francine: david davis has for the exit. resigns,t secretary saying they put the u.k. in a weak negotiating position. can the prime minister hold onto power? a down week. shares drop on the first a with escalating trade tensions and uncertainty about valuation, to doubtvestors reason the company. and an escalation could be disastrous for the world economy. we will bring you that exclusive interview. ♪

welcome to "bloomberg surveillance."i am francine lacqua here in london . these are your markets. trade tensions actually focused on the upcoming earnings season for you can see the stoxx 600 to .66%. i'm looking at the pound. we are expecting an announcement very shortly. we are wondering if this will turmoil,resa may's since david davis does not have that much support behind him, if it could make a difference to the prime minister. euro-dollar at 1.1768. we will hear about monetary policy and trade tensions. later on, we talk investments with patrick armstrong. president trump is set to announce his supreme court pick.

then we get a view from leslie v injamuri. now it's hit to the bloomberg first word news from taylor riggs. pompeo has given a proposal -- appraisal of his north korean talks. pyongyang described u.s. demands as "gangster like," however, the american statement was merely a and thatng tactic pompeo is not discouraged. pompeo: i am counting on chairman kim to follow through on the commitment that he made, and if those requests were "gangster like," than the world is a gangster, because it was a unanimous decision at the u.n security council about what needed to be achieved.

taylor: rescue efforts stepped up in areas hit by flooding and landslides in japan that forced -- 100 people into to rescue soccer players and their coach continues. they have been brought out of the cave the rescue will continue after oxygen bottles will replenish. 12 boys and their coach work dropped to weeks ago -- were trapped two weeks ago. one of the two people thought to be poisoned by russian nerve agent has died. thewoman was exposed to chemical last week along with a man who remains seriously ill in the hospital. the couple fell ill just miles from the -- from where the

former russians spy surgery scribble and his daughter were four months ago. global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i am taylor riggs. this is bloomberg. francine? francine: taylor, thanks so much. you can't brexit secretary david davis has quit, plunging theresa may into a crisis. the recognition comes two weeks after the announcement that she had secured cabinet backing among which a bloomberg sources davis could not support. it can reduce the chances of a no deal brexit. is bloomberg's editor, also patrick arm strength -- patrick armstrong, and emma chandra.

is this a crisis or not a crisis? emma: this is the worst crisis in the last year. the focus is now on what will pre-brexit lawmakers do with this? hardline pre-brexit on the street, are the letters going to go in for a new challenge, no, it is not about the letters, it is about getting the policy right, so that will be coming up in the next few minutes, what the pre-brexit hard-line lawmakers say about this is important. if they say may can stay, that is very different t. francine: the pound is not moving. could david davis go at it alone? does his resignation make that much of a difference? emma: davis has been on the radio this morning, although his letter sets out in strong terms why he is opposed to it.

breach manifesto pledges, and this morning, of course he said he wants me to continue as prime minister, that his situation is different, because he has to go out there and defend it. poorest johnson -- boris johnson said saturday night that he is staying. gifts may were to lose a minister, that could actually moralr her sort of authority were standing in brussels, because brussels could say she has such a strong vision, take it seriously, but it depends. francine: patrick, what do you think? you introduce this segment, it reduces the chance of a hard brexit kumutha, but i do not think it reduces the risk of a hard brexit. everything we just talked about now, the challenge to theresa may, even elections at some point, those kind of things are a hard brexit.

francine: what i am concerned about, and let's look at euro pound and bring my chart up. emma think that is the worst crisis in a year come up with the pound is going up, which is why i am struggling. patrick: i think it is going up because friday it looked like a soft exit was more likely. you have the minister resigned this morning, and that creates some around appeared overall, not much has changed. it is going to matter what brexit delivers. i think that is what the markets are focusing on. francine: we are just getting some headlines talking on a pretty popular radio show here moggondon, and emma, rees- is saying that theresa may needs to give up on a proposal of brexit. it's her job really at risk, and we know the next 48 hours which

way it goes? come as wesa may know, has survived many crises before. is important thing to note what the pre-brexit lawmakers will do is they have enough numbers to start a challenge. to win aot have enough challenge. they made it very clear if she was challenged, she would fight. she would not just go away and stand down -- she would fight. that means it is very hard for the likes of rees-mogg and others to oust may. they have two time it right, and malware not be the moment. francine: how is it timing out, when you look at brexit and the economy, is theresa may going to stay? i certainly think the last thing the u.k. needs right now is a change of government, even agree.n of course

i think the opportunity costs all along, this whole journey, are so vast and that is so regrettable, so of course the whole leadership is focused on taking the country out of the eu rather than focusing on more pressing economic issues that could have actually been progrowth rather than the opposite, and of course negotiations are likely to be delayed if there is a prolonged government crisis in the u.k., so a big opportunity cost for the u.k.. you see it as, do a least likely hard brexit or is ?t possible soft brexit seems to me that uncertainty is definitely here to stay, but i would say that buoyed by them fact that discussions went this way until this point, and i

believe clearly the longer the hope process is postponed, the longer the transition period, the greater the chances that prevail and that u.k. will remain as tight ties as possible with the eu. tariffsging it into the sphere, tariffs are not the big issue in terms of trade impediments these days. most people have cut their qu significantly, and when you look at itite, it is the client -- compliance rules that represent 80%. the decision by the u.k. to leave the eu and not respecting eu compliance rules. anything that prevents the u.k. from staying in the customs union is going to impose those that on u.k. trade, so clearly should be everybody's focused to try to avoid. francine: what does this mean, emma? we're looking for a name, the

person who would replace david davis would be, does it look like the decision would depend on who theresa may chooses? ama: i think it makes difference for internal politics. if she approve someone who campaigns for may, and that rivals the pre-brexit faction even more. -- we must over th remember that all the robins -- he has a lot of clout, so it would be almost a cosmetic political appointment rather than one effect anything. this is a headwind for the u.k. economy. it is the subtle headwind. i do not think it is going to change any decisions right now. i think august is still on the

cards. i think of something terrible happens, there will be access to that. francine: thank you. emma ross-thomas in, bloomberg editor, and patrick armstrong both stay with us. cap the bank is not complacent about the risk that a global trade war can bring. they spoke exclusively to bloomberg at the economic forum. >> what is important to us is business confidence. process asescalation skirmishes get into clusters, and them that eventually leading to war, and that would be very bad for business confidence. so forth, very strong growth in the eurozone, meaning that so

far it has a potential for a recovery. reporter: so are you going to sit back and watch the trade war happening? t: so far, we think it is strong enough to withstand the shot. caroline: have you already seen some companies holding back investments because of the protections? it: it happens. we are not complacent on the possible risk. and with the u.s., by the way, would be u.s.im workers, and we very much hope that does not happen. caroline: what could derail the plans?

benoit: as we speak, i see no reason to raise our expectations. caroline: there seems to be some with investors about it being on hold through the summer of 2019. can you explain to us again what this means? benoit: at least through the it is database guidance. so far we have not done it. we step forward, we have forward guidance, and at the to adjust we need depending on the data. caroline: the ecb and some national central banks are bringing government bonds into a corporate bond or vice versa. benoit: that is not something we have discussed. that will be at the goal -- that will be a technical discussion.

from the perspective of the investment of government bonds, which are part of the program. caroline: there have been operation tweaks from the ecb about valuation bonds. is this happening? something we not have discussed. caroline: is it something you are planning to discuss? are discussing the policy. i do not think that is an aspect of the guidance policy. caroline: with brexit, it seems affectshave had major come on friday and i come on friday night, after 12 hours of discussion, theresa may managed to get some kind of blueprint. do you see this as good news or bad news? well, to start with, the ecb is not part of the

negotiations between the u.k. and europe. to theresainly defer may when it comes to the political direction. the british authorities are willing to engage in a constructive way, a practical way, a detailed way. that said, and beyond the review, the discussion is moving on. we also believe the ecb, the drive it layers, have a responsibility -- the private layers, have a responsibility. francine: that was the ecb executive board member benoit coeure speaking and an exclusive interview. we still have patrick armstrong urimi and marie owens

thomsen. they could stay well behind the curve. how is that with the u.s.? marie: i personally do not see them being behind the curve. we clearly do not have to percent inflation on trend in the eu yet. i think they are close 20 the first rate cut into the second half of 2019 is a eminent and sensible one. there are also things going on which also influence monetary policy in addition to the data flow. one big issue is of course that wordif i can use to encompass a everything, which i think is still going to exert downward pressure on inflation going forward, so allowing central banks to keep

rates low. looking in the background are the high debt levels, which are an issue in the eurozone, why some countries obviously would not do very well with higher interest rates. i think the ecb is doing a pretty phenomenal job. francine: do you agree with that, patrick? thinkk: yes, i do not they lag behind the curve. the interest rate is appropriate for the whole of the eurozone, not appropriate for the north of europe, which is creating different phenomenon's. the way the economy has come i think the guidance is right right now. francine: marie, do you worry about the politics in europe? italy, when it comes to labor reforms, seems to have gotten back to where it is more workers' rights rather than business friendly prose. marie: absolutely. we see a reaction all over the

world. this is not a particular european phenomenon. almost everywhere you look at you can see an increase in nationalism and populism, and this is very much a reaction to, you could say, if you have choose one variable, the growing income inequality. europe, income inequality is greater than anywhere else, barring scandinavia. how do you address this? you clearly address it through structural reforms, and it is hard to do that in the current climate. have slowedeforms everywhere. they peaked in 2014 in 2015 and emerging economies, and this is bode well for potential gdp growth going forward. francine: what is your take on the politics in europe? how will they reshap the visione?

