istanbul.erage out of we thank you for watching "bloomberg surveillance." ♪ daybreak. >> turkey's action plans. banking regulators step in to stop the lira freefall. a fix or a band-aid? and iran is the biggest casualty -- goldman sachs says the spillover should be eliminated. el-erian warns of tightening global liquidities. he blames stronger late -- stronger rates in a stronger dollar. i am david westin back with

alex. what you do with turkey? alix: we are seeing the rush and the rest but not as much as we thought. 15%.es were up today they are negative but off the lows of the session. see a 1.10 on it i euro-dollar. the 10 year yield getting a little bit of safe haven not the type of move we saw on friday. oil state pat. david: it is a big story. the question for today is how far it will expand. now it feels like it will not expand quite as far. alix: if you find up -- if you want up having more, what do you have to sell? i do not know if we are there

yet. today feels more like we want to look for opportunity. today, the media will get to meet the astronaut scheduled to travel on spacex. 2:00 this afternoon, the congressional budget office releases an update to its economic projections for the next 10 years. on thursday, brexit talks resume in brussels and over the course of the week we will get retail earnings from home depot, macy's, walmart, jcpenney, and nordstrom. we are joined today by bloombergs romaine bostick and peggy collins. the first story has to be turkey. we will put up what has happened to the lira over the last five days. just record low after record low. that is the dollar rising against the lira. let's talk about what they have done to strengthen the lira a little bit today. they announced changes in the

policy. going to liquidity. easing bank collateral and trying to step on all of the speculation by restricting dollar/lira swaps. they are trying to reform. will this be enough to shore up the lira? peggy: it has been enough to give a sigh of relief in some way. we thought today could be a bloodbath but it seems like there has been a little taken off. the market is looking for a move related to interest rates and for now we are seeing turkey's government is resisting that or going directly to the imf. that is what the market is looking for now. alix: president are to one speaking in on kara -- speaking in opera right now. -- we must besis ready for different forms of the attacks and the attacks on turkey are expected to continue. it is more of the same.

is this rhetoric what is going to matter going forward or will it be the financial minister and his actions or will it be about the market or dissipation -- market participation? romaine: president are to one -- president erdogan is fighting the u.s.. it clear have made that this easing of what he is doing is not going to be enough. they want the interest rate hikes, they want changes in fiscal discipline, they want changes in monetary policy and they are not getting it. that is why you have a market down over 5%. that is why you have a lira at 7%. that is what the market is telling you and president erdogan does not want to hear it. david: he does not want to cut back on fiscal policy. there is one alternative which is capital controls. at some point you will be forced

into capital controls. risks.that has its own it is important to remember that president undergone is talking -- president erdogan is talking to the word and his people. he is coming off a coup and trying to tell his people he is their leader. i think it is important to remember he is speaking to the people and the markets are trying to talk to the people who are underlying that government in terms of the finances. turkeys biggest bank has come out and say we need action on the interest rate level. we will see whether or not that is convincing. from more headlines president erdogan talking in ankara and says the u.s. is attempting to step turkey in the back and steps need to be taken against these accounts. he says the lira would settle in a rational level soon. no retreat from free market economy. have 20% or nearing

20% inflation there and your currency is still weakening. what does that tell you? we are talking about fundamental principles of economics and policy that forever -- that for whatever reason he does not want to embrace. if he thinks there is political gain, you have a market that says we will take our money elsewhere. alix: that having ripple effect through other emerging markets especially in south africa. you have the peso and the rupee all falling. will it be a pause? have seen jpmorgan strategists come out and say the issues in turkey are specific and unique to turkey. broadly it may not be a reason to sell up emerging markets totally in terms of investors. saw, any type of weakness

and emerging markets in one country is definitely rattling others like the mexican peso or the indian rupee. david: which raises the question or is it one off betraying more fundamentals that may cut across other markets? romaine: that is a hard question but one currency trader said something on friday, it is not about contagion, it is about risk aversion. you see a lot of traders looking at these other currency and saying do i want to be in this environment? when you talk about the us in craddock risk, a lot of this is pretty -- about the idiosyncratic risk, a lot of this is percent dictated by the stronger dollar. a lot of investors are looking at all these factors in saying em does not look like the safest place to be. alix: the correlation between the lira and the em pick up as well. idiosyncratic at

a point but people are starting to think this could be a broader issue and we could see more contagion in the sense folks do not want to be exposed to em. isx: a lot of the verbiage this is a turkey specific issue or a u.s. issue. mohamed el-erian raised a third point and senate also be about the fed. when it comes to global liquidity the world is in a transition away from a period of loose financial conditions engineered by central banks. affected asset classes especially emerging markets which has experienced considerable capital outflows. there are does good things to take away from that are to watch going forward. we have seen a lot of people focus on the european banks in relation to turkey who was exposed on the lending side and a lot of that has come through central bank easing where banks had the ability to loan to businesses in turkey. where is that rest?

whenever the fed is tightening on the u.s. side that is something rippling across the yen markets. we have seen a lot of readers -- across the em markets. the fed says we cannot keep everybody in mind and our goal is the u.s. economy. they are walking that tight rope. thank you so much, romaine bostick and peggy collins. you see president erdogan .peaking in ankara in turkey he says those spreading speculation will pay and the u.s. will pay for the economic war they are waging. not taking a lot of responsibility. david: my favorite one is measures will be taken against economic terror personalities online. he has put the two together with economic terrorism with speculators. alix: he will tweet on it and go crazy with that.

