>> musk ditches going private share he car company and rice goes. faces investor lawsuits and inquiry. fed all but guaranteed the hype messaging at jacks hole. nd u.s. and mexico set to resolve their trade differences as early as today. we will talk trade. welcome to "bloomberg surveillance." the markets starting with equities we have u.k. markets closed today so no

trading in europe. we will bring you breaking news irst and we have been waiting on this the august german business confidence index in at 103.8 beating the estimate of 101.8. there ting development check the d we can euro. it touched the 116 handle friday on dollar weakness. we are steady on the bloomberg but weakened by .5% what happened in the u.n., news thened by some 1% on of countercyclical factor in the u.n. so that is something we are watching. european equities gaining .2% 1% in e saw more than aia and u.s. equity benchmark record high friday. the mexican peso is

side on ming on the up the prospects of breakthrough turkish a and worst is markets and seeing lira weakness 613.8 of is where we trade. speak with the president of germany's efo institute in minutes time. now let's get the bloomberg riggs. ith taylor > the chancellor is marked to return with the call for europe interest.s in her first national television ut is after the summer break she says they need to take on responsibility as trump attacks their prowess and tkpwhrglobal trade war. over migration. hat is close to my heart i may

say is europe. the european community sometimes seems a little to be a given. we think we inheriteded it from but they have the war experience of the second orld war and we who did not have to have this war experience have the duty and task of making europe a strong factor in the world so that prosperity, remain secure.om >> italy's deputy prime minister opposing will start european union next budget after deal ailed to follow the it june for handling phraoeug after this was brought to the head of the future of 177 vessel a week ago. it members states failed reach a deal called to discuss a migration.oach on u.s. and mexico are poised to

nafta differences maybe today. significant breakthroughs kill the past several days on on 10 shus issues -- contentious issues of cars and nergy with canada to recover ta talks. strength ral bank has wanted daily reference rate by 6.8508 per dollar. declines as limit the fed continues to raise rates. it s the 13th day in a row has been stronger than expected longest since bloomberg started forecast in e august of last year. newspaper 's main accused the u.s. of staging military drills to prepare an at the same time looking for dill log. they cited movement in the ition and said they threaten

derail their dialogue. the pentagon called it and this after president trump on friday state it cretary of cancel a planned trip it pyongyang. senator john mccain will decade saturday will lie in capitol rotunda and receive a full dress funeral ervice at the washington national cathedral. he served two decades in the avy after graduating from the naval academy and represented arizona in congress 35 years lie in state at the arizona capital before his maryland.annapolis, and l news 24 hours a day on bloomberg in more than 120 countries. this is bloomberg. >> there seems to be little on he horizon to delay the yield

curve flat,ing as it dropped to points the gap between that two and 10 shrank below 19 narrowest since 2007. it marked the last time the inverted but debate over the significance of local ing at the jackson gathering. >> the treasury curve is onsistent with what we have been saying in our economic outlook and consistent with what the fed has said. >> there's no reason to the yield curve at this time. in other circumstances if inflation was higher and heading higher i might say we are taking recepti risks but i'm willing to trade that off. we are not in that. and tion is low and stage barely up to target. >> that part of the curve is broader market. >> i think there's reason to

may in the be signal -- may not be signalling the past. it is usually correlated with an recession butinto there's reason that the long now for otherssed reasons. in particular there is demand safe assets though quality like the u.s. treasury. >> i would remind you that this not our objective, to manage the yield curve. signal to say what to tell us about our policy path. fed president e in week at the jackson holcim symposium. thanks for joining us on there monday in the u.k. curve at 18 basis points could we see an inversion

fed's next rate hike assuming the 10-year yield steady? skwraoeurb>> the next rate hike points and we are just below 20 on the 10-year stays yes, we could see a small inversion of the yield those assumptions. but i think we should look at all the factors that are the long end and u.s. orward to where the economy is going. i think we might be in for an a flat yield d of curve which is a little a little sloped and bit invert ted during it time. some of the risks are mounting, but we don't see a near-term recession. we think recession will occur, say, over the next three it five years. but -- three to five years but

in the necessarily straight following thesion next one or two hikes by the fed. in terms of the fed hikes, does it hike twice more it year this cycle in 2019? i think what we heard over the weekend from jackson hole the chances, the odds of a hike in september are very high, going to ssume that's happen. we may look a little further baseline internal view is we will probably see between now hikes and the end of next year. playplay a callth im my more in 2019. i think enough momentum in the economy for the fed to continue this quarterly of nudging the policy rate up. ut as we go into 2019 we are

expecting a pause but ending next year with the policy rate 2.75 to 3% range, which of hink is toward upper end -- we call the fought rely neutral rate for the fed funds. you said where you think neutral could be but beyond that should he fed to a more restrictive policy based on the u.s. economy? >> not necessarily. banksg thing that central are grappling with rate now and powell alluded is the stars and in particular the rate of unemployment. hen we look around the globe, be it in the u.s., germany, japan, unemployment rates are below where conomists thought that the

nonaccelerating inflation rate , yet mployment is or was inflation in the labor market is materializing. under those circumstances, it oes speak for central banks to keep on tightening and their economies are expanding but they have to rush at it and overly tighten policy. i think there are some very long-term underlaying factors in such as increase participation rates of elderly people which are just changing economies and f the way inflation is generated intoight mean we are going a longer extended period of good much inflation out of the labor markets and pwaufrpbbanks moving toward neutral. >> does the 10-year yield go here?r from

>> i think direction of travel is more ofyear yield a stable level, maybe moving up sync with the policy rate. but, beyond that, i don't think that we are going to see a big -- and steepening of yield curve. to the extent we'll see steepening forward it might come the hike weersal of have seen the fed deliver so far. >> stay with "bloomberg surveillance." e are joined next from munich from the efo president from the german business confidence. is bloomberg. ♪ ♪

platea beat on nance, german ifo data and we are by their president. great to have you with us on the program. is behind this increase in business confidence for the first time in nine months. >> good morning. two factors. first of all, strong domestic activity. a record run, really, in construction. this has been going on for some time. a strong services sector. the second factor is the truth the trade war with the u.s. tariffs on cars have at last been postponed or important.e is we see a jump in expectation in the automotive industry. two most the important factors, i would say. > on that trade point, i'm

wondering how much concern you may still be seeing with german trade disputes. investmentting their beyond simple expectation? will wait withhey hr some investment projects and be more cautious. the first time we have a perspective which is more positive. more gloomy ming and now it seems that donald trump thinks about there. not forget we have the about issue here that is trade and german automotive industry is one of major players. so there's a lot of isn't around and companies think about this investment plans. i'm sure they postpone some projects but at least we have good news. >> how worried are german companies about capacity tight labor nd markets? >> they are very worried. e see that companies are

running into both technical constraints so their machines enough and they will react by investing more. and they are running into in the labor market. -- finding kwufrtd qualified employees is increasing difficult and there trying it hireut more abroad so we see these condition straeupbts -- constraints. >> on that about capacity con constraints are you expecting bund yields move higher? >> i think they will move higher not just the skwrrgerman marke policy rates tends of 2019.

at the specifically germany we get the impression , rather than are ratcheting up wages and coming the price they are put but rises ut are taking place but they are magnitude place at a such that is causing a problem for monetary policy. >> with you agree with that point on wage rises? basically, yes. we have seen wage rises this than hich are higher previous years. but overall wage growth is very which is puzzling to some extent given the tightness so it not r market clear what is going on but it wage rises are growing but not as strong as we given the t situation. >> are german companies ready to

with higher interest rates whenever they do come? saying they are expected toward the end of 2019. >> i think they are. german companies have reduced debts and become a net saver in the economy. they would collect savings from households and invest them but they are saving a will can deal many so they with higher interest rates. >> thank you for engine being us today -- joining us today. both of you thank you so much. up next. leader elon muck reverses to take them private. this is bloomberg. this is bloomberg.

