>> pboc ways then. china's central bank says it will keep the currency stable. crisis averted. merkel has a deal on migration in germany. now she turns back to trade. the u.s. moves to block china mobile from entering its market on national security grounds, launching another salvo in the trade war. good morning everyone. i'm they were trichet in london.

we see some weakness in the asian session. we're seeing equities bid in europe. stoxx 600 up some .4%. we got those comments from the pboc governor. stepping in to support the wand, at least verbally. you're seeing the offshore yuan starting to his rank than. we saw both the offshore and onshore flow past that level that some were saying the area that was a line in the sand for the pboc. oil, jumping as much as 1.2%. after survey showed that opec output is fairly steady despite the saudi's ramping up. car also focusing on, falling the most in two years --er saying that it is glencore also focusing on, falling the most in two years

after saying he was under investigation for corruption and money laundering. later, lewis talk to stephan ingles. let's get the first world -- first word news. sebastian: angela merkel has halted the immediate threat to the government breakup. she has kept her bavarian sister party in the fold. holding stations we set up for refugees already rescue -- already registered in other countries. has hit itslation highest and was 16 years. the annual inflation rate rose to 15.4% in june. consumer inflation start accelerating in the second quarter, putting more pressure on the central bank to raise rates. theresa may is said to be

holding one-on-one meetings with ministers to win their support for new proposal for a custom deal with european union. it's about how closely to strict -- to stick to the use trade regime. meeting at crucial mays country estate. u.k. companies aren't breaking point over the lack of clarity on brexit and the slowdown there experiencing. that's according to one of the main lobbying groups. they have statements on just two of 23 issues with businesses need clarity. uranium president will visit switzerland today and austria tomorrow as a landmark nuclear deal hangs in the balance. it will be his last meeting before president donald trump reignites sanctions.

return to their nuclear activities unless the partners can ensure investment will continue. the central bank is looking for victory. it's trying to stabilize inflation. the economic expansion is the longest at least four decades. trump has said the wto treats the u.s. very badly. this comes in response to reports that trump consider withdrawing the u.s. from the organization. casess. has 187% of the it has brought to the wto since 1995. the european commissioner says he plans to travel to washington this month. day, onews 24 hours a

air and at tictoc on twitter. i'm sebastian salek, this is bloomberg. let's get off with the markets. the governor of the pboc saying china will keep the yuan stable. earlier, some of china's major banks to set to have sold the a slump to break the key psychological level of 6.7. what's up next for chinese markets? you. to see let me's nash limited to a chart. 6.7.ing through as you can see from the chart, pulling back from those levels after we heard from the pboc governor. what is behind him stepping out

today? fundamentals and differences the last few years is, given the shrinkage of the current account, you rely a lot on capital flows. youwant to discourage cases have capital outflows. not the best interest of the authorities to have bouts of volatility. at the same time, the currency has to adjust to a stronger dollar across the board. it has been doing so. it's in the best interests of the chinese government to maintain it edible basket target and two extend it, actually catch up in the face of they want to. i think that move is quite justified and they would like to avoid moves above that. nejra: could it resume its life from here?

themos: anything can happen but in the medium-term, the odds are that the dollar will stabilize. a more stable dollar environment, the yuan is probably going to stabilize as well. how much has is actually reflected concern about china's economy? there are signs of the economy is holding up. as the weakest been a reflection of the fundamentals or something out? themos: i think the two biggest components of how this has juste slightly bigger than an adjustment to a stronger --lar is a, trade war's trade wars. and a fear of a slowdown in the second quarter. what investors haven't taken stock of the fact that despite -- tightening,e

economy has held up a lot better. the consumer is proving to be a lot more resilient. consumption is a bigger part of gdp. it's a lot more stable as a component of gdp. for us, were part of our forecast is that this is -- this tightening leads to slightly slower pace in the second half, it doesn't take you to any kind of rejections which are nearly as bad as they happen in the past. when you're looking at the impact of this tightening on gdp growth. i think that fear, although it's a practical fear, it shouldn't be a common. you were talking about trade wars in one is that the step up and trade war's might already have an impact on chinese corporate. the missionary this chart.

chart.me show you this his is a red flag for you? -- is this a red flag of for you? themos: it's quite negative so far. what we have seen is small. i think this is something we are focusing on very closely but you need to see that kind of escalation. before you price it in. there are a lot of ways that these time -- these kind of trade tensions play. redirection, supply chain redirection. in the long run, these issues tend to backfired but not in a way that is straightforward. nejra: we haven't had a chance to talk about the impact of the

yuan on other asian currencies more for next time. he stays with us. glencore, falling the most in two years after it has been subpoenaed by the u.s. department of justice to produce documents relating to corruption and money laundering. you can see shares down almost 13% over the past two days. as underlive in berlin comes to a compromise. this is bloomberg. ♪

nejra: economics, finance,

politics, i'm nejra cehic in london. it's come across the bloomberg in the last two minutes. saudi and russia have reaffirmed deal to adjust outputs by one million barrels a day. own -- only ticked up ever so slightly in june. let's switch gears and turn to germany. angela merkel has halted the immediate threat of a government breakup, crafted a plan to tighten migration and keep her sister party in the fold. holding centers will be set up at the german boulder -- border for refugees already registered in other european union countries. the minister who threaten to quit will remain in his position. maria joins us. right to see you. this deal seems to have been

appease the coalition partners. with the be enough for the rest of europe? -- will it be enough for the rest of europe? into this reached meeting with three challenges. to keep her position, to keep her party together, and to please her minister. she has done that for the time being. the german government setting up migrant transit centers along the border. when you look fine print, there? -- when you look at the fine print there are question marks. for example, how long can you hold people in the centers? we still need to hear from the spd. these are the german socialist. they were against this idea.

there is a deal but a lot of gray areas still. much to our you so reporter. let's bring in a voice from one of germany's opposition parties. the secretary-general of the green party joins us now. viable is you, how this deal? it's a crazy day in germany. no one knows how this deal will work out. it's a bad deal for the economy. we will see what happens next. what we do see after these crazy , the social democrats will probably fall into a trap and have to agree on that deal. a tough day in german politics. nejra: you say angela merkel is

one of the people who lost here. do you not see that the coalition has been strengthened? deal.l: it's a very shaky octoberhold maybe until for the regional elections. a lot of questions are unsolved. she was blackmailed and she kept her office but she is weekend. eakened.s w minister of the interior blackmailed her and is staying in office until the election. they will probably lose the majority and he is gone anyway. further down the line, we see a dissolution of the cdu/csuou alliance --

alliance, what government would you prefer? it's a sinking ship. a very unstable governing coalition. we will talk with them but i don't believe it would be possible to form a government coalition which could sustain for the next three years. if they split, no one knows what happened -- what happens. could we see a new election? when, if so? believe werrently i will have a government until the regional elections. we will see what happens afterwards. i'm quite sure that the csu will lose an election. a stalemate.

it's not very stable. is angela merkel's faith in her position -- until the end of return -- position until the end of her term? michael: she is weekend. see in the next , the next 12 or 24 months, if we will see debates within the christian democrats if there will be a new successor. she has to get reelected at the end of the year. we will see if she will still be chancellor in germany or not. there will be lots of changes coming up in the next 24 months. nejra: you have been critical of the deal that has been struck.

if your party was in a position of power to solve this migration crisis, what would you suggest? michael: that's not a solution, what we see now. need, just now we saw the pictures of syria. we need migration but we also need refugees to have a chance to apply for asylum in germany. it's one of the results of our history. we need legal migration to germany. we needed for the economy. it's one of the big problems of the deal. germany is strong because we have a strong european union. we have open borders within the european union and for the economy.

