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. prods beijing as the countries prepare for major negotiation. washington plays hardball as steve mnuchin says the white house is ready to hit turkey with more sanctions. offloadshipping giant it's a drilling assets in its latest move towards exiting the energy industry. shares rise and we hear from the chief executive. good morning, everyone, and welcome to "bloomberg surveillance." these are your markets.

after a tumultuous week, european stocks are unchanged. they were gaining a couple of percentage points 15 minutes ago. we did also have a positive asian stocks session, something we had not seen for at least eight sessions. euro-dollar, you can see the dollar is stabilizing. and the u.s. treasury market is unchanged. coming up, we hear from the chief executive, as the company unveils drilling plans. it is the biggest shipping company in the world. it'll be interesting to see what they think about how this all ends. now, let's get straight to bloomberg first word news. the u.s. treasury secretary has set washington is ready to hit turkey with more sanctions turkey refuses the release of an american pastor. mnuchin's comments further

escalate the spec that has rocked financial markets. the dollar and japanese yen rally. >> secretary pompeo and myself, on the release of the pastor, we have put sanctions on several cabinet members. working with you, we have more we are planning to do if they do not release him quickly. australia's central banks says rates will remain at a record low, while lamenting the local currencies resilience. philip lowe also noted the resilience in recent years and said policymakers hope that as the reserve titans, it would drive the u.s. dollar higher. italy, a large family has vowed to fight the seizure of toll assets. investors in atlantia, the infrastructure company, face major losses after the disaster that left at least 39 people dead.

the company said they would protect shareholders and bondholders. world's wealthiest family just $11.6 billion richer. walmart reported strongest sales and more than a decade, sending shares soaring as much as 11% and boosting the fortunes of the walton family members. according to the bloomberg billionaires index, a ranking of the world's 500 richest people, their collective net worth surged. 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. this is bloomberg. francine: thank you. donald trump has pushed china for a better deal as the countries prepare for their first major negotiation. that is as they step up efforts to avoid a trade war. trump told his cabinet's he

would hold out for a deal he deemed fair. >> we are talking to china. they are not able to give us an acceptable deal. so we are not going to do any deal until we get one that is fair. so how optimistic should we be about this round of talks? joining us now is a china's macro strategist. thank you both for joining us. let me start with you. looking at china, the rhetoric has been ok, but if they were to inflict pain, it would be right before the midterms. is there any likelihood they would do that? >> in some ways, it is not in china's interest. going back into talks and trying to resolve the issues is the best outcome. china is the loser in this battle. it is more in their interest to try to get talks started, not .et into extra tariffs applied

and then to dial down the issues. it is creating a lot of domestic tensions. francine: can they offer anything more? we saw what happened with the yuan, i do not know if that is a gesture. is there anything else they can do? miranda: they are trying to stabilize the yuan. suddenly,ks through, you're getting into dangerous territory in terms of international sentiment. stabilizing above seven is important. but in terms of what they can actually offer, they have already offered some movement on the trade deficit, offered reducing tariffs, opening up industries. wants isdeal trump sort of unknown. francine: that is fair.

what is it mean for how it escalates? simon: i am skeptical about it china will ever move. i absolutely agree that, from their perspective, it makes that -- sense for them to make a deal done. i think that is one of the issues. thinking about the yuan story a lot. there is an argument to say it will muddy the water ahead of any grander trade talks. but it also makes sense from the perspective it helps stabilize the market. .here is also an opportunity if they were to start intervening more actively, it would give them the opportunity to start running down some of the dollar. francine: of course, it only expect the dollar.

if it is dollar weakness, what is that mean for the yuan? simon: [laughter] i suspect the real battle will be about dollar strength. we have astonishing comments coming out from the president yesterday about the cherished dollar. i'm still time to work out what he was driving for. but he said he wanted to use the dollar as a weapon, maybe re-politicizing the currency. who that is against is tough to say. if turkey, that is an issue. but china maybe. if we see the one pushing towards a seven, it destabilizes chinese markets and maybe helps as well. francine: we had a brilliant story on the bloomberg terminal that says there is a suspicion running through the conversation that chinese conversation -- officials are having. not just about tariffs. this is part of president trump's plan of stopping china. is there any truth in that?

miranda: you have got chinese companies. it used to be chinese manufacturers for global companies. now you are seeing chinese manufacturers coming out, seeing more international presence. is trying to stop the expansion, whether it is one belt, one road. see who will become the next autonomous driving ai. trying to stop that in its tracks, it is not just the size of the economy, but whether you have the leading technology. becomether your brands going head to head with u.s. brands, you are undermining the whole u.s.. francine: but if you talk about the war in space and ai, that is one thing. but if the u.s. policy is to curtail china's economic growth, they will not stand for the. -- that. miranda: but on the technology

progress ater to their technology, china is still reliant on u.s. technology. whether it is a semi conductors or the software. so we do need to cooperate in order to drive the next phase of technology developed until they get into a leading position. the u.s. is trying to stop them getting into that position and making sure they are aligned on their technology. u.s.-japan, to the they have the same argument in the 90's over semi conductors and who controlled semiconductor space. we are in a similar game. francine: all right, miranda and simon stay with us. up, with us, plenty coming including china's ethics play. offshore yuan surged. our policymakers propping up the currency?

chinese assets and the deleveraging some of the pboc regulation. a marriage of convenience. merkel welcomes to germany for their first meeting, we look at how donald is shaking up international relations. this is bloomberg. ♪

francine: economics, finance, and politics. this is "bloomberg surveillance." let's get straight to the bloomberg business flash. ap moller-maersk a has decided to lift is a drilling unit.

making a step from the exit from the energy industry. -- companies that they will make a decision next year and offered shareholders the possibility to participate in the value creation opportunity of a here playoff for drilling company. >> we believe this will create value for our shareholders. the reality is that there are many great companies, but not many companies with strong balance sheets. so the possible transactions involve some kind of merger, going told mean we are end up having more exposure to the sector. >> air france has named air canada's ben smith as ceo, casting aside union objections to entrust a foreigner with turning around europe's biggest carrier. the ceo will take the reins by next month. smith, currently air canada's theation chief, was succeed

ceo after failing to end a series of crippling strikes. the airline said they would announce details as soon as possible. the royal bank of scotland has tapped katy murray to be the interim chief financial officer, as stephenson prepares to step down. murray, currently deputy cfo, will take on the role in october. stephenson leaves the board in september, as he has for a job as finance director for hsbc. tesla executives have in trying for years to recruit a coo or another number two executive to assume some of elon musk's day-to-day responsibilities. the search has intensified in the wake of mosques recent tweets. they say the company approached facebook's sheryl sandberg, but quote to the best of my knowledge, there is no active search. that is your business flash. francine: thanks.

the pboc has taken steps to support the yuan. this includes a stronger than expected fixing, regulatory measures, and reducing offshore yuan liquidity. bloomberg intelligence thinks the bank is likely to step up the fence should the yuan remain under pressure. so what is next for the yuan? still with us is a simon and miranda, and as if by magic, chinese yuan also extending their gain 17%. the level is at 6.8780. will they keep stepping up? simon: they will continue to defend the seventh for a while. talksst until the trade and. -- end. there are a couple of reasons why it makes sense.

one is domestic markets. , it isnecting markets interesting the pressure coming up the hong kong markets. it is quite astonishing. from that perspective, market stabilization is a good thing. said, it, as we muddies the water ahead of trade talks. also agree that beyond seven, we get into territory we have not been in. the chance of that could seriously destabilize markets. i am still term, unconvinced about what china really wants to stop. francine: and this is about stabilization, right? volatile yuan has on the economy is bigger than the effect of a weaker yuan. miranda: if you want capital outflows.

