francine: bond market pain ahead. traders. warns this week, we get fed minutes on jay powell's speech. streamuys israel's soda for more than $3 billion. we talk m&a. good morning, everyone, and welcome to "bloomberg surveillance." i am francine lacqua here in

london. you can see stoxx 600 gaining some 0.7%. there is a little buoyancy on the markets. first of all, i think out there on the markets, very our hopes hope that theis tree sanctions will ease. jackson hole gives us a little bit of a clue for the outlook of the markets. this is what the yuan is doing over in china, $6.8524. let's also check in on mulberry after shares to the lowest level since october 2010. you can see this all has to do with the troubles over at house of fraser. it is actually at the lowest since we saw back in 2010. coming up on "bloomberg surveillance," we speak with pierre moscovici, the eu commissioner.

we will talk to him about italy's populists. that conversation at 11:30 a.m. london time. with get to first word news. markus karlsson. a path turkey maybe on for a 300 interest point rate increase. -- 17.5% i percent retail rate. it is trying to counter the lira slump without formally hiking. the rate was cut further to junk . venezuela has taken drastic measures to shore up its economy, and evaluating its currency by 95%. the official rate will lead about 285,000 to the dollar to 6 million, and the government will try to offset by raising the 3000%. wage three

inflation is already forecast to reach 1,000,000% this year. italy will go ahead with plans autostrade's highway concessions fear that is after offering 5 million euros in initial aide after the bridge collapse. salvini says it must " compensate everyone for the disaster." donald trump says truth is not true when talking about special counsel robert mueller. rudy giuliani told nbc "meet the press" that when two people like donald trump and james comey tilde for stories, it is somebody's version of the truth, not the truth. the jury is still out about whether the president will speak

to investigators. efforts amidelief the outbreak of waterborne diseases. that is nearly one million people gather in relief camps in southern states to the death toll has climbed to 300 $.41 monsoon started in india in june. it is estimated that the words flood since 1994 have caused $2.8 billion worth of demonstrating first hollywood film and almost a quarter-century with a largely asian castoffs the north american box office. warner bros. "crazy rich asians" rate and $32.4 million helped like of advertising, the reviews, and social media posts. the shark thriller "the meg" main $21 million in its second weekend during global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. this iskus karlsson,

bloomberg. francine. francine: thank you so much, markus. a warning for bond traders. justin goodlatte says the buildup of short positions in u.s. treasury's is setting trainer suffer pain ahead. this as we are set for a big week, the jackson hole symposium kicks off on thursday, and we get minutes from the central bank's latest meeting. what should we be meeting ahead of jackson hole? joining us now is paul donovan, chief strategist at ubs wealth management. what have we got? paul: i think you have a concern here that a lot of people say their valleys to the treasury is 4.5%. -- fair value to the treasury is 4.5%.

sadly, we are not in a perfect world, and we have rigged markets, captive investors, the set itself continues to distort the market, so i think there is a disconnect between people who are looking at rather quaint, old-fashioned views of it and where we are. francine: at some point, and i'm not saying the economists will take over, but we will go back to a more normal world are we to years away from it, or will it take longer? it is a question about -- what is a more normal world? will we go back to fair economic value? no, we will not. not for the remainder of my career at least, and i am hoping to be around for a good couple of decades. six income, changing demographics and changing

pensions, foreign central banks, not just the said, foreign central banks that are holding more than they have ever held in the past. all of this for you together creates the market. look at the gilt value. francine: i guess people are expecting more than treasuries because they are treasuries. let's bring you over to the chart. do you see an in version? see: i don't particularly an inversion. i don't really care. i don't think people who know what they are doing at the fed care, except there are some people of the market who fear an and version, so the only thing the fed "has to fear is fear itself." that might change the inversion, but it does nothing economically. francine: in the past, it always

foresaw a slowdown, but this time is different because of the mechanics? paul: absolutely. there are a couple of points. first off, it did not forecast except in the state. the bond traders have some kind magic insigh, because if they had come it is not working out. second, it worked out when we had inflation and when inflation is cyclically correlated. in the 1970's, inflation is the only thing that matters with bonds. now we have a situation where inflation is not the only thing that happens with bonds, and it does not move up and down with the economic cycle the way it used to. that combination basically destroys the mechanism, which allows an inverted yield curve to have the appeal. francine: what are you looking for when it comes to jackson hole? i guess it is the jay powell speech, but what do we think we

understand better than others? paul: so jackson hole is fantastic for economists, and economists get excited about the content. markets get excited but for the wrong reasons. they think it will be a signal of what happens inext. francine: interest in the past. paul: occasionally. it is long-term structural changes that they are looking at, and there is a lot of structural change going on in economy.l it is fascinating for those looking at a 10-year, 15-year view, what the relationship is, and that is where the real value of jackson hole comes in. second sound bites that are converted into market moves, it is just noise. i do not think we should be focused. francine: if you have one question for jay powell, is on inflation, on wage, what is it? paul: mr. powell is not an economist, so i'm not sure asking him will prove

instructive in terms of getting an answer. if you are talking to powell, you are asked about regulation. that is an area where he has considerable expertise. if you were talking to new york fed president william, then you want to be asked about structural change in the labor market, because that is equitable issue. francine: paul donovan, thank you so much, global chief economics at ubs wealth management, he stays with us for the hour. wreps up a decade of crisis that has seen more than 300 million euros of aid, but is it better off? and we're live in moscow and russiano wrap up the financials. all that coming up. this is bloomberg. ♪ rg. ♪

francine: economics, finance, politics must this is "bloomberg surveillance." i am francine lacqua here in london. let's check in with markus karlsson. pepsico has agreed to buy sodastream for $3.2 billion. volume2% above the basis. pepsico says the transaction will be funded with cash on hand. the agreement is subject to a sodastream shareholder vote, regulatory approval, and it is expected to close by the end of this year. shares have plunged by almost 1/3 this morning from over it, afterwords of house of fraser close at 3 million pounds.

they risk a material reduction in full-year profit. view k's ministry of justice has taken an immediate control of birmingham prison from the contractor. this is after widespread evidence of alcohol, drugs, and violence, and reported corridor's later with cockroaches -- corridors littered with cockroaches. elon musk says he wants to make a different approach to change the way he works. that came after arrieta huffington wrote an open letter, accusing him of outdated and inefficiency. tesla shares fell by almost nine four cents friday -- 9% friday after a "new york times" interview after must describe the last 12 months as the most "difficult and painful" in his career. francine: thank you so much for

a reduction of prices that have transformed the country's people. more than one million jobs have a cluster leading to that is despite greece receiving more than 300 billion euros in aid from creditors. lenders are facing higher financing cost when the ecb stopped accepting government debt as collateral. how far does the country still have to come? we have the resident scholar at google, and paul donovan of ubs is still with us. what happens to greece next? guest: greece will enter a period of so-called enhanced surveillance. and also, even though the bailout ends today, greece will continue to have to comply in rather tight conditions, partly

led to a large primary surplus, but they have to implement reforms like labor market and other public organization reforms. francine: zsolt, what do you agree is the best case? not a matter of time, imf rain gear it must more depends on what kind of policies the government will be able to depends onmore what kinds of policies the government will begin to implement. net investment is actually negative, and lighting the capital -- implying the capital stock is on the decline. attract foreign investors. the government will have to regain trust, then greece can be competitive, otherwise, i am afraid the country will struggle for many decades to come. francine: paul donovan, if you

look at the speed at which you resolve civil disputes, which is one of the concerns, it is still slow. where does the economy go? isl: what we have had now obviously the credit bubble has been reversed, and more than reversed. i mean, losing a quarter of your gdp is a pretty big thing. this is great depression type stuff. now the question is -- what momentum like for the greece economy going forward? we have effectively two problems, as we were just hearing, this lack of investment, but there is also the lack of human capital. the entrepreneurial classes getting out. if you are young, educated, and greece.ou're not increasein hundreds of thousands of people are leaving the country. that is always a problem or a

country, particularly, i think, for greece, the loss of this entrepreneurial class is a challenge. the government has to do something to keep people in greece and to attract that some people who have left. francine: what lessons, zsolt, have you learned about the bailout in greece? i am sure the list is pretty long. part of the problem is greece was in the seismic shock of the eurozone. not workthe euro does properly, and it has been partially resolved, but of course it took a lot of time. when you are dealing with something like a crisis of confidence, the issue was always market reacts faster than policy does. we have a partial farm work in place now -- framework in place now. has moved a little

