francine: eu leaders gather in brussels to talk trade and brexit. to angela merkel seal a deal avoid a tussle within her own government. the greek prime minister tells us he will support a pan-european response to the immigration crisis. we bring you that interview. entity doubts, trump gets another supreme court pick. is america's top judicial body about to become the most conservative in generations? ♪

good morning and welcome to "bloomberg surveillance." these are your markets. the stoxx 600 much flat. a lot of talk on trade, on china, and on if it u.n. can -- yuan can weaken further. we have a great story about central banks. we look at the 22 important central banks that make up 90% of the world central bank policy. euro-dollar at 115. -- 1.15 , we hear from the greek prime minister on the migration issue. a little later, our weekly brexit show. than still to come, the german deputy foreign minister. make sure and get your questions in by going onto gene keady go on the bloomberg terminal.

let's get straight to first word news. peels is marking its top contender for the u.s. supreme court. that is according to those familiar with the in ministration. the 81-year-old justice anthony kennedy announces retirement yesterday, letting president trump nominate a successor and potentially creating the most conservative court a generation -- in generations. >> he will be missed, but he will be retiring. so we begin our search for a new justice of the supreme court. that will begin immediately. the greek prime minister has bowed to stick with the financial commitments he agreed to with european leaders as month. speaking exclusively to bloomberg, he tells us he is determined his country will not go back to the responsible manager seen in the past.

in greece inpened previous years and led us to bankruptcy was a huge waste of money, and corruption, and irresponsibility. we should not go back to that. i will do what ever i can for greece to not go back to that tragic period. >> the white house is going ahead with plans on chinese investments, but is going against using a rarely used tax law. president instead embraced stronger scrutiny of intellectual property rights on the committee of foreign investment. said china's later responses to u.s. trade demands have so far been unsatisfactory, and that the administration is not retreating on china. defending champions germany have been knocked out of the world cup. defeat by south korea

means they came bottom of their group. the first time they have that maybe knockout stage since 1938. for all the latest results, head to the bloomberg terminal. ,lobal 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. francine: thank you. european union leaders will gather in brussels to tackle issues. due to increasing pressure within angela merkel's coalition , the issue of migration will be high on the agenda.

they are also likely to discuss trans-atlantic trade relations, beefing up the areas of bailout fund and slow progress of brexit negotiations. spokeof that summit, we briefly to their prime minister, and started by asking him about the migration issue. >> however, we need to consider if the crisis and any other big crisis faced by europe will be dealt with in a collective. -- spirit. or, whether each country will deal with them separately by building fences or looking at its own backyard. i support the former approach. make a problemd bigger and leads to the dissolution of the eu and the way in which we think when it comes to solving these problems. >> you are here in britain and we have the issue of brexit. would you offer anything to mrs. may in terms of bilateral deals?

do you think there is something that greece can bring to that? we cannot compare the , butssion regarding brexit it is interesting to see how things changed. greece, from being part of the problem, has become part of the solution. is no longerit part of european vocabulary. i am still of the opinion that it is a difficult choice. this is the choice of the british people, but we believe it will not be to the benefits of britain or europe or the people. we need for its to be the best possible terms, both for european citizens and british citizens. we are working hard to find the best possible solution. this is not easy. , andieve we will succeed

in the end, have a fair arrangement. was the greek prime minister speaking exclusively with bloomberg's editor-in-chief. for more on the leader summit, let's head to brussels and to our reporter. good morning. first of all, it seems like there is a lot less commonality that there was a year ago. stakes are higher, there are challenges with the economic union, what is their focus today? >> top of the agenda is migration. and her future has eclipsed the summits. this is meant to be the big europe revamp summit, but that has fallen off the agenda, and it is all about migration. migrants numbers are down, but the political problem has escalated. the italian government is clearly taking a much tougher stance, and obviously, merkel has come under major pressure at home.

i want to point out she just spoke to the german parliament. she is saying her decision to let one million refugees enter germany was the right decision isthe time, but obviously, hoping to get a deal that makes her look top at home and appeases countries like greece, they, and spain, because are key when it comes to limiting the movement of migrant in europe. francine: how important is it for germany and italy that they find a deal on migration? the italian government, and this is key, we have to point out that migration numbers have fallen. but it is the political discussion that has shifted. the italian government is now saying it cannot go on, we cannot give them all of the work. we are seeing tensions play out. the issue is we have seen a draft document they were used tonight.

they are going to express that italy doesn't need more support and that there has to be a much more comprehend the agreement -- comprehensive agreement. we also know the italian government has said it is not enough and we need something bigger. and the issue of asylum-seekers is controversial. is a refugee qualify for asylum? but the government is taking a tougher stance now. francine: thanks so much. migration issue affect the euro and what is next for the currency? is the director of g10 at strategy at bank of america merrill. give us a sense of how much you look at these summits. a lots of the time, it is behind closed doors and the level below them that they find an agreement. does the euro selloff? i think the historic focus

has been around brexit negotiations, given it is a key theme that has been driving european politics. we have the saudi dynamic, this is not a new dynamic. we have had a variety of -- electionstries driven by the migration issue. it is an important issue. doesn't have a meaningful impact on the euro, we don't think it does. backup prevails, but this is obviously a long run issue that will continue to permeate. is there a danger that the refugee crisis pulls the euro apart? we are used to the greek crisis and monetary unions, but not underlying geopolitics. i will say the

implications on growth is going to be important. looking at the u.k., strains on , more broadly, funding in a you countries for immigration flows, is obviously going to have an impact on fiscal spending and the numbers which feed into currency. francine: what does it mean for european central bank policy? they start working on assets by the end of the year and hiking in summer of 2019. mike they have to postpone that? kamal: we think no. the ecb will stay on track. start hiking policy by september 2019. theme isnk the common the need for structural reform. that will be a continued theme that may limit the extent to which, or the ability, to hike rates. francine: thanks so much.

stay with surveillance, plenty coming up. a prime contender to join the supreme court. and america's growth spurt. they report their latest gdp readings and steven mnuchin says he is inspecting a big number. we discuss that next. this is bloomberg. ♪

francine: economics, finance,

and politics. this is "bloomberg surveillance." let's get to one of our top stories. president trump will get another supreme court appointment. anthony kennedy, the reagan appointee, the court swing vote, is retiring. he joined liberal justices to legalize gay marriage is, and with the conservative wing to throughout campaign-finance restrictions. his successor could create the most conservative court in generations and put a landmark abortion-rights ruling at risk. this federal appeals courts judge is emerging as the top contender to replace and, according to sources familiar administration. joining us to talk about the significance of this news and what it means for businesses is our senior writer stephanie baker. stephanie, thanks for coming on.

i know you keep up with the trump administration. what effect could this have on social issues? stephanie: i think this will have a big effect on social issues like lgbtq rights and abortion rights. the landmark roe v. wade decision, justice kennedy has been the swing vote defending that. if republicans, if trump, gets through his nominee, he is likely to try to adhere to a campaign promise to appoint a conservative justice that would seek to curtail or rollback roe v. wade. pessimists say it means it is dead, but what it means more broadly, is that this will become a flashpoint during the campaign for the november midterms. i think it will really supercharge both bases, both republicans and democrats are

because they view this as an absolutely crucial issue. francine: is it too early to know what effect it will have on the midterms? it is tricky because there are several democratic senators up for reelection in states that trump one. they will be under tremendous pressure, a difficult decision for them as to how to vote depends on who trump eventually picks. to lookr issue we need at is the two moderates and .epublican senators suzanne collins is one to watch. i think it will certainly be a rallying cry around the campaign in november. francine: what is the chance of the nomination getting through? stephanie: they change the rules

-- on approving supreme court nominees. it now means there is no democratic filibuster. all they need is a majority. if they get all republicans on board, they do not need democrats. if they have a few wavering republicans, they will need some democrats who are up for reelection in those red states to be on their side. francine: thanks so much. we will get back to our guest. we will talk to him about gdp and what that means for his dollar calls. up next, america's growth spurt. reports its latest gdp readings this afternoon, and steve mnuchin says he is expecting a big number. we talk growth next. this is bloomberg. ♪

francine: this is "bloomberg surveillance." in the u.s., first quarter gdp is releasing at 8:30 a.m. in washington. at 2.2% onts come in an annualized basis. steve mnuchin said he is expecting a big number. so what will it be? a blockbuster quarter for growth and what is next for the dollar. still with us is our guest.

