francine: merkel's leadership on the brink. she holds coalition talks. bmw's trade warning. the carmaker joins gm to lobby against u.s. auto tariffs. would signal weaker exports? mexico turns left. the presidency won in a landslide, giving it its first left-wing leader in modern times. good morning, everyone.

welcome to bloomberg. i'm francine lacqua. these are your markets. seeing a little bit of selloff in the european equities. the stoxx 600 is one of the biggest losers. getting some breaking news out of the euro area. manufacturing data for the month of june. expected, ais little bit below but not by much. the preliminary was 55 and it comes out at 54.9. look it eurodollar and pound dollar. there's little bit more pressure for asset classes. out are trying to figure what all this means. also bring you to the price of oil. below $74 a barrel. after we had president

trump weigh in on what opec should and shouldn't do. merkel's future, the and more. ricardo van holt joins us. -- burkle to event holt varnholt also joins us. its firsthas elected left-wing president in link -- in recent times. the earliest figures announced by the electoral board gave him 53% of the vote. handing a crushing defeat to business friendly parties who have run the country for decades. in a televised address, he promised steep changes and preference to the poorest and the forgotten. he also made a point of allaying market concerns, respecting the

central banks autonomy. attacked trump has opec, accusing them of manipulating oil prices. he has caused confusion over whether or not saudi arabia will increase crude output. the president said the kingdom had agreed to pump an extra 2 million barrels a day, a claim the white house had to roll back. opec is manipulating and they allowed less them with thought last week. they have to put out another 2 million barrels in my opinion. china has almost halved oversee import duties on cars to 50%. set to him in five days when a levy makes the more expensive. backs president trump down, the u.s. set to increase sanctions on chinese imports.

a bloomberg businessweek investigation alleges that private opinion polls and an early concession allowed -- allowed funds to make millions. have no financial interest in the currency moves on the day. the only bet on brexit that i had was for leave. i had no other financial interest on that evening whatsoever. penalty shootouts have side -- have decide the latest to matches at the world cup. after a drawing at, a penalty russia's goalkeeper cause wild celebrations in moscow after two saves. day onnews 24 hours a air and at tictoc on twitter.

powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine: the fate of angela merkel's coalition is to be decided today. separate meetings of merkel's cdu and its sister party broke up well after midnight with no public resolution to the standoff. everyone knows it serious. i would like christian democratic party and christian socially and still continue working together. together, we are very strong and people have expectations of us. important not to be unilateral, coordinated, at the expense of third parties. parties are holding joint talks in berlin later today in the attempt to broker a compromise.

joins us from berlin. walk us through what exactly happened. we had some rather dramatic talks that extended into the early morning hours today. those talks taking place in munich and berlin. minister, heterior is the head of the christian social union. the bavarian party threatening to quit. we thought at one point he was actually going to step down and then he pulled back from that. these 11th hour talks today, he will be meeting with chancellor merkel at 5:00 p.m. local time to discuss if there is a way out of this crisis. anthey are not able to reach agreement, we expect it is likely he will actually step down from his post in the move will have to see how things play out from there.

-- and then we will have to see how things play out from there. francine: where does this go from now? >> we will have to wait and see how these taxes payout. we are likely looking at another late night of discussions between mr. zhang oh-fer and chancellor merkel and others. decide they are unhappy with any compromise, he would potentially quit the government and quit as head of his party, which he had threatened to do last night. from there, we will have to see if the members of his own party back him and stick with this stance they have. case, you're looking at the possibility they could pull out of this coalition government . then merkel would have to decide

whether she moves forward with a minority government or tries to bring another party into the government. this is all speculation at this point. it depends on how these talks play out later this afternoon here in berlin. francine: what is the likelihood of another not been chancellor in two weeks because of this? it seems very unlikely that she will end up stepping down as chancellor. she has very strong support within her own party for stats. out thisn polls morning show that a strong majority, two thirds of germans, backers stance on migration so it seems more than likely this would lead to her having -- it seems unlikely this would lead to her having to step down. it looks more like there would be some change within the christian social union should they not meet some sort of

agreement. francine: thank you so much. he is our german bureau chief, chad thomas. what does it mean for the euro and investments? burkholdow is varnholt. he is a professor at the london school of economics. in me start with you. -- let me start with you. if angela merkel doesn't have to resign, she was soon -- still be weakened by it. what is this mean for europe? europe.ed stability in you would think there would be another franco german alliance leading the rest of europe but it's presenting huge problems.

number one is migration. number two is euro and the eurozone. especially in italy. past, the problem was always france and germany divided in leadership. now that there is stability, there is a big power vacuum being created. it's not clear where they are leading. i agree with merkel's policies. francine: the markets today are little bit down. they're actually trying to figure out political risk and what trade war means but they're not looking at germany per se. is a mistake? markets never like turmoil. the -- this is why we have been underweight eurozone equities for some time.

i would say that history is littered with people that believe they weren't replaceable and as it turns out, nobody is. francine: it changes the course of the nation, right. countries and politicians have two sorts of power. soft power in hard power. mrs. merkel throughout her years has been a master at bouncing soft and hard powers. it is one of her towering strengths. this is not the first time she is challenging. not the first time a german chancellor was challenged. this storm will also pass in the euro will recover. do you see the putting thequestion european project that risk? frontier that may be

difficult for the markets to price in. it's difficult to see how the migration crisis will affect it. generally a mike -- an anti-migration feeling throughout europe. the northern countries say why me, i have taken enough. is biggest problem of all although migration flows are down this year, they're going to get worse because of demographics. africa and middle east are growing faster than europe. there is no policy and we would see what policy is coming.

be threatened with closed borders. some countries may say they are done with open borders. in other countries, they would put an end and continually with free trade and single market. and not with movement of people. bring you overe to a market chart that we did. you to the queen of charts. when you look back at history, the 10 year yield is low on absolute basis. the german yield has been harder -- higher for euro-based investors than the 10 year u.s. yield. are you a buyer at this moment? it would be premature to ration buying them at these levels. realrisis this time is not but a political crisis.

as we all know, is down more than 90% on a two-year comparison. all the negative side effects are of all over europe. -- are down all over europe. this is a crisis being created by politicians seeking reelection's or national profit-taking. storm, there is a european economy that is still humming along well despite the threats about trade wars that we can discuss. companies are not yet affected by this in any meaningful way. that is different from the greek crisis a couple years ago. does impact it earnings, at what point? guests stay with us. stay with the program, lots to

come up, including has led. elon musk reckons they just became a real car company. plus after confusing claims whether saudi arabia will increase oil output, president trump stirs the pot again. this is bloomberg.

