♪ tom: year of the bear. chinese stocks at dropped 20% from a five-year high after worries of a u.s. trade war, or lack thereof. white house trade hop peter navarro tries to soothe fears about the impact of restrictions on chinese investment in the u.s. as the trump administration getting nervous about the stock market decline? bmw's brexit warning. the carmaker joined airbus by saying it will pull back u.k. investment if a favorable brexit

deal is not reached. now an executive is saying that they are no longer considering leaving the u.k. welcome to "bloomberg surveillance." i'm matt miller in berlin. francine lacqua is out today. but the check on how the markets are trading one hour into the start of equity indexes. we have got gains across the board. a little bit of a dead cap bounce -- cat bounce after the losses that we saw yesterday. 2.25%tse was down yesterday. and the dax and cac those levels as well. i have got bit g10 -- have got the g10, who the big movers are as far as the severity of their move away from a 90 day average.

the yen season some strength -- sees some strength in the currencies. crude seeing some strength, and gold coming down right now. there is a bit of a safety bid and that the yen is catching a bid. on the other hand we see gold coming down. you also see some other save haven assets, like the u.s. 10 year, not really getting bit up up thisning -- bid morning. gauge: china's benchmark entered a bear market over concerns of a trade war with u.s.. taking aseng fell, loss of more than 20%. uan is also weekend. suggesting that

a treasury department report later this week on foreign investment will not be as sweeping as markets are anticipating. he said there are no plans to impose restrictions. the dow jones industrial average ended lower yesterday for the ninth time in the past 10 trading days, as investors continue to worry about the prospects for global trade. hasident donald trump accused harley davidson of a surrendering in his trade war with the eu. that is after the company said it would relocate some production outside of the u.s. in response to european retaliation for the president's tariffs on imported metals. said heican president was surprised that the motorcycle maker would be the first wave the white flag. the ceo of -- biggest dealmaker has weighed in on the u.s. tariffs. he says in the long-term u.s. consumers will be forced to pay higher prices. >> in the short term we do benefit from tariffs.

the price of iron will go up. u.s.,nger term for the consumers will have to pay for this. they will have to pay for the high price of steel. the economy will suffer at the end of the day. taylor: uber says it's moved to protect passengers and drivers has appeased london's transport regulator. london's transport regulator said the company was not fit and proper to operate in the city, but the list of issues with uber have been addressed. uber's appeal of that license ban started yesterday. 16 billionhrow's pound expansion has won the backing of the u.k. parliament. there will be a third runway constructed, but some opposition

from those representing areas around the airport. the british airways owner called the price of expanding the airport too steep. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. matt: taylor, angst very much for that -- thanks very much for that. as global trade tensions increase, our washington and beijing on a seemingly inevitable collision course? fell&p 500 and the u.s. the most in almost 12 weeks yesterday on concerns about this budding trade war. the international ceo at goldman sachs asset management told bloomberg that there is now fear that rhetoric is escalating into something of real consequence. >> now i think investors are more cautious that there may be something pretty substantial done by the u.s. that generates

a reaction from china, from the eu. it is that reaction and that potential tip for cap -- tit-for-tat that could go on the has people more nervous. matt: let's get more now with our chief asia economics correspondent. what is the latest on the escalating trade frictions here? some kinding to see of investment restrictions on chinese firms in the u.s. -- are we going to be seeing some kind of investment restrictions on chinese firms in the u.s.? >> i think everyone is waiting to see what these trade restrictions will be. the initial expectations are very much around this idea that it will go to restricting chinese investment in u.s. that is kind to a rebuke of china's future industrial strategy to become a war leader in aviation, robotics, high-tech, and the like. the reason the u.s. has a problem with that is that it is a state-sponsored plan separate

2025 -- set for 2025. for as it will leave room middle ground that might raise expectations that they can work their way out of this. moment,right now at the all indications are that this trade dispute continues to be quite severe. it does not show any signs of easing anytime soon. matt: you know, we saw initially i thought all of branches -- olive branches from beijing. rather than turn the other cheek, china is more likely to punch back. how aggressive has the rhetoric been in beijing? rhetorichas been using quite consistently from the beginning. they have always made clear that they are willing to make concessions, come to the negotiating table, by up more goods to try and smooth out the trade dispute.

they have equally been very sharp in their rebuttals of any u.s. hawkishness. they have a big stick that they are willing to use if need be and have threatened that they will retaliate with tariffs and with non-tariff measures. if the u.s. pushes ahead with the tariffs that they have mentioned, they are limited in terms of matching dollar for dollar on the tariffs side of things, but there are other things that could make life awkward for u.s. businesses in china. most in the investor community believe china will do just that. matt: thanks very much, our chief asia economics correspondent, enda curran, talking about what has been the top story for the past couple of weeks. let's keep the story on trade and global markets. joining us is valentin marinov, head of g10 fx research at credit agricole.

what do you see from this rising rhetoric? it seems that it adds to a safe haven bid. we see stronger japanese yen and a stronger u.s. dollar. valentin: yes, indeed. these have been the trends in the markets and the recent days. all of that trade rhetorical is adding to the headwinds for global growth. it is seen as reducing market appetite for risk. it is certainly boosting the value of the dollar, but also boosts safe haven currencies like the japanese yen. we may not be out of the woods yet, especially if before long, emerging-market central banks have to start defending their falling currencies in earnest, burning through their fx reserves, and in the process selling treasuries, boosting treasury yields. that triggers a vicious circle where dollar buying begets more

dollar buying, and so on. certainly you can make the case for some more dollar resilience against those currencies, but also resilience of the safe haven currencies. matt: i want to put a line under that note on emerging markets. we have seen the currencies fall so far, and clearly they are suffering this kind of double whammy affect from the possibility of a trade war, as well as the fed rate rising path. is it too early to go in and start to try to bottom tick those currencies? try to get some bargains? are you trying to catch falling knives? do you expect that they could fall further? valentin: it is tempting, especially in real fx exchange rate. some of those currencies and do look cheap. like i was saying, we are not out of the woods yet. things could get worse before they get better.

i think a cautious approach in trading emerging markets is certainly warranted. that is our view. an hour g10 space we think that -- in our g10 space, with think that currencies related to china could continue to experience further headwinds, further lows may be likely before the summer is over. i don't think that investors should be brave at this stage and try to catch these falling knives. they should be a bit more cautious here. back tot me g quickly your point on central banks in these emerging markets trying to defend their currencies. have you seen examples lately of that working? where they just boost rates to almost astronomical levels, and investors then back off? valentin: we did have turkey more recently really trying to arrest the slide in the turkish lira. also the attempted by the

brazilian central bank and all that. these are temporary fixes. the bigger issue is that we are entering a d globalize world where the primary source of dollar funding for these countries with their trade with the u.s., trade with the developed world is being questioned. currencies,f their they could burn through their fx reserves, or indeed adopt a more hawkish stance. they are hiking at a time when the economy is slowing, and that is not the best policy mix. they are hoping the storm will pass. i think it may pass at some point, but i think we are not very it. it is the case that we may have to experience a few more turbulent months. we really have to go to that time of de-risking by global investors. matt: truly fascinating stuff.

we are going to talk about more. valentin marinov from credit agricole stays with us on the program. stay with "bloomberg surveillance." yourself. we have angela merkel's compromise, if she can find one. the german chancellor will meet with her counterparts to find a deal. the curve collapses. the u.s.the german chancellor wt with 2-10 year yield spread hits a year to date low, a 2007 to date low. we will look at the challenges facing jerome powell. this is bloomberg. ♪

♪ welcome back to "bloomberg surveillance." i am matt miller filling in for francine lacqua today. let's get the bloomberg business flash with taylor riggs in new york. taylor: irish banks are said to be forced to hold more capital. that is according to a person familiar with the matter. the country's central bank is leaning towards increasing the so-called countercyclical capital buffer from a 0% in the coming months. back in 2015, the buffer is meant to two guard against the banks tendency to slash lending in a bust and increasing during boom times. instagram would be worth -- if it were a standalone company according to data compiled by bloomberg intelligence. facebook has made a 100 fold return since its purchase back in 2012.