may seeries me is we borders coming back within the european union which would weaken germany's economic position. nejra: thank you so much. joining us now on set is the chief economist at dt with you. we have a solution for now. with it likely hold? solution.t an easy especially what this means for austria and italy. a continues the trend towards the hardening of migration policies in germany and europe. in that sense, it is likely to hold. if we think about any changes in the future to this deal, it will probably not make migration policies significantly softer

again but a bit harder than they are now. makingour guest was references to impacts on germany's -- on german economy. we don't think there will be in a impact on the economy. it's not border control. that's not on the cards. the general destruction of business is not on the cards. the german economy is fundamentally in such good shape that the uncertainty we had over the last two or three weeks probably had just a little impact on confidence for a month but will not have a significant impact on the overall outlook for the business. trade tensions are much more important for that. nejra: i want to ask you, how vulnerable is the euro? themos: i think to import items

here. popularityne is the of the party and the people who created the standoff in germany did not particularly increase throughout this. it probably tells you that this was not well navigated. this broaderre is trend of reducing migration. this implies that some of the one offs we saw the repeat. don't think anyone was betting on those repeating. from here, the political math, is probably what is below and cheap your level. the main question is the italian budget for the political side. you see more of an impact

on btp's that on bonds. halger: the issue is not what happens to german policies. that is marginal. likelihoods, was the of a clash between germany and anything, the tail risk has gone up. if there is a clash, you know which bond market would suffer more than the other or which bond market would see inflows and which would see outflows. vulnerable.be another focus for markets is trade. the u.s. moving to block china mobile from entering the telecoms market on national security grounds. another escalation of tensions as we build up to friday.

at the moment, the economic impact is limited but the big question is, you don't know what will happen next. the major force behind the recent sentiments is this trade issue. in the u.s. we don't see it because they have the fiscal stimulus at the same time. it's so was uncertainty. the numbers that are at stake, their miniscule but that's not the issue. trust in do i have the right supply chain. that trust is being eroded. that is bad. nejra: we have seen the impacts in the european pmi's. there were still some signs along the supply chains that trade tensions are starting to impact. is that impact on pmi's likely to manifest its south into the

growth numbers? themos: there is very little shows that pockets of uncertainty have any kind of meaning for this. huge uncertainty around brexit with very little actual long-term impact. the initial stage of the tensions is miniscule so far. speaking, europe and hadrest of the world has negative growth surprising the first three or four months this year. it was not mirrored in the u.s.. that none of the u.s. is going to sustain for the next couple of years. nor is europe going to be as soft. , most likelyt out

you are going to see growth in europe around 2% and some normalization in the u.s. growth base. it means the euro should edge fighter. nejra: thank you to our guests. they stay with us. up next, theresa may is said to be holding meetings with key cabinet colleagues. we will discuss if they will be able to reach an agreement. that's next. ♪

nejra: this is bloomberg surveillance in london. it but check on what training across the bloomberg universe on tick-tock. ofela merkel has staved off

government breakup. u.k. companies are in point from the lack of exit clarity. hutchinson is buying out its partner to take control of that italian joint venture. getting a market-making operating business. to keep chinaved mobile from entering the market. it we just got some u.k. data that we are waiting to break. we have the construction coming in at 53.1. this is a beat on the survey of 52.5. let's get to first word news. said itn: the company

has been subpoenaed by the department of justice for corruption and money laundering. the biggest commodity trader said the business in nigeria -- they will provide further information. the german chancellor angela merkel will be talking about the government breakup. center will be the general order of refugees registered in other eu countries. governor says china will keep the yuan any premium level. wereof the major banks trying to break a key psychological level of 6.7.

a 94th what is seen belgium advance to the quarterfinals. the manager brought into substitutes. the european side had equalized with the winning goal coming shortly after. they fought back from two goals down. face brazil in the finally on wednesday. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries, this is bloomberg. back to the get u.k. and theresa may is said to be holding talks with cabinet ministers in an attempt to win support for her brexit plan. this is ahead of her summit this friday when ministers will agree on a blueprint for the future relationships with the eu. the british chamber of commerce

says they are at a breaking point over the lack of clarity on brexit. joining us is david merrick. but we start with you. good morning. what do we know about what theresa may is proposing? david: this is the big mystery. newre told there is some proposal on what the customs arrangements britain will have with you. there were two options on the table. there seems to be a magical third one which the government will bridge the unbridgeable divide. we don't know what senate. ministers don't even know what is in this. isn't the giant rivet -- rabbit out of the hat? we are still waiting on those details. we have this checker's summit, they will be locked in a room on friday.

there is a paper due to be published next week, which will lay out the details. i think that probably tells us reale-deal fails -- details are being hammered out. nejra: do we have any idea whether that's going to be the u.k. position or present options for negotiation? david: that's not clear. it will be brought up for us. some of her benchmark speeches she made, the one most recently, she said she will make a bigger speech to lay it out. these are based around principles, what she is called the relationship with the eu. a lot of things that have been dismissed as cherry picking, as breaking up the integrity of the single market. she's got away with us by being a little bit light on details. it will be interesting to see if she can continue with that strategy. we got that construction

data, will they be more sensitive to the data or brexit? >> part of this is because of the euro move. the pound so far has had little upside when we've had very good news. it has not been tested at a point where you have real bad news. the limited upside, the economy is not doing well enough to support a very strong euro. that is the main benchmark. of downwardny kind spiral in terms of brexit implies athat negotiation may be required for capital flows in the u.k.

nejra: how concerned are you by what they've been saying about the lack of clarity and how it might impact their plans and what impact it could have on u.k. growth? >> i'm not very concerned at the moment yet. we will likely have some clarity in the next three or four months if we are lucky. bythis uncertainty goes away october, probably the economic impact will be limited. it is a significant risk. i see this is a clear warning to the government to finally get real. when the government gets real, we don't know yet. show theresa may should the drop in the bond yield first to see if there is something and it that the eu could accept. otherwise, these discussions within the u.k. maybe futile. nejra: that was a great comment

from the u.k. prime minister. he said the u.k. is negotiating with itself. chart shows subdued volatility in two different measures when it comes to the pound. his is the market under the pricing brexit risk? i think it's a statement of the fact that recently there was a stable pound against the euro and a stronger pound very recently in the last few days, a slight rebound against the dollar. i don't think the world market would price this should it materialize. think the market is trying to wait and see. nejra: thank you very much. stay with us. stay with surveillance, plenty is coming up including the u.s.

yield curve. what is the outlook for the curve in 2018? is lookingys the fbi into the cambridge analytic a dated scandal. we bring you the latest. this is bloomberg. ♪

nejra: this is bloomberg surveillance. i am in london. now to the curve in with the up,sury containing two wrap

the front end of the curve is going to take center stage in the second half of the year. from is a hawkish meeting baron berg. it before we get to the technical side of this, i want to ask about the yield curve flattening. that's going to take center stage again this week. is this the late one of concern for you that the yield curve flattening, we have heard some members expressing that lately. it's not a major concern that the yield curve is so flat. we have strong economic growth in the u.s. now, which will likely moderate going ahead. there is no sign yet that this yield curve is projecting anything more significant than a moderate slowdown. a big focus in the last meeting which might come up in

interest onwas the excess reserves. i've got a chart that i have affectivehowing the fed fund rate spread tightening and what the dollar has been doing alongside it. does this chart suggests we are going to see further dollar strength? alger: actually, there is long debate about what's going on in money markets. thisis one side of manifesting in fed expectations and the gap between bills. there are a lot of moving parts in money markets. there is one theme, that you have the fed allowing the markets to shrink. the treasury is absorbing a lot of liquidity every quarter. end,cularly in the front

at the same time what you have is banks finding it hard to arbitrage, expensive to arbitrage with different interest rates. they require collateral. the more it resembles cash, the more the value passes. the banks find it harder to operate in this environment. the main question is does this gap today reflect some kind of dollar liquidity? the answer is probably not yet. we don't know for sure. in the medium-term, what it means is the economy requires a larger set of reserves. that means the fed may interrupt or stop its program ahead of what the market thinks. for allar is beginning

larger balancing effect. the two-year is moving up because of fed hikes and the curve flattens. then the dollar is neutralized. morell potentially invert than in past cycles. nejra: you've been nodding along. holger: thanks for a much for the explanation. i pretty much agree. sheet isbalance shrinking and will continue to shrink, but it will end up as a .igger sayer of gdp it's a bit different than banking than before the crisis. a goodsome put forward explanation of why the longer and 10 year yield right -- might remain anchored.