♪ francine: economics, finance, politics. i'm francine lacqua in london.

let's check in on the markets. you one of my favorite boards. stocks are slumping because they're trying to figure out the trade risk and what it means for their investments. political risk also dragging on the euro and the pound. overall, we also need to look at mexico and the peso diversity -- reversing games. of your marketl action but let's get straight to the bloomberg business flash. here is kaylee. tesco is to form a purchasing alliance with a french retailer. it will increase leverage with suppliers. the lines between two of europe's largest retailers will combine annual sales of about 100 71 billion dollars for managing purchasing for branded goods and private label items. they expect to conclude the

agreement within the next two months and that will last for three years. --n musk says tesla made tesla just became a real car company after meeting its production target. they produced 5000 of the cold -- of the cars last week. they built a third production line. move described by an auto analyst as insanity. the company's largest investor goes against the deal with the steelmakers supervisor board met on friday. that's according to a bloomberg source. they have faced months of pressure from activist investors. is less attractive. that's the bloomberg business flash. let's focus on trade

and tariffs. auto companies and parts suppliers are urging the trump administration not to boast duties -- boost duties on imported cars. they are saying import duties would be devastating and jeopardize investment plans in the u.s.. this comes as president trump continues to lash out at harley davidson. >> i think they're going to take a big hit. it's a great american products and our people have more pride than they used to have. people who are buying harley davidson, they don't wanted it built in another country. our guests join us again. thank you both for staying with us. you are pretty optimistic about investment and the markets. what do you think about something like trade war we

don't know at the end game is for the trump administration and if it will hit automakers. is aard: the trade war serious risk and we need to take into consideration but what i just saw, it sounds a lot like political campaigning and is good reason to assume that some of this is related to the midterm elections, which would give us a sense of where or when this might end. we have seen that the administration has been willing to call victory with more or less than what they initially set out to achieve. sectors orfrom countries that are most affected by this but see light at the end of the tall is how i would describe it. i've heard over and over in the markets, this is political campaigning. he seems to have followed through every election promise

so far. why straight different? burkhard: because he is also making american shares go down for his foot of success. not for a while. burkhard: at the end of this year, he wants to say that u.s. shares are up and unemployment muchwn and he believes more voters will be able to give him much more credit if he can refer to those yardsticks. he is watching markets and he will not be ready to crash markets sustainably. francine: do you agree with that? are we in a trade war right now we don't know where it ends? christopher: that's exactly what i think. wants to show his good for markets but that's exactly what

the problem is. the actual tariff is not a big problem to a company planning their future. the problem is that you don't know what coming next. uncertainty and instability in policy is the worst thing for investor. it's the worst thing for these companies. the european union will , chinate further because is a more difficult problem. it costs china more. they are going to retaliate for political reasons. i just came back from china.

talked to very influential corporations in china and policymakers. irritated by the whole approach. can this get to a point where we are seeing a global recession? or at least a slowdown of growth that is significant enough to hurt central banks? christopher: i can see it happening, yes. highermon nation of tariffs and uncertainty can slow down investments for sure. i can see a general global -- .here is more slowing down

central banks will need to respond somewhere. francine: what is your take on china overall? we had quite a bit of a selloff. it started again today. burkhard: it's the eye of the storm but let's not forget the irony in this whole story is that as this trade war speeds up, it could unravel and even accelerate what i would call the rise of the new world order where in china will make their currency convertible sooner than expected. this is a process that is by no means smooth but it would do great good for china as a country and the financial markets. they may fully liberalized financial markets because they are two sides of the same coin. imagine difficult to that china's stock market

capitalization will move up to something much more meaningful. reflectscause it china's economic power in the world. francine: thank you so much, both of you. you both stay with us. we talk mexico. mexico has elected its first left-wing president in decades. what does that mean for the mexican economy and peso. we will discuss that. a sea of red across the board on monday. a lot of people are trying to think about what this week will bring. this is bloomberg. . this is bloomberg. retail.

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

leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. economics, finance, and politics. i'm francine lacqua in london. he will check in on what's trading across the bloomberg

universe. tesla has meech -- reached its tesla has reached its milestone for production. the german migration policy reaches its in game. theresa may will try to restore order with a friday summer with senior figures in her own party to discuss brexit. and leading carmakers have called on president trump to lessen terrorists -- lesson tariffs. we are getting some breaking news out of the u.k.. this is the pmi manufacturing figure for the month of june. it is coming in a little bit better than expected. 54 was the figure we were expecting, 54.4 is the figure we have.

we'll give sterling impetus or not is what will happen with theresa may. whether she can hold onto her job and convince her cabinet to be more united. has elected its first left-wing president in decades. the election is seen as a public revolt against crime and poverty. join us now is our emerging markets team leader. she's in dubai. right to have you. what does this mean for mexico? there's a big? weather this economic model will continue considering he has said he will roll back some of the programs that have been in place. there is a lot of uncertainty among investors right now. they are nervous about what he

is going to do. he has tried to calm everybody by saying he is not going to do drastic rings but he said there will be some changes. mixed messages there. this comes at a time when emerging markets are under a lot of pressure because of the dollar nominated that's. -- debts. this is the worst time to have uncertainty in any economy or government. investors are looking for any excuse to sell assets across emerging markets. now that the dollar is rising, there's a lot of concern that is what -- that what is happening in mexico may change the picture. if you were to look at mexico, you would see a country that a lot of investors would like to invest in. yes there are some deficits and there is some concern over economic growth but on the whole , the economy is doing quite

well in the assets are attractive. if he starts to roll back the programs that investors think add to the economic picture in mexico, we might see the peso fall into the same category as countries like turkey and argentina. but that really depends on what he says. francine: they get so much. dana from dubai. weeks have been tumultuous for emerging markets. not been helped by the federal reserve's continuing tightening. within minutes of last month on tap, this we could get em investors some clues. -- this week could get em investors some clues.

actions in mexico changer outlook for the country or emerging markets? surely a change of the outlook for mexico. mexico has enormous economic and political challenges to deal with but it is a country that investors want to invest in. it has amazing human capital and is a very productive country and economy. government manages to make it easier to do business in , and let's not forget that left-wing governments do have a surprisingly good track record, and if they manage to make it easier to do business, that is thoroughly -- that is surely better for mexico and south america. there is a wave of people fed up with corruption and living wages. does that time back to populism?

christopher: i wouldn't think so. mexico is usually the bottom country and many statistics. when you see fundamentals of the economy and where it is located, it should be doing better. it should have a lot more and if you ask why it's politics and political corruption. uncertainty,e is about what is going to do, i don't think investors would be so worried and run away from it because the past wasn't good anyway. you look at the mexican peso overnight and you can see the highest level of

volatility since the u.s. election. how well the new president interacts with president trump, will it be more attack in the stick or what he ratcheted down -- more antagonistic or ratcheted down? he could go both ways but is unlikely to be anywhere in between. let's give him the benefit of the doubt. a lot of these emerging markets issue debt in dollars and will have a tough time. to have an that's and thea and turkey others haven't, really. i'm surprised they reacted so much to the dollar because they have changed and become much less commodity dependent and much more of a technology market. it's also to do with the fact that they are so slow and overly dependent on foreign capital flows. that's what i referred to before. this whole thing may speed up

the rise of a new world order which will lead to more liberalized markets in american markets and asia. they will drive their financial markets, equity and bond markets, and if you look at it , this is the most attractive investment opportunity for equity markets in regions around the world. francine: do you worry about emerging markets? christopher: not really, no. markets growing even more stable, it will help emerging markets. how fast it will move, i'm not so sure. the chinese, especially, are very cautious about opening up

their markets because they are controlled by the state. the currentith leadership, they don't want to open up too much. the new president of mexico is a germany sodant of what he does their is also some hints at what we will see here. we will talk about what that will mean for the u.k.. our vote -- our guests both stay with us. aboutconfusing claims whether or not saudi arabia is going to increase oil output, president trump still -- stirs the pot again. that up next. this is bloomberg.

