francine: guilty as charged. lawyer admits to making payments as his former campaign manager is convicted. supporters the witchhunt continues. will mexico seek to deny the existence of the nafta handshake? the peso pairs its gains.

♪ francine: welcome to bloomberg, everyone. i am francine lacqua in london. we are seeing some mixed messages when it comes to these stocks. i'll attach, down a touch, up, and now flat. this is the stoxx 600. we saw a little bit of volatility in the asian markets. they are trying to gauge what the political drama in the u.s. means. by legal troubles reported the press yesterday of president trump. you saw a little bit of a bid for haven assets at that demand went off in an hour or so. , 1.1559.ar you can see gold down a touch but it was up yesterday in late trading. coming up, we will speak to peter trubowitz about michael

cohen's guilty plea and paul manafort's conviction. he will see what that means for your markets and what that also means for president trump's troubles. let's get to the bloomberg first word news with julia sally. -- juliette sally. nejra: president trump's longtime lawyer and fixer michael cohen has admitted he made illegal can paying contributions on the has the president trump. while the president's name was not mentioned, the money paid matched that paid to foreign actress stephanie clifford to keep quiet about affair she had with trump. he also took part in a scheme to pay 150 thousand dollars to a second woman to keep her story out of the press. are charges that reflect a pattern of lies and dishonesty over an extended. of time. they are significant in their own rights and are particularly sncc living -- particularly

significant when done by a lawyer. convicted paul manafort of tax and bank fraud, ending a tense legal drama. he faces eight to 10 years in prison on the tax charges alone. he faces a second trial next month on of structured of justice and act -- justice and agent as an unauthorized of ukraine. >> this has nothing to do with russian collusion. this started as russian collusion and has absolutely nothing to do. it's a witchhunt and a disgrace. it has nothing to do with them starting out looking for russians involved in our campaign, there were none. nejra: the mexican peso pared gains against the dollar even as the u.s. and mexico get closer to a consensus on a nafta bill.

there is still no broader agreement on reshaping the agreement. the trump administration's talks with mexico are seen as an important precursor to a final pact with canada. global news 24 hours a day and at tictoc on twitter. powered by journalists and analysts in more than 120 countries. i'm juliette saly. back to ourt's get top story, donald trump's terrible tuesday. he suffered perhaps his worst day in office as his former personal lawyer implicated him in a crime and his acts campaign chairman became a convicted felon. michael cohen pleaded guilty to charges related to hush payments that violated campaign loss. he says the orders came from an unnamed candidate. later, paul manafort was found guilty on eight counts of tax and banking fraud. pumped spoke to reporters after manafort's conviction. spoke to- trump

reporters after manafort's conviction. do withhas nothing to russian collusion, it's a witchhunt at a disgrace. they started out looking for -- russians in our campaign and there were none. what does this mean for trump's remaining time in office? kathleen hunter joins us. alan katz is in paris and on the phone, peter trubowitz, a professor at london school of economics & political science. how bad is this for trump? if you look at the two gentlemen is there one that can bring him down with them? thing that happened for trump is what michael cohen had to say. there's a direct line between them and he said trump ordered him to do the things he's guilty

of doing. in that, in some ways, is an easy narrative for trump's to tractors and prosecutors to draw a line to trump directly. is the cohen probe a potential threat to donald trump? >> because it ties a specific crime to the president himself. he said in court that he was directed to do this by a federal candidate and the only candidate he was working for was donald trump. his lawyer said in a statement that cohen was referring to trump. that ties trump to a specific crime. if you want to look at specific prosecution, the justice department won't execute a sitting president. those aren't binding but there's no indication they will go after a sitting president. if you want to look at possible impeachment are other ways, tying into a specific crime and

saying this is why we are pursuing him, that is a serious manner. francine: is there evidence of collusion? collusion is a pretty specific term about acting together in order to commit a crime. -- they did look at potential collusion in terms of election campaign finance laws but the collusion that trump is referring to is russian collusion. he is correct in that there was no reference to russian collusion in either of these cases. francine: can president trump's shut down the investigation? -- trump shut down the investigation? kathleen: he has shown he is willing to break with normal boundaries to do what he wants to do but that would be a dramatic step.

he couldn't fire mueller directly, he would have to get rid of mueller's boss. it would be a convoluted ross us. peter, let me full jew in. what does this mean for the midterm elections? in -- foldold you you in. what does this mean for the midterm elections? the democrats. he had a terrible day, mr. trump. in some respects, what the manafort berdych does is it makes it harder for republicans in congress to call for an end to this investigation. it's hard to call it a shipping -- a fishing expedition. he got something big. the cohen play, from a political standpoint, what makes this

important is it makes it difficult to refer to this as a witchhunt. cohen pleaded guilty to charges stemming from a grand jury investigation led by the u.s. attorney's office for the southern district of new york. this didn't come from mr. mueller. in the run-up to the election, it's going to fuel talk of impeachment that is going to democratsnd push some to the left. we are going to feel pressure from their constituents. i think people in the tank for donald trump, though supporters he spoke to in west virginia, it's not going to make a difference. the big question is whether it leads republicans on capitol hill to the distance between themselves and the president. we saw the first glimmer of that last night when the second ranking republican in the senate said he would like to see the

case run its course and let the courts to do their job. that's an important signal to the president and he will have to see whether or not the republicans pick it up. francine: we've seen that in the past with very senior republicans distancing themselves from the president and then fall back in line. why is this time different and you think the president could be charged with a crime? peter: it was pointed out earlier, first of all, the president could be conceivably charged were indicted -- charged or indicted by the southern district of new york down the road but mueller himself has not .ade it clear he accepts the justice department's view that the president can't be indicted. this is more about the political

optics in whether or not there are offenses here that are impeachable. lighting campaign finance --s, that gets you in the violating campaign finance laws it's you in the ballpark of an impeachable offense. it would depend greatly on who controls the house and ultimately not only who controls the senate, but you would need a two thirds vote for impeachment to be upheld. i just don't see that in the cards. francine: the dynamics change significantly if democrats when the house. peter: -- win the house. peter: absolutely. kathleen: they will be under more pressure to look at impeachment proceedings if they do when the house.

those could potentially backfire in terms of 2020 if we end up in a situation where the house and peaches and the senate doesn't follow through. how that plays politically is dicey. emboldens does democrats and energizes their base, i think it carries political risk on the other side as well. francine: allen, there are multiple investigations. exactly is known about what russia did wrong? both not very much and a lot. there are a lot of investigations going on. there are indictments of dozens of russian intelligence officers for hacking into servers. there are cases against -- guilty pleas by a variety of aidsrent trump trades --

-- trump aides. both the cohen and manafort cases aren't finished. on tv last night and said he be happy to talk to robert mueller. the lawyer for stormy daniels, the poor and actress who was paid off, has said he is going to pursue a deposition against trump for the lawsuit filed by stormy davis for violating that nondisclosure agreement. there are a whole host of cases but they could really go forward in the next couple of weeks. to beanafort still has sentenced and he is another case in washington september 17. he could choose to cooperate with officials as he faces actual jail time. what happens going forward, michael cohen, paul manafort,

and stormy daniels are the next three to look at. we're trying to figure out and it's unclear to me, do people care about this? the midtermly swing elections and if people care, who cares? does trump space care? trump's base care? peter: i don't think it will affect his base in the near-term. you could sense it in west virginia, in the audience. it almost doesn't matter what he does, he has that core base of support. there are more moderate republicans where if these up,gs begin to start to add it becomes more complicated for them.

