francine: roadblocks to trade, the u.s. plans curbs on chinese investments, citing security risks as the trade war with beijing on a irreversible course. erdogan scores a new trial as the liver and stocks surge. where live in is stumble. oils slide. -- we are live in is stumble. oil slides. sending brent lower. happy monday and welcome to bloomberg surveillance. i'm francine lacqua in london.

are seeing a little bit of pressure, stoxx 600 down .6%. the german business confidence is as expected, 101.8, the estimate was. we were worried because we had lagging data out of germany and that goes back to the possible trade war. euro-dollar is not moving on the back of that, 1.1644. we are spending a lot of time on the back of that as mr. erdogan won a second term. we talked trade with kit juckes. a little bit later on, we get a view on global growth and ubs gives us their call on turkey lira after erdogan solidified his power after the election.

let's get straight to the bloomberg first word news. here's taylor riggs. has won aey, erdogan mandate to govern with sweeping powers after eight victory in presidential and parliamentary elections. the government news agency, he had 53% of the presidential vote to 31% for his closest challenger of the secular republican people's party, with more than 99% of the ballot counted. the index opened 3.7% higher this morning and the lira strengthened by as much as 3% on the news. a investigation has found that hedge funds hired polling companies who sold them advanced information on the e.u. referendum, including data that would have been illegal to give to the public. this allowed some of them to earn fortunes by shortselling the british pound. confidentiality agreements have

made it difficult to discover the identities of the hedge funds, bloomberg has found a dozen were involved. an internal e.u. memo has warned that president trump's aggressive approach and his assault on the world trade organization will unwind decades of progress and return global commerce to a free-for-all. the memo was prepared for government ahead of the summit where trade will be discussed. the league party has surged in a second round of voting in italy. candidates from the league and traditional parties won in a second round of local votes in most italian cities. is according to data on the interior ministry's website. they wanted a traditional left wing cities including pisa. in supportm a pickup

for the parties since the national elections. he called the results historic. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm taylor riggs. this is bloomberg. francine: thank you so much. let's talk trade. bloomberg has learned that the u.s. treasury department is planning to heighten scrutiny of chinese securities. it could put the trade tussle with beijing on and it reversible course. the white house will examine possible threats in u.s. companies in areas such as new energy vehicles. china' us central bank announced a reserve for carmen ratio cut -- reserve requirement ratio cut. this is the third reduction in 2018. for all of this, let's get straight to end the current.

-- endo curran. great to have you on the program. onk about these curbs chinese investments. we have seen this in the past. is it different this time? >> good morning. you are right. just the next or degree of scrutiny when it comes to chinese investment, not just in the u.s., but anywhere overseas. that is what is happening in the u.s. they are pushing back on this with these proposals. they are making the point they have their own national security concerns. for china, it goes to the heart a their strategy to develop world leading economy based on technology. they need to source a lot that technology from the u.s. and if they're not able to buy those assets, that could put a break

on curbing their economic ambitions. from the u.s. point of view, they are concerned about national economic security. francine: are we seeing any signs of stress in the chinese economy? seeing signs are of moderation now that we are approaching the midyear. this is dependent upon the trade tensions. overall, china has signaled to the world there happier with a slower pace of growth as long as it is more sustainable. nonetheless, there is a feeling that the tensions are not blowing sentiment among china and some people think the language and the moves has been about making sure they're sending a signal that whatever weight the war -- whatever way the war plays out, they will be there to back it up. domestic issues but

also a sense of concern about where the trade will end up. francine: thanks so much. our chief asia economic correspondent. what does the ratcheting up mean for global markets? ,oining us is kit juckes societe generale. you look at, there is a negative and positive on china. the trade war could escalate. it seems the chinese authority have a handle on growth. do they cancel each other out? >> not quite at the moment. i think the market needs to be convinced about the ability of the chinese to let air out of the balloon in a control -- and. -- a controlled fashion. lots of pictures showing us the scale of the chinese debt problem. you're trying to tackle this debt problem. if the air comes out too fast,

we're going to put in more at the same time and where managing that while this trade war throws needles at the balloon. it is hard to be relaxed about that combination. francine: what to worry about? we are not talking about recession -- are we talking about downturn in gdp? >> we're talking about the debt ofblems leading to a pace slowdown that the chinese authorities cannot control. chinese policy is about being in control. it is a question about how many things you can throw at it at the same time. they do a great job of controlling their economy. ans paddlingre of sw furiously. this could go wrong. nervousness,is there are lots of things coming

at markets. francine: would it go wrong enough to spark a worldwide recession or is it slowdown in growth? will see thely we chinese economy continue to slow. would have to tolerate more economic weakness rather than less to keep it under control and that is going to be a drag on global growth. francine: with this trade war, could be scaled back quickly? control, wes out of are looking at this, thinking, can we have a trade spat. francine: could it turn into something more manageable? >> the trade tensions, at the ,oment, since the beginning president trump once a deal. he wants concessions.

he wants movement on some issues. he does not want a trade war. there is collateral damage that the u.s. could suffer from. francine: we are getting breaking news out of the pboc saying china will increase the loan relenting quota by 150 billion yuan. the more we get this, does it make you feel more comfortable? >> it makes me nervous in the sense, this is the chinese authority's working hard to maintain control over the pace of slowdown of the economy in the face of challenges. i can be amazed by how in control they appear to be. other countries have failed to achieve what they are trying to do. francine: let me bring you to over to our chart.

you can look at violations and see that u.s. stocks are the priciest ever relative to china. what does that tell you? >> u.s. stocks are expensive. it tells me the chinese equity market has been beaten up. francine: thank you so much, it kit juckes stays with us. group. tightens his he wins both presidential and parliamentary elections sending the letter stronger. -- sending the lira stronger. we bring you the inside story about how hedge funds it used information. this is bloomberg.

francine: economic, finance, politics. this is "bloomberg: surveillance" let's get to the bloomberg business flash. here is taylor riggs. lobbye main business groups have told theresa may their concern time is running out for a deal. writing to the prime minister of the weaken, they said in the absence of clarity, businesses will have to implement plans for a worst-case scenario which could cost the economy billions of pounds, thousands of jobs, and leave families without an income. may is under pressure to sell out britain's vision. she has promised a white paper for her plans before the summer recess stars. she must first reach consensus with her cabinet and party. bitcoin has jumped back after

dropping to a 2018 low on sunday. the virtual currency traded above $6,000 on monday, after dropping below that for the first time since february over the weekend. the volatility reflects increased scrutiny by regulators on the digital currency sector and global central bankers raising questions about viability. down almost 70% from its record high of almost $20,000 in december. uber's long-awaited hearing in the u k courts begins today. it will argue it is fit and proper to hold a license in the capital after the city's transit authority refused to extend its operating permit last september. the case could go all the way to the supreme court. the london mayor said in november, the process could take years. that is your bloomberg business flash. francine: thank you so much.

the turkish lira and stocks surged as erdogan won a mandate to govern with sweeping new powers after clinching a win in both presidential and parliamentary elections. he took 53% of the vote against 31% for his closest rival. >> the winner of this election is democracy. our nation, the winners of this election are our citizens. the anchor of bloomberg markets middle east is in istanbul. ofputs an end to a period political uncertainty that has been dragging on markets. >> in theory, that is correct and that is what we're seeing getting priced in. what a night it was for a lot of people in turkey, fireworks in the early hours as the results

began to become clearer. two key takeaways. mr. erdogan wins another term with additional powers. the surprise element was he was able to seal the deal. the second surprise is on the parliamentary front where the party had to give away its majority. that means it will have to work with another partner which has implications for economic policy. you mentioned stocks trading higher. strengths in communication and basic materials. let's get perspective on this. we are joined by the managing partner in istanbul. are seeing in stocks, how long is it going to last? >> the election is over. the uncertainty on the political side is over. as you said, we're having a rally. on how thes implementation of the new

government, the new system is going to be. after some point, we are going to settle down, maybe in one week, maybe two weeks but after how, we are going to see the economy is. >> that is critical. we had a cat scan of research in the last few hours. there saying this is -- they are saying this issue of the administration returning to unorthodox policymaking, they will use the new power to continue doing what they have done. >> i do not expect so. the things the economic team will do our clear. we have external data of $450 billion and half of it is going -- externalnced debt of 450 billion dollars and

half of it is going to be refinanced this year. investors,ink the the for and investors are going to like it. i believe that and i expect that. system, the growth will come down and there is going to be a soft landing. >> you expect gradual rebalancing? >> exactly. >> they have been on the nationalist lean. >> they did not tell their opinion on the economic side. on the political side, we know what they think. on the economic side, it is not so clear. we are to see in the coming days. >> what about some of the other , the turkish

sovereign debt, if you look at the spread over treasuries, it is remarkable. >> the confidence of economic policies is lost in the last three to six months in turkey. all we need is confidence of the investors, especially foreign investors. rates are of interest attractive for them. i believe if the confidence restarts, the foreign investors are going to buy lots of sovereign debt and turkish treasury bonds. interest rates are attractive for the time being. >> you say confidence needs to be rebuilt for foreign investors. we have seen the administration of mr. erdogan in the last three to four months make it clear he is willing to he more with monetary policy. how do you reconcile that? that this is not an

easy thing to continue. before, with this amount of external debt, you cannot add growth based monetary policy. point,ve that after some the economic team of the new system is going to understand that. example, the central bank, the interest rates rise by 500 points. that the central bank and the economic team and mr. erdogan is going to believe that it is like a passage. it is going to gradually lower the interest rate. it is not easy to lower the interest rates like this.

