♪ francine: the single worst of trade deal ever. president trump brands to leave the wto if it does not shape up. tidjane thiam shrugs off trade tensions. he tells bloomberg that for now the global economy will weather the trade storm. currency contagion. the argentinian peso plummets further. markets --ency emerging markets get hit. ♪ nejra: welcome to "bloomberg surveillance." let's check in on the markets.

in the equity markets, the focus seems to be on trade. many comments from president trump on that, not just about wto, but also about china, the eu, and also tariffs. european equities were lower by 0.6%. it is carmakers that are leading the losses in european equities with industry groups. emerging markets as well as is what we are keeping and i on. emerging market currency headed for a monthly loss in august, the fifth monthly loss, the longest losing streak since 2015. the indian rupee hits a record low. the turkish lira strengthening. we have seen weakness in other currencies, of course we mentioned the peso, and also the south african rand dropping to a two-year low. bread take a look at whit shares.

it has announced that it is coffee tosta coca-cola. whitbread react, jumping at one point as much as 19%, the most since 1992 for those shares. an exclusive you interview with you was president donald trump. that is definitely -- u.s. president donald trump. that is definitely something to look out for. taylor: argentina's currency crisis has deepened as an emergency interest rate increase failed to stop investors from pulling their money out of the country. the argentinian peso extended losses. monthke, the second this come was the latest attempt by policymakers to defend a currency that has lost more than

half its value this year. p.s. has slid to a two-year low. indonesia and as india have seen their currencies and bonds come under selling pressure. to a return of foreign funds into its debt market. legendary investor warren buffett has told bloomberg that the u.s. banking system is "in great shape." he also said he is still buying stocks, even amid record wall street ties -- highs. >> i am buying stocks. i am buying them because i think they will be worth quite a bit more money 10 years or 20 years from now. i don't know if they will go up or down tomorrow, next month,

next year. i do know that they are good businesses. taylor: u.k. companies became more pessimistic in august as concerns that brexit would hurt growth increased. business confidence slid to the lowest level since december, with both trading prospects and optimism towards the wider economy dropping. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. nejra: thanks so much. president trump has threatened if itl out of the wto does not treat the u.s. better. i would say the wto was the single worst trade you'll ever made. if they don't shape up, i will withdraw from the wto. nejra: another sign that the

trade disputes between the u.s. and its allies are solved -- are not solved. pres. trump: it's not good enough. they do a lot more auto business than we will ever do. first of all, it is not just tariffs. to have barriers up to our cars. they would take the barriers down and charges no tax, but it is not enough because they will always sell more cars. their consumer habits are into buying their cars, not our cars. nejra: jean-claude juncker responded this morning, saying that the eu will retaliate if trump raises car tariffs. joining us is our international government executive editor and also joining us for the hour is christian keller and james athey . before we get to the trade story, i just want to quickly break some news coming through from the bank of japan. size of someng the

september jgb buys. i am not sure if the yen is reacting to that. i would it not expect that it would react too much. 2%.lar-yen up by 0. that is pretty much what we have seen for a lot of the session. let's get back to the trade story. we heard a number of things from president trump. where-ranging interview trump talked about the wto, the eu, and china. didn't come through as a more hawkish stance from the president? >> certainly -- did it come through as a more hawkish stance from the president? trump, president everything is a deal, good or bad. he will look at you and say, what am i getting from you? he is very transactional. the other things that these

comments tell us is that he is under pressure at times. the midterms are coming up in the u.s. so now he is going for europe, the eu, the view to eu, thenada, -- the wto, canada, mexico, iran. nejra: at of everything he said, what should we take more seriously -- out of everything he said, what shall we take most seriously? >> to me what stood out were his comments on europe. when you look about what he is saying about europe, only in late july he and jean-claude juncker had a handshake deal on trade and he quickly blew that up. his a attacks on europe and the could mean that

weakening of europe means that some of those smaller states in europe to gravitate -- could gravitate elsewhere like china, and russia. the overall structure that underpins global trade since world war ii, it's a great thing that stands out. nejra: we see equities overall weekend. , you are looking closely at this trade issue. do you see significant potential fallout from europe? christian: the problem is that these things come overtime. if you look at it, if you were the go into a world where we no longer have the multilateral , and we go into bilateral trade agreements, each country, we will get to a high level of tariffs and the world overall, and that will have -- tariffs in the world overall,

and that will have a big impact. nejra: james, you are more relaxed on this issue, or certainly were last time when we spoke to you. does that mean you're sitting on the sidelines or putting your money where your mouth is when you say the trade issues will be resolved? james: very hard for me to sit on the sidelines, so i am very sanguine. ounces,e problems, and inefficiencies -- imbalances, inefficiencies. has really been able to use the system well to its advantage. that is a set of common regulations and therefore acts as a non-tariff barrier to trade. in terms of the issues here, i think they are real.

is able to identify where there are weaknesses to -- to get to a negotiating position. personally, i think this is a necessary step to get to a more free and fair global trading environment. --ra: what would suggest success look like in these negotiations? christian: there is no doubt that the wto has flaws. china has abused some of the rules. i think president macron said we need to adjust the wto. the difference between that and really breaking it up and going to bilateral trade them i think we would see over the coming months how it pans out. china will likely respond to the tariffs. i think at the moment the market likes to sing green about it, -- nguine -- the market

itnguine.e sa about nejra: does this mean that the market thinks for now we will keep risk on the table? james: to me it depends where you put the risk on the table. european equities have seen 24 weeks of outflows. we have seen emerging-market debt and currencies really struggling, and yet u.s. currencies are hitting new highs and the nasdaq are hitting new highs. the u.s. will definitely be hurt a lot less if this does escalate. it is a nobody's interest for this to escalate. because of those motivations, i think it is right and proper that we only have a small percentage chance of these more

dramatic negative outcomes priced in. nejra: thank you to james athey and christian keller. they stay with us. talking trade with tidjane thiam . we will bring you our exclusive interview with the credit suisse ceo next. this is bloomberg. ♪

♪ nejra: economics, finance, politics, this is "bloomberg surveillance." let's get the bloomberg business flash with taylor riggs. donald u.s. president trump has said he is considering the capital gains tax break. the capital gains change would cut taxes for investors when

selling assets such as stocks and real estate by adjusting the original purchase price for inflation. he made the comments an exclusive interview with bloomberg's editor in chief. it,. trump: thinking about i'm thinking about it. that are a lot of people that love it and there are some people that don't, but i am thinking about it very strongly. whitbread shares a sword evening after it agreed to sell costa coffee to coca-cola. itbread said the majority of proceeds will go to shareholders. to limitegulators plan the number of new online games and the total number of titles. tries toll as beijing mitigate the impact of gaming addiction among the nation's children. the new measures come on top of a freeze in game approvals

nationwide. shares of game related stocks across asia fell on the news. that is your bloomberg business flash. nejra: thanks so much, taylor. emerging-market assets are heading for a monthly loss. declines in argentina and turkey -- of contagion. tidjane thiam spoke to bloomberg. tidjane: world managed economies are safe. there are no thing as emerging markets. there are well-managed and less well managed economies. those who have public finances in order and have significant forex reserves are safe. when people fear contagion, they are wrong. contagion from

poorly managed economies to well-managed economies. a current account balance problem makes them vulnerable. it is not because they are emerging markets. it is important to manage the fiscal situation responsibly. it's important to have significant foreign-exchange reserves. you will find that a lot of emerging economies are in that position. the ones that have come under pressure, whether turkey or brazil, have more fundamental macroeconomic problems. authorities and it is clear that argentina has some real challenges to deal with. to extend that to further test to other emerging economies -- to extend that to other emerging economies is too simple. i don't believe there will be

much contagion over time. in the short term, there is always kind of a very strong, spontaneous reaction, but it's not justified. >> the impacts on european banks? in a muchanks are different situation than they were back then. you look at the size of the turkish economy back then. i'm very positive medium to long-term on turkey. demography is one of the key reasons why. no. the banks have regional exposure to turkey and --. >> has credit suisse have to unwind and positions in turkey -- any positions in turkey? tidjane: no. >> there was reasonable appetite for yesterday's options of

italian debt. are the markets underpricing the risk coming out of italy? tidjane: i would be very cautious in any situation to say the market is mispricing. i am not close enough to that situation to have a strong opinion. i think we need to see in the coming months what involved in italy. >> what you expected the ecb to step in at some point -- would in atpect the ecb to step some point? tidjane: i think it would do what is necessary. we have seen over time, i think the euro is resilient. i was never worried when portugal, ireland, greece, it , i was never concerned. europe has a rich history.