they break through that 200 day moving average since january. you are talking about inflation expectations, will that means the third year yield remains suppressed? upside there is probably for the 30 year yield, 30 years is a long run. you would expect inflation to normalize somewhat. some of the effects of globalization and the rise of china will stay overtime. demographics could turn into an inflationary force. run, therethe longer is significant upside for yields. in the short run, there is upside. nejra: what does that mean for the dollar? we have seen strength in the first half? thatr: it doesn't have much to do with central-bank policy. i see the dollar as a reflection

of risk on risk off. if there are tensions in the world, people move to the u.s. dollar. if we want to see trade tensions later this year, then the euro can recover in the dollar could fall a bit closer to 120 two the euro. just ayou say it's not function of monetary policy. we talked about the strength of the dollar, if you look at currencies, the yen is even better. reflection of concerns around trade tensions? for the rest of the year, is the yen the big winner? themos: it has this phenomenal feature whereby there is very little the bank of japan could do and dollar yen is driven by shifts in the 10 year in the u.s.. off, the yenk is

wins even more than the dollar. we havet thing is thrown a lot at u.s. yields. monthslly, the next six oil permitting, it's probably going to moderate from here. that push for the dollar is not going to be there anymore. the dollar is expensive. whether you look at the international position of the u.s. balance sheet, the u.s. is liability, that's pointing to a dollar expected at these levels. forneed the burden of proof further dollar strength from here. that means a slightly higher euro. nejra: thank you so much for joining us today.

still had, glencoe come is the most after they've been secreted by the department of justice. we discuss that next. this is bloomberg. ♪

nejra: this is bloomberg surveillance in london. let's take a quick check on the market. soft and weakness in the asian equity section. you can equities, losing the stoxx 600 higher. meanwhile, oil, the bti jumped in the session. trading is above $74 a barrel. opec output only one up slightly despite a wrapup from the saudi's. at 10-year is unchanged 2.87%. we are seeing some curve steepening. let's look at sebastian. sebastian: socgen is including the products and market making

operations. the french bank said it will take their investment and asset management business to frankfurt, london, and hong kong. they did not release financial details. facebook is being investigated by more federal agencies. they've hired a consultant. the company says it is cooperating with the ftc and the fbi on their reviews of cambridge analytic it. it will have a tough time regaining user trust. they are doubling user staff. stake ingreed to buy a the italian mobile operation. filing, the practice is worth 2.5 billion euros and will be using free cash flow.

payewaterhousecoopers will more than $625 million. the judge said they did not designed the audit to detect fraud. colonial bank collapsed during the financial crisis. they don't believe the ftse is recorded to the -- entitled to the damages. the u.s.'s move to block china mobile from entering its telecommunication market. as another salvo the between the two biggest economies. they said it should be denied on national security issues. some of itsducing model three production.

that's after reaching the output target of $5,000 per week. they will carry out maintenance work. some analysts question whether tesla would be able to sustain those higher production rates. that is the bloomberg business flash. nejra: i want to bring you a headline. premier hasys the x been arrested. the is just crossing bloomberg and we will give you analysis as we get it. shares of fallen the most after the company has been subpoenaed by the department of justice to produce documents relating to corruption and money laundering. the biggest commodity trader said the documents are in nigeria. 2007 and theen present. joining us is mark burton.

it's been a big move in the shares. is it potentially overdone given the news? mark: on the face of the announcement, yes. to, investors are reacting it's the potential for this to broaden out. problems and it's been well known for a while that a similar's sharp slump when it was announced that they were considering an investigation into it. with this announcement, we have the doj is looking at payments made by the oil business in venezuela and in nigeria. what we are seeing is investors same have they ever reached here? they have an appetite for risk.

they have been operating and difficult jurisdictions. , justestion is now exactly how operations have been run in very difficult regimes. nejra: it's not until we get more information over the size of fines. there could be some certainty and reassurance for investors. thank you so much for bringing us the latest. now, bloomberg surveillance continues. tom keene outins of new york. we have an exclusive interview with anthony douglas. this is bloomberg. ♪

tom: it's morning it, it is president trump against europe. he once them to pay more money for defense and nato.

will the summit work? chancellor capitulates in a spectacular reversal from we want order, control and limit immigration. will a strong euro crash exports? the strengthening of the euro this morning. good morning, bloomberg surveillance. guy johnson is in for francine. i thought last night was extraordinary. shet true to say capitulated to the right? guy: i don't think it goes that far. works to deal with what keeps her in office. thisnk she is leaving phase week and then are implications for eurozone reform. there are indications for what and nato.th trade

i don't think she leaves this stronger. tom: for our european audience, toughight europe got words from president trump about nato. taylor: shares of glencore are taking a dive today. the biggest commodity trader said it's been subpoenaed by the justice department to hand over documents related to money laundering and corruption. the investigation is about the business in nigeria, congo, and venezuela. hasermany, angela merkel staved off the government breakup over migration. she came up with a plan that would tighten immigration and keep her party in the coalition. he will stay on it. the former prime minister of malaysia has been arrested in a

graft investigation. the arrest was made by the task force looking into the corruption. recoup moneyng to from the fund. the u.s. is opened up another battle with china days before they are likely to impose paris -- tariffs on each other. prevent chinag to mobile from entering the telecommunications market. in the world cup, sweden takes on switzerland in the round of 16. england will play columbia. two goals downom to beat japan. belgium will play brazil in the quarterfinals. for everything you need to know about the world cup, log on to the bloomberg terminal. global news 24 hours a day powered by more than 2700

journalists and analysts in more than 120 countries, this is bloomberg. i am taylor riggs. tom: thank you so much. let's do equities, bonds, commodities. it's a quiet day. the curve is steepening. the euro is strengthening, that's an underlying theme. we will talk about this in a moment with oil getting a lift. the vix was 17 showing the better equity markets. there 111.out we are very much in the news, the weaker chinese currency. that has been tangible. asia, dxy is at a number we normally show. this is the dollar index for asia.

we will show that chart here in a moment. what you have this morning? guy: i think you're right about was happening with the chinese currency. they are trying to stabilize it. the turkish lira is very much on the move. there is an upside on cbi's. it was the ppi number the caught my eye. both of those numbers will put pressure on president erdogan. european stocks rally up a little bit this morning. china rallied into the close. is half turkish lira way back from the weakness we saw a number of weeks ago before the election. this is asia dxy. we say good morning to michael purvis. a collapse in lessons learned. we have a stronger asia currency.