thatck: income inequality were just mentioned, i think the trump election and the brexit vote were a result of that. an ongoingm to be theme or populism is a winning strategy, and that is promoting short-term solutions to long-term problems, and you get short-term wins, but you are not addressing the real problems. do you see euro higher or lower in the next 12 months, marie? : murray as a macro economist, one of my favorite indicators for currency is the current current and the large account is something that supports that currency, and that obviously contend to bring about a depreciation in currencies. the largest is that of the u.s. and the second-largest is in the u.k., so structurally, i would be a bit more negative on those currencies.

the larger surpluses are found in germany and in china, so from a macro point of view, i would be more bullish the euro and the yuan. francine: what is your take on europe, patrick? onrick: we are short sterling. we're pretty neutral on the euro. differentials, but the political risks i think are higher in the u.k.. francine: speaking of the u.k., we're just hearing from filedogg saying they have a letter of no confidence against sure some may. we have a lot of time to figure out exactly what this means. we will get back to pound, and then we will have plenty more on that a little bit later. , marie owensth thomsen and patrick armstrong stay with us. shares falling on the first trading day. by asmpany's stock fell

much as 6% following a trade war and uncertainty about its valuation. that puts it on the course for the worst debut for a billion ipo since 2011. i's market value is in the range of $50 billion. joining us now is our bloomberg hong kong markets reporter. sophia, talk to us about everything that has gone wrong for xiaomi ahead of its ipo. sophia: it was pretty bad timi market wise considering the campaign in that wasking something pretty weak already have it overseas trade war with the u.s. on helping. aaomi, as you remember, had valuation, dollars and it amounted to get only about half of that. wanted tompany that

dr's, and that failed after the company failed to regulators in china, so it only managed to raise about $3 billion in the u.s., in hong kong. that is a very reduced valuation compared what bloomberg was thinking a couple of months ago. francine: i do not know whether is diplomatic of something in asia or whether it is a concern of a particular company. patrick: they are not be high growth segment people thought they were maybe 12 months ago, and it is a concern around the whole geopolitical trade wars, tariffs, and the potential economy in general and china. i think it is the global macro issues as well. how much offia,

this is company-specific, as investors were expecting too much of it? is this more or less of what you were expecting? sofia: so, i mean, as we have been talking about xiaomi having a little bit of an identity crisis, because it was a software company when in fact 17% of its sales are from hardware, last week, we had indication of the premarket about 5%, at least on the retail side, it did fall about five to percent on its lowest risk, but if you consider that an ipo you are expecting investors get a little bit of a first-day pop, double digits are a normal thing in the u.s. we look at data for ipo's going , they close an average 3.5% higher on the first day of trading.

it was not necessarily a big thing. stoxx traders 17 hong kong dollars, which was the issue price, but it does not go higher from there. it was a pretty dire situation for another ipo in march. stocks barely traded higher than the issue stock since. is once again a stock like that -- it does not bode well for future tech ipo's in hong kong. francine: patrick, do you like the technology space overall? patrick:patrick: not overall. it has been coming down over the last nine months. we still have chip companies in the u.s. it is not a very good performer. francine: patrick, i need to go back to the pound story, but is there a concern that actually that theseis worried

rules are cherry picking, which rallying? pound is it is possible. they have not immediately come out and squash the whole of this. i think the eu is taking a pragmatic view that the u.k. needs to take care of itself internally before we are criticizing it. horta e costa, bloomberg markets hong kong reporter, thank you, and patrick armstrong stays with us. jetting off to europe for what could be a contentious meeting. this is bloomberg. ♪

francine: economics, finance, and politics, this is "bloomberg surveillance." let's look at what is trending universe. bloomberg

here are five things to avoid when in new york city. more stories on the bloomberg terminal across the hour. presidenta reminds trump nuclear weapons will not come cheap. resigning,id davis throwing the brexit deal into another crisis. finally on bloomberg.com, in case of emergency. if ag out the currency recession occurs. let's get straight to bloomberg first word news in new york city with taylor riggs. taylor: francine, the u.k.'s prime minister has been plunged into a crisis over the key minister has resigned in protest. exit secretary david davis resigned late yesterday in a double blow to theresa may's

negotiating strategy and her grip on power. the brexit secretary is expected to be announced this morning. you see the executive -- ecb executive board member been enoit coeure says his policies stance is working well for he made the comments an exclusive interview with bloomberg. a trade war would be extremely bad for the world economy. victim would be with we want torkers, and make sure this does not have a jared taylor: u.s. secretary of shruggede pompeo has off north korea's appraisal of this weekend's talks, saying kim jong-un has not of and commitment to wind down the nuclear program. describedkorean side

it as "cancerous and gangster like," however, the american side said they are not discouraged. pompeo: i am counting on chairman kim to follow through on the commitment that he made, so if those requests were "gangster like," then the world is a gangster, because it was a unanimous decision about what needs to be achieved. taylor: the number of people killed by record floods in southern japan has risen to 100. have stepped up efforts in areas hit by landslides. companies, including mitsubishi halted.rs, work president luisn da silva has been told he must a in jail after another judge said he should be free. the court is split over whether he should be able to take part

in october's presidential election. lula was given a 12-year sentence for corruption. thaiperation to rescue soccer players and their coach, four voice have been successfully brought out of their cave. the rescue workers will continue . 12 boys and their coach were trucks two weeks ago when heavy rain pushed water levels up. and british police say one of the two people thought to be poisoned by the russian nerve agent novichok has died. the couple fell ill miles from where former russian spies surging triple -- certainly skripol and his daughter were exposed.

global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i am taylor riggs. this is bloomberg. francine? francine: we are getting news rees-mogg. he says he thinks theresa may will be prime minister in march. there is a headline that caught my attention, which is it will not trigger a confidence vote yet rated is something we definitely need to keep an eye on. according to the "london times," the u.k. prime minister's chief of staff has invited all labour mp's. uers onppened at cheq friday. offering a deal that could be perceived as a soft brexit deal, and then late last night, just before midnight, the brexit minister resigned, saying he cannot stand for this. rees-mogg saying that chequers

marked a turn on brexit policy. you see the pound actually raising. it is at 1.3350. it is a big week for president trump. he is set to announce his supreme court pick. here's what he said about the matter yesterday. pres. trump: let's say it is for people, but they are excellent, everyone, you cannot go wrong. i am getting very close to making a final decision. >> what is in mind right now? bes. trump: double bogey decided sometime tonight or tomorrow, by 12:00. francine: it is off to brussels for what could be a contentious nato meeting with the u.s. president, having criticize european leaders' spending on defense. he brought up the issue at rallies and at last year's summit. pres. trump: nato members must finally contribute their fair share and meet their financial obligations.

23 of the 28th merger -- european nations are not paying what they should be paying. that, president trump has to meet with theresa may. chequers, that is scheduled for friday. how pivotal is this week? joining us now is the head of the u.s. american program at chatham house, and still with us as patrick armstrong. great to have you on such an important day and an important week. first of all, what do you know about his supreme court pick? conservatism of the supreme court for years to come. >> that is exactly right. all of the candidates that he is looking at will do exactly that. it will create a lot of domestic mobilization. it is galvanizing the american public. it is galvanizing the democratic party. they are getting ready to contest to ever he puts forward. the broader context is is in

the lead up to the midterm straight it is the most consequential thank him arguably, that president trump will do with the respect to the future of america, and america's domestic politics and society. represent a deep divide in the polarization of americans, and it is very significant. leslie, even if you look at the midterms, and a very separation of immigrant families arriving in the u.s., we are reading that his goals were going up, so him personally, trump candidate, was doing quite well. leslie: he has done well. never as well as one might have expected. those ratings stay, the 38%, 44% , and it does not seem to fluctuate much beyond that. but the story is doing well. the choice of the supreme court justice that conservative will be very popular with his base, very popular with the republican

party, but it is divisive, and forill be divisive the democrats. they will be contained, some of them, for their concern about what will happen to their own use in the midterm elections. there are a number of individual senators, for example, coming up for reelection in red states, who will be very worried about not stay in close to the conservative base in those states commanded pick up a supreme court justice complicates politics for those people. francine: patrick, what does it mean for the markets? in the past, it is difficult to see it move the dow and the markets, and yet it could change for the next 15, 20 years. patrick: the supreme court matters for a much. what we talked about is popularity is actually about trade. every time he talks about trade, we see is popularity go up. it is the popularity and the soft market. he kept talking tough on trade until the market got spooked, and then he sort of toned it back down. of those twos

things, and i do not think he will go too far in this space. the spring court, he is not going to lose any votes by going very conservative, obviously. that is his base, and nobody will be disappointed. the more conservative, the better for them. francine: leslie, do you think president trump will actually talk about trade? he has done it in the past. leslie: i suspect we have conversation will be less about trade and more about the demand that the american, european partners in nato will spend more, that will be the headline, and that is very popular back home with his base. but undoubtedly, coming off of the g7 and the tariffs will be front and center in the mind of many of those european leaders, and it will certainly,. where he comes to the u.k., imagine, depending on what happens in nato, very difficult situation for theresa may now, and to face a donald trump coming off of what might be a very difficult nato summit will be something to watch. the president, remember, what he

