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. manager says his budget will call the outlook. in turkey the risk for europe? theresa may comes under fire from her former foreign and brexit secretaries.

good morning and welcome. i'm francine lacqua in london. a little bit of pressure on the stoxx 600. overall, low volumes. it is a u.s. holiday so a lot of stokes are -- stocks are closed. -- stock brokers are closed. it may or may not move euro as trade goes on. we are looking at thin volumes. welcome back everyone. it's going to be a busy couple of months. figure outying to what this complex foreign policy of the u.s. and trade war tensions escalation means for markets. 1.1609 --ollar at 1.1609. troublese been some because of conditioning. of course they were downgraded in terms of the ratings.

we speak to the deputy chief financial officer in about 15 minutes from now. let's get straight to the bloomberg first word news. u.s. president donald trump has slammed what he calls decades of abuse by canada and threatens to cut ottawa out of any new north american trade deal. is no political necessity to keep canada in the new accord and warns congress not to interfere or he will terminate all discussion. the president's tweed was sent shortly after he left the white house to go to his golf course in virginia. skip toe, he will summits in asia in november. it stoked concerns in the region as america's viability as a counterweight to china. vice president mike's -- mike pence will head to singapore and papua new guinea. attendedt is normally

by chinese and russian presidents. u.k., both prime minister theresa may and opposition leader jeremy corbyn are under fire as british lawmakers return to work this week. for may, the issue is brexit. per agreement was attacked by michel barnier who firmly opposes it. she was also derided by her former brexit that -- secretary. jeremy corbyn continues to be dogma the accusation that he is anti-semitic. a fire has engulfed the national museum in rio de janeiro. about 7:30tarted p.m. local time when the museum was closed. it is -- the president tweeted that it's a sad day for all brazilians. local news 24 hours a day and a tictoc on twitter. powered by journalists and analysts in more than 120 countries. this is bloomberg. francine: now to the finance

minister esses up -- italian finance minister as he claims his upcoming budget will calm europe. he sitting back at charges that the budget could go off the rails and breach rules. he's also contending with the threat of a downgrade. how real is the risk for investors? joining us is bloomberg senior reporter. our italians talking about the spread? is this time different? think we are back with it on the front page of every italian newspaper. on the street, you hear people talking about this. we saw it during the weekend.

vets -- investors saying the budget will calm investors but we had to leaders of the government coalition speaking to their supporters and saying, italians come first, then rating agencies. we want to make it work for our citizens and we don't care too much about the rules. concern is guess a that the finance minister is definitely trying to reassure investors but how much do we know about his position? or could he be fired at any point? like there isoks a contract signed on this economict and that policies are part of this contract.

he said last night, discussing , het the 3% of gdp limit said they will softly touched the limit but not go beyond it. this is the line the government will likely follow with the next budget. francine: thank you so much. our senior ilsley reporter. .oining us now our guest. i want to look at my chart somewhere. it will be on your screen. worried --cut is worrying investors. you can see the tenure spread of raising significantly. once the worst-case scenario? the worst-case scenarios the standoff with the eu starts to spread into a signal to the commission -- from the commission to the european

considering to stopping by and a time bonds. italianing buying bonds. we're looking at what kind of spending and what kind of profile are we looking at. these standoffs between the budget rules are quite regular and lots of it comes down to how good nationstates are at making a case where this is the kind of spending the takes on a more stable platform against the backdrop of some infrastructure spending. it's a more credible way to argue a case. rather than porkbarrel spending. about theyou worry catch-22 about how much banks have exposure to italian bonds. and actually the fact of the economy is vulnerable because of that. simon: i do worry.

