francine: tesla's stocks sore as elon musk says he is considering taking the car off the market. weathering a trade storm. chinese exports raise faster than expected. duties on another $16 billion of we'll speak with prudential's chief executive after their numbers break. francine: good morning, everyone. welcome to bloomberg

"surveillance". these are your markets now. a little bit of pressure across the board when it comes to the stoxx europe 600. a little bit of pressure. an escalation of the trade war. also earnings that disappointed investors in certain cases. when it comes to trade, as we understand, actually the chinese little bit. o go a we're looking at the pairing with the u.s. dollar. let's take a look at our corporate stories. glencore shares sinking after missing analyst estimates. i think it was down 4% but now gaining 0.2%. as we mentioned, later on in the program, we speak with mike wells, the chief executive of prudential. the earnings will be released at 9:30 and he will be with us

shortly after that. let's get to the bloomberg first word news. reporter: the u.s. said it would begin imposing 25% duties on another $16 billion worth of chinese imports in two weeks. they will begin collecting duties on 279 products, down from 284 on the initial list. it will be the second time in this past month despite complaints by american companies that such moves will raise business costs and eventually consumer prices. chinese exports have grown faster than expected while imports surge. demand continues to rise despite the uncertainty of trade relations with the u.s. imports climbed 27.3% leaving a trade surplus of $28 billion.

u.s. president donald trump said he will make an announcement next week that will slash prescription drug prices. he made the comments at his golf club in new jersey but didn't further explain what actions he ould take. president trump: prices are too high. we are announcing something that will get that down substantially. reporter: and turkish officials are expected to hold their first meetings with their american counterpart in washington today. this call comes as speculation s rising that they may need to control capital control as the lira and other turkish assets fall. powered by more than 2700

journalists and analysts in more than 120 countries. ms. bloomberg. francine: thank you so much. elon musk is toying with an extreme measure to silence tesla's critics. he talked about taking the car company private at $h20 a share which would amount to an $82 billion valuation. shares closed at the highest since september. joining us now is alex who writes about tech. first of all, how feasible is it that he can take it quiet? how much money will he need and who'll the backers be? >> if you are a tesla shareholder you will still be able to retain your stock. how many people will be able to

retain that position. without it, he probably needs to raise $50 billion. that would be the biggest leveraged buyout of all team. it would probably be $6 billion or $7 billion a year to just service it. it is probably going to -- $3.5 billion, even if it manages to go positive which would be a miracle. there may be something else going on behind the scenes. the announcement came after the financial times broke news the saudis bought a stake. francine: george, give us a sense of -- do they need a big angel investor and would it come from sovereign wealth funds in the middle east? >> yes, i think it is the right thing for tesla to do, going private.

the individual shareholder is taking issue with the capital market and the way it is treating him. as we have seen from some of the earnings calls, clearly have no respect for sellers or analysts. then going private would be the sensible thing to do. you're then in control of the situation. you're not answering to wall street. in terms of whether l they need a strategic investor? difficult to say at this point in time but given the numbers involved, a strategic investor seems a reasonable assumption. francine: tesla is doing amazing things. they also have execution problems and is also burning through cash. is the problem different if they are private? >> look, those problems obviously don't go away if you're private. however, to the extent the

investor who is take part in this are supporting you for the long-term vision, there is not the near term pressure to meet quarterly expectations when it comes to cash flow that is placed on tesla as a public company. francine: alex, this is a pretty wild tweet. i've never seen anything it. are there going to be investigations because he moved to share price. is this a joke, elon musk making fun of twitter? >> he gave himself some wiggle room. he said he is considering taking tesla private. didn't say it is definitely going to happen. if there was going to be an investigation, the tesla backers knew nothing about this. the way that the f.c.c. regulation is set up, you have to warn the market in advance and say i'm going to tweet thing something. will there be a twitter

announcement? there is clearly some space there to look at. whether they will remains to be seen. it will be a hell of a movement if they did. francine: are there going to be investigations? this goes to what elon musk likes to do. what does it mean for the rest? >> i think in terms of the tweet similarly from a disclosure perspective, this is not my area of expertise but i believe it is unconventional. with 22 million followers, you know, it is in the public domain when he tweets and tesla does point to twitter in its filings. clearly if there is no substance to this, then serious questions are going to be asked given the reaction of the share price as to what the intention was. but i think that there is

substance to what he is suggesting. some of the specifics for xample the price provide suggests this wasn't just a tweet that he made randomly at some point yesterday. francine: george, how many investors do you think would stick with tesla if it was private? he said the reason for doing all of this is creating the environment for tesla to operate best. they would have less checks and balances. >> right. look, if we look for the shareholder base, clearly 20% is elon musk himself. that obviously stays where it is. we then look at the next four to five significant holders. you're probably looking at something in the region of elon's 20% ncluding

stake. i would expect them to keep a large percentage of their holdings in the private entity. these largest shareholders in tesla clearly believe in tesla's ability to execute long-term, take significant in what is a large totally addressable market and as a result i don't think they would step back at this point as model 3 is launched. francine: let me briefly make a point to our viewers and listeners. looking at the options activity in august for tesla. alex, this would be the largest leveraged buyout in history. do they have a profile where they could get away with it? >> i don't know. the fact is the market clearly doesn't seem to think so. we know the price is $h20.

i'm not better qualified in the market to say whether that is possible or not. those numbers speak for themselves. francine: thank you. stay with "surveillance". we're just getting some breaking news. the pound the lowest since 2017. slipping to the lowest level against the euro in almost nine months. there seems to be concern they could lose the e.u. up next we talk pound and also talk trade war as it escalates. the u.s. says it will slap 25% tariffs on more chinese goods in two months. beijing vows to strike back. and viewing the gender pay gap. achieving parity in the workplace.

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francine: economics, finance, this is bloomberg "surveillance". i'm francine lacqua here in london. let's get straight to the bloomberg business flash in new york city. reporter: the biggest ever half-year profit for glencore. came in at 8.27 billion dollars up 23% from a year ago though that is slightly below analyst estimates. the world's biggest commodity trader said it will continue to focus on returning money to shareholders but it did not increase interim dividend or expand an existing buy-back at a time when buyers are paying out

more to investors. disney's c.e.o. has given an upbeat view of his plans for a video streaming service and the $71 billion buyout of fox entertainment assets even after earnings missed estimates due to film writeoffs. bob iger said how he sees the deal. >> fox also has a significant stake in sky. the most successful pay television company in europe. the addition of these assets will enhance our position as a global entertainment company with excellent production businesses in markets around the world. >> they completed the largest public offering in two years xaouming. repeat of

it capped the market value at about $28 billion u.s. dollars. that is almost 20% below its valuation they were hoping for as recently as a couple of weeks ago. papa john's sales fell 6.1% in its latest quarter. weaker than analyst estimates and sent the stock down as much as 12% in late trading. founder and major shareholder issued a statement saying history shows the company performs better with me involved and declines when i step away. francine? francine: thank you so much, taylor. let's talk trade and tariffs. the u.s. will impose 25% duties on an additional $16 billion this chinese imports in two

weeks time. exports grew faster than expected while imports surged showing both domestic and international demand. it marks the first month of u.s. tariffs from $34 billion of chinese good making an early impact on the trade war. et's get to our chief asia economics correspondent. is the dat good! or worrying? >> i think pretty robust all things considered. it shows the export side of things is good. imports were strong although here is a view there of higher energy prices. when economists look at this, even though it captured the july month, the real gain is just

starting and will play out over the coming months. the next $16 billion of good targetted. we have $200 billion with. a counterthreat of more tariffs on u.s. good. there is a feeling as the months go by we will get a much clearer picture on how the trade war is affecting the chinese only u.s. economy. it is not quite visible yet. francine: how bad can it get? exports grew faster than expected. for the moment domestic and international demand is there. how much more can it take? >> well, i think the critical thing will be to see whether or not there is only kind of a resolution in the near term. that offsets some of the worst kind of threats made. if we get to a point where the u.s. imposes tariffs of up to 25% on as much as 200 billion

chinese good or china retaliates then that will have a material impact. maybe a half a percentage point of growth in china or more. confidence and sentiment on business plans to expand and raise wages. that's harder to measure. if on the other hand we reach some kind of negotiation of sorts whereby the worst of these tariffs are documented, that would be a clear positive. the mood is somewhat downbeat. i don't think many are expecting much the. francine: thank you. should investors be positioning as the trade war ramps up?

thank you both for joining us. when you look at china, should i worry after they are trying to stabilize an economy that it will also be hit by the tariffs? derisked funds we have and diversified. one of the reasons it is specifically china, you think of the conflict between the u.s. and nafta, there is sort of a kiss and make up with mexico. there is increasing probability there is a hug-kiss and make up with the e.u. with china the conflict is likely to keep going. come september, another $200 billion is in play, probably 25%. actually disturbance is quite a lot. if you look at u.s. growth data who has seen a pretty strong first half. a lot as companies try export

over the tariffs. strong exports probably as well. people trying to move ahead of the tariffs. come september, come q 4, the u.s. will continue to push. we still have mr. navarro really pushing for an anti- china stance to counter the china 2025 program. francine: this does seem to be a tit for tat situation. is the higher risk that it actually escalates? >> it certainly looks that way. i'm not surprised with how belligerent the chinese have been. the e.u. has a long history of putting police cars above economics whereas china the underlying priority of any chinese leader and the communist party machine is to keep the communist party in power. you need some broad bases disparity for that to happen. the reason we have this

situation is because it is a leadoff if you like. you need to give your enemy an escape route. they will fight back hard and your battle will be more difficult. they need to create a climbdown for trump and jinping so they can both save face. respect to economics we have to be careful. you have margins of companies. these things don't happen instantly. they don't necessarily have a huge impact. we may see the impact elsewhere. if people see the price of things they have to consume going up. very complicated analysis. francine: if you look at some of the imports for china, pushing up energy prices which narrowed the trade balance, what happens to each one from now on? does it become a weapon? if we get into a proper currency war, what does it mean for the trade tension escalation?

