francine: turkey's troubles deepen. , historic low yesterday. putting morein pressure on president returning. he urges president trump to put the knife back in his pocket. an indonesian satellite into orbit, launching another milestone in its bid to use rockets. francine: welcome to "bloomberg

surveillance." francine lacqua here in london. these are your markets. from 0.4%, thein earnings season is continuing. , i am also looking at euro-dollar 1.1577. has a little bit to do with the u.s. economy. we have a great interview coming up. we will be speaking with steve major. coming up on "bloomberg surveillance" we speak exclusively to the chief financial officer from, bank -- commerzbank. one of the stocks we are watching is pandora. >> in the u.s., the trump administration has restored

puttions on iran, and will tougher penalties on oil sales. -- andsures restrict bands imports of persian carpets and statues. the iranian president is open to talk to washington but not while sanctions are in place. >> negotiations and sanctions at the same time is meaningless. if someone is in front of his rival and enemy and pushes a knife against their arm, the response is that he should put the knife in his pocket and come to the negotiating table and use logic. >> in the u.s., paul manafort's right-hand man has broken his silence about how wealthy ukrainian businessmen used offshore accounts and shall companies for political consulting work. rick gates on the tax fraud trial said he helped steal

millions from the irs, hide offshore accounts, and lied to banks. the u.s. justice department had a lot to say at the trial why at&t should not be allowed to buy time warner. the judge cleared the $85 billion deal, did not want to hear it. that allow the merger to go through. the judge shut down arguments that he felt were repetitive or unhelpful. in the u.s., authorities say fires in california have become the largest. the fires known as the mendocino complex ignited on july 27. it is the second straight year that california has recorded the states largest wildfire. spacex launched an indonesian satellite into orbit. the elon musk company

plans for a second mission in three months to carry a commercial satellite. of the the first reuse rocket that was built to be launched as many as 10 times. global news, 24 hours a day on air and at tic-toc on twitter, powered by 2700 journalists and analysts in more than 120 countries. this is bloomberg. lira is: turkey's recovering after hitting a record low yesterday. the move came among heightened concern. a spat with the u.s. overshadowed. hovered at aond low while president erdogan said they will respond to sanctions over a detained american pastor.

furtherto go to avoid turmoil? what is the trigger for a move of this proportion? >> the interesting thing about yesterday's move, the lira fell 7%, the most since 2008. in --s. and turkey are the u.s. has imposed sanctions on turkey. markets are making a rational calculation that every day turkey does not return the hostages is a day that the probability of more damaging u.s. sanctions increase. what are policymakers doing about it? they tried to do a couple things, but it does not seem to be enough to reinstate confidence. >> not much. they are on the sidelines here. turkey moved to a new system of

administration, new people in charge in the economic administration. that in a time of crisis, they would be calling around with investors in london. there does not seem to be anybody left to do that right now. francine: thank you so much. for turkey? where is the lira headed? ,oining me is john j. hardy head foreign exchange strategy, saxo bank. role if anyone? john: the signal needs to come from the top. in the character of mr. erdogan himself. he is going to have to employ the mechanism and get the

central bank to do so. the central bank should be acting independently. we will see a rate hike. supposedly turkish officials are going to washington. we need to see a response from the top if we will turn the tide on the lira. francine: what happens if they don't find an agreement with the u.s.? what happens to the lira then? the risk ofk negative confidence continues. foreign debt exposure in turkey from corporate and on the sovereign level, it is pointing to a crisis if the tide is not turned on confidence. turkey needs to offset this issue. the turkey economy will be crushed, but damage can be limited if they turn the tide and send the right signals now. francine: is there anything policymakers can do if they do not have the accord by the president? john: i really do not see where this is going in terms of what

they can do. the u.s. has turkey over a barrel, and turkey needs to respond. mr. erdogan needs to swallow his pride and make friends again with the u.s., whether it is orr the russian missiles, the dealings with iran. some moves have to be made otherwise we are going toward a capitalscenario or controls, which can be damaging for a long time. francine: when you think we will see capital controls if anything? let me also bring you to my chart. surging and the lira collapsing, you have two inverted yield curves. yes, the pace of the movement has gotten to where the window is rapidly closing here.

dwindling net reserves that can be mobilized to stem the flow. something in the next couple weeks needs to happen. the climax point is here and now on the lira. this is just a guess, not a prediction, a 10 day trading window. francine: can you explain why is not takinggan care of this? is there a mismatch, or does he think differently in his head? john: he does. the idea that an economy exposed to foreign debt does not have to , it is misguided, and his response has been poor on all fronts. -- turkey ising dependent on capital inflows. inflows toed the

offset. the debt has to be paid in confidence. toarly, it is in his hands turn the tide, change his ways, and increase confidence, bring back investor confidence in the situation. the damage is already done in terms of turkish gdp and risks to the real economy. francine: are there signs of central bank independence? to stop thegh selloff? john: that is one of the many complex of issues here. the unfortunate thing for mr. erdogan, precisely his power to do whatever he wants even a new constitutional reforms and expanded the powers of the executive is the problem. bank against central independence. be pulled back as well.

he is the lightning rod of the situation. the irony is the backdrop is that the markets are not supportive over the last month and a half. we have seen credit spreads coming down, capital flows into emerging markets. it is a turkish problem here. francine: head foreign exchange , thank youaxo bank john j. hardy. president rouhani says he is open to talks with washington. the s&p 500 closes at its highest level since january. we will look at the impact on the strong earnings season. this is bloomberg. ♪

francine: economics, finance, politics. this is "bloomberg surveillance ." let's get straight to the bloomberg business flash. commerce is coming at a higher price than expected. the strongest revenue growth in 18 months, with of the pace at winning new customers slowed. capital levels dropped surprisingly. commerzbank warned operating costs would be higher than expected. unicredit has written cause productions to a second-quarter profit that beat estimates. even as the italian bonds holds took a hit. lower costs and provisions for bout -- the bank also expects to reach

a target ahead of schedule. softbank is considering a valuation of $90 billion to acquire japanese wireless in a public offering. bloomberg has learned it is speaking to advisors. the company shares rose the most in almost a month. a representative for softbank did not comment. facebook shares jump to the most that it is offering customer service the of the messenger chat application. that could boost user involvement. the social media giant has tried for years to make messenger a national communication destination. racism aboutspread the security of private data. that is the bloomberg business flash. francine: on the first round of puttingctions on iran,

president rouhani under increasing political pressure. the sanctions are intended to stop the republic -- in a televised address, returning said they are open to talks with the u.s., but such dialogue would be pointless while his nation is being hit with sanctions. negotiations and sanctions at the same time is meaningless. if someone stands in front of his rival or enemy and pushes a knife against their arm and seeks talks, response is that he should put the knife in his pocket and come to the negotiating table and use logic. let's look at the impact on crude. we are getting late breaking , this is thehina foreign exchange reserves coming in at $3.1 trillion.

a little bit above estimates. reserve, it ise extremely important, given the trade war. also get to the guest for the hour. patrick armstrong and jonathan bell. patrick we are getting these numbers from china. much should we look at reserves? patrick: it was worth looking at today. china is propping up their currency, there was no expectation they would have. as long asmfortable it remains orderly, and nothing dramatic like in 2015. it is an indication they are not doing that at that point. francine: you agree with that? i think we are seeing

the natural response to the easing in china. it will lead to a pickup and an improvement and growth. looking back to 2015, we saw a pickup after that. we will get back to mike and patrick. there is a lot going on. there is china. i want to get back to iran. what does this mean for the oil market balance and opec? ,> i think there is nothing new we were expecting me sanctions to kick in as of last night. torybody is looking forward november, that is the real tightening. that is when oil sanctions kick in, and everyone is looking to see if there will be waivers granted by the u.s. administration. u.s. administration has been clear saying they want as many countries to go down to zero in

terms of imports from iran. there is concern that china will import more oil than the usual to offset declines from other countries. they arechina has said not cutting back on imports, they will not raise imports either. we are expecting a drop off of about 1.5 million barrels a day, from 2.7 million barrels per day by the end of the year. the dollar sanction as of last night are important because most of these payments are done in dollars. even the ones done in euros, those banks are not willing to transact with iran because of the sanctions. the second sanctions are far more important for the oil market than the direct sanctions are. it is hard to assert how many individual and private companies and even banks are being cautious, saying, we will not deal with iran. francine: what does that mean

for the region? the trump administration is weakng on a week iran -- a iran economically, which means it has an impact on the war in syria. conversely, could that get it more of a cloud because it is the fight against the americans? >> absolutely. our view strongly is we do not think iran will come to the table. they have gone through a lot worse in the past. you ran retirees speech -- rhoutani's speech. a huge that is challenge. inflation is rising, but they have had worse before. the critical thing people forget, in 2014-2016, oil prices are higher today, so, their overall revenue, even with

exports, are higher. they do have some buffer. as oil experts decline, that hardship will increase. but iran is very tough. i do not think they will come to the table easily. i do expect there to be more muchishes in the region, as you have seen attacks around the red sea. there is more unrest in yemen and syria as well. francine: what would it take for iran to close the strata for ms. -- the straight of hormuz? >> we really do not think iran will go down that route. that would be at direct escalation -- that would be a direct escalation. given the red lines israel has drawn, and potentially the u.s., but that is why i think we will see indirect communications via syria.