view, you haveof got sustained depreciation pressure. u.s. metrics are rising, chinese interest rates should be falling. you have had fiscal stimulus, monetary loosening. you have had the spread between the u.s. and chinese rates are going down to all-time lows here --. the yuan should be under pressure, the older thing holding it off is the pboc is active support. and expressing support for the currency about seven. on. market fundamentals, you would see sustained pressure. how much more stimulus should the pboc put in to alleviate concerns? miranda: this is one of the big problems. if you look at the informal

financing, that has gone down over 100%. the peak financing, you had a dramatic drop of about 300 platforms >> --. that is affecting the consumer market. bond markets are down, everything. all the financial channels are drying up. they are going to have to push through the fiscal measures, special local government bonds. but that will only prop up the infrastructure side of the economy, not going to give you your next growth story. they need equity markets to start working again. with the trade war, the currency, and the weak economy, it is difficult to persuade people to get back in. francine: but would that be the pboc? they can help at the margins, but are trying to get confidence. is there anything to do on

interest rates? miranda: they will probably not move themselves, but it is about providing enough liquidity. cut would be in the cards. we have got local government bonds continuing, and monetary easing, but not all out loosening. francine: miranda, thank you so much for joining us. miranda and simon stay with us. we previewed a big meeting between angela merkel and vladimir putin. that is up next, this is bloomberg. ♪

francine: this is "bloomberg surveillance." let's talk geopolitics. the big item to watch is a meeting between angela merkel and vladimir putin near berlin to discussed syria, ukraine, and the north stream pipeline. it is a major breakthrough for putin, while merkel needs to reassert her leadership role after clashing with donald trump. joining us for more is our international government executive editor and simon is still with us. i do not know what brings these leaders together. is it the fact they need to deal with or talk about turkey, syria? but also crimea?

or is it just to understand trump. >> i think it is a combination of everything. markle is hedging and putin is exploiting. the current circumstances create the ability for this meeting. it is interesting it is happening in germany for the first time since 2013. merkel has invited putin into her turf. the angela merkel, she does not chance putin. she has been a vocal critic, in fact, famous for a g20 meeting where putin is walking alongside her and she is caught rolling her eyes. it is just a starting point. francine: germany is also in a that hotspot -- hot spot. does she need him to agree to

something? or is it just a meet and greet? >> part of it is to make sure --many's voice is still her heard. though it more sanctions may come, there is a sense of a personal report between putin and trump. accused oftrump has being held hostage by russia over gas. so she certainly has -- the timing is right for. francine: does this move euro, dollar? simon: probably not. if you look at the next 12 months, yield, generally speaking, has become less of an issue. politics. geopolitics have yet to play a major role in driving the market. but there are things kicking in

that suggest it starts to play more of an issue. for example, the pressures they have brought on turkey had been quite extreme. again,re elements there, we are talking about what russia is doing. it tells you that these geopolitical themes are starting to bubble up. area--.a big one, no francine: will get back to trade. simon and eric stays with us. up next, more sanctions are threatened on turkey. we talk about the escalating diplomatic risks. 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. with more airline passengers looking for low-cost carriers,

rail operators could face a similar shakeup. old companies like these could soon face no cost rivals. on bloomberg.com, maersk spinoff of the drilling business, part of a move to focus on their core transport business. and our most read stories, in third place: draghi's at toolbox keeps the ecb call as turkey and italy's crisis raise on. second place, nvidia's gold rush is over, and on top, the u.s. says turkey could face more sanctions. find out more by logging on to your bloomberg terminal. but get straight to first word news in bloomberg city -- new york city. >> donald trump has prodded china to offer more at the negotiations table. that is as the world's two biggest economies step up

efforts to head off a trade war. >> we are talking to china, they want to talk. they are not able to give us a deal that is acceptable, so we are not going to do any deals until we get one that is fair. italy, atlantia has vowed to fight the seizure of its brutal assets. -- road toll assets. the family faces major losses after the disaster that left at least 39 people dead and ignited a political thunderstorm -- firestorm. and the world's wealthiest family just got $11.6 billion richer. walmart reported strongest sales and more than a decade, sending shares soaring 11% and boosting the fortunes of the walton family members. bloombergto the billionaires index, a ranking of the world's 500 richest people, their collective net worth surged.

race previous losses. -- the race previous losses. 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: thank you so much. mnuchin says turkey faces more sanctions if the country refuses to release an american diplomaticalating risks that have rippled through global markets. it was prompted by president trump, who said turkey is not a good friend. so how much risk is left in turkish assets? dimitri, welcome to the program. get?uch uglier will turkey we also have s&p the liberating on the rating. -- the liberating. it can be a volatile,

but so far, turkey is taking the right steps. they are moving in the right direction in terms of getting help from friendly governments. still not seen a structural reforms taking place. we have to see what they will do with fiscal policy. but the risk is still there. there are quite a few opportunities, especially in fixed income, where we see real value emerge. just because of the assets are being sold across the board. given they are so correlated, the attractive assets can be picked up. francine: d.c. any chance of capital controls? -- do you see any chance of capital controls? dimitri: so far, they have said

they will not. which i think is wrong, even if it is just a short-term solution. i do not see them taking such a drastic measures, but they can go and get more help, as they have done. qatar is not the only place they can do that. that could be short-term subsidies from the imf, but we will see. this is a concern, that they are just short-term fixes. miranda: absolutely. the capital controls issue is absolutely there. at the structural changes taking place this week, they are making it an awful lot harder for people to do business. a gets this question of increments. agree about the fact that they can get other loans from friendly governments. when russia emerges in the story is important. francine: what will it take for

you to go into the turkish lira? even if russia gives alone, does that mean investors are buying lira? simon: it would take an awful lot more from the central bank than they have already done. i think that is what it would take people to come back. the key story, even before the sanctions issue came along was about the fact we had a central bank under political pressure and that people had no trust. if we look at what has happened this week, yes, we have had this formal tightening, but nothing that would suggest the prime focus is going to be using monetary policy to solve the problem. francine: dimitri, what happens to the emerging markets? the contagion basically hit anybody with a dollar-denominated debt. much is it turkey, and how

much is it just the markets freaking out? dimitri: i think most of it is markets freaking out. materializese risks in turkey and say this could happen somewhere else. does not haverkey that much effect on the rest of the market. that creates opportunities for us to, you know, by other markets. we have political and economic diversification. and the risks that are out there are global. brexit, thes political institution in europe, china, these are global risks. but you have global -- local stories within p.m.. -- em. francine: the other crisis is argentina considering plans for more financing. bloomberg officials said it may include credit lines. that is as the peso has weakened

more than 37% to be the worst performing em currencies this year. looking at that, how does argentina stack up? dimitri: it is a different kind of risk. ignited by the united states. argentina's problem is different. they have an easy way to solve them. they already have packages from the imf. they are talking, discussing it. it is not such a volatile story. francine: do like any of the emerging-market currencies? anything out there that looks like it has been sold off too much? simon: not really, no. [laughter] i agree that what you are seeing is rational contagion, if you like. sense that everybody recognizes that turkey's position in the global scheme of

things does not have that many connections outside of europe and maybe bulgaria. so the reaction, it is fairly logical where people see the possibility of tariffs being brought. but the thing that worries me is china and the broader impact it has. we have gotten to the bottom of that. that is why i am cautious. as you said, it is a global rather than purely em story. francine: thank you both for joining us. next, mace -- maesks seeks to focus on transport. we bring you the interview with the chief executive next. this is bloomberg. ♪

francine:i("x". (x)- they had prevented maintenance spending. capn,10/32-28i -- >>right now they have pulled back from their stance.