i think all of the decision-makers are determined to do with -- whatever is necessary in the end to make sure that the euro continues. nejra: that was tidjane thiam speaking to tom mackenzie in beijing. says he does not regret appointing jerome powell as fed chairman, even after criticizing interest rate hikes by the fed. he made these comments and an exclusive interview with bloomberg in the oval office. andl with us is james athey christian keller. everyone had stars in their eyes at jackson hole as jerome powell spoke. james, you want to focus on what bloomberg is calling the financial stability star. a different picture to the neutral rate? james: yes. i read that article a few days ago and it was a bit of a hallelujah moment.

to me it is a philosophical question. this is not about the academics ,nderlined, the economic theory this is about the notion of making decisions under uncertainty. what you can and cannot know. what we have seen in the build up to 2008 is that inflation is not a sufficient measurement of the potential for instability to build up in the system, potentially -- particularly in financial markets. i find it difficult to separate the notion of monetary policy and financial stability. they are two sides of the same going. you cannot achieve your monetary policy goals if your financial stability is uncertain. jerome powell is a shift away from a very academic approach from one that is more pragmatic and holistic. nejra: you say this could be a philosophical discussion.

in some ways it has implications for new monetary policy -- for monetary policy. i kept asking people whether actually the fed should be getting ahead of itself a little bit and perhaps taking a faster hiking path than what is being signaled or what markets expect. financial stability should maybe come into that. christian: it's a difficult question, right? -- economists from the u.s. are quite aggressive. we see four hikes next year. would that invert the yield curve? when on the market is focused on this because every recession was preceded by an inverted juncker -- inverted yield curve. suddenly create the financial stability but -- that you want

to prevent by hiking rates. i agree with jerome powell. i think he is a concise communicator. i actually think that the new he has of just staying as it is and dots,ng the importance of stars is refreshing and adequate. nejra: anything to add to that? james: i completely agree with christian. it is all about middle ground. if you are look -- to look at the potential costs of a single policy path, you need to win that against the potential weigh s -- way that -- that against the potential benefits or costs of another path. dovish,ubt, you are because that cost less.

i think that is a short-term misjudgment, because it is easy hike inf you like -- the markets and economy react badly quite quickly, you can say i made a mistake. point.that's a good cost of being dovish. it brings us neatly to the boj. we got some headlines saying that the boj lifting the size of sum of its september jgb buys and limit purchases. >> i think this will continue. if the fed moves ahead -- we have all reasons to believe it that they will because the u.s. economy looks indigent. we have an -- in good shape. we have an ecb that is in a difficult situation. they still have a negative rate of 14 basis points. boj, we just saw the headline

coming in. they are already not able to buy as much as they officially declared, 80 trillion per year. in september we have to look at what it actually means. the boj is already acknowledging something that james has said. they live with a flat and negative yield curve at the short end for so long that it starts to hurt the financial system. they don't know how to get out of it. i think they would like to, but they don't know how to manage it. arethe other central banks risking whether they can get into a boj scenario. nejra: how does this feed into global asset allocation? james: we can't understand quite what this step means. we need to look a bit closer. in terms of the more medium-term outlook in the boj policy, i think one of the things that investors got wrong in 2017 was on powerful boj policy was

locking down their 10 year yields and leading to that financial repression to go offshore. i am more hawkish boj. attractive toore domestic investors could be a big hit for demand for u.s. government bonds, german government bonds. nejra: the 10 year jgb yield trading at 0.1% right now, 10 basis points. james athey and christian keller stay with us. coming up, we discuss why an emergency interest rate rise failed to stop investors from leaving argentina. this is bloomberg. ♪

nejra: economics, finance, politics. this is "bloomberg surveillance." i'm nejra cehic in london. buy-cola has agreed to

coffeescoffees -- costa to step up its battle with nestle. the eutrump rejected tariffs. 'indonesia -- indonesia's rubio falls. falls.a you can check out all that across all of our platforms. for now, let's get to taylor riggs. donald trump has threatened to pull out of the wto if it doesn't treat his country better.he has long called for the u.s. to take a more aggressive approach to the organization, arguing that it is incapable of dealing with a nonmarket economy such as

china. america withdrawing from the wto would potentially be far more significant for the global economy than even trump's growing trade fight. i would say the wto was the single worst trade deal ever made. if they don't shape up, i will withdraw. taylor: donald trump has ejected the european union to scrap tariffs on cars, likening the block's trade policies to those of china. after thejust hours european commissioner told parliament lawmakers that the eu was willing to bring down even our car tariffs 20 if the u.s. does the same -- to zero if the u.s. does the same. >> it's not good enough because they do a lot more auto business than we will ever do. first of all, it's not just tariffs, they also have

barriers. they will take the barriers down and charge us no tax, but it is not good enough because they will always sell more cars. their consumer habits are to buying their cars, not our cars. taylor: warren buffett has told bloomberg that the u.s. banking system is in great shape. the berkshire hathaway chairman and ceo says he is still buying stocks even a bid record wall street highs. >> i'm buying stocks. i'm buying them because i think they will be worth quite a bit more money 10 or 20 years from now. i do not know if it will go up today or tomorrow or next year. i know that they are good businesses. taylor: global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs, this is bloomberg. much.it hass so been an ugly august for emerging

markets. argentina is one of the latest casualties. the latest currency crisis deepens after an emergency rate increase failed to stop investors from pulling out money.the record rate hike was an attempt to defend the peso after a lost more than half its value this year. we are joined by sebastian and christian and james. what i feel like i have learned this morning from what happened andhe indonesian rupiah what happened with the peso yesterday is that rate hikes don't always work. all,ey don't work at particularly if you are too late to the party. you have to be ahead of the curve if you want rate increases to work. your problem has to be monetary. it shouldn't be fiscal. what has happened in argentina and other places is that what

has started as a monetary problem has become a fiscal problem. the dichotomy from a growth oriented government and a truly hawkish central bank, looking at cross purposes against each of them and policy the sponsors don't really work. nejra: talk me through what is happening in the emerging markets space. if i look on the bloomberg and emerging markets against the dollar, the india rupiah has been hit. the turkish lira is actually strengthening. >> if there is any contagion, it is mostly sentimental, not fundamental. in turkey, we have been talking about a debt balance in the turkish lira for the past two or three months. the nature of the volatilities -- it doesn't mean it is rebounding at all. emerging markets have now become like this beautiful list

breakfast where the bacon is great, the sausages great, the eggs are great. but there is a drop of poison in the orange juice. that is making you not want to eat anything. you are not inclined to look at value all over emerging markets because of this poisonous corner. it has to do with the heterogeneous nature of the emerging-market. at some point in time, investors will start differentiating. 3 that differentiation -- nejra: that differentiation for you, is that present even the ur overall bullish? james: i think it is been one of the features of 2018, and that is exactly what we expected and what we will continue to expect while the major underlying cause of the market moves is the withdrawal of the liquidity charge. dollarbecome qt,

offshore is being squeezed. only when the tide goes out that we see who has been swimming naked. to some degree, that is what we have seen here. it is pretty much driven by the dollar. contagion, maybe is the wrong word.there is correlation between emerging markets because they appear in some benchmarks. if an investor chooses to sell the asset class, they're n -- the knockdown effect is that they are selling and other emerging economies as well. i still think this is a nervy time for the emerging asset class. point to come back to the about the, physical versus monetary position as well how much of this can be simplified to simply staying away from those markets that have current account deficits? christian: i'm not sure whether it is necessarily the solution -- investors are smart because at some point there is value. i think it is about having a

creditable monetary response. you are at 50% of your central bank overnight, a doesn't necessarily help. if you do it in coordination saying i will adjust my fiscal but iger incrementally, do steps that are credible to reduce the deficit, i think interest rate hikes help and work. it is a matter of having a package. same with turkey. i think it is debt cap bonds. maybe some fine-tuning here and there. the lira bounce today doesn't mean anything for the longer term. importantt is more for where emerging markets go from here in terms of looking at the dollar and what happens in china and the stability of the yuan? christian: contagion is always a matter of sentiment. markets sense something here.

the two things are going wrong for emerging markets at the moment, the past from those idiosyncratic policy mistakes that some countries have made. one is the global system -- trade system is at a threat. if china's global value trades break, that is a big issue for asia. secondly, to trade, the other issue is dollar funding costs rising. one thing that is happened over the past decade is everyone is that cheap dollar funding. we now have non-us bank dollar borrowing of over $11 trillion in the system. to, refinance that becomes more difficult it puts a lot of pressure on emerging markets. that is the common factor despite all of those heterogeneous elements we have in emerging markets. i think this is why investors generally are pessimistic now. nejra: where are the best opportunities across em asset classes? is it in some parts of the

dollar bond space because that spread on em dollar bonds, we have a chart to show, has widened versus treasuries above the five-year average? james: i think you need to be bullish or at least feel the bulk of the fx to make any of the asset classes particularly attractive at this stage. there is value, but timing is an important part of being an investor. the amount of money we have seen go into the em asset class, the potential for outflows. the outflows we have seen so far are relatively small. of course there is value at this stage as we have seen a large cheapening. i think from a timing perspective, i certainly don't think now is the time to necessarily step in. i think we're going to see better opportunities to buy. nejra: we will all look out for poison and our orange juice in the morning. james and christian stick with us.

