>> howell makes his jackson hole debut, but don't expect him to fear from his messaging. the kansas city fed chief says trump's criticism won't influence monetary policy. >> scott morrison will become australia's sixth prime minister in 11 years. stocks in the aussie dollar gain. defies u.s. president his attorney general in a move that would fire robert mueller for constraining is russia probe.

welcome to surveillance. let's check in on the markets. after a mixed session in asia, we saw the index trading that overall, we are seeing modest gains in europe. the stoxx 600 up .25%. u.s. futures, pointing higher toward the end of the week. i want to show the two-10 curve. to flattening has taken us 20 basis points on that. focus ahead of jackson hole. a some fed officials have shown concern over yield curve flattening. something to bear in mind. we are keeping an -- keeping of the g10.fx out a touch of dollar weakness, crude oil on the 68 handle. perhaps dollar weakness fitting into that. strength following the data out of the u.s. earlier in the week.

throughout the day, live coverage from the jackson hole gathering of bankers. the fed president's of st. louis, dallas, cleveland, atlanta. first, i first word -- a first word. >> in australia, the treasurer scott morrison will be sworn in as the country's prime minister after ruling liberal lawmakers voted to oust malcolm turnbull. he will consider appointments to his cabinet over the weekend as the government attempts to boost it lagging poll numbers ahead of an election due by may. >> our team needs to look after the event of this weekend how that is impacted on them. they are going back to their families and will listen and bring things back to us. where there needs to be changes, they will be made. where there needs to be continuity, that will be maintained. u.s.-china negotiations have wrapped up with no age or

progress, setting the stage for further escalation of the trade war. cameonclusion of talks hours after beijing and washington rolled out their latest round of tit-for-tat tariffs. bloomberg understands no further meeting has been scheduled, while chinese officials raised the possibility negotiations could now be on hold until after november's midterm elections in the u.s. china has removed limits on foreign holdings in domestic banks and asset management companies. under the new rules, financial institutions overseas will be treated the same as local companies. foreign states were previously capped at 20% for single and 20 54 multiple investors. sectors --ultiple investors. donald trump has reportedly told italian prime minister giuseppe america will help buy government bonds next year as a leasing -- attempts to

refinance its debt. three reported, citing high-level officials. told about it after a meeting with president trump at the white house. he didn't give any details on the fifth -- if the plan could go forward. u.s., two key republican senators have signaled to donald trump he could replace jeff sessions after the midterm elections in november. lindsey graham and grassley changed their positions yesterday after the president launched a fresh attack on sessions. the move would open the way for firing robert mueller or constraining his probing to russian meddling in the 2016 election. global news 24 hours a day, on-air and tictoc on twitter, powered by more than 2700 journalists and analysts in more .han 120 countries i am markus karlsson. this is bloomberg. the jackson hole

symposium, which a guest has called summer camp for economists, is underway. the big event is jay powell's speech at 10:00 a.m. eastern today. bloomberg, with esther george, who gave her a few for further rate hikes. -- review for further rate hikes. doing well andis based on what i see today, two more rate hikes could be appropriate. i am mindful that is not a commitment. each meeting, you have to reassess. what are you hearing from your constituents that you talk to and make the decision at that time. nejra: for more on this, our global economics and policy editor kathleen hays joins us from wyoming. great to see you, kathleen, and thanks for your fantastic coverage. waiting to hear from jay powell, what is the world waiting to hear in what could be a surprise from his beach -- speech? let'sen: first of all,

set the stage by saying traditionally, the chair of the federal reserve kicks off the friday morning proceedings, panelists and papers, etc., by giving some remarks about the economy, the conference and for jay powell, given what we saw in the minutes from the august meeting where he said another rate hike would be appropriate soon and further rate hikes would be needed, that seems to point to december, people think you will get echoing of that from jay powell. the fedportant that if chair wants to give a dramatic message on policy, it has been done in the past. ben bernanke in the august of 2012, argued for more stimulus after q1 and q2. on the 13th, the fed announced qe3. alan blinder spoke to us

earlier. a former vice chair of the federal reserve, and a long time jackson hole participant. he said jay powell could announce something mentioned in other minutes regarding policy as it, native and it is time -- accommodative and it is time to shift on that. >> it needs to adjust its language as it moves away from the super accommodative stance to a more neutral stance. it has been doing that. he started back in the june meeting. he could choose this venue to c hange the communication a bit, or he could wait for the september fomc. kathleen: this would not be able -- market moving change. this would be a subtle change. it would be interesting if he chose to address the yield curve and dismissing it as the possible outcome of many other

factors, some of them technical, if he said he was watching them work closely. he is concerned it could invert, that could be a market move. bloomberg economics doesn't expect a fort -- fourth rate hike this year, but the markets are priced first two she more rate hikes like esther george said and that is what people think we will get. nejra: any mention of the yield curve would be something to take note of. thank you for joining us. bloomberg's kathleen hays from jackson hole. thompson and owens james barty, cross assets strategy at bank of america merrill lynch. let me come first you, murray, looking forward to jay powell's speech. changing monetary policy in a changing economy. what are you going to be looking out for? there is no doubt monetary

policy is crucially important, but it remains nevertheless the gas we put into our cars. it is something necessary to move forward, but not what determines the size of the engine. i would like to encourage everyone to shift a little of the attention away from monetary policy and in favor of looking more at the fiscal policy and what the government is doing to alp the u.s. economy to be greater performing economy in the future. . howa: in that case come crucial is it for you that we understand what neutral is? debatedhis is a hotly subject among economists and all the diligent and excellent monetary policies put in place by central banks 2008 has protected us from another great

depression, but they have perturbed a lot of pricing of assets in our financial markets and have had a big impact on the gilt curves. -- yield curve. we are clearly all looking forward to a new era where some of those distortions could be removed progressively. isra: james, one question what makes restrictive policy for the fed. i have addressed that by asking ie, but should the fed be james: i thinke the point adam blinder made was they are going from an accommodative stance to some neutral where the fed feels comfortable. i don't think there is as much debate about september and december of this year. the big debate is next year, where the market is uncertain, as well. if you look at the minutes from the other night, there is debate about how far we want to go with policy. 'sme of the fed say fiscal

policy has given a stimulus, emerging market is tight. the yield if we push curve into inversion, that is potentially dangerous. the real debate is how far do we go? do we go to neutral or slightly restrictive next year? nejra: on the curve, the 2s/10s now at 20 basis points, i was talking to michael from bnp paribas and he said one thing that could come up in chairman powell's speech would be to do with the balance sheet and moving toward short duration. some reverse operation twist. is that a possibility? james: it is possible. the fed has multiple options. it can raise rates or just wanted to tightening. if you are worried about the curve going inverted, you can unwind the balance sheet pfister -- faster.

there is room for the fed to do that. that justure they do yet. the debate at the moment is on how far we go with policy. maybe next year, we start to worry about the curve and tweak it then. nejra: on the yield curve inversion, we heard from raphael he wasn't too concerned about the yield curve at the moment. other fed officials have different views. are you concerned about where we are on the old curve? 2s/10s at 20 basis points? marie: it has been in the past a very efficient indicator of upcoming recessions when the curve actually inverts. just flattening is not enough to signal an upcoming recession, but an inversion has definitely been a reliable signal in the past. i think everybody ought to be concerned about that, but when we are discussing how many rate hikes in the future, we also , theyo take into account

have to reassess at every meeting what the situation is. the stronger dollar is the form of tightening. i wouldn't think any central bank, which conceptually wants will hike it, twice if the currency at the same time is very strong. the dollar is not an explicit target of the fed, but a crucial variable and its strength is something that also feeds into the rate hike policy. i am not so sure we will get the two rate hikes and that ties in with fiscal policy, where i think there is still a lot of uncertainty as to whether the fiscal policy is actually going to raise gdp this year or not in the context of the trade situation. i think all of that argues for a negative surprise on gdp, and the year could end with one for the rate hike. i think that is a possibility. nejra: interesting, and on the

possibility of future rate hikes, i have a chart which were first what james was saying earlier about the outlook of 2019 being less certain. with that in mind, do you see rates moving higher or not? i think as far as the 10-year is concerned -- what the fed is doing, and the global uncertainty. the thing that is capping 10 year yields is more about concerns about u.s.-china trade, the slowdown in china, and i think that could drive 10-year between now and the end of the year. if we moved to a trade deal, my guess is that 10-year would be up. if we get more concerns about chinese growth and the trade war escalates, it is possible to-year-old curve goes flatter. nejra: thank you for joining us. marie owens thomsen and james barty from bankamerica at

merrill lynch stays with us. stay with surveillance. plenty coming up, including scott morrison taking the top job in australia. we are live in sydney next and following draghi, germany may not push for -- to be the next ecb president. could the race be more open than previously thought? we will discuss. this is bloomberg. ♪

nejra: economics finance politics. this is "bloomberg surveillance and i am nejra cehic in london. we are looking at actors of the

new australian government being sworn in as scott morrison will become the country's sixth prime minister in 11 years. we had that news this morning and a news conference from the prime minister designate scott morrison. we are looking at pictures of the australian government being sworn in. win 45-40 in aid closed-door meeting of liberal lawmakers. turnbull,malcolm ahead of an election. outperformedllar on the news. bloomberg's australia managing editor joins us now from sydney. edward, great to have you with us. think you for joining us. what is going to change, if anything, on the economic front from here? unlikely anything

substantial will change and prime minister -- underscore morrison. -- under scott morrison. iswas the treasurer, which the equivalent of chancellor. a the choice of morrison, marked continuation of economic policies of the turnbull government and i think that is one of the reasons the dollar, in particular, has retreated some of the losses of yesterday. it dropped to the lowest level since may 2017. at one point, 4% during the turmoil yesterday and resignation and the clamoring to oust malcolm turnbull. this latest political turmoil we have had, it is not new.