will they defend their interests? >> right now, we are hearing that the government is pulling back. that is true. francine: all right, kevin, i think we are having technical difficulties. we will get back to him a very shortly and see a little bit more about what is happening in italy. announced a new unit on drilling. is danish shipping a giant making a latest step towards a complete exit from the energy industry. the company has said they want to streamline structure. the chief executive spoke to bloomberg's matt miller earlier. soren we have looked at all options. we believe this is the option

that will create the most value. the reality is there are many great companies in the drilling sector, but not a lot of people with strong balance sheets. all of the other possible actions involve some kind of effectively,, would mean that we would end up having more exposure. we actually think this is a good solution. it would allow our shareholders that willin a company do well in the coming years. >> it allows you to stay focused on the shipping business. what does this mean for the drilling unit? there are 4000 employees, very closely tied to you. how is the outlook for drilling? are calling soren: us will take some comfort from

the fact that their main shareholders will, at the outset, own more than 40% of the company. they have also made commitments to continue as a major shareholder. they will remain part of the family, if you will. >> how does it affect the shipping business? profit,n't generate drilling. so that will follow a with the demerger. soren: from the balance sheet perspective, this transaction will be a neutral for our balance sheet. what is most important is really that we get even more of our time to focus on driving the transformation of debt. we are in the process of integrating our business units. others, we are in an

industry challenged by lower freight rates and geopolitical risk and freight attention. , it is about being able to focus on the company. >> let's get to the freight rates and trade tensions. warning at a profit couple of weeks ago, one of the few times i can remember the market up in a company that works on profit. why do you think that happened? francine: first of all, we put out a profit warning but also disclose the key numbers for the second quarter. in the second quarter, we were able to deliver. ,e were significantly above most importantly, we were able to demonstrate that we have regained control of our cost. we had a very poor first-quarter when it comes to managing our cost. it was very much impacted by the int that we took over

december, added a lot of new capacity that came in. to we were not able rationalize that quite as fast as we would have liked. if the second quarter, we regained control. that is very important for investors. francine: that was the chief executive sorensen who -- soren sikou. up next, cryptocurrencies gold rush is over. this is bloomberg. ♪

francine: economics, finance, and politics. this is "bloomberg surveillance." i am francine lacqua in london. let us check in on your markets with annmarie hordern. >> european stocks seem to be studying after what has been a bruising week, especially at asia. besides china, a bit of an underperformance. ftse is up, the dax relatively unchanged. u.s. futures are pointing to a muted start. i want to take a look at emerging markets, they are actually up.

but if you look at it across, first time they are up, but if we look across the weekly seeing theirre having their worst week since the february selloff. they have been battered by what is happening in turkey, and argentina, as well as the tech stocks in china hits the em space. finally, i want to take a look at metals. copper sent into a bear market this week. i am looking at the volatility of metals. they are highest since january of 2017, and this is on trade tensions. the london metals exchange has not been this jumpy since donald trump was coming in. and many were questioning how this would affect global growth. you could call it deja vu, but these questions are reappearing. td securities says metals are the ones at that react the trade

more dynamics -- war dynamics. francine: thanks so much. let's get to the bloomberg business flash in new york city. air france klm has named air canada's ben smith as ceo, casting aside union objections to entrust a foreigner returning around europe's biggest carrier. the new ceo will take the reins. smith is currently the operations chief of air canada and will succeed the former executive, who failed to stop the number of strikes. they will search for someone as soon as possible for the post of nonexecutive chairman. the royal bank has tapped katie murray to be chief financial officer. murray, who is currently deputy cfo, will take on the role in the beginning of october. steven sent leaves the board at

the end of september as he heads for a job as finance director or hsbc. tesla executives have reportedly been trying to recruit a coo or another number two dated to assume some of elon musk's day-to-day responsibilities. the search has intensified in the wake of musk's recent tweets. in an interview, they say they approached facebook's cheryl sanders but quote to the best of my knowledge, there is no active search. more, a partner at credit suisse in brazil is leaving the fund. the bank with faster part of the business to okumura. they will be responsible for several incumbent pension funds. data compiled shows assets under have plunged 94% from a peak in may of last year. that is the bloomberg business flash.

francine. francine: thanks so much. it is the end of the road for nvidia's crypto gold rush. they say it has right of faster than expected. sell $100ted to million of chips in the second quarter, but only managed 18 million. they say revenue is likely to disappear, with stop dropping in late trading. joining us to make sense of this is bloomberg's across asset team. first of all, how worried should we be? how worried is nvidia? the video card makers always saw this as a bonus. they never really wanted to believe in this in the long-term. they did not hold this into their projections. for them, it was nice to have while they had its, but they are not overly worried. it did not feature in the long-term. francine: what does it mean for bitcoin?

is it to bust? >> we have seen bitcoin dropped 70%. it certainly does not feel as hot as it did. that said, we have seen cryptocurrencies drop as much as this in the past. you seen them drop more than 90%. we are near levels that look quite interesting. but the coming months will be telling. francine: why do you miners need a video cards? >> they love these cards. -- good atally do doing calculations really fast. they will continue to buy them, but what we are hearing from the industry is that they are not making money. francine: that is why they do not need as many video cards? that is pretty simple. is there anything you are watching out for in the next

couple of weeks? bei think what we will seeing is an etf launch in the u.s.. everybody is waiting to see whether we will see an etf launch, which will insulate investors from the risk involved in trading bitcoin. notou buy an etf, you are worried about your bitcoin being stolen. that makes it more accessible for the institutional investors. francine: thank you very much. in the meantime, we are getting some breaking news, a market move when it comes to turkish lira. we had told you it was less volatile. for the moment, you can see the turkish lira sliding versus the dollar. 5.932.currently at if you look at european stocks, they are heading a touch. it also ended a positive week on

a tumultuous week. treasuries a little unchanged. "bloomberg surveillance" continues in the next hour. we will be talking u.s. trade, tariffs, and the turkish lira. again, steve mnuchin says turkey will face more sanctions if they do not release the detained american clergyman. beket stocks seem to studied, but see what happens. you could see a seven second selloff bringing these emerging markets to the brink. this is bloomberg. ♪

francine: trump's trade push. the u.s. president prompts

beijing to bring more to the table as the two countries prepare for their first major negotiation and months. stephen the notion said the white house will slap turkey with more sanctions of the detained pastor is not really used. -- is not released. good morning. this is "bloomberg surveillance." and francine from london. tom keene on a very well deserved off. we hope you rests. quite a significant move on turkey lira, 2% move in the last 20 minutes. now if that means there is more anxious and the emerging markets. the turkish authority has made it difficult to sort the currency. her difficult to trade.

as the liquidity story gets worse and worse, you may see these moves coming through. weekurks want a quiet coming through. out for s&p later on. let's get to the bloomberg first word news. >> president trump says the u.s. will pay turkey nothing for the release of a detained american pastor. in a tweet the president referred to bronson as a great american hostage. steven mnuchin says the u.s. is ready to impose more sanctions turkish not free bronson. president trump is pushing china to offer more at the bargaining table. the two sides are preparing for the first talks in two months on the trade dispute. says china wants to negotiate, but is not able to give the usa deal that is except

double. china plans to introduce floating nuclear power plants and islands in the region. beijing claims 80% of the south china sea leading to a clash with other countries. would like said he to see the nation's currency get lower leading to local inflation, jobs, and let the reserve bank of australia normalize interest rates. the australian dollar has fallen 8% against the u.s. dollar in recent days. global news, 24 hours a day on-air and on tic toc on twitter, powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. thanks.: european stocks edging higher. equities in europe ended on a positive note. if you look at treasuries, there is little change. we are also looking at the turkish lira. guy: it is the first quiet friday we have had this summer.

the big are not seeing macro moves, we are seeing individual stocks on the move. let's look at what we've got. the company is pleasing investors, spinning off another part of its oil business. and france selected a canadian to be ceo put the union is voicing disquiet. we are looking at the italian highway story, genoa, your part of the world. we will come back to that. finally, look at what is happening in the tech space and video. it seems to be having a negative effect on the european sector. is trading lower? anti-goes through the volatility. yesterday we spent a fair amount of time looking at commodities. that tracksndex

their volatility. you can see it surging to the highest in 18 months. it is something we are keeping on,on, x -- an eye especially with the sanctions threat on turkey. surprise, the ongoing story, is the outperformance of the u.s. market. you look at the advanced decline, what i think is fascinating about this recovery is it is reaching all parts of the market. -- there was concern it was reaching only take, but there are many areas of the u.s. performing is strongly. it is one of the highest participation stories we have seen in the u.s. recovery in some time. it is interesting in the longevity of the rally we are seeing. iy: a meeting -- francine:

meeting between angela merkel and vladimir barton to discuss austria.peline, and merkel needs to reassert her leadership role in europe after clashing with donald trump. this comes a steve mnuchin says america is ready to slap turkey with more sanctions if president erdogan refuses the quick release of an american pastor. thank you both for joining us. let's kick off with you. is this a big deal with angela merkel because she needs to get putin onside to put pressure on trump, or is it just the de facto leader of europe? is dealing with tensions with the u.s. over trade and iran over climate

change. she needs to talk with vladimir putin key issues on the table for europe, including turkey which is very much in the news. time athad a difficult home, difficulty performing a government. this gives earn opportunity to step back into the role and advocate for europe. francine: how much will they talk about turkey? big story.s a very this will be a crucial meeting. it is an opportunity, a crisis opportunity for president putin to gain something on the back of that.

