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-quarter revenue is

2.8 5 billion. that is a narrow miss. i don't see the earnings per share. we have been looking at this because discovery has been struggling because they have been losing scrubbers as most basic cable outfits have. -- lost rating. s./ they added the scripts properties. they make reference to makesdavid aslam reference to the scripts integration. he says they continue to make great progress with the integration but does not give much more detail than that. david: when they made the deal, they said they would have savings of $350 billion. they have taken that up to 600 billion.

that seems to be driving that deal right now. let's get to rachel evans, bloomberg cross asset editor. rachel. let's turn to you. disney is the big one we are looking for after the bell. then we have 21st century fox. there is the larger theme of these traditional guys trying to move into streaming. rachel: that is what everyone is looking at as we see these last few media earnings come through. the surprises have all been to the upside on the earnings front. .e will see if that translates we have seen discovery, but we have disney and 21st century fox still to come. for disney and fox, they are in these merger talks. it will be interesting to see if we get more details on how that is going. whether everything will be smooth sailing in china with regards to fox and this battle in the u.k. over skype. onwill see if we get updates

intense to roll that back in the digital space. david: we are looking at these basic issues, two categories, the old and the new. concerns on espn flattening out. the new is what they are going to do with that first through fox set of assets and if they are going to bid against sky. >> they are knocking the ball around in the movie business. they are the leader by far of all of their competitors. it is all about content. that is what is going to drive streaming media. disney has a good share of that content. julie: it is interesting because disney alone among these acquirers is up this year reaches acquirees. 21st century fox is up.

discovery is up because it has been talked about as a potential target. we see a lot of outperformance within the media stocks this year. rachel: disney is trading at a two-year high. can the earnings come through and push it to take a new leg? a lot of the news regarding disney and fox has played out. can they come through with something we don't know yet with streaming and digital assets, but will be interesting to see. julie: let's talk about china because that is the other big story we are watching this month. weion in the market there as saw that biggest gain in the shanghai composite in two years. we have before exchange composite coming out last night. that rose despite weakening currency and export growth. we see this action on chinese stocks in the chinese currency. the foreign-exchange reserve number is a little surprising. >> a big surprise actually.

there was some anecdotal evidence during this run a weaker currency where we saw potentially china intervening in the markets. the idea was that they were using these reserves to intervene. we were seeing a lower number. ,eople were ginning up for this and if that number was a lot lower, they would have gone after the currency again. overnight, the state administrative foreign-exchange this was it is not going to settle. everyone backed off. the currency strike, the stock market strike, investors that china was going to step in to support markets. we will see if that actually transpires. this is far enough for now. julie: it paints this picture for us about what china is and is not willing to do when it comes to stimulus amidst strange dealings with the u.s. rachel: absolutely. the yuan taking a breather is

interesting. i have not seen any explanation as to why the shanghai composite has bounced back. it is still down 16% or 70% this year. best 17% this year. the china daily report, the government is going to step in and add liquidity and stabilize the market. is this about the retirement products coming in? is this about oil rising? i think the currency argument is not as convincing. >> there is no reason why the stock market rebounded all right other than the word has passed down the line between the central bank and the government trying to shore things up. that led speculators to take back some positions. david: where there is not industry is in turkey. this is the third story. we know what is going on in turkey, and it is not good. that is the shanghai comp.

we were going to go to the turkey lira. that is at record lows. the high number is that because that is the dollar versus the lira. that has been hit. the 10 year this morning it hundred percent yield. it is basically the u.s. sanctions coming into effect -- hit 20% yield. it is basically the u.s. sanctions coming into effect. >> it is a big deal. secondaryat a to the inflation issue. we have seen over 30% decline in currencies so far this year. but that into perspective, if the italian euro and french franc were two devalue, it was always on the order of 10%. if they don't do in emergency rate cut, and i was suggested by tuesday, where they issue bonds, the market will go after them again next week because the bonds they will be issuing will

be worth less if they do the hike afterwards. julie: erdogan thanks higher rates will hurt the economy. >> that is what central bank has taken such abuse. contrast is a sharp with china where you have the government coming in and trying to manage the problem and on the other hand the government trying to comment and fumble around. hope wethere is some are seeing turkish assets becoming less correlated with other emerging market assets. rallying,lot of em china included, and turkey is this outlier. it's problems are domestically oriented. hopefully they will stay that way. julie: interesting story. david: thank you both for being with us. reminder, you can find all the charts we just used and more by

using gtv on your terminal. coming up, how investors navigate shifts in monetary regimes. we will discuss monetary concerns with ian harnett, absolute strategy research chief investment strategist. this is bloomberg. ♪ mberg. ♪

>> this is "bloomberg daybreak." i am kailey leinz. billionaire investor carl i hnn is urgingcan cigna'sders to resist takover bid with express

grips. foran stanley is looking assistance in its takeover of kansas-based mortgage lender. the biggest american aluminum maker is asking for relief from tariffs that were meant to help it. help withs acquiring a form of aluminum that is not available from american makers. that is your bloomberg business flash. julie: thank you. we are continuing to see a rally in u.s. stocks. the s&p 500 is at the highest since january selloff. globally, stocks have not recovered as much. are investors underestimating a

global monetary regime change? joining us to discuss how investors should navigate the absolutethe market is strategy research chief investment strategist ian harnett. talk to us about this shift in global monetary policy and how the markets are or are not pricing it in. ian: our sense is that what you're seeing here is a big divergence between what is happening in the u.s. and the rest of the world that is compounding the issue of higher interest rates, faster tightening in the states that is driving that dollar up. that is a significant tightening of global liquidity, and we are seeing global em1 decelerating. everything is fine, look at the earnings, don't worry about that old-fashioned liquidity stuff. we are saying, watch out, it definitely is not.

