francine: europe closes its doors as eu leaders reach a deal to stem the flow of micro -- m icgrant -- migrants. they felt the friends -- effects of stress test. and ready for liftoff. elon musk's rocket is inspected to take off in the next hour. ♪ good morning, and welcome to "bloomberg surveillance." these are your markets.

this is what the stoxx 600 is doing. euro-dollar, definitely the most important currency move. euro on the back of that immigration deal pushed by the italian office. you can see it is currently at 1.1621. an ugly week for chinese stocks, but they are up. exactly what it means for debt restructuring we will go into. we are also getting breaking news from the bank of japan, saying they are planning to keep its current pace of bond buying in july. it is been a couple of years since we heard about targeting the yields and bond buying, so we keep an extra close eye on what they will do next. and latere talk fx on, the former greek finance minister joins us to talk about

the future of europe. make sure you send us your cut and hit the asked a guest a question function. william from citigroup gives us his economic forecast a little later. first, let's get straight to bloomberg first word news. >> the federal reserve stress forces six of wall street's top banks to rein in ambitious plans. but with overall payout still at record levels. u.s. lendersrgest said they will distribute billions of dollars through dividends and stock buybacks. deutsche bank's u.s. unit was the only one out of 18 domestic and foreign banks received an objection. hascompany responded it made significant investments to improve its planning capabilities, as well as controls and infrastructure.

in the u.s., police in maryland man is int -- white custody after a rampage at a newspaper office. for journalists and a member of staff were killed after a man armed entered the offices of the capital gazette in annapolis. targeted attack in which the gunmen look for his victim. bank has's central raised their benchmark interest rates by 50 basis points in a bid to halt a deepening slide in the currency. they reverse repurchase rates and have raised 50 basis points to 5.25%, more than the amount expected by economists. u.k. confidence took a turn for the worst, and businesses and consumers became more pessimistic. according to a report, business optimism dropped to the lowest level this year. the decline is driven by concerns of the strength of the economy, brexit, and increasing

global trade tensions. group,ounder of carlyle david rubenstein, says he sees a investment climates but no signs of an impending recession and no long-term trade war. >> i think the economy is in good shape. something unexpected could come along that could change. right now, a tariff war would not be wonderful. i do not think that will happen, and negotiations will resolve this. the cycle may be longer than anything we have seen since 2001. it might be the longest cycle ever of economic growth. it could go on for another three years. i have talked to a lot of leading economists and i can't find any of them who say we are going into a recession. dalio is planning to give more stock ownership as

they move towards the next phase. the partnership changes will give them a greater say in governance and management. in an exclusive interview, the bridgewater founder also gave his view of where deals are headed. say probably between and this is really an imprecise they. -- thing. interest rates rise, discounts relative to the curve already, the more assets have that as a negative. daylobal news, 24 hours a on tictoc in twitter, powered by 27 journalists and analysts in more than 120 countries. this is bloomberg. francine: thank you. italy's new prime minister has negotiated a package of measures at the eu summit to stem the flow of migrants into europe and

spread the burden. during talks in brussels that continued past 4:30 a.m., member states agreed to increase border security, set up holding centers, and to speed up the process. will this deal be enough to appease a merkel's critics? joining us now is a team of bloomberg reporters on the ground. what's do the eu leaders actually agree on on migration? >> good morning. it was a very long night here in brussels, very contentious, i should say. at one pointister saying he would veto the entire summits if he did not get a comprehensive migration deal. one, ismain points, that european leaders have agreed to set up migration control centers. they are not going it camps, but that is what it is.

migrants will be vetoed and screened, and those who qualify will be allowed, those who do not will be sent back. , ifndly, and kiefer italy any european nation feels it is being overwhelmed, other states are going to have to pitch in. again, the? .ill be how to implement it fromine: apart implementation, is this enough to save the german chancellor? . >> we probably will only see this on sunday or monday morning , but it makes it easier. at this stage, it is a lot about saving face. they really have to present something where they can go back andheir voters in bavaria say we have reached something. but we have to keep in mind they

did not get what they want. they want that germany is sending back asylum-seekers, and that has not been achieved. we do not know where it is heading. francine: final question, when do you think we will have the details of the implementation? the press conference was delayed and ultimately canceled, and that shows the tensions we saw play out. major tensions between the italian and spanish government. today, we think midday we will get more details. especially which countries are going to have to volunteer those migration centers. francine: thank you both. so what does the migration do actually mean and what is next for the euro? or --g us now is cosmetic

hans from morgan stanley. the euro went up on the back of this deal, but what does it mean? why did it go up? hans: it is a question of profitability. the markets were concerned about what would happen to the german government. now the probability that this will take a far more positive outcome has certainly increased. morning to phase in the euro outside, identifying levels. better toying it is use this euro advance to get on the other side of the trade, the short side. so reason why they would do is we have to identify what really are the medium-term drivers. euro is really driven by

political uncertainty, or is this euro driven by the outlook on global liquidity and volatility. that is precisely our viewpoint. how much is that's glued to liquidity factors, how much is monetary policy? a lot depends on what is happening in the u.s., particularly the yield curve. when we are talking about it is not about the central bank or united states in , or itative tightening is not that american banks are now much more resilient in increasing its broad money supply. which, by the way, is no longer growing as fast. many have not observed that. there is a third component. flat curve ina

one of the main funding currencies of this world, the u.s. dollar, obviously it reduces the incentives of banks in the united states as well as outside to convert shorter daughter -- dollar liabilities. that means you have less incentive to provide a long-term u.s. dollar loan. that is a liquidity contractor. francine: is the biggest concern for the ecb the cycle? that they do not start normalizing and then they are behind the curve? hans: they have to take a cautious view. qe is getting paper. we know that information, but they gave the information that thursday. they have no intention to hike rates anytime soon. late, very to be

certain, that they are going into the process. what we have seen recently on economic data. today, we got german resales. 2.1% down in a month, that means a lot. if you think about is that going to push the ecb forward or backward, it is pushing it backward. for somebodythat who is investing in the eurozone and who may consider to take a currency hedge, they may do that. they have more planning security because the ecb is going to sit on its hands for the time being. tot means they will pay you converge your possessions to lower the value risk outlet. ist could mean the euro going to get under some selling

pressure. 1.13nk maybe maybe on the shorter side. francine: thanks. stay with surveillance, plenty coming up. payday, americas for biggest banks say they were turned more than $110 billion to shareholders after the fed stress test. but not all lenders are allowed to do payouts. we bring you the details next. ♪

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

let's talk banking and tougher fed the stress tests. six of wall street banks are to rein in ambitious plans. but with overall payout still at record levels. the four largest u.s. lenders said they will distribute more than $110 billion. u.s. unithe bank's was the only one of 18 domestic and foreign banks received an objection. it company responded that has made significant investment to improve its capitals planning capabilities as well as control and infrastructure. joining us now are our guests. still with us is hans redeker. , alsog about unit credits

getting rid of the property assets. thinking about those european banks, that clean up is what we have been waiting for. with the credit, their target for the year is 4 billion euros. that is a low target. three and have bill young, there they're alsocome looking to get down from 45 billion to 24 billion and the end of 2021. again, we think it is further proof they will bp starts. the market is getting better. so the ability to sell and the prices you are getting should be positive. with kaiser bank, same thing. -- caixabank. are they going to

merge with this bank or the other or is it a success story? it is one of the few where you could almost see some merit. but we are years away. what it does is give you confidence in capital. better visibility on the underlying earnings. they're also going to remove a big chunk of costs. francine: talk to me about the stress test in the u.s.. first of all, deutsche bank is still negative. >> as expected. you have a bank with a lot of different managers, has restructured, no surprises. anything, this is probably short covering. does the solve their problems? absolutely not. but they needed to pay out a 30% dividend, no. so i think this is a another catalyst out of the way. would you want a shorter here necessarily?

francine: what is your take on financials overall? it is also a monetary policy story. >> a couple general points. first, it is clear the banks are no longer problems. they will no longer be the source of the next crisis. u.s. banks look quite cheap to 10 year bond yields. other general point around the stress test is that it is very clear that a lot of this tax cut is going into buybacks as opposed to the economy. so i think there are some negatives in terms of risk to the global economy, not just in the u.s. banking system, but other sectors. make of: what would you a significant difference between the german banks, french banks, u.s. banks, french banks? it is a different story than what we see on wall street. james: european banks are

further behind in did -- in lots of different ways. european banks don't look that far off from where they are supposed to be. u.s. banks look cheap. i think differentiation matters. i know you caps off specifically about banks, but the read is that volatility could significantly help some of the banks, right? if we have the good kind of volatility back. hans: some volatility may be good, but super volatility will always be that. --bad. you have to think about the implications. when we are talking about this, we have to put things in perspective of where we are in the economic cycle.

we are in late cycle. environment, i think to be cautious on matters, especially risk, is more than warranted. it makes it very clear that -autuminto this awesome- could find us in a challenging situation. we are in an environment of d correlation. --decorrelation. volatility going up and down. in late cycle environments, this is always a results of liquidities starting to shrink. basically, you can no longer cover everything, and that is a precursor for a volatility event. francine: thanks to all of you.