maybe rusher will approach for financial support. as we know turkey imports more than that percent of its energy. after the collapse, it is crucial for the country to secure slightly cheaper source ussias and oil, and r can provide it. guy: the lira market is broken. to make a reasonable price for the turkish lira right now is difficult. they essentially put both hands around the market and squeezed. very thin. piotr: absolutely. very thin. what will happen over the next the move higher in the lira is a collapse

direction. we have seen the move and other em currencies over the past few years. it is a textbook correction. i think it is too early to declare they are out of the woods. and turkey, russia, germany, how nervous is angela merkel as she approaches october and the elections improve the -- elections in breath area. bevera? concerns.she has 2 the immigration issue. she needs president erdogan onside. she is facing criticism over floods of refugees.

coming into germany she needs it erdogan to keep his part of the deal. there is the issue of keeping him and nato, which angela merkel wants to prioritize. no one is suggesting erdogan well -- be the interesting thing. the apprentice for her is to avoid too much of a drift by erdogan into putin's orbit. you can see erdogan reaching out to china, to iran, to a bunch of places, and also europe. the impetus for merkel and europe will to be to make sure that erdogan remains the bridge from the east to west. francine: what does russia and vladimir putin need from europe? piotr: the eu is an important trading partner for russia.

over the past few years, actually, rush of reduced, for example, its reliance on imported food from the eu. in that respect, they replaced eu food imports with their own product. on the subject of nato, this is also crucial. will persuade erdogan to loosen ties with nato. that would have serious implications on the refugee crisis. with the turkish economy now facing potentially severe recession, it will create problems how turkey will integrate those syrian refugees, and refugees from other unstable middle eastern countries. unemployment will rise, and it will be a tremendous burden on those refugees on the turkish economy.

perhaps erdogan will request more financial support from the eu. francine: thank you very much. up, the shipping giant will list its drilling unit as it focuses on transport. our interview with the company's chief executive. this is bloomberg. ♪

>> this is "bloomberg surveillance." shares of air france are lower today. one of the carrier's unions is threatening strikes over the appointment of a new ceo. then smith this the new chief. he is the first non-french

national to run the country. elon musk said no one reviewed his controversial tweet about taking tesla private. buyout had been secured, it caused tesla stocks to jump. they have not received a formal proposal. china has taken several steps to support the un, including stronger than expected fixing to increase the costs offshore and increasing yuan liquidity. is david. are we going to see a base formed in the chinese currency?

that has implications for other asset classes? >> yes. francine: [laughter] you have to speak longer than two seconds. i think that chinese authorities have allowed their currency to depreciate against a manner that has been well controlled. they are easing policy, while the fed is tightening policy. it is a reasonable response to the position of tariffs. the dollar would be stronger in that scenario. but they are doing is saying we have gone far enough. we have made the adjustment. there is the concern it becomes a one-way move, then you get capital fly and we see a repeat of the 2015-2016 slide episode we think they have gone as spies they want the currency to go.

that is likely something they can sustain. it will be broadly positive for the risk assets more broadly. guy: positioning on the clampdown on gaming related to the fact they could news that as a vehicle to move currency offshore. i we going to see stabilization? piotr: from emerging markets it is about the pace of depreciation. seen something similar to what happened in 2015-2016 when the yuan weakened sharply. chinese officials tried to stabilize the currency, but we maintain our bearish view of the yuan. the chinese economy faces lots of headwinds. decline to prevent the housing

market from collapsing, injecting more stimulus. the standing pressure on the prevail.ikely to all they can do is control how fast and far the yuan will fall. the correlation between the yuan and other currencies will remain. perhaps the trade war between the u.s. and china will unfold and have negative implications for other currencies. francine: we are getting another headline saying the turkish lira has depreciated 4.2% vs the dollar. firsts because the sanctions from the u.s. if the pastor is not immediately released has become more problematic? david: i would be surprised if it is to international investors

-- effectively the turkish lira has become untradable. even if you are trying to go long, it is difficult to get forward points on that. it may be some squaring of positioning, perhaps by local banks in anticipation that we are going to see a rate cut later from s&p. i would be surprised if s&p don't cut the rating. i don't think that should be -- i am sure it won't be a surprise to the board of market. turkey goingal for forward is will they have the ability for banks to do their rollovers? that will determine if they are successful, if they can rollover the short-term liabilities they have. francine: if capital controls are in palatable, will they go to the imf after several loans?

i think ultimately they will have to do a combination of need to importd credibility, even more than an external financing. going to the imf is one way to do that. that would require a huge political u-turn. isthe moment, their strategy we are going to take the pain, tighten fiscal policy. the economy is going to crash, but they are doing poor contraction, and we will try to our wayr way -- muddle through. that strategy can failed to radically, and they will have much more pain. guy: the next inflation, that could be a critical moment in

this story. pretty frightening. they will stick around. coming up, christian schulz. that is what we are looking forward to. this is bloomberg. ♪ is bloomberg. ♪

francine: good morning.

this is "bloomberg surveillance." we are in london. tom keene is having the day off. higher after they are in talks for the revocation of their italian license. it was lost after the collapse of a highway bridge in genoa. politicians are demanding justice for the disaster that killed at least 39 people. joining us is the bloomberg senior italy reporter. what we know about the license? >> there is an interesting division inside the italian government. on one side we have the populist five-stars asking for revocation. they are targeting the family that owns atlantia.

the eu has a more pragmatic approach with atlantia to get a ticket00 million euros atlantia to rebuild the bridge. why we are seeing atlantia shares rebound from yesterday. people also telling us that the government is thinking of a noty fine for atlantia, but the revoking of concession. they're saying we need to revoke the concession because the bridge is not there and people are missing. guy: how will this affect the budget discussion? did we get more clarity on that? >> it is still unclear at this point. and nationally attacked the european union saying we

need more flexibility to do maintenance. now they say they have all the money they need to rebuild the bridge and maintain the highways. on the other side, the focus is more on the company. they are probably saying they need more flexibility for investment in the country. they would probably use the necessity to build the bridge and do more public work. guy: thank you. joining us on the story in genoa. get more details on it. next, we continue our conversation with david riley. around.l stick we will carry on talking about geopolitics. ♪

guy: guy johnson in london. francine lacqua in london. a quick check on emerging markets. we are seeing a move both in the turkish lira and in the ram this

morning. see, we have decent moves but it does seem to be limited to the rand and lira. dollar-rand, trading at .93. francine: let's check in on what is trending across the business week. with more passengers opting for low-cost carriers, carriers could face a shakeup. on bloomberg.com, maersk announces it will spin off its drilling business. it is part of the move to exhibit the energy industry and focus on its core business. draghit read stories, keeps the ecb call as turkey and italy crises rage on.

in second place, nvidia nine-month crypto gold rush is over. top, turkey could face more sanctions as -- if they do not release a detained pastor. let's get to the first word news. turkey has stabilized its currency and staved off a financial crisis this week. it faces a new threat. president trump says the u.s. will pay turkey nothing for the of the detained american pastor, andrew brunson. tomorrow, a turkish appeals court will rule on his bid for freedom. president trump could end up forcing angela merkel and putin to come together after years of confrontation. the german chancellor has been one of putin's pierces critics of the annexation of crimea. this weekend, they will have their first meeting in germany in five years. president trump has accused germany of being controlled by russia. mike pompeo has set up a new

group in ramping up economic and political pressure on iran. the group will for -- focus on ways to force the country back to the negotiating table. the jury in the paul manafort trial resumes deliberations today. jurors ended the first a by asking the judge that is at the heart of every criminal trial -- what is reasonable doubt? the former campaign chairman is accused of financial and tax fraud. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm kailey leinz. this is "bloomberg." francine: thank you so much. mark maersk has announced it is drillinga separate unit. it is the latest step toward a separation and says it wants to

focus on transport business. the chief executive spoke to matt miller earlier. >> we have looked at all options and we believe this is the option that will create the most value for shareholders. many great companies in the sector but there are not a lot of companies with strong balance sheets. other possible transactions involve some kind wemerger which would mean would end up having more exposure to the drilling sector rather than less. good solutionis a and it will allow our shareholders to remain invested in a company that is well-capitalized and will do well in the trading sector. matt: it allows you to stay focused. what does this mean for the drilling unit? it is 4000 employees. they are closely tied culturally to you.