you want to be rotating away from the more cyclical areas of the market. some of them have been doing well. you want to get defensive areas of the market and take advantage of the fact that bond yields are moving up towards 3% to david: let's take a one of the points you made, the diversions between the u.s. and japan and the eurozone on the other. thewhite bar is showing rate of growth of u.s. gdp, and the blue is the eurozone, pink is japan. or to whatlarger extent is that it is a fiscal stimulus and the u.s. that we are not seeing in the eurozone and japan? ian: i think it is two things. first of all, it is that fiscal stimulus you are seeing. perhaps that is what the fed is trying to offset. it is also the impact of higher oil prices. oil is a tax on the rest of the world, china, japan, the eurozone.

in the u.s. because of shale, you have a much more balanced environment. our concern is that what we are going to see is at the moment market investors seem to be assuming strength in u.s. is going to leave everybody else up. we are worried that what you're saying is monetary tightening around the world, the strength of the dollar, high oil prices drag, eventually, the u.s. back down to the rest of the world once you start to see those tax cuts run out, and particularly as fed chair powell continues to tighten aggressively as he seems to have implied. julie: how does trade play into this scenario you are talking about? we have the gaming out of the trade back-and-forth between the u.s. and china. we are trying to figure out if anything more substantial is going to come of it, or if there is going to be an agreement.

where do you stand on that question? if we do get an actual implementation of a lot of these tariffs, was impact does that have on your scenario? interesting thing is we can get through a whole hour-long presentation with our minds talking about this type of environment without having to talk about trade. we are talking about the monetary side of things rather than just trade adjustment. if you add trade on top of that, you get through impacts trade wars will impact economic activity negatively, and the impact prices to the high side. when you get slower growth and higher inflation, that tends to be negative for pe multiples. you want to be in more defensive areas of the market. from that point of view, the u.s. holds up relatively well. it has a balance of sectors and stocks. there are no winners in this environment.

to be in that more defensive space -- you want to be in that more defensive space. julie: if you got into defensives now or a month ago, you would not be doing so hot. defensives, despite some fits and starts, have been underperforming. when do we see that inflection point? particularly in the u.s. because activity surprises in america are still probably positive. -- broadly positive. they are less positive than they were. and the rest of the world, you are seeing negative activities of prizes. you are seeing -- surprises. you are seeing a lot of people are not aware that health care in the u.s. has outperformed tech on a one-month and three-month basis. sectors, foodhave producers, tobacco stocks, these

have 5% yields. these are starting to be attractive to a number of investors. julie: you have ian harnett of absolute strategy research. he will rejoin us in a moment. engels,p, stephan commerzbank ceo. this is bloomberg. ♪ ♪

david: commerzbank posted its strongest revenue growth in 18 months in the first quarter. the pace of new customers slowed and it warned that operating costs would be slightly higher than planned. earlier, our matt miller sactown with stephan engels, commerzbank that sat down with stephan engels, commerzbank ceo. think you clearly see

the growth, and the strategy want to see the growth is paying off well. have israte clients, we still a competitive environment. we can see growth on the customer side, and we can see growth 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 revenue expectation for our corporate clients. matt: your over all revenue expectation, you want to get back where the bank was in 2016. can you still get that goal? stephan: i think the strategy is right, and the strategy is working. 9.8 is the reichel to fight for. -- right goal to fight for. that is what we fight for. that is what everybody tries to achieve. the call with analysts,

you said not all of your growth strategies are moving as quickly forward are working as quickly as you would like them to. can you elaborate on which strategies you are having problems with? stephan: it is mainly in germany the price competition, which is fierce. to weiys need to look gh growth against profitability. i think we have taken a prudent approach. new business and mortgage financing was a bit down, and we have achieved much better margins than before. growth is not everything. what you need is more customers. more customers reduce more asset. more assets is more revenue. with: that was matt miller stephan engels. matt joins us now. great to see you.

great to see you. they had strong results. is in the main problem just too many banks, too much competition over there? matt: absolutely. the results were better than the analyst estimates. as soon as they came out this money, we started getting notes from analyst saying these results, the growth was not being driven by the things we needed to see it driven by. mainly retail banking operations and corporate banking operations. commerzbank wants to do old-fashioned banking in germany. the problem with that is there are so many other banks that want to do that. if you look at the market share of commerzbank and deutsche bank together, it is a tiny sliver of the german banking industry because of so many local and community banks that germans a lot of times prefer. it is difficult to gain market share in that area and add customers. that is why they have not been

able to add customers as quickly as they would like. david: typically when you hear that, you think consolidation. where is the consolidation? matt: that has not happened yet. a lot of people in the thinking that for this region and this sector for a long time. because of the european rules, they have not quite achieved the level they want to four thinking consolidation cross-border. partially the pride, but also so many employees at the big banks, commerzbank and deutsche bank, it would not make sense to put them together as it would be so difficult to cut costs due to the labor unions at work. david. julie: i will take it from here, matt. great to see you. bloombergs matt miller. joining us is ian harnett of absolute strategy research. i know you have looked at the big banks globally. earlier, you have written a lot about the issue of financially

important institutions. i know i will get the actual acronym wrong. systemically important financial institutions. julie: there we go. all seems well on the systemic health of the banks. the i think this is one of disconnects we see in the market. the market seems to have this positive live to it. -- vibe to it. when we get to it, systemically important financial institutions are still 17% below where they were at their peak in january. good deutsche bank down 38% -- when we look at deutsche bank down 38%, for out of the top six worst-performing banks. 22 systemically

important financial institutions that are european are down 20% from january. there is a lot of pressure globally here that talks to the fact that this liquidity environment that seems to be providing a fairly healthy return for equity investors, particularly in the u.s., is not being replicated around the world, and the financial sector is bearing the brunt. that is where we see a lot of risk. david: ian, thank you so much. he will be staying a little longer. turkish assets really taking it on the chin today. we will talk about that with pablo goldberg, blackrock financial's head of global debt. this is bloomberg. ♪ oomberg. ♪ retail.

