is a lot of

uncertainty about what exactly this executive order would do. was drafted quickly come at drafted without much consultation, with many outside experts or policymakers. in haste. policy done they are hoping this will be a problemy and a, but the and the immigration concerns very much exist. francine: i want to talk about trade. something that struck me was president trump when he was saying webout zte need to take care of jobs. we have the first european carmaker lowering outlook for trade. how will president trump react? kevin: it is remarkable. yesterday i was on capitol hill where wilbur ross was testifying. the final question from a republican from georgia said

coca-cola is still making cans. they are headquartered in georgia. the pennies impacted by the price of aluminum going out, the tariffs implemented, have type of in a massive rror from for companies like coca-cola. he is a republican, ultraconservative republican, by no means a moderate republican. afterr republican republican press this commerce secretary to outline the vision of finality on what exactly the final outcome hope is for these trade wars, and for them to walk away from that hearing yesterday with uncertainty, i think that speaks to the cloud of uncertainty and the geopolitical moment we are in with regards to these trade negotiations. now joining europe in a response, china in response, is india. the president prefers bilateral

talks. he is getting a multilateral response. francine: does that mean the president is just trying to keep promises from his campaign because of november, or is there something more underlying this? commerce secretary testified they feel they have to this policy to communicate to other countries, most notably china, that their type trade policy with the u.s. will no longer stand as is. they agree with that come i will let everyone else decide. withwilbur ross will be bloomberg today. what has been the effect of the forbes article on the secretary's finances? has it made him less effective? kevin: to be frank, i think the issues of the day have provided

political cover for other political contrabass is, whether at the epa or commerce department, that in other administrations would have dominated news cycles. tom: here is the new york times. page a12.id on that the bottom is the reality within this cultural debate, a beautiful starry of kids flown , andnew york in harlem what do you do with these kids? washington, does anyone care whether it is new york, kansas city, or montana? does anybody care the actual mechanisms of our immigration industry? the department of homeland security secretary kiersten nielsen was out dining at a mexican restaurant earlier this week and was literally booed out of the restaurant by

protesters. that is a perfect illustration of what is on the mind of some folks here in washington. are mrs.important trump and mrs. kushner in helping the president find his path on immigration? don't think there is any debate that those two individuals in particular were not with him on this at all. have in the past represented more of a moderate tone of the republican party. they have received criticism for not eating moderate enough, but i think -- usb earlier this week about who was representing the moderate wing on immigration in the administration, and i struggled to find a concrete person, that i think they emerged this week as the face of that to counter the likes of stephen miller.

think that is an interesting dynamic we are watching you call. this isnd of the day, an issue that i think mobilized many different factions of the republican party from the bush wing as from the democratic perspective, that they finally feel they have a push back issue on the issue of immigration. tom: thank you so much for an extensive briefing from washington. later.s with us daniel with us later. on deutschel story bank and a huge trading loss. , our team wilbur ross will grill him closely on the events of the day and his finances. but for that at 7:00. this is bloomberg. ♪

>> let's get the bloomberg business flash. deciding its next move in the bidding war for fox. disney raised its offer to $71 billion. the company is close to winning antitrust approval. comcast may have to offer more than $75 billion to have a chance. a wild trading day. deutsche bank raising questions. traders at the u.s. unit suffered a one-day loss that was 12 times estimated. they were offset by gains in london. u.s. regulators have tried to get a better handle on the banks operations for years. that is the bloomberg business flash. francine: thank you so much. assets beaten up lately.local g

to goldman sachs. this as argentina and saudi arabia are given emerging market status. if dollar goes up, what to do that haveing markets debt denominated in dollar? let's get straight to a specialist on emerging markets. neil, always great to have you on the program. how much is structural? how much has to do with dollar strength? how much will be impacted by msci? changes are a bit of noise. >> there is not much in history getuggest that you suddenly in the msci in your market explodes.

underpinning of all of this are three big things is. the first is the strong dollar and the fed. the second is the trade war stuff. has benefited the most from the wave of globalization in the 2000s. that is domestic politics is becoming a concern, elections in turkey this weekend, next month in mexico, in brazil and october, all of these things are starting to weigh on em assets. you put all that together, i find it difficult to be structurally bullish at this stage of the cycle. francine: where do make a difference between india, it also impacted by trade concern, as opposed to mexico, or do lump them all as an emerging market class? >> you have to defend trade.