the tariffs wel just spoke about on gtb go. coming up, more on the turkish tour more oil -- on the turkish turmoil. this is bloomberg. ♪

emma: shares are following in the premarket. the agrochemical company monsanto was hit with $289 firstn of damages in the trial that claimed weedkiller roundup causes cancer. monsanto will appeal of the verdict and says the decision

was at on's with the evidence. -- the rest of the company will and include in footwear brands such as north face in timberland. sales of genes slowed in recent years. -- thes a report that wall street journal says elliott those more than 8% to nielsen and plans to push the company to sell itself. nielsen says it continues to die you had a best -- to evaluate how to best position the business. david: the big story is the growing turkish economic crisis with the lira continuing its a store fall in turkey is trying to take steps to stop the bleeding. these are some of the things it has done to address the liquidity concerns. also restricting dollar/lira swaps because as president about, has been talking he says he wants to stop the speculation.

joining us from istanbul is use of aldean -- is yousef gamal el-din. us what they did and why it apparently did give some relief to the year -- to the lira. sef: the market was waiting to hear from the central bank and they came out with a statement that said they will do whatever they need to do to preserve financial stability. they helped out with some of the liquidity as you pointed out. they did not do anything about the interest rates which is what the market wanted to see. -- the lirareaction recovered some of its losses. the big elephant in the room are those interest rates. unless he buckles on that front, we are unlikely to see a meaningful move. that is what people on the ground tell me. david: even as president erdogan

is speaking right now and does not seem like he's inclined to move interest rates. let's talk about what he said over the weekend. unilateral action against turkey by the united states will only serve to undermine american interests and security. washington must give up the misguided notion that a relationship can be asymmetrical and come to terms with the fact that turkey has alternatives. failure to reverse this will require us to start looking for new friends and allies. that sounds ominous. who are those friends and allies they will turn to? yousef: they have friends in the middle east. they have russia. they have china. fromentioned the comments president erdogan, digging his heels deeper. the market was perhaps hoping for a conciliatory tone but what we are hearing here are attempts to make turkey into a paper tiger pointing out that the

economy is under siege and they will go after those people attacking the economy. united states stabbing turkey in the back, that is not conciliatory at all. this is an administration that believes it can top this out, even though if you look at the economic fundamentals, the inflation people are feeling on the ground tells a different story. david: give us an update on what the markets are doing in turkey, not only the lira but what is going on with bonds? what is going on with the stock market? yousef: we are seeing a broad selloff and a bit of a weaker move off of the back of the latest comments from the president. the lira is down over 7%. a lot of pain in bank stocks. this is the concern. as the lira continues to weaken it will be hard for a lot of these companies that have been lent u.s. denominated loans over the years to roll over that loan.

it is not a question of water two or five days. -- of one or two or five days. if this persists it can spread into the water system and become much worse than the currency crisis. alix: thank you. you see president erdogan speaking in ankara with strong words directed at the u.s. the question becomes can we wind up seeing the markets having to dictate what happens in turkey? is not just it about president trump's tariffs and the market will have significant impacts. >> the markets will force his hand. you cannot keep the economy going with these kinds of problems. the trump tariffs were the straw that broke the camels back. it is a big straw. he structurally had too many problems. joining us is david

lafferty, nexus investment managers chief market strategist. on a day like today, how do you play it? david: you have to be cautious. we do not see a real contagion risk from a fundamental standpoint. turkey is not that tied to the global trade flows. emerging-market investors, a lot of them tend to be tourists so they look for commonalities. they will look for countries that have significant dollar funding risk, big account deficits, significant need for trade flows, and high debt levels and you can look around argentina, hungary, poland, places like that. they will look at those commonalities and become more about the sentiment of emerging markets even if the fundamentals are not tied to other countries. alix: we can see that play out with turkey. credit default swaps for turkey.

you can see how much it has widened past what we saw in 2009, nearing 600 basis points. theour point of view, was relationship between turkey and the financial prices of the 90's? david: we are starting at much lower interest rates so it is hard to know it'll be the level of interest rates. if the fed continues to raise rates. or it will be in the amount they raise by. case, what we have is the fed's only raise interest rates hundred 75 basis points -- 175 basis points. this should offer some liquidity to the global economy. what the market is worried about is how far and how fast is jay powell going to go and if he continues at this pace or he picks up on u.s. strength, then there are potential other emerging markets you will have to worry about. to what extent is the

pressure on emerging markets a currency issue? betweendistinguish countries that have a trade deficit. i will put a chart up that shows the dramatic increase in emerging-market fx volatility as opposed to the g7 currency. as you would expect, the volatility of fx has gone up substantially more. yousef: when you look it up -- david: when you look at emerging markets more broadly, right now it is a currency story but in the last couple of months it has also been a china story, a much more broadening story about emerging markets slowing as they reflect a slowdown in china. that had taken the edge off. you also have to remember emerging markets were up 40% in the last year or so. they had a great run. china begins to slow in takes

the edge off, but do your point it has become almost uniquely a currency play in the last couple of weeks as the dollar continues to strengthen. alix: what i'm interested in is the safe haven aspect. gold is now below $1200 an ounce. if you need to look for safety -- bonds kind of bid but not the kind of bid we saw on friday. is this a you need to seek safety kind of day? it says is the market is not convinced this is a systemic risk. it is contained to turkey or contained other countries that have similar debt and currency liabilities that turkey has. we have seen that's go up a little bit -- we have seen vix go up little bit from 11 to 14. we have seen treasuries rally , it isng from 295 to 286

a little bit of a risk but it tells me the market is not convinced that turkey is the beginning of something much bigger. alix: does that mean it is why on the dip kind of day? david l.: i think it depends on which dip you are buying. if you have the ability to do the fundamental research and figure out which emerging markets are being thrown out with turkey, it definitely could be. it does not look like it is complete contagion. i do think you have to do the research and figure out that hypertension -- that bifurcation between the countries that will remain under pressure and the ones that of been thrown out with the bathwater. david: let's go to that point. the south african rand, the mexican peso, the indian rupee most affected.