australia seems to have been in political crisis for 11 years. what issues are at play? edward: that's right. its 2007, we have had six andges of prime minister since that date, no prime minister has served a full term. the election cycle is only three years compared with five years in the u k. has been an extraordinary period of political turmoil, particularly when you think between 1983 and 2007, there were only three or four prime minister's. what has been a play? to an extent, we have seen the same populist tendencies that we have seen in the u.k. with brexit vote and the u.s. with the election of president donald trump. we are looking at the intensity of the 24 hours news cycle. fixation with opinion polls, and the rise of smaller single issue parties that have managed to get

one or two seats in parliament, particularly in australia's upper house, that means no single party has managed to control both chambers, making it very difficult for them to push through a policy agenda, which voterther compounded by this and chance meant with the two mainstream parties here. labor on the left and the liberal national coalition on the right. nejra: edward johnson, bloomberg's managing australian editor in sydney. from with us, james barty bankamerica merrill lynch on set. you have certainly seen the aussie dollar react to this, rebounding a little bit. we trade at 72.75. how much does this political drama affect your view on the aussie? james: not a huge amount and there is a little relief with a new prime minister who is not the populist. the australian dollar is a kind

of global trade currency. aussie got production on yen, which we basically had as a hedge against escalating trade that will dominate the outperformance of this trade in dollar more than domestic politics. if we end up with a global downturn, the australian economy is considered to that and the australian dollar will come under pressure. point you make a good because it is a proxy for risk and tends to be volatile, anyway. this chart is the rate differential. the aussie 10 year yield falling to the lowest since 1981. does this rate differential support the argument for a weaker aussie dollar from here through 70? james: yes, it is a modest influence. rate differentials have a bit of an impact. aussie is not bad versus other currencies. this is a dollar story because dollar rate has been going up and dollar assets have become more attractive. a lot of people discounted that,

but our strategists say in the u.s., the central bank is the only game in town and that is a reason the dollar has been well supported. nejra: speaking of central banks, the political changes, does that make any difference to the rba's rate hiking path? we saw a little repricing in markets over the changes in politics. james: i don't think so. like a lot of central banks, the rba is pretty independent. if it affected the economic outlook, it might have switched them a little, but they will do what is right for the australian economy. nejra: you were talking about aussie yen and that being a play on the trade. in terms of other commodity how are you positioned on other commodity currencies? james: we are relatively neutral. we bought some brazilian government local debt.

that is much more of an em play more generally. the selloff in em assets over the summer has been overextended. we have taken turkey as an example and extended it into the em generally. it was a clout -- crowded position last year. it is looking attractive to global investors this year. nejra: your positioning through that primarily in brazil? james: we have put our toe in the water in different ways. got south africa, asian equities, as well. it is a small part of the portfolio but we have very little emerging market exposure until the last few weeks. these acids are now as cheap as they have been since the beginning of 2016 when the emerging market rally started. global economye is going to be ok and u.s.-china will come to a deal, your entry points in these assets is looking interesting. nejra: if you think there will be a deal on the trade front,

does that mean you take a short dollar view from here? james: yes. our view is the dollar had a good run. a lot of the factors pushing it higher, we talked about corporate tax flows into the u.s., the fact that investors were underweight the u.s. and people didn't appreciate the fed -- a lot of those factors have run. in terms of sentiment, people have gone from being bearish the dollar five months ago two no one really seeing why it should turn around. i think it will be driven by the trade talks. that is arguably the most important thing till the end of the year. progress on that would be a good excuse for people to take short the dollar. i think hedge funds are short every g10 currency against the dollar for the first time since 2017. fair point the positioning, but you are not explicitly the --

suggesting a short dollar view. you are doing it on the em channel? want to do you don't is be long em and short the dollar, and have those traits all going in one direction. what is the best way of expressing that view? we would rather do that than short did dollar. nejra: james: stays with us. the top of ther ecb is more fraught than we thought. this is bloomberg. ♪

nejra: economics, finance, politics. this is "bloomberg surveillance." i am nejra cehic in london. what is trending across the universe?

tictoc, ---- according to a morgan stanley economist. on bloomberg.com, scott morrison australia's 30th prime minister and the sixth in 11 years after malcolm turnbull lost control of the ruling liberal party. theof those stories on bloomberg terminal. powell at jackson hole. citigroup sees the rest year in a decade for its asia equity unit and trump gets the fire sessions after the elections. for now, let's get the first word news. -- in australia, scott morrison has been sworn in after ruling liberal lawmakers voted to oust malcolm turnbull. earlier, he said he will consider appointments to his cabinet over the weekend as the government attempts to boost its

flagging poll numbers ahead of an election due by may. >> today, our team needs to look after the events of this week and how that is impacted on them. they are going back to they are electric, going back to their families and will listen and bring things back to us. where there needs to be changes, they will be made. where there needs to be continuity, that will be maintained. >> u.s.-china negotiations have wrapped up with no major progress, setting the stage for further escalation of the trade war. the conclusion of talks came hours after beijing and washington rolled out their latest round of tit-for-tat tariffs. bloomberg understands no further meetings have been scheduled, while chinese officials raised the possibility negotiations could now be on hold until after november's midterm elections in the u.s. china has removed limits on foreign holdings in domestic banks and asset management companies. under the new rules, overseas

financial institutions will be treated the same as local companies. foreign stakes were previously capped at 20% for single and 20 25% single institution and for foreign investors. u.s. president donald trump has reportedly told italian prime minister giuseppe conte america will help buy government bonds next year as italy seeks to refinance its debt. citing three high-level thatials, it was reported conte told about it after a meeting with president trump at the white house about three weeks ago. didn't giveys conte any information on the plane or if it is feasible. in the u.s., two key republican senators have signaled to donald trump he could replace jeff -- attorney general jeff sessions after the midterm elections in november. both lindsey graham and chuck grassley changed their positions yesterday after the president

launched a fresh attack on sessions. the move would open the way for firing robert mueller or constraining his probe into to russian meddling in the 2016 election. global news 24 hours a day, on-air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am markus karlsson. this is bloomberg. nejra: thanks so much. the race to succeed mario draghi --the european central bank -- won't replace them have cast doubt over the role. the new appointment could cast a long shadow on who could get the top job. applications to replace the head of banking supervision closed today. powerful role, but whatever candidate takes over is probably out of the running to replace draghi.

let's get to nicholas comfort. run us through the candidates and who could be most likely to get this position. you mentioned two in the running. ireland --ery from she has built her kudos, developed in terms of nonperforming loan problem. then you have the other candidate who would be the obvious choice. she lives for banking alreadyion, but she is in a high position in the ecb had it rolls her out unless he resigns from that she has done. i would be doubtful about her. there are other names you hear. a high-profile former politician.

has the political skills going for her, and then three italian who are exceedingly competent, well-respected, but they are male and that is a big problem if you want to be closing in on the job. nick, how important is diverse city going to be in the selection process -- diversity going to be in the election process? nicholas: it could be the trump card carried you want to be competent with political backing, but the ecb has a broader problem with gender diverse city at the top ranks and this is a job where the ecb gets to candidate. they will probably be wanting to femalesignal and favor candidates for the top job. thanks so much, our financial supervision reporter for us in frank for. still with us, james barty.

we have run through the process on this selection. how much does this matter for markets where the ecb goes? james: not a huge amount. the president role as much more important. we know draghi will set down -- step down. ecb.itive easing by the the next president will have to continue the unwind of that and also have to raise rates. when we had a favorite, there was speculation to move faster awayhe ecb needs to move from this loose monetary policy stance. if he is not going to do it than someone else, potentially for markets it is important. nejra: you said during the break you had sold all your european assets earlier this year. why? james: two reasons. has rollovericator

carried european assets tend to struggle when people are coming out of cyclical assets. we use slightly more defensive assets and sold europe by the u.k. and japan by the u.s.. the concern is about italy, as well. now you have seen european assets pullback and like p.m., e --m, they are starting to look interesting relative to the u.s.. one you to get better news the global economy, european assets are potentially the ones that could have the catch up from here. nejra: would that be to do with a catch up on the euro side as opposed to softening on the u.s. side. goes down,he s&p global markets don't perform well against that. if we get a rallying global by so market, the s&p much over the past few months, other markets will probably have to catch up. nejra: when you talk about european assets, would you be

talking about equities and the euro? the euro has taken a hit this year, as well. james: predominately was talking about european equities that far as the euro's concerned, our strategy is targeting 115 and down to 112, which we got to. positioning and trend perspective, the euro is starting to look more interesting against the dollar. the big uncertainty is the italian front. looking more interesting against the dollar. is it looking more interesting against sterling and other currencies? james: sterling has its own issues. we saw the brexit issues posted yesterday. we have the conferences, negotiations of the eu. our view in a note last week is that the tail risk around brexit has gotten bigger. we know there is a hard deadline after march. there is the ireland border and conflict in parliament.