do i think this affects the midterm? it will likely polarize things. they are already very polarized but it will increase trump's incentive to turn this into a base election. to play very hard to his base and look for issues that will stoke up the base. there are policy issues, i would expect to see a fair amount of china bashing between now and the election from the president. side,k on the democratic this is just grist for the mill. the effect to the sense that this stuff gets traction of nationalizing the election. on trump republicans side, and steve bannon has argued this, that their best

chance is to nationalize the election and turned the election into a verdict on trump himself and that will bring out republican voters. but it willbly true also bring out democratic voters. francine: thank you so much, great team coverage there. , andeen hunter, alan katz , theurse peter trubowitz professor of international relations at the london school of economics. stay with " surveillance." developments for the market in the longer-term next. plus china -- plus xiomi presents results as a listed company for the first time. this is bloomberg. ♪

francine: welcome back, everyone. this is " bloomberg surveillance." traders try to gauge the fallout from the latest legal drama involving president trump. the s&p 500 touched on its all-time high with what some call the largest bull run in u.s. history. we are joined now by thanos papasavvas and caroline simmons. thank you for joining us. when you look at the trials and tribulations, the stocks at a record high but the legal promise for president trump, where does the market go? caroline: the market isn't

paying that much attention to the political side. it's much more about what is going on with earnings season. market high but not a pe high. we are in the longest economic recovery and a bull market. q2 is 25 percent earnings growth and that's underpinning these levels. the tax: do you worry cut was implement it at the wrong place? we see strong momentum but as soon as that runs out, you have in cycle plus tax cuts. caroline: we have upgraded our back of the tax cuts but it's not only the tax cuts that are in the earnings growth number. there is fundamental gdp growth. francine: a lot of the market plays in currencies, right? you surprised that geopolitics does not seem to be

at the forefront? thanos: i am surprised especially if you look at the vix as an indicator of volatility. it's still at 12 or 13 despite the concerns of tightening a policy and the worry of inflationary pressures after the strong levels of growth. currencies have not been representing that. we've seen benign volatility across the developed world whereas in ember -- emerging markets we see a little more volatility. , do they the politics trump any kind of monetary policy chat in jackson hole or will the markets look for a shorter term or medium close -- medium-term" and mark thanos: -- medium term close? the marketsthanos:

don't seem to think -- the markets don't seem to think that. any worry about the president's verbal intervention would see a spike in yield. we see the logo glitzy in this holiday. of august. -- low liquidity in the holiday period of august. francine: we don't know the dollar policy is with the trump administration if they have one. do you worry about the fed's independence? caroline: if you think about the way trumpa positioned powell we don't needish, rate hikes but they have been hiking. i think we need to take some cues from the actions that have already been in place. is we expect another hike at the end of this year and then three more next year. we had two more hikes this year and we took one out partly because of the trade conflicts.

it will be interesting we get the minutes to see if they mention it. francine: what do you like and these kind of markets? caroline: we like global equities. that is our preference on a reached a basis. we are looking for some slightly defensive themes that can tap into the fundamental positive story but also provide some downside protection when there is more volatility. something like global quality where you are less leveraged and less volatile in volatile backdrops. francine: we will talk about some specific sectors. stay with us. they will be with us. let's get on to smart phone to reportmi, set earnings for the first time as a public company. they raced 5.4 billion u.s. dollars in their ipo. the results will's shed light on their international expansion plans. joining us is shelley.

to prove withave these results? it was a pretty underwhelming ipo. they will look to see if they deliver on their original ipo promise. we are not only making smart phones but selling services and apps and all sorts of things to the users who buy those smartphones. they will be keenly focused on what percentage of revenues are coming from internet services versus just smartphones to make that argument. how competitive is the landscape shaping up to be? shelly: it's continuing to get even more competitive because the overall global smartphone market is not growing as fast as it was in some countries. it is actually declining. it's getting even more competitive for companies like xiaomi. your seen this play out in

emerging markets like india where xiaomi has been very strong at all sorts of smartphone makers are going after their growth there area and -- there. francine: anything specifically you are watching for results? market share, pricing, anything that could counter the negativity after the ipo? shelly: because the stock is so highly priced, people will look for some sort of perfection. will hit to see xiaomi targets for revenue and are continuing to grow their smartphone business. that globally their business is growing in places like india and europe and that they are being competitive and defensive end china where xiaomi has pledged to become a bigger player but is still not there yet. let me also folding caroline simmons. do you like tech stocks? u.s. tech oration tech? caroline: we have exposure to

technology. a very good growth sector but the valuations are now starting to reflect that a little bit more. overrate, weech were trading at a discount and now it's trading as a premium and now we have right the tory and trade issues coming into the sector. it's ok as a part -- as part of a portfolio but it's not one of our key sectors. francine: we will be keeping a close eye on those xiaomi results when they come out. we will be back with analysts -- with thanos and caroline. how much more stressful be added to the ruble and how will the kremlin respond? the markets.ck to u.s. futures now down but european futures pretty much unchanged. dollar steady, this is bloomberg. ♪ this isn't just any moving day.

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simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. francine: economics, and politics, this is "bloomberg surveillance." let's check in on what is trending across the bloomberg universe.

the biggest u.s. bank is following an ongoing battle for retail investors. outrgan is planning to roll an app next week. michelle says talks are entering the final stage for brexit. tesla stays on a rocky road after rough coverage at the start. trump's terrible day sees michael cohen plead guilty. writing you have been in on that. let's get the juliette saly. trump's: donald longtime lawyer michael: has admitted that he made -- michael

cohen has admitted that he made legal payments on behalf of trump. one was to keep quiet about an affair one woman allegedly had with trump. these are very serious charges and reflect a pattern of lies and dishonesty over an extended period of time. they are significant in their own right. they are particularly significant when done by a lawyer. juliette: a federal jury convicted donald trump's former campaign chairman paul manafort of tax and bank fraud. he faces 8-10 years in prison on the tax charges alone. he is scheduled for a second trial next month on obstruction as astice, and registering foreign agent of ukraine.

this has nothing to do with russian collusion. it started as russian collusion. this has nothing to do. this is a witchhunt and it is a disgrace. this has nothing to do with what they started out looking for russian involvement in our campaign. there were none. juliette: the european union's chief brexit negotiator says talks will be -- with negotiations at a virtual impasse for a week, they're looking -- a powerful earthquake interruptinguela, a pro-government rally on controversial economic reform. the u.s. geological it was a magnitude --

no injuries or major damage has been reported. a similarly powerful quake killed dozens of people in the same area in 1997. 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. saly.liette this is bloomberg. much.ne: thank you so the u.s. is expected to impose new sanctions on russia today on the poisoning of a former agent in the u.k. they will limit exports to russia of american goods. christopher, ais managing director. thanos and caroline are still with us. what happens today? how much will russia feel the pain and actually how much will

russia fighting to have sanctions like the u.s.? christopher: new sanctions enter into force today. they will have zero economic affect. they are absolutely insignificant and negligible. they come under a u.s. statute of 1991. measures are duplicating previous sanctions. francine: this is on purpose, right? perhaps the administration wanted to show congress that it is continuing to be tough on russia in order to deflect these much more aggressive sanctions. them.are half a dozen of is any of them were in active, we would be having a conversation on economic effects in europe. these sanctions today are insignificant, even if the

second round comes than. the realng is, giveaway is the united kingdom government asked for nothing. they are meant to be the victim here. clearly, it was a u.s. initiative. francine: we know that in the past, there have been sanctions that have targeted and shut out independent companies from the bond market. with all that happening. if the u.s. were to want to hurt vladimir putin and people close to him, they can. christopher: the power of the united states treasury in the world is absolute. if it wanted to shut out any bank from the dollar system, that is the end of that bank for international purposes. the interesting thing about those sanctions on the russian statess that the united

treasury did not step back from that. within two weeks of imposing them in april, it was saying that the goal is not to put that bank out of business. instead, they redefine their knocking the controlling shareholder out of business. that shows that they haven't really got the political will or intention to throttle the russian economy. francine: is there a link with ller investigation? christopher: the administration has done nothing about the congress line active. -- enacted.ctive.

i think there were only two defenses that mr. trump had no option but to sign it. the administration did nothing for several months. to pop that with these very aggressive sanctions. trump'sich, mr. rhetoric was that he could be tough on russia and go ahead with his -- i think these sanctions are to do with deflecting from a much more aggressive and economically financially significant initiative, which are cooking in the congress. also, it remains to be seen whether in the next session if it will do anything. francine: let's broaden it out. there are also questions on nafta. mexico is now saying it never happened. foreignl be the u.s.'s relationship when it comes to trade with its neighbors and china?

christopher: these of sanctions questions on russia are to the international economic affairs issue which is driving global markets. that is the trade wars. focus.ery much in what is interesting now is that since more or less early july, the concentration has been very intensely on china. , the economic advisor said that the truth with europe -- truce with europe on trade was all to do with gaining up on china. china.ing up on he used very explicit language. trying to calm down and patch up other fronts, but concentrate all fire on china. the big event next week will be

bute fairly low-level, negotiations bilateral with u.s. and china. nafta, wefor understand there is a framework, but also many obstacles remaining. if there is a framework, is the dollar positive? would be moret positive for the mexican peso and canadian dollar as a result. we have already seen a little bit of a positive movement in both of these currencies in anticipation of actions and discussions taking place. francine: you could argue that it would mean the trump administration is scaling back its rhetoric of the anti-globalist. that would mean that longer-term, it would kind of remove what we saw with these trade tensions with the u.s. and china. christopher: i think the pressure will still continue to the midterms. in my view, president trump is

not willing to go the full hog as he is preparing for the next election. i. he would not want the -- election period. he would not want the u.s. economy to be on the back of that. what we have done is actually head back some of our risk positions. we still think the earnings growth is solid. these discussions we have been going on about are rising. the risks are rising. we have pared back to a neutralist position. 500.ve a put on the s&p we put a little bit of protection and with cyclical measures inside the portfolio. francine: thank you all for joining us. up, right here on

bloomberg, we will talk brexit. brexit negotiators pledged to kick up the pace with talks to reach an agreement before the end of the year. , the entire government could have a state lender. we are live in milan. this is bloomberg. ♪

francine: this is 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. the eu and u.k. have the brexit talks will now be continuous. britain must respect the simple market.