the rollover of the last number of years, this is the new rollover right now. i think it shows a perception. weakness, to asian but we are moving in that direction. guy: i want to talk about the big auction yesterday. this could just be a holiday shortened week factor. day yesterdayweak on this auction. of, the thing you don't want to talk about in the markets if you were to ever see the market not buying up bills. yesterday, we saw some evidence of that. had the u.s.we government potentially shutting down. we saw a lack of issuance of bills. the trendline has been lower. that's been important. , the centralson

bank of china is talking up a stable you one right now. maybe, maybe not. emma, i am taken by this. is it still eight managed currency? is beijing pulling all the strings? emma: it certainly looks like it is moving to the market's 10. we might have expected them to step in before now and erase those losses. this is based on the slowing economy, the trade war, all of those fundamental factors. maybe we did see them step in today. it's a crucial move issuing a statement. thatis not a central bank talks willy-nilly and puts out statements. say,said what they always

they want to keep the yuan stable. the market is reading that as assigned they want to stop at these levels. tom: the readjustment is very substantial. this is the onshore, the major currency pairs. simply, we have two standard deviations from 630 up to 670. you wonder where that is. that is a trend. guy: what next? is this the first of a move? where do the chinese go next? you said you were surprised they didn't step in before? surveye actually did a which did pick 6.7 per dollar at the level they might try to defend. it does seem as if they are acting to do that through verbal

intervention. we also saw but we think is intervention in the stock market, which boosts sentiment. stakes that are called into action whenever china thinks stop losses have gone too far. maybe we've seen a temporary reprieve, but it's quick to remember that the fundamental factors of heaven weighing on are still there. we are seeing lots of signs of that. guy: thank you very much indeed. simon french joins us. he is a chief economist. he will be with us for the rest of the hour. what took the chinese so long? simon: this isn't a simple task. they are looking at domestic policy support for their

exporters. is aof the reaction multiple response function they can use, not just the threat of tariffs. the question is that doesn't come without its costs. therefore, there is a point. what the chinese management function is to trade wars versus the economic slowdown. you have to go back three years, they decided to see it weaken. once the response function in a trade war? do they let it move further? we haven't seen what comes back from the u.s. guy: what are the implications on fixed income? >> the reason there has been of theetoric is because pace of the depreciation.

this is the important factor. it is destabilizing for the economy, for those with leverage. i'm not suggesting they wouldn't be comfortable with this going to seven against the dollar. given the slower economy. tom: let me ask you an amateur question. good morning. controljing actually it? is it really 100% managed? do we overplay that? is china isoint wanting to liberalize the account and let international investors participate in the currency. it's not going to happen if the pboc is intervening all the time. they have to step back from intervention and allow the currency to find a fair value so it becomes more international.

emphasize it's not important here. it's the pace of the depreciation. i would argue the dollar is expensive here. it's not just against china, it's expensive against the euro and even against sterling on a medium-term basis. we've got the market ahead of itself. i think we've got to find a turning point, which is not far off. we will have more in the market. tom: we will continue with simon and peter. let me tell you about this. the colonies will have a celebration tomorrow. we do that in boston. a fireworks spectacular tomorrow, 8:00 p.m. alix steel.

♪

taylor: let's get the is the/. french banks are wanting to expand in the largest european economy. they are trying to exchange products and market making operations. terms of the deal were not disclosed. the commerce bank unit generated $406 million in revenue last year. tesla has called a timeout. they've been working around the clock recently to be a production goal for model 3 sedans. the company is pausing production to allow them to do basic maintenance and upkeep. workers will be able to

celebrate the fourth of july holiday. navigatebia has to prices. opec's biggest producer may be tempted to cut prices to entice asian buyers and satisfy president trump. on the other hand, this gives them an excuse to price higher and boost profits. .t's difficult that's your bloomberg business flash. tom: thank you so much. it's about recalibrating for the second half of 2018. we do that with simon french and peter joining us on the london desk. let me talk about the yield curve. what does this yield curve signal in europe with all those negative interest rates? is it so distorted you can't use it as a tool?

simon: i think it tells us there is a lot of reading across from it. we deal with that on a daily basis across from italy, hungary, slovenia, austria. it tells you that the way back to positive yields across the curve is the kind of reform we got a little bit excited about last year with macron, the french and german alliance. the yield curve tells you the market lost faith in that. on it?at is your theme we saw a recalibration toward a stronger euro. i'm hearing that from you as well. peter: we thought it would end the year it 125 after taken into account the easing that surprised the market. the fundamental point here is

from looking at a number of global markets, we don't see how the fed it can continue on this while these hikes other global factors are in their heads. tom: what is interesting in the last week or two weeks is we are really seen big figure calls from houses. there was a big call on the euro. we are seated across all the major currencies, real adjustment in the forecast. guy: is there a china connection in all of this? we have this bill auction that did not get coverage. are part of parcel that story. looking at have been maybe migrating away from u.s. assets. that could be a factor in this.

it's going to be something to think about when you look at the way the flow story is going to work. stabilizenese want to the currency, do they need to sell treasuries? peter: as a course, that maybe a bit extreme. is theical conclusion u.s. is going to be applying tariffs to the trade they do with china. u.s. trade will become smaller in total chinese trade. this means they have less of a response going forward or they could be an active seller if the currency continues to depreciate. i think it's a logical conclusion to expect they could

have continued less sponsorship going forward. guy: where do you see the call on the euro going? the tray stories beginning to develop. maybe the chinese side will shift the balance toward europe. that includes flows into the european 16. simon: we don't have the outside risk on the euro-dollar. the reasons the european union get caught in a devaluation iory coming out of china, agree with the idea that the federal reserve is going to start to look around the rest of the world and say we are decoupling here. it's quite interesting. know that inflation will

into trade -- pass rebalancing. that's the core of his message going into the midterms. let me tell you about our next hour. we will do a re--- a real recalibration on the u.s. economy with megan green it. she will talk to us about the huge economy. is moving into 2019. worldwide from london and new york, this is bloomberg. ♪

guy: glencore is tumbling the most in two years as its trouble escalated dramatically earlier. u.s. authorities are demanding documents related to money laundering. gordon us now on set. the stocks took a little while ago. this looks broader. is that was freaking people out? mark: what this tells us is two things. it demonstrates that their issues with its african business aren't going away. the first part of this is they are faced with regulatory scrutiny in the copper in cable

business. there was a sense this was fading. they struck a couple of agreements with partners. cases that were basically putting the company on the road to having assets x appropriated. the market light the result of those issues. with this doj investigation, we have a clear indication that the issue is rumbling on. got congo,'ve nigeria, venezuela. mark: the reason shares are today,ng -- falling there's a sense that regulatory scrutiny is on the wider

business and that's going to become an issue going forward. there isn't too much information about the precise nature of the investigation. it does have a legacy of legal issues related to its oil business. it's a question of whether it's just a copper issue or something else. guy: thank you very much indeed. later on we've got a great conversation,. is taking over for jim hogan. there's a lot he has to do. that's a fantastic conversation coming up on bloomberg. ♪

tom: "bloomberg surveillance" in london. guy johnson. tom keene in new york. right now, first word news in

new york city. here is taylor riggs. taylor: the trade conflict between the u.s. and china may already be showing up in official data. rose 5.4% in the first half of the year, almost 14 percentage points lower than a year ago. the british chamber of commerce says companies are being forced to slow down investments while they await answers to key brexit questions. the lobbying group says the government has made limited progress on just two of the 23 issues. the stakes have been raised for the secretary of state's trip to north korea this week. there is evidence that kim jong-un kept ramping up his weapons production before his meeting with president trump last month. mike pompeo wants a detailed from kim's plan

regime. the federal reserve may offer clues this week about how high interest rates may go. they may also show officials debated the risks caused by dispute between the u.s. and its largest trading partners. 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 am taylor riggs. this is bloomberg. guy: thank you very much. german chancellor angela merkel has halted the immediate threat of government breakup. , holding centers will be set up at the german boarder for refugees already registered in other european union countries. the interior minister had remainned to quit will in his position. joining us now, maria from the

berlin. give us the details of the deal. maria: good morning. ran into this meeting facing three challenges, stay in office, make sure her christian democrat.org stays as democrat platform stays as one, and keep her interior minister. those who cannot stay in the country will be quickly deported back to other countries. i want to show you the front page that germans are waking up to this morning. --says unity on a asylum. this means significant concessions for merkel.