let's get to our top corporate stories. has raised $7 billion in its hong kong ipo. the beijing-based smartphone maker price shares at 17 hong kong dollars each, actually at the lower end. separate sources say billionaire george soros is amongst investors that place the orders. joining us from tokyo is bloomberg's asia technology managing editor. first of all, how does this match expectations we had? well, this was a bit of a rough offering for xiaomi. they are very popular within china and had high hopes of being able to reach greater heights, both with evaluation and the amount of money it raised. sources told us they were ofgeting a valuation

billions, and ended up getting about half that valuation, only 54 billion and raising less than $5 billion. it was disappointing for a number of reasons. the markets are certainly rocky right now, trade tensions have been challenging. some speculated they might just pull the offer altogether. also, they wanted to raise some money out of the mainland market through these china depository receipts. out, probablyork because regulations are compensated. -- complicated. the fundamental reason is that they never persuaded investors that they are more than a smart phone company. they tried to make the case that they are not just about the hardware, that they have a good e-commerce business and an internet advertising business, and that sales pitch has not got over that well. francine: what does it tell us

about the next chinese tech ipo? there is certainly some caution for the other chinese tech companies looking to go public. we have had a bunch already, and a bunch more lighting up. is a food delivery and recommendation service. again, very popular in china. they are planning on going out and raising money. they are looking for a valuation of around $60 billion. and there are a bunch of other countries that would like to go public. these markets are challenging. trade tensions have certainly made it more difficult. francine: thanks, peter. let's focus it on china and the tech sector. still with us hans and jim. at the know if you look

asian technology space, but does it look attractive? james: i don't look at it that much. what i would say in general is equities,s global it's not as though valuations have mattered much for investors. cap looks expensive across dimensions, but it still goes up. european stocks look relatively cheap. it is difficult to call on a valuation business. francine: what does it mean, hans? we talked a lot about chinese selloff, do they have a good handle? is it devaluation or the market structure? we have to think about what time the day we saw the ribbon on the selling pressures. looking at the time zones, you can find the selling pressure occurs during u.s. trading hours. particular, there have been

significant inflows into china. when you look at the bond markets, it has received an increase flow of about 67%. there was about 500 and $80 billion of rim and be going in -- yuan going in. that was a turning point. on wednesday, we saw it going the other way. that came with them easing monetary conditions. on china we talk more and emerging markets and will be back with our guests. this is bloomberg. ♪ two, down, back up!

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which could save you $400 or more a year. it's a new kind of network designed to save you money. click, call, or visit a store today. francine: economics, finance, and politics. this is "bloomberg surveillance." let's check in on what is trending across the bloomberg universe. elon musk space x will launch

its 15th resupply mission to the iss. it will set off from florida in around one hour from now. the minneapolis fed president invited bloomberg over for a barbecue. seasoning, state, and yes, monetary policy. head to bloomberg.com. and are most read stories on the bloomberg terminal. in third place, analysts expect china to defend their currency if it falls. in second place, deutsche bank failed their first stress test of their combined u.s. business. and the eu has negotiated a package of measures to stem the flow of migrants. we are also getting gdp figures out of the u.k. for the first quarter. there is actually no change here on year. looking at quarter on quarter, they revised it. a little better than expected.

, better than the 0.1% that we were expecting. looking at gdp, this is the final reading, but is sentiment stagnating? or because we do not have a clue of what kind of relationship the u.k. will have with the eu, sentiment will deteriorate. hans: it is a reason of concern. we are getting in these few when it comes to investment, they are not planning security. that implies investment continues to be week. --weak. before that, it is difficult to trade sterling to the upside. this currency is at a low valuation. to provide you with

good opportunity once we see clear out of the deal. and the quality of the deal is going to decide how much sterling could increase. i would not be surprised if it would sit here in a years time. about 150. talk --1.50. is next to impossible if we have a hard brexit. a soft brexit, it looks relatively cheap. in my mind, the next few months is all about volatility. sitting at close lows with some of the highest uncertainty we have seen in years. a little more on the u.k. and the emerging markets. first, let's get straight to bloomberg first word news. italy's new prime minister has negotiated a package of measures at the eu summit to

stem the flow of migrants into europe and to spread the burden. during talks in brussels that -- beyond 4:30e agreedember states a -- to increase security and speed up the processing of applicants. they also agreed to a key italian demand to overhaul rules for stripping migrants when a gateway country is overwhelmed. after the discussion, president macron of france said that european corporations had one. -- won. after nine hours of talks and work, a deal has been reached and is good news for friends. it is the fruit of hard work and european cooperation instead of a deal that would have been neither efficient nor lasting. the federal reserve stress test forced six of wall street's top banks to rein in ambitious plans.

but, with overall payout still at record levels. the fourth largest lenders said they would distribute more than $110 billion through dividends and stock buybacks. onlyche bank's units was one of 18 domestic and foreign banks to receive an objection. the company responded that it has made significant investment to improve its capabilities as well as controls and infrastructure. the u.s., police in maryland say a white man in his late 30's is in custody after a rampage at a newspaper office. for journalists and a another member of staff was killed after a man with a shotgun and the offices in in -- in annapolis. they called it a targeted attack. day innews, 24 hours a more than 120 countries. this is bloomberg. francine: thanks, marcus.

the u.s. 10 year yield is rising for a second session as the eu deal on migration dampens haven demands. we talked with ray dalio in an explicit interview, and he gave us his view on the path ahead. i would say probably between 3.5 and four. but this is an imprecise thing. rise,re interest rates discounts relative to the curve already. the more assets have that as a negative thing. so, is he right, and what is next for treasuries? hans, first of all, where is yield going from here? we think volatility is

going up and markets will have it difficult. we believe financial conditions will tighten globally. think we need yield moderation against a consensus yield. so a slow drift lower. james: i am on the other side. this is a year where we find out how high a yields the global markets can take. my guess is it's higher. if anything, the pressures on u.s. yields are going to get more acute. the fed winds down is picking up. i think we are still moving higher on u.s. yields. francine: is there a psychological point? where the yield level hurts the rest of the markets. to see that from a 10 year

yield level, i would be careful. i believe the predictive force of the yield curve is much better in this sense. the fact this curve -- the flatter it becomes, the more you find in the credit multiplier. read think that it yields,bout u.s. bond but about the interpretation of the growth potential of the u.s. economy. if you think that potential goes up, you will have yields going up. says that is a probability of less than 20%. francine: do you agree? if you look at the year, bondep getting periods of yields that create pressure elsewhere.

it happened in april and may, emerging markets went down. about thish hans late cycle environment, u.s. yields will get pushed up and keep causing problems elsewhere. we will finding what the pressure point happens to be. got anotherk we've 25-50 basis points before we caused a real stress. francine: let me bring you over to brussels where the commissioner in charge of negotiating brexit is talking to reporters. i know in brussels you have a million reporters trying to get to newsmakers. i think speaking in english. , theu.k. red lines autonomy and decision-making of the eu, and respect of the

fundamental rights of eu citizens. now, we are waiting for the u.k. white paper. i hope it will contain a workable, realistic proposition. but we have to mention once again that time is short. we once a deal. deal.t a we invite the u.k. to come back to brussels next monday. [indiscernible] >> no. thank you. that was barnier

speaking, and one of the few times i have heard him speak english. maybe part of a negotiation tactic. he is saying progress has been made on brexit, the commissioner also saying there has been a huge divergence over the irish border issue. want an ambitious post-brexit partnership and that time is short for talks. let's get back to our guests. mean that the eu is now thinking of a possible partnership post-brexit? is it in the interest of the eu to delay? then they have their back to the corner. hans: i think a deal is in the interest of both sides. i think the irish border is having a significant impact on the negotiation position of the u.k.. i am actually quite constructive.

i think they are trying to build bridges into the u.k.. , that is a significant challenge for mrs. may. she has to make sure the majority of her party, which stands on the brexit side, that's those people can accept this type of deal. increase potential within the party, and what you have to consider whether you react to that in a foreign exchange market. we see currently that sterling is pressing higher. i think it is not yet time to buy. francine: what is your take on how it will pan out? james: how it pans out is a difficult one. from my perspective, what investors need to understand is the next six months is the key window.