♪

bloombergthis is" surveillance. surveillance." this is because a lot of this weekare taking as crunch week when it comes to global trade. maybe a little better position on the monday before an important decision by president trump on friday. let's get to the first world news -- first word news.

merkel and her brother and sister party are expected to hold talks today. compromisebroker a in their dispute over immigration policy. minister said he he had proposed resigning from cabinet but put the threat on hold to allow talks to continue. mexico has elected its first left-wing president in recent times. the earliest figures announced vote,im 53% of the handing a crushing defeat to the business friendly parties that ran the country for decades. he says to give preference to the poorest and forgotten. he also made a point to allay market concerns.

halved overseet on cars to 50% but protections for those models it builds of the u.s. is set to end in five days. unless president trump backs down, the u.s. is set to impose tariffs on $24 billion of imports. penalties have decided the latest matches at the world cup. after a draw in extra time, it can issue out -- a penalty issue out caused the wild celebrations in moscow after tuesday's. -- after two saves. news 24 hours a day powered by more than 27 journalists and analysts. this is bloomberg. trump is president

stirring up the oil markets again. he has accused opec of manipulating prices. his comments come after he caused confusion over whether or not saudi arabia is going to increase crude output. the president said the kingdom had agreed to pop a next her 2 million barrels a day, which the white house been rolled back. they allowed less than we thought last week. they have to put up another 2 million barrels, in my opinion. still with us, our guests. you follow the tweets with the president or these interviews to figure out if the oil price moves or is it noise? burkhard: it's noise. if only it was as easy as having opec drive oil prices.

oil prices are driven by supply and demand and it's a much more complicated thing. francine: what is your read across this? is the angle that trump is getting involved in things that traditionally other presidents ?aven't christopher: it's difficult to see where the price of oil is going in the short-term and it's because trump just speaks without having to think very much about evidence. he sends a tweet in the middle of the night. opec is a very big supplier but ofentially now, the price oil is driven by an increase in demand and how long it takes to bring back into production.

would oil experts are saying is aat $68 a barrel should be maximum when production comes through. is it in a range? do you have to adjust lower or higher? burkhard: the way to invest in to be invested in energy companies across the entire chain. they are the real winners. trying to trade in a choppy you will lose this game. francine: the cabinet prepares

for a friday summit. the prime minister to keep to a no deal is better than a bad deal promise or risk being ousted. what this brexit uncertainty mean for growth markets and investments? --did see don't think we are more likely to see early elections because no one wants to step into theresa may's shoes currently. europe doesn't care as much about brexit as the media and press here. europe is concerned much more about immigration.

they come up with something, the european say it's like good enough. no one wants to take over power now. they want to force general after the government -- safe withlaying very brexit and not taking a clear view. is your readt across? you like u.k. assets? would you look at the flipside? we are overweight in the u.k.. as opposed to eurozone equities which were underweight.

the market in of itself is slightly more decentered then the eurozone equity markets so we like it at this point in time. uncertainty, it's impossible for anyone to call. to createntinue turmoil in sterling. thank you both for joining us. is a professor at the london school of economics. we'llrd: will -- burkhard stay with us to talk tesla. that's next. this is bloomberg. ♪

francine: economics, finance, and politics. ombergs "blo surveillance." could tesla become a real car company?

the carmaker hit its 5000 a week in goal for the model three. joining us now is a new guest. plus burkhard is still with us. at the model three, why is it important to tesla? huge number people have paid deposits on these cars already. don't get a big chunk of that cash until they deliver the ensure they do not need to raise more capital, they need to sustain this number. francine: is it a milestone and if it is, how does it change the dynamics of the company? alex: it is very important. we have been giving tesla a tough time. full credit to them. the question is, at what cost have they done it?

they had to build a whole new production line. they able to do it at high qualities so there are no recalls? also, are they able to sustain that number or is it a one-off? francine: does it affect demand for the cars? alex: at the moment, they have more demand than supply. that's the issue. are some customers going to say they want their money back. i paid this two years ago and there's still no sign of my car. if they are ramping up production, maybe that won't manifest so quickly. is a tech company or a car company? if you look at german car companies, the people at the top would be real engineers, not

computer engineers. not whether ors not the car of the future would be electricity or fuel, it's how and who will deliver the cars that will become autonomous and it has everything to do with five g mobile phone technology and what will be the business model? a sharing model or an ownership model? francine: is it the banks? is it the networks? the reality is a lot of the well-established players in this are very smart and strategic about it. don't count those european carmakers out. they understand the disruption. they understand more experience than markets are giving them credit. francine: thank you for joining us.

.lex and burkhard surveillance" continues. will talk about the joint venture agreement with tata steel. a little bit of a selloff when it comes to equities. stocks offer lower futures at the start of a crunch week for global trade. the pound lower. this is bloomberg. ♪

♪ francine: german chancellor

with her ition partner. chris vis in the biggest economy. b.m.w.'s trade warning, the lobby againsts to tariffs. wins in ft-wing leader a landslide. what does that mean for with its relationship southern neighbour. francine in i'm london. tom is in new york. tom, we look at global markets. on the downside. the ean markets following asian markets. investors want to position hemselves in case trade wars escalate. tom: may be uncertainty over the weekend. twice, three times - proclamations from the white hours.nd reversed within it was back and forth. given some uncertainty this

morning. it has.: let's get strikes to the bloomberg news in new york city. is kaillie. >> hi, for the first time in mexico elected a left-wing president. 54%won in a landslide taking of the votes. fix the mised to and avoid taxes. president donald trump ffered mixed messages over the weekend. oil prices fell after a trump saudi uggested that arabia promised to pump 2200,000 more. ollow up statements were ambiguous. the two sides have talked. a specific target and china.automakers

in half. t reprieve for cars in the us is set to end later this week. when china poses a 25% duty, in tariffs on for president donald trump is dropping. >> germany. angela merkel's ruling coalition is to be decided. union and bavaria party will try to resolve a policy. ver migration the german interior wants to migrants. merkel has rejected that idea. decided ty shootouts the two latest matches in the world cup. sent spain out of the contest. fter a 1-1 draw, a penalty shootout by the goalkeeper riggered wild celebrations and moscow. go to the

quarterfinals. day. the news of the powered by 2400 journalists and in 120 countries. aime kaillie. bloomberg. tom: let's get to it with futures. negative 128. he curve in with a vengeance, flattening to 31 basis points. can't get out of its way, would. reen, if you the big 17.3. two year yield in germany's ang. on a lower negative yield the two-year gold. when i walked through the door. mexico peso, weaker off the election. rancine: this is what i'm looking at, tom. it's a similar data board to you. basically markets are slumping. you mentioned the uncertainty.

it's a to the fact that crunch week for global frayed and there's political risks pound and the euro slower. i like 1.3169. 129. ning at that would be something to see. let's go to the bloomberg. it's a mexican payeso, what a big, big victoria which for the mexico, the long-term depreciation of the payeso. out over e election, 20, and we have come up in recent days. wonder where this will go in the coming days. this is like the first time in the history of surveillance. i only have an overnight spike. after a left-wing landslide. to show you the volatility spiked the most since

the us election. spike. investors taking stock about what that means. et's focus on trade and tariffs. autocompany and part supplies trump ing the administration not to impose duties on card. saying importm.w. duties will be devastating. it comes as president donald trump continues to lash out at manufacturer harley david on. president donald trump: i think they'll take a hit. american product and our people have more pride than they used to have. - people buying harley davidson, they don't want in another country. francine: trump has been weighing in on o.p.e.c. that the saudis agreed to raise production to cut the consumers. for oining us bloomberg's governmented tore richard. starting with you.