are those thrown out with the bathwater or it is it a more fundamental problem? david l.: i do not think it is triggering fundamental problems. they have similarities to turkey. mexico is a liquid emerging market currency. it is where a lot of people buy and sell on the emerging market world and as a result it tends to reflect broader trends with a much higher beta. after is a place where the election we have seen a bit not only in the fundamentals beginning to show a little bit of improvement on the consumer side but the currency has done better. you see turkey begin to fall off the map and mexico begins to reflect that. as i said earlier, that looks like sentiment, not fundamental, dipaybe that is a buy the

kind of place. alix: you're looking at the ripple effect between the lira and emerging markets. the ripple effect between the rand and the lira. a trader on bloomberg had a note out that said bad economic policies, pathetic liquidity, -- that issitioning what he was talking about in relation to turkey. what kind of threat is that? david l.: i'm not sure about the positioning. i do think the politics is what is driving this. there are not a lot of easy ways after this. just trying to job own the markets is not likely to work for resident are gone -- four president erdogan. he is not a big fan of interest rate so it is not clear what he is willing to do to get in front of this train. that is why there will continue

to be pressure on turkey and the lira. that outside of sentiment this becomes contagion into other em currencies. david: it is about politics, particularly within turkey. at what point does the pressure become overwhelming on president all?an or not at david l.: the nationalistic attitude and rhetoric will play for a little while, but when prices for every day things begin to go up dramatically, and that has already started to happen, i think the leash gets shorter. there has been a lot of talk about how independent or not independent the turkish central bank is and that will be tested in the coming weeks. you of seen them do things at the margin today with collateral and limiting swaps but the market is still waiting for that interest rate hike that would be

an attempt to backstop the currency. until we see that, we will remain under pressure. alix: david lafferty of nexus will be sticking with us. ubs wants to nibble. david: in the meantime president erdogan has been speaking to a group of investors. he says our economic fundamentals are strong, we will not give up our economic vision, we will continue to expand on projects, and it is everybody else's fault, particularly the united states. alix: do not look at our inflation. david: we will have much more coming up right here on bloomberg. ♪ retail.

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near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. alix: this is "bloomberg daybreak." i'm alix steel. president erdogan saying there is no weakness in the lira.

thenarkets a lot calmer they did on friday. the dow jones futures only off 81 points. the s&p did have its worst day in a month on friday. the european banks are taking it on the chin. down 1.5%. still concern about exposure to turkey and if they want to close up shop in turkey. many things to watch. front and center is euro-dollar. 1.13 is how we print. there is worry of contagion in europe. -- that fear permeating across europe in particular when it comes to peripheral debt. the 10 year yield in italy up by nine basis points as there are no buyers in the market. the spread is deeper in the treasury market. crude off by .4.

trauma when it comes to the commodity market yet. david: let's get an update on what is making headlines. amash chandra is here with first word news. is here withra first word news. emma: the president of turkey says the economy is under attack. policy makers announced a series of measures to free up cash but there is no measured of raising interest rates and the lira fell to another low. russia is looking to protect its economy from the u.s. sanctions. deputy prime minister will cut u.s. security holdings more and reduce its alliance on the dollar. the new sanctions and the threat of more have set the ruble to a two year low. the leaders of north and south korea have agreed to hold their third summit of the year in pyongyang. will take place

sometime before the end of september. slow progress in u.s. efforts to get north korea to give up its global -- its nuclear weapons. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i am emma chandra. this is bloomberg. david: the standoff between the united states and turkey continues with neither side ready to back down. spoke severalgan times over the weekend, making plain his determination. >> you're going to sacrifice relationship with 80 million people for a pastor with ties to terrorism but we will do is the law dictates. you cannot make turkey bow down. we have just heard president oregon speaking to get -- president erdogan speaking again. aliriza.e dr. bulent thank you for being with us.

explain what is going on within turkey. president erdogan shows no signs of backing down. can he back down? >> he just won reelection on june 25. his party has a majority as part of an alliance with the nationalists in the turkish grand national assembly and frankly, given the centralization of power and authority and direction, he can pre-much do whatever he wants except he has chosen to show defiance in this case when there looked to be the opportunity for a compromise in the last month. continue giving the attitude he has been displaying as wells the part of president trump. david: an american has been detained in turkey for some

time. at what point does the pain on his own citizens put pressure on him in terms of popularity if not constitutionally? bulent: one of the strengths of president oregon -- of president erdogan is his ability to tell the turkish outlook that the economy which is in the doldrums after the 2001 financial crisis which led to his party coming to power is that things have improved in every respect. there has been a lot of consumer spending and public projects coming from funds coming from abroad. now the question is are though funds -- are those funds beginning to dry up because of his ability to can can you with the social programs. combined with an increase in prices because of the fall in the turkish lira.