particularly when you talk about risks. if you're worried about the dollar and the fed, your concerns are around argentina, turkey, perhaps some of the smaller frontier markets. that will not be a big deal for whose em's like india dollar debt burden is slow. if you're concerned about trade issuethat is a u.s.-china . to what extent it trickles down so you, latin america, differentiate according to the risk and how great that threat is. tom: let's go to the continued acceleration in em em depreciation. it is a vector with convexity and acceleration. when you look at that, it comes back to the estimate that the have.banks the em's

is the piggy bank enough to help them with u.s. dollar appreciation? in 1997-1998 that was all about asia. this time will not be about asia. it will be turkey, argentina, turke countries that are very vulnerable. rand.so, the the mexican peso looks cheap, but then you have trade headwinds, elections. it is possible to see against the backdrop of dollar strength, some em currencies weaker. in asia, big trade surplus countries, that is different. strong fx reserves, current account surpluses. tom: the piggy bank they have now, these are surveillance adverbs, radically different the 1998? >> certainly.

fx reserves way higher and stronger. wasresponse to 1997-1988 run large external surpluses and build up buffers. francine, this is terrible. i'm only allowed to use eight adverbs a month. that was only one of them. francine: the year, or maybe every six months. capital economics and proverbs, adverbs staying with us. later tonight, henry fernandez at 1:30 p.m. in new york, 6:30 p.m. in london. this is bloomberg. ♪

tom: terrific news flow. francine lacqua in london. april minister may victory yesterday on path of brexit. minister may victory yesterday on the path of brexit. now, neil, to pause the end of june on china, how is doing?nt xo can he deliver 6% economic growth? >> that is the bottom line. the idea china continues to grow at 6%, 7% a year is gone. there are huge structural problems. you have large parts of the

continue to can't invest 50% of gdp and produce returns that generate 6% growth, so potential growth 4%. it'lower. we have to get used to a world 4%.e china gross 3.5%, tom: what does that mean is a knock on effect for pacific rim countries? their percentage is huge. >> there are two issues. what does it mean for the pacific rim? the knock on as it goes through supply chains regionally. spokesas this hub with in different parts of the region. for commodityean producers. china has been sucking in these commodities. it has implications for latin america and parts of africa too. francine: what does it mean for companies,u.s. tech

how will china try to hurt the u.s.? the thingsthe one of overlon the debate about trade. the debate about trade has been framed between u.s. and china relations, but there is stuff in china as well, the chinese economy is weakening. that is playing into the trade debate here at it is playing into china's industrial strategy. that has framed the trade war theme. china will not give up on the strategy. it sees it as its push towards modernization and getting structural reforms of putting the economy on a different sustainable growth path. much.hank you so coming up, this is going to be at time the interview. on the bank of england, on the challenge governor carney has.

americannchflower on wages. he is the nations expert on wage dynamics. he is opinionated opinionated on the lack of wage growth. along,juergen will come and deutsche bank as well. -dollard-dollar -- euro strength showing weakness. turkey leading the charge today to a weaker turkish lira as well. please stay with us through the morning on television, radio, worldwide. this is bloomberg. ♪ two, down, back up!

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which could save you $400 or more a year. it's a new kind of network designed to save you money. click, call, or visit a store today. francine: we are getting breaking news out of the french government. this is according to french business daily, the french government is looking at

splitting the state-controlled power group into two groups, one renewables, and the other nuclear assets. to theings us back consolidation phase we saw in germany 18 months ago. we had this sweeping restructuring of germany's power industry. investors have been asking how do you value these utilities if they have competing businesses, renewables and everything else, so in adjusting development in europe. it is having impact on the share price. first, let's get to first word news. global trade got worse today, china accused the u.s. of trade abuses and will hit back at new tariffs if they are imposed. inia has joined the ou

imposing retaliatory tariffs on u.s. goods. the trump administration will propose merging the education and labor departments. the washington post says the plan will make changes to the weight low american incomes get -- americans get benefits from the government. the president wants to soften a prescription in the defense the spending bill. lawmakers call zte a security threat. in the oilbottleneck fields in texas and new mexico are on most completely full thanks to a production boom. as a result, some producers expect to have to shut down wells actually pumping oil. 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. thanks so much. fended off ofs brexit rebellion from pro-eu rebels in her own party. the group had been pushing to give parliament more of a say in negotiations come up but backed down. announce its rate decision at 12:00 p.m. u.k. time. rob hudson joins us. he speaks to insiders at westminster. you understand westminster and u.k. politics. >> as much as anyone can. of thee: you are one best in the business. what do you understand the next step for theresa may is at this point? >> there are some legislative things we have to get through. last night, the brexit bill finished its final stage in the