the car-makersre trump to stop the administration for imposing tariffs. they are really ratcheting up us.rds ri words with the two weeks ago they imposed tariffs.ry and on friday, the ior itself commerce ter to the department. arguing against car tariffs that be as high as 25%. the rhetoric is escalating, and coming to a head week. this francine: there was confusion 2 million was barrels, the white house saying -- that's not se the case. does the president thing

that it has more power does. james: i'm not sure what the president things. the concept of o.p.e.c. manipulating the market extraordinary. they are producing pretty much can. ch as they ew people have the capacity to produce more. cope with buffer to destructions to supply. disruptions with to supply. we have seen them in the past. and thanks to the reimposition sanctions on iran we'll see more in the future. thunder en, i was struck by the process with the president of the saudi arabia, and everyone else. every nation is behold everyone een. family of saudi arabia beholden too. beholder to president donald trump, are

they. probably not. of us has a great deal influence. there really want ns a promise promise -- wasn't a from the king of saudi arabia to 200,000 barrels a day. yes, they had a conversation it. t the saud yis have been clear through the meetings over a week they would supply what is needed to bans balance the market. be what the king of saudi arabia said to president donald trump again this weekend. the president seems to have slightly more boolishly that. >> what is the date calendar this week, what do i need to to know the nt future of german chancellor angela merkel. at in e you looking brussels. >> well, the most important date the us willay, when decide on whether or not to

on 34 billion worth of chinese imports. china said they will retaliate in kind and in size. be the start of the war. trade francine: thank you to bloomberg and bloomberghard julien lee. joining us now. with a strategy at c.i.b.c. chief holas gartside, investment officer at j.p. morgan. jeremy, starting with you, is this really a trade war, and did war become ugly where intosk putting the economy recession, or are there many point.to reach that jeremy: yes, i don't think we should over play that situation. reaching towards to scenario. we were looking at that time,

globalized recovery. things looked calm. clearly those head winds started to build and go through the first half of the year. extending through the second half. the trade measures are on the rise. talking about only the us and china. and the risks to the european union. f we see the tradetariffs increasing in momentum and impact, the global economy will a strong isser basis. yet. e not a reception but we are flashing amber. or light read? nick: we are at amber, and when at the strayed impact on growth. it's muted, a forward looking indicator. looking at things like manufacturing p.m.i.s, that's flashing amber and going forward with a little

softness. tom: happy july, 4th of july, in boston, when are you going to blink and the blankers going to blink on low interest rates. see a form we may of sluggish possess and slowdown. we to where central banks blink. nick: we are a long way from that. look back when you payroll , there's a lightly to show inflation, tax through, there's a rowth rate of 4 if not 5% now, keeping the course for a minimum. two hikes. what eneral assembly, level of euro gets your attention, if we get stronger euros, a point where stronger are stronger. mindful ofy they are the euros, and the headwinds, if

euro e to see the appreciate significantly, that to markety the growth 119 preciating beyond the level in the short term, that would cause a rick. would be increasing uncertainty if we see it give way. i'm glad you guys are with us on july 2nd. nick and jeremy you need to show as we report on the john francine is beating farrell in the world cup racquet. francine: i'm doing it for us. you put our median averages, middle.kind of in the tom: that's bure okay rity known known. lots to talk about in the next hour. street for you. eth masters joins us, he is

terrific combining economic investment. seth masters coming up in the hour. ck this is bloomberg. bloomberg.

♪ francine: this is bloomberg surveillance. let's get the business flash. tesla just became a real car company. seeded a exceed long-fought production target. building more than 5,000 the last week of the second quarter, musk hoped to of h the goal by the end last year activist investor dan is on a goods pressure

company. divesting its stake in l'oreal taking a lock at the government sector. response from nestle. $3.5 billion stake in nestle. chains tesco will increase leverage with the branded goods g privatates. francine: thank you so much kaillie. the fate of german chancellor merkel's coalition is due to be decided as the dispute an end game. separate meetings of merkel's brokeand the sister party up after midnight with no public off.lution to the send >> translation: everyone knows it's serious. democratic and social union to work together ecause we were a success story for germany, we are strong and

people have expectations from i it is in this spirit that will hold discussions today. for me, it is important. unilateral. not coordinated or at the third parties. francine: the parties are xpected to hold joint conferences to broke an 11th hour compromise. is european government leader alan crawford. that ryan e chances merkley is not weakened by this. well, i think there are a few notably she that, has to deal with this rebellious sister matter of her in bavaria. ed it's hard to see how they can through this without her sacking the minister.

ultimately, the new resolve in the whole erm, coalition looks weakened in the longer term. alan, you are the author of a book "angela merkel, chancellorship forged in crisis." survive is this angela merkel? alan:when the dispute arose two looked weeks ago, it like she knew she may be wobbling. bavarians are more conservative side of this party. they were essentially in a block, for the combined and they felt they could peel members.park yesterday it was clear her own her. was behind t looks like merkel will come

on on top. tom: german chancellor angela merkel has been chancellor coming on 13 years. have seen - i say this with respect to the public service. of presidents in the united states. president ior, and regan as well in recent years. s angela merkel just simply exhausted. public arn out from her service to the nation? question, 's a good tom. certainly i have covered her for summit. breaking up at five in the morning, and last night we were in the morning. i think you should be happy to the the summer, and traditional parliamentary break n a week's time, after the n.a.t.o. summit when president donald trump arrives, which is another blow up. take the summer to recuperate.

francine: thank you so much. european government team leader book onwford other of a angela merkel. let's get back to jeremy stretch, and nicholas gartside. actually, nick, let me bring you to the chart. this is a simply chart. to hilary clark that brought my attention to it. history, there's no denying that they were low in basis, the german yield was investors european after hedging for a currency risk. does it look attractive. it does in that perspective, yes. investor, it has an appeal there. the challenge comes out when you ecg. ck to the and given the extent of the in europe.

it moves earlier as opposed to ater, and you lose the anchoring effect. is path of least resistance higher yields. francine: let's bring up the chart. better?gs jeremy: i agree with the data in e.c.b. the in terms of rhett jofric. in terms of the forecast there's that onsistency, how is going to resolve itself. unless the trade situation orsens, i think it will be actioned sooner than the market now forced to reconsider. would see that we high yields over time, and we see back in terms of the bond-buying strategies. to the impetus in terms of differentials in terms of between the us and eurozone. advantage that the us has is of being remiss.

tom: one of the points of disagreement in the second half this year is the size of the oves that we are going to see in foreign exchange. suggesting re they it will be gradual or like the figures, 10. or in euro, two or three. is it? jeremy: we wouldn't expect anything like it. the daly will be supported. in the eurozone perspective. i think it will be consolidation, more a story quor beyond that the euro gains traction. time. e it higher at the it's an issue of looking at the parameters. trange for the third sector. we have a chronic negative

yield structure in europe. it's approximated by deutsche macquarie bank rolling over. broken through to the can in euros, how long europe sustain negative yields recollects and support its financial system. me, that's a major second-half question. true, , it is, actually, that the financial sector in europe continues to have risks.ral as you say, some of the big bellwethers, in terms of stock scenarios struggle. reasons the ushe recovers faster and recovers the eurozone is lacklustre in that record. running risk parameters. over time, we'll so a structural improvement in the euro don. we'll see the fundamental story back into the dynamics in

cab. of the yield and the negative yields diminishing over time. the e.c.b. is on the runway. qe by the end ded of the queer, and it's a matter of time -- of the year. matter of time. the policy is set for an emergency. it's not an emergency. we are in the early stages. yields.negative francine: is there a danger that downturn in the us. we can't deal with the us downturn. >> that's the risk. but the context is important. set for the is emergency, that is what a negative interest rate is. thick of the eurozone, with a by the weakness, it's above friends rates of growth. tom: above trend rates of growth for europe, you are suggesting.