how is the outlook for drilling? >> our colleagues in drilling will take comfort from the fact they will still have a main shareholder as they have today. will, own more than 40% of the company. they have made commitments to continue as a major shareholder in that company. of thell remain part family, if you will. matt: how does it affect the shipping business or your core business? they did generate a votto profit drilling and that will fall away. from a balance sheet perspective, this transaction neutral one or less our balance sheet. for ourmost important logistics business is we get even more of our time to focus on driving the transformation of

that we are in the process of integrating our business units. where are in the middle of integrating. we are in an industry that is challenged by lower freight rates and lots of a geopolitical risk and trade tension. for us, it is a matter of being able to focus on the future of the company. matt: let's get to that freight rate and trade tensions. out a profit warning a couple of weeks ago and it is one of the few times i can remember a market bid up shares, 7% on the day. why do think that happened? out a profit warning but we disclosed the key numbers for the second quarter. in the second quarter, we were able to deliver numbers above consensus and we were able to demonstrate that we have regained control of our unit

cost. first quarter when it came to managing our costs, impacted by the fact we took over in december. we got a lot of new capacity they came in during the first quarter that we were not able to rationalize as fast as we would have liked. in the second quarter, we regained our unit cost. -- regain control of our unit cost. the mayorthat was chief executive speaking with matt miller. let's continue the trade conversation. we are joined by marion petting her, chatham house and still with us david riley. singer, chathamn house, and so with us, david riley. there anything china can

offer the u.s. that they have not already? what thenot clear trump administration has tried to get from china. out whatficult to make the administration might be willing to accept. president trump is focused on reducing the trade deficit with china. he hasother hand, pointed toward the 2025 strategy which is nonnegotiable. he has also pointed toward anti-trade practices by the chinese, intellectual property theft. he has a point. instead of working with allies, like the canadians, what he is doing is pushing the chinese and europeans and other allies against a wall by seeking multiple trade wars. francine: china has promised to accelerate reforms.

will be trump administration see that as a u.s. when? -- will be trump administration see that as a u.s. win? group of chinese negotiators traveling to washington interested at striking a deal. that is unlikely to happen. if you look back at the may agreement by secretary mnuchin and the chinese vice president, that only held for two days. unless trump is negotiating, i do not think any deal can be struck her -- struck. guy: in a situation where low-level talks got the market moving, where are we in terms of what we are anticipating? >> at the moment, there are bubbles that blowup again. for the time being, it is important we have negotiations

going on again, even at low levels. i do not expect a breakthrough but we are not seeing an escalation. u.s.ng at china and the trade relationship next week, the second tranche of tariffs is going to take affect next week. next week, we will see the tariffs hit. there is a hearing scheduled for next week that could be imposed on $200 billion. i think there is complacency in the market about the risk of an escalation in the trade war. i think it is more likely than not that we will get additional tariffs imposed on $200 billion worth of chinese imports. where i would differ is i think risks havee warr

decrease. -- have decreased. part of that is if you go to capitol hill, across the isle, there is support for bashing china. fore is not so much support getting into trade complex with allies, whether that be europe or canada or mexico. conflicts with allies, whether that be europe or canada or mexico. i think the issue is how big will those tariffs be. andcine: if you are china you want to hurt the u.s., would you not do something right before the midterm election to put trump in difficulty. what are the chances of doing that and is there a point of no return? >> i think they will do that because the lesson learned from dealing with president trump is

that if you escalate, he is willing to double down and go harder. as the market has been signaling in terms of the currency and the performance of the dollar. you look at the s&p versus chinese equities, the market is saying china you are a more difficult situation than the u.s. -- you are in a more difficult situation than the u.s. the thing that would stop an escalation would be if we had the s&p respond to that rather than beijing. francine: what moves on the back of trade? how much does it have to do with turkish contagion which is investors realizing they worry about dollars -- about countries that have dollar denominated debt? >> if we look at the performance of emerging markets, we had a positive start to the year. when that trade war escalated,

investors realized the trump intends to deliver on his pledges to reduce trade deficit with china. emerging markets have been under selling pressure. skeptical that the trump administration is going to adopt more. the u.s. is winning this war. the u.s. stocks have been outperforming significantly other major indices, not to mention of emerging markets. the u.s. economy is doing well. above 4%.wth if this trade escalates, the u.s. economy may be negatively impacted. over the next all months, it seems unlikely. the economy is solid, the u.s. is winning and

this is one of the factors that is weighing on emerging markets. from turkey, you have specific negative domestic factors that contribute to outflows from emerging aspects and capital is being shifted to u.s. stocks. francine: thank you for joining us. coming up, j bryson at wells fargo at 6:30 in new york. this is bloomberg. ♪

guy: guy johnson in london and francine lacqua in london. tom keene having a new york. -- a day off. named ben smith as chief executive. he will take the reins of -- by the end of the month. the biggest carrier casting aside union objections to a foreign ceo. global business europe joins us well. perceive thiswe as a strange choice? >> in some ways, yes. it is an experiment. this is a departure from the way corporate france normally takes. if you look at it from a french point of view, there is a group of executives that is moved

around, especially when it is a government role. the government is a shareholder. they have these people who are french will gone to the same schools and so on. what they have done is they've brought somebody in from canada. he is an outsider. what he is is an insider to the industry. he has two decades of experience, a reputation as a cost cutter. that is what they are trying to fuse, somebody who knows the industry and what the medicine should be but who do not -- but who does not come with political and local baggage and will be able to cut through the noise. guy: if i'm thinking of booking a flight across the atlantic and i'm wondering whether i should be flying air france, what can from this about

whether or not that plane will be flying? take fright, not flight, from this appointment? tasks, is one of his big to show people why air france is still relevant, why i should be booking on them, where they are a distinguishing factor and the fact they are up and running for business. that has been one of the that strikes on both long and short haul and those have rippled through the system. there are many other choices these days. has a big hub. air france is the airline that is most affected here by this turnaround and to make the company relevant, to make it a relevant choice, is going to be difficult. if you are a passenger, you do not know what air france stands

for other than the upheaval we have seen and that is not a great selling proposition. via going to get bigger? >> probably and that is no surprise. he has expanded in canada and that is the way the industry is going. we are seeing low-cost operations at lufthansa. that is the logical poll of the industry that they low-cost operations are growing. ryanair, easyjet who are making lives difficult for these companies. if you want to find out these fancy, long-haul, that is the only way to do it. you have to make sure on the shortfall, you have a viable business. to bet is going

interesting to see how others react. thank you very much. benedikt kammel. we are going to carry on a conversation with david riley. a lovely day out there. this is "bloomberg." ♪

>> this is bloomberg surveillance. i'm kailey leinz. there is a report that tesla has been searching for a chief operating officer for years to take some of the workload off of elon musk. the new york times says the search has intensified in the wake of musk's recent tweets. the paper says the use of ambien has worried investors, saying it leads to late-night twitter sessions. a house subcommittee made sub he told dorsey on twitter that he is invited to testify next month. twitter up's -- twitter's approach to policing content has come under fire. that is the bloomberg business flash. francine: thank you.

we're back with david riley. there are a million questions, are we late cycle and what that means going forward. let me bring you to my chart of the week. it shows that as the federal reserve continues on its hiking, the two-year is near the widest sense data began. we will push it out on social media. this seems to be significant. >> it is significant and one of the ways it is significant is the way international investors are allocating between europe and the u.s. because you've got such a wide gap between europe and the u.s. short onert end, the to three year u.s. credit looks good.

even once you take into account the hedging costs, you're getting a reasonable pickup. in contrast, europe at the short end does not look good. the underlying yields are low. longer and, we're seeing asian investors, there is value to be had in longer end. francine: we forget sometimes that the u.s. is late cycle and the rest of the world is not. what does that mean for a recession? >> the chance of a recession in the foreseeable horizon is low. we have been obsessing with the curve. i do not think that is a good guide to recession risk. a better guide is the toee-month to 18 month two-year horizon which tells you more about what the market thinks. that curve has steepened a little bit.