we will see what kind of impact that has on him. -- he is not threatened politically, not least because of the weakness of the opposition but there are question marks like we have not had in 16 years. alix: turkey just sold fixed coupon bonds, 24.89% is what they had to pay. what is the breaking point? bulent: we will see. the central bank raised its interest rates during the election campaign. it is now at 17.75 but on the over 20. front it is it is creeping up as we look at it today. turkey's ability to borrow on the market is going to be more and more difficult and the rise of the interest rates that you refer to is evidence of that. turkey very much benefited from the flood of money moving into

the emerging markets over the past 10 years or so. reason drying up and the turkey was able to attract them -- thee last few years funds it needs -- is because of the high interest rates which erdogan opposes. he needs cap high interest rates and this is why we have speculation about the central bank raising interest rates again despite his opposition. the higher interest rates raise the burden on heavily indebted turkish companies. one of the things president erdogan says is he does not want to turn to the imf for help. he wrote that unilateral action against turkey will only serve to undermine american interests and security. washington must give up the misguided notion that our asymmetricalcan be

and come to terms with turkey has alternatives. failure will require us to start looking for new friends and allies. who are those new friends? i know the minister from russia is on his way to turkey. part of the is process which brings together turkey, russia, and iran to talk about syria. turkey and russia have a major relationship that has been expanding to the political realm. i think there are limits to that relationship because they do disagree on what happens next in syria. turkey is backing the opposition. russia's ability to help turkey financially is extremely limited. the more interesting country we need to look at is china. the treasury and finance of turkey was recently

in china. turkey attended the conference in south africa and there is a lot of speculation in the program of is there a new economic model turkey will participate in in which china will be a major supporter of turkey in which he continues down a path of high-growth and public projects. there are question marks over china's ability and willingness fundse in and provide the instead of the western funds that have been coming into turkey. that is what mr. erdogan is talking about. david: he cited economic vision converging with china. what about one belt, one road? is that a way for china to make some of the infrastructure he wants to make? bulent: we will see. been accusations against

china that is engaging in predatory lending. did take a lot of money from china as part of its involvement in the project. it has had problems with respect to the $9 billion loan it took from the imf. president us back to erdogan's dilemma. the imac had come in in 2001 with major standby loans. since he came into power he has been saying that unlike my predecessors i'm not going to look to the imf for support. if turkey is forced to go to the imf, there will be the question of u.s. opposition for a number of reasons, not least turkey's involvement in the chinese vri project. david: thank you so much for giving us your time. dr. bulent aliriza. alix: there is a lot of question

as to what is to blame for turkey's downfall. mohamed el-erian says it is tightening global liquidity. he wrote that when it comes to global liquidity the world is in the midst of a transition away from a protracted and joe of loose financial conditions engineered by central banks. -- still with us is david lafferty of nexus investment managers. how are the fed to blame with what is happening in turkey? david l.: i think you have to look at the background versus the proximate causes. i would not blame the fed for the last few days. turkey has its own issues. the composition of that debt being in dollars. rate and questions about the independence of the central bank. these things are creating

pressure. i would tendound, to agree with mohamed el-erian that the underlying current of this is a world where central banks and in particular the fed is withdrawing liquidity. our view going into 2017 was that markets would become very slowly and imperceptibly a bit more fragile and volatile. that is what happens when you try to let the air out of the balloon slowly. it is not easy to do. alix: that brings us to if we do want up having the spread, what other countries are at risk when they have large current account deficits and are dealing with a andyear yield in the u.s. dealing with that stronger dollar, what else is at risk. the places typically cited are ones that have a lot of debt and u.s. dollar denominated debt and current account deficits.

typically talked about our argentina -- we're already seen -- thef that pressure hung gary and -- the hungarian rent, the south african rand, there are currencies that have similarities with what we are seeing in turkey even if they are not fundamentally related from an economic standpoint with turkey. alix: argentina's bond rose almost 10% on friday. last question. if you're looking at the fed, you need to change how you raise rates? yet. l.: i do not think so i think the fed is looking at the things we and other investors are looking at, which is to see is the systemic? is there a contagion risk. init appears well contained

this is much more of a turkey-specific issue, i do not see it getting the fed off their mandate. i think they stay close to price stability, their inflation target, as far as an optimal level of unemployment. it will not wonder from its mandate unless it thinks it is becoming more systemic and begins to pollute the banks. in that case, they may move. we are a long way from anything changing jay powell's mind at this point. david: thanks much for joining us today. tesla and yahoos are just a few of the names to pass through the sec's san francisco office. we take a look at the watchdog in the wall street beat. this is bloomberg. ♪

emma: this is bloomberg daybreak. coming up the next hour, chad morganlander portfolio manager. this is bloomberg. alix: a return out of wall street. silicon valley's untapped wealth. unicorn elites have stakes worth billions of dollars but only on paper. yahoo!, silicon valley is keeping the sec's office busy and finally turkey's

flash sale. -- line-up outside retailers as the lira continues to plunge. joining us is jason kelly. it is not surprising who leads this list. elon musk. jason: $60 billion is what our guys and bloomberg wealth calculated. they work so hard to give us these great stories. in mind six out of the top 10 billionaires on the bloomberg billionaires index did come from tech. this is where billionaires are made but $60 billion is a lot. if you look at elon musk and spacex and tesla, although spacex is where most of his wealth is, they are saying that company will not go public until they're going back and forth to mars so he has some time and he is distracted by tesla.

wealth so is paper you actually have to go public to cash out. david: a wealthy person says he does not count it until he is cashed out and he has pay taxes. alix: they are very far from that. that is fun is san francisco's sec office is going to start investigating tesla and elon musk, also yahoo!. jason: this is a busy group. you feel like if you are at the sec you think this is going to be an easy job living in san francisco not in the rat race of d.c. this has been intense because of elizabeth holmes at theranos is under investigation. andaba under investigation this tesla inquiry is no joke. david: those stories are interconnected.