you look at the progress the italian state has made on nonperforming loads -- loans. but we do need to understand is if they expanded fiscal injection from the time toernment passes through higher growth, let's not business that is an outlook. industrial performance will improve. this is why the details are really important. francine: if you go back to my becauses this markets we hear about italians first, is this making them concerned that he doesn't care about the rules? that he may want to take them out of the euro? that spread is justified because what you worry about from solving his rhetoric that he wouldn't take the high road in terms of setting out a budget plan, going into negotiations

saying, look, this is prudent economic management. it brick -- it violates the budget rules in the short-term but we are putting italy on sustainable footing. if he's going to start attacking rating agencies and the commission, that will worry investors. you dismiss the idea of prudent economics and start a rhetorical battle. in this scenario, the italians versus the european central bank will come second. francine: what does it mean for europe? look atou have to whether the ecb starts to bring this into discussion over the policy outlook for 2019. most people understand the policy path to the summer of 2019 but not beyond that. start to move to

balance sheet reduction? we don't know. pathi ends in 2019 so the of the euro is linked to his successor. successor factors in a disruptive italian slowdown, you get a softer outlook for growth which should start to weaken the euro from the levels we currently see. francine: thank you so much. you should stay with us, we have plenty coming up. we talk about casino. it gets cut. we will speak to the casino deputy chief financial officer next. and turkey's trouble with consumer prices. we'll talk about emerging markets. this is bloomberg. ♪

francine: economics, finance, and politics. this is bloomberg surveillance. casino's debt rating has been cut further. assetsts pressure to cut amid investor concerns that the company's parent will struggle to repay. by the deputynow chief financial officer. thank you for giving us a little bit of your time. what are you telling investors today? >> thank you for having me here. what i like to tell investors is that the s&p statements in no way reflect any to generation of

our business. quite the contrary. it commends us were good operational performance. strong momentum sales. and good results. stems fromin rating a change in methodology. account oure into parent company and our share price but in no way reflects the deterioration of our business and i was pleased to read in their statement they even wrote that we had strong operational performance, particularly in france. put a lot ofs must pressure on you because you are also battling the shoot -- short that is taken some of your financing. you have to sell assets and the you have buyers for them? i didn't hear the end of

the question. francine: you have a 1.5 billion euro asset sale plan. do you have buyers for those assets? david: sure, we do. some very nice indicated offers. we are committed in consistent to deliver a one billion debt reduction this year which will be largely financed with this asset disposal. and also by our cast -- cash flow generation. that's why we are confident in retaining our debt reduction 3.722.7 by the end of the year. we are confident in the ongoing disposal plan. when do you think you will be disposing of them? by the end of this year are it take longer?

we plan to do at least half of it before the end of the year. we will be of course able to announce it as soon as we have a definite offers. it's a very confident you that we have based on the discussions we are having right now. just to make sure i understand, are the assets real estate? david: some of it is real estate. thought of it is not real estate. the part that is real estate, what we see, is your game prices. that's usually what we get we sell our real estate. 2225 years of rent is the value

of our real estate. 20 to 25 years of rent is the value of our real estate. do you have any signs that it's getting easier for you guys? terms of inflation? david: i didn't get the end. food inflation? francine: have you seen any signs of inflation taking hold? david: overall, our business in france is extremely strong at this stage. we see very good momentum. we disclosed our summer numbers, which is very good. if it's about how we see the competition in business going on, we think we have the right positioning. the right positioning and the

right mix of formats. of right combination physical and digital business. results of thee revamping that we did on most of our stores recently. are -- this shows in the sales momentum and that was of which wasiced by s&p above the average growth in france and retail. francine: i know you're having trouble hearing me so thank you for bearing with us. one final question on amazon. amazon wants to become bigger and france. how much of a threat is that? david: i'm really sorry. francine: we will leave it

there. i was going to talk to you about amazon but i think we will even there. that was david lubec. the chief financial officer of casino group. now to turkey in the nation's central bank. it will use all tools at its disposal and reshape its monetary spending at next week's policy meeting. simon, when you look at the emerging markets space, how ugly do you think you can be in the next couple of months? are two things to caution against investors expecting a replay of to you -- 20 years ago. two things are different. globally, there is about $5 trillion of fx reserves across central banks. partially held in china but most have learned the lesson and