lords. he goes for rail ascent next week. great, fantastic, that is one down. there is a whole load to go. we are in this extra long parliamentary session that a year and a half ago may said we we haved this because loads of legislation to get through, and then she did not get her majority. since then, we are at this point whether it loads of legislation cued up and she won't bring it because she is worried about these back-and-forth beca, .nife-edge votes and rebellions the amount of effort getting this one through, and this one was one we thought was going to be quite easy. francine: what does she do with ireland? we heard from the irish foreign

minister saying theresa may's failure to make progress is starting to irritate them. >> i can imagine. it is fascinating. the answer is we don't know. there are three things that are true. the british government does not want a border between northern ireland and southern island, a border between northern ireland and the rest of the u.k., and does not want to be in a customs union with the rest of the european union. you can have any two of those, but you can't have all three. for months, years, we have in saying, which two? we will people think end up in some kind of customs union because the other two are harder to do, but a significant number of tories are prepared to northernrder between arm in an southern ireland, or a border in the irish sea. constitutionally that is problematic because that moves

towards irish reunification, and the u.k. getting smaller. tom: a delicate issue to say the least. thank you so much. we appreciate it. neil shearing of capital economics, and from dartmouth feiler --avid blanche blanche flower joins us. his wage curve is a classic textbook on wage dynamics, and also a student of brexit. voted 52.5% to lead the european experiment. would they do the same today? >> hopefully not. the one part of the u.k. that hugely benefits from its membership with the european union. if regret has any part to play they shouldis, change their minds.

i thought your commentator did a good job of explaining the complete confusion. thought he did really well. nobody could have done it we will see what happens. the thing he didn't say is if you give some special deal for wantern ireland, wales may that deal. scotland will want that deal, so that is a third thing. if you have a separate deal for northern ireland, it's going to be more and more confusing. i thought your commentator was fantastic. surebuy his book and make everybody a dartmouth college buys his book. , you as ablanchflower liberal voice, explain to conservatives what happens right now the day brexit goes into effect. >> oh goodness me. i think the way you said that. that sounds like a cliff edge.

i think that is not what is going to happen. we will see a slow and gradual move towards it. i think it would be very disastrous to have a cliff edge. the uncertainty would be huge. the negotiations have effectively killed off economic growth in the u.k., and likely to do so going forward. the data on incoming investment is very bad. , pointhe first quarter to forecasted for the second brexit, so if a hard were to come, that would be disastrous. i think the markets will drive this thing and it will go for a long time, and it will be fudge brexit, not a cliff edge brexit. francine: good morning from london. it is francine. peoplebrexit a lot of were saying this would be a disaster. we have not seen that.

>> we have seen of slowing. itncine: we have seen slowing, but not the disaster a lot of people were saying. >> it was part of the politics of the debate. we clearly have seen an economy slowing. if you look before the brexit was probably the best performing country in europe certainly. it now looks like the sick man of europe. yes, it has not been a cliff-edge disaster, but the central bank stepped in and countered some of the great weakness at the time, but the uncertainty of what is coming and what we have just listened to, how can confirms know where to place their investment? in theasically anarchy houses in westminster. that looking forward is the problem. if you know what is coming, then

you can plan. can how any firm plan for what is coming? i don't know. francine: what does it mean for mark carney's planning? i have a viewer question. please continue sending those questions on tv . do you think the vote will change? >> i don't think we will see much of the change in the vote. in reality they made another horrible error. the market saw 100% prospect of her rate rise. it never made any sense to me. there was no data to sustain it. , nowthey had the backtrack looking very weak. if anything right now, the vote should probably be for a cut, not that the committee would do economy is not doing