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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. julie: this is "bloomberg daybreak." i am julie hyman. alix steel is off today. let's take a look at what is happening with equities around the globe. in the us, we have a pop-up with

futures. this following the heels of a rally in europe and asia as well. wave gohe asian around the globe. we have mining stocks going higher. standout is the shanghai composite up 2.7%, it's best single they performance in two years. that represents a rebound after declines recently. it is also a had scratcher. we saw other moves in the market, including an increase in oil contracts in china. traders trying to get to the bottom of what spurred those gains. we will talk about the turkish lira in a moment. the dollar is little changed against the lira. we saw the lira fall to a record low against the dollar. the u.s. dollar index is lower

by about 0.3%. linked toing, perhaps what we saw happening in china overnight. crude also rallying. china launched crude futures in march. we saw the chinese contracts for september delivery jumping by his daily limit to a record. curious moves around the globe. david: time to find out what is happening outside the business world. we turn to kailey leinz with first word news. >> president trump warns that anyone doing business with iran will not be doing business with the u.s. the first round of new u.s. sanctions on iran have kicked in. he is threatening to target iran's oil industry with sanctions and september. the president tweeted that he is asking for world peace, nothing less. california battling the

largest wildfire in its history. and 4400rned 75 homes square miles of land. ministerk, prime theresa may is helping president trump may help with brexit talks. the u.k. has learned the eu wants a later deadline for brexit. theresa may is hoping that the eu will be so preoccupied with the prospect of donald trump at the g20 meeting they will want to finish brexit talks earlier. 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. david: thank you. emerging markets had a rough first half of 2018. there are also country specific issues such as in turkey where concern about u.s. sanctions

drove the lira to new lows yesterday. we welcome pablo goldberg, blackrock's portfolio manager and head of emerging-market debt. we have overall emerging markets and also idiosyncratic factors. talk about turkey. we need to take a step back. when we look at turkey, it is similar to what we saw in argentina earlier. got more expensive. investors are looking to which countries have large reform movements abroad? first investor eyes fell on argentina now turkey. argentina was very committed to adjustment, rates around 40%, ready to deal with the imf. it is allowing the economy to slow down. in turkey, we are not seeing

that yet. until we see that, i think the pressure will continue. julie: in that case, what kind of further move could we see in turkish debt after what is already been a dramatic? pablo: i think the market is trying to see what is the next move by the authorities. since the last central bank meeting in turkey came out with no hike, they were saying they were going to wait to see the effects on the economy of the ice they had done before. inflation is running faster than interest rates at this point. that is the first move the markets would like to see. what they would not like to see is any sort of capital control. you were just reporting rumors about that this morning. i think the move should be coming on interest rates. david: how much of the inflation

markets are driven by the fact that we have a president erdogan pushing the central bank not to raise rates? pablo: if you have negative real relates,e really low we know inflation becomes an anchor. that is an important determinant. in 2016 2017, the government pushed forward with very easy policies on fiscal lending, allowing the banks to lend a lot. we had the economy grow close to 7%. an economy that goes that much that to the current account deficit around 6% of gdp. see a move interest rates in the country understanding that this interest rate will have to adjust. the longer that takes, the more difficult it will become.

julie: i want to turn to china. we are watching the situation closely. we had the big game in stocks. ian harnett is still with us from london. i know he is watching china. we saw that unexpected increase in china foreign exchange reserves. i will start with you on that, pablo. what do we read into that in terms of how china is managing through its struggle with stimulus, not stimulus? pablo: i think the most important reading is the striking difference between what is happening now and 2015. 2015, there was an important loss of reserves. there was significant pressure in the domestic market china. this is not what we're seeing now. that is important because that allows the chinese authorities to let the currency move way more than before. why is the currency moving? three alternatives out there.

the first one is they are playing the trade war you currency. the second is they're trying to ease the currency. the third one is that the currency has gotten very expensive, and they are trying to bring into a better level. if you look at what the data shows, the three possibilities are still supported. there is a very important difference about which is the current leases. if you think about trade war's -- ng, then we may have inid: ian, pablo has put it short compass. which one is it? ian: what we see is a recalibration of policy. we still have president xi having his war on debt. we see certain combination terms of domestic liquidity. but we see that has offsetting the pressure you will see on corporate, who have

borrowed aggressively. that increases their financing costs. we think the chinese authorities are allowing that exchange rate adjustment to a bit of pressure off the export side and allowing the liquidity to expand means they can expand some of that dollar-denominated debt into rmb denominated debt. we agree strongly with pablo here. this is not the same as 2015. this is not monetary and fiscal stimulus. this is really accommodation. julie: as we watch the situation with china, like turkey it is not has -- unlike turkey, it is not as isolated.

i think in asia generally it is still going well. if you look at the region surrounding the m space -- em ,pace, we had a strong 2016 2017. part in thes taken adjustment. mexico has been doing well. we are now trying to figure what is good with the next is and. in asia in general, growth has been solid. we need to see whether what is happening with trade tariffs will eventually lead to some slowdown. so far i would say good enough with all economies performing quite well. some of this chinese slowdown is some of what we want to have happen.