sterling will be dominated by brexit. we are probably more happy to own the euro than sterling. nejra: cap year with the euro over the sterling, possibly against the dollar. would you short euro against any currencies? james: the scope for the scandinavian currencies to outperform against the dollar rather than the euro. nejra: james barty from bankamerica merrill lynch stays with us. we will talk more u.s. next. sessions in the firing line. senators suggest donald could replace him after the midterms. could that lead the way to sacking robert mueller? this is bloomberg. ♪

nejra: two republican senators have signaled to donald trump he jeff sessions after the midterms. the president launched a fresh attack on sessions. the move would open the way for firing robert mueller and straining his probe into the 20 -- 2016 election. donald trump has long been a critic of his attorney general's decision to recuse himself. >> he shouldn't have done, or he should of told me. sessionsnemies say should have told you he was going to recuse himself and you wouldn't have put him in. he took the job and said i am going to recuse myself. i said what kind of a man is

this? now,: joining us bloomberg's senior writer and from with us, james barty bankamerica merrill lynch. first question, how right are these two republican senators? could it come to pass? >> that is a real risk. there is a very slim republican majority in the senate. it is unclear if they have a candidate that has enough support within the senate to get confirmed. also, we don't know what the makeup of the senate will be after the midterm elections, whether the republicans will retain their slim majority. will they have more seats, fewer seats? it is hard to predict how the midterms will affect the senate. it is significant they have changed their tune because jeff sessions was their colleague in the senate for many years, and had enjoyed their backing. it is significant they are

changing their tune on whether or not trump firing sessions would gain their support. fire: if trump were to sessions, with the biggest implications be on the mueller investigation? is that the biggest fallout? stephanie: absolutely. trump has been attacking the justice department and jeff sessions for the past year. what is different is jeff sessions is pushing back. the statement released yesterday was unique. he hasn't said some things so strong in response to trump's criticism. gettinglook like we are an escalation in the war of words between the two. will that continue? will sessions continue to push back? to make trump more determined to change his attorney general as a way of at the least limiting the scope of the mueller investigation. nejra: james, it has been a big headline week for u.s. politics and we have seen markets move on it. i want to bring you to a chart, the skew index.

it shows that investors are paying up for protection, even though we have seen the bull market run on, the longest in history. if you agree with that view. would you be paying up for protection while buying up u.s. equities? ,ames: we have done put spreads because the view is so elevated. imagine, 5%can pullback in the equity markets. it is difficult to be bigger than that. telling you investors have been pretty cautious and we have been climbing this wall of war he over the -- worry over the course of the comer because people have been worried about politics, trade. this week iskable that despite the issues trump has had with manafort and sessions, the market has largely shrugged it off. nejra: the pullback he referred to, the possibility of pullback,

with that come from the political front were more the economic front? james: it depends. we have talked about u.s.-china, and that is probably the biggest thing the market is concerned about. any uncertainty around president trump's position would potentially risky pullback in markets because we are running into the midterms. potentially a change in the house where the democrats could control that, a change in the senate. given what happens with mueller and the other issues with cohen, could a democratic house try to impeach the president? that is a big uncertainty. nejra: in terms of how this could evolve with michael cohen and paul manafort, what are you watching poor? stephanie: -- for? there is another trial coming up with paul manafort carried facing a jail

sentence, he could turn and try to do an agreement. it is unclear if he has enough to offer mueller to get that agreement. much more important is what is happening with michael cohen and the pressure that puts on the president. ,here is a lot we don't know and it does seem michael cohen wants to quad-play with prosecutors. -- cooperate with prosecutors. his lawyer suggests he has more information helpful to mueller. that is why you see trump lashing out more strongly. with robert mueller, i don't think we will see anything unless he moves in the next week. is that he consensus doesn't want to come out with anything earth shattering right before the midterms. he would have to move in the next week, otherwise we will have silence until the midterms are over. nejra: stephanie baker,

bloomberg's senior writer, and james barty stays with us. trade talks stall with u.s. and making little progress. the risks for business and markets next. this is bloomberg. ♪

nejra: economics, finance, politics. this is "bloomberg surveillance." let's get the bloomberg business flash. has hired morgan stanley to assessed him amid his potential bid to take tesla private. is advisingnt bank elon musk, not the company, its board, or a special committee to evaluate the event -- potential proposal. morgan stanley suspended coverage of the stock without explanation. yesterday at a tesla factory in california was extinguished, causing no injuries or damage. microsoft has said it became aware of the potential wrongdoing in a tongue dairying unit in 2014. the software giant added it moved quickly to investigate the issue, firing for employees and

terminating business with four partners. it came after the wall street journal reported microsoft is being investigated by u.s. authorities over potential bribery and corruption related to software sales in hungary. citigroup predicted asia equities business will post its best results since the financial crisis, which could help the firm sustain flagging momentum. the head of equities told bloomberg that revenue increased 33% in the first half of 28 team compared with the previous year -- 2018 and is set for the biggest annual growth in a decade. recent building will provide a boost, even as markets worldwide that more challenging. that is the bloomberg business flash. now, the closely watched trade talks between the u.s. and china have wrapped up with no

major progress, setting the stage for escalation of the trade war between the economies. removedis morning limits on foreign holdings in domestic banks and asset management companies, one more step toward opening its $40 trillion financial sector. still with us, james barty from bankamerica merrill lynch. those fries there is no progress this week. we always knew this would be talks about talks. in terms of how you are hedging your exposure, are you hedged for any eventuality in the outcome of this trade war? we took a view that given the pullback in emerging markets and a lot of risk assets, your risk for would be asymmetric. hedged to, we were the downside and dipped our toe in the water q3 in e.m. assets. we are probably more risk on, but we do not want to be completely gung ho.

we still own protection against our u.s. position, u.k. position, put spreads and the aussie yen, as well. we want to own some production to the downside because there is still uncertainty. nejra: you've also got hedges on your e.m. exposure. here showing the performance of u.s. stocks relative to the world. he goes back to 2013. from here, does the rest of the world catch up with the u.s.? which markets in particular would you favor globally? been a sustained underperformance of the rest of the world against the u.s. and partly because the u.s. recovered best. profits came through best in the u.s., but also because the u.s. has the biggest tech sector. here,ms every down from outside the u.s., markets had their worst performance in the past three months.

that shows you there is room for a rebound. if it happens, it is probably emerging markets that would lead it. europe would do well in that situation. more cyclical, equity markets would be the ones that would follow fastest. nejra: in emerging markets, are you looking at it through the lens of current-account deficit surplus? james: we do look at that. , in e.m.gue specialist, says today is different than 1998. a lot of emerging markets countries had current-account deficit problems. now it is just a few. the problems in argentina and turkey this year they are two countries that we highlight as having structural issues. extrapolateou can't to the rest of the em space. see further weakening, is that the cause of concern for you or a normal

process given what is happening in china's economy? james: it depends why. the president has called the currency manipulation. when you have a potential trade war, a slowdown in the euro economy, it is normal for the currency to depreciate. in those terms, it is normal but because it is more than managed a currency, it goes too fast too quickly, it is a risk. nejra: thank you for joining us, james barty from bankamerica merrill lynch. "bloomberg surveillance." in the next hour. guy johnson will be joined by tom keene throughout the day. we are bringing you jackson hole coverage. don't miss it. ♪ don't miss it. ♪

>> this morning, this early jackson hole morning, it is just

as much who is not in wyoming in this hour. our michael mckee on the theory of how all. brexit, all eyes are on the right -- ireland border. we go back to first principles on the many idiosyncratic theories of your emerging markets. good morning, everybody. this is "bloomberg surveillance." i am tom keene. guy johnson, in for francine lacqua. give me an update on brexit. we are getting close to this critical september. is it really just about the irish border? guy: i think it is about that and a whole bunch of other things, tom. the irish border is a significant factor in it. i think it is a black box right now. we are getting into the final stages. at this stage, it is difficult to handicap what will happen. tom: we have a lot of news to

talk about, but we want to get to jackson hole. on equities, bonds, currencies, commodities, range bound yesterday. curve flattening. that continues. it is not front and center at jackson hole, but a backdrop. of range bound activity going on and on the second screen, the idea of a vix at 12.6. confoundsnd at -- inflation. my id is japanese yen has had a weaker day, three days in a row with a 111 handle. your data, please? australia's got another prime minister. i am shocked. i think they have had seven in 11 years. in itslmost italian ability to generate new prime minister's. the aussie is rising this morning.