has on his midas meeting mr. putin. this is a couple -- on his mind is meeting mr. putin. patrick: this deliberately completes trade and nato, because whenever he talks about nato -- francine: he talks about surpluses as well. patrick: yes, and he links them together. everything is part of a negotiating tactic with him, i -- obama andto bush also talked about countries not paying as much as they promised to. it is not a new issue. francine: you're right, leslie, i guess the crescendo is next monday, the 16th of july, where in helsinki the president will meet put in. will they have a deal? will they talk about? leslie: arms control will be central to that discussion. will they have a deal? this is what american partners are worried about. they are worried there will be some sort of conversation --

remember, the question of troops in germany is something that europe is worried about, that america will pull some of the troops. but they are very concerned that he will go often strikes and deals with putin that they will not see coming, not clear what it will be. one of the things to remember is with this president, whatever happens in the summit, it is really what happens in the 10, 12, 24 hours after the summit that tells us a bit more of the story. anything can be done. it can easily be on done by this particular leader. francine: we will talk more about nato next. and patrickmuri armstrong both stay with us. up next, will the u.s. president continue to pressure allies regarding defense spending? that is up next, and this is bloomberg. ♪ oomberg. ♪

francine: this is "bloomberg surveillance." i am francine lacqua here in london. as we mentioned, donald trump is heading to nato this week, where he is likely to pressure allies regarding spending. weeks, a strategy that america's nato ambassador has said is paying off. the summit comes as the meetdent is set to face-to-face with the russian president. what could be a series of contentious meetings. bonino, a is emma

former italian foreign minister, also a candidate in the election. ms. bonino, as always, thank you for giving bloomberg a little of your time. how do you see the nato summit going with president trump and his allies? this is sort of unpredictable, in my opinion, as it is unprintable, the moves of president trump, and also there are major problems in nato, aarting with turkey, which is nato country but is also playing another game. it is a question of boosting the financial support. verythink it will be a problematic summit. ofncine: you have a lot experience in foreign policy. i guess the biggest worries for nato allies is if president trump meets with president putin

in helsinki, they find a deal that cut certain nato members out. how would you convince nato members not to do that? ms. bonino: there is a lot of rumors going on, a lot of speculation. normally, the outcome of the summit the nato, the eu are even worse than expected, so i would not really like to go into speculation with what is going to come, just reading the paper, and frankly speaking. francine: the atmosphere, could it be relieved i nato members actually spent more on defensef? do you give in to what president trump wants? i think in this posingpresident trump is the right questions, but i do not know what will be the

answer. possibly a member state of nato 2%l pledged to release the to the leaders, maybe it is done already. theit is not exactly biggest question. i think this is one of the reasons, but the question behind that, the real question -- what is nato today? what is its mission? nation of member states and the ratio between the u.s. and russia? so that is why it will be problematic, because there are a lot of issues that are behind the money, the money and the financing question. francine: all right, but emma bonino, if you look at nato, is it still relevant today? isn't something that should

matter more or matter less? ms. bonino: i think multilaterally, it is on the verge of disintegration, which is very bad news, because i think that in the world today, we need more market letter realism than less, exactly as i think we need more europe than less europe, particularly in foreign policy and defense. leaderseems to me that in europe are not exactly aware or they are not paying the right attention to this issue. it seems to me, at least in my country, it continues to campaign with promises and his -- and slogans that

nurture fear, threat, etc. without any kind of rationality. a loss forgn mood is everybody, it seems to me, in the medium term. francine: you are of course waging a pretty difficult battle in support of migrants. pretty also waging a difficult battle, frankly, in support of europe. what do you think will come three or four years from now? ms. bonino: i am sorry, i missed the question. --ncine: the question is you're pro-european and pro-immigration in italy. what we still have immigrants coming into the country in three years, and will we still be a pro-european country? ms. bonino: that remains to be seen. public opinion is not, let's a static issue. it depends on what kind of information, what kind of input

leadership are giving to public opinion, and in my country, it is the highest responsible of the government, feedingnues, continues the fear, the threat, the fake news of invasion, and so on and is arth, so public opinion response to the input of information that they see, and if they are being fed fake news over and over, every day, from morning to night, of course they tend to follow this kind of fake information. and that is not helpful at all. francine: but overall, do you believe that actually italy will have a closed-borders approach? will it be a locked down, close-borders approach soon?

and what does that mean for the rest of europe? you also have angela merkel in the spotlight with immigration touching germany. ms. bonino: the point is again that it is spreading all over europe. it is also in france. not -- atmacron is ,ll, so it is being left geographically speaking, alone, and facing this phenomenon, which is not an invasion, but definitely is a problem, so the membernference among states is "not in my back yard, full stop." not helpof course does the solution. the real issue has reached more than the euro, more than any other issue. europe is really running, in my opinion, the risk of disintegrating. francine: all right, thank you

so much, emma bonino, former a tiny foreign minister, joining us from rome. still with us are better armstrong and leslie vinjamuri from chatham house. that immigration policy will be the one commonality amongst european leaders? islie: the real concern here it has been made very clear over the last recent years that if gainean leaders cannot control of their borders, they will not be able to ward off populist challengers. that is the bottom line. one of the key pieces is to clearly differentiate between refugees and migrants in developing a comprehensive policy, but getting orders is the bottom line bottom line to prevent the disintegration of collective -- of collectivism at the european level. francine: the concern on the borders, does it mean that you

end up not having a european union? patrick: that is the risk, i guess if you push it to its anclusion, that potentially disintegration of the european union, if you get really strong on your own orders, and you are always worried about your own backyard, then disintegration, that maybe one of the things that starts. you do need long term solutions to this, and i think that is what macron is trying to have a discussion two, he is not talking about migrants coming in the short-term. francine: the market seems to have difficulty come and partly rightly so, since this is not an economic crisis, but how do you view it? do you need to take hedging positions? what does it mean for investments longer-term? patrick: we are largely ignoring it. it is a very long-term, slow-moving thing that is happening at the edges right now. it is still such a low probability for anything in the next 15 years, i think.

but migration is one of the issues. it starts to sow the seeds. we are nowhere near that during the rich country start to subsidize some of the poor once. -- ones. francine: leslie, when president trump shows up in europe, are there leaders here that he listens to? we have seen the friendship with emmanuel macron. does the president believe angela merkel is really weak? leslie: i think he does. the queue datat about who americans see as the strongest, more most important partners, and if you look at republicans, germany is way down the list. that is reflective of the president and his language. vc's angela merkel as weakened, -- he sees angela merkel as weakened whate has not changed he has been willing to get here

he has taken a hard line on the terrace, he has pulled out of the iran deal. he can have the relationship that you might want to have, even his affinity for putin has not translated into a different the of allah see between united states --policy between the united states and russia in this moment. francine: do you worry that you see germany with already trade policy that will hurt german carmakers, that will hurt some carmakers, or will it be in the eye of the storm? ?hen trump shows up here in europe, will be attacked germany? patrick: very much so. germany has a very competitive advantage and economy. it is good for the eurozone but maybe not for germany has a whole. germany maybe the epicenter. francine: can germany defend itself? leslie: i think continuing to say it will spend more in defense, i think probably taking a hard line on the tariffs. this is the real question, when

we look at the trade site for europe, is it going to really stand strong and firm with respect to trump's tactics or not? i think increasingly europeans are thinking there needs to be a continued strong line against this president. francine: leslie and patrick, thank you so much. leslie armstrong and house.ri at chatham i have the pleasure of welcoming tom keene in his first hour in london. "surveillance" continues. tom keene in the house. we will talk about the supreme court. we will talk about brexit. tom on allating matters of royalty coming up next. this is bloomberg. ♪ t. 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. francine: david davis heads for the exit. he resigns over theresa may's

plan saying it puts the u.k. in a weak negotiating position. sterling expands. can the prime minister hold onto power? an ecb executive board member tells bloomberg that an escalation could be disastrous for the world economy. an exclusive interview. and xiaomi shares escalate. tensions regarding valuation. good morning, everyone. this is "bloomberg surveillance. " i am joined by tom keene. heathrow.nto and then there are a million things going on with brexit and mr. david davis resigning. tom: huge news. what is fascinating to me is the news just threw today will be extraordinary. aancine: where expecting

replacement for mr. david davis. the pound is up. traveln, of course, we or migrate after the week in london, president trump shows up to brussels for nato. tom: with angela merkel and macron. you wonder how the prime minister's position has changed in brussels given what has just happened in the last day. the next eight or nine days will be surveillance crazy. the chinese prime minister receives a military honor from the german chancellor in berlin. we have some pictures of that. and then a news conference at 2:00 p.m. there you go. the military honors for the chinese premier. now, on to what else we are watching for today. the bloomberg first word news from new york city. taylor: theresa may's government has been thrown into crisis.

david davis and his deputy have quit in protest over theresa may's plan for a soft exit from the european union. policy has but the u.k. in a weak position. theresa may says her plan would help the u.k. keep close ties to the eu after leaving the block. four members of a youth soccer aam flooded -- trapped in flooded cave have been brought out successfully. new air tanks will have to be brought in before the rest of the team can be brought out. more rain is expected. atesh police have opened murder investigation into the poisoning death of a woman exposed to a nerve agent. ess died yesterday after being exposed to a military grade nerve agent used to attack sergei skripal.

and president trump announces his choice for the vacant supreme court seat tonight. bloomberg has learned that thomas hardiman is a strong contender. he was runner-up a year ago when the president selected neil gorsuch. global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in over 120 countries. raikes and this is bloomberg -- taylor riggs and this is bloomberg. currencies and commodities right now -- a quiet market. sterling being watched closely in the united kingdom particularly euro-sterling. manyuro is out in so houses. looking for a stronger euro for the rest of 2018. on to the next green, the resiliency in the equity market. 13.9. nevertheless, a super -- nevertheless, surprising many.

