f dolls ara year. plus, get $150 dollars when you bring in your own phone. its a new kind of network designed to save you money. click, call or visit a store today. accepts that russian meddling election. powell says the bank plans to keep raising rates for now. and may is straight through, the prime minister finally avoids a catastrophic defeat, but at what cost? >> welcome to surveillance. we check in on the

markets, we have breaking news coming through 4.3 billion euros is what i hear. we bring it up with more details as soon as a get it, but let's get back to the markets. see some gains, the mastec hitting a fresh high post powell's testimony. the stoxx 600 gaining up some 5/10 of a percent, and we have seen carmakers perform on the possibility that maybe talks to do with tariffs. the dollar gaining, up 4/10 of 1%. gaining against all of its peers , we are seeing some weakness in the session after theresa may's troubles. the dollar showing broad-based gains, at a six-month time. in the crude is coming under pressure. 8/10 of a percent now following the data. coming up, we get the latest currency calls from david bloom, global head of fx strategy.

shortly after 11 a.m., we talk trump and brexit with the vice president of the european investment bank. and later in the day, we speak to the former fed governor. but first, let's get first word news. as you mentioned, donald trump says he accepts the conclusion american intelligence agencies that russia interfere in the presidential election. those comments came amidst a backlash from republicans. but even with a prepared statement in hand, he introduced doubts, saying that the meddling could quote from also have been from other people. >> i realize there is a need for some clarification. it should have been obvious, i thought it would be obvious, but i would like to clarify in case it wasn't. remarks, ince and my said the word would instead of wouldn't.

been, i don't see any reason why it wouldn't be russia. the european commission is reportedly considering to urge member states to prepare for a no deal brexit. according to the telegraph, a 15 page document will be presented today. that comes as the u.k. government saw a bit by conservative rebels to create a customs union with the eu if a trade deal fails. later today, theresa may will face prime minister questions and address the meeting of tory mps. jerome powell says the federal bank will continue to gradually raise rates for now to keep inflation near its target amidst a strong labor market. he told the senate committee that they believe, for now, the best way forward is to keep rapidly raising the federal funds rates.

meetingon sybase, a g20 -- buenos aires, a g20 meeting. they have learned they are unlikely to be included in a final communique, as delegates are keen to avoid the kind of fiasco seen at the g7 meeting, when donald trump withdrew from the final statement amidst a flurry of insult. global news, 24 hours a day. powered by more than 2,700 journalists in more than 120 countries. this is bloomberg. thanks so much, taylor. the fed plans to raise rates for now, according to jerome powell. of theared in front senate banking committee where he also warned about the risks of protectionism. >> it is difficult to predict the outcome of current discussions over trade policy, as well as the size and timing of the economic effects in fiscal policy.

some asset prices are high, and there is an elevated level of debt. i hardly need to tell you what higher tariffs would do for agricultural producers. that is an area where we lead the world in productivity and our great exporters, and, you know, in would be hard to fight these tariffs. companies that have not erected these barriers have grown faster, had higher incomes, productivity. and countries that have gone in a more have done worse. that is the empirical results. the program has to continue to evolve, we want to make it more transparent. want to improve it over time. and all of our actions are designed to do that. evolve, we want to make it more transparent. if you look at the banking system, this test will require higher capital. i think you will see that is consistent with our actions. the shape of the curve is something we have talked about a lot. some think about it more than others. the question it as

being what is the message from a longer run rates about the rates. hour isus from the larry and my -- maya. great to have you both with me on sets. you., let me start with should we focus on this? larry: we always focus on the fed. statement underscores that jerome powell is a lawyer who knows how to use the language. it gives them both a opportunity to hit the fed is looking at some issues out there, like protectionism, as a reason to slow down. however, it can also be symmetric. if it were to accelerate, it can mean we are going gradual and now we go faster. he got a bit of his take and eight it to -- ate it too.

he kept all options open. it was very crafty. nejra: and this is sort of "questions -- discussions. things to are lots of do once against to that race, but it hinges on the knowing what the neutral rate is. maya: absolutely. something i found striking is when we look at what the fed tells us what they will do, and you look at where markets are, markets are meaningfully more dovish even before we get to that rate. points0 basis points, 75 for the year after. curve, look across the markets look to be meaningfully dovish. i have a look this morning, the atlanta fed cast is at 4.8%. that is the speed of the u.s. economy is going by. inflation is on target, wages

are picking up, in line with a tight labor market. so those rates they are indicating seems justified. nejra: and to that point, should the markets the repricing a bit? or does the statement yesterday show that it is ok they are a little behind the fed outlook? larry: fundamentally, i would agree. the markets are probably being too cautious. not just this year, but 2019. but it is probably not the time for that repricing to take place. if you look across research produced, more and more of it is focusing on downside risks to growth. stemming largely from trade conflict and the adverse spillover. so i think the market is still going to be on its heels. fed will probably

deliver something closer to its dot plot and the market will catch up to it, but tactically, it is not the time to think about shortening duration. nejra: so tactically, how are you positioning along the curve? tactically, and indeed, longer-term, we are using duration less and less in portfolios and asset allocation. when we look at where yields are today, in the u.s. for example, you have negative premium, short and expectations that does not fully price in what we expect. at the end of a 35-year-old bull run in government bonds, we question the role overall. the nice thing about a bond is you are shown when you are getting paid. the last nice thing is what you

get isn't what you locking in for the next five years. point 5-3%, that the return you are getting on the bond. so not very much. withnk risk reward for us favorite not duration at all. reaction, the dollar strengthening yesterday and continuing today. what does that tell us? larry: it is somewhat partial. it has made an interesting move not just in the last 24 hours but longer-term. i think that makes quite a bit of sense, given the preferences in japan. in a sense, we are still trading in a range against the euro. i think that is a tug-of-war around the data flow, i would not read too much into it. i think there was something in the fed statement yesterday. and a bit of a tussle going underway, but i do not think there is a meaningful move underway.

nejra: i said in my data check the dollar strengthened against the yen, and you see full -- further strength this year? maya: the dollar tends to do when -- well in one of two scenarios. when the u.s. economy is outperforming some inflows. or when risk, and the dollar flows from the safety. we are strategically bearish on the dollar from here. but i would suggest that trade wars are certainly one of the many risks that could lead to more dollar strength. that cyclicalct story, the u.s. outperforming everywhere else. we think europe will catch up, for example. in japan, we are quite meaningful -- meaningfully above our percents and forecasts. that should help close the gap from that and. but one thing that could keep the dollar bid is more risk

markets, particularly linked to trade wars. nejra: absolutely, but you might have to talk about that. thank you so much to larry hathaway and maia -- maya bhandari. a 4.3 is said to get billion euro fine over android, a record antitrust fine. and we will get more on this breaking news about this record fine of 4.3 billion euros from the commission. up on what has happened. learned that the final will be about 4.3 billion euros. about $5 billion, another record find over last year's record against google, 2.4 billion in a related case.

are going about his about the android mobile phone that is loaded on most mobile phones. other software they put with it, be it male, search, other things. the eu feels bundling them together creates antitrust. nejra: and have begun any response from google? tony: nothing in regrets it is fine. but this find is in the ballpark of what everyone expected. i do not think it will be a shock. last night, they had a call with the eu antitrust commissioner where they were briefed on what would happen. they did not get the exact number, but they were aware of what the ballpark would be. nejra: does this tell us anything putting this into context about the eu attitude towards tech? tony: this has been going on for years. last year we had google, apple before that.

the back tax ruling which was 13 billion euros. that was a record in tax cases. we can have lots of records we can throw in your. -- here. but there are many who feel they have been difficult with american tech companies, and this will certainly provide more grist for that mill. nejra: google is said to get that fine. is this definitely going to go through? tony: this will happen in a few hours. nejra: thank you so much. surveillance, plenty coming up. including the warning from as the uk's repairs to meet their chief negotiator. and we speak to the eu competition commissioner at the block is set to impose a record fine on google. this is bloomberg. ♪

nejra: economics, finance, and politics. this is "bloomberg surveillance." let's get the bloomberg business flash. said to be hitis with a record 4.3 billion euro fine by the european commission, according to bloomberg sources. the regulator claims the tech giants mobile device strategy unfairly strengthens its dominance of the search engine market. later today, we bring you our interview with the european competition commissioner. amazon's fourth annual sales about lower shoppers from around the world. according to estimates, spending jumped 89% in the first 12 hours on the e-commerce giant's website, compared to the same

time last year. they prime day to 36 hours and added for countries. the start of their promotion was played by technical glitches, which shopper spent about using the #prime day fail. and watch has reported its highest profit in three years. gainss the maker of omega market share for some of its most profitable brands. rose $628profit million, beating analyst expectations. thank you so much. be told towill escalate their preparations for a no deal brexit. -- page document will be presented in brussels, after theresa may narrowly survived a tour rebellion. they swore off a bid to create a

customs union if the trade deal fails by just six votes are --. our guests are still with us. it seems like every day there is a new crisis and some kind of turmoil facing theresa may. how are you allocating across the u.k.? maya: brexit uncertainty is not something that goes away. it adds and flows, and meanwhile, the u.k. economy is not in great shape. it slipped from being a top performers to one of the bottom, with higher inflation to boost. boot u.k. assets have had a decent year. . overall, balancing out those risks we just spoke about, we are firmly neutral. neutral assets, neutral equities, neutral on sterling.