first of all, dollar dynamics. it is what emerging markets and the fed want to know. where do you see the dollar going from here? one .15 has been the level -- 1.15 has been the level people have been focusing on. we forcast at 1.14. there are risks to the downside of the euro. ecb, that is dialing down on its rhetoric on monetary policy tightening. the u.s. growth story is entrenched. we know growth is strong and the is what markets will focus in on. francine: is the trade war inflationary or deflationary? kamal: in a trade war

environment, tariff war's high prices and that should be inflationary, but it is not part of our core scenario. we see core inflation heading around 1.8%, 1.9%. that should keep the fed on course for four hikes this year. of itself, be a support for dollar sentiment. emerging markets have pretty much held it together. some that have had to preempt the move. what happens from here? kamal: we can see there are some stories, like turkey, south africa. in latin america, brazil, argentina. i think markets are looking at where the idiosyncratic value story is. francine: is there any doubt that inflation is definitely coming in the u.s.? fact we havethe

this overlay of a strong fiscal stimulus in the u.s. economy, and overlay onto a an already strong economy, suggests we will see further inflation. the average hourly numbers move higher. it is not a big move, but it is consistent and gradual. utilization is also tightening. toare expecting pressures remain underpinned within the economy, and that should be enough to continue. francine: what is your favorite pairing? i don't know if you look at yen or something more secure. kamal: we look at a lot of things. the key is that we see decoupling of the policy narrative. we see the fed move to a slightly more dovish outlook. i think that is where the potential near-term pressure is more broadly. we are still bearish on the euro. there is some further downside

to cable as well. francine: we have a good roundup of central banks coming up, but do you worry about european growth, germany in particular? the u.s. is looking at cars, and in general, the political situation. kamal: the risk is that trade war is a downside to european growth, and our team has written extensively about this. that would require a weaker euro to rebalance the european economy, should we have a slowdown. the risk is on our forecasts, but obviously a downside. francine: thanks so much. next, easy money. we take a look at central banks and what they are doing around the world. this is bloomberg. ♪

francine: economics, finance, and politics. this is "bloomberg surveillance." let's check in on what is trending across the bloomberg universe. the sun may be shining, but

germany summer has been spoiled. the nation has crashed out of the world cup, the first time since 1938, they haven't made it. brussels toather in tackle a growing number of challenges. from brexit, to migration, to the u.s.. and our most read stories over the past few hours. , a federalace appeals court judge is said to be a key contender for trump's suffering court pick. what are investors looking at from today stress tests. finally, steve mnuchin has won a battle inside the white house over trade policy with china. let's get straight to the bloomberg first word news. judgeeral appeals court is emerging as top contender for the u.s. supreme court,

according to two sources. of the 81-year-old justice anthony kennedy announces retirement yesterday, letting president donald trump nominate a successor and potentially creating the most conservative court in generations. >> he will be missed, but he will be retiring. we will begin our search for a new justice of the united states supreme court that will begin immediately. eu leaders gather in brussels to talk a that about a growing number of challenges. the new government in italy and increasing pressure within germany, the issue of migration will be high on the agenda. the summits is also likely to discuss transatlantic trade they eu bailout fund, and the slow progress of brexit negotiations. in an inclusive interview in london, epm tells bloomberg the

challenge of migration requires collective action and a european solution. we need to consider the crisis and if it will be dealt with in a collective spirit. the european challenges require european solutions. other countries will challenge them by building fences. i support the former approach. movingwhite house is forward with plans to limit chinese investments, and has decided against invoking a rarely used law. president trump, embraced stronger scrutiny of intellectual property rights. advisertop economic later said china's responses to u.s. trade demands have so far been not satisfactory and the in ministration is not retreating.

moneyeen is making more from the uk's offshore industries. the crown has said the company that generates income for queen elizabeth reported a 32% increase in earnings from clean energy technology. the u.k. has more turbines in the sea than any other nation, and install an average of one new machine every day. has broughte crown least 29million -- at million pounds to the treasury, some of which is used to maintain the balance -- palace. and the number one fee for rate team at germany has been knocked out of the world cup. a defeat at the hands of south korea meant germany came at the bottom of their group. it is the first time they have not made the knockout stage since 1938. for the latest results, head to bloomberg. hours a day,24

powered by more than 2700 journalists and analysts in more than 120 countries, i am taylor riggs. this is bloomberg. francine: thanks. we have a great story saying that germany's early world cup exit could hit companies such as ideas that are sponsoring it, but could give a boost to some of the bookies in germany. after years have been spent pumping easy money into crisis economies, the world's central banks are starting to drop back their support. the fed has raise rates twice this year, the ecb says it plans , wellp buying assets bloomberg economics took a look at 22 of the top central banks, which together, said policy for almost 90% of the world's economy. next?s we're talking about some of the

outlier calls you were looking at. but talk to me about the u.s.. a point you made to me was repatriation. that is a clever way of looking at what happens next. kamal: one of the defining is this significant resurgence in reinvested earnings. around $175 billion worth. this has been key for bank of america. what we have seen is a dollar, offshore dollar earnings coming back to the u.s.. we think the next overlay is likely to be non-dollar holdings. in context, three and a half trillion dollars are held overseas, and that money has yet to move back to the u.s.. that is where we think the next leg of the dollar risk flying for the greenback. francine: what is the chance of a world right recession? would it be sparked by monetary

policy and bad decisions? kamal: higher than it was, but we don't think it is a likely scenario. what we have seen is at the beginning of 2018 there was a strong synchronized policy. canada, bankank of of england, bank of japan, all dialed back on their right height expectations -- rate hike expectations. in terms of liquidity, we think it will remain large. that should support the macro economic outlook. recession no, chances increases given the trade war. but central banks remain a accommodating. francine: looking at the economic cycles, you could foresee a downturn in the u.s..

kamal: this is definitely a story which has gained traction over the past few months. if you look at smaller banks in europe, they have negative rates. they are so far advanced in their own cycle, the question is, what do they do if the next downturn comes? still have say they some policy tools, but looking at the bank of england, it looks as though there is an urgency to hike rates ahead of brexit and a case of a slowdown. there certainly a narrative permeating through banks. francine: what about the ecb? the danger points are basically ecb, doe -- boe? you have got the ecb which is now starting the process of normalization. they will be slow and steady.

the risk is, by the time we get there, growth momentum may have slowed. francine: thanks so much for joining us today. up next, prepare for the worst. eu leaders are warned the risk of a chaotic brexit is rising when they meet in brussels today. can theresa may offer any assurances a deal will be reached? our weekly brexit show next. this is bloomberg. ♪

francine: welcome to our weekly brexit show. let's get straight to the bloomberg brexit bulletin. >> spain's foreign minister says the eu's biggest countries will block any attempt by the u.k. to combine single market ownership immigration curbs. they say some smaller european countries would accept it, but the most powerful ones, would not. bmw is warning that the pullback in investments to the u.k. if a brexit deal does not ensure the free flow of goods. uncertainty ongoing over negotiations is not helpful , and customs arrangements remain a cause for concern. the company's ceo says it is not considering moving production out of the country. hasoomberg investigation found that hedge funds higher polling companies to build a critical advance information on the eu referendum, including

data that would have been illegal. this has allowed some of them to earn fortunes by shortselling the british pound, although agreements have made it difficult to determine the identities, we have found at least a dozen were involved. some are optimistic that the u.k. will reach a fair brexit deal. speaking to bloomberg, he says the terms have to be the best possible for eu and british citizens. >> this is the choice of the british people. we believe it will not be to the benefits of the euro or the british people. we will need to try for the terms of brexit to be the best possible terms. both for european citizens and british citizens. >> that is her brexit bulletin. i am taylor riggs. this is bloomberg. theresa may has to

brussels for an eu summit and is likely to receive stern words from her counterparts who warned of the risk of a chaotic brexit is rising. that could weaken her negotiating hand further, as the eu is in a stronger position. can be prime minister instill confidence today? joining us now is a member of the u.k. house of lords and the former director general of the cbi. thanks for joining us. first of all, it isn't in the eu's interest to play the long game? giveu postpone it, do not assurances, they think they might get a better deal? >> if i was the man negotiating, he hasn't had to do anything. no,he keeps doing is saying let's the remain camp and the establishment do its work for him. say theygle time, they are not putting up with this, not going to accept this.