don't have total defense against currency stress but have more tools to deal with it. the second thing is there are far fewer fixed exchange rate policies than there were. work has been done to understand how you deal with crises in a strong dollar environment. ams is not to say that i sanguine, i think there are threats but anybody who is expecting a redux of 20 years ago needs to explain why with those structural changes, things are going to play out the same way. francine: if you look at the impactsng sense, do the happen in europe because of italy? simon: contagion of emerging markets is a broader story where the mercantile view of the u.s. white house coupled with the only aggressive monetary policy

amongst developed markets is kind of a perfect storm. the question is whether the euro and the trading system in the eurozone is sufficiently resilient to stand as a counterweight. i believe it does which is why i and not worried about a mercantile view in the white house that may change in eight years. it's unlikely to be something that is prevalent over a a protected. of time. we're seeing it in turkey, in argentina, and it would hit much quicker than in europe. with turkey versus argentina, argentina is a different case. simon: the advantage argentina has is there is less? about the institutional independence of the central rank that central bank.

it hasn't protected their currency. the issue in argentina is one of quite a difficult economic reform program difficulty timed. the idea that independent sovereign economies can move in isolation of global factors is debunked by this. what he is trying his laudable but the backdrop comes of the worst possible time for the argentinian government. francine: where you expect dollar to be. school, u.s. foreign policy, what does it give us in terms of where dollar goes? in late december of last year, i was on a strong dollar putting their. that didn't really play out in

q1 but played out in q2. i expected to play out. let's not overcomplicate this. policy,antile trade which we've had a history before from the early 1980's, a doubling in the dollar index, from a american centric foreign policy. i see the dollar index strengthening further from here leaving more pain for emerging markets. francine: if you look at dollar strength, are we sure the administration will let that happen? that's the million-dollar question. simon: let's be realistic. we cannot answer that with absolute clarity ball we can do is go on the statements of various members including jerome around how responsive they will be to white house which will take some of

the winds out of the sales of the dollar area -- dollar. we saw some comments that took out short-term but longer-term they're still in a hiking trajectory. it's still 3, 4, maybe five hikes to come. which developed market will counterbalance that? it's just yields by play. francine: if you look at japan, europe, brexit, where do you think most of your time in terms of research will be spent in the next eight months? wages, in developed markets, remain a real intellectual blind spot for economists. to try to understand whether a shrinking output gap in most of start to be core

inflationary, that changes the dynamics for eurobonds, routed long trade, and whether that strong dollar dynamic persist into 2019. can come back to the table with a slightly more aggressive timetable, repricing starts. i think that stems out of the eurozone labor market. so that means a repricing german bunds, . simon: absolutely. to see ad be prepared change of leadership in the second half of 2019. francine: he stays with us. britain's biggest online loan provider announces its london ipo. we will speak with the cofounder. that's coming up next and this is bloomberg.

francine: economics, finance, politics. this is "bloomberg surveillance." let's get straight to the bloomberg first word news in new york city.

u.s. president donald trump has slammed what he calls decades of abuse from canada. he tweeted there was no political necessity to keep the new accord and warned congress not to interfere or he will terminate all discussions. sent shortly after he left in a motorcade down for his golf course in virginia. theresa may and jeremy corbyn are under fire as british lawmakers prepared to return to work this week. for may, the issue is brexit.her proposed attacked bys barnier. it was also derided by her former brexit secretary. dogged bytinues to be the accusation that he is anti-semitic. arey's new budget details detailed -- under fire for the

next month. italy's bond yields have pushed higher over the summer in response to the new populist government's promise of hefty tax cuts and universal income for the poor. a myanmar judge has sentenced to journalists to seven years in prison. they were found guilty of breaching the country's official secrets act. they both pleaded not guilty with the news agency citing evidence of a police set up. fire crews have been battling in liverpool to save the building. a 50 million pound scheme to transform the site had recently been announced after it had been empty for the last 15 years. 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.

leinz.ley this is bloomberg. first of all, we are getting some manufacturing data out of the u.k. back to fend tech -- funding circle announced its plans this morning. the plans to raise about 3 million pounds selling new shares in the stock exchange. , theng us now is samir chief executive officer of funding circle. welcome to the program. how is it going? brexit must be impacting some of the smaller loans. actually, you're benefiting from it forom the uncertainty?