the photo sharing platform reached one billion monthly active users earlier this month and could account for about 16% of these books revenue over the next year. bmw is warning of a pullback in investment to the u.k. if a final brexit deal does not ensure the free flow of goods to the eu. the german automaker has four plants in the u.k. and says the ongoing uncertainty of brexit negotiations is unhelpful. speaking this morning, the company's ceo says it is not considering moving production out of the country. that is your bloomberg business flash. matt? matt: thanks very much, taylor. german chancellor angela merkel is meeting with leaders of the other parties in her coalition government today. this comes as she tries to secure an eu wide agreement that would return migrants to the countries in which they were first registered. for more on that story let's go to tony, a government and editor -- government editor and berlin

and co-author of a book on angela merkel. let me ask what you expect. an eu wide agreement seems like such an impossibility. thehave to convince italians to take back migrants that they have already gotten out of it country. how unlikely is that? >> it sounds pretty unlikely. i think the realistic expectation here would seem to be that in this case, angela merkel and the other europeans agree on some kind of partial agreement,ilateral some kind of plan of action, maybe. then the question is, is that enough to satisfy her domestic constituency? matt: you and i were talking earlier about how much we actually note of what -- know of what angela merkel is planning to do. what is this chancellor like?

how difficult is it to get leaks, information, scoops out of angela merkel's office? >> it is not like the white house, even though the level of infighting might seem roughly similar these days. it is a very tight shop. one,a merkel is not especially in these kinds of situations where she is under pressure, to sort of carry out her fight in public. that is being left to the bavarian party, which has been driving this entire debate, which has taken over the narrative in germany over the past week or 10 days in a remarkable way. matt: do you expect markle to -- angela merkel to figure out a fix? or will this iraq into an absolute catastrophe for the uptding coalition -- er into an absolute catastrophe for

the leading coalition? party -- there are things that have pointed to a slightly more conciliatory stance. they are saying we do not want to blow up this government. two senior csu officials have been quoted in interviews. they don't want to push this thing to the max. matt: they want to back up a little bit. tony, thank you so much. great to get your reporting on this. tony is a government editor with a ton of experience covering these issues. let's keep the conversation on europe and bring another voice into the conversation. joining us from brussels is maria demertzis, deputy director at bruegel. valentin marinov is still with us as well. let me start with you, maria. let me ask you what you think about the possibility of an eu

solution here? can i go to michael actually make that kind of -- can angela merkel make the kind of magical deal? sorry.i'm matt: i'm sorry. maria, i don't know if you can hear me. i am wondering if you think angela merkel could make some point of -- kind of magical eu wide deal? is this too difficult to tackle -- tackle on an eu level? maria: it is a very difficult issue to handle, but i am sure we will get a solution to that. we will find a solution at the 11th hour. i think the germans will have between them an agreement, amongst them. there will be in my view an agreement -- partial agreement on the solution that we need to use for migration. we have to understand that the problem is very complex and will

stay with us for a very long time. therefore, there cannot be just a magic bullet. we need a group of solutions that we can apply over a number of years to have an effective solution to the issue. the fact of the matter is that the burden of the problem has been disproportionately addressed in a number of eu countries. that has created anger in a number of them. the urgency is much bigger than it was let's say one year ago. matt: we have seen the euro come under a little bit of pressure, but not really get punished for this. i think it is interesting that the currency can remain at such a relatively high level, if you look at it against the other currencies. not only has it got this migration problem confronting it. this is the bloomberg euro index. it has also got the issue of eu reform, which is just not happening. takingng union is not

place and nobody is willing to share risk in this little club. why do you think the euro remains at least rely resilient? valentin: i think that is part of the story, is really that lyrical risk, when they -- political risk, when they materialize and start to have an impact, that is really a matter of time. fx markets seem to respond to more immediate threats or risks. the fact being that the issue is the migrants are indeed -- as you mentioned, the eu reform, banking union, all of that, these are issues that have been on the table for years. the fact that these are resurfacing yet again may not ant the immediate response of the markets. the markets tend to respond when there is an immediate threat.

italy elected a populist government that has contained its most extreme urges. i think on the whole, we will continue to see that the markets will wait patiently for the outcome of yet another summit we are going to have later in the week, and see whether we have made progress towards those objectives. our view and also underpinning our longer-term view is that progress will be made, but it will likely take time. let me ask you, because you have got a lot of experience at these institutions. you are at the dutch central bank and the european commission -- were at the dutch central bank and european commission. how do you see progress moving forward? d.c. it -- do you see it being hindered by the migration issue? maria: i think we have made incredible progress when it comes to the banking union.

if you think of where we were in 2012 and how much we have addressed over the past six years, it is the speed of light. you are right. we are not there yet, the banking union is not complete, and it needs to be completed, but we're getting there. matter of time before we actually complete the architecture when it comes to that issue. yes, we have to wait for the next summit. i hope there will be some progress on the banking union. i hope there will be some progress on the issue of migration. i think that is going to be less on the issue of the euro a form, but again -- euro reform, but again, these are difficult things. matt: do you think that as far as a structural reform is necessary, the big government is helping? are the countries that have budget surpluses willing to do the spending that needs to be done as well as the budget deficit countries willing to cut costs?

maria: i think this is a perennial problem in the european union. you see the reluctance of the creditor countries to reform in that respect. the pressure remains and i am sure that external fx to the happenings of the european union might actually force countries that are creditors to reform. when it comes to structural reform urgency, there is one reform that remains in my view, and that is the issue of governance and the rule of law. matt: all right, maria, i appreciate your time today. maria demertzis, deputy director at bruegel. valentin marinov from credit agricole is going to stay with us. this is bloomberg. ♪ .

matt: welcome back to "bloomberg surveillance." i am matt miller in berlin filling in for francine lacqua.

lifted, certainly after the markets after the stormy day yesterday, down to present and more in europe, the most in the 12 weeks in the u.s., asian markets, shanghai cop was down and recovered to a loss of .5%. trade.u see the european last 30stocks, in the minutes or so, they have come back from unchanged to a gain of .5%. french and german stocks almost up .5%, u.k. ftse was down 2.25%, a decent recovery. the fall was far. italy is just short of austria, doing the best. city for to new york the first word news with taylor

riggs. stock: china benchmark with a bear market amid growing concerns about the country's resilience with the trade war with the u.s., the shanghai composite l at the -- fell at the close today, taking the loss in january hike to more than 20%. visor petertrade navarro has sought to ease investor concerns about u.s. , suggesting a treasury department report later this week on foreign investment will not be a sweeping as markets are anticipating. he said there are no plans to impose restrictions and the dow jones industrial average ended lower yesterday for the ninth time in the past 10 trading days as investors worried about the prospect for global trade. president trump has accused harley davidson of surrendering in his trade war with the eu after the company said it would

relocate some production outside the u.s. in response to the european retaliation for the president's tariffs on imported metals. the american president said he was surprised the motorcycle maker would be the first to wave the white flag. ceo of ukraine's biggest dealmaker has weighed in on the trump administration's tariffs, saying that in the long-term u.s. consumers will be forced to pay higher prices. , localt-term, we benefit u.s. producers will bump up production of iron. the longer-term, the u.s. consumers will pay for the high price of steel, which means they will be less competitive in the international arena. says it's moves to protect passengers and drivers have appeased london, they said

the company was not proper to operate in the city but now they havehe issues with uber been addressed. appeal of awaited license ban in the u.k. capital of -- had yesterday and the judge may make a ruling as early as today. hason heathrow expansion won the backing of the u.k. parliament, lawmakers voted for the construction of a third runway by a large majority. biggest-- heathrow's customers called the price tuesday. -- too steep. global news 24 hours a day, on air and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. matt: let's talk about the u.s. treasury curve, a continues to get flatter and flatter and

flatter. gp between two year yield -- gap the 22 year yields and 10 year yields reached a low yesterday at several firms questioning their year-end forecast. morgan stanley rates team reckons the 2018 peak for 10 year treasury yields is in the rearview mirror. let me ask you what you make of the flattening yield curve. typically we talk about this indicating the coming of a recession, is that the case right now? >> there is a mixture of factors. consistent with what you just mentioned, quality of clients do yieldflattening treasury curve as a precursor of u.s. recession potentially as soon as mid-2020. the number of clients that are thinking that have increased since last year while talking to

the fed, the view seems to be that other factors like flow, demand for long-term, command with issuance on the front end may be among contributing s. certain things are still low given the credibility of the fed targeting regime. the jury is still out. what is concerning for the fed and should be is that the growing number of clients do think that following the brisk pace of growth in the u.s., this year potentially forecast next year, the payback will come where the u.s. economy may decelerate sharply and ultimately enter a recession by mid-2020. this thinking, if that continues to be communicated to the fed, could serve as a break for the fed on their path towards further policy. matt: how much do you expect the

fed to increase rates by? terminal rate? lowerthink it will be than the fed is expecting and think that the curve will reach zero basis points, to sense will be -- two cents will be flat next year late, and then we think the ten-year treasury 3.5%.could be closer to the risk on the downside. we think that the results will call for further fed rate hikes, may be more limited, especially longer-term 2020 than the fed is hoping at the moment. matt: what do you think about the attractiveness of yields? ,ooking at the u.s. two-year getting almost 2.6%, is that