at home, the symbols have said to give it. it will all come down in typical eu fashion. , theutes before midnight 20 night of march, when we are due to leave. there will be a deal. agree on one point, i'm not sure it strengthens the eu hand to keep saying no. a good example is bmw. they don't want to leave britain, in my words, a competitive place to make cars. they like being here. the ceo has actually said in your bulletin they are not going to leave. but we do not like this uncertainty. and airbus, the best makers of wings in the world, they don't want to go. but they are saying give me certainty. all the companies i may chairman of, the five, all saints a -- all saying the same.

they are saying we're stopped -- going to stop being a bully. but, you know, give me three things they want, what are they? digby: we are in agreement here, there is no plan. germany keepsthat saying no, so what is the point. they have red lines, don't think? digby: germany, what is in your best interest? that is not going to help britain. so we need a compromise. thesecond thing we need is single market custom unions aspects of doing trade easily, but at the same time, why did the brits say no, we want out. really, it was over control. control over judges, trade deals, and borders. i understand why brussels says you cannot have that.

stay in a single market and have that control. that is not on. if that is the case, why are we posture? why don't we prepare for some , so whyone, we will go don't we do a free trade deal with europe? brussels keep saying no, so it is very difficult. if you are buying a house tomorrow, and he said he would make me an offer, and the guy said no. come back in three weeks, no. it is difficult to negotiate. francine: rights, but i would have to have a proposal to buy the house. you were a very prominent member of the eu. digby: rights, i worked with brussels. i don't want to be controlled by germany. do we need to have a firmer view and stop insider fighting within westminster to

understand what the uk's relationship with the eu is? digby: yes to that. francine: so, why don't we haven't? digby: because 48% have voted to remain. francine: who is the establishment elites? digby: politicians, i the media, a lot of big business. the southeast of england, maybe london. they are doing everything they can. francine: is boris johnson and establishment elite? digby: i don't think he knows what he is. please do noteas, look at our foreign secretary and think he represents us in any way. francine: who do you think does? digby: it's got to be the prime minister. what i feel strongly about is that the country is at civil war. you have got remainders -- remainers in the cabinet.

so you are right saying unless there is a proposal, what do they argue with. that is britain's problem, not europe's. the problem is, if you just keep saying no, at some point, germany is going to say i'm taking control. what is the biggest market in the world for german motorcars? it is britain. double what they sell to america. three times what the south china, they sell to britain. -- they sell to china. francine: is it politics or economics that will prevail? germany also has great interest in the union. digby: they will write case studies of this for 100 years. which is the british voted for things other than economics.

you and i and all of us have been obsessed on the economics. at the end of the day, the european union have to look at the political solution. keeping the union together. my answer will be, at the end of the day, politics. question, is the trimester trying to please too many stakeholders? digby: yes, but isn't that what leaders have to do. francine: so what kind of brexit will we end up with? the five coming from u.k. or eu? or eu?e coming from uk be a: there will transition. where whatever is made to work. but what you end up with is something in goods that a single market in each -- marketish. services in the trade deal, quite a lot about borders, and judges having independent.

and it will all be done a minutes to midnight next march. francine: thanks so much. we talk a little bit about the irish border next. disapproval, big business has turned up the heat on theresa may, warning of the dangers of a bad deal or the dangers of uncertainty. can the divorce talks still deliver the benefits? nes, and yougby jo can ask him a question on bloomberg. this is bloomberg. ♪

francine: welcome back. let's get back to a to b jones -- digby jones. we spoke of the merits of a proposal in the u.k.. are you expecting an early general election? digby: no. it is in nobody's interest to risk a corbyn government. i'm not commenting on whether it will happen or not. it is in nobody's interest

because of corbyn support for the ira. it is not an theresa may's interest, for obvious reasons. it is not in anybody's interest to have a marxist government in britain, other than the marxists in the labour party. at the end of the day, the dominic brings up this year -- world, they will get to the and say if the only way out is to call a general election, we will back off. francine: will theresa may be prime minister in 18 months? or will to get kicked out after brexit? digby: what will happen is she of the brickbats in braces, hand over to somebody i have not even heard of, it will jump a generation. a woman,ike to see somebody who's mom and dad were not born in this country.

really make a change. that it could be somebody who goes 18 months before an election. you are youis of surprised at the strength of the euro, when it is almost beyond certain that other countries will seek to leave the eu? will globalists allow to happen? digby: i am surprised at the strength of the euro. it is in clear turmoil. off air, we were just talking about the politicized nature of the euro. greece and italy, then you have got: and hungry not liking it. francine: but that focuses the mind of leaders. digby: you've also got sweden and netherlands who don't want it. in my surprise the euro holds -- yes i am.m it speaks more about the dollar that the euro, but i don't think

it will fall apart. i'm not at all certain the eu will have anybody else. country, fifth biggest economy, look at our problems trying to get out. if you were little, you would be murdered. francine: thanks for joining us. bloomberg surveillance continues in the next hour. tom keene joins be out of new york, and we will be talking currencies. andad an interesting call we will be talking angela merkel, talking the supreme court. this is bloomberg. ♪

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francine: a test of unity. e.u. leaders gather in brussels

today. can angela merkel seal a deal for immigration? tipping the balance. trump gets another supreme court pick after justice kennedy retires. is america's top judicial body about to become the most conservative in generations? good morning, everyone. this is bloomberg "surveillance." tom keene is in new york. we looked at trade and g.d.p. a little later on and we'll talk about football and germany being out of the world cup. on a serious point it has an impact on adidas and some of the sponsors. tom: i don't know about that. i'm looking at belgium. i guess neither team wants to win. they want to play switzerland and russia. it is called half of death. i have no idea what i'm talking

about. francine: in football. you sound like you know, tom. tom: it is 2:00 p.m. wall street time. it is -- does anything else matter? francine: now for us what mares, s bloomberg first word taylor: brett cavanagh is merging as a contender for the u.s. supreme court. that is according to two sources familiar with the situation. 81-year-old anthony kennedy announced his retirement yesterday letting president trump nominate his successor and possibly create the most conservative court in generations. president trump: he will be missed but he will be retiring but we will begin our search for a new justice for the united states supreme court that will begin immediately.

taylor: u.s. vice president mike pence said he expects the subject of russian meddling in u.s. elections to be discussed when trump meets with putin. national security advisor john bolton said the time and place of the summit will be announced later today. european leaders will gather in brussels to tackle challenges facing the continent. an increasing pressure with angela merkel's coalition. migration will be on the agenda. ey are expected to discuss transatlantic trade. and greek prime minister tsipras is expected to stick with the

agreement he made. they will not go back to public fanses seen in the past. >> what happened in greece in previous years and led us to bankruptcy was a huge waste of money, corruption and i would say irresponsibility in the management of public finance. we should not go back to that and as far as i'm concerned, i will do whatever i can in order for greece not to go back to that period. taylor: the queen is making more money. the estate reported a 32% increase in earnings from the queen energy technology. the u.k. has more turbines than any other nation and installed an average of one machine every day last year. some of the money is used to help maintain royal palace and

the queen's residences. powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. tom: thanks so much. a new answered kind of day. -- a new aunsed kind of day. euro, churning but yen weaker. an odd day all in all. 24,117 is almost a correction stage on the dow. we're not quite there yet. you see this in a 30-year bond. 298, 297. a lower yield and a higher yield in the last day or so. but the 30-year bond showing the oddities. the rupee a weakness. francine? francine: if you look at stocks, they are struggling a bit.