they pledged to step up negotiations. thanos and caroline are still with us. first of all, what is your take assets? is now a good time to go into them more or do stay away until you figure out where brexit actually means? caroline: i think it is a difficult time to take of view because of brexit, it could be quite binary. i think the main way that would play out is through the currency. we see that currency is most vulnerable. estate, financials that are the most exposed. we are neutral on the u.k. we think the dollar will probably strengthen a little bit more in the short-term, but longer-term will weaken. the moves we have in our forecast are more dollar driven.

francine: first of all, you look at cable, or do you look at euro pound? the dollarle is more move. in order to see that your play , it ispolitical side more eurosterling. i think the pricing in the market has been for a less clear and increasing risk of a no vote. deal.not pricing in a no i that were to take place, think the adverse impact in the u.k. economy would be more significant. however, my view is that after everything has been said and done, there will be compromise between the two parties. they would not want to be hitting themselves in the foot.

theimpact would be for u.k., ireland, the netherlands. what do you think carney does next? caroline: we haven't got any hikes forecasted. i think once we are through the march deadline, we may have a slightly clearer picture. we have no more hikes expected, that we do expect some sort of transition deal. the risks of no deal rise the closer you get to the deadline. francine: i'm seeing so much research papers saying the lost interest rate hike is a mistake. caroline: if you look at where inflation is, you would argue that that hike was just fine. if you look at the way they voted, it wasn't a split decision. there are quite a lot of things that would suggest that that was a warranted hike.

it is all about the outlook. that is the bit they are a bit uncertain about. thanos: i think it was prudent to do so. the u.k. is prone to higher inflationary pressures. it has not risen its head global yet. as it does, it is a sign that the bank is ahead of the curb. francine: when is the right time to go into u.k. assets? is that when the deal is locked and loaded? is it the first sign when the eu soft and's -- softens? portfolio,n a global we would have some u.k. assets. we are just not convinced the u.k. is going to outperform. if we were to see a significant pricing for a hard exit, which we are not seeing at the moment, but if we were to see sterling continuing to decline, that maybe a time to start to get

into it. the moment there is an attractive valuation, and is hard to see what can unlock the in the shorter term. francine: thank you both for joining us. etb considers its options. plans involve the state lender? this is bloomberg. ♪

francine: economics, finance and politics. this is "bloomberg surveillance." let to check in on this morning's it u.s. front pages. guilty to illegal campaign-finance charges. he all but names trump as having ordered him to do it. cohen's guilty plea under conviction of palmetto f -- paul manafort.

we will have a full roundup of the u.s. newspapers shortly. let's talk italy. the government is considering involving gdp. bloomberg understands the role for the lender is one potential option being weighed by the government. senior us now is our italy correspondent. what can we expect today? the board meeting is starting in about 10 minutes. we are expecting them to ss the impact of the disaster on its business, and potentially on its results. the company formally confirmed a plan to rebuild the bridge in eight months. today, the board of atlantia

will take a different look on its domestic implications. at the center of the situation now, there is the indemnity that the state would be forced to pay atlantia if they decide to go ahead with the concession. it is about 22 billion euros. francine: what exactly is, for , the companydience and what role could they take on? wantsso: the government to resolve the concessions and have a business from atlantia. doing this through the normal way, through the concession, may cost the government 20 billion euros. the government is trying to find creative ways for doing this. one option would be a state lender owned by the government to buy a stake in the company.

in that way, you would have the state being a shareholder or controlling shareholder. could tell the public that the highways are safe. obviously, this also depends on the willingness to sell the stake. francine: also, which measures is italy actually considering to take against atlantia? o: the deputy prime minister has said very clearly, we are not going to pay any penalties. yesterday, the prime minister said 500 million is not enough. serious considering

measures to take against them. that is why the board is meeting today. it is an emergency meeting to evaluate the response. francine: thank you so much. bloomberg's italy senior reporter there in milan. this is what i am looking at across the board. one of the main stories is italy. the other big story is politics. president trump a terrible day yesterday as manafort was convicted and cohen pleaded guilty. stocks in europe are little bit down. asian stocks are a little mixed. i think traders are engaging the drama. stocks are a little changed, that we saw a rise in japan, but also a rise in hong kong. china golden giving up some earlier gains. if you look at bonds, broadly higher across europe.

u.s. legal troubles at to a complex picture across global markets. i'm looking at the 10 year treasury yield. 3%.ty much remaining below the markets also want to know what the evolving dynamics of the american tax cut mean. "bloomberg surveillance. continues in the next hour. tom keene joins me. we have a full roundup of your emerging markets, a full roundup of your domestic markets as we also talked trade. this is bloomberg. ♪ xfinity mobile is a new wireless network

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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: guilty as charged. convicted ofr

making has payments. markets are trying to figure out the fallout. the which had continues -- president trump says the witch junta continues. -- hunt continues. good morning, everyone. i'm francine lacqua in london. the follow-up on the market has been quite muted. if you think about what the markets are worried about, their try to figure out the politics, time to figure out trade and also the emerging markets. tom: historic day yesterday. was guilty verdicts original in american history. not a direct effect on the markets, but nevertheless, it has captured the full attention coast-to-coast in america. francine: that of course is our top story. let's get straight to bloomberg

first word news with sebastian salek. sebastian: it may have been the worst day of donald trump's presidency. cohen all that named the president as having to pay has money to a former foreign model. his former campaign chairman also attacked and bank fraud. that is considered a big boost to special counsel robert mueller's investigation. president trump's latest remarks on china show concerns that the administration wants to contain the country's rise. china's economy is no longer on a fast-paced to be larger than the u.s. trade talks resume this week. facebook says it has uncovered a new global misinformation operation. for the first time, it named a

country other than russia using fake accounts, iran. facebook says it has removed hundreds of pages and accounts that originated in iran and russia. brexit talks are in nonstop mode. negotiations continue today in brussels in an attempt to avoid a no deal brexit. the chief negotiators said the two sides can find common ground. they're trying to reach a deal by october. 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. salek, and this is bloomberg. tom: thank you so much. equities, bonds and currencies always informative. a lot of talk about the length of the bull market. underher clerk flattening 23 basis point.

euro, theg in the euro turning as well. strong yen, wee -- weak euro. francine: dollar advancing treasuries pretty steady. european markets, markets globally, u.s. equity futures falling as people try to gauge the fallout from the latest legal drama and golfing donald trump. -- engulfing donald trump. i think context is key today because the investors are grappling with the dynamics of the american tax cut, the escalating trade war and turmoil in emerging markets. tom: let's begin our coverage with what is going on in washington.

we will explain some of this as we move through the morning. the president did some explaining yesterday. here is the president of the united states. trump: this has nothing to do with russian collusion. this has absolutely nothing to do. this is a witch hunt and a disgrace. this has nothing to do with what they started out looking for russian involvement in our campaign. there were none. tom: i believe the president was in west virginia. a whole stream of every comment he made. piecesow, picking up the from a historic hour yesterday. kevin, give us an estimate from the experts at how long mr. manafort and mr. cohen will go to jail. kevin: a couple of weeks. these were two of the president's closest confidan ts.

attorney and longtime strategist with ties to the reagan administration, and then went on to become the x chairman of president trump's presidential campaign. , paul manafort found guilty of fraud charges. guilty cohen pleading of providing has money. tom: what people want to know is how long will these guys go to jail if they are going? to be have any idea? kevin: several months for michael cohen, and several years at least for paul manafort. two things i want to point out. the president saying there was no russia collusion, that there was no type of knowing collusion with russia during the last presidential campaign. the second point is what is in the court documents. pay close attention this morning to a folks are saying about michael cohen and what folks are

not saying. president trump did not make any mention of michael cohen. he pleads guilty to having been instructed by a candidate, the only candidate he was working for the time was president trump, to having been instructed tomake payments to women prevent a negative new story from going forward. there is no evidence to show that then candidate trump provided money for hush money. francine: the question is could president trump be charged with a crime? kevin: a lot of sources i spoke with say this is a big win for special counsel bob mueller in terms of how he is building his case. for thedes new evidence treasure trove of documents and information made from the michael cohen investigation and paul manafort.

