>> fresh sanctions hit russia. the ruble six and russian stocks sink. the kingdom retaliates further, threatening to target investment flows. justin trudeau's says they will not change their approach. executivea's chief steps down after they lose nearly a quarter of value. shares jump on the news. francine: welcome, i am francine

lacqua. these are your main markets. you can see some pressure on the stoxx 600. overall, starts are mixed. the session in asia, that was mainly led by chinese stocks. and of course, the two may stories of the day. this is the turkish lira. you can look at the development with the staff of the d.c.. and after the sanctions were imposed by the u.s., the ruble at 66.2556. wilson,speak to nigel he joins us after 11:30 a.m. u.k. time. and thens, currencies, a nice conversation with nigel wilson about not only earnings but asset management. let's get to bloomberg first word news. with italy,ting

they are ready to repeat the tough tactics they used to receive concessions on migration. deputy prime minister luigi demaio told bloomberg that the antiestablishment coalition has enough a flash taxes next year. he suggested this eu takes away the deficit and calculated his plans could be implemented without reaching the limit. china's factory inflation held off in july, even as commodity prices. they rose 4.6% from a year earlier. consumer prices rose at 2.1% against forecast of 2%. this is as china confirms they will match a u.s. tariffs on an additional $16 billion worth of import.

the uk's prime minister is stepping up preparations as negotiations break down. theresag understands may is planning a top-level meeting of her next month to discuss readiness for a no deal brexit. secondly, a group of officials is being convened to devise ways to keep the irish border free of customs checks, even if there is no agreement. york congressman and his son have been indicted for insider trading. christopher collins, a republican congressman presenting the 27th district of wereork and his son charged by federal prosecutors in manhattan. they deny any wrongdoing. investigating elon musk's tweet of a possible bias. the wall street journal says

regulators want to know if the message was factor. and sec spokeswoman and tesla declined to comment. meanwhile, bloomberg was told that he spoke to investors about investment and taking the company private. they say negotiations stumbled when he proposed taking disproportionate control. we speak with their ceo at 7 p.m. u.k. time. global news, 24 hours a day on air in more than 120 countries. i am taylor riggs. this is bloomberg. francine: thank you so much. story andto our top the ruble, down sharply after the u.s. said they will issue fresh sanctions on russia for a nerve agent attack. washington expects the measures on the 22nd of this month.

meanwhile, saudi arabia says they will ratchet up pressure on -- criticizingk the recent arrests. they say it could affect investment. justin trudeau says he will not change his approach. canada will always stand up for our workers and companies. we have to make sure we are protecting canadian interests in any situation. we continue to engage with the government of saudi arabia. minister of foreign affairs had a long conversation with their foreign minister yesterday and the diplomatic talks continue. francine: for more, let's get to our team on the ground. our russia economy editor joins us from moscow and and reporter from dubai. what do these sanctions mean? turned --e can concerned it will be a repeat of april.

>> that is right. the sanctions are not that draconian. the details will come out later this month. they look to be targeted to technology related to chemical weapons. the market is more concerned about the broad signal that washington is in another wave of section activity. there was a proposal for a new bill that was quite draconian, new restrictions in which trump was criticized for. too close to putin. markets are coming to recognize that sanction pressure will go up, not down. francine: how should i read this? how would you describe the relationship? if president trump is seen as too close to putin, will we see even more sanctions? i cannot figure it out. >> it is a tough one.

you have trump continuing to talk about his desire for a closer relationship. a better relationship with russia. bulk of thee the ministration at capitol hill wanting to punish russia for election meddling, the salisbury nerve attack and other things. , it a policy standpoint looks like the actual actions they are taking are more unfriendly from the russian perspective. trump,er than music from the actual things that are coming out of the bureaucracy and congress are tougher measures. francine: let's go to the middle east. we saw this spat between the saudis and canadians. what kind of measures are they planning against canada? the foreign ministers said they are considering more measures.

one of them could affect investment flows. there are very little details, but what we know is the saudi central bank and state of instructedds have overseas money managers to start selling off holdings. we understand they are not massive, so it is more of a symbolic action. just like the other investments related actions. the two countries are not really strategic trade and investment are -- partners. that is what makes it easier for the saudis to escalate this would -- way. francine: how is it playing out in the region? it seems geopolitics are at the forefront, once again. >> yeah. right after saudi took its action, we saw statements of support from the uae, the arab league. the saudis are saying we have a large bloc behind us.

it adds to uncertainty in the region, gives questions to investors. before they can commit long-term funds two countries. saudi arabia, which needs investments as they diversified their economy. the short-term impact has been somewhat muted. francine: thank you both. our bloomberg team. investors be positioned amidst growing political risk? now is a portfolio manager at pimco and chief executive at goldman sachs. course, she was also recently appointed to the management committee. that you for joining us, and congratulations. first of all, the concert is we have two huge things. things that came out of the blue. because they were started by diplomacy concerns.

how do you position yourself to counter the risks? have been dealing with geopolitical risk more than market risk. over and over, whether it is tweets, tensions and asia, and now these new items, investors are trying to match the geopolitical versus a nine economic backdrop. so far, the backup has been winning. these latest two issues will be watched carefully for what they might mobilize -- symbolize. does it mean the sanctions world is back again? of ahe moment, neither substantial size. francine: if you look at the global economy, sheila is rates. a lot of it is due to a tax cut. >> that is the challenge. the challenge is how much of the celebration in growth is sustainable. we have been through a strong time of growth.

is hard to know is that when you look forward a year or getting the second staining second round from this bout of stronger growth and how quickly the rate hikes a bite. they may not bike in the u.s., it could be outside as risk-free rates go up. and risk rates of are low start to come back. looking forward a year or two, that is where the main challenges. we do not see a lot of second round positive effects. that is the crux of things. comfortablee you the growth will continue on the trend we have seen? and what do clients ask you? clearly, we have been under a growth trajectory that is heightened. i think we see normal levels, but still strong.

what clients have been looking at is a divergence that is happened. a first half where em stuck out in terms of all are performance certainly, you can see a lot of the action has been about he multiples. at it is the moment to shift gears. for investorsnt who have moved out. they ared thing looking at is the broader swath of issues with sanctions and so on. looking at domestically oriented ,ompanies, u.s. small caps similar to the kind of stories they might look for it em. francine: investors going to cash? mike: it would be aggressive. even now, cash is not a cheap asset. even short-term u.s. rates are moderately above zero in real

terms. argument, and we would argue, that it relates to how high interest rates will go. a lot of the price on long-term interest rates, which ultimately will stay well anchored. there are still things you can do. i do not think it is a positive risk environment. we are not arguing for an aggressive stance. but to be invested, there is still plenty you can do. francine: we also have to talk of the trade war, showing no signs of easing. yesterday, the united states announced duties on an additional $60 billion of goods and china responded in kind. how john out with the conflict be -- drawn out will the conflict be? you have lived in asia, sheila.

what is the endgame? sheila: for the moment, it is rhetoric versus reality, tit-for-tat. --h economies are so they big that it is still not impacting markets and traded to the extent headlines would suggest. overall, the u.s. only accounts for 8% of em revenues. from our perspective, even when it is not the greatest environment for risk, we think em is a place where the risk reward is worth it. they are in much better fiscal positions. and when you look at asia specifically, taking about the time i spent there, there is so much going on that one can engage in that is still insulated from the trade war. francine: argue positive on china?

will they weaponize the currency? china is one of the places that has more risk but some reward. we see clients being positive on china. there is hope there is a loss in their arsenal. in terms of stimulating the economy and managing risk, that there is capability. certainly, they have demonstrated an ability to manage that. this is a great unknown. the actions you see in a trade war are a long time since government -- long time coming. so the action is a big risk. that is why we see people looking other places. francine: what should investors worried more about? is it the fact they are having stimulus, meaning you can see leverage? trade wars? mike: the performance of the economy and the authorities.

one is the trade tariffs. the other is trying to go through a gradual de-levering of the economy. those are not easy to do in any state, but to do them at the same time makes life tricky. hand, the main way to deal with trade wars is to have a currency go down, but that puts pressure on the d lever story -- story.ing they want to keep growth stable. ,tability is the great focus not getting too focused on the trade spat or deleveraging. francine: thank you for joining us. both mike and sheila will be that with us. i have a great chart i want to talk about. trump: currency minute later. manipulator. jpmorgan says do not rule it

out. this is lord -- bloomberg. ♪

francine: good morning, everyone. let's get straight to the bloomberg business flash in new york city. taylor: pandora's ceo will step down after the jewelry maker of its market value when they cut their profit forecast.