and the probability of extreme outcomes are going up. we have seen would lead us toward something more positive. we are positive on sterling, directionally. but it would not say that is a strong view. where we are most confident is that investors need to reengage with the u.s. political, u.k. political situation. and realize it is a volatile. . -- volatile period. francine: thanks. up next, we look at trade tensions and what the yuan weakness is doing. this is bloomberg. ♪

francine: this is "bloomberg surveillance." let's bring you up-to-date with brussels. from theeard commissioner as he was in writing for a second day of meetings. i don't know if we had a couple pictures. i believe we are waiting for alexis tsipras arriving any second. reporters are all in position. let's get back to the emerging markets. china's offshore u.n. higher today.-- yuan higher is the turkishrs lira, showing signs of a turnaround after being one of the worst hit current during the first five months of the year. , evenro is clawing back

as broader selloff continues. what is next for e.m. fx? you make a difference between the ones linked to oil or a difference between the ones that have more debt denominated in dollars? hans: most important thing is dollars in books. what we need to think about is asset quality. what we have is emerging markets balance sheets did improve of the last two years. they are not comparable to the balance sheet in 2013. they offer significant vulnerability. at that timeeficit was 2.5%, now it is 0.8%. but it did not prevent the decline. means that just looking at this from an angle of balance

sheet quality is not sufficient. you have to put it into the context of what is happening to global liquidity. i am repeating myself. it is about the global liquidity engle, which will be decisive when going into the markets. to theu come with us conclusion that liquidity will you have tomeans look into what is the position in emerging markets? yesterday. exercise at morgan stanley affects. -- fx. is thoseame up with markets which started in january 2016 into this year. we looked into the aggregates of the inflow and saw how much had been liquidated.

what you see is very little has happened on the bond side. we see liquidation of about 30% on the equity side. but that has left many portfolios being along that stock. and when you have a liquidity issue emerging, you are producing where you think credit risk is the biggest. and you do not ask the question does this risk improve or not? you put that risk in perspective with other risks globally. and there, emerging markets are still offering significant -- francine: give me a parent -- p airing. hans: first, argentina, turkey, brazil. we went from market to market and did not see it. now we have korea coming under pressure, india coming under pressure. you reported that indonesia was

hiking interest rates. that is in response to the exchange rate. you see the exchange rate at risk of breaking a high which has been traded a few years ago. i think there, central-bank sensitivity is well emphasized. you have process of gold central-bank policy. mr. patel from the reserve bank of india has been right saying there is a lot of liquidity withdrawal coming from the united states. and the central banks quantitative tightening approach, which currently, takes 160 billion out of the market. and at the end of the year, will approach 600 billion. the nextan impact, but

question is what is the mandate of the central bank? global or local? under have only seen it exceptional circumstances that they were looking more at this approach. francine: this is your chart. last time he briefed me for why the germans were a rubbish team, you're probably right. this is the currency chart. do you like that chart? as we talked about before, when you have a team in the first game, you could see that. in many cases, there was slowness in the game. getting yellow cards, basically you are hitting somebody else. a sign that you are slow. and an old team is slower than a young team. i think that germany has to rebuild. on this: but quickly,

chart, looking at the argentine peso, the brazilian rail, the japanese yen, what is going to go on top? if you have a negative view, if you look into korea, indonesia, india, that is where we are currently positioned on the negative side. i'm those currencies which have been coming under selling pressure, this is a relief time. francine: one team that did not even make it, of course, my italian team. the italians arriving as we speak. i have to say, it was quite a win at home for the prime minister. the rookie prime minister negotiating a package of measures at his first eu summit that would stem the flow of migrants into the block and spread the burden of handling those who do arrive. this is what happened.

they come in through the main red carpet, go around, and takes a couple minutes to arrive to the reporters. so we will stay on that shot to see if he does speak to our reporters. i'm not sure he speaks english, so maybe he will speak italian, but we will get you a translation. is is a win, hans, for the new prime minister? is this a personal win for the start of his premiership? hans: i think so. but i believe they had no other alternative to the agreements. there is so much internal that is what will happen when you start to have border controls. it is much better to control the outside and to do it rigorously. otherwise, you can have a significant negative impact on the project. and nobody would like to see is.

therefore, it is positive. francine: wouldn't lots of politicians like to see that? they would rather have political stability and stave off some of the populist parties at the risk of jeopardizing? you need to look into the interests of communities. when a populist government, they are always trying to keep things getting populist support at the next election. that is a bit far-fetched. i do not believe in the sense of the stabilizing. have a look ahead at the next 4-5 years, you could see europe is doing a big leap forward in the integration process. but you also need stable borders , and the free flow of people and goods inside the borders. francine: thanks so much.

in around one hour, space x will launch its 15th resupply mission to the international space station. packed with research equipment, supplies, and hardware. it will set off from florida. joining us now is bloomberg's opinions alex webb who covers tech. he is in paris today. see?are you expecting to alex: well, hopefully it works. there have been a number of years where spacex has had to cancel takeoffs for a number of reasons. they are working for a stage with a can get people on the planes. right now, they are supplying things like t-shirts. the aim next year is to put people in these rockets. francine: does it actually help? if this is a success, does it help how analysts view the country? alex: yes, i am sure.

at the moment, it is still a private company. athas raised money recently, a valuation which makes it the third most valuable private company in the u.s.. the key is being able to demonstrate that they can reuse components in this launch. in previousen used lodges, and that is the technology underpinning the whole economic. rather than parts just burning up. francine: how is this funded? is it like other companies? alex: in many ways, it is a classic startup. nasa is of course paying for this. a quite big chunk of change nasa gives space x for these projects. you one last helmed

affairs, there is pushing the limits of what you can do with that funding. they are already talking about , which you should google, it might not be safe for work. but even that is not fully approved for human use. pushing the boundaries is the way elon works. francine: thanks for that. bloomberg surveillance continues in the next hour. tom keene joins the in new york, we will be talking with the former greek finance minister. this is bloomberg. ♪ retail.

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populists to stem the flow of migrants into the bloc, cement the euro higher. -- sending the euro higher. and ready for liftoff, elon musk falcon rocket is set to take off this hour. this is "bloomberg surveillance ." we are just getting a little bit of banking news saying prosecutors in germany are now stepping up their investigation at manyeds of bankers of the biggest names in finance, including barclays, goldman sachs, and bank of america, for which is abating in a tax refund scheme that costs treasury more -- for billion euros participating in a tax refund scheme that cost the german

treasury more than 10 billion euros. tom: busy newsday. most is that focus will be on deutsche bank. we will touch on that today. equities, bonds, currencies, commodities. bitcoin under 6000. upures up 15, dow futures 164. summert that friday feel, but there are some nuances in foreign exchange. francine: there's a little bit of talk from the brexit commissioner on behalf of the eu. what i was interested in is he is saying a little bit of that he is seeing a little bit of progress -- he is saying there's a little bit of progress. stocks rising on the back of an ecb report.

tom, let's get to our top story. rookie prime minister has negotiated a package of measures aimed to stem the flow of migrants into europe. leaders are currently meeting in brussels, securing a migration package. basically, there's a fault line in europe wanting to secure something on migration. there's a new prime minister, and he pushed really hard for the rest of europe to come up with a package. we still don't know a lot of the details or how they will implement it. it is also and angela merkel's interest to find a conference of solution. let's get straight to our reporters on the ground in brussels to talk more about the and the leader summit very latest on what this means for angela merkel and her coalition.

maria, they had a deal. it was a 4:00 a.m., but they have a deal on migration. >> to have a deal on migration. it was -- they have a deal on migration. it was a very nasty night in brussels. at one point the italian prime minister basically said i can put down the entire summit if i do not get a deal that is good enough for italy. they have agreed to create migrant control standards. essentially that is what it is. a crucial point in this deal, if a country feels it is overwhelmed by the flow of migrants, the other nations are going to have to step in and distribute the migrant quota. francine: tony, what does this mean for angela merkel?

does she live on as chancellor? is,he short answer to that of course, it is a bit early to tell. move is up toxt this bavarian faction in her government that has been putting on all of the pressure about migration. they've really talked this up. merkel obviously went to the summit with that in mind. is this deal enough to satisfy that bavarian party, the csu? that is something that that party itself will decide over the weekend. they set a meeting for sunday which will probably go for quite a while because they ultimately have to hash out is this enough, or do we want to push this further and put merkel's government at risk. tom: in your decades of experience, the key dynamic here is the flow in europe.

what is the presumed flow of migrants and refugees into europe in the coming few years? tony: this is something that is on everybody's mind. i think that is fair to say, perspective,lin's angela merkel. is hugefact that there migration pressure from africa. this is the way that it is seen by, it is fair to say, all european union governments. it is just a fact they have to deal with, and that is what makes this so in tract of best so -- so intractable. it is a balance between laws,tarianism, asylum and your voters who you also have to keep in mind in a big way. francine: thank you so much, our reporters on the ground.

joining us now is jordan and the former greek finance minister from athens. thank you for joining us. what do you make of this migration deal? >> it is no deal, really. difficultother european fudge. on -- there's been no agreement on the substance. they gathered to discuss two issues. one is the rule that says the country that receives an asylum must dealmigrant, with this person internally. therefore a rule which was never thegned to cope with

massive migration flows we experienced in 2015. that was meant to be discussed with a view of reforming it. the second question, the one that angela merkel was desperate to resolve, the question of what they call secondary migration. the bavarian part of the german , and even demanding putting in jeopardy the german government, with chancellor merkel. francine: fudge or no fudge, they have a deal. that puts the european project in a better place than it was two weeks ago. is that fair? >> no it doesn't. a deal that actually addresses the problems that they gathered to resolve would indeed have improved the prospects of the european union project, but a deal which is only a deal in name, but not in substance, and does not deal with these two

issues threatening the very existence of the german government, not having a deal on that is not putting things on a better pedestal. let the say that the one thing the agreed-upon is absolutely despicable. they agreed to subcontract the libyam to country's like and regimes like turkey. it is like treating human beings, refugees, as pawns liking human rights and returning them were actually paying the traffickers, effectively, in order to haul them in what is nothing more than glorified concentration failure of thee european union, to agree to a policy of settling these refugees, those who do manage to get status of refugees, with the european union. it is a complete failure of the european union which is packaged as a success. tom: wonderful to have you back

on again. you were a minister of finance of greece. what do you do when they show up on your shores, on the many islands of greece? i want to know operationally, what do you do when refugees and migrants show up on the greek shores? sure that they are picked out of the water and don't drown, you tend to their wounds, you give them warm clothing, you feed them. that they are safe, that you deal with severe physical and psychological injuries, and then you turn to your european partners and say if we are going to have a european union, how about dealing with this not as a bos, but ofles the european union?