attractive to you and what appears to be a rising dollar environment? valentin: indeed, undeniably. the growing rate advantage of the dollar has been one of the key drivers of the dollar outperformance since 2014. the decoupling last year between rates adolor could be attributed to a range of factors, most notably befalling approval ratings of president trump. with the massive fiscal stimulus, the trade war's, making all of the trading partners in the u.s. worse compared to the u.s.. all that is putting the dollar in a different context. a re-coupling between the dollar and rates. from the point of view of a u.s. investor, using dollars to fund the carriage rates, two-year rates at those levels mean the unwinding of the carriage rates

should be on the card, specially that currencies like the us trillion dollar and new zealand dollar, you have to estimate fx hedges which are reducing return. your home currency, no such threat. i expect further unwinding two dollars fund carriage rates to support the dollar, especially against other high-yield currently in the g10 space and em space, that should offer the broader theme of dollar currency which will dominate the fx markets in coming months and could translate to more dollar strength, especially against high-yield risk correlated currencies. much, greatyou very day to have you on. valentin marinov at credit agricole. stay with us, plenty coming up on the program including bmw's brexit warning, they did warn of a u.k. pullback, or someone who

works there did. he is being overruled by an executive. ian robertson saying they are not considering you -- leaving the u.k. says it has- uber appeased london but what if they don't? how will you get around? this is bloomberg. ♪

"bloombergme back to

surveillance." i am matt miller in berlin. bmw says it will pull back on u.k. investment if brexit prevents the free flow of goods to the european union. the german carmaker criticize the uncertainty criticized -- created by negotiations. it has clarified in the last hour it is not considering moving production out of britain. bmw's warning dollars airbus last week suggesting businesses are being more outspoken as they wait for a brexit deal. joining us is our global business managing editor. they interview the customs manager who said we believe if no deal. but ian robertson said we are not considering and the customs managers job is probably in jeopardy. why wouldn't they think about

leaving, if the cost they will face will increase so much? >> there was a statement after the interview saying we are looking at this. it was carefully worded. forcefulms manager was and said we are pulling the plug if this continues, we are out here they said not so fast and ian robertson said we do not want to pull out. they are trying to say this will not happen overnight. if we do leave, something we are heard from several companies, it will be slow cutting off of oxygen. nothing that will happen rapidly. something over years additionally where they start moving it's in pieces of production to other site -- bits and pieces of production to other sites. the beginning of what may happen. reading in king's

doctor said if a they fall back on wto rules, pay paris one to parts they import to the u.k. to build a car, and pay paris on the car they ship out so we can buy it in berlin. it would be expensive. do they have time to wait and see? isn't it the case they may want to have their plans before they face a 20% jump in costs? problem, thee aret -- the industry's built in a cup in time manufacturing and cannot wait to see how brexit plays out or wait for goods to crisscross, not only costs by the time it takes to get the goods from a to b, . u.k.as four plants in the

it would seem odd to produce the rolls-royce in munich. builds, and it is building, it almost seems choreographed. we have had airbus and now bmw, who is next, siemens, somebody in france? the government is saying we better do something about this. matt: i could afford a 20% rolls-royce but a mini countryman, maybe not. >> are some customers immune to price swings? somebody buying a rolls-royce does not care if it is $50,000 or less but affordable luxury, that is a big issue. matt: the price of a rolls-royce could go up two minis.

our global managing editor for business, thank you. say it has moved to protect passengers and drivers are winning over london's transport regulator, and free water and phone charger, can it win the right to continue operating in the city? this is bloomberg. ♪

matt: economics, finance, politics, this is "bloomberg surveillance." i am matt miller in berlin filling in for francine lacqua. uber's desire to remain in london they receive a boost from the transit authority, they say the moves to protect passengers and drivers for the regulator transport for london producing a biggest hurdle to its operations. a ruling over the 2017 refusal to extend uber's permit to operate could come today. instagram would be worth more than $100 billion if it were a standalone company, according to data compiled by bloomberg intelligence.

it suggests facebook has made a 100 full return since purchasing it in 2012. for more, alex webb joins us. the rights for tech. for tech.es case, how is it -- how important is it for the company? >> potentially an important precedent as others watch it carefully, a huge deal when london said it would ban uber, they are in a very important market. others will look at the rationale and say we might follow. matt: what happens if the ruling against it -- is against it? much more difficult to get around in a timely fashion? substitutions?

this a possible lyft is in london or just black cabs and the two -- tube? >> one of the reasons london is an important market for uber. blacknly of it -- have cabs. but no other competitors. transport and the race was not because of its -- the transport raised was not because of its business model, it was more about the way it was doing business and the way it was disingenuous and bending rules. necessarily from one day to the next not the case we will have an uber in london as there is more to go.

let's talk about instagram. what makes the company so valuable? do you really want to see pictures of other people's breakfasts so badly? >> what would you prefer to see, someone's interest in a news story on facebook or an insight into your friends lives? --ebook used to be very much people posted pictures and maybe occasionally a news story. content.toward instagram has better quality. you are looking at people's experiences. the earlier people know how to create ad space.

ads are cheaper. potentially a risk but the reason for now by instagram is so appealing. matt: what is the biggest risk? i hope they use as much as my possible soa as they can target the advertisements personally to me, is that something others do not want? shiftht now, in europe, a into the post gdp are world where people have the option to opt out of the forms of data sharing. what we have seen with facebook, the main platform, increasing people got sick of it. the penetration in north america and europe, people are pulling back. people are tired of the content that is being pushed, the echoing chambers that have been much talked about in the u.s. election, for instance.

because instagram is not a space where you have a conversation. you are experiencing what your friends are doing. you may have a discussion but not a debate. it is a different experience. the problem is, if you advertisers highlander instagram and are not vetted, which facebook does not do, it does it through automation, there is a poor quality and that reduces the experience and poses a risk for engagement. matt: alex webb joining us to prepare us on the top tech stories. one more great one, before high-profile attacks on sony pictures -- tax on sony pictures, equifax, another cyberattack a stuff of legend. a band of criminals and 2013 using a piece of malware to

penetrate more than 100 banks in 40 countries, forcing atm's to cough up money and stealing $1.2 billion. although the suspected , theeader is under arrest gang is just getting started on a new robbery, the full report including exclusive interviews with law enforcement officials and computer crime experts is in the latest issue of bloomberg businessweek. joining us from london is a writer of a report, and robinson. -- ed robinson. bighas this case been so and yet we have not really heard anything about it? type of a primordial attack when you look at the history of the spectacular hacks. -- debt has been well known in law enforcement. what made it -- it has been well known in law enforcement, they use the tools of cyber

espionage, state backed agencies, when they go into a network, they want to place it under surveillance. that is what they did according to the police. they used be a fishing to --bauer into a bank network a would take over the cameras on the pcs and grab screenshots, they would log keystrokes. as a result, they could identify which bankers moved money around and would take control of them. matt: it is a fantastic story. i recommend everybody check out bloomberg businessweek to read it. ♪

tom: futures are flat after yesterday's adjustment to the trade war's. politics, we of

considered the dollar as litmus paper. greek,ers in brussels does angela merkel have a round-trip ticket home? mike is the key -- mike hedge funds -- might hedge fund be a mighty case of -- this is "bloomberg surveillance." johnson keene and guy is in for francine lacqua. taking the day off because she is moving up in the world cup brackets. where are we with brexit in england? guy: how long do we have? confused. we have a confused business community and confused cabinet. confused moment.