euro-sterling in pence. european stocks are following some of the gains that we saw in asia. investors seem to be setting aside the concerns over escalating trade tensions to focus on the upcoming earnings season. dollar falling against a number of major peers. the renminbi is rising. and the british pound is climbing based on the optimism willtheresa may contain the rising tension. interesting especially when one of the main cabinet ministers resigns. tom: curve flattening over on the bloomberg. further of the yield curve -- you have to throw the -- show the difference between the two year and the 10 year. and down we go. the acceleration of the curve

flattening. further of the yield curve has global attention. the pound,ooking at another way to look at the brexit story. you cannot see it by looking at this chart but if you look at it and think about it politically, theresa may plunged into the worst crisis in the past year after key members of her cabinet quit. we are not really understanding what will happen next with these ministers. her leadership is called into question again. look at the pound and interesting that it is fine. president trump is set to announce his supreme court pick and then he is off to the nato summit in russell's. on friday he has to the u.k. to meet theresa may. after that, he holds a summit with the russian president in helsinki. joining us now is leslie

vinjamuri and kristin keller, barclays head of research. thank you to both of you for joining us. we spoke in the last hour about some of the factions. what leader president trump likes to speak to. what will be a successful week for president trump? leslie: for president trump, the successful week will be the meeting with the head of russia. that is the one he is coming across four. in the back of his mind, all of the messaging will be at some level driven towards what he is trying to signal to russia. that is a relationship that he cares about. it is a one he has been thinking about since he was on the campaign trail. the trip is not really about that. it is about london. the in his mind, even at nato summit, he is thinking about the relationship with russia. tom: the zeitgeist in america over the weekend was regarding

nato and the most out of chick past.the nostalgic as president trump interested in a new nato? leslie: i don't think he is that strategic. he does not like a lot of europeans working together with america coming in and out. his preference would be to work bilaterally. to divide and rule even within nato. but nato is good for america. donald trump and come across and meet with everyone at once. tom: what is so critical is a set of administrations, republican and democrat, that overreached and moved east with nato. where do you sit on that at chatham house? is a dividing line amongst people thinking about the u.s.-russia relationship, the future of europe, and the post-cold war security. many think they went to far.

there is a very strong case for continued nato cooperation, reaching beyond the old members but undoubtedly, it has put russia in a position where it is than it hasive been. these are questions we continue to face today. but, and i guess this is the dividing line, the u.s. president at nato does not see russia as the threat that his nato partners do. that is driving a significant division between the u.s. and europe when it comes to security issues. francine: we will talk about the supreme court pick in a second made just be, nato an excuse for president trump to show off and beat up on your. how likely is that to be taken seriously by the markets? i assume he will say

something about trade but he will point out that germany continues to spend 2% on nato. he will follow a script that does not surprise the market anymore. to top that, markets are looking u.s. has been meeting this but now we see better data coming out of europe and the u.k. despite the term i'll the political front and tariffs. francine: think about how conservative president trump will pick. -- will pick? leslie: all of the potential are all is looking at conservative. -- concern is how reliable is how reliably conservative they will be. people want to focus on how

reliable they are on that dimension. the democrats are lining up to with thehat but midterm haunting them -- the politics of their choices, state by state, for particular candidates will influence their a left world you cannot divorce the two things. tom: for a global audience, which you define doing another quebec. the president heading to brussels. what does that mean? it means the president comes in and has a relatively, -- -- a relatively difficult meeting, and then it will all unravel. that is what followed the g7. everyone is anticipating a difficult nato summit. the tariffs are a difficult issue. you do not know what this president. he might decide that he is going to come over and turned the

relationship around on a dime. tom: have you calculated the tariff affect on germany? christian: which one? on terrorists, if you -- on if you compare them, the biggest effect comes through. especially in this world of global supply chains. i think that could be quite dramatic. done is some global calculations. a 10% tariff across the board. thesetice that a lot of facts are not linear. they kick in on some level. before, they were relatively minor. the same will be true for tariffs -- on car imports. francine: how disruptive would these be on the german car economy?

christian: if you think about it, it is the largest part of german industry. have a lot of suppliers around it that are not counted as part of the car industry. i think it will be quite a daxraction particularly the is very export oriented and people think this is just the beginning of the falling apart of a global trade structure. tom: christian, wonderful to have you here. for stayingk you around. we could do another 90 minutes tomorrow and the day after. coming up, the president travels to europe. he will always look back at the american economy. on has a more cautious view economic growth. london,h us, from francine lacqua and tom.

this is bloomberg. ♪

francine: -- taylor: this is "bloomberg surveillance. " investors put a damper on the debut in years. escalating trade tensions may be one reason plus they are worried billionaomi's $50 valuation. shares of nissan fell today. the japanese automaker admitted that the emissions data was fake. japanese trades last

year after the admitted that the process was faulty. denmark authorities are warning smaller banks may be targeted by money launderers. this after a string of allegations that the banks were used to launder millions of dollars from russia. that is your bloomberg business flash. thank you so much. the u.k. brexit secretary david davis and his deputy steve baker have quit over theresa may's plan for a soft split from your. -- in resignation later his resignation letter, davis said the direction of your policy will leave us at best a weaker negotiating position and possibly an inescapable one. theresa may who achieved an overall cabinet backing for her plan on friday said she was sorry that davis had to go to insisted that she does not agree on his assessment.

her office said it replacement will be named today. our guest was part of the labor government under tony blair. joining us now from westminster is lord adonis. adonis forandrew joining us. what do you make of the latest developments? guest: i think what has happened today makes a second referendum and the prospect of stopping brexit entirely much more serious. essentially has happened is theresa may has been unable to find a middle way between leaving the eu and staying and it that can command either a majority in her party or in parliament. what she has sought to do is move halfway to the eu by staying in the integrated customs arrangement with the eu.

but david davis resigned over that same it was staying to close to the eu. but the labour party and probably a parliamentary majority are concerned that theresa may is not close enough to the eu and the halfway house she announced on friday after her cabinet meeting would in fact jeopardize large amounts of our trade and prosperity because it would divorce us to much from the european customs union and the single market. as of today, it looks like the center ground she was trying to establish is disintegrating between her feet -- beneath her feet. if that happens, the only way forward would be for parliament where she does not have a majority, so parliament would have to take charge, parliament would demand a second referendum which would happen in the early part of next year. would say yeseu to this cherry picking. this is cherry picking.

how do we know what the eu thinks at this point? the eu may not accept what she is proposing. the crucial thing that happened on friday was she was trying to establish a negotiating position on the part of the british government when it meets the european commission. the government has spent two years essentially negotiating with itself to establish a position. division in the ruling party is so great. it is perfectly possible that the arrangement that theresa may reposed on friday, a sickly we could choose which parts of the ontom rule we stay in and that basis, we have some measure , it is perfectly possible that the eu will say that is not acceptable. if that happens, she is left with no deal at all and that is what makes a referendum on staying in the eu in your certainty.

-- the thing british british population did not vote on was to become poorer. economic relations with our biggest markets are severed, including access to the customs union in the single market, people will see a cliff's edge in terms of their jobs and are incomes and there would be huge public demand for another referendum and for staying in the eu. tom: tell me what boris johnson will do. i read it as a forest this morning. this morning.t what will you watch for from him in the next 48-72 hours? guest: there is some chance that boris johnson will resign because he has tried to make himself a kind of tea party equivalent in britain. whodical brexiteer

cultivates the grassroots in their hatred of the bureaucracy, the central government in britain, and also the european commission and the european union. he has never wanted any major politician to get to the more populist side of him which is a reason why he campaigned for leaving the european union to years ago in the referendum even the before that he had been broadly in favor of staying. his position will become increasingly untenable. even if he stays, theresa may's position has weekend. tom: fatally weekend. i have heard that a number of times. i agree -- fatally weakened. i have heard that a number of times. i agree. if me the timeline of "fatally -- give me the timeline of "fatally weakened."

guest: it is not that soon because there is not agreement in her party as to who could replace her. be whenial time will she has to present a treaty. she has got to get agreement in her government on that treaty. given what has happened in the last three days, i think there is a good chance that her government will implode before she can get to that stage. ad then she also has to get majority for it in parliament. the right-wing of her party will not vote for a treaty that has any meaningful relationship with at all.pean union equally, the labour party and the opposition parties will not vote for that. i don't see that there is a parliamentary majority for her treaty. we are on a slow burn. her policy is being disowned by her party. i think in due course it will be

disowned by the parliament and that will be the end of her. francine: if you want her job right now, isn't that the simple question? does jeremy corbyn want her job? jeremy corbyn wants her job as soon as he can get it. i think a very unlikely outcome of the current crisis is a general election because that will be turkeys voting for christmas on the part of conservative members of parliament. even those deeply opposed to what is happening either because they want a harder brexit or because they want a softer brexit, what they are all united on is not wanting jeremy corbyn as prime minister. which is part of the reason why the campaign for the referendum is becoming viable because that does not involve an immediate change of government. it is perfectly possible to hold

a referendum on rejecting theresa may's to go sheeting position or her treaty on staying in the european union without an election or a change in government and i think that is the more likely course. nis, thank you ado for joining us. christian, if you look at brexit, i am surprised that everything is out in the open now. you don't know if theresa may will survive the week. and yet the pound is rallying and going up nicely. what is the market seeing? christian: markets look at politics but also at data. the markets had a good week last week. that is one thing. do take thatarkets into account. on brexit, i was following what

was said but haven't we heard all of this before? there were several instances in the last few -- in the last year where we were told that may was on the brink of failure. and yet she holds on. markets look at this and say there is a lot of turmoil but ultimately she seems to be getting her will. the conservative party does not want to lose the government in hand it over to labor. and therefor, even those unhappy with what is going on do seem to move along with her. everything we saw in checkers, not a lot of detail or data, but it seems to move us towards an agreement that big business is much more relaxed. francine: we are just getting a name for the person that will replace david davis. the u.k. has just named dominic as secretary of state for

exiting the eu. he is a british conservative party politician. i think he was elected a member of parliament in 2010 and then he was appointed parliamentary under-secretary of state at the ministry of justice in 2015. this is the first cabinet reshuffle where you see him have a prominent role. we will look into who he is and what he stands for when we come back. we will look at all of that. this is bloomberg. ♪

francine: this is "bloomberg surveillance." president trump arrives a little later tomorrow here in europe for the nato summit in brussels.