italy's 10 year listening to. the president apparently offered to buy some. that was an offer made to giuseppe conti at the white house. equities range bound and there is your cable trade, your brexit trade 128.29. "bloomberg surveillance." right now -- tom: right now, our first word news. sixth prime has its minister in 11 years. is taking over after welcome turnbull control over the liberal party. it is a shakeup aimed at boosting coal numbers before an election by may. 200 rows's benchmark and so did the australian dollar. look for the trade war to escalate. there was no progress after two days of low-level talks in washington. bloomberg has learned china has

raised the possibility there will not be more negotiations until after the november midterm elections. the latest round of tit-for-tat tariffs took place yesterday and a new round could be imposed next month. a big stepormalized toward opening its financial sector. it has removed limits on foreign holdings and domestic banks and asset managers, financial sees -- overseas institutions will be treated the same as local. some welcome to the change as it opens the door to more foreign capital. jerome powell will be the focus today at the jackson hole central-bank retreat. time.a.m. new york implications of increasing market concentration of what it means for consumers and workers. global news 24 hours a day, on-air and tictoc on twitter, powered by more than 2700 journalists and analysts in more .han 120 countries this is bloomberg. thank you so much.

ambiguous is an important word within economics and mathematics. let's look at the mother of all ambiguous charts. i know jordan rochester joined us. this is the yen and this is a sharply weaker yen two years ago and there is a little move here, but we are really back to great ambiguity about which way the yen goes. it is a massively indeterminate yen right now. the word i would use, and i know it is sophisticated, the chart is "soup." it is a mess on japanese yen. as in coleman's soup. can often not be market moving. sometimes it is. one of the things i want to

highlight in my bloomberg is why today could be important. it is a bit more in the weeds. this data is a week old, but it is highlighting how short the market is of the u.s. treasury market right now. as a result, maybe we are more attuned to the idea we could get movement here and it could be substantial movement. this data is a week and a day old. i want to highlight the market positioning going into this speech by the chair later on. tom: market positioning is important on a number of things, including massive strong dollar. it is jackson hole. it is a beautiful lodge with a big tall grizzly bear. longet off the deck is a reach with animals walking around, the whole thing. the dram the antelope play -- deer and the antelope play. we heard two rate hikes from

esther george. i agree the economy is doing well and based on today, to more rate hikes this year could be appropriate. i am also mindful that is not a commitment. each meeting, you are a reassessed the data, what are you hearing from constituents and make the decision at that time. tom: joining us to begin this important day, michael mckee. know in you and i jackson hole at this lofty hour, the chill is in the air. is there a frost on the ground this morning? michael: a little bit of frost on the ground. wall street is getting ready to go on a bear hunt. is there -- chairman powell going to reiterate our backup what esther george is suggesting? that the fed will continue an aggressive rate rising model that goes for times this year.

with the treasury positioned as they are coming you might see yields back up a little. or will he talked and 50,000 foot terms about what is going on? i've got to point out. i don't know if you have seen the piece on the bloomberg this morning. 20 years ago, james stock, the , did athe economist paper. conditions then were the same as they are now. low unemployment, sticky inflation, and he said the model showed them the fed should be more aggressive, not less in that situation. do they do that today? i talked to alan blinder and he is a lot for jay powell to do, but if he wants to make a change, he should do something that ratifies what the market thinks anyway. here is a listen. it needs to adjust its language as it moves away from the super accommodative stance to a more neutral stance.

it has been doing that. he started that in the june meeting. tocould choose this venue change the communication a bit, or he could wait for the september fomc. tohael: most people i talk say he will probably wait. if he does anything, that will be the direction he probably takes. tom: the simple parsing of hawks and doves doesn't work anymore. you have four wonderful interviews today. what is the partition between these two groups of higher interest rates and lower interest rates? it is a veryel: narrow line. georgeks like esther generally want to do one more rate increase than the others and keep going. the doves like a jim bullard, why will speak to, -- who i will

speak to, think the fed should hold steady. ofis really only a question 25 basis points or so at this point. guy: if you read the minutes, which are a historic document, they hinted at that point. keeping a wary eye on what is happening in the emerging markets in the wider world. any chance we see the chairman backed that up a little more today, and could this be the swing factor in determining whether september is on or off? michael: it is always an issue. what does the fed do about the outsized impact the u.s. has on the rest of the world because the dollar's status as reserve currency? powell doesn't really want to move markets at all today, so he will probably play it safe. you are right, that could play a major issue.

he said emerging markets and where they go from here based on what happens not just with the fed, but the ecb, as well, could be the deciding factor if it comes down to a narrow decision for december. guy: as ever, thank you. great coverage coming up thanks to mike mckee. london, fxin strategist and cio of cross bridge capital. mike thinks the chairman probably doesn't want to move markets. >> i don't think it will be a thriller. jay powell, a lawyer by training. it is not that much in terms of janet yellen and bernanke were using the symposium for, powell will try to keep the message the same. the minutes have become more

transparent over time, so the is whence this time jackson hole was important, we had a lot of ambiguity. you had to employ people ducis cash to decipher -- to decipher. itell's mission is to make understandable to the guy on the street. we have to ask questions. if the fed is dovish today and powell questions the hike in september, you have record shorts on treasuries, yearly highs and dollar longs. the move we have seen already this week is reflective of that short-term positioning. we are in a dollar doom loop. if the fed because dovish, it is not because of the u.s. it is because of what is happening with the rest of the world and china. if he is dovish, we will see risk on. the structural problem is not happening in the u.s. andave this outperformance

your typical fx models would say the growth is better in the u.s., therefore demand is higher, fx get stronger. maybe powell gets some reprieve. if he is dovish, it will be short-lived. guy: the market positioning is critical here, isn't it? i am looking at it more from the geopolitics point of view. we have a president who thinks he should bring the policy of america back. then you have an academic, powell, who wants to manage the economy. is bad for every thing the u.s. can do. i want to see how much he brings that into his speech, if he does. he may not have all. themarkets, what does president think. i know he wants to win the midterm and keep himself safe, but does he believe america can run this trade war with china

and come back? it is not something new. to the extent the gop is called the "grand old protectionists," am me to understand -- i looking at the scenario. the idea of a mercantile jackson hole will be one of our themes. our two guests, thank you. our kathleen hays and michael mckee at jackson hole. joining them from st. louis, cleveland, dallas, and atlanta, various and sundry presidents of the fed. stay with us. ♪

>> this is "bloomberg surveillance." let's get the bloomberg business flash. newspaper reports president trump told italy's prime minister the u.s. is willing to help the country by buying government bonds next year. just as he is said to have told italian's about the offer since returning from washington. he reportedly didn't give details on the plan. citigroup predicts its asian equities business will post its best results since the financial crisis. revenue increased 30% in the first half of 2018 from a year ago. it has spent years rebuilding its asian business. that is the bloomberg business flash. the this month has seen trump administration sending shockwaves through the emerging-market currencies. the south african rand took a hit after the president weighed to the land reform debate. we have been hearing about what

is going on in turkey. kathleen hays spoke with the south african reserve bank deputy governor in jackson hole. she asked him if the bank had a plan in place. >> if there is a significant depreciation of the currency and and that feeds, through to prices, clearly we will respond to that but i think we take a fairly measured approach. as we always say, panic is not part of our toolkit. guy: panic, not part of our toolkit. will the rand we can further? further?ken >> south africans hike when they need to. guy: over the last few days, the bank has been independents questioned, as well? looks at the nearest

similar thing. current account deficits, south africa is one of those. turkey is the main one. short turkey, long rand is one of the cleaner trades. getting to the weekend, the correlations that are out there. what are the linkages between foreign exchange? are we in the land of the idiosyncratic? jordan: we are more broadly macro in the dollar. it has been trading sideways if you look at the broad index. crosses like at euro-dollar, you have italy risking their. hole, once we get past jackson hole, say we get a middle-of-the-road outcome. dollar is not moving much on the back of it. we are moving to september, and it is all about italy. not, there will not be a further blow out from italy.

we have cheap spreads versus general -- germany. in october, the european commission doesn't have much to to getyou find a way through on that process more smoothly than the market thanks. there is a reason to be long euro september into october. but for the time being, we saw the pmi's yesterday. the headline numbers are ok. if you look to the details, new orders have been declining in europe and when you look at business confidence, that is at a low. the european story has yet to turn. maybe italy in a month or so could turn that around. guy: i want to bring you pictures of an event right now in moscow. have the russian foreign minister his turkish counterpart briefing the press. the turkish prime minister. we heard from mr. lavrov. reopen againarkets on monday and it will be

fascinating to see what happens when they do. bit -- we have seen a brief respite in the turkish story that has allowed the market to digest what is going on and formulate clearer ideas about where turkey is going next. the fact the turks and russians are meeting is significant. when the market reopens monday, markets be fighting against the erdogan administration? are we done with this yet? >> i don't think we are done with this yet. the amount of money turkey needs to get through this crisis, those will not come from russia or china. those numbers can only come from imf. the politics get into everything. everyone expected the central bank in turkey to raise rates by 10%. some said 16%. they are not following the conventional rules. they are negotiating with u.s.