>> economic finance, politics, this is "bloomberg surveillance." tesla faces bumps in the road musk reversed on the plan to go private the latest floated the idea followed by news that a senior xecutive is leaving the company. we have our bloomberg editor in toyota. it has been a wild ride the past couple of weeks. the focus back on del 3 production and liquid

liquidity? >> that would be helpful but if tesla a shareholder of this has been a very bumpy ride and you have to start asking how can you take. man whocompany led by a made it every turn that he is input of g shareholders and their interest. it is hard to interpret it any whiaway. the idea you want to take the private when it has such a rich evaluation is a slap in to suddenly slam the brakes on that and i didn't mean it and you have a top leaving, this is really a test for shareholder loyalty. there is some trading in the german shares and looks like like this t going to move. it would be good, as you say, if on can get focused back production. one question before. that would be good because they hit the production target

and get good news flow. on that briefly does that moon it would be good -- mean it orld be good news for shares will we just see more volatility from here? bet is volatility. but if they can shift the focus to how many cars they are making whether or not they are hitting the interim targets for good 3, that would be news. that can help the share rise. ofre seems to be a reservoir good will for company. it.il investors like that s.e.c investigation will continue nonetheless? that is the rough spot. no matter how good the news is about production you have suing the company for -- very serious comments musk made and never explained. by saying he is not taking it

private that scotches any chance have funding d secure and had the right to make the comment which is whether -- what produced the lawsuits so they are a liability probably mpany and that will be the source of negative news for the company in and months.eeks >> we have all seen the shares down in premarket. you so much. up next we talk the latest in and we could be getting close to deal on and a -- on nafta no this is bloomberg. this is bloomberg.

nejra: economics, finance, politics. this is "bloomberg surveillance." let's check in on what is trending across the bloomberg universe. sold 1962 ferarri hasn't

$48.2 million. londoners are buying more homes outside of the capital. nearly 40% of leavers relocated to the southeast. in third place, trump's china hawks prepare to sweep after slow gains. musk's gambit to take tesla private ends. let's get to taylor riggs in new york. germany's chancellor has marked a return to the front line with a call to europe to ensure its interest more forcefully. angela merkel said europe needs to take on more global responsibility, including

defense.this comes as trump attacks germany's economic interests and pursues global trade while italy clashes with its european partners over migration. >> i'm interested with many tasks. what is very close to my heart is europe. the european community. sometimes it seems a little that we have been given. our forefathers also had the war experience. who do not have to have this or experience have the great duty and task of making this europe a strong factor in the world to ensure that peace and prosperity remain secure. taylor: italy's deputy prime minister says that it will help create europe's new budget. his comments come after the issue was brought to a head over the future of 177 migrants on a

coast guard vessel which doctors in a sicily court a week ago -- docked in a sicily port a week ago. u.s. senator john mccain who ind on saturday, will lie the capitol rotunda moc a full -- and will receive a full funeral. he graduated from the naval academy unrepresented -- and it represented arizona in congress. his burial will be in annapolis, maryland. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. riggs, this is bloomberg. the u.s. and mexico are poised to resolve their bilateral differences as early as today.

thatberg has learned significant breakthroughs between the two countries came during the past several days on the contentious issues of cars and -- give us the update on nafta first. >> it looks like the u.s. and mexico may have resolved some key differences, particularly in areas like automobiles and energy, that would allow them to agreement,ey have an but they then have to start, restart the talks, and get back into the talks with canada. it wouldn't be the end of the process, but it would certainly be a significant turning point, and canada would have to join and signoff on any agreement. inwould be quite a milestone these talks that have been going on for some time. nejra: in terms of the other talks between the u.s. and

china, where do we stand now after we didn't get that much progress as expected from a talks about the talks last week? talksthe talk about the ended with no real visible progress. occurring,they were there were $16 billion in tariffs that went into effect on the importance of both china and the u.s. while there may have been slight progress, the tariff war continues. even as they were having those talks, the u.s. was talking to europe and japan about ways to trying get china to make some significant changes in its trade policy. nejra: thank you so much. mark, chiefow is investment officer at ubs.

good to have you with us on the show. let's start with trade. are investors underpricing the risk of the trade war? mark: we think they are a little bit because it looks like this u.s.-china trade issue is going to get a little bit worse before it gets better. the u.s. still remains on track to put in those extra tariffs on $200 billion in trade. we have seen that they did not let up last week. is this already posing a risk to china's deleveraging? mark: i think that is a good point. it is something we are watching closely because as the u.s. stock market and economy continues to do well at a second-quarter earnings, china has had to change his policy a

little bit and pull back on some of its reform efforts in order to address some of the weakness in their economy. they probably are going to have a real knife edge to walk if they want to simultaneously keep their economic growth and also continue on a path of deleveraging. nejra: in your latest outlook, you have a great chart showing the correlation between global markets and events in china. how much of a hit to global markets take if concern increases? first of all, i would say our best case is that equities can continue to do well, but this may be a time for some investors to cause before they add additional overweight exposures to equity because of the concern you highlighted. what you see in those charts is

that politics is starting to matter more. while we don't expect the depreciation of the yuan and slowdown in china is going to lead to the kind of dip we saw in 2015 or 2016 in global equity, that is something we are watching very closely. nejra: on friday, we saw the yuan strengthen 1% following some signals that china was ready to be there to support the yuan. i'm talking about the reintroduction of the countercyclical factor. how significant is this for you in terms of stabilization? i think that was really important. i think that was the driver of the dollar on friday, not powell's comments at jackson hole. one of the things we're watching closely is the chinese policy response. on thes a direct bearing

foreign currency reserves the china holds. i think china is aware that if they start to see foreign reserves get depleted the way they did in 2015-2016, they may lose a little bit of control of the situation. this was a significant and important move on friday. nejra: since we have had that move, is it still likely we could see the yuan move toward seven or is that a more distant process? mark: these measures help prevent that. particularly as we see the response on the u.s. side with how much they are going to do on more tariffs. the president has threatened to beyond the 10%s on $200 billion as well. terme at a time where

in powell is saying the federal reserve is navigated by the celestial stars. can means that politics blow us a little more off course as we enter the fall. with the u.s. does in terms of policy, and the way that china responds, is going to be a key force we are watching over the next month. nejra: how is that key force point to affect the dollar from here? that as long as china's policy response and ability to manage their fx reserves remain strong, we don't anticipate the dollar can strengthen been an extreme way from here. more dollar strength in the very near term is possible. over the six month view, we see many of the major cross-ice

at these levels -- crosses at these levels. nejra: plenty coming up, including turkey returning from its holiday. we talk emerging markets as the lira sores. this is bloomberg. ♪

nejra: economics, politics, finance. this is "bloomberg surveillance." turkey's lira thinks against the dollar, shattering last week's relative calm when markets were shut for holiday. the currency has slumped this month. ubs global wealth management is still with us.

your overweight u.s. dollar denominated foreign debt. this despite everything that happened in turkey? mark: i think the turkey situation gives you something of an opportunity. turkey is a relatively small share, less than 7% of that index. it is an opportunity to take advantage there because the yield seems to be strong. i think if there is further em weakness, that could be a place to add exposure. nejra: will we see further em weakness, particularly if the dollar strength might start to normalize and the dollar might even we can from here? case, thatat benefits the em assets if the dollar weakens. i don't think the message from the federal reserve was necessarily as dovish as many

interpreted the action on friday. i think they're going to continue to be focused on the on theonomy and focused strength of the u.s. economy. they are on track for a hike in september. when the u.s. is acting on what is good for the u.s. economy, we don't yet know if it's actions will coincide with a period that is also strong for emi sets. i think the immediate -- e.m. assets. , we don'te immediate see turkey spilling over into a wider contagion. that means investors in e.m. assets probably don't need to take widespread and immediate action to reduce their position. nejra: you just mentioned the fed and your overweight 10 year u.s. treasury's. is that decision based on the fed or something else?