further on banking integration. i think what we need to take from the greek crisis is how much more still needs to change in the euro to make it work. we do need some kind of fiscal consideration. we do need some kind of genuine banking integration. francine: going back to structural reforms greece needs, paul was saying part of the drain. is a brain how many do they need, and what is their timeframe of this? how quickly is to attract entrepreneurs that's the country? -- back to the country? zsolt: the short answer is it takes a long time. the longer answer is greece has implemented a number of factors to measure in the last eight years. has done moree than many sometimes acknowledge, but there is still a lot to do. paul mentioned it takes ages to resolve a legal dispute, the

fixing the legal system is a major upgrade. there are many other issues, also the labor market. it will take a long time, i am regain until greece can trust in attract both physical s whotment also greek have left the country to return to the country. francine: greece has experienced the export-led recovery that other countries have. is this just the nature of the economy? paul: yes. recess export, but it is products that are more -- greece export, but it is products that are more -- like tourism. you are not going to genetically change the situation, because if anything, the crisis is damaging to the whole tourism side of the economy, because you are presenting an image of the

country in chaos. that is always a problem. i think that there are challenges, well, we will have export-led growth in greece. that is not necessarily the case. it is a case of getting a self-sustaining domestic economy. that is going to help. of course, greece trays with turkey as well, just a graphic proximity -- trades with turkey as well,, just geographic proximity. francine: the you believe investors will remain a little bit shy to invest in greece for at least a couple of years? zsolt: i am afraid indeed investors will not rush to invest in greece, and one reason is the public debt problem of greece has not yet been resolved. the euro group, the group of eurozone finance ministers, agreed a number of measures

basically by pushing maturities and repayment periods far to the future, but still, greece has to repay a large amounts of loans, not least of the imf, the european central bank, and also to creditors for the first bailout. greece will have to grow a lot of money in the coming years. i am afraid economic growth in greece will slow down, investors might become nervous, and insurgency will linger for quite long. francine: zsolt, thank you so much, resident scholar at brueg el, and paul donovan will stay with us. was in russia over the weekend, the first bilateral summit since 2013. they agreed to take steps to protect the north stream to gas pipeline from threats by president trump.

joined now by bloomberg correspondents. first of all, tony, why did merkel do this? tony: well, francine, the one answer to that is donald trump, right? we have seen this for some time now building up. the frequency of contacts and also visit, including by merkel to russia, has increased. now she invited him to this government guesthouse outside berlin, and in many ways, as we have written, it is a sort of marriage or alliance of convenience, but also of necessity, because both of them do realize that the trump administration is upsetting me applecart, to put it mildly, and ew, you know, new

realities in the global order, and that is where merkel and putin come together. francine: greg, if you look at merkel, she has been one of vladimir putin's toughest opponents for years, pushing sanctions after the ukraine crisis. so what is putting them together now? again, is it only trump? it is partly trump, certainly he is the main driver of the disorder that has been caused by trump up ending in long-term relationships and trade deals. the foundation of merkel's policy. those are big drivers. also issues like migration, the syria crisis, the return of refugees to syria, and putin made a large comment about the risks, a corporation of efforts to stabilize syria and again rebuilding with europeans.

refugees and a stabilizing there. it is a number of factors some of that trump is at the top of the list. the north stream to, iran nuclear deal, anything else? tony: those are the two big ones. obviously the gas pipeline directly from russia to eastern germany is a big one. reallynce, it is not new, as the germans and the russians telling us, russia has in supplying gas to decades. a new onesthere is that merkel has made it very clear that she wants to use whatever leverage she has to avoid ukraine somewhat being cut out more than it is already out of the gas flows, and on the 's spokesmanputins

made it very clear that russia sees this as an "purely economic deal, which is a new ones that merkel has tried to d differ with. even there, there are differences, but those are the two big things that are keeping them together or bringing them together. francine: all right, thank you so much. we also need to talk about vladimir putin attending the austrian foreign investors meeting. zka.ory white and tony czuc up next, we will discuss what the biggest currency devaluations in history. this is bloomberg. ♪ this is bloomberg. ♪

francine: this is "bloomberg surveillance." let's check in on what is trending across the bloomberg universe. elon musk has defended his

relentless work schedule. the bank of england's decision , araise rates this month survey shows a majority expect the rate to reach 2.5% by the end of 2019. currency's 95% inaluation, and a buildup treasury markets could cause a .queeze find out more by logging onto your bloomberg terminal. italy will press ahead with plans to revoke the highway concession. that is despite the company's

offer of about 500 million euros in initial aid after the bridge collapse. deputy prime minister says the company must open its wallet to compensate everyone for the disaster. saidd trump's lawyer has truth is in truth when discussing why having the president interview by robert mueller isn't a good idea. rudy giuliani told meet the press that when two people like trump and james comey tell different versions of the same story, it is somebody's version of the truth, not the truth. authorities have stepped up relief efforts amid the threat of the outbreak of waterborne diseases. that is as nearly one money and people gather in relief camps across the southern states. the death toll has climbed to

341 since the monsoon started in june. it is estimated that it is the worst flood since 1944 and has caused $2.8 billion worth of damage. of speculative short positions in the treasuries market is setting both traders up for pain ahead. according to the commodity , hedge fundsng have had the highest on record. the extreme nature of the positioning has raised the risk of a possible short squeeze. andfirst hollywood film almost a quarter of a century with a largely asian cast topped the north american box office in its weekend debut. raked in 22asians" $22 million dollars.

global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. so much. thank you the pain for emerging markets isn't over yet. wasey's credit rating jumped further into s&p. meanwhile, venezuela devalued its currency by 95% today. this wasn't the only drastic measure by the president. inflation is already forecasted inreach 1,000,000% this year the oil-rich latin american nation. what is next for emerging markets? paul johnson is still with us -- donovan is still with us. turkey basically meant that there was a selloff in all emerging markets. turkey also seems like it is a

very turkish problem. paul: i think it is a very turkish problem. i don't think you necessarily have the same degree of contagion that we have perhaps seen in the past. the ending of that process combined with uncertainty about economic policy, and with u.s. president trump's sanctions -- there is a whole series of specific issues. we are also in an environment where emerging markets have had run and we are now seeing structural changes in the economy. there are questions on trade which tend to hurt emerging markets disproportionately. there are questions over the degree to which dollar liquidity is going to move from international markets. half of the dollar cash in

circulation is outside of the united states, a lot of the in emerging markets. if you're going to see tighter liquidity conditions, that is something that will have an economic consequence. francine: is it all emerging markets? which one would be hit the most? bel: i think we have to careful about talking about emerging markets as a block, it has really moved on a long way from that. if we look at what is happening in asia, the trade story is something which impacts asia more than other parts of the world. commodities tend to impact latin america. the tightening of interest and theoth in europe united states, raises questions if you have been dependent on credit fueled growth, like turkey. you have these specific problems. venezuela and argentina are clearly markets being significantly affected by the

situation they find themselves in. countries like south africa and brazil, markets say they seem to be moving in the right direction, but we are not giving them much margin for error. francine: let me bring you over to my depreciation charts. how do they defend lira now? paul: the challenge with of the lira is that the turkish economy runs a current deficit. it needs to have international money fairly consistency to finance that -- consistently to finance that. it is not just about raising rates. higher rate of return, but it is not going to solve the underlying problem,

which is that turkey is unsustainably borrowing. that is going to be a question that will permanently overshadow the lira. it is not just about raising rates. it is about creating an environment where you believe that the turkish economy is going to a more sustainable level of growth. it is not a consumer finance economic expansion. this is something more robust in terms of its medium-term potential. francine: we started the conversation on venezuela. let me bring you over to my chart. to president plans redenominate. what happens to venezuela? paul: i think you have the traffic problem of a higher inflation society, that there is a lack of confidence in the currency. one of the key criteria of a currency is that it has to be an

acceptable store of value. difficult tory return to that accepted a store of value without a very drastic set of reforms. you don't just knock zero's off the currency and say it is going to be ok. all cryptocurrencies have hyperinflation all the time. you have got to come up with something more credible than this that restores confidence in the currency. francine: will the president come up with something that restores confidence? paul: the evidence we have over the weekend, no. i don't think tying to a cryptocurrency is going to restore confidence. the devaluation is just an acceptance of currency. it is not a measure. i think you need a break. you need something which is, this is where we are going. whether it is dollar-wise.