it is being created in silicon valley. not have people who do a lot of experience dealing with adversity or public companies, you have people make mistakes. we will see where this investigation goes but as the story has gone on it feels less and less like it is fine, he did exactly what he should have done. david: right now from what we see it would be hard to say he handled is fine. kid. elon musk is not a if mark zuckerberg did that, ok but he is 42. the third story, turkey. it is not bad for everybody. some people are making out like bandits. jason: this is just a matter of currency differential. what we saw was mostly foreign people who have a lot of foreign

currency were able to go on a shopping spree this weekend in istanbul. david: 25% off. jason: 25% off everything. is $3700hanel bag versus 2600, do i care? there was not a turkish person to be found. they are all asian. ofon: i love the visual people with their smartphones watching the currency fluctuate. you charge me a little too much. many thanks to bloomberg's jason kelly. coming up, matt winkler will join us to discuss saudi arabia's interest in tesla in his latest opinion piece on how the media is underestimating the carmakers strength. live from new york, this is bloomberg. ♪

david: elon musk reportedly shopping around for funding to take tesla private and there is no shortage of skepticism on tesla. as bloomberg's matt winkler writes, the tesla story is about more than burning through cash. tesla is spending money at a rate considered unsustainable but shareholders remain indifferent because tesla is creating increasingly more value the same way amazon did the same way -- after more than a decade of repeating no earnings. terrific piece, matt. comparing with amazon, those are bold words. matt: the product speaks to itself and the product has gone from strength to strength. you see that in the way investors perceive it, which is over the past five years it is the least volatile and most lucrative stock and that is because shareholders look at

tesla and say it is so disruptive in the automobile market in terms of its growth and also the outlook that electric vehicles are the future. we will all be driving them decades from now and tesla is ahead of everybody else. alix: you have a great chart that shows the market cap of tesla versus other car companies. can you qualify tesla as a car company versus a tech company and does that come with different comparisons? matt: if we go back to the start of the century there was one vehicle, roadster, there was a model s, there was a model x, and a model 3, and the model 3 is the most important electric vehicle company in the world in terms of purchases in market share. alreadyl 3 is disrupting the luxury compact entry market with its sales,

which are likely to outpace everybody this year. a lot of the value is and what comes around the corner. they have not had much competition yet. whothe bmw's of this world are crashing in with many more miles. might that slow down teslas rate of growth? matt: i think it might do the opposite. all of these other companies are not all in. tesla is the only company that is completely in. bmw is still committed to internal combustion engines, so teslarsche, so is jaguar, is the only company that says this is all we do. if you're a consumer and you will buy an electric vehicle, if you -- who will you buy it from? tesla?hat color is your do nott is a color they

make any more. it is a 20 it is a very dark green. -- it is a 2014 and a very dark green. alix: thank you so much for joining us, great to see you. coming up we are breaking down more for markets. markets, it is risk on but not as steep as we saw on friday. yet s&p futures down by about .3%. the real action will be in euro-dollar. jpmorgan said that contagion could be in europe, not emerging markets. this is bloomberg. ♪ this isn't just any moving day.

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pump morenk tries to pun money into the market. goldman says spillover should be limited and look for opportunities. wants to be part of any deal to take tesla private. .> welcome we have heard from president erdogan. the question is how far does it go? the kremlin said they have not been officially asked for help. david: china might be their friend. there have been close relations. alix: and how close will they be? david: how much money close. alix: in the markets friday was a severe risk off move.

today we are neutral. feels like a buy the dip kind of day. the s&p futures are pretty much flat. euro-dollar still the currency to watch. options 110, downside for euro-dollar. europe could see the most contingent -- contagion. trade.at is how we now we are flat on the day. david: time for the morning brief. the media is going to get to meet the astronauts scheduled to travel on spacex next year. the congressional budget office releases an update to its economic projections for the next 10 years. brexit talks resume in brussels. we will have retail earnings from home depot, macy's, walmart and nordstrom. welcome to bloomberg markets. the big story, turkey. turkish, crisis

didn't show signs of letting up. you can see what happened in the various assets. the lira reaching that record lows. the turkish 10-year is up 22% and you can see that the equity market is down 4%. we are going to turn to our colleague in istanbul. we are going to put on the screen what they did this morning to alleviate the situation. its dealt with speculation. at the moment we are not seeing much of a movement. initially the lira climbed back from the losses. traders realized this was a halfhearted move in a way to skirt the real issues, the

politically charged discussion around interest rates. moments ago they came out in a speech and said again the current issue is going to get resolved on its own. the united states stabbed turkey in the back. a lot of combative language we heard. what remains to be seen is how long turkey can hold on because if it is a question of toughening, double-digit inflation locally, billions of dollars in debt, time is running out for turkey but the president feels he is in a position to negotiate, to threaten he can look to the other side of the world, to russia and beyond for support. the stakes are higher with every hour that passes. go to that. president erdogan wrote an op-ed in which she talked about the

fact united states better back down or turkey would look to other friends and allies, as he put it. we have heard about russia, china, qatar. how realistic are those? they could give relief to turkey. >> the since i am getting from people i have spoken to is it is going to be tricky. anybody who live in hand to turkey's countering a u.s. measure with tariffs, trying to get turkey into line. this relationship, over the decades, this is but the president made clear in his editorial, it has had its ups and downs but everybody came back to the table and they were able to figure things out. over the years turkey has served as a key for u.s. foreign-policy. there is a lot to lose for both sides but the voice we are

getting from this administration have much lesse to lose than you do. on the sides of this, the turkish economy is getting a drumming as we speak. alix: not a bad site there. shabby assignment. bloomberg has been speaking to bloomberg participants. -- market participants. >> we should not be under ,llusions that this tragedy blaming the u.s. for the ongoing hardship in turkey will buy him more time than many believe. >> there is a bastion of support in the country and he is going to keep trying to speak to those turks who do support and trust

him. the problem is banks outside are looking at the debt that turkey holds and looking at it as the contagion effect it can have on their own balance sheets. >> the markets are going to force his hand. you can keep the economy going in any fashion with these kind of problems. the trip tariffs were the straw that broke the camels back. had a big straw but he is too many problems. now, advisersus head ofo manager, research, good to see you. catherine, the comparison to the asian financial crisis was the talk on friday. what is the true comparison between that and where we are with turkey? >> funding costs are what is most comparable.