year this has been a wild where, at the beginning of the year some people were saying 10 years are going straight to 6%. i think we took the under on that and thought that we would get closer to a flatter yield curve. typically, the tenure tends to rise at the beginning of a fifth heightening cycle. the rise from their comes at a slower pace. that is one of the things we were looking at. allocation, and a balanced portfolio or any portfolio, there is that rim for to be unbalanced instability in terms of the market is scared. they have continue to play that role. for us, we think the 10-year can continue to go, they yield can continue to go higher in a gradual way as the u.s. economy

continues to recover. we don't think it is going to be a dramatic move the way that some have anticipated. got a neutrale stance overall in your portfolio. given what you have just said about u.s. treasuries, how are you positioning in global equities? we saw u.s. stocks hitting fresh record on friday. we have a very small overweight in equities, we think in terms of risk assets, that is a place that can continue to do well, but it has to be balanced by some of the other factors that we spoke about earlier, such as the fact that we can see now politics is taking a little in the way stage that risk assets are trading. we have been very much positioned overweight in equities, and taking advantage of the climb up. over the summer, we did see that

politics were starting to play a larger role. weore the episode in turkey, cut our allocation to risk overall. nejra: i just want to briefly ask you about the yen because reactedpened -- hasn't as the safe haven you might have expected. do you have any positioning around the yen? good we think the yen is a safe haven relative to the dollar. we think the yen can strengthen here based on what the bank of japan is doing and how the japanese economy is doing. we still think it has a role as a safe haven. i might the swiss franc, which is to some degree still influenced by were the euro was trading. nejra: thank you so much for joining us today. merkel callsgela

for an assert of europe and her first national television interview after the summer break. we will discuss the future of the block next. this is bloomberg. ♪

nejra: economics, finance,

politics. this is "bloomberg surveillance." let's go to taylor riggs in new york. haver: tesla's shares fallen in premarket trading after elon musk made a dramatic u-turn on his attempted to take it private. he broke that the electric carmaker will remain public after shareholders failed to get behind the move. meanwhile, the wall street journal is reporting that one of up investors that were lined was volkswagen. shares in a german retailer metro have soared this morning after speculation that a takeover offeror may be near. -- offer may be near. petroleum and chemical has raised its dividend payout by 60% after half-year earnings jumped by a record. the world's biggest refiner

moved to $6.2 billion in the first six months. oil and gas exploration was brought closer to breaking even. drug did notohnson prevent clotting in high risk patients after they were released by the hospital. it is a setback for one of the manufacturers best selling drugs. about 12,000 patients took part in the trial. euros in sales last year. a china giant is drawing criticism for its safety practices after a second female customer was allegedly killed by a driver. it has halted the service to

reassess and remove to senior executives. according to state media, a driver suspected of killing a passenger has been detained. that is your bloomberg business flash. nejra: thanks so much, taylor. angela merkel returns to the political front line with a call for europe to assert its assertiveness more forcefully. oft is the significance merkel's weakened comments about europe meeting to get stronger? it has been very difficult, perhaps more difficult than for any other european country, for germany to come to terms with the disruption that is being rocked by the trump administration, by his presidency.

germany has always been the special ally of the u.s. and europe. that makes it especially difficult. otherwisein this unremarkable tv interview. the hints that emerges from it there is a growing sense in germany, in her government, that germany and the european union with it need to step up and take a more active role. that has been set for quite a while now. tony, meanwhile, germany's foreign minister talking about keeping business going with iran, despite renewed u.s. sanctions. tell us more about that. tony: that is part of the same issue. minister waseign just talking about an hour ago. he said this is a very difficult

issue, and there is no guarantee of success. most of the questions surrounding this kind of bid for or increased independence are unresolved. there is a symbolic value in that. that is also something merkel is seizing on. say that we in europe and germany will not just roll over and take anything that comes out of this u.s. administration, which doesn't mean that we are giving up on the transatlantic partnership. quite the contrary. nejra: just briefly, italy is vowing to veto the eu budget after feeling shunned by the eu. where is this going to head? tony: it looks like it will head for at least another few weeks of clashes between italy and the rest of the european union. toward a heading summit in salzburg, austria in just over three weeks time.

italy has shown it is ready to play hardball on this migration issue. that is likely to continue. as we know, it has this populous government in rome. it has shown that it does move markets. there may be a possibility of that going forward as well. nejra: thank you so much. great to have you with us. "bloomberg surveillance. continues in the next hour. tom keene joins guy johnson. tesla shares lower in the premarket as well. this is bloomberg. ♪

tom: this morning, after jackson hole, a grinding curve flattening. the peso of argentina, the

turkish lira both weaken. stocks have a bid. the impact of sanctions and tariffs. if you are in cash, where should you invest this monday? mccain willy, john rest in the capitol rotunda. this is "bloomberg surveillance." morning, a august new slow continues. we see that headline on mr. erdogan's travels in september. guy: i think he is in for a busy time. we also have the relationship with germany, which i think is going to be interesting there. it is going to be interesting how he plays the europe angle, the iran angle, the united states angle, and where russia fits into all of this. tom: the jigsaw puzzle of it.

right now in new york with your first word news, here is taylor riggs. taylor: the u.s. and mexico could renew their trade talks as early as today. bloomberg has learned there have been significant breakthroughs during the past several days on two of the biggest issues, cars and energy. the u.s.'s trade war with china is about to get uglier. talks and the trump administration have gained the upper hand and are about to launch a fall offensive. last week's talks resulted in little progress for the cease-fire. the u.s. is planning new tariffs on an additional $200 billion of chinese products. beijing has vowed to retaliate. you could say that apple is trickling down on the iphone x. bloomberg has learned that the company plans to relaunch three new phones. the new phones will have a wider

range of prices, features and sizes. fullyf the three will be new designs like the iphone x was last year. 's plansusk -- elon to take tesla private backed off. stooped to buy, investors he wasn't sure what support him including key backers from saudi arabia. mccain's allies and political joined in offering tributes following the arizona republican's death from brain cancer. former president obama praised the man he defeated in the 2008 election. president trump tweeted his deepest sympathies and respect. the president had criticized mccain repeatedly. he will lie in state in the capitol rotunda this week.

global news 24ws 24 hours a dayn air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. tom: it is a weird day. trading here and not trading their. futures up seven. flattening, well in over 20 basis points. i'm not on the inversion watch yet, but i'm getting there quickly. the next screen is more interesting on e.m.. 30 year bond was 2.98. ago,sh lira just moments really spiking up on that erdogan-orairan headline. i had to put in argentinian peso just to impress.

i did it for no other reason. guy: he is here on a national holiday. volumes of very light here in europe, which is worth talking about. the big story overnight into the weekend and overnight session for europe was the fact that the are putting pro-countercyclical measures back in. kind of walking back to what they have done in the past. thetake a look at correlation finders on your bloomberg and you will see that the thing that is most correlated with the chinese currency, and you have to flip this around, is gold. gold should benefit from this. it isn't benefiting much this morning. the chinese stock market did benefit this morning. we are seeing increasing push back against of eu from the italians once again. they are concerned the migration

deal put in place has not been put into reality. they are looking to maybe veto the eu budget. italian stocks underperforming today. tom: let me show the accelerating convexity of change. the president's election in november 2016, curve flattening. we have a much steeper plummet here and accelerating tone it to the curve flattening. i'm not on the inversion watch. guy: you have to remember as well that the market has incredibly short treasuries. this will only accelerate that theme is well. tesla pre-markets, this is where we are. that was quite a round-trip from elon musk. this morning, trading down. let's get back to that yuan

story and talk about what is happening there. friday, we saw some big gains. the chinese are trying to stabilize their currency. the pboc signaling it will take action to support the yuan. with the united states showing no sign of easing anytime soon. talk us through the significance of the moves being made by the chinese and the wider ramifications of it. >> good morning. i think it is the latest step taken by authorities in beijing to try and get some stability around the yuan. they have already made it more expensive. they have already told banks to avoid behavior and follow it down. that has reintroduced this measure. it has proven quite successful in the past.