because the risks of where we are concerning brexit, but also economic growth and inflation. it is not very good. have the risks increased for you on a hard brexit or no deal? larry: i think so, but they were always there. i think we are just getting more validation. it is difficult to find a parliamentary majority,. . -- full stop. difficult to negotiate with britain. that will be a consequence of this. it does that mean they have to take a hard line, but they have to be conscious about striking a deal that will not be validated by parliament. it feels to me like the probability of a no deal is going up. but equally, the probability of an extension is going up.

and the probability of a fresh election or second referendum is also rising. you have to resolve this politically in the country. you must find out the will of the people and express that through the agreement you sign. and right now, that is difficult to find your the to circumvent that is elections. you are neutral u.k. equities, but some say that because they are so unloved, there is an opportunity. what would you say? there might be, but we do not like investment strategies based on uncertainty, i.e. acorn toss. -- a coin toss. in general, take opportunities to sell the pound on strength, because it will have weak moments ahead. shy away from that, we from taking too much u.k. risk across asset lasses -- classes. nejra: got it.

we talk about assets flattening in the u.s.. but also long this curve, what is your view on guilt? maya: similar to our view on duration overall. in so far as we do not see risk reward favors long-duration assets. concerned,he u.k. is the central bank is likely to raise interest rates. we think they will, in do cause. but that growth inflation backup is not particularly favorable. and when we talk about u.k. duration, one bit we favor is multi-asset portfolios is the short dated investment-grade u.k. markets. like, an orphan assets. not owned by pension funds, and it offers a nice yield pickup with light duration. long-duration

would sit in the same bucket for us. nejra: interesting. thank you so much. it is a another big day for u.s. bank earnings. results from morgan stanley later, and the pressure is on, after strong numbers from rivals. and goldman sachs job as much as 2% after analysts flag expensive and a surprise drop in equity trading. joining us now is bloomberg's dani burger. .et's start with morgan stanley what will investors focus on? one of the big surprises that will be relevant is an and a. heading into these results, there is an idea that you have trade tensions building and corporate clients will not spend as much. but we saw a lot of these for these banks. morgan stanley is one of the top advisory firms.

definitely the best of any of the five banks. if they disappoint, they will have a lot to answer to. nejra: will trading numbers be a bright spots? how will that be in focus? has beending interesting. like you said, goldman a bit of a disappointment. others have exceeded expectations. for morgan stanley, i will be looking at fixed income. saying they expect on average a billion a quarter. last quarter, they beat that, nearly 2 billion. spending a lot and their electronic bond trading markets. this is something that they are putting a lot of emphasis on. nejra: i want to go back to goldman. you have got david solomon taking over as ceo, and there is talk the focus could shift into what a consumer -- into a consumer side of things.

get equity trading seems to be with push the soft loader -- stop lower -- stock lower. dani: pushing to the consumer side is difficult. we have had a lots of banks harping on their investment results, and questions remain whether that is sustainable. especially with loan growth, especially with the yield curve flattening. it is going to put a lot of pressure. session.because of the the economy needs to keep up, obviously that is important. nejra: and what are we generally hearing about the earnings so far? dani: we have had a lot of variation. looking forward, a lot of it will be the yield curve, and whether trade is going to affect the business.

an interesting contrast, saying corporate clients are hungry for deals. and powell saying he has seen spending come back. playw that is going to out, analysts are focusing on that and listening to what executives are saying. nejra: thank you so much dani burger. coming up, europe's bid to reduce car tariffs. can they convince president trump to step on the brakes? this is bloomberg. ♪

nejra: economics, finance, and politics. this is "bloomberg surveillance." let's check in on what is trending across the bloomberg universe. trump backtracks on comments in

helsinki, saying he accepts the conclusion of u.s. intelligence agencies. i'm bloomberg, theresa may has fended off a bit rebels to create a customs union if the trade deal fails. the government won by only six months. ,nd our most read stories are in third place, analysts in blackrock say now is the time to buy emerging markets. voicednd, fed officials concern about the next financial crisis. and goldman sachs surprises by setting aside a unusually small portion of revenue to reward traders and bankers. i just want to get a quick comment for my guests. larry, on goldman, what we see under david solomon? larry: it comes out of the investment banking after. -- backdrop.

i suspect consumers will still be a big part. issuesy have to address around trading, including equities and bonds. going forward, it will be more challenging. because of the flatter yield curve, and i'm even markets. it is a difficult to consistently beat on trading when the market is not trending, that is true for asset managers and investment banks. he faces big challenges. he has big shoes to fill, and despite the share prices, he has a vote of confidence. when you look at banks, equity versus credit, which is more appealing? maya: banks are behaving in an increasingly equity friendly and credit unfriendly manner. we have seen a greater dividend payouts, less of a buffer in terms of balance sheets.

the trend is more favorable for equities over credit, for banks in particular. nejra: thank you both, let's look through that u.k. data as we have show you the inflation rate staying at 2.4%. if we look at how sterling is reacting, it has are even weaker under thesion challenges may is facing and broad-based dollar strength. let's get bloomberg first word news. taylor: donald trump says css the conclusion by american intelligence agencies that russia interfere in the presidential election. he retreated over comments made a day earlier. came amid backlash. but even with a prepared statement in hand, he introduced doubts looking up from the text, saying the meddling could also be other people. i realize there is a need for

clarification. it should have been obvious, i thought it would be, but i would like to clarify in case it wasn't. ,n a key sentence in my remarks i think the word would instead of wouldn't. "i don't seee been any reasons why it wouldn't be russia. " eu is planning to urge member states to increase preparation for a no deal exit. a 15 page document will be presented at brussels today. that comes as the u.k. government saw a bit by u.k. rebels to create a customs union if the trade deal fails. later today, theresa may will face parliament questions and addressed a meeting of tory and fees -- mp's. jerome powell says the bank will continue to gradually raise

interest rates amidst a long -- strong labor market. said the fomc believes that, for now, the best way forward is to keep raising rates. global news, 24 hours a day. powered by more than 2,700 journalists in more than 120 countries. this is bloomberg. thanks so much, taylor. transatlantic trade will be the focus of talks. bloomberg has learned that the eu commission president is hoping to start negotiation's on reducing car tariffs for several partners. let's bring back our guests. when you look at how equities are trading in this session, carmakers are most the biggest gainers, presumably on this possibility we could get some sort of negotiation or agreement on tariffs. we see movement every day on

this news. but when you are actually allocating and looking ahead to that august 30, when the tariffs could be imposed on china, how are you positioning? larry: i think you have to pull back. we decide evidence of it. the president will say one thing, contradict himself the next day. that is not just in russia, but somebody is that so many instances. it must be extremely frustrating. and for us in the markets, the same is true. this is one of the reasons we have these choppy markets, and ,hat sense to the broad market as well as those beleaguered sectors fighting against these protectionist threats like european autos. having said that, europe's intentions are clear. they signed this agreement with japan, extending a free trade arrangement between those countries.

europe is serious about terror production as a way of winning this spat. it is something that is overdue. so there is a chance here that we could find a break to this otherwise difficult. -- period. but they have to find out how to play this. not just in the way of a few votes for the administration, they meaningful sense for the world. if that happens, we will all regain confidence, but the onus is to improve, rather than just tactics which have dominated the debate. nejra: i understand you are quite positive on european equities what gives you faith when there is a possibility that some sectors could be quite hurt if the trade war escalates? maya: fair question. we favor european and japanese equities. nejra: they can also be quite hit. maya: they could.

is we think we are expecting good earnings to come through in both regions, europe in particular. we are expecting a 10-15% this year, next year. and that reflects a combination of an economy doing nicely, but also, high operational leverage to what is currently a global reflationary story. in other words, they tend to have a high fixed to variable cost. they should be the companies that really benefits your however. tensions, ind general, are certainly a risk. as europe and japan are very exposed areas to those sorts of tensions. so while we have held onto our japanese and european equity positions, based on those expectations for good earnings to come through.