that is not a level which is signaling near-term recession risk. if you look at u.s. credit, high-yield, triple c has outperformed. the credit market is not worried about recession risk. it is going to happen but not over the next 24 months. guy: thank you very much for coming to see us. david riley of asset management. coming up, anthony crescenzi of pimco. when do we hit peak? that is another story. that is coming up. this is "bloomberg." ♪

francine: trump trade push.

the us president prods beijing to bring more to the table as the countries prepare for the first negotiations. steve mnuchin said they white house is ready to slap turkey with more sanctions if they detained pastor is not release. exitings moving toward the energy industry. we hear from the chief executive. this is bloomberg surveillance. francine and die from london. we have -- and guy from london. we have quiet markets. we saw a little bit of a move in turkey. there could be anxious this creeping up. guy: it is rippling through to the brand. , with the market close next week. -- closed next week, you're seeing some nervousness, local

buying of dollars. the market is hard to trade so this is probably a domestic story that is moving the rand. francine: let's get more of the markets. let's get to first word news. here's kailey leinz. the u.s.ent trump says will pay turkey nothing for the release of detained american pastor. the president referred to andrew bunsen as a great patriot hostage. steve mnuchin said the u.s. is ready to impose more sanctions of turkey does not free brunson. he is accused of having links to the coup attempt in turkey. president trump is pushing china to offer more at the bargaining table. the two sides are preparing for their first talks in two months. the president says the chinese want to negotiate but cannot give the u.s. a deal that is acceptable. the pentagon warns that china may add a nuclear element to the south china sea. a report says china plans to

introduce floating nuclear power plants near islands. beijing claims more than 80% of the south china sea that has led to clashes over energy exploration and fishing rights with other countries. in australia, central bank chief philip lowe says he would like to see the currency get weaker. he says that would lead to inflation and jobs and let the reserve bank start to normalize interest rates. the australian dollar has fallen 8% percent against the u.s. dollar in recent months. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm kailey leinz. this is "bloomberg." francine: thank you so much. these are your markets. little bit of markets cooling off this morning. overall, we saw a reversal when it comes to european stocks.

they were gaining, then flat, now down. turbulent week, the dollar falling for a second day. treasuries little changed. emerging markets are steady after the selloff. the turkish lira weakened after mnuchin said the country would face more sanctions if it did not release a detained pastor. that is where the turkish lira is that now. the lira has recovered a little bit this week. we are reversing some of that. interesting stock stories out there this morning. it is quiet from a macro point of view. view, bottom-up point of aersk, they are going to be spinning out more of the oil assets. air france is trading down. happy.ons are not

atlantia bouncing back this morning and nvidia, just saw the headline. story and whato you're seeing this morning is some of the european semi-stocks under pressure as a result of that. francine: let's have a quick look at what some of the other emerging markets are doing. we did see turkey edging away from the abyss that now it is facing u.s. threats. e did see impact on the rand. there is another story which is what the remnimbi is doing. this is regulators trying to pop -- probably story and this is doing with stabilization. want to offend or aggravate the trump administration by letting their

currency weaken further. what they do not want is an unstable currency. they would want a higher currency weaken exports. let's move onto geopolitics and the big item to watch is a meeting between angela merkel and vladimir putin. the meeting was one of -- with one of his most vocal critics is a major breakthrough well merkel needs to reassert her leadership role after clashing with donald trump. this comes after steve mnuchin said he would slap turkey with more sanctions. joining us for more is kevin cirilli. thank you for joining us. kevin, let's kick it off with you. the pastor is not released by tonight, did the u.s. give

turkey the weekend? >> turkey is under intense pressure. steven mnuchin saying to that the trump administration is considering additional sanctions against turkey. they've got them ready to go. the s&p is going to take a look at the credit rating of turkey. there are other factors besides of the release of this pastor. you have got a deteriorating economic situation, the threat of syrian refugees going across the border. let's bring you into this conversation. angela merkel is going to be i amng vladimir putin and curious about where the risks and opportunities lie. what is her objective? she is worried about turkey, the relationship across the atlantic , the president of the united

states is not keen on the north atlantic to project. what is the objective of this meeting? side has, the german been reluctant to define any clear goal. first of all, what they say is it is good they talk with each other again on this high ranking level. progress in the ukraine conflict would be much desired. the minsk agreement has to be fulfilled. of course, syria. it says some kind of peace agreement could be bargained. to find out when refugees could be sent back. these are major objectives. guy: kevin, the german chancellor and the u.s. president not seeing eye to eye

right now. i am being nice. chancellort a german that is trying to figure out a way forward on turkey. she is meeting the russian president. can i perceive this as provocation? how will the president respond? i'm not sure the president trump is going to comment publicly about the merkel andp between putin. there is intensifying pressure in the republican party for president trump to be more aggressive with his rhetoric with what goes on with russia. lawmakers who noted the policymakers -- policy positions of the u.s. have been trending toward the same trajectory of the u.s.-russia relationship.

i'm talking about the energy sector as well as sanctions which have been applied to russia and the tariffs which have been applied against turkey . i think you have to pay attention to that. all of this is connected. yesterday, when president trump said that turkey was not a good walk --many folks were were watching the relationship of turkey and russia in seeing whether turkey is going to russia as nato allies intensify pressure on turkey. francine: thank you so much, , our cirilli and in berlin german government reporter. joining us now is christian schulz and we are getting news out of deere. it is good to look at these companies reporting to figure out what their forecast is for trade tensions escalating. u.s., do youre a

export more tractors in china -- to china, what do you think about what is happening with the neso story. story. ani say i'm going to buy expensive tractor when i'm worried about how the agricultural sector is being affected? francine: let's go to christian schulz. there is geopolitics, what is happening with turkey. what will change the course of world economics? >> the trade war is a recent phenomenon. and itted in march started with baby steps. not everywhere.

thise still thinking about remarkable event where mr. watching and further trade war seem to be off the cuff. it is a murky picture. we expect backed to impact we expect but in -- that to impact investment but in an uneven fashion. global growth is strong but we are seeing more heterogeneity. some countries are doing well. the u.s., for instance. we see some which fall off a cliff. francine: what is the likelihood that the china-u.s. escalates and derails global economic growth? christian: the u.s.-china conflict is the most important one. if you look at industrial indicators for europe, there are driven by the chinese cycle.

this is a relatively new phenomenon. if you look at 2000, you see hardly any correlation. cycle, since the financial crisis, china is the driver of the financial cycle in europe and that is what we are seeing, this downturn in germany is driven by china. if china faces headwinds, not just from the mystic imbalances, but from u.s. trade wars, that is a concern for europe and that is a bigger concern than direct confrontation with the u.s. francine: thank you so much. kristin schulz will be staying with us. coming up -- christian schulz will be sitting with us. coming up, maersk exits the energy sector. morell be bringing you from that interview with the chief executive. this is a trade story. this is "bloomberg." ♪

>> this is bloomberg surveillance. let's get the business flash. shares of a are lower. one of the unions is threatening to renew strikes following the appointment of a new ceo. air france named then smith to be its new chief. he is the first non-french national to run the company. elon musk says no one saw or reviewed his tweet about taking tesla private. that is according to the new york times. he wrotehe times between does he drove himself to the airport. it said funding for a buyout had been secured. 's board has not received a

proposal. that is the bloomberg business flash. the manufacturing powerhouses behind much of the powerhouse preparing for a trade war. taiwanese companies are amongst those devising contingency plans, including moving production from china. curan joins us now from hong kong. our we going to see more of these moves? we going to see more of these moves? >> it is an example of tangible is a greatd taiwan example. it is the backbone of the global supply chain. we have commentary from these companies. companies are talking about shifting production to europe,

mexico, southeast asia in anticipation of where the trade war is heading. consumer electronics have not been targeted by mr. trump at the fair is they will be in the next bucket they do get targeted. -- but the fear is they will be in the next bucket that do get targeted. taiwan and china, you cannot shift factories overnight without cost. there are -- they are flagging their intentions. they're wanting to get ahead of the curve but it is early stages. isn't there an argument that says the u.s. consumer is the one spending money and you want to be close to that consumer? enda: for sure, that is the case. thatnn was an early mover

shifted production to the u.s. and we've seen japanese companies have been doing that for a long time as part of their relations with the u.s. made an effort to offset some of the tensions by relocating production. with the booming u.s. economy, there is an incentive to be there. what we see happening on the ground in taiwan and the expectation of it happening with other companies in china is that we will see more of this relocation of production, of facilities, of plants. thecine: if you look at fight in trade and the tensions between the u.s. and china, do you think the end game is on technology? enda: it has to be. certainly, in that area. there are two sides to this. you have the goods deficit which

by chinasolved offering to buy more goods which they vindicated they are willing to do. the other side is structural. it is china's ambitions to create this world-class, world theing economy known as made in china, 2025. that is more of a red line when it comes to making concessions. the u.s. does not want state sponsorship in promoting technology. that is the harder side of it. some people call it more of a tech war than a trade war and wet is what -- that is where see the tensions continue to play out. guy: thank you very much joining us out of asia. ,oining us out of new york anthony crescenzi of pimco. kristin schulz. -- christian's schulz.