there is no refugee crisis in europe. there is a european union crisis. we don't really have a european union that deal with their problems collectively and in solitary. your project syndicate essay, which i read very carefully this morning. emails exactly what i thought the other day. greece's predators have been practicing this extend and pretend strategy as though they were training for an olympic event. instead of a courageous and therapeutic haircut, or the moderate gdp indexing solution, the euro group's recent decision boiled down to the apotheosis of this cynical practice." i thought the same thing. i was stunned there was no haircut on this debt workout.

would you explain why there is no haircut like there was in south america and every other national debt workout i've ever seen? yanis: before i answer your question, let a point out it is not just you and i agreeing. there is also the international monetary fund that has not signed up, which continues to raise issues about stability. imf is the-- the only international group that is capable of doing this type of analysis. they don't want to have anything to do with it. coming to your question, it is just purely political. germany headed by chancellor merkel since 2010 has said to be members of parliament areerlin that these loans

loans for the government, and they are going to repaid fully and with interest in the long-term. not the caset was because the greek state was bankrupt, and no bankruptcy can be overcome through more loans, especially when the loans, tact -- especially when the -- as youact with know, no politicians like to go back to parliament and admit they lied to parliament, especially when the fed -- the said politician is angela merkel , who happens to be at her weakest position in the history of her tenure. it is just desperately hanging on for dear life. francine: we are just listening to the president of france, emmanuel macron, stopped by .eporters the president decided to give a couple of words to reporters

waiting for him. is one of the first times i've heard the commissioners speak in english. we are monitoring everything that comes out of the president of france speaking to reporters right now. i have a viewer question saying aroufakis if the markets, the stock market and the bank are better after the 2015 negotiation. yanis: the only reason they have passed those stress test is because the criteria have been lowered significantly. three of the four banks would have failed them. look, no banking system can be declared solvent when more than 50% of its loan book is interest taylor: they are nonverbal -- is

interest. they are nonperforming loans. amount of nonperforming loans due to the economic depression of this country can be overcome through sending to 8%,ous funds those loans at 9% of face value and forcing auctions in a real estate market . any such proposition is going to fail the basic criteria of this isense, and indeed part of the same fudge, the same extending and pretending that the greek state is not bankrupt, that the greek banks have passed the stress test, pretending that an economy in a state of permanent depression can come through gigantic .urpluses in the budget that is a crime against logic. let's end this.

let's stop pretending the crisis has been overcome just because we've declared it finished. varoufakis, our spoke-in-chief extensively the other day with -- you have a real understanding of domestic greece. tell me where the business elites fit into greece over the next five to 10 years. can the business elites work within the fractious domestic politics of greece? yanis: there's a very sharp division amongst greek business. there are businesses trying to do their best which are struggling to survive, and they are doing a splendid job in an environment which is very hostile to them. terrible bureaucracy, but of course the tax regime.

you have 29% corporate tax in greece. also you have an obligation to prepay next year's corporate in anis year environment where the banks are not even lending to someone. there are some heroes within this business community who are managing to continue functioning along the lines of the private sector created. then there are other businesses that have been bankrupt for a long time of a part of the oligarchy. by the toxic alive loans, and i am afraid that this , insolvent,nkrupt malignant part of the banking community in greece is making it very hard for the heroes amongst the business community to excel. tom: i've got one more question, the most important of the day. we at "bloomberg surveillance" will have a surveillance wedding

in greece next year. which island in greece would you get married on? is: well i did get married on an island, which is actually where i am going in a couple of hours, and i can't wait. it is a very tourist island. i would suggest you would do it in center reading -- in santorini. it is much more bloomberg. [laughter] varoufakis, the former greek finance minister. francine: we have jordan rochester, and also the president of france, emmanuel macron, still speaking to reporters about the immigration deal and saying how much of a success this is for europe. and continuing to try to listen to the president. jordan, let the bring you and talk about euro strength. when we had that deal, euro actually rose. will it stay there? jordan: in the long run, euro

should be heading higher. the structural story is the euro should head higher. in the short-term, though, it is all about what is going on in china right now, impacting the global growth outlook. in the u.s. you've got massive expansion due to fiscal stimulus. what is strange is 4% q1 q great for q2 in the u.s. the big question is when is the next recession because most people have said it his inner lung expansion and we see what haspens globally -- said it is a very long expansion, and we see what has happened globally. things are slowing down. how is that going to impact europe? there are these darker clouds coming into the picture. i think this is sort of

necessary in europe. we've got the inflation data to consider, of course, but the strong forward guidance from the ecb not raising rates until after the summer of next year means there should be very small market reaction. you need to have big growth data towards the end of this year. francine: overall, if you are the european central bank at the end of the cycle, you are not ready to normalizing the fed is normalizing. should they worry a little more about a possible downturn in the u.s. and the ecb being behind the curve? jordan: at the moment, no. they are going to look at the more recent growth data in the u.s. and say it is great. surveys are still saying that u.s. growth is going to be really good. central bankers are looking far ahead. they should be more worried about what is going on there than what is happening in the u.s. tom: because we are at the end

30, i second half, june would like you to look at how fx performs in the business of making money. was it easy to make out the in the first months of 2018? jordan: it was very difficult, tom. we start to see these tremors popping up. it feels very late cycle. we've had a very long cycle of growth since the financial crisis. it feels very light cycle with all these spikes in italy, germany, now china. this is an environment where growth is ok to an extent, but if you get in a position like , or italy,ke we saw and you are in a crowded trade, it can be very difficult. francine: thank you, jordan rochester of nomura.

bridgewater cochairmen and co-chief spoke with bloomberg yesterday at the aspen ideas festival on creating a partnership at bridgewater. >> what we want to do is formalize a partnership structure so that there's actual rules about partnership, a designated group. we wanted to formalize that because we are going from a company where i led the company in our democratic way, and now we are going to something that needs broader and more formalized partnership. it would be like if you are going to have the kinsey as a partnership. reporter: once upon a time they were a partnership. >> it is a good example because when they have a partnership, they still have to maintain that way of being, and yet they are a public company. we are not a public company, never. of creating an

structure so that there is a that plays structure a role in needs to have some greater formalization of us about us why we are excited about it. reporter: how will that work? >> we in the process of figuring out how it works, but the way it is mostly, there's been a group of designated preliminary partners. partners and 50 other partners. reporter: these are the senior people at the firm? >> generally speaking. people who have been there a certain number of years come all the things you would think would represent partnership in terms of decision-making capabilities and the like. all have, me and established that group. they have to decide how it is going to work. we are not part of it so that we have total freedom. there is a board. we will have board

representation because they are the owners, just like that goldman, and a sense. reporter: these partners will have equity in the firm. >> a lot of them already do, but they will continue to have more equity in the firm. and then they will have their board representations on the board. evaluate --s will they will evaluate the ceos. that is how it is going to work. reporter: david and eileen. >> david and eileen. will operate by the partners, who then report, and then that is a board that is representing the owners as there is a transition. reporter: over what period of time? >> we've done most of the transition in terms of equity , so ie like, a lot of it think that probably over the next three years or so we are going to do a lot more.

but most of it has been done, and we need to just formalize their decision-making capabilities. out in the wild of the west, a conversation there on shop.ture of mr. dalio's a difficult and challenging thing, that future-ness of a hedge fund. we are speaking with jordan rochester of nomura on the future of the u.s. dollar. can you find trends right now? i mean, you need a trend to make big money, big figure moves. can you do that right now? jordan: trend following makes money, tom. we've seen oil rise quite substantial this year. that was one of these president 2018 so far that has led to emerging-market week this -- emerging-market -- that was one far,e surprises of 2018 so

that has led to emerging-market weakness. right now with the sort of trade war rhetoric, is very difficult. we've got july 6 coming up, and nafta talks on hold until we get mexican elections this weekend. tom: one of the things we learned this weekend, a lot of people are betting on big figure move weakness. for example, in yen with a stronger dollar. there is simply that collegial that on a stronger dollar. can you get on that trend? jordan: no, opposite. it is one of our key positions in terms of the dollar-yen. we are looking for 100. tom: wow. jordan: we've been at it for a while now, over a year-and-a-half. we've been sort of anti-consensus on that view. francine: thank you so much,

jordan rochester of nomura. he will be staying with us. coming up, the former has extend central bank governor will be talking emerging markets and some of the fed normalization and what it means for dollar. that interview coming up at 6:30 a.m. in new york, 11:30 a.m. in london. this is what your markets are doing. , looking at at wti a little bit of euro strength. we are talking about the migration deal. time is short for a brexit deal, but they've made progress. this is bloomberg.