nick: it is. issue is the fund growth rate is not high. it. where is nick: one and a quarter perz. 1.75. is significantly above trend. om: it will be interesting to see. francine, what i find ascinating by the second half of going into the second half is he number of ambiguities, mysteries that we have like the movement and currencies, some of these to r.b.c. is one example. there in bates out july. francine: there certainly is. - a lot of the markets want to try to figure it out. jeremy stretch, cab. gartside, chief of investment officer. pmorgan asset manager are staying with us.

hiesinger is ve mr peaking at a press conference joint venture t agreement. we'll have a lot more on that story later on. he will join us. 11:30am in london. this is bloomberg. ♪

♪ >> bloomberg surveillance, hecking on what is happening across the university. of oc reaches a milestone

reaching a target. elon musk of tesla becomes a company. on bloomberg.com. of german chancellor angela merkel will be decided after a coalition dispute over an end game. hes and here in bloomberg over the hours, theresa may will restore order with a friday fig ears in her own party. and second, leading car-makers called on president donald trump rethick tariffs in mexico, lecting a first left wing president in decades. handing a defeat to business parties. find out more on the bloomberg terminal. to the news with kaillie. mentioned in mexico, it was a resounding defeat. first s have lected the wing president in recent titles,

lopes with 53% of the vote. promised to fight crime, corruption and poverty. he pledges to respect the central bank and avoid raising taxes in reel terms. report concludes that north korea is committed to nuclearng stockpiles of armed missiles. reports from the middlebury kim tute of studies says jong un expanded a missile anufacturing plant in a run up to the summit. undercutting the president's is nonce that north korea onger a threat and a supreme court nominee if they be supported agree with legalizing abortion. has expanded the list in probasketball. lebron james is leaving his home town cleveland cavaliers again,

a 4 year, $154 million contract with the lakers. les the third time in three years changed. he leaves the cavaliers with a years ago. o bloomberg 24 hours a day on air tictoc. 24-00 by more than journalists in over 100 companies. mexico elected a new president. the first left wing president in decades. it saw him fight against crime, arruption and policy, handing defeat to the business friendly arty who ran the county for years. richard from chat am house joins phone. he

change? it >> it's not clear which way he the end of the year. he is known as a hard leftist. n recent weeks he has been better in relation to business, and promised to maintain and spoke inility, favor of the n.a.f.t.a. agreement. and so he's been much more friendly. he's appointed a leading to advise him on is outc policy, the jury what this means for investors. onit's wonderful to have you short notice this morning, with your decades of experience in fabric of latin america, the 'financial times', is his c idea here promise to undo years, decades endemic corruption. ill you explain how he will do

that. million hat it the 64 question. no one knows con - he talked taking headline grabbing measures. reducing salaries of top he's als, but as we know not going to create the national you need to die through the transparent institutions. one of the things we have seen mexico, which is different to brazil is the institutions don't have the independence. they don't have the power, the authority to push through and brink corrupt officials. go.that's where we wanted to short of this die doing a turntable. here's a lot of human rights issues in the philippines, how does he link up with the elites military and the elites to go police supports

after the crime, terror and corruption. to get the prescription that done? the policy idea is vague. violence - homicide rates have tripled. a link to the nd drugs trade in many, many mexican states. spreading, getting complex. an easy problem to deal with. an extension his an of populous m or something different? richard: it's very early days, it's more like the old style left-wing free government. been rubbing mexico between the mid 20s, and 2000. did a some left-wing period

'70s, and late 1930s. they were nationalizations. this - what we are seeing is the reconstruction of model. i think molina, and his morena and his party a mexican - this is andco going back to basics, rejecting some of the changes 20 -- tack in the last characteristic in the last 20 years. new ine: how will the president deal with trump you president donald trump, will he yik.re antagonist > one of the threats is how indrakate he is. he'll not be a nationalist as , e leaders in the 1990s and 2000s. he'll be national lift in tone. may be for example with

president donald trump. it will be rhetoric. when it gets down to dealing. to talk. continuing as i said he wants to keep n.a.f.t.a. on the road. it's too important for mexico to let it drop. you uld be stormy, but, know, not as stormy as you think. ou are saying that the n.a.f.t.a. posture of mexico will not be that much different lefts, from the old elites. that hink - i think there's a lot of - there's a lot mexico in stand for maintaining that. a lot of invest the ride on it, lot of jobs on the continued presence of the big companies in mexico, who are closely economy. with the us for them to ficult apart.reaking that

tom: richard lapper from chat am with the 'financial times'. jeremy stretch and nicholas gartside on the other side. em or m-11. in the mix ofg it change. >> i think you wouldn't demesly with em. going context of mexico forward i reiterate the language correspondent. and the importance. with thewill negotiate us. i think there'll be a lot of headline risk. having a strong leader may well little historical agreement. rump seems to like strong leaders and warm to them. transitional he

budget proving to be modest in physical expansion. the pace should be performed latter stages of year. and we have been cautious looking for modest gains at the year.f the >> it's a winner. you led the boat on mexico. see them go overweight. >> certainly when you look at mexico. on the political side. side. mestic political or the key is overwhelmingly the biggest matter as you have growth. to strong mexican growth. good value here now. an inspection depreciation. throw in. er thing i when you look on the field.

or seven percentage, it's good value. joining us. for nicholas gartside. they both stay with us. on your commute tune in on radio. daybreak. in fork, washington d.c. across the bay area and us. this is bloomberg. ♪

. richard: /* /- chard: /* /-

♪ tom: good morning, killing at the world cup bracket. last place. about us, smarter than me jpmorgan. rtside g10 fx my stretch from

strategy. let me bring up the chart. a second half after a blow out q2. everyone agrees it was better than good. down we go with the dollar beating the weakness. here is the rally we have seen. way to go have a long if we are to have a sustained dollar rally. c.i.b.c. saying in us second half on pure selling? jeremy: looking at the chart was the story, the mark rather sold. it's now cerktcorrected. now it's a case of understanding he differentials and trade risks into the second half of the year. we don't buy into the dollar extending and extrapolating later in the year. to discounte market what the fed will do. it comes back to the policy banks. other central that's where markets become a little underpriced in terms of of others in the past,

discussing monetary policy tightening. to catch up. i need a trade that will save me that will save me for the second half. what is your best currency pair right now? looking at ave been the euro looking at the euro proxies, they have value. although they are not as well owned. that's a currency to serve up. the swedish chroma has a little down-term risk but we'll see a correction. a currency we'd like to own. but at the levels we have to after the elections in september. euro i proxy and the think will perform in the second half of the year. value on the market. outline is sterling. and mexico very much worth a look. at these levels or wait a couple of weeks to see how it pans out. mexico at these levels.