a little bit of pressure on the emerging markets. i think investors are trying to continue to understand what america's strategy toward chinese trade and investment means for global growth and inflation. and also getting breaking news out of the euro area. economic confidence for the month of june. it has fallen a little bit to 112.3 but still a little bit better than forecast. tom: we have shown this chart before. we have shown it on turkish lira. the white line is brent crude in u.s. dollars. the orange line is the indian rupee. you really can see here the agony of 2013 and again, this is a huge gap between dollar denominated brent and buying brent in indian rupee. expensive for india to buy

hydrocarbons. francine: i have a great chart looking at the german 10-year yield. it is a chart a little bit different to what we normally do because it is related to volumityity. -- volatility. it measures how attractive or unattractive a bond is after accounting for market risk. it has collapsed to the lowest n a year, tom. treasure secretary steve mnuchin is said to favor a less aggressive china strategy and it seems he has won this ground but trump's economic advisor said the president is not softening his stance. -- e joined now by george what does dollar do from here? >> the market is in risk

aversion mode and the dollar tends to do quite well, particularly against emerging markets. if we look further out towards the end of the year, however, i think we're approaching a very important inflection point. the market has priced in a huge amount of divergeance between the fed and the e.c.b. and other banks that have turned very dovish. and this is a big if, it is going to be very difficult for fed market pricing to stay immune to this. the dollar can continue to do quite well over the next few weeks. i think we're approaching the limbs of how much the dollar can rally against the developed market currencies in particular. francine: if you look at global trade wars, would it be inflationary or deflationary for the u.s.? >> i would say both. definitely inflationary. trade war -- attacks, price of

import goods will go up. medium term, it is a negative shock to growth, to demand. that's how the e.c.b. said they would see it and how the fed would look at it as well. it is the reason why the curve in the u.s. continues to flatten. essentially the market is pricing higher risks of structurally weaker trend growth. tom: where are we in the idiosyncratic meter? argentina, turkey. it is all idiosyncratic. where are we on that story moving from individual stories to a combined -- >> we're way fast idiosyncratic at this stage. that was case in april. what is interesting is number one, you're now starting to see outflows, portfolio outflows

that are fairly broad based so this is not just confined to a few specific e.m. stories and we're southeast seeing the pressure shifting to china which as the world's second largest economy starts to have ripple effects on the asian currencies. how stable china remains is going to be quite critical for e.m. over the summer. tom: which currency pair is the one you watch? >> if you look at dollar korea, dollar taiwan, they all have very high beaters to dollar china. what i would say is the most important thing is the supply chains. china is bearing the brunt of the criticism in terms of trade. you have to bear in mind global trade is very globalized. if there is pressure on china and korea and taiwan, these

supply chains are very integrate and that's why dollar-asia is going higher. francine: coming up next, we talk a little bit about euro strength or weakness and talk about the political system and angela merkel and the e.u. leader summit. d we talk with euro asia's analyst. bloomberg. ♪

taylor: this is bloomberg "surveillance." let's get the bloomberg business flash. b.p., the u.k.'s largest charging company is going to be bought.

there will be 12 million vehicles on the road. charge master has 6,500 charging points across the country. the inventory levels increased further. does the swedish retailer suffer from logistics issues? they have been struggling to adapt the new legital landscape as customers buy online. francine: thanks so much. european union leaders will gather in brussels to face challenges facing the continue innocent. we spoke with the greek prime minister tsipras and started by asking him about the migration issue. >> the migration crisis is here

to stay. it is not if you like a crisis that we will overcome easily. it has to do with some big causes behind it. the wars. the imbalance between third world countries and europe. however we need to consider whether the crisis and any other big crisis and challenges faced . europe will be dealt with whether l each country deal with them separately by building fences? i support the former approach. it will make the problem bigger but lead to the disillusion over the european union and the way we when it comes to solving these problems. >> do you think if there is an grem in coming migration summit, which would ask greece to take some refugees back from germany, would you be open to that?

>> this discussion in membership is not that important to greece because as it is known, there are no secondary migration flows from greece and if there are any, these are insignificant. our borders unfortunately for us have been closed since 2015. francine: that was the greek rime minister tsipras. george of deutsche bank is with us to figure out exactly what it means for the e.u. leader summit. whether they can agree on something. thank you for sticking around. george, charles, welcome to the program. when you look at the e.u. leader summit, is there anything the leaders agree on? we don't really have a deal on immigration. we don't have a deal on refugees. we don't know the positions. >> it is a very important summit. i agree it is supposed to be

about the future. it has become a crisis summit. mostly because of migration. i'm not sure i agree there is no grem at all. there was an informal summit last sunday which doesn't produce much. it allowed everyone to express their position and since then partly because mrs. merkel is threatened in her own country, there has been an effort to put together some sort of an arrangement. offering the italians concessions in exchange for some very, very soft measures to deter secondary migration. that will help mrs. merkel. francine: that was going to be my question. is that enough for her to actually keep her job? >> over the past two weeks, they have produced this extremely ambitious and controversial migration plan. there has been a slight toning down to have rhetoric depending on who you listen to. some of the younger generation

are talking about asylum tourism. i think it is slightly more likely they stay in because it is a huge risk for them to leave the coalition. tom: charles, who pays for all of this? which nation, which institution is writing the check for all of this migration? >> you can't break it down to one nation. quite often people talk about germany putting all the cash into my problem that takes place in europe. that is not really the case. y european initiative, reinforcing the external borders, everyone pays. as a measure of g.d.p.. then obviously there are countries that are more affected. italy. as mr. tsipras was saying, greece is not as relevant as it

was in 2015. this is costing the italian government a lot. francine: how much does this mpact e.c.b.'s thinking? >> from a market perspective what is most interesting is that the e.u. summit is not going to be most relevant development and instead what happens back in germ on sunday when merkel is due to meet with her colleagues, what the market cares about the government stability. the precisions and the details around immigration are extremely important from a political perspective. it is all about whether merkel can survive or not. and if she can, then the market can go back to focusing on growth and inflation rather than the complexities of politics. tom: that is a good thing in

this hour. we're going to look at the magazine business and the ability to pick up things that are printed and actually read magazines. this is bloomberg. ♪ ♪

tom: bloomberg "surveillance" from land and new york. george of deutsche bank, and oreign exchange.

global wall street ready. bring up the chart now. looking at adx, it is amazing the second derivative, george. it has fallen out of bed. it is off a cliff. what does that mean for capital flows of the pacific rim countries? >> the reason behind the move, i think it is all about dollar-china really. it has been the anchor behind asia and it has been remarkably resilient to the dollar rally so far. now dollar-china is starting to -- however we have to put it in perspective. if you look at where dollar-china is, it is where it was in defense. it is one of the best performing currencies so far this year so far this is just a catch up rather than a beginning of this new episode of very large asia depreciation. tom: we'll have to look at trade weighted. we showed the indian rupee a bit

ago looking at the oil effect. this is more european. this is something that is almost social whether it is swiss franc, euro hungarian, foreign with some real stable, george for four years and all of a sudden this leg up of weaker ungarian currency. >> you have two dynamics going on. eastern europe is very much a global growth or a german growth beater. so when the market is optimistic on what is going on in the global economy, eastern europe tends to do quite well. what we have seen over the last few months are worries around trade war tension, global growth and that would tend to hurt central, european currencies. on top of that, they have extremely easy policy, real rates are extremely low and i

think you put the two together, lower great expectations and easy central bank policy you're getting this underperformance out of eastern europe. francine: are central banks, if you look at the cycle of the european central bank, what are the chances it is normalized by the time there is a recession in the u.s.? >> i think what is interesting is you look at what mr. draghi did a few days ago, it was buying insurance. they are worried oob around italy. they are worried around trade war. however for me this is just a buying of insurance. if the downside risks don't materialize, the guidance the e.c.b. gave in terms of rates, i think we'll be out of dates. domestic demand in europe is doing quite well. buying insurance, however if the downside doesn't materialize we could be talking about e.c.b.

tightening by the end of the year. francine: thank you very much. both will be staying with us. remember bloomberg users can interact with the charts shown using g tv go. you can catch up on key analysis and chars for future references. there are some pretty good charts. i have a chart looking at some of the dynamics for bonds in germany. what we need to focus on of course is trade. stocks retreated overall. merging markets under a little bit of pressure as there seems to be a cloud over the economy because of trade. this is bloomberg. ♪ ♪ two, down, back up!