♪ francine: good morning, everyone. "bloomberg surveillance

." spacex will launch a mission to the international space station from cape canaveral, florida if you minutes from now. you must watch for the weekend, minneapolis' fed president invited bloomberg over for a barbecue. yes, they are grilling steaks. they talk steaks, seasoning, but also monetary policy. you can head to bloomberg.com to watch that interview. on the bloomberg over the past in second place, deutsche bank failed the first stress test of its combined u.s. business. italy negotiating that package of measures to stem the flow of migrants into the bloc. u.s. unit wass the only lender out of 18 to fail the fed stress test. senior analyst for

eu banks is joining us. banke looking at kosher gaining 6%, unicredit sold off some of the ugly stuff for 3.5 billion. does it feel better for eu banks overall? atorter: if you look confidence will, it is difficult to get a sense. we've been waiting for spain and italy. for one of the larger, the number two domestic bank, this is a great transaction. it is 15 basis points of capital. it removes a big chunk of costs, the same day you've got into credit proving it is going to beat its targets. it is good to see the secondary market is clearly working. the ability of the banks that have been sitting there for years and years to actually address the bigger problems is what is listing the sector. francine: unicredit seems very

big because you were suggesting some of the target could be better than expected, that they will reach them quicker and can do more. does that also give impetus to merge with someone else? reporter: certainly at some point with may see a few transactions. we discussed this numerous times. together,t the banks but we are still a ways away from that. they are going to be targets every year. we are quite comfortable with that. but there's still 23 billion to sell down or have come through recoveries before they get to a target of 24 billion in 2021, so it is a while. francine: i'm sure tom has a deutsche bank chart. before that, the stress test in the u.s., besides deutsche bank, were there any other surprises? reporter: a few of the banks

haven't been through this before, and we seen a lot of european banks with u.s. subsidiaries falling. they are not quite doing what this said need them to do. i don't think the goldman-morgan stanley stuff is really a surprise. we know part of that is due to the impact of the tax changes and the hit they took full-year. net, i think everything else is in line. tom: here's one of my favorite paribas,pmorgan, bnp and the other guys we have been talking about. blue, bnp in. green we do explain the profit -- bnp in green. would you explain the profitability of the operation they are running, and is it worth it to the european deutsche bank people? is new york really worth it to them? reporter: the bit of the u.s. bank that was stress tested is

about 30% of their u.s. banking spaces taylor: -- banking spaces. we know that all of the market risk is part of the business they are looking to run down, rates, etc. we can't compete. we are going to retrench. they took a new strategy. will they pull out of the u.s.? absolutely not. they have a lot of other services -- a lot of other banks they service from. i guess i would agree with that from a distance here. what is the urgency of deutsche bank to turn things around? eight year low handle on deutsche bank today. what is the timeline to turn this around on june 30, 2018? reporter: part of the problem they've had is revenue they had absolutely no idea about.

, 2 billion.range nobody has a handle at all on that. the ability to forecast revenues within many of hundreds of millions, they don't have that either. the first thing this got to do is get a handle on cost. that will be more pain, unfortunately. that will take six to 12 months. the stock was at multiyear lows, and my that would be this is short recovery on a day when it looks quite attractive because the other banks are beginning to address their long-standing problems. cost is the most important thing. the vix was expected. doesn't make it great for the story. and tightening that consensus range, do you have any idea that range is? francine: are there any banks

that we don't understand what they want to become? they are cutting costs, trying to get healthier, but you don't see it in the space in the economy with current retailers? italians reporter: the -- reporter: the italians are the outsider still. cheap, but is very that is because of a lack of momentum at the moment. is it now time to step in? you know which banks they are going to be looking at. it is hard to get a look at the key level, which is revenues. tom: appreciate it. wonderful briefing on deutsche bank with the new york stress test and their european future as well. right now our first word news in london. reporter: in the u.s., police in maryland say a white man in his late 30's is in custody after a rampage at a newspaper office.

four journalists and another member of staff were killed after the man entered the offices of "the capital gazette" in maryland. u.k. prime minister theresa may could accuse the european union of putting the safety of its 500 million citizens at risk by blocking a brexit deal on security. in brussels yesterday, may said that britain was to play a major role in european security after it leaves the bloc. may: we want a deal that is going to work for the u.k. and our european partners. if we work together, we can support each other's prosperity and security. we are going to be publishing our white paper shortly, and i want to see negotiating accelerating and intensifying thereafter. reporter: indonesia's central

bank has raised its basis point by 50, more than the 25 expected by economists. the cofounder of carlisle david rubenstein says he sees no signs of an impending recession and no long-term trade war. something unexpected could come along. i think there will be negotiations that ultimately will resolve this, at least that is my hope. right now this cycle may be longer than anything we've seen really since 2001. we might be at the longest cycle ever of economic growth. it could go on for another year or two or three. i can't find a economists who say we are going into a recession in 2018 or 2019. they just don't see that. reporter: global news 24 hours a day, on air and at tictoc on

twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm sebastian salek. this is bloomberg. francine: this is what you should do in the next couple of minutes. stay with us, and we will together at the spacex falcon nine rocket that will blast off from cape canaveral in florida, carrying some 5900 pounds of supplies including a droid, some coffee to the international space station. this is significant in multiple ways. first of all, this will be the last ride of the moderate really old -- the moderately reusable model really reuse some of the parts, and this will be significant for spacex in the future. tom: think about the time of day. they have been sold in florida to get out of bed and watch this. they have the sun coming up, and that the elevation the rocket

will be at, you are going to get the arc of light from the sun. why are they doing this? because of the time of year were they avoid the famous florida thunderstorms. this is all about the weather. get up early and get this thing done before those acclaimed florida clouds come in. this is really going to be from a view standpoint something unique. francine: it is, and for a business this is basically elon musk wanting to reduce the cost of spaceflight by making more parts of the rocket reusable, and i understand with a quick turnaround. let's get to the tech expert, bloomberg's matthew block of. we love watching this, but this is also white significant in the business progression of spacex. a changeit is quite because this is the last time they will be using the block four booster rockets.

going forward they would use the block five boosters, which have to launch and then launch again with a 24-hour -- again within a 24-hour period. francine: i'm no expert, but i do love that some of these rockets will be reusable of to , certain components of these rockets. they will have a refurbishment time of 24 hours. how far are we away from that possibly happening? matthew: the ambition for that is to be quite a bit of progress for 2018. the 10 times reusable is actually without any refu rb.

they put more fuel in and they can launch it again. are essentially recyclable assets, and they will be pushing to get to that point. but i can't actually launch one, land it, send it back in space within 24 hours. i think it would like to do that before the end of this year. tom: if you are joining us worldwide, we are looking at images from cape canaveral in florida. this is, of course, cape kennedy. before that it was cape yearsral, renamed earlier. challengeseen some after one explosion. this is not a routine launch by any means. there is an internal pressure as the valve that mr. musk and his engineers have really been working on to make better. let us listen now to the launch. 1.5, 4, 3, 2,

lift off. >> [inaudible] >> and there you saw it, we had a successful liftoff of the falcon nine. you also saw the strong

backward track during that initial launch. , andve through supersonic coming up next, the point of maximum aerodynamic pressure where the rocket is pushing hardest. we just had a callout to the vehicle supersonic. tom: coming up on the maximum stress pressures. , itchemistry is amazing really is still, the chemistry of another time and place in space engineering. matthew: that's right. there's nothing routine about launching a rocket into space despite the fact we been doing this for decades now. it is still quite incredible to watch that go up. that ismount of thrust pushing, and it is hard to believe that the next generation, the falcon heavy rocket, will have something like five times the amount of thrust when it launches.

francine: it is absolutely incredible. it just brings you back to the dreams we all had as a kid. does an aihat crewmember in space look like? reporter: it is really bringing sci-fi into reality. it is called simon. a is a floating sphere like soccer ball, generally intended to be a new member of the crew. it's got ibm powered artificial intelligence from the watson program which will give it a kind of voice user interface. it is going to help i think in terms of the longer-term manned spaceflight into deeper space how computers can help take away some of the more mundane tasks astronauts might have to do so they can focus on the more important things. does --: he actually

from will we understand, the kind of float around the station and zoom in on astronauts as you call its name. does it do menial tasks? matthew: i think it is for a mix of things. it is partially to take away those menial tasks, but also to provide some interaction and stimulation. you have this thing floating out a bit like a sci-fi. apparently they loaded up with personality traits from some film robots like r2-d2, for example. francine: but not tom keene? [laughter] matthew: i think that was probably too expensive for them. francine: what comes after this? does this help with fundraising at spacex? who is putting money into this? matthew: they have a multibillion dollar contract with nasa for the iss cargo

missions, so you know there's a very solid financial contract there for them. the next big steppingstone for spacex and some of the come edition is to -- and some of the competition is to demonstrate they can deliver manned space vehicles. that is what the falcon heavy, this dragon crew cargo vessel, that is the next step for spacex to really cement their future with the u.s. administration. tom: we are looking at images here of the spacex launch in the second stage breakout. we are going to a number of minutes out, 11 minutes out where the solar rays will deploy. , some of two hours out the control they doors will open. what is interesting about this, by chance last night i was looking at an ancient movie from