>> we have already seen it weaken by 9% since april. the review probably stabilizes here. to the extent it reaches and breaches a psychological 7% level may cause broader concerns around china. the pboc is going to try to lean on locals to slow down the path of the ro minute bi. what you pointed out around imports, it is difficult to isolate a victim of a trade war. these days global supply chains are intralinked. to an extent the u.s. is trying to hit china, that is probably going to purke late. 're talking about 3%, 4% c.p.i. increases. julie: we have a very nice bloomberg story. china is focused on the yuan

stability and they are meeting with the big banks today. this is pboc. how much should they be worried? >> everything is about per segsseppings. there is going to be more persuasion trying to lean on the banks that made an announcement yet trying to slow down the depreciation. they are watching the reanyone bi. the reserves dipping below 3 trillion in other psychological numbers. it is going to take a time for us to get to seven or dip below three trillion. if the u.s. tariffs continue to ramp up. probably gradually to offset the tariffs. francine: for fixed income investors it means lower returns.

would you buy? >> not really anything to do with trade wars but the macro environment to us it is screaming out that's what we're likely to be facing because of the changing nature of policy. that means monetary policy is ebbing away. we have some fiscal stimulus coming in in the u.s. that is an incredible size. it looks like it should be good for risky assets because compless doing as well as they have in a long while. actually there are a lot of liquidity driven investments and i think we're going to see volatility. i think it is quite difficult for an investor to find classes which look particularly attractive. there is a number of ways to offset that. francine: we have this weakness in the pound. this is because of uncertainty about whether we get a hard brexit are you short on the

pound at this snoint > no, i'm long on the pound. i think a good deal brexit is necessary to get a good deal. you don't build nuclear weapons because you want to use them. you build them so you don't have to use them. truly no deal is unlikely. what we're talking about is an all encompassing deal. no free trade deal. different from having customs arrangements. i believe we'll get somewhere more positive. francine: stay with us. up next, bottom of the debt pile. we talk turkey. this is bloomberg. ♪ loomberg. ♪ retail.

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on. wrigley is moving from chewing gum to backing wellness, a company that makes medical marijuana. bloomberg.com is all about elon musk as he moves at taking tesla private. and the take over avenue the arsenal football club. purr is building to back the second brexit referendum. now we're getting without a doubt the interview is with the prudential chief executive. we're just waiting for the prudential earnings to break as we speak. i know we want to ask him about possible speculation in consolidation in the sector. that side one of the big things that actually we were looking at. this is the latest. the dividends coming up at 15.6. the chief executive saying they have made a good start to 2018. typically what people want to know about the operating profits for the first half, ifra is

beating estimates at 2.4 instead of 2.2 we were expecting. prudential remains on track. he exexternal net is 3.5 billion. that is something they will be pretty pleased about it. we saw competitors having to report some outflows. we'll put all of those questions and put many more to the chief executive mike wells. it is gaining. this is a little bit up. they were down in the market mayhem because of market volatility and future concern about what the trade will bring. currently bucking the trend after their earnings. we'll speak to the chief five or six mince or so.

let's get to bloomberg news. taylor: the u.s. it will begin imposing 25% duties. they will begin collecting duties on 279 product lines down from 284 items on the nrble ist. it will be the second time in this past month despite complaints by american companies that such moves will raise business costs and eventually consumer prices. chinese exports have grown faster than expected while imports surge. demand continues to rise despite the uncertainty of trade relations with the u.s. exports rose 12.2% in july in dollar terms from a year earlier. imports climbed 27.3% leaving a trade surplus of $28 billion. tesla soared yesterday after

elon musk said he is considering taking company private. that would value the firm at $82 billion. the co-founder and c.e.o. said i'm trying to accomplish an utcome where tesla can operate with as little distraction as possible. it would be the largest leveraged buyout in history. global news 24 hours a day on air and attic tock on twitter -- tictoc on twitter. this is bloomberg. thank you so much. turkey has replaced argentina as the worst performer in local currency bonds this year. they have lost about 39% in dollar terms compared to argentina's 35%.

that is according to bloomberg's indices. could the president erdogan be forced to back down on some of his firmly held economic policies? you look at emerging markets. not sure what to do with turkey. there is not much appetite in the leadership of turkey to back down on anything that the president has said and investors are freaked out. >> there is two camps out there. the bulls are saying the i.m.f. and the bears are saying capital controls. neither is likely. i would say capital control is more likely than mitch. -- i.m.f. the reason the currency is performing so poorly is there are a lot of questions around their policy mix. this is a country that is

pursuing high growth policy while it has -- a lot of vulnerabilities and yet you look atsur vays and 65% of the population believes turkish weakness is due to conspiracy against turkey by the west. perhaps the leadership is not a concern with what is going on in turkey. you look at it is going to hurt their corporates and their banks. concern about their path of travel in the country. francine: depreciation. i think it is standard deviation. we're waiting for any u.s.-turkey developments. it has an added bonus in geopolitical concerns. >> there are obviously some weaknesses. most of those at the very least are connected to the external sector. the dynamic that concerns me the most is the self fulfilling nature of this and what that means for the inflation and the

necessary nominal depreciation. when you have 15% to 20% inflation and the currency is weakening 2% to 3% every day, that is a self-fulfilling prophesy and very much needs intervention to stem that. instead of following a fairly standard play book, they are not. they are ripping that up. doing things in an inconsistent fashion. the central bank still behaves like it is under some influence from politicians. that really does concern emerging market investors. >> to the point about geopolitics, we have to remember turkey matters for europe probably more than the u.s. which is why president trump feels he can escalate this conflict are iran via turkey. turkey has the most refugees in the world. looking at the political environment in europe, no one is

looking, would be will be to accommodate them. europe is going to be more willing to help turkey than the u.s. francine: what will it take for you to increase your position in turkey? a simple central bank is independent and probably will not be enough at this point. it is too early to make any sort of sizable bets on turkish assets. we're waiting to understand better their reaction function. they have not had much of a hiking cycle. they have always had an emergency hike and then cut rates back down. people waiting for an emergency hike, understanding better what is going to be the policy mix going forward before it can say we're willing to take a stab and get bullish on turkish assets. francine: thank you both for joining us. up next, we'll dig into those numbers from prudential. it is more than insurance but also an investment company. the chief executive mike wells joins us here for an exclusive

interview. that is next. don't miss it, and this is bloomberg. ♪

francine: this is bloomberg "surveillance". i'm francine lacqua in london. let's get straight to the bloomberg business flash. aylor? taylor: elon musk said he is considering taking tesla private. he said i'm trying to accomplish an outcome where tesla can operate at its best free from distraction and short-term thinking as possible. however the shares failed to reach the $h20 indicating market

skepticism that he can pull off what would be the largest leveraged buyout in history. glencore has posted its largest profit. billion.n at $2.87 up 20% from a year ago but was slightly below analyst stiment estimates. they will consider working on cutting debt and returning money to shareholders but it did not increase dividends. at a time when rivals are paying out more to investors. disney's c.e.o. has given an upbeat view of his plans for a video streaming service and the $71 billion buyout of fox entertainment assets even after earnings missed estimates due to film writeoffs. bob iger said how he sees the deal enhancing the company's global offering.

>> fox also has a significant stake in sky. the most successful pay television company in europe. the addition of these assets will enhance our position as a global entertainment company with excellent production and distribution businesses in markets around the world. taylor: that's your bloomberg business flash. francine? francine: thank you. 2.4 umber came in at billion pounds. joining us now is prudential chief executive, mike wells. always great to speak to you. the asian part of business is doing particularly well. what have you gotten right there? mike: i think the pivot to help in protection. the demand in asia for core medical care, the out of pocket expense, i'm sure you have seen many times something like 40 cents of every dollar versus 9

centses in the u.k. 70% of new business profits are derived if that new, from that focus. that has been tremendous. over 90% of that is regular premium. clients stay with us year after year and 95% of the existing clients renewed this year. this first half. very, very healthy client relationship, some 15 million clients across a dozen markets. leadership positions. the wealth business is doing well doing what we hope it to do now. francine: there is a lot of m&a speculation in insurance. would you be a seller? one tried to buy the business? mike: no. this first half of the year, politically and currency-wise and things, none of it diminishes the structural demand in europe. a million asians a month enter the workforce.

our sweet spot is clients entering in the middle class. the structural opportunities in asia are ahead of us. 12% of asian households own mutual fund-type products. comes up 13%. first half of the year. good progress. we're actually -- investors are very bullish on asia. francine: do you actually want to expand in china? mike: we are expanding in china. i was just there again last week. and china -- changed last year its regulatory regime. they want the ininsurers away from the bank space. we have licenses for about 70% of china's population. we have to build into this footprint. market share we're still small but it is a very high-tech, very mobile based.