you look at episodes of significant hyperinflation, the period in germany in 1933, or the czechs in the 1940's. you get out of that post hyperinflation by having a real structural break. if you have hyperinflation, you have to wipe the slate clean and start again. francine: thank you so much. paul stays with us. oallowing the deadly genera bridge collapse, we are live in milan. this is bloomberg. ♪

francine: this is "bloomberg surveillance." italy is pushing ahead with provoking the highway concession in the wake of the deadly genoa bridge collapse. despite an offer from a parent company of around 500 million euros. the disaster has thrown the family into a fight to salvage its lucrative tollroad fortune amid rising public anger. for more, let's get to our senior reporter in milan. thank you so much for joining us. antia sharesa plummeting again this morning. >> the only simple answer we the so far is that government has officially restarted the process to revoke the concessions.

rated sunday was atlantia despite offering 500 million euros to help rebuild the bridge. francine: can the government really revoke concessions, or is it just loud talking? ommasso: that is a big question. i have a copy of the concession here. i was trying to go to it before we spoke. if we look at the contract, it is a very long process to revoke a concession. i was just reading that the concession last until 2038 four r atlantia. they are not trying to revoke the concessions. the contract i have in my hand, they made a new low, which will

rule all the new concessions. essentially, they're going to let the concession expire. uncleary, it is still if it is something that can be done on a constitutional basis in this country. francine: which risks are they facing? tommasso: they're facing the risk that the main business, the highway business, will essentially lose a big part of its value. atlantia already lost about 6 billion euros in market. the assets are worth about 12 billion euros, about 50% of their assets are in atlantia. they are facing a big risk at the moment. francine: thank you so much. let's keep the conversation on italy and the situation in italy. paul donovan is still with us. when this tragedy happened last

oscovici was the first to respond. it is difficult to directly say that this huge --astrophe i think it will be exploited in terms of the private sector and the wealth of individuals involved in the running of the business and so on. i think that there are obvious popular ingles which the government may choose to seize upon. the mood in italy, the antiestablishment mood which has been there, perhaps a sense of frustration and reform in

italy, frustration about where the economy is going. this is another outlet for that. along with the national grief that you veryedy, understandably get anger from people from that. politicians may choose to use that anger and perhaps unorthodox ways. francine ban what does that mean for -- francine: what does that mean for economics? we going to see more populist measures? it all points to what they point to for this budget law. the structure of the tie-in government itself doesn't appear to be that stable. you have two parties which are not, other than being antiestablishment, have not necessarily agree on where they go forward. they are good at campaigning against things. we are talking about anti-politics.

when you look at what they are in favor of, they start to move ontologically apart quickly. quickly.gically apart, in terms of economic situations, we are against the eu policy on this, we are against corporate action in this area, whatever it is, as long as they are standing on a soapbox and campaigning against something, that helps the unity of the government. when the government is required to come up with a solution, that starts to widen some of the fractures. francine: what does that mean for the entire relationship with the eu/ eu? i think it is generally understood that once you are in it, you're not getting out of it. i think the question is more about, to what extent does italy

become a problem in moving forward with other essential reforms within the eu and eurozone itself. as thef you have italy third largest economy in the eurozone, railing against europe, the government who is looking to find reasons to argue, that is quite to be problematic in the council of ministers. 3 thank you so much -- francine: thank you so much. paul stays with us. about women who get paid less than their male counterparts. this is bloomberg. ♪

francine: economics, finance and politics. this is "bloomberg surveillance." let's get straight to your bloomberg business flash. markus: pepsico has agreed to buy soda stream. st is 32% above soda

ream 30 day price. the agreement is subject to a shareholders vote and is expected to close by the end of this year. the luxury brand said that that added to a tough trading discussion and material risk insian -- reduction full-year prices. -- it follows an inspection that found widespread evidence of alcohol and violence and corridors littered with cockroaches and vomit. the government is removing hundreds of prisoners out of the facility today. francine: female chief executives of the biggest london

businesses are earning an average of 300 -- 3 million pounds less than a male counterparts. mailb --st-paid -- earnsarns nearly significantly more than the highest-paid female boss. this is basically a report that gives advice to your nonheterosexual clans and how they should invest. >> there is an issue here. the first is that there are obviously legal problems, if your nonheterosexual. you don't have the same rights in many countries as a heterosexual would. from an investor point of view, that means you may need more legal structures to manage your portfolio, and he probably need

to save more money. in most parts of the world, including 30 of the states in the united states, you can be fired at will for not being heterosexual. apart from the complete absurdity of that to the is, ifn, what that means you're not heterosexual and you're in one of these terrible environments, you need to have higher precautionary savings as an insurance policy. obviously, if you are in the u.k. or switzerland or something like that, that is not necessary because you can't be fired. for most of our clients around the world who are not heterosexual, they will need to save my money. francine: this is the same also for non-heterosexuals in asia. paul: absolutely. homosexuality is still legal in singapore. the risk that you could lose your job for no reason at all is distinctly higher in those countries. you have to have precautionary savings balances.

francine: how do you invest differently? paul: there are other things that you need to consider. lesbian couples, female partnerships will live longer than a mixed gender couple. they need to consider having a higher pension pot, and managing that money more significantly. there is also the issue of legacy.a lot of our clients are very concerned about legacy estate planning. legacy is one of the key attributes we focus on with our clients. if you're in a nonheterosexual relationship, the chances that there is a low possibility that you will have children. it is about half the probability of a heterosexual couple. there are lots of legal and complex issues around this, if you are in a nonheterosexual relationship about how you

manage your portfolio. francine: great stuff. thank you so much for coming on. that was paul donovan. "bloomberg surveillance." continues in the next hour. guy johnson joins me. we will talk to our guest about greece and italy. in the meantime, this is what your markets are doing. we are seeing european stocks be much on track. the dollar is pretty much study. a lot will have to do about what the central banks will say. this is bloomberg. ♪ xfinity mobile is a new wireless network

designed to save you money. whether you use your phone to get fit. to find meaningful, thoughtful, slightly-weird gifts. or just to know which way you're facing right now. however you use it, your wireless bill is about to cost a whole lot less. ask how you get xfinity mobile included with your xfinity internet. so you just pay for data -- by the gig or unlimited.

saving you hundreds of dollars a year. plus, get $300 back when you buy a new smartphone. xfinity mobile. it's simple. easy. awesome. click, call or visit a store today. francine: bond markets paint ah ead. this week, we get minutes on jay

powell's a speech. venezuela carries out one of the largest currency devaluations in history. turkey ratings it seep deeper into junk. -- we askedially the european commissioner. i'm here with guy johnson. you look at the news out there and we have a couple of earnings. i think amazon is maybe shopping around here in the u.k. -- have overwhelming guy: i don't think he is talking about anything new, but the numbers are eye watering, in terms of the positioning now both in terms of the dollar longs and shorts in the treasury market. i thinkwas to move,

we're going to be paying attention to that. well.ne: we certainly let's get straight to our bloomberg first word news. there is report that the trump administration has rejected demand from turkey over the the american pastor. turkey wanted to tie his releases to dropping an investigation into the turkish bank. violatings allegedly u.s. sanctions on iran. is talking about whether the president will sit down with special counsel robert mueller. isn't truth while discussing why the investigation isn't a good idea. he said it could be a perjury trap for the president. monsoons anded by india have forced more than 900,000 people to flee to relief camps. officials are worried about the outbreak of disease. authorities say 341 people have

died. in venezuela, the president is testing the capacity of an already beleaguered population to face even more pain. he carried out one of the largest currency to violations in history over the weekend. he devalue the currency by 95%. inflation was already set to reach -- global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm sebastian sally. this is bloomberg. francine: thank you so much. you're looking at hyperinflation in venezuela. guy probably has a very similar chart. european stocks attracting some of the asian gains. study.pretty much i think a lot of the focus will be on what happens in jackson hole.

china is propping up the currency just as it prepares to restart trade negotiations with the u.s. euro slipping for the first time in four days. guy: copper is moving this morning. that is worth paying attention to. oust the want to say this chart. -- i also want to show you this chart. when you start to think about ways out of a crisis, you start to develop a theory, you get unintended consequences. the turkish government has tried to crush the speculators out of shorting the turkish lira. the problem with that is a it has generated an unintended consequence. the turkish lira started to trade a little bit stronger. the problem with that is that you have people invested in local denominated bonds. normally, they would hedge the

risk with those bonds. the problem is, they can't. as a result, they start exiting those positions. the lira has started to stabilize a little bit, what you continue to see is low denominated bond yields continue to rise. that is the ugliness of some of the parties out there. inside of fixed income markets traders.ning for this as we are set for a big week from the fed. enal and men richard.