and president trump, but i don't think they get away with it with the amount of money they need to run the economy and their banks. i think the crisis will build up and my personal opinion is that they will eventually get money from imf, but after a long negotiation with the u.s., with politics playing out -- and of course, you have china using this to get back at the u.s. and russia using it. i don't think the crisis is over and things will get worse. as we see in august prepare for september, i hear the word grind. grinding is when you have a trend and it moves a little every day. i see that, jordan, japanese-yen. i see it in the italian two-year and certainly in lira, even closed. what does a signal to you that we have so many grinding trends? jordan: it means it is august.

it is summer still, so we haven't had big central-bank changes. no major developments in emerging markets. dollar-yen is a tricky one because the japanese yen has such a large current account the yen strengthens against current-account deficit countries like the u.s. the u.s. has a lovely carrie profile. much more attractive than being long jgb's. we just have to follow japanese flows and figure out when those flows -- >> what do you see now and what is your call on yen? jordan: yen long term, we have room for strength. the dollar could grind lower, if anything. once we get past the august lull, we have 200 billion dollars in the u.s. in september. japanese outflows into the u.s. that is the better traded than being long dollar-yen for the time being.

it is not my favorite way of seeing any market, but bank of japan has made it hard to be long yen right now. i am playing that on a risk perspective. the better trades are against the dollar. the one that stands out to me is sterling. 60% probability of a harder brexit. our international minister for trade, i think that is way too high. 20%, soit is more like maybe we see sterling outperformance. intoe market gets signals september, the eu has a way out of this without no deal. vote,ou've got the brexit so we should probably listen to them. thank you both. we will be back with these guys in a few minutes. let's turn our attention to china. the trade talks between the u.s. and china were relatively low level, but no major progress made. this effectively sets the stage

for further escalation in the trade war between the world's two largest economies. china this morning limits foreign holdings in asset management companies. opening up its financial sector. we are joined from hong kong. these are low talks. they have broken down. that has got to make increasingly the base case that we see further escalation. further escalation could be $200 billion worth of additional tariffs. is that how people are seeing the story developing? good morning, guy. i think that is exactly right. there is no sense of the circuit breaker. much expected, but by all accounts, the movement is as you were. we're hurtling toward the next batch of tariffs that are on $200ng up to 25%

billion worth of chinese goods. if anything, the war is deepening. i think the message from the washington talks is as you were carried the china-u.s. trade is very much alive. tom: did we adjust ourselves from tit-for-tat or are we still on the tit-for-tat path? >> we are still tit-for-tat in terms of china's ability to keep a tit-for-tat. if the u.s. goes with the $200 billion worth of goods next, china can't match that dollar for dollar, but has threatened on $60ond with tariffs billion worth of goods and there is always the risk of nontariff barriers. china making it more difficult for u.s. businesses to operate in china. we are still very much in the tit-for-tat stage. in this. . there is no sense this is being

different -- the escalated at all. enda thank you very much, curran. bloomberg users can interact with the charts on the program. tv go, you can use them and save them for future reference. there are many more than those. there are great charts with this function. theill continue conversation next. we will talk about the single currency. the president has apparently offered to buy btp's. this is bloomberg. ♪ xfinity mobile is a new wireless network

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

saving you hundreds of dollars a year. plus, get $300 back when you buy a new smartphone. xfinity mobile. it's simple. easy. awesome. click, call or visit a store today. tom: bloomberg surveillance, the state of economics. johnson in london, i'm tom keene in new york. we are in jackson hole. there are people who will not be

there but more importantly, good conversation on the path forward atlanta fed. guy: i think you need to watch out for bears and i mean that for the grizzly things and market positioning, the shorts in the treasury market worth paying attention to. -- let'snd what is check what is trending. 20 stocks are poised to leverage growth. scott morrison is australia's 30th prime minister and the sixth in 11 years. this after turnbull lost control of the ruling party and our most read stories, and third place,

citigroup sees the best year in a decade for its asian equities gets a path to fire sessions after the midterms after republicans relent. find out more. talk in which, let's get an update. here is kailey leinz. >> china is putting a positive spin on trade talks with the u.s. that ended with no progress. beijing says negotiations were constructive. that does not hide the fact no new talks were scheduled and may not be until after the midterm elections. duties to round of place yesterday -- took yesterday. the latest talks on the north american free trade agreement will take place next week. negotiations will not be complete until canada signs on. the trade minister has not entered the talks in five weeks.

present trump wants the legal to faceof the opioid the death penalty. he discussed the matter with jeff sessions. opioids killed an estimated 29,000 americans last year. hurricane lane is battling -- battering hawaii upon stress big island. they lashed the island with 20 inches of rain. honolulu is bracing for the hurricane. they pound sandbags along windows and doors to prepare for flooding. -- they piled sandbags along windows and doors to prepare for flooding. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm kailey leinz. this is "bloomberg." tom: thank you so much. he has experience as attorney general. jeff sessions was attorney general for his alabama in 1994. he is in the crosshairs of president trump.

there is a raging internal 1600e between the pennsylvania avenue and the department of justice. i want you to give us a clinic on why the department of justice is different than the department of agriculture. hashe department of justice operated independently of the saw, we haved we seen trump trying to push back on the justice department's jeffendence, attacking sessions for recusing himself from the mueller investigation, saying he would not have appointed him if he knew he was going to do that. now, what you have is that jeff sessions is pushing back, saying yesterday that the justice department will remain betweenent and this war

the white house and the justice department has escalated. raising the prospect that trump does seem determined to try to get rid of jeff sessions, now that he has support from republican senators for that idea, will he go ahead and do that after the midterms? many questions to be asked. we do not know what the makeup of the senate will be. tom: this is important and this would be lindsey graham and others within the senate who are wavering. tgeist i see in washington, gauging his support for mr. sessions. what is that, do we know? sessions served in the senate alongside many of those senators. he has enjoyed the support of colleagues for

quite a long time. i do not think grassley and graham have company there. colleagues for quite a long time. you have seen other republican senators come out and say they think that would be a bad idea. however, trump does not need to get support for a replacement for sessions immediately. he could appoint someone on an interim basis who could move to curb the mueller investigation or even fire mueller. there would be opposition to that in the senate. it is too close to call it these -- at this point. guy: let's talk about the credibility of the u.s. justice system. is that being called into question? we have seen is that the justice system is doing its job from the successful conviction of paul manafort that

we saw this week as well as the trump's former attorney, michael cohen, made this week. , we haveeen attempts the manhattan district attorney looking at investigating other aspects of the trump haveization, that they been operating independently, pursuing criminal investigations, as you would expect them to do. if anything, the comfort we can take from the events of this week is that the judiciary is acting as we would expect and hope. i just wanted to know, if you think about the midterms and where they could go, how critical is the interaction of this process and the midterms? polling this week that indicates a greater

proportion of the public supporting the investigation than previously. the manafort conviction and the plea deal seem to have given some evidence to people to believe that there is something behind this, that there is something that needs to be investigated, that mueller needs to complete his investigation. republicans inct the midterms, depending how they position themselves in relation to trump. democrats, particularly in the of support.a lot it is unclear in the senate because of the nature of the races up for grabs. stephanie baker in london, ,ur bloomberg senior writer with particular expertise on mr. manafort. much more coming up with us.

coming up, an important conversation. allie renson of the institute of directors. this is "bloomberg." ♪

guy: guy johnson in london in four francine lacqua. tom keene in new york. francine lacqua. tom keene in new york. a grim deal for a no deal brexit continues to be painted. of large fiscal quonset is if they were to get a hard brexit. is --cal quonset whence consequences if they were to get a hard brexit.

brexit minister was saying he felt the implications would be lower than the chancellor was suggesting. all of this is allie renson, institute of directors, head of europe and trade policy. good morning. timing waslor's interesting, putting out these comments at the same time the technical papers were being published. are those papers help? >> i think it depends on the sector you are in. in financial services and pharmaceuticals, we saw commitment to unilateral measures the government said it would introduce. had talked about providing temporary authorization for firms operating in london to continue trading. in pharmaceuticals, they said

they would continue to recognize the standard certification on pharmaceutical drugs. in other sectors, there's a lot --t to be seen and i signal single out goods trade. it does not look like the government is committed to waiving requirements. the comments i've seen seem to be suggesting that there are significant issues when it comes to dealing with the excise agents which they claim are not enough. can i start to get more belief in what the chancellor's saying and the impact he feels a hard brexit will have? think it came out on the same day with a letter to the chair of the treasury select committee. it becomes easy to have this discussion about what the forecasting is on gdp.