he then shows up here in the u.k. tom: and then there is a soccer game on wednesday. i heard about that. onncine: let us check in what is trending across the bloomberg universe. on tictoc, it may be one of the greatest food cities in the world. stories in the last few hours. nuclear weapons will not come cheap. and markets gain as global trade sidelined. and david davis quits as brexit secretary and we just had the nomination of a new secretary. this is what we have on bloomberg.com. out then maps currencies to purchase if a recession is coming again and the singapore dollar is on the top. now, let us go to new

york city. here is taylor riggs. taylor: a big blow to the british prime minister's brexit negotiating strategy. david davis and his deputy have quit in protest over her plans for a soft exit from the eu. davis says may is putting the u.k. in a week negotiating position in brussels. he will be replaced by dominic route. may says she has cabinet backing for keeping close ties with the eu after leaving the block. majoris describing floodwaters. at least 110 people have been killed and 80 are missing. 23,000 have been forced into evacuation centers. companies including mitsubishi have shut down factories. the weather is expected to improve this week. u.s. secretary of state mike pompeo is brushing off north korea's criticism of the date new -- of the denuclearization talks. north korea has

continued to support giving up nuclear weapons. have korean officials called the meeting gangster like. in brazil, a series of judge ease have raised the stakes for october's presidential election. a blocked in order to release a former president from jail. despite his 12 year sentence for corruption, he remains the most popular politician in the country. he leads opinion polls for the presidential vote. global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in over 120 countries. i am taylor riggs and this is bloomberg. francine: thank you so much. joins us from westminster. we know dominic rob is being named the new brexit secretary. we have been following -- following all of the brexit news.

joining us now live. great to have you on the program. you are pro-europe. you are calling for a softer brexit or a second referendum but overall, what does your party stand for? what does the labor leader jeremy corbyn want? both of the main parties in the u.k., there are a variety of views. neither party is wholly united on what it's brexit position should be and that is because our country is divided on this also. personally, i think it is clear that we will end up with a bad deal that destroys hundreds of thousands of jobs and will affect millions of people in our country. that is why i believe this is not an issue. that 600 50eve members of parliament should be the ones that have a voice alone on that issue. i believe that should be a

people vote on the final terms for the brexit deal. francine: why do you think we will have a bad deal? is it too early to say? we will have a white party -- a white paper. the pound is up. it does not look like a bad deal. well, it is going to be a bad deal and let me explain why. based on the government's own economic analysis, every single option short of staying in the european union is going to damage our economy. this is an issue of damage limitation. what the government's own economic analysis says is the least damaging options is russ to stay in the european union stay a part of the customs union. and the prime minister has ruled both of things -- both of those things out.

we know this is going to destroy people's jobs. and there is a lot of excitement in westminster regarding the ofmentary on the resignation two ministers. i am concerned about the hundreds of thousands of jobs we know depend on this and which the government's own economic analysis says is at risk because of what the government is doing. any notion that this is a softer brexit is fantasy. and the new appointment for the brexit secretary is a hard brexit are -- hard brexiter. thatsome of the background we need is that your constituency i believe at the highest -- has the highest percentage of remain in the kingdom. what is your counsel to the party?rs in the

i did not quite here that but i think ultimately, and a member of parliament, regardless of whether you are labor or conservative, this is the biggest issue in a generation facing britain. we will never be forgiven if we act in party or political interests when deciding what to do. we have to do what is right for the country and the community. that has always been my message to labour and conservative members alike. many think we need to stay in the single market and the customs union to avoid whatever happens at the end of this process doing huge damage to the economy of this country. that weolutely clear

should not do brexit at all. francine: the least damaging way -- you should -- you could question whether it is brexit at all. my question is going back to the replacement for mr. david davis. a hardliner. that would suggest that theresa may is in charge. if she manages to ask -- to brexit minister coming into her cabinet, doesn't that show she is in charge? guest: nominally she has been in charge for the last two and a bit years as prime minister but years for thewo british cabinet to come to a single view on what to do. once they came to that agreement on friday, it was followed by resignations.

she is a prime minister seemingly in office, but i am not sure how powerful she is. and ultimately, we have seen anmbles and chaos -- it is embarrassment frankly. ofn i talk to the heads governments of other member states of the european union, it is fashionable in the u.k. to say that they are trying to punish us for leaving but the truth of it is they want to know the position of our country. if we knew what that was, they say they could move forward. the fundamentals remain the same. we have a big problem. have, we wantwe to make sure that it does not lead to a hard border with ireland. currently, there is no solution for that conundrum. these are the fundamentals. not the ministers coming and going. that is a soap opera. this is a fundamental issue. unchanged in the last 24 hours.

francine: it does look like we now have a white paper to send to the european union. to christian and marilyn from blackrock. when we look at the politics influencing -- do markets ignored this nitty-gritty? read theossible to internal machinations of how the tory party is working. many: there has been so crisis points in the last two years, theresa may has proven herself to be very resilient. she always comes up with some deal. the ball is in the court of the eu. theresa may has put this agreement together and now it goes to the eu and is in their court. every single time the u.k. has

come up with a proposal, the eu has been swift in knocking it back or watering it down. tom: you do fundamental research at black rock. fundamentally, it is about the government. still united kingdom within austerity? do you have to look at your bond prism thinking of austerity? austerity has reduced significantly. as you see the government we can -- weaken. sayink it is also fair to that they are still in authority mode but it is much weaker. tom: very good. marilyn watson -- watson with us from blackrock. radio,up, on bloomberg

bloomberg daybreak -- from london, this is bloomberg. ♪

francine: this is "bloomberg surveillance" from london this week. is joining usly as we follow the president of the u.s. to helsinki on monday. risks of thee global trade war. thepoke exclusively to official on the sidelines. >> what is important to us is global confidence.

we start with skirmishes and with nato.shes a full-fledged war would be bad for business confidence. the backdrop is a very strong europe. a strong eurozone. meaning that so far what we have seen has the potential to derail the recovery. can the ecb sit back and watch this trade war happening? we never sit back and watch. we have to understand what is going on. we do believe it is strong enough to withstand the shock. caroline: do you already see companies holding back investments? guest: that may happen. we are not complacent on the possible risks. a full-fledged trade war would

be extremely bad for the world economy. victim would be u.s. jobs, you was workers, and we very much hope this does not happen. could derailt these plans? guest: that is clearly our anticipation. as we speak, mid july, i see no reason to change our expectations. the executive was board member of the european central bank. joining us now is cap -- is kathy matsui and here in london is christian keller in london is christian keller and marilyn watson are still with us. kathy, always a treat to speak you on japan. you are one of the smartest voices out there. what worries you about japan right now? concern isbiggest

what everyone is talking about globally which is a continuation or the intensification of the trade wars. clearly, japan is not out of the woods and with midterm elections not until the early part of november, that leaves a lot of runway and risk for people to talk and speculate that there may be an intensification of that pressure vis-a-vis japan. so far, japan has only been impacted by steel and aluminum tariffs. any people are worried about the automobile industry which accounts for 37% of bilateral trade between the japan -- between japan and the united states. have writtenou about the september election of mr. ape. be. he has got to get through it with the japanese populism. defined the populist mood in japan. it is not poland or the united

states of america. what is different about populism in japan? kathy: it is a different character. i am not seeing -- i am not theng it is populism a la u.s. definition, but i do think that abe's platform is national obviously, people are still uncertain here in japan about the negotiations with the north koreans. the japanese government and society take a hard line stance on this issue and abe stands for a bolder stance vis-a-vis geopolitics. ongoingsecond thing is reforms for the economy. some things have been achieved in the last five and a half years but there is still a long homework list including deregulation. like not populist per se income division between the rich and the poor but it is really about harnessing these two

things, i.e. geopolitical issues as well as the economic reform agenda he hopes will carry him through the elections and get him elected in september. tom: back to the automobile angle that you mentioned earlier, from where you sit, and with goldman sachs research, the you discern a difference with the president of the united states between a mercedes and a toyota? does he make a distinction between a tariff on a toyota and a tariff on a mercedes? kathy: that is a good question. i don't think there is enough evidence to prove either case at this point. of course, there has been more explicit directions or sentiment coming from the white house towards the european union automobile industry but again, we all know that japan sells a lot of cars in the u.s. market

as well. having said that, japan, having 1980'sessured over the has also planted a lot of direct investment in japanese auto factories in the united states of america. the japanese negotiating angle tariffs onyou place our autos or make it more difficult for us to sell japanese cars into your market, then we will end up having to cut a lot of jobs in the u.s. for american people. we shall see how this plays out. frankly, as we have written in the last couple of months, we think the rhetoric vis-a-vis trade and protectionism is likely to remain quite high. once thewe shall see midterms are behind us if some of the rhetoric dissipates or if it continues. that is the number one issue that our clients are grappling with in the near term for the japanese economy and the stock market. tom: kathy, thank you so much