the congressional reaction has been swift. republicans have remained largely silent on this. democrats have raised concerns about the present potentially having the ability to pardon paul manafort and/or michael cohen. rudy giuliani out in full force last night. cohenizing michael it would suggest that the president is defending paul manafort, but opting for a political nuclear war against his previous longtime close confidant and fixer, michael cohen. francine: i have a million questions. if the president can part upon manafort, will he and what are the implications for the midterm? summer,ithin the last president trump answering directly by dodging a question when he was asked by reporters at the white house, the question of whether he would pardon paul manafort. that would suggest that he has

not ruled it out. from a political standpoint, there is legislation in the democrat attorney general in the state of new york, has proposed legislation that would make it more difficult for the president to parted paul manafort and/or michael cohen. the second point, in terms of the impact for the midterms, enthusiasm gap. it means democrats now could be more charged to get to the polls. you look at the special elections. we will explain what some of the experts are saying on this. writing, how big a deal is a manafort verdict, very big.

consequences of investigating a president may be great, but the consequences of not investigating such matters are far greater. does that set up the incentive, forget about the impeachment debate, is how they pulled a president in to these investigations. what will mr. mueller do with a president who is removed from criminal investigation? should democrats take back control of the house, yes, impeachment is now very much a real topic of discussion. house majority leader nancy pelosi putting out a public statement that the president has increasingly put himself in legal jeopardy. secondly, i would say that we have to take a positive because the events of the last 24 hours here in washington, d.c. the president of the united -campaign chairman

found guilty by a jury of his peers that he had fraud, and secondly his longtime close confidant and personal attorney and fixer pleading guilty to providing has money at the instruction of donald trump. francine: thank you so much. .et's also bring in leslie you always make us smarter. i don't know whether the dynamic or how much the dynamics change, if the midterm gives a win to the democrats. leslie: it could be very significant. we have 11 weeks to go to the midterms. the question of what happens, a lot could happen right now. the president is going to feel under tremendous pressure. it is difficult to know what that means in terms of his action. if the democrats take the house, that obviously puts the table,

the possibility of impeachment. certainly,ts would if they have a majority, i suspect consider pushing forward. that would obviously be very significant. one thing to watch now is to see -- we don't know. it looks like cohen is cooperating. will have to look and see if there is more cooperation following this. cannot president actually shut down the investigation? leslie: the president could fire mueller. we know that he certainly wanted to do that in the past. . he has not done that i think that is the question right now. mostese next 11 weeks,

importantly whether he would actually fire him in the run up to the midterms. there's a very interesting piece in the financial times it reminding us that if the democrats take the house, and trump had to fire mueller, they could reappoint him as the investigator appointed by congress. that is a very interesting angle. the president has the power to fire mueller. tom: i assume we are now completely subsumed by politics, 76 days to the election. it is going to happen in spades. who is advising this president? i find day today, i don't have a handle on actually who is advising him, or is he literally a president alone? leslie: he is not a president alone, but he is not a president that necessarily takes advice.

--have seen that he i intermittently takes advice. at the moment, he seems to be taking advice -- he is saying to not actually be interviewed by mueller. he seems to have taken advice on that. he is very unpredictable. and it is very difficult to see who is advising him on who has leverage over him at the moment. there is a lot going on for this president, but this is the thing that is really consuming his time and energy. given the context, if you think about the major topics on his agenda, this is tremendously very problematic for the country. thank you so much. greatly appreciated this morning.

kevin and leslie on our first briefing this morning. coming up, we are going to continue our discussion. with have a lot on foreign exchange. the focus on washington. camera will join us. stay with us. --kim will join us. stay with us. this is bloomberg. ♪

sebastian: this is "bloomberg surveillance." between billion deal industrial gas giants may be in jeopardy. getting across u.s. regulators will mean divesting more than what the company had planned.

financial tech darling is out with its first earnings report since june. it reports a 67% rise in net revenue. doubledave more than since the listing. a chinese maker reporting earnings today for the first time as a public company. the company posted a loss. thees have fallen 90% from post-ipo peak. francine: thank you so much. futures trading lower. 500 touched anp all-time high, making what some call the longest will run in history of u.s. equities. we are now joined by andrea.

some of it is you have the political, in the market ignores it. andrew: i think it is about a couple of things. . these are obviously very big and historic headlines we have this morning we have gone through an 18 month period weather constantly seem to be very big news stories in the market has continued to charge ahead. i think what the market is going to focus on is a couple of factors. if we think about today's headlines, does this change the math for the midterm elections? i think that is the most direct way you can take today's headlines. i also think the market is going to be watching very closely friday in jackson hole. does the fed continue to sound like they are going to continue to tighten policy, tighten financial conditions? i think that is going to be very important. the amazing thing over the last five years is that the real long-term interest rate in the u.s. hasn't really moved very

much. this market has yet to really be tested by higher real rates. francine: let me bring you over to one of my charts that hillary clark made for me this morning. this is the difference between u.s. stocks relative to the rest of the world stocks. there is a huge premium when it comes to u.s. equities. this in part, is due to the tax cut. what do you worry about when looking at this bull run in the u.s.? andrew: for better or worse, there is a lot of precedent of the u.s. market being a late run in the cycle. i think you see that quite clearly from this chart. if you're based in the u.s., it has been a pretty good year. the thing that u.s. investors should be thinking about are the biggest risks that always face markets, which is extrapolation. we went through a period last

year where the market was very skeptical of any tax cut passing, to some hope of it passing, to it passing, and now those tax cuts eating extrapolated in perpetuity of the future. the risk is always that things change and that always makes the market more vulnerable. tom: wonderful to have you with us today. morgan stanley has a rather cautious view on markets. cautiousexecute a investment strategy? i want to be a bull i don't want to be a soccer and go to cash, as so many people have over the year. how do i affect a cautious approach? andrew: i think there are two things that we would like there in addition to cash. a think one would be rotating your portfolio toward more defensive equity sectors. are u.s. equities strategist recently upgraded the utility

sector in the u.s. we become more constructive on u.s. staples, more constructive on some of the european defensive. i think the first step is to rotate a portfolio more defensively. we also like some of the non-eurozone equity markets like the u.k. we also like u.s. treasuries here. we think they will outperform cash. we think u.s. yields over the next few months can drop. invest -- break up the chart here right now. this is a chart that andrew knows oh so well. this is just off the lehman low's. the 85 reasons why andrew said should i go to cash? andrew, should i go to cash?

how do you fight that emotion in a great bull market? andrew: it's tough. this is why they say bull markets climb a wall of worry. what i find most remarkable about that chart is that up until this point, it fell consistently the market was constantly worried there was a recession right around the corner. we had a recession scare in 2015.2011, 2012, today, i think what is most remarkable is so much confidence that there is not a recession anytime soon. that makes us somewhat nervous. i think one of the reasons of the morgan stanley view is more cautious as opposed to a more optimistic view last year is the view around the economy, and i think among general investors hasn't shifted a lot. francine: first of all, what

would trigger a recession and what we had a sign of an imminent recession? absolutely. i think the bond market is already telling you that it is getting concerned that current growth is not going to be able to sustain itself at current levels, and that is why the yield curve is flattening. i also think the market sometimes approaches this question in the wrong way. it is kind of that question of will a recession happen, and if it won't, then i shouldn't worry about it. think the risk for market is not about will a recession happen or not, but could the odds of a recession rise from currently very low levels to something higher? francine: what are the implications of it? are there any canaries in the coal mine that we can foresee? andrew: there are a couple of things we're watching. the first is, do you continue to see weakness in ism?

do you see weakness and consumers approach toward big-ticket items. those have started to soften a bit. also, do we see trade tensions starting to impact corporate confidence more? we estimate this one way. i have seen very good studies at of institutions. how much fiscal stimulus is left in the system? offt of that starts to drop over the next 12 months. i think some of that fiscal impulse search to swing the other direction by 2019, that would also mathematically shift those numbers. tom: bring this up if you will. this is hard to see on tv, but all you need to know is one year s&p upg double-digit,

17%. i have been told that it is a single digit world. it doesn't look like a single digit world. do we go back to a single digit assumption or go big negative? i think it is a safer assumption to assume a more single-digit type of market. the other element their that i is, the markete is still pricing with relatively low volatility, which means it is still pretty skeptical of either tale. i think the element that the market sometimes gets too caught up in is when the market is relatively expensive, you assume it can't go up very much.that is very to over any sort of tenure horizon. there is little evidence that valuation matters of whether it will turnover six months or 12 months.