when you look at brexit, does it hurt? i would just talk about the business first is that is ok. we are platform that allows anyone, individuals institutions or government to lend money directly. we have been 5 billion pounds. one billion of which came in the first half of 2018 alone. actually, if you look at the business since brexit in the decay, it has actually grown over 171%. bankses like this, typically pull back from the market. whereas platforms like ours are able to stay open for business and keep supporting those companies. francine: do have an average size of loan if you look at the high volumes you are explaining in terms of banks pulling back and you coming in?

samir: we don't lend to start up companies. these are all established small businesses. on average, they have been trading for about 10 years. they have about eight employees. the average loan size is about 65,000 pounds. the business doesn't just operate in the u.k. we are also in the u.s., germany and the netherlands. the average loan size is pretty similar. francine: how big a role increasing your debt play and increasing the company? samir: i think it will be important. no one takes risk more seriously than us. we have employed hundreds of people from financial services institutions, technology companies. if you look at our platform, on average, the net returns to investments have been between 5% and 7% a year over the last eight years. we are delivering this better product for investors as well.

youcine: and a last friday, seal the deal to sell $1 billion in loans to the u.s. by the u.s. and u.k. markets very different? what it's ank markable about our business is we concentrate on this sub 500,000 pound euro part of the market. we see that banks don't really care about that type of lending. it is a very small part of the balance sheet. we haven't actually had to change the product in any of our markets in the u.s., germany or the netherlands. really excited about the $1 billion purchasing commitment from one of the largest asset managers in the world to purchase loans from us in the u.s. i think what it really shows is we are really starting to get traction outside the u.k. as well. the u.s. and germany and the netherlands are collectively seven times bigger than the u.k. market. when you look at loans, is it

something the bank of england looks at or should look at in the u.k.? simon: they happen looking at it for the past few years. unsecured lending in the u.k. has been growing between 8% and 10% the last couple of years. it is about 220 billion pounds. the bank of england has tried to pair that back. it is uncomfortable with loan growth in accessible gdp. there a lot of structural growth in the marketplace. there is still plenty of demand for credit. the challenge in assessing any business coming to market is, has it come full cycle? we are quite late in cycle. when of the questions you always pose is what is the default rate? if brexit becomes disorderly, what happens on default rates? how quickly do those ramp-up? we haven't gotten a lot of data for the last 10 years.

francine: this goes back to the debt question. how difficult is it the type of model given that we are going to brexit? amir: i think europe has an unsecured consumer lending. business lending is still much smaller than precrisis and hasn't been going very much. banks have continued to pull out of that part of the market. it is very much undisturbed -- and service -- unserved. trouble befored people are investors would lose principal. run -- ourregular expectation is that in a downturn, losses would roughly double. we haven't been through a downturn. however, all the modeling, the team that i've assembled has

gone through that. we are very confident in our relative performance. : when of the questions we , somehave in the u.k. is loans have really suffered from the administration recently from retrospective policymaking. yourgulator comes and goes pre-2014 loan book is subject to a different set of rules. do you worry about a regulator who appears to revisit the operating environment, and should investors worry about that? samir: i don't think so. the first thing to say is that we loan to small businesses, which is a different regulatory environment. the second thing is, our interest rates start at 1.9% per year. we actually believe we are offering rates -- loans at rates

comparable for cheaper than what they could get that banks. on top of that, 5% of the loaning comes from the british governments -- lending comes from the british government. 16 european investment bank, local councils, i think what government with a like about what we're doing is we twice for small business borrowers to allow them access to grow and expand. estimates, we did the estimates were that it created and sustained 75,000 new jobs last year across our added nearly 4 billion pounds to economic gdp. it is a very different business model to consumer and attacks a very different regulatory and government response. francine: samir, thank you so much. simon stays with us. , theresa may faces another

brexit -- as per the maker -- parliament returns this week. this is bloomberg. ♪

francine: this is "bloomberg surveillance." in the u.k., theresa may faces another revolve within her own party as lawmakers returned to parliament this week. her proposed brexit agreement was strongly opposed by the eu. >> i bet against it. it would be rather odd for me to resign over something and then vote for it when it came back. proposal -- the

proposal is almost worse than being in. francine: the pound is holding losses after a second referendum vote was ruled out by the prime minister. theresa may is not getting used to some sort of result. we does assume that she -- ca we have had comments from both that of poured cold water on the idea that the agreement, which was painstakingly difficult for the u.k. government to agree, it led 's boris johnsons resignation, david's resignation. sterling is continuing to trade weaker on the idea that the u.k.