warren buffett says he is always on the lookout for good value stocks. that is one interview you won't want to miss. catch that next. this is bloomberg. ♪

>> it's not good enough. they do a lot more auto business than we will ever do. in other words, first of all, it is not just tariffs. they also have barriers to our cars. they will take the barriers off and charge us no tax, but it is not good enough because they will always sell us more cars. their consumer habits are to buying their cars, not our cars. trump that was president

speaking exclusively to bloomberg about auto tariffs. if we take a look at how that is feeding through to the european equity session, carmakers some of the worst performers on the stoxx 600. taking aee daimler little bit of a hit their. volkswagen leading out of those three big german carmakers. legendary investor warren buffett has told bloomberg that the u.s. banking system is in great shape and he is still on the lookout for stocks. that comes as the oracle of omaha celebrate his 80th birthday. birthday. the earlyack to 1960's and 1970's, we were torn apart over vietnam. we go through all kinds of things. we went through a great depression. we went through a great panic that almost turned into a great recession not that long ago, but this country moves forward. the luckiest person in the history of civilization is the

baby being born today. we have the problem of a family that is getting richer and richer and richer. and the market system, which worked wonderfully in terms of delivering output, now gives more and more to the people at the top. if you go back to hundred years, 80% of the people on the farm, if you are the best farmer in the world are best for hand and i was the worst, there was some differential and our ability, 100 --wasn't 1000 41 or 1000 for one or 100 for one. >> we are coming up on the 10th anniversary of the great financial crisis. most people agree that financial markets are safer because we have taken more reserves out of the banks. >> we have added to the reserves in the banks, and we have curbed

their activities to some extent. the banking system is in way better shape than it was in 2008. >> but in part, it has pulled back some and other asset managers have stepped in. we now have blackrock with $6 trillion. we have shifted from bankers to investors, does that make the system safer? >> the system will always have a panic. it will not always come from the same cause. dodd-frank did one thing, actually will probably make it more difficult to deal with a certain kind of panic is it is the power of the fed to act in a panic unilaterally and say this will and now. i think that was a mistake. >> do we need federal regulation of the nonbank banks? >> we need some kind of

regulation. people do massive lending activities that we need, whatever their names, we need some kind of regulation. there is no question about that.the market system is wonderful , but animal spirits can go too far. >> finally, it is your 88th birthday. look back, 38-year-old warren buffett. if you are starting up today with the principles that got you to where you have gotten, would they still apply? a lot of things have changed. have they changed the fundamentals of investing? >> no, they haven't changed at all. you try to evaluate where a business is going to be and 5, 10 or 20 years and he tried to buy it at the right price relative to valuation. you leave alone the ones he tried to understand. the principles don't change at all. buffett,at was warren

ceo and chairman of berkshire hathaway speaking to bloomberg's david westin. james atheys are and nejra cehic -- christian keller. are we going to see more buying of equities to catch up to where the u.s. market is now? >> i think it given the tricky policy path we are now going to see, the first step is the most difficult psychologically for central banks. also, because these are economies with a lot of structural weakness and cyclical strength. that really does mean that if we start to take away the cyclical support, unfortunately, that is going to show up in terms of the structural weaknesses. regions like the eurozone i think the next 12-18 months is going to be incredibly difficult for mario draghi to step away from qe and move toward

hiking rates without being a disturbing for the emerging markets. i still think we are in a volatile environment. i think central bank purchases from the recovery, but i would equities.favor u.s. nejra: in the next six months to a year, does it lend support to the bull run continuing? the second corner over 4% -- there is no growth over 3% well supported by private. earnings per share estimates have been going up. you would think if the economy slows now, we do know that equity performance and growth doesn't always go hand-in-hand. there are now people trying to find new reasons depending on how the midterm elections go. could trump consider further tax cuts, etc..

james., i'm with it is difficult to see where we get extra momentum from here. i don't disagree that maybe there are tariffs, but i see more downside risk than upside risk. nejra: a lot of people have been saying to me that the growth we see now is coming up the price of future growth. are the gains we are seeing in equities now coming up the price of future gains in the sense that sometime a big correction could come and upset the market? christian: it is widely discussed that if a recession comes, we have very little tools left. themselves input a very risky fiscal position. if you get a recession now and the fiscal balance goes out to a deficit of 6% or so, you need to do a fiscal adjustment and a recession. i think this would make the u.s. a bit of a risky experiment. we are all loving the growth right now, but let's not forget it was bought by deregulation that was granted by a huge tax

package. comes at the risk of the future because if growth doesn't go at it path of 3% or 4%, we are going to have a deficit and somebody needs to pay for it. nejra: thank you so much to james athey and christian keller . stay with us throughout the day. we will bring you the bloomberg editor-in-chief's exclusive interview with u.s. president donald trump. coca-cola. with this is bloomberg. ♪

nejra: economics, finance, politics. this is "bloomberg surveillance." i'm nejra cehic in london. --a-cola gained a hot brand new brand and hot drinks.

thanks so much for joining us. great to see you. so muchd shares surging lead me to wonder whether coca-cola has overpaid here. benedict: this is certainly a good day for whitbread investors. the stock is up over 15% right now. whitbread has put costa on the block. they were under pressure a couple of months ago from activist and investors to reconsider their portfolios. sta. have co the criticism was these businesses don't really work together very well. they decided to do an ipo for that business, and they have now found an altogether more profitable escape route for this. coca-cola came around and they're paying almost $4 billion for this asset. the ipo would have mainly been

worth half as much. whitbread.y good for the question is, what will they do for the money. this is obviously, for the whitbread side, a great outcome. nejra: great outcome for the whitbread side, as you said, but for coke, what is the riskier? was this a wise play -- risk here. was this a wise play? benedikt: we saw archrival pepsi diversify with a bid for soda stream. these sugary drink companies are looking at alternative business roots in other growth areas. for coke, this is coffee. coke does not have a sizable coffee business at all. them.s a growth area for their entering a very competitive market. the u.k. is very competitive around the globe. we have starbucks.

jab holdings. -- this is a market that is highly saturated and competitive. nejra: bloomberg's double managing editor in berlin. "bloomberg surveillance." continues in the next hour. tom keene joins me. we will bring you more with bloomberg's editor-in-chief interview with donald trump. this is bloomberg. ♪

morning, contagion for a selecting emerging-market

currencies. they continue to weaken yet. is the mighty dollar strengthening? september beckons. there is no pass fail behind the oval office. the president gives himself an a plus. the attorney general struggling toward the quality c. it's the end of the summer of 2018. what do you do? maybe go to cash. good morning, everyone. this is "bloomberg surveillance." i'm tom keene in new york with nejra cehic in london. you look at em currencies this continues.d it turkish lira does better, but there are a lot of other challenges out there for em, aren't there? nejra: yes, we saw the argentine peso slide yesterday. you see the rupiah take a hit again this morning. the indian rupee hitting a

record low as well. the turkish lira, the outlier for once. tom: this is the backdrop not for em, but maybe for chairman powell and mr. draghi, the idea of euro area inflation slowing from 2% away from a forecast. nevertheless, that is really quite a move. right now it's the friday briefing, here is taylor riggs. taylor: the big story today is the bloomberg interview with trump.nt the president is talking about the european union as though it is likely to be his next trade target. he told bloomberg the eu was almost bad as china -- as bad as china, just smaller. he rejected an offer earlier in the day to eliminate transatlantic tariffs. wto.s a warning for the it came in his oval office interview with reporters from bloomberg. >> i would say the wto was the single worst trade deal ever

made. if they don't shape up, i will withdraw from the wto. the wto is considered a cornerstone of the international trading system. a u.s. withdrawal could potentially have more of an impact than the trade hikes in china. -- fights with china. bloomberg has learned that the president wants to move ahead increase tariffs on china. the president says he thinks the u.s. and canada are close to a deal to revamp nafta. negotiators have stepped up the pace of talks, trying the administration's deadline today. the president told bloomberg that canada will make a deal because ultimately, it has no choice. we have learned a preliminary deal appears likely today. global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more