and quite a lot of uncertainty on where we end up. we have not added to those positions, because we are a bit worried about how this progresses. , i find a trade is the hardest to think about. because it is very much a macro concept. and when you look across the street, much of it converges on half of a percent, 1%. but it is really what happens under the hood that matters, the micro implications that the challenge to those very integrated channels that have evolved over the last 25 years, is quite meaningful. and automakers are a case in point. speaking of looking under the hood, larry, is it important to not take a broad-based look and be much more selective? or is it about having a lower correlation view?

what we have seen sometimes is when there is angst over trade wars, everything gets hit. hasy: i do think the market moved towards a couple of things, one is certainty. these markets have been a refuge for many investors with share low correlation strategies, fixed income strategies, bonds, things like that. and we continue to believe that is right. as a broader concept within portfolios, we have moved away from return chasing data, as it were, across markets. it is a lower hurdle to beat, but in these markets, you want to avoid drawdown. it is difficult to make up for, so taking a conservative stance in your portfolio is appropriate. ,ut coming back your question it does seem to be the earnings quality and certainty is a key performance characteristic.

we share the views that parts of europe and even emerging markets have a great deal of leverage a could exploit. but their inability to demonstrate that is clearly a reason they have fallen out of favor. small cap japan is generating more of that on a continuing basis and remains our preferred non-us market. ok, thank you. our guests stay with us. and stay with surveillance. rally, are emerging markets set for games? we talk emerging opportunities in em. and amazon's primate event. turned to soaring sales at the finish. this is bloomberg. ♪

nejra: this is "bloomberg surveillance. " day -- of the world's biggest banks predict nem search -- an em surge. which they argue will withstand a potential recession. guests are still with us. as you are smiling, what is your take on goldman, the rest of them. is it time to buy em? larry: it is a little soon.

investors have taken quite a beating, relative to what they thought they would enjoy. keyave seen a number of strategies across momentum, value, and others really struggling. investors are cautious going into a quiet period of the season. i do not see an immediate bounceback. i share the view that the potential is there, but investors are saying show me the money, the earnings, and demonstrate to me you can deliver. and they are struggling against dollar strength. a reprieve would be helpful, but it is not clear we will get that reprieve. secondly, we have to address the issue of global trade wrote. --growth. it is what drives the ends, to some extent. eventually, yes. the fundamentals are there and the value proposition is there. as a style is just not

performing, and it continues to underperform. we are in a show me state, we need to see earnings first and in the story will unfold. em,a: are any parts of regionally or in terms of asset classes, showing you opportunities? maya: i am glad you asked. i think em is a danger, and there are lots of different market, more differences than similarities. and certainly in equities. we have a preference of emerging asia over other regions. and that ties into the operational leverage story. does that include china? maya: it does. i think emerging markets, more leveragedo have high to the global cycle. notwithstanding some of the

tensions we have talked about, doesn't continue to evolve favorably. we have good earnings expectations for asian em. and notwithstanding, slum slowdown in recent chinese data, 12 big concern for investors or 18 months ago was the chinese lead risk off. a hard landing, as it was called. ,nd as we look at china today we are impressed with how they managed to rebalance their economy in favor of consumption, domestic demand, without having that hard landing. so i would argue some of the chinese risk, perhaps, is less intense in the short term as well. nejra: would you agree with that in relation to china? larry: i agree with the fundamental assessment. is that it also looks like the acceleration is behind, as if we have peaked.

it is unlikely, it seems to me, we will continue consecutive plus quarters. remainsedit story tight, particularly in the non-bank sector. they were hoping, obviously, to offset that with exports in consumption. so that is a another area we are looking at peak growth, and europe's inability to recover is out there. ways, the narrative of strong growth helping em feels like it should have already. it is probably not going to get areer from here, and there chances around various aspects that we will see some slowing of growth over the next 12. and that will be a difficult environment for them to cope with. from that perspective, there will be opportunity, but tactically, i don't think the timing is right. nejra: very quickly on trade,

you said you favorite emerging asia. are they not at risk? maya: it is an area of risk. i think a lot of things are at risk if trade wars escalate. we have a reference for equities, commodities over government bonds. if we did have an all-out trade war, i think it would be a concern beyond just emerging markets in asia. there be a questioning of framework, thinking about the world order, i guess. all bets are off at that point. it is quite striking just how well earnings and even have held up across the world. particularly in asia and europe. nejra: thank you both. thank you so much for joining us this morning.

coming up, amazon's primed a recovery. the retailer sees a slow start. that's next. this is bloomberg. ♪

nejra: economics, finance, and politics. this is "bloomberg surveillance." let's talk amazon. after a stumble due to technical glitches, amazon's prime day event saw soaring sales and spending jumped 89% in the first 12 hours, compared to last year. for more, our bloomberg opinion columnist joins us now. alex, how significant is this day for amazon? alex: not really. total revenues, not the for amazon, before the service, about $3.5 billion.

amazon generates over 100 billion in revenue for itself. for amazon itself, it is more of a marketing dimmick. -- gimmick. nejra: what does it tell us about their marketing power? alex: in that sense, it is significant. in the past, it was criticized for being a bargain basement. in the past, you would see stuff that is not the quality. this was not the case. discounts on things like callaway, procter and gamble. they were offering huge discounts as well. that demonstrates some increasing market clout they have. able to go to these brands and say give us discounts. nejra: we might come back to this, but i need to turn to hour, weecause in this have had breaking news about this possible fine. google is said to be fined a record $5 billion over android. in terms of just the numbers, is

this a fine they can swallow? they have a hundred $3 billion in cash reserves, so it drop in the ocean. it will be the biggest find they have imposed on any company, but far more significant will be the remedies. what can they do? been strong device makers into carried the google engine and the chrome browser as default, not caring others -- carrying others. if the remedies impact that in a significant way, that has real impacts on google's advertising business. the reason they have caps on phones is so that they can track you and see what your browsing behavior is like, and serve the market. nejra: we saw the nasdaq hit a fresh record high. when we get headlines like this about fines and that sort of thing, how are investors likely how easy youen

said it was for google, will this affect investors? alex: probably not, but we are seeing a shift towards regulators. europe takes the lead on this. they are imposing greater regulation on these tech companies. , howow they are policed that develops, will likely trickle into other regions and economies. that will have significant impact on facebook and google, in particular. throttling the flow of data and internet traffic is something which affects their businesses in a substantive way. they rely upon advertising to make money, and the ability to target that is something that could be stymied. nejra: quickly going back to amazon, we have the prime day, what else are we watching for in terms of stock? alex: we want to see what they are doing in health care. they have this joint venture with jpmorgan and they have

appointed a ceo. quite how that attacks the market will be interesting. we have seen help stocks take a pounding the moment this news broke, but it remains unclear what they are up to. the health care industry is colossal, so there is a lot of room for players to come in. but that does not mean there are not niche as they can target. nejra: they for joining us. we continue in the next hour, tom keene to the out of new york. and we bring you our interview with that european competition commissioner. this is bloomberg. ♪

tom: this morning, ask not what your country cannot not do for you.

the president seeks protection from left and right critics in the land of the double negative. democrats speak. his base cannot not respond. we have no reply from moscow. the dollar cannot not weaken. that is a double negative. the yen goes through 1.13. stanley, they report cap accounting does not allow double negatives and mr. gorman cannot not adjust. this is "bloomberg surveillance." i am tom keene in new york and i cannot not introduce my colleague, nejra cehic. this is what it has come down to. we are going grammatical in our politics. nejra: absolutely. i wish i could say i was

surprised by the about-face, but i am not. i am curious to find out what could have driven it but what it means will happen from here because there were so many implications from helsinki when we discussed this yesterday. tom: it will be interesting. right now with the immediate briefing we cannot not go to taylor riggs. taylor: president trump has made a rare retreat from something he said. said he jumped to conclusions -- he accepts the conclusion by u.s. intelligence agencies. that came after a backlash from republicans with his meeting with vladimir putin. still, the president said other people also could have metal. there is likely to be more drama in brexit parliament as may faces prime minister's questions and boris johnson could signal whether he intends to challenge her. may supporters are under fire

for the tactics they used in parliament on her brexit plan. willuropean commission tout eu countries they better be prepared for a no deal brexit. alondon newspaper says document urging the country to boost their brexit contingency plans could be published tomorrow. they'll be the day the new brexit negotiator visits brussel. google is about to set a dubious record. bloomberg has learned the european union will find the the most ever for an antitrust penalty. -- global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. equities, bonds, currencies, real market movement.