for joining us today. sachsmitsui with goldman in japan. marilyn, what i noticed on my reading of the japanese fixed income market is they are locked up. is there any opportunity on a yields ins -- on real japan? marilyn: there is little volatility that we see. the central bank has continuously revised its timing. for the inflation target. we still think the japanese -- will focus onpan profitability and pension funds. we know they wanted to happen but the question is timing. a lot of the market in the past was focused on the bank of japan lessening the curve a little more but we have not seen that yet. the timing would be difficult to gauge. has tried toapan

make an announcement to do it rather than having the forward guidance to do it like other central banks. francine: christian, what is your take on the yen? countryn: japan is a that is largely positive. owes that country. we think the boj could starting next year move the zero target. has made several times before and the usually let it slip. does the how much trade war shave off gdp and japan? -- in japan? say one thingould about what was said earlier, it

will also hurt the u.s. the u.s. is the most closed economy so it would hurt the u.s. less and later. the u.s. is no longer an energy dependent country. importanta lot less than other nations. in the trade war, they can do would like them to do and that puts them in a favored position for now. you so muchank christian keller and marilyn watson. which talk about xiaomi has fallen on its first trading day. dropping as much as 6% in the escalating trade war and the questions over valuation. richard, what happened with xiaomi? there was so much concern leading up to the ipo, there is

no surprise. guest: to me, there is no surprise. my valuation has been significantly below the price the ipo was coming in now. it is disappointing for the company because it is the last thing you need. francine: what happens from now? can they get back on track? does this hurt the appia to -- the appetite or the valuation for all ipos in asia? ishard: the other problem you have a difficult parallel to draw. manufactureremium of pcs for gamers. likes another hot ipo just xiaomi. came in at the top of the range, had a great first day and then fell. notstory was sold necessarily on the fundamentals. i think xiaomi could suffer the

same problem. from that perspective, you also have the situation where the smart phone market is slowing. for xiaomi, the story is around the internet services. this is what they pegged the story on. if they can grow it more than i you expect come one could see a good development on the share price from here. tom: how is the accounting transparency? do you have a handle on cash flow, the income statement, and the goodwill on the balance sheet? richard: if you look at hong kong, from my perspective and i looked at corporate governance and transparency for hong kong versus new york versus london versus some of the european exchanges, i have had no issue with the hong kong accounting standard. and regarding corporate governance, to date, they have been second to none.

to win the xiaomi ipo, they won it to keep it here and not let it go to new york. when you look at all of this, it is another company where either it is way out front and it will be a huge gain or as you mentioned, there is a real struggle to it all. how will the company a just to the ipo pricing? how will it adjust to the market? richard: they have to knuckle down and deliver on the promises they have made and then some. when i look at a fairly rosy scenario and breakout the different revenue streams that xiaomi has, it is difficult to justify xiaomi trading on a premium to someone like tencent or alibaba. that is something difficult to

swallow. they really have to come out and show some really good growth on the internet. that for me is the number one target of what they have to do in the aftermarket. , thank youd windsor so much on short notice. we were thrilled to have you this morning. we have much more coming up. be joined with an analyst from morgan stanley on the american economy. morgan stanley has a really cautious view on the shift from -- on the shift of the gdp from a boom down to 3%. please stay with us, from london, this is bloomberg. ♪

♪ facesrime minister may thesi

crisis, a new minister. president trump will announce his supreme court justice nominee. england,president to scotland, helsinki. prime minister may perhaps will await. city,wn, summer in the london and choice the hottest summer since the romans were here. there will be a soccer match in russia on wednesday. this is "bloomberg surveillance." good morning. , tome live from london keene with francine lacqua. the real festivities, the president will meet the queen at wednesday or? details are still being ironed out. i'm not sure about the queen. the brexit factions, how it will play out on negotiations with

the european union, theresa may convinced a progress of person to be in her after what happened at checkers. the next five days before you and i go to helsinki, i have no idea where we will be, each ,event front and center what nato is and what nader will be. i had a conversation with the german defense minister. we were talking about whether president trump will use the nato as an opportunity to talk about surplus and trade. for all of you, first word news with taylor riggs. trying to hold onto her brexit negotiating strategy and grip on power. she has named a former housing

new rigs itthe minister. he will replace david davis who quit over theresa may's plans for a soft brexit from the eu. it is stay two of the daring rescue bid in thailand. cnn reports a fifth member has been brought out safely. crews had to replenish air tanks before resuming rescue operations. seven players and their coach are still in the cave. have opened a murder investigation into the poising death of a woman exposed to a nerve agent. she died yesterday. police say she was likely exposed to residue from a military grade nerve agent used in an attack on sergei skripal. hisident trump announces choice for the vacant supreme court seat tonight. the appeals court judge,

hardiman is a strong contender. he was a runner-up a year ago when the president selected neil gorsuch. global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thank you. that i haveso busy barely had time to look at our world cup bracket. francine: we are not too bad. tom: excuse me. worldwide right now. we are not too bad, she just said. i have been in last place since day one. francine: not anymore. tom: i have faulted -- vaulted. i am all france. francine: i am france too.

we both think france will win. it depends on how england does. i have to explain this for a global audience. do you know why people say football is coming home? tom: thank you for bringing it up. i have no clue. francine: all the u.k. fans are this is coming home." if they win the world cup, football is coming home. is he in st. petersburg? he might be. is there is'm here no one in london that knows less about this than me. the world will stop for the world cup, and the british game with croatia on wednesday. futures up this morning.

curve flattening. oil with a bid. next screen. showing resilient markets. that is the friday close on the dow. the 10-30 spread in with a vengeance. i put euro-stemming there -- sterling there. tom: miners and energy companies, the winners here stoxx 600. advance.onsecutive psychologically investors shifting away from trade to the earnings. pound climbing on optimism will contain the latest government crisis over brexit. finally, the chinese renminbi rising. for the unitedly kingdom, very quiet off the over the last 12 hours

as well. , never a dull moment, bloomberg's chief washington correspondent joining us now. the zeitgeist of the weekend was an analysis of how the president will treat the nato members. is he going to do a québec redux? can people assist him in avoiding that, or is he a man on his own mission in brussels? kevin: i think he will be approaching this as a go it alone strategy and urging nato members to increase how much they pay to nato. natomes at a time in which allies have consistently said time and time again, wait a minute. what is going on with trade as a result? you are asking us to pay more now. it will be a tense economic argument the president will have

to make. it is interesting to see the distractions as we get to brussels. going throughkel some honors right now. the chinese prime minister in germany, always with a lot of symbolism to say the least. ofin, that is a good example the distractions these ministers will meet before they get to brussels. will the president be briefed over the weekend? it was madekend, clear this is a president who is not reefed. do you think things will change by the time he gets to brussels? gtv kevin: i would note the president before going to deal with nato will have to announce his supreme court justice pick. he will meet with the vice president at noon, then later tonight will make that unveil with regards to the supreme

court pick. the big thing in washington that was fascinating to watch as mayor rudy giuliani spoke publicly, drawing some parameters for whether or not the president will be interviewed i bob mueller's investigative team. it would appear the president is between himself an and bob mueller's team. knowkevin, what do we about how hard president trump will be on germany when he shows up that nato? time there was a ,eeting of the minds at the g7 we all know how that played out in canada. here they are once again. chancellor merkel and president trump have had a tense relationship. i would expect that to continue. on foreign policy, they have found common ground. it comes before the president is

to meeto to helsinki with russian president vladimir putin. , again, i can't stress this enough, the differentiations between trade from an economic standpoint and the justification of increasing payments for nato is at the forefront this week. tom: thank you so much. we look forward to continued reporting. chancellor merkel and the prime minister of china meeting. huge symbolism as china works in the global travel. they have been doing that for months. not only the idea of a eurasia spanning from china and across the indian ocean and up to the persian gulf, but visiting with european officials. mr. macron visiting china recently. chancellor of germany and the prime minister of china meeting today. , morganw in new york

stanley, their chief u.s. economist. in london, the london school of economics. me go to you and follow-up on kevin before we get to a quick review of the american economy. you have been almost harsh in your criticism of this president. is the change agent he needs as he comes to europe? >> he needs to think about how to achieve the goal of europe paying more in defense. germany, for example is one of the worst offenders with low payments as part of gdp. trump is toxic politically in germany. russian andw chinese politicians more favorably than trump, which is a striking thing up the heart of nato. if he wants to build a coalition, he needs to think

about how this will play in germany and how merkel can increase spending without losing support. tom: is president trump going to link it to surplus? a nation ofu are surplus. just put more money in defense. >> it is ignoring history. it is ignoring history in terms likew close nato members germany and the united states have been in the past, and thinking germany has been a bulwark of support on key international issues for the united states. trump has neglected to acknowledge that. if you look at the stuff with brexit and the eu, or the summit in brussels, the one unifying factor is this is music to the ears of vladimir putin. it is incredibly helpful to him to see not only that u.k. and eu splintering, but the u.s. president attacking nato partners while praising the

russian president right after we have a woman in britain die as the result of a russian nerve agent attack. francine: the president may praise vladimir putin, but he does not get an easier deal. he still has sanctions voted by congress. >> the implementation of the sanctions has been incredibly weak and not what you would expect from a republican or democratic president. president, if you had an assassination attempt on allied soil using a nerve agent, you would not go to helsinki to meet the person and praise them. russia isnot interfering now in western elections. this is something that both , trumpcans and democrats is breaking from the nato alliance more generally. tom: we will drive for this conversation with professor klass.