95% of our transactions are in china. i know you travel there. it is an economy that has created a new era of currency. the acceptance rate is fantastic. we're a part of that. it is very good for our business. francine: at the moment you own 50% of the -- would you increase it? mike: the law would allow us to go to 51. it is a very good business. it is growing rapidly. we both like it. they are a very good partner. i don't think i would want to navigate china with 100% ownership. it is having someone with their expertise, their relationships and scope and scale, and brand is hugely helpful entering new markets. they have been a good partner. that business is growing very, very well. we're happy with it. francine: over all your earnings were good. no real surprises. we're trying to figure out who would then regulate your asia

business after the demerger. it has gone to hong kong. why over singapore was hong kong chosen? mike: the way the process works, the p.r.a., the bank of england will regulate until the merger. prudential in the u.k.. the regulatory college, the we maining regulators then select who the next regulator is. they have selected hong kong. that is a process where we have input but we don't have a vote in and they are all collectively -- including singapore, in their desires for hong kong and how they will regulate us. when a global business like ours is every local regulatory regime matters and those are stacked up on top of each other. you basically hold double-a capital. -- that 's supervisor,

becomes the over all supervisor recovery. francine: what do you with the extra capital? mike: you keep it in the business. it is a good fit for our u.k. business. not a particular good fit for our u.s. or asian businesses. the local regulatory regimes matter more. we want to keep well capitalized strong businesses around the group. we're investing heavily in new sales and technology and new capabilities. you saw us buy 55% of an asset manager in thailand. bab lon health took their technology across to china. there is a lot of new things we're doing. that is where the capital is going. you saw an 8% increase in our dividend. our shareholders are getting some of it. it is allocated correctly.

francine: talk to me about net inflows. a little bit weaker than some other parts of the business. is it tough? what are you getting right and is it tough being an asset manager in europe? mike: 3.4 billion of inflows which effective sli managed by i.n.g. i think it is the funds and the it is ecord and this was in the balance-risk categories in fund management. total return. well allocated funds. high dividend stock. total return funds. they have good track records. they are the more conservative places for capital. consumers in europe just like the u.s. are more responsible for their retirement and they are not looking to be exposed to a -- an argentinean futures

fund. they want the return that is reasonable for the duration they need to protect their retirement. i think it is unique for both. francine: is it tough managing money in this kind of environment? we have trade wars. it is quite a tough environment compared to what it was six years ago. mike: it is. i don't think there is ever an easy period to manage money. if it is easy, consumers think they don't need you. if it is difficult, it is very difficult. particularly on the debt side. they do all the failure and don't get credit for anything unless something goes wrong. the teams are currently working hard. the allocation of the funds is key. maintaining duration on credit and quality of exposure you're willing to take at this pointed of the cycle. i think the strength over the two brands we have in the u.k., people want trusted brands and i

think that matters after 170-plus years to people. hat drives flows candidly. francine: will costs be demerging. when will it be offset by savings? mike: it is almost -- i would say we haven't disclosed completely. keep in mind, we're not raising equity. francine: you're not raising capital? mike: no. you have two poggets going on. the merger and upgrading their technology and that gets some cost savings and new capabilities. you see that. we held out 145 million pounds of savings by 2022. we're on track for that. the technology improvement. trading for the asset managers. you're seeing integration in the management teams and faster product to market. a lot of distribution alignment. all sorts of things like that. that gets you some of those

savings. some of it earlier. it is about building what we think will be a national champion. that has to be a cost efficient competitive priced operation platform and everything would suggest it is on track to do that. francine: so you don't want to give a time because otherwise it is too much pressure? mike: no, no. some of the stuff comes in at various stages. there is 200 work streams and they are all basically on track. there is no lack of pressure on the teams that are depoifpblgt there is a couple hundred people focused on that. you see that in the strength of the results and the breadth of the results. i think it gives us a little room with veppedors and things for timing and cost. it is going well. there is no barriers. the key almosts are the transfer and liabilities transfering to roth. that is affecting the earnings. those earnings numbers of of the u.k. are three months of that.

the asset management, operating earnings up 10%. operating earnings per share up 17. we discussed this before we came on line. they have a strong standalone company. get the regulatory piece done. this will be ready to go. francine: the earnings are good but something that is out of your control is world growth. do you worry about it given eaverpbing that we hear here on a daily basis? mike: no. the political climate affects how long it takes to make a decision. we have the wealthiest market in the united states with insurance and wealth management. we have the fastest growing wealth and insurance market in asia and leadership positions. nine of 12 markets were one, two, three. the only two players in that and then the most underserved market, africa, we're up to five

countries there. we're developing capability that is unique. i think we have the right footprint to manage it as a portfolio. i don't think we'll get even growth across markets. we never seem to. there is always some issues somewhere. the products, channels, countries, risk adjusted for their shareholders. i think we have another six months of doing that. francine: thanks so much. now the latest episode of leaders with lacqua airs to want. i spoke with the departing chief executive of lloyds of london and what lloyds is doing to fix the gender pay gagne gap. in the u.k. having to report the gender pay gap has highlighted the financial ssts sector. shares are not so good. getting that data out will help us realize where we are and i eel do something about it.

it is 27.7%. that means that is a sign of the lack of females in senior positions. we have to do a much better job. not necessarily of enticing them in in the first place but keeping women. giving them the confidence to go for those senior roles. provide them with the sponsorship. the mentorship that is going to be so important. i know how its affected me. i know that i needed that extra boost, that extra hp, that helping hand. that's why i would like to do as much as i can to really create -- an increasing environment where women feel they can do just as well as men. the industry, the insurance industry still has an old school feel about it. people drinking and smoking in pubs at lunchtime. is that the case? >> we tried to move on from that. in fact, many firms have moved on now.

so that is definitely changing. but we still have a lot of behaviors that two on that are not acceptable. we recently launched an increasive behaviors pledge. two of us got together. another female leader. we were sitting around one day and we said actually there is some behaviors that happen really at the ground level when people are interacting that are not necessarily appropriate. francine: like what? >> there might be sexist comments to women. there might be racist comments or comments rude about the lgbt community. often people don't know they are being hurtful or excluding somebody from a conversation. maybe someone gets so shocked they shut up and don't join in. a lot of these behaviors are not necessarily known. they might be done unconsciously. we said, we have to talk to groups about this and highlight this. we have now got at least 50

signatures. of 50 c.e.o.'s of 50 insurance firms. most of them are men who signed up for this to say let's address this behavior and make it more inclusive. say we will not tolerate bad behavior. francine: you can watch the full episode tonight at 9:30 p.m. in new york. 7:30 p.m. in london tomorrow. bloomberg "surveillance" continues in the next hour. tom keene joins me out of new york. we'll talk with the chief executive of hong kong exchanges and clearing. that is coming up. this is bloomberg. ♪ ♪ two, down and back up.

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amid growing concerns that the u.k. could leave the e.u. with no future for economic tice. good morning, everyone. this is bloomberg "surveillance." i'm francine lacqua in london. tom keene in new york. we have quite a lot of stories. we'll look at euro politics in the u.s. om: sterling is interesting.

here is taylor riggs. taylor: the u.s. is escalating the trade war with china. the government said it will start imposing 25% duties. two weeks from now. the new list includes products ch as motorcycles, steam turbines and railway cars. the trade war doesn't seem to have had an impact on china yet. exports grew faster than expected in july. imports surged. in ohio, a republican candidate backed by president trump holds a narrow lead in the special election. he has a little more than a 1,700 vote lead over o'connor. several how the provisional ballots have to be counted. it is seen as a test of the president's influence ahead of the november election. elon musk would have to pull off the largest leverage buyout in history to take tesla private.

his tweets came just after a report that saudi had a stake in tesla worth about $2 billion. and disney's c.e.o. bob iger is looking past film writeoffs that led the company to miss uarterly earnings estimates. he said the new espn online service that costs $5 a month is attracting for than than forecast. powered by more than 2700 jourm estes and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. tom: it is -- out there. i thought we would get to the

bloomberg -- which tell a story. a weaker euro. strange movements. i'm going to leave it there with the vix well under 11. francine: i'm seeing a couple of things out there in the markets. the yuan steadying. tom: we showed this chart a lot in february with the blowup. let's go other to the vix now. this is the s&p volatility index. 2008, the testivity of fear out here. the vix is 70. you don't see it a lot on the chart. the daily move is up to the 50 level. we come right back down and

really begin to nudge that 10 level with 9.41 being the low mark there as well. francine? francine: i have a chart on pound which i will bring to you shortly. let's gets on to tesla. about k is talking taking the car maker private at $h20 a share, a price he claims would amount to an $82 billion evaluation. look at my chart. this is why this chart matters. it is also looking at options. could tesla raise the money . eded for a buy great to have you on the program. what is your main concern for tesla?