is that bull market can have a mind of their own. francine: and you will be staying with us. coming up on the david rubenstein show, oscar munoz. i am sure they will talk about the controversial policies that were put in place. this is bloomberg. ♪ xfinity mobile is a new wireless network

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included with your internet. plus, get $300 back when you buy a new smartphone. xfinity mobile. it's simple. easy. awesome. click, call or visit a store today. tom: the start day in america. -- historic day in america. francine lacqua in london and i'm tom keene in your. new york.

we will do morning must reads as well. here's "the new york times." pleading guilty, cut wood implicates the president. let's go to "the washington post." that maybe is the story for the president. finally from england, on the paper, don'sondon cons with a little bit of lightness this morning. let's go to the news. >> let's keep it with trump. he is shrugging off the conviction of his former campaign chair. rudy giuliani says a guilty plea by the president's personal attorney has nothing to do with it. it was a double-barreled blast the bad news for trump, . michael cohen pleading guilty to a crime. the case had to do with hush money paid to a foreign actress

.nd former playboy model coul that's a big victory for special counsel robert mueller. duncan hunter is also accused of filing false campaign records. the justice department says the hunters used money for family vacations, tuition, and dental work. a spokesman called the charges politically motivated. the u.s. and mexico are moving closer to an agreement on how to support a new north american free trade agreement. bloomberg learned the progress butbeen made between talks, more is to remain. that thes a 15% chance world enters a recession and used. they warn investors that they should see more volatility and money using turning to tightening.

they say there could be a recession as soon as three years. global news 24 hours a day on air and on twitter powered by 27 journalists and analysts in more than 120 countries. this is bloomberg. tom: look at the ramifications of what we have observed and in washington last night. maybe it's removed from cohen and manafort. let's begin our coverage. with hising with us decades of perspective on american journalism and gregory white is with us. let me go to you first greg. mr. putin has had a wild 48 hours not only observing what's going on in washington and the microsoft work on russia this and russia that coul. is helsinki totally gone? the russians were

certainly taken aback earlier this month when things turn so cold in relation to the contact trump and peyton had in helsinki. they are still holding out hope for trump. they still believe the personal relationship between the leaders there is any if chance trump might get political opening to soften things with russia that he might be able to do it. the events of the last 48 hours make it less likely. the russians have not yet retaliated to the latest sanctions by the u.s., so there seems to be a suggestion they are reserving judgment now. round two ofs is these sanctions against russia coming from the u.s. when do they even put them in place? that we the sanctions are expecting to come out as early as today by the state department is mandated from u.s. laws on the use of chemical weapons and they go back to the

march attack in salisbury and outside london of a russian former agent. he and his daughter were poisoned with a nerve agent that britainians denied, but and western allies point the thing at moscow. the first wave of them are narrow. it is not likely to be economic effect, but the symbolism and the atmosphere already when these were announced two weeks ago knocked the ruble to two-year lows. tom: gregory white, thank you so much in moscow. jim hertling is with us. i want to bring this up. this is one of the morning must reads we will play a number of times. generally a conservative writer of opinion pieces for "the washington post."

"there are many reasons why pardoning manafort would be a disaster. for one thing, he could still be subpoenaed to testify and subject to perjury charges under oath. lose theon, he would fifth amendment right to testify under the grounds it would incriminate him." so much of this seems to be playing out like a movie, except the movies are hollywood and this isn't hollywood. people with families and children are going to jail. as the president aware of that? -- is the president aware that? be it for me to speculate on what the president is aware of and not aware of. while very quickly he is the star of this, he can become a secondary player. it's interesting how the republican party and republican caucus in congress react to

these legal events. remember -- he's a politician. he's not going to be indicted. impeachment and the whole process of dealing with him is a political process. so far, he has got nothing but cover from the republican party. they have no interest in doing anything other than protecting him. that's where the rubber will meet the road. francine: so cohen pleads guilty and manafort convicted. what are the implications for the midterms? jim: on the one hand, it could motivate the republican base to get out and vote. there could be speculation that democratic voters are motivated and field speculation that we might see a blue wave. trump's base is very solid and they need to come out. the swing vote -- i guess the centrist republicans if any of them remain, the swing voters, if they get too disgusted with the possibility of having an

alleged criminal in the white house, they may want to have a democrats ining control of one of the houses of congress. francine: if something happens in the midterms and the house goes to the democrats, how does that change president trump's end? jim: for the next two years, all the democrats are going to be doing is investigating him, throwing subpoenas at him, hauling his staff before congress. policymaking if it has not already ground to a halt will certainly grind to a halt. maybe budgets will be passed, but i cannot imagine anything else of import getting through the policymaking progress. francine: jim hertling, thanks. joining us now is rush to tell -- raj patel. i will ask anything about the dollar impact.

are we expecting more market volatility ahead of the midterm elections? we are talking about a time when china decides to escalate the trade tensions. sebastian: i think so. i would've told you the same thing a month ago and volatility has not ticked up. the reason volatility will pick up and the reason it will pick up is that you have forces in motion that will stay in motion until you get more of a market response. those forces are fed tightening where you have rising inflation and an economy approaching full employment. you need the fed continuing tightening financial conditions and would only back off if market volatility worsened. you will have a trade strategy that will ratchet up pressure until there is a sign from the market that it is causing damage. you can throw on current political events and focus on the midterms. all those continue to pose risks over the next couple of months. francine: what does this mean for the dollar? >> this news comes at a time

when the speculative market is extremely long dollar. it's a know another reason to hd for the exit doors. u.s. leading indicators potentially coming off elevated levels. this is another reason to see that unwind. we just need some good news out of the rest of the world to get back into that trade that we saw at the start of the year. we saw the dollar tumbled under similar uncertainty drop shortly. it's just finding that move really. tom: what is the positioning right now? are we in the doldrums of august swaying things or is there actual volume and that's being placed? viraj: the market is really long dollar across the board here. that's a big vulnerability to the dollar. we have seen similar positions over the couple of years. that has knocked 5% off the dollar index in a short space of time. that's a big risk for us.

when we do not have any fresh news from the fed, we don't have any fresh macro interest driving the dollar higher. we are waiting for that dollar story to turn on its head and you have to look at what washington wants. they want a weaker dollar. in the meetings, that will become self fulfilling. tom: mr. sheets is with us from morgan stanley as well. your morning briefing on bloomberg radio. we say good morning to all of our team working in washington as well. "bloomberg daybreak." stay with us. this is bloomberg. ♪

francine: this is "bloomberg

surveillance." tom and francine from london and new york. the u.k. and the eu have said brexit talks will be continuous. the block had to be compared for prepare for no deal scenario and britain must "respect the single market." he and the u.k. counterpart stepped up negotiations before paring gains this morning. patel and us is viraj andrew sheets. callad a pretty gutsy when it came to cable. euro pound andat euro pound and there's a strong chance that some more political noise could be priced into that. we also think risk no longer favors chasing sterling. a lot of bad news is preston -- preston could there's an assumption -- priced in there's

ain. there's an assumption. there's not least the domestic ifry if not the global story one views this political premium will be priced out. cable could move sharply higher. that is our base case. 1.40 is in the cards and it depends on what happens in westminster. francine: is it too early to say? it feels like the risks of crashing have increased over the summer. now i hear more market chatter that we are looking at a soft brexit. viraj: it's too early to make that call. wait on the sidelines now because there is risk priced in, but not enough of the soft brexit noise to go into that trade right now. tom: with and it is the idea of september. this be finished by september or do we drive it into