,hey could put in a few minds and that is dangerous, but we genuinely do not think that is the route iran wants to go down. there will be talk about it and military exercises, but we do not foresee a closure of the straight of hormuz. francine: let's get back to mike bell, vp/global market strategist, jpmorgan asset management, and patrick armstrong, head foreign exchange strategy, saxo bank. think there is very little chance, we are talking about a million barrels per day. price, russia and saudi arabia can offset that. should things deteriorate before they close the straight, a lot of rhetoric about the nuclear deal, this may indicate they want to move away from that if

sanctions are put in place. i think those will be the first steps if there is an escalation of rhetoric. francine: mike? basically the oil price will state and a $70 to $80 range. the risk is if the oil price went up to $100 a barrel, that would be a cause for concern. francine: how do you look at geopolitics? from the trump administration, or the last time we talked about iran, how does it impact your portfolio? trade is-- patrick: the big wild card. we think we are still in an expansionary phase of growth around the world. you have the two biggest economies in the world at the epicenter. should that deteriorate that

could have a knock on growth, on confidence. we do not expect it. that is the area of geopolitics that has the most impact. protectingobody is it will happen, but if it does, it could change everything, especially for bonds? having come from strongly positioned in favor of equities for most investors, we are going to a stage where the cycle in the u.s. is a reason to be reducing equity overweight to a closer to neutral level. and you have political concerns, trade in italy. do you go to cash or gold? macros: the global unconstrained dynamic strategies, but also there is room for treasuries. francine: do you go to cash?

patrick: we've got a significant amounts of shorts. in that position in equities we are at about 7%. almost as many short trades now. are too people pessimistic on cyclical risks. francine: what are you shorting? we short the s&p 500. we long the value stocks. we prefer traditional companies. we sold the high-growth companies a year ago. , weey reporting today prefer that more than netflix. suite ofs a broader assets.

netflix is poised for huge growth. europe, francine: we will have plenty more from mike and patrick. mike bell, vp/global market strategist, jpmorgan asset management. patrick armstrong, cio, plurimi wealth llp. is onne: our matt miller the ground for an interview coming up at 10:30 a.m. london time. we will talk consolidation and ecb and central-bank policy. a little euro strength will come up. the biggest concerns therefore investors. this is bloomberg. ♪

francine: economics, finance, and politics. this is "bloomberg surveillance ." i am francine lacqua in london. product has returned to growth this year.

-- prada has returned to growth this year. their shirts feature mash-up's. bloomberg.com. british billionaire peter hargrave was one of the financial backers of brexit, now he is fuming over how the eu divorce is being handled. the gulf between north korea and secretary of state mike pompeo over denuclearization seems to be widening. rick gates testified that he helped paul manafort rake the law. breakhelped paul manafort the law. let's get to president trump's former campaign manager. yesterday, manafort's right-hand man gates said he helped him break the law. the appearance by gates who

pleaded guilty and is cooperating with special counsel robert mueller. we are joined by our editor who joins us on set. what have we learned so far? judge ise learned the running a tight ship. -- the prosecution is not through its case, it is obviously in the middle of questioning it star witness, rick gates. what we know is paul manafort, what we learned is he earned tens of millions of dollars that his accountants testified were not disclosed to tax authorities in the united states. there were questions whether his income, whether he mischaracterized his income as loans. all of that was setting the groundwork for the gate testimony -- the gates testimony. what we do not know is that this relationship to his role on the trump campaign, because that name has never been mentioned in

the course of the trial, and it probably will not be. it is like calling the game at halftime. mueller and his prosecutors succeeding getting a conviction, that will be an important building block for the investigation. it will insulate him a little bit. if manafort is acquitted, you can imagine the tweet storm from the white house, and renewed calls to shut it all down. francine: thank you so much. james hertling. let's get to the first word bloomberg news. >> in the u.s., the trump administration has restored sanctions on iran and will impose tougher penalties on oil sales in november. the measures restrict purchases

of banknotes by iran and ban persian carpets and pistachios imported to the u.s. negotiations and sanctions at the same time is meaningless. if someone stands in front of his rival or enemy, and pushes a knife against their arm and seeks talks, the responses that he should put the knife in his pocket, and come to the negotiating table and use logic. >> the u.s. justice department had a lot to say at the trial why at&t should not be allowed to buy time warner. judge who cleared to $85 billion deal did not want to hear it. the trial allow the merger to go through, and show that sidebar conversations between district judge and justice department lawyers, the judge shut down arguments that he thought were repetitive or unhelpful. blazes rapidly spreading

and california have become the biggest wildfires in history. the fires are burning a few miles apart. it ignited on july 27 and encompasses areas the size of los angeles. launches an indonesian satellite into orbit this morning. itss another milestone in rockets. willlon musk company prepare for another mission in less than three months. this is the version of a rocket that was built to be launched as many as 10 times with little refurbishment between missions. global news, 24 hours a day on air and at tic-toc on twitter, powered by 2700 journalists and analysts in more than 120 countries. this is bloomberg. thank you so much.

let's get back to the markets. in the u.s. the s&p 500 closed at its highest level since january despite escalating threats between president trump in china over the trade war. earnings were driving the gains. what next for u.s. stocks? still with us, patrick armstrong , cio, plurimi wealth llp and mike bell, vp/global market strategist, jpmorgan asset management. what is your take? michael: it is clear the earnings will not be as strong at this time next year. the question is how much of a drop will we see? from a stock market perspective, we are starting to get into the cycle where you start to look 2019, as wen beyond go into next year. there it becomes less certain.

.e are becoming more balanced the u.s. is the one major market where we have an overweight position on at the moment. i would agree that growth stocks look expensive at the moment. the value looks more attractive. generally you want to focus on quality stocks. stocksnd to outperform that come under trouble. >> you said you like disney. is this because of their exposure to asia, or what makes it attractive? patrick: everything with me begins with valuation. trading at 17 pounds. says these companies are worth the same. disney next year will come out with us dreaming -- with a streaming competitor to netflix. all of its movies, "star wars", "the avengers."