a huge leverage buyout. who'll back it? >> i'm wondering about this tweet from yesterday. it is not the usual way of communication. if he wants to buy back 75%, it means i guess an amount of more than $50 billion, whatever the amount. to me, it sounds like a typical elon musk marketing gag which is not very serious. especially the weight of communication is not that serious maybe it is a legal investigation. . we will see but it is really strange thing. francine: it is something we have not really seen in the past so we will have to look at whether the fcc looks into it. it markets do not believe

and rocked wall street. this was on the back of the saudi sovereign wealth fund taking a chance. will we see more from the middle east taking a piece of tesla? pardon? francine: would you see a sovereign wealth fund take a bigger chunk out of tesla? frank: it is really dangerous to 10% or 20% in tesla because you could burn a lot of money. elon makes a red number still. good fourth quarter but he did not reach his goals. he was not able to produce 500,000 cars, what he actually promised. if you look at the numbers of production or the deliveries of the model s and model x, they

are shrinking a little bit, maybe because he tried to push them all. he often will not reach his numbers. it is difficult to get an investor. tom: which ratio would you use to bail the company? i have seen for different numbers, but the basic idea is above $70 billion is one working number. what ratio would you use to analyze this nonprofitable company? frank: that is a good question. it is difficult to talk about $70os, but more than billion is an enormous amount. losses,mpany that makes record losses this year -- i think the amount of less than $40 billion would be realistic. i think everybody should wait for the third quarter, wait if elon can realize his promises

and maybe then we are a step forward. black numbers,s it is good but i don't expect them to be back in the black in october or november. francine: regardless on whether they can have the investments or not, it makes sense for a company like tesla, doesn't it make sense for a company led by elon musk to be private? frank: it can make sense but it is really difficult. he does not have the money to buy back the shares. he needs to buy back the money or needs new investors. investors what information and this is what elon won't give. elon is a marketing men. an. he makes interesting tweets, but he is not a man who gives answers when questioned. we have seen that in the second quarter.

it is not common what he is doing and maybe -- he has good ideas but i think it is prudent to realize his ideas and to have numbers for tesla. tom: thank you for the briefing this morning. frank. we now turn to someone who has driven a tesla. alex webb is with us. the queen victoria station headquarters yesterday, mr. webb falling off the chair. let me ask you an open question -- let me go to a wonderful dig on where i am on this and we will get alex's thought. benjamin bayne with a fabulous quick take last night. regulators may want to examine regulation but funding for the move has been security --. down down. investor support is confirmed. bankers close to tesla were said to have no knowledge of plans for taking the company private.

ok, i'm dazzled. let me ask you an open question, where does this go in terms of disclosure? tesla does say in the filings it will relief some stock on social media. i think that is warning investors you will post things social media, that is allowed. the question is there truth in this? did give himself leeway because he said i am considering taking tesla private. does he means he needs to demonstrate he had conversations with bankers? orestors who fund the buyout investors who currently invest in tesla and retain their shares to make it private? a lot of question marks. you get only tell the answers if the sec investigates. tom: you are a young, hip guy.

the social media distribution is against rate fd. anything we know from traditional law. what does he need to show this morning on secured financing? well, it would-- be good -- we know from dealing on the m&a, there are sometimes some leaks which are kind of strategic to demonstrate how credible something is. if i were elon and had my investment bankers, i would be saying to them, let's have a chat with the journalists behind the scenes to make it clear this does have some substance because it is hard to see were that substance is. francine: what i am trying to understand -- as a company, the way they do research, the where they have subsidies, does it make sense for the company to be private? does it make better?

alex: it makes it easier for the investor. tweet proves it is very hard to be a tesla investor because you have no idea what is coming down the tweet tunnel. tesla itself, it puts it under less pressure to deliver on quarter by quarter basis. i'm investing for the long-term. i'm investing in the future of energy company, but the tesla bulls, huge amount of tension in short-term metrics. can the manufacture 5000 vehicles in one week. it would inoculate it slightly against those concerns. concern about the short-sellers but tesla has a huge amount of debt, and negative free capital. those concerns do not disappear if you become a private company. francine: thank you so much. rbc capital markets

analysts coming up at 6:30 a.m. in new york. we will talk dollar dynamics. we will talk about the trade war and the implications for chinese. this is bloomberg. ♪

taylor: let's get the bloomberg business flash. glencore has posted record profit. the world's largest commodities trader failed to increase its dividend and did not expand in existing buyback and a time where rivals are paying out more to investors. that may leave the door open to more dealmaking by glencore ceo.

samsung plans to invest $161 billion to ramp up its ability to produce memory chips and other products vital to future growth. it will boost r&d spending in a number of areas, including artificial intelligence, wireless networks and biopharmaceuticals. shares of abn amro rose the most in eight months. better than expected results underscore lending business in the second quarter. abn amro ceo told bloomberg, the bank agreed to buy software and private banking units in belgium last week. >> we will look to make selective acquisitions as we did last week, but we will also look to return capital to shareholders in the event that we have access capital. >> that is your bloomberg business flash. tom: thank you. we are thrilled to have holger

of ehrenberg bank. we will get them on the european economy. prime minister may called the show and said we need a briefing on sterling now. are we going to see a sterling retest, brexit retest down and through where we were a number of months ago? >> i think we will continue to see sterling weakening and get a little bit lower. i think the mower significant -- more significant is the euro is honest lowest levels of this year. it is on a general downward path. i think the only way you get to that againstthan the dollar is if you see the euro lead it down. tom: let me show the chart quickly, francine. here is the chart on sterling. here is the sterling-dollar, not euro-sterling. the lows,.

up we go and we roll over where we begin to talk about the retest. francine: what are people worried about? this is on the back of -- we heard it with the bank of england, that they could hike again. the markets do not believe. this seems to be almost a mood swing to the fact that the probability of a hard brexit is crashing out. >> the language is we used to think a hard brexit was a brexit that took the single markets. now a hard brexit is what we used to call a cliff edge brexit where we leave suddenly with nothing on the wto rules. what we are calling heart is a lot harder than what we were calling it a year ago. that is an increased possibility. and frankly relatively scary for the economy. francine: is that right? the probability increased of a disorderly brexit?

>> the last few months, it has increased of a disorderly brexit. however, we have to see that for the last 15 months, the duke a with the -- u.k. has become more realistic. i know we have to be nervous as the decisions approach, but i still think that chances are fairly good that there will be a deal between the eu and the u.k. that they can get through the u.k. parliament with a little bit of support from the opposition benches. tom: this is a really interesting idea. what if we get through the weakness that we saw? what does it actually mean for the united kingdom? how does your world fold into politics if we get to a 119 or 121 sterling? kit: at that level -- sterling is incredibly cheap in real

terms if we get down there, the euro and the dollar. my starting point would be -- we have been lower than that or as low what 120 would meet against the dollar twice in a long time, twice in my lifetime. once in 1976. the second time only nationalized the banks in the end of 2008, 2009. in real terms, it has not been close to those kind of levels looking back a really long ways. those are incredibly cheap levels. if we don't get inflation and the economy saw a big inflation differential, we could talk about turkey later that get a differential, if that does not happen and the economy, however long it takes, stabilizes and moves forward, i don't think you could keep sterling down at those levels. what it will mean for us around here, we will have tourists all

over this town. tom: when i look at the eu, when i look at britain right now, give me the relative growth prospects of the united kingdom and continental europe. holger: well, it largely depends on the brexit for this country over here. brexit,t a semi-soft we get a deal and it u.k. stays largely in the single market for good, then will continue around the growth path around 1.6%, which is not very good. it used to be around 2% but it is sort of ok. for the eurozone, it depends a lot on trump. if there is no massive escalation of the trade war. if trade tensions received a bit, the eurozone will likely re-accelerate the growth rate around 2%. due to brexit, there is a good chance the eurozone could be

slightly ahead of the u.k. whether that is the case of and to what extent will depend on the u.k. choices on brexit. francine: tom will hate me for a wednesday but euro against the pound, you look at the bullish trends, they seem to be breaking out and that next the case for further strength. is that the one you are looking at, the euro-pound? kit: if you think in the short term that 115 is about as cheap as the euro can get after the fall earlier this year, and wash around and arrange and move against theeuro pound looks like a pretty attractive trade. i think that will break. francine: can euro go lower? we have not talked italy and the budget they will reveal in december. kit: we faced political

concerns, trump concerns. 115, the euro is a cheap currency. i think we are building a base here unless we get shockingly bad political news. we will probably get the odd scare but if all goes back to the kind of 2% growth rate, i think the euro-dollar will be 1.21, 1.30 for most of the next 12 months. i think that is a better bet. the risk of short-term use is always there. tom: to those of you not used to the world of kit, we are trying you waiting three currencies. francine, demands we show the euro-sterling chart. here is the chart right now. euro-sterling going the other way. it is even more confusing because up and down are different for sterling-dollar versus euro.