most businesses are going to be focusing on the technical notices and what the information are rather than having a debate over the extent to which the gdp is going to be impacted. tom: thrilled to have you with us and may be a look that does not have to do the five biggest companies centered in london. a lessening of business in scotland among midsize and small businesses or can it be business as usual? lot of the small and medium-size enterprises, it is business as usual but that is part of our concern. when we have done research, less than one third have done contingency planning. most of these smaller companies are overwhelmed getting on with the day job, dealing with known quantity compliance requirements and they have no idea how to make those adjustments in advance of brexit.

legal advice is costly. we put out as much guidance as possible. we want to make sure there is not a day one no deal and people are taken by surprise. hopefully the information help serve as a call to action for businesses to explain and understand how they can take first steps. guy: thank you very much. allie renson from institute of directors joining us. the morebeen on positive side of the brexit story. you think this is going to be good. are you nervous? >> i'm not nervous but there are uncertainties. we talk about the forecast the chancellor made yesterday. in the event of the u.k. voting there will be 5000 people jobless.

do we believe so much in these models. what changes have they made to make this new level? dinner with a senior french policymaker and the goingon was is the e.u. to get a deal on goods with the free movement of people? the answer was yes. there going to be lines of the ferry terminals? he said no because we still have the same rules. if you take into account people will not work together and movement will not happen, you will have gdp lower. if your model does not take into account anything positive, you will come up with these numbers. that is what has happened with another set of numbers which nobody believes, only treasury, and i find it disturbing. talk about how the

pound traded in the interim. entering a -- we do not know a lot of what is going to happen next and it could go a number of different ways. is the pound cheap enough to reflect that kind of lack of information? it is hard to trade realistically. clients, theyt just go it is too difficult to trade that. guys like myself who have to look at that, the way i like to say it is that the pound is cheap. i agree on some things you said. i think that no deal is unlikely. that is all the market needs right now. do we get another two years in the e.u.?

that is remaining in the single market. great. if you get that, the pound goes higher and there is that from, 60%y, 60's probability of a no deal. that is high. that makes you think maybe the market is too pessimistic. i do think if you have no deal, then all the things the doom mongers have said do come true. we sit there and say, can i trade with my european clients? i am not true -- i'm not sure. it is a career deciding risk. you might break a regulation. business would drop, not off a cliff, but there would be so much uncertainty on what you can do that things would come to a slowdown.

i think there will be a transition. tom: i want to take advantage here of a quiet news item that i want you to comment on and that was the lowering of deutsche bank under nine euros per share. i thought that was extraordinary. e.u.is your thought on banking? how is this going to end up in five years with deutsche bank and smaller banks? is a profound question, what happens to the banking industry. , i do not believe european banks have a huge upside. when i put on that what is happening in the economy, you have seen the gdp growth has halved. we know the italian budget is going to be an issue. we saw what the german foreign minister said that europe needs

to build its own system independent of the u.s. i see a lot of risk in the european economy. i do believe that this truce between the e.u. and the u.s. is going to last. for that reason, i am underweight europe and i do not have a positive view. tom: thank you for this conversation. jordan rochester with us as well. an important day of global economics and certainly, american economics. the jackson hole meetings with kathleen hays and michael mckee. look for important interviews between fed presidents. this is bloomberg in new york. ♪

guy: welcome back. in new johnson york. the president of united states made an offer to conte when they met at the white house.

if it wasuy btps necessary. i am curious how they got to the point when the president made that offer. apparently, that is what happened. this is a story being generated out of the italian press this morning. still withester us. in some ways, this is logical and consistent from the president. the dollar is a weapon and he is using it as such. with donald trump and foreign policy, keep an open mind. look back in history. what we are talking about is foreign-exchange intervention. he would have to sell dollars, btps.os and sell that has happened before.

the 1980's, they agreed not to do this with competitive devaluations and the only time we've had exchange intervention among major players is when it has been court needed. -- it has been coordinated. foreign central banks were buying euros. it has been court needed, not unilaterally. if the u.s. does this, it is breaking the norms. the u.s. policy is mixed on what the dollar is. do they want stronger or weaker? what mnuchin says is a stronger dollar. if you sell dollars while the fed is tightening, you've got opposite monetary policies. trump is trying to offset what the fed is doing and that is why it is ineffective. in: i want to get this

because the new word i have got is trump lateral. let's look at the new chart. this is the italian-germany spread and we have had three out of four days jump. when i look at this movement, we are getting up near points of tension on historical basis. are we going to get there in september? jordan: anything is possible. this is not going to change unless they start buying it. italy,s of this story in do they blow the budget constraint that was signed with italy and the e.u.? limits,breach those does the european commission except that? the base case should be that they find a way through this and

it might buy them sometime. that spread will get tighter. tom: we have got to leave it there. jordan rochester, thank you so much. -- manish singh, look forward to having you back with us. we will have important interviews with michael mckee. just important, perspective at someone who is good at gauging economic growth. stephen stanley on your and chairman powell's economy. stay with us. this is "bloomberg." ♪ xfinity mobile is a new wireless network

designed to save you money. even when you've got serious binging to do. wherever your phone takes you, your wireless bill is about to cost a whole lot less. use less data with a network that has the most wifi hotspots where you need them and the best 4g lte everywhere else. saving you hundreds of dollars a year. and ask how you get xfinity mobile

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. morning, this early jackson hole morning, it is just as much who is not in

wyoming on the theory that chairman powell, what is the theory behind brexit? at surveillance, we recalibrate in september. principlesto first with stephen stanley on the idiosyncratic theories on american economic growth. this is bloomberg surveillance. i am tom keene in your, guy johnson in london. brexit, i thought it would be quiet. it is not quiet, is it? we are getting the publication of the technical papers on what will happen to individual sectors if there is a no brexit. i heard it covered by one of the big businesses saying they got more than they expected and less than they need in these papers. britain is preparing but maybe it does not need to. that is the story.

we will wait and see. tom: we have seen all sorts of movement. friday newsith your briefing, here is kailey leinz. kailey: look for the trade war between the u.s. and china task lay. there was no progress after two days of talks in washington. bloomberg has learned that china has raised the possibility their may not be anymore negotiations until after the midterm elections. the latest round of tariffs took effect yesterday and a new round of tariffs could be imposed next month. australia has a new prime minister in 11 years. scott morrison is taking over after malcolm turnbull lost control of the ruling party. it is the shakeup ended up boosting sagging poll numbers before an election held in may. australia's s&p rose. so did the australian dollar. china has formalized a big step toward opening its financial

sector. overseas financial institutions will be treated the same as local ones. some chinese banks will welcome the change since it opens the door to foreign capital. fed chairman jerome powell will be the focus today at the jackson hole central-bank retreat. powell speaks on monetary policy and a changing economy at 10:00 a.m. new york time. the theme is the implications of increasing market concentration and what it means for consumers and workers. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm kailey leinz. this is "bloomberg." tom: thanks so much. currencies, the , underg tread -- trend 21 basis points, a flatter yield curve. market,showing the bull

all that talk we had this week of a record bull market. we have gone down to 11, act up we go. is, and the yen weakening this week. about what isk happening in the other markets. we are paying-- attention to the aussie dollar, we've got another prime minister. the italians, well known for having many governments. the australians going down that road as well. the italian 10 year, this story tpsut the president buying b is attracting attention. it is to of the top three stories this morning. european equities beginning to gather traction. this is -- there is a story about stockton unicredit.

n unicredit. tom: it is going to be interesting. we have great pride in our jackson hole coverage but also important, timely interviews with the -- where the elite of world economics gather. joining us from amherst pierpont securities. it is shocking how accurate he has been. out where the deer and the antelope play, not playing, deadly serious with interviews today are michael mckee. every year is different. of 2008ber the sweat and 2009. what are the themes this year. lot calmer mood.

decided theyty fed should be looking ahead at israel's that are going to affect the markets going forward. they have settled on market competition and changing market structure. at things like changes in the way investors ande, high-speed trading the concentration of power in industries in the united states. say for example, amazon. sexy as what as the fed is going to do with its fourth rate move. we talked with the university of it iso and they say important that policymakers understand what is going on. just because amazon is big, does not mean it is bad. have a listen. >> concentration can be related to market power which can depress investment, harm consumers, raise prices.

on the other hand, changes in technology that make it easy for companies to obtain scale or things that affect markets that make it easier for customers to , we think of those things as beneficial evolutions in industry. questionshese are that policymakers do not have a good handle on. they're going to be talking about it in depth. tom: please stay with us. joining us for this roundtable, stephen stanley. michael said a critical thing which is surprising to people. this is a set of academics worried about the power of perceived the inequalities of this american economy. is this a jackson hole within a gilded cage? -- gilded age?