the greens are saying they don't like this idea. they are concerned about the humanitarian angle. fromill have yet to hear the austrian government. guy: where does this leave angela merkel going forward? where does it leave her ability to manage eurozone reform to deal with the president of the united states? how weekend is she as a result of this? maria: we know that this is a chancellor that has been weakened ever since her election performance. clearly the german public opinion is divided on refugees. she has had to make significant concessions. the person that is strongest out is her interior minister. there is a regional election in germany where he is going to

play this on migration. we don't know if this is a deal that is going to last for three years and get her the three years she needs. this is underpinned by the idea of free movement in europe. governmentsg other asking what is going to happen? if we are keeping borders open, what is going to happen to people between germany and austria? sheificant concessions show is not at her strongest right now. guy: thank you very much. french,th us, simon andrew gorman. simon, we know that angela eakened.as wae there is already friction between the parties. what hope do we have that europe is going to deliver the reforms

economically that it will need when the next downturn comes. you can see the issues surrounding it already. is europe going to be ready if merkel is weak? reason any leader is given a finite amount of political capital. she is spending it on many fronts. she is spending it with the president of the united states, her own interior minister. is she going to then spend it on the kind of fiscal reforms that we have spoken about four years? mario draghi finishes every statement at the ecb with commitment to structural reforms. if angela merkel is going to be at the vanguard of that and take a skeptical public administers in her own cap, she is going to need some of that political capital. i want to pull in the

chancellor with the president of the united states. the zeitgeist out of america this morning is simple. trump hates europe. how will merkel respond to that? like to bed quite the leader that upholds the global rules-based system to use the jargon that has existed broadly since the end of the second world war. she would like to position herself as the guardian during whichriod of time during the trump white house stays in power. whether she can actually do that, she will have to reinforce her own domestic position if she is going to play the international states woman. all of domestic stories and european stories, italy, austria, greece, poland, czech republic, the list is extensive,

all play to the fact that she cannot operate at the supranational level. tom: if there are all these little stories, and the buttress is nine big figures in europe, that makes for a fragile economic backdrop for europe. when the president comes to europe, london, when we see the protests that are expected, what will be european economy be like? is it slowing down enough that eakened economy that the president addresses? forhat i see is an appetite aggression in a managed way. we don't see the crisis of 2011. there were countries that had their debt crisis that were threatening to take down the eurozone.

we have now the political appetite, the legacy of the great recession, the shift eu iss populism in the well underway. that means there will be strong demand to take control as the brexiteers said, to decentralize the sovereignty within the eu and the eurozone. when it is a managed disintegration, it has very different financial implications. if it is a managed disintegration, what happens about the target to balances? there has to be a deal whereby those target to imbalances within the system have to be dealt with. as a result germany putting in a disintegration deal, and therefore there is a disintegration cost that has to be paid. guy: let's talk about fiscal

spending in a little more detail. institute, the president in the united states is unlikely to deal with the german surplus. merkel hides behind it being an eu problem. in the presence you, it is a german problem. you are not but his solve it by dealing with exports. the real issue behind that surplus is germany just doesn't import anything. germany under-imports. it doesn't over export. they chronically under spends on infrastructure and pretty much everything. if you are in the white house, and you are trying to figure out how to deal with the surplus, how do you persuade the germans to spend more money? is it on defense?

where do they spend more money, and how can the u.s. get them there? >> it is two things. the rebalancing of gdp expenditure in germany, where there is limited leverage for the white house. what the white house can do, and this would be a word of caution to the white house of being too aggressive with the european union and particularly germany on its current account surplus. look at what is the single thing that has united all 27 european countries. it is brexit. when there is a challenge to the structure, it has united that group quite effectively. there is a danger that if the u.s. ramps up its rhetoric, you see a unity that may not necessarily serve a white house that is quite comfortable with the european union that is squabbling amongst itself. tom: the beginning of a

discussion that i think will take us to helsinki and mr. putin and mr. trump in a couple days. your morning briefing coast-to-coast on bloomberg radio, washington, new york, the bay area. mood, karen moskow, bloomberg daybreak. stay with us. this is bloomberg. ♪

guy: guy johnson in new york. francine has the day off today. angela merkel has halted the immediate threat of a government breakup in germany. she has crafted a plan to

tighten migration to these are bavarian sister party. european countries are said to be at the breaking point over the lack of clarity for brexit. oneeting designed to decide the blueprint for the future was chip of the eu. betweenationship britain and the eu. ck holdings has agreed to buy out its partner. jen acquiring commerzbank's business. mobile blocked china market.tering its to raise rates towards the end

of the year. frenchith us is simon and gorman. is it time that we see the expression raising rates? it has been in lockstep with the ecb. >> i think the strength or burgeoning strength on inflation suggests there should be a tightening trajectory to the monetary policy. i take issue with what some of riksbanke isthe likely to be implemented. an economy like sweden with such with thenks eurozone area to out of step with the ecb, this is a problem. if it is tightening policy, it is much more of a q4 2019 problem. >> why would you go in front of

the ecb? >> you would only go if you were concerned with domestic issues in the housing market. consistent with a lot of other central banks, are they going to use macro intervention as we saw with the rba statements overnight which don't necessarily you with the tools that address domestic housing problems in the economy's right now. athink you have to look whether the ecb q4 2019, that is probably moving to the right at a fast pace, whether it holds well into the next decade. tom: when i look at where we are within all of this, the mix of this as well, guy mentions the negative interest rates.

none of this is my textbooks. what is our confidence that we negative interest rates? >> it is very low. i think there is good evidence that we are stuck in a unity trip the euro area. the euroity trap in area. i am very pessimistic about normalize interest rates on a structural basis. we have monetary policy the district that is trying to what are structural issues. the central bank should be what reallywhether gets discussed, whether this reaction function of monetary policy is correct and whether we

should be coming up with some sort of political solution. tom: fascinating. what does mr. draghi need to do? he is getting rave reviews does he need to take a more aggressive approach to normalize? >> we need to start talking .bout draghi the man he cannot look beyond 12 months for the simple reason that he will be impinging on the next president of the ecb's tenure. very politically, will be controversial. i want to go back to the textbooks you are reading it we need to go back to a start if we are talking about positive nominal yield, then we need to talk about debt cancellation. what should we look at?

$235 trillion globally of debt. if that starts to be canceled of ofturned to a period the nominative positive interest rates, i think we are so far from that on a structural basis that we need to be looking at very different instruments at which this cancellation said top of the list. guy: thank you. to be there, the most important thing happening in sweden today is what is happening later today. coming up on bloomberg, stephen engle under his joining us. standard chartered bank. that conversation at 9:00 a.m. in new york. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." i am taylor riggs. comcast has given up the fight

with disney over by the 21st century fox asset. they had considered a partnership with private equity firms. brian roberts could be open to buy just some of the fox assets. lyft is joining the bike rental business. it is purchasing the operator of city bike in new york and other major u.s. cities. last month, the two were discussing a price tag of $250 million. uber bought electric bike start up jump bikes in april. kids across the u.s. are not the only ones feeling the absence of toys "r" us. so our retail landlords. most since 2009. the company is now in bankruptcy

proceedings. that is your bloomberg business flash. tom: thank you. you can rip up the script with deutsche bank about every eight hours. it seems that every eight hour point, another body walks out the door. let me bring it on the bloomberg. this is the actual screen we see. this is out of asia. two more bodies at deutsche bank. james thompson, deutsche bank asia. what is really important here is because details are private. details are private as the ceo wanders around telling everybody things are great. we need to get the gap between things are great and private this morning. how bad is the hemorrhaging this early july? >> we have seen a sustained pace you have out.