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that's why xfinity mobile can be included with xfinity internet which could save you $400 or more a year. it's a new kind of network designed to save you money. click, call, or visit a store today. tom: thrilled you're with us. om keene, england. francine rooting for belgium. switzerland, croatia.

smick like that. there is a big football game this afternoon. that's what you need to know. right now you need big first word news. taylor: the white house is moving ahead to limit chinese investments but is against using a law for emergencies. trump's top economic advisor arry kudlow said china's responses to u.s. trade demands have so far not been satisfactory and the administration is not retreating on china. u.s. vice president mike pence suspected the subject of russian meddling in u.s. elections to be discussed when president trump immediates putin later this summer. in an interview aboard air force he said russia's invading

crimea and the ukraine will likely be discussed. the greek prime minister tsipras said turkey's presidentered egan can sometimes be un predictable but it is important that greece has good relations witts neighbor. >> presidenterdogan is a political responsibly. a very important penalty but sometimes unpredictable. we in greece however as you know we see this issue with turkey in a very different way than the way you're dealing with it here. we share borders with turkey. therefore it is important for us to have a good relationship with our neighbors. taylor: also in that interview, he said channeling migration requires collective action and a european solution. >> we need to consider whether the crisis and anyor big crisis

and challenges faced by europe will be a collective expert. they require european solutions, ch. each country will deal with them separately by building fences. i support the former approach. germany has been knocked out of the world cup. a 2-0 defeat by south korea. that is the 57th best team according to fifa. deepa failed to progress to the next round. it is the pirs time they have not made it to the knock-out stage since 1938. for all the latest results go to the bloomberg terminal. global news and at tictoc on twitter. i'm taylor riggs. this is bloomberg. francine? tom? tom: thanks. i think i figured it out. you don't want to play france or

argentina. ou want to play croatia or denmark. belgium wans to lose today. francine: it is like a pyramid. you want to go through the stages. you don't want to be kicked out so that you have a better chance. tom: you want to be in the right bracket. francine: don't follow lacqua or keene. follow ferro. tom: now the supreme court. stephanie baker with us in london. for a global briefing on this name, anthony kennedy. i met him a few times he was appointed by ronald reagan but changed over the years. how did justice kennedy change into truly the legend that he is right now? >> well, he was a crucial moderating force on the court at a time when it was becoming

increasingly partisan. he was the swing voter in a number of crucial issues. lgbt rights, same-sex marriage wade cially roev. abortion rights. there is why there is some concern about his departure. at will it mean for roe v. wade and other crucial votes that come before the court. tom: the list of candidates, i regret that everybody is in an uproar about conservative versus liberal. i don't see anybody there really bigger, broader, more philosophical like a breyer or a kennedy. everybody seems to be much more narrow. do i have that right? >> yeah, i think you do. he came from another era at a time when you know, u.s. politics wasn't so partisan. he could rise above it. and i think the real question is who do they get to replace him

that doesn't alienate some of the more moderate republican senators who trump needs to get the nomination through? d i think again, roe v. wade and abortion lab crucial kind of test for whether or not certain republican senators, susan collins' name for instance, whether she will back trump's nominee. francine: what effect will this have on the mid determines? >> both sides are saying this will super charge their base. people will view and understand how important the november midterms are because you know, the fate of u.s. congress can decide these factors. there is some concerns for instance this might not be the last supreme court justice that trump could nominate. there are others like ruth bader ginsberg, she is now 85. i think there is concern there could be other retirements and trump could be able to fill

other seats. francine: what is the chance to have nomination getting through? >> again, i think it really depends on -- it may be that trump needs to appoint someone who is more moderate on some issues in order to get those moderate republican senators on his side. again, there are a handful of senator up for re-election in states that trump won that will need to be -- think very carefully about how they vote on this. and again, i think that roe v. wade will be a litmus test for them as well. francine: our senior writer there, stephanie baker on some social issues, jornl from deutsche bank and charles from eurasia are still with us. i want to get to g.d.p. in a second but does change? the supreme court, there are important rulings for business and we have one on am exoverfight nfl -- am

exovernights. >> i was looking at justice kennedy's voting record and he was rightly known as a swing vote because on social issues he tended to side with the liberals but on business and regulation and corporations it is more of a mixed picture. he was looking at the legal case all the time. i think u.s. allies have before the trump administration seen the supreme court as too politicalized and polarized and predictable. many i.n.s. tations in other countries have deteriorated and become very political. this seem tobs the biggest symbol of that. ae allies will regard this as further step and in a negative way. tom: looking at dollar strength, the economy is a backdrop for the judiciary. the economy is a backdrop for

executive and legislature as well. do we have a strong dollar nols now within our make america great again economy? >> i don't think we have. if you look at previous instances where trade has been a huge focus of the administration, for instance in the early 1990's, the implicit dollar policy was a weak one and remember, just at the start of some ar, trump was making negative dollar comments. sfl the dollar continues to rally, i would not be surprised at all if the dollar negative narrative came back. tom: we haven't seen that yet. what would be the catalyst to bring back the job -- in the weak dollar? >> i think it would be key levels. if you see euro-dollar drop into the low 110's, dollar-china starting to move above the year highs you're likely to see the

twitter machine -- tom: i like that phrase. i'm going to steal that. the the twitter machine. francine: the twitter machine, always eventful. when you look at emerging market currencies, are you concerned about dollar strength? >> for now eled like to see some stabilization in the flow picture. we're still seeing the outflows. i think the uncertainty around trade, it is very difficult to see that fully lifting ahead of the midterms. this being said, you are starting to see value emerge. some e.m. currencies are starting to look cheaper again. i would be looking at it from the glass half full side but oom not sure now is quite the time to be turning more positive. tom: george, thank you so much. i know you have to start with deutsche bank. well, he has a theory.

it is an important conversation. you do that when you have an idea and you do that at the spen ideas festival. erik schatz kerr pulled the short straw. this is bloomberg. ♪

francine: this is bloomberg "surveillance." tom and francine from london and new york. let's check in on what is trending across the bloomberg

universe on tictoc. the sun may be shining but germany's summer has been spoiled. germany did not make it past the group stable. a couple of challenges from brexit. our most most read stories on the bloomberg terminal over the past few hours. brett cavanagh is expected to be a key contender for trump's supreme court and from goldman sachs to deutsche bank, what are investors looking out for today's stress tests and steve mnuchin has won a battle inside the white house over trade policy with china. find out more when heading to the bloomberg terminal. let's talk brexit today on our brexit bulletin. as brexit starts to get wole real in the u.k., e.u. leaders

are warning theresa may they are preparing for a messy breakup. let's get prepared on brexit. what you do with the irish border. let's get back to charles litchfield. the clock is ticking and yet we don't have a u.k. proposal on what kind of brexit deal they want. when will get it? >> well, it will need to be soon. it used to be only a few weeks ago that people were planning for this to be cleared by the june council which begins today. over the summer, theresa may is promising to her e.u. counterparts she will manage to get her cabinet in line around a plan which offers a slightly closer relationship on customs that will partially solve the irish board r problem although you need more cooperation.

you can't pick what you like without taking responsibilities and the u.k. doesn't want to participate in freedom of movement. pit seems clear that will no be accepted. francine: there is an intensifying public debate about the risk of brexit. is the debate shifting or is it the uncertainty that is increasing that is scaring chief executives? >> i think it is just the clock ticking. it has taken a long time for corporates actually to express their feels about brexit. they have been squared about the public backlash. it is interesting to me that the firms that have expressed themselves don't necessarily have to please consumers that much. some funds are doing so which is a more public affairs risk for them. they are doing it because they see very clearly the risk of brexit and a disorganized chaotic one if there is no solution to the irish border in

the next few weeks and also in long-term, the u.k. leaving the customs union and then having supply chain problems. the car manufacturers that have come out said clearly a close relationship is need for the just in time building that they do. francine: a magazine just published its annual quality of life survey. munich was named the most livable city with berlin, also g and dusseldorf making the ranking. tyler always a pleasure to have you on bloomberg "surveillance". you look at things a little bit differently to everyone else. london is nowhere to be seen. is it a brexit effect? talk to us about how you measure whether a city is pleasant to live in or not? >> good morning, francine. good morning, tom. it is 12 years now that we have been doing this survey.