the overarching theme over the last several years has been the inability of the economy to see an increase in inflation. we have got a hot economy, a tight labor market, inflation has remained well behaved. this is one of the questions economists have been asking. guy: let me turn it back to where the market is. the market is wondering about december and is trying to figure out whether the fed is up for december. we have got extreme positioning around treasuries. the data that will be released today, the market is short on treasuries now. that just ups the chances that anything the fed says today could move the market. how on a knife edge is it? bit.el: it is a

you left out it is august. trading is thin compared to other months of the year. anything that jay powell or other members could say could have an outside effect. that is one reason people think powell will steer clear of direct references. former fed chair says if he does anything it will be to ratify what the market is expecting that they will go in september or that they will remove the phase -- phrase about accommodative policy. to give usikely indications about december at this point. thinktephen, what do you he is going to say about trade and what is happening in the rest of the world? were taken andes publish, the emerging markets story has gotten more difficult. do you think the fed chairs

going to have to mention that today? this could be the factor that determines whether december is on or off. it might get mentioned but not much more than that. the theme is that the u.s. economy is strong and trade and emerging markets present downside risks. the base case is for a strong economy for the near term. with us,hen stanley wonderful on gauging the economy. where are we? the volatility of the volcker years and ugly inflation and let's call it morning in america for a good 20 years and coming out of the great financial meltdown, and ugly 2% gdp.

the president is taking a victory lap on 4.1% gdp. , where arean powell we out here? where are we heading to? stephen: the most important issue in terms of that is where is productivity growth? productivity growth was low during that time when growth was around 2%. it might be taking up. the fed is skeptical of the ability of tax reform, which is boosting investment. cbo is under 2%. where is steve stanley? stephen: unlike the fed, i think we might be getting up turn in productivity. we might be able to get into the -- 2's.id to spirit

tom: this has been wonderful, michael mckee and stephen stanley with us here in new york. a set of interviews today, smart discussion. all of these people are different. kaplan, mester, bostick. stay with us. this is "bloomberg." ♪

kailey: this is bloomberg surveillance. i'm kailey leinz. t-mobile usa is warning customers about a hack that may of compromise personal data, such as phone numbers.

the team of the third largest carrier shut down the breach monday. t-mobile says no financial data or social security numbers were involved. an italian newspaper reports president trump told italy's prime minister the u.s. is willing to help the country by buying government bonds next year. conte said to have told italian officials after returning from washington last month. conte did not give details on the plan. shares of the world's largest personal computer maker are premarket trading. hp's market forecast underwhelmed investors. the company has been struggling within margins. that is the bloomberg business flash. tom: thank you so much. it is always august in washington but the capital showing a different august and a white house with questions that include the i word.

i cannot believe this. how well-timed this is. anybody of any persuasion, your read of the day. the impeachment of president precedent a strong for the impeachment of president trump. it is a bad argument. clinton's conduct is not with the impeachment clause is about. to use it as a precedent for trump would compound a grave blunder in coordination with end at the direction of a candidate for federal office. kevin cirilli with us on sessions. we have got to talk about the word. can we get there after november? >> i think this is a question for the democrats in congress. -- of the democrats , they have dodged this in the sense some of them have

said they do not think impeachment now or they have left the door open. that is framing the debate, until bob mueller finishes his investigation, i do not think any of them will make up their mind. tom: let me show you the reading for the weekend. thisnot convey how monograph on impeachment is a must read. this is a gift to the nation. i cannot say enough about its public good. kevin, onto jeff sessions. every president has tensions with their attorney general. this time is different. >> it is. yesterday, jeff sessions releasing a statement saying the justice department would not have any implications from any political politics of the day. the white house went into overdrive, signaling they want to have him removed and there

were key signs yesterday from capitol hill. the first was senator lindsey graham who said that there could be a situation where the attorney general is removed early next year. the second is senator chuck grassley, chairman of the judiciary committee. he said he would be able to find time to have a confirmation hearing for a replacement for the attorney general. there are other republicans who do not want that. there seem to be moving parts that this could happen. goes, the conclusion has to be that the trump administration would move on the mueller investigation. is that right? >> if he fires jeff sessions, the concern would be from democrats as well as others that he would move to fire a host of other folks from rod rosenstein

to others in terms of the administration. that is that domino effect. to hear from senator lindsey graham and chairman grassley to forecast they would be willing to do that, was a signal that this could happen. guy: who could replace him? kevin: that is where it gets interesting. knows who the president would pick to replace him. it would kickstart folks under him who would take control of the justice department and a more conservative viewpoint who would target other investigations. tom: you have not seen this yet. here is a tweet from the president moments ago on mr. sessions. we will have mr.'s a really comment on this. the department of justice will let be improperly influenced i political -- by political

considerations. what everyone wants is to look into the corruption on the other side including deleted emails. kevin, this is a start of the day for the president. where will we be on monday? kevin: good morning. the president responding in real-time to the statement from his attorney general who was responding to the president in a public statement. where will we be? jeff sessions job is on the line. there is no other way to put it. tom: let's put it there. , witheading this weekend a quiet washington august. coming up, a conversation on inequality. in jackson hole, look for that at 8:00. from london and new york, this is "bloomberg." ♪

tom: bloomberg surveillance on a friday. we've got michael mckee and guy johnson him friday -- in london. stephen stanley, the amherst pierpont securities. to this chartack which gauges the make america great moment, the boom economy we have got. here we are at 4.1% gdp. you said this is a one-off. is it a lessening of

consumption, of investment? it is not a lessening of government spending. 4% to under from 3%? stephen: the post was from trade. we had an improvement from trade which is not likely to be sustainable. the biggest pieces of gdp, consumer spending and investment have been strong and are likely to remain strong. 4%? how do you get to will do i think we better than 3% in the second half of the year and we will be above 2% next year. over time, the labor market cannot continue to be this tight forever. that is bringing policy back and you will taper down. the economic surprise index continues to fall. does that continue to be a trend that the market needs to pay attention to?

stephen: the market is tied up in the trade situation. the trade situation is more of a risk than a reality. it will mushroom and have bigger issues going forward. it is a confidence issue. the minutes noted there are businesses holding off on investment the cousin of uncertainties around trade and that could -- because of uncertainties around trade and the could become a bigger story. tom: that is the uncertainty and it is out there. into is ambiguity going q4. stephen: and a lot of ways, the trade story today -- in a lot of ways, the trade story today is like the tax situation a few years ago. there is uncertainty and potential negative repercussions. i'm going to wait and see what happens. tom: you sound like a red sox fan. the yankees could catch up.

september is coming. stephen stanley with us and michael mckee in jackson hole this morning. lots of important discussion on bloomberg radio today. to begin your day, bob moon and karen moskow, a great morning briefing before we go on to those important interviews. thank you for being with us. we will continue. this is "bloomberg." ♪ retail.

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mr. draghi takes a by. is that newsmaking in europe that he said no. guy: i would not read too much into that. it is summer over here. maybe he is kicking back somewhere else. i would not get too excited about that. european some representation. tom: very good. let's go to kailey leinz. kailey: china is putting a positive spin on trade talks with the u.s. that ended with no progress. beijing says the negotiations were constructive. that does not hide the fact no new talks were scheduled and may not be until after the midterm elections. that opens the door for more tariffs to be imposed as early as next month. the latest round of duties took place yesterday. talks on rewriting the north american free trade agreement

will run into next week. the us and mexico have not resolved issues. mexico says negotiations will not be complete until canada signs on. that country's trade minister has not attended the talks in five weeks. not tois warning china lure away tie' us allies. ties withs rethinking el salvador after that nation cut ties with taiwan. tosaid it would continue oppose china positivist political interference in the western hemisphere. hurricane lane is battering hawaii's big island. it is offshore but it has lashed the island with 20 inches of rain, causing landslides. honolulu is bracing for the hurricane. hotels piled sandbags along windows and doors to prepare for flooding. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm kailey leinz. this is "bloomberg."

guy: thank you very much. chinaade talks between and the u.s. have wrapped up with no progress. they were low-level talks. it is setting the stage for further regulation of the trade war between the economies. china this morning removed limits on foreign holdings of domestic ranks -- banks. the chief asia correspondent joins us now from hong kong. $200 billion worth of additional tariffs, the next development we see in this story. people are saying that is becoming their base case. can you hear me? what we have seen here is the low-level talks breaking down. stephen stanley joins us in new york. what do you think is the next

development in this story? you talked that this is where the market is focused. where do we go? the u.s. administration feels like they've gotten leverage. like they are putting the screws to china and it seems to be working. the u.s. is in no hurry to resolve this because they feel like they have leverage and can get a better deal if they continue to squeeze china. guy: we can now bring you into the conversation. how significant is the breakdown of these talks? can we talk about additional tariffs being the next step? i think all indications are that we are locked on for the next stage of this trade war. there was no meaningful rate through. there was not expected to be.