how strong those walmart numbers were. the u.s. consumer is spending money. if i am in china, in europe and i'm looking at the trade story and wondering how i can get exposure, if i do get exposure to that consumer, i am in trouble. >> there are other parts of the world that are growing strongly. we have an optimistic forecast for the global economy that will 6's this year. we will get -- some exposure to the u.s. is important. it is in 2020 that things change because the fiscal impulse goes from positive to negative, call it about -.4 or so. it is a couple more years to run at least. global producers do want to cater to the u.s. but there is

growth globally. the absolutely but the fact u.s. is doing as well as it is an posting the kinds of numbers we are seeing on a daily basis has got to encourage the president to think he can keep going and be more aggressive and deal with china in a increasingly illiterate way. isn't that what we are going to see, the data would support him? political and the runway seems longer than many would believe. it seems the american public is supportive of the actions on trade. it is important to remember, there are 150 million people employed and 85% of them are in the service sector. we have to be thinking about the service sector. while there may be retaliation in various areas, it is not likely to hit the economy in a major way. the tax cut has to end

at some point. when are we going to see the end of that benefit? >> it looks like the fiscal impulse will end in 2020. there is a half-point boost this year and next. hass something ben bernanke quoted as calling eight wile e coyote moment. it will collide with this negative fiscal impulse to cause troubles for the u.s. economy. we are not forecasting recession. we would say the likelihood is high over a five-year period. it should mean some falling off. it may not be negative. growth in the united states is in the high 2's. francine: what does it mean for

the fed rate hikes next year? fed will keep moving until he gets closer to neutral, closer to 3% and then see what happens. there is the negative fiscal impulse it has to be thinking about. it will keep going now. despite the turmoil in the emerging markets. the odds of a hike in september remain high. christian, should we hikese careful about rate given what the fed has done up in the last 10 years? >> difficult to say. from a european perspective and a currency perspective, when is the growth differential between the euro area and the u.s. going to peak? goings the differential to peak?

our data shows that the relative movements and growth between those economies drive the exchange rate. we are seeing u.s. growth going through the roof. europe, we have to be skeptical. rid the trade war's with italy, with the other things -- with the trade war with italy, with the other things, you have to be skeptical for the second half of the year. not before it next year, are we going to cp growth differential. euro cant, perhaps the come up and that is what is going to matter for the ecb. guy: does the euro vote down in the meantime -- go down in the meantime? on the one hand, we are talking about resilience of the u.s. economy to trade war spirit

there is one vulnerability and that is the dollar. it is a concern for the u.s. side. it is probably not going to have a dramatic economic impact. markets,e and emerging this pair is important. it is driven by the growth differentials between those. that is going to peak a lot earlier than 2020. francine: i do not know what the trump administration is thinking on the dollar. he had talked it down and we had a tweet yesterday where he says our economy is doing that are than ever, pouring into our cherished dollar. do you want weaker dollar or a stronger dollar? wanted to be stable but a strong dollar means the weakening of u.s. exports.

when the u.s. dollar was strengthening against the chinese currency, the administration was showing its anger. is -- weakening of the chinese currency would help its exports. it will say it once a stronger dollar. it might even wanted to be weaker. anthony crescenzi from pimco. christian schulz from citi economics. coming up, jay bryson from wells fargo is going to be joining us. we are going to be joining the conversation about the outperformance we're seeing in the u.s. this is "bloomberg." ♪ retail.

under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. francine: this is bloomberg surveillance. tom keene having a day off. let's get to first word news, starting in turkey is kailey leinz. has stabilized its

currency and staved off a financial crisis this week. it faces a new threat. president trump says the u.s. will pay turkey nothing for the release of the detained american pastor, andrew brunson. the administration warns more sanctions could be coming if he is not afraid. tomorrow, a turkish appeals court will rule on his bid for freedom. president trump could end up forcing angela merkel and putin to come together after years of confrontation. the german chancellor has been one of putin's fiercest critics since he and crimea. this weekend, they will have their first one-on-one meetings in germany in five years. president trump has accused germany of being controlled by russia. the jury in the paul manafort trial resumes deliberations today. jurors ended their first day by asking the judge that is at the heart of every criminal trial -- what is reasonable doubt? the former campaign chairman is accused of financial and tax fraud.

in india, thousands of mourners are saying farewell to the man who turned a country into a nuclear power. the former prime minister died at the age of 93. he led the right-wing coalition government from 1998 to 2004. he defied a global outcry and ordered a series of underground nuclear test. -- tests. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm kailey leinz. this is "bloomberg." francine: thanks so much. the debate over turkish contagion spreading into other emerging markets continues. the lira has extended its decline. >> we are in the midst of a contagion phase. it is impacting both strong and vulnerable economies. francine: let's get more on the

emerging markets. jay bryson, wells fargo, writes that he thinks any financial crises would be individual rather than systemic. still with us, christian schulz and anthony crescenzi. thank you for sticking around. welcome to the program. i'm trying to figure out whether people are concerned about contagion or they look at turkey and they say my exposure is big because they have a lot of debt denominated dollars. let me cut that position. say but inhard to general, there is concern about the emerging world. our thesis is we think it is more individual names than something like in 1997, thailand goes down and it spreads her out asia and takes down russia.

it is more individual been systemic. francine: should the fed pay attention? should they take a pulse -- a policy in hiking rates. jay: the fed has two objectives. one is full employment and the others crisis stability. they are mindful that what they do does affect rings. that -- affect things. they are focused on what happens in the united states. to the extent that it affects the united states, they will pay attention. it is hard to say it is having a market effect. guy: how much of what is happening in turkey is turkey and president erdogan and his unorthodox approach to economics and how much is a dollar story? the former is idiosyncratic but the latter is not. there is this turkey specific thing running around. it has a current account deficit

, high external debt that can flee quickly. phenomenon buty the dollar strengthening not only against the lira but against most emerging currencies. that will continue for the near-term so there is a dollar overlay. turkey's issues are made in turkey, not in the united states or with the dollar. look at what is happening around the world at story ist and the em negative. you have got what is happening with the chinese currency and that is insulated. elsewhere, there is a dollar in effect coming through. it is the tide going out and we see who is swimming without trump's on. trunks on. jay: i'm not saying they're not

countries with high external debt loads. turkey is one of those. i would say is that the developing world today is better equipped to deal with this than they were 20 years ago. currencies have flexible exchange rate regimes which can act as a shock absorber so you do not have to have a central bank jacking up rates to defend currencies. they have higher foreign-exchange reserves than they did back then. i do not think the tide is going to go out to the same extent than it did 20 years ago. anthony crescenzi, talk to me about emerging markets. our currencies oversold? it is difficult to

generalize the emerging markets. the stress that has been a currency -- has been occurring is more political. there has been plenty of time given these nations for notice on the rate hikes that the fed wants to deliver and probably will. the amount is probably smaller than was thought about during the taper tantrum. many of these problems are homemade, political, idiosyncratic. are not ines there the realm itself but in individual countries. i do not know. where this situation dollar story seems to have an effect on emerging markets but the ripple seems to stop at the edge of the developed markets. it having this affect