al: pretty much, our view is very much in mind the market and that we do think the fed is going to hike this year? we expect at least three next year. when you're looking at these comments, it is open to the fact that the market is positioned in that way. --'re looking at some of the with some of the trade risks which it do mean that if we see an escalation and some of the trade rhetoric coming out, that could have significant impact to given this issue we are seeing. francine: overall, when did we go back to the treasuries functioning like they used to, tracking inflation? : we still need to see some stabilization of structural things happening in markets. when you're looking at the global economy as it is, you really do need to see other central banks start to normalize, and not all of the pressure on the fed to be the

driver of the global economy. currently, the treasury market is not acting as you would expect because of these other interests coming into play. we have massive expections on the 10 year and massive long positions when it comes to the dollar. which one is wrong? richard: i think they are both quite consistent. i think if you have people expecting higher yields in the u.s. and going short and buying the dollar on the back of that favorable interest rate differential, i think if just is rightight -- jeff , that see this downside will see not only those positions unwind, but also belonged dollar positions unwind. therefore, you could see a bit of a domino effect or one market leads the other. i think one of the things that

supported the dollar throughout the first half of this year has been those favorable interest rate differentials. as that starts to turn, i think you see the dollar start to weaken. guy: if we were to see this backed up by an event, which it turns the market around, do you think you could see this forcing the curve to invert? they're not far away from it. you probably get a bigger move in the middle of the curve, rather than the front of the curve. back and forth that curve could get very close to being inverted. look kind of a debate could force us to happen? think the type of unexpected event, we could see broader turmoil in emerging markets, not just turkey but a further contagion. something like that could possibly drive the far end of the curve of those yields considerably lower.

the short end of the curve is probably well anchored by fed expectations, unless that starts to shift. i think we could see that curve inversion. i don't think there's a view across the markets, exactly what that means this time around. tois been a precursor difficult times when the curve inverts. -- if thereould see is some sort of event with the short end anger, we could see those far in yields come down. francine: do you worry about a yield inversion? is there worry that the market interpreted as something ugly? meenal: we do think the curve will invert toward the middle of next year. we think that is a natural part of where the cycle is going towards at the moment. in terms of how the market reacts to that, the market does look at that as an indicator of an oncoming recession. there is the chance the market

starts to price that in. i don't think the fed is to be worried about that at this point. the economy is still holding up very well. it is still justifying them to carry over with policy. there is no reason for them to be concerned. i think an inversion of the curve is very likely to occur next year. francine: thank you so much. ichard stay with us. coming up, the eu commissioner for economic and financial affairs. we will talk to him about greece and italy. in the meantime, these are your markets. european stocks rising after asia's late day gains. it is august 20. this could leave the markets a little bit vulnerable to headline risk. remember, jackson hole later this week. this is bloomberg. ♪

guy: this is -- sebastian: this is "bloomberg surveillance." pepsico has agreed to buy sodastream for $3.2 billion in cash. pepsico points out that sodastream makes great tasting beverages while reducing the rate of plastic bottles. in italy, the government is company'sd with the role in the bridge collapse. a time say it will cancel the highway contract because the 42

victims of the collapse deserve justice. mu -- elon muskn sees no option but to continue working foward. he appears determined to lead tesla for the turmoil. guy: thank you very much. the pain for emerging markets not over yet. argue those cuts could have been even deeper. and richh us, meenal jones. in some ways, we look at turkey him a try to figure out what is going to happen next and how the turkish authorities are going to deal with it. linking what we're talking about a few minutes ago in turkey, what would have turkey and all of the other emerging markets,

would be a short squeeze in the treasury markets and a big move in the dollar. meenal: exactly. if you look at what is happening in turkey and em, a lot of that is down to the dollar has been extremely strong. that is having a huge o impact on em because they have a lot of foreign debt. not all emerging markets are the same. some countries have large account deficits. economiceing large imbalances now coming to the front of investors minds. the current account deficit and huge dependency on foreign thetal, added onto that, issues around the credibility of the central bank and tariffs that is the and put in place. all those things have come together, not helped by the strong dollar either. guy: let's talk a little bit

about what is happening specifically around turkey. you guys were talking about this earlier on the blog. we are now into the situation where we are dealing with unintended consequences. we have a lira market that has been almost crushed out of existence. the problem with that is that the currency risk that goes with them. let's not forget that turkey is off for the rest of this week. i think around midday, the markets shut. that is going to be a week that will have less liquidity than usual. i think you are right to characterize the steps that have been taken so far. i don't think it is something that will lead into some sort of meaningful resolution of what is going on. you kind of feel that we haven't heard the last of this situation in turkey. i think when it becomes a really big issue and where i think it

becomes interesting is if it does become something that has more contagion elsewhere. i would say that we haven't really seen that much of that yet. i think the fact that we have not been able to break down below that lower level, shows me that there hasn't been that much reaction yet in the traditional havens we would have seen in previous emerging market crisis. if it does deepen, it is hard to think that this is the end of it, i think we could see the dynamics start to takke part. the same time, i guess not all emerging markets are created equal. meenal: it is a little early to go into em at the moment because of the pressure that all of that . there are some emerging markets that do still look like they have value. those are the ones where the current account balance is not too stretched. the macroeconomic side of it is more compelling. the russian ruble, where the

actual economic data is very strong, and given our view of oil being supported as well as the course of the next year, we still think that feeds through to a stronger russian economy as well. francine: what is your take on china and what they have been doing in stimulus and stabilizing currency? : it wasn't that long ago when everybody was talking about china potentially losing the currency. obviously, in the last week, we have seen a lot of action from the pboc in terms of intervening with the market. i think it is got to the point where the current basket is at week enough levels that they feel like they need to intervene. restricting the liquidity in the offshore bond market has been very interesting. we have seen the point is moving toward that 600 level. it shows that heightening of conditions they are trying to put through.

there is still a further tightening they could do, but i think we are now seeing the point where they're looking to step into the market and calm down some of the -- guy: let's talk about stability now. for the time being, it looks like we have stability. what is interesting, and we saw this a little bit in the equities early on, we are still not getting a green light from the equity markets. there are signs of stability in the currency. the bond market looks better positioned. the equity market is still signaling that there could be issues further ahead. what am i listening to when it comes to china? rich: i think you are right to highlight the equity market. i think the currency markets have had a bit more stability of late than in previous weeks. i think you are right to highlight the equity market. you don't look at it and feel the level of confidence that you really like as someone looking at china in a macro sense. until that stabilizes make it a

little bit more of the bottom being put in, i think that is something everybody should be watching. i think it is something everybody will be watching. until that really comes together, and we see that stability, you really catch it on the all clear. guy: thank you very much, indeed. meenal is going to stay with us. joining us out of the gulf to give us a perspective on where oil prices are going next. this is bloomberg. ♪

guy: 23 minutes past the hour. i am guy johnson with francine lacqua in london. pepsico has agreed to buy sodastream. gain the technology -- waite going to have to until the markets open to see the full impact on these shares. joining us now is michael arnold. what does pepsico want to with this business? was a fear that if they didn't strike now that the stock would get too expensive to buy? i think that may have

been one other considerations. the stock has certainly been on a tear since the beginning of 2016. it was down around $20 a share since then. it is up at $129, most recently. the purchase price of this deal was $144. thing pepsico probably thought this was the time to strike. guy: what are they going to do with it? this was a business that was previously used at home and you could make cola flavored drinks, but they decided not to do that. where does this fit in to the story for pepsico? michael: it is interesting. i think the sodastream ceo really had his finger on the pulse. two years ago, he made a decision to get out of the soda business they were in before because they realized they couldn't compete with the big guys. the second one was due to sodastream as an environmental

sodastream has bottles that can be reused again and again. i think the ceo was promoting this is a real point of difference for sodastream from companies.nks and is possible that for pepsico, this is a way for them to capitalize on the environmental move. francine: how much do we know about how big this environmental movement is? this is the at home market. how much further can it grow? do we have any idea? strongestodastream's market is europe. lenty of room for them to grow in the u.s. the way you use sodastream, is you take tapwater in carbonate it.