he will leave the company at the end of this month. in recent years, they have battled retail weakness, and this year, problems arose in china way market eroded sales and profits. a discussionhis is with the board and has led to the fact that i will be leaving by the end of this month. i look at where our share price has moved, i understand that it is disappointing from a shareholder perspective. taylor: ryanair faces their worst strike in their history. german and dutch pilots joined a protest forcing increased pay and working conditions. more than 400p flights, disrupting travel for over hundreds of thousands. this is after a union announced a 24-hour walkout on the same day strikes are planned in belgium, sweden, and ireland. airline pilots

association revealed they would also take action. that is your bloomberg business flash. francine: thanks, taylor. with the u.s. wielding a trade war on several fronts, there are reports president trump could weaken the dollar. they say it is not the best case scenario, but they cannot argue with the policy. complaining that a strong dollar blunts their competitive edge. meanwhile, investors scooped up a record billions in treasuries. signaling that the government has yet to put pressure on the long-term borrowing costs. still with us is sheila from goldman sachs and mike from pimco. i'm not sure if a tweet is a policy, as we are still trying to figure out. what happens to the dollar going forward? has quite allar

tailwind behind it for the short-term, that the fed is few othertes and banks are raising rates at the speed of the fed. benefiting and will continue to benefit in the short term. the challenge is that as the u.s. continues to grow, notwithstanding, the president tends to reduce the trade deficit. it is hard to believe you end up in a twin deficit situation. where the current account remains a wide and, generally, twin deficits are not good for currencies. you have these shorter-term strong tailwinds which we think will still play out, but it is not all one way. you have to remember that countries with twin deficits go through times when the currency goes under pressure. francine: do you agree? sheila: generally, yes. the biggest question is

president trump's ability to sway anything. that could create volatility, but if you look at where the fed is headed, comparing best to the actions we expect from other banks, where the ecb is not in the same position and the boj, where investors have had concern but is now more confident that you will see them continue to be the most accommodative of the , it would be pretty hard for president trump to influence the dollar meaningfully. that is the volatility we look out for, but otherwise, we expect things to stay on course. francine: where do you see treasuries? you look at the way the boj and that yield curve is doing, it has implications for treasuries. we have seen the range consolidate. where you get some volatility is

if you see real meets on the bones of the trade war issues. or you see unexpected action by the fed then we are expecting. mostly, it has been consolidation, in other reason people have been relatively calm about the broader global market. francine: mike, are you buying anything in european assets? mike: they have been pretty stable, frankly. is only think that has moved the 10 year italian government bond market. reason challenge is the it is moved, because budget negotiations started earlier than expected and we expect some tension. so we would not see the bond market as particularly attractive. it does not look to us to give you sufficient compensation for the potential ramping up of frictions between the government and the eu.

and the rest of the market has remained stable. european corporate credit still trades quite extensively, looking relative to others. in credit land, we would rather buy credit outside of europe. at the moment, europe is not what we are focusing. francine: we spoke to demaio yesterday, saying they will use tough tactics in budget battles. thank you both for joining us. sheila from goldman sachs and mike from pimco stay with us. this time, could fixed income be the next big thing? we talk about that. that is coming up next. this is bloomberg. ♪

francine: economics, finance, and politics. this is "bloomberg surveillance." i am francine lacqua in london. let's check in on what is trending across bloomberg. the oscars will at a new

category for next year's awards, best popular movie. the ceremony will also be shortened in an effort to win back viewers. the announcement of new sanctions against russia for the nerve agent attack in the u.k.. and our most read stories, and -- new york has approved a one-year cap for licenses, and efforts to reduce congestion. in second place, the buzz is growing about the new film of singapore millionaires. and the mystery surrounding elon musk's plan for tesla enters a third day. read up on that using the bloomberg terminal. let's get to first word news. russian currency remains weaker after the u.s. says they will sanction russia for a nerve agent attack. expects the measures to take effect on the 22nd of this month and could be followed

by a round of sweeping counties later this year. spy and his daughter fell seriously ill after coming into contact with what authorities say it was a powerful russian made agent. the kremlin denies any involvement. italy is ready to repeat the tough tactics they used to win concessions from the eu on migration. when the forthcoming battle -- budget battle gets serious. that demaio told bloomberg the country's antiestablishment enough flexibility to introduce a flashback and citizens income. changeested that if they the way the deficit was captivated, then his government plans could be implemented without breaching the limits. saudi arabia will continue to ratchet up pressure on cap -- canada. that is as justin trudeau upheld his stance on human rights.

the kingdoms of foreign ministers says the next wave retaliatory steps could affect investment flows. saudi arabia has the backing are,e gcc, apart from cuts and the islamic organization. these make up one third of humanity. we are part of an arab league and a large islamic organization , and canada must understand that its actions are , buteptable not just to us there nations and the entire islamic world. canada will always stand up for our workers and companies. we need to make sure we are protecting canadian interests in any situation. we continue to engage with the government of saudi arabia. the minister of foreign affairs had a long conversation with their foreign ministry yesterday and diplomatic talks continue. taylor: a new york congressman

and his son have been indicted for insider trading related to shares of an australian firm. christopher collins, a republican congressman, his son cameron collins, and the father of their fiance, were charged by federal prosecutors in manhattan. they deny any wrongdoing. global news, 24 hours a day on air. powered by more than 2,700 journalists and analysts in more than 120 countries. i am taylormberg. riggs, this is bloomberg. ♪ quiet but profound, that is how our guest describes the shift underway. he says in fixed income could replace equities as a core asset class. expanding related borrowing from billions of dollars to trillions. so what are the drivers of this pivot? still with us is our guest from pimco.

what is the catalyst for this? mike: it is twofold. as long-term investors, we have been, over a number of years, trying to formally integrates these long-term issues. the stench to play out over a multi-year time period. it is something we have been embedded in our team, which is likewise is what we had in doing. now, we think we are at the point where it is embedded across our team. we can really make some noise about this. the equity universe has been focused on sustainability for a number of years. the arguments there would be around the ability to influence board's -- boards. it fixed income, we find it is a repeat issue.

we have not only a role to play in incorporating this analysis to make sure we get the best intellectual rigor, but can also positively influence of those issuers overtime to tell them where they had got gaps or challenges they could improve on. francine: what is the biggest concern? is it a time gap? that you want returns and stability takes a long time. mike: the most important thing is timeframe. recognizing issues that can play out over a multitude of years. key investment timeline is 3-5 years. a lot of these can play out. there is a consistency of approach between the way we invest in markets and incorporate these factors. it is a multi-year process. we all have to recognize that you cannot solve these problems

overnight. ironically, we have a lot of wildfires across the world. and these have been issues which have been out there for a while. but we need to start and do something about it, and obviously, the sooner we start. this is key. we do not want this to just be an equity market story, we want the whole investment community to think about this. francine: is this a corporate issuance? or is it at a country level? if so, there is so much geopolitical uncertainty, how can you be sure? mike: we want to think about it in every part of the market. 25% of the market is corporate. we want to think about influencing a there. 50% is sovereign's. related to hows you influence a government.

we think that large bond investors do have an advantage. you tend to find that where you have the greatest influence is if you are a large investor with em countries in particular. making sure you have the dialogue -- francine: how do you know it is not a pr exercise? mike: you need to constantly talk to them. which is why size, obviously, helps you. much.ne: thanks so mike from pimco stacy lewis. up next -- stays with us. may is holdinga a cabinet meeting to talk about a no deal brexit. we talk about it in our weekly brexit show up next. this is bloomberg. ♪

francine: welcome to our weekly brexit show. let's get straight to the brexit bulletin. the uk's trade secretary says negotiations are now more likely to end in failure. , heking to the sunday times said there is a 60% chance of a no deal. commission foru a lack of flexibility in 16 months of talks. the office issued a statement saying they remain confident of securing a deal. thesure is building on jeremy corbyn to switch course and back a referendum on whatever brexit deal they reach with the eu. labour party activists are trying to force a debate on their annual conference in liverpool next month. , a second vote

could potentially reverse brexit and becomes much more likely. one of britain's richest people says he would bet his entire fortune that britain will get free trade with the eu if there is a no deal brexit. hargraves, the founder of hargreaves lansdown said a no deal brexit would be quote the best option because eu countries would be clamoring for tariff free trade. global news, 24 hours a day on air. powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. francine. francine: thanks so much. theresa may is stepping up preparations in the case of a no deal. sources say they are planning a top-level cabinet meeting to discuss how to prepare. last week, the boe governor mark carney that he was not comfortable with the current chances.

he spoke to me about that approach. it is our responsibility to anticipate a very bad version of that cliff edge disorderly brexit. what could happen to the markets impacthat would in fact financial institutions, we have prepared for it. francine: so how concerned should we be? is the director of the center for european reforms and mike from pimco. thanks for sticking around or showing up. aould we have the chances of no deal brexit increase in the summer months? the chances have increased, but not significantly. they know it would be a catastrophe. the eu government knows the government knows that. when the british says you better give us a good deal, they know

you will not just cut off your nose to spite your face. they assume the british government will soft and their red lines, giving them what they want in the negotiations. one line of thought is that if you are fearful of a note brexit deal, you will do everything you can. how do you see is panning out? like mike orle chief executives actually know what kind of future relationship we have? the real shape of the relationship will not be visible by the time they leave. the withdrawal agreement has to be finished by the end of this year to allow britain to leave. that will have attached to a political declaration setting out, in vague terms, the shape of the future relationship. allowing everybody to say they have what they want. i would not expect a detailed

description to be visible. will have to be some detail about future customs arrangements. will not accept the irish protocol, saying what happens on the irish border stays united in regulatory terms. unless the british government is confident they will not have to activate the backstop, meaning they need nice language on customs. francine: what is going on in the markets? there was no real catalyst for it. it seems no matter what the boe said, the market had a bet they could not raise rates. mike: the market is sensitive to brexit risk. markets working assumption is that there will be a deal, but there is an increasing probability of no deal. we can look at it as sterling against the euro. sterling against the dollar, you get the dollar angle on table. -- cable.