than 120 countries. i'm taylor riggs. this is bloomberg. tom: thank you so much. let's get right to it. futures turning. curve flattening. euro-dollar really not doing much against each other. american oil, $70 a barrel. showing the equity angst we saw yesterday. the idea of more tariffs action with china. dollar weaker. turkish lira up to 6.8 for yesterday, comes in a little bit with some strength. rupees with ana example of epa's. a 71 for the indian rupee is just job dropping. nejra: you know what else has been job dropping is the rupiah in indonesia hitting the lowest since the asian crisis. what i have shown is the lira,

as you did as well because there actually a little bit higher today but also the rand recovering today from a little bit of the losses we saw yesterday. european equities lower on a lot of the straight talk from president trump carmakers really taking a hit. tom: it was in the intimacy of theoval office with portrait of andrew jackson overlooking our editor in chief. here is mr. trump on eu and china trade. >> they create standard that make it impossible as they have standards, like with medical equipment, they created new standards so we can get our medical equipment. not at the standards are higher, but they are different, so our companies can get the medical equipment into europe. you have to change your ways because the european union is

almost as bad as china, just smaller. tom: define it as you will. maybe it is trump-lateral or some sort of bilateral, or perhaps it is multilateral. here's the president on the wto. >> i would say the wto is the single worst trade deal ever made. if they don't shape up, i will withdraw from the wto. tom: joining us now from washington, not in the oval office is our chief washington correspondent. i thought it was fascinating to have the interview in audio, rather than the visual extravaganza of tv. you hear this act every day. what was distinctive about the interview? takeawaythink the big is the attorney general has a job until after the midterm elections. jeff sessions is going to be safe and his job after the

midterms.after the that is really notable and driving a lot of conversation here. outside of the beltway, in terms of the economic developments out of this, president trump double down on his criticism of the wto, in addition to saying he actually liked the capital gains. they were interesting things in terms of the economics of this. it comes at a time in which just before the interview, bloomberg exclusively broke that the $200 billion in tariffs against china are still very much in the pipeline. theme, ise overriding that there is an election in november. who is advising the president on what he should do to secure a republican house? kevin: there are a couple of folks. -- the outside apparatus that the trump administration has truly against itself and ingrained itself in the republican national committee.

that.k you are seeing they, are hard at work building an apparatus not just for the midterm elections but also for 2020. if we think about what president trump said on trade, the comments on the wto and eu but also the tariffs on china, was this a definitively more hawkish stance from the president on trade? kevin: i think it was a hawkish interview. i think you double down on his hawkish proposals and principles. and also comes at a time for their seemingly appears to be momentum for some sight of breakthrough. even as it comes as a bilateral deal with canada and mexico, and not trilateral. with specific regard to the world trade organization, and the president not accepting the offer on auto tariffs, i would note that i think a couple of weeks ago and months ago, earlier this summer, there was a

next occasion from european allies that they had calculated the president would somehow deal with the wto. administratione did not take the bait. yesterday, the president doubling down in criticizing the wto. ajra: on trade, do you get sense that the presidencies the eu as much of a foe as china. kevin: on trade, yes. with regard to national security, no. the president within the last 24 hours being extra critical of china, particularly for what is going on in north korea. in terms of trade, yes. i think he has been just as hawkish, to some extent in his rhetoric on europe as he has with china. nejra: thank you so much. leslie us now is

vinjamuri. great to have you with us, as always. you describe this as quite a next ordinary interview. what was extraordinary for you? leslie: in some sense, it is more of what we expected from donald trump. to have an american president having quite an intense set of words when it comes to, especially trade, to threaten to take the united states of america out of the wto is really quite extraordinary, alongside a number of other measures. i think the key thing here is that the president is pushing very hard on all fronts. he is not choosing a single target. he sees himself as a president that can really rewrite the global trade system in america's interest. this is the thing he is most committed to that he really thinks he can make movement on. his strategy is not to double down on one target, china, but he really hit on all targets so

that he is threatening and thinking he will make again on nafta and perhaps on china. point, the extra $200 billion on china, to some extent you could say we were kind of expecting that he would be hawkish on that. is it more surprising that he came out so forcefully against europe? leslie: it is, that he said he certainly wouldn't consider the zero tariffs on autos. he is more things on his mind, most important, the nafta agreement. he is wanted that since before he was elected. it is important that he gets it now so that this mexican president can sign it on december 1 before he finishes. that donald trump can claim it as he approaches the midterms. the signals that the comments to europe, the timing of the $200 billion, it's always speaking back to the thing that he is most concerned that in this moment. tom: you are an expert on the game theory involved here. as i said, trump-lateral, my way

or the highway. we are hearing that right now on canada in spades.when did people just start saying to him , no. no? does trudeau and xi say of all, america has a very big market and economy, very hard to say no. remember that canada is playing a long game. it has been working the trade issue with congress, a number of interest across the united states there intelligently. it stands to gain potentially from what looks like it's going to be a renegotiated nafta deal. there is an argument out there that if trump pushes hard on canada's need to remove tariffs on dairy, but that is actually something the government in canada might like. i think a number of states are looking at this and access to american markets are important.

certain things be negotiated aren't necessarily against their interests, which is enough to make it worth dealing with a president whose language is frequently very disgruntled and his tactics are hard to work with. tom: to change gears here, clearly what we are seeing is emerging-market angst. some would say we began to see contagion yesterday. from your chatham house view, are the institutions that will come to the assistance of these em countries, are they prepared and ready to do that? leslie: i think it is very difficult right now in part because there isn't this global leadership. you don't have a sense of the major economies working together, whether it's through the g20, certainly not for the g7. what is a concern of going on at the global level, how is it going to spillover and affect the regional management?

that absence of leadership is really critical. we have a united states president that is clearly not in favor of multilateralism, that really hates things like dispute settlement that really are the of thefor independence multilateral institutions. that appearance of defection from working collectively or collaboratively, inability is going to have an impact on the signals -- inevitably is going to have an impact on the signals of emerging markets. tom: thank you so much. throughout the day, we will have further analysis of our interview with the president of the united states. about. talk we will do that across our bloomberg platforms through the day. please stay with us. worldwide, much more to come, including a view of the emerging markets. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." president is stepping up his criticism of technology firm, from a very liberal point of view. the president told bloomberg that companies such as google, amazon and facebook meet in -- may be in an antitrust situation he said he cannot. comment publicly on whether they should be broken up. the bank raises benchmark lending rates by 15 percentage points to a global high of 60%. the peso is down by 209% at one point. it has lost more than half its value this year. the ceo of credit suisse is shrugging off the impact of the trade hike. said interview, they

client activity has dropped within the last two months, but they're optimistic. >> for the time being, i remain positive. i think it is relatively contained. most of the world -- taylor: that is her bloomberg business flash. nejra: thank you so much, taylor. just want to bring you some headlines about crossrail in london. basically, this project delayed until the autumn of next year. that is what we are getting through on these headlines. the elizabeth line by central in 2019.o open the crossrail is citing extensive testing and final infrastructure needs. coca-cola has agreed to buy the u.k. chain costa coffee for 3.9 billion pounds. owner whitbread

sword the most in nine years -- soared the most in nine years. >> i am buying stocks, but i'm not buying them because i think they will go up next year, i am them because i think they will be worth quite a bit of money in 10 or 20 years. i do know they are good businesses. is thejoining us now deutsche bank of european equity strategy. over the next six months, you see the stoxx 600 pretty much flat. that doesn't sound too interesting. you have interesting overweight and underweight. what are you overweight? banks are underperforming very sharply, growth stocks underperforming. we think this trend is coming to now.d right we think growth momentum is going to pick up and benefit these victims of the slowdown we

have seen so far. nejra: you are also quite positive, is that the do with your expectations for china? sebastian: the main drive of the mining sector is copper. there is a lot of negative either. -- negativity there. we think that these are trends that are at the turning point. we see downside for the dollar over the coming months, upside for the china pmi. together, these two developments would help copper and mining. tom: that is a breath of sunshine on a friday here at the end of august. loving this optimism. the backdrop is, you have em contagion. how do you distill em contagion worries into your optimistic equity view? sebastian: that is a great question. . the main reason for these idiosyncratic troubles you have

seen this year is dollar strength. look at the emerging markets over the last 20 years. there is one main driver, which is the dollar. in a period of dollar weakness, like laster where the dollar dropped 9%, life was sweet and easy. it is when the dollar strengthens that pressure is on. much.hank you so we will continue this discussion in our next hour. the president in conversation with bloomberg news. we look at the perspective and analysis, particularly driving to those midterms. horizon investments chief global next.gist is stay with us throughout the day. this is bloomberg. ♪

tom: let's look at a chart right now. ofs is euro swiss off brexit. franc.weiss are breaking down the new flight to quality swiss franc strength today. all of that brings to mind the distinctions between continental europe and switzerland. with us is sebastian of deutsche bank. i look at the success of the conglomerate concept in switzerland. nestle, unilever and the rest. ofen an update on the value these huge bonded companies, how cheap are they right now? sebastian: many of them are in

the food and beverage space. this continues to be one of the cheapest sectors on our evaluations scorecard. in terms of what is going to drive performance over the next what really matters for these investments is what is the u.s. bond yields going to do? recently, they have benefited from the fall in the bond yield from 3% to 2.8%. we expect the bond yield to go back up to 3.2%. tom: do the european, big multinational conglomerates becoming a more anglo-american use of cash model or are they going to be a very european model going forward? sebastian: they are highly international businesses, but the main question for us always is what is actually driving the performance? what actually makes the difference between whether they go up or down 10%?