>> it sounds like you are foreseeing reform. >> both economic and legal reforms. >> we will see how it plays out. thank you. that is the managing partner at istanbul portfoi. another voice in what has been a vibrant discussion here. francine: it looks so dreamy. great reporting there. to keep the conversation on turkey, kit juckes. what happens from here? paul's,et a period of first. -- pause, first. you have a lot of people who up and forced to short painfully because were not going to a second round because we have uncertainty about the outcome.

people are going to look around and say turkish assets are cheap, the currency has fallen, bond yields are high, everything is attractively priced and you will get people buying on that basis. that is a trade, not an investment. then, it is about policies. know there is nervousness about what will happen in the longer run. we will have to see. the markets are going to take convincing that the policies are sustainable in the longer run. francine: we are looking at credit risk coming off the highs of 2018. we had the turkish lira which we've talked about extensively. how long does this initial trade last? this initial trade will last for a little while. it is not helped by the external environment. turkey is not the only big current account deficit to see its currency suffer.

south africa, argentina suffered. pakistan was forced to devalue. you could go through a list. it is not pretty reading at the moment. if we get back to treasury nexts, talk of the fed's move, onto conversations about a itinking fed balance sheet, is going to be a testing summer. we will get really for a little bit. is onebal environment where global investors are going to be nervous. what is making them like turkey is yields. francine: what does the dollar do from here? >> it is likely to remain bid against emerging markets because of the u.s. environment to the fed tightening and the prospects of the fed balance sheet changing direction. -- all of that is going to support the dollar

against the broad range of emerging-market currencies. what turkey would need to do is to a policies that stand out from the crowd. francine: which would be what? the president saying the central bank is independent? to be in a hurry to cut rates. it is back to the current account deficit. if you're going to have investment, the markets want to be convinced the investment is there and it is going to raise output. init is no productive gains the future, it is just money borrowed to pay for something and you're not sure of that. some of the plants to put a -- plans to put a canal in the bosporus, confidence on that from the administration is important. francine: you find out after the summer or could it be longer? >> it is ongoing.

how much depends on the central bank, what is the desire on fiscal policy. francine: thank you so much. kit juckes stays with us. the big short after the brexit vote. we will give you a story about how a hedge fund used insider information to cash in. this is bloomberg. we will have more to come throughout the day. we are looking at asset classes. we also had figures earlier on. it is good, it is not as bad as expected. it is in line with expected. we will talk about immigration. this is bloomberg.

francine: economics, finance, and politics. let us check in on what is trending across the bloomberg universe on tictoc.

find out why saudi arabia is moving forward with a plan to turn qatar into an island. bank justeutsche cannot shake off its problems. and the most read stories on the bloomberg terminal, in the third place, china cuts the bank as it loosens policies in response to trade concerns. second place, aired again -- erdogan has a victory. and the u.s. treasury department to heighten its group name of china. scrutiny of china. there are stories coming from every single angle imaginable. wti. an election in mexico. mr. birol: july 1 --

ne: july 1. kit: it is the big tied for markets that will be the difficult thing from u.s. interest rates. each one of these idiosyncratic stories will be harder to cope with. francine: thank you. let us go to taylor riggs. taylor: in turkey, erdogan has won a mandate after a double victory in president and parliamentary elections. he has 53% of the presidential vote to 31% for his closest challenger. that is more than 99% of the ballots counted. the electoral board has not

published official results but it did confirm erdogan's victory. upsident trump has ratcheted his demands on immigration policies saying people that enter the u.s. illegally should be deported immediately. he tweeted -- we cannot allow all of these people to invade our country. when someone comes in, we must immediately bring them back to where they came from. our system is a mark gray to good immigration policy and law and order. the u.s. treasury department plans to use an emergency law to heighten scrutiny of u.s. investments. under the plan, the u.s. would use one of the most significant law available. the move could put washington's

trade war with beijing on an irreversible course. putting on aers brave face over their persistent differences over how to handle migration loads. german chancellor on -- angela merkel says there is a lot of good will and they will continue to work towards a solution. a lack of tangible progress could further escalate the crisis. creating a rift in germany's governing coalition. global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in over 120 countries. i am taylor riggs. this is bloomberg. after a two-year roller coaster ride, sterling is trading at roughly the same level as it did the day after brexit. counterking outcome ran

to what was anticipated. some hedge funds cashed in on the market turmoil. sold critical advance information. that is a subject of an investigation in this week's issue of bloomberg businessweek. it is one of the most fantastic reads i have had in the last 10 days. joining us now is one of the writers behind the story. thank you for joining us. this is an exclusive bloomberg investigation. you have been looking into the relationship between the hedge funds, the polling stations. what are the most surprising things you found? should not be terribly surprising that hedge funds and other financial services companies would be interested in the polls ahead of the vote. the polls were moving the market consistently. that the major

polling companies, the most prominent polling companies in this country, were selling exit polling data on the data hedge funds, streaming it to them throughout the day so they could policyre their trading so they could make their bets while people were still voting. that was quite surprising especially because the fact that the country is leaving the eu is significant. the largest crash of any major currency since the founding of the financial system. u.k. t is a crime in the this is criminally defined as public information. people who do exit polling of any kind are forbidden by law to publish it before 10:00 p.m. -- offinition of public published is to provide it to

the public. for thethe tricky bit pollsters and the hedge funds. got legal companies advice, structured its offering around that advice. they were told that if you do it for one hedge fund, we think you are within the law but other pollsters would not tell us what advice they got but there were multiclient polls. the pollster he said was first to see the rise of ukip and who first spotted the rise of nigel when he madet was his concession. francine: here is how he broke his early concession. >> we have spoken with nigel ferriss. -- nigel farage.

extraordinary referendum campaign. turnout looks to be exceptionally high. is it looks like remain edging. talk to us about what happened there. >> if you saw the timestamp, 10:01.s upwas immediately followed from yougov. when british voters expect to see the real news from john curtis and his team. gave an yougov exclusive exit poll that called age had asked

for. the hedge fund got results in advance that hold them essentially what showed them the same result that yougov read on air on sky. these critical for five minutes at the start of the sky broadcast pushed the pound up ahead of the crash. they would the in position for the underlying data. francine: what i struggle to understand is that in the end it was the other way around. it ended up leaving. what happened -- were the polls wrong? there was even a poll saying that brexit woodwind. win.at brexit would that were told by everyone one of the polls was correct. those hedge funds would have been in a great position to make some good bets that night. even polls that got it wrong

dave underlying data. we heard from the traders and the pollsters that showed critical trends. polling is about the interpretation of the data. the hedge funds can look at these data. are there going to be investigations? >> that is not up to us to decide. some people are calling for investigations. francine: kit, i don't know if you want to comment on this. i also have up euros/pound. pound is cheap at these levels. we are very bearish. about what is coming. much tond to place as good news. if only we got some good news.

sterling continues to bump along the bottom. in the market wants a level playing field. someone will have to decide the difference between good digging and bad digging for information. there is a line that will have to be decided. the gray area probably needs to be clarified. we said just that in that story. he says he did not have an exit poll that night but he had been subscribing to a uke -- a uke up -- a service up to that. francine: do we know how many hedge funds possibly used this service? >> a dozen if not more. next, opec prepares to boost production.