you have not seen a big shift in that move. the markets are more sensitive, but as charles mentioned, the risks may be going up. is fairly natural for the risks to go up. charles: a bit of a brinksmanship. mike: exactly. isncine: the concern we have we seem to be talking more about who will be the next prime minister or if theresa may has a leadership challenge, instead of focusing on negotiations. if we are distracted, they must be. charles: the point i would make is that because of brexit is so all the dominant, it is not. there are many things the eu is worrying about that are more important. the crisis with italy, trade war with trump. brexit is not priority number one. francine: it does not need to be priority, does it?

you have mr. barnier, he and angela merkel tell him what to do, and it does not need to be at the forefront of their minds. as long as you have a capable person. mike: therein lies the reason you can get a compromise which does not necessarily give you perfect clarity, march, but gets you through the next hurdle. you have mr. barnier on the european side. do not forget that there is a high degree of sensitivity to the leadership transition creating an environment where you end up with a general election, the one thing the conservatives do not want. on each side, you have these tensions. reasons why neither side should want to push the other is ultimately why we think you will get this deal. may be not a cliff edge. what is the chance of

a second referendum? charles: less than 25%. francine: a general election? charles: rather high. maybe 25%. francine: chances of a hard brexit? crashing out. crashing out no deal, i would say less than 20%. there will likely be a deal, the question is how soft it is. they will still achieve something along the lines of their checkers plan. parliament is more likely to vote it down. they are counting on macron and merkel pushing barnier to be more open in the final moments. francine: thank you both for joining us. charles grant for the center for european reform and mike from pimco. coming up, what does the future hold for the selloff murdoch empire? we bring you the latest.

that is coming up next. this is bloomberg. ♪

francine: economics, finance, and politics. this is "bloomberg surveillance." i am francine lacqua in london. with 21st century fox's billion dollars deal with disney, murdoch has laid out plans for a new fox, anchored by popular tv programming and the nfl. for now, they are getting boosts from assets they plan to sell and movies like deadpool 2 contributed. analysts estimated $.54 per share on average. for more, bruno joins us. thanks for joining us. first of all, what happens to fox? bruno: it has been a pretty uneventful week. francine: [laughter] bruno: there is probably some deal fatigue here. then, an announcement from fox that they have posted documents

for sky. so there has been a switch. it was surprising. and obviously, we had the results of fox, beating every estimate. francine: what are they getting right? bruno: it validates the entertainment business and the type of deal for disney. but the real question here, and what we get from our clients, some of the more prominent hedge funds, is what happens next with skype -- sky. the question is why has fox switched from a scheme to an offer and what happens from here. we are in a competitive situation. francine: is the skype the limits? -- sky the limit? with a growth 40% quarter

look,rter in q4, i think, if we take a step back, the regulatory conditions have been satisfied. next is a rush towards acceptance. the switch to an offer was a strategic move. previously, the acquisition was implemented, which is target lead. it target document shares with's and schedules the core meeting, yada yada. by switching to an offer, they are back at command of the offer. the scheme is very binary. you either get 75%, or you do not, and you fail. so what happens now -- francine: go ahead. is thato what happens although they have said 75% they

are at 39% of cap, 11% of the total, 18% of minorities. comcast,mpare that to who had 84% of the minorities. francine: what are you telling me? that it is more difficult for contest? bruno: that comcast is in a inferior position. however, let's not forget disney is offering more. francine: what about regulation? bruno: here is where the i think, look, if you look at the takeover document, fox's telling us they have until the 22nd of september for the offer. it is a little disingenuous, because we think a panel led auction. because thered,

was an auction in 2012 led by the panel. if, by day 46, there is a competitive situation as it meansby the code, both offers can still be increased and there will be an auction. this is interesting -- francine: have we ever seen an auction before? bruno: 2012 quarter of energy. that is literally the only one. panel will bring both parties and say, from now on, every day, you can raise your offer. you need an announcement by 5 p.m. every day. if both parties are able to raise their offer, on a second day, if neither party has raised, they can until one party does not. the panel will then announce the winner. francine: it seems he will have no sleep. bruno: [laughter]

absolutely. is actually far from finished from an outside perspective. this is why i point out that even though they have an offer close 30 billion up. -- 30 beats up. francine: exactly. let's check in on the market currencies. the lira, wrubel, and the new zealand dollar. they seem to be tightening as the souring relationship with the u.s. is affecting turkey. this is bloomberg. ♪ phones have made our lives effortless.

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which could save you hundreds of dollars a year. plus, get $150 dollars when you bring in your own phone. its a new kind of network designed to save you money. click, call or visit a store today. ♪ francine: fresh sanctions hit russia, washington punishing moscow for the nerve agent attack.

the russian stock falls. saudi arabia spat with canada grows, threatening to target investment, the government will not change the approach. show me the money. u.s. regulators investigating elon musk's claim of securing funding is fact or fiction. this is "bloomberg surveillance," i am in london and tom keene is in new york. we have an exclusive interview with italy. there is an emerging-market scene with lira lower. tom: i would note the tesla story continues to keep on giving. extraordinary moment yesterday.. "bloomberg surveillance," on radio, when we saw those headlines come out, the confusion between the board and mr. elon musk. francine: we will continue with a spotlight on tesla.

let's get to the first word news. the u.s. is warning the latest round of sanctions on russia may not be the last. announceddepartment new penalties punishing vladimir putin's government for the nerve agent attack on a former double agent and his daughter in the u.k. the uss sanctions may be followed by a round of more penalties later this year. the u.s.rt that secretary of state is giving north korea a deadline on nuclear weapons. according to the news website, vox, they told kim jong-un he must hand over 70% of the arsenal within six to eight months. mike pompeo has presented the plan's multiple times over the last two months and it has been turned down each time. italy about to battle that eu overbudget. he isime minister says ready to repeat the tough tactics used to win concessions from the eu on migrants. the government

wants flexibility to push through a tax and guaranteed income next year without breaking eu budget restrictions. as we have been mentioning, regular readers investigating elon musk taking tesla private. he has offered no evidence to back up his statement and according to the wall street journal, the fcc has asked the company if what he tweeted was factual, and why it was stated in social media rather than a filing. a shakeup at the danish jewelry maker, pandora. stepping down at the end of the month, they lost a quarter of market value earlier this week when they cut the profit forecast for the school year. doubled the company in the time i have been here and we set a good direction for the company. that, i do not regret.

clearly, if we look at how this has been seen in the stock market -- i am not satisfied of course with the development we have seen their. -- there. taylor: global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs, this is bloomberg. tom: thanks. a lot to talk about on data, equities, bonds, commodities. oil soggy. american oil, $67.07. curve flattening. nuance on turkey and russia, the vix showing the bull market, 10 points, dollar flat to strength, turkish lira, stunning statistic, 5.41, with interest rate equivalent. down there is the two-year turkish yield, 26.27 in lira.

that, the teamat on point. markets, we saw chinese equities shrugging off ongoing terrace, tit-for-tat between beijing and washington tarriff,ngoing between beijing and washington. you could argue this came out of nowhere and u.s. sanctions saw the ruble at 65.99. ruble down sharply against the dollar. sanctionsof fresh over this nerve agent attack, washington expects the measures to take effect on the 22nd of this month. meanwhile, ratcheting up pressure on canada for criticizing the recent arrest of

women activists. the kingdom says more measures are coming and retaliatory steps could affect investment. the prime minister of canada said he will not change the approach. >> canada will always stand up for workers and our companies. we need to major we're protecting canadian interests in any situation. -- make sure we are protecting canadian interests. we continue to work with the government of saudi arabia. the minister of foreign affairs have a long conversation with their foreign minister yesterday and diplomatic talks continue. francine: joining us now, the economicst africa and governor, joining us from moscow. why are investors so concerned? this escalated so quickly. we don't know what sanctions mean. people are fearful that we go back to what we saw in april.