we can give it to chairman powell on his testimony. equities flat. talking up a choice set of what happens in inversion yesterday. the euro gives way. dollar strength. good morning in dubai this morning. the 10 year yield has not moved. that is news. we have currency move without yield move. 1.1302. to gold further cells this morning. nejra: we are seeing movement in european equities. carmakers outperforming somewhat after hearing possible talks of tariffs between the u.s. and eu. we have that u.k. cpi data coming in soft and more

difficulty for theresa may even though she won that vote. the 10 year bund yield not doing much. tom: let me show a chart. this is dollar strength. this chart matters. we can make jokes about double negatives, which is foundational to investment theory. i cannot convey enough that where the president went yesterday with would and would not is the heart of what you hear by some of our esteemed guests, including the nobel laureate who has been brilliant on this. here is the dollar strength up right up at resistance. average,hat moving just one moving average that describes a trend. nejra: the dollar driving everything, at least that is what my chart is suggesting. when we talk about u.s. equities and how while they are doing we have to look under the put. -- under the hoood.

this chart shows that u.s. companies with foreign sales have been underperforming those more focused on home revenue exposure. this is something else we talk about we talk about the nasdaq hitting a fresh record high. tom: we have jim with us on the in hisd this is wheelhouse, all of this uproar about the president's language but i first want to bring you to moscow. withis the new york post mr. trump, the sun. for those of you on radio, it is the two faces of mr. trump. hoopski.ottom, w we go to moscow with our senior government reporter.

is there any word from vladimir putin on the walk back by the president? all the top russian officials including vladimir putin in an interview he gave to fox news all judged it a huge success. even before trump walk back on his comments there was already some understanding that in fact trump probably miscalculated by provoking a huge backlash in the u.s. may have actually made it much harder to achieve this rapprochement that russia so desperately wants. short,st to keep it nejra i want you to jump in here as well, what is the next step for vladimir putin? we are all watching mr. trump step-by-step. what is the next thing vladimir putin does?

henry: they are going to try and nail down some of the areas they agreed to work on. i think that is how the russians ,ee they have to move forward that is arms control, that is syria. those are areas where they can make progress. russia has not given up hope this will work out but obviously hopes have been deflated. that said, did president trump do the right thing in not talking president putin down as he was standing next to him in front of the global media? peoplei have spoken to here in moscow who are close to the kremlin and they say yes it was a mistake of trump decide publicly with putin on the issue of election interference. it inflamed the situation. there is a recognition that trump miscalculated.

tom: thank you so much. greatly appreciated on short notice. the follow-up from moscow. let me do a morning must-read. it,new york times nails english and what mr. trump was talking about. wouldn't or would it not be russia, trump goes double negative. affect and effect, clinton once wondered what the meaning of the word is is as he whether the monica lewinsky affair. then he goes on to reagan's clarity and says mr. gorbachev, do not not tear down this wall.

with us, the gentleman with the best english chops i know, jim hartley. jim, i thought we would never talk about this in our life. what is a double negative and how did the president do walking this back? jim: it is interesting that they found an excuse, they found a rationale. what he has done is given political cover to all of those republicans who want to stop criticizing him. is he wassting thing very clearly on script. he changed his tonality. he made it very clear he was reading a script. it, he was done reading made it very clear he was speaking asked temper any of the and you saw again in the fox news interviews that he gave to

sean hannity and tucker carlson. wasakes you question what behind the walk back. i daresay you had senator saying -- they're able to now say we believe him and take him at his word that he misspoke. whether he feels that way, notice the headlines, he wrote in black sharpie on his script, there was no collusion. nejra: in terms of all of criticism we saw yesterday, is that going to go up in thin air from his party? jim: if past is prologue, yes. paul ryan in mitch mcconnell, not a word of president trump's performance standing alongside vladimir putin. tom: we will go grammatical to pay homage to your abilities. coming up from finland, we had a

wonderful time in finland. alexander will join us from the european investment bank, former finnish prime minister, good to catch up with him after the joy that francine lacqua and i had in helsinki. this is bloomberg. ♪

taylor: let's get the bloomberg business flash. to amusk has apologized british diver for remarks that appeared to rattle investors in tesla and tweeted that he was sorry for referring to the diver as a pedophile.

musk and theticize mini summary he built to help in the rescue. a shakeup at texas instruments. the io is out after less than two months on the job. the company says he violated their code of conduct. former ceo rich templeton resume the role on a permanent basis. the former ceo of microsoft has thechanged now that he owns los angeles clippers. , i becomeand scream more moderate so i preserve my vocal cords. it can be a problem. it can be an issue. taylor: you can watch the entire interview with steve ballmer on the david rubenstein show.

that is your bloomberg business flash. the fed is planning to raise interest rates gradually. for now. those are the two keywords taken from the committee yesterday. a strong job market and inflation close to our objective in the outlook balanced. bestlieve that for now the way forward is gradually raising the federal funds rate. nejra: the dollar and vance after powell spoke but this was based on an upbeat assessment of the -- we are joined by david bloom. the dollar gaining against most g10. what was dollar bullish about what jerome powell said? your a dollar bear, right. he is doing what he has

always been doing. the yield curve going negative, the fed is going to pull away, no. the economy is doing well, i am raising rates for now. i only care about now, worry about tomorrow tomorrow. this is a benevolent dollar move because dollar-yen went up. the dollar can also rally because of trade wars and the horrible things going on. this is a positive dollar rally. nejra: why do you think not everyone is buying your assessment of dollar strength? david: because they like losing money. -- that is what makes the market, they have the opposite view. my view has been the u.s. economy is doing well and the rest of the world is faltering. talking september next year the bank of england saying one and done.

all is countries that were normalizing were not there. i get paid a lot of money to own u.s. rates in the world looks nasty. in dollars i can pick up on the short end with no duration risk. what -- how may figures does yen move and which way? david: it is an interesting question because the dollar-yen move is nothing. i am not interested in dollar-yen. us -- my golden --p us -- compass david: when the dollar is rising that is a benevolent move. bonds are not moving. that is beautiful. when dollar-yen is heading down, back be a trade war and something nasty. dollar-yen tells you what kind

of dollar value you're getting, but if you believe in the dollar like me you do not care what kind of dollar value it is. we have the dollar-yen--- we have the dollar-yen flat. i was just using the yen as my golden compass, not to trade with. nejra: what about real rates? -- that does not feed into being dollar positive? david: why not. if you're a millennial and you're sitting on the trading floor, you've not seen these rates in your life before. no duration. i do not have to wait 10 years with journeyed coupon payments. i can just -- the dollar. that is fantastic. tom: within this i have to make , or to go to the double negative, i cannot not lose money. when you go to your trading desk

is it about making alpha or is two i cannotc type not take risks, i'm afraid i'm going to lose money. david: i think it is a bit of both. people are worried about losing so risk aversion is still everywhere. you still have to make money if you want to be in financial markets. you cannot be scared of everything. i think you buy the dollar across the board, g10, em's, there are a few exceptions. i think that is the way to go. you can pick up beautiful rates in the u.s.. that is great. the quote think floyd, we do not need no education. is the trade in the dollar getting one sided? i understand you are dollar bullish. you will feel a lot of pain if it goes the other way.

david: no. people are fighting me every step of the way. it sounds like i am dollar bullish. people are not believing. and then when you look at the data on the long positions of the dollar, people are not that long. there have gone from being long euros to flattish, maybe a bit long on the dollar. at the moment, resistance is good. nejra: resistance is good. that is david bloom of hsbc. this is bloomberg. ♪

nejra: google will be fined around 4.3 billion euros over android apps according to bloomberg sources. the fine would and an eu probe into the company. caroline hyde joins us from brussels. great to see you. butcord potential fine would this be easy for google to absorb? : $5 billion is a drop in the ocean of cash for google. thanber they have more $100 billion they can spend in short-term investments in cash. this is a big symbol. $5 billion is a record amount,

more than 50% than they had to pay out in their previous fine that was laid out last year. this is another shot across the bow from the eu. of course they can pay it. tom: you and i talked about this in london. that europeea is really cares about this and nobody in america cares. why is that? why is this a huge deal in europe and everybody in america is going what? : i think the eu regulators care. they are worried about the monopoly of facts that the key tech titans have. 80% of android is market share in phones. markets around the world you have 90% ownership of google search.