well.ked quite it certainly seems to be the measure that 6% of losses in the yuan may just be as much as authorities are willing to tolerate without risking broader financial instability. thatnk that is the message they are happy with some flexibility, but not too much. guy: talk me through the next step beyond this. what does this mean for china's decision to move into a more consumer-oriented economy? what does it say about china's fears? read the tea leaves for me. enda: i think it clearly indicates that it is very much a command and control economy, and that the authorities are certainly not willing to let go

of the exchange rate. we know they already have very rigorous controls in place. there were some suggestions this year that they might open some of the controls, but now we have two things happening. the economy is slowing on the back of domestic issues, which is mostly the campaign it to get a grip on debt in the overall economy. the other side, they are heading into something of a loop, that will certainly stem pressures into the economy as well. this is how they are responding. they are making it very clear that they are in control. already made some measures trying to get money into the economy. they were willing to let the currency go to a certain extent, but now they are putting a floor under it for the time being. unde modernizing and rgoing a big transformation, but it is still a commanded and controlled economy.

tom: i know you are looking for three bedrooms and three fireplaces up the hill at the mandarin oriental. tell me how real estate in china in general, what is real estate doing in china? one of the side effects of the very strong capital controls on china has been that the money that could not lead to go overseas, has been funneled into assets such as real estate. that is one of the reasons china's real estate has done so well because you get your money out of the country. with that said, they are brought managers to take to fraud off of some of the cities around china. i think you know that they have managed to get property drives down. hong kong is a slightly story.nt the concern in hong kong is that the market measures being taken by the authorities might work in china, they show signs of working in australia and singapore, but in hong kong,

there is very little that can be done on the policy side of things. it is more about freeing up land and meeting the demand, and lifting some of the restrictions on the residential property sites around hong kong that people say would be the biggest solution here. i think on a near-term, clearly in hong kong real estate -- guy: great stuff. thank you for updating us. what do you make of the chinese move? >> i think they are clearly decided to draw a line in the sand for now. i wonder whether part of the methods they are sending is we are in control, in the sense that there has been very little evidence of capital flight. of foreignigns exchange reserves falling off sharply. from where i am sitting, it seems to me that there has not been much cost to them for a weaker currency.

so maybe what they are saying is we don't want this order. we have done well moving it from 7.2 seven -- 6.5 to we won't go anywhere now. tom: we are going to come back to kit on emerging markets. we need to talk to you about equities. it is the end of the summer. we won't talk about the inky's catching -- yankees catching up to the red sox. the end of the summer, which means you need to look at your portfolio. what are you going to do with all of that cash? john is going to join us. bloomberg. ♪

the judge found that did not prevent clotting in high risk patients after they were released from the hospital. billions ofd dollars in sales. bayer has the right to the rest of the world. the world's biggest oil refinery posted earnings. refining profits soared. breakdowns in crude prices brought units closer to break even. that is your bloomberg business flash. tom: thank you so much.

back and forth here of nafta and trade, we talked about china moments ago, happens day by day. the new slow always a surprise if you look to try and get to the end of the week. jacob joins us now. explain to our audience of the sequence here of the u.s. has to agree with mexico before canada will reengage. am i right on that? jacob: that seems to be the case. i think what is happened is that the u.s. has found that it is easier to deal with mexico before the new administration starts, and then bring in canada. we have seen a lot of back and forth. we have seen negotiations nearly blow up over a number of issues. i don't want to speculate what the prospects are and what might actually happen. tom: who has the power in these difficult negotiations? jacob: in principle, the u.s. has the power.

it is the largest economy and population. can workd canada together in some situations. i think the u.s. can put a lot of pressure on, but the question is more what are the interest groups in the u.s. saying and owng, because trump's instincts are different than a lot of the interest groups supporting him. guy: let's say nafta gets done. once it gets done, where does attention shift next? fear, in the economics think the question is does the u.s. look to specific partners to try and revive any of the previous trade agreements left undonend by the obama administration. china?es he refocus on

he is going to increase his focus on china. it is clearly his and peter navarro's driving force of the world economic order. tom: my phrase for this is trump lateral, which is basically my way or the highway. where are we on those negotiations? we basically saying it is the u.s.'s way or the highway? jacob: that seems to be the case. i think trump is finding the limits of what he can do with that. he has managed to shake some concessions, but the degree to which his attention is shifted by what is going on in domestic politics, a degree to which he doesn't necessarily have a consistent team around him, makes it difficult to have that. tom: how weak is peso? how weak is mexican peso?

--ob: it's not terribly weak kit: it is not terribly weak. the peso is competitive at these prices, but let's put it this way. if we get a deal done and people get excited, this is news people want to hear. tom: what happens if we don't get a deal done? kit: we see dollar peso go up more than a goes down, not deal versus deal. you would get a bigger selloff than rally. guy: we will leave it there. jacob, thank you for coming to see us. next, you on musk reverses his own mission to take the electric carmaker private -- elon musk reverses his own mission to take the electric carmaker private. there is the stock. this is bloomberg. ♪

guy: guy johnson in london, in for francine lacqua. it's a national holiday today. tom keene in new york. we're watching tesla pretrade. that is not the only tech stock we are paying attention to. apple is also going to be a big focus of the session ahead. also great news coming through from bloomberg. it is basically doubling down on the iphone x.

bloomberg has learned that the world's most valuable company plans to launch three new phones very soon to keep the edge screen of last year's launch, they get a bigger and colorful. is bigger better? is that what we are learning this morning? >> it certainly seems to be the case. they know that that is what the consumers are drifting towards, particularly in asia.consumers like having a big screen . they don't typically carry a smart phone and tablet. they want something larger. with apple aiming for the iphone at a 6.5 inch screen, it is hoping it will catch all of that market. it really is a thing that consumers have opted for. i think anyone who has ever try to read on my news on an old-fashioned phone is wondering how their eyes can still work. that is at the bigger screens are doing . their particularly good for watching videos and games. guy: great reporting here.

are alsoe things we learning is that they are going more colorful and we are getting various other things being thrown at the consumer as well. i'm confused a little bit. had as a consumer work out what they g -- are getting and how much they should pay for it? robert: that is indeed going to be the challenge. the most expensive phone will be a 6.5 inch screen iphone similar to the iphone x of last year. there's also going to be an upgrade to the iphone x at 5.8 inches. the lower power using screens. in the middle, are going to be the cheapest with a 6.1 inch iphone that will use an lcd screen. what they are really going to be counting on is for people to understand the difference between the old screen and lcd screen.

both a very high definition screens. something aficionados get, but i'm not sure average consumers will get. the other challenge is working out what to call them. tom: i'm waiting for my iphone xiii somewhere down the road. help me with the idea of a better chip, and the idea of a new generation of phones versus that midmarket s phone. is this essentially an iphone xs? or is it going to be an iphone iphone 11? robert: it is more going to be an iphone xs. back 10 years, they bring back the best model which has design changes. you are going to see that phones in terms of the shape are looking similar.

xs, welarly, the iphone will call it that for now, there will be more colors. they're going to differentiate between glass and steel. it is going to be largely a focus on inside the device rather than the external. they'll look to their back-to-school blitz as well. great reporting. greatly appreciated. tesla moving south as well. we will continue with kit. noon,omberg politics at douglas and his work with john mccain. ♪

tom: the diplomatic season begins the last week of august.