2019? do i need to place of the short term or as more long-term bet on strong sterling? viraj: september will probably be a bit of a negative month. we have the party conference season and parliament coming back from recess, both political that risks for the pound. if we can get through september without any major new news and the opposite is the same, i think the risk will start favoring position for a potential relief rally in sterling. if push comes to shove come march 2019, we do not see an economic regime change that will take sterling massively lower. francine: andrew, how the you view this? our week coming every single word from barnier and boris johnson or at the moment you don't go into u.k. assets until we have a clear picture of what goes on? andrew: the fundamental viewenge is that a similar

is that we ultimately end up with a softer brexit deal is that the challenge of the next two months is still really difficult onto specific fronts. one is that the u.k. government appears to be taking an approach that is more open to this idea that there might not be a deal, using that as a potential negotiating tactic, which is fine as whatever strategy you want to pursue, but certainly a higher risk strategy. secondly, i still don't think you have a majority in parliament for any specific deal,n of brexit especially because what was agreed at checkers is likely to change as all deals have to change negotiations. you have this challenge where the market is assuming this will work out without a clear path of what gives and how you get there. i think that means more volatility in september and october as parliament comes back into session and talks come down to the wire and you face the possibility you don't get to a deal by october that you really need to go down close to the

wire. francine: you stay with us. brexit is tricky. here your chance to play through the different options to see if you can find a path to the brexit of your dreams. it's a really cool game, you can. . you can find it on bloomberg.com. check it out. i'm starting right here. you have to choose what happens to theresa may next. you go through all the options. it's fun. this is bloomberg. ♪

sebastian: this is "bloomberg surveillance." let's get the bloomberg business flash. the embattled founder of pop a johnson is taking his battle with the pizza chain to employees. he has launched a new website called save papa john's and the company's 100,000 workers. he says the board is trying to silence him and hurting the brand. asresigned under pressure chairman last month for using a racial slur. the parent of united airlines is

seeing improved average airfares in the u.s.. it's not that fares have gone up so much, but it is few airlines offering bargain-basement prices. united is also being helped by stronger business demand. oncesmithkline potential bidders to make offers for its indian consumer health unit. the business on the popular brand and could fetch more than $4 billion. pepsico and others have expressed interest. that is the bloomberg business flash. francine: thank you so much. xiaomi has delivered a jump in quarterly profits as the chinese smartphone giant has made jumped over seats. -- strides overseas. tim culpin.ow is

the ipo's overshadowed by disappointments, but to the results make up for that? tim: i don't think they do and there's a big growth revenue. this is a company growing quickly. if you look at the bottom line, net income was also awesome, but it was mostly for a one-time gain as they revalued the class b shares through the ipo. it's an accounting thing that gave them a strong number. turning to a loss again because of shared compensation costs, but if you look at growth margins, that is one area where you can look closely at how the business is doing. growth margins shrank and quite a lot -- two percentage points. that's quite a lot for a company that is bringing ways up in margins. that was at the smartphone level and the other businesses such as lifestyle devices. thaty nice topline numbers make the company look very good, but profitability is not as strong as it should be. is itne: first of all,

only the smart phones that are helping with these growth numbers? tim: most of the growth is in smart phones. that's absolutely true. they are trying really hard in other areas like iot and lifestyle products. that is growing, but at the end of the day, two thirds of their revenue is still in smartphones. one thing i will say for the company is that they are doing quite well in terms of internationalizin lesg. less and less of their product is still in china. year-over-year, 12 percentage points more of the revenue was coming overseas. about 35% in the latest quarter. they are doing a good job of internationalizing their business. tom: there was a chart that was that was superb based off jpmorgan research on the comparison of china internet stocks to u.s. internet stocks. basically china tech versus the faangs.

ofwe know the accountings these companies when you say growth margins come in by 200 basis points? do we really know what's going on there? tim: if you look at the internet stocks, one thing you can do is look at alibaba. the real concern is that topline revenue is growing and that's great. they are having to spend more and more money on sales and marketing and promotions to get heads out there to bring people back online. the cost of that revenue is driving. you can throw a whole lot of marketing money at something and get numbers up. it is costing them more and more. a real king for a long time, their growth margins are at historic lows because they are spending more and more money to get the topline to keep growing. that is a real concern. tom: can the government support these stocks if the bear market continues? well, the government pretends that they don't support

the stocks at all. they are publicly traded stocks. i think they will maybe not support the stock directly but certainly support the underlying businesses. right now for example, if you are competitor to tencent, many south korean game makers cannot get their games into china. south korea makes really good mobile and pc games. they have this long queue of games they want to bring it to china. they can't do it. they have to hook up with tencent to do it. those kinds of barriers ash that's the way the chinese government to help these companies out or find other ways to prop up the revenue of these companies. francine: tim, thank you so much , bloomberg opinion tech columnist joining us from taipei. do you like the technology space? andrew: we are relatively cautious on that space. a u.s. equity strategist downgraded technology to an underweight and that's the reason why are emerging-market team has been cautious on asia since the start of the year.

as i talked to our bottom-up analysts, they see downside to those technology numbers. we are relatively cautious. tom: andrew sheets, thank you so much. coming up, we will continue our coverage out of washington with kevin cirilli and others, looking at the morning after for the president of the united states. foreign-exchange -- brazil up to four per dollar. we will be joined as well. much more to talk about today on this late august. never a dull august and never a dull day to say the least. a beautiful new york this morning. with special coverage from washington, this is bloomberg. ♪

tom: this morning, and the morning after, two separate

courts, to separate prosecutions find guilty please against some of the presidents men. what next for the president of the united states? thes&p 500 a record high, dollar churns. our summer of idiosyncratic discontent, argentina, and now brazil. we are live from our headquarters in new york. absolutely extraordinary yesterday in washington. you wonder for the president, where to from here? francine: where to for the midterm, the gop, and if you are a market trader, some of the politics was ignored by the markets. hole.e looking at jackson

tom: here is your first word news. >> it may be the worst day of donald trump's presidency. president trump said the manafort-gates had nothing to do with russian collusion. the president said china's economy is no longer on a fast-paced to be larger than the u.s. a globalhas uncovered

information operation and named a country other than russia. an, and it says it has removed the inauthentic behavior. negotiations the eu chief negotiator is trying to reach a deal. global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. tom: this long bull market. euro-dollar with a little bit of

recovery. 30 year bond under 3%, the longer lower yields. brazilian riel 4.05. francine: i am looking at u.s. .quity futures falling treasuries steady, advancing. one company lowering guidance. tom: what an interesting day yesterday. the president responds to paul manafort. >> this has nothing to do with russian collusion.

this started as russian collusion. this is a witchhunt that is a disgrace. do with whating to they started out, russian collusion in our campaign. there were none. tom: a long night looking into the morning, can it be business as usual today? >> no. administrationn preparing to go politically nuclear. rudy giuliani commenting publicly last night, saying they cohen.tical of michael

the question becomes if evidence suggests he can back up his claims. we just heard the president defending paul manafort, but making no mention of michael cohen. tom: this from no if feldman. ah feldman. the closest analogy was when the watergate special prosecutor named nixon as an unindicted co-conspirator. this event is therefore unprecedented in u.s. history. trump could be charged with a federal crime the moment he leaves office. that is absolutely critical. is it right to say the president is untouchable and the day he walks out of the door this will

follow along with him? democrat inosi, top the house, saying yesterday following these reports that the president has put himself in "legal jeopardy." response is an abuse of pardoning power. in new york, the democrat attorney general has proposed legislation that would close a loophole that would give the president the ability to pardon someone like paul manafort. if heesident was asked would pardon paul manafort. he said he did not want to answer that specific question. that would suggest he is leaving that option open. note the politics on this. republicans agree with the president that the investigation is an "when shut

-- witchhunt." francine: do they stick with the republicans? >> enthusiasm gap. the democrats have been outperforming republicans and would seemingly be more motivated to get to the polls, and that is concerning to republicans i speak with, including republican lawmakers who have said as much on the record. tom: one question is kind of like in the news tonight -- today, or not. -- are paul manafort and michael cohen going to spend time in jail. >> yes. when i got home, i was looking at my journal. i ran into michael cohen a couple of months ago. he said he was trying to stay out of jail. tom: thank you so much. kevin cirilli, our chief

washington correspondent. enjoying a all of this is our guest, not only the financial aspects, but politics as well. this has to be a washington frozen. not only does anything not get done until the midterms, does anything get done after the midterms? >> good morning. the only thing that will happen from a legislative standpoint will be bills to start the fiscal year, october 1, and two forcing a shutdown to get the democrats to accept terms, i think that goes away. will be trying to de-risk washington as much as they can. toy will not allow anything happen in the legislature that would increase that risk going into the midterm elections.