may just crash out in march 2019 because no common ground can be found. i still think a very late deal is the base case. you have to say those tell risk scenarios of a disorderly exit are now looming interview. francine: the more we talk about it, the more those die down. michel barnier says 80% of it is done. what does that mean? simon: it is very easy to get bogged down in the details, but there is a key question investors must ask themselves. euple question, will the conceded to some sort of bespoke arrangement regarding access to the single markets, and inside only part of the customs union? the eu commission have been very consistent. they have said there is no cherry picking. the u.k. government have clearly

bluff.hat is if we take it down to the wire, there will be some concession, because clearly that would be some --there will be any signs of a weakening or watering down of the situation have not been obvious from what macron -- he slightly flip-flopped on this one. his most recent comments are around the indivisibility of the single market. for me, that doesn't suggest that the proposal is flying. barnier, in an interview has set a similar sort of thing. the problem for the u.k. government is having somethinggly come to which is just about tolerable for their own parliamentarians. will a preferred watering down the tolerable? very likely there will be political unrest. what happens to the

guilt and all of this? simon: they were down low shortly after the referendum. we are back up 1.4%, but most of that is a little bit the broader government suffering selloffs. you would expect the bank of england would need to be more stimulative in a disorderly exit. the potential for restarting the qe program. i think that is probably the trade and a disorderly brexit. francine: coming up, nigeria's oil minister tells bloomberg he sees opec shifting in favor of curbing supply, if prices stay high. we hear from that exclusive interview next. this is bloomberg. ♪

francine: economics, finance, politics. this is "bloomberg surveillance."

nigeria says it expects opec and its allies to continue curbs on oil production through next year. brent crude has risen to the high 70's since the cartel trade the markets. nigeria's oil minister spoke acoustically to bloomberg and set up prices remain at these levels, the outward curves are likely to stay. it has worked for us. i think before we dislodge what -- we are going to see how the market plays out. if come this summer, we find out everything that is working is working, definitely what you are going to find is -- we will struggle with that decision in june. -- if comeember,

december, we see reactions from --sident trump and his team if it goes a southward. i know russia itself is also aware of how long this can continue. everyone has their own internal drive. how long we keep this going is literally a balance between how bou --e boy and prices prices maintain. sanctions will probably impact volume. iran has been a very resilient country. it will probably go through this way for quite some time until they work out a relationship

with the u.s. european countries themselves are much more supportive. they've not taken the drastic positions. >> what are you seeing from venezuela in terms about that for the rest of the year? as they continue to decline? >> i think it will, unfortunately continue to decline. there is so much fundamental, the morale issue, the environment, the issue of finance. it is anybody's guess. >> we talked about price and whether or not the output cuts are extended into 2019. what, for you is a comfortable price for brent? >> alike the mid-70's. mid-70's, 73, 74 up to 77. i begin to get uncomfortable when it hits the 80.

the momentum you see for everybody to do something about it, especially from the consumer nations, increases. i priced at 70 and slightly above, uncomfortable. much more below, i begin to worry. especially from the point of view of nigeria, we need all the money we can get. >> as you look at the environment now, where do you predict the price? >> i think we'll be in the mid 70 range. francine: we are now joined by bloomberg's executive editor for commodities and energy. what we worry about going into september, october november is iran gets much worse. is opec have the capacity? no.nd

it is going to come down to how that is the situation in iran? which saudi arabia probably has one million barrels. it depends i you measure it. everyone has a slightly different word for describing the capacity. keep it going for a certain amount of time, there is some doubt. what is going to make it harder is what exactly iran is producing. they are going to go back to deal playbook of hiding what they are doing. the market has to uncover that. francine: is there a consensus amongst opec members? we stillt the moment, don't have full clarity on what the u.s. is going to impose. i don't think we have really had much in the way of clarification on just how big those waivers are going to be. when you look -- francine: when you look at your economic forecast, what do you assume? this is my oil chart.