the question is whether or not they can effect change. well the business model of google change? will they have to stop bundling google search with the android phone? will we get more market share for the rivals? we did see a change in russia. caroline hyde for us in brussels. david bloom of hsbc stays with us and coming up the european commissions competition commissioner on google. 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. streaming must see tv has never been easier. paying for things is a breeze. and getting into new places is even simpler. with xfinity mobile, saving money is effortless too. it's the only network that combines america's largest, most reliable 4g lte with the most wi-fi hotspots. and it can be included with your internet. which could save you hundreds of dollars a year. plus, get $150 dollars when you bring in your own phone. its a new kind of network designed to save you money. click, call or visit a store today. nejra: i'm nejra cehic in london. tom keene in new york. let's check out what's trending across the bloomberg universe.

trump backtracks on comments in helsinki, saying he accepts the conclusion of u.s. intelligence agencies that russia meddled in the u.s. election. up a bid byhas seen conservative rebels to create a custom unit with the eu. the government won by only six votes. our most read stories over the past few hours, analysts from templeton and blackrock say now is the time to buy emerging markets. former fed official ben bernanke and timothy geithner voice concerns about the next financial crisis and goldman asidesurprises by setting a portion of revenue to award traders and bankers. let's get to bloomberg first word news. taylor: president trump now says he accepts that russia meddled in the presidential election but he did not sound sold. the president backtracked from his meeting with vladimir putin after a backlash from republicans. he introduced some doubt.

the president added other people but also have metal. the trump administration is opening an investigation that could lead to tariffs on imported uranium. the administration will determine if those imports harm national security. the american uranium industry wants to be shielded from competition from state owned companies in countries like russia and kazakhstan. several names from the last financial crisis are concerned about america's ability to fight another one. ben bernanke, timothy geithner, and henry paulson played roles fighting the other one. former secretary treasury -- former secretary of the treasury timothy geithner -- ben bernanke criticized tax cuts. billionaire jeff bezos plans to launch another rocket today. his company says the new shepherd rocket will be carrying

scientists for microgravity research. this is the ninth mission. tof bezos eventually expects send rockets into suborbital space. you can watch the launch on bloomberg at 10:00 eastern. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. riggs.ylor this is bloomberg. tom: the risk here is to go all politics. news flow is extraordinary. we saw that from nato to the united kingdom in scotland and up to finland and the furtherance of it in the last 24 hours. there are still arguments of trade that fold and what we do at bloomberg and into our politics. we are honored to bring in marianne schneider-petsinger from chatham house, focused on the geo-economics of the moment and david bloom with us with hsbc as well. marianne, let me begin

with you. what is the future of trade? marianne: i think president trump has made it clear he is interested in bilateral agreements. there is obviously the question whether there is room for negotiation with the european union. that is a bilateral deal. the trump administration has also made it clear they do not see as such, they view it as a multilateral deal. the future open. on the other hand, we are seeing other countries moving ahead. the european union just negotiated a trade deal with japan. they are interested in trade deals with australia and new , thend, this week remaining countries of the trans-pacific partnership are meeting to expand and discuss

and bring in other countries into the agreement. american just an ugly and i just talk about angela merkel and emmanuel macron, but there is another europe out there. can finland or poland or portugal, and they go bilateral? i do not understand that. don't they must have a multilateral trade discussion? marianne: obviously the european commission and the european union has authority to strike trade deals and that is the competency they have. it does not mean that individual countries of the european union cannot have those talks with the united states and tried to explain how new trade policy is conducted. it is also interesting that next week the european commission president will be traveling to washington, d.c. to meet with the president. the big question is what is going to be on the agenda on

trade? will it be about the tariffs that have been implemented or is it also looking at the looming tariffs because the trump administration is currently conducting an investigation into whether there are going to be tariffs on the imports of cars and automotive parts. came up in the question to jerome powell yesterday, surprise, surprise. my question to you is what would it take for the trade war to impact the u.s. economy? marianne: we are not seeing it play out in the macro economic indicators. there is the question of is it going to be a tipping point. for the time being, what we have reform, thex positive economic benefits are .till dominating the other question as to what extent will businesses speak up and stand up to trump on trade

and will republicans take a stand on this? for the time being they have only taken baby steps. introducing nonbinding motions to rein in the president with regards to the tariffs he has introduced. the republicans are not standing up because they know republican voters are more on board with trump on trade than they are with the traditional free trade republican orthodoxy. , is theavid bloom dollar of the ultimate safe haven currency if we get the trade war. david: no. i think it is the yen. the yen beats the dollar, the dollar beats the euro, the euro beats the others. you want to be buying closed economies and not strong open economies. that is why i've been saying the golden compass is the dollar-yen. if we start talking about this being the main drama and the yen does well against the dollar,

dollar-yen goes down. different type of dollar move and the way you tell which type of dollar move it is, you look to dollar-yen. tom: go ahead, i interrupted. david: please do not argue. nejra: a few weeks ago, i asked you do you buy the dollar against every currency except the yen when there is a trade war situation. now we are seeing the dollar strengthening. is this telling you the dollar move is about u.s. fundamentals? david: that is right. you have talk of the fed. equity markets are doing well. on cannot getting hurt. this is telling me this is about the u.s. economy. if dollar-yen was going down, it would be a very different type of dollar move as a thing i hold in my hand to look at is dollar-yen. that is why i do not want to traded.

it.o trade i want to win on both sides. a 30 year bond, 2.97, steve major look smart now. do you sustain. do you sustain low yields, still? david: sure. what are you going to do? if this is a trade war you will go in a trade war type environment, you will be buying the dollar and treasuries. what are you going to buy? that is what we think. that is a winner not for the world but for those assets. obviously it has its impact on global growth which is negative. tom: are we just talking about mercantilism and maybe neil mercantilism or double negative ?ercantilism marianne: it is.

the trump administration has made it clear that it is a euro -- a zero-sum world. the question is to what extent that is overblown on other fronts. i think the trump administration has pointed to valid concerns when it comes to trade, particularly with regards to china, intellectual property rights, those are real issues. andoes not get touched upon what we are seeing is that the trump administration is putting allies to the side, the european union, with those tariffs. there is an opportunity to work together between the european union and united states to confront china on some of those practices. it is not done. what we are seeing play out is the europeans and the chinese are now working together. nejra: where does this end?

does it end with less trade globally or with trade reshuffled? marianne: the real question is one of the implications on global supply chains. trade is not just import/export, it is across borders. in this environment of uncertainty, it is tricky for businesses to make any kind of decisions. in terms of economic implications, the imap push their estimate -- the imap -- published -- there could be negative consequences. fed chair said yesterday, it is tough to see how this is going to play out and predict what the economy is going to respond to. nejra: when i see those predictions about hits to global close, -- global growth, how meaningful is that? marianne: to some extent they have priced it in and the real question is the impact of the uncertainty.

with regards to the tariff we have seen so far, that is quite minor. the question about what is going to happen about the looming ariff, that is down the road larger question and that could have economic implications. we do not know if that is going to spiral out of control or if there is an open path of negotiation where you could deescalate the tensions. it is uncertainty that is the -- the keyere at point. tom: this has been wonderful. marianne schneider-petsinger. this is a wonderful function. , if you're at hsbc, you're an intern in london and you have 11:00 with david bloom, steal my chart.

dxy. dazzle david bloom. you can steal it at g tv . ♪

nejra: i am nejra cehic in london with tom keene in new york. the u.k. prime minister has fended off an attempt by pro-european conservative levels to keep your -- to keep britain from entering a custom union. the financial times says theresa may restores her grip on brexit by seeing off pro eu rebels.