francine: i don't know whether there is coordination or whatever you want to call it, president trump, should he be charged with a crime or if he has done something wrong or is he untouchable? >> i am not a lawyer. i am impressed by walter dillinger, now at the university of north carolina. he wrote two months ago that this question has not been posed sixerefore, he questions that would have to be answered. it is an open question and will occupy a lot of minds between now and the end of the year. francine: what are the chances of the president pardoning anaphoric -- manafort? and what would be the implications of that? >> the political implications would depend on the context. if we continue the trial for , from a political

standpoint, republicans would have to deal with a lot of pushback if the president started to pardon people proven in our system of laws of being a criminal. there would be a lot of consultation from the hill to the white house to avoid that outcome, particularly in advance of the midterm elections. tom: to get away from the ballet of today, how does your eurasia look on our pending deficit? >> to the degree we will end up with an additional $1 trillion of debt from this true school -- this fiscal year, we are headed debt toover 100% gdp if we don't reduce the deficits. the first 10 months of the , we have 20% higher

deficit year-over-year than a year ago, spending is five times greater so far than increases in revenues. 2017 andpened by the 2018 spending bills are showing up in real time already. up in the showing consciousness of anybody up on capitol hill? does anybody care? >> that is always judged on a lag here in washington. we would have to wait for another couple of weeks and get beyond the election before you test with a real deficit hawks exist. tom: i look at this and the massive distraction this morning , and we hoped to speak to in the coming weeks about the lag on kim wallace is washington. he is with eurasia group. coming up next, we turn away

from the politics, the ballet of washington, a ballet for a september brexit, we will look at the foreign exchange. stay with us worldwide. this is bloomberg. ♪ this is bloomberg. ♪

>> this is "bloomberg surveillance." let's get the bloomberg business flash. between twodeal industrial gas giants may be in jeopardy. getting the merger past u.s. regulators would requiring the vesting more assets than planned. financial tech darling out

-- post-ipost ipo report. for uber,es payments netflix, and spot a fight. shares have doubled since the ipo. xiaomi delivered 68% sales growth in its first public overseas,king strides while fending off local rivals in china. that is the bloomberg business flash. tom: let's take a look at the markets. francine: futures lower. trying to gauge the followed from the latest legal drama engulfing president trump. the s&p 500 touched an all-time high, marking the longest bull run in the history of u.s. equities. joining us now is our guest.

always great to speak to you. what will it take for these markets to correct? -- i thinknk we have we have a good example of resiliency yesterday night when we had all this news coming out. i had a lot of questions from clients about how bad is this. this morning, futures are barely the s&p is incredibly resilient, even in the face of serious news that could have wide reaching consequences. francine: what will it take for it to correct? you can see the bull run. it is getting higher and higher. there has to be a downturn. >> at the moment, we have strong data. flips,e data in the u.s. that will be a turning point for

the equity market. fiscal stimulus in the pipeline. in fiscal stimulus kicking and the second half this year. it will be strong. calling the turn on the economy seems premature. chart,want to go to a lehman brothers low, dollar chart. this is very good mathematics from that 2009 low, the turn, , up, up we go. strong dollar throughout the cycle as well. to thedollar linked equity markets and the multinationals that make up the american experience? >> there is a connection between growth. growth is a driver -- tom: the united states. >> the difference between the

equity market and the dollar is the equity market is focused on global growth, and the dollar is driven by idiosyncratic growth specific to the u.s. one of the reasons we have had a strong dollar is strong growth in the u.s. and a setback on the global growth front. the gift that keeps on giving and the dollar keeps going up. what is your call in terms of flow of funds and confidence to move money into america? do you have that belief? >> there is flow support for the dollar. i am glad you ask about flows. on a global basis, we have had a move over the last three years that supported emerging markets. this year is reversing, not just u.s. and europe -- a lot of people look at the euro, the

dollar index, but the dollar versus emerging markets looks like a structural change because the flow is no longer moving to emerging markets. it is coming back to the nine it states, back to europe, and the big flows driven by qfii and low global interest rates is what is changing this year. emerging markets are vulnerable and week against the dollar. inncine: there is turmoil emerging markets, and escalating dynamics ofnd the the american tax cuts. out of those three, what will dominate markets in the next two months? we are entering a critical phase of the trade war. we have had some optimism there could be traction in terms of fresh u.s.-china talks, but september is a time when the big

hit on tariffs is likely to take place, the $200 billion is likely to come into effect, so that will escalate tensions versus china again and reignite the currency weakness in that where and i think this is we are getting conflicting messages from the administrations, these tariffs. will they be delayed? one of my concerns with this legal problem that trump is facing now is that he will push even harder on some of these fronts to create a foreign enemy , and that could bring these auto tariffs into play. francine: what do you sell if there is a glimmer of an idea that this escalates? do so germany because of its exposure to carmakers? >> we have had an interesting

situation around the child seems -- chinese currency where we have weaknesses, then they took a number of steps and bumped up the kerry in the offshore markets, so technical but important things that stop the weakening. the $200 billion, then they will probably let it move third and reignite currency tensions. that could be important globally. tom: enough of this fancy fx talk. let's talk to someone with the courage to be in the markets. ahl. must be robert is this the most unloved bull market ever? why are we so miserable in this bull market? >> people don't enjoy making

money. there are all kinds of things to worry about. has usual, bull markets love to climb walls are for you. underneath the surface, we have an economy and an earnings profile that is pretty good. that is what drives the markets. so the twok, parallels, clinton and nansen -- nixon, one market went up, one went down. , earnings andra the economy were in trouble. era, earnings and economy were fine. tom: you have done this for decades. i've missed it. i need to get back in the market. how does bob doll get back in a

market he has missed? >> the easy money is clearly in the rearview mirror and it is bumpy from here. i am a dollar cost average or. , and at the end of 10 months, i am invested. if markets go up, i got started. if markets go down, i have some powder for later. francine: do you buy gold? >> no, i don't think so. i don't think the fundamentals for gold are all that good. with inflation is still anre, but we don't have inflation problem, so i am cautious on gold. francine: what is your take on chinese renminbi? are we going to see a currency war? if we do, how ugly will the markets get? >> we could have interruption.

you have hit on it. currencies are some of the hardest things to predict, and they are the place where lots of things around the world adjust most quickly, so they tell us a lot. we could have a selling squall because of the concerns with liquidity and government stability. tom: within this is the idea of what to buy, and that means technology. is bob doll long amazon? >> it is not one of my bigger holdings. -- ink it is and then the price the stock. tom: where is the value? tech, somee part of of the health care names are still interesting, consumer stocks because the consumer is doing well and has responded

presuming you -- reasonably well . look at the earnings producing good results. tom: thank you so much. everyone publishing on what we witnessed yesterday, and absolutely historic a day in the history of this american oneblic. moments ago, article makes it very clear. trumps real fight is in the court of public opinion. mike allen emphasizes what will be the consequences for a democrat victory in the house in november, discussing the paths of impeachment coming off that first tuesday of november. let me tell you about an important conversation, peer-to-peer conversations with somebody running a challenging company, united airlines, chief executive officer sits down with

david rubenstein. that is a timely and interesting conversation. please stay with us. more on washington. this is bloomberg. ♪

tom: we welcome all of you worldwide. an extraordinary morning in washington. your first word news briefing from london. president trump shrugging off

the conviction of his former campaign chair. rudy giuliani says the guilty plea has nothing to do with him. it was a double-barreled blast .s michael cohen pled guilty the case had to do with hush to two women. meanwhile, paul manafort was convicted of tax and bank fraud charges. the republican congressman and his wife have been indicted for using campaign funds to pay for personal expenses. he is also accused of filing false campaign records. it is said he used it for vacations and dental work. s thekesperson call church's politically motivated.

bloomberg has learn progress has been made during five weeks of talks between mexico and the u.s., but key hurdles remain. there could be a handshake deal with mexico as soon as tomorrow. john bolton says the trump administration has not decided when to release its mideast peace plan. bolton wraps up a three-day visit with israel. he said the palestinians should move on from president trump's decision to shift the embassy to tel aviv. global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. tom: thank you so much. derby, within the retail some of, thumb down, home depot doing better. there is target with 6.5%. that is the big number for

target. vision is emerging markets in a bit, but now, nafta dynamics. mike mckee has done a lot of coverage and the peso. the peso was a huge barometer into the election. is peso a barometer of nafta-ne ss? >> it is. they had their own election that caused some tension. now you can see in the last couple of weeks that we have had tensions around turkey and so forth and the peso has done pretty well because there is optimism about nafta. see if thereing to is a handshake deal coming. tom: francine, you said it. didn't we back off the handshake

deal? francine: yes, we think mexico is saying there was no real handshake. are trying to keep up, but different sources are saying different things. link between the politics in washington and what president trump does on trade? i think the problem with this administration's approach to trade is they try to fight so many wars at the same time. in my view they have been aggressive in the china connection, and right now they are struggling to do deals anywhere. it is crucial to get nafta on track. there is ant, bilateral talk between mexico and the united states, and

canada is waiting on the sidelines. we need to get them together to sign a comprehensive deal signed by all parties. will conclude,o then canada can be invited into the talks. francine: how much does the peso need this deal? talk about brazil later, but emerging markets are being hit by dollar, dollar-denominated debt, at a time when markets are freaking out about turkey. mexico needs this deal. it is crucial for the mexican economy. the ecb is withdrawing stimulus. they have this positive piece of news, otherwise, we can see retracement's of 5% or more in a short space of time. tom: michael mckee has done a great job, canada, mexico to cover this.