in countries where the tapwater is of questionable quality, they are not selling. economy. huge untapped this company has a huge area of growth if they can solve that problem. francine: michael, thank you so much. remember, bloomberg users can interact with the charts on the g tv . you steal some of guy's really cool charts and put them on twitter and say they are even better than tom keene's charts. that would make my day. it is a fun way to dazzle your boss at the 10:00 a.m. meeting. this is bloomberg. ♪

francine: good morning. "bloomberg surveillance." here is sebastian. mike pompeo says it

is time to end american's longest war. here's the taliban on to take part in a cease-fire. the 17 year conflict has ground to a stalemate. troops have been unable to bring about a victory. president trump says the white house counsel. the president was reacting to a new york times report that he had had at least three voluntary interviews. the president said he allowed him to testify. economists say that president trump's tariffs are bad for u.s. growth. showed 91% of those surveyed said tariffs are having unfavorable impact on the economy. two thirds c negative affects if the u.s. withdraws from nafta. migrants stay let in the country in case of a no deal brexit. details of and

offer will be set out in one of the papers on a no deal brexit being published soon. 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. this is "bloomberg." francine: thank you so much. eurozone, about the about italy, let's bring you to a chart which is the premium between italy and spain. italy may have no greater incentive to ensure it stays within the european spending rules. we have that controversial budget law coming up. ofll with us, mena patel jpmorgan. if you look at italy, it seems the government is making waves. what does it mean? at italy, are looking it is down to politics and the

affects of what that might mean for other countries. we are looking at italy as an isolated case. we are not seeing the spreading out to other countries but it is a risk we are starting to see this as billy and that is can -- see this as billy and that -- te and that is a concern. italy is a concern on the fiscal side. that is when you're looking at the european side, that is more of a concern. break theif they estimate of 3%, how much wider does the spread with german bunds get? >> a could get wider. if you think about -- eight could get wider. if you think about other countries, we saw that spread go further.

the spread is already wide. thinking about the market, italy is not as much of a concern at this stage. there are other things going on as far as emerging markets. italy is under the radar. the possibility that continues to get worse should we see escalation and breaches coming through. guy: on that point, it is under the radar, how many questions do you get on italy? of aaly is less conversation point, our clients talking about trade war's. china is coming up a lot and also, turkey. the u.s.ory and administration is more of a concern alongside brexit because as them, it is a huge impact

for what the future might be. italy is not causing concern at this stage. guy: the euro is trending what -- 114 against the dollar? two, if you were to see italy becoming a problem, would there be downside to the euro? of 115 is athrough psychological level. we are seeing short positioning start to pick up. if we were to see the italy story come back, there is room for a pullback. 112 to theook at dollar quickly. we're still waiting for the dollar to justify being long euro. people i'mer of talking to are wondering whether move, which came

at the same time as the turkish move, are related or whether they were different events which seemed to happen at almost the same time. if i can draw a line? >> there is a knock on effect. isyou think about who exposed to turkey, the foreign banks have the biggest exposure. you look at europe having the largest share of that. there is a correlation. move buthave got a btp not a move in the spanish bond market. of all the other problems you have within italy, this is an additional risk that adds to that risk which is why the market moved more than the spanish market. have a highly

populist government in italy for the liga who is waiting their time to break away and rule the country. they're are linking the disaster with spending. how can this not trigger alarm bells within the market? >> there is not enough focus on this at the moment. when i am looking at all the other things that are happening, this is not getting as much interest. that risk me them can come back. premium can come back. ae short-term risk is downside move in euro and that is an additional risk premium being priced in for italy. --ncine: could constitute of quantitative easing be extended? >> possibly. the ecbnue to think

will move policy in line with how they have guided the markets. we will start to see that pullback. our base case is around the assumption we do not see too much of an escalation in trade war's. we do not see contagion coming through. we believe the ecb will continue its plan. if that is wrong, we see risk picking up. if italy gets worse, that starts to put on. guy: you can see how that would feed through to the fed. moves, inscale of the emerging markets, there has been significant selling in goodncies, bonds, is now a time to start thinking about getting in? >> i think the dollar has further room in the short-term and that can put the market

under more pressure. i would not venture into turkey yet, into argentina, and brazil. all of these countries that have those idiosyncratic risks, i would stay away from. there are some countries that have sold off which looks strong from a fundamental perspective. not all em is equal and there are opportunities. we mentioned russia and that does have value. there is more downside that could happen because we are in market isd when the trying to find out how much contagion is going to come through. involve?this we might see more downside? francine: thanks so much for all of that. bobour commute, tune into

moon and karen moskow. it can be heard in new york and across the u.s. on sirius fm. this is "bloomberg." ♪

guy: welcome back. you're watching surveillance. i am guy johnson with francine in london. oil is holding steady around $66 a barrel this morning. this is investors sign of glowing -- slowing growth. from the-late11% june.

the turmoil in turkey and china threaten global economic growth. joining us now is majid hamid jafar of crescent petroleum. it is the largest oil and gas company in the middle east. good morning. are you comfortable with the oil price where it is now? >> stability is what everybody is looking for. this range of $60 to $80 meets everybody's needs. we are seeing with this new opec double the size the despite all the political or geopolitical tensions between the key members, when it comes to the oil side, they are able to put those to one side and work together. we saw that at the recent summit. guy: you have got stability at the top because the oil price is looking stable at the moment.

what does your cost structure look like at the moment? people are trying to figure out whether we see cost inflation. these levels, it is manageable. it was when it was priced north of $100 that costs started to get out of hand and impact projects in a negative way. in the middle east, where we are focused, the costs are not a major issue. our challenges tend to be above the ground, whether it is local unrest. iraq, in a major way. our biggest producer is in curtis stamm. we have three rakes going. rigs going.

francine: where do see the price of oil headed and what is your optimum price? >> being an upstream investor, we look longer-term. in the short-term, things like you mention, whether it is turkey, the trade war, can have an impact as well as countries because ofela geopolitical concerns. looking forward, the demand growth is solid, even if it is only one million additional there'll's, we lose -- additional barrels, we lose 3 million barrels a year which -- which means we need to add a north sea every year. viewsith more pessimistic and optimistic views of u.s.

production, we will still need growing demand for oil. that is not driven by passenger vehicles. it is driven by petrochemicals. most of the items in the studio are products of our business. trucking, and, and shipping are seeing growth from asia. francine: how do you see the chinese economy developing? you have producers in the u.s. that could take some of the space you have been selling in the past. >> there are different views of where the industry is going in the u.s. the extremes,ke you're going to need oil. the countries that have added capacity are the united states and iraq and we are increasing our footprint in iraq.

we have three new oil and gas fields. we are waiting for the government to be formed. downll have eight fields to the kuwait border and despite the challenges, the potential is high and the contribution to global supply is going to be important from the middle east going forward. guy: what do sanctions mean? sanctions mean everyone is projecting some amount of oil to come off the market. .e have seen that in the past what was more shocking to the markets was venezuela and that seems to be getting worse. a lot of the countries that are producers do have these geopolitical swings.

you are seeing opec plus the other 20 cooperating and at the same time, demand growth is robust. the concern is underinvestment. we have not yet seen, we're distributingies dividends and doing share buybacks and adjusting their cost structure. despite the oil prices coming back up from $28, we have not seen the investment coming back up sufficiently. the concern would be oil price spikes up. francine: back up to what? $100? what does that mean to consumption? >> it depends on whether we see sufficient investment. the questions over where the u.s. industry is going to end because the growth there seems

to be continuing. guy: just one quick one, the ipo, the portfolio effect, what affect us that going to have -- if this company comes to market, when you meet investors, i'm curious to know what they are thinking? >> we are private. we do have a listed affiliate. lists in saudi arabia, it would bring interest from international investors. andher or not it lists when, the key is that national oil companies in the region are now trying to be more like the private sector and more cost efficient and more investor friendly as well as opening up their own countries for more investment in different forms.