we are really touching up here on euro strength. go weappens here when we have gone too far and turn right around? what is the market saying here? kit: for each of those points when we look back at them is say in the sterling is too weak. the euro-sterling rate is important because it correlates a family close to what the trade rated value of the pound in an inverted sense because we do a lot of trade with europe, not the u.s. despite what any politician tells you. make a new high in the euro at some point and index. in the trait i think that is inevitable before we are done. the air is thin. francine: holger? holger: they could be a pretty volatile coming months as we approach of the moment of truth.

but if in the end we do get some brexit deal which is not very -- the semi-soft brexit i alluded to, still we could recover a bit. that would fit with the underlying picture which is sterling is undervalued at the moment and it would lead further bad news on brexit to get sterling down further. francine: how worried are you about loss? holger: i am fairly worried about italy but i don't really think that things will spiral out of control this summer already. we know have the discussions in italy. the finance minister does sound sort of reasonable. the various political parties have suggested that they don't want to implement their agenda in one go, that they have five years to do all these things. as a result, we probably get the occasional scare in the coming

weeks but not yet the big italian debt crisis. francine: not yet. we will have to get more on that from holger. ob staying with usoth. lacqua, i with spoke to the outgoing ceo and the importance of diversity. p.m. today and30 7:30 p.m. tomorrow in london. up next, talking more about the markets, tesla and talk a little bit about chemicals. this is bloomberg. ♪

francine: good morning. coming to you from london and new york. we will get to our top corporate stories.

selling its stake in the synthetic rubber business to seti aramco for 1.4 billion euros in a joint venture formed three years ago. shares getting a boost this morning on the back of that deal. the chief executive joins us on the phone from germany. thank you so much for joining us. you created this venture in 2015 and the initial pact was to remain together for five years. why is it now ending early? ourhias: i think part of clearly comfortable with the transaction we announced today. saudi aramco in the last two years with a deep insight in the world of synthetic rubber would like to accelerate further and invest in technology and further capacities. this is something that does not fit with our strategy. for that reason, we came together in the last month and negotiated intensely and over the weekend.

so everybody is happy. francine: did you achieve what you were expected? easier than you thought, more difficult? matthias: saudi aramco is a prime partner. the biggest oil and gas company in the world with top-notch experts in the industries they operate in. i'm sure in a few years down the road, aramco will be the number one also in downstream, also as far as synthetic rubber is concerned. they will be a prime owner for synthetic rubber business. tom: it is wonderful to have you with us today. what i find interesting is the new smaller company within the

multinationals of germany and continental europe. what is your strategy over intro arms of growing revenue? can you grow organically? matthias: we have clearly stated that we are participants in the industry consolidation, but we want to be in the literally chemicals and small markets. wherever we compete, we want to be a leader internationally, globally. through the acquisitions we have done over the last 3.5 years, we are a participant in the industry consolidation. were,ou worked with came up through the financial channel. is smaller corporations within europe, are they becoming more anglo-american in style or can there be something uniquely german about your next strategic 10 years? matthias: well, i have always

been a fan of operational excellence. i have a lot of sympathy for the financial analysis. i'm always striving for operational connectivity and i love the chemical industry. what i'm doing here is fun and i essnk you will see that lanx will make big strides going forward. francine: now you are into the rubber business and in the speciality chemicals, are you 100% sure there is the right direction? matthias: if you see what we have done over the last few years, we have consolidated the industry with appropriate multiples which was valued highly by shareholders? this journey is going to continue. we will not rush into transactions. we will do transactions when the time has come from a strategic standpoint and financial attractiveness. no need to hurry. we are patient and look forward

to an interesting dynamic industry. francine: with the proceeds, would you be looking at another acquisition? is there anything on the horizon you would like to own? matthias: i would first of all like to mention that we had, after the acquisition come around 2.6 net financial debt that we had honor balance sheet. the divestiture of cody, we will be in the solid investment grade position which has the opportunity. tom: thank you so much. greatly appreciate it. we will come back and have lots more for you. right now, the first word news with taylor riggs. taylor: china striking back on the new u.s. tariffs.

the trump administration will begin posing 25% tariffs of an additional $16 billion of chinese good starting august 23. american companies have complained about the tariffs saying they will cause costs and consumer prices. the foreign minister says european nations are lobbying under countries to buy iranian oil despite pending u.s. engines. countries that are not currently buyers are being urged to buy crude. industry on the oil take effect in november. says he willmp make an announcement next week that will bring down prescription drug prices. he gave no further explanation. the president spoke hours after health and human services secretary alex azar told bloomberg in a change of

medicare that will allow private insurers to bargain over drug prices. british is building on opposition leader jeremy corbyn who changed course on brexit. labour party activists want him to back a referendum on whatever brexit deal it reaches with the european union. a second vote could potentially reverse brexit could become more likely ifs it succeeds. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs, this is bloomberg. francine: thank you so much. glencore has posted record income profit. the world's biggest commodity trader did not to extend with existing buybacks, investors wondering what it will do with all its extra cash. one of the experts on glencore. thank you for joining us, john.

the million-dollar question is for glencore investors, what do they do with the money? do they buy something, reinvest or give it back? john: they are already paying back $1.4 billion as far as buybacks and dividends policies. the earnings are great, but a portion of these earnings and the earnings growth is coming out of the conga. the problem with the congo is they have been paying a company related, and the americans are unhappy about that. maybe it a $1 billion fine heading their way. i suspect ivan glaze and berg who has been involved in the , he must bee congo a bit worried about what is heading his way and the ramifications are. francine: there is also the u.s.

department of justice. in they wererew going to look at oil trading in nigeria, venezuela. it would be difficult for any chief executive to be sure nothing bad has gone on in those areas historically. tomi think the doj through those in, we will get you and something else. tom: i want you to talk about mining in general. and her a really smart view executive turning around rio tinto. theave seen a rebound off mass of the decline, the failed mining experience. a, is it all clear for mining? b, aptly only begun to see a little bit of a share appreciation in these two giants? john: these companies are during really well. and cut their costs automating their mines in

australia. there is margin improvement going on. be careful, there are clouds on the environment. tom: what are they? john: inflationary pressures. you've got potential for trade war with trump to perhaps reduce demand. from what we see, demand is still very good in china. that was reported today. it still looks pretty good but we have seen a significant pullback in copper price in the last few months. the principal earning divisions so much is driven by iron ore that it is a good place to be. tom: the article over the andend, out of australia iron ore australia and china. give us an update on the iron ore dynamics between president xi and australia that is greatly

worried about the china effect. china: china continues to produce more and more steel and that requires more iron ore. they are producing it more environmentally friendly manner. they are buying higher-quality, iron ore and paying premium prices for that. they are doing really well because they are able to produce this top-quality product. francine: thank you so much, john meyer. coming up, hong kong exchanges and clearings chief executive officer. we will talk to him about one of the biggest ipos in the chinese markets. that is coming up in about one hour. this is bloomberg. ♪

tom: good morning. trade and tariffs. kit as well. on us go right now to kit, china and trade and the idea of what to watch. what is a tea leave you are watching in the tit-for-tat? what is the market saying that matters to kit? kit: the biggest concern to me will continue to be chinese foreign-exchange policy which is looking for stability. having tolerated a weaker yuan and having achieved it to weaken without having to do anything but to stabilize it because capital flows have been

dramatic. that part of it at the moment looks fine but i have no idea what their plans are which bothers me. looking at things like today's numbers, we are not going to know for two or three more months. gives us ag's data partial glimpse of the beginning of sanctions and a partial glimpse of life before the sanctions. i would like to get a sense of the economic effect but that will take two more months. tom: what is so fascinating about that is the absolute mystery. in washington, there is a lot of servitude going on. i'm not sure we know with the servitude is. francine: it is that there is no servitude, i guess, going forward. holger, how much do you quantify the global gdp to assist trade tension as relates into a full-blown war? holger: at the moment, global gdp is very small because it is not that much in terms of tariffs that has actually been imposed.

what we seen is a confidence that has not slowed down growth in europe and probably a few other countries around the world. at the moment, global gdp growth may be 0.1% for this year. not that much. the thing to watch is if this escalates a lot. if we get a full-blown u.s.-chinese trade war that does not stop, then we might be talking about a .5% loss of global growth. francine: at the moment, it is tit-for-tat which suggests it could escalate. holger: tit-for-tat is escalating and it could go one. is this from both sides, the preparations, upping the ante for extra talks or will it go on and on? it is too early to tell but there seems to be a pattern in the behavior of trump. we have seen that occasionally this year. he goes in with strong words. he ups the ante with north korea

and then tries to strike a deal. fued,pe in the china-u.s. they are not showing each other the weapons, showing each other they are ready to act, but then they hopefully will talk. between the u.s. and the eu, then hopefully the talks will mean a kind of cease-fire. tom: if i read my jonathan spence, we are talking about china. don't they just wait this guy out? course, has a of long-term development plan. china can afford to take the long view. they have a political system --ch allows them to take having said all of that, china is still by far the weaker of the two parties, the u.s. versus

china. the u.s. is a fully developed country. china needs long-term development. it is the one that needs access to western technology, western markets. i think as a result, china will in the end settle for a deal that will hopefully improve market access for western companies to china, that will hopefully and probably will change some of china's interesting practices on intellectual property and the like. tom: what is the knock on effect to the pacific rim? we had michael purvis with us on the london desk and he is very big on adxy, the currency conglomerate in the pacific rim has been weaker. what is the knock on effect of u.s.-china tariff relations to the pacific rim? kit: it is clearly a threat if it gets to something that hurts

growth more widely. it has china's trade partners within the region. in currency terms, you can see it already that the correlation and have a you -- having australian rate, even the yen is different. if it is such a big part of everybody else's trade weighted currency index and the way the behavior, you had a period where it was very controlled at a flat level and then weakening against the dollar and then strengthening -- now we don't know what is happening to it. if you get a large higher in the u.s. rate that will weaken all of agesia's currencies. if in the process of that we also have weaker growth across the region, i think it is even more serious. francine: thank you. both will be staying with us.