that has been the case for several months. what is not clear is how many of these departures are part of the plan and part of the downsizing the bank has announced at how much these are voluntary the partners from people that decided to -- departures from people that decided to jump ship. we will get an idea of the impact hemorrhaging has had on revenue and the bottom line. the company survey on morale out last week shows some of the ateauing and concerns about the future of the bank. tom: thank you for the quick update this morning. she is running all of our bank coverage in europe somehow we will be speaking more to her in july as well. president trump really going

after nato. president trump sort of jawboning and getting ready for brussels in a week. we will look at mergers and acquisitions as well. comcast is in the news as taylor was just talking about. do they do it today? do they do it this week? fireworks for comcast. robert profusek with jones day. stay with us please. this is "bloomberg surveillance." ♪ what's a gig of data?

well, it's a whole day's worth of love songs. 300 minutes of baby videos. or, it's a million chat messages. a gig goes a long way. that's why xfinity mobile lets you pay for data one gig at a time.

and with millions of wifi hotspots included, you'll pay less for data. it's a new kind of network designed to save you money. click, call or visit a store today. tom: tom: this morning, the president takes on europe. is the atlantic alliance broken?

president trump troubles to brussels next week. we consider a 2% plus american economy. we consider chairman powell's degrees of freedom. mr. roberts will respond. we consider mergers and acquisitions fueled by the new cash. with us this hour, robert profusek of jones day. we are live from world headquarters in new york. guy johnson in london in for francine lacqua. let's wrap up the script right now. who does sky tv want to take them out? want?es fox do they want disney, comcast? do they not care? guy: if i was a sky shareholder, i want the person that will pay me the most money. leave it at that. in which theyriod

thought they would get a bidding war. that would be fantastic. that seems to be fading into the background. money talks. tom: money talks. this is going to be good. have bob profusek coming with us later in the hour to talk about this idea of private equity piling in. we will talk about the president and his language tone to your. your first word news in new york. taylor riggs. taylor: shares of glencore are taking a dive today. it has been subpoenaed by the u.s. justice department to hand over documents related to money laundering and corruption. it has to do with their business in nigeria, the democratic republic of congo, and venezuela. the former prime minister of malaysia not cheap razak has been arrested.

it is looking at the troubled state fund 1mdb. in germany, chancellor angela merkel has ended the immediate threat of a government bi breakup over migration. seehofer ended their disput. seehofer had threatened to resign. the u.s. has opened up another battle with china, just days before the countries are likely to impose tariffs on each other. the trump administration has moved to red china mobile from entering the u.s. telecommunications market on national security grounds. sweden takes on switzerland in the round of 16.

yesterday, belgium came from two 3-2. down to defeat japan for everything you need to know about the world cup, log on to your bloomberg 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. i am taylor riggs. this is bloomberg. tom: thanks so much. delicate ballet . this is in switzerland with mr. rouhani from iran. this is exceptionally symbolic with the president of iran coming for the first time in two years to europe. the symbolism of this is profound, visiting austria as well. there is a huge set of symbolism, isn't there? guy: absolutely.

the europeans are making sure the iran deal survives in some shape. that is looking increasingly difficult. he is going to austria. they will hold the rotating presidency of the eu. the europeans are hanging onto this idea that something can be saved. tom: the symbolism is extraordinary, one week before the president of the united states takes the grantor of his fractious -- grand tour of his fractious europe. dow futures are up 116. curve steepening. oil is up. brent crude 77.87. remnant be was weaker. turkish lira, are you doing that again? guy: i think so. why not? we saw a very strong print on

inflation earlier on. that has boosted the dollar versus the turkish lira, putting pressure on to what is happening with the new erdogan administration. asian stocks weren't. chinese stocks floating with key levels at the moment. dxy, this shows one of the many dollar stories that are out there. dxyr down we go with asia weaker. an lows, the key rollover. you wonder if we get back to that kind of weakness. we are not there yet. i let's talk about the auction late yesterday. low, low, low.

the reason for this is you have a holiday coming up. as a result, traders are not going to be seated at their desks. that is probably the most logical explanation. the chinese authorities, how do they deal with their currency and what is going on now? do they not show up for auctions? do they not buy treasuries the way they once did? i am just having a little bit of fun. tom: beautiful. let's go to kevin cirilli, our chief washington correspondent. my basic theory is that it is too hot to play golf. what will the president be doing this fourth of july? kevin: it is too hot to be doing anything. the president will continue to prepare and interview his supreme court justice picks. that selection is set to be made monday. the battle lines are already

being drawn between which picks he would decide on and the potential indications. any pick he makes, he isn't a need centrist support from senators susan collins and joe manchin, republican and democrat respectively. tom: let me go to my morning must-read. this swings back to the fractious white house you know so well. what is important is who wrote this, daniel dresner at fletcher school at tufts university. he is widely respected as a centrist. he is brutal. navarro was clearly wrong. he takes on the secretary of the treasury. mnuchin seems generally canada and mexico did not only rely on the wto to push back on tariffs. that mnuchin is surprised by this is surprising.

he really goes after the president. as for trump, he is lying. there is zero evidence that any country has expressed an interest in negotiating a new bilateral deal with the united states. europe inent goes to a week. who will he speak to on trade? kevin: he will have to have a message for the europeans. where gain a resident is right is there is the thinking that uld go through the wto, and the administration would play hardball. that is a bit far out before he is considering making significant changes to the u.s. involvement in the wto. there was one thought of having a congressional response to that. there is not much support on capitol hill amongst republicans to tweak the wto and the u.s.

involvement in that. many republicans are very skeptical of what the president is doing, not on intellectual property, but commodities. guy: i am looking at the new york times website. it says trump warns nato allies on defense or else. can you walk me through the or else bit? kevin: in regards to his previous strategy with nato, he wants nato allies to pay more, and if not, he is going to hit them hard on bilateral trade negotiations. you look at the response we have seen between the eu, canada, mexico, south korea, and china. there is intense push back and increased skepticism in terms of the presidents long-term strategy with regards to trade. tom: thank you so much.

greatly appreciated this morning. it is going to be a really interesting 10 days. no, like 13 days. july 16 in helsinki. listening to all this in boston, megan greene with manulife asset management. manulife call the on the u.s. economy? is it make america great again forever? megan: no. absolutely not. the sugar it is the tax bill and spending bill. that should peter out. the u.s. should converge with its potential gdp growth rate, which is around 2%. we expect growth rate around 2.7%, a little below consensus. the big bonus of the tax bill, which was the expensing piece that encouraged is now being offset by all this uncertainty around trade.

companies that may have brought forth investment plans are now delaying because the operating environment is so uncertain with u.s. trade policy. i think the sugar hit will peter out quickly. in 2020, we will be facing a bit of a fiscal cliff, not as big as the one after the global financial crisis. but that is going into an election year. guy: good morning. to that point, how deep will the next recession be? will it be shallow? walk us through the back into a we're talking about. -- the magnitude of what we are talking about. megan: the magnitude will probably be dead like -- debt like last time. history does not repeat itself. it just kind of rhymes. companiesr small cap

look pretty highly leverage. that is ok right now, but that is set to change. led crisis, debt fue that could last longer. i don't think it will look like the last one, where i don't think we'll have to take out a bank. it depends on how much we let these bubbles go up before they burst. tom: coming up, we will speak to dr. green about david price and his inability to strike out the dreaded new york yankees. a major theme for all of you nationwide, the boston fireworks. not the red sox and yankees. the actual boston pots. this is a huge tradition for new england and america. that is it :00 p.m. tomorrow.

taylor: this is "bloomberg surveillance." m taylor riggs. socgen is buying the exchange traded products and market making operations from germany's commerzbank. the commerzbank unit generated about $406 million in revenue last year. tesla has called a timeout. electric car company has been working around the clock in recent weeks to meet in production goal for its model three sedan. the company is causing some production this week that will allow tesla to do basic maintenance and upkeep.