the minister tells us he is looking for others who -- for other ways to overcome sanctions. this is bloomberg. ♪

francine: a deal between opec members pledged a nominal increase of one billion barrels a day. spoke to russia's energy in vienna on the deal. level total conformity

currently is at 150%. the decision has been made to take it back to 100%. which means we would be adding one billion barrels a day of production. anne-marie joins us here in the studio. will they cheat on it? >> things really changed between friday and saturday. on friday they said it was when million on paper. but it will actually be last. less. it will actually be saturday, they came out very strong saying it was one million barrels hitting the market. it is a lot more then the 700,000. francine: i see a lot of positioning. >> brent is looking at the opec atl while wti is looking

activities in america. there -- they are waiting to see what happens with iran. the sanctions will come up hard in the lead up to november. i spoke with the minister and he would not give export details. 500,000et is pricing in by november. he did say when i asked about waivers -- he said he did not expect any country to get any waivers. take a listen. there will be a waiver from the united states. they will find another way. they will be looking for other ways that they will work around. he did not want to give details because he did not want the u.s. government to block it. he even named names including shell. sparene: saudi arabia has

capacity to make up for any loss in production. ititically, it it is -- is palatable for them to do that? >> they are under a lot of pressure. isis the fact that the u.s. asking them to pump more. foreign policy wise, they need the u.s. on their side. francine: how do you look at the opec meetings? opec isast 18 months, back. it is relevant again. kit: it is relevant except in the concept of -- in the context of what is happening behind the scenes. partly because of venezuela and also because of iran. a town of excess oil around that can be easily brought a mine. theys job is easier when

could push prices higher. to be quite ase tough against that background to keep the price at a higher range that everyone in opec is frankly happy about. the concern is that if it goes too high it will start to hurt consumer countries that will then by less of the oil. kit: and it has geopolitical concerns. to keeprtel, you want the price high enough. francine: does this have an impact on inflation expectations? at break evenok inflation in the oil price, the answer is yes. it should not to the degree that it does. francine: thank you for joining us.

up next, a europe divided. new leaders make little progress regarding migration at talks. avoid mutinyrkel from her coalition partners? we discuss that next. this is bloomberg. ♪

francine: economic finance and politics, this is bloomberg surveillance. let us get straight to the bloomberg business flash. taylor: the uk's five main business lobby groups have told the prime minister that they are deeply concerned. writing to the prime minister over the weekend, they said -- in the absence of clarity, businesses will have to implement plans for a worst-case scenario which could cost the thousandsmy to lose of pounds and cause many families without a main income. to provider pressure a plan. she has promised a white paper before july 24 but must first reach consensus with her

squabbling cabinet and party. uber's long-awaited hearing in the u.k. court is today. it has argued that it is fit and proper to hold a license. the transport for london has operating extend its permit. the case could go to the supreme court. the london mayor said in november that the process could take years. and that is your bloomberg business flash. francine? francine: european leaders have put on a brave face over their persistent disagreements on how to handle migration flows. chancellor angela merkel said there was a lot of good will and they would continue to work towards a solution. a lack of tangible progress could further escalate a crisis that could create a rift in germany's governing coalition. how concerned should investors be?

we are also getting some polls saying that things are better than good when it comes to the popularity among the citizens. should we worry about immigration and the impact on the economy? kit: we should worry about europe having an immigration strategy that is coherent. that is the critical thing. europe as a whole needs to get ahead of the news flow rather than having an individual reaction causing divisions. is a missedthis opportunity. getting ahead of the news means finding agreement. we know in the past when it came to the greek crisis that it took all of the countries to find a solution. kit: it is hard to be

optimistic. it does not get away from the unionhat the european immigration crisis isn't years old now. it started with the arab spring were left of people in camps in north africa and the middle east. and there was no plan on how to help them stay in their countries and eventually, the dam burst and they came across the sea. the crisis was felt first to buy the countries closer to where they were. and that is why we need a pan-european solution. we are nearing the 11th hour. francine: what does this mean to ecb policy? kit: nothing directly unless it feeds through to financial market insecurity or the economy. it is clear that at this point

with the soft patch in the european growth numbers, may be easing with the friday pmi numbers that this ecb is in much less of a hurry to start normalizing monetary policy than ratesevious one who rose in 2008. mario draghi -- they are not going to come charging in. francine: is that a danger? we could see europe missing a trick and not have the tools to deal with a recession. do anything too make the recession come sooner. if the global economic cycle is too much against the european economy, there is not much the ecb kendo. the ecb is still in a position where they don't want to make things worse. sense, the ecb will go

on reacting to the economy and other things will affect the economy. juckes, thank you for joining us. "bloomberg surveillance continues. we won't get a view on global growth. i am looking at some movement on the turkish lira. we are also seeing a credit default. and we have a great market blog saying the only certainty is if we will -- is that we will see more volatility. futures following an asian shares are lower. this is bloomberg. ♪

francine: roadblocks to trade. curves on chinese investments,

added security risks. is the trade war on an irreversible path? turkish president scores a new term. turkish stocks erasing initial gains. sets afterors' as opec supplies go lower. tom keene is in new york. good morning. happy monday. it is an interesting new flow. europe, immigration, we look at the u.s. and opec, it of course the turkish lira. see what is interesting to is the debate with angela merkel in europe, they are going to an important meeting. in the markets, it is risk off this morning. francine: it certainly is. also looking at china and the u.s., that spat intensifying. here is taylor riggs with the first word news. withe turkish president

sweeping new powers after a double victory in presidential and parliamentary elections. according to a government news agency, he has 53% of the presidential votes, to 35% for the closest challenger of the republican people's party. that is after nine and i percent of the ballots counted. the turkish lira has strengthened on the news. president trump brushing of his demands on immigration policy, same people who entered the u.s. illegally should be deported immediately without court hearings or any normal judicial processes. "we. when somebody comes in we must immediately bring them back to where they came from. our system is a mockery to good immigration policy and law and order." u.s. treasury department is planning an emergency law to heighten -- of chinese

investments. under the plan, the white house would use one of the most significant legal measures available to declare china's investment in u.s. companies involved in certain technologies a threat to economic and national security. the move could put the trade war on a potentially irreversible course. partytteo savini's league in italy, candidates for the league one in the second round of votes and most entire cities, including the left wing cities tuscany.nd he called the results historic. global news, 24 hours a day on air and on tictoc, powered by over 2700 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. francine: --

tom: thank you. equities, bonds, securities, commodities, futures are light. and -169 on dow features. euro with a fractional advance. , 1.37 points, vix that is a big deal. breaking out of the recent trend, call it 14 down to 9. german two-year is lower, actually that is green on the screen, higher negative yield right now. but that was lower earlier to .67. gold is light. turkish lira after this election. francine: u.s. equities stocks lower. seems that traders this morning i decided to look at a possible blooming process for the global trade economy.

turkeys currency is surging after the turkish president claimed a victory this weekend. and i am also looking at china shares, the currency falling after an announcement that it would free up a lot in the banking system to help caution the economy. .1661.llar at let's sum up with the 10 year and the two-year. this is the spread. you can see the convexity. there is the trump election, down we go with a flatter yield curve. this curve is a huge deal. this is the acceleration of an ever flattening yield curve. we spoke with our guests, there are many rationalizations for what is going on with the curve flattening. francine: this is an interesting chart. i know that we look at the

turkish lira a lot, and might prefer the standard deviations long time, but with the credit risk it is coming off of 2018 highs. after the news of the weekend, it will be an interesting thing to look at turkish risk. tom: let's go to china to begin our coverage. the complexities and many stories behind the megan trade war. yes, it does affect -- the american trade war. yes it does affect china as well. let's look at the action of the central banks to free up cash. what about the beginnings of this trade war? >> i think there are signs of caution and worry starting to emerge. we are seeing the move by the central bank with lower rates . there are dominant factors mattered domestic behind this. smaller companies are facing a

challenge. the broader backdrop is that the economy is moderating and the trade war poses a significant headwind, especially if we go beyond the tariffs on $50 billion of goods, the something much higher. china will be feeling the pain. policymakers trying to get ahead of the curve here. tom: let's bring up this chart. dollar-yen in a tight trading range here, with remember the weakness. with jawboning on trade, there is a bout of weakness we have seen in the last number of days. what is the risk to american technology companies? china has a few weapons, don't been? -- they? >> certainly. it is not just the tariff barriers, they can make it