this is part of that. emerging markets have been slowing down, particularly in the second quarter. now we see growth plateauing around 4.5% for emerging markets as an aggregate. that is good enough to attract investment. theing the first half of year was tough for emerging markets assets. we are entering a better period with the dollar as a better anchor. the renminbi is a better your from here. david: the headline crossing the bloomberg right now says the pboc is set to meet with banks herdan and urge no behavior. what do you interpret from the pboc saying don't move the same direction at the same time? pablo: we want to market. this is with the u.s. has been asking from china, no currency

manipulation. we see them saying we are going to step out of it, and we would like you guys to trade in the renmimbi and trade assets. julie: apparently there was a meeting. mondayd a meeting morning with the banks that trade with the central bank and encouraged this avoidance of herd behavior and momentum chasing moves. let's go back to ian on this. pablo says this is a good move. is this a convincing one? do we believe the pboc that they want a market? ian: i think they want a two-way market. i think they are trying to

stabilize things. we don't want everyone to be selling at the same time. sees stabilize the currency whether the market will actually determine an appropriate outcome. our concern is, until you get stronger economic growth globally, and that will be tough to get against a stronger dollar and rising u.s. interest rate and trade war environment, then it is difficult to make a strategic rotation into emerging markets, sorry, pablo. david: an exceedingly precious thing they are trying to do here, control and say they want a market that is freer. good luck to them. harnett, i give for joining us. and ian goldberg harnett, thank you for joining us. thatat we now is

yesterday, on monday in beijing, the pboc met with 14 major banks, foreign and local, and these are the banks that provide the main tool the pboc uses to manage the yuan on a daily basis. they urged them to avoid herd behavior in the market. what we understand that to mean his often their clients will jump onto a trade and then they will get in on the act too. they are urging them not to do that, to back off from that behavior. the pboc is not a fan of that in the market, particularly with yuan aton -- dangerously weak levels. julie: we were already seeing some strengthening of the yuan

today. i guess the question is will that be sustained? what is the feeling in the wake of this? >> the fundamentals really have not changed that much. these are the reasons for why there has been downward pressure on the yuan. the trade war remains live. it is still a very confusing and live factor for many investors. they don't know whether donald trump will move on more terror threats or whether china will act in other ways to move against the u.s. we also have the hits to the economy. it was already looking to slow before the trade war intensified. it is expected to slow a little more with this factor in play. people are still expecting more weakness in yuan.

people are expecting more stabilization after moves like this. julie: thank you. appreciate it. david: we now move on to the wall street beat. , $90 billionftbank valuation may lead to the biggest ipo on record. finally, cohn's summer vacation. what has. to -- has gary cohn been up since leaving the white house? >> i love superlatives. billion valuation for softbank mobile. potentially a $30 billion ipo. that would exceed the $25 billion that alibaba fetched.

to, absolutelyd crushing it. david: no question. this when you factor in development with what has been going on with the vision fund and the investment. david: he is a great investor. matt: it does seem that way. it reminds us that, and we have talked about this before, there is literally no deal of skill that softbank is not either looking at, having passed on, or doing. it is remarkable the scale at which this is happening. this would be a big win for the tokyo stock index. david: slightly smaller still, steinway piano. atginally purchased this $500 million or something. the chinese are buying steinway's faster than they can make them. >> amazing. sometimes we talk about the scope of china.

as a consumer market, it is massive. as a high-end consumer market, particularly. david: these are not cheap. >> this is good news for john carlson. julie: he needed some good news. >> this was clearly a good buy. it was competitive when he bought it. there is competition on the other end. there's one chinese company. there are private equity firms as well. cohn'sour third topic, summer vacation. joining us to talk about that is bloomberg's amanda. she caught up with him. out in the hamptons, hanging out. sounds like you got quite a long time with him. what really stood out to you? >> i was interested in his comments on facebook. he was saying it creates more 2008.han the banks did in that is a dramatic statement

and made an impression on me. you have seen gary returned to a land that is familiar to him. he is in the hamptons. wall street is a bedrock there. he is a regular on the golf course. he is playing with his friends again. and that comfortable environment, he is venturing out. he told me about investments he is making and travel he is doing. david: he is clearly looking at different things about boards he might go on. there is also cryptocurrency and things like that. his comments on facebook is no doubt based on the work is doing now. >> i think he is very enamored in the culture he is finding on the west coast. he ventured out of where he spent his career go to the white house. i think he is ready for new things. >> the other interesting thing is this is wall street's summer

playground. wilbur ross has been there as well. what else have you been picking up as you have been out there reporting all summer? >> i think heading into august, there are a lot of fundraisers on people's lists. people are focused on the midterms. there was a fundraiser for cory booker, governor cuomo. this is not a traditional land of trump. julie: i wanted to ask you about that. did you have, socially, what happened to gary cohn when he was in the white house, and was he welcomed back into that liberal society now that he has left? >> i go back to what his wife said in remarks at this benefit saturday night. he was able to carry how boards down to the docks for anybody because he was unemployed. there were loving chapels from the audience. audience.s from the

i think his friends on wall street that saw him probably took comfort that he was there. he feels he deserves a pat on the back for getting the corporate tax reform done. david: he would not talk about trade and things like that, but tax reform. even liberals that live in the hamptons are in favor of tax. they don't mind getting a little more in their paycheck. in the hamptons it is the power and influence. these philanthropic events bring those together. it is much more concentrated than it is in new york. all of these things are more elevated. gary cohn showed up in a red electric car. david: it was not a tesla. >> you couldn't miss him. david: thank you. coming up, consolidation in