they recognize the need to compete with the u.s., africa, south of mafic -- south america. guy: thanks for coming in and spending time with us. jafar, crescent petroleum, ceo. we are going to stay with the commodity theme. john mayer is going to be joining us. theill get his take on metals market. a.m.conversation at 6:00 this is bloomberg. ♪

sebastian: this is bloomberg surveillance. let's get the business flash. jack dorsey is warning against any move to block content based on political or social views. he tells cnn that would increase rising concerns about the power of social media companies. the jones. limits on there's a report that london-based ceos make $4

million less than their male counterparts. basicis a 12% gap for salaries and that widens to 75% for long-term incentive plans. the first hollywood film in almost a quarter-century with a largely asian cast tops the north american box office. warner bros. "crazy rich asian"" raked in $32.4 million helped by advertising, the reviews, and social media posts. the shark thriller "the meg" made $21 million in its second weekend. francine: we have had a viewer question coming through the terminal. we love hearing from you. and go to gtv click underneath the video screen. risks facingions russia have resurfaced. given that you probably like the ruble longer-term, what are the

chance of sanctions hurting the economy? >> we like the fundamentals of russia and the economic story. sanctions are posing a risk. the u.s. administration using it like a tool ahead of the midterm elections in november to advance their position more. if we think about sanctions that have come through with regards to china and turkey, trump's approval ratings increase further. ahead of the elections, there is you risk and that chance see sanctions broadening out to other countries and russia is one of those. we're speaking to the longer-term story with russia that sanctions could disrupt -- but sanctions could disrupt that story. francine: geopolitics flaring up again. would you go to cash? >> i do not think you need to go

to cash. a lot of people would think that is the right place to go. you do see volatility in markets. if you think back to last year, volatility has been lower than where we would've expected it to be. these types of things are not unusual when it comes to how markets perform. it pays to stay invested in markets. you might want to rebalance slightly and change that alan's -- that balance or put protection strategies in place. i do not think you need to move everything in cash. it is an oil story and that is the big difference between it and turkey. with crescent, if oil stays in those ranges, russia is going to benefit. >> exactly, fundamentals are

important. the global growth story is that you should see a continuation of that and that should support the oil market. ofre looking at an average $67 per barrel. that should take you to around $70 for the remaining part of the year. the balance is tight and that is supportive of the oil. that is good for russia and the economy. francine: thank you for joining us. coming up next, pierre muscovici. we'll ask him about the turkish lira. this is "bloomberg." ♪ retail.

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we get fed minutes and jackson hole. emerging-market turbulence. venezuela carries out one of the currency devaluation's in history. after almost nine years of economic crisis, greece will exit economic austerity today. we have pierre muscovici. good morning everyone. this is "bloomberg surveillance." we look at turkey, what is going greece withand in that interesting interview. guy: looking forward to that conversation. he is going to talk about how the country has changed and what comes next. it has parallels in italy. francine: we have a couple of things they have learned with the bailout. let's get to the first word news. president trump's

lawyer, rudy giuliani is casting doubt on whether the president will sit down with robert mueller. is not nbc news truth truth while discussing while the interview is not a good idea. he said the questioning could be a trap. it is day three of jury deliberations in the trial of paul manafort. prosecutors say the manafort hid millions of dollars in foreign income. callefense did not witnesses and said the prosecution did not meet its burden of proof. in india flooding has caused , more than people to flee to 900,000 relief camps. officials are worried about disease. the floods are blamed for damage. authorities say 341 people have died. in venezuela, nicolas maduro is testing the capacity of a population to face more pain. he carried out one of the largest currency devaluations in history.

he devalued the currency by 95%. inflation was forecast to reach 1,000,000% this year and this may make it worse. 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. this is "bloomberg." francine: thank you so much. this is what your markets are doing now. we are seeing green. u.s.neral, if you look at stock futures, they seem to be tracking gains across europe and that is tracking gains across asia. are hopingrticipants of easing of a trade war and this is ahead of central bankers later in the week. guy: i'm going to use gmm go which will take you around the world.

in the fx line, continuing stabilization in the chinese remnimbi. interesting price action today. towardarted to push up the close which did not look like it was going to happen. elsewhere, we seen positive price action in the metals today, copper has been big. you have seen some of the others being bid. i am just looking at one of our main stories and this a warning of record pain. you can see a breakout of a couple of months and you can see investors asking whether this is a bull market? guy: that is one interesting tweet. i want to talk about other interesting tweets. one of them is of tesla.

it was a response from a elon musk, referring to a comment from arian huffington. the price action is interesting. we are flirting with the 300 line. we happened softer with that. this morning, trading $300. a buildup of speculative short positions in u.s. treasuries is setting traders of for pain ahead. the jackson hole meeting is thursday. joining us now is anthanasios vamvakidis of merrill lynch. thank you for coming in. what do you make of these comments? >> it is interesting. looking at the developments we have seen so far, this is a

market with a lot of themes. the eurozone has been mixed. toare waiting for this week see how the major markets are thinking. we have developments in turkey. volatility has been higher. there are interesting themes investors are focusing on. francine: what do you expect in jackson hole? are the markets putting too much hopes? the meeting is important because we are expecting central banks to use this event to give us more forward guidance on what they are doing. this is not the case this time. are in the process of policy normalization globally, it will be interesting to see what the central banks are thinking about this process,

given it might have taken volatility in specific emerging markets. it looks to be an important event to focus on. a look at theke positions coming out of the data, they point to the fact the market is longer the dollar. do think the dollar has longer upside from here -- do you think the dollar has longer upside from here? moves is this justified by the data. the u.s. data has been strong. the eurozone data more mixed. if you look at the rate differentials, you can see further upside for the dollar and positioning is long but is not stretched. sense,re some specific in europe, we are concerned about italy. in emerging markets, we have

developments in turkey, trade tensions are affecting the markets. in the short term, we may see more upside. most likely, we're seeing the end of the dollar run. we're looking to go short the dollar against the euro ahead of next year when we will start positioning for the ecb to start hiking rates. guy: what kind of levels? byour projection is $112 september. by next year, we see the euro-dollar going to 120 dollars. the fiscal stimulus is likely to start weakening on the economy. the positioning is short the dollar. looking at everything, the outlook is positive. the short term is italy.

are bullish on the dollar in the short term. francine: thank you so much. italyl talk more about and the ecb policy and to could replace mario draghi. -- and who could replace mario draghi. up, pierre muscovici, coming up at 6:30 a.m. in new york. this is "bloomberg." ♪

sebastian: this is bloomberg surveillance. let's get the business flash. pepsico has agreed to buy sodastream for $3.2 billion.

that represents an 11% premium to friday possibly is closing price. pepsico points out that soda stream makes great tasting beverages while reducing the amount of waste generated. in italy, the government is moving ahead to revoke autostrada's highly concession after its role in the deadly bridge collapse. that is despite atlantia offering $5 billion in aid. italian authorities say they will still cancel the highway contract because the victims of the collapse deserve justice. elon musk sees no option but to keep working at his current pace. board members and investors are growing more concerned about his health. musk tweeted he had just gotten home from the tesla factory. he appears determined to lead the car company through the turmoil that erupted when he suggested taking it private. that is your bloomberg business flash. guy: thank you very much, indeed.

let's talk about europe. greece may be out of the woods but that seems to be a myriad of risks to contend with. italian bonds, fears around the budget. the 10 year yield spread over germany touched the highest level since formation of the new government. with us is anthanasios vamvakidis to talk through all of this. let's talk about what is happening with the euro-dollar. i want to throw this chart up there to see if you are technically interested. , a head andows shoulders formation. it takes us down to around eight $105. -- $105. >> it would focus on the fundamentals. italyld take more from

and the budget discussions are important. if the eurozone data continues weakening, which depends on data from china because we've seen the data weakening in germany, this is second. the trade --do see concerns about the trade war coming back, this would be negative for the euro. fourth, now that the market is pricing the end of the u.s. fiscal stimulus next year, how about if trump comes up with new fiscal stimulus focusing on construction. there are a number of factors that can push it lower. guy: it is interesting you bring up china. we credit impulse in china, seeing big changes in terms of project, inging terms of the way they are handling the currency. is going to give the

economy a boost, how is the relationship between the credit impulse in china and what we see in germany? at whatake a look happens with the data and you correlated with the german credit impulse, they are almost two for one. >> if you look at germany, it is strong and this is because of china. there is a direct impact. in china, we are going to see .lowing of the data also, the trade tensions have increased uncertainty. beforecan become worse becoming better. the fact the currency is weakening and the authorities are controlling this, they are not losing reserves.

there are a number of offsetting forces. the trend is for the weakening of the chinese economy. the problem child for the ecb is italy and we hear from the italian politicians asking the ecb to continue buying bounds -- bonds to counter speculative forces. >> italy was always a long-term risk given the high debt and their slow potential growth. now, it has become a short-term risk because the government has fiscal expansion plans. it is likely we are going to have a budget with a higher deficit than the target which was supposed to be lower. are likely to get

consent because the europeans are unlikely to accept this. francine: how big will the conflict be? we are listening and looking to pierre muscovici who has just started his press conference starting to talk about greece. will italy bailout? >> i do not think things will get that bad and i do not think we will see a crisis in italy. it is likely the europeans will accept the budget plans at the first go. we will have some back-and-forth. guy: what is the worst case scenario? in italy, a situation in which the budget is unrealistic, and foreign costs are increasing. you start having a sustainable debt dynamic. things can escalate quickly.