when we see the political shocks is the implemented programs are first thought.an francine: the concern is what the dollar does from here. dollar ook at the dynamics, there were certain merging markets. it's really only argentina with more. as there too much of a sell off. jeremy: i think so, if you look at the em and you looking at the basket it is disingenuous to some of the other dynamics, you to look at a distret basis in terms -- secret basis, those significant dollar liability, those with great that are those underperformers. which look into em states have fundamental stable a uctural backdrops and/or scenario of global growth it reasonably construct

stiff and there can be value coe turns s, moment in. with the peso, it's probably in of 6 c, at current levels you can't remove all but very good value. om: one of the other neems -- in the second how does at - dash jpmorgan adapt and adjust to year, even ths one two year paper. nick: it is. at reality is you look three months libor, and you have 3%, a rate close to above inflation, how do you from te the capital gain that. so it's realistic cash holdings go up. focus on is eas to credit. credit most beaten-up

market which is a steal today is the european high yield. a spread of 4% gainst a backdrop of low default rates. tom: give me names or categories european high yields. nick: thing of some of the cyclicals in europe, telecommunication names and when you have a re, decent domestic back drop. rates and the eality is supportive european central banks. tom: if i ask you the next francine will have to buy you lunch in the nab because me in the world cup bracket. francine: think of the risks, tom. devaluations, looking forward to it, tom. on. that is serious, come i have to buy siemens high yield to pay the lunch.

nick, this is a serious point. four big figures is a lot of points. e and european - what is the risk. high yield i mean, it's there isn't it? risk is the classical high risk if europe slips into high risk environment. that in 12 months looks like a probability. he european recovery relevant to the us is getting going. supportive s a driver of that. your ne: what happens to pound. you have yen, theresa may allying her cabinet to speak from the same hymn sheet. manage to get them to agree? fascinating. she needs to advance from the brexit committee to the cabinet her way in terms of

policy remit. there are a few in her party not like the messing given by the whole cabinet on friday. a period of politicalists until now and the nd of the parliamentary session. as a commence of that, it has to sterling. if there is further risk playing perspective. . euro zone is the way to play it. joining thank you for us, jeremy stretch from c.i.b.c. and nicholas gartside of jp asset management. you can interact with the chart. go to dtv go, take tom's - he's doing abobackground in the season. some of them are good. you cap save them for future reference. this is it bloomberg. ♪

this is bloomberg surveillance, let's look at a business flashing. technologies moving to take

control over vm ware. tack created in 2016 helping the company. ware, cks were for vm which the company inherited as the deal bloomberg's learns that a miss a target for jets powered by engines - costing a three month halt. paying nding up penalties. companybritish software microfocus taking over in cash. n the equity firm, s u.s.c. of ialises in the line product. microsoft warns a decline will be greater than expected. that's the bloomberg business flash. kaillie. thank you could tesla become a real car

company. musk's goal of bringing masses cars to the reached a critical goal. 5,000. g alex web joins us, great to have you. milestone, how significant is it. cancelling orders are specking with tesla. cancellationsbeen of orders. april 2016, people put down here 1,000 with a promise that some time down the line they'd get the cars. that there nounced would be delay, some reported that more people asked for the government back. now the fact that they are up means they are actually kind of bank - the

balance - there's a 37,000 car. the more expensive options. 36,000 more from the statement. back of the up means envelope 5,000 cars, the that's about $800 million. looking at it e for the structural tesla. for extra have to ask funding. mass, reaches critical it's plain sailing ahead. hard to say right now. they hit the 5,000 a week number. continue doing it, was it a one-offest. what is the quality -- one off effort. what is the quality like, how much was it for the production line. to produce a new production line in the tent. remain big on unanswered questions. questions ure future will be said. i like what you said is it a car company. we'll see. the webb, thank you with bloomberg opinion. it is the second half of 2018.

we are trying to give you perspectives across the markets, equities, bonds, political nd the economics in this tumultuous time. the next trong, in hour seth masters joins us, a investment officer of a.d. bernstein. perspective on how this all fits together. it is most important. i was stunned at the gloom over the weekend. coming to an end, get out of the markets. cash, go to go to cash. no. masters says we'll talk here in a moment. it is hot, it is steamy in new york. tom: we morning, futures are

down short the -- sharply.

there's a trade war. what will president trump do next? the left wings big up and down the ticket. what is the future of nafta for mexico? in the world cup, spain is upset by russia, argentina down in flames. good morning, everyone. is bloomberg, live from our headquarters in new york. i am tom keene. in london, francine lacqua. is the second of july, let's not talk about football because you're going to jinx me. when you look at what markets are doing, they are rl -- they are a little bit on it. maybe it's because of uncertainty. trade risk is back on.

the pound falling on the back of political risk. big week for global trade with president trump decided on tariffs on friday. of the world calling for the gloom of. , first world -- word news. >> for the first time in decades, mexico has elected a left-wing president. it was a crushing defeat for the business friendly parties who ran the country's by -- for decades. he 153% of the vote. he pledge to respect the central banks autonomy. won 53% of the vote. he pledge to respect the central banks'autonomy. president trump said saudi

arabia needs to produce 2000 barrels more day -- 2 million barrels more day but the white house walked it back. beijing has cut tariffs almost in half. later thisset to end week. it's in retaliation for tariffs that president trump has assessed on china. angela merkel's ruling coalition is set to be decided today. they will try to decide a dispute over migration policy. minister want to turn back of migrants that have registered first in country. penalty shootouts have decide the latest two matches at the world cup. russia pulled off a major upset, sending off spain.

it triggered a wild celebration in moscow after the goalkeeper made two saves. they give croatia in the quarterfinals. these --et croatia in the quarterfinals. this is bloomberg. let's do a first-place data check because in the bracket, i'm in last place. theres not down under handle yet the we are getting there in a bit. down futures down 150 points. curve flattening. cibc talking up a resilient euros.

francine, your data check. francine: we also have some breaking news from dell. i see red across global equities. a crunch week of for global trade. treasuries are climbing on the dollar strength. he had that breaking news on bell. -- dell. the class five tracking stock, there's the headline. we will have much more on this through the day. bring you the morning must-read on the many topics we could touch on. a presidential critic in the washington post, a conservative, this is interesting.

finlandization, the process proy which a country is induced to favor or refrain from opposing the interest of the mork powerful country. if the lennox alliance arrives is presently in its current form , a will be a miracle. it speaks to a fractious weekend. mr. bolton is spending the/trump meeting as business as usual but no one agrees. the putin/trump meeting as business as usual but known agrees. russian investigation is still being investigated.

the optics are bad. the second point, from a policy inndpoint, is what we saw the similar concerns before the meeting with kim jong-un. there is a significant risk from the president's critics vantage point of this could be the same type of situation where potentially the president could get off script. the weekend was extraordinary. with into monday morning percolating hope. who is in control of the present schedule? who is control of beefing him in control of briefing him right now? kevin: he doesn't have traditional workings from a procedural standpoint. hope hicks has remained in close

connection with the demonstration. she is named as chief of staff, is someone who will have a relationship with this administration and the trumpet mark -- trump organization as she wants. i add your question directly, would argue that in terms of foreign policy, the secretary of state is still in lockstep with the administration and nikki , secretary pompeo has definitely increased his clout in foreign policy. in terms of domestic, as of now, general kelly. that is in the rumblings for quite some time. francine: what does the president or the trump administration choose to do on trade will be of utmost importance to everyone. how will he make that decision? he will make that

decision, ultimately, if he feels the chinese are playing ball with him. it could also pose risk if the chinese choose to respond. he has said if they do choose to respond, he has additional tariffs that he is willing to get through. the administration is pushing this idea that the chinese have more to lose from a trade war or a trade back and forth in the u.s. would. they are looking at the shanghai markets on that front. republicanlks in the party are with the president on intellectual property but not with him on agriculture and commodity tariffs. you a much. our chief washington correspondent. to get briefed. let's do that with seth masters.