i'm very proud of my chart. does it stay range bound? simon: i personally think it moves lower. that is my view based on a scenario where globally, there is still lots of financing out there for additional capacity. yes, it comes with a lag. we me, a lot of the price see are issues. behind the scenes, it has been venezuela and libya with a bit of nigeria. if those it start to narrate any still have additional capacity brought on the u.s. through favorable finance conditions, something replicated globally, than i think it is this downward pressure. traditionally, that has been supporting macro. it has not been done instantaneously. it has come with a bit of a time lag. certainly, the global sweet spot in growth could very much find its origins in the low oil price a couple of years out. if that plays out, medium t

erm economic growth should play out. at the moment, you have an environment supportive for lower prices, the way things are going. in some uncertainty, i think exactly the energy, the intense miss of the energy us and china is going to matter a lot. francine: thank you both for joining us. in the meantime, we are also looking at president xi jinping speaking in china. "bloomberg surveillance. continues. this is bloomberg. ♪

francine: italy's calming tactics.

we are live in milan. turkey's troubles inflates while consumer prices move. how big is the contagion risk for emerging markets? westminster. theresa may comes under fire from her former brexit secretary. good morning, everyone. this is "bloomberg surveillance." i'm francine lacqua here in london. tom keene off for the u.s. holiday. what i am looking at is a little bit of market anxiety. they are trying to figure out next.y what comes it is also back to school, so we are getting a lot more volume starting tomorrow. i think stocks are trying to figure out exactly what the context looks like for trade and foreign policy, whether that will be contained and what the term means for emerging markets in the next quarter. first, let's get straight to bloomberg first word news.

>> president trump has a warning for -- canada and congress. he says if there is not a fair deal after what he calls decades of abuse, canada will be out of the north american free trade agreement. he says congress should not interfere or he will terminate the current nafta treaty. leaders of italy's government say they will carry out extensive campaign promises. that undercuts the prime minister's promises to calm investor nerves. the government has promised a guaranteed income and flat tax program. in turkey, the central bank is vowing to use all the tools at to curbosal inflation. ra is getting the

blame. a judge in myanmar has sentenced to reuters journalists to seven years in prison. they are accused of violating the secrets act. says there is compelling evidence the two were set up by police. 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. leinz, this is bloomberg. francine: thank you so much. this is what i'm looking at. when you look at the markets, there is quite a bit going on because we are trying to position ourselves ahead of a busy couple of weeks and months. stocks here in europe are drifting a little bit. we did see declines in asia. there pretty much flat today. investors trying to figure out exactly what foreign trade will look like for the u.s.. we are also trying to figure out some of the turmoil we saw an emerging markets will be contained or whether it will be

continued. the dollar holding on to some of the gains from last week. the pound is slipping as a chief european negotiator on brexit does he strictly a post the u.k.'s current proposals. there is quite a bit going on. we will try to keep an eye on everything. bonds pretty much mixed. u.s. stocks and treasuries are closed for the labor day holiday. across asia and europe, trade conflicts. state street global advisors says conditions bode well for risk assets like equities. by rickw joined lacaille. he was also with global equities and it previous investment officer. when you look at markets from now on, what kind of portfolio would you ideally have as you look at september, october, november and december? rick: we have had a

normalization of the risk environment. with a 2018 will be 3.79%. we're overweight in risky assets. we are overweight u.s., underway europe. we are now neutral in emerging markets. we have a little bit of a barbell with our fixed income positions where we are overweight and treasuries. francine: let's start with the u.s. why are you overweight? rick: i think that is a legitimate concern. think the momentum in the u.s. economy mention from earnings in the u.s. is still very strong. we have had the enormous debate about what might bring that to a halt. inflation is certainly one of them. precipitating margin declines and rates rising. there is no evidence of inflation. think that is one of the challenges. we look hard and we don't see it.