bloomberg users interact with the charts shown using g tv . he's in a good mood. euro gdp, this is what sterling traders, the pros look at. this is bloomberg. ♪

tom: francine lacqua in london, i am tom keene in new york. we are not afraid to use foreign-exchange and we do that with the nature of turkey. right now, five yesterday with the economy and government coverage. cut to the chase, who in turkey is going to washington and what are they doing? >> there is a turkish delegation that includes officials from the foreign ministry and the treasurer and finance ministry, as well as minister interior which is headed for washington, d.c. they are said to have their first meetings with their counterparts in d.c. later today. there are a variety of

shoes they will discuss with their counterparts, including the continued detention of pastor andrew brunson. francine: what is the likelihood that the turkish economy going into recession, and unless the president of turkey backs down, will financial markets gain assurance from anyone that the situation is going to get better? onur: the are certainly higher expectations the turkish economy is going into technical recession or going down later in the year due to the sudden depreciation of the turkish lira since pretty much mid-may. whether or not that is going to change or whether or not that should change is subject to debate among people we are speaking with. and investorssts who think a little bit of slow down in the turkish economy is not a bad thing after all. whether or not the turkish

president back down from some of his views on the economy in the sake of market pressure is not something that is bound to happen. we don't know whether that is going to happen or not. tom: thank you so much in is then vote. -- in istanbul. i want to show the chart on turkish lira. a week earlier up. ook.s absolutely textb waiting for a decision. what do you do with this this morning? do you go short, weaker turkey or go strong erdogan? kit: i don't think you can buy the turkish lira with confidence until there is a catalyst for believing the lira is 20% bond yields is irresistible to investors. at the moment, it is just waiting for a catalyst. yields, verybond

attractive on a global level and say i don't necessarily have to believe in the long-term story and everything is wonderful but i have to have some of this on my portfolio. what the politics has made difficult in the short term is looking for a catalyst. credible monetary policy and aggressive rate hike, a resolution of the political impasse in the u.s., all of these would be catalysts. do i want to front run those just because some delegates have gone to washington? that is outside my pay grade. holger: as an economist, i look into the long-term than the immediate catalyst for a market turnaround. turkey has had excesses in government spending, excesses in deficit. there is probably no way around some cleansing in turkey. the real question is whether this cleansing will be short, sharp recession soon, which is possible or a more protracted.

acted period of slow growth. mend relations with the u.s., mend relations with the eu. let the bank act more independently again. that will help to reestablish investor confidence and could after a while open a new phase of growth for turkey, but now looking for some cleansing. tom: holger and kit, thank you so much. in our next hour, particularly the privatization of tesla. is mr. musk playing by the rules? we will look at the markets as well. this is bloomberg. ♪

tom: this morning, the agony of takesy, a republican

ohio. can the gop hold the house? can progress democrats embrace the light of danny o'connor? mr. musk wants to privatize tesla. no word on the leveraged buyout. erdogan migrate to washington this morning. good morning. this is "bloomberg surveillance." live from our world headquarters in new york, tom keene, francine with me. it is the single biggest deal since the trump election. mike allen publishing on the suburban vote outside columbus ohio. it is game changing this morning for all of american politics. is, a lot of people aren't

calling it yet, but i wonder whether the president's rhetoric changes. tom: very interesting. kevin cirilli knee-deep in this. here is taylor riggs. >> the u.s. is escalating the trade war with china. the government will start additionalties on an $16 billion two weeks from now, including products that include motorcycles, turbines, and railway cars. china has bad to retaliate. crisis has not had an impact just yet. imports and exports surged. in ohio, a republican candidate backed by president trump holds a new route lead in that special election. 1700s a little more than

votes as a lead. provisional ballots have to be counted. the race is seen as a test of the presidents influence ahead of the november elections. would have to pull off the largest leveraged buyout history to take tesla private. he said he had the funding to take the company private at a price that would amount to $82 billion. reported came after that saudi arabian sovereign wealth fund had built a stake of $2 billion. bob iger looking past the write-offs that led to the company missing estimates and gave an upbeat view of plans for a new video streaming services as they take over 21st century fox. he said the new espn online service is attracting more subscribers.

global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thank you so much. i only have one screen. it is a goofy day. there is news, but there is not. -dollar under 1.16. francine: i think you are right. at europeanook stocks slipping following a mixed session. there is concern about global trade keeping markets in check. the dollar in erasing early declines. the renminbi steady as the central bank is to seek currency stabilization. the pound is significance, lower from here. tom: a snapshot of this great

bull market. we did this in february. at 70.he vix again, 2011. here is that february blowup. boy, have we come down. francine, just a snapshot of the bull market that want give up. francine: i'm looking at tesla. this is why my chart matters. tesla sort after elon musk said he is considering taking the company private, valued at $82 billion. ,his is my chart of the day looking at tesla over the last couple of years. said itail, elon musk will try to accomplish an outcome where tesla can't operate at its best, free from

distractions and short-term thinking. $420,ares failed to reach indicating market skepticism. ,oining us now is david welch bloomberg detroit bureau chief. sense? make let's forget about the fact it would be the biggest leveraged buyout in history and they need a strong anchor investor. does it make sense for the company? can it grow and perform better? >> very possibly it could. one of the things that musk said is they are making short-term decisions for the good of the happyr to keep investors and at a. this is a company that needs to invest for the long haul. this is an unusual company in the sense it is an automotive startup. we have not seen one of those, a credible one, since the late

1940's. these companies need a lot of money, a lot of time. startups where you get the product out the door in 6-12 months and start bringing in a lot of cash. it takes a long time to get a car out there, then you have to make a second one and third one. it is years and billions in the markets don't have patience for that. elon musk does not have patience for short-sellers. it does make a lot of sense for them. finances are a big question though. francine: i was going to ask you about the finances. can they pull off such a buyout? >> so far the markets are saying no. did the stock closed , buthort of the $420 price

in aftermarket, it traveled a few dollars more, so the markets are saying they can't. it is difficult to see how he would get that much money. they already have $10 billion in debt on the books. investors, equity and ,ixed income, analyst as well are worried about whether they will pay this back. there is some skepticism there. then you would put more on the books. in fulln't a company production of the model three that was swimming in cash. you have those issues. investors mostly money from the sovereign wealth fund yesterday, someone like apple, big silicon valley possibly? quite but $82 billion is big. tom: thank you so much for the

briefing this morning. the tesla news. ron temple with us. what a career. also ron temple at deutsche bank years ago. deutsche bank or where you are now, you are on the buy side. this goes back to you and i going back to the guidelines set up for fair play. reed hastings at netflix change the rules on how we few's -- use social media. did elon musk use social media yesterday correctly? >> it will be interesting to see how this plays out. is this a legal, valid filing? is this a statement? i'm not sure how this will play out. it frames questionable potentially. tom: we don't usually do this on an august morning.

this is too much for tv, the weighted average cost of capital chart. all you need to know is his capital right now is way expensive. this number is up here. and gm, it is way down here. he are ready has a big expense of capital. >> there is relative disadvantage. publicciate why any company might want to think about going public again. it might make it more difficult to raise capital. there is an interesting dan amick and decision-making process. francine: if you look at how he raises capital, would it come from sovereign wealth funds? on the back of reporting that the saudi arabian sovereign wealth fund was interested in tesla. >> again, assuming there is funding from the saudi sovereign

wealth fund, that would seem to be positive news, but it was not new share capital, it was purchasing of existing stocks. clearly there would be funding available. the question is what price. raising capital for tesla would be feasible, but elon musk has made it clear he is trying to avoid diluting existing shareholders. arebest management teams good at juggling short pressure in the market with long-term goals, but often that might be easier out of the public eye. francine: where would, who would be interested, technology, 1-2 big investors? what kind of appetite comes for these kinds of deals from what parts of the world? >> i can imagine a wide range of potential funders from other companies in the technology space with a consumer focused, sovereign wealth funds, entities

with large amounts of capital focused on fossil fuels. there is a broad array of funders. i have little doubt tesla could find capital in the current environment. is a liquid market where capital is available on a broad basis. francine: if they do get away with it and manage to raise funds come that tesla would be better off if it were private? >> that is a tough call. i could see the pros and cons of being public and private. at this point, it would be best. ofla seems to be on the cusp reaching positive vines and cash flow. if that is true, there is a question whether this is the right time to go private. tom: do you own tesla? >> we do not own tesla. own tesla andot we would like to state that to

you this morning. we continue with ron temple. coming up, charles li on a rather large ipo as well. stay with us. this is bloomberg. ♪

francine: this is "bloomberg surveillance." >> let's get the bloomberg business flash. , starwood property trust expanding beyond real estate. starwood lands to buy a general electric energy finance business. 2.6 billion almost dollars and includes $2 billion in loans.