is with us from morgan stanley. so much of this is about what will happen with trade. have you been able to calculate the european-u.s., or the asian-u.s., trade impact? >> we continue to work through iterations of this. very easy to point to surveys of businesses where businesses are clearly worried about what is happening with trade. we have evidence that businesses have been pursuing other resources, options, supply options, preparing for this, but when you put trade negotiations timeline, itdensed can be very disruptive. ?hat a we know now $36 billion of trade tariffs have gone into place friday. it largely affects intermediate and capital goods, not consumer goods yet.

it will have secondary effects through supply chains and financial conditions, but when we start to hit consumer goods with that 10% tariff on $200 billion of chinese goods is what i'm eyeing. tom: i want to give you a shout out for the courage of showing a slower u.s. economy relative to the boom economy in q2 this year. reaffirm why we will see a gdp slowdown in the coming quarters. what we areook at tracking in second-quarter growth, the optics of that north of 4% in the second quarter certainly looks like things are kicking in now and we are getting that fiscal stimulus and everything is off and running, but i focus on the domestic economy. most of what has driven that number north of 4% is exports and inventory. i want to look at private final domestic demand, which is average between 2% and 2.5% in

the first half of the year. i would expect something similar in the second half. this is not a new day with the second quarter gdp print. i want to see what the domestic economy is doing, and the factors driving that have not faltered, and that is perfectly respectable growth, but not 4% growth, so we are still a 2.4% full-year growth, and i think we will have to have a serious talk as we go into the second half of the year because people will be saying i thought the economy was up and running. what are these numbers? tom: we have two wonderful guest on this monday. ellen zentner in london, brian klass of the london school of economics. we will continue. forgetus on big caps, about it. focus on something smaller. more on theuch

president's trip to europe. this is bloomberg. ♪ bloomberg. ♪

"bloomberg surveillance" from london this week. has been announced as the new brexit secretary. the appointment comes after david davis quit his role as secretary of state for exiting the eu late last night. for the latest, let's go to westminster with a guest. >> good morning. yes, i'm joined by a conservative member of parliament. great to have you with us. your reaction to dominic raab as

brexit secretary. >> it is a good choice. he is lawyer by background. having worked with him in the housing department for the last six months, i have seen him firsthand. , a sincere ander long-standing brexiteer who will be trusted by that party. supportave come out in of the plan announced over the weekend. a lot of people are interpreting it as a plan for a softer brexit. how does someone like dominic raab, does it make that soft brexit less likely? >> i imagine the prime minister would have confirmed with him that he supported the plan. 25 of 26 cabinet members have agreed already to the plan, and i imagine dominic will have agreed to it, that does mean it

is the basis on which we will move forward and strikes the right pragmatic compromise, getting control of money, free movement, having complete access of the single market is the right balance. when we get the full plan thursday this week, i think it will give business a lot of confidence. andnizations like the cbi iod have welcomed this plan. it is good news for the city and the country. there are political disagreements, but anyone with the country's interests at heart needs to get behind this plan and make it a reality. >> do you think the eu will be happy with the plan as it stands? 53 the distinction between goods and services when it comes to the single market?the eu said in the past it would not be happy to accept. >> the tweet on friday seem to be constructive in town, saying he was looking forward to the negotiations starting on monday,

july 16. i would interpret that positively. doing a deal along these lines is in the european union's interest as much as ours. they have a giant surplus in the trade of goods with the united kingdom, so it makes a lot of sense for them. european companies have in or mislead integrated supply chains. it is sensible. i think they will engage constructively. >> what are the chances we could see a vote of no-confidence a against theresa may? lob as is not the time to leadership grenade into the midst of this. get our2-3 months to negotiation to a reasonable landing point, so having a leadership contest makes no sense at all. that's why i don't think it will be happening. >> are you concerned at all about anything that might come

out of a meeting later today? >> he has said this is not the time for a contest. jacob is right to say that. he clearly is not keen on the agreement. we have a diversity of opinion in the country, parliament, and the party, so neither wing will be completely satisfied. we need to reach a pragmatic compromise as far as we can and square the circle, and both wings will not get everything they want, but they will have to get the hind it because the alternative is worse. >> anything to hoping to see from the detailed plan? >> services. we know we are going to for a regulatory equivalence approach. the city itself would like for the u.k. to see some level of , financialdiversions services, which the european union has in mind, won't work for london come in so some more detail around that would be very welcome.

on saturdaytreet morning, that was fleshed out. we will see that published in just three days time. chris philp, thank you for joining me. tom: thank you so much. ellen zentner in new york. york,klass with us in new watching the different shades of brexit. everybody has their talking points. this is an odd kind of populism. you studied german populism, polish populism, u.s. populism. a divided theine united kingdom right now? >> you have a situation in which there are unworkable deals on both sides because of a lack of

clarity. trying tooliticians engage in populism, anti-eu populism, let's get brussels off our back, that when it comes down to a deal, there is not a lot of clarity. european union politicians do not believe the short-term economic costs of the deal with the u.k. is worth giving up the entire project of the european union. they will make the sanctity of the european union their paramount goal, and that means they will stand united against these compromises. that is why the soft brexit option seems most likely. british politicians will run up against the reality that a hard brexit is effectively a catastrophe for not just industries, but their own political interest. tom: i just don't hear it from the pre-brexit people. if there is anything or anyone that would want

theresa may's job, who would it be? we often talk about this leadership challenge, but i hear from all factions that they don't want the job themselves right now. >> it is a terrible job to have. this is not only something where you will be waiting into political disasters day after day, but your legacy will be defined by something those people agree will be negative, at least in the short term. there may be political infighting. as the moment approaches of a hard brexit, the population will get scared of the consequences. that will put an immense amount of political pressure, which is why we're seeing checkers happen come up where you have a softer brexit that tries to salvage the free trade areas and creates less of an impact on the economy. francine: thank you very much. of the london school

of economics. suisse head credit of securities and global fx on year old-pound -- euro-pound. this is bloomberg. ♪ . .

tom: good morning. "bloomberg surveillance," francine lacqua and tom keene. we migrate to helsinki for the important summit of mr. trump

and mr. putin on monday. every important is going to to look at the nato meeting in kevin cirilli will join us in some really. .t's a busy eight days here's taylor riggs. theresa may's government has plunged into crisis over her plans for a soft brexit. today, she named a new chief brexit negotiator. he is the former housing minister who campaign for brexit and he will campaign -- he will replace david davis. says the soft brexit plan put the country in a weak position. in japan, raging floodwaters and mudslides are being described as a story. have been killed, 80 are missing and 23,000 have been forced into evacuation centers. as mazda andh mitsubishi have shut down factories and the weather is expected to improve this week.

u.s. secretary of state mike pompeo is brushing off north korea's criticism of denuclearization talks. pompeo exists kim jong-un has not passed up a commitment to give up nuclear weapons. he called the meetings gangster like an says the regime will not accept them. in brazil, a series of judges has raised the stakes for october's presidential election, they blocked in order to release former president louise inaugural lewis silla from jail. he remains the most popular politician in the country and he leads opinion polls for the presidential vote. global news, 24 hours a day, on-air, online at tic-toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs, this is bloomberg. tom: taylor, thank you. joining us now, marcus ashworth and luncheon and alexander --

ellen zentner from ellen's debt -- from alan stanley great. what is the distinctive feature of the american consumer as we go into the second half of the year? volatile markets and uncertainty about tax policy. it isn't just a shift or us which we are in the second half of the year, it's all about the where volatileer markets and put them down there not spending as much. they are not declining their spending, but they are not spending the same phase they were before. there's a lot of uncertainty about how the tax policy might affect the group and what does mean? the top income quintile in the u.s. represents 40% of all consumer spending. i'm not playing violins for the

ever income group in the u.s., what i'm saying is they aren't spending as much and that means that for overall consumer spending, it stays muted. as we spoke about earlier, that's being masked because you up in thet jumping second quarter. this will really come to light in the second half. go ishat's -- let's unfair. we avoid discussing inventory very what inventories are important to an economist like you and what do you see right now in the quarter to quarter inventory dynamics? ms. zentner: the media is reddish irate -- he's right to shy away from estimating inventories. and swinging gdp from quarter to quarter. when companies are building inventories, that adds to gdp,

they are building inventories accelerating pace. if we are not clearing the shelves as quickly an analog or building inventories at as quicker pace, and actually detracts from gdp in the following quarter. we are getting a big inventory boost to gdp in the second quarter and the more we boost second-quarter through inventories, the more pay that there is in the following quarter. i just look at private filed in --ick demands in the economy private, domestic demands in the economy. it defies the optics of a 4% gdp number. tom: ellen zentner of morgan stanley. marcus,hows worth -- one is a flatter yield curve that we've seen in the united states in with a vengeance. a much flatter difference in

yield between the 30, they are very close right now. and the idea of banks almost in bear market, jpmorgan, down 12% from its peaks, this economy that alan describes, how beautiful that in the bonds and then into the financial system? marcus: the flattened yield curve, to my mind, is are getting back to what the fed did in their operation twist in 2011-2012. the barn off a lot of long dated bonds and that's the reason the 10 cities are so tight and that hangs over now is the fed steps of the pace from this month onward at $50 billion per month, long on reinvesting back in to u.s. treasury's. it's a problem of their own making and we should not read too much into the flatness of the yield curve because it is the fed's own making. francine: do you agree? -- wee should be

shouldn't be taking it as an impending slowdown of the u.s. economy? to zentner: we are right focus so much on the yield curve because of its historical importance in anticipating or presaging downturns. fed -- thek the consensus on fomc is exactly what marcus was saying, large , that keepsts long-term yields lower until structurally we should expect to operate in a flatter shield curve world. in that flattish-year-old girl -- flattish-year-old curve world , the problem for the fed is when push comes to shove and we believe this will happen after they hike another time in september, is faced with possibly inverting the yield and there are some participants in fomc who say i will not hike -- i will not vote

for a hike that inverts the yield curve. francine: marcus, you could argue that this is their making, but will they be shy to invert it? does it have an impact on how may hikes they vote for? -- yes, but we will have to see whether this is a march conversation as opposed to a december conversation. they will hike in september and i think they probably will in december as well. however, if the yield curve really is right on absolutely premier ateally know all and long ends, possibly is one of several factors which will seem a whole lot.