francine: what does that mean for what the fed does next? i think of normalization of interest rates is still on the cards. i think the market is more or less where it should be on u.s. interest rates. that is going to lead to the yield curve shifting further. i think the old curve itself is forecasting recession. francine: i have a great chart. if you look at the s&p 500, it has risen by so much. at some point, it needs to correct. when is that? i think looking at where earnings are going is particularly important. they won't grow forever with low unemployment in the u.s.. you are reaching the end of the cycle. if can extend that a little bit further, think we can certainly see earnings growth continue. that said, we are not in denial of that. i think from a credit perspective, the cycle looks very mature. francine: do you buy equity in

general or the industry you are lik -- you like? rick: we like u.s. large caps. there are clearly some better overvalued, but we found even in overvalued stocks or sectors like allegedly i.t. hardware and software, if you apply a value lens or just price, you can still see value both sectors as well. francine: this is a classic 2/10 spread. do you worry about that? we have all seen that chart many times. i think the alarming thing is that when the 2/10 spread is at a very low level, normal economy it -- normally the economy is going really well and you have a recession a couple of years after. that is where we are at now. every cycle or sub cycle is different i come. -- i think we come out of a

global crisis with a lot of slack. we are not in late cycle in all parts of the world. francine: when you're underweight in europe, is that italy or something else? rick: it is across the board, frankly. the weakening euro might lead us to improve. i think there are enough risks and europe that we are really not seeing enough value. although, there is a value differential between the u.s. to entice us. francine: what do you do with the trade war? if it escalates, is germany the strongest economy? rick: i think there is a lot in the price already. in the china risk, there is a lot factory into some degree of tension. in the case of germany, that would be a pretty significant challenge. i think it stands out within europe is a surplus country.

francine: is there a chance the market is getting what the ecb does wrong? is the most violent pricing in german bunds? rick: i think -- the market has left what is been done in ecb markets. you have an actual change in leadership and prospect in the ecb. unfortunates an time for people to be asking questions about the sustainability of the kind of political economic story and italy. francine: depending on who replaces mario draghi, does it move on the back of it? that --at is one person is the environment supported? if it ever had its foot on the gas, in terms of structural reform? francine: any bubbles you are worried about? rick: i think credit is very late cycle. i think we are made more comfortable by credit and the

lack of bad news. i think this year credit expansion, all around the world has to be a little bit of concern. francine: what would that mean? the next financial crisis looming or do something you want to keep an eye on? rick: i think the catalyst is inflation or increasing cost pressure leading to reduced margins, and that feeding through the cash flows. then people getting concerned about the most overstretch parts of the high-yield market. that doesn't spell he financial crisis that is a normal credit cycle. . francine: thank you so much. rick will be staying with us. we will be talking about italy, brexit, and of course the institution that is the european commission. this is bloomberg. ♪

kaylee: this is fordmberg surveillance." they reportedly cut thousands of jobs. the sunday times says ford may eliminate 12,000 jobs. several models could be discontinued. ford is said to have lost $73 million in europe in the second quarter. there was a new ceo at the world's largest advertising company. announced a new ceo. he has been helping to run the company as chief operating

officer. he takes over wpp at a time when consumer giants are reducing their ad funding and there is more competition from digital rivals. of --nesota, the founder police say the investigation is still underway. that is the bloomberg business flash. much.ne: thank you so the president of china is speaking in beijing at the china africa cooperation forum. i know they are talking about investment. again retracing the appetite for china to import more african products. it had started with a lot of the -- it is interesting to see president xi saying they will also plan on more infrastructure

cooperation. let's talk about the emerging markets and turkey's consumer inflation accelerated as a falling currency boosted prices. its monetary stance will be adjusted in september. we're back with rick. much like the developed nations, it is about picking and choosing. rick: picking and choosing and making sure you don't write off assetole accept class -- class. it is a widely diversified group of exposures. that hasn't always been the case. previously, contagions have led to very high prices. francine: there was this kind of fear and anxiety out there.