awkward for those companies operating in china by heightening inspections, and of course by canceling orders outright. they can source technology from alternative places as well, but there is no doubt they rely on the u.s. for technology, and that is why the potential restrictions on chinese investment in the u.s. is such a threat to china's future industrial strategy to become one of the world's leading economies powered by technology. francine: what is the central bank doing? we saw a reaction after they cut the reserve ratio for some of the chinese banks. it, guess they had signaled for the signals, the new governor has been saying that they are watching what is going on with a trade dispute and they are ready to back of the economy, if need be. been -- that has

always been something that has come from the chinese economy. they are conscious that this harm and they are willing to step in. the overall economy is holding its own. thinkny signs of stress, this is more of a story that will develop over the coming months. francine: thank you. enda in hong kong. joining us, erik nielsen chief economist at unicredit group. also elsa lignos. thank you for joining us. when you look at the pros and cons. e a possible escalating trade war, and the sentiment of china being cautious, did they cancel each other out? erik: no. what we are seeing now is

terrible news for the world economy, certainly for china and europe. and i think there are two issues for the chinese, the technology path, and they need to keep grow going. the economy is slowing by itself right now. and they are using this climate, a terrible instrument to use, because the number one issue china has is the leverage issue, so you cannot resolve the slow down by asking for more leverage. i think they are in a tight spot. francine: what will happen? elsa: i think it may be weakening from here. we have seen it in mexico and canada that both countries have been less concerned about the threat of tariffs, because their currencies can do a lot of work in counteracting the tariffs, but the chinese do not have that capacity because it is such a managed currency, but we will see a trending higher overtime. francine: what about, what will it do overtime?

sa: something above seven and 2019. this will play out over several months. we will see the u.s. responding every time, but it takes two months to get to the legal hoops, so this will not happen overnight. tom: we have a chart that we will put up. we have this on the terminal, 680.e we go, si willoughby the affected of that upon china? is, i think one of the outlets china has to use, we have heard the u.s. threatening $50 billion, then $200 billion. they have a lot more than china then responded -- been china can respond in time.

francine: do you want in? call.680 is in bold how much of that is dollar appreciation and how much of it is the chinese move? on in the year, whenever we were calling a euro-dollar at 130, certainly we have some dollar strength in their. i am looking for dollar-yen at 120 come it will not reach 680 in this environment. francine: was is it me for emerging-market currencies? elsa: you highlighted turkey. turkey is one of those countries that is an sensitive to a strengthening dollar. it has good news today on the back of the election results, so that would be a good time to get out of the lira holdings. tom: if we were to get the outcome from the capital markets, do you automatically

assume that europe benefits? if there is a trade war, is it just automatically meaning that europe benefits, or will europe be dragged in with america on these challenges? erik: we will be dragged in. i do not think there is any way to shelti yourself from a trade war when it involves america. we have talked about all the research that is done now and what it could do to global growth. it is potentially very serious. so we all suffer. there is a hope the europeans and chinese will do things together, thereby cushioning the downside, but there is no way of hiding. tom: did i hear you look for weak yen to a 1.20? elsa: that is right. it is interesting at the moment. people expect the yen to benefit

intensive risk aversion, the sensitivity is a lot lower. so when we see these risk off moves -- go ahead. tom: keep talking. head is the chart of where the yen is going. this is a real jump up. things wene of the are looking at is the change in behavior of japanese investors. and as the fed is hiking rates, we have seen the cost of hedging for japanese investors, you are ready for the impact of that in the q1 capital flows with them rotating out of treasuries and into ecb's. but at the end of the day, they wanted to take more currency risk. tom: we will continue this. and we have erik nielsen doing partial differentials way too early in the u.s. morning. we will continue. [laughter] we will do some partial --ferentials with

short term markets. tony can send the in the next hour. in turkeyn election with mr. to want doing well. erdoganh us -- with mr. doing well. they with us. this is bloomberg. ♪

this is "bloomberg surveillance." >> uber's hearing in the u.k. court begins today. they will argue it is the and proper to hold a license in the british capital after the transit authority refused to extend its operating permit last september.

the case could go all the way to the supreme court. the london mayor said in november that the process could take years. and bitcoin has bounce back after dropping to a 2018 low on sunday. the biggest virtual currency has fallen as much as 5.2% to peers the -- pierce below that was sent on february 6. the volatility reflects increased great name by regulators on the digital currency sector, and global central bankers raising questions about its -- bitcoin is down almost 70% from its record high of almost $20,000 in september. and greater has agreed to acquire edr for about $4.6 billion, including debt. they will pay $41 .50 six cents a share -- $41.56 a share. this is according to a joint statement from the firm.

the deal was unanimously approved by the board of directors at edr and is expected to close in the second half of 2018. that is your bloomberg business flash. francine: thank you. a turkish presidential candidate speaking. he was the main challenger in the election, in former physics teacher born in northwest turkey and he was backed by the chp. this comes as modern turkey's has gotteney ruler new powers after double victory and parliamentary and presidential elections. straight to our man on the ground, who is in is the bullet the latest. where exactly does this leave the sweeping power of the turkish president and the turkish economy? yousef: some things to keep in

mind, this was a big win for him on the presidential front, that he was able to seal the deal in the first round. the issue is in parliament, he won a have to work with another party to form a coalition, that could mean uncertainty, but you heard comments that you just recapped, which shows there were issues with the vote. we reported this in the run-up to the election. we will see where they do about it in the coming hours. francine: if you look at stocks, and currency, it kind of rallied, but it seems to be possible that this will be very short-lived. --sef: lost the we may have line, so we will get back to you. we could also just enjoy the view, because it is beautiful, of course with the oil tankers

in the background. we have anthony skinner. elsa erik nielsen and still with us. what do you make of this kind of significant win by erdogan? >> it is not surprising that the turkish lira has rallied. it has settled any concerns related to the parliament being dominated by the opposition, concerns related to the second round vote, but there is concern over policymaking, specifically in relation to the president strengthening his control of monetary policy, and the need for structural reform. it is likely the government will kick the can down the road until 2019. francine: when you look at the turkish president, he was here about a month and a half ago toling us that he wants to take charge even more of the central bank. does he needs to sever that

link? >> ideally, he should, but he is concerned with the generating demand, economic growth, and to perpetuate the positive story he enjoys over previous years, specifically over the course of the first 10 years of the policy performance of his party. we do not expect him to stand back, unless there is a near run on the lira, unless there is an economic crisis, he might withdraw. but that is a concern for inflation, that is a concern for the deficit, and a concern for companies. tom: mr. putin says congratulations to mr. erd ogran. case-based to his "great -- he space to his "great political authority." is he a dictator? >> the key issue is will he make the necessary moves. tom: this is important, is he a

dictator? was the election rigged? >> this is an issue, if you listen to the opposition you can draw your own conclusions. it is clear there have been irregularities, it is clear that the party, hdp, did not enjoy an even playing field. that is a problem for turkey and it is clear that erdogan is in the driving seat. there is practically no independent body that can challenge him, so you can use your own terminology, i think it is all over the press. francine: what does it mean for the turkish lira. weave a chart looking at -- we have a chart looking at it. thisnt up a little bit, is short-lived? elsa: i think there are two problems, one is a domestic problem for turkey, that you mentioned already, the pressure that the president is putting on the central bank.

it is not clear that it will subside after the election. and the international backdrop. this is a country that is having problems. and turkey falls into that category. francine: what is your take on the turkish economy? erik: it is in trouble. with the dictator question in the sense that, whichever way he got there, my impression is there is nobody in turkey today who could challenge him in terms of policymaking. the real concern is when people get too powerful, at least for some, they will not listen to advice. even the good people around him seem to come up against a problem. so there is a rally now, but i am worried. tom: it was six cups of coffee ago that we were talking about turkey entering europe and being part of europe. how distant is the president from the discussion of seriously

five or six or seven years ago? erik: it is completely gone. so i think that it is fair to say, tom, in retrospect it is something that he really believed, that turkey was going to join the european union. i think today he was playing the european union to get the turkish military out of his hair. but in the process, of also because of the faults on the european side and the terrible mess with immigration and everything going on in europe, it is inconceivable today to see any meaningful, any progress at all in this area. francine: what is your call a turkish lira? elsa: turkish lira lowered by of the of it this -- year is a safe bet. francine: how does the central bank take back control?

elsa: there is nobody domestically that can contradict the president. he said he believes higher interest rates cause high inflation. if that is your understanding of monetary policy, you have a problem. francine: go ahead, tom. tom: i think what is so important is the politics forward. will there be new politics from mr. erdogan, or is it business as usual, including an estimated 160,000 people in jail? is there a new erdogan? >> no. it is business as usual from many different perspectives, in terms of the strive to flush out elements of defense and turkish society, in terms of policy by and large. and we saw the central bank hiking rates in may and june and he has an eye on local elections. so it is business as usual.