-- parliament and confused it is public. -- british public. tom: the first word news with taylor riggs. sought -- peter navarro has said about tradeerned policy, saying a report later this week on foreign investment will not be as sweeping as markets anticipating. he said there are no plans to impose restrictions and the dow jones ended lower yesterday for the ninth time in the past 10 trading days as investors continued to worry about the prospects for global trade. the ceo of ukraine's biggest steelmaker has waited on the trump administration's tariffs, saying that u.s. consumers will be forced to pay higher prices. >> short-term we do benefit from tariffs because the price of big iron will go up as the u.s. producers will bump up production, the longer-term, the

u.s. consumers will have to pay for this, pay for the high price of steel, which means they will be less competitive in the international arena. special counsel robert mueller preparing to accelerate the program to possible collusion between donald trump presidential campaign and russian to interfere in the 2016 election. this is according to a person familiar with the probe, they say robert mueller has an eye toward a conclusion or dust conclusions and indictments by the fall -- conclusions and indictments by the fall. london heathrow's expansion has won the backing of ukip parliament, lawmakers voted for the construction of a third butay by a large majority the opposition from the representing areas around the airport. the biggest customer, british airways owner called the price of expanding the airport too steep.

cup,matches in the world australia meets peru and in marketplace france. another group, nigeria against argentina while iceland faces croatia. spain and portugal advanced and iran only missed out by one point. global news 24 hours a day, on air and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thank you. this is great, mark barton, nejra cehic, chart -- guy johnson are killing it. who do you have winning the whole thing? but goldman sachs has rerun the numbers. probabilities. given where we are now added it now has a brazil-england final. -- i do not know

what will happen in the u.k. but many heads would explode. .n incredible event something not seen since the 1960's. tom: it could be interesting and i have no clue what is going on. i am having fun. calm thanck, more yesterday afternoon with futures flat and curves flat. a quiet tape with some exceptions. gold hitting a 12.59 handle. what do you have? guy: panda bears meeting dead cats. shanghai, at a close, finishing a bear market, panda bear, the dead cats is the bounce we see this morning. in europe, not sure how rubbery the dead cats are but not bouncing very high. a little bit of a move higher.

as in the, futures pointing to a fast open. level, keep an eye on that, the hundred day moving average, and i want to point out, turkish lira, rally it's all postelection, not lasting long. president they drew resounding across europe and the middle east. we will talk to jane foley in a minute but need perspective from russell. -- brussels. richard, ladies first, what will be the chinese response, american -- peter navarro came markets,arkets -- calm what is the next step from the chinese? >> they are concerned about their markets. changi hong -- and i call heading into -- shanghai called heading to bear market territories, not reassuring

chinese investors on the mainland. their position has always been, for the past week or so, the rhetoric has stayed the same. they do not want a trade fight. they do not want theseif but they will hit back if donald trump actions them. they are on the defensive. they have not announced anything new. if anything, greg comes from the u.s., they will hit back -- if anything concrete comes back from the u.s., they will head back. -- hit back. tom: when will the chinese retaliate against american companies? >> we are by some accounts seeing that. some american companies reporting they are finding some holdups at the border with imports. with getting things in. they are experiencing greater than usual numbers of inspections.

that is only likely to increase at this -- as this heats up. aboutichard, we talked bears and cats, what about hawks, harley davidson -- hogs, harley davidson and the reaction from the president about them moving jobs offshore as a result of the eu tariffs, the commission must be thinking it is hitting its mark. >> the eu just imposed its tariffs on riding. it was a targeted tariff strike. you see harley davidson announced they will move some production outside of the united states to avoid the european union barriers. brown-forman said they will increase prices on whiskey by 10% in the eu. targeted tariffs do seem to be taking affect. eu has come out to say that they

are willing to escalate this trade conflict, if donald trump continues to push back. government -- m o'brien -- calmingree of overnight. stability emanating from the european markets but not much of a bounce. jane foley from rabobank joins us on set. is this just a pause? >> most people think there has been an escalation over the last few days. many people argue it is part of ,onald trump's positioning maybe there would be concessions. end ofe sixth is the next week and the moves we have

seen recently suggests there has been an escalation. companies like harley davidson saying that these tariffs are making an impact and we are making investment decisions on the back of it and it is more real. chinese stock market, the level of the market, concerns the economy is slowing. they are having to stimulate. more tangible signs the trade war is having an impact. didn't it have a bigger effect than it did? chinese toourage the do more because they did not get much bang for the buck? >> they will have to do more. we go back to china and the level of debt. to what they were supposed to be having in. if i have to go back to stimulate -- if they have to go back to stimulate, that is an

issue and people speculate about what they would do with the currency. two weaponize. -- weaponize. parts, that is on capital flows. what does rabobank see about the change in capital flows? >> talking about china, without a doubt, if they lose and capital control, capital would flow out of china. the renminbi is waiting to weaken if they were to allow it. the other affect of capital flow is emerging markets. we have been seeing for a while that the appetite is down partly because of trade wars and partly because the u.s. is increasing the capital which is not flowing out of -- natural when risk appetite falls. given the escalation of trade wars, likely we will see a

reversal and that means people are vulnerable and particularly those -- continuation of trends that have been established in recent months. tom: within where we are in the renminbi weakening, is it a critical point, or will it fade away into further one weakness -- you one weakness -- yuan weakness? >> china is trying to establish itself as a world reserve currency and it will not help their campaign if they allow the renminbi to all. they want stability -- to fall. they want stability. it is potentially something up its sleeve, something the americans could be concerned about, and also the europeans. if the renminbi weakened

significantly, chinese would be cheaper for all of us. significant. tom: a lot of our guests looking for movement on currencies, somebody talked about 120 yen, substantially weaker. jane foley with us from rabobank . coming up, sony kapoor will be with us, angela merkel going to brussels on thursday with a hugely righteous domestic german politics. we will talk to sony kapoor about that. stay with us worldwide, this is bloomberg. ♪

taylor: that get to the

businessflas, bmw warning of a pullback. automaker says the ongoing uncertainty over negotiations is not helpful. customs arrangements are a cause of concern. ceo said is not considering moving production out of the country. irish banks are said to be forced to hold mode -- more capital to cope with the economic downturn. is country's central bank leaning toward increasing the so-called countercyclical capital buffer from your percent in the coming months with a -- from 0% in the coming months. introduced, it has meant to guard against boosting lending n booms.s -- i guy: the german chancellor

meeting with leaders of other parties in the coalition government later today as she tries to get an eu-wide agreement. international the think tank re-define is with us as his jane foley of rabobank. will she get a pen european deal on migration? >> the most likely outcome is we'll -- you will get some commitment. -- she will get some commitment and the discussion will be postponed after the elections in bavaria. on the domestic front for germany and angela merkel, it is driven by the feeling insecure about the alternative to loans stepping at its heels in the upcoming bavaria election. some domestic pressure will ease after the election.

guy: that is a long way away, in the fall, in the meantime, the summer migration days to get through in europe. the greeks and italians and other countries on the front line will not wait until october. >> that is true. hey see angela merkel's -- the untying government wants to see the opportunity. if one is fair, they have a strong case, historically, when the migration from libya started for example and italy appealed for help, largely ignored in 2010, 2011. since then, not a fair burden sharing in the last big influx we saw saw germany and sweden bear a disproportionate burden. there is far too little political space available

between the central east european divide, east-west migration divide comment populist in italy and angela merkel's domestic problems, to strike a meaningful deal that stabilizes the situation long-term. new is italy, how are they changed to calculus for chancellor merkel? >> up until now, with few exceptions, and the one time they leave tried to revolt, when it was going was forced out -- italyconi was forced out, was a policy taker in the victim between france and germany and other actors. governmentew italian that has come to power on a platform -- of euro skepticism and they will play hardball. this significantly diminishes angela merkel's sway with the

eurozone or eu wide policies, especially in an issue as divisive as migration. the difference of two migrations, from the south, mediterranean, syria, africa, and the migration from eastern europe. reuters has written a huge partition of migration, which is a bigger problem for angela merkel? >> longer-term, if you look at the eu, 500 million. we saw about one million migrants come at the peak in one year. that is all it took to completely destabilize its politics of europe to see populism to such an extent that some are drawing parallels with the 1930's. if you look at the demographics in north africa and nigeria, prospectsthe economic

-- almost surely in the near future, the eu will face far greater potential influx of migrants from the southern borders than it has seen in the past. we are so poorly equipped to handle one million people, the challenges will be big and in the longer term it is that issue , the ones from the southern borders. the most problematic. of theerm, political central european countries which may be problematic. guy: they were coming into the austria presidency of the eu which will help define the relationship. how do i price this into the market? you have a bunch of factors in europe, a desire by the french to drive europe forward in the eurozone forwards and generate momentum of political

behind reforming the eurozone. and the migration story. pointy overlap at some and end up infecting the other? the issue of angela merkel and how she fits into the story, whether she is more destabilized by it. how do i price that and make it real from a market point of view? let's focus on the economic impact. >> you can make it complicated or very easy. if you take the easy route, you compare it to last year. we had better than expected economic growth in the eurozone. from the french election and dutch election, this year, anxiety. you may not understand the premises with respect to immigration or with respect to budget for with angela merkel. we know that there are issues

and they could eventually potentially interfere with coherence of the region. that is currency negative. people want to move away to german debt but the euro will be under pressure until, hopefully this will never happen, under pressure unless things in europe gets so bad that the market speculates there will be a breakup. that is when the parameters change. if it is germany and other core members in charge of europe, that is when you buy. salam anxiety now. -- sell on excited now. -- anxiety now. mp made a comment, saying that it is a close run judgment on the rate forecast.

we have a boat, he will replace one of the three. we may go back to where we were before. if it is a close run judgment or the rate forecast, where does that leave us in terms of expectations about whether or not the august hike will be delivered upon? a close run thing, a little bit of moving it you decide could move the balance. patterns, you could have every member almost about to vote for a hike, more hawkish than one or two or three voting for a hike. i think it is necessary to look at these comments. and look at the minutes and the comments and their. -- in there.