>> it has been whiplash for investors here. if you go back to helsinki when trump and vladimir putin met for the summit, the music was good. everything seemed on track for trump's efforts to rebuild relations. the criticism of his handling of the meaty rose quickly in washington and we have seen a crescendo of new sanctions. the senate had proposed quite a stiff bill. the market has come into focus that despite the warmer ties, there will be more sanctions in the coming months. tom: the depreciation of the ruble has gone through one wave out of 2008, two waves, three ways, now a new wave of weakness. what does it mean for the russian people when they see the ruble approaching 70 per dollar? what does it signal to the people of moscow and across the

nation? the sensitivity here has been reduced since the big wave of evaluation which we saw in 2014 when oil fell and you saw the ukraine conflict and ruble left half the value against the dollar. people went rushing out to stores to buy televisions and refrigerators and cars, anything you could use as a store of value. currency has fluctuated. it has come back at times in the years that followed. individual reactions have been muted. it is summer vacation season. so far we do not see alarms on that. people are cautious. the other caveat -- for the vast majority of russians, they do not have savings. there is not a lot you can do. they would like to shift to other currencies but they don't have a lot to do it with. francine: this is regarding saudi arabia and canada.

how did it escalates of quickly -- escalates so quickly? >> that is right. it was surprising. there was no noise we heard before and. it suddenly exploded -- before hand. it suddenly exploded. we asked around. in general, there are several things that play. in general, saudi arabia is more aggressive with foreign policy. canada is not the only country where this kind of action has been taken. it is the one where the saudi's have been most public. they have come out with a statement. we know that with germany, there are still issues there, saudi arabia is not giving german companies any new contracts, over a similar issue with the foreign minister, as regards the lebanese prime minister at the time. before that there was an issue with sweden. similar things.

in this case they went public and made a point. they said -- we are really going to not trade with canada anymore. the idea is to tell the international community, if you want to deal with saudi arabia, do not mess with our domestic policy. tom: it is a historic relationship with the united states, it is complex. does this attack against our northern ally change the relationship of washington with riyadh? >> hard to tell. i don't think so. at the moment the reaction from the u.s. has been muted. equating ando be asking the sides to talk. which justin trudeau is saying they are continuing to talk with the saudi's. the saudi's, in terms of rhetoric, continue to ratchet up. we heard the foreign minister

yesterday saying, we are going to do more. the relationship between trump and the crown prince is strong. it is probably the best relationship between a u.s. administration and the saudi leadership in decades. it is hard to see how this alone anything. francine: what does it mean for investors? saudi arabia trying to transition their huge economy, looking to ipo saudi aramco. why do you go into saudi arabia now? >> there is a lot of money to be made. a lot of projects, deals, being offered. having said that -- any investor once a certain amount of certainty -- wants a certain amount of certainty. if they see these quick swings between countries that are friendly -- saudi arabia and

canada are not known for being confrontational -- any investor will ask themselves -- what does that mean? do i have to put into a risk premium on any investment in saudi arabia? that cannot be in the interest of saudi arabia, which is very keen to diversify and pushing hard on that front, investing in technology especially. we saw the tesla investment recently. technology is a big thing for them. it raises the question mark. francine: thank you. amal sharma andk peter dixon. thank you for joining us. kamal, we saw a huge swing in ruble and the canadian dollar. this was unexpected. are you expecting geopolitics to have small outbursts on currencies? kamal: you're seeing that in a

number of currencies, anything from euro swiss on italian risk. brexit is permeating through sterling. this is the new normal for currencies. we are beholden to the next trump tweet. markets have become more accustomed to incremental news, it does not have the impact it once did. we are all perpetuated by the russian headline, what is the new development? an uptick of sanctions. simple fact -- we will trade currencies more in a political sense rather than strictly macro. tom: let me bring up ruble chart. it is interesting. we will do that on twitter in a moment. the hugerash -- appreciation and 2014 off ukraine -- that huge depreciation off 2014 and ukraine.

these individual stores are adding up. is it a nonevent or something correlated? in some ways you are seeing -- peter: in some ways your same reaction. you just saw new zealand push back the first rate hike. underlying all of this is geopolitical and trade tensions, which continue to permeate markets. from an investment perspective, you look at pmi indicators, sentiment readings, this is becoming more pervasive for markets. you're bringing these things together -- emerging markets have had a bad time over the last few months, very much trading on defensive. any relief seems to be short-lived. francine: what is your take over all about geopolitics? you cannot run for the hills. the you go to cash? -- do you go to cash? peter: at the moment investors are still buying equities.

the chart earlier show the vix at 10.8 something. that is astonishing given the uncertainty we are talking about in this environment, trump, brexit, russia, etc. investors do not seem concerned about risk at the moment. why should they be? over the course of the last decade, they have stared down the barrel of the gun in the face, come out the other side. it is almost as if the global economy can set anything up in the market still go up. investors are prepared to call the market's bluff. francine: we will continue this conversation. later, nigel wilson, coming up at 6:30 a.m. in new york, 11:30 a.m. in london. we have a couple questions on insurance premiums and money managing. this is bloomberg. ♪

♪ taylor: this is "bloomberg surveillance," let's get the bloomberg business flash. adidas got a boost from the world cup. the german sports shoe and athletic wear maker posted second-quarter revenue and profits that beat estimates. america and asia and selling a record number of jerseys, even though the national teams that sponsored lost out in the world cup tonight he. -- to nike. includelion, buyers private equity firms. profit has fallen by more than

half since 2014. carrierd largest mobile posting profits that the estimates. -- beat estimates. bloomberg intelligence says broadband's market share grew in the number of 4g users rose more than 4.5%. that is the bloomberg business flash. tom: thanks. what you heard on trade and tari ffs. the idiosyncratic nature of russian ruble, turkish lira, we switched gears and went to saudi arabia and canada. the jumble of the summer of 2018. peter dixon of commerzbank and kamal sharma of merrill lynch. peter, the great balance, funneling back to strong dollar, flows and relative interest rates. which is predominant in the

international economy? international capital flows? or a real rate nominal rate difference? peter: flows, most definitely. it goes back to what we were talking about, political risk. investors are being primarily driven by political factors at the moment. that has had impact. you can see that up on the flows, particularly out of emerging markets. that said, interest rates play a big role, particularly u.s., because as u.s. rates go higher, investors take a negative view, of the emerging market world. that has been driving capital out. kamal, the news today, turkey is coming to washington hat in hand. no one really knows. what will be the institutional responses to the idiosyncratic news we talked about in the first section?

kamal: this is the flow story. there is an underlying interest rate narrative in the background. if you look at bank of japan for example, we've had contrasting news from them. fromnderlying message japanese investors that they still want to buy overseas assets at the expense of domestic assets -- or is a cross-border capital flow story there. having said that, as peter mentioned, the vix holds the key. if we see a meaningful spike in the mix index, -- in the mix, as this comes to a head, that changes the narrative around interest rate differentials. it takes the markets into a more defensive mode, there for currencies like yen and swiss franc should be beneficiaries. francine: boj was significant. one of the biggest stories if not the biggest, around central

banks. does that change what treasuries would do? have you look at boj impacting the world? -- how did you look at boj impacting the world? kamal: it was in some ways the treasury moves of the last six months, that has triggered the bank of japan response. you can see the yield curve recalibration mark to mark of what has been going on in the u.s. treasury markets at 2.5% to 2.7% on the 10 year. 3% and above, 11 basis points is hard to achieve. that has given more flexibility. from following on impact what has developed in global bond deals, that led the bank of japan to move target. francine: the bank of japan's success in bond yields, even after boosting the ceiling on the tenure rates, is a potential lesson for treasury markets, you could argue. peter: the boj has its own

particular dynamics, the japanese market as well. slightly different issues there. of boj has much more control the japanese market than the federal reserve market has over the u.s. it is not independent. if treasury markets continue to edge up, that will make life difficult for the object. -- the boj. also for emerging markets. hasn't lost control of monetary policy but you wonder -- what is the objective of monetary policy in japan now? what is the point? it is not helping inflation. it is not doing much. tom: what does the sharma shock meter look like now? we have all these different stories. you and i have seen this. it sets you up for some form of shock which upsets the system.

what are you studying with the team at merrill lynch? we take a slightly opposite view to the fact that we are seeing confluence. extolling the virtues of reduction in trade tensions, which would lead to opportunities in emerging markets. the most g10, pervasive development is the brexit negotiations. we are getting more questions asked by clients as to what the impact and potential spillover impact will be over hard brexit on the rest of the g10 complex. that is where the focuses. sterling, that is idiosyncratic. far outpacing anything else in g10. there is the italy story. to ais not manifested point of no return. we have things bubbling under the surface but the one thing that stands out, is the brexit

issue. tom: what level of cable or euro-sterling gets your attention as a tipping point? maybe as a jump condition? --al: we look at scenarios on a conducive backdrop, on a deal sign, re-think cable goes back to 1.40 levels. is, brexit, no transition we are not necessarily concerned about levels, we are concerned about speed. on the 24th of june we saw a 15% decline in the trade weighted index. we're looking at those kind of moves that would focus markets on something more existential. francine: the more we talk about brexit or crashing out, and the more we talk about the bigger

probability of earlier in the summer, does it make it less probability because it is in the radar? peter: i hear what you're saying. it does not prevent the jump. if we get to markets tipping, you get this rapid pace of adjustment, market sentiment has changed overnight, even though there is no incremental change in assessment of hard brexit. what the markets will do is price proactively ahead of the main event. even if there is a whisk of a hard brexit which is not delivered, markets could crash sharply and then recuperate quickly. francine: we could see a few hikes in a few years. the market doesn't believe that. is the market pricing in a harder brexit than it could be? peter: i don't think so. i think the market is right to be pricing what it is given the information we have. if you believe the information flow, the british government

cannot agree what it wants, they can't agree with eu on any deal, i think the markets in that vacuum are right to say anything is possible. tom: great conversation. sharma.xon and kamal we will talk about brexit and sterling with more focus in the next half hour. with a good time to speak the united kingdom department of trade advisor on trade weighted sterling and about president trump and global trade. stay with us from london and a vibrant new york. thunderstorms last night, lightning. this is bloomberg. ♪ retail.