has cut debt to below target. it failed to increase its interim dividend and did not expand existing buy back when rivals are paying out more. that made leave the door open to more dealmaking by the glencore ceo. britain's prudential focusing on asia is paying off. it says first-half profit from asian operations soared 14%. spinoff preparing a that would separate to operations from faster growing markets elsewhere. we spoke with the ceo. >> very healthy client relationships, 15 million clients across markets, the wealth business doing well. it is all doing what we hoped it would do right now. >> that is your bloomberg business flash. tom: thank you so much.

it was extraordinary last night to see the county by county, urban, rural, and suburban results of the 12th district in ohio. as transfixedwas as i was. ,evin, delaware county, ohio there is the wesley and university. were they the difference here? i look at the dynamics north of remarkable the minutia and trends in suburban columbus. >> it is remarkable. this was the district republicans had carried by 11 points in the previous cycle. balderson, uptroy by one percentage point against danny o'connor, the democrat. this is a district that has been conservative for quite some time, more than two decades. the president himself campaigning earlier this week. it is forced to a recount.

for as a remarkable turn once-republican stronghold. is: what i find fascinating it is really about the republican traditional ohio suburban voter. what did you observe last night? >> the suburban voters, and we joke about it sometimes, but these are the independent voters , the voters who sway elections. they vote for republican sometimes, democrats sometimes, and the turnout. talk about the enthusiasm gap leaning heavily towards democrats. all indicators suggest that, that independent voters in suburban cities is problematic in terms of the republican party as they move forward because of how polarized the country has become, and these independent voters broke for democrats.

but they have, only a couple of weeks until some of these candidates will have to campaign again. they will have to do this all over again ahead of november. francine: for our global audience, they will face each other again in three months. this is close for the republicans. what does it mean for the mood within the republican party? does that change the way the trump administration deals? >> let's go global. if you are overseas and watching this, this is what is called a special election. they had to have a temper election that would last until november, and they will have to do it again. beyond that, the momentum seemingly, even though the republican is edging it out why one percentage point, this is a

district that was carried by 11 percentage points, the momentum looking behind the democrats. the democrat saying they will ride this into november. tom: i guess it is day 42 of the manafort case in washington. what do we look for today? forhe thing i am looking consistently with this trial is new bombshellf testimony that would connect that june 2016 meeting with the russian attorney into the president himself. we have not seen that. history will judge. ofs is the campaign chairman canada donald trump's campaign charged with conspiring against the united states of america. i just think we have to keep noting that. tom: thank you for the ohio briefing as well.

he is in charge of hating ohio state news. us as we look at politics and where we are now. gdp, where is this economy when we get to the midterm election? >> i think the economy will be strong. my biggest worry is fed policy. the fed is excessively hawkish. months, 10 years, 120 seven months where core cpi was 2% or above. that is the target. and yet we are worried about raising rates. it is amazing. the fed i worry about. i worry about protectionism. it has not hit the economy yet. you are starting to see it in surveys and the agricultural economy.

you are seeing companies saying because i have to pay in import tariff, maybe i should move production out of the united states. completely counterproductive. tom: are we doing good public policy now? >> i think there are some legitimate grievances on trade. forcek market access, transfer of intellectual property are legitimate. it would have been far more effective in my view to our light europe, canada, and japan to say there are certain practices that are unacceptable and we work together to make sure we get change in chinese practices. i don't think that is the direction we are heading right now. francine: a quick question on u.s. gdp and overall strength. certainly when it comes to earnings, tax cuts fade away. ,re you worried that tax cuts

if you take those away, they unveil a weaker than expected gdp figure in the u.s.? >> the tax cuts added to growth on the margin, but i think they get too much credit. this economy was quite strong before the 2016 election. it was below the surface. entered a third leg of growth around 2015 when the labor market got tight enough that you saw wage growth across the income spectrum and those middle-class consumers getting real wage gains that could boost spending power and confidence. part one is the economy was in decent shape. we added tax cuts that added momentum. what gets insufficient praise is the spending package in february. after we cut taxes, congress passed a spending bill for 2018-2019, so there is a big

sugar high in the economy that will fade as we move into 2019 and 2020, so it makes the picture look better than it is from a sustainability perspective. francine: what about china? they are talking to banks about stabilizing the yuan. >> i think china expense they capital outflow situation that was treacherous in 2015-2016. i think they have clamped down and have that her control over the currency rates. clear how hard china is willing to go to allow the currency to be part of the trade discussion. i think weakening of the renminbi has been part of the discussion. if you allow the currency to weaken too much, then capital flows come back and it is more difficult to control devaluation. tom: the vix under 11.

what do you do with cash? >> you get paid for cash at this point. you are up to a zero real yield on cash. effectively that is a positive. i still think we have room for the upside in equities. i am worried the market is complacent. has been viewed as an anxiety index. i think the market is complacent about geopolitics. north korea is back on the radar. trade policy is in the center of the radar. the earnings are really good. tom: the margins are good. margins have held up. and moree had more companies talking about wage pressure. what has not shown up in the macro data is wage pressure. it seems that is showing up in company core profit margins, but

we will wait to see what happens when the tariffs start to bite. again, i think that is the case with the market is too complacent, not taking about what corrective vision is a -- what protectionism means. you say the market is complacent about geopolitics, but how does that play out in the markets? is there anything in a bubble that will be corrected? >> that is the toughest part. i do think markets ignore geopolitics will populism. how do you quantify populism. if you're worried about populism leading to protectionism, i can but again, path, that would play into a higher discount rate for risky assets, and we are not seeing that in the markets. geopolitics come if you're

worried about north korea, how should it play out? argue, a tough story to but does seem to argue you should have a higher discount rate on risky assets. we are not seeing that right now. francine: thank you so much. ronald stays with us. we speak with the chief executive of hong kong clearing and exchanges on the new rules and earnings. ,hey saw first-half profits up but what do we see in the second quarter? that is what we will be asking him come also china. that interview is next. this is bloomberg. ♪

tom: we say good morning to you. we have been talking about china. the tariff discussion with the

u.s. now the valuation of shares. li.peak with charles an honor to have you with us right now. there is a debate between china and america. with in it is the triangulation of finance and china. me that the center of finance is always hong kong. what are you getting right at the hong kong exchanges? kong beingit is hong heart of the one country, two system, but because of the rule come we are markets absolutely trusted by everyone else, so that is the unique role

to translate and convert the different systems that need to be integrated. tom: what are your best practices to attract china tower with the many billions of dollars. what is your single best practice to compete against someone like the new york stock exchange? i obviously from a market-demand perspective, market-axis perspective, a market rule of law, we are similar, but the key difference is many chinese issuers feel from their perspective that it it is easier to do a transaction here. hong kong represents the best of both worlds.

you have the convenience and familiarity of hong kong and the .eographic proximity meanwhile, completely open western rule of law where international investors have no issues in accessing this market, so that represents the best of both worlds and why issuers and investors congregate in hong kong over the last 25 years now. francine: china tower is the biggest ipo in two years them a pricing of the low end of the market range. is this a trend to come? is this a trade tensions side effect? i think generally speaking we are dealing with an overall choppy market environment that has an impact on sentiment for ipo's. during the ipo roadshow we all momentum. an issue of

you can price it at the more aggressive in. market with nopy directions will you are starting to see ipo's tend to become more conservative to get the deal done rather than the best dollar out of the table, but i think we will see a few deals like that. it is not dissimilar from new york and other markets, but is the nature of things. it is the largest power company in the world today. i think it is very substantial. the most important thing for a deal of that size is that it gets done in this kind of market itself, it speaks for hymns the -- speaks volumes of the hong kong market. does it mean the

pipeline for ipo's is also drying up? >> no, the pipeline is very strong. companiese have 240 already in the pipeline to date. we have close to 130 companies already listed. that number is basically the same number over the last year combined. we raised 187 billion hong kong dollars to date. that is the amount of money we raise last year in the whole year, so we have not even gotten into the third quarter. the third quarter and fourth quarter are the peak for ipo's, but the second half is different from the last second half. this second half will be quite choppy and the market will be directionless because people

don't understand and don't see how this overall trade war were go and have the market will react to it. with that come the volatility will be up the second half, so the trading environment will be market in but the ipo hong kong and asia typically happens the third quarter and the first part of the fourth quarter. francine: your chairwoman warned of dark clouds over the global markets for the year ahead. what will weigh on your performance looking at results moving forward? it is the overall trading environment. exchanges depend on trading. the bulk of our revenue comes from the actual charges we make on people's trades, so how many people trade, how actively, how

deep they trade dictates our earnings results come and the second half will be more challenging than the first half. tom: you are uniquely qualified with your heritage at merrill lynch and a j.p. morgan china, the affect of the president's discussion on tariffs and trade with china and what it will mean for american international banking. president going to in pens the ability of american banks to do the marginal revenue dollar in china? see the't necessarily direct relation yet. the phenomenon we are seeing today is so unique that nobody would have anticipated the challenges we are in today, so everybody is in new territory, but i think china despite the

current dispute and conflict that needs to be resolved on the tariffs, the broader direction is that china has to open more, and so china will probably allow more service companies to come to china is probably the direction to go, so rather than thinking this is a negative reaction against companies trying to seek a foothold in china, this make tension we be thoseg back after challenges are behind us, it may be the opportunity to meet two of faster opening of china's domestic market and giving international firms a better chance. i think this is probably over time is going to become a positive rather than a negative. i don't think china will take a retaliatory action on that particular opening, because that opening is good for china

itself. francine: i'm looking at dismal price.ance that in share have you learned anything from that listing? as the exchange operator, we don't get obsessed about post-ipo performance. we want it to trade well so everybody is happy, but a difficult market with a big deal like that and the valuation level like that, getting the deal done is pretty amazing. deals haver big tech had a massive first day or first month of trading. some of them don't do that. if you are a good company with a strong business model coming you will succeed. tom: thank you so much from hong kong today. ron temple with us.