workers will be able to celebrate the fourth of july holiday. that is your bloomberg business flash. tom: thank you so much. on the american economy, megan greene of manulife asset management. 2.7% on the u.s. economy as you pointed out moments ago. some of that will come with better capex. is there investment to buy back more shares? megan: we have seen a small tick up in capex. it was not in line with the hopes of many analysts after the tax bill. much more importantly, we have seen a ton of m&a deals and stock buybacks. it seems like what companies are doing with repatriation and the

proceeds of the tax bill is lying back their own shares. nato,he gdp, what is that and exploding boom consumer? megan: i think it will be strong. i think part of it is carried by the consumer. a big piece of it is trade and inventory. that will be driving the q2 figure. 4%,hould get growth around which is as strong as it gets, then decelerates. guy: what kind of wage growth are we going to get? megan: we have jobs data coming out on friday. i think the consensus is 2.8% year on year average hourly growth. that is in the range it has been 3.5 years now. unemployment could fall further. the markets could get excited about that. at some point, the phillips curve should reassert itself.

there are so many factors that are undermining the phillips curve, things like demographics, the economy, service sector jobs. the fact that we have access to a global workforce now consider just our domestic workforce, and there is a glut of cheap labor out there. that will keep pressure off wages and off inflation. i don't see this late in the business cycle surge. guy: august 1 is not a good meeting, but it is as boring as you can get with this fed. would it be a good time for chairman powell to surprise everyone? megan: i'm not sure why chairman powell would want to surprise the markets. i'm not sure central bankers like to surprise the markets. i think it will likely continue through q2. statistical quirks need to drop out of the year-to-year

comparison. they know these are statistical quirks and likely transitory. they will be looking through it. inflation is looking a bit better. financial conditions have tightened a little bit. the fed has room to move without roiling the markets, but the yield curve is really flat. thated is fairly positive 10 out of the last 13 recycles, they have pitched the u.s. into recession. guy: thank you much. megan greene of manulife will be staying with us. coming up, an exclusive interview with tony douglas. possible restructuring of that airline out of abu dhabi. this is bloomberg. ♪

guy: guy johnson in london. tom keene in new york. francine lacqua has the day off. angela merkel halting an immediate threat to government breakup. tightening immigration and keeping her bavarian sister party in the fall.

more, let's go to berlin, where we find bloomberg's maria tedeo. did anyone win in this negotiation? >> good morning. there was a winner, and it is a clear winner. that is see offer. he had vowed to resign. it was a clear challenge to angela merkel. at the end, we saw was a lot of concessions from angela merkel to stay in power and keep the christian democrats in power. they did not want a party split. major concessions. the tension is the german government is going to put at the border with austria, creating tensions with the austrian government. principalkel said the of the free movement of people is a redline, now it looks like she is blurring her own redline.

guy: what about the other german parties? these two are not the only german parties. what do the other parties in the parliament think? >> that is right. thirdrman stp is the pillar of this coalition. we know angela merkel is going to meet with them today. she wants to hear what they have to say because they could pose a challenge to her government. you see how weak this chancellor is. in 2017, they said this idea of holding people in holding facilities is something they don't like. they don't like the humanitarian angle. will they try to get a different deal with merkel? that seems unlikely. the green party, which has threatened to leave on the migration issue, says they don't like what they see with the chancellor on a humanitarian ground. we don't know under what conditions those migrants are

going to be held and for how long. lots of questions on the humanitarian angle that need to be resolved. tom: thank you very much. we will continue our conversation of the day for those of you interested in the fervor within transactions in global wall street. us fromrofusek joins jones day. we will speak to spirit of m&a and ipo's. all that cash moving around with futures up 10. 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: bloomberg surveillance. thanks for being with us

coast-to-coast. the trade conflict between the u.s. and china may already be showing up in official data. china's exports to the u.s. rose five .4% in the first half of the year. almost 14 percentage points lower than a year ago. businesses in the u.k. are at the breaking point over the lack of clarity over brexit. the british chamber of commerce says companies are being forced to slow down investments. the lobbying groups as the government has made limited progress on just two of 23 key issues. for thehave been raised rest secretary of state mike pompeo's trip to north korea. there is evidence that kim jong-un kept ramping up his weapons production before last month's meeting with president trump. the presence as north korea is no longer a nuclear threat. bank isn the central

moving closer to its first interest rate hike in seven years. the banks governor spoke to bloomberg. onrect things are moving quite nicely in this rich economy. it depends on the growth numbers of the global economy. on the other hand inflationary pressures are actually quite modest. given that that is the case we ourly would like to see inflation target close to 2%. global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. i'm taylor riggs. this is bloomberg. is the interview of the day for those of you on global wall street. it is about scale affected through synergy in really low interest rates. and iould be the boom

mean make america great again boom in mergers and acquisitions. the transactions and combinations. there is no one better to speak to then robert this morning. to get out of the way to usuals you are representing so many different people. we can't talk about the specifics of comcast. i want to ask you is today the day. can mr. roberts do a transaction. that would be rude. why is all of this going on? i keep. the word scale. is it that simple? >> there's never one explanation for anything i guess. i think the main factor is on the one hand and a horizontal transaction we're getting bigger. it is scale. look at t-mobile sprint. two big players trying to combine. is isllmark in my view

also these vertical transactions where it's not just adding more of what we've got. there's lots and lots of that and that is powered by technology. it's the pressure of technology. it was an announcement this ipg group announced buying a data mining company. i'm not exactly sure what data mining is. i have a sense of what it might need. the business was bought five years ago for $150 million. you how things are changing. tom: this goes back to the nobel laureate thomas schilling in his classic essay on how people leave the theater. speak to the tooth --

the cfos right now. is this the pressure of cfos trying to get out the door of the theater before the rate structure moves up? >> there's a little bit of that. ceos and cfos don't wake up one morning and say i should have thought about t-mobile merging with sprint. they think about these things a lot over a long period time. rateshere's a sense that may go up that is effective. earlier in the year the 10 year treasury got over 300. back well below 300. it is not clear but it is a factor. of burningand years companies together. can you state the silly season is here? i don't want to speak for mr.

roberts, mr. eiger, mr. murdoch and sons. just in general is the silly season here? look so.t it doesn't have the feeling of the late 90's when everything was changing and everything was going to be.com. it's actually feeling much more substantive. especially in these vertical transactions. there are things that make sense. if you don't do something you may be marking time. what we are starting to see is acquirers share prices going down when deals are announced. is that a canary in the coal mine? >> sometimes they do and sometimes they don't. we have been in period where there's just the euphoria of it.

it is much more selective right now. most deals are pretty well explained. even when there is an initial weakening the management team goes out in the road, explains the strategy, explains the synergy. deals with things that weren't dealt with perfectly in the investor call and they intend to come back up. that big deal creates some uncertainty. there is pressure on the price. we see it every other day about the trade wars. it is the trade war, it's not a trade war. tensions are easing, they are increasing. it's all that stuff. in general strategic deals are pretty well received. sometimes and i think this is a function of the fact that we've ,ot these step out transactions those are harder to digest when you are an investor.

i think you get more pressure then. you bring up the issue of trade. there is evidence and it's interesting that we've now got china mobile headlines on the bloomberg this morning. that theeing evidence authorities in washington navy are pushing back in key areas, technology being the most obvious one. how is that going to affect deals getting done? what are the applications of that?- implications of >> most significant businesses are auction. if you take out a big part of the financial or industrial equation is going to have an impact. right now there is a lot of skepticism about selling things to chinese buyers. there has always been some. i don't mean to sound like some nationalist here.