exceed market share. there will be a number two it. the market says a dollar a , --ey francine: what you do with emerging-market stocks? michael: we have been overweight in india. a bit more neutral everywhere else, given trade risks we are seeing at the moment. the potential that a trade concern dissipates, you can see a balance in emerging-market stocks. our efforts are mainly on the indian francine: do you like anything in europe? patrick: we think europe earnings will come in around 8%. the u.s. will come in at 21%. that is 10% on a pretax basis. an have the ecb in

accommodative phase. tailwindome in as a for companies. cyclical companies, we like banks, french banks in particular. francine: thank you both for joining us. mike bell, vp/global market strategist, jpmorgan asset management. patrick armstrong, cio, plurimi wealth llp stay with us. francine: we will bring an exclusive interview. this is bloomberg. ♪

francine: this is "bloomberg surveillance." i am francine lacqua in london. thees are plummeting after jewelry maker slashed its growth forecast. the copenhagen-based company has been under siege from hedge funds betting against the stock. pandora has had a rough ride this year. down more than 40%. while the former u.s. treasury secretary larry summers says a trade war will only make us poor. >> this is a trade war that will because our poorer consumers will pay more for the products they buy, and our producers will be less competitive because they will be paying more for inputs. i do not think china is the savior of globalization. i think china is a developing in terms of its average income, with average standards of living

like those in the united states. during the 1930's. it's context is very different. there will be competition from more places, but i think in london, the principal risks have been the self-inflicted wounds of brexit. i think new york will have to make a variety of strategic decisions, but should be able to maintain a major role in financial services for a long time to come. "bloomberg surveillance is -- francine: is summers right? patrick armstrong, cio, plurimi wealth llp. mike bell, vp/global market strategist, jpmorgan asset management. francine: are we just board -- bored of the trade war? michael: it is part of the

reason we are neutral across other markets. markets,e thing when there was no bad news priced in, of the have the risk trade war dissipating, but it can get worse as well. francine: what about you, patrick? patrick: the u.s. is moving away, regardless of a trade war or not. and the united kingdom with brexit, those are moves away from global trade. francine: but growth is spectacular in the u.s.? patrick: growth is spectacular, that is a fair statement. it is coming from a sugar rush. you are getting a huge fiscal stimulus. you have interest rates left, and inflation. we are at a good economic point, but why do we encourage that with global trade and push it

more? most people look at global trade, win-win. that is the conventional wisdom larry summers is talking about. last week trump talked about tariffs saying it is win-win. i think it is rhetoric, and there will be a compromise, but if that is the real thought, that is one of our reason the u.s. is moving away from trade. francine: you start to see a repricing on the 10 year yield. what do you do with japan? patrick: we do not have a big position on japan. we are long a little bit on the yen. we do not have a meaningful position on equities right now. francine: you like japan? michael: it is one of the markets it usually impacted, if you see markets move down. is a good hedge, and you are more cautious about

equities because of the impact on the rising currency will hit the equity market. the only market we are overweight is the u.s. at the moment. , and the u.k., there is so uncertainty on the brexit front. sterling, there is probably more bad news priced in than is warranted. you could see sterling move higher, but that is not great news for the u.k. , or have is that right the chances of a crash increased ? even if it is unlikely? depending on your trading horizon, you have to look where things will go in the next few months. getting closer to not crashing out, there are a lot of things that could make it look like it is closer to crashing out even though i will not think that is the end game. francine: thank you for joining

us. mike bell, vp/global market strategist, jpmorgan asset management. patrick armstrong, cio, plurimi wealth llp. both stay with us. up, the 15thing mission for spacex this year. this is bloomberg. ♪

francine: economics, finance, and politics. this is "bloomberg surveillance ." i am francine lacqua in london. now to the bloomberg business flash. >> commerce banks long search for scale is starting to pay off. it is coming at a higher price than expected. it registered its longest revenue growth in 18 months. its core capital level dropped surprisingly. the bank also warned that operating costs will be slightly higher than bank planned this year.

we will have an exclusive interview at 10:30. bonds took a hit, hurting revenue and capital, lower costs and provisions for bad loans boosted income. the bank also said it expected to cut branches and staff ahead of schedule. softbank is considering a valuation of $90 billion for its japanese wireless business in a planned public offering. they are speaking to advisors about selling a third of the business on the ipo. the company shares rose the most in a month. the majority owner of arsenal football club has agreed to buy out the russian owners stake. stan cranky -- stan kroenke

agrees to buy out a stake. mostook shares jumped the in april on optimism to offer customer services the of the messenger chat application. the social media giant has tried for years to make messenger a natural communications destination with the aim of improving email. it faced widespread security over private data. businesses american push for diversity but when a woman steps down, the position is usually filled by a man. of 24 women who have stepped down, all but three has been replaced by a man.

that is the bloomberg business flash. launched anacex indonesian satellite into orbit this morning, another milestone. today's mission saw the elon , bloombergmpany opinion columnist joins us now with patrick armstrong and mike bell. this is a big deal because if you use boosters instead of scrapping them after each use, you can potentially get the price of flying into space down. has had prices of $113 million for these rockets. that is the price of the launch -- $450 million. that would enable them to visit frequently.

and if the rockets get bigger, even a bigger payload. "bloomberg surveillance >> elon has let the team at spacex get on with things. as atnot as hands-on tesla. clearly, there is a different business model. if you build rockets, you build them at a smaller and longer time window than cars. story aboutrilliant the management of spacex. the coo runs the ship. we have seen huge turnover at tesla. the management style seems to suggest and explain the difference between the

companies. francine: houston is too soon to know if spacex will be making progress to reuse parts? soon to knows too a spacex will be making progress to reuse parts? >> they hope to turn a rocket around in 24 hours. they push for crazy deadlines. whether they can hit that, they are launching more rockets annually than any other privately held space organization. rockets that go to the international space station are coming from russia at the moment. it will be a colossal achievement for a privately held company. francine: how do you look at spacex? at.ick: tesla, we look we have been short a number of times. at the moment, we are not.

tesla, it does not come without risks. tesla could go bankrupt in the next couple of years with a 50-50 chance. you've got an event evangelical following for elon musk. now, it istor right the most expensive car company in the world. it is great with technology, but it's distribution, inventory management are things it does not do well. francine: you can argue they just push down trees and it makes everybody better to keep up. produced 80% as many hybrid and plug-in vehicles as tesla. it is trading at 7.5 times earnings.

i prefer the traditional companies in many senses, and this is a great example, like netflix and disney scenario. francine: thank you for joining us. --patrick armstrong, cio, plurimi wealth llp. , vp/global market strategist, jpmorgan asset management. francine: this is bloomberg. ♪

francine: turkey's troubles deepen. 10-year bond yields hit a high.

spread afterhes a hitting a low yesterday. iran sanctions kick in, bring more pressure on president rouhani. he urges president trump to put the knife back in his pocket. launching ans, indonesian satellite into orbit. good morning, everyone. this is "bloomberg surveillance," francine lacqua in london, and tom keene in new york. we had a headline from the u.k.. that was minutes ago, saying the u.k. is expecting to see a brexit deal deadline for the end of november. tom: the calendar is out there. terrific heat in america. really extraordinary. overnight, the fires in california have become a huge

story. francine: certainly a big story in europe. let's get to first word news. here is kailey leinz. >> u.s. sanctions on iran have now kicked in. they have aimed to stop the government from using dollars and trading gold and other precious metals. the sanctions were expected after president trump quit the 2015 nuclear accord in may. present were some money -- president rouhani. a diplomatic crisis with the us has sent the turkish lira to a low. the lira fell more than 6% before rising today. the trump administration has sanctions inmic order to get turkey to free an american pastor.

donald trump's lawyer rudy giuliani told the washington post there is a reluctance to allow any question about obstruction with an interview with robert mueller. russian oil companies have hit a sweet spot of rising crude prices and weakening ruble. record cash was in the second quarter and their highest net income in five quarters. 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 kailey leinz. this is bloomberg. tom: thank you so much. equities, bonds, currencies, commodities. starting with futures up big. futures up seven. features up 87. curve flattening. steven major will join us from hsbc.