guy: can i draw a line from greece and those we can apply to italy? >> you have a high debt level, you need a clear credible fiscal consultation plan which italy does not have. you need to address structural rigid to the. the structure of ,he greek and italian economies both economies have low potential growth. the main problem is not the debt, it is the low growth. greece should be an example of it what to of -- of things to avoid. francine: we will talk about greece later on. is thelook at greece, it only crisis country which is not having gdp fueled by exports. we saw that with ireland, spain, greece is not doing it, why? had a low export share

which is different from italy and other countries. theboom in greece before crisis was driven by domestic consumption by the government and the currency was overvalued. place after the crisis was supposed to implement reforms that would achieve production which did not happen. this is why the recovery we are seeing is slow. exports and aer current account surplus so that is not the problem. , ay have low investments rigid economy, a share of small enterprises which have lower productivity. these factors keep the potential of the economy slow. hindsight, do the programs that were put in place help greece? >> yes and no. progress took place.

the current account deficit was large and now they have a surplus. deal, they have achieved a debt level that is high. that is the main problem. if you look at the growth experience of greece, it is similar to the u.s. depression without recovery. they have lost gdp and you expect them to grow by 4% or 5% as they recover. toy expected to remain close 1% in the long-term. this is pessimistic which suggests this is enough for an economy which has not been able to reform. francine: thank you so much. coming up, we speak with pierre muscovici, the european commissioner for economic and financial affairs. he is giving his first press

conference of the day. greece is about to exit is bailout. it transformed the economy and the life of its people. that interview, coming up in 10 minutes from now. this is "bloomberg." ♪

guy: good morning.

i'm guy johnson in london with francine lacqua. tom keene has the day off. let's talk about the m&a stories. agreed to buy sodastream for $3.2 billion. the beverage giant would gain technology for making soft drinks at home amid rising concerns about plastic waste. joining us now is michael arnold. six months ago, pepsico could have bought this business for less money. what is it they are buying and why are they prepared to pay such a high price? >> they're buying a company that is growing by leaps and bounds. sodastream has gone from strength to strength with every quarterly report, having laid out a strategy a couple of years ago that had its finger on the pulse. was made two changes, one to get out of the soda business. it is ironic they are being purchased by pepsi co..

the other was to push themselves as an environmental company, focusing on the fact you can reuse bottles. thateo correctly grasped health and environmentalism were going to be trends with consumers and that is what pepsi is buying. francine: why are they buying it now? >> for one thing, even though the stock has gone up, there is the chance that the stock could go up more. there has been talk about the ceo's future. he has been with the company for 11 years. maybe he has done what he could do and he might be looking for a new challenge. perhaps the company thought is is going to be difficult to replace this guy. better to look for a purchaser. that has been the scuttlebutt. one other thing is that the fact that sodastream has not been

selling in developing markets like china and india means that pepsi could look forward to growth opportunities down the line. francine: thank you so much, michael arnold on the latest on sodastream. staysasios vamvakidis with us. we will look at some of the oil related effects that he likes. on your commute, tune into bloomberg daybreak. it can be heard in new york, boston, and across the u.s. on sirius xm. this is "bloomberg." ♪

francine: this is bloomberg surveillance. guyguy and francine from london. tom keene has the day off.

base metals are staging a rebound, copper climbing. it comes as australia reports this week. tomorrow, the group is expected to report its strongest profit in four years. what else can we look for? joining us now is john mayer of sb just -- john meyer of sb angel. what is going on in commodities? >> there is a recovery going on in copper and base metals. some of that is a reaction to the selloff we had. some of that is that the dollar has stopped appreciating for a brief moment, allowing these metals to show more recovery. the fact that the world does not seem to be slowing down. francine: what happens from now? if you look at china, does that economy, how much more support does it need and what impact does that help them copper? >> if you think it -- think

where we are seasonally, manufacturers have a summer slowdown and in the northern hemisphere, we see buyers coming back into the market. saw, much ofe which was momentum driven and was sparked by unusual selling in china and perhaps a reaction to trump's terror of ideas, we're seeing a recovery from that. tariffs ideas, we seeing a recovery from that. other commodities picking up. francine: it was not a lack of demand? a selloff of a large amount of copper in china from a coal merchant who sold $1 billion worth of copper into the market. it caused momentum on the downside. everybody else jumped in on the back of that, on the back of

tariff policies, creating a slowdown in the global economy. reality is coming back into markets. guy: you are of the view that the chinese are using the copper market as a signaling mechanism to communicate with a white house of the effects of a slowdown on the world economy. there are back channels and there are backed channels. this is towards the rear of the room. >> this is an effective channel. it utilizes the power of chinese commodity trading these days. investors been these for an investor to dump copper into the market is an interesting signal. everybody else jumped in. guy: can i show you a chart which is rebar and that has not

experienced anything like the downdraft copper has seen. why -- what is the market telling me about what is going on? >> this is telling you there is steel being produced, construction going on because the demand is there for the metal. this is telling you china is not slowing down in terms of its manufacturing ambitions. they are still exporting steel because they are not going to consume all of that themselves. they produce more than half of the world steel these days. they change the mix in terms of what china is buying in terms of raw materials. how useful a signal is that in terms of its relationship? what is the relationship with chinese growth, between rebar and the import market?

, walk meuilding lifts through how much of a signal is this as to what is going on? confidencesignal of and the confidence is they are still growing their economy. they can continue to grow their exports and the tariff changes are not going to stop that. francine: what is your take on remnimbi? havespite the fact they not been losing reserves, the chinese might be using this as one of the tools in the trade tensions with the u.s. they are in control. that the move is exaggerated. a lot depends on the negotiations that follow on trade. francine: they just want to

stabilize it, right? end up to anue extent, this is why they've target whichsket improves flexibility. if the trade dispute with the is only using tariffs, china is in a good position. perhaps they are using their currency to indicate they have more tools. they do not want to go into extremes because this can make all sides worse. they are sending a signal to the u.s. guy: using copper as well. what are they doing in terms of the credit impulse? what is happening in terms of the banks and their ability to lend? there was more liquidity being made available to exporters. they seem to be turning the taps tackle on. there was some idea we were going to be seeing deleveraging.

where are we in terms of the credit impulse? >> they are trying to engineer a soft landing during turbulent conditions. this has not been done before. they want to tighten credit and they do not want a hard landing. they're trying to move credit to where the economy needs it during this process. it is not going to be easy. it seems the authorities are in control of the situation, different than what we were seeing a few years ago. these questions will remain relevant for years to come. francine: what are you expecting tomorrow? >> good numbers driven by iron ore, strong premiums on top of the price we see for good ,uality material and bhp another 10%, 20% on the price. copper,od numbers from

nickel, and they're going to announce the sale of their u.s. onshore oil and gas operations. there are some flies in the ointment. they have got another write-down. that was a big down take they had in brazil. spending a lot more on expiration because nobody knows where the next generation of copper mines are coming from. there is more going on in that area. guy: thanks for coming to see us on bloomberg. john mayer joining us on the metals market. mayer joining us on the metals market. sebastian: mike pompeo says it is time to end american's longest war. he urged the taliban to take part in a cease-fire. the 17 year conflict has ground to a stalemate. u.s. and afghan troops have been unable to bring about a victory.

president trump says the white house counsel, don mcgahn,. the president was reacting to a new york times report that mcgahn had had at least three voluntary interviews with robert mueller. the president said he allowed him to testify. economists say that president trump's tariffs are bad for u.s. growth. a survey showed 91% of those surveyed say tariffs are having unfavorable impact on the economy. two thirds see negative affects if the u.s. withdraws from nafta. the u.k. would let migrants stay in the country in case of a no deal brexit. the telegraph sites cabinet papers said details of an offer will be set out in one of the papers on a no deal brexit being published soon. 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 am sebastian salek. this is "bloomberg." ♪

sebastian: i am sebastian salek. let's get the business flash. twitter's jack dorsey is warning against any move to block content based on political or social views. dorsey told cnn that would increase rising concerns about the power of social media companies. earlier in the week, twitter put temporary limits on the account of alex jones. there is report that female ceos of london-based company's make $4 million less than their male counterparts. there is a 12% gap for basic salaries and that widens to 75% for long-term incentive plans.