1967, which is mr. connery back when he was cut and chiseled doing the james bond act. it was "you only live twice," and they open with the gemini mission taken on by spectre. it is extraordinary to look at these images and how we take it for granted versus the sweat we had through the apollo missions. matthew: i think that is right, but we also have to remember this is quite a recent phenomenon. i remember the space shuttle program, and that has closed down, and really space travel was really quiet. space exploration is becoming a big deal again. it is an exciting point in the evolution of the human race, really. we are at the frontier where space travel is going to become something a bit more normal. francine: we just want to remind our viewers and listeners what

we are experiencing right now, which is a successful launch of engineeringpacex into the international space station. from a business point of view, this is also trying to reuse some of the parts. were talking about this ai robot called cimon. they are also measuring temperatures for the plants, to figure out how come as a planet, we could do things better. thank you: apparently when plants -- matthew: apparently when plants get hot, they sweat. ony are going to put a probe the space station which will be able to measure the temperature of plants and how stressed plants are getting and how well they cope with different climactic situations. given that we are in a changing climate, that is going to be important in terms of how we

manage crops going forward. francine: i want to be very careful because we are also on radio. we are seeing some light pictures. describe to us what we are seeing. i'm looking at the video a something i'm not exactly sure what we are looking at. is this the end of the rocket? matthew: this is the second stage, which puts the dragon payload castle into its lower --it -- payload cap sewall payload capsule into his lower anit so it can then, in automated sequence, make its journey onto the international space station, which is going to take a couple of days. 2.is due to dock on july tom: about nine minutes we will see the second stage separation.

thecan see over on the left imagery from the ground, and then the fabulous camera up on the right with that heat. huge heat forces on the second stage. i believe that is the second stage nozzle we are looking at. musk and the spacex team, what have they learned over the last four or five flights? think they've been trying a few different things. don't forget in february they had that very well-publicized launch, the first launch of the fountain heavy, which took one of its tesla vehicles him of the roadster into space -- vehicles, the roadster, into space. every time they be one of these missions, they are learning more about how to read land these rockets -- how to re-land these

rockets. that is really important for this next stage of making these things reliably reusable. every time they do that, they learn something new. there's been a few technical glitches with aspects of the booster. they really need to nail that down in order to make nasa feel comfortable that this thing can put -- that they can put astronauts on the thing. tom: we just saw the map of the globe, and over to africa was the stage one and states to break away here at 9:27 in the flight. moving on from that, we will get to 11 minutes. there goes the second stage. i'm sorry, matthew. this is still extraordinary, and it was wonderful that nasa was able to put the sun right behind the breakaway. you still get chills. matthew: very much so. tom: this is not spielberg. life, and its real

is pretty impressive, isn't it? amongst all the scientific projects, there's a few pods of apparently the world's strongest coffee, so they will be getting their caffeine fix in space and if you days -- in space in a few days' time. they want to commercialize and industrialized this so people can go into space. is it 30 years, 50 years? matthew: that is really hard to say. the way musk works, it is next year, but we know the ambition doesn't always match the reality. there's a long way to go before we are in the realms of super reliable passenger space travel. i think the kind of next big step over the next couple of years is going to be using these commercial rockets for

astronauts, for military style astronauts. tom: if you are just joining us, we are loopnet the nasa feed now. it is amazing to see this from mission control that we just showed. you can see the different private and public partners involved in this mission, very much different than what we saw 30, 40, and even 50 years ago. we are coming up on a point here where the solar arrays deployed. that is to keep the beast going, isn't it? matthew: that's right. that is what propels the capsule on its way to the international space station, where it keeps on track. it takes over to power the vessel. tom: matthew, thank you so much. greatly appreciate the perspective this morning on the spacex launch, i believe the 15th launch that we've seen.

still extraordinary imagery. jordan rochester, thank you so much for joining us as we look at the solar panels deploying right now. i believe these are the bay doors opening as well. francine, just extraordinary imagery. would like their conference that they've had over the last several days to go as smoothly as this launch. francine: absolutely. for the moment we are thin on details on what eu leaders will do. maybe they were also watching the launch like we were amid difficult negotiations. it was pretty incredible imagery , but also with the end result parts,e is reusable which would mean that this could

be on a more sustainable basis and more frequent trips to space. ,om: the solar arrays deployed earth in the background. we will leave our astronomy and space mission for the morning, and we get an official word out on twitter, spacex saying this was a good launch and they are now in orbit. we are going to orbit in the next hour here at the midpoint in 2018. worldwidey with us from. london -- worldwide. from london, from new york, and from space, this is bloomberg.

tom: this morning, the close to a tumultuous first half of 2018.

the february this crisis. dollar strength and em weakness. the culture wars of america and europe. we want to send it to china this hour. yourm buiter citigroup reconsider the view from kazakhstan on russia and china and the belt and road initiative. attend. affiliate will summer school. they have a summer reading list. they cannot go out for varsity soccer. neither can the german world cup team. that is that. good morning. this is "bloomberg surveillance." on tom keene. girl,e in london, space francine lacqua. we have been watching spacex. it is really out of the 1960's. bring up the imagery. i think we've got george clooney. a replay of the launch.

and in with what you matthew saw. francine: it was successful. congratulations to the team that managed to pull this off. we talked about what they are sending into space. i was taken by the fact that they launched a robot helper, and artificial intelligence robot called cimon to the international space station. we were talking about the significance of launching components of the rocket that get reused up to 10 times. tom: rumor has it that they were launching the head coaches of italy and the netherlands into space. willem buiter has not gotten over the netherlands not making it into the world cup. interesting launch. annapolisnews out of leading our news this morning. u.s., police and

maryland say a white man in his late 30's is in custody after a rampage at a newspaper office. four journalists and another member of the staff were killed by a man with a shotgun. local police called it a targeted attack. cologne are said to be preparing their first indictment involving some of the biggest names in advance. it is said to have cost german taxpayers over 10 billion euros. ing firms account are being probed. many of the individuals involved have released statements denying wrongdoing. the federal reserve stress test tosed six wall street banks pause plans for payouts. the four largest u.s. lenders said they would extend $400

million of stop buybacks. indonesia's central bank as raised its benchmark interest rate by 50 basis points in the a deepening slide of the currency. it was more than the 25 basis points expected by economists. then there were 16. the world cup group stage concluded yesterday with a win for belgium over england. for all the latest results, head bloombergupgo on the terminal. global news 24 hours a day, on

air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. tom: this is painful. let's go look. i did not realize how long the world cup went. i thought it was four days come and we are done. jonathan ferro in second place. francine lacqua just barely behind mr. ferro. i don't know what to say. i went to the willem buiter school of soccer analysis. .t is a good feeling i am doing worse than caroline hyde. francine: let's put it this way, tom keene is better at space than he is at football. i respect that. this,f seb salek had done he would have done worse than me. but he did not do the bracket this year. i am going to watch the simpsons.

i need to get briefed on soccer. let's check the data. in last place, i had france winning by way. dow futures up 140. it is june 30. oil with a list. oil is a big part of this first half of 2018. francine: the european stocks are tracking the rally in asia. global markets seem a little more upbeat to what was a pretty tumultuous quarter. i'm looking at u.s. treasuries ticking higher. the dollar declining yesterday. we had a little move on the pound after hearing there was progress on brexit. tom: one of the most difficult things to do in technical analysis is to find a trend when you don't have enough data. this is called danger as you can. logarithmic from the

advent. the first moonshot, stability, the second moonshot, then this move up to 20,000. we have rolled over. at aboutmoving average 4000. i would not put much faith in that. all i am saying is that on a long-term log chart, maybe i have support in the vicinity of around 3,600. maybe. francine: it is a good chart. something we might spend a little more time on. this is what matters to me. basically italian debt. we did have an auction this week. it did not go as expected. this is the spread between italian btp's and german bunds. 1.34, the cover was

lowest since july of last year. i guess investors trying to figure out what the next step for italy is. tom: very good. what a joy to speak with willem buiter of citigroup. he has taken over the day-to-day rains of global citigroup economics. he is noted for rigorous academics and the ability to speak his mind when appropriate. we are thrilled to have you here today, professor. it is appropriate to talk about trade. when you look at the media coverage of trade, what are we all getting wrong in our coverage of the history, present, and future of these trade war's? media paidhink the too much attention to the rhetoric instead of the reality. so far isve seen

round one of a potential trade conflict, the u.s. imposition of tariffs on steel and iron and aluminum and the 50 million in two stages. , there willf luck be no second round and no third escalation. the situation looks contained. frightening, yes. accidents those happen. no one wanted world war i to happen. i think we should view this as a game of bluff and double locked and counter bluff. game theory and the art of strategy, is president trump's strategy to be a mercantilist? is that what we're talking about. a great essay in the washington

post said we are bombing ourselves to 1680 when the netherlands reigned supreme. willem: he believes that trade deficits are bad for you and surplus is good for you. he also wants access for you u.s. goods and services to foreign markets. he has written the art of the ofl and the strategy conflict. if you can convince your counterparty in a situation of conflict that you are irrational, you have enormous meaning advantage. -- bargaining advantage. francine: when you look at the impact on the economy, are we downturn dueactual to the possibility of trade conflict? in one sense it does not

help economic growth globally and is a contributor to the softening of global growth we are seeing. we are not talking downturn. we talking about a slowing down of growth partly driven by fear of trade war's. there is a big difference between fear of trade wars and the realization of trade wars. that confirms our worst fears, we could have a pleasant surprise come the end of summer. tom: what is the buiter prescription for the white house for the next six months? what is your to do list? first, address the unsustainable deficit problem for the federal government that they have created as a result of fiscal stimulus.