europe cannot find a bid. down to a 1.15 handle. a 10ix 11, down near print. the pros which is what look at, is moving with a vengeance. strong yen, weak euro. francine. francine: i have turkish lira as my chart that matters today. this is what i am looking at overall, most major stocks advancing. tot helps to give a lift up investor sentiment against the backdrop of trade concern and geopolitical noise. treasury setting. i am looking at pound because of that brexit headline. tom: when things unravel for any nation, it is about the piggyback. let's look at the turkish piggy bank, which is fx reserve. it is remarkably linear for a

while. this is the ascent of mr. erdogan. we go with a nice move. we roll over. reserves are now to where they were at the beginning of the crisis in 2008. this is they should have, could have line for turkey. this is the gap in the piggyback as they go back to 2008. that is rolling over as well. francine: i like that chart. mine is very similar. lira, itok at turkey's hit a record low yesterday. that is why this chart matters. i am charting lira against 10-year yield. the move came amidst heightened concern over a diplomatic spat. how much further do with authorities need to go to shore up the lira and avoid further market turmoil? economyus is our

reporter in istanbul. capital controls is certainly one of the hot topics that investors and analysts, everybody outside of turkey have been talking about for some time. turkishaid that, when officials, whenever this comes up, they have been adamant about not imposing capital controls. they think this would be economic suicide. they think it is an unlikely scenario for turkey, and unlikely tool they would resort to. whether it materializes remains to be seen. they have been adamant that it is not on their minds. francine: i guess the concern we have is this is sentiment, investor sentiment turning sour with no real catalyst. what would help investors right now? if we have strong central bank

independence, would it be enough? >> it is certainly about sentiment. yesterday's huge market move, it was the worst day for turkey's currency in about a decade, since the global financial crisis in 2008. there is no real reason the markets behave the way they did. most of that was due to market sentiment. what could turn it around has to do with the central bank. they could boost bank fx liquidity. however, but judging from the lira's reaction, that does not seem to be enough to turn down the sentiment. heard frome investors around the world, turkey should have a large reform package, so to speak, that includes everything from a

different relationship with the west, the u.s., to massive fiscal tightening. the central bank alone may not be able to turn things around this time. tom: the deposed economic leader darkened the door of the world bank and the imf in washington. does turkey want to have a relationship with the international monetary fund as mr. subject would have proposed? relationship that you are referring to requires for turkey to apply to the fund for some sort of rescue or help or a, financial aid. the best of our knowledge, that has not happened yet. in the administration, there were people that thought this could be possible and needed at some point if there was economic stress him and surely these are days of economic stress we are

seeing in the turkish financial market. there is no evidence that turkish officials think such a relationship with the imf is necessary, nor do we know of any contact that was established to indicate such a relationship. francine: thank you so much. ts lombard,ow is managing director of the mea and global political research. that onethem to say thing would be central bank independence and monetary policy. the other quick fix is to get out of this political spat with the u.s. just before he came over to the studio, istanbul is reporting today that there will be some turkish delegation, not specified which level of officials in washington, d.c., couple of days from now perhaps trying to patch things up and

fix the intransigent position of the turkish leader. francine: if they cannot find a way out of this, what happens to the economy and lira? are we looking at capital controls? >> it has to be some dramatic change. that can be a very hard landing for the economy with higher inflation and total stagflation. they could get cheaper for the bounce back happens. it is going to be a shop of one type -- shock of one type or another. either policy or macro. as your colleague in istanbul just said, political accommodation with the u.s. would make the pain much less on both ends and the risk of pain correspondingly lower. politicale

accommodation, and this goes back years ago, mr. putin shows up at the door, a tendency for russia to look to turkey, turmoil within american foreign-policy, is this a gift that keeps on giving for mr. putin? >> it has been giving white nicely for him in the last couple of years. that catch up came before the up in turkey in july 2016. you will see results of that in economic ties with turkey and russia, record russian tourists on turkish beaches this summer.

useful but marginal for turkey's racing macroeconomic and financial problems and the fx exposure of its banks and incorporates being -- and corporates being key. i don't see there being any easy escapes. even chinese financing. after sanctioning, russia got for chinese financing some projects, but it is no real substitute. the financial power of the u.s. is such that countries need to accommodate. tom: christopher granville of ts lombard. we will continue. we will review a low interest rate strategy. steven major on what is going on in the bonds of italy. he is with hsbc. here are the headlines now. we keep you advanced on europe

and around the world. daimler suspense limited iranian activities. they scrap their iran expansion u.s. because of sanctions. good morning. this is bloomberg. ♪ ♪

>> this is "bloomberg surveillance." i am kailey leinz. keepse conglomerate hna selling off assets after a global shopping spree. they are in advanced talks to sell a minority stake in jet avolon company

holdings. two deponents involving japan's softbank. the telecom company vision fund and advancement. they may sell one third of their the business in an ipo. francine: thank you so much. let's turn to japan, where the central bank has advanced a massive monetary stimulus program. governor kuroda said it would levelse bank -- and keep extremely accommodative. economists have disagreed. christopher granville and steven

major are with us. you are smart on treasuries. 's. are smart on jgb >> i think it needs to be put into perspective. they have been making iterative shifts over the last two years but quietly. the amount of flow that was deployed was about 5/8 of the initial 80 trillion they announced. they have been slowly backing away from the initial 20 and 30 year. that was two years ago. in the event the only bought 10 year maturities. they have been allowing that steepening to happen in a managed fashion over the last year. the policy has been a success. when you say that upsets people. it was a success and that it was laid out to do certain things to control the yield curve, and it did not. it was not a success in bringing

the inflation of. -- up. francine: governor kuroda said they were going to take up more securities. is that white is a success? -- why it is a success? >> the 10 year has been more volatile since they announced this. the 10 to 20 year curve has been steeper. it has steepened on average about two basis points per month. that is a gentle move, slightly above the base from what i can see. what they have done was disruption. if the curve steepen's too quickly, you will get a massive flow of money back into japan, the yen will strengthen, and the policy will backfire. this way they can slowly manage the currency and the yield curve

normalization. it is so slow. it is a snail's pace. two basis points per month. you can see it. culturalin this is a reality the bank of japan has to deal with, the people japan and their ability to acquire debt whether it is institutional or retail. do you see that changing? >> no. it is going to take a long time to see this work through. japan has been in this deflation challenge or trap for a long time. they had qe before anybody else. the summarization of the debt load happened many years ago. they have been slowly transferring the debt overhang from one sector into another and has eventually ended up in the sovereign. i actually think we could be sitting here in a years time,

and those eels would be a handful of basis points higher. tom: the price to me as nominal gdp rolls over, the vector has a second derivative field. is the price all the bond dynamics and animal spirits fritter away 20? -- to zero? >> you'll know that the secondary market rarely traded before recent times. they are slowly bringing it back to life. this takes years. people to ask japanese how they are doing. most of them are doing all right. they have managed to model their muddle theirhis -- demographicshis, and technology and all that. japan has found a way to muddle through this, their own way.

francine: thank you so much. steven major and christopher granville stay with us. you can interact with the charts shown using gtb go. -- gtv . you can change them, use them, dazzle your boss. this is bloomberg. ♪ this is bloomberg. ♪

tom: these are the headlines

that give one pause. tom keene of "bloomberg surveillance." you can color code it anywhere you want. all you have to do is look down here at a small auto company in germany limits iran activity. with us is christopher granville of ts lombard. punishing sanctions, what is the difference between these sanctions and sanctions sanctions with russia for example? >> they are more extreme than the sanctions with russia, at least if you factor in today's batch with the second installment coming in november with iran's oil export trade and its whole financial sector will be banned by the united states. that makes the sanctions with russia even the latest once seem relatively mild. this is designed to threaten the iranian economy. the u.s. for all of its power

is, as resident rouhani said, isolated. particularly the european union is pushing back. tom: if we get to a fragility of the iranian government, whatever that means, can europe step in and assist mr. rouhani? are they removed as we are? >> i don't think the european union has particular influence either way. it is more for their own purposes they wish to uphold an international agreement which is still valid, with which the parties, particularly iran, are still complying as a matter of principle. we should always be careful what we wish for. regime change as a result of this economic pressure on iran may produce, from the point of view of the u.s. and its western allies, a successor which is even more -- even less congenial

than the present one seems to be. i would stress that the idea economic hardship and iran will make the regime more fragile is not necessarily the case. francine: what are the chances of them closing the street of hormutz? >> that would be the ultimate apocalyptic scenario. it would not last for long. the u.s. naval power in the gulf would stop it. there is a lot of trouble in the gulf the iranians can cause short of that. francine: thank you. steven major in christopher granville staying with us. this is bloomberg. ♪ his is bloomberg. ♪

francine: this is "bloomberg surveillance." tom and francine from london and new york. let's check in across the bloomberg universe. dervish collection of summer

shirts which cost up to $1700. on bloomberg.com, british billionaire peter harding is fuming over how the eu divorce is being handled. andgulf between north korea mike pompeo over denuclearization seems to be widening. paul manafort's former right-hand man all caps testifies that he helped manafort break the law. i don't know whether you wore your gerrish prada shirt -- today, butda shirt it is only for fashion insiders, and i know you are a fashion insider. tom: i am a fashion insider. everyone is chasing gucci. it is amazing. absolutely amazing. francine: it is amazing.