speaking onf france foreign policies where he lays out thoughts. he will speak of the challenges of the continent and touch upon to france,ortant particularly the relationship with president trump. guy johnson? guy: he looks animated, doesn't he? the french president speaking on policy going forward. it was interesting in light of what we heard from angela merkel talking about a more assertive year. -- europe. let's talk about what is trending. -- actoc, a furry has ferrari has sold for $48.4 million. they have outperformed the s&p over the last few years. it is the much -- it is the most anyone has ever paid at an

auction. londoners are buying more homes outside the capital. prices remain too high. to the40% relocated nearby southeast. our most read stories this morning, in third place, trump's prepared to swoop after a summer of trade talks show few gains. migration.to veto musk's attempt to take tesla private fails. the u.s. and mexico are on the burger breakthroughs. the countries could agree on changes as early as today. the way forlear canada to rejoin the negotiations. the u.s. and mexico has worked out differences regarding energy and cars. north korea is accusing the u.s.

of preparing an invasion. it calls u.s. troop movements and south korea provocative. it says they threatened to derail the dialogue between the u.s. and north korea. trumpeek, president canceled mike pompeo's visit. congressional democrats are not saying whether they think president trump has committed impeachable offenses but they are promising investigations if the party regains control of the house. republicans have seized on the threat of impeachment to feel turnout in the election. italy is threatening to the tow the european union budget over migration policy. the italian government is not happy that members failed to follow through on a deal for handling migrants. minister saidme italy will block whatever budget measures are not convenient.

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 taylor riggs. this is "bloomberg." tom: thanks so much. it is a interesting weekend. it is the small matter of tesla. it was a private gambit. it collapsed in flames over the weekend as tesla say they will stay public. we are joined by bloomberg in germany. why whytart with the did we see mr. musk say never mind? >> it must've been a lot of pressure. tons of pressure. tom: we assume litigation will

follow him -- he still has a business to run. interesting is the search for someone to assist him with executive capabilities. where does that stand? >> i do not think we know of any progress at the moment. this is what that has shown is that he needs help. he misinterpreted the situation. why would volkswagen invest in tesla? why would you go to volkswagen in this story? yeah, our understanding of the people we talked to is it is a nonstarter. volkswagen is gearing up a major electric power offensive. they have their own platform, they are starting to roll out their own tesla killers. they can just wait.

aside, yesterday, angela merkel rolled back her to the strong climate change strategy she put in place. how much pressure is she getting from carmakers now? frome is under pressure two fronts. is the massive climate investments germany has made but the auto industry which is the pillar of german industry and they are under pressure to meet these targets as well. starts when the noose getting tighter for them. tom: chris, thanks so much. we're going to come back with kit juckes on emerging markets. they are moving and there are some subtle charts.

morgan stanley, a more cautious view on gdp, pushes back against what we are seeing for q3 in america. allen's under at 2:00 p.m. this afternoon. this is bloomberg. ♪

guy johnson in new york and tom keene in new york. the markets are back open, the lira is soaring. slumped 20% in august on concern the economy would worsen. is kit juckes

from socgen. good morning. we are back, the holidays are over, now what? >> we expect further volatility in the turkish lira. there was no development that pushed the needle. theave seen statements by president and his chief spokesman saying this is a war to undermine turkey. that does not change the narrative. erdogan's next move? >> we expect the turkish government to ride through this storm and tilt there is some kind of let up. -- until there is some kind of letter. u.s. will keep turning the screws on turkey until the pastor is release. within turkey, are they

getting traction in terms of economic confidence, financial confidence in the ability to execute some sort of plan? >> i would say not. we saw statements by the chief of staff of their economy. things ine right terms of fiscal reform, in terms of consolidation. there was lack of details. what turkey needs is a plan in terms of how it is going to get itself out of this situation. there need to be measures to address corporate debt which stands at $313 billion u.s.. we also need to see the central bank provided independence to hike. tom: well said. kit juckes of stockgen with us. at what level of lira do we get the attitude adjustment to affect anthony skinner's plan?

kit: the danger is this happened slowly. -- happens slowly. we traded in a closed market. going to be talking about seven again and we will be back in volatility. we will be talking about the intransigence of policy in getting real interest rates above zero. behind it, what we are going to see is going to slow from here. in an adjustment phase. it will be the domestic implications of that that matter. the problem is, neither side, the u.s. or turkey, looks like they are going to give on their current stand. can markets change anything? i am sure the deep economic

slowdown is what comes next. has happened is the turks have crashed the overseas untradable.lira is that had consequences we cannot hedge my local a nominated bonds. my -- my local d nominated bonds. what happens in terms of asset prices? to get rolleds over so you need to find money from overseas. what is coming next? the problem is that the fall in the currency translates to higher inflation. we get higher prices straight away and that is what hits the economy hard. the overseas lenders to the private sector in turkey do not have anything to give them confidence. thing that gets people

back is that there are not many places today where you can pick up yields close to what is offered in turkey. them a catalyst, if canrestore confidence, you turn confidence around for a while in turkey but if you do not do that, at what point does someone by debt? guy: and you will got a guarantee you can get your money out. anthony, when we look at what happens next, how important is what happens on the street? is getting hot now. you cannot get the liquidity you want if you're looking for u.s. dollars. it is becoming problematic. when does that change? anthony: erdogan is the master of playing with fire.

he is riding on appetite for pain that derives from the fact that a majority of turks believe the united states is out to undermine turkey. this goes back to the history of ines in turkey -- coups turkey. the attempted coup was not condoned -- condemned by the u.s. administration. it is this perception of the united states which is out to undermine erdogan but turkey at large which he is riding on. he feels he is able to stick to his guns. there will come a point whereby by if the screws continue to be turned by washington, erdogan is going to have to do a u-turn but he is going to want to of something to show to the public that he has been able to extort

something from washington. tom: if they are going to extort a concession, doesn't he have power in terms of how the u.s. military uses turkey as basing? military hasu.s. been reckoning with turkey not being a reliable ally for some time. we have seen that clearly. the airbase not being accessible for airstrikes and operations over syria. that has been a reality. the turkish armed forces and the u.s. military are working together. this is important from both perspectives. there is such a conflict between is difficultat it to extricate these issues even nson is released and

returned to the united states, there is a series of pitfalls that they have to negotiate. guy: president erdogan is hosting angela merkel in september. how does that meeting, what are the things that need to be talked about? we have got migration, how big a point could that be? kit: turkey is more important for europe than it is for united states. turkey is a big part of nato. it has a lot of troops and nato. what president trump's view of nato is. it is important for europe. lent of the money that was to turkish companies was from europe. it is the guardian of the border for a lot of potential

immigration refugee flows that are heating up again. there are lots of good reasons for europe to be a more empathetic ear than the united states. whether that is worth anything, i do not know. guy: anthony skinner joining us. kit juckes staying with us. up, narayana kocherlakota is going to be joining us at 8:00 a.m. new york time. looking forward to hearing what is said there. this is "bloomberg." ♪

>> this is bloomberg surveillance. i'm taylor riggs. in china, public criticism for dd. its most media rebuked viable starter for safety practices after a second female customer was killed by a driver. service toed its reassess its business model.