he is waiting until there is a period of easing in order to make the adjustments that the economy desperately needs. time is not on turkey's side. francine: thank you so much, anthony skinner. and elsa lignos. erik is staying with us. at 6:00, we will have anthony crescenzi. talking about dollar strength. , comingt the volatility up. this is bloomberg. ♪ retail.

under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store

near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. francine: this is "bloomberg surveillance." i'm francine lacqua. tom keene in new york. let's look at what is trending. after cutting ties with

emirates, find out why saudi arabia is moving forward the plan to turn qatar into an island. and shares at a record low, why deutsche bank cannot shake off their problems. and are most read stories over the past few hours. third place, china cuts the rrr for some banks, loosening policy. in second-place, erdogan with the mandate to govern turkey with a sweeping new powers after a double victory in the vote yesterday. and at top, u.s. treasury department heightening its scrutiny of chinese investment in u.s. industries. now first word news. taylor: president trump has brushed up as demand on immigration policy, same people who have entered illegally should be deported without court hearings or other judicial processes. cannot allowwe people to invade our country.

we must immediately with no judges bring them back to where they came from. our system is a mockery to good immigration policy and law and order." european leaders put on a brave face over there differences on how to handle migration flows. speaking after an informal gathering of leaders from 16 e.u. states, angela merkel said there was a lot of goodwill and that they would continue to work toward a solution. a lack of tangible progress could further escalated crisis that threatens the block. and create risk in the governing coalition in germany. and the u.s. treasury department planning to use an emergency law to heightened scrutiny chinese investments in sensitive u.s. industries. under the plank with a white house would use one of the most significant legal measures available to declare china's investment in u.s. companies involved in certain technologies a threat to economic and

national security. the move could put the trade war with beijing on a potentially irreversible course. columbia fans in high spirits as their team got their tournament back on track, with a comfortable 3-0 win over poland last night. the result means poland cannot qualify for the next round. the final matches today will be in group a and b. russia looking to face uruguay. iran with a chance to begin place in the final 16. global news, 24 hours a day on air and on tictoc, powered by over 2700 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. francine: thank you. bloomberg investigations has found that -- sold them advance information on the referendum. -- the e.u. referendum. for this exclusive story, you

can find it on her website. our editor joins us now. thank you for giving us your time to talk us through this story. you have been looking at the relationship for several months, actually for seven months, what is the most surprising thing you found? >> it is not surprising that hedge funds might want to know what the public mood is. but what we were surprised by was there was a relatively small group of hedge funds that paid major polling companies in the country to stream exit polling data throughout the day, while the polls were still open, so they could position themselves, position trade in the run up to the final result coming in. why that is surprising is it is not just a critical market moving on information, but it is criminally defined as nonpublic information. it is a crime to publish exit polling data before the polls

are closed at 10:00 p.m., defined as sharing with the public or any section of the public. that is tricky ground for the pollsters and maybe also for the hedge funds. and it is also, it raises questions about the relationships that exist. people curating the conversation around the brexit without any of us knowing they had these relationships with the hedge funds betting on our opinions. and how we voted in the end. francine: nigel farage, a key actor of the events, this is how sky news broke his early concession. >> we have spoken with nigel farage. not with the official campaign, but the other leave campaign. he has given us the statement. "it has been an extraordinary campaign, turnout looks high. and the party will only continue

to grow stronger in the future." francine: what are we looking at here? nigel farage, i guess going on to say that the remain campaign probably won. callinglear concession, out to his people of the future, like a concession works. francine: did he know otherwise? cam: other people that were with him have told different stories, but the most important thing, that was breaking news at the moment the polls closed, followed immediately by a pollster. at cap.pm, usually we see -- at 10:00 p.m., usually we see the famous exit poll. this was an exclusive exit poll. they follow up, backing nigel farage's words with data, saying it was 52-48. and by 10:04p.m.,

p.m., sky news -- these incredible pieces of information that would prove wrong, drove the pound up before the biggest crash of any major currency in the history of the global financial system. those two things together with the most significant, really the only market moving news in the window between the polls closed and when the real tally started coming in. the pound fell off a cliff from there until 5:24 a.m., when it bottomed out at $1.32. there are questions about what nigel farage knew. his favorite pollster, his political advisor, the man is a genius who did the largest hedge fund exit poll that day, who he was in contact with about the results, but the question is when did he speak with him? there are disputed results of that. so they sold separate data 10

them, that enable that hedge fund to them what the results were going to be on tv. they got the same result. they were in a position to play on the way up. and on the way down the results started coming in. francine: fantastic story. cam, thank you. and erik nielsen from unicredit. i have a good euro pound chart up, what we know about brexit at this point? erik: it is in this. the u.k. government has not decided what they can or want to do. there is maybe a little bit of a isnce that the hard brexit not so big. my guess would be that what we will have is a transition period, maybe beyond 2020. but it is unbelievable. apart from the investigations

here, which are mind-boggling, but politically and seeing the economy underperformed so severely, but seeing a major european country in political disarray, i never thought i was going to see it. tom: i look at where we are on brexit and on the path forward into 2018. i can assure you americans are distracted by some issues, like the great immigration debate over here, but what does unicredit look for in the next six months? erik: we are looking primarily on the progress, hopefully, in the european reform agenda to build a more sustainable architecture for the institutions in europe. we saw thethat, declaration between angela merkel and macron, but we particularly hope that they will focus on things that will drive

growth stronger, instead of all talk with stability, but we want growth before anything. tom: growth before anything, is it there, will real wage growth find out in the united kingdom -- flatten out in the net kingdom? erik: so i think in the united kingdom we have a double whammy. on the one hand, we have a cycle that is more like the u.s., that it is better than the eurozone early on, they have closed the gap and you have basically full employment. we have a natural tendency to easing a little bit, but then comes brexit uncertainty, which is starting to bite. the higher inflation numbers, which are undermining real income. and the uncertainty for businesses. you saw the announcements. some are starting to think, will they really invest here now? so i think the economics is very

tricky. francine: what will it take to move the pound from here? do we have a blueprint of what the government wants to do? what does it take to move the pound? erik: very good question. it seems a lot of major currencies are trended this way to meet -- trending this way to me. i think the u.k. economy is weaker than we have it in the market. i think if the moment that people realize what a mess it is, you will see a weaker pound. i think that will be the direction. of what news you specifically get coming out of there, it is tough to say. timing is never are strong suit. [laughter] tom: we will talk about the timing of the world cup's poll.

erik: that we can talk about. tom: francine is doing better than i. coming up on bloomberg radio, the lead story, is francine lacqua vaulting off of the world cup poll? that after your monday briefing. "bloomberg daybreak" on radio. ♪

francine: this is "bloomberg surveillance." 's and francine from london and new york. crude trading to the downside after opec members pledged an increase of one million barrels a day franc,.ine lacqua.

will oversee the hike. we spoke with several key players in the and on the deal. >> i believe that president trump is going against market fundamentals, against a market, against the free market. and it is not going to benefit even the consumers. the high-level price caused by the action of president trump. >> i mean, i would like to say that the united states is the largest consumer of crude oil, but at the same time it is one of the largest producers. and this means that there are different polar views on this topic and interest inside the country. it is a good example of an area where consensus needs to be found. from aink any feedback major importing country has a

feedback to us, and we take them seriously because they have feedback to us. we received from the prime minister earlier, before president trump, from the prime minister of india, a statement. we received from many of the major importing countries like china, korea and japan, they talked to us and gave us their feedback. and we need to take this seriously. francine: so we are still with erik nielsen. when he speak with hedge funds and market the dispense in the oil industry -- market participants in the oil industry, we have more questions than answers at this point. erik: the one million barrels will only materialize into 600,000, because many do not

have the capacity. that is why you saw the oil prices move higher, it is not a very big number in a sense. francine: what did you learn from opec? first, saudi arabia, does that deal hold? are the much more careful in trying not to break up, because they wanted to make sure iran was on board? erik: an attempt at stability is what they are trying to do. they our happy with oil prices in the 70-80 range. and that gives them and russia a good deal of cash that they desperately need. they know if you push over 80, then even the most unprofitable gas companies in america become profitable. tom: i agree, it is hard to find an optimal price when you fold the u.s. into it. what is the optimal price for

europe as they go into the winter? erik: if you mean the best, to know is not possible. we are net takers. so i will say this, on our estimation, between global demand and supply is probably closer to $60 a barrel, so there is a premium on the uncertainty in the middle east, it is still there. our guess is that will stay with us because of donald trump and qatar and saudi arabia, and the questions with iran, so we will continue to pay a price probably worth $10 a barrel for political uncertainty generated by the middle east and donald trump. much,ne: thank you so erik nielsen, staying with us. harry --.