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impose on russia could block hundreds of millions of dollars worth of exports. penalties are punishing the government for the nerve agent attack on a former double agent and his daughter in the u k they could be followed by more sweeping sanctions this year unless russia agrees to quit using biological and chemical weapons. turkey is refusing to release the detained american pastor at the center of the escalating feud. the u.s. has imposed sanctions over the matter and a turkish delegation came to washington to meet with the state department. they raised concerns about a state-run bank being investigated over a scheme to evade sanctions on iran. the u.s. will not discuss that until the pastor is free. a report that president trump has suggested he is open to broader sanctions and reforms than he is previously backed. ident has met with senators to discuss prison

reform. chuck grassley says the president is in support of a reasonable compromise. new york city's counsel has dealt a blow to uber and car hailing services. there is a one-year cap on the licenses and regulators have the authority to set minimum pace standards for drivers. unrestrained growth has led to more congestion in manhattan. global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs, this is bloomberg. thanks. this is a huge deal. the right-hand column of the new york times today on uber and new york city limiting growth. francine, this is a huge story in new york city. i don't know how big it will play in london but to me the big story is the pay issue.

it has left the limiting of the licenses, which everyone in new york agrees they need to do but it is the idea of are they going to figure out some minimum compensation form for drivers that seem beleaguered? francine: i think this is also huge because it will have worldwide impact. in thechallenges by cabs u.k. trying to stop uber. challenges also in italy and france. a lot of regulation. uber is being challenged in germany. what was surprising as a european audience, they are challenged with these caps in new york and new york is considered the kind of free world. that is interesting. the sec reportedly investigating elon musk's tweet about a possible buyout of tesla. regulators want to know if the message was factual. they spokesperson declined to comment. bloomberg has been told that

softbank could be investing in tesla and taking the company private. sources say negotiations stumbled when elon musk proposed taking disproportionate control. joining us, david. where do we go from tesla? we still don't know what the plans from elon musk and tesla are. david: i think it will be about intent. mr. musk issued that tweet a couple nights ago. the share price is not moved a whole lot in either direction. according to marcus, the short investing in the stock has been higher. there is disbelief out there that he somehow has $71 billion worth of funding lined up, without any actual evidence or further details, it has set speculation on where the money is coming from. francine: there are 25 angles on

the story. what are your top three? the saudi's looking to do a bid. the fund could look at what it means for future saudi money invested in tech. are some companies that are all private? -- better off private? or is there some type of regulation where the fcc should be involved? david: it was only a couple days ago that the fund said they were investing $2 billion in tesla. it is nowhere near the $70 billion. the sovereign wealth funds around the world will be in a smaller position. qatar, 1.5 each. a long distance away. in relation to the fcc, i don't think elon musk will deliberately send a tweet to prop up the share price of his

stock. he knows he would be in hot water. the money must be summoned from somewhere. in relation to share price -- some will be looking at this and saying -- if he is telling the truth, there is a $40, $50 upside on the short. down, in terms of risk management play, it would not be unwise to call the bluff on this. tom: what is the risk management play for the board? particularly for james murdoch? he was brought on late. a great source of discussion on "bloomberg surveillance," yesterday. do you expect board members to resign on this mr. musk does not get it going? david: it sends a very negative message. turning around on twitter, not the correct channel for this sort of thing, stating you are considering taking the company private, with unsecured funding.

if you're sending out the rationalhat, this is a tional behavior you would expect from a creator type, which he is. but there is a lot of controversy around this company in recent months. mr. musk could look to take a different role in the company, more focusing on innovation, and looking to someone else for day-to-day management. he does like to be in control. francine: thank you so much. us, peter dixon of commerzbank and kamal sharma of merrill lynch. i don't know whether this goes to innovation, whether this company would be better off private. it is spearheading a movement in the industry, because of the hotspots between elon musk and analysts. >> if you look at many of these

companies that are disruptors, tesla is one, airbnb is another. they are all falling foul of regulators. it is difficult to drive a business model forward in a way which is consistent with regulations in place. it may be that tesla is one of those companies that is not hitting targets, it is struggling to convince investors it has a viable future. maybe it is one of those companies which could benefit from rabbit owned -- from privately owned. francine: it would do with the biggest leveraged buyout industry. who would get away with that? peter: where will you find the money? we heard the potential saudi investment -- maybe it will not be selling a majority stake. it could be a partial stake. i don't know.

it would reduce the size of the publicly available company. it is clearly an interesting time to do this. given where markets are now, in terms of valuations, someone has to have a big conviction that this is the way forward. tom: also if it is not an equities to, what it means for rate rising in the u.s. -- the 2-10 spread, 29 basis points, yields turning as well. we will continue. coming up, the chief operating officer for a small start up, softbank. look for that in the 2:00 hour. this is bloomberg. ♪

♪ francine: this is "bloomberg surveillance," i'm francine lacqua in london. let's check on what is trending. tictoc, the oscars will add a new category next year, best popular movie. the ceremony will be shortened in order to win back tv viewers. on bloomberg.com, new sanctions against russia by the u.s.. our most read stories on the bloomberg terminal, new york has a proved a one-year cap on ride hailing services like uber in an effort to cut congestion in manhattan. top story, the mystery surrounding elon musk's plan for

tesla. still with us, peter dixon of commerzbank and kamal sharma of merrill lynch. return to italy. prepared toen return to tough tactics to win concessions from the eu. is this the most feared thing in the markets? we suddenly see volatility in italian yields, impact in europe? move in recenter days which has taken euro lower, the bellwether trade, euro swiss. what markets are assessing is -- where is yen going? we are still have some measures the administration wants to put in, such as the migration issue already in place but the more existential issue is -- what

does this mean for italy's future in the euro? we're not suggesting that italy is about to leave but what we can foresee for autumn is budgetary negotiations which will lead to inevitable tensions. francine: if we have fresh elections -- does that automatically mean, next year, say, does it mean euro membership takes center stage? >> i don't think necessarily because that is the platform the italian coalition has been working toward. the polls would need to move significantly for the market to assume there is a different outcome to what we have seen. if anything, you could see a slight move to one of the other parties. is in aly the market wait-and-see moment. spain, the market jumped all in to the risk.

they are more savvy now. tom: peter dixon of commerzbank, and i dotioned greece not buy the idea that italy is the next greece. i am not a big fan of pricing versus foreign-exchange but here is the gloom of italy. 2011, 2012, we are nowhere near that. help me. italy is not greece, is it? peter: it isn't, clearly. on the one hand, italy is a much larger economy. it cannot be pushed around by that eu in the same way that greece was. tom: why doesn't italy push back? thing, it is the world's third-largest bond market. if you want to shake the italians, you start to rattle the italian bond market and that spreads risk through the rest of

the eurozone. the italian position is they want more concessions, they don't want to leave. we are not hearing any signs from a tight politicians that they are serious about wanting to leave europe. in 2015, we had a situation where the greeks were prepared to leave the single currency region. it is very different. it is a different economy and environment. greece is one of the original signatories to the treaty of rome, integral to the eurozone. it will be cut more slack. tom: let me show you this chart. this to me is one of the most interesting charts of your italy. this is per capital nominal gdp and italy has gone nowhere for a decade. longer. extraordinary chart, francine. it picks up the polarity of a

nty and north versus -- bouya north versus south flat on its back. francine: 1.5% in 2000, last year actually. people did not feel the benefit and this is the difference between growth in europe and other ones, it is export driven growth which people do not feel they are benefiting. is economyly, this that has structural problems. what can the government do? are you hoping they stick with the finance minister so we avoid volatility in markets we could see? >> i think tom registers a good point. that is probably at the heart of why the italians are so upset. there has no been -- there has not been growth. they do not feel better off as a consequence of eurozone. one of the reasons why italy signed up in the 1990's was, it

allowed, it took control away from the unstable government which had been in place in italy for the preceding 50 years. it is a much more technocratic environment. italy is still not getting benefits of being part of the single currency region. the government knows what it has to do. it has to reform the labor market, more production. there are differing interests to push that forward. you are both staying with us. in the last couple minutes, headlines from the kremlin. this is the first time they are speaking after the fresh wave of sanctions, which we do not know exactly what they will involve. we know they were in retaliation to the u.k. nerve agent case. the kremlin talking to reporters on the ground saying -- first of all -- russia has not been involved in the u.k. nerve agent case. the kremlin is saying the

russian financial system is stable. that of course after the fall in ruble and u.s. sanctions has not improved ties. it goes back to what we saw in helsinki, then suddenly you sought sanctions may be even harder because the president wants to distance himself. tom: helsinki is old news now. i guess it is a coordinated system between the united kingdom and the united states. we will see how president trump responds. headlines coming out from the kremlin. we will continue to cover russia with gregory white in moscow. from new york and london, this is bloomberg. ♪