it has fired two senior executives. exxon mobil has been looking to buy renewable energy for delivery in texas. asked suppliers to pitch contracts that would last up to 20 years. said exxonnalysts involvement is a sign that renewables can be cost competitive. was the topasians" movie in north america for the second week in a row. $25 million atn the box office. distributor, warner bros., has started working on a sequel. that is your bloomberg business flash. tom: thank you. one of the themes of the summer has been the idiosyncratic nature of the emerging market collapse. one story here, one story there. us.juckes is with

let me bring up the argentinian peso. an simple story is this is ,legant chart, well behaved well behaved through july and once again, unraveling to a weaker argentinian peso. this speaks to the struggle of all of em, doesn't it? kit: not only is confidence hit flow of bad news, whether domestically or trade uncertainties but in the backdrop, i've got this trip -- drip of rate hikes from the and thereserve tightening of global financial liquidity and making buying of emerging-market assets less attractive. it comes up. guy wants to get to

turkish lira. inn do the institutions step ? imf, their annual meeting in 6-8 weeks. we are nowhere near institutional crisis, are we? kit: it is the nature of this chinese water torture of the way that some of these markets are getting squeezed. it is coming through the currency, not through equity markets getting hit in a broad-based and there is no .eedback to developed markets it is when it starts beating back into the s&p index that everyone starts to panic. it is each market that has a problem though argentina and pakistan and turkey that have got genuine problems of liquidity, shortage of leading

money -- needing money but there is not a generic solution. to reset around that, was powell dovish? powell was, we're going to go steadily because navigating through stars that are not enlightenment is difficult. think he was dovish except in the sense they are not going to accelerate the pace of hikes. they are going to try to move towards a neutral policy stance without wrecking everything. he is not giving indication he is stopping soon. longwhy is the market so dollars? data told me the market has upped the ante but yet the dollar is going sideways.

normally, they are correlated. they are not. there is a bunch of long dollar trades within that long dollar as opposed to the beginning of the year when the market was short dollars because it was long euros. that no one can think of a good reason to be long anything else. we have got political problems in europe, brexit, not a lot of people finding joy in being long the yen as we watch the dollar-yuan move higher. people are not in love with major currencies so they are long the dollar by default. tom: kit juckes, thank you so much. greatly appreciate it. isaac boltansky will

join us with compass point research to begin our morning on international relations. inty schenker will join us remembrance of senator mccain. we are thrilled to bring you jonathan golub. it is like, where are we in the equity markets? resilient even with the curve flattening we have seen. any number of themes to talk about to get you ready for the end of august and ready for back to school, already happening across manhattan. stay with us. this is "bloomberg." ♪ retail.

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

near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. this is moving day with the best in-home wifi experience and millions of wifi hotspots to help you stay connected. and this is moving day with reliable service appointments in a two-hour window so you're up and running in no time. show me decorating shows. this is staying connected with xfinity to make moving... simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. tom: this morning, after jackson hole, a grinding curve flattening.

is the peso of argentina and turkish lira weaken. the impact of sanctions and tariffs, tax u.s. multinationals. where should you invest this monday? john mccain will rest in the capitol rotunda. president trump knee not attend. this is bloomberg -- need not attend. this is bloomberg europe -- bloomberg. is it a bank holiday in london? why is everybody off? guy: it is the summer holiday, the traditional august bank holiday. activity,ing a lot of volume slow. their half of what they would normally be. tom: we see turkey out to new weakness. the markets are speaking as

turkey reopens. guy: again, remember that london is shut and there is lighter volume. markets went around a little more than most. turkey is back. what happens next? erdogan needs to extract something he can take to the he can be able to back down. tom: let's get the first word news. u.s. and mexico could result trade differences as early as today. that would clear the way for canada to rejoin talks to rewrite the north american free trade agreement. there have been breakthroughs on two of the biggest issue, cars and energy. the u.s. trade war with china is about to get uglier. hawks in the trump administration have gained the upper hand and they are about to launch an offensive. last week, talks resulted in little progress towards a cease-fire. the u.s. is planning new tariffs

on an additional $200 billion of chinese products. beijing has vowed to retaliate. authorities in jacksonville, florida, say a gunman at a shooting at a videogame tournament was attending the event. he is a 24-year-old man from baltimore. andilled does go people wounded nine others before shooting himself. you could say that apple is tripling down on the iphone x. the company plans to launch three new phones that will keep the edge to edge design of last year's flagship. the new phones will have a wider range of prices, features, and sizes to increase appeal. none of the three will be new designs like the iphone x was. 's plans to take tesla private collapsed as musk announced most shareholders wanted the company to stay

public so he backed off. he was spooked by blowback from investors he would sure would support him including backers from saudi arabia. senator john mccain's death has led to a rare show of unity. mccain's allies and foes joined in offering tributes following the republican's death from brain cancer. former president obama praised the man he defeated in the election and president trump tweeted his deepest sympathies and respect. the president had criticized mccain. mccain will lie in state in the capitol rotunda this week. he was 81 years old. we take a moment to consider the senator from arizona. , he was for al hunt close to the senator and introduce me to john mccain years ago. here is al hunt.

this is an elegant essay. he was a senator no one could ignore. he harbored contempt for mr. ofin's and then they speak the korean war, with his bravery in korea flying planes. glenn was a bigger hero than either of us, mccain remember saying to john kerry. this can get you in the room but then you have to fill it. marty schenker with us. when he came off that plane, the young kids do not know what it was like. don't but there are many people in this country

while not recognizing the extendedhis heroism beyond the facts. he was a giant in the senate and the last of them. tom: i know bloomberg has done a great job. we had this moment in our history which harkens back to henry clay and the president of the united states will not participate. do i have that right? marty: that appears to be the case. the family has not forgotten the rhetoric that donald trump used to go after john mccain including, i like my heroes to be not captured. he has never apologized for that. it might be wise for donald trump not be there given the eloquence of president obama who is going to make a eulogy at the cathedral on thursday. there would be sharp contrast there. tom: the thing i find

fascinating is this unique republican, it appears to be disappearing, including the battle over who will replace him. it is almost whigish. we're on the edge of the whig party if you look at this moment. marty: the governor has a tough choice. he is on the ballot in november. his choices going to resonate for his own election. they republicans are coming together because this is a way of distancing themselves from donald trump without mentioning his name. up: he was a man that stood to russia, that had strong feelings about america's place in the world. with his passing, do we need to think about it from that point of view? he has always been clear about

what is happening in russia. put in context is passing and where we are with america's relations with russia. marty: the controversy over donald trump seeming warm toward isdimir putin, that voice now gone from the senate and there is no one there to take his place. decided, heer has would be the second most critical voice against russia and he is going. observed, he is such a guiding light in the senate and a voice for internationalism and it is gone. the senate and the country are going to miss that voice. generationpart of a --t remembers the unum vietnam and remembers american

foreign-policy in a different way. that generation is leaving us and it is going to change american politics. could we see his to parch or as part of that process? -- his departure as part of that process? marty: there is no doubt about that. , theutpouring of emotion bipartisan support for mccain and his family represents nostalgic recognition that this is the end of an era, the giants of the senate are gone. there is no one there to take their place. tom: what do the democrats need to do? ofas amazed at the analysis the republicans and there is little study of if the democrats , but they -- but that they will stay on the left wing.

where does that stand now? are struggling internally with forces like elizabeth warren who are pulling the party to the left when there are signs that the republicans recognize that as a older ability. the ability -- a vulnerability. the democrats to come together is a challenge. tom: marty schenker, thank you so much. much more to talk about but we will continue, flags at half mast.

guy: guy johnson london, tom keene in new york.

francine lacqua has the day off. after thearket revelation this company will not be going private, we are down about 4% premarket this morning. we will see if the market firms when we get more volume in. it looks like the story that we seemst going to be seeing to be taken initially poorly by the market. thatems it was the market swung elon musk to keep this company in public company. for for bayerback and johnson & johnson blood clotting drug xarelto. a study found the drug did not prevent clotting in high risk patients after they were released from the hospital. bayer reported $3.7 billion in sales and called it a key growth product. johnson & johnson sells xarelto in the u.s. bayer has the rights to the rest of the world.

uber ceo says the ride-hailing service will keep investing in new ventures. timesls the financial there is a $6 trillion mobility market and no one product is going to be serving a. he discussed uber's potential ipo. he says the trade-off is between profitability and growth. the world's biggest oil refiner posted record half-year earnings. sinopec's net income rose 52%. refining profits soared and a rebound in crude prices brought the exploration unit closer to break even. the company raised its dividends by 60%. that is your bloomberg business flash. tom: taylor, thank you. a lot on foreign exchange in the last hour. turkey weaker this morning. are, up 6.22 earlier.