hike theyterest rate were giving, the banks are watching the data. some of those members that voted indicated theyy expect gdp to push higher in the second quarter, to rebound. the statistical agency said that the core gdp data and quarter one was not weather-related. which is it? we need gdp data and there will be changes from the ons. date it is changing and we do need to see what it is, and going forward, what will the pmi? as to whatuide us will happen in august. guy: he is talking about the risk for the boe, if the boe races rates to quickly, risks behind that but he agrees with

the broad direction for interest rates. read between the lines for me. >> most people agree with a broad direction, yes, they will go up but at what pace? ago were moreonth optimistic about interest rate hikes than the money market, money market last week, said there may not be anything until the beginning of next year. economists have stuck to their guns with august. one of the big things, how far do they want to hike interest rates? tom: sony kapoor is still with us. was taught at -- has taught at dartmouth and nyu, he is one of our experts on productivity. do you, like him, have an optimism on rising productivity? >> i happen to have spoken

mpc'sly to some of the members and it is important to remember that, as much as they say that focus on data and they need to, they cannot take your the political and economic context. the uncertainty around what will happen in brexit, around investment level, and with the increasing noise of bmw, airbus. tom: we have to leave it here i am so sorry dear we will -- we have to leave it. i am so sorry. this is bloomberg. ♪ what's a gig of data?

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pay for data one gig at a time. and with millions of wifi hotspots included, you'll pay less for data. it's a new kind of network designed to save you money. click, call or visit a store today. guy: guy johnson london, tom keene in new york. let's talk about what is trending across the bloomberg universe.

the maker object daniels has said it will have to raise prices for american whiskey gold -- sold in the eu following the implementation of tariffs. our most read story on the bloomberg terminal over the last president the chinese vowing to match donald trump blow for blow. hasecond place, trump accused harley davidson of waving the white flag as a manufacturer says it will relocate service production outside the u.s. white house trade adviser peter navarro seeking to ease investor concern on trade policy, indicating a treasury report on foreign investment wouldn't be as sweeping sing -- sweeping as

markets seem to be pricing in. let's get a "first word news" update. growing concern about the country's resilience to a trade war with the u.s.. the shanghai composite index fell one half of 1% at the close, taking its lawson's the january hike to more than 20%. president trump has accused harley davidson of surrendering in his bidding trade war with the eu. that is after the company said it would relocate some of the production outside the u.s. in response to european retaliation for the president's trophy tariffs on imported metals. he was surprised the motorcycle company would be the first to quote, raise the white flag. wildfires breaking across northern california have forced thousands of people to abandon

their homes. major blazes are continuing to rural regions north of san francisco and threaten hundreds of homes and businesses. no injuries or deaths have been reported. global news, 24 hours a day, on air and at tick toc on twitter, powered by over 2700 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. guy: thank you. some of the world to give largest money managers have -- emerging markets. turkish assets seem to be back at square one. james foley joins us from bravo bank. that turkish lira bounce did not last until lunchtime.

>> risk appetite is not particularly good. there was that element, that fact that the strength of that bounce. investors were worried everyone taking control of monetary policy. go to the markets are going to wait to see what his next move we have to see if the central bank is going to recover more of its credibility. guy: let's talk about china. the question that is lurking in the background of this trait story is whether or not your world gets into the trade world, whether fx suddenly becomes a weapon of choice.

at the moment scott -- at the moment, it does not feel like we are there yet. how far did the chinese have to be pushed to decide that the currency is the next step? at some point, it will become clear that they are doing it and the bank is a big river to cross. jane: clearly, they are simulating the economy already -- stimulating the economy already. they are hiking interest rates. china's stimulation of the stock market is quite lower this year then people had anticipated. if we saw a much greater concerns about the pace of growth in china, we could consider seriously the threat that they would use currency. tom: we have been showing this chart a lot. this is a bundle of em currencies that everybody follows.

down, 6%, 8%, even 10%. it is nonlinear. at some point, this slams in with a vengeance. how far are we from something worse? jane: we're going to carry on the trend we are as long as the news flow stays the way it is, as long as fears of an escalating trade war carries on. it is not great for risk appetite. some of these emerging markets have domesticated, but what we're getting into is that some of the yen have been pulled into this trend even perhaps as the fundamentals are not that bad. that is just a marker. tom: picking out somebody giving way and every day, a different country gives way.

the dollar philippine. you will not see this on graph tv . here is another example of a further currency weakening. doesn't this have a domestic ramification, whether it is the philippines or indonesia? jane: it does. turkey and we look at how much that currency weakness can affect price pressure. that becomes an issue for central banks. of the central banks that have hike interest rates in 2018, only two have been in the g10. the rest have been in emerging markets and a large part of that has been currency weakness. tom: you and i have been through this a few times -- a few times. the bottom line is we are rationalizing this em weakness.

we are going through a set of rationalizations until what? what isthink the until until interest rates are so attractive, the domestic economy is going to go through a lot of pain as a consequence or the global fundamentals begin to improve which would be a step back at this stage from the trade war escalation. guy: stanley fischer used to be at the fed. do you get the impression that the fed is as global in its thinking right now as when stan fischer was vice chair? jane: this question comes and bernanke and the paper tantrum, that appears to be a the fed is i think

wary about the impact of their policy on the rest of the world which is why they communicate quite strongly we're not in a crisis, in the u.s. and they told us recently they could hike by a total of four interest rate hikes. is the risk that it is less rather than more at this point? we see china entering a bear market and the impact on the s&p 500. will i certainly think it put on guard all the other central banks within the g10. they have to be quite sensitive to the worsening of the news. i was surprised how little they mentioned trade war's a month ago. i expect in a few weeks time that this will be a much bigger

topic. guy: where is the ecb? not so much on the front line as the fed. they are super dovish right now. tom: very good. breaking news here as we say thank you to karen emil hart. will spin offic baker hughes. this is out into the future according to the wall street journal. inis said to exit stake baker hughes in the next two years. ge is said to spend off its health care operations. that is ongoing. yesterday, a small part of the power transmission area, machine making was spun off, a

$3 million transaction. this is part of ge. stay with us. worldwide, this is bloomberg. ♪

tom: breaking news on general electric. dismantling ofhe general electric. yesterday, we heard about the power division. today, ge announces they will spin off their health care unit. that is a big deal. also, they may cut the dividend. that was something that was iffy.

reporting they begin to discuss that oil transaction of a few years ago, the idea of somehow liquefying and jettisoning baker hughes. it is the dismantling of the welch era. let's talk about what is happening in the commodity space. is the function you want to use if you want to follow along. speculation that the u.s. will be facing an ongoing supply crunch in the risk of uncertainty on how much opec is planning on boosting outlook. joining us on set, jane foley. we will come on to shape of the curve in just a moment.

a lot of it depends on two factors really. how long is this shutdown in the big oil since? the other is national, how much is opec going to increase the flow of a lot of it depends on o factors really. oil in the market? and is pushing down brent pushing up wti. tom: -- guy: how long are we seeing outages? what we getting in terms of information? problems in terms of capacity. that seems like something that is going to be hard to solve in the near term. ases: it is not as simple pumping of the ground as is processing facilities.

at this stage, we don't have clarity on just how long and how big the impact is going to be from this issue in canada. tom: we got the news that ge will jettison out of oil. your area is in such turmoil right now. only going to see a consolidation of assets as ge unloads baker hughes -- are we going to see a consolidation of assets as ge unloads baker hughes? james: there was always an appetite for oil assets. baker hughes is a big company. it does not sit well with ge, but there should be other interested parties. there has been a lot of consolidation in that sector. byreasingly, it is dominated

a number of others. it is possible somebody could snatch up baker hughes. guy: is ge selling at the right time? are we seeing pricing power returning to the services sector, as it was, as we were a couple years back? james: we seem to be entering a phase in the industry where the services do better. cutsprices drop, everybody costs and the service sector is squeezed. prices are going up and the services will start taking a bigger share of the pie. they can charge more to the international companies. though ge is not necessarily doing this voluntarily, it is better to be doing it now rather than two years ago.