thend, make sure that rhetoric on trade does not become self-fulfilling. china wants a deal. europe wants a deal. i believe america want to deal, too. tom: thrilled to have you with us here on the vicinity of the second half of 2018. coming up, and exceptionally important conversation on china. they share an extensive border of western china and eastern kazakhstan. is care act countertop. this is bloomberg. ♪

>> this is "bloomberg surveillance." i'm sebastian salek. prosecutors in cologne are said to be preparing first indictments involving some of the biggest names in finance. the practice is under investigation are believed to have cost german taxpayers billions of euros. the case is said to involve hundreds of individuals. many of the companies involved have issued statements denying wrongdoing. unicredit is said to be selling at least 3 billion euros of nonperforming loans. the entire bank is also establishing a partnership to work with corporate debt. is disposal project

expected to be finalized next month. companieson after the low-end at the market range. the beijing-based smartphone maker priced shares at $17 each. they took roughly half the companies initial goal. francine: thank you. minister hasrime negotiated a packet of measures thehe eu summit to stem flow of migrants to europe and spread the burden. afterhink we have agreed intensive discussions a good outcome having signed up on common wording. >> a deal has been reached. it is good news for france.

it is the fruit of combined work . the national decision would have been either efficient or lasting. >> i think it is good news for spain in that conclusion of the council recognizes the intensity of the influx of migrants. what theof them around united kingdom has been encouraging for some time, which is taking more action in countries of origin so that we can make sure people are not making these very dangerous journeys. >> i would say overall we can be satisfied. it was a long negotiation that tells us the timetable. italy from today is no longer alone. francine: for the latest from our european economics reporter is in brussels for us. i guess theoretically it is an ok plan. how do you actually make it work?

how do you sort the people on the ground? how will this happen? >> that is right, francine. the big risk for european leaders and angela merkel was that there would be no deal. we have two main points, european leaders will agree to create migrant control camps. the point is you are going to vet migrants. those that potentially qualify for asylum would be allowed to stay. those that do not, they would be sent back to their home country. if a country is overwhelmed by the flow of migrants, the rest are going to have to contribute and distribute the flow of migrants. the problem is when you look at the fine print. it looks like a classic hedge from brussels. it is a voluntary decision. it is unclear what country is going to do what if at all.

tom: what is the number, the scale that people are working with? what is the total number of gees they are talking about when they are having these discussions? >> they are talking about thousands. this is a great point we need to keep in mind. migrant numbers in your have gone down. -- europe have gone down. the height of the crisis was 2015. angela merkel is under major pressure back home. the new italian government is clearly taking a much tougher stance. the problem is not so much the number of migrants rising as the political situation becoming harder in brussels. tom: thank you so much. we will continue with willem buiter of citigroup, an important discussion on these issues in europe. later we will move on to a

discussion of the issues in the united states of america. please stay with us. this is bloomberg. ♪

>> thank you for talking to bloomberg. confirmedust francine: this is "bloomberg surveillance." i am francine lacqua in london. new york.is in we were talking this immigration package signed overnight by eu leaders.

there is a lot of anxiousness about what happens with italy and other countries in the periphery. willem buiter of citigroup is still with us. is italy still the number one problem? is it a political concern you have, or is the politics spilling over to the economics? willem: it is both. clearly, the refugee deal that was negotiated, even though it , is a bigally binding positive because migration is in excess special -- existential issue for the entire euro zone. italy faces a special problem of being a key member, one of the three elephants in the eurozone. proposals are so out of whack both from what brussels will accept and what markets will accept that if they get

through with anything like proposal that is still officially part of the government's program, and we will have another sovereign debt exits around october or possibly -- crisis around october or possibly even sooner. it is going to be extremely contentious and difficult. francine: are we over the euro crisis, or can we go back to the existential question, whether these countries actually stick together. willem: we will never be over the euro crisis until they reform the eurozone in a way to make it if properly functioning central bank rather than a system of currency boards as it is now. problem is most acute because of the doubtful sustainability of debtitalian sovereign that spilling of

over from italian banks to a eurozone crisis. tom: moments ago, rekindling something that is out there right now, which is present from talks a lot about -- president trump talks a lot about american leaving the world trade organization. well with the ramification be of america leaving the wto? willem: it would be extremely serious. it would mean a multilateral framework for resolving trade disputes and disagreements will have to be replaced by a portfolio of bilateral agreements, which is much more likely to result in conflict. you cannot do a deal between 100 plus. tom: we have been here, haven't we? willem: yes. tom: it harkens back to the regional blocks of the

1930's. willem: yes. is extremely worrying. the u.s. will declare victory if it achieves some modification if not in the formal rules but the practices of wto. tom: let us come back. willem buiter with some important comments here and president trump's desire to move away from multilateralism. we're going to look to kazakhstan. we are going to learn a lot and gerardhstan cassidy on american banking and deutsche bank. this is bloomberg. ♪ ♪

♪ good morning, everyone, tom keene in new york, francine lacqua in london. i think we should go to sebastian salek. sebastian: good morning.

ray dalio is planning to give bridgwater more stock ownership as they move toward the next phase. they will give it a greater say in governance as they work through a succession plan. >> we are going from a company in which i led the company in this way, when i deemed a merrick ruddock way, and we are andg -- mayor craddick -- we are going to a way that needs a more formalized partnership. sebastian: he successfully --nched his 16th supply spacex confirmed the dragon spacecraft is in good orbit. it was reported to be traveling on gordon ai robot called simon. -- supported by

high oil prices, the pickup in the rate of price growth was in nine desk in line with forecasts. the cofounder of carlyle group said he sees a cautious investment climate but no signs of a pending recession and no long-term trade war. >> this economy is in good shape this year next year. something unexpected could come along that could change. if we went into a tariff war, that would not be wonderful at i do not think that will happen. i think negotiations will resolve this. this cycle might be longer than anything we have seen since 2001. we might be the longest cycle ever of economic growth, but it could go on for another year or two or three. i cannot find any economists who say we are going into recession in 2018 or 2019. sebastian: global news 24 hours a day on air and @tictoc on

twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm sebastian salek and this is bloomberg. tom: thank you so much. a headline out here, willem buiter moving the market or maybe it was us mentioning asked the o's. axios.s -- futures up seven. not so much that mr. trump seeks to exit wto, he has said that many, many times.

percolating again here into the fourth of july weekend. there is a move in the market. willem buiter leading the way from citigroup. we are not going to talk about too big to fail banks. never in the timeout chair at rbc capital markets with gerard cassidy, who has wisdom on various shades of thinking in the united states. i looked at the operating income of jpmorgan yesterday over 15 years. they are minting money. explain why we are having stress tests of banks that are minting money. gerard: i think it is a direct 2008 and 2009e crisis that the banking industry went through. you are absolutely right, it is not just jpmorgan taking a fair amount of money today but it is the entire industry. to put this in perspective, the stress test last week, they had the dodd-frank stress test results and yesterday the sea car results. when you look at the losses that the industry could produce in a downturn of unbelievable comparison to what we saw in 2008 and 2009, it would have been over $570 billion of losses. when you go back and take a look

at the losses from the largest banks including lehman and everybody else, the industry lost less than $100 billion. our banking industry today is very profitable and strong. tom: i don't know if you follow deutsche bank directly, but is there new york operation profitable? gerard: we don't follow it directly, but i would say there new york operation is profitable. the issue at deutsche bank, and you saw it yesterday with them having a qualitative failure, it is more of a control and procedure issue. it is more corporate governance inside that organization versus a quantitative failure which would have to do with credit losses and not being able to make money. you might remember back in 2014, citigroup actually failed the qualitative desk for qualitative reasons. -- for qualitative reasons and they put up a big number yesterday. francine: how long does it take

to fix these concerns? gerard: it is an interesting question, because it comes down to money and manpower. if you put enough money and people on the problem, often times these problems can be fixed within 12 months of failing a test like deutsche's did yesterday. if they put enough people on it and spend money, they should be able to fix it in 12 months. francine: there is so much talk about them exiting the u.s. is it worth and spending the time and effort to stick with the u.s. or should they pull out? gerard: that is a very tough strategic decision they are going to have to make. if they don't believe they can reach the profitability that they need to reach, they may decide it is better off to sell it and let someone else do it. at this point in time, we would say they are committed to the u.s. and that is not the path they will go down. tom: gerard cassidy with rbc capital markets, thank you.