three/19t's more a conversation. and ellens ashworth center. is a lot of graphs, you can dazzle ellen zentner with dtv go. we are in london all this week and we are missing mr. serving us. new york. this is bloomberg. ♪

taylor: this is "bloomberg surveillance," i'm taylor riggs.

groupon shales are surging in premarket trading. they reported over the weekend the company has been looking for potential are -- potential buyer. at $16 billion in 2011 it is now valued at $2.5 billion. the final straw for starbucks, the world's largest coffee chain shot says i-20 20 it will eliminate single use plastic straws. starbucks uses more than one billion plastic straws per year and it will replace them with alternative material ones and lives.ble straw less more than half a century after they got together, the rolling stones are proving their time is still on their side. they signed an unprecedented deal with universal music group. universal continue to distribute catalog and the company will handle brand management and merchandising rights. that's your bloomberg business flash. francine: ecb executive board

member says he does not think the trade war will be really euros in recovery. he spoke exclusively with bloomberg on the sidelines of an economic conference in france. >> is really important to gauge the impact on business confidence which so far has been limited. we see this escalation process without with skirmishes and then turned into clashes and that could turn into a full-fledged war. the strong growth in eurozone, resilient growth in the eurozone, meaning so far what we have seen doesn't have the potential to derail the recovery. francine: that was the ecb executive board member. zentner ands, ellen market shaft north -- marcus ashworth.

and is getting the hue from the dollar. no one cares about the dollar, it's quite an amazing result this morning. you see that's what's driving things. the weakness of the dollar this month, that sounds the trade in some sense's hope for from trump, he wants a weaker dollar. he has the capacity to turn it on and off and we should see how he feeds through for the central bank concerned. everyone is warned about it but no one knows what it means. francine: david davis resigns and they put another brexit are as the bracket -- as the brexit secretary. he could have a lot of thought that means theresa may is powerful. he said yes to being in her cabinet. ifcus: the context is that the key brexiteers remain just that's likely

david davis's department was being consumed sidelined. he said the chief civil servant on this was essentially driving the process and it wasn't david davis anyways. they spent the whole last year coming up with a plan that has been good lately ignored and the cabinet office has done their own thing. this is made taking charge and she has put back one of those collective responsibilities on the cabinet. the games are over and you have to stick to the government line. tom: to the dollar, is there an optimum level for dollar ?trength or dollar weakness" ms. zentner: what it's about is the pace of movements in the dollar. this goes for any country. no one likes disorderly movements and their currencies. a study strengthening or weakening, it's much less disruptive the country than

sudden movements. but absolutely, even though we have a strong dollar policy, we can't deny that a weaker currency at times in the near term can help the trade position of the u.s. and can help boost gdp and it can help the fed's arguments on concern of trying to keep core inflation at or slightly above or around the 2% goal. toon't think they need dollars do that, they have trade tariffs that are going to help them do that. tariffs will be a substitute, but we are seeing a lot of houses with really substantial predictions on the major currency pairs. what is morgan stanley's view on the dollar? is it dollar ascendant and ascendant substantially? ms. zentner: our view is that we are in a longer-term bear market for the u.s. dollar, we still have near-term upside here in

terms of this near-term sentiment in the dollar. it does appear we are in a goldilocks situation for the dollar. we have jobs report that says nothing is wrong with the domestic economy, it is still strong but it's not too hot for the fed. up,ave equities that are long-term yields that are down. it's a goldilocks scenario and until that changes, you have near-term support for the dollar. francine: do you have a view on brexit? because of what was signed at checkers on friday, muscles momentum for even a trade deal between the u.s. and the u.k. being signed in the next 10 years, but it must have repercussions at the margins on u.s. growth. will,ntner: it certainly but i can tell you that's our focus is right now. our focus is on some of the other major trading partners escalations, we are

in the midst of it and it has a more immediate impact on growth. that's for we have been focused. full bureau and the u.k. into that by bringing on board auto tariffs and that's when the picture gets ugly cumulatively for the u.s. and the global economy as these things pile on each other. our focus is on the more immediate tariffs and trade actions that have been put in place and that are in train. francine: what's your take on what the dollar does from here? does it weaken or strengthen? ms. zentner: going back to hans we are in aew that goldilocks view for the dollar, something has to change there. if we completely lose the global growth story and maybe trade escalations can do that as we start to see the cumulative effect pile on, once investors say this global growth story is over and they shut the door on that, certainly global trade

escalation can do that. then you lose support for the dollar, certainly. and we go back into that long-term dollar bear market. francine: ellen zener of morgan stanley and margaret chatsworth -- marcus ashworth staying with us. tune in on bloomberg radio and bloomberg daybreak can be heard in washington, new york, washington, d.c., and across the u.s. on sirius xm. this is bloomberg. ♪

tom: good morning. "bloomberg surveillance," from our students and -- or studios in london. francine lacqua, putting up with tom keene. we can do this with market shaft andh -- marcus ashworth ellen zener. i made this chart before i dashed off to jfk. gdp?are is 7% nominal i was surprised that year-over-year, the ability to

sustain boy nominal gdp -- buoyant nominal gdp is a lot harder than it looks. you have been leading on the theory that we are not going to be able to do it. what would you say about the challenge in this economic environment of sustaining make america great again animal spirits? ms. zentner: i think what's lost here and i'm not alone in this in my view is an economist is there's not enough focus on the supply side of the economy. there are areas of our economy that had shrunk over time, areas of the labor market that have shrunk over time, areas of manufacturing that have shrunk over time. that are directed towards the end game of trying to expand our manufacturing sector, these have to play out slowly over time. tos disruptive if you try turn the trade switch in another

direction suddenly and we don't have the wherewithal to meet our own demand internally, domestically. it does force companies to source from other areas and you've got the global shifts of supply chains that are coming. tom: kevin hassett, chairman of the president's council of economics is an ardent supply-sider and he believes if you regulate less, good things happen. when you look at the tax effect ,o far of our new tax reform are you able to see supply-side benefits? ms. zentner: i think we will get supply-side benefit but it's about the timeline here. factors time for these to be digested into the economy and for idle factories to be started back up, new factories to be built. and a new labor force to be trained or attracted back to work. those things take time and so i absolutely see the need for

changes in trade policies, is difficult to deny that. very good work by a harvard economist was put out where they looked at specifically what happened after china entered the wto and the uncertainty over tariffs was completely illuminated. we can see the clear movement of businesses and processes over to china as we eliminated that uncertainty. and that's exactly where we lost most of the markers -- the workers from the manufacturing sector varied on board with the are you know that there is a need for trade policies to shift but this very condensed timeline in which we are trying to do it at a time in our economy where structurally we have continued to shrink on the manufacturing side, it can be very disruptive. if you're looking at the president's arrival here in europe at nato, he goes after germany with surplus. what does it mean for the world economy?

-- is itfit effects better that he picks a fight with germany rather than china? arcus: if you're going to do trade war, you want the economy smaller than it is right now. becauseeating a fight it's with the reserve currency nature of the dollar, he has epic control over things and you see that with chinese equity, it is suffering quite noticeably. yes i think he will go after the german account services, it is something that the germans have let rip for far too long and that needs to be addressed. tom: are they ripped because of the fiction of the european structure? the bottom line is that the fiction and we don't need to go into a right now, but they have a surplus because of where the euro is. is that accurate? and there's's fair a level of defense spending they did take as well as which has been noticeably week particular in germany. i think the germans will get the largest product of this and it's

, is symbolic nato with german cars to be will to do that. marcusashworth --tom: ashworth, thank you for being with us and ellen center -- ellen zener, thank you. i have survived my first day here, i read about arsenal last and anyways, we are here for the week. ,here's a soccer game in russia i learned that. there's a tennis match somewhere. it's outside london. stay with us through the week. this is bloomberg. ♪

>> david davis quits the of a government, protesting the plan for brexit and sterling barely blinks. dominic rob steps up as the new brexit secretary. panic, markets breather five relief is no trade news is good news. morgan stanley's mike wilson starts to get defensive. earnings take the baton, u.s. earnings reporting friday. what companies still have pricing power. in one welcome to bloomberg daybreak, i'm alix steel and david westin ditches me and goes to d.c. and i haven't seen you in over a week in there you go. david: welcome back to boston. i'm down here in the president is doing a reality show thing tonight. is going to announce who's going to succeed anthony kennedy. he's down to four people and he's going to tell us tonight. alix: how do markets wind up looking at this over the next 24 to 48