equity marketur portfolio, about what you're going to do in september. withhan golub is here hyper detailed research with credit suisse. i love your research because you get into granularity. what matters now? jonathan: the most important thing is that the business cycle is healthy and stocks go up. there is a second story which is the dominant tech over the market. tom: you have a chart which --ws earning growth's earnings growth of the market. are you owning tech because of the revenue persistence at the top of the income statements? i think the revenue story is the most important. think, think about

market. amazon compared to walmart. amazon is about one third of the sales. what will that be in a decade? or if you look at online advertising and how much of our data are on the cloud compared to what they will be. the size and the revenues of these companies are going to be eager -- bigger. guy: money is flowing into american equities. what would it take to reverse that flow? all, the first of dollar has been stronger and that gives investors a benefit for being in the u.s. better thans are the rest of the world. tax benefits, the u.s. earnings are three times better than rest of the world. taxes, theclued the u.s. is twice as good as the

rest of the world. that is probably the most important thing. you have to remember the rest of the world does not have a tech footprint like the u.s. outside of emerging markets, if you look at europe, there are almost no tech companies, which gives the u.s. a leg up. guy: this year, your today, the 7.5%, in europe terms, of 11%. the market is a discounting mechanism. at what point does it start discounting the tax effect? jonathan: it leaks into next year. we had this spending bill that lasts through next year as well. see, mayou're going to be the big story is global divergence where the rest of the world is rolling over and the

u.s. is staying at this elevated level. that plays out until the late part of 2019. where u.s. data and the rest of the world are on different planets. tom: i have a question. friday, all of the articles come out, the world is coming to an end, sell equities, how does a bowl like you -- bull crew.ou live with a gloom you say, the market is up, it must be expensive. this year, what you pay for earnings have come down because the earnings have surged. if you break the argument down, it is not an issue.

the same if you look at profit margins. we put together a model which said what should margins be? you have input costs going up but companies are able to pass those along. in your do you dovetail chief economist' is work who is saying 4% gdp is not sustainable? whereomes to your world gdp growth is not sustainable. jonathan: people assume my optimistic view means -- year, willis probably hit a 3% gdp number. benefit,ok out the tax it would be 2.4%. that is more sustainable and that is what people should be focusing on. we are going to have slow earnings next year. next year, they will be a 8% and thatthat --

is a distortion from these taxes which are going to get removed. great stuff. jonathan golub sticking with us. up next, we going to carry on the conversation around tesla. the stock initially dropped in premarket, coming back a little mid. elon musk reversing his mission to take this company private. that is next. this is "bloomberg." ♪

guy: 23 minutes past the hour. guy johnson in london, tom keene in new york and -- your. bloomberg has learned that apple plans to launch three new products. it will keep the edge to edge screen design. another part of silicon valley, tesla has announced it is going to stay in public hands. --athan golub of credit sees credit suisse still with us. jonathan: i do not tend to talk about individual stocks. the important thing, is the dominance of changing technologies on the landscape and the disruption that they are having. this may always be the case but whether it is the impact of

electric cars or the dominance like apple and amazon, it is not them as companies that what they are doing to disrupt the brands and types of products we normally by and that is the big story here as opposed to who holds them and how. union, to theean annoyance of americans, is going to regulate these companies heavily. it was interesting the fed spent time debating the impact these companies are having on macro economics. is there an argument that says we probably are heading toward a more regulated environment? that is a threat and it is a conversation that i am having with seasoned investors. i do not think that we will or we should.

i will give you an example. amazon sales are one third that of walmart. while they are disrupting everything, they are not of the monopolistic size that would tell you you have a problem. even if you look at the advertising concentration online of facebook and google, they are not dominating all of advertising in a way that was different than when we were kids watching three networks in the u.s. i think there might be more oversight but i do not think this is as bad as some are making it. we spend our -- time talking about 10 companies. do you emphasize the 10 real valuer is there in those other companies?

the majority of the market cap is in those other names. techu look at the suite of and retail companies, they are dominating the earnings power of the s&p. these are hot because we are speculating in them. they are dominating the marketplace. tom: jonathan golub, enthusiastic on the markets. we are enthusiastic on a morning briefing, needed with the news flow we are seeing. you get that on bloomberg radio. a nice start to the monday, start to the week. from london, from new york, stay with us. this is "bloomberg." ♪ xfinity mobile is a new wireless network

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saving you hundreds of dollars a year. plus, get $300 back when you buy a new smartphone. xfinity mobile. it's simple. easy. awesome. click, call or visit a store today. tom: good morning, everyone. i johnson in new york. york and ison in new am tom keene in new york.

your first word news in new york city. here is taylor riggs. >> authorities in jacksonville, florida say a gunman at a shooting at a videogame tournament was attending the event. he was a 24-year-old man from baltimore. he killed two people and wounded nine others before shooting himself. the u.s. and mexico are on the verge of breakthrough in trade talks. could agree as early as today in changes in the north american free trade agreement. that would clear the way for canada to rejoin the negotiations. the u.s. and mexico have worked out differences regarding energy and cars. north korea is accusing the u.s. of staging military drills to prepare for an invasion. the newspaper calls u.s. troop movements in south korea provocative. it says they threaten to derail the dialogue between the u.s. and north korea. last week, president trump

canceled mike pompeo's visit. french president emmanuel macron says the u.s. seems to be turning its back on history with can noand the continent longer count fully on america to provide security. a new push ford european defense projects today. italy is threatening to veto the european union budget over migration policy. the italian government is not happy that members failed to follow through on a deal for handling the flood of migrants. the deputy prime minister said italy will block whatever budget measures are not convenient. 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 taylor riggs. this is "bloomberg." tom: thanks so much. taylor riggs is the only one that has read each paper at

jackson hole this year. kathleen hays and michael mckee were there. here are thoughts from various fed presidents. the case for raising interest rates is compelling. we have an economy that is growing and we have inflation at our goal. >> we ought to be moving toward neutral which means three or four increases over the next nine to 12 months. moving in september and december is consistent with that. andhe economy is doing well two more rate hikes could be appropriate. >> i would rather not be calling rates accommodative. ie structure is lower and think we are at neutral or close now. slowe impetus for going was that we wanted to make sure the economy had legs to stand on its own.

we are there. tom: very good. with the goode work of our michael mckee and kathleen hays. ofhave steven ricchiuto mizuho securities. with us of credit suisse. the atlanta gdp numbers are superb. do you have a belief in those kinds of numbers? assumptions built in about where we are going. i would look at the data we have and the data says we have an economy running 2%. that is where we have been on average. within that is your work on .nalyzing the american consumer what is the -- what does the

american consumer look like into autumn? growth. running at 2% it is hard to get much beyond that. bit from little investment spending, a little bit from trade, from inventory and that is where the economy is. guy: good morning. guy johnson in london. we had a piece over the weekend that talks about september is a done deal. december looks more difficult to factor in. there are a whole bunch of factors and the policy environment becomes more difficult. he is pointing us to an environment where the fed has a think about what is happening around the world and waits until march. is that what gradually means? stephen: i do not think that is where the focus is.

they are said to do both hikes. the question is whether or not the curve goes to zero between now and these -- the december rate hike. there will be some financial pickup that causes a reset in terms of forward rate expectations. it does not stop the december move. guy: what about next year? further,ke the point he is saying things are going to become more difficult to understand from a monetary perspective going forward. then what? stephen: that is a function of where inflation keeps going. you will have a gradual upward creep and the fed will continue to follow through, keeping the curve flat. it is going to be up to that cyclical move in inflation whether you get it or not as to how much additional hikes we get. tom: what are you going to write about for september?