media. we will take a look at what sorts of deals make sense in a changing media landscape. go.ck out tv on your terminal. this is bloomberg. ♪ is bloomberg. ♪

david: a little under an hour ago, we get discovery second quarter earnings, which miss. we talked to brooke about what happened. welcome. >> we got a big mess on earnings per share. david: what accounted for that? >> i think it was largely higher costs. it is integration cost of the network acquisition. they also talked about higher cost for spend, higher

international sports content. they are spending a lot to try to stay competitive ahead of this deal. david: this is disturbing because in the first quarter, they had the olympics. they said they had a one-off there. one of the reason i understand discovery did the deal for savings, isor cost that still coming down the pipe? >> i think it is still too early. they increased the cost savings target. -- as originally hundred 50 is 600.lion, now it i think if you can combine more content and increase your reach, you will be of to take your cost down and be more competitive. i think the question with discovery-scripps, is does this

make them more competitive? given all the other consolidation with comcast and 21st century foxconn does a larger consolidation -- fox, does it make a larger consolidation favorable? >> this is a john malone company. he has thrown out there combined discovery with charter and lions gate potentially. then you have movie, tv content, and distribution packaged into one. that could be competitor into at&t time warner, comcast. david: there are some media companies that want to move into international spheres. >> that was a big appeal of the scripps network. you can take hd tv and the food network and expand it

international. discovery already had international falls, so they could take it international at a cheaper and faster rate. david: did we get any loss of subscribers? >> they did get subscribers coming down this quarter, which is a big red flag. subscribers to fully debated networks down 3%, which is a warning sign to networks. discovery is trying to push its own streaming service. this is disturbing. david: thank you. up, sharmin mossavar-rahmani, goldman sachs chief investment officer. this is bloomberg. ♪ ♪ this isn't just any moving day.

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simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. >> china rises. shanghai stocks rose with whom

they have in two years. turkey solyndra falls to record lows. a selloff of 10 year bonds drives yields up on fears of u.s. sanctions. and media week. earnings out this evening. can the traditional players catch up to streaming giants like netflix and amazon. welcome to bloomberg daybreak. we have already had some fireworks. u.s. futures are hanging on to gains here. the fireworks are in the chinese yuan. we are seeing a gain through recent levels on reports of the people's bank of china told banks they should make efforts

to prevent herd behavior. someomentum chasing moves movements on the part of the fomc to reverse the strengthening or weakening that we have seen in the chinese yuan . it shanghai composite, before we got those headlines, the best one-day gain. it wasn't clear what the primary factor was. we did get a report afterwards chinese foreign exchanges unexpectedly rose. finally that move and the lira. we have the lira bouncing off the lows after reaching that record low. what is making headlines outside the business world. >> president trump tweeted when it comes to iran he is looking

for world peace, nothing less. sanctions kicked in today, the first since the president withdrew from the nuclear agreement. he said countries doing business with iran will not be doing business with the u.s.. a diplomatic crisis. fell 6% before rising today after reports that turkish officials are heading to the u.s.. in the u.k. prime minister theresa may is resisting the european union timetable for brexit talks and hoping president trump may help. the u.k. once a later deadline. may thinks at the end of november the eu will be so preoccupied they will want to

get a brexit deal wrapped up. global news 24 hours a day on air and on tictoc on twitter. this is bloomberg. chinese stocks moving slightly higher after weeks of decline. tradewas a growing dispute. larry summers set down with bloomberg and talked about the trade dispute as well as china's role in driving the global economy. >> this is going to make america poorer.e -- our producers will be less competitive. the causeink china is of globalization. china is a developing country with average standards of living

like those in the united states during the 1930's. the context is very different. , the privatee now wealth management group, good to have you here. you have a new update which you don't always do in midyear. one of the things you talk about tradeible headwinds, levels going back. spike, the level of trade. three different numbers take it up to 6%. how big a threat is this? >> as you mentioned we have highlighted several factors people are concerned about.

we have gone through most of them and said they are not significant concerns. broadly we have everything from the issues the u.s. was concerned about with the eu, then nafta with canada and the co, and china. ,ith the eu and with nafta concerns have decreased. we are going to come to some reasonable negotiation. we think about china we don't think in terms of the trade issues. we think of it more broadly. our view it is justified the u.s. needs to revise the council of foreign relations has called the grand strategy towards china , and economic perspectives, or a political perspective.

we think of these trade tariffs topart of the bigger picture change various practices. when you look at the numbers, even if they added that additional tariff to the toner thaton day have stated, president trump talked about, it is not going to be that disruptive. inflation is stable. volatility of inflation is low. in terms of the big picture, there are more important domestic issues. we published a report a few thes ago talking about how world in china is with this huge growing debt. you have highlighted the issue of what the pboc is trying to do.

want a rapidly depreciating currency because of the huge fear of capital outflows. much a commandy and control economy. growth is weakening. they are trying to ease policy. the trade wars will affect china much more than it will affect the u.s. from our perspective. has athat mean the u.s. better chance of success getting china to the negotiating table? thus far we have not seen much willingness on the chinese side to get fair. get there. >> there was a sense they were going to negotiate. day --s the end of the they are not making that much progress. have a stronger hand. it is a larger economy, it is

growing strongly. china is concerned about their slow down. a poorforget it is country. the average gdp in china on a nominal basis is below the gdp per capita as the poverty level of the u.s.. one has to keep these issues in mind. isn't a strong chinese economy and interest of the united states? >> good global growth is in everybody's interest. other hand the idea china has driven growth elsewhere is in congress with the idea of a country that has a huge current account surplus. you definitely contribute to the headline numbers for growth.