♪ taylor: this is "bloomberg surveillance," let's get the bloomberg business flash. scrapping a merger that would have reshaped the retail and health care industries in the u.s.. the transaction was opposed by advisors. one of them, iss says owners

would not have gotten a fared interest. deutsche telekom forecasting higher earnings bolstered by growth in the u.s., underscoring the deal for $26.5 billion. they are the market leader in germany and in europe where growth is hard to come by. german conglomerate reporting a loss in the industrial unit. the company has been facing pressure and last month the ceo resigned under fire. interim ceo trying to turn it around. he spoke to bloomberg about the obstacles. >> we do not like protectionism. we like free-trade. this is only good for business in the long run for the countries to develop -- trade wars never help anyone. we are not a friend of that we have to deal with the issues.

we are set up worldwide and producing. we have a clear plan forward and i hope these uncertainties will go away because for all involved parties, they can only be good to have a solid and stable environment. taylor: that is your bloomberg business flash. tom: ruble chart. kremlin headlines out. next. denying the united kingdom events. ruble comes in weak. a reversal here after sanctions. francine: we have a great story on the terminal talking about the outlook for chinese currency, coming down to economic data. we are focusing on the trade war . if you look at economic data, i wonder whether it gives support to currency. it is asia's worst performing currency falling 6% since june.

this chart looks at the potential for women -- four run in the. if you look at it, kennedy weaponize? -- can it be weaponize? >> there is speculation if the chinese have been weaponiz ing., the depreciation absorbs the tariffs imposed. what you have said is right. the relative macro story, the fed is tightening policy, you have the chinese easing policy. the chinese have seen the impact of looser domestic credit conditions and impact in the ecb , sterling and the dollar. this easing of credit conditions is leading to weaker currency. francine: the question is -- is

there a policy of risk in the stimulus? if you stimulate you much, the chinese economy, you go back to high debt and leveraging? >> it is certainly risk. the sense i get looking at chinese authorities is they take the economy, down over 6%, it is still heavily in debt, you do not want to ease too much. the long-term effects of adding more debt to the chinese corporate balance sheet is going to come back and bite you in the long-term. tom: thank you so much, gentlemen. this has been fascinating. kamal sharma with merrill lynch and peter dixon of commerzbank as well. we will move forward. the united kingdom department of trade advisor will join us and

we will talk about the tensions that link politics to economics worldwide. nigel wilson will join us as well. we will talk to mr. wilson about tesla and what is the board to do? turkish lira dramatically gives way overnight to a weaker lira. people waiting for a statement from mr. erdogan on the financial system. maybe we are waiting in washington for a statement within the paul manafort trial? it may be a statement from the president and how he will campaign, to the first tuesday of november. stay with us. this is bloomberg. ♪ two, down and back up.

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which could save you hunreds of dollars a year. plus get $150 when you bring in your own phone. its a new kind of network designed to save you money. click, call or visit a store today. tom: this morning, call it idiosyncratic thursday. , theuble strengthened

kremlin denies they assisted in those murders in the united kingdom. the turkish lira weekends. how will president erdogan respond to 20% plus interest rates? how will president trump campaign to keep the house. when in doubt, send ivanka trump to the suburbs. ast will james murdoch do elon musk decidedly goes it alone? this is "bloomberg surveillance." we are live in new york. i am tom keene in london. francine, headlines out of the kremlin moments ago. emotion ofup in the salisbury, england, doesn't it? francine: it does. first of all, we need to wait for the sanctions from the u.s. to see how much they will hurt the russian economy. we have not heard from president

putin about how he will react. for the moment, they say they were not involved in the attack in the u k and goes against what they thought their relationship with the u.s. was like. tom: huge news flow. let's migrate to north korea. here is taylor riggs. >> there is a report mike pompeo has given north korea a deadline on nuclear weapons. according to a new site, he told of 70%ime it must hand of its arsenal in 6-8 months. the report says mike pompeo has presented the plan a number of turned down each time. italy battling the european union over its budget. the prime minister says it is ready to use tough tactics it used to win concessions on migrants. the government wants a not -- enough flexibility.

investigating elon musk's claim he has money secured for an $82 billion deal to take tesla private. musk has offered no evidence to back up his statement. the sec has asked the company if what musk tweeted was factual. a shakeup at pandora. the ceo will step down at the end of the month. pandora lost a quarter of its market by you this week when it cut its profit forecast for the full year. bloomberg spoke with the ceo. >> we have doubled the company in the time i have in here. we have set an internal and prudent strong strategic direction for the company, so that i do not regret, but clearly if we look at how this has been seen in the stock

satisfied witht the development we have seen there. >> global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. thanks so much. picture of the day, really interesting nuances, curve flattening, the euro weaker with resiliency in the dollar, oil weaker. underll market, the vix 11. ago, andira moments there is the two-year in turkish lira. that is untenable. , crudee: dollar gaining near a seven-week low, shares down today. look, a mostly positive session in asia.

chinese equities shrugging off the tariffs, but concerns about tariffs, geopolitics overall. turkish lira and russian ruble as this islumps deepening. moscow,ht now in gregory white is with us with bloomberg news. we will be discussing headlines out of kremlin. kevin cirilli as well. we have got to look at the politics of the suburban america. the washington post making a big deal about ivanka trump to the suburbs. issue going to save the day for the president and the gop? >> every time they have deployed ivanka trump anywhere come she has gone to key battleground , to the suburbs.

i think we should dig deeper into these numbers. republican,at college-educated, millennial women, they have been a key independent vote for democrats and republicans. for obama in the previous selections, then the romney campaign tried to go after them, and now they are here. , thef that said administration and sources that work with this white house feel ivanka trump can make that case to her peers. it is not about getting 100% of the vote, just a key sliver. tom: the president is not a politician. does he have political advisers on a given midterm election? >> yes, he does. the president has stumbled down -- double down on the rhetoric they feel will get out a base movement.

many people are saying you have got to attract independents. it is why you have seen melania trump break with him and why you have seen ivanka trump break with him. they are trying to expand the appeal for independent voters that don't like republicans or democrats. whatine: when you look at is happening with russia, how would you describe the relationship? friendly, not? to besident trump going tougher with russia than his predecessor because he does not want to be perceived as being friends after the helsinki show? solved.hetoric has been we have not seen aggressive rhetoric directly from president trump. on the flipside, you have to look at the actions. the policy positions with regard to energy policy have not been changed, nor any change in syria

policy or policy through the united nations. the second point is you also have lawmakers on capitol hill who are adamant president public and a dock a tough frederick when speaking to russia, and i would note that a press conference the brief onr how serious cybersecurity is with regards to the upcoming midterms. president trump appearing at a campaign rally later that day did not mention that at all. francine: thank you so much. our chief washington correspondent. let's get to gregory white. , there hearing their kremlin saying they were not involved in the nerve gas agent, and this goes against their relationship with the u.s. likelynlikely or more

they will keep on refuting the fact they were involved with the nerve gas agent attack in the u.k.? >> i don't see any chance the russians will turnover and say, you got me and we did it. they have been struggling to deal with the mixed messages out of washington, where they get encouraging signs from trump, then get tough measures like the sanctions last night. you can hear that in the comments of the kremlin spokesman, saying this does not fit with what we came home with from helsinki. this is a different administration and we don't know how to process this. tom: what will be their response to dramatically? what weapons do the russians have? >> they don't have a lot of cards to play. their economy is smaller than the u.s. is to limit is left

things like rocket engines supplied to the u.s. space program would hurt russia too. there was a threat back in spring they might cut off titanium supplies to boeing. there are not a lot of other buyers in that market except airbus. the titanium producer said that is not a great idea. we would get squeezed out of the market and it would not be good for us. at the moment, they are holding back and waiting to see what comes of this. we are not happy with it, but we will wait and see. tom: thank you for the briefing from moscow. ourwhite, the head of russian government coverage. credit suisse with us now, a massive global platform looking at the linkages of global exchanges. we could go this way, this way, this way this morning.

what does a nation do when the two-year is 22%? in our textbooks, you don't go forward, do you? >> you have to take pretty aggressive actions. tom: where is he this morning on this? that is hard to tell, and is why have such a large risk premium in those assets. we don't know what he is thinking, but we don't know what the other players with respect to u.s. sanctions are thinking either. that is why you have such a large risk premium. if you add in high inflation -- tom: it is almost a dishes cycle. doom and gloom, russia, argentina, turkey and him may be the president as well. gloom you push against people who say turkey omg?