is this a nuanced move in nafta? are these profound changes from mexico? >> the most important change around nafta is to get the uncertainty eliminated. the whole thing is for everybody to save face. >> that is why it is important the sunset clause. tom: help me with that. >> the idea is they will renegotiate every five years. that will create uncertainty. we need a deal that eliminates uncertainty and corporates know we'll be there for the long haul. that will eliminate uncertainty. tom: do you have a trade on mexico this morning, peso-renminbi? >> you are reading my mind. mexico then trading

outperformance against brazil and other emerging markets. the question is whether that bet is still valid if there is uncertainty around nafta. the nafta deal is making progress, but news reports are conflicting. francine: what does that mean? we understand there are a lot of obstacles, but we have a framework. if we are inching closer, what do you buy? >> if there is progress, the mexican peso is a relatively cheap currency. moved a lot before, so it can gain further. you want to go with the trend there. the question is how bad is the global emerging market environment going to be, and can you trade dollars next, or dean you need to have it on a relative basis where the mexican peso will outperform emerging markets? tom: i have never brought this up before.

mexico, brazilian volatility showing strong mexico, week brazil. it has a very nice curve here. of the higherat volatility, the bet that would be strong mexico versus brazil? that is the conclusion of nafta? events that two will drive performance, positive resolution around mexico and nafta. that could be the bullish catalysts there. on the other side, we have an election in chile that is incredibly uncertain. we essentially have a breakdown of the political assumptions and we don't know what will happen. tom: you are trying to play both

sides of this? >> there are catalysts in the mexican and brazil legs that push towards mexican outperformance. tom: francine, please? francine: i am looking at brazilian real. away from theing peso that you would trade brazil? calls some of these weird . a reputation for giving away calls, but there are two things you want to keep in mind, the country specific and the global environment. the global environment is one with a discount rate from the u.s. is different than the last 10 years. the other thing that is different is the flow from the eurozone into emerging markets is tapering with the ecb qe

tapering, making the global environment for emerging markets more challenging. that is a structural thing. very good. some entrance treatment of foreign exchange. at four gets our attention this morning. we will draw our attention back to washington. morning, news from washington. this is bloomberg. ♪

>> this is "bloomberg surveillance." let's get the bloomberg business flash. walmart,pt pace with the best same-store sales in 13

years, rising 6.5%, beating estimates. revenue has been boosted by house brands and online orders. the founder of pop at john's is taking his case to employees, launching a website aimed at the company's 120,000 workers. board is trying to silence him and is hurting the brand. pressure fromder chairman last month after using a racial slur. the parent of united airlines is seeing improved prices in the u.s.. the ceo says fewer airlines are offering fewer bargain prices. it is also being helped by stronger business demand. tom: thank you so much. a lot going on this morning. i look for david westin with complete politics coverage.

we will get back to our guests in a bit. and our moscowow bureau chief joining us today on sanctions. what do sanctions mean from moscow, the people of moscow, the people of greater russia, what do the sanctions and threat that new sanctions mean? the sanctions have had an impact on investment and economic growth to russia. companieshundreds of and people under sanctions right now. a lot of them don't have discernible impact. some of the sanctions have limited access to boring in international markets and has a knock on effect. you would notup have known the sanctions were having an impact.

tom: it is being felt. is it in food? give me some color on what it is, automobiles? ,> well, discernible effects russia impose counters sanctions in 2014 after the first wave of sanctions. those have impacted imports of food. getting a good french cheese, can't do it, but most everything else you can get, and people are still traveling, bringing back suitcases with anything they are really missing. francine: why is the eu not imposing sanctions. the u.k. saying he wants to pressure brussels to do it. i think part of it is the general lyrical climate in the united states.

after the trump-putin summit in helsinki, there is a feeling trump had not pushed putin hard andgh on election meddling that the u.s. is being tough on russia. now we have sanctions on russia attack, thehe u.k. chemical weapons attack. francine: we have been talking today about michael cohen cleaving guilty, manafort and gates it. how is it playing in the russian press? >> it is playing in the russian press, but the message has in that trump wants to improve relations with russia, with putin, and that trump is open and available for talks and discussions, but that he is held back by forces in the nine it states, congress.

tom: thank you for the briefing. nearing 68, which is something that could my attention. we will touch on that with emerging markets in a moment. francine, coming back to russia, i want to make clear that i am guilty of this, i bring back suitcases of stilton from london. i just like to bring back that big wheel. know how muchn't you actually have to bring back home, but that is another conversation. tom: there it is. we will come back. our guest is with us. an important discussion coming up on how you can make and maybe not lose money in emerging markets. please stay with us. worldwide, this is bloomberg. ♪

tom: "bloomberg surveillance" focused on washington. a historic day yesterday, two

quarts, to prosecutions -- quarts, to prosecutions. francine mentioned this earlier. ups is dollar brazilian real to four. and we go to stability. we become unstable often election. once again, this populist thrust, the workers party, it appears they could take the government from the elite. is an election like i have never seen before or you have a person essentially in jail that is now running ahead in the opinion polls, so the uncertainty comes from the fact we have a popular person who will probably not be allowed to run, and that means we see who is second in line, and that creates incredible uncertainty. tom: this is so important. one of the great errors i made

was a bet against lula when he took over. we have the limit search and strong brazilian real, why can't fix it just happen again? can't he deliver again brazilian real stability and strengthening? is that because of his involvement in the previous corruption case, he is tainted. he is convicted in certain ways. therefore, there is a question whether he is legally allowed to run. this is where the uncertainty comes from. the traditional parties do not .ave a second lula there is no alternative to him. so you go to extreme candidates when lula is out of the question. it is a reflection of what we are seeing globally. there is a breakdown of support for the centrist parties.

that is why politics are becoming much more important essentially all around the world. francine: if we look at the lula, an army captain, environmentalists, state governors, a former mayor. is there one or a combination that the markets would be ok with? >> that is the problem. when we take lula out of the equation, we have a right-wing candidate that has around 22%. he is an unknown character and views onunconventional thereforend so forth, the market is uncomfortable with him. this is why the brazilian real is weakening. we don't have a traditional market candidate we can rely on and we don't know what the policy framework is.

the fiscal trajectory in brazil is incredibly troubling, the unsustainabley is and we need a strong person to bring the fiscal situation under control. tom: a chart that is so important. rim andthe pacific emerging markets, think indonesia, the collapse of 1997, recovery, and this new rollover with some real velocity. there is an inertial force here. >> this all has to do with china to be honest. weakens come it drags increasingly the whole region with it. tom: do you have a level on renminbi? >> seven is the key level. overwe saw these measures the last couple of weeks to stabilize the currency,

everybody is raising this question, is seven a line in the sand, or is it just temporary and they will hold it here? that is why i mentioned these tariffs in september. is the $200 billion going to be such a big shock. thank you so much. one more look with kevin cirilli , always working in washington. have a sentencing of mr. manafort in december. what happens to starting today -- michael cohen starting today? >> he could face jail time for several months. the question for michael cohen is does he have evidence to back up the court documents in which he pled guilty to being instructed by a candidate to

issue these hush money payments? ,rancine: the pardon question will we find out in the next 24 hours, week, months from now? >> that will take months. that would have to make its way up. he has left the door open for that, and has not shut the door. he will likely be asked again between now and the sentencing. the democrats have been adamant that they put pressure on the president and not pardon paul manafort or michael cohen. tom: this is new for all our listeners. i'm going to go to this quickly. how big a deal is the manafort verdict?

pretty big. how big is the michael cohen cleat agreement? very big. the consequences of not investigating such matters are far greater. very quickly, what does mr. mueller do this morning? keep moving forward? >> keep moving forward, building the case. everyone i spoke with said yesterday was a win for bob mueller. tom: thank you very much. kevin cirilli, our chief washington correspondent. we continue bloomberg surveillance on radio through the day. cleese stay with us. this is bloomberg. ♪

david: what a difference and our makes. to close advisers to president

trump are convicted of felonies within minutes of one another. markets shrug it off. global markets appeared to be taking the president's troubles in stride and the bull market continues its record run. the consumer points to continued economic growth. welcome to "bloomberg daybreak." alix steel is off. oh to be a fly on the wall. if you look at markets and the reaction to the headlines yesterday, we did see a dip in futures in the u.s., but they recovered a lot of their losses, so we will see how that falls as the day goes on. higher.trading