are you actually taking growth away from other places? current account surplus because you are it ising to countries, true globalization and global trade him proves growth for everybody but china does not actually stimulate growth and other places with the exception of major commodity countries. specifically because of concern of capital households, we had a different experience. they had to clamp down on currency controls. is that because the pboc has gotten more sophisticated? of thet a reflection confidence of the chinese in their own economy? you look at the reserves they decrease substantially and they tie in

catholic -- capital concerns. have never gone back and retraced the tightening of the capital controls. they are more concerned about continued outflows. given the economy that is open in terms of trade and exports, it is hard to totally clamp down. corporations, they want to diversify. ae equity market has done lot. there is concern of where people can actually invest. capital outflows are continuing and the question is can they tighten further? >> you are going to stay with us. thank you. you are sticking with us. keynesians.

they are facing challenges to their model. i'm new york, this is bloomberg.

>> this is bloomberg daybreak. urgingahn is shareholders to vote against the proposed $54 billion takeover of express scripts. cigna is overpaying for the benefit or. he said the company would be better off any multiyear agreement.

bloomberg has learned china poly group may make an offer for steinway musical instruments. it for's firm bought $520 million. a pair of media and tech moguls has raised a billion dollars's you can be entertained by waiting at your doctor's office. they have started new tv wishful offers short tv. that is your bloomberg business flash. onnie: tvjulie: there are ready is at my doctor's office. we have to move to economic. they believe the federal reserve has a role to play in correcting

. bloomberg fed reporter matt vogler wrote about this in the bloomberg markets. explain to us the sinking -- thinking behind these guys. phd's around the time we were seeing higher inflation and the fed control it. >> that is right. 15% inflation. crushed inflation, this is exactly the time when things new appointees to the fed board appointed by donald trump were getting their phd. marvin got his phd in 1990. came of age at a time when this was the central problem in

economics the community was trying to deal with. that is why they build up this orory of the last 30 years so that stems from that central fact. the problem is their main failure of free markets, inflation. right now it is it really a problem. >> their response would be inflation is not a problem until it is. so why are they wrong -- rolling this just around the corner? >> one of the things they have been saying, as we had this long .xpansion >> that is why we are setting up for an interesting year in 2019. they are going to be raising interest rates to that level they have called neutral. do they go past that next year? .hey are so convinced

the market is leaning toward no. you have these guys coming in who designed this theory in the first place into power. julie: the markets traditionally have not had a great amount of faith in the fed in terms of their inflation control pro s. do you think these guys are right? >> we are not concerned about inflation. if we look at the level of , since april 1996, we are are in a regime of low and stable inflation. we look at the various components, trim cpi, the sticky components, whether we're looking at global excess capacity in so many industries, looking at the union labor share

in manufacturing, across-the-board we don't think inflation is a problem that is going to suddenly rare its ugly head and the federal reserve board members were they need to tighten at a strong pace. our perspective goes back to when the fed first hike and chair yellen at the time said when the fed has been early, when the fed has said it to tighten before inflation, when they are slow and steady, fed tightening has not led to a procession. if we think of all the fed tightening cycles, the only time it has is when it was early, slow and steady. we believe the fed is going to be on that path. once they get to the target rates you referred to they will pause and look around and see what is going on. >> we are getting around the phillips curve here. are getting more wage increases.

what is different? why is this not 1974? >> if you look at the wage growth data, we haven't seen as strong of earnings growth. , servicesak it down is where the breakdown has been. it has not been as strong to pick up there. doing about wages what you would expect. we have had a shift away into services. some of those things going on in that sector have been kind of leading to questions about these presentinglly themselves at an interesting time when people are coming in. there is the issue of inequality. that is like this generations inflation scare. the interesting thing is it down to this idea of a natural rate of unemployment.

the question is how much give and take you think there can be around that number? is that a hard and fast number you have to react to now? low rates continue to foster a strong economy. manufacturing in the united states, as we get this back-and-forth, and is not as significant in the economy as it once was. thisthat change as we see tariff back-and-forth, as we see at economy continue to grow a relatively low rate? what is one of the consulting firms did a series called made in america, boston consulting group. they are fascinating. these reports are coming out three or four years ago. the idea manufacturing comes back to america is a theme that

predates president trump. it was brought on because of manufacturers. ining manufacturing in china the late 90's, early 2000's, the pricing then was different than today. everything from the price of oil to the price of land, to where the currency is. the competitive advantage china had in 2001 when they joined to where it is now is not the same. the other thing that has changed, people have realized the rest of the supply chain, after the tsunami in japan, corporations have changed. they like the manufacturing to be closer. there was a great example of water heaters that can be manufactured in california and they would be cheaper than actually importing them from

china. there has been some ship that the trend will continue. a great piece. corporate and household debt and what it may be saying but economic growth. that is next. .his is bloomberg ♪

>> some people have expressed concerns about the real leveraging of corporate's and household. it is too early to worry about a credit crisis derailing economic growth. sachs, we us, goldman are good at take two of your charts and put them together. there is real every jim. should we be worried about this?