the funding problem here is immense. i think it is almost comical to think they can rely on alternate allies or sources to battle this crisis. the financial sector is stocked full of u.s. dollar liability, financing in liras. you don't buy that we are going to pivot to russia and china. we believe in their vision. you don't believe that scenario. liability, private companies in u.s. dollars. if the market continues to believe turkey has more than 25% chance of default it is going to be extremely difficult. if they go to china, china is already in a slowdown. issue.e has a sanction

i don't buy that. alix: where is it prudent to take some bids here? >> like mark twain said history doesn't repeat itself but it does rhyme. this is the typical emerging-market issue that could become a contagion if it metastasizes. cautious onough be emerging markets into the beginning of the year, the worst fairly overweight emerging continue towe remain that way into the next several trading sessions but valuations do matter. we may lift our exposure if you see a massive dislocation. we are nowhere near that. david: talk about running history. it was last and we had the country of this size who refuse seek help and take monetary

action. we have had situations like this . argentina just recently. they reached out. what happened? >> argentina is a fantastic example. in may the argentinian central bank jacked up rates. that is what the market is looking for right now. if theyexample. don't the market will melt down. we would even get a financial sector collapse. i do think there is value here. --aid by the makes them mexican peso. i think it is sentiment driven. i think you alluded to this areier today, there attractive valuations. you have to do your research but i think mexico is one of them.

david: in turkey it is fundamentals, isn't it? .hey are not increasing they continue to have substantial stimulus. he said this morning he was not going to back off of the projects. he wants to accelerate them. >> they are turkey related. not mexican. a lot of these contagion related driven.is sentiment in the fault of throw this at president trump. that is not the story here. the story is massive debt above 7%. costs, the past decade credit has grown on average with most of that in foreign currency liabilities. you have fiscal spending and

inflation surging. a classic problem of currency mismatch in the financial sector and a terrible debt profile. emx: what has been unique is contagion to europe, to the currency and peripheral debt as well. is overdone orat appropriately pricing in risk. that will continue until turkey runs into the arms of the ims. that is what they will eventually do. we don't think china or russia will be able to stabilize the situation. >> some of the banks are pricing in they are moving that business from turkey. , why did itt happen

happen now? is there value you can see on this? a recommendation news, we would be under exposed todevelop in relationship the u.s. but there are opportunities in european equity markets. we would shy away. if you are a trader or hedge fund, you could go into these financials. all right. you are both stay with us. how is the crisis affecting other emerging markets? we discussed the currency selloff next.

david: we have been talking about turkey all morning. maybe there are other reasons as well why turkey is suffering. tightening global liquidity is a factor. comes to global liquidity the world is in the midst of a transition away from loose financial conditions engineered by central banks affecting more fragile asset have experienced considerable capital outflows. let's go to you on this subject. we know this is coming. how much of that is a backdrop against what is going on in the markets? >> emerging markets face that

headwind for some time. i would not say that is the principal reason for the turmoil in turkey. it is certainly a headwind. if you get the u.s. dollar that continues to rise, weakening currencies, central banks have to increase interest rates. i agree with him, it makes for a but i thinkckground some are more vulnerable than others. .hat is clearly turkey that i think is the crux. alix: the other part of the story is the fed says we are going to affect these economies. we need to rethink what we are doing. mandate,s their third how are the financials on a global scale behaving. they don't want there to be

dislocation in the global credit markets that would cause issues in the banking system. so they are keeping an eye on that. you are sitting to see when you look at expectations fed rates going out. we believe overall the fed will continue to go about one or two times this year. might be concerned on emerging markets. numbers came out friday, charles evans switching saying we should have more rate hikes. moree have to pay attention to domestic inflation rather than what is going on in turkey or argentina? >> i think there is no chance the fed does it continue to hike rates because of turkey. if we have a financial crisis on global level, the fed is going to keep raising rates. strong.s extremely 4.1% is unequivocally strong.

we need to be at a higher pace of interest rates it the pace of those remains moderate, predictable the markets are already discounting that. you can send some stability beneficial for the emerging space for the remainder of the year. unless the fed hikes more than expected i don't expect there to be too much. david: great to see you. coming up, tesla anyone , who filed one such suit over the weekend. who is he filing for? this is bloomberg.

alix: saudi sovereign wealth funds looking for life deion investments like

uber and the softbank, as well companies. if tesla goes private will they be part of that? joining now, good to see you. this is a story bloomberg broke over the weekend. walk us through. >> this is happening in concurrence with reports of tesla being in talks with softbank. softbank said no because they chose to put their money with the gm and it were. saudi arabia is looking at tesla which strikes me as interesting because saudi arabia is invested in softbank fund. you can see where people are making bets and where they see the future. softbank would rather

invest in lift. >> which tells you how much competition tesla is seeing. they were the main player. i think people are concerned about their ability to hit these targets. moread you see these mainstream automakers that know how to do this. some of these funds are saying the be that is the better place. elon musk didn't want saudi investment to begin with but now they may have to say let's talk about it. >> and funding secured. these talks are ongoing. he was not interested. he didn't want to issue new shares. they had to work with an investment bank to buy this stake they have.