well. there is no argument whatsoever for a rate rise. the problem they have is if the economy starts to tank, what do they do? they have very few air rose in their quiver. it does not look that mays government can do anything. i think that is a real concern going forward. they can't cut by much. they will probably have to go negative. qe,ill be back to lots of so there is great concern about fiscal and monetary policy in the u.k. because of the chaos going on. based on thising craziness around brexit, and that is a hard and to do. the risks all look to be to the doside. tom: one of the most important papers of the year is david bell and david blanchflower on full employment. i want you to respond right now to your profession that says america is fully employed. well if you look at

yesterday's speech that jerome powell made in your it -- in europe, he clearly has doubts. most of the stuff i hear shows no understanding of the labor market. if you were close to full employment, you would see wages taking off. we have not seen that. all we have heard for the last 10 years is that it is about to come. the u.s. and u.k. labor markets are very far away from full employment. what is driving wages is in fact under employment and non-employment. we can show now that that is very far away from full employment. that is the explanation as to why there is no wage growth. all they keep saying is that it is coming. technologys the overlay here. this labor market is not in the labor textbooks that we studied

in school. what is the technology overlay? wei think the overlay is have globalization going on. we have this thing called the great recession. what the great recession did is it scared workers senseless. worried about what might happen, that the firms will go abroad, that they will lose their jobs, so they are not pushing for wage growth at all. if a firm has lots of people there saying i would like to work more hours at the going wage and there aren't enough hours, why not? is answer is labor demand not high enough right now to take all the people available. the world changed in 2008. the globalization got greater. all those things that we were taught, that world has changed, the phillips curve has

flattened. than 4%,ser to 2.5% and those people who keep saying they know where full employment is have no explanation as to why wages are not rising. they are not rising because the u.s. is a long way from full employment, driven mostly by under employment still being high come and that is the explanation. the central banks and the fed are making it error because it does not understand the labor market. francine: neil, do you agree with that? >> danny is the expert when it comes to the labor market. i would not like to disagree. why have we got record low unemployment and no wage growth picking up? i think one argument you might have is the phillips curve is flat. we don't know how much is globalization. some people talk about whether

you have a kink in the phillips curve. suddenlyget is everything kicks in and wage growth picks up. the one thing you would say is in financial markets over the last five years, everyone said it is just around the corner, but it keeps failing to materialize. my sense is the phillips curve is essentially flat. that is the heart of the issue. rate.ront i want you to respond to the academics comment on the double or triple plug-in. he is saying nehru is sub 3%. no one at the fed is saying that, are they? >> there are several questions here. what is nehru? we can agree it is lower than in the past. tom: but blanche flour is going

way come away away. >> no-win knows where that neutral rate real interest rate is either. this is a great challenge policymakers have. they are desperate to get rates back to a normal level. of theat is the cost central bank that does not go with your nehru estimate? of two high aice plug-in within their calculus? major impact. it hurts people, lowers their wages, lowers living standards, reduces employment, reduces hours. i agree with everything just said. let's put this in context. says thein its minutes nehru's 4.5% and wages are exploding. it is 3.8% and it isn't. the answer is they are tightening too soon, the economy will slow.

that will hurt people. givehould let the economy a kick, and that would raise wages. the fed has it wrong. tom: we have to leave it there. thank you so m and an esteemed juergen,h this. daniel it is a morning to speak of the commanding heights. we will speak of that in a moment. haveuergen wonderful to you with this. why is this be in that meeting different from other opec meetings? >> what makes it different is there are two things. .t is not just opec it is also non-opec. the second thing is the recognition that the price crash is over and it is now going into a different era. era i look at the different

we are in, and it is supply and demand, microeconomics. is there an underestation of demandina? actually there has been a recognition that demand has been strong the last few years. saying theme synchronized boom is no longer synchronize, interest rates are going up, emerging markets. there is turbulence on the subject of trade, trade wars and so forth. that is out there. basically they are looking at strong demand. atthe same time, looking geopolitical risks, otherwise known as a total collapse in venezuela. about thetalk to me

meeting on friday, whether iran is on board, whether opec decides to increase production or not. do you have any doubt that russia and saudi will stick to their agreement of increasing production? here, whatthe mood you are hearing, is a converging consensus, i think, on the , that it will go up. there has been the chronic prices,that with low there is a situation of underinvestment. that has been very much on the minds here. everybodyem that

involved, that there will be a to take this of the in alliance to a new level. francine: what does that mean for the price of oil? how much is priced in? i don't know. i could take a guess on that, but i think just from the flavor of things that a lot is priced in. the expectations are there, maybe a few days ago people talked about a sharp crisis or confrontation. thes also interesting to me degrees to which the voicef the consumer is being heard in vienna. could be in the united states, but also india, china, and even russian consumers. francine: let me bring in neil.