-- if they defeated the prime minister's plans, and in the scotsman there is a call for a rerun of the eu referendum. today, the prime minister gives evidence the liaison committee which will question her about issues ranging from brexit to changes in our government. let's get back to david bloom, hsbc global head of currency strategy. you have been a sterling bear. we keep getting all this political noise, just the latest over the customs bill. does sterling have much farther to fall? david: we have not got it falling much. our forecast is 1.30. when it was 1.403i was sweating. was going to be a soft brexit, the bank of england was going to be raising rates. now you see the inflation the bank ofy,

england is going to do one more and now we have this political situation that remains messy. on what basis sterling should be cheap and it is. i'm perfectly happy with that forecast. nejra: given that you are a dollar bull and we could get downward pressure on sterling because of dollar strength and the fact that i question whether the market at where sterling is right now is really pricing a worst-case scenario? david: we cannot be. does go weeks ago we are pricing in a different scenario, a softer brexit. the softer brexit got bigger. it is all over the place. people not quite sure what to do with it. you do not know this outcome. time is dripping away. we have a date. it is next year. tom: i love this.

to go greek letters with david bloom is great. that is right where i want to go, the x axis. prime minister may's is different than labour and tory and all the shades. what is the city's x axis? there are big things were worried about. one is the interest rates. should they be raising rates or not? we think they will raise rates. should they be raising rates, i'm not quite sure. the other thing is timing. we chose the date. probabilities are of different events with no end. this has any and the. which is it -- this has been end. in time we could get a big move if we think something dramatic is going to happen, either customs union or no deal. which is it? we have been a softer brexit for

the sterling sake. nejra: volatility and sterling and eurosterling has been subdued. 89.18.rling trading it it has been in that range. it has broken out of that now. is there a further upside now? david: the ranges tight but sterling has done some of the move and euro is playing catch-up. we haven't staying in that range. we have euro going back to 1.13 or so. we could get a turnaround. to break that range and get that -- atthrough, we have to the moment we are also laying from heart is soft and soft a hard. subdued. you cannot put all your eggs on one side of the other side. o weeks ago, soft, now it

could be hard. volatility say lower , sterling between 1.30 and 1.34. nejra: brexit is tiring david bloom out. tom: the president did not go to david at the press conference. david bloom with the hsbc here with us. coast-to-coast. , 99.1 fmboston washington. sirius xm channel 119. bloomberg daybreak on radio. ♪

taylor: this is "bloomberg surveillance." hedge fund your capital management judgment is the latest to buy -- york capital offering $45 million for the platform. it is currently under a court order liquidation. the turnaround is starting to take hold at ericsson. rose 11%rican sales for the swedish maker of wireless networks and for the

second straight quarter of a key measure of ericsson's profitability improved at a faster pace than analysts estimated. bloomberg has learned government has given boeing a $.9 billion contract to keep developing planes to serve as air force one. that caps off a contentious battle with president trump over costs. the boeing 747 would be delivered in 2024. that is your bloomberg business flash. tom: taylor, thank you so much. we are with hsbc, the hong kong and shanghai banking corporation. we have to talk about the pacific rim. let me look at a dxy. bring up the chart. teach a course on trend analysis and this is to die for. if i was lecturing at hsbc on trend, this is absolutely meant

right there. we have a secondary trend that is just weaker pacific rim currencies on adxy. do we sustain that? weaken but not to the counterpoint they have been weakening. i think the weakening could be more severe elsewhere. we certainly are looking for the dollar to be king. -- is now gone through 670. we are watching that level carefully. there could get nervous. the dollar is winning everywhere. you can show any chart of the dollar you like and it would show the same thing, it is a winner. nejra: who is king dollar going to crush most in the em space? david: there are quite a few that have problems.

people are getting optimistic politically. and is starting to wane cyclically the economy is looking were structurally. your the fiscal situation not great and politically it is overdone. turkey.razil, dollar on turkey specifically, you are quite bullish on the lira, you are holding back now? we thought a more stable policy would be in place but we are not seeing it. we thought it would hold at 4:40, now we do not believe that. with central bank reluctance, the idea of not having a more sustained policy framework, i'm afraid we have thrown in the towel on that one. nejra: flexible and nimble. tom: that is right. keep talking. i'm trying to get up for you right now.

we try to do this at bloomberg as quick as we can. we willdential tweet, feature this in our next hour with kevin cirilli. some any at the higher ends of intelligence, we thank david bloom for bringing us higher ends of intelligence on foreign exchange today. much more to talk about. washington.itics of we'll drive forward the conversation on economics and investment and the tumultuous times of international investigations. stay with us. this is bloomberg. ♪

♪ tom: this morning, ask what your country can not do for you.

the president seeks protection from critics. his base cannot, not respond. the dollar cannot, not weakened. that is the double negative. yen 1.13. chairman powell testifying, no double negatives allowed. letaccounting does not double negatives, but will he go all pro forma? good morning. i am tom keene. not, not with us is francine lacqua. how is prime minister may doing? is she walking back her story as well? >> she managed to get the bill through. the question is in doing what

she needed to do she is selling future discord. the implications are that every single vote will come down to the knife edge, and that makes things more challenging. right now with your first word news in new york city, here is taylor riggs. >> google about to set a dubious record here it the european union will find the company five 80 and dollars. -- 5is the most ever billion dollars today. that is the most ever for a telecom operator. president trump has made a rare retreat from something he said. theaid he accepted conclusion by intelligence agencies that russia interfered in the presidential election. that after backlash from republicans over his remarks it

at his meeting with vladimir putin. the president said other people could have meddled and just tweeted many in the intelligence community loved his performance in helsinki. there is likely more drama over brands of today. prime minister may faces prime minister questions and boris johnson could signal whether he intends to challenge her. her supporters are under fire for the tactics they used to win a vote in parliament on her brexit plan. the european commission will they bettertries be prepared for a no deal brexit. to boost their contingency plans could be published tomorrow. that is when the new brexit negotiator visits brussels. 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.

thanks so much. right to it, right now. futures go nowhere. under 1.17. oil can't get a bid. the vix showing that bull market. under 3%.nds yen at 1.13 moments ago. gold can't find a bid. gold is an interesting story. acted liket always that safe haven. .uropean equities of .5% some outperformance from carmakers. bunds gettingerman a bid. the inflation data getting hit, but also dollar strength, and

brent crude lower. tom: on amazon, this just out from piper jaffray. primehows you amazon day. that is a wow statistic. amazon prime day was this norm enormous sale they did. was looking at prime date wondering what i can buy right now. kevin cirilli with us. how is the president this morning? nato, england, finland, major walked back. what is next? >> there was a bombshell headline yesterday. forr lawmakers are calling mike pompeo to testify before the senate about the performance

in helsinki. that means there are widespread concerns. they will be taking a lot of questions on capitol hill in front of those cameras in the coming weeks. tom: i read the miriam webster definition of treason last night. i'm sorry. it isn't it. is there is a tool called censure. simpley move towards a censure? >> they could. i don't hear realistic talk of that. maybe it is a short-term. i would point to policy positions the senate has taken on trade in a situation where you have the legislation by bob corker, who has advocated

and got to nonpartisan legislation support for something to make it more difficult for the president to use section 232, citing national security concerns on trade. calls for theote secretary of state to come and testify, and the criticism we have seen in terms of the beingr of the house critical of the president for the performance in helsinki. >> on that performance in helsinki, i know we are looking forward from here, but from people you have spoken to, what happened? was this plan from the start in terms of saying one thing in front of president putin, then back tracking? what is going on? >> i would note the political in now, whichlive is increasingly polarized. that was the president speaking behind the podium next to

president putin in helsinki. the president trump i am used to sing on the campaign trail in a massive stadium filled with supporters. it was not the president we typically see when he is talking to a head of state. the second point i would make is the policy and what we did not get, the reversal of lifting sanctions. we also did not get a change in u.s. policy position regarding the gas pipeline from russia to europe. nor did we get any switch in the new start program regarding nuclear disarmament talks. , note substance of energy and shift in policy, but the theatrics are a cleared part. and on the theatrics

and the many faces of president trump, which one is going to show up for the rest of this week? >> i think this is a president doubling down in terms of defense of his administration. there has not been a public reading from sarah sanders in quite some time. from lawmakers on capitol hill will dictate how long this place out. tom: the high point of our work yesterday was a conversation with a former supreme nato commander, is steamed naval officer. he was scathing about the people in the administration, almost begging for them to resign. where is that? and what is that discussion this morning in washington? >> i'm not sure there is talk of significant resignations in terms of the administration. that said, this is a unique situation. it is fluid, but to your point,

, the seniority of republicans critical of this, but also from mitch mcconnell's perspective, the architect of the midterm elections, so close. of presidentse trump political movement that has not deserted him and feels he is a political outsider representing in a nonpolitical way what they elected. going back to helsinki, i know we are focusing on what happened with president clinton, but another thing -- president putin, but another thing that came up was president trump referring to the european union as a photo on trade. the meeting next week supposed to be discussing eu tariffs for automobiles, what could we hear? >> the president has argued

consistently that they will continue to double down. the president on this morenational trip was much in line with his economic advisor and steve bannon in terms of articulating a global trade and economic view. this will only continue. the president as critical in public with regards to the eu on trade, but let's not forget the other headline on trade. it was out of the eu. the eu is signing the largest deal in history with japan. came back inrilli a gulfstream, so he is not jetlagged. this from the president a few moments ago. the meeting with russia may prove to be an even greater

success. many positive things will come out of that meeting. the sidebar and in your post is asking for five people to be granted clemency so they can testify against mr. manafort. , theypan, robert mueller coalesce into a moment, don't they? >> they do because of russia's energy relationship with europe and how they're trying to get into the middle east. to the president's point, his , they are looking at the developments of the past 24 hours, and this is what i hear. they say what about that russia reset that the democratic party tried in the obama administration? are living in an increasingly tense political times. all of this is impacted by these geopolitical shifts that seem to

be happening rapidly. >> thanks so much to kevin cirilli. great to have you with us. coming up later today, a conversation with the european union competition commissioner. fine,rd today about that the possible record fine on google from the eu. this is bloomberg. ♪