the main driver historically over the last 10 or 20 years is the discount rate, the u.s. bond yield. that is our main focus to determine our positioning on these stocks. nejra: overall, it looks like you have a growth risk tilt. sebastian: that is right. as a rule of thumb, you want to be defensively positioned when growth is rolling over. if it starts to pick up, you want to go into the cyclical. nejra: sebastian is staying with us. bloomberg users can interact with the charts using gtb go. browse those charts and use them for yourself as well for future reference. this is bloomberg. ♪

tom: it will be september in .2% have not done

their summer reading. we know this. it is a perfect day. the heat wave has broken. the weather could not be nicer after difficult whether the last week very -- week. nejra i am happy for you. did not dods in their reading, let's take a look at what is trending. coca-cola has agreed to buy whitbread. it is buying it to step up its battle with nestle. trade will not escape ire for long. he said the block is almost as bad but just smaller. in third place, the repeal falls . -- the rupiah falls. second, warned buffett buys more apple as he says the iphone is under price.

here's taylor riggs. president trump says democrats a should not try to impeach somebody who is doing a great job. thehe interview he said stronger economy, his performance on foreign policy, and the danger of setting a precedent making it too easy to remove future present. -- presidents. president trump is considering a new tax break for capital gains. issued bloomberg key may a regulation that would index gains to inflation. the treasury department is studying whether could bypass congress on the matter. european central bank policymakers are pushing back against president trump entree. the president told bloomberg europe is am is is that is almost as bad as china when it comes to tray. he disagrees. -- when it comes to trade. he disagrees.

europe and i do find it serious to compare chinese and european trade policies. the european union is committed to the liberal international order both in security and trade. said toangela merkel is have made her choice for the next european commission president. he is the leader of the people's party in the parliament. she consulted with members of her rolling commission. east-west the new railway crossrail will miss its december opening day. willkesman said services not start until next autumn. more time is needed to make sure the rail well -- railway is safe and reliable. it will cost more than $20

million. 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." nejra: thank you so much. emerging-market assets are headed for a monthly losses as declines in argentina and turkey spot fears of a global contagion. we spoke with tom mackenzie about contagion risks, the ecb, and brexit. >> well-managed economies are safe. there are well-managed and less well-managed economies. there are economies with current account surpluses and have significant foreign-exchange reserves and are safe. when people fair contagion, there is no contagion from poorly managed economies to well-managed economies.

the countries of that are under pressure is because they have a significant current account balance problem and that makes them vulnerable. it is not because they are emerging markets. it is important to manage the fiscal situation responsibly. you will find a lot of emerging economies are in that position. the ones that have come under pressure historically have more fundamental macroeconomic problems. i met some of the senior authorities in argentina and mexico and argentina as challenges to deal with. to extend that to other emerging economies is too simple. >> in terms of the contagion from turkey, you think that risk is overplayed? >> i do not think there will be

contagion overtime. term, there is spontaneous reaction but it is not justified. >> the impact on european banks? >> it is manageable. banks are in a different situation than then. you look at the size of the turkish economy. i am positive on turkey. the demography is one of the key reasons why. banks have reasonable exposure, the banks were talking about. has credit suisse had to unwind positions in turkey? >> no. >> in terms of italy, we see concerns about debt. there was appetite for yesterday's auction. the yields have picked up slightly.

our other markets underpricing the risk out of italy? >> that is a tough question. to say theautious market is pricing things in. i am not close enough to that situation to have a strong view. we need to see that a in the coming months. >> would you expect the ecb to step in to support that? >> the ecb has clear objectives to manage inflation. it will do what is necessary. the euro is resilient. worried when portugal, ireland, i was never concerned. history and iich

think decision-makers are determined to do what is necessary to ensure europe continues. suissee head of credit on a wide number of topics. let us talk about the reality of banking. we are delicate when we do that with sebastian radler. he is not appropriate to speak on deutsche bank, their comments on recent days. we can talk to about this word scale. scale this, scale that. is scale for e u banking different than scale for american banking in terms of people making money in equities? sebastian: you are talking about the right weight to run the business -- the right way to run the business. whatwe are focused on is conditions will be stocks go up or down. there are main drivers.

the first is the growth sentiment we discussed. is the 10 year bond yields in germany which has fallen. we think they will rise 30 basis points by the start of next year. the combination is a powerful positive environment for banking stocks. tom: are they in a position like the american banks where they will have cash to deploy? are they going to be sitting going share buybacks or further dividend increases? there are three things you focus on, one is buybacks, the second is dividends. we do not expect much on that front. will they start lending, accelerate their lending growth? we've seen a positive signal from the ecb bank they are

easing their lending conditions. it is positive for lending growth. as well as recently overweighting banks, you have done the same with carmakers. how are you figuring trade tensions, and particular the latest commons from president trump? sebastian: that is a good question. everybody was optimistic on autos at the start of the year. they have underperformed by 20%. why? they have followed the trajectory of growth momentum. if only that stops and this starts to pick up, it is a positive forecast. if we get tariffs, we will have to talk again. that is not our base case. nejra: speaking of underperformance, let me take you to a new function on the terminal.

it is called factors to watch. you can do a by region, do it by sector. we talk about fundamental investing. year to date, value has underperformed the most in europe. is this one of the reasons why your positive on europe? sebastian: being underweight value was one of our strongest calls and it is always the same call. if growth rolls over from a 20 year high and falls at the sharpest pace since the 2011 recession, value stocks are going to suffer and people are going to hide in world stocks. we have reversed that call because we think that growth slowdown is coming to an end. you for those delicate answers on banking. em,re going to focus on

getting an update on that currency matrix. interview, mark zandi of moody's. boy, did he nail or percent gdp. 12:00 noon today.

tom: good morning, everyone. nejra cehic in london and i'm tom keene in new york. always writesh interestingly for bloomberg opinion. he killed it with an essay in the last 12 hours. let's go to it. on fire, foaming at the mouth.

the difficulties for emerging markets have entered a new phase, gyrations do not look to a been driven by dollar strength. the heart of the problem, the federal reserve will raise rates over the next year and he goes on to beat up on commit -- on italy. jumped two-year yields 16 basis points on thursday. congratulations on the must-read of the morning. eml us about this asymmetry, panic but we're not getting dollar strength. we can blame the dollar for a lot of the starting point for all this. the dollar was strong and it switches back to being weaker against the major currencies but what is interesting is we are upting currencies tripping on other currencies. problem,en turkey's

argentina has had ongoing problems. it has been having to raise rates. the scary thing is the imf was ,he savior and for argentina the markets are not scared. it almost seems irrelevant and that is what worries me. turkey one time, italy one time. i trotted out irving fisher and this all reads down into the bond market but then into the financial system. i see indian two-year yields reaching 8%. what do you see in the bond or leadsat correlates into contagion. marcus: it is a lack of a global safety net which comes from a

hiking ratestly and you have not got the situation which is going to be helped out by em. we looked at the argentinian 100 year bond. what happens to that? that is a worry. we're looking at italian yield not backing away. there is no news on the budget and investors are not prepared to give them any benefit of the doubt. you are seeing other countries which should not be under the spotlight, say india, which are getting affected. south africa is another one. nejra: i am glad tom brought of fixed income. i have a chart which shows the impact of yield spreads rising above its five-year average. some might say we not being compensated for risk. this is a bigger, wider

move and this is not a value picking opportunity. it has gone against you. the emerging-market yields look attractive but the reality is, what ever yield you're going to get, like turkey, they're cutting tax on foreign currency deposits. you are losing 60% a year, it does not matter whether you get taxed or not. nejra: one thing i have learned today as well, seeing what happened with the peso despite the rate hike and the indonesian rupiah continuing to decline despite the fact that central bank has hiked this year. hikes do not work a lot of the time. marcus: nor does the imf. where is the global savior? qe atb is stopping there

the end of this year. the boj is making all sorts of moves. global liquidity is on the decline and that is going to accelerate. going toal reserve is take trillions out of its balance sheet. that is going to impact global liquidity. tom: that was nicely said. when we get the strong dollar, it is very poignant. and the come into play central bank as a leading institution. are we near where people start screaming and say, stop it? we are in the context if you are an emerging market. he has no reason to listen at the moment. % second-quarter gdp growth and rising inflation does not point to a federal reserve which is going to back away from hiking interest rates.