you're right. we don't just look at the key factors of spending power, and house prices. that is one component of 60 different metrics. we look at important things like hours of sunshine and zobal connectivity. and also -- global connectivity and how affable is it when it comes to attracting new business. germany did very, very well across all the cities mentioned. tom: one of the things we're seeing is where amazon is going to plant their second city. what i found fascinating is they are catching up with tyler in cha it is really about quality of life and the power of young people. whatever you want to call them. young people that have real power, corporate power in these decisions, don't they? >> slule. that was a considerable component of this. it is not just about of course

are you going to get incentives to bring your start-up to that city? what is the education system like? is there a goodex pat community? at the same time, a city like zurich or munich, can you jump in the lake or river at lunchtime and after work and also have a drink on the street without getting arrested? tom: where is london on this? they are not on your map. what happened to london? you have to be kidding me. london. what is wrong with london? >> london has a few challenges. francine and i did a few workshops on this from time to time. there is a lot going on. brexit plays into this. london has never done really that well over the years with us anyway. we talked about this last time. there is a talent movement now. you see people going to amsterdam, berlin, to be able to say after work you wand to go for a surf in lisbon. a lot of hedge funds and many

other businesses too across europe. francine: do chief executives care about the quality of life survey? we talk about bonuses, keeping your employees happy. should they look at this index and decide with people go and live? >> i hope so. we're doing a big conference in zurich tomorrow. c.o.o.'s, g how many c.m.o.'s are here to hear that story. these are hard factors when you look at the quality of housing stock as much as what are the kindergartens like as well? tom: let's come back to tyler. charles litchfield, thank you so much. thank you for being with us. we're going to come back with tyler and talk about the entertainment. we want to talk to you right now about the smartest guy at bloomberg. who'll that be spanning the

borders of germany, eastern and western germany, spending weekends in munich, living in berlin. who is the smartest person at bloomberg? here he is according to tyler. matt miller of germany has it all. this is bloomberg. ♪

taylor: this is bloomberg "surveillance". 'm taylor riggs. speaking to blood pressure, the impact isfor the gulf concerned about the trade war. >> we are trying to adapt the way that we were doing the business according to that. organization is the key to be competitive in the trade war. taylor: that's your bloomberg business flash. francine, tom? tom: thank you so much. with us in zurich, tyler, in america, we have seen time

warner, i guess it is time magazine even though it is still published. magazines get pushed aside. you push against that every day. what do we need to know about magazines particularly in america with the backdrop that carter is going to resurrect whatever he is going to do after vanity fair? what do with need to know about magazines right now? >> i think people need to know big brands, when you talk the likes of time or wherever braden might go. they rely on advertising. we are seeing a bit of a shift. i've been in milan, paris, talking to our clients for next year there has been a bit of a movement away. if you want presence, if you get on your lufthansa flight, seeing that outside back cover for whatever that brand is, i think we have sorts o neglected that sense of the adjacent si, the community you get in print, that

you can be b.m.w., whatever the brand is, you create a sense of community which is still very hard to do digitly. tom: is it still an upscale business? is field and stream going to cut it? >> depends on where field and stream wans to go. it might be a challenge for them. if you look at the german market, the women's weekly still doing very well. and the luxury titles doing very well at the same time. francine: in asia, is it demitcht asia to have people consume mag citizen zones than in the u.s.? >> if you look at the asian market, japan, you go to book stores in japan, there are so many women's titles. in s so competitive

switzerland you are fightinging to have an outside cover of a japanese or chide title for sure. tom: too short from zurich today. safe travels. he is monocle's editor in chief. it is a most busy day in international relations. a major focus on the judiciary in the united states of america. kevin will be along to brief us on a new supreme court justice and of course also we'll look at putin-trump and that scheduled meeting. maybe noums on that later today. and the equity market after the turmoil yesterday. s&p near correction stage. indicate moore of blackrock. stay with us. this is bloomberg. ♪ retail.

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as stocks near correction. gold cannot find a bid, em currencies as well. critical eu meetings in brussels, angela merkel is losing the debate. andedy retires, we consider define trumps concept of a conservative supreme court. good morning. this is "bloomberg surveillance." i am tom keene in london. , announcement in a bit, helsinki is where the trump-putin summit is. think a lot of folks , the meetings we follow closely. president trump showing up in the u.k. in two weeks. we will see what the relationship with china will be by then.

tom: we will get to the with kevin cirilli in a moment. first, taylor riggs. kavanaugh is emerging as top contender for the u.s. supreme court, according to sources familiar with the administration's thinking. justice kennedy announced his , lettingt yesterday president trump potentially create the most conservative court in generations. gather tonion leaders tackle challenges facing the continent. with the new government in italy and increasing pressure and coalition, they are likely to discuss relationsntic trade and the slow progress of brexit negotiations. germany have been knocked out of

the world cup. by south korea. that meant germany came bottom of their group and failed to progress to the next room. it is the first time they have not made the knockout stage since 1938. global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thanks so much. a lift to the market, but you don't trust it. upures up five, dow futures 31, curve turning, but a flight yield curve, weakness the last three days. next screen. the vix showing the angst out there. indian rupee and a new record.

francine. retreating,ocks are pressure on emerging markets. these trade clouds continue to hover. i'm looking at mining and technology companies. look at asia's main benchmark, it fell for a fourth day. tom: very good. we would look at the supreme hour debate later in the with a wonderful colleague and former clerk of justice kennedy. ,utin and trump, kevin cirilli we have feet announcement of helsinki. with the president have supportive republicans are capitol hill? i think there will be deep skepticism from many republicans, including senators like lindsey graham, who will

press the administration and make sure they have a plan and before meeting with putin. we are expecting the formal announcement later today. the administration for months has been laying this groundwork. tom: this is a scathing op-ed piece. why trump shouldn't meet putin. last summer when trump met putin, he briefly agreed to a u.s.-russian cyber security task idea as ridiculous as an anti-narcotics commission headed by el chapo. "you think our country is so innocent," trump responded. if mr. bolton was leading the putin, the u.s. would be in good hands. he understands that putin is a liar and a killer, but that's

the point. nobody can control the president , whether singapore or helsinki. kevin cirilli correct. correct. the president was on script in singapore. whether there is that same level practicality will be there with putin, we don't know. what do we know about the mueller probe? i we going to have developments during the summer? is it impossible to know at this point? francine: it is impossible to know the timeline. -- kevin: i reporting suggest potentially before the midterms that there could be a additional reports made public about it. again, he is operating on his own timeline. tom: thank you so much.

greatly appreciate that this morning. no doubt helsinki-bound. equity markets and a recalibration. chiefock joins us, their equity strategist. , but theens to be dow answer is it goes from the lower left to the upper right, and yet we are wringing our hands. how bull market is this bull market now? >> there is a ton of angst. i look back this time of year in mid-2017 and there was a time of stress as well. they were worried about valuations, sustainability of the rally. i feel like it takes a lot to get confidence back in the market these days. tom: this is the dow. there is the long-term trendline in green. we are off the mean, but not

that far off compared to 2000. think the important part here is what is causing the duration in sentiment is not data on the macro side or on the earning side. this is about geopolitics, trade, and policy, things we can't control. it has caused the risk premium to rise a little bit of a but that does not mean it will be sustainable and we should not be backing away from her equity allocations at this point. francine: good morning. how much does it hurt sentiment? you are talking about animal spirits. how much do they take a beating and how do you translate that into the real economy? francine: that's a good question. >> it is difficult to quantify this. is of the way i look at it

fun flows, equities first bonds versus money markets. the other way to look at it is the rotation within the market and trying to figure out how bad sentiment has gotten. we have not seen a wholesale sale of equities or massive change of leadership in the equity market that suggests a lot of capitulation. that of hand binds headlines, handwringing, but we have not gotten to the point of mass fear. wait and watch stage, especially as we go into second-quarter earnings and hope to get more information about trade. francine: what would be the catalyst for fear? it is difficult to quantify actually whether trade escalates and whether there is a trade war. >> i think the catalysts would be around trade specifically, and less so around earnings,

which i expect fairly strong. the other side we would see is a china manages to build coalition with other trade partners at the u.s. and there is a united front approaching trade agreements going forward, i think that would be a cause for concern. we need to watch the investment out an of companies, not just the u.s., but globally. there is a big story about the , andinability of earnings of a part of that was the investment pattern. tom: i know you don't talk about individual securities. yesterday we have a giant number, $10.9 billion. what does that signal to the $100 billione see