this is bloomberg. ♪

>> let's get to your bloomberg business flash. uber's long-awaited hearing in u.k. courts begins today. the company will argue what is fit and proper, after the transit authority in the city, refused to extend a permit last september. the case could go all the way to the supreme court. the mayor of london said that the process could take years. ge nearing the sale of its power generation unit for at least $3 billion. according to the wall street bid was beatval out by cummins. advent could not be reached for comment. and big one has bounced back after dropping to a 2018 low on sunday. it had fallen more than 5.2% to

onrce the previous low set february 6. the volatility reflects increased scrutiny by government regulators on the digital currency sector, and global central bankers raising questions about its viability. fromoin is down almost 70% its record high of almost $20,000 reached in december. and that is your bloomberg business flash. tom: we greatly appreciate it. unicredit's erik nielsen with us. now to the important information of the day, the world cup poll. isd to say, but all you know i am off the mat. the real news her ise francine and pharaoh -- ferrero tied. francine: that is a miracle. tom: they are tied.

erik is here with us as we consider germany and the german economy. how do you link german world cup woes to the german economy? erik: i had some of that in minutes yesterday. heard theon me when i description of the german defense as living through an identity crisis between the old traditional german ways and the new and more inspiring way that was brought in by munich. has been their position fray while. -- for awhile. they came up with immigration proposals that they said that they would implement, even though it was not in the coalition agreement, and ultimately the captain, angela merkel, had to do with that. -- deal with that. tom: let's stay on a serious

matter for a moment. , angela merkel has an important week on immigration doesn't she? erik: she does. it is very, it is a very difficult position that she has. she has stepped out of the mainstream in many ways and her political opponents are pouncing on her. i have a lot of sympathy for what she did and how she is trying to pull it back. and i think that she will. i was one who thought that the minisummit we had was not so bad. you actually had the italian prime minister come with a detailed plan. and there was some acceptance of some of it and some not, but the point is you have to talk to each other. this is a european issue. then you move forward. on the other political issues, some countries just say no, we do not want to do anything.

that cannot be good. francine: how will we deal with immigration in europe? is that the fault line investors should be watching out for? >> i think -- erik: i think it is difficult to see the immigration issue become an important for investors unless it continues to drive relative power the people who are anti-european, where they come with a lot of baggage of bad economic policies. whatever your political view on immigrants and the social issue, which is a huge issue. the problem i have is those who are gaining problem -- power on and that immigration have policies -- on and that immigration policies that are not good for growth. tom: nobody cares, all i want to know is france and denmark tomorrow, can denmark take out money france? erik: well, if we get a point we

are very happy. but we do not have a good record against them. you know what, peru still it away. and got a victory. tom: news you can use. francine: there you go. erik nielsen, thank you so much. visiting the french prime minister, -- is making a joint statement as we speak following their meeting in beijing. i'm sure the question of trade and tariffs came up. we will monitor the situation closely. this is bloomberg. ♪ what's a gig of data?

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and with millions of wifi hotspots included, you'll pay less for data. it's a new kind of network designed to save you money. click, call or visit a store today. tom: this morning, a risk off market. what will be the outcome of an

american trade war? the renminbi weakens. strength of a make america great again economy. how long can we sustain 3% gdp? moon." bout "good night parents here and children there. good morning, everyone. this is "bloomberg surveillance live from our headquarters in new york. with me is francine lacqua. there is no other story than this immigration battle in america and in england, an --ortant bloomberg story fascinating francine: about the night of brexit. an -- fascinating about the night of brexit. francine: a fascinating story. we will delve into that further. tom: it talks about the

difference in polling in america versus the united kingdom. right now with your monday briefing and first word news is taylor riggs. taylor: president trump has ratcheted up his demands on immigration policy saying that people that come in illegally to the united states should be deported immediately. he tweeted -- we cannot allow all of these people to invade our country. we must immediately with no judges bring them back to where they came from. our system is a mockery to good immigration policy and law and order. won akey, erdogan has mandate after a double victory. according to government news agency, he had 53% of the presidential vote to 31% of his closest challenger.

that is with more than 99% of the ballots counted. n's raising was called a grave danger to democracy. departmenteasury will use an emergency law to heightened scrutiny of chinese investments in sensitive industries. the white house would use one of the most significant legal measures available to declare china's investment in u.s. companies involved in technology a threat to national security. the move could put washington's trade war with china on an irreversible course. municipal voting in italy. candidates from the league and in thethers of italy won second round in most italian cities including the left wing tuscan cities.

calledults were historic. global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in over 120 countries. i am taylor riggs. this is bloomberg. tom: risk off this morning. currencies -- a little negative. the curve is flattening. we will get to that with anthony crescenzi in a moment. to a new levelut of banks to. the german -- a new level of angst. the german two-year yield -- turkish lira showing the erdogan victory. francine: this is what i am looking at overall.

a similar data board to what you have. european stocks followed by asian shares lowering -- lowered. turkish currency surges. currencyse shares -- they're falling after the announcement that it would free up more than 100 billion dollars in the banking system to cushion the ailing economy. tom: let us begin a conversation crescenzi, an expert on short-term yields. geoffrey dennis is with us, remote from boston. wonderful to see you. point at an inflection with the emerging markets? their currencies are weaker. does it matter yet? geoffrey: it has been mattering for several weeks. the dollar has been stronger than we had anticipated.

that has put a lot of pressure on emerging markets for several weeks. is, is changing recently having seen a number of currencies under considerable rusher, we currencies like the turkish lira, you see a bit more spread of the currency weakness to elsewhere. with the china -- chinese currency coming under pressure, that is a source of concern. currencies are a source of concern. we need the dollar to start to pull back again. tom: tony, the dynamic in your world is suddenly cash has yield. are we back to normal? we spoke with the indonesian finance minister the other day, can we tell them that we are back to normal? we think we have further to go. conversationg a

with ben bernanke about the feds latest meeting. we asked if he thought the stress was there? and he said he did not think so. well.believes that as what we are seeing in these various countries -- it is more political than economic to an extent. it is not related to the fed. we should not believe that the fed will slow its rate hikes down yet. tony, however, emerging markets falling out -- can it hurt world growth? global growth nominally come real plus inflation, will be a little more than six. that is the same as last year and we would project that would be the same for next year. this is up four percentage

points from a few years ago. equities inead to the double digits. based on the msci index of low teens or so. by index has been driven china despite the stress in the emerging markets now. the em currency plunge harkens us back to history and two other crises where the u.s. central bank becomes central banker to the world. are we there or will we be there in 2018? i don't believe so. tony is right that politics has played a role in certain of these countries but i don't think we are seeing anything like the degree of crisis in the past. there is a fundamental difference. with asia and 1997 is ridiculous.

markets should allow currencies to go down. and the fundamentals in emerging markets in terms of current accounts, fiscal, etc. are much better than they were for example in the late 1980's. turkey is one good exception. basically, this is being driven by a rally in the dollar. bond yields rose earlier in the year. politics here and there has made it worse. the moment the dollar goes down, if it goes down, the money will go back and chase yields. as tony also said, the global economy is in pretty good shape. francine: isn't this the problem that we don't know what the dollar does. fundamentals could rally because there is a divergence in the monetary policy and we are seeing inflation in the u.s. and good growth. and we also had the trade war pessimism hurting emerging markets. the shock effect of

that leads to flight to quality and pushes the dollar up. although we doubt that would be the long-term result of a trade war. as you rightly say, we don't know which direction the dollar will go. ubs believes the dollar will go down. we think the fed has priced in. we think ultimately ecb will withdraw a qb in such a way that the euro, which we think is undervalued, well rally. i make no apologies for this. a lot of what will happen in and out of e.m. will depend on whether our dollars view is right or not. let us get to it. you have a doctor. it is about this thick. it is not be treating. -- beach reading.