if you look at interest-rate probabilities, there is a rising expectation the fed will stick to this one hike every quarter pace for the next year shows you the market is not backing away. , thatt the two year yield tells you the market is not expecting the fed to back away. the rest of the world is on its own. tom: thank you so much. i will put out on social his wonderful research note. we are going to do more on currencies. geoffrey dennis will join us in the 8:00 hour. i'm thrilled to say steve will be with me this morning on radio. nothing gets better than that. this is "bloomberg." ♪

taylor: this is bloomberg surveillance. i'm taylor riggs. ride-hailingggest company lyft will try to beat over to the public markets next year. hired an advisor and will start taking pitches from banks next month. an ipo could take place in march or april. it turns out the google and

mastercard cut a secret deal to track retail sales. andalliance gave google asset for measuring retail spending. advertisers could track whether the ads they ran online lead to sales at a physical store in the u.s. the company's never told mastercard holders of the arrangement. there's a report that wells fargo is working with nonbank mortgage lenders to package for months and to investors. the bank is looking at lenders whose borrowers tend to be low income first time homeowners backed by the government. wells fargo is not commenting. that is your bloomberg business flash. flashback to the reality for europe. sebastian raedler with us of deutsche bank. you doesinated how

tech. is the way you do tech at deutsche bank that you have dubai american apple, microsoft or can you buy e.u. tech? we have got a tech sector and it is the most expensive in the european equity space. from thiser to model macro perspective we have been discussing because it has got a strong product cycle. it dislikes a weaker dollar because it has got exposure to the u.s. softening in growth sentiment which we are seeing at the moment. we are under way. aroundlar we think has 3% downside in the coming months and the sector is expensive. tom: should americans buy eu stocks?

we are underweight. we have a call relative to european equities to u.s. equities. our models are more ambiguous now. they point to reduce downside and they more balanced outlook heard we continued -- outlook. a weakerur call on dollar, what sectors does that affect? sebastian: one sector that has benefited from the strengthen the dollar is pharma. it has outperformed its with on the yieldsn the -- with bond yields. if the dollar weakens, it will come to an end and the key beneficiary from dollar weakness will be mining because it will push up the copper price here it -- price. tom: i have learned a lot. but aian raedler with us

more global tone. it is an exceptionally busy end of august friday. we have got currencies, the dynamics of the market and the dynamics of a quiet interview around the desk in the oval office. john micklethwait in then intense conversation with the president of the united states, the president focused on the midterms, on global trade, on capitol hill, and politics. 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, collect contagion friday. selected emerging-market currencies continue to weaken.

is the dollar strengthening? sitting behind the desk in the oval office, the president gives himself an a+. the attorney general struggles. look for more in higher tariffs. it is labor day, the end of the summer of 2018. maybe you should go to cash. good morning. this is bloomberg surveillance, live from new york, i'm tom keene. in london, nejra cehic. the crossrail is delayed and former global audience, how the ourabeth line -- inform global audience how the elizabeth line is not being built. nejra: personally, i do not think it is going to make a lot of difference for me. a lot of people might be recalibrating their route into work, a delay into 2019. tom: the crossrail gets you to

the dorchester? nejra: there are separate crossrail lines. i'm going to have to remind myself what they are. if you want to get to the dorchester, much better to get the underground. is still front and center and john micklethwait's interview with the president where he crushed the wto. with your friday briefing, here is taylor riggs. taylor: that big story today is the interview with president trump. the president is talking about the european union as though it his next trade target. he said the e.u. was as bad as china, just smaller. the president rejected an offer made to eliminate transatlantic auto tariffs. president trump has a warning for the wto in his oval office interview with reporters from bloomberg. >> the wto was the single worst trade deal ever made.

if they do not shape up, i would withdraw. taylor: the wto is considered a cornerstone of the international trading system. a u.s. withdrawal could have more impact on the global economy than the trade fights with china. president trump is preparing to ratchet up pressure on china in the trade war. the president wants to move ahead with plans to impose tariffs on $200 billion of chinese imports as soon as next week. when asked, the president told bloomberg it was "not wrong." the president says he thinks the u.s. and canada are close to a deal to revamp nafta. negotiators have stepped up the pace of talks, trying to meet the deadline today. the president told bloomberg canada will make a deal because it has no choice. we've learned a preliminary deal appears likely today. 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. .30 on dollar-canada this morning. we look at equities, bonds, a quiet market. let's get through this quick. we have got too much to talk about. 6.84 yesterday, doing better this morning. neargled out indian rupiah 71 as quite something on the moment. nejra: it is and you are right to single out the rupiah. i want to know the indonesian rupiah but that hit its lowest since the asian crisis as this contagion seems to have taken.

still worth looking at the currencies that are gaining. lower, thisities seems to be around trade concerns, carmakers hit. coca-cola,o mention, i am more coffee. coca-cola buying costa coffee from whitbread, it has seen its shares surge. coca-cola a little higher. tom: thank you. president makes his oval office different and president trump has the portrait of andrew jackson looking down. yesterday, in conversation with john micklethwait. here is the president on china and trade. they create standards that make it impossible because they have like with medical equipment, they created new standards so we cannot get our medical equipment.

they standards are different so our companies cannot get medical equipment in. you have to change your ways because the european union is almost as bad as china, just smaller. tom: many other topics but it turns to tax. here is the president on capital gains tax. pres. trump: i am thinking about it. there are a lot of people that love it, some that do not. to the politics, with the cabinet changing, and it is the midterms. here is the president on his attorney general. pres. trump: i would like to have jeff sessions do his job and if he did, i would be happy. notjob entails two sides, one. tom: the president from the oval office yesterday afternoon.

it is good to have wisdom. vallieret with gregory with horizon investments. midtermsrward to the and joining us as well, kevin cirilli who has followed mr. trump from the beginning. kevin, how has the discourse changed from when you first followed him? kevin: it has not changed much at all to be frank. the take away from yesterday's sessions was that jeff is safe until november but not much after that. he double down in terms of populist rhetoric with the world trade organization. tom: what are we going to see from mr. mueller? onngs happen in washington friday. at 3:37 is when they dropped the bombshell.

what are we going to see? kevin: there is no harder worker in washington than gregory valliere. you dive down into the weeds, president trump defended mr. weisselberg, one of the top officials of the trump organization. he praised him. despite him getting immunity from the mueller probe, the president is very critical of a lot of folks, not so mr. weisselberg. tom: 60% was the argentinian seven-day rate yesterday. i believe there will be a shutdown in washington toward the midterms. would you explain how a president shuts down washington as a political tool? gregory: i think he is so insistent he will make that. the more likely scenario is that

republican leaders in congress will dissuade him. they will convince them that is a bad idea one month before the election. nejra: the other thing kevin mentioned in that interview with president trump was how he doubled down on the trade rhetoric heard -- rhetoric. u.s. stocks closing lower yesterday. are we getting to a crunch point in this conflict? gregory: with canada, there is a chance we will get something later today. and aory is china deterioration in relations between the u.s. and china is imminent, with the u.s. imposing stiffer tariffs. if we look at the u.s. trade representative, the role he played a nafta, there was something this morning about him playing a bigger role in negotiations with china, what

would that mean in terms of the prospect of china backing down? gregory: kevin would agree there's so much inconsistency within the white house on this, whether it is larry kudlow or mnuchin, there are hardliners who do want to have a position. there are others who want to cut a deal. with this uncertainty, it is tough to have a climate they can produce a deal with china anytime soon. up everythingsum we heard from president trump on trade, a more hawkish stance. kevin: there was a hawkish tone. worth against china next week. the second on the world trade organization and the president saying no deal, with european country saying they would lift those tariffs.