guy: we will leave it there. james to james haran -- herron. -- overseas work in washington. he will be here to give us a great perspective on what is happening with the oil market right now. att conversation coming up 7:30 a.m. in new york this is bloomberg. ♪

taylor: this is bloomberg surveillance. let's get your bloomberg business flash. ge planning to spin off its health care business and unload its inner -- its ownership in baker hughes. final plan is expected to be presented to investors today. to exit its investment in baker hughes over the next two years and ge is likely to reduce its dividend pay off following the spin off of its health business. -- says transport

for london was not fit and proper to operate in the city but now it's body of issues have been addressed. uber's long-awaited appeal was yesterday and the judge may make a ruling as early as today. afterite is down in china comedian john oliver criticize president g paying -- president xi jinping. chinese authorities appear to have blocked hbo.com but hbo programming has not been affected. that is your bloomberg business flash. yesterday, our investigative team in london put of hedgebshell report

funds front running the news of exit polls. matt levine of bloomberg opinion drives for the conversation for the today -- further today. informing the public about the results of an important referendum is illegal but giving these results to a hedge fund so i can profit from them might be legal. might be thate there is no way to get any of this right, that intuitions about insider trading and market cheating and journalism and democracy are hopelessly conflicting. this goes back to martha stewart and further than that. exam are just took the cfa know that insider trading is a good way to flunk the exam. what did you take away from the article yesterday? it was a distinction to me that the u.k. does not know what to do with hedge funds. i get the difference

between this and insider trading is with insider trading as i canrstand it is that you parse the information is somebody else but if they trade on that, it becomes illegal. this might be that parsing the information is the problem. aroundory also centers the issue of what nigel farage new win -- knew and what he said. the issue is him coming on sky. i rarely quote from the daily mail but i am going to do so now because the story is for rogers denies purposely misleading the nation when he conceded defeat on the eu referendum night.

my understanding is this is causing some consternation down in westminster and there is some degree of interest in having some parliamentary investigation. im: a nice summary and what find interesting is how different the u.s. in the u.k. is and how they treat these might this orit it might that. let's move on to the transparency of a present tense brexit discussion with jane foley of rabobank. -- whatat is your call #jane: is your call? jane: we do think that cable is honorable but if we look at what is impacting sterling right now, there are just cofactors. andbank of england hiking if they do hike, that will give

sterling some support. we have to look at the politics and one thing that is surprising is given the confusion about brexit and what the government's position is which is supposed to into thed up going june summit and it clearly isn't, that is causing a lot of investors to stick to the sidelines. given that brexit is only months thinkn march 2019, i sterling is going to weaken. guy: that feels like a dollar story. if you take a look at it versus the euro, much more stable. are we not doing justice to the story by focusing on what is happening with the dollar when what we should actually focus on is the eurozone and there, stability seems to be -- jane: i think you are right

because to evaluate brexit, i have been looking at euro-sterling. months, last few year, a positive euro backdrop is now turning into a much smaller backdrop. we have the italian situation some of that came into the market quickly. we do have the budget. that is something which could impact the eurozone. guy: we are going to wrap up their. tom: thanks so much. jane foley, thank you so much, with rabobank. coming up, robert shiller on president trump's america. ♪

tom: this morning, get your motor running and run out on the highway out of milwaukee as the

companies likes davidson to leave these shores. robert shiller on our culture war and -- and america's need to take the world in a long embrace. futures are flat after yesterday's adjustment to the trade wars. this bull market never wants to die. surveillanceberg and in honor of steppenwolf, i am tom keene in new york, guy johnson in london. harley davidson is moving to europe. guy: harley is moving. most of the production is going out to asia. they are basically worried that if they raise prices in europe, people would not by hogs. they're taking production out of the united states and putting it

elsewhere in response to the targeted eu tariffs. tom: the news out of general election, their health care business jetd. that is 16% of their revenue. guy: they are rapidly reforming. the timing could be quite good because you started to see pricing power coming down into the supply chain of the oil and gas services industry. tom: with a presumed dividend cut, the news coming up, general election -- general electric saying health care will be a standalone company. right now with your "first word news," here is taylor riggs. taylor: growing concern about the country's resilience to a trade war with the u.s.

china educate you on content -- china's yuan continue to drop. -- continued to drop. -- later this week on foreign investment will not be as sweeping as markets have -- as markets are anticipating. the dow jones industrial average ended lower yesterday for the ninth time in the past 10 trading days as investors continue to worry about the prospects for global trade. of ukraine's biggest dealmaker has weighed in. >> in the short-term, we benefit. tariffs are good. production is only happening right now. consumers will have to pay for this.

they will have to pay for the higher price of steel. special counsel robert mueller is preparing to accelerate his robe and the possible collusion between donald trump's presidential campaign and russians who sought to interfere in the 2016 election. this is according to a person familiar with the probe. the source says mueller and his team have an idea producing conclusions and indictments by this fall. mueller's office declined to comment. in the world cup, today sees for matches. australia meet peru. denmark plays -- iceland faces croatia. yesterday, spain and portugal advanced with iran missing out by one point. for everything need to know

cup> go. global news, 24 hours a day, on air and at tick toc on twitter, powered by over 2700 journalists and analysts in more than 120 countries. this is bloomberg. tom: thank you so much. we are seeing ge headlines right now. we heard earlier from reports in the wall street journal. any number of headlines here. 16% of revenue is their health care operation, it is going to be a freestanding company. baker hughes will exit over two to three years. i like this headline right here. these are the actual headlines we are looking at. this one is really important. ge actively exploring options to cut insurance exposure. ge capital is a small part of the company, but it is without question an important and emotional part and they are having trouble in their long-term care insurance and

they are going to cut that down. a lot more headlines out there, including maintenance of the dividend. we were talking a dividend cut and here we see maintaining the current dividend to the completion. we knew it was coming, but not this quickly. guy: we knew it was coming in 2007. in some ways, it has taken a long time. this is the latest step. they had an incredible business that simply did not the together and the finance angle got way too big and it has been a slow process ever since. this is the latest development in a long road of disentangling the general electric that became so big. tom: this headline that came out is so important.

over as lead director. i cannot convey to you the symbolism of the leadership, running in as lead director for general electric. methodss and industrial that includes huge shareholder return. let's go on to a data check. we have robert shiller and kevin cirilli with us on what is going on in washington. futures at negative two off the day. the euro turning off of -- churning off of an important meeting. guy: merkel not optimistic on getting a deal on migration. that is a significant factor for her chancellorship. bear market being confirmed in china.

shanghai now in a bear market. the european markets, there is a dead cat there, but not a particularly rubbery one. we could see that 700 level being ed again, stateside. it does not look like we are going to get much of a bounce today. tom: in washington, kevin cirilli, i want to go to vice president biden in his heated op-ed in the washington post. ais is joe biden who spent significant amount of time in central america. it soon became evident that migration from central america could not be resolved by stronger enforcement at the u.s. border, let alone by building a wall. the murder rate in honduras dropped a third since its peak in 2011. he says this progress required

face-to-face diplomacy. this is the most intelligent thing i have heard about the arts debate. do we fix this at the border or do we fix this in central america? what do republicans say it -- say in the house? is a widespread acceptance that to address the immigration issue, you have to get to where the root of the problem is and that is in , thatl america and mexico is where they are passing through. what is interesting about the timing of former vice president joe biden's op-ed is that comes at a time in which the current vice president is actually in route to latin america for a series of meetings and sources suggest that there is this form of soft power in terms of trying to invest in latin america and in south america in particular

to fix and get to the root of this problem but it has not garnered any attention in congress. tom: i want to keep tort because we have robert shiller but i want to ask you a yield academic question. the good society that republicans want as we go to the midterms and as they get ready for 2020? what is a good society that majority republicans on the hill want? to keep it're going simple. they want the economy that is robust and growing and that is where this trade issue gets interesting and they do want immigration reform addressed in some way. guy: good morning. shanghai went into a bear market this morning. is that a win for the president? kevin: absolutely. when you look at how the chinese market has been trending downward on a series of lows,

that is definitely something that they feel, there is a collective sense of the u.s. has the upper hand at least from the administration's perspective. they feel that china has more to lose than the u.s. in this particular trading instance. tom: thank you so much. we now turn to robert shiller with us. when does the new book come out? robert: i have not turned the manuscript in. i put a self-imposed deadline of september to be done with it. tom: september 2018. robert: but it won't be until 2019. tom: there we are. kevin cirilli gave a penn state answer on the great culture war. reaffirm what the good society is. a lot of americans don't want robert shiller's good society do they? robert: the term good society has never been accurately defined.

it is a dream. the american dream, i suppose. society, it seems to me that term developed in the early 20th century and it reflects a whoon built of nice people have concern for others. right,ise their children they are tolerant. tom: that is a liberalism. school.f the realist republicans and the president doing very well in the polls with more of a realist approach. can your good society fit within the realism that america faces in 2020 and 2030? robert: there is definitely a good society feel to trump.