a belief thate is the long end of the curve is going to have to drift tire. let's assume -- drift higher. , is thesume the 10 year fed comfortable inverting the curve and pushing into that territory? stephen: the fed has always inverted the curve and then comfortable. the rhetoricge in and no reason for the change. they are paranoid about inflation. that is their job and they are going to stick to it. they will invert the curve and that will bring about the financial pickup. cycles, we have had a double inversion. tom: what is a double inversion? nancy kerrigan did that at the olympics.

what is a double inversion? stephen: it inverts the first time and expectations adjust and the curve steepen's down. bubble is an example. it was not until they destroyed the corporate bond market that that was the end of the cycle. keeping him less gray is that the idea that the fed needs to raise rates so they have room to come down the next time they have a hiccup. how do you respond to the need for the fed to raise rates? stephen: that has always been a bad argument. you do not raise rates to set you up for something you're capable of tripping yourself. that has been a weak argument. the fed has been noticing the upward movement in the inflation. they are at the 2% level.

they are not going to fight it aggressively. there is likely to be a cyclical creep. we are at low rates of underutilized resources. we do have access supply counterbalancing that. we have a stronger currency counterbalancing that. there is a tendency for the economy to build more inflation pressure. it is going to happen again. you have factored in for 2019 on the fiscal side? stephen: no change from where we are now. we have got it locked in. going to get much accomplished that will influence growth in 2019. whether you can start talking about 20 is a different story. i expect little to come through that will help the economy beyond what we have in 2019. guy: the president puts so much

store by what happens in equities would want to keep the show on the road. it provides him with firepower to persist with the trade story he is pushing with china. there is oh is this pressure for the politicians to do what they want. there is an election coming up that could change the framework under which he has to manipulate and that will be interesting to see what could happen in 2019. tom: turkish lira, right now. you are listening to all of this into your colleague james sweeney, the idea that we have to readjust what companies will do at the top line. i remember honeywell did a person of organic -- 8% of organic revenue. do you assume the top line comes in? jonathan: they are changing

their business models. if you have a weaker trend growth, if you believe that the gdp,r term trend is 2% companies want to lower their capital intensity and focus on services, the software models out of tech companies dominate and it changes the nature of the way these companies operate. u.s. companies do a great job of that. non-us companies are not adjusting as well. , somethingh lira we're watching this morning. steven ricchiuto with us and jonathan golub. we have got an equity guy, and economic sky. speaking of economics, do the math. kocherlakota, the university of rochester in the 8:00 hour. this is "bloomberg."

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tom: the beginning of the diplomatic season in september and a busy october. that would be the president of france speaking on foreign ,olicy and he speaks on turkey turkey unraveling this morning, not trading for days. at 6.23, unable to find any bid. the single best chart. --links and steven ricchiuto it links and steven ricchiuto and jonathan golub and isaac boltansky. this is the deficit and the idea

of where this is going and it is a -3.7 deficit to gdp. the assumption is we migrate down to something, back to the 1980's. with us right now is isaac boltansky of compass point. is any policy going to get done in washington against the backdrop of more debt and a greater deficit? isaac: no, we are for the year. -- we are done for the year. next year, with democrats in control of the house and republicans retaining the senate, it is going to be about investigations of the president and a few big moments of legislating around the debt ceiling. steven ricchiuto, when you look at this, i go to the report that was buried, you are looking

at a 2% rate, is washington ready for economic growth? stephen: know, they are not ready for cbo type growth. thatngton has this belief 3%-4% growth is sustainable and it is not. they do not get it and that is why you have deterioration. you are not getting investment spending off of this tax cut, you're not getting consumer spending. all you have done is you have widened out corporate margins so he can do his america first game that would squeeze corporate margins and leave corporate america in good positions while -- which is why this street were is going to drag on. guy: isaac, if the republicans do lose the house, if they do not do well in the midterms, how

will they appeal to the base buyout macro economics -- via macroeconomics? the republicans, if we assume they are going to lose the house, the republicans will return to the call of focusing on the deficit. it is easier to focus on the deficit when you are in the minority party than when you're in the majority party. they president is going to continue to pay of it to the things he knows. the america first agenda is chief of mungo's. chiefre logjam -- is among those. the more logjam we have, -- tom: if we assume the democrats take the house and that is an

assumption, the first wednesday of november, is it the same old in washington or can we get any initiative in 2019? isaac: we are going to have lots of talks and hearings about donald trump and his businesses. chart,want to bring up a this is turkish lira that we're watching this morning. it is coming off the quiet of a few days of no trading and we go with a weaker turkish lira now. means a stronger dollar as a general statement. what does a stronger dollar due to your multinational world? jonathan: not as much as you would think. the dollar isand

a 1% drag on earnings. stronger,ollar is people want to be in an appreciating currency. i look at this lira chart you have and if you were to look at other real currency crises over is the third or fourth inning of how bad this could get. while we are making this a headline, the downside of turkey ifs -- the downside of turkey does not manage the situation well, this is not yet disruptive. guy: london is out today so there is light volume. stephen, i would like to ask you a question about financial conditions. is a big part. conditions are easy. the markets are long the dollar.

how much does the model and the fed thinking change if we were to see the dollar coming down? stephen: you are asking a powerful question. fed, it isust the what happens with the global situation. a lot of problems are related to commodity oriented countries. a stronger dollar makes their life more difficult and their ability to fund their overseas debt more difficult. it does not create that much inflation pressure within the united states because we are the reserve currency. it becomes more of an effect on weaker commodity prices than helping to dampen the topline inflation. whered is worried about inflation is going to go, not where inflation is and that is why they are going to do the hikes. tom: i want to show this lira

chart now. the is lira, this is standard deviation move of a couple of weeks ago. this gives you perspective on the scale of the weakness of the turkish lira this morning. jonathan golub, thank you, steven ricchiuto, thank you as well. please stay with us. isaac, thank you as well. this is "bloomberg." ♪

>> this is bloomberg surveillance. i'm taylor riggs. let's get the business flash. in china, public criticism for didi. state run media rebuked its most viable startup for safety practices after a second female customer was killed by a driver. it has halted its service to reassess its business model. it has fired two senior executives. exxon mobil has been looking to buy renewable energy for delivery in texas. the company asked wind and solar's -- solar power suppliers to pitch contracts that would last up to 20 years. bloomberg analysts said exxon

involvement is a sign that renewables can be cost competitive. "crazy rich asians" was the top movie in north america for the second week in a row. the film about lifestyles of singapore's rich and famous took in $25 million at the box office. the distributor, warner bros., has started working on a sequel. that is your bloomberg business flash. guy: thank you taylor. is trading down 3% premarket this morning. facing possible bumps in the road after elon musk reversed his own plan to take this company private. his latest tweet after he first loaded that idea. that was followed by news that a senior executive was leaving the company. joining us is the bloomberg european autos editor. what do we know about the reasoning behind this? from what we can gather, his

tweet about the funding being secured was far from complete. then that went , a lot of things were being done and there was an interesting report in the "wall street journal" the talked about o and fro'ing but also talked about that he was not happy with some of the investors lined up. one of the investors was volkswagen. guy: you wonder, volkswagen is about to bring out what people are calling tesla killers. what does the board need to do now? is right ono that

the edge. what does the board need to do? i think you have hit the nail on the head. been, i doeks have not want to say turmoil, there have been surprises. in board needs to do work terms of getting a sense of calm into the company but also telling the market their ceo is in a position to continue leading that company. guy: thank you very much. coming up on bloomberg daybreak , narayana kocherlakota. this is "bloomberg." ♪

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off. 17 days after elon musk wanted to take tesla rabbit, he buckles under pressure. even as the car flattens, traditional economic models don't provide clarity for that i experience mexico and the u.s. are waiting on deal. they are close to an agreement. it is a sad day in the nation's capital because of the death of john mccain. welcome to bloomberg daybreak on this monday. i am david westin with alix steel. alix: i wasn't surprised. i didn't think it would be as quick. i didn't think it would be the next 24 hours. david: a real loss, particularly of this man at this time.