of transactions with big companies now? >> we have to look past those deals and ask how much do they need to buy? how quickly will be the revenue be accretive? tom: they are buying revenue, right? activity doesf not tend to the early cycle. tick up ing a activity in 2018, but buybacks, some investment plans and capex intentions. people get worried about trade. everyone's a concern supply chain will get hit, we will see a retrenching and a desire to hold cash levels high. tom: thank you. this is a joy. coming up, travis lightner joins us. than an acquaintance

with the justice kennedy. personal attention to the retiring justice from him. from new york, this is bloomberg. ♪ ♪

taylor: let's get the bloomberg business flash. biggesto buy the electric vehicle charging company for an undisclosed amount. bp estimates there will be 12 million electric vehicles on the road. andits missed estimates

expectations, and inventory levels increase further as the swedish retailer suffered from logistics issues that hurt shipments. pretax profits are up 22%. h&m have been struggling to adapt to the digital landscape. that is your bloomberg business flash. francine: thank you. , steven mnuchin and said to favor a less aggressive china strategy. larry kudlow says the president is not softening his stance. guest thatnow is our are our guest. thank you for staying with us. what do you make of this china trade skirmish? it is unclear whether trouble escalate it or back down. >> when he said were going from

52 200, anything china delivers to the u.s. that they will match with something worse. the point is china hasn't matched it. --is going through different options and hasn't escalated in the short term. once we get to july and tariffs are implemented, that will be a key point to watch. tom: we are moving from theory to application in real-time. francine: i wonder whether when

it comes to m&a, certain countries. stou.s. the first one to p china from coming in and buying u.s. companies. ?re we going to see more m&a are the chinese going to buy the companies they want, or because of trade issues with of the blocked more? >> if they try to buy anything in the u.s., that will be blocked immediately. japan,as been a shift to one obvious one. buying the semiconductor machinery, it is the european and japanese companies that are still cooperating with china, even while the u.s. is blocking it. seen european leaders

emphasizing eu-china ties. that is quite an interesting sideline to the key trade war. tom: how do you weigh the appetite of xi jinping and the chinese economic leadership and the communist party to go after individual american companies? xi invited a lot of u.s. leaders. there are different reports. one is he is saying we will not target the companies on sure. others taking quite a tough line. we are looking for something they can bring to negotiations to counter the threats from the u.s. side. they said we will shut down all operations in china as a negotiating tactic, then you would have a similar reaction.

they would stop selling semiconductor equipment to china. just trying to block u.s. sales in china itself is not a good strategy on the negotiations side of it. tom: i guess i just want to buy in wisconsin, kansas, or man time not -- or montana. >> if are talking about buying property in montana, i can't say no to that one, but the global supply chain and impact on companies, it feels to me market is underestimating the impact this will have on u.s. consumers ,nd on inflation and on pricing and overestimating the pain this will cause chinese companies. are seeing this massive selloff in the chinese equity market. the chineseke me have other options, in the case of doing deals and other

countries and acquiring assets outside the u.s., but also a tremendous amount of political will and capital willing to support industries stressed by this. it is underrecognized by the markets. it is much less in my view. tom: this is wonderful. up, an important discussion, a timely discussion with dr. fuhrman on the fiscal challenges. stay with us. this is bloomberg. ♪

we were talking about china. we were talking about the market moves. you say let's do it with the trade issue, but debt issuance at a specific time. >> you always had a credit squeeze at the end of june. shot of thinking, smaller financials, and lots of companies are fledging shares. they will have to sell those down if they get caught up in this credit squeeze. you have brought liquidity tightening and not everyone is sure where the risks are.

this is why you're seeing such a fake fall. you have that combined with a trade war and the economic slowdown. june's a nasty quite it -- credit squeeze. then that started easing off. we could see the end of this route shortly. tom: do they clear their private debt market? do they have the ability and process to clear the market? >> that is the issue. banks have to tidy up their balance sheets right up to the having end, so you're all those exposures back on the balance sheet again. you are seeing funding costs rise across the board, particularly smaller companies and financial institutions. tom: given the new leadership in

china, can they clear their financial system? >> you are seeing a clearing. you're seeing the corporate down, evencoming while households and governments are leveraging up. if you look at the cut at the atkend, that was targeted debt to equity swaps. there are two trying to transfer equity, whicho means you have a less leveraged financial system. francine: some people are saying it is losing steam because it is a competitive devaluation. >> if it was a competitive device way shannon, you would expect to see the pboc continually set at lawyer. -- set it lower. than theding lower

pboc set rate. pboc is trying to support above these levels. if it was competitive devaluation, you would see it going down. it seems to be stabilizing. they don't want capital outflows, devo bosch -- devaluation risk. tom: thank you very much. on china this morning. an important moment in the equity market off the close near correction stage. this is bloomberg. ♪

tom: good morning. let's get to our first word news. president putin says the

withdrawal of russian forces from syria is in progress as mike pence says he expects the subject of the kremlin's military incursions in the country to be discussed when president trump meets the leader later this summer. , mike pence said russian meddling in u.s. elections is likely to feature in the talks. john bolton says the time and place for the summit will be announced later today. european union leaders rather and brussel to tackle the challenges facing the continent. the increasing pressure in german coalition come immigration will be high on the agenda. the summit is likely to discuss trans-atlantic trade relations, the bailout fund, and the slow progress of brexit negotiations. germany's deputy foreign minister has told bloomberg that europe needs to find a common solution to deescalate the migration issue. i had of the summit, in an

exclusive interview. commoneed at the end european solution, and i hope that the leaders of the european .nion can convince each other toxicole atmosphere is and we have to de-escalate. greek prime minister has found to stick to the financial commitments he has agreed to. speaking to bloomberg, he told us he is determined his country will not go back to the irresponsible management of finances seen in the past. >> what happened increase in previous years led us to bankruptcy and was a huge waste of money, corruption, and irresponsibility in the

management of finance. we should not go back to that. i will do what ever i can to that tragic period. taylor: global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. thank you so much. this is our interview of the day. academic of the combine of kansas, but a person of immense uniqueness. he has clerked for justice kennedy and justice brett kavanaugh, who is on the short list to replace mr. kennedy. by him anded now washington. no doubt you saw this yesterday from harvard law. help our audience with how justice kennedy practiced supreme court law. what was he like in chambers? and colleaguess

come he was incredibly collegial. the report presents in its root couldn't -- written work a combative place. in fact, many have close relationships, and justice kennedy was part of that fabric on both sides of the aisle. you saw that in statements from his colleagues yesterday, who really will miss his personal presence on court and in chambers, as well as his legal mind and work. tom: as we move to brett kavanaugh and other candidates, it seems like a generational shift. others speak of justice kennedy's interpretation of dignity, this broader view of making law. is that a generational shift of the past? what will the new lobby, whether justice kavanagh or someone else? if it is a sure

generational shift in legal thinking. any time there is an opportunity for the president to make a nomination to the supreme court, it is usually a generational's shift -- generational shift. all the replacements are in their early 50's are late 40's. in terms of jurisprudence and ift the court looks like, justice kennedy is at heart a conservative, but if you trace his roots to california and western a u.s. libertarianism. that is a street that runs through all of his opinions. new type ofbably a conservatism whoever is nominated to replace him. what ism where you sit, a distinction between justice gorsuch and a candidate such as kavanagh, or is it almost a cookie-cutter, modern conservatism? >> to contrast to justice gorsuch and cavanaugh, there are

probably differences in the margins in the way they approach issues and the experience they have had. justice gorsuch set on the 10th court of appeals in denver, a circuit difference from justice kavanagh's court in d.c. ,n terms of legal thinking those are similar. professor at harvard captured this beautifully. chicago is a midwest voice. there is an american view that the supreme court is controlled by the elites of the east and a few selective liberals but got lost. how mid-continent will the supreme court become? how kansas-like will the supreme court be? >> i'm not sure it will be