they have the creative director at the top. he literally transformed that powerhouse. tom: absolutely. styling in gucci this morning. here is kailey leinz. >> british prime minister theresa may is resisting the european union's timetable for brexit talks and hoping president trump may help. may thinks by the end of november, the eu will be so preoccupied by the prospect of president trump disrupting a g20 meeting that they will want to get brexit wrapped up. north korea is having a problem with mike pompeo. there is a widening gulf between ofe pompeo's descriptions denuclearization talks and north korea's. the second year in a row,

california is battling the largest wildfire in its history. the twin fire system north of san francisco has burned 75 homes and more than 4400 square miles of land. the trump administration says the judge who approved at&t's takeover of time warner ignored common sense. the justice department is trying to reverse the takeover. ignorede said it factors of the takeover. and salest profit forecasts. it is struggling in the u.s. and china. it has lost almost half of its market value since the start of the year. 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 kailey leinz.

this is bloomberg. francine: thank you so much. its focus on the bank of england , and governor mark carney did not rule out hiking interest rates again. the boe raised rates for only the second time since the financial crisis, citing the need to temper growing amid fresh pressures. critics say the backup is not strong enough to warrant the increase and they may have to reverse course if negotiations turn sour. gaps turn to the output chart. this is a good chart. overall, there seems to be what mark carney is telling us and what the markets believe. why such the difference? >> it is tricky because markets are trying to look through a great deal of noise. there is the brexit deadline we all know about and what kind of world we are going to have post-brexit if brexit actually happens.

trying to figure out interest rates for the next two or three years is tricky. the bank of england is guiding to a neutral rate that is roughly half of previous cycles, , roughly half based on hundreds of years of history. the market is thinking you are barely going to get there. is the market wrong? the market is making a weighted probability every day on what is the chance of hard brexit? clearly, looking at the news flow, the and puts a high probability on that today. -- the market puts a high probability on that today. the market looks through that kind of spike in the rate cap. -- path. francine: i keep getting pushback with every guest, the idea that every bank around the world would want have room to cut is nonsense. do you agree with that?

>> it is the duke of york policy, you go up so you can come down again. when i think about forecasting in the central banks we meet with. if you told them you were forecasting rate hikes for the next year and rate cuts for the year after. they would say, are you silly? if it is so obvious we're going to hike and then cut, then we're not going to do anything. i think it is fair enough. i don't say we are forecasting anything like that. we are keeping our forecast on very low rates, the 1% for gilts. we think the bank of england will struggle to hike again. when you look at sterling, for example, i know it is going down, and everyone is bearish, and the market seems to be short, but perhaps there are investors that are exiting sterling, leaving and not coming back. that is the challenge for mr.

kearney and the bank of england. they are seeing a structural shift away from the currency for the market. tom: can you make a forecast for europe? do you have a confidence on the vector of the bond market in europe? or is it tough to make a call? >> you said it. you have german bonds that are 40 basis points for 10-years. you have great bonds up 4% -- greek bonds up 4%. all of this is sovereign credit. this all has sovereign credit risk. when you look at the yield on a eurozone government bond, you are not just looking at ecb policy rate, but the probability of fiscal union or not at some point in the future. that is why with italy the yield can easily gap 50 basis points

up or down based on the news flow of the next couple of months. mix does the political within italy allow you to forecast such a gap jump higher in yields? >> i think it does. you have the data points to do it. during may, we saw the expectation that the new italian government may want to see some sort of new debt moratorium, and the yields looked up from -20 to plus 230. move in the space of a few days. 2012 the 2011 or entire italian curve yielding 7% from front to back. moves like that are possible because we have seen it. i would be surprised if we do not get another round of risk off uncertainty to do with italy without knowing the endgame. my tendency would be to want to

play it from the short side, especially at the front end of the curve, where they are most horrible. -- vulnerable. we have no foresight on this. in fact, according to copy of, economist,ur italian you may look at the fundamental and say the picture is not that bad, but you don't need to look at the fundamentals. it is too radical, the market will not like it. we are trying to second-guess market response to a policy move that may or may not happen. that says to me i don't really want the risk. if you look at treasuries, and we saw jamie dimon saying 5%, and they know we will talk about treasury shortly, where is the biggest pricing risk?

>> i would love to know where he gets 5% and whether it is sanctioned by the research department. where do you get 5%? 45% to be possible in the next few years, the fed would have to move to four. it is currently moving to three. i would take the other side of the trade every day and have been doing so for a while. it grabs headlines, but i'm not whether there is much research behind it. tom: you mentioned the u.s. curve. let's bring up a chart that goes back, and it is just a u.s. chart. it goes back to dwight eisenhower in the 1950's. down we go. have we broken this trend? to me, we have not. it is an interesting long-term. we have not really broken the back of 40 year disinflation. >> i think the trend is still down. if you look at that chart, you

can see a few key points that have broken a few times. people told me 3% as a number of matters. frankly, it does not. in 2018, the treasury has closed at three or above on eight occasions in 150 trading days. that is with the weight of money that has been shorting treasuries and then bearish, all they have achieved his loss of coupon. tom: i will go with that. that is certainly correct. do you reposition? is it the mother of all opportunities? do you try to guess around mr. powell one or two meetings ahead? add?at i had? -- would i yes. i don't know whether it is going to be december or some point next year, but the possibility of there being a pause is quite

high. if the fed falters, the market will respond in a way that says that is the end. that means the yield curve will have to flatten on a number way below three. at the moment, people are implying the flat yield curve will be delivered around 3%. i think it will have a two handle and as low as 2.3%. let's say by the year and the bond level is flat and much lower than is currently applied. that is where i think we are going. francine: coming up next, and ask us if -- an exclusive interview with stephan engels of commerzbank. this is bloomberg. ♪ ♪

>> this is "bloomberg surveillance." i am kailey leinz. lender helportgage with its business of buying and selling homes. it is acquiring kansas-based mortgage lenders of america. offering mortgages is and at streamlining the process for people. co --l speak with the low zillow's ceo today. australia has kept interest rates at a record low. they have maintained the cash rate at 1.5% while they delivered a sobering take on the global economy. they have said growth has slowed a little. -- y taking a hit from the time bonds

it holds. current ceo is ramping up savings and improving asset quality. the bank is selling billions of dollars of bad loans. francine: thank you so much. sticking with european financial. posted's commerzbank has strong growth in the last 18 months. we are joined now by bloombergs matt miller who is in frankfurt with commerzbank's chief financial officer. over to you. matt: thank you. engels.e with stephan let me ask you about the way these numbers developed. you handily beat the street expectations on almost every level from profit to revenue. analysts were concerned about the way you did that. >> thank you for the question. indeed it was a beat.

to 2018, youre 27 more customers means more asset, and more asset means more revenue. that is working. we are working on are other issues, including the acr business as well as optimizing others. in total it is a beat with a broad kind of ingredient contributing at the end of the day. morgan stanley specifically said they are concerned the growth is coming from your non-core assets and your retail and corporate banking divisions are not putting forward the kind of growth they want to see. >> we have seen growth, especially in psbc. we have seen growth on hundred 86 billion. the strategy clearly wants to

see the growth. that is paying off well. in corporate clients, what we have is still competitive environment. we can see growth on the customer side and on the loan side, which is fine. monetizing this growth will probably take a bit longer than originally anticipated. this is where we have slightly reduced our revenue expectation. your over all revenue expectation, you want to get back for the bank was 2016, 9.8 billion euros through 2020. can you still get that goal? >> i think the strategy is right. i think it is working as you can see. 9.8 is the right goal. for.is what we fight that is what everybody tries to achieve and what we are working on. matt: on the call with analysts,

you said not all of your growth strategies are moving as quickly or working as quickly as you would like them to. can you elaborate on which strategies you are having problems with? >> it is mainly in germany the price competition, which is fierce. you always need to weigh growth against profitability and profitability and risk. in that sense, i think we are taking a prudent approach. one prime example is the q2 net new business is down, the liberally stared down a bit, -- deliberately steered down a bit, so we have delivered more profitability. provide mores well profitability. you only added 150,000 customers this first half. does that mean you're going to accelerate customer additions,