thatolleagues were saying negotiations are parked until after the midterm elections. the focus is shifting toward the next round of tariffs. the question will become, how severe will those be? 10%? 25%? it looks like we're continuing down this path. tom: stephen stanley just said it. it is an assumption the u.s. is in the driver seat. you have got to be kidding me? china can out weight anyone, can't they? anyone, can't they? enda: look at what they're doing on the policy from. china has been slowing -- showing signs of slowing and they are moving to get growth measures out there. they're getting cash to

companies of it needed and the parts of the economy that need it the most. they are making sure the economy is on the strongest footing possible so they can live it out. tom: stephen stanley, i think this is fascinating. china can wait out anyone. do you disagree? stephen: that is a fair point. the administration think they have the upper hand. their long-term is the first tuesday of november, right? stephen: exactly. the u.s. is likely to be cautious. i am sure they will ratchet up tariffs but i doubt it will be $200 billion at a time. what we have seen is small steps, buying themselves time. will see progress on other fronts, nafta, it sounds like they are having some degree of success.

there is some good news on trade because i do not see good news with respect to china in the near term. guy: let's talk about the currency. where do we go next? is seven realistic? some analysts say there is further room for the currency to go. policy makers have been happy with the market pushing down china positivist currency. -- china's currency. a cushions the tariffs. china will not want to let it get out of hand. they've made that clear. they do not want to trigger capital flight from the country or trigger instability in the broader market. there could be more room for it to fall. to be stable yuan and it would take a lot for that to shift. guy: stephen, how would the u.s.

react to another leg lower in the chinese currency? stephen: i am sure we would hear some tweets about it. unless it starts to impact the u.s. economy, the level is limited. i am sure we will hear about it. tom: stephen stanley with us and enda, thank you so much. how about tweets? there they are. the president with a tweet 20 minutes ago with a list of grievances vis-a-vis christopher steele and his phony dossier, the clinton foundation, illegal surveillance, russian collusion, and so much more. open up the papers and documents. you can do it. waiting! what did we do with entertainment in the

mornings before presidential tweets? this is "bloomberg." ♪

kailey: this is bloomberg surveillance. i'm kailey leinz. let's get the business flash. 500le has removed almost youtube channels tied to a state run media outlet in iran. it was attempted state-sponsored hacking. the move came after twitter took similar action. japan has launched a project to develop flying cars that includes boeing and airbus. the government led group will gather next week. uber has set a goal of starting commercial operations of its air taxi service by 2023.

the sports betting operation could lose its gambling license in las vegas. corrupted --t is it accepted illegal betting from outside nevada. it has agreement under which the company agreed to pay a $250,000 fine and find a new technology provider. it will try to work out a deal. that is a bloomberg business flash. guy: thanks. the marketrump said would crash if congress impeached him. up withago, he followed a tweet saying our economy is settling -- setting records, the best our country has done. tremendous value since the election. the world is respecting us. companies are moving back to the usa sarah ponczek is joining us.

i'm sure you talk to a lot of people. what has been the market market would the crash if the president was impeached? sarah: the reaction is, probably not. if you look at previous impeachment processes, when thatess did initiate process in 1974, it was a different environment. inflation was high. fall more go on to than 30% through october of that year. if you look at 1998 with clinton, it was different. we were in the middle of a bull market. that environment is more like today. when i speak with strategists and portfolio managers, they believe that may be some short-term volatility but in the long term, we will recover. stephen, with the market go up or down? stephen: i cannot say i have a

great answer. i think it would be a negative in the short term in the sense it creates uncertainty. the notion that trump is suggesting is that all of his policies would be unwound if you were to leave, i'm not sure that is true. tom: this is the greatest analysis i can do. here is the fake news from the morning, this is the bears in jackson hole. alpha new jersey as the one that brought this to me. this is the bear cam in alaska. the big deal has been the bear cubs. this goes to the symbolism of the bears. you know thered will be 14 articles on how the world is coming to an end. how do you interpret those? sarah: we keep saying this is the longest bull market by some definitions. what does that mean?

does that mean worrier at the end? if you look at fundamentals, earnings we had 24% growth. things are looking pretty good. the economy looks pretty strong but you will always have your bears out there. the jackson hole symposium, there will be headline risk. tom: i want to go to you, stephen. alan greenspan always emphasize the need for confidence. is this bull market jury rigged or is this a confidence builder? stephen: what is unique is that we got this big tax cut at a late stage in the cycle. tailwindovided a huge to companies. their earnings are benefiting from lower taxes. investment has picked up. the economy is strong and it is getting a tailwind. tom: are they investing in america or is it going to multinationals?

stephen: we will have to see. it is early in the game. some of the changes in the tax law should promote companies back -- companies coming back. guy: does the market think of the vice president as a safe tariffs hand? sarah: if you look at his they did mention that as an option. we woulde to get him, not get a rollback of the policies we have had in place of the tax-cut. the cbo estimates we going to have positive impacts because of the tax cuts. if he were to take the home, it would be more of the same and he does have a good track record of growth. guy: stephen, what do you think on that front? it is so early to talk about this. ways, it is coming to

what happened because of the way congress works. let's say we do end up with the vice president. how would the market take that? have you had that discussion? stephen: i do not think we are there yet. people have followed the headlines but people are not pricing and impeachment -- in impeachment. you would have to imagine the people -- the way people would talk about the midterm election. it seems like we are going to settle in to gridlock, the typical state for washington. it is not clear a lot of new things are going to get done between now and 2020. tom: sara, thank you so much. following this great bull market and stephen stanley with us as well. let us gaze once again, not the bears of jackson hole. they are out there.

cubs.ars of alaska, the stay with us on wild kingdom. this is "bloomberg." ♪

guy: welcome back. tom keene new york, guy johnson in london. we pay attention to this here in europe because it impacts brands like adidas, hopefully it will affect nike. they are trying to manage inventory. the numbers look good. we have a bit higher in terms of the premarket. tom: the shoe war is extraordinary. where a long way from where you have children. those flyers will look great on you. no one watching those. our single best chart right now is stephen stanley, u.s. focus. let's go international. here is turkish paper. -- is it, waiting for

a monday opening? guy:yup. tom: the turkish lira it yield 23%. chairman powell is giving a speech today at looking at emerging markets, isn't he? stephen: they view it as a risk, meaning that what we are seeing is not enough move for the u.s. economy. that could start to impact the u.s. have become an industry of compartmentalization. that was bob sinche's magic. do we need to get back to more --istic, broader strategists is that where we are heading? side,n: from the economic you have to take a broad view because you never know what is

going to be the next big thing that is going to impact the economy. you have to have expertise on everything. guy: is the fed, steven, i've always thought about it through this lens, when you had stan fischer there, he was international, is this bed international? it does not feel like it? stephen: probably, less so. you still have while brainard. brainard. by necessity, they have to have an international event. -- bent. at this point, the view is that the u.s. economy is less vulnerable to shocks than it was. we get risk aversion, i'm curious, we were talking ofut the yen, there is a lot

yen flowed out of japan into the united states and it is similar in germany which runs similar to the current account surplus. if we were to start seeing risk aversion coming in, do you think those yen would flow back quickly? the flow stories when we do not talk about. possibilityt is a and the other big story is going to be the reversal of the qe moves. we talked about the boj loosening up its hold on the long end of the japanese therement on market and has been talk the japanese investors will bring money home if the yields look attractive. a similar dynamic plays out in europe as they wind down kiwi. -- qe. those good have a big impact on u.s. markets. tom: what is your call on

inflation? say, theheir year to vector is in our direction, we're going to see higher inflation? stephen: i think so. i do not think it is going to run away and we have made it to 2%. tom: this is critical. chronicngible on a basis, isn't it? stephen: we might see 3% over the next year or two. i do not think it settles there. we have a hot economy with a tight labor market. if you're ever going to get inflation with a strong economy, this is the time. guy: what about europe? ?here do see the economy going -- do you see the economy going? a call for deutsche bank to fade away, with a price target of eight. the u.s. feels like it has moved

on in a big way from the financial crisis. europe, it feels like it is with us 10 years on from that anniversary. it feels like we are in a different place. stephen: the u.s. was more proactive and quick to make the adjustments that needed to be made in the financial sector. europe has been slower and you will be slower to come out of it. there are structural issues in europe that the u.s. does not deal with. the germany versus italy kind of thing with some countries in different places in terms of monetary policy and the fact that there can only be one monetary policy for the region. tom: what will you be listening for today from chairman powell? the headlines will come today. there has got to be something a pro like you listens for. stephen: i am not sure we are

going to get a lot on policy. tom: said independents -- fed independence? stephen: that is boilerplate. abouthas anything to say how far we are from neutral and what happens after we get there. cause or a one meeting is there a since the fed is going to have to keep selling? tom: thank you so much. further coverage from jackson hole. today.nt guestsw stay with us. this is "bloomberg." ♪ xfinity mobile is a new wireless network

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central bank is in jackson hole discussing fundamental changes in monetary policy as chairman power take center stage for his debut. getting too greedy. trade with china, mexico, and canada as more tariffs loom. and tech struggles. which struggles within profit margins. welcome to daybreak on this friday, i'm david westin right here with julie hyman. julie: happy to be here. happy friday. alix steel will be back on monday. i wanted to look at the week that was in markets. had a very tight trading range in the s&p 500. of the looking at some intraday moves that we are seeing on the major averages. the s&p little changed on the week as well. gaining about .25%.