into the emerging markets and not into the developed market complex? anthony: consider the growth in the world economy. global economy will have grown about 20% over three years. a lot of that relates to china and the growth there. stability is the word. growth there has been close to 70%. of gdp for theon world. when we think about growth in the world, where that figure is coming from is from the developed world. seem overways does time in any economic expansion, to be some stress somewhere in and emerging-market nation. so long as the developed market itld is moving forward and

has been, and the u.s. is rebounding relative to where it had been, it can shrug these things off. francine: christian schulz, what do you make of the emerging markets sell up and the impact they could have on europe? christian: europe is more exposed than the u.s. it has more emerging markets around it and we have seen during the crisis, europe was impacted, in the taper tantrum, heavily impacted. we have nots is, had a long series of idiosyncratic shocks to emerging markets and yet europe is growing. we have got strong domestic demand, with the recovery we have had, it has been almost entirely driven by consumption and investment. that looks likely to go on because interest rates are low, employment is growing, wage growth is starting to pick up. there is a solid floor to

european growth. there is volatility. last year, we had a good your driven by china. this year, a slightly weaker year. china is down. if you look outside china, the rest of the emerging markets, volatility and affect. china is the one we are most focused on. guy: let me come back to you and get a sense of where you think things are going. these are a series of stories that are unrelated and are not going to have an impact on the global economy, take me forward through the next 18 months. some of these stories will become more problematic, some less so. how does that feedback into u.s. growth? on the unitedt states is going to be marginal.

as au look at exports percent of gdp in the united states, 10%, 15%. you have to a big swings to have an impact. are we going to continue to grow at 4%? no. the fed will continue to hike rates. the outlook is reasonable. we are getting to a point where monetary policy is starting to get tighter. it is going to become restrictive. as you look towards the end of 2019, 2020, you could see signs of slowdown. would have to have something dramatic happening in the emerging markets in the rest of the world to have a meaningful effect on the u.s. economy at this point. francine: we have a viewer question. please log on to bloomberg and send us questions.

we like asking our guests. this person is asking, do you see this investment in turkey help the turkish lira or exacerbate the lira drop or boost the economy? jay: it is a stabilizing affect on the lira. is this the silver bullet? no, you have too big of a current account deficit. there is the potential for capital flight. does this help on the margin? yes. i would not say the crisis is over because of the investment. guy: thanks for a much for your time. we appreciate you spending the time with bloomberg. christian schulz and anthony crescenzi sticking around with us. on your commute, tune in to bloomberg radio. hearderg daybreak can be in new york, and the bay area,

and across the united states on sirius xm. this is "bloomberg." ♪

>> this is bloomberg surveillance. i'm kailey leinz. let's get the business flash. there is a report that tesla has been searching for a chief operating officer to take the workload off of the elon musk. the new york times says the search has intensified in the wake of musk's recent tweets. the paper says that the use of the ambien has worried directors who think the drug leads to late-night twitter sessions. google is trying to quell a controversy about whether will reenter china. the ceo told workers that his

china plans are exploratory. that google ists developing a search engine that would enter results in the chinese government. a house committee may subpoena jack dorsey to force him to testify. that is according to a congressional aide. greg walden told dorsey on twitter that he is invited to testify next month. to policingproach content on his platform has come under fire. that is the bloomberg business flash. guy: thank you very much. maersk has announced it is planning a separate listing of its drilling unit on the nasdaq copenhagen. anis the latest step toward exit from the energy industry. the company wants to streamline its structure and focus on its transport business. the chief executive spoke to matt miller earlier. >> we have looked at all options also four masked ruling and we

believe this is the option that will create the most value for shareholders. the reality is there are many , great companies in the sector but there are not a lot of companies with strong balance sheets. all of the other possible transactions involve some kind of merger which would mean we would end up having more exposure to the drilling sector rather than less. we think this is a good solution and it will allow our shareholders to remain invested in a company that is well-capitalized and will do well in the trading sector. matt: it allows you to stay focused. what does this mean for the drilling unit? there are 4000 employees. they are closely tied culturally to you. how is the outlook for drilling? >> our colleagues in drilling will take comfort from the fact they will still have a main shareholder as they have today.

it well, at least at the outset own more than 40% of the , company. they have made commitments to continue as a major shareholder in that company. they will remain part of the family, if you will. matt: how does it affect the shipping business or your core business? they did generate profit drilling so that will fall away. >> from a balance sheet perspective, this transaction will be more or less neutral on our balance sheet. what is most important for our container shipping logistics business is we get even more of our time to focus on driving the transformation of that we are in the process of integrating our business units. we are in the middle of integrating. we are in an industry that is challenged by lower freight

rates and lots of geopolitical risk and trade tension. for us, it is a matter of being able to focus on the future of the company. matt: let's get to that freight rate and trade tensions. you put out a profit warning a couple of weeks ago and it is one of the few times i can remember seeing the market bid up shares, 7% on the day. why do you think that happened? >> we put out a profit warning but we disclosed the key numbers for the second quarter. in the second quarter, we were able to deliver numbers above consensus and we were able to demonstrate that we have regained control of our unit cost. we had a poor first quarter when it comes to managing our costs, impacted by the fact we took

over in december. over in december. we got a lot of new capacity that came in during the first quarter that we were not able to rationalize as fast as we would have liked. in the second quarter, we regained control of our unit cost. that is important for us. francine: that was maersk's chief executive speaking with matt miller. theill continue with conversation on trade. we will also see the difference onto your treasuries. later on today, on what you be talking about turkey and a thing or two about trade, coming up at or clock p.m. in new york, 9:00 p.m. in london. this is "bloomberg." ♪

francine: it is bloomberg surveillance and it is guy's favorite time because it is the single best charts. it is the two-year treasury and the schatz. the interest rate staying at current levels during 2019.

the federal reserve continuing on its hiking path. what it means is that u.s. treasuries and german bund, the widest sense data began. let's get to anthony crescenzi of pimco. an interesting countercurrent call on the ecb. you think they will raise but that is it. is not likely that the ecb will raise its rates until next year, probably in the latter half to something less negative, they will get into positive territory in 2020. perhapsl get to 0.25, 0.5. they will pull back to zero in the five-year horizon. we think the policy rate will though no higher. in japan, to add something else, probably staying at zero in that five-year period, the fed at three.

this low interest rates is here to stay. you take a look at the euro-dollar. i have got a chart. there is a nice head and shoulders to the right-hand side. you've got to follow through to the logical extension. 1.05ould take you down to $ on the euro-dollar. how low does that get? anthony: it may take a longer time. what is ahead of us is this debate over how high the fed will go with its policy rate. what is priced in is that they will raise it one point. the market will have to decide like it did, is this where it ends? 2004, the market decided it would end in the 4's.

it decided in 2006, it would -- where the to dollar goes relative to the euro will depend on the debate that occurs next year as to whether or not that what is priced in today is enough. please push back, or if you agree, agree. christian: where i disagree is i do not think there is a neutral rate for the euro area. for the u.s.,me, which is 1% or above 1%. that, i do not see. what i can see is that the ecb starts hiking rates next year, growth souls in the u.s., the fed cuts rates, and the ecb -- growth slows in the u.s., the fed cuts rates. guy: how is it credible that we

have a single currency zone when you've got extraordinary stimulus? the euro area has stuck together through hefty crises. fall or no means not herbal next downturn. to the- not vulnerable next downturn. it is a concern. is going to be maxed out so we need fiscal policy. francine: tune in on monday, we will do that. christian schulz and anthony crescenzi. hostst, lisa abramowicz bloomberg radio. ♪ retail.

under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store

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stronger dollar just weeks after blaming the currency for taking away america's competitive edge. the weekend turmoil in markets main it is time to buy or sell? blaming raw material costs. president trump warns china only a fair trade deal is a -- acceptable. david: welcome to "bloomberg daybreak." we need the break of the weekend. alix: it is going to be like today. there will not be a lot of trading. you will go to the beach at the hamptons. what kind of risk do you want to take on over the next 48 hours? david: the markets are reflecting that. it is a nice summer friday. alix: that is what you said when we came in. let's take a look at this summer friday could s&p futures pretty much flat. euro-dollar is flat.