it holds the door open in a storm. you can get it on your iphone and it will take half your data. it is not a linear function. it is quadratic. where are we in the continuum? are we in the -- it does not matter yet? does notit probably matter to the equity investor much or the credit investor much -- tom: or the e.m. investor? anthony: or the e.m. investor. where the fed goes relative to what the markets price for. if the view on the path changes towards something different, and i can give your reasons for why that would happen, then it would matter. tom: are the dots the same as the forward market in the crescenzi world? anthony: people emphasize the

dots too much. they are higher than the markets. but the market is not worried about and overshoot beyond what is priced in. the thing that would take it to the dots, the mid threes, is the fed tolerating more inflation than the market thinks it will tolerate. this is not likely. the fed is projecting that inflation would reach 2.1% this year and next year. cas tom: that is quote. -- that is cool. that for do you worry example the ecb is behind the curve? what are economists getting wrong right now? sure how toam not

answer that. dothink the fed has more to than the market is telling you right to oret is close to being right as far as where the fed is concerned. longer -- they could stay easier longer than is anticipated. if they maintain the trajectory they have laid out in terms of falling back on qe and going towards "normal policy" and raising rates in the third quarter of next year, that will help the emerging markets because that will bring the dollar down eventually. we are waiting to see how that plays out. tom: very good. we have a lot to talk about. and geoffreyenzi

david -- geoffrey dennis. coming up, deborah layer. there are a lot of different crosscurrents going on right now. that will be a good chance to catch up with her. we do that in the 8:00 hour. please, stay with us. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." has bounced back after dropping to a 2018 low on sunday. the virtual currency had fallen

as much as 5.2%. low hits inprevious february. the volatility reflects increased scrutiny by government regulators and global central bankers raising questions about its viability. from down almost 70% of -- its record high reached in december. uber is long-awaited hearing in the u.k. courts begins today. the company will argue that it is fit and proper to hold a license in the english capital after the transit authority refused to extend its operating permit last september. the case could potentially go all the way to the supreme court. the london mayor said in november that the process could take years. sale of itsng its power unit for it least a three billion dollars.

according to the wall street journal, it beat out a rival bid and the transaction could occur today. a ge representative declined to comment on rumors or speculation and the other company could not immediately be reached for comment. company has agreed to a choir a student housing developer. $41 -- willll pay pay over $41 in cash for the firm per share. that is according to the joint statement from the firms today. the deal was unanimously approved by the boards of directors and is expected to close in the second half of 2018. what is your bloomberg business flash. francine: thank you so much, taylor. erdogan won a mandate with sweeping powers in a double victory. the nation's longest serving later took 53% of the

presidential vote against 31% from its -- from his closest rival. we have the very latest. what does this all mean for the turkish economy going forward? >> it is another critical step beenhe president who has in power for 16 years and can extend his position. roundsue was in the first he was able to seal the deal. the expectation was that it would go to a second round though that did not happen. the focus is switching towards what will be done about economic policy. will this government move away from its expansionary aggressive easing? francine: when do we find out? should investors

give the president to see if anything changes? >> you have a ready seen the reaction in the markets that the time is running out. turned stocks have negative. there were gains of 3.5%. investors want to clarity on the fiscal front but also on this contentious central bank independence issue which has plagued the currency even more than its peers in the emerging market space. francine: in the delicacies of turkey'sow does politics changed today, tuesday, wednesday? into july? what will be different? >> the key thing to bear in mind is that there has been a bit of a shift in parliament. that is a key insight we have been having in conversations here.

the incumbent political power has lost their power. they need to work with another party. that working together could yield some interesting new tensions or some interesting new results but that will be a factor that investors will be watching especially whether it could lead to further paralysis or stagnation. francine: thank you so much. and istanbul with the latest. we are back with and -- with anthony crescenzi oh, managing director at pimco. and geoffrey dennis. how much time to investors give the turkish president? i think very little time frankly a specially in what a hostilemoment global environment. the emerging policies were very interesting.

challenged long ago the independence of the central bank and then it acted very decisively. with a aggressive hikes. will the newly empowered president with the vote behind him try to interfere once more with the independence of the central bank? we will find that out pretty quickly. at the same time, fiscal policy in turkey needs work in terms of reducing the size of the budget deficit. with turkey running a massive deficit, we need answers pretty quickly. much will the lira regression or weakness have to do with fed policy or dollar strength? or how much does it have to do with internal concerns in turkey?

if you were to get our it is fair to say that as you look at the emerging markets overall and you stack them up, turkey has basically the weakest fundamentals as far as we are concerned in terms of all of the current countries in that index. that makes it particularly vulnerable in a time where you do get hostile global financial market conditions. together and that is why you need to see from the new president in the new environment decisive action on the fiscal side and some reassurance that the central bank can do what it needs to do to push interest rates to the right level. real withs go very anthony crescenzi from pimco. here is one book at real yields in turkey. versus the one week

inflation. it has exploded higher. do real yields matter now the same way they did in 2006? anthony crescenzi on real yields in 2018. anthony: they do matter but politics matter. think of argentina. it raised rates meaningful enough.- meaningfully investors were satisfied that they had enough compensation against risk. it is another way to talk about the term premium. investors don't want much of that in developed nations. tom: will we get back there in the united states? anthony: not easy. tom: bill gross talked about financial regression. is that still the call of pimco?

anthony: the new neutral is still the appropriate framework. meaning central banks have policies tove lower say. wantnly do older americans fixed income assets, there are fewer human beings to purchase goods and services. because of the beam -- baby-boom generation. -- baby-boomg me or turn 65. turn 65. francine: what percentage would you give roughly and where would it come from? anthony: they are roughly in

line with historical average. the united states calls it in the teens or so. but going out to a year and a half, we would say in the 20's. that is high at least for the united states which is in its 10th year of economic expansion. it hopes to match us to your. it has been in expansion since 1991. pimco in your meetings? you mentioned australia. where are you in the commodity super cycle? goods are in deflation. anthony: industrial commodities will pick up some. these are long cycles. the amount of investment that occurred in years prior -- a low

level of investment is now rising. think of oil. in 2014, oil hit $100 per barrel but opec was strategic and knocking out some u.s. companies. tom: what a great idea to have anthony crescenzi with us. we say thank you to geoffrey dennis from ubs. section --- former former secretary julian castro will be with us at the noon hour. stay with us through the day. 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. tom: good morning, everyone. "bloomberg surveillance." a lot going on this morning. a monday briefing. taylor: a bloomberg investigation.

some hedge funds hired polling companies that sold them advance information on the eu referendum including data that would be illegal for them to give to the public. this allowed some of them to gain fortunes. although confidentiality agreements has made it difficult to discover the identities of the hedge funds, bloomberg has discovered that is a dozen were involved. resident donald trump's aggressive approach to recasting unwindrtnerships will decades of progress according to a memo and return global commerce to a free-for-all. the memo was prepared for eu governments for an eu summit where trade will be discussed. european leaders put on a brave persisting differences regarding immigration flows.

16 european countries gathered in brussels on sunday. angela merkel said there was a lot of goodwill. a lack of tangible progress could further escalate a crisis that threatens to unlawful the passport free area and create a risk to germany's governing coalition. and the u.s. treasury department is planning to use an emergency law to heightened scrutiny of chinese investments in sensitive u.s. industries. the white house would use one of the most significant legal measures available to declare chinese investment in u.s. companies involved in certain technologies a threat against national security. that could put a possible trade war with china on an irreversible course. global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in over 120 countries. i am taylor riggs. this is bloomberg. tom: thank you so much. chiefo kevin cirilli, our

washington correspondent. before we get to the immigration battle, i want to talk about mike allen's memo. the fact is the president is polling new highs. isn't he? kevin: yes. is more unpopular than the administration and it would also suggest that republicans are very much in lockstep still behind the president. that means his base has not deteriorated. the bottom line is that we live in a political culture right now where people are living in two different political reality news feeds. to a larger polarization. if you are a republican this morning and you are trying to gauge for prices for the midterm elections, republicans are still

very much behind the administration. tom: this is my morning must-read. carolina offrom the the south. -- he goesg fathers on to say that this represents my biggest disagreement with the president. the president's concern was over personal loyalty rather than issue loyalty. there should be a consequence to make -- to making things up but we have somehow fallen into collective amnesia. what is the state of the amnesia in washington this morning? kevin: with respect to mark sanford -- he lost his primary and that is a sign of the times. to take it back to the mark a tragic car accident over the weekend but his opponent was able to beat

him. because of the endorsement of president trump. congressman sanford lost. tom: in all of my reading on where do we send these people back to? singleyet to read a essay on this council of foreign relations. ok, this person wants to send him somewhere. where are they going to? kevin: this is what is in. rating -- infuriating. no one knows. at is why this is such a difficult issue that quite frankly will pose significant political risks for republicans. the evangelical community is urging president trump to get something done and that is the base of his political movement. on immigration. from a policy standpoint this is a policy nightmare because no

one knows exactly how it will be resolved. immigration reform will not get done this summer. and then it will get more tricky because if democrats take back the house, the situation is even post-midterms. long-term immigration reform has still largely eluded the u.s. political system. axiosine: given that as is reporting that the president is higher at the polls, what does that mean for the midterm elections? why is he at new highs? then: first and foremost economy. especially when you get into the more conservative districts in the middle of the country. congressmank about king in iowa. his district feels the president

should not change course on immigration whatsoever. on the issue of trade -- it is really nuanced. , one ofsherrod brown the most aggressive senators up for election in ohio -- taking a more measured approach and saying that parts of the areident's trade policies something he can agree with. to win in he was able states like ohio, wisconsin, and pennsylvania. the working class vote. naftavery skeptical of and trade agreements with china. tom: it will be a sporting week. heaven, we look forward to your reports. berenberg now from along with geoffrey dennis and anthony crescenzi from pimco. kalluum pickering.