this ongoing question of does he have the money? there is a big controversy over why he is shopping for this. already had a first lawsuit filed friday. welcoming now one of the lawyers , welcome back to the program. i read the complaint. layout for us on whose behalf you are suing and for what. >> we are suing on behalf of a class of investors who purchased tesla stock between the minute of elon musk's tweet that funding was secured and the close of trading august 8. , theamage is measured inflated price on those days as a result of the market run-up the false statements caused on the exchange. >> have you done a calculation

to see how many did by the stock? volume --imited bit but volume was high as a result of the market news. almost four times the running average. , $11e seventh alone billion in market clearing trade . to take the percentage of damages from those purchase , it is a significant number for the short class number. >> is this a securities law valuation? >> yes. public statements on behalf of a company are public statements on behalf of the company and have to be accurate. tesla advised investors elon musk would be tweeting about in

company news and investors who wanted up-to-the-minute information could follow his twitter. the fact the states were made publicly and were false and knowingly false when made, or made with reckless disregard for the truth is the source of liability here and the reporting we have seen subject -- subsequent to those statements bears out conclusively that funding was not secured and the company is in the early stages now of trying to secure it. david: i don't remember the quote from the media, as well as the defendant himself. you quote bloomberg at one point. >> we rely on the best, of course. that has been solid over the last several days. the commentary shows they are scribbling to decide how they can put this funding together.

say the funding had been secured. david: thank you very much. 48 hours worth of trading. it is a small time frame. david: but it is also easier to prove. julie: good point. home depot may see more reporting. we are going take a look at the health of brick-and-mortar next what it means for other areas like groceries. this is bloomberg. ♪ ♪

david: this is bloomberg daybreak. it is a buy the dip kind of day. futures down to positive

territory. bank stocks still taking the brunt. well off the lows of the session. you can get the same feel here. euro-dollar completely unchanged. you did have calls for 110 in the session. the one thing that has not tv, a little steeper here from the safe haven bid that came out of the market. , palat 1200, the lowest level since march 2017. david: explain that. >> higher inflation. real rates that might be negative, should it be gold positive? unless there are more safe havens now. that is what performs relatively

well essentially. an update onget what is making headlines. the president of turkey says the country is under economic siege and expects the attacks to continue. he spoke after the central bank to discuss the record slide. there was no mention of raising interest rates. russia is looking to protect its economy for u.s. sanctions. moscow will cut u.s. security holdings more and reduce reliance on the dollar. the new sanctions have sent the ruble to a two-year low. the leaders of north and south korea will hold a third summit in pyongyang. it willsides it say take place before the end of september. expert see slow progress in u.s.

assets to give up nuclear weapons. global news on air and on tictoc on twitter powered by 2700 journalists and analysts in 120 countries. retail earnings starting this week with home depot, walmart, macy's reporting. us, she covers retail for us. welcome. what is the one you are looking forward to the most. >> walmart is particularly important. the showdown with amazon and how powerful a force that is, the numbers you want to watch are the e-commerce growth number. it disappointed on that but picked up in the first quarter. it has guided on that measure and it is going to need to pick up the pace to achieve that.

like walmart who are going to invest in online and those who say they are doing more, they are more like traditional retail like macy's. bifurcation.a macy's has been an interesting story. in that loser bucket for some time now. they had tenants -- magically they were able to turn that around. they were up 60% to one of the biggest movers. that seems ambitious. investors are in for a reality check when we get those earnings results because while they did improve slightly there are structural challenges for the department store sector they have an answer for yet. for a deeper dive we are joined by paula, managing

partner at chad morgan lander advisers. retail sales numbers out this week per what is the read through? what is the read three were expected to see? >> i think we're going to see a strong quarter. ed by amazon prime day. david: does it tell us anything other than they got one good day? >> it was a huge one good day. some merck, early summer it is usually quiet with people at the beach. amazon multiplied sales 18 times. it was a huge number. because other retailers try to respond the basically the whole boat got lifted. consumer

discretionary. due in part because of the tax breaks. we favor walmart. we think that has a low bar to jump over. overall with half $1 trillion in revenue, they need that improvement in operating margins. alix: i'm going to show this chart that shows the cost of living in the u.s.. rate, minusmortgage three in day quarter. panel is cpi for utilities. how do you factor that into your call? nothat i am looking at is as great a call when it comes to walmart.

you only need 2% revenue growth. retail overall, because of the strong jobs market, the consumer is under levered, the numbers will be strong over the next several quarters hence the reason why we favor retail. >> what about it? market.tight jobs real wages have slipped to the negative. you have housing costs going up. >> a doping they have more money to spend. they have been spending what they can. depending on your persuasion you may think the tax change made a difference to the average person. others may not.

if the political unrest continues i expect consumers to shrink back. i wish i could be as bullish but i am not. you can't separate retail and consumer confidence from what goes on beyond us. how much is due to the pricing power? less margin hit, for example. >> because of the extreme amount of revenues that come from walmart, they have pricing power. they are operating margins have gone down 100 basis points and we think that is going to give liverginally and to the individual equity. investors have to understand it is not all amazon all the time. there are other retailers growing profitable and well-capitalized.

the u.s. economy is growing overall. we are not seeing a tremendous amount of deleveraging happening . we are starting to see modest re-leveraging. that is a critical aspect. it will give more of a lift to consumption patterns. david: it can also be walmart's prop -- power to extract lower prices. they can put that pressure upstream. if you buy ais truckload you are supposed to pay the same amount. there are certain laws. i want to say i am bullish on walmart. they have done some good things and been clear in saying they

will pass any tariffs along to their customers. while i am bullish on what they have been doing, with technology, with buying other companies and keeping the , if they aretact experiencing wage stagnation it can get hanky. that will have a downward effect on margin and sales. so much is based on political perspective on the tax break. it is tough. david: groceries, that has been changing. walmart fighting for groceries as well. what do you expect to see? >> you will see it rise. online ornge through the challengeect,

with it isn't about the top line. they turn the product fast on a large margin. if you have to move it around more hands on that you way at the margin and slow the turn. you're going to see a lot of action. but i am not sure anybody is going to make a ton of money on it. alix: what retailers don't you like? >> retailers that have a lot of debt on their balance sheet. you gave macy's. they have assets on the retail side. we are shying away from those companies. we think those could also change over the next several years and be vulnerable. you, thank you

for sticking with us. up, new regulations for financial service brokers. this is bloomberg.