or do you plan to miss your target this year? >> i don't forecast missing targets. the goal is to clear 2 million by the end of 2020. we have admittedly seen slower new customer growth in the first half, but that is reflecting market dynamics and little bit. let's be honest, the soccer world championship did not really produce the kind of tailwind we would have hoped for. there is still the second half of the year. let's see what we have to offer. matt: do you really see an on theon your business dismal performance of the german national team? >> let me put it this way, if the strategy and companion runs for six weeks is different from two or three weeks. that is as much as we should discuss. bloombergreporter at reported that your long search

for scale is paying off. what is the strategy of commerzbank going forward? >> it is very clear we want to grow the bank. we want to make it faster, simpler, more efficient, and more digital. that is what we have been doing. these are the big investment periods. it is paying off. and at the new process consumer finance. it is fully on our books. it is fully digitalized. we plan to grow the revenue side and also enable us to reduce costs again. if you look at our cost goal of 6.5 billion, totally unchanged, you have about 5 million of reductions coming and 200 million from the eu. that should pay off on the cost side, and on the revenue side,

more customers, more revenue. matt: you raised your outlook for costs in the second half. is it more difficult as a german bank? we see a bank like rbs at the height of the financial crisis had 300,000 employees. they now only have 140,000. you had 155,000, and you still may have 145,000. is it more difficult for you to cut costs? >> i think our ability to cut costs is impressive. we have compensated a lot on additional cost, mainly on radio tory complaints as well as -- regulatory compliance as well as bank levies. admittedly, yes, we want to invest in the same digitization

and growth, which contributed to the growth in costs. we are running the emc project faster than originally anticipated, which will result in a cost-reduction. you need to do some investment to make sure you get the processes automated in such a fashion that you can basically layoff 5000 people. thank you so much. thank you for your time. stephan engels, chief financial officer here at commerzbank. in london.ish up we are thrilled to have michael purvis of weeden and company. vixut what you see in the and u.s. equity market. they seem to be two different worlds. is that true? michael: who would guess that we

would see the vix below 12? if you want to answer the vix question, you have to go to the move. that is plumbing record lifetime lows. i look at the conductivity of the move index to the term premium, which is also at record lows. on one hand, that does not make a lot of sense to have the term premium so low after the tax deal, after the spending deal with higher deficits. it did rise a little earlier in the year and then filled out again. i don't know if you -- fell down again. i don't know if you have a chart. the treasury has really been tracking the bund yield quite closely. that gets to the point of where the ecb pivot point is going to be. the indication is it is not going to be anytime soon.

do somethingreally significant, shift to a qt stance the way the fed has. that keeps things volatility and term premium and 10-year yield lower longer. francine: where do you see the pivot point for the ecb? >> that is probably three or four years out. they are indicating the first rate hike cannot be until next summer. we have to get to the end of the asset purchases and the reinvestment is 15 billion a month. that is continuing. we are looking at three or four years down the line. that will be consistent with the ecb being four years behind the fed, which is exactly where they are in the cycle. what will the world look like in four years time? i have no idea. and may not be one where everything is booming. the ecb may have missed the

chance to normalize the summer. -- cycle. michael: i think there is a lot of disinflationary forces central banks are reckoning with. you have italy, which is going to be a problem for the ecb, reducing their balance sheet. the other factor, getting back to tom's volatility question, is gradualism. the of what they're going to be doing with the prospect of normalizing, that gradual as tends togradual rising be there and stay there. you are wondering when we are going to get this massive shift in the floor of the vix from what we have seen before the financial crisis and qe, i think of have to see this concept hyper gradualism fade from the landscape. i don't see that anytime soon. the short vix trade is back in

business. of weedenel purves and company and steven major of hsbc. kevin cirilli will join us on that important ohio election today. all of america tuned to ohio near columbus. we will look at e.m. with jpmorgan asset manager joining us gabriela santos. we will continue to monitor turkish lira, gyrating over the last 24 hours. it is a heatwave in new york, no other way to put it. this is bloomberg. ♪ is bloomberg. ♪ retail.

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trump sanctions take hold in iran. tweets.ident he has some sincere questions about metaphor. the defense will cross-examine today. the dollar in a boom american economy. good morning, everyone. this is bloomberg surveillance live from new york. i am tom keene. suite,e, a presidential the president looking for world peace. it's the president all caps, talking about the iran sanctions. these of the most biting sanctions. anyone doing business with iran will not do business with the united states.

there it is, a statement from the president. francine: it's a pretty strong statement. it depends on whether iran decides to ratchet up. let's some -- you need to look at shipping. iran decides to escalate, that could hurt china which would not be in their interest. a turnalation could take for the worse. tom: we looked at russia and the impact there. a morning briefing, your first word news. >> president wanted anybody doing business with iran will not do business with the u.s. the sanctions have kicked in. that was expected when the president 11 the nuclear agreement. he wants to target iran's oil industry. the said he is working for world

peace. facing robert is mueller's offer for a presidential interview. says there is a reluctance to allow any question about obstruction. they will send a letter to robert mueller this week. have hit a companies sweet spot. the biggest oil producer posted record cash flow in the second quarter. they had the highest net income in five years. their shares are up 45% this year. spacex has launched its 15th mission of the year. they deployed in indonesian satellite into orbit today. it lifted off in florida. eight minutes after launch, the first stage landed on a drone ship in the atlantic ocean.

global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries, this is bloomberg. francine? tom? tom: we will look at the 12th congressional district in ohio. we will have more on that later. dow futures are up equivalent. screen please, curve flattening it. the fixes 11. -- bits is 11. the euro yen is 12887. the turkish lira with a bandit, that's not much coming off the report. we have a report from mr. iconic coming up on the bloomberg. this is the soap opera of cigna. what do you have? he is recommending that the cigna holders recommend

for voting against the deal. we will see what the market impact is. this is what i am looking at. in europe, earnings season is positive. the backdrop is trade. anxiousness and geopolitical noise, treasuries are edging lower. tom: very good. let me look at the bloomberg, the turkish that he bank. this is always interesting when a country unravels. there might be stability up through 2004. crisis.the financial we roll over the chart. that's a big rollover back to 2008 levels. you can see what the hope and dreams were supposed to be with the tuesday extrapolation. isncine: the turkish lira

hitting a record low yesterday. that's why this chart matters. both of these, heightened concerns over the diplomatic to support.e intent how much do they need to shore up the lira? is our reporter in istanbul. with is a diplomatic spat the u.s.. if it gets resolved, how much does this support the lira? to answer that question, we need to look at what triggered the market move. there has been a diplomatic spat between the u.s. and turkish government. they sanctioned to keep ministers. when thege market move lira lost 6.7% against the dollar. that was the worst move in a

decade. there is no reason that explains why the markets explain the way they did it. it's all about sentiment right now. around in ae turned way that the markets are performing. tom: we are looking at the weakening of the turkish lira in the last two hours, what is going on right now? news flow?r mid day today, we had reports that a turkish delegation is heading to washington. there might be a solution in the works. we did the put that into perspective. the litigation has been established. less goes back some time. there is no solid evidence from

anywhere that this is going to resolve any time soon. francine: what needs to happen? we talk about central bank independence, what needs to happen to shore up the conflict? it has gotten ugly. are there three or four steps president erdogan has in place? confidence,e investors say the central bank needs to tighten its monetary policy significantly. however, the difference this time around is whatever action the bank takes, it won't be able to turn things around. it looks like there is an expectation for a serious physical tightening. -- fiscal tightening.