>> this is "bloomberg surveillance." let's get the bloomberg business flash. elon musk has apologized to a british diver. tweeted the man was a

pedophile. those whos one of rescued the boy's from a flooded cave in thailand. he criticized musk and the miniature submarine he built and help in the rescue. texas instruments is out. the former ceo rich templeton will resume the role on a permanent basis. became famous for high-energy performances while ceo of microsoft. he is this week's guest on the david rubenstein show. >> i yell and scream. i become more moderate. i preserved my vocal cords. it can be a problem. it can be an issue. >> you can watch the entire interview at 9:00 p.m. new york

time here on bloomberg tv. that is your bloomberg business flash. tom: thanks so much. economics and international relations, the market can give us indicators. not the equity markets, but looking it fixed income. our guest joins us right now. you and i know in every case that fixed income signals bad things to come first. is it signaling the gloom that is so pervasive now? is it signaling recession, and version? theixed income is signaling fed is well priced here. it is telling you the fed will hike to neutral, then stabilize. if jerome powell word to force the fed up of neutral, then you

get an inversion of the curve. i would say that is not a good signal for risk assets, for the economy, but the market so far is cautiously optimistic fed will not push the envelope too much. tom: i can bring up the real fed funds rate chart. i am going to say we don't have real rates, tangible real rate. if the fed moves up, is it a function step-by-step, inch by inch, or is a quadratic where it has an impact into next year? >> that is a key point. i think the market is nonlinear. neutral, itets to has a next financial impact on risk assets, risk premium,

equity markets. you talk about this quadratic function. i think it is as eu lead up to neutral. it is all about neutral. that is the key issue. the market does not know what neutral is. productivity and labor force participation are not picking up. if long-term growth is stagnant, i would say the neutral rate is 2% to 3%, so we are entering into this neutral zone peered -- zone. nejra: the market may not know where neutral is, but there is pressure the fed nose as well. also, balance sheet runoff. that can have implications for the curve. you say markets are not talking about the likelihood that balance sheet runoff could in sooner. why would it in the sooner? with what iso do

the true excess reserve demand. pre-crisis, there were no reserves. now,act that we have this it requires banks to hold on to more reserves. reserves are shrinking. if they demand reserves, they will push up funding rates and have an impact on all risk assets. money can buy -- deposit for three months at 3%, why buy mortgages, equities? i think that can spillover. tom: back to the land of the president, tweaking out a tweet storm. the sun north korea and russia. we put out this headline across the bloomberg. russia has agreed to help with north korea. the process is moving along. there is no rush. remain?nctions

big benefits and exciting future for north korea at end of process. the president is back in washington, staying on message. much more on washington and international relations. market right now is weaker yen, stronger dollar this morning. again, the president tweets. we will have more for you. this is bloomberg. ♪ ou. this is bloomberg. ♪

nejra: i am nejra cehic in london. let's turn to trade. the european commission president will meet president trump next week to explore the possibility of starting negotiations on reducing car tariffs for key trade partners. as the trump administration is opening an investigation that could lead to tariffs on imported geraniums in a trade war. is the former finland prime minister. still with us in new york is our guest. good day. of anyhold out much hope kind of concrete outcome from the talks? i think quite often when you discuss president trump, it is unpredictable.

areink the european union doing the right thing. and sunday they were in china talking about trade deals. to tokyot, they went to talk about trade deals. ae nine it states is leaving power vacuum as far as free trade is concerned. that vacuum is being filled by the european union. hopefully we can get something with united states as well. nejra: does president trump have a point when he criticizes the eu on tariffs? >> yes and no. ofhink tariffs at the end the day should be negotiated youilaterally appeared if don't do that and go purely intoeral, you usually get an auction time. the more free trade between the united states and the european union is the better.

that is why the best avenue should have been to push for the ttip agreement. we also made a great agreement with canada. , there are not winners in trade wars. tom: wonderful to have you with us. just got back from helsinki. if you can just keep the sun out 10 months of the year, that would be plus plus for me. do you people have a tangible power given the focus on chancellor merkel and the others? >> i do think we are seeing a of tectonic plates in international relations at this moment and the long-lasting relations between the united

states and the european union is shaky. we need mediators. i would argue that angela merkel is one of those, zte donald tusk --jean-claude juncker, donald tusk and others. it is getting a little rough. my thesis is that diplomacy is about human relations, communications, how you treat others, and right now we are seeing language that is not very comfortable in international relations. tom: are we seeing an economic factor out that will pull us away from the negatives of populism? are we going to get tolerable economic growth in europe, sustained growth in the u.s. and asia, that will allow us to move away from the harmful effects of populism? no.es and

i was in government for eight years. period that was the of an economic downturn. when you are in power in that type of situation, it is demanding and difficult. what you are doing essentially is pushing austerity. we are seeing fairly good growth in the european union, eurozone, and the united states, but it is not about growth. it is about how that growth is divided and what the perception is about income gaps. if we can narrow the income gaps and distribute more fairly, then we will see a reduction of populism. gap keeps on growing, then unfortunately the populist forces will be stronger. the best way i heard it , someone said our gdp has grown peered someone from the audience said, perhaps your gdp, but not mine.

so income gaps or what we need to address. nejra: let me get your insight on brexit. theresa may fighting on what feels like daily basis. with the plan as it stands, is that what brexit will look like at the end of the day? >> to be honest, i want to be hands often careful with brexit. this is an issue being negotiated on one hand by the european commission backed by all the member states. on the other hand, the u.k. government. perhaps as an anglophile married to a britt i would say the problem seems to be a little bit of political mayhem in the u.k., but it shows the complexity of brexit. brexit is extremely difficult with many different issues. isn you ask the question

this is what it would look like at the end of the day, my answer would be probably not. or has thely knows crystal ball to say what the final outcome of brexit will be peered -- will be. tom: we are all looking for export commodities, and i think for finland it might be hockey players. is this your lead export in finland, not the gin drink with grapefruit, ice hockey players? >> it is a good export. my dad is the chief scout here in europe. all the european players go through him. this year was ok in the draft, but the previous year was excellent, three top tens, so it is a good commodity. tom: lead news in finland in the

newspapers. thank you so much for being with us with an update on eu trade. right now come an update on first word news. huge news flow. here is taylor riggs. >> president trump trying to back up his assertion the meeting with vladimir putin was a success. the president tweeted that russia has agreed to help with north korea. will be anre exciting future for north korea at the end of the process. tweeted the president at higher ins of intelligence left his press conference with putin. several big names from the war on the left are concerned about america's ability to fight another one. they all played prominent roles in the last one. former treasury secretary geithner are said there are probably too many constraints to counter an extreme prices. ben bernanke criticized the tax

cuts as ill-timed. jeff bezos plans to launch another rocket today. the new rockets will carry a number of science in education experiments for microgravity research. this is the ninth mission. jeff bezos eventually hopes to send tourists into suborbital space. you can watch the launch at 10:00 p.m. eastern time. 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 so much. one of the things we have learned, our travels, francine lacqua and myself, is to look t out 1-2 years. during stable times, maybe we looked out a decade. what bill gross would call financial repression.

retirees are getting killed on an inflation-adjusted basis. a decade-long? >> i think so. global interest rates are so low, this whole idea of diversions. tom: what you mean by diversions? > european inflation is not picking up. the dual mandate has been reached, but can the u.s. grow by itself? that is why the dollar is strengthening. that is why it is hard for the at. to rise significantly the german ten-year is a 35 basis points. i think that is something the global rates market struggle with. coordinated global growth, inflation, and also troubling's can normalize, i don't think you get the u.s. interest rate significantly higher from here.

nejra: is that the reason the 10 year yield has been in such a rage? or is it about the push and pull on one hand and the fear of trade on the other? >> i think the fed wants to hike up to neutral. the reason the market is not pricing in exact neutral is because of the trade war. if you look at the spread, january still close to zero, u.s. 10 year close to 3% looks very attractive. that is the gravitational pull. some interesting thoughts on all the doom and gloom essays out there right now. a&m oftleman from texas

the house financial services committee. look for that of the 2:00 p.m. hour. this is bloomberg. ♪