a true asian expert. he's synthesizing all the noise that is out there. safed, wonderful to speak to you. i look at thei look at the glooe weekend. article after article, the recession is here. the doom and gloom is out there. why so much? seth: it reflects the fact that there are storm clouds lurking over the horizon. the near term, we are really looking at blue skies. it's an economy that's running hot. we have very good economic growth in the developed world and by and large in the emerging

world as well. unemployment is low, inflation is still tame. all of those are in place to maintain for the next x months or more. -- next six months or more. the bottom line is corporations need to adapt and adjust to all this noise. i am observing them doing just that. every dayorking around the political and economic noise they are handled -- handed. rightight now -- seth: now they are benefiting because the tax cut was beneficial for companies. you are seeing huge earnings boosts. many companies are buying back huge amounts of stock and doing a lot of m & a.

that is helpful for their earnings per share in your seeing one of the better years for earnings-per-share growth this year. we're people are starting to -- our right to start worrying, is what happens when we roll over to 2019 and 2020. francine: should investors worry more about trade consequences and a possible trade war hurting growth to the point where it pushes the world into a recession? alex: -- seth: yes they should be concerned. if it's sunny weather for a week but their storms in the atlantic, you should be aware of them. market has a bit of schizophrenia with the market ping-pong he between excessive optimism and the pit of despair. that is really what the story of 2018 has been. an extreme rally in january and the lot of gnashing of teeth.

it's a conversation with the chief executive officer in europe. the challenges of industry. look for that this hour. stay with us. this is bloomberg. ♪

tom: this is bloomberg -- >> let's get the bloomberg business flash. real car just become a company. built more than 500 sedans in the last week of the second quarter. elon musk had hoped to reach that goal by the end of last year.

putting the pressure on nestle. the consumer goods companies should -- divest its stake in l'oreal. and take a hard look at its governance structure. no response yet from nestle. four of europe's biggest supermarket chains will form alliance to cut costs. they want to increase their leverage with suppliers. will measure purchases for branded goods and private label items. that's the business flash. welcome you to the second half of 2018. with us, set masters. great to have you here. we touched on it before. some of it is central banks that have to deal with a liquid vacation of the system. whether it's stuff coming off the balance sheet or the fiscal

expansion in the united states. now, or we still going to benefit from this? it's one of the most important stories out there. for the last eight years, the system was benefiting from a huge amount of support as withdity poured in central-bank balance sheets expanding. then that changes, right? now it's a tightening. the u.s. has begun to shrink its balance sheet. japan is beginning to consider what its posture should be. tom: the doom and gloom, we're going to recession, it's all lessened by the balance sheet

dynamics of central banks. the curve flattening is not as great as it normally would be. do you agree? let's happening now is actually not unprecedented. what waslar to happening the late 1960's were the yield curve used to be less steep when it got steve. true that as still flattening yield curve will put pressure on financials and it does also tell you something about liquidity preference. as we see, eventually, continued tightening in the u.s., with that will mean is we face the likelihood of a recession but not for probably a year and a half or two years. by that point, it's the question of whether the fed has enough ammunition to deal with the downturn.

seth: i think that's a great question. whether a fiscal thingus was during an time. the fed is aware of that which is why they will probably have more tightening this year. and maybe more tightening next year. i would guess when that happens, it will be another source of volatility. are you more worried about europe? you could foresee a recession or a downturn in the u.s. 18 month, not having done much. maybe it's a europe that suffers most. in terms of where the european economies are in recovery, they are only now getting to be self-sustaining level. the problem in the eurozone is,

you have major uncertainty in italy and with brexit that could change the schedule. how much ammunition does it have to deal with another geopolitical crisis on top of the ones that are already sort of happening. i want to go to a chart. howhows how original and unique the second half is. this is really important. this is wonderful technology from bloomberg. you can steal these charts. you can pull that out and bring it over to your terminal and use it in your second half morning briefing. stay with us. this is bloomberg. ♪

francine: good morning, everyone. francine from london and tom from new york. it's a big day for the german government. merkel and her government partners will hold last-minute talks today. everyone knows it is serious. like the christian democratic party and the christian social union to continue working together because we are success story for germany. we are very strong and people

have expectations for us and it is in this spirit thou be holding discussions today. but it's important for me to be not unilateral and not the expense of third parties. he was see today if affectslition dispute anything. what happens next? thehere concern that cabinet member gets pushed out? with that we can or embolden angela merkel? patrick: all the balls are up in the air. he apparently offered to resign last night. would come toe berlin and make a last-ditch effort to come to some compromise. that could be difficult. if he resigns, the next step is what happens with the government. will there be a break between merkel's party and the bavarians? that could trigger a collapse of the government.

or they could keep moving on. francine: how weekend is angela merkel? we have always heard she's the ultimate game maker, bringing everyone together. can she handle this in a way that no one else can? there's an assumption that she has one that because she has the backing of her party. there is a poll this morning showing that two thirds of voters backed her. the cse was not winning this game politically but it's probably not that simple. even if it passes, somehow they reach a compromise, we can start asking how weekend merkel is. canmany of these disputes she survived and maintain her authority? that's also an open question. francine: thank you so much.

patrick from berlin. you will get back to the markets. we will get back to what this means for euro and the coalition. what we will go a little bit later on, we will look at your markets was set masters and amy bernstein. also on bloomberg markets, the chief executive. asking him about consolidation in his industry. we will talk about renewables. this is bloomberg. ♪ ♪ retail.

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

near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. tom: how about a chart i have never seen?

the great spice maker of baltimore, maryland. look at this chart. two standard deviations of volatility, and we stay within the range beautifully. we have a little bit of spikes up but nothing, little bit of spike out of the range, but nothing like the recent readjustment. i see this in company after company after company where the market is not getting the good news. -- seth: as i had mentioned before, the market is going to be great. the market is parsing that in. because companies, most of them and they're out, buying back stock. i look at the operating

income of the major banks and i a presence dimon has at park avenue. it's going to be tougher for the banks in general. think the oh thing to watch is, some companies and it usually happens at the end the cycle, are getting overenthusiastic in your seeing m&a deals go through that look a bit silly to me. what do you think of this transaction of disney and comcast? it is silly season, isn't it? i don't know how they think they make the numbers work. i'm not sure if this is the one,

but it could be. tom: there was a pun in there. here's your first new -- first word news. >> in mexico, it's a resounding defeat for the business oriented parties that have run the country for decades. they have given over door 53% of the vote. their promise to fight against rampant crime, corruption, and poverty. they want to avoid raising taxes in real terms. a new report concludes that north korea is committed to increasing its stockpile of nuclear arms missiles. this comes on the middlebury institute of international studies. this is part of the road to a summit with president trump. that's undercut the president's

assurance that north korea is no longer a greater threat. republican senator susan collins support a she won't supreme court nominee who would strike down abortion. toldays the white house her it has now expanded the list. and in pro basketball, lebron james is leaving his hometown team again. he is agreed to a four-year, $154 million contract with the los angeles lakers. it's the third time in eight years that james has changed teams. cleveland's drought without a championship. day.l news 24 hours a powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. tom: thank you so much. return to mexico.

carlos peterson of eurasia group asked me to stop everything and speak to him around 10:00 a.m. this morning. he was part of the rugby national team of mexico. you have some real authority here. when they step on the field, after the selection, how does the public of mexico react to that representation in washington? me national team has always played great against good teams. once the emotion for brazil against mexico? >> it's building a rivalry. it's been an ongoing back-and-forth. a phone call this weekend.