keep colors of any stable organization would require monetary tightening and a reset with ties in the west. tom: we greatly report -- appreciate your reporting from istanbul. joining us now is gabriela. she knows four languages and she is working on her rosetta stone. buried in your notes is the phrase unorthodox. this all looks a little unorthodox. you said it looks like 92 or 94 or 98. pieces,ages of these how do you synthesize that? gabriela: we came into this year with a very positive backdrop for emerging-market economies. we had improving growth on the ground and earnings area we had receivable commodity prices and

a weaker dollar. what changed in april was we got the dollar strength. that tends to expose the weak links in emerging markets. the tomb prime candidates we've been speaking about our turkey and argentina, the countries that have account deficits and a lot of dollar debt. the difference between the two, they keep talking about this in the same breath. you can see argentina taking the steps to actually improve the situation. it feels like turkey is stuck in this vulnerable position. turkey,: if you look at can you reverse the sentiment very quickly? does it take three or four or five steps? gabriela: i think it's not an overnight process. if you take a look at what argentina has done over the past

few weeks, it has improved sentiment. you had a central bank at height rates a lot. substantialocess of fiscal tightening. this is at the expense of short-term weakness in the economy and a long-term gain. it's a multi-step process, it's not overnight. there are some important steps that need to be taken. tom: we will continue with gabriela. the complacency in the u.s. market is remarkable. there is no complacency over at cigna. carl icahn is writing a letter. this is common across my bloomberg terminal. cigna is dramatically overpaying for the srs. we will follow that story

throughout the day. i believe the, air quality in new york is not so good. this is bloomberg. ♪

>> this is bloomberg surveillance. let's get the business flash. a chinese conglomerate is selling off cap -- assets after a shopping spree. they are going to sell a minority stake in a jet leasing company. the sale could fetch $2 billion. they want to reduce the debt load. two developments involving japan, a telecom company stands

to lead an investment of $5 billion. it's a food delivery giant. they seek a 90 billion dollar devaluation. that could make it the biggest public offering ever. that is the bloomberg business flash. tom: right now, joining us is our expert on congressional elections. ourn cirilli joins us, chief washington correspondent. we've got an awfully big election coming up today, the 12th district of ohio. how is it different than the soiree south of pittsburgh. kevin: the key difference is this is ohio, ohio, ohio. this is a bellwether that runs through ohio. district, this is a

that like the southwestern district of pennsylvania did lean conservative. the president has gone all in on this. jim jordan may be running for driven house. tom: he loves to get out on the campaign trail, what is the strategy of democrats? kevin: the strategy is should they shrink the gap in terms of polls, they can make the case that they have the enthusiasm and that is something i heard week, theyicans last are an easy that democrats are going to have that enthusiasm gap ahead of the election. francine: kevin, talk to me about the last presidential tweet we spoke to at the top of the hour about iran. what is his and game? -- and game?

he is willing to meet with the iranian president with no preconditions. that is something we have heard from officials even yesterday on a conference call. that's the second point i would make, all of this is they are trying to get back to the negotiating table. there does not appear to be something they are forecasting instead of a clear strategy. that may be impacted by nikki haley at the u.n.. this is the first round of sanctions that are being reimposed. the second round will happen in mid-november. those waivers, there does seem to be some wiggle room for other countries in the energy sector. tom: this is your must read this morning. he is 86 years old. william ruckelshaus writes.

he cannot convey whatever your politics, the importance of this essay. he was ordered by the president to fire archibald cox. kevin, with the manafort trial, how will his essay play in washington? where there was a moment rick gates, they were essentially one and two. he testified yesterday at the trial and was asked if he committed a crime. he testified under of saying yes he did it. francine: what does that mean for the mueller investigation? probe might be able, you have rick gates

cooperating fully. this dates back prior to the campaign. becomes if there was any money with the russians, with these pro-russians in the ukraine. i don't want to speculate. i want to stick to the facts. that trial is separate. you have seen a shift in the legal strategy from people like rudy giuliani. they have been echoing they don't think collusion is a crime. tom: thank you so much, our chief washington correspondent. we will have coverage of the trial throughout the day. we will continue with miss santos from jpmorgan. ceo will be on in the 9:00 hour. stay with us. worldwide, this is bloomberg. ♪

tom: bloomberg surveillance worldwide, francine is in london. in about really selling august. you really need to check out. gabriela refuses to check out. august is a disaster. what do you do now with cash or

how do i reallocate? gabriela: we always think it depends on the starting point. if we had a fully invested be on the we would equity side, not as much as 18 months ago. we have more equities compared to fixed income. we would focus on the u.s. and emerging markets, a little bit of europe. on the bond side, we would be more cautious there, expecting a time of higher yields. it's a tougher market for fixed income. francine: we are getting some breaking news out of turkey. bond, it is10 year extending the drop. it is touching 20%. despite the measures they have place, some of the extreme measures are being talked about.

bailout talk about a and a capital control. we are not there yet. whenever there is a move, speculation and talk increases. tom: let's look at the chart. this is a long 10 date chart of the turkish lira. you can see this reversal right here. only 80% away from that. jpmorgan is pros at looking at the bloomberg right now. they have to make decisions. when you see this instability in turkey, even away from the adjacencies, everybody cautions up. gabriela: i would very much still emphasize that the turkey situation is miles apart from what we see in the at majority

of emerging markets. it's been a tough year for them. performance has suffered. when we think about what we are starting from, it's a much healthier place. turkey is still very much an outlier. in the first half of the year, there has been much more of a risk aversion toward emerging markets. would need to see some stronger growth in the second half. we would need to see some simmering in the trade sessions. tom: you have the stronger philippine peso. this is the same chart as the lira. it's going the other direction. francine: i am also looking at some of the talk around india, around some of the other emerging markets. is there anything you like in the emerging market space? gabriela: there is a lot that we

like. if you think about the long-term story in emerging markets, it's not about these economies and these countries. ofs all about the emergence the consumer. that's a trend that is ongoing. that's the story that is very strong to think about. i would include india very much in that. i would include china, we still think about southeast asia as well. tom: we will come back. holden fromilliam washington on trade. stay with us. this is bloomberg. ♪

francine: we saw a little bit of a move on the turkish 10 year bond. ,hey've been extending the drop the central bank and government

have been largely silent as the currency plummeted. this is after more sanctions. ae lira fell the most in decade on monday. we will keep a very close eye on and he market moves. let's get to the first word news. >> the president tweeted that when it comes to iran, he is looking for world peace. the new sanctions taken today. they are the first since he withdrew from the nuclear agreement. further sanctions would take effect in november. he said countries dealing -- doing business with iran it won't be doing business with the u.s. california is battling the largest wildfire in history. it has burned 75 homes and more than 440 miles of force. 20 fires are burning in the state. the trump administration said

the george that -- judge that approved the time warner deal did not use common sense. time warner would have added bargaining power over other companies. the eu may is resisting timetable for brexit talks. she hopes president trump may help. they want a later deadline, that is looking for a showdown next month. the eu will be so occupied with the prospect of president trump disrupting the g20 meeting, they want to get a it answer. the company is struggling in key markets such as the u.s. and china. pandora has lost half its market value since the start of the year. global news 24 hours a day powered by more than 2700 journalists and analysts in more

than 120 countries, this is bloomberg. tom: thank you so much. it's always good to speak with someone from washington. they are wired in on the policy of the hill. dinesetter is someone who at the homestead table in indiana. he has a career of careful analysis, of indiana and washington. your column was a breath of fresh air. you actually went out and talked to those knee-high by the fourth of july. william: the crops look good in the midwest where our family farm is in indiana. are they concerned? they are looking at the future. fairness, my family farm

is corn and soybeans. they are very worried about soybean prices. i was there at the fourth of july recess. that's a concern. fromi just got any mail riley in the west village. maybe we will talk about it at some point. save us from our broadway work. francine: i wanted to ask you a question about how this escalates or deescalate's. if you are looking at pressure points, how do you make a decision on if this gets ugly or not? william: it's clear to me that the statements they have made that this looks like we are getting into a tit-for-tat. that is unfortunate.