today you got to look at the administration. think about the broadcom deal. that was turned down before the application was filed. it was just blown up. to ask you.ng what was it like the last time you talked to brian. i can't do that. i get the game. i do want to know the game theory across all of jones day transactions about we have to do this deal so the other guy doesn't get it. is it the same as it has always been or in 2018 is that a different feeling? >> it's pretty much the same. there's usually more than one other guy. we operate in a global economy. it isn't one other guy. tom: it's not like the movies anymore. >> that's one of the things that the chinese being kind of sidelined in many transactions.

particularly ones that deal with technology. if you take that out of the equation it affects the dynamics of the auction process. tom: there is so much money coming in with comcast looking for private equity. translate that for us. there is these pools of money out there. you know better than me. are they just dying to get those aliens involved? -- billions involved? >> the folks you just mentioned are very smart buyers. the money is not burning a hole in their pocket. by the same token the funds that have been raised are staggering. tom: the bottom line is norway to go aftere going

whichever media property without embarrassing jones day here. >> that's right. you are going to see a lot of that. are thrilled that robert k is with us today. megan green with us as well in boston. mr. rouhani is in switzerland. this is a hugely symbolic trip. the iranians travel to europe. rouhani managing the message. summarize the goal. europeans would like to see something salvaged from the iran story. we will wait and see whether that ultimately turns out to be possible. muchly the president very against that and making it difficult for european companies in particular. we will see. keene,y johnson and tom

please stay with us. this is bloomberg. ♪

>> this is bloomberg surveillance. let's get to bloomberg business flash. comcast hasn't given up the fight with disney over buying the 21st century fox entertainment asset. the company has considered a possible partnership with equity firms to compete with disney's $71 billion offer. comcast ceo brian roberts could be open to buying just some of the assets. lyft is joining the bike rental business. thes buying motivate, operator of city bike in new york and other bike rental programs in major u.s. cities.

discussingthey were a price tag of $250 million. bought an electric bike start up in april. kids across the u.s. aren't the only ones feeling the absence of toys "r" us. so our retail landlords. the amount of occupied retail real estate in 77 large cities fell in the second quarter by the most since 2009. toys "r"tor, shattered us stores. the company is now in bankruptcy. that's your bloomberg business flash. tom: with us is robert profusek of jones day. in boston is megan greene. let's go to her for a backdrop on these transactions. so much of what happens in mr. profusek's world is going to be they stuff interest rates. there is a panic of higher rates and yet you have written about a value which is

perpetually low rates. is that still the call? low nominal rates and low real rates? i think that's right. rates are only going up. if you look at the amount of debt we've got out there the volume of triple b rated credit has risen five times since before the financial crisis. highero start getting rates and downgrades we could just fled the high-yield market and that could have implications for the markets as well. so much of this has been debt fueled. tom: talk about the underestimation of private debt versus sovereign debt. is america up to its eyeballs in debt? that bob profusek and joan stay signed off on? up to itssolutely eyeballs in debt. in terms of sovereign debt the u.s. does benefit from having the global reserve currency so i

don't think that is something we need to worry about so much. with got a ways to run before we hit the kind of investor strength that europe hit. we do have a lot of debt. i think it is not specific to the u.s., we don't have a sustainable growth model that doesn't center around leverage. i think we will continue to have all of these booms and busts. i hear the hurdle rates have come down or they just don't exist anymore for many of .he pe firms that tells me that lps are desperate to put money into these funds at this point in time. what does that tell us about what megan talks about about their inability to generate rent elsewhere and their ability to throw money into these pe funds? >> i'm going to go back to what

megan said a minute ago. it's very interesting what has happened in the credit market. the fed has made all these signals. now expected about 280 or something like that. you can make the argument that whatever the fed does what's the impact on long-term rates. most deals are obviously financed on somewhat of a long-term basis. pretty much when you give effect to the tax benefit. almost free money at least compared to equity. maybe it's the amazon effect on the credit markets. where in an environment your is an ability to shop credit rating and your deal all around the world just like we were talking earlier about the deal itself. argument that at least in this context is lower for longer.

your nlp investor. where are you going to go? i can't talk about the specifics. p firms may be back in the comcast bid. , if theyxample of that can get x blocked in on a pretty reliable credit that's probably not a bad thing and their lps are not hunting for 20% returns anymore. it just nudges into the double digits. guy: absolutely. when the search for yields was on when you really struggled to leastoney at theoretically the search for yields in the united states has gone away yet money is still being thrown in by lps into these funds. and they're kind of safety net stone exist anymore in the way they want did read i'm kind of curious to know where we are in that process. do these guys still need to

search for even any kind of a pickup right now or do you think their opportunities as investors are getting wider? >> their opportunities are as wide as the world is wide i suppose. still when we are talking about the environment like it is the man -- the land of milk and honey. there are risks out there. are going ons that in some parts of europe again. talking about italy and spain. there is discussion about whether the so-called trade war is going to lead to a recession .ere so there is risk. if you can lock in? risk-free yield be on the treasury. if you can lock in a good return, not so bad. there's plenty of money looking for some yield. tom: there's a wall of money out there.

megan greene, thank you so much. with the red sox doing better than good than the yankees over the last hour. even the washington nationals last night. i'm going to get a pyramid screen right now. g tv . it's extraordinary. you can look at asia dxy. you can look at china. logarithmic. these are smart charts. pulled him over to your bloomberg. bob profusek with us. this is bloomberg. ♪

guy: guy johnson in london. tom keene in new york. including the during cash german lenders -- the german lenders. joining us from bloomberg intelligence. why are they buying it and what benefit do they get? >> they

have a 4.0 strategy at the moment. they are refocusing. a 120 billion. derivatives have traditionally been a strength. germany is a massive market. it dovetails very nicely with the rest of their business. of: there has been a lot talk about ranking consolidation in europe. we got really excited about big and standardrclays chartered. i remember you pouring cold water on this when i got excited. that doesn't in many ways make sense. these incremental changes, is this how m&a happens here in europe? >> absolutely. capital is adequate but there is no growth in europe. the next focus will be on cost. all the european banks are

spending billions on a digital plan at the moment. earnings growth in europe is impossible to get. you continue to tidy up your businesses. guy: those phone calls you get goes,e where somebody ppi, we thought we were done with those. >> so far the banks have over 30 billion pounds. for everybody pretty much. we think we are done. we are comfortable. you have now had a ruling that the weight of the compensation is calculated and figures are being bandied about. is -- this isere a court case. it reopens a can of worms. but is it another 15 billion of cost, i think that's unlikely. want to knows we the cutoff date is next year. august 2019.

we are planning not to worry about it. tom: the president traveling to europe next week. ourill continue conversation with mr. profusek. we will do that on bloomberg radio. jonathan ferro and myself with a special edition of our world cup coverage. dollar-yen with a 111 feel. 6.65 yuan curve dollar. this is bloomberg. ♪ what's a gig of data?

well, it's a whole day's worth of love songs. 300 minutes of baby videos. or, it's a million chat messages. a gig goes a long way. that's why xfinity mobile lets you pay for data one gig at a time.

and with millions of wifi hotspots included, you'll pay less for data. it's a new kind of network designed to save you money. click, call or visit a store today. david: steady as she goes.

the chinese central bank governor says they will be keeping the yuan steady and markets rally on the news. not so fast. the president is not ready to pull out of the wto and thinks he may have a trade deal soon with europe. and keeping it clean. glencore stock plunges on news of the department of justice is investigating it for possible bribes in congo, venezuela and nigeria. welcome to bloomberg daybreak on july 3. i'm david westin alongside julia chatterley. alix steel is in boston for july 4. you can watch that coverage on bloomberg. fireworks coming up. in the meantime you have fireworks this afternoon for england. julia: we hope. do you know it's 20 years since england last faced columbia in the world cup. i like that kind of precedent. david: it has been 10 years since you have been this far in the world cup.