he has been listening in. it is the wild west of asia equity investing. is it easier now? the accounting, transparency required? >> the quality of reporting and this closures has improved, and the quality of companies. in the 1990's when you talk itut an asian tech industry, was low-cost offshore manufacturing. the ip content and development was the minimus relative today. there are good companies that can leapfrog some american companies in terms of tech. tom: wall street, the city, wall street, the city come and here is hong kong doing business. is the real competition as a place to do transactions and combinations? >> i think there is a rising

competitiveness in asian markets. the depth of liquidity in the u k and u.s. is far superior to any other market in the world. market cap for the hong kong exchange and singapore exchange, while they have grown and there are good companies, there is nowhere close to the liquidity you can find in the u.s. or london. francine: thank you very much. now to turkey, the worst performer in local currency bonds this year. investors have lost about 39% in dollar terms. the imf says there is no sign turkey is considering asking the fund for aid. will erdogan be forced to back down on his economic policies? joining us now is benjamin harvey. a lot of questions, very little answers. there is the diplomatic spat. we have officials going to

washington. resolved, what will it take for investors to go back into turkey and turkey assets? >> there are mixed views on this. some people think the policymakers is so shot and the damage so great that it would take something short of a miracle for them to get back in. others are saying turkish assets are cheap, attractive, the yields on bonds are attractive, all it takes is one step by the turkish government, and they would get back in, but so far policymakers have been absent in turkey. president erdogan has been off the schedule. the central bank and economic policy are nowhere to be seen. francine: what does it mean? does it automatically involve a step,t erdogan taking

backing down on some of the policies? >> absolutely. they have to get out of this diplomatic crisis with the u.s. the u.s. is demanding this pastor be released from a turkish prison and sent back home. for erdogan, this is a tough ask. he needs to save face here. that theen claiming turkish judiciary is independent. the u.s. disagrees and is basically forcing him to order this man be released. tom: you know the charts better than anybody at bloomberg, the two bond markets of turkey. lira-denominated, 21% yield, up, up, up. u.s.-dollare denominated yields at 6.22%, the red line. for the future of turkeys banks,

what does this chart mean? what is the distinction of darl are -- of dollar and lira debt mean to turkish banks? >> this is where investor attention will be focused. the depreciation of the lira and the rising interest rates, cost of borrowing for turkish banks, and turkish companies, how will this filter through the economy? we are seeing an increase in restructuring, companies having trouble repaying their debt. tom: we will leave it there. thank you so much to you for your great services. benjamin harvey running our turkish operation. first word news in new york, here is taylor riggs. >> china vowing to strike back against new tariffs.

the trump administration will begin in posing 25% tariffs on $16 billion of chinese goods is starting august 23. they include motorcycles and steam turbines. american companies have complained was saying they will raise costs and consumer prices. home depot cofounder thinks president trump is wrong if he thinks tariffs will work. he spoke to david westin. >> this is a ploy, got blessed him. >> what if it is not a ploy? terroristslieves will work, go back to the 1930's. it doesn't work. if he is a passionate believer and it is an end in itself, he will pay a price. >> you can watch that interview next wednesday at 9:30 p.m.

new york time. british building on opposition leader jeremy corbyn to change course on brexit. activists won him to back a referendum on what ever deal the government reaches with the eu. if they succeed, a second vote could reverse brexit and could become more likely. global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. ♪

francine: this is "bloomberg surveillance." of leader episode with liquid airs tonight -- with

francine lacqua airs tonight. u.k., the pay gap has highlighted the financial services sector. banks are bad and insurers aren't so good. getting that data will help us realize where we are, and i feel to something about it. the gender pay gap at lloyds in the u.k. is 27.7%. that is a sign of a lack of females in position. we have to do a better job of keeping women. you can watch the full episode tonight at 9:30 p.m. in new york, tomorrow in london at 7:30 p.m. tesla soared after elon musk said he is considering taking

the company private. shortly.e back sayingding something never mind tesla, bmw is a real deal for a buyout. tom: bloomberg quick take walks through the challenges. to look at this and the analytics of tesla and the way this announcement was made is our guest with rbc capital markets. when you fell off your chair last night from the tweet by mr. musk, what is tesla worth? >> our price target is below where the offer was taken place. in many respects this comes down to a funding decision. has committed funding as

he claimed, then the deal could go through. may be some doubts about sources of that funding. i don't think traditional lenders would sign up to support it. there has to be some significant outside funding lined up. that means almost an equity investment. this is not a traditional analysis of corporate debt versus the high-yield space. it is a huge multibillion dollar equity plug-in. >> that is a good way to assess it. there are some deep pockets out there. there was a report yesterday the saudi sovereign fund took a stake. that is another source. there are a lot of cash-rich companies out there. and thee in china venture capital as well. to them believing

in tesla's much longer-term vision. how would you describe the relationship between elon musk and the analysts that cover tesla? do you think test would be better off being private? quarters goouple of where there is a rough patch between elon musk and the industry that seem to have been soothed over the past quarter, but i think the company does the shortcupied with thesis. look, when you are a public company, there can be quarter to quarter variations, and a longer-term metric is a better means to think about the trajectory of a company, but the timing here is a little bit suspect. he did on the last quarter call

come out and say how tesla will be profitable from here on out. if that is true, that seems to throw water on the bear case. they are still burning through cash. there are execution problems. does bringing it private deal with that? if you havevate issues and being able to do that out of the limelight could be helpful. you remove some of the artificial barriers of the and something can slip into next week or so. i think that part is there. things,rand scheme of what this comes down to is execution over the long-term should win out. certainly being private will , butsome of that variation

over the long-term should not matter. tom: very well said. thank you very much. , ronaldle best chart temple, we have shown him this chart any times before. i framed it with the dow, the depression in the 1920's, then up here the new reversion to a bull market. is the late to go 1960's and 1970's, where we were range bound. what was our risk after the great bull market off of 2009 of going into a range? >> 1965-1980 was characterized by an increase in inflation rates. you had a stagflation story. it depends on how we proceed. tom: you will link this back to inflation? methat is what jumped out at

, increasing inflation rates come the market stagnated in real terms. tom: jamie dimon says 5% yields. not 1960's inflation, put up the chart again. this is like art camp in the summer. that is range. the range mr. temple is talking about are those two marks. heller's walter 1960's, 1970's inflation, but can we get to inflation in this new environment? >> you can, but there is an of andion with inflation, there is no evidence inflation is ramping up. i would love to see more wage inflation. that is what we need for the consumer to improve balance sheets. i don't see the evidence yet. i think central bank policy could nip inflation in the bud

too early. with the exception of protectionism leading to a particularly negative scenario. francine: you could also argue that once inflation picks a, it goes very quickly from then on? >> i have heard that argument. id. know if i buy it. inflationer to reduce than to increase inflation. .e can ask a central banks increasing inflation is incredibly difficult. you can control rates and squeeze out excessive liquidity quite easily. tom: thank you for your comments. greatly appreciate that. , i will get the update, 5.31% on turkish lira. yen with the some strength.

it had a 1.10 handle earlier. euro up again. interesting comments there. sterling, 1.2862. francine: one of the biggest market moves today. the pound has fallen versus the euro. this is all to do with a no-deal fear. tom: very good. this has been wonderful as well. coming up, bloomberg surveillance, bloomberg radio, on this bull market. this is bloomberg. ♪ phones have made our lives effortless.

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dream, wanting to take tesla private, how it could happen. trade war? what trade war? the country takes advantage of a weaker yuan as the u.s. slaps more tariffs on chinese goods. the last push on earnings with the s&p near record, well company struggle with profits. >> i am david westin. welcome back. alix: i miss you. >> you look great. .lix: i rested i was sleeping longer than four hours a night. it was like a miracle. we are still around a record high. earnings continue to trickle out. what is very interesting, dollar-yen down