>> this is "bloomberg surveillance." the turnaround is starting to take hold at ericsson. sales rose 11%. ar a second straight quarter, measure of profitability improved at a faster pace than estimated. bloomberg has learned the government has given boeing a contract to keep developing two new planes to serve as air force one. that caps off a contentious

battle with president trump over costs. would beg 747 delivered in 2024. fors a tech tonic shift berkshire hathaway, giving more leeway to return cash to shareholders. in the past, it has used its cash pile for more acquisitions. tom: thanks so much. research come more research, and further research out in the street. essay on, a terrific the equity market. 98% of recent gains coming from a small set of tech stocks. our guest joins us. seems as narrow as josh

brown talked about. is it?> >> did is not an amazon market. i'm not suggesting large-cap stocks haven't appreciated, but 40% of the s&p 500 has gone down. gains have recoup the losses of those others. the other 200 that have gone up have contributed to the gain of the market. it is how you attribute the percentage and market cap gains. sincee looked at the data the first quarter of 2016 and what percentage of the s&p 500 constituents are outperforming the s&p. beene are 45%, which is the average the past two years. names in the s&p have outperformed the s&p index. it is hard to say it is narrow.

it isn't. important.s nejra: we like to be inclusive. showing, andt here bear in mind gains across the board here -- this is normalized back to march 23 this year, the rising dollar has weighed on u.s. companies with a large percentage of foreign sales. the blue line is the s&p 500 focused u.s. revenue exposure index. when you factor in the dollar, how does that affect what you might be more positive or negative on on the s&p 500? >> if you want a great chart, at the relative performance of the s&p 500 versus the russell 2000. small cap stocks do better in a rising dollar environment.

somewhat mistakenly related to this i did there is less exposure in small caps. 75% to 80%are about domestic. even areas like technology, particularly semiconductors. to assembly facilities in the asia-pacific region, then get exported out to developed markets. miscalculation. i understand why people do it. sell that shipped to a destination in china, but it does not stay there. you have to think about where the demand is coming from. the small cap, large cap trade is all about the dollar. that is more powerful than the international revenue calculation. nejra: we've been talking in the eventaps

we get the trade war escalation. are there any sectors you prefer or dislike in the event of trade war escalation? thinkre is a tendency to of health care as a protected area. someone is going to let the cholesterol go up. pharma biotech is probably one of the more insulated areas. tom: fixed income inequities, an interesting idea. and dividend growth a proxy for yield? >> it has been. if you can buy three-month treasuries at 2%, should you be buying equities for dividends? i would argue you can take no risks, buy three-month t-bills. we are almost back to a normal bond market.

still begrowth will there. we saw warren buffett talk about share buybacks at berkshire. is financial engineering going to give us dividend growth? >> the question is what is your time frame. number two bank, on the buyback versus dividend, what you have to look at is not a buyback occasionally. we do companies that buy black stock every year and reduce the share count. those stocks have performed well. nejra: we keep asking people when this bull market might end. i just want to know what areas of the u.s. market are going to show the pain first, if and when that comes? >> you almost have to get into

the mindset is going to be the .rowded large-cap tech names they have outperformed in a way that is remarkable in a rising bond yield environment. in the s&p it is 25% of the market, so probably the most exposed in that eventual downturn. likely toech is underperform because it is such a crowded trade. we are not sure what the next catalyst for upside surprises are. that is important. investors are very greedy. we want more and more and better and better. ,here is a great story today cybersecurity, virtualization, automation and the but where is the next big deal? tom: you don't talk about individual companies. netflix and the implosion

yesterday. it comes down to cash flow. there are companies where there is no understanding of the win of free cash flow. give us a clinic on sustainable cash flow. >> it is very important. people think about high-growth stocks and sticky business models as eventually generating that cash flow. it does not have to be today, but there has to be visibility. tom: we are doing eventually securities analysis? >> high-growth companies that positions tend to get those premium valuations because there is a sense they eventually will generate a huge cash flow. i will not talk about a particular company. tom: is there a moat around full faith and credit? i think there is to some

extent. dollar, even though our deficit is booming, would you really put your money in europe? i think that is what creates this faith and credit. i worry about how much the tax cuts boost near-term gdp. we going to is are get this boost to long-term gdp. chairman jerome powell is saying i am not sure. is the equity market pricing in this long-term growth pick up? if that does not happen, is that in issue as well? nejra: is the equity market pricing in that long-term growth, tobias? >> the comments are well-founded, but too many people are focused on tax cuts

and less on the big fiscal spending program put in place in april that will add a full point to gdp next year, which gives you visibility to 2019. offset. is an i think the bigger question is 2020, 2021, and the market will probably have muffled compression as a result of that uncertainty. by the time we get to the middle of next year and have more visibility to 2020, then the market can reassess. near-term markets are not likely to price that end. tom: a final question, if we can. can we not, not have a low rate donald? are we going to get jawboning from the president? tom: you are confused because i use the double negative. not have lowme rate donald? thanthink he knows better

to interfere with the fed. jerome powell wants to be politically independent. i think the fed themselves are confused. what is neutral, 2%, 3%, and how much do we overshoot? all the uncertainty around neutral and the fact we don't have any inflation pressure, i think that keeps the fed from hiking too much. there will be political pressure, but the fact long-term growth is not picking up and we don't have inflation should keep interest rates low. nejra: thank you so much. be staying here. bloomberg users can interact with the charts shown using gtv . you can browse those recent charts to catch up on key analysis and save charts for future reference. some headlines from liam fox, coming from a tweet, speaking

rather at the royal society. you can see him doing that there. he said the u.k. is the holder consultation on joining the cpt pp trade pact, the u.s., australia, and new zealand. it was signed last march and will come online 60 days after it is ratified by six of the 11 signatories. this is bloomberg. ♪ this is bloomberg. ♪

tom: the granularity of what boeing and airbus do, a terrific interview with the leadership of boeing. it is not about one big order. ordersbout little summing up, $13 million, not that much, vietjet. of how the granularity you get business done in aviation. so much of that has been the leadership of american banking, having a financial system that can reach out internationally. , tobias cannot talk

about individual banks, but the single best chart partitions american banking. this is exaggerated. jp morgan versus the beleaguered european banks. deutsche bank in unicredit disasters down below. what is the pixie dust of american banking right now? >> one of the things they did is post-crisis, they recapitalized sharply. they deluded themselves. stocks went down a bunch, but they created that new capital base to handle any volatility. the sament through global financial crisis in 2007-2009, and they did piecemeal. tom: they didn't dilute. the elites in europe didn't want to dilute, right? giving yourself capital to

handle the proms that could one, but painful day probably really good news over the next 36 months. i appreciate that. the japanese banks diluted terribly in the 1980's. it gave them the position to next problem. european banks avoided that, but now look at the problems they are dealing with. nejra: some of the regulatory changes recently you could argue , some of theks midsized banks. what size are we looking at within that category? board.ss the i appreciate the regional banks get more regulatory relief. i don't think that is the story for the banks. i think everyone is aware that those things are well in the

marketplace. i don't think what is understood is likely a pickup in industrial loan activity. we are seeing some loan growth now. i think you will see more as the year progresses based on what has been a six-quarter lag between surveys an actual activity. will impact of broad-based, but i appreciate the comments about regulatory relief. tom: we have earnings from morgan stanley. has been an asset-based three from the get-go. mr. gorman, if you are watching is it english? strong performance in investment banking, sales, trading. they had a pretax margin of 26.8%.

that one statistic is jaw-dropping, 26.8% out of wealth management. that out.ve much more today. it was see that across bloomberg today on radio and television, tearing apart morgan stanley performance. all of those coming off the goldman sachs announcement of a changing of the guard yesterday. what will you look at today? nejra: what will i be looking at? brexit, but earnings. to see be interesting the comparison between morgan stanley and goldman sachs. this is bloomberg. ♪ two, down and back up.

our phones are more than just phones. they are pocket sized personal trainers... last minute gift finders... siri: destination ahead. and discoverers of new places. it's the internet in your hand. that's why xfinity mobile can be included with xfinity internet.

which could save you hunreds of dollars a year. plus get $150 when you bring in your own phone. its a new kind of network designed to save you money. click, call or visit a store today. ♪ >> the mysterious testimony

puzzles economist. markets look towards the next round of q and a. morgan stanley crushing it with investment banking. stock pops in premarket. eu slapping google with a 4.3 billion euro fine. we are moments away from a press conference in brussels. i am alix steel. david is off today. the eu find will be 4.3 billion euros. we will get more details as we go. >> that is the big news. for morgan stanley, a alix: equity underwriting crushing