gdp insustain a better europe and critically can we sustain the make america great again economic growth in the united states? fundamentals are still good. the thing that worries me is that we are still in this post lehman age of caution which means risks can still have a major effect on economic behavior. we are seeing this in europe. in the u.s., you have a fiscal officer. unless these risks subside, i think it is unlikely we get to an accelerated gdp growth we saw late last year. francine: getting some breaking news from the european commission. the vice president who is talking in china at the eu china forum and he says the u.s. has severed the most on these aluminum and steel tariffs.

do we have the data to support that? kallum: we do not. if i look at the measurable effects of the current tariffs, it is hard to predict anything whatsoever. what worries me the most is that the tensions hang over us and they affect our confidence and breeze uncertainties. that has a big effect on economic performance. francine: what does that mean for the future? do you expect the trade war is to be scaled down? scenarios.re are two there is the just learn to live with that scenario or the risk of all out trade wars. crescenzidr. anthony

floor, "days of our lives" is in charge of the thermometer. look at i am trying to it through the eyes of the president of china. brown, oneth gordon of our it pfizer's. he met with the chinese president. he said that that president has two goals. trapid spartacus' against the athenians. if it is true that china once to avoid a trap or in other words the rising power fight the existing power, it will try to be conciliatory as possible and play the long game.

he is now taking retaliatory actions because he needs to. small but if they go after american corporations, it has to affect gdp and that is where we come down. morgan stanley was suggesting a 2% frame of gdp. kallum: if all of those triggers think about how trade benefits us. it allows us to do the things we do. terrorists do is raise the cost of trade and it asked down the productivity curve. and about how important that is to a country at full employment. anything that frustrates gains in productivity will limit your real gdp growth. kalluum pickering of

berenberg, thank you so much. anthony crescenzi from pimco. we are joined by a democrat from ohio. we do that at 12:00 today. francine lacqua from london and i am tom keene in new york. dazzled. that is coming up. ♪

taylor: this is "bloomberg surveillance." the sale of its factory power generation unit for it least $3 billion. according to the wall street may be accepted

as soon as today. a ge representative declined to comment on rumors and the other company did not have a spokesperson that could immediately be reached. uber's long-awaited hearing in a u.k. court begins today. the company argues it is fit and proper to hold a license in england's capital after the transit authority refused to extend its license last september. the case could go all the way to the supreme court. the mayor london -- the london mayor said that the case could take years. learned that the fundraising is slightly behind schedule but is expected to be finalized this week. billion goal -- it received a $20 billion pledge from saudi arabia's sovereign

wealth fund. that is your bloomberg business flash. tom: it was not an f-15 jet going down the hudson river this weekend. it was taylor riggs taking the level three cfe exam. should you take the failed right now or will you wait for the test scores? taylor: we will wait for the score is. but the problem is now that i do not know what to do with myself. tom: you have been a zombie since february. taylor: thank you for the embarrassment. tom: congratulations on the exam taking. it is a right of passage. -- rite of passage. francine: companies in the european union are not thrilled at the status of the brexit discussion. britainn one third want

penalized in a future trade deal. the report gives a rare insight fromthe brexit situation companies outside of england. what do we do with brexit? how do you price it? kallum: the pound is capturing formarket's expectations all of the scenarios that could happen. that would range from a no brexit to a very hard brexit. less than 1.5%. the risk of a hard brexit seems to be holding the pound down but i think the u.k. is heading to a situation where it cannot make up its own mind and eventually european union at the last hour will offer the u.k. a deal to issue.he irish border

and the jeremy corbyn threat -- will decide that the glue binds us together more than a hard exit so we will take the european deal. in about a 1.7% growth. if you are a pounds trader or a u.k. economist, will you take the bet now or august as to whether it will be a soft or hard brexit or something in between? tooum: the probability is evenly spread. there is not much differential. i think we will know something by october. mr. barney said the eu will need six months to ratify the transitional deal plus the bill plus the rest of it with the irish border. that means about october.

that is the time when the day light will shine on this. nominal and real wages? inflation is coming up ever faster. will we see the same dynamic in america where real wages or the real rate is less than we would expect because inflation is coming up? anthony: many believe the thealled phillips curve -- laws of supply and demand has been rescinded. tom: nominal wages? realny: nominal and also and that is starting to occur to an extent. we will have to see what chair powell does with the story. he seems to be throwing out the of where is the non-accelerating rate of unemployment. -- perfectloyed

unemployment. 4.5%. he wants to see the whites of their eyes. tom: david blanchard from dartmouth was scathing last week over the idea of the fully employed america. it -- is it a fully employed america? kallum: indicating you are at full employment -- that was not there. i would like to make an adjustment to the phillips curve. the number of job openings divided by the number of people unemployed -- you are capturing the demand side of the labor market. tracking wages. we are heading into a world where real wages should edge of gradually. what do you think of the idea of people on the sidelines of the labor force will come back? it is simply not shown. there is no evidence that people are coming back.

atlum: i would be looking unit labor costs. when they are still low, it it is likely that firms will still try to higher --to hire. start to rise,s then i think we will know we are at full employment. tom: thank you for joining us. we are in new york and from london. this is bloomberg. ♪

francine: "bloomberg surveillance." tom, we are doing a little better in the world cup game. an honorable position we are at. i know a lot of traders are focused on england. every time there is an england game, people sit around. , england.um that is all i am focused on. francinefocused on is jonng jon ferro -- beating ferro. he spends hours on his analysis. uruguay russia

will be fascinating. we are with kalluum pickering of berenberg and anthony crescenzi from pimco. here is a pending charge of the year. deflation has been there since 2013 and we are finally lagging up. -- legging up. in goods prices is what we need. i don't see much evidence that nominal wage growth is accelerating in a rapid way anywhere. we will probably see goods prices rise. if trade war's breakout, it will not be because demand is high. francine: are economists

optimistic or pessimistic about the world? anthony: appropriately, they are optimistic. if they were not, the stock market would not be where it is. credit spreads would not be as tight as they are. that is optimism. where one would have to start to aboutor start thinking central-bank policy going forward. what not a concern now but if inflation in 2019 picks up in such a way that investors are unnerved? that could rattle the world. the inflation stare -- the inflation story going into tent -- into 2019 will be important. francine: tom, on trade, getting some news from harley davidson implementing a plant shift. it was one of the companies that was mostly hit to buy eu tariffs

when they retaliated against the u.s. tariffs. tom: it is a big deal and this will be the microanalysis we will see from company to company. i am focused on the chinese response to apple and foxconn in china. this is something we should expect to see more of. davidson, andey bourbon and others. thank you to kalluum pickering from berenberg bank and anthony crescenzi. we begin the week with a lot of good conversations. we will continue this conversation with jon ferro. this is bloomberg. ♪

alix: the u.s. plans to limit chinese investment in u.s.

industries, citing national security issues. and erdogan for the win. the really rally for lira fades and abroad em gets crashed with warnings from analysts. what happened with opec? confused the markets as to how much oil will really be added to the markets. david: welcome to "bloomberg daybreak." i'm david westin with alix steel. harley davidson, as we know there was a retaliation against harley davidson specifically. 6% tothe tariffs went to 31% for those being imported to the european union. it looks like they will take a hit. david: but the symbolism is important. a quintessent