i don't think he is a terribly religious person himself. he presents himself as an upholder of american values in a different way. it is all in the interpretation. maxine waters has a very different interpretation. professor.orning is a good society compatible with mass migration? robert: the nationstate is under threat. commissioner for refugees, what is the number now? 60 million refugees on the planet. it is trying our basic concepts of nationality. on the other hand, americans are more patriotic now than any

recent memory. tom: within this is the culture war we stand in. we have been here before. william jennings bryant and others. we always seem to recover from it. how do you perceive american changes and morphs into the next decade? robert: this is highly speculative. i think that there has been a lot of anger, fundamentally about the middle class not moving ahead, about the economy becoming more unequal. it has led to anger and we have politics of anger. we see that on both sides. we see a polarization. i think this will last too many years. americans don't want that polarized society and they will get tired of this. tom: what we are going to do is

talk on general election -- general electric. on the creative destruction of , thank you soic much karen. a joy to speak to you yesterday. as ahis come to you surprise that ge is moving this quickly? an announcement of this magnitude was not expected so soon. selling off part of health care was a possibility, but not the whole unit. that is a surprise and the timing is quicker. they are going to sell a. 20% and get cash. guy: what are they aiming for? karen: all they will have left

his power which is a problem and aerospace which is a terrific business. if they get rid of health care, everything else is really small. guy: thank you very much. let's talk about what is going on in brussels. the european commissioner is speaking, presenting the annual report on trade and investment barriers around the world. go on yourto terminal to follow what is happening. this going to the big fear in brussels right now that we could see a trade war in the car sector. let's get to a bloomberg business flash right now. taylor: boeing poised to bolster its backlog thanks to an announcement of two transactions. bamboo airwaves signed a boeing'st for 20 of

dream liners. -- break from industry practice of stockpiling for the annual trade shows. instagram would be worth more than $100 billion if it were a standalone company. that is according to data compiled by bloomberg intelligence. the estimate suggests facebook return since fold its purchase back in 2012. the photo sharing platform reached one billion monthly active users and could account for 16% of facebook ticky revenue over the next year. --'s -- facebook's revenue over the next year. -- john oliver criticized president xi jinping. he called out the chinese leader for amassing a local power and

censoring online dissent about him including banning references to winnie the pooh. chinese authorities appear to have block hbo.com but hbo programming is not been affected. that is your bloomberg business flash. thrilled for the nation and for finance and investment. robert shiller is with us. i want to bring up the chart of general electric. force.as this iconic ge andg-term chart from then the agony of the recent rollover. this is showing percent change as well. this comes back to creative destruction, buttressed up against this modern phrase that you detest, financial engineering. did we incentivize our ceos and

managers where instead of adding true value, they financially engineer? robert: financial engineering has been used both positively and negatively. i like the positive side of it. that is where you invent new financial devices that improve the efficiency of the economy. tom: what about financial engineering based off of ceo bonuses tied to equity price but not ordinary income treatment? robert: doing that is supposed to encourage long-term thinking. the problem is it encourages promoting long-term growth and earnings but also some funny things like share repurchase which boost prices and help the options of the ceo. tom: or at least share repurchase at the wrong time.

when ge'sember numbers came out, one of the biggest deals going. quarter after quarter, one of the big events was ge's numbers. process,part of this this problem that ge finds itself in was the short-term focus, that it was so focused on that moment in time? robert: i think long-term focus is hard to maintain. short-term focus is looking at the newspaper every day and looking at what people are saying about you. from sittingrent back and thinking, should we start a new product line and suffer losses for 10 years thinking we will eventually prevail? that is hard to do. most companies are not that good at it. we have a system that encourages quarterly reporting earnings and

looking at the short-term. it has been a problem for a long time. guy: how do we change it, because if you are running an industrial company, then you need to make big long-term investments and we need to figure out a way of allowing those companies to be able to do that. do we stop quarterly reporting? do we band share repurchasing? what is the right structure to allow us to generate long-term thinking when it comes to investment? robert: this is a question in behavioral economics. the human mind tends to be short-term and we tend to be focused on immediate concerns and lose long-term. carelessle are very about planning for retirement. tom: really? robert: and in following dr.'s advice.

short-term, take this pill and feel better now, you can do that. do they wants their diet and their weight? tom: did you talk to mrs. keene and come here to lecture me? us.rt shiller is still with and the robertson in charge of bitcoin academics at bloomberg -- edward robinson in charge of the coin academics at bloomberg -- at -- of bitcoin academics at bloomberg. ed, where is bitcoin six months from now? >> talking to investors in crypto, analysts, people who run exchanges. it could just be flat. ofs could be a long period little volatility in bitcoin. back in the 2014,

2015 timeframe where a lot of crypto traders like to call winter for bitcoin but it may just be kind of boring for a while. tom: the idea that bitcoin is value trapped. is it likery basis, gold where it is a fixed asset or are weoing into an era where it is a mystery? at 21 million, but you have fractionalization -- it is capped at 21 million, but you have fractionalization. you can look forward to's -- synthetic bitcoin. that is this huge vision financial services companies would put out bitcoin etf's that would be synthetic so you don't actually have to hold tokens. in: this sounds like cdo's

2006. guy: bitcoin squared. when a bank gets robbed, the dollar does not go down. when a crypto exchange gets robbed, bitcoin goes down. people still don't trust the infrastructure around bitcoin. ed: that custody question is huge in bitcoin and some of our columnists have written some good stories. why would i put my savings and is something that could be robbed and there is no recourse? that is a question these exchanges have to address. tom: robert shiller has -- is an expert on this. you look at this within the idea of economic theory, people talk about its value. forget about that, for me, it is hugely generation.

is -- say itsay it rocks and fossils like you and me say you are out of your mind. how much of this is generational? robert: is generational and geographical. the east coast is less into it then silicon valley. this is not a rational response to new information. it is a social movement, an epidemic of enthusiasm. it is a speculative bubble. that does not mean it will go to zero. speculative bubbles recurve. we had a bubble in bitcoin in 2013 and it looked like it was done. to $200.rom $1000 tom: this is really important. are you equating this tulip -- equatingl estate this to to the bulbs in real

estate? robert: tulips are still valued. tom: a lot of people got harmed in the tulip bubble. is that is what -- is that what this is equivalent to an bitcoin? robert: in some fundamental sense, yes. it does not mean the price will go to zero. i think of bitcoin as a remarkable social phenomenon. there is also impressive cryptographic theory coming out of computer scientists. invention has so much more attention. do you know what is going on inside your laptop? millions of interesting stories about engineering devices but we don't hear about them. that is because they are not part of a bubble, not part of investor excitement at the possibility of getting rich. we are going to leave it there.

thank you very much, professor robert shiller of the alien of her's of the. and robinson, great to see you -- robert shiller of yale universi you.binson, great to see ♪

tom: markets moving now. a quiet tape up to about an hour ago.

futures are now negative six off the huge decline yesterday that mr. navarro stepped out of the white house with comments to cnbc. we are off again today, futures down. dow futures negative nine. gold was breaking through moments ago. that gets my attention as well. ,ight now with your briefing here is taylor riggs. >> president trump is a kid harley davidson of surrendering in its trade war with the eu after the company said it would relocate some production outside the u.s. in response to european retaliation. through the tears on imported metal. the president said he was surprised the motorcycle maker would be "the first to wave the white flag." robert mueller is preparing to accelerate his probe into possible collusion between russianrump and

attempts to interfere in the 2016 election. that's according to a personal desk person familiar with the probe. source as mueller and his team have an eye towards producing a conclusion it possible indictments for the latest collusion by the fall. his office declined to comment on his plans. london source as mueller and his team have an eye towards producing a conclusion it heathrow expansion has won the backing of u.k. parliament. lawmakers approved the construction of a third runway by a large majority. with opposition from those representing areas around the airport. airways call the price of expanding the airport to steep. seese world cup, today four matches at two groups see their conclusion. in group d, nigeria plays argentina while iceland faces croatia. yesterday spain and portugal a vance -- advance. for everything about the games go to wgo on the terminal.

global news 24 hours a day on air and twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs, this is bloomberg. tom: my emotional team was nigeria. they kicked the ball and it's great. look at this right now. argentina and nigeria, my brain went with argentina. i'm an idiot. everybody has to vote for nigeria today and root for them right? argentinian inr which case are terrified you're going home. it hasn't exactly been the greatest tournament for argentina bus far. -- thus far. there's been a missed opportunity. 's last game messi today?