>> when we look at the corporate side you do see an increase. it is important to look under the hood and dissect the different components. the biggest increase on the corporate side, financial corporate's. in 2 sectors. information technology and health care. informationabout technology we're looking at companies increasing leverage from low levels. should we be concerned that apple or microsoft has increase their debts? our answer is no. their interest coverage ratios in terms of how much cash flow they have is a very favorable and better than aggregate numbers in the s&p 500 broadly. , ite we see that increase is nothing to worry about. in 2013, theber

federal reserve governor at the aboutalked at a symposium overheating in the credit market. people have been concerned about overheating in the credit market for some time. we think levels on the corporate sector are fine. in the household sector they have deleverage significantly. savings rates are great. david: she is going to be staying with us. coming up, earnings season enters its final phase. this is bloomberg.

julie: this is bloomberg daybreak. alix steel is off today. around the globe, equity moves strengthening in the u.s.. we are awaiting big media

earnings that could push markets around and launching -- and watching headlines on trade. vacation but is on he has his twitter account of course. we have minor strengthening on the back of metals doing well in today's session. .ome strength in asia the shanghai composite having its best session in two years. outside stocks, interesting moves in the currency markets in particular. we have been watching the turkish lira. that represents a bit of a bounce for the lira off the record low versus the u.s. 1% and wedown 4/10 of are watching the chinese currency after substantial weakening as of late. familiar met with some

banks and told them to avoid heard mentality and momentum trading. we have seen a reversal. crude prices on the heels of gains. david: kaley has first word news. >> anybody doing business with do -- with iran will not business with the u.s. according to president trump. sanctions have kicked in. that was expected since president trump pulled out of the nuclear agreement. he is starting to target iran's oil industry. the president tweeted i am asking for world peace, nothing less. for the second year in a row california's battling the largest wildfire in its history. the system burned 75 homes and 440 square miles. it is the largest of 20 big

fires that are burning in the state. malaysia, -- the case against him has to do with the scandal state funds. he then restarted investigations into the fund. onbal news 24 hours a day air and on tictoc on twitter powered by 2700 journalists and analysts in 120 countries. this is bloomberg. david: entering the final phase of earnings season. for of five companies that reported thus far are surprised to the upside. s&p rally closer to its old highs. welcome now romaine bostick. i will start with a chart i have in my terminal. pointing to a record number of beats.

that depends on what they got it to come which is fair but even then they are doing pretty well. had 420 companies report so hard -- report so far. between of the gap analyst expectations and the company's report, the last emily are closer this was out of the recession and we have favorable comparables. there is a lot of skepticism in these numbers but i will point out revenue beads as been at and historically low number as well. it is near the top of the peak of where we have seen. there is some substance behind this. it is not all just accounting magic. julie: you see this during earnings season. stocks moving up and down. the s&p since earnings season began is up 2% which i am surprised about. i thought we were more flat.

>> earnings season has been good. there was some great day to put out at bloomberg intelligence, she was showing how the one day stock price move for these stocks after earnings, it was pretty strong. one and a half to 2% moving averages and for companies that feet on the bottom line and topline and bottom-line it was even greater than that. drift of wes the have seen in s&p and nasdaq. david: what is driving this earnings growth? one of the interesting charts was the extent to which technology was driving it. it surprised me. i thought tech was driving it more than it is. overall the one on the left, the faang.

those are the tech stocks. it is not that much lower actually. >> we think the hype about that whichever basket, one, or the information technology sector, if one looks at the returns as well as earnings, and takes out those components both earnings have been strong as well as returns. it is a myth that without the faang stocks, earnings have been in the. for the last couple of quarters we have had such broad-based earnings across all sectors. it is the underlying strength excluding the tax cut benefits. we think that is one of the key equity market. when you are in an economic growth environment, as far as we can see, we have low odds since

the recession. you have a good earnings profile. julie: growth has been good but but can it last? it remains something that i know has been hotly debated. you have 4.1%. is goingt believe that to continue. isn't it the same with earnings? interesting, earnings have it come down for the next two quarters. if you look to q3 they are growth,g on average 21% which is slightly down from the growth we had year-over-year. when you going to q4 it is something like 19 or 18%. you are not talking about a huge job -- drop off into 2019. one thing we did see, the biggest gaps is not among tech. it was health care.

and industrials. diverse set of beads than what we saw if you go back three or four quarters when it was all the big tech names driving this. it is a different mixed and we are getting. with the reason for that is we will see. cut's,apart from tax earnings per share, if you have fewer shares your earnings go up. you have a chart in your update that shows buybacks are at record levels. how much of this learning support is companies using money through tax cut or otherwise to buy back shares? are two concepts. what does it do for earnings per share improvement, and what does it do in terms of general support for the equity market? it has helped with earnings per thee but if you look at

increase of earnings since the crisis, to attribute it to five fax is incorrect. the average earnings growth might be 1%. have offset huge outflows, one of the most surprising things for us is how much money since this crisis has gone into bonds, the lowest returning asset class. how much money has gone out of u.s. equities, which is then the best performing asset class? into the wrong places rather than the right asset classes. something else that struck me is volatility. i have a chart looking at this. i can't take credit on this. says the reports of the short

fall trade have been exaggerated. were looking at etf's that track volatility. , are weat spike we saw back to being complacent? strong picturea for earnings growth that will continue but is the market under appreciating risks? earlypeaked at 50 in february. now back to the levels we saw before in 2017. if we think about growth what should drive volatility? policy uncertainty. if you look at the skew in cboe you can see uncertainty there at high levels. showing theindex is markets are concerned. that the picture from the vix does not completely convey the amount of concerns people have

about risk. our view is the recession is a low probability event. if the odds of a recession are the vixpercent in fact is correctly pricing in limited risks. the risk of military engagement with iran is high. it is not zero. is it 20, 30%? yes. recommend client stay invested. being withk you for us. coming up, disney reports results. how it is trend to get a acre piece of the streaming market, next. this is bloomberg. ♪