we continue with willem buiter. it would be inappropriate to speak of these stress tests. what is your neck of the woods with your u.s. economic team? you mentioned the fiscal issue before. this make america great again economy, macro economic advisers and a 5% plus gdp for the quarter. how long can we sustain that into this year and 2019? willem: q1 came out disappointingly at 2%. course, that is simply a continuation of first-quarter disappointment and goes back to washington crossing the delaware. we do believe that this fiscal stimulus, while it has some positive effect on supply, it will really boost demand for the rest of this year and into next year. the demand effect is a level

affect, not a permanent effect, so it will peter out even if we renew the spending commitments that were entered into this time. tom: do the supply side economists know that it is a level affect? jargon.massar buiter do supply-side guys know your economics? willem: the supply-side effect is also a level of exit, no impact on the growth rate. you will see a short-term impact on the growth rate and the path of the ge the dust gdp will be level. -- gdp will be level. growth going from 1.7% to 2%, nothing like actual out but growth -- output growth which will be hitting 3%, well above potential. measure: how should we animal spirits? -- much do animal spirits

are of importance to an economy doing well? willem: they drive financial conditions. you get it from surveys, business optimism, household optimism. you see it reflected in financial asset markets from the stock market to the bond market. it is very high-frequency, very volatile driver of the real economy, but a very important one. it can start booms and it can puncture them. francine: willem buiter -- tom: willem buiter with us from citigroup. we have a wonderful discussion coming up on kazakhstan which is sandwiched between the tensions of europe and the western border with china. let me tell you about g tv , you have a meeting today with professor buiter and your knees are shaking. dazzle ham with an e.u. banking

chart of jpmorgan, bnp paribas, deutsche bank, and unicredit come a you can do that only if you steal the chart from g tv . this is bloomberg. ♪

♪ this is bloomberg "surveillance." prosecutors in cologne are set to be preparing their first indictments for the tax invasion -- evasion probe for some of the biggest names in finance. germ believed to have cost taxpayers -- german packs mayors -- taxpayers more than $10 million. many of the companies involved have issued statements denying wrongdoing and that the trade relies on legal opinions, they

were allowed. shares have plunged after the company cast its profit for the year. beforepany said earnings interest and tax major up to 200 million euros or might rise to 450 million your -- euros. they said they saw ebit increasing. a slower than expected recovery in rate -- freight rates. xiaomi and investors are said to have raised $4 billion. therding to the source, smart phone priced at share at 17 hong kong dollars each. the value is about $54 billion. that is the bloomberg business flash. tom: thank you so much. it is all the discussion now, it is on eurasia. for that matter, it is on china and the belt and road initiative . a book this writing

summer. is and hasmbetov asked on and living the modern eurasian experience. he is joining the set with willem buiter. i think the american influence of causing's don starts with your shared and contentious border with china -- kazakhstan starts with your shared and ,ontentious border with china across central asia is extraordinary. how will you bring a new financial center to your country to change kazakhstan. kiarat: i would like to remind you that the structure of the a 50% european union, 20% russia and china. in terms of a u.s. tabulation this year, the president of

kazakhstan met with president trump. achievement. u.s. gas and oil company is our best investment. the tendency to move beyond a hydrocarbon nation. kiarat: after the financial crisis of 2008 and 2009, we were concluding our lessons. ther the dramatic drop of oil prices in 2014 and 2015, we decided to start to diversify our economy and implement structural reforms. the idea among the post-soviet union countries to -- to create a regional financial hub. tom: let us look east to a regional financial hub, your border with china, a new relationship with a stronger and more dominant president.

how do you perceive kazakhstan's long-term relationship with china? how will it change? liket: we would like to be a service economy to one of the biggest global economies. the chinese economy is growing very much. we are now exporting natural resources like oil and gas and uranium, but we would also like to provide other services including financial services. centerd like a financial and to be engaged with the chinese market and globally to play a role in the belt and road initiative. francine: good morning from london. do you need the blessing and support of china to be able to do that? kiarat: i think we diversify the dimensions of our financial center, so from one side we are focused on eurasia and central asia. from the other side, we think this initiative of chinese

government in terms of the belt also likeand we have in the u.s. today, let's make growth great again, i think it can be win-win for kazakhstan, eurasia, and china. francine: how do you see the prices of some of the commodities evolving? how does that impact the government's thirst for pushing the financial center? kiarat: it is something like $55 thebarrel, so we believe economy is quite comfortable. when the prices close to $100, people start to think of structural reforms. when the price is in a more or less comfortable situation, we should not start with that. francine: is there a concern, currently wti is at 73, but if

it stays between 65 and 70 there will be less infrastructure to help with attracting financial companies? kiarat: i think the price of oil is quite comfortable. for the government, we still resource ofditional oil revenues international fund. the sovereign wealth fund size now is more than $60 billion. tom: a question for the governor. who are your main these regional financial centers in your part of the world? previously wek did not cover it from london, from istanbul, from london -- from moscow, from singapore, and

now we want to establish a completely new financial hub. shiner talkser about water as the great divide. the china belt and road is an addition of marco polo and kazakhstan. how are you going to compete with the ships moving along the eurasia, across india and over to the persian gulf? kiarat: in terms of eurasia and central asia, kazakhstan is more than 50% of gdp of central asia. we are the most developed and reformed economy since we got independence. we believe we are now closer to that kind of latest things like new financial landscapes. we would like to create the new financial services industry which can cover the entire region. tom: governor, thank you so much for joining us today.

kiarat kelimbetov. francine? francine: we are getting some breaking news from lloyd's of london. this is the insurance group here in london, and the chief executive is due to leave in 2019. we understand she could leave by the end of this year or the beginning of next year. lloyd's of london putting out a statement after a report was leaked, saying she could leave and lloyd's of london saying the search or her successor is underway. eye on keep a very close any developments and we will bring them to you. this is bloomberg. ♪

♪ tom: good morning, bloomberg "surveillance." thank you for the comments this morning on our coverage of spacex. that was really very -- we are getting good at it. francine: are we? sometimes we are good, sometimes bad, a little like the markets. tom: excuse me, she brings it up

because she has launched up to the ether of jonathan ferro and guy johnson in last place. first-place chart, an important single best chart with willem buiter, this is a chart he has taught at yale and princeton, this is global exports all in. global trade, if you will, world exports from 1950, from the time of eisenhower after world war ii. we are in another malaise here. what is the textbook way where you get a better slope to global exports? what is the trick? willem: clearly the trick is not to do certain things. tom: like leave the wto. willem: and initiate trade conflicts. youe is a case for arguing will see shorter supply chains and therefore the amount of off shoring will fall and re-on shoring could take place.

there is no law that says trade will always grow faster than gdp. if there is a natural slowdown, that would be acceptable. tom: how do you respond to the people that say, we got better and better and better on world trade and we just reached a limit? a marginal improvement in tariffs, etc., did not have much impact. willem: there is something to that in principle, but in practice, there are many parts of the world, especially in emerging markets, that are under traded. brazil is a very closed economy. among advanced economies, japan's trade shares in gdp are extraordinarily low. if you took away the man-made barriers to trade, we would see another decade or two of trade

growth exceeding real gdp growth. francine: if you take away -- even if you take away the specter of a trade war, there is a concern that emerging markets will suffer if the fed hikes too quickly and if the dollar goes up. how can they stop having so much debt denominated in dollars? willem: as long as the dollar is the only serious global reserve currency and it is likely to remain that way because the euro is no longer ready for prime time, and the renminbi is not yet ready for prime time, i think emerging markets are going to borrow, have exposure disproportionately in the u.s. dollar. they are therefore going to be hit whenever the dollar strengthens an interest rates rise. the only thing the u.s. can do to help i think would be do things like opening supply lines

to emerging markets to remain open to advanced economies and leading emerging markets. there seems to be no sign of that. tom: professor, thank you so much. francine, have a great weekend. we need to go and take another look at a spectacular cape canaveral launch. this is bloomberg. ♪

♪

alix: halftime, u.s. futures pared gains after a report on president trump looking to exit the wto and its trade battles delivered a big surprise in the market in the first half of the year. alloff, rise and fall, and advance in the dollar. goldman and morgan stanley free some payouts and others released billions in record buybacks. in italy, the new be prime minister gets an immigration package for the e.u. david: welcome to bloomberg "daybreak" on this friday. i am david westin with alix steel. reportame out with a that president trump may pull out of wto, and then you read the report he has been thinking about this for a while. alix: i do not have all the details and then two seconds later you are like, chill. in the market, we take a dip lower and start to use -- climb up.