the groundbreaking movie crazy rich asians was the box office winner in north america this weekend. the first hollywood film in almost a quarter-century with a in the asian cast took $25.2 million. shark thriller "the meg" made $21 million in its second weekend. francine: thank you so much. has saidump's lawyer truth is not truth when discussing why having the aesent interviewed is not good idea. -- the president interviewed is not a good idea. when twoiani said people tell two different sides of the same story it is somebody's version of the truth, not the truth. we're joined by kevin cirilli. is anyone speaking about anything else?

kevin: the political fodder being driven about how this investigation is heating up. that new york times report suggesting that perhaps there are some on the legal team that are cooperating with the probe, suggesting the president might fire some of his team. the president taking to twitter to refute that story. it comes as rudolph giuliani also echoing the president in terms of how he is defending him. all of this comes at a time at which the jury is still out with paul manafort. the previous campaign chairman, that juries still deliberating. they will return today. a lot happening on the investigation front. this going to see the president? it was fascinating in terms of the intelligence community that released a

letter. it is rare to see such high caliber folks to get on board for a letter refuting president trump's decision to revoke be security clearance of the former cia director. i spoke with someone who tried to put it in perspective. the community tries to stay out of political issues driving agendas. they feel, according to this person, they have to speak out. francine: talk to me about the trade war. seeing more lobbying from chief executives trying to convince the administration that escalating the war is a bad idea? a survey in the last couple of days saying that the trade policies are going to hurt the united states more so than other countries. the second point i would make is

that $16 billion worth of tariffs set to go into effect. the chinese are set to come here to washington to have these talks restart. the under treasury secretary of international affairs is going to lead that. guy: thank you very much indeed. joining us from washington. there are fantastic charts on the bloomberg. you have to pick one. this is the single best i pulled out. it is an unintended consequence. what the turkish government has done is to squeeze in break the offshore market in lira. they have dried it up. this comes with consequences. well the lira versus the dollar has started to come down a little -- while the lira versus the dollar has started to come down a little, the white line has continued to rise.

if you cannot hedge your exposure, if you are a foreign investor, you are going to sell the bond and that seems to be what is happening. unintended consequences. what will the turkish government do next? they have got a holiday coming up. we're not out of the woods. what is the next policy tool? many cases in the past including in turkey of what needs to be done. they need a full program of macroeconomic adjustment that will include a fiscal plan, central bank hikes and a signal that the central bank is independent. they might need imf help. absent such a package, things will become worse. any measures can only have a

temporary impact. they will address the problem in one market and trigger a problem in another. guy: there is a big difference the between this and other crises. the guy that is pulling the strings has a different approach to macro economics than most other people that are running countries in those economies. if he sticks with the current policy, what happens next in this economy? ,> definitely, this situation turkey has its own problems. politics have a lot to do with that. is dispute with the u.s. part of the problem. even if you resolve this, economic problems remain. in the past, there is a backstop.

there is the imf, the lender of last resort. because of the politics, it is unlikely for erdogan to ask for help from the imf. the market believes things can get bad before erdogan admits defeat and asks for help. past experience a shows the more you have this approach and you're in denial, the more likely you are heading towards a hard landing. this is the most likely scenario. the corporate sector is over invested. will the lira touch eight against the dollar? >> it is hard to tell. it has been going down consistently. aremost we're seeing now something you do not see before.

in a freefall, anything is possible. it made it difficult to short as theyency but as long do not address their underlying problems, things could get worse. likely toresident is resist and you look at europe and you wonder how this is going to end up impacting your. story, --he migration and up impacting europe. there is the migration story. those factors are on the table? you could see all of this on a spectrum, diplomacy, financial markets, military action, all kinds of things in terms of policy tools. if we start to see those moves being made, turkey goes from being a in idiosyncratic -- and idiosyncratic story to being a wider issue? contagion is limited.

some banks in europe have some exposure in turkey but it is a small part of the european economy. when you look at previous crises in turkey, it never really affected europe or the broader economic outlook. europe is in a difficult position because of the migration deal with turkey and the issue of refugees, they cannot put the pressure that they could do in the past. they have tried to balance this and given the geopolitics, you cannot afford to allow the contagion becoming too bad. francine: thank you so much. greece's bailout program and today, it has transformed the country and its people. it is still the most indebted country, facing higher lender costs.

the european commissioner for economic and financial affairs, pierre muscovici, joins us. thank you for giving us your time. talk to me about whether greece is a safe investment destination. why should investors go to greece? today is a historical day because greece can walk on its own feet. it can have free access to markets and i think the reforms which have been realized make greece a more secure country. financial services are stronger. is of higheration quality and the social and economic system have been improved. an attractives destination and investors can trust greece. during has been done

these years, eight years of greece had a deficit of 15%. now, there is a surplus. greece is on the right track. how can you be sure that greece will not be back in crisis if -- is genuine debt relief the only way to ensure that? relief isw, debt something that can be subjective. that has to be reimbursed. this is just the taxpayers of other countries money. the german people have to renounce 80 billion of euro

debt. on greece, you are stronger than i am. there was never an appetite for cuts. we can say it was not good there would have been a cut. there are now some short-term debt that arem going to alleviate the burden on greece. that itthat we can say is on the right track. guy: commissioner, good morning. basic piece seems to be growth. does not seem to be still there. if you move back just six years ago, there was a recession in greece of something like 5% per year. we know that greece has lost 27% of gdp.

of, we have a growth focused 2% for the years to come. i am certain that the growth potential can be improved, especially if investors show that they trust the reform. is an innovative country with a lot of assets. the first acid is the human capital. the greek -- first asset is the human capital. the greek people. we have got more solid structures than in the past and we can conquer that level of growth. greece is on track, yes it is. difference between the other countries and greece is that lack of growth. ireland is growing and growing strongly. spain. if you look around europe and

you think about what is happening, they are growing in a way that greece is not. why the difference between these groups? you know, we must look carefully at this. i have been involved in those programs. been finance minister before joining the european commission. irelandn portugal or came after the exit of the program. the fact that these countries went back to markets and recovered their own sovereignty, were free to define their economic policy, the fact that investors from abroad showed confidence. after the exit of the program, growth in portugal was not as high as it is today. what i hope and i think is possible is that greece enters

into the same success story as other countries that exited the program. we would not have taken the decision to end the program and to end it we did not believe that the reforms are now decided and need to be implemented were not capable of creating that success. francine: what our stress levels like when you look at italy? is this the next country we need to bail out? which weis a country need to monitor as far as the debt to gdp ratio is concerned. italy is a strong country, a big country. italy is the third largest economy in the eurozone. italy has strong assets.

i am not frightened about italy but i am prepared to have solid discussions with the government on the next budget of italy, which needs to be credible. the place of italy is at the heart of euro zone you need to respect the common roles. francine: given what happened with the bridge tragedy and the words we heard, do you believe is itching for a fight with the commission? >> i hope not. i think that will not be fruitful for anybody. it is not time to point fingers. to be with these people who are victims of this tragedy. aboutnot time to discuss any totally different nature of public finances.

prioritye to share a which is necessary for italy and for the italian people, a priority for public investment. done a lot to authorize italy to invest more. it is time the investments become a priority and that is up to the government to decide. there must not be and cannot be confrontation between italy and europe. that would be silly. guy: do you think that the italians have a point -- europe has crumbling infrastructure. it would be useful if that was excluded from the current budget rules. if you look at the amount of money authorized for investment in italy, you can see there are 2.5 billion for structural funds , a .5 billion has been locked in for waste and 12 been

billion for the plan. the question is not the amount of money, it is the use to make it efficient and to select the right investments. our rules are flexible enough and italy has been benefiting. we must not change the rules. we must have the right priority for investment. you, pierreank muscovici. this is "bloomberg." up next, i will continue looking at markets and a special focus on monetary policy. ♪

>> a focus firmly on inflation. turkey gets a downgrade. the turkish economic crisis shows little signs of abating. the market show little confidence the government has a plan. hall the bottles. -- hold the bottles. demandkers fight reduced at seek ways of cutting back on plastic bottles. welcome to bloomberg daybreak. >> it is good to be here. interesting stuff going on. august is a dangerous time in the market. let's talk about what is going on in markets. we have a little bit of a pop in s&p futures. some buying in asia overnight. that is spreading across the globe. we have