people in the midwest where i grew up in like to see this and is quickly as possible. i guess i can't be too optimistic right now. to haveident appears done his wheels and. -- heels in. francine: who does the president listen to? should he listen to constituents? : i think he represents the entire united states, he should listen to all constituents. case, thereicular are some producers that are going to be losing under the trade war. specifically in the agriculture sector, they are hit hard. there are consumers out there who will benefit in terms of employers in certain areas. it's a balancing act. kudlow,stening to larry

peter nav wrote. they are trying to bring to attention that china has not been a fair trader. tom: and the time that we've got left, we've got to go back to the budget. there is a wide understanding that the budget is going to impinge on society. what is the level of deficit to gdp that matters to you. is it 5%? william: what matters to me is the level of debt to gdp. 70% of gdp, i'm not looking at the annual rate. i'm looking at the total amount of data -- debt we carry. my goal would be to get it down 40%, that would be the rate it has been in the past. the accumulation of this debt will continue to impact future

generations. makes headlines with the 5% coupon. and therest rate interest on the debt is coming up a little bit. are we anywhere near where it begins to hurt? william: it's hard to answer. it's a situation where you drop that last drop into the test tube. you don't know when that's going to take place and turn us. we are getting very close. orwhere near the 70% of gdp debt is too much. that needs to be corrected overtime. there was a need for some stimulus and a reduction in the tax rates. the economy is growing right now, we still need to look at the spending side of the equation going forward. worries you about

the economy? are you worried about a downturn? william: what worries me most about the economy long-term is the burden of debt we are placing on future generations. that, we areoing sacrificing, i hate to go back to my farm roots, we don't spend the seed corn of the future. we are reducing our spending on things that will produce or activity in the future, education, infrastructure, technology, research. when we have the entitlements growing as they will grow with an aging population, we are sacrificing those investments that are necessary for the long-term growth of the country. francine: this doesn't become a problem six years down the line?

term, wein the near will continue to have a good place for investors overseas to put their investments in the united states. is owned byebt foreign investors. if we build walls, that creates a problem. at some point, people may say we don't want to invest in the united states. that will drive up interest rates. i would say we are at a risky stage going forward. tom: thank you very much for the report from indiana. you can see his essay at usa today. to move away from your boss, we are talking about higher yields. is there an understanding of higher yields? are yields up, price down?

gabriela: we've been in one for 18 months or so. we don't think it's quite over yet, we still think yields can move higher for the next 18 months. ultimately, if you think about where the 10 year should be, without any artificial anchor on the 10 year, it should equal nominal gdp. even if we are not optimistic, we are talking about 2% gdp growth. the 10 year should drift toward that 4% yield. we are not there yet. tom: that seems to be the feeling. yields will stay flat. the uncertainty now, talk to us about the uncertainty and the mysteries that are out there

this august. gabriela: i think the discussion about the 10-year, what anchors can we expect to way down on that long end? i don't think it's a concern about growth in the u.s. 2% gdp is attainable. it's not concerned about inflation. i think there is a concern about other anchors the way on the long-term curve. central banks in the u.s. and around the world, there is some risk aversion we've seen for the past few months around trade tensions and what the future will look like in the u.s. and the global economy. francine: what is your biggest risk outside central-bank policy? gabriela: it is the conversation around trade tension. into this year, we were expecting another year of good global growth.

really, that has been thrown into question. we don't necessarily know how much further they will escalate. to sentiment.oes we have seen an impact? we have an interesting chart for you in a little bit as well. let me tell you about bloomberg radio. york,, washington, new san francisco. we are on sirius xm. it is bob moon and karen moon. bloomberg daybreak: europe this is bloomberg. ♪

>> this is bloomberg surveillance. billionaire investor carl icahn is urging cigna shareholders to vote against the takeover of another company. he said cigna is overpaying for the manager. he said the company would be better off in a multitier partnership with them or a similar firm. the home listings website operator is acquiring mortgage lenders of america. mortgages streamlines the organization. we will talk with the zillow ceo. italian cost-cutting rose to a second quarter profit. it exceeded estimates. the ceo is ramping up savings

and improving quality. they are selling bad loans. that is the bloomberg business flash. tom: single best chart right now, we showed this earlier. this is the long-term chart. , down we go. trump this is 2%, 3%, 4%. this is a jamie dimon like 5%. is it's about the vector. whether it happens suddenly or abruptly or we are given time to normalize, that wasn't shown within the comment. gabriela: as we see in the chart, we had a time of much higher yields.

we are not going back to 14% on the tenure. this is not an economy that has that type of inflation. toally, that line will tend follow gdp in the u.s. and give us closer to 4%. tom: the heart of the matter here, it's about the inflation adjustment yield as well. as the others you have or where your ceo is, as we gdp, inflation comes up with it. gabriela: or if we are talking about a 5% 10 year yield but we align% growth, that would with nominal gdp. i think it's also not just the inflation side but what you think long-term potential growth

is as well. francine: if you look at long-term potential growth, is there a concern that even if you look at earnings, tax cuts are inflating it and not telling us the real picture out there for the economy. gabriela: when we look at our estimate of potential growth, we are below 2%. we do see some big challenges for the economy, from demographics on one side and low productivity on the other. there is a reason to be optimistic given some recent changes in terms of the tax code and regulation. however, we haven't seen it in the productivity side. of 4%ets us to the math for now. francine: how many rate hikes are you expecting and 2019? gabriela: that's an important

question, two more is expected. what about next year? does the fed move above what the rate for this kind of economy is? twoould get there after rate hikes. we could in that spot 12 months from now. that's where the question is. will the fed it take us above neutral? abouthat cause some angst stepping on the brakes too hard? tom: once the state for cash right now. at 10.king at of vix gabriela: i think it considers what you call cash. is it your savings account at one of the big banks, you haven't seen a massive improvement in interest rate. if you look further and you talk about money market funds or short duration bonds, you can get the yield of close to 2%.

you are talking about not just equities. do we say put all your money in there? that's not going to get your money to grow. tom: thank you so much for the briefing today, particularly earlier. the president just tweeted moments ago. what is important -- i don't have the tweet in front of me. linkageright after the of the democratic candidate with nancy pelosi. the president with a political tweet. stay with us. we have full coverage of that election this evening. stay with us. this is bloomberg. ♪

tom: bloomberg surveillance, we are certainly after fox. comcast is going out looking for new things.

disney launches earnings today. what will you look for today from mr. bob iger? gabriela: a healthy earnings report reflecting really good trends in the studio, momentum in the parks. what investors are going to be focused on is any data point with their espn plus product, a streaming service they launched in early april. it's been a full quarter now. we will see if there is interest in how they updated that product and what the future demands may be. mentioned, espn is about cord cutting and the future of tv. an update on the disney streaming exercise.

>> they are preparing for their branded streaming product launch next year. be tipping their toe in the water a little bit, gauging the demand. they are getting ready for this new product launch. they beefed up their content point folio. the fox acquisition is all about bolstering their content assets, deepening their library content. they are sent to do that with the launch of that product sometime next year. francine: what will you be looking out for with them in the past. they have done well with theme parks, particularly in asia. >> we see some good momentum in the theme parks. we saw some really healthy numbers last year from europe and shanghai. they opened some new attractions in california.

they opened toy story land in florida. this is going to help keep being the momentum going at the parks division. there is going to be an unfavorable impact from the timing of the easter holiday. that might do him the profit a little bit. francine: are they subject to foreign-exchange? is that something we should be looking out for? >> not so much. tom: thank you so much. froms with us today princeton. an update on turkey, what do you see? francine: quite a lot is going on. the currency fell to a record low yesterday. lot,jumping around quite a there is more speculation there will be extreme measures in place. nothing has happened. we don't know if this is true.

they are talking about capital controls. we will take a look at the lira, the 10 year yields. tom: here is the turkish lira chart. this is a stronger turkish lira off the meetings in washington. this is just in the last hour or two. that story is developing to say the least. we will develop over to radio. rumor has it i will be with jonathan ferro today. will take a look at turkey among other issues. stay with us. 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. david: china rises. stocks rose more than they had

in two years on more signs the government will support the economy. turkey falls. the lira falls to new record lows, falling faster than it has in seven years. fears of u.s. sanctions and growing inflation. media week. earnings out this week from disney and 21st century fox. can the traditional players catch up to netflix and amazon? welcome to "bloomberg daybreak." i am david westin. alix steel is off today. welcome back to a. -- julie. julie: the single look at markets. it looks like discovery is just starting to come back out. i don't know if you want to jump in. david: second-quarter adjusted eps missed. earnings before introduction on taxes on 1.2 billion. the second-qua