>> sometimes it is not a good idea to push against that view. the market is very under weight turkish assets, but the reasons to be in that position are many. signs of a see some movement in the right direction. whether that is in terms of being more compliant on international relation issues, or on the other hand, whether it is monetary policy. one of these things, preferably both, have to move in the right direction before you squeeze people back into the market. francine: good morning from london. what would it take for you to turn bullish, or at least positive, on turkey? >> firstly, any sign of an improvement in the geopolitical climate, with specific relations to the u.s. that would be helpful.

the market has been disappointed by what appears to be a lack of credibility when it hike to the capacity to rates efficiently to stabilize the currency. that would he from the technocratic perspective the best outcome. if you look at what is happening between saudi arabia and canada, between the u.s. and russia, what is happening with the u.s. and turkey, how difficult is it to figure out diplomatically where it goes? , aif it is a new environment merry-go-round of disputes with the u.s. at the center of most allhem, which is driving fx over the place. peso, the nafta issue looks better, so that will come back. instead we moved to turkey. the fact there are so many

different issues on the table at nafta, it makes our job or interesting, but it is a new paradigm. it means these currencies end up with a high risk premium than they would normally have. that probably means higher real rates to keep them stable as well. francine: thank you so much. wilson, we will talk about insurance premiums and risks. bond yields is coming up in 30 london,at 11:30 am in 6:30 a.m. in new york. this is bloomberg. ♪

>> this is "bloomberg surveillance." i am taylor riggs. adidas got a boost from the world cup. it posted second-quarter revenue and profit and eat estimates. it was driven by growth in america and asia. the deepest sold a record number of soccer jerseys, even though the teams and sponsors lost out to those back by nike. done and bradstreet is going private, valued at $6.5 billion. profit has fallen by more than half since 2014. on chinese made products are starting to have an impact on american companies. some will have supply chain exposure and is shifting

exposure to other countries. the u.s. china business council in beijing says some production has been moved to brazil and the shift is likely to speed up if u.s. tariffs amount. that is your bloomberg business flash. francine: thank you so much. the u.s.-china trade war shows no signs of easing. the u.s. announced duties on an additional $16 billion worth of goods. china has responded in kind. still with us.s simple question, but difficult what happens to renminbi? tariff issuesthe are in play and could get worse, the underlying trend will be towards a weaker renminbi. what we have seen from china recently is a step up of slowpts to stabilize or the pace of its decline. you have seen high capital

charges on ford rates, talks of introducing measures each day. these are designed to clog up the wheels of the system and make it harder for the two fall, but you can't turn the trend around until you have some positive news when it comes to the underlying story. that still seems some way away. it francine:ponize -- francine:will they weaponize it? the u.s. trying to weaken dollar and renminbi weakened artificially? >> there are signs the renminbi is being weak and artificially at this point. the market is saying that china's economy will be weaker as a function of tariffs, exports softer. the currency is reacting to that by falling. if anything, were the chinese to make it clear they were trying

to weaken the currency, they have the risk of generating capital flight in china and creating something they can't control easily beyond that. i'm not sure they are trying to force it down to but they are trying to allow the market to take it where it needs to be to reflect the new trade story. tom: good morning everyone watching. here is the chart right now. , trade weighted broad dollar, including china and asia. the dollar is not all that shone. sure, cheap, cheap, cheap, up we go with dollar strength, but we -- some roomed to to move on trend here. how rich is the dollar? >> given the diversions and economic performance, it is not that rich. tom: thank you. francine: from the perspective of president trump, that may appear rich. >> the underlying flows are

still dollar positive. that is not going to change soon. tom: i want to talk about em with you and the idea of using a pacific rim index as one signpost. speak withwe will the united kingdom department of trade advisor on international economics and the buttressing up against the white house. please stay with us worldwide. this is bloomberg. ♪ g. ♪

thursday.athon it about we are race it so doesn't look like a john madden football chart. this is the pacific rim ex japan, strong dollar, short asia, extraordinary chart. how do you link the president of united states to this persistent pacific weakness? , u.s. interest rates are going higher because of tax policy. that raises dollar against most currencies. the other factors specific to asia is the tariff story. we see that mostly aimed at china at this point. of their currencies and countries get sucked up within that. the combination of these factors

combined to create the conditions we have now. francine: what does that mean for your favorite plays? do you short the commodity-rich currencies? traded directly by being short asian currencies. that is the lower yielding currencies like the korean won that make more sense. indonesia has a lot of local risks. within the asia-pacific region, there are currencies that some feel over time will correlate with this trend, new zealand dollar being one, given it has its own local problems. tom: where am i going to make money on this? i need to make money this morning. what is it? dollarave locked the higher against the low yield are's. tom: what about the philippines? manila is not ankara, is it?

>> you are taking a lot of local risks been, which requires you to think about more local issues. i don't have a strong view on those right now. i would trade and larger, more liquid currencies. ,rancine: some breaking news tribune media terminating its merger pact with sinclair broadcast. they are also filing suit for breach of contract. this is something we need to talk a little bit about more. date walk day for the transaction. this is bloomberg. ♪ this is bloomberg. ♪ retail.

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they will sue sinclair in some form. i will read this out the bloomberg terminal. their chief executive officer says of tribune, "this uncertainty would be detrimental to our company tribune and tribune shareholders. accordingly, we have exercised our right to terminate the merger agreement and by way of our lawsuit intend to hold sinclair accountable." all sorts of american politics involved here over sinclair, a conservative invoice wanting to keep attached to their station network. that was maybe that nuance beneath this proposed merger. francine: this comes two weeks chairman said he stood by his agencies decision acquisitionlair's to a meeting, so also a

political dimension. we turn to international economics and politics, first word news. russia is threatening to retaliate for a new round of u.s. sanctions. the u.s. is imposing penalties to punish the government for the nerve agent attack on a former double agent and daughter in the u.k. response wast defiant fight and officials denied any involvement, that they stopped short of threatening specific measures against the u.s. to release ausing detained american pastor at the center of an escalating feud. ,he u.s. has imposed sanctions and a turkish delegation came to washington to meet with the state department. there are concerns about a state run bank being investigated over a scheme to evade sanctions on iran.

there is a report president trump has suggested privately he is oprah to broader reforms than he has previously back. the president met with republican senators to discuss comprehensive prison reform legislation. senator grassley said the president is in support of a recent compromise. the new york city council has dealt a blow to uber and car hailing services, a one year cap on new licenses and they gave regulators to set minimum pay standards for drivers. unrestrained growth has led to congestion in manhattan and hurt pay for drivers. global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. thanks so much. alumni meetingle of the london school of

economics this morning. credit suisse is with this, and pippa doing a lot with the u.k. on trade. that means brexit. she has worked for the younger george bush. she has worked in robotics. it has been in a collective half -- an eclectic path for the economist. you talk about trade weighted united kingdom this has come up twice today in conversation. we are on the edge of john major. this is the path of brexit raking down below here. back to 1992, is this the u.k. of 1992? it is.n't think it is not in the same scale. many of the investors are saying i may not like the uncertainty of rigs it, but it is still not easy to make money on the continent.

it is not either or. reactions are's commensurate. foreign investment in the u.k. is still rising. tom: i know you have a bias as well him up with the idea of linking market activity with what people do with money is a key determinant, isn't it? >> that's right. the currency is trying to look ahead and price in a risk premium to what the u.k. could look like in 2-3 years if we end up with a new deal brexit. at that point, questions will be asked about how much investment the u.k. will be seeing, and the pound is trying to price in some probability. >> the weaker sterling goes to the more competitive it is. tom: francine? francine: the concern manufacturing only makes up a small part of the u.s. economy. the economy so relies on financial services, if there is

a disorderly brexit, what does that mean for this industry for the u.k.? views,e are my personal but money is like water and it will move to where there is the least resistance. unless the british racer taxes ,re regularly take above the eu then capital will continue to flow into the u.k., more so if sterling is weaker. the idea of the city has to be smaller going for it is no deal after brexit doesn't add up. francine: where do you see pound from here? does it weaken? is it justified weakening? >> i think right now the market is aware that september poses a ,umber of risks, the eu summit the conservative party conference at the end of

september, and the fear is that the u.k. government has to sound bee it is willing to deal or ready to put it risk the possibility of a no deal brexit. that reality keeps the pound under pressure. it has hit some technical levels now. it differencemake from the market perspective. the near-term direction is a weaker pound. tom: one theme today is how idiosyncratic it is. we had substantial turkish lira weakening. we've had kremlin headlines about the u.k. and such. or the we coalescing contagion or the correlations of the market, valid now? >> i think what we are underestimating is the brexit movement has moved on to the continent as well.