>> this is bloomberg daybreak. up, leonard lance of new jersey. this is bloomberg.

to your bloomberg business flash. president trump backing harley davidson owners who say they will boycott the company if it moves out of the u.s.. harley does not sell bikes overseas. petrochina wants to stay out of the trade conflict. bloomberg has learned the gasany may quit buying for to avoid paying additional taxes. a stunning debut for a movie about a 70 foot shark. was almost wife what analysts estimated. it was produced by a warners

chinese joint venture. sec taking his term at are treating clients fairly. considering a best interest standard. good to have you back. the last time was back in the day. a couple of years ago they put forward a rule that was pulled back on the trump administration came in. how is what the sec proposing different than what labor did? >> in some ways it is the same. in other ways it is different. the sec started down this road before the department of labor. the most important difference is , it applies to all retail investment accounts.

this is a broader scope. the second thing is this will accomplish what the department of labor try to do saying brokers must put client interest ahead of their owns. conducive to a way the brokerage model. that is what they tried to accomplish. that is what congress intended in section 913. they authorized the sec to take such action if they decided they needed to. what this ins up with is a higher standard for brokers. equivalent to that investment advisors. one last thing is most financial advisors in the united states advisoryding investor services. the client picks and chooses

what is appropriate. if they want to have their money managed on a continuing basis. greaternot only a production but in terms of what they want to buy. there's a fair amount of resistance. >> we believe the proposal is in the right direction. we think it is a good proposal. it raises the bar. most already made this effectively. we think there are changes to make it consistent. other standards brokers are subject to which, brokers are examined and regulated in a higher capacity than investment.

we think there are modifications that need to be made. they can get done and will be to the benefit of investors because they will hold brokers to a higher standard. the investors will not be limited in their choice of whether they want a commission based product. david: why is that? it is not his background. >> he came into office -- more in the institutional side, wanting to close the loop on this once and for all. he talks about mr. and mrs. 401k. he believes we need to finish this discussion, get to a place where we are -- brokers under arbitration, investment advisors

are not always, held to a fiduciary standard. i think mr. clayton is saying let's get to where we already are today and make sure we pull the others up to it. >> not that much will change for most. why is it important to do it? why do we need a rule? >> we need to make sure the investor understands what is sod to them and have clarity that brokers understand what the rules are they have to operate under. they feel they operate that way and are held to that standard. but equally important is we believe this for 10 years. we ought to upgrade the standard to make it a best interest standard.

let's do it for all retail accounts, not just some. david: when mr. parrish was secretary of labor he had these horrible stories, if you try to -- retirees who lost their wealth because of abuse, as he said. was he right about that? is there a need to change that? flex no one wants to see abuse. we believe there are redress under the brokers, a lot of times you don't see the end of that story. we think this rule would help weed out bad actors. we should always be looking to do that. in vast majority operates the best interest standard but the rule should be clear as to what you should do. joining us. you for good to have you here. alex. alix: thank you.

the markets, and interesting reversal happening. dow jones and s&p unchanged on the day as the selloff appears to stem it's tied here. similar story, stronger dollar through the separate dollar-yen. trying to climb into positive territory. looking at 110. selloff in the bond market continues. gold not participating in a safe haven bid. interesting to see it feels like a buy the dip kind of scenario today. we are going to deed into those turkey tumbles. we will break it down. this is bloomberg.

alix: the turkish lira continuing its decline all flows of the session despite trying to take steps to stem that bleeding. you, have wehank seen the bottom for the lira? fear that is unlikely because of steps taken today are -- they initiated the fall of the lira are actually history. there is still doubt. >> what about other em currencies? you have the ruby and the rand. is there more for them? they recovered throughout the

day. it depends on if they are likely to show a clear sign they are going to take stabilizing measures. for is likely, less likely the european rupee. likely totagion cm is say the stress is going to go to europe. what is the downside for that? >> the downside potential, it is up to safe haven demand. i agree. right now it seems as if the main stress has calm it. imply they are going to

risk agencies. alix: really appreciate it. when you are off on friday contagion isn't even a game. i wondered about the liquidity thing. how many people are trading. >> it is all about turkey. >> all about the stronger dollar. , in a marketmerica where it feels like a buy the dip kind of scenario with futures flat. this is bloomberg.

jonathan: from new york city i'm , jonathan ferro. 30 minutes until the start of trading. this is the countdown to "the open." ♪

jonathan: coming up, turkey spreading through emerging markets, the dollar with a new high, and the u.s. markets looking resilient. outperforming the rest of the world by the most since 2014. hazlitt john interest from saudi in its quest to go private. 30 minutes away from the opening bell. the price action for you, the features a little bit softer, but outperformance compared to european equities. in the bond market, yields by a single basis point. and we are waking up to the lira crashing. president are to want re-freezing to take the necessary steps to adjust the crisis. certain thatuite the top leadership in on curragh -- in ankara understands what is about to hit them. >> we are in the mid