shockingitutionally, when for the left has to deal with the traditional institutes of mexico, including the police and the military. can that possibly happened if they really go after corruption in a constructive way? i don't think there's going to be that much of a structural change on that front. bring anythingly that will structurally change and the general corruption is in the country. i don't the week -- i don't think we can see that much of a change in the future. he has new ideas and new ways of thinking and i think people should be expecting a meaningful change going forward. but on those particular things, i don't think is going to be structural. what kind of changes

and what does it mean for investors? they are used to dealing with public servants in the finance ministry that react in a market friendly way. it might changes parties about in a bigger government with more interventionism. there have been specific sectors in areas where they have a different view of inflation. they reject the opening of the sector. it was one of the most important reforms the current administration did. francine: we'll have an impact on how mexico and deals with trade or the trump demonstration? -- or the trump administration? >> i think so. who is veryeone

domestically focused and mexico focused. go against president trump and start any types of risks or battles with him. he will have to deal with this issue. it will have to be his first priority rather he wants to or not. it'll be a very different type of confrontation. many of our viewers have an understanding of topside in u.s. -- top down in u.s. and british politics and others. how does this victory filter down? does it seeped down into the provinces? >> it's going to be a very presidential center change. the whole political regime is about change.

the traditional strong parties are now weaker and more fragmented. the opposition is not going to be very well organized. that's going to give him a lot of room to maneuver. it's going to allow him to make changes from a strong position. what kind of socialist is he? what socialist is this socialist? carlos: he's not a challenge type of socialist. he grew up in the system. he emerged from the ruling party. he was part of that party for many years. he was part of the system for many years so he knows us to operate within the system. is not good to break it entirely. he has very different policy views. he's more of an intervention list and he has a stronger

domestic policy. the way the world used to operate in the 50's and 60's. a more closed economy. but he will not come here just to break everything up. francine: we initially had a bit of euphoria and now the peso is falling. investors are trying to figure out what kind of economic model the nation will be under because of this new left is present. how much time you give him to figure out how far he will go? carlos: i think it will take time for the changes that he wants to implement. he won yesterday but he will be sworn in office on december 1. after that, he will have to start implement in his plan. it will take time to really start reflecting changes in the mexican economy and how the

government operates. that leaves investors a little bit of time to think about how this will change. it's going to be very important to see the different announcements he makes about his policies. in order to try to identify any meaningful risks. this will be more of a medium-term type rather than a short term type to the mexican economy. i think a weaker peso is going to be a constraint. the nafta talks are going to potentially freeze investments from abroad and that's another problem that he will have to confront. i think that creates a lot of uncertainty that will test his ability to achieve this policy objectives. tom: thank you for bringing this up. timeline? does he have days, the see of

months to prove there's some legitimate danger in mexico? they are going to give him the benefit of the doubt. similar to what is happening with the trump administration. his supporters are still supporting him. they are going to wait and be a little bit patient. there are many issues. the security commissions are also deteriorating. the problems will build up and if he doesn't solve them quickly, it could generate trouble. i have brazil beating mexico in my bracket which is hugely positive for mexico. thank you so much. former member of the national team in rugby in mexico. we will continue this morning. make it your second half have it for 2018. a briefing. we would drive you forward during the campaign.

coast-to-coast. this is bloomberg. ♪

francine: -- >> let's get the bloomberg business flash. the world's private technology company announced plans to trade policy again. will return to public markets in a cash and trade -- cash and trade stock deal. their common stock become publicly listed on the new york stock exchange. airways parent says there will be no hostile acquisition. the company will knock into a

bidding war for a discount carrier. he called the region's financial performance very poor. a british software company has agreed to sell its german subsidiary. in linuxhey specialize products. that's the bloomberg business flash. thank you so much. elon musk says tesla has become a real car company. they have finally exceeded their production target. reach his goalto by the end of last year. investmentchief officer at a bernstein is finally with us.

businesses,n many it's been a great bootstrapping story were elon musk continually finds new ways to finance himself. the big question is, has a run out of rope? he's burning a lot of cash and it's kind of a desperate play. the fact that he is managed to cobble together an assembly line in a parking lot for manual labor is substituting for machines that didn't work is not something i would be excited about as an investor. i certainly wouldn't be excited about getting behind the wheel of one of those model threes. it's an experimental, handbuilt product. founder: it means the will make this work almost at

any length. you may see less cancellations of the model three. there are bright spots. if it works, he continues to be a genius and my hat goes off to him. the ingenuity and adaptability that you are seeing from tesla and the elon musk companies is very inspiring, i'm just not sure that it's a sustainable model for a car company. from their cars is absolute safety and dependability. let me pick up on the manual labor with your wonderful expertise. this is how asia and china did it, manual labor. you mentioned, mr. musk seems to be doing this as well. it doesn't work anymore because the technological tolerances of our technology, whether automobile or computer. mitch and spices before with mccormick.

manual labor doesn't get it done anymore. car companies in china today are some of the most automated in the world. there's a reason for that. at this point, it's not about lower costs because cost is a proportion of the total cost structure from labor and it's pretty small. most of the reason they use automation is because of high tolerances. capital labor dynamics have changed and was interesting about that is the word for 2018 is scale. everyone is out there trying to find scale to make profit. to findeth masters scale on something like tesla? define scale on sunday like tesla?

tesla?omething like seth: when you sell a mass-market car, you have to sell not five or 10 times more, but 50 times more models. we are having fun here. francine? francine: always having fun. when are we not having fun? coming up next, we talk with an oil company chief executive and get his take on commodities. this is bloomberg. ♪

francine: this is "bloomberg surveillance." let's get to steal. companies say they see synergies. and the joint ventures for the long term. now is the thysse

nkrupp chief executive. are you satisfied, more or less, with the outcome of renegotiations on the deal terms? your share prices down 1%. i think the share price, they will not do it in one day. i am satisfied. we brought a two-year negotiation to a successful end and it addressed the four major issues for us. addressed the structure problem of the steel industry in europe and we created substantial value for our shareholders. the maturity of our employees, we could secure a more promising future. it's also a good cultural fit for our transformation. what does your largest

investors say about this? i think you need to ask them by themselves. repeat what mr. fairbanks outlined over the weekend. he said he fully understands the logic of the merger. he is seeking a fast execution and the strategy going forward. francine: can you quantify how much more value you get? it's very simple. the 400 million to 500 million synergy creates a value of at least $5 billion. if we can get a higher share on a company delivering the synergies, it's a meaningful reflection of the performance we see right now. this was confirmed by extra auditors. have you spoken to

have a tech capital? apital?vita cpa share discussions with investors here on tv. we are always engaging with investors and shareholders but those dialogs stay between the investor and us. one final question. the steel market has rebounded somewhat. are you expecting it to get better in the next 12 months? it's difficult to chart the steel market over 12 months. we look at the industry at a six month. and we are quite optimistic for six months but it does not change the rationale for the deal. are in normal part

of the cycle. we take it as a positive that we have a more favorable environment and makes the start of this more easy. francine: thank you for joining us. rupp. executive of thyssenk up, daybreak america. a sea of red across global equities. european stocks and u.s. futures following a slump in asia. i'm looking at euro and pound of both lower on politics -- political concerns. ♪

>> mexican history.

the leftist candidates swept to victory as the next presidential -- mexican president and bringing with him alike the majority in congress. angela merkel continues to coalitionwith her partners. trey get serious. until now, it has been mostly talk. are a looming friday deadline for tariffs. escalating retaliation is threatening. welcome to bloomberg daybreak. i'm david western. alex field is off today. >> let's take a look at the open. it's lower.