priceoes the higher oil and the soon to be lower price mean for central bank expectations? >> at the moment most central banks in the developed world are happy to look through any inflation shock that may have come from the rise in oil prices, then the fallback in oil prices, the fed can ecb, boe will look through that. where it starts to have an impact is emerging markets, this perfect storm of higher prices and weaker currencies. bank thisico central afternoon. i would not be surprised to see a rate hike there. tom: i go back -- >> look what happened in brazil. tom: and brazil as well. the head of the state oil company resigned because of protests on prices. tom: we have to leave it there. thank you so much. we greatly appreciate that.

reporting, and then there are bombshells. yesterday bloomberg published a story on deutsche bank. perfect within the week of the cfa institute exams. it is on value at risk. one of the reasons he studied value at risk is to learn how worthless it is. let me show you a chart. obviously it is not tv ready. this is the crutch of value at risk at any major bank. on guest to joins us now hundreds of millions of dollars of loss of deutsche bank. congratulations on your reporting. this is extraordinary reporting. i want to ask two questions. was mr. cryan shown the door

because of his trading error? >> there were a lot of errors at deutsche bank that a lot of regulators, including the federal reserve -- tom: is this the final straw. >> in the first quarter, they had that loss were they 35 billiony sent dollars to another client. there is a lot of volatility in the first quarter. we don't know what it looked like in terms of total losses. we do know it was staggering. tom: what is fascinating about the, and i go back to incredibly important risk management article in the new thistimes in 2009, why is a ministry? this is award-winning reporting. why did you have to do this instead of shareholders going we made a mistake, which happens on wall street. why is it a struggle to get this data? >> with the regulatory filing in may, this is not something that

comes out in the annual report. mostholders don't look at it. by the time the court goes by, you absorb the information and we find this number that was very outsized. translate to a al loss. the reason it is hard for regulators is that it happened in the u.s. operations. with the european regulator see is a different picture. 2006, francine. francine: it could. that is a big affirmation. is this a problem with certain banks, or a problem about how you value risk overall in the financial sector? >> it is a problem with both. it is a problem with deutsche bank in this instance because regulators did ask, and it is something only u.s. regulators can see. did not see the ecb anything strange happening in

the first quarter. with all banks, deutsche bank's figure was 12 times. tom: 12 times value at risk. bnp paribas is the worst one. deutsche bank is like this, right? when you weressue talking about the uselessness of the measure, there are different measures of value at risk. is one we are talking about regulatory value at risk, which is more stringent men with the banks themselves calculate. if they weren't aware of anything unusual, does it mean it is weaker in europe? know, the loss happened in the u.s. operations, so we don't know how it was offset somewhere else. is that its indicate makes it difficult for regulators to understand what kind of risks are being taken here and there. tom: the first quarter there was

some upset in february. do you have a clue what they enjoyed losing these dollars on? was it a trade? how did they enjoyed losing these many millions? >> i would like to know. tom: get to work. seriously. how come we don't know t how come deutsche bank shareholders don't know this? >> it is not something they are required to disclose. tom: how much did they lose? >> if you do the math, it implies $400 million. tom: your math is they lost $400 million in one day? >> they are not required to disclose that and that is not in the regulatory filing. tom: will this be changed? sure if regulators were asking the question, investors must be as well. how much disclosure

they decide to give. tom: congratulations on this reporting. we look for more of it in the coming days. bloomberg news on a massive loss at deutsche bank. wilbur ross, u.s. secretary of commerce, this will be quite an interview after the forbes article the other day. coming up in our incredibly busy news day, bank of england and four minutes as well. wilbur ross and the next hour. please stay with us worldwide, this is bloomberg. ♪

♪ boe: hold now, hike later,

moments away from its rate decision. ,rade is a decisive factor higher sales and higher cost this year. 600 billion dollars, argentina and saudi arabia added to the msci. goldman sachs says by local emerging-market debt. david: welcome to "bloomberg daybreak." we are waiting for the boe. alix: as expected, no rate hike. still holding at .5%. the vote 6-3. dissenters, now a third added. erasing any ofng its tech line after that decision. you can take that as