we have many separatists movements. we still have issues in spain. we feel it in the denmark, netherlands. tom: will we feel brexit in the united states? is thee: the point sentiment of populism is saying we want a different kind of policy environment is everywhere, even in china. tom: how do you fold in the fiscal experiment now? we have a wave of austerity through europe. to look at u.s. auctions and the expansion of u.s. debt. will that be a driver of discussion in the autumn and next year? >> markets are always preoccupied with these epic there levels of debt, but is a return of inflation. every major institutional investors sank i have to get out of cash and

something that can out run it. some wealth funds are coming into the equity markets, private equity, cash coming off the sidelines, not because they see something so wonderful, but because they have to get out of cash. think we wouldi suggest taking tesla private as a use of cash. francine: that is one way of betting on technology. when you look at world growth, treasuries, can treasuries reach 4% plus? >> it seems like the market does not believe that is achievable. the yield curve is very flat at this point. the belief is growth would slow quickly given how much leverage there appears to be in the global system. i subscribed to that view as well. particularly if we find you can't go into next year with

more policies that add more fuel .o the fire for example, fiscal stimulus starts to wane. then you will find the market was struggle taking us to levels like 4%. francine: is there anything in , that should's did be a warning to the treasury market? >> any move that can be incrementally seen as a tightening move from japan can be put in the category of a warning, but you have already had a small movement in 10 year terms and thelute introduction of for guidance from the boj, which means that as long as the inflation rate stays as low as it is and keeps disappointing the boj, the odds of a dramatic shift higher in japanese yields are still low in my view.

flow intokeep the u.s. treasuries continuing for the time being. tom: what are you thinking about? we are in the dog days of summer. there has to be a killer essay in september. >> i may be the last person left who think asset markets have a lot higher to go. earnings are earnings, earnings are earnings, and earnings are more earnings. is that your theme? >> it is a combination of a little inflation makes everybody go into real assets. trillion we did not have during the financial crisis. the fed can raise a couple of times. is this the beginning of normalization, which is affirmation you should be getting into markets. robotics, automation, ai -- tom: tesla. francine: the new public is private. tom: that is an important trend.

well said. out, 3, 2, 1. thank you so much. we will continue with credit suisse. coming up, an important conversation. the chief executive officer, biogas, maybe they will talk about one of their bond managers, mr. gross, 10:00 a.m. this morning this is bloomberg. ♪

>> this is "bloomberg surveillance." i am taylor riggs.

rite aid and albertsons have agreed to stop a merger that would have reshaped their industries in the u.s. their transaction was opposed by two proxy advisors. it says right age shareholders would not have gotten a fair share in the combined company. deutsche telekom forecasting higher earnings posted by growth in the u.s.. is the marketom leader in germany and elsewhere in europe, where growth is hard to come by. a company facing pressure from activist investors, and last month a ceo resigning under fire. krupp is being turned

around. >> we don't like protectionism. we like free trade. this is only good for business in the long run and for the country to develop. ,rade wars never helped anyone but we have to deal with the issues as we are. we have a clear plan forward. i hope these uncertainties will go away. for all involved parties, it can only be good to have a solid and stable environment. >> that is your bloomberg business flash. francine: thank you. first-half profits beat estimates and higher profit forecast for the rest of the year, now nigel wilson the chief executive joins us. a look at to have what your industry can bring and will bring. earnings, what are you most worried about for the future? >> i am not worried much for the

future. .usiness is good long-term rates, had low interest briggs, many other factors, and inhave delivered 10% growth eps and 20% r.o.e. for the last 10 years. daycine: i feel like every there is one story about consolidation, m&a. where do you play into all of this? do you want to be a choir -- an acquirer? >> we can't be complacent about it. we have had a focus strategy. if things come up, we will look at them. we are not looking for huge, transformational deals. we have a great strategy and are

executing that well. insurers how many big around the world do you see in 5-10 years? >> i think the industry will change. up is sotunity scale much better than they have ever been. competitors don't exist. they have closed down or have been consolidated. there will be exciting new entrance. a lot will fall by the wayside. a lot of major exits in our business. the landscape has changed dramatically. it is changing rapidly and asia. withi can do this with you your it eclectic wisdom in economics. i want to talk about james murdoch. we are seeing an original corporate exercise in tesla.

you have a guy on your board, i know he is trouble. you wake up every morning worried about what he will do. it is a nightmare of a ceo. what is mr. muska going to do with his board, and what will james murdoch do as a board member at tesla after what we witnessed over the last 48 hours? >> if i had done that in the u.k., i would not be sitting on the program today having a pleasant discussion with you guys. it is interesting what you can get away with in the corporate world and america. the regulators here would be harsher on me. tom: what should board members do, seriously? you have a wonderful board. how should the board members respond to a new york times or an sec lookport of

through and where the money will come from through this transaction? this is bizarre to say the least. >> it is bizarre. i don't know the specific dealings of the board. --now how boards broadly they would have me in for a full explanation if i made that comment. hopefully the board will sit down and talk to what is a brilliant entrepreneur who is frustrated with the markets. we all get frustrated with the markets. you can't take it out on them. the only person who wins in the end is the market. it goes back to the relationship that a chief executive should have with analysts and shareholders, right? do you feel like your shareholders are two short-term -- too short-term?

>> that is why we have seen structural underinvestment. the companies that have been investing are the ones that have been the more successful, u.s., large technology companies that have driven the stock market in america. they have done a great job of responding to customer needs, delivering great products, and creating huge advantages. we have to copy the best of what they do, not the worst, in terms of the issues they have, but investing for growth is what legal & general is about. also, read generating macro economy in the u.k.. weak because of a lack of investment. francine: how do you invest in technology? how much do you spend on algorithms as opposed to security and data protection? >> we have a serious

cybersecurity program. we invest in startups, scale ups. 200 start upn businesses last year across the u.k. we are taking 20% to 40% ownership. our top companies are investing heavily in technology to lower costs and better customer journeys, but we have a big cyber investment program as well. we have to do that because it is the right thing to do. tom: where do you see the business going with rates higher? is your assumption action going to knowledge up here with higher u.s. interest rates? is the policy of chairman pal a change agent for -- chairman jay powell a long-term change agent? >> some of the things we have been doing in the u.k., building

future cities -- i and spending quite a bit of time in the north or outside of london talking to manchester,lasgow, what the cities can do to stimulate economic growth. the u.s. has great examples, boston, denver, seattle, high-growth, technology-based cities. we have better universities, so we should be doing better than we are. we have to invest more to grow. instead of waiting for the central government to help them, they have to get on and help themselves determine themselves. tom: what is your calendar for brexit this fall? clear one guest that make this is the global issue. andn imagine that with em all the rest going on that brexit is a real determining going forward. how do you read that?

are doing soment good negotiation in terms of saying there is a high probability of no deal whatsoever. encouraging people to come up with a solution that is good for everyone. if we truly believe in free trade, they should be getting on and getting the deal sorted out and moving forward. i don't think in the short-term it will make a huge amount of ,conomic difference to britain but there could be bottlenecks if we have not got the logistics sorted out in the latter half of 2019. people feel poor or have less spending power, they cut back on insurance? >> i don't agree they will get poorer. francine: they could. >> what we are seeing is the u.k. creating a record number of

jobs, highest vacancy rates we have ever had, so there is a different story out there outside of london. mencine: the bbc is telling i may not get my medicine in time. part of it may be scaremongering, but you don't really know the effects. deed a people work in mastic economy and will continue to be served. a lot of two-way trade of the same products through the same firms. the idea we won't have drugs and food available is nonsense. that we need to continue to plan for. the likes of ashes in a cup are holding a slightly higher amount of drugs in stock, but it is not wartime we are talking about. we are talking about a relatively modest amount of products where there may be bottlenecks as a consequence of rigs it. francine: i am really worried

about the imports of french biscuits. this is serious stuff. >> i will bring you some back. francine: what are the chances of a disorderly brexit? sense iserly is in a what happens at the respective .orts it is not in terms of people, jobs come and what we will have available at a macro level in the supermarkets across britain, pensions not being paid. that is not what will happen. there is a long way to go in terms of negotiations, but the premise is prime minister may is in charge. we are agreeing that the course of action is transparent and the european union is responding.

i have the privilege of having commercial negotiations in private, which is easier than public negotiations. tom: nigel wilson, thank you so , much more & general to talk about. terrific news flow, em, russian ruble, criminal headlines, and turkish lira new weaknesses and silence from president erdogan in ankara. the domestic politics of the united states. the yen flat. please stay with us through the day. this is bloomberg. ♪ is is bloomberg. ♪

talks withheld

softbank, but talks went nowhere. to russia with love, new sanctions on russia, dragging the ruble to a record low as geopolitical risks rears its ugly head. inflation expectations rollover with the oil price, the latest read on deck. david: welcome to "bloomberg daybreak." the dog days of summer am a but governments keep us going. alix: we are in the dog days of summer. david: russian sanctions, saudi arabia fighting with canada, turkey. alix: i wonder if we are looking at such compressed liquidity. david: markets may be overreacting. everyone has gone to the beach. alix: we are here. stocks around record highs.