the president said not good. finally, the potential for a nafta breakthrough. to go to the gossip of the moment. we are into september. r ld you frame for me where yvonne good trump fits in? -- ivanka trump fits in? the communications apparatus of view her as one of the key assets for the midterm elections. key swing states in the midterm the 2020 and ahead of election and in terms of policy, what you are noticing is a and a of legacy setting understanding of

who their base are within the public party. vanka had a meeting with lindsey graham who has emerged as one of the big friends of late senator mccain but also someone who is influential with the senate. they were working on financing for women in third world countries. tom: this is where i wanted to go which is kind of -- the kind of republican you see in this election. zeitgeist is that the republican party is dead. i'm going to say that the gentleman from new hampshire does not believe that. gregory: i kind of do. we thought marco rubio would be the nominee. it got annihilated earlier this week. it is a new party. one other point, i think the

threat to trump is not collusion with russia. the threat is obstruction of justice and by going around saying, i'm going to fire my attorney general does not help his case. have the chances of impeachment increased? chances ofw that the a house takeover by the democrats have increased, yes. they would like to keep quiet but i do think january, february will begin that. the key issue is conviction. i do not see 67 votes in the senate to convict. nejra: to that point, for markets, this not much of a concern at this point. gregory: i do think so. worry abouthave to a trade war getting nastier, foreign currencies, emerging markets. when you start to see euphoria,

we're getting close to that in , bull markets begin with despair, bear markets begin with euphoria. we're begetting -- we are getting to a point they could begin to worry markets. tom: this has been wonderful. thank you so much. kevin cirilli and gregory valliere. michael darda will join us from mkm partners. we will link together fed policy and drag it over into michael and toward the american equity markets. from new york, this is bloomberg. ♪

taylor: this is bloomberg surveillance. i'm taylor riggs. cash-rich20 other companies used to be the biggest buyers of short-term corporate debt. they've turned into sellers. a 300 billioned dollar a year hole in the market and making it more expensive for other companies to bar. the reason why apple and others are selling u.s. tax cuts are prompting them to bring home hoards which had been invested in short-term debt. president trump is stepping up his criticism of technology firms he says are favoring liberal points of view. the present told bloomberg companies such as google, amazon, and facebook may be in an antitrust situation. he said he could not comment publicly whether they should be broken up. that is your bloomberg business flash. we have michael darda with

us to begin your launch into september. he is with mkm partners and giving his advice on economics and part of this is the and mr. powell. let us link powell to the cross. for radio, do not feel bad, you cannot read it on tv. here we are with the supply curve moving and that means boom economy. do you believe in the persistency of 7.4% nominal gdp? i do not in the treasury market does not either. tom: clearly. michael: nominal gdp growth was rapid in q2. year-over-year, we're 5% growth.

the fact that bond yields cannot get over that 3% threshold and stay there despite growth at highest, record confidence levels, booming profitability, record stock market tells you that the treasury market is looking for slower growth next year, longer-term especially, slower growth rates than what we have been enjoying. tom: we had comments on chairman , bring thishe issue up as well as you can and they go right to the seven-day argentinian rate with that 60% number there. is chairman powell link to that headline -- linked to that headline? they are and that is an important story.

that combined with local policy dysfunction in argentina and brazil when you have the combination of sustained bed tightening and a sustained dollar appreciation, emerging markets underperform and you get debt blowups. we were talking about all kinds of stars at the jackson hole. should the fed be thinking about that ensures financial stability? michael: it is popular now to focus on that. the problem is, it is unclear how the fed would do that or how we are defining financial stability. -- is it some level of debt and if the fed is going to use the tools of monetary policy

definition ofome financial stability, does that contradict the mandate? there are more questions and complications then some of the advocates for that approach are acknowledging. you said the 10 year yield failing to hold about 3%, the bond market does not believe growth will sustain. what does the bond market tells about whether the fed is following the right policy? michael: the fed is on course for now. these gradual rate hikes have been appropriate. now thatsaw yesterday, the fed has achieved its inflationtarget, core on a three month, and 12 month basis at 2%. we are close to full employment if not over. the fed has met its goal.

the goal will be to call it quits before they overdo it. we will have a discussion about the flattening yield curve. they will probably do two more rate rises in my view. the bond market is telling us you will have to call it quits after that unless they want to play russian let. -- russian roulette. tom: i want to pick up on what nejra mentioned. dardat to know what star is -- what has permeated your work is your humility about the complexity within the system. do they have humility? that is where the debate about the yield curve comes in. fed are sayinge is the yield curve has been a

good indicator in the past when it has inverted. it is different this time. ben bernanke made that argument in 2006 and it was not different this time. was made inument 2000 when the yield curve inverted. it was supposed to be different because of fiscal surpluses. 1989, chair greenspan told us different this time. tom: drag it forward. michael: now, the argument is are nottortions from qe going to work as it once did. the yield curve is a long leading indicator. it -- in versions tend to predate recessions by nine to 24 months. tom: the bottom line here is the elasticity and the

responsiveness of the responsiveness of these dynamics is perceived to be different this time around. we are in control. i do buy it. michael: i do not either. to have humility and keep its i am forward-looking information, not just lagging data -- keep its eye on forward-looking information, not just lagging data. i do appreciate that. that is the challenge they face into the later innings of this tightening. nejra: is the fed taking less of a risk in staying on the dovish side? not think they are as dovish as perceived. they are right on track. they brought rates up 175 basis points, the balance sheet is falling in a sustained way. a lot of people thought we would have an economic accident or some predicted inflation that

never occurred. the business cycle is doing well, inflation is on target. policy abouthave properly calibrated now. the key is not to go too far. do not be too dovish, to hawkish. try to approximate the stars you mentioned. that, nominal gdp will stay at a sustained growth rate below 4%. we are running above that now but the bond market things we're going to see slower growth next year. that will be due to the lag impact of fed tightening. they are on track. nejra: do you see more of a risk of inflation overshooting or growth undershooting? michael: good question. indicatoris a lagging , demand-side inflation will tend to lack the business cycle.

if we do see inflation start to pick up and that starts to catalyze the hawkish voices and it leads to an over tightening a policy, that could be a risk. i do not see a path for sustained high inflation. we could see modest overshooting. i would not worry too much with curve flattening. we have got monetary growth slowing, financial conditions are not easing so you do not have that propellant to grow from compressing credit spread. growth will be slower next year and the markets are not worried about an inflationary overshoot. let's do this, let's do the equity markets. here is an interesting headline. real simple, the united states

over 100 years, over 27 million immigrants. argentina is next. germany welcomes argentina decision to seek talks with the imf. i thought know what was interesting, argentina has done some of the things everyone should beturkey doing. still, we seeing the peso declined. coca-cola shares up in premarket. it has agreed to buy costa coffee from whitbread. whitbread shares have been surging the most in nine years. 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. we are watching currencies with an iron argentina. not open. -- with an eye on argentina. not open.

indonesian rupiah weakening this morning. here is taylor riggs. president trump says democrats should not try to impeach somebody who is doing a great job. strong economy, his performance on form policy and the danger of setting a precedent to making it to -- of making it too easy to remove future presidents. democrats are framing the november elections about whether they can remove residence. president trump is considering a new tax break for capital gains. he told bloomberg he may issue a regulation that would index gains to inflation. the treasury department is studying whether it can bypass congress on the matter. european central bank policymakers are pushing back against president trump on trade. the president told bloomberg that europe is almost as bad as china when it comes to trade. he disagrees. >> it is regrettable that from the u.s. side there is a

tendency to escalate the trade war, especially with china but europe and i do not find it serious to compare chinese and european trade policies. the european union is committed to the liberal international order both in security and trade. taylor: in london, the new cross real will miss its december opening day. a spokesman said services will not start until next autumn. crossrail says more time is needed to make sure the railway is safe and reliable. they'd line will cost more than $20 million. 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.

john micklethwait in conversation with the president , here on a multilateral organization, on the wto. is therump: the wto single worst trade deal i have made and that they do not shape up, i would withdraw. at 11:00 a.m. today, washington in memory with john mccain, the president on senator mccain. pres. trump: we had our disagreements and they were strong. i disagreed with many of the things that i assume he believed in. i respect his service to the country. tom: president trump on the senator from arizona. us, ourhenker joins chief content officer on this a self gradhere was

ing since. + is it?d of an a marty: it is the one he thinks he deserves and i do not think he is going to pass it out to anyone but himself. he feels he is winning this battle on policy, on trade. tom: he is winning this battle with his constituency. is there any indication within 1600 pennsylvania avenue they can go beyond that? how do you define his core constituency? the equity markets are part of that. 401(k)sald trump touts and the wealth created by this market, he is not run. that involves more -- he is not wrong. that involves more than steelworkers outside of pittsburgh. that is the investing community and they do support policies. leslie vinjamuri of

chatham house was with us earlier. she pointed out that the common about pulling out of the wto was one of the more extraordinary things. explain what the president would have to gain in terms of public opinion from a threat like this. i understand when he says things about china, about cars, but the wto? he suggested that nato might be something he might pull out of and did not do that. he said he might pull out of the paris accord and he did. is an obscure wto thing to most people and to the electorate. what he is saying is he is going to fight for what he believes in when it comes to unfair trade. it does remain to be seen whether he would do that.