terribly kansas-like. the potential nominees listed now, all of them regardless of current geography share an academic background and background in law that looks very similar and is fairly elite. professor feldman and others have pointed out this is not a court made up of byron whites, tony kennedys. this is an east coast court, regardless of who is nominated, even if that person sits now in the midwest. talk aboute politicians getting into power and changing a little bit and how they do things, trying to find more consensus or be more belligerent here it is it the same for -- belligerent. is it the same for justices? do they change in their beliefs? >> i don't know if they change immediately upon appointment to

the court, but we have seen changes while on the court. the court is a legal institution, but also a political institution. justices read the newspaper and know the issues of our time. as the balance of courts shift and members come and go, you do see changes among the remaining members. that happened when justice scalia join the court with justice o'connor. some say it happened after justice o'connor departed for justice kennedy. theould be we see with something we see with chief justice roberts, who now many say becomes the center of the court. that center will have moved slightly to the right if it is the chief justice who occupies that middle position. francine: what effect will this have on social issues facing the court? is there one social issue that will be in the limelight? >> there is discussion about

several social issues, abortion being the leading one, but it is not clear what effect a new justice will have. all of the justices on the short-lived come from the more conservative school of legal thought. that does not necessarily mean all abortion decisions are potentially overturned or reversed. there could be some narrow ring. we have seen that over the last 10-20 years, the narrowing of abortion opinions, even with kennedy at the center of the court. differences the between a 5-4 and a 6-3 court? 7-2, but what is the difference? andnternally at the court externally from a public in the court trust as an institution standpoint, there are certainly for us

externally watching the court, when you see a 6-3 or 7-2 and broad consensus on a controversial issue, that means it is a narrow opinion. for many people that is a comforting sign the court is being more incrementalist rather than taking broad steps. a replacement for kennedy changes the number of 5-4 decisions on this court. in the term just concluded, justice kennedy never joined the liberal justices to create that 5-4 we have seen previously. we could see a term that looks like this term in terms of how the vote stack up. tom: thank you for joining us today. all i want to know is what not to buy and the stock market?

we did not do much on markets this morning. there has to be something where you say i don't want to own that. where is your value trap? >> superhigh leverage companies. tom: with a lot of debt. are concerned around trade, policy, everything else, i think we can agree the macro backdrop in the u.s. is solid. companies with high levels of leverage and that will be more earnings challenge. tom: i don't want to comment specifically on it, but their care -- there are mountains of money looking for a warm place. >> i would say it's not just private equity, private debt, private credit. there seems to be an unlimited amount of capital flowing from the sources into companies on the private side and eventually

finding their ways into public markets, or at least starting valuations. that is a fair observation. what i would say is that when we are looking out public equity markets, quality balance sheets will have a strong bid. less so on the sector neutralize quality, meaning absolute quality is more important than quality relative to your peer group. i don't see investors changing their view on this. it is something we continue to recommend even if we have solid macro data. tom: we will continue on state of the markets. kate moore with blackrock. you have a meeting today and you don't know what to do. gtv . you come over here. somebody said you can't do that. i said you can. to can steal these charts

dazzle in a meeting. dow jones back to 1910. look at that chart. ex japan,o asia dxy look at that second derivative. it is a brutal move. it is a brutal gtv . ♪

francine: this is "bloomberg surveillance." the state blank chinese technology giant is said to be in talks to acquire a parts maker. the company could announce an agreement with the private equity firm as soon as the next couple of weeks. this is according to people

familiar with the matter. been discussing a potential valuation of 2.2 billion year old -- euros. a german manufacturer says the reduced forecast is in response to a slowdown in the automotive sector. the company cited restrictions on trade and said it is considering an organizational realignment of the group. francine: thank you so much. european union leaders will gather in brussels to tackle challenges facing the continent. i ahead of that summit, we spoke exclusively to the greek prime minister and started by asking him about leverage issues. >> the migration crisis is here to say. it is not a crisis we will overcome easily.

it has to do with some big ,auses behind it, war inequality, democratic and balance between third world countries and europe. we need to consider whether the crisis and other challenges faced by europe will be dealt with in a collective spirit. european challenges require european solutions, whether each country will do with them separately by buying fences, i support the former approach. it could not only make the problem bigger, but lead to the dissolution of the european union and the way in which we think when it comes to solving these problems. agreement ins an the coming migration summit which would ask greece to take some refugees back from germany, which you be open to that? >> this discussion in my opinion is not that important for greece.

there are no secondary migration flows from greece. if there are in the comedies are insignificant. for usders unfortunate have been unilaterally close since 2015. francine: that was the greek prime minister speaking exclusively with john mickelthwait. joining us on the ground is our bloomberg economy reporter and brussels. , immigration, brexit, banks. it seems the european union is firefighting. >> indeed. there are a few things going on in brussels. angela merkel under massive pressure due to an immigration crisis. trade, some breaking news. european officials are prepping for the worst. they don't get donald trump when it comes to global trade.

it's not a global trade war yet, but is starting to look like one. let's take a look. >> we are not fully in a trade war yet, but we are moving in that direction. we will see how it turns out between the u.s. and china. if donaldasked her trump decides to impose more trade restrictions, is the european union going to retaliate. she said they will have no choice. she said as early as july could be a possibility. european officials prepping for the worst when it comes to donald trump and his trade policy. francine: thank you so much. of blackrock staying with us. coming up from the aspen idea festival, bloomberg interviews at 7:00 p.m. london,

2:00 p.m. in new york. this is bloomberg. ♪ is is bloomberg. ♪

in: "bloomberg surveillance" london and new york. bloomberg radio here in a bit. right now, let's look at the financials. single best chart. i went for the drama. european stock index, deutsche moo doesn't talk about individual stocks. re deutsche bank down 70%. other financials are week as well, even in the u.s.. i have been constructive on financials for a while. tom: you are never coming back, right? >> of course i'm coming back. how could i not come back for you and francine.

the under performance of banks feels unjustified. big day today. we are expecting more capital return out of banks. that should lend some support. massives been this disconnect for good reason between u.s. banks and european banks, and both are critically important to brought indexes. for european banks was one of the reasons why we downgraded european equities earlier this year, basically saying without the ecb looking to raise policy rates and make things easier for them on the profit side, it would be difficult to deliver earnings growth and leadership. we seeing more consolidation in the banking space? do we need more consolidation? does that impact the u.s. banks? >> it will be interesting to watch what happens, not just high-level mergers and acquisitions, but acquisition of assets. we don't expect to see more big

bank mergers in the forecast. , what theyx cuts have done for the smaller banks may make some regional mergers more attractive. , this isomes to europe a real challenge. i've mentioned the large percentage of market cap is made up of the banks in the european indexes. our view is they are structurally impaired and have not done the work they need to to get to the level of profitability that makes them attractive, but we also don't have the policy and regulatory support underpinning our case for u.s. banks. this is a tale of two different sectors, despite being of the same name. change?: when does that does there need to be a catalyst for you to be constructive on european financials? >> we need to see some institutional-level changes and a greater fiscal union across

the european union for us to get constructive. we would have to get closer to that second half of 2019 when the ecb is thinking about moving policy rates. real animalee spirits. we were talking about this in terms of credit growth and investment. tom: i want to throw up one more chart. kate, on j.p. morgan and goldman not talk about fortress dimon or fortress bank fine dust blankfein. what does this say about a holistic larger bank versus a more narrow, authentic investment bank? it is a category discussion. >> i would suggest there is some information around expectations

on the consumer. some of those banks that have deposits and a huge amount of loyalty that is underpinning a lower deposit depositative to hire beta for the regionals is a real positive. we are seeing multiple different lines of income. in all of these cases, we are constructive on cash return. tom: thank you so much on j.p. morgan, goldman sachs, and the future of banking. please stay with us. we will be doing bloomberg radio , deciding who will lose, england or belgium. this is bloomberg. ♪ ♪

♪ alix: losing confidence,

european confidence at an eight-month low. the ecb says protectionism is a key risk to global growth. relief for emerging markets, the indian rupee hitting a low as rising oil prices. president is not retreating on china. it is the real world impact of trade battles. david: welcome to "bloomberg daybreak" on this thursday, june 28. this is a red letter day. alix steel is following soccer. alix: i totally surprised david this morning. i clicked on an article in the bloomberg. it was about soccer. david: it is quite a big deal. al