>> this is bloomberg daybreak. later, the cumberland advisors chairman. now two-year your boom -- bloomberg business flash. the biggest american aluminum maker asking for really from tariffs that were meant to help it. the company once a form of the lightweight metal unavailable from u.s. producers. they are using everything from coca-cola cans to boeing

jetliners. cello plans to buy a mortgage lender. the home listings website operator is acquiring mortgage lenders of america. offering mortgages is aimed at streamlining the process for people who buy a zillow owned home. russian oil companies have hit a sweet spot. postedgest oil producer record cash flow in the second quarter. the company reported its highest net income in five years. shares are up 45%. that is your bloomberg's nest flash. david: discovery came out with the company missing estimates. next up, disney reporting after the bell. here are the things we will be looking for the media networks, espn, given how important they are to driving earnings.

parks, resorts, and the movie studio which has had to step in with what espn is flagging on. 21st century fox update, they are buying those assets. what is bob iger going to do with those? are they going to up their bid for skylar diggins comcast? porter bid who, knows the media world. let's talk about what you are expecting from espn? growth make up for what they are diminishing out of movies? >> espn plus is going to be light right now because they did not have any of the big sporting events of this quarter. ,he world cup, the golf open they did not did in those rights have become if seemly expensive. difficultg to be more

to generate revenue and profits. david: but the movie studio. they're making a fortune. >> disney owns hollywood. 35% of the box office in the u.s.. the next is universal with 14%. disney is king of hollywood. julie: it is given them the luxury of time if nothing else to deal with the espn issue. are the attacking it? slow ander has been laggard lay in terms of appreciating the cord cutting going on, in cable. 33 million cord cutters in the last 12 months versus 27 a year ago. it is accelerating. disney is doing the right thing going over the top and direct to consumer. julie: do you think we will get some details on that? >> not a lot.

they are going to say we are waiting for european approval of assets. everyone is focusing on the disney streaming service that will probably take off the second half of 2019. david: how important are they to that? spending closer to $13 billion this year. more next year. , high has that content quality content that is going to make the disney streaming service a viable competitor to netflix. what is important, amazon is coming in. google is coming in. probably apple. it is not going to be an easy field for disney to navigate. julie: where do sky fit into this? say skyger continues to is the crown jewel of the fox assets.

gohink he is still going to up against comcast. julie: why is it so important? >> sky is the salvation of espn. instantly global. they have european sports rights. the interesting story, it is going to command 34-30 $5 billion when liver gets it, that is half of what disney paid for the fox entertainment assets. it is a pricey commodity. david: sky is a shortcut to get to the right to that. you still have to pay those bills. >> exactly. sky is priced for the premier league in europe, half of their market cap. >> these companies, not just disney but comcast, they have

little choice. it came from our colleague, viewing patterns of television across age groups. the old guys, may at the top watching tv. .ook at the red line as you get younger and younger you watch less and less television. you have to go over the top. >> pew research came out earlier this week with a survey that , 14-21, of teenagers ony are 100% of their lives their mobile streaming service. that is where the future is. david: that is my son. marketou are not in that , you are out of business. julie: the cost we were talking about for this, it is almost no object. does disney come up against that?

>> disney has the greatest treasure trove of content that has ever been assembled. when you add in the fox assets it is dynamite. the problem is it is not a nice can find a market the way cable used to be. it is a fragmented competitive market. one of the most interesting things, disney is shut out of china. , it wastest movie disapproved and has no distribution in china. bob iger has to go into an earnings call and show that it is growing. netflix doesn't have that. it doesn't matter if we're making money or not. how can you compete in that world? >> good question. the problem bob iger has is twofold. he has a lot of competition. he has to integrate.

disney and fox assets into the disney channel, espn and hulu. hulu is the sleeper. it has 20 million subscribers. it is losing a billion dollars a year but it is one to start making money unlike netflix. julie: another company out after why isn't snap doing better? >> instagram. the salvation of facebook. growing a billion dollars a year in profits. the dynamite service for teens. it is going to steal. in -- snap, you focus your camera on a product, and it cliques into amazon and you can buy it off your telephone. it is going to be a millisecond before instagram does the same thing. david: everything snap has done.

quick snap has to start earning money. the report is when to show a big loss. bigger than last year. david: thank you. coming up the president trump set to meet with a dozen ceos at his new jersey resort today. he begins to shape his economic message into the midterm elections. more on what we're watching, next. in charge shown using g tv on your terminal. browse recent charts to catch up on key announcements and save charts you want for future reference. this is bloomberg. ♪

his resort. it is interesting whom he has asked. mike manley, the new ceo. the outgoing ceo -- ceo of coke pepsi. this is to figure what he is saying about the economy in the midterms. isn't it late for that? >> these companies are affected negatively by tariffs. if you look at boeing and fiat, all of them use aluminum. as we talk about ceo interactions, alcoa has looked for waivers for the tariffs because not only do they produce

globally. when president trump is sitting down with ceos, if he is expecting to hear nothing but praise you have to wonder what that meeting is going to be like. david: they were supposed to protect alcoa. now they are saying they heard us. >> so few of these big industrial companies anymore are exclusively u.s. focused. even in an aluminum company makes its lumen am not in the united states. >> you might get a waiver. >> i don't know if the alcoa ceo is on the list. up, the research president and founder joining now in new york. this is bloomberg.

coming up, the lira hitting a record low. .0 year yields breaking 20% restoring iranian sanctions. president trump saying anyone doing business with iran won't be doing business with america. foreign exchange reserves rising despite a weakening currency and worsening outlook for exports. ahead of the market open, byures for 5.2% -- firmer .2%. upo-dollar breaching 116 and .4%. the main story of the last 24 hours in foreign exchange. talk of an imf bailout for turkey. the lira plummeting to a record low. investors weighing in on an emerging crisis.