the wto provides the global framework for resolving trade disputes. if we were to pull out, what would be left? a bilateral, country by country fight which i do not think anybody wants. it is rhetoric to strengthen his base but i do not think you have to take it seriously. nejra: up to this point, it seems like the u.s. and you were making -- and e.u. were making progress when it comes to car --race and he talks about it car tariffs and he talks about it not being enough. are you surprised by the commons? marty: i was not. and narrow does not address cars. gets upset when he sees mercedes on the streets of washington and hit when he goes to europe -- and when he

goes to europe, he does not see chevrolet. he wants to double down on your. -- down on your. tom: you do not see many fords on 5th avenue. let me bring up michael, a lot being written in the last couple of days. votersida, republican said they were more low to the president. must pick their own point of principled resistance to a corrosive populism, if they have one. how did the president feel in washington? do they have his back? i think the republican party is in line with donald trump. they recognize he has an impact on their ability to be reelected

and as long as republicans make the calculus that supporting trump is good for their reelection prospects, they're going to back him. tom: bring the photograph up. it is in anylic as leader's office. there's andrew jackson staring .own on the president the symbolism is important. that southern anger that andrew jackson had. marty: it is. donald trump has played into that base and the question is, in 2020, can he expand on that? lots of time between now and then and i do think donald trump is going to be a factor in the midterms that people are underestimating his impact. good point about

underestimating his impact on the midterms. michael, are the markets underestimating the impact? michael: it could be the case. tom was mentioning the run up in the equity market earlier. injust saw a record highs the s&p 500, the data has been strong. it may not take too much bad to motivate a corrective undertow in equity markets. i agree with what marty was saying. this is not over with respect to china. to listen toting negotiators because it does not sound like the message is consistent. if you listen to trump, this is about trade deficits. if that is the case and there is no end in sight. could come up

abruptly and soon, within september. marty schenker, thank you. michael darda of mkm partners with us. if you are worried about emerging markets and foreign exchange, without question our interview of the day. erbole ofhe hyp currencies failing. worldwide, this is bloomberg. ♪

bloomberg surveillance with michael darda. darda.o math with

argentinian peso on trend. linear and then it is not. all of this is nothing more than hyperbole. chairman powell is looking at that. michael: he probably is. is the culmination of severe, chronic policy error. we talk about nominal gdp a lot. for the last decade, it has been too weak in europe, the u.s., and japan. here is a situation where it has been too strong. over printing money, high inflation, not a lot of real growth, fiscal dysfunction. developedeality is nation bankers are going to react.

we have seen that every time. michael: let's take a step back. the question came up about the dual mandate, whether it should be broadened, how to put financial stability into the picture. they do take consideration of financial conditions. if a disruption is taking place start to impact u.s. credit markets in a sustained way, tightening of a financial conditions in the u.s., that goes into the forecast. is if thenot go in argentine peso is selling off today. that is not going to make a difference. nejra: when you look at what argentina has been doing and what happened with the indonesian rupiah and the sense that the central bank has hiked slide,ll it continues to i was talking to one of our expert saying, rate hikes do not

work, when you're fiscal house is not in order. you just talked about fiscal dysfunction. how do these emerging-market economies get out of their currency sliding without taking panic actions? michael: it shows you what happens when you lose credibility and the confidence of markets. --se and effect is difficult to say that the rate hikes do not work, it could be the selloff would be worse without the central banks tightening policy. it may not be enough to stabilize confidence in currency markets. ,t has to be fiscal sanity fiscal policies have to get on track, monetary policy needs confidence. it is going to be tough to see peace and tranquility. in an environment where the fed's tightening and the dollar

is enjoying a sustained rally. headwinds for emerging markets likely to continue facing difficulties, and less the dollar starts to turn down. -- unless the dollar starts to turn them. if you want a path to stability, it runs through the dollar. nejra: you have preempted my next question. i was going to say, should a lot of these emerging markets give up and go home while we have a strong dollar? i am going to ask you, is the dollar overvalued? michael: it is difficult to say. it may be but it might continue to be increasingly overvalued. risk free cash assets higher in the u.s. than overseas, the fed continuing to tighten, you have to go with the path of least resistance for the dollar to march higher. a you want me to give

multi-your forecast, it looks different. i'm going to go if a higher dollar over the next six months. tom: one of the most amazing things i heard was for the first time in reading or listening, i heard the $2 trillion word. he suggested with chronic deficits and when and if we get an economic slowdown, that is 1.9% andet to 1.8% or he said $2 trillion. that has ramifications. what are they? michael: the ramifications not directed at the bond market. the ramifications of running up debt late in the cycle when you are fully employed gives you fewer resources to deploy in the future. i do not know one economic theory, any of them, that would

advocate running up deficits at full employment nine years into a cycle. this is due to political expediency but it is not good policy. togethers putting this for september. can you be long stocks and if you have cash, can you own u.s. equities? michael: the answer is yes but i would be more cautious. see someait until we type of correction developing to precious -- press harder into risk assets. tom: thank you so much. without question, our interview global wallng on street, steve hanke will join us from johns hopkins. please stay with us. futures -40. please stay with us worldwide.

this is "bloomberg." ♪

taylor: this is bloomberg surveillance. i'm taylor riggs. let's get the business flash.

the-cola is expanding in hot drinks business by buying a global brand. it is buying coast the coffee for $5.1 million. that is its biggest acquisition in eight years. coke and pepsi have been seeking while the market in sugar drinks declines. the ceo of credits we seize the opportunity grow without consolidation. he spoke to bloomberg in an interview in beijing. consolidation is an answer to rapid growth because then it becomes a cost game and companies cannot grow and they can get together and reduce their cost. shrinkt think one can its way to greatness. that is not positive. it is an admission of failure. we are having positive

conversations with partners. we would like to invest more in china. we do not have that joint venture. we have that asset management venture. china wither two in that. that was the credits we ceo speaking with tom mccann -- credit suisse ceo speaking with tom mackenzie in beijing. nejra: the s&p 500 still above 2900 and mike darda still with us. when you look at where u.s. equities are right now, is a melt up on your mind? michael: we have experienced a melt up of sorts. it is happening against a backdrop of explosive earnings growth. if you look at the last time the market was this high, earnings were lower.

the forward multiple ran up to almost 20 in january. right now it is 17. the combination of slowing economic momentum and another chapter in the trade war with china are the ingredients for some kind of pullback or correction, not the end of a bull market but i am looking for a pause. whether you call this the longest bull market in history or not, how does this look different to you to previous ones? michael: great question. i do think it is the longest in history. , meaning if the market falls more than 20%, that is the definition of a bear market. that was the longest and strongest. this would be number two. ,he way in which this differs

earnings growth has been stronger. we are on sturdier foundation for this market. that, whenw years of valuations exploded to the upside, that could happen. we are not seeing that yet. i think we should feel more comfortable about fundamentals. nejra: are we late cycle? michael: i would say we are. the longest business cycle expansion in history has been 10 years. we are nine years into this one. the cycles do not die of old age. they are cut off by fed tightening. the key will be for the fed to avoid over tightening and the cycle can carry on. if we look at where the labor market is, the flattening yield curve, this would look more like a late cycle environment than earlier midcycle. nejra: as you brought up the

yield curve, i do not want to get gloomy, let's bring up recession. from what you were saying earlier, it does not seem like you see a recession coming soon and you pointed out in one of your notes that it was recessions that were linked to the death of the bull market historically. why not keep adding in u.s. equities? the 1950's, most bear markets have been associated with recession. a recession looming over the next 12 months? the best indicators for that in the u.s. have been the yield curve, we are getting a flattening but not an inversion. flat does not mean recession. inverted is a different story. that has almost always been associated with recession going back.

that is what we need to worry about. it is a light flashing orange now. it is getting flack, not inverted. and then, monetary growth. it is slowing down in the u.s., it is still positive in real terms. , we need toegative worry more about a recession over the 12 to 24 months. we are not there yet. nejra: not time to worry yet. thank you so much. throughout the day, we will bring you more of john micklethwait's interview with president trump. this is "bloomberg." ♪

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alix: trump's rap refocuses on europe. president trump europe to china when it comes to trade taxes as the eu offers on auto not good enough. u.s. not backing down on china. trump argues china manipulates its currency and wants to levy tariffs on $200 billion worth of chinese goods next week. august surprises. e.m. weakness. of monthlytring losses in 2015 while u.s. equities a grind out. we made it. it is friday, august 31, the last there the month. i am alix steel. in the market, you can imagine it is going to begin liquidity, then volume. not a lot of risk. s&p futures, a little softer.