guy: i don't think it's been his greatest world cup. pieces,been a few set let's it was happening in germany. merkel will be me with the spanish premier -- supporters,iggest migration the forefront of discussion. all this comes as we get towards the summit of the back end of the week. angela merkel say no comrades and eu accord by friday. allen, good morning. securechancellor cannot a cop brands of accord on migration by friday, how big a

problem is that? it is a problem domestically for it is a problem domestically for her because she has her sister party who basically try to set some kinds of ultimatum whichr to get a deal allows the return of migrants from germany's borders to the country where they first registered which in other words would be countries on the mediterranean. overseeing inme, the past 24 hours are signals from this party which is one of three and a coalition that they are backtracking a little, i think they realize this is an playing well with their own voters in bavaria. is a regional election in the autumn. guy: where does the problem lie for her? is it with the new italian and the countries on

the forefront of the story or is it actually the central and eastern european countries that pose the biggest problem here? we are about to go into the austrian leadership of the eu and youonder whether or not the tone will change. the political constellation has thrust migration to the top of the fact. arrivals along the mediterranean are down from the peak and so yes all of the above are the issues. they can agree is the efforts to strengthen the border to also there are moves effectively establish camps in other countries like libya or albania to keep refugees there

applying for asylum from there. the difficult question is how to deal and distribute those who are letting to europe. tom: thank you for the update this morning. with us we have robert shiller for a thoughtful conversation. what's so interesting here is idea was economics and economic growth can solve a lot of immigration angst. thelearly haven't had economic growth. is that all we need? i refuse to believe that just economics can solve our immigration problem. can it? robert: economics is the study of the use of scarce resources. problems, itlve moves to a more effective solution. yes i think there are things we

can do. is a hugeee problem , it's notnal problem a purely economic problem. is it an institutional solution problem or is it a every nation for itself? assumesfinance often it's everybody for themselves. they make contracts and they make risk management decisions. there willrd we know be new refugee crises. we can develop a better international framework for handling these crises in advance . this is a financing solution. heldn't just have people in limbo for years.

this is something, there should be more creative thought. tom: where is the creative thought in europe now as angela merkel go to brussels? guy: a lot of talk but not a lot of solutions going out of it. angela merkel desperate to deal with this on an eu level but that doesn't seem to be the way it's going at the moment. down to individual state stories. that's what the problem lies for the eu. at least i get from the united states point of view you can manage is that a federal level. europe -- does this have the potential to fragment europe in a meaningful way? robert: that is the concern. the way i view this is europe was horribly fragmented for centuries, then world war ii kind of drove this fragmentation

to the most extreme and tragic levels and we saw some to go to a more enlightened european union. the problem is as world war ii fades in our memory, we start losing our commitment to that. tom: the unilateralism of donald trump entrenched, is it permanent or will it moved to something like we saw out of the atlanta charter consensus. >> we are talking about subsequent decades as opposed. my feeling is that americans are rad tired of the angry rhetoric -- already tired of the angry rhetoric and polarization. they will want a leader or a government that is more measured in its words. problem, ase is a

the memory of world war ii fades , we are going to be drifting back to nationalistic fundamentals. tom: we saw that a quebec with out editorializing. let me tell you about a way to dazzle roz jeff robert shiller. your master's degree from your the bloomberg terminal at yale university. shiller,e professor you steal a long bitcoin chart, general electric. how the jpmorgan emerging markets spot index? more fun and games. there it is for you to use on your terminal.

>> this is bloomberg surveillance. let's get the business flash. ge will spinoff its health-care health care business and unload its ownership in baker use. focus on power aviation and renewable every nation. ge will maintain its dividends after a review. boeing is poised to bolster the backlog with orders thanks to the announcement of transactions. bamboo airwaves the enemy startup senate commitment for 20 of the 787 liners and jet airways india announced it would buy 75 of the 737 single planes. for the big annual tradeshow in paris and near london. bmw is warning of a full back

investments if the final brexit deals not ensure the great flow of goods to the eu. the german automaker as plans and says the ongoing uncertainty over negotiation is not helpful at customs arrangements are made a cause for concern. speaking this morning become the ceo said it is not considering moving conduction -- production out of the country. instagram would be worth more than $100 billion if it were a standalone company according to data compiled by bloomberg intelligence. facebook is maybe 100 fold return since it's purchase in 2012. the photo sharing platform reached one billion monthly active users this month and accounts for about 16% of facebook revenue over the next year. that's your bloomberg business flash. tom: we thought we would say on script here and do that.

-- is a the two of you together is fabulous. when things change, kathy fisher changes and all of a sudden cash is cash now an asset. kathy: -- tom: is or might still working? it is indestructible. yields for has people with short-term needs, it now to play the role that he couldn't before. for long-term investors cash is never the optimal. talking efficient frontier, i flunked the cfa offices. there is a theory, does this theory still work?

kathy: there are anomalies from time to time. there've been a ton of anomalies in recent years. i was talking above the dollar. they were saying why the dollar now rising that rates are in now we have the dollar rising and we are getting all the facts. fundamentalsan the had the charts make sense. to williamgo back sharp at stanford university, there was not a certainty, but a lot of other people took the theories and made them religion. the religions come back but the new religion we are in, are beginning that the normal 2006. >> going back to the early 1950's. showediant paper that how portfolios can be optimized with some simple calculus.

nobody saw it before. that is an important theoretical revolution. as you say some people carry it too far and think it's the perfect model describing what happened. we needed a counterrevolution. ,hat was behavioral finance it's been going on now for 30 years. standard and becoming widely appreciated. go read that paper. has he read it? tom: of course we've read it. guy johnson, jump in here please. takei'm going to let kathy a civil water. thatissue being something can be used tactically now --

tom: we have a technical difficulty. talking about -- let me go to professor shiller. the going to be linking behavioral economics with the stuff kathy and i had to learn at gunpoint, what does that just what is that going to be besides humility? i'm writing a book called narrative economics about the importance of narrative and financial markets. it's the exact opposite of markowitz. i remain an enthusiast for markowitz. it's all the different perspectives and different models.

economics is not like physics. tom: that's one of most important things to learn. with professorck shiller and professor filler -- pressure fisher. -- professor fisher. 7:00 hour, stay with us worldwide to the morning on general electric. this is bloomberg. ♪

kathy, let me ask you the question i was tried as the moment ago before technical issues. you were talking about the tactical use of cash being real in the united states. i'm in europe looking at the yield. from a real yield point of view it charlie negative. -- sharply negative. we have negative in europe come positive reads in the united states, that mismatch. what will it have -- what effect will it have? kathy: we will see investors gravitating towards cash because it has yield.

there is a lot of change. i would go back to what i said before. long-term investments cash is never the optimal place to be. timenk it depends on horizon and that something we have to keep in mind. traders are different for long-term investors. tom: i want to go to the motion of what you deal with and wealth management every day. here's the single best chart today. here's the single best chart today. kathy fisher will not talk about individual companies, we know that, but this is the general electric and we know it moves up. what do you do when somebody walks in the door with an undiversified portfolio and the party's over for the selected blue-chip success story? kathy: we have that conversation all the time and it's no longer blue chip. think of the tech companies and new companies that have gone in

recent years and often time we do advise they sell and diversified substantial pot -- diversify. they've seen what happened to companies. and a lifecycle of companies is beginning to shorten. no one expects a company's day will be a great company 20 years from now. tom: i can't convey how i agree on how the lifecycle has changed. shiller's work is humility. basically economic humility. tot is the tone you have give to bernstein. need. the humility you we've all enjoyed our bear markets. what's the show humility to use every day. kathy: we have all seen how markets move. we always used behavioral finance of the core of how we think about investing because we can take advantage of the human tendency to overreact in the face of trouble that can lead to

great insurance. we can go to the fact that people get overly exuberant. is keyzing human emotion as a common patient the cluster. as a common patient the cluster. guy: it looks like the s&p will test why 700 the moment. the market is feeling nervous. ist would you say right now the market getting a little bit -- the u.k. economy -- u.s. economy is moving along nicely. >> i think investors are appropriately looking ahead and saying the trade discussions and issues haven't been escalated. we thought was a minor thing in march with posturing, they are real now and we've seen some companies recognize they could have problems as a result. if you start to connect the dots

, you worry this could lead to lower earnings or less productivity, inefficiencies of people deal with supply chains that are now disrupted. you can see of the market is getting jittery. that's why diversification is so key. the next few you weeks will be important. what happens by july 6 will matter. tom: thank you so much. we will continue through the morning. general electric is up nicely. still finding out there. please stay with us through the morning. this is bloomberg. ♪

david: combing the waters. navarro denies reports of

restrictions in the market settle down. xi says he believes in punching back at least when it comes to trade. emerging markets are caught in the crossfire. goldman sachs is it's time to get defensive is trade talks moved to action. welcome to "bloomberg daybreak." washington, you are down there and it turns out trade is the issue thereto. alix: this is the world gas conference. the first time in decades and d.c.. the big question becomes china the biggest lng buyer in the world, everyone wants to sell to them. u.s. companies need long-term contracts. if there's a trade dispute why would a chinese company confirming long-term contract? that's a cousin that question