do you expect that again to continue being tamed or does it go back to what it was in the past? rick: i think investors need to be rewarded for that real risk of they got in turkey, argentina, brazil. i think if you look at real yield, you get to the point when the currency declines were investors are indeed being rewarded for those. even in those unaffected currencies, we don't think those markets are cheap. francine: let's have a look at my turkey five-year breakeven rates. this is what we saw coming out of cpi. we did hear from the central bank saying that they would use all tools at their disposal. do you believe them? is a time to go back into lira or to you what is the concrete action? rick: i think you would have to be very careful about taking it face value given the lack of independence we have seen in turkey. i think we have to be a little bit cautious. that said, currency is cheap and yields are at very high levels.

it doesn't it mean it is a rifle but it ispportunity, certainly interesting to think about when you are going to get rewarded for that risk. francine: again, is it only on or is it a way to enter the market or do shy away from it? rick: at this play, i think it is too early. buttility is not rewarded, eventually spread gets the point where it will counteract that volatility. you really have to wait and not be too early. francine: are there any emerging markets you like and how do you choose them? rick: i think emerging markets as a whole, excluding those who are market cap in terms of equities, the really extreme ones like turkey, russia etc., they look pretty good. if you look at taiwan, it has been affected by sentiment about china already in the price. if you look at many of the

smaller asian countries, we feel pretty positive about those markets in the equity and debt side. francine: what you do with argentina? rick: argent -- argentina's little off the map because the government knew what to do and were scared about public reaction, so they went slowly. for a while, investors were content with that speed, but eventually lost patience. i think right now they are in a very sticky spot. we think argentina will do quite well. currency is now cheap and the government's are doing the right thing in terms of structural reform. francine: how much of a headache is a strong dollar going to be? tied up in ait is straight question. the more trump ratchet it up, the longer we will have a stronger dollar because it is coupled with the strength of the u.s. economy as well. those are problematic for emerging markets, but not all of them.

francine: is anyone's guess as to what president trump do next in terms of trade tensions? or is it your best guess that after the midterms he brings it down a little bit? rick: this administration is more risk seeking than we are used to. mexico and canada mike it resolved before china, the time it is much more important. we have got probably a year or two of uncertainty. you have the midterm elections coming up. francine: if you look at the worked., so far, it has you could argue that the u.s. has just been getting over and over what they want. there is no deterrent from not continuing on these trade tensions. rick: i would take issue with the fact that it has worked. it may not still be a good thing from a global perspective or a u.s. perspective, but he has achieved what he set out to achieve, partly. francine: what do you make of china? they have this china-africa

forum saying they will invest more in infrastructure, of china still has a huge deleveraging problem. they are concerned about outflows. rick: i'm not sure they have a problem with outflows, necessarily. trajectorylong-term toward liberalization. think the infrastructure is using some of the spare capacity in the chinese economy in other parts of the world. francine: do you worry they will have to cut interest rates are simple -- stimulate the economy in a way the u.s. did eight years ago? rick: i think we're not at that point yet, but there will certainly be more of a shift to state-level debt and taking on some of the bad credits from the past. francine: how do they marry the two? had they stimulate the economy to make sure there is not too much debt? rick: it looks a little bit more

like a slow-motion tarp, in which government has more control on the economy. francine: i like that. a slow-motion tarp. rick will be staying with us. coming up tomorrow, the head of research at deutsche bank. this is bloomberg. ♪

francine: this is "bloomberg surveillance." i'm francine lacqua here in london. tom keene having a day off for u.s. labor day. for all of our u.s. viewers and listeners, happy labor day. emba china and their hna group will probably need to slim down further before gaining the trust of investors. the total debt fell $9.5 billion at the end of june. it is the first time the number has fallen. joining us now is bloomberg's senior deals reporter. thank you so much for making a little bit of time coming on air. what do we know about how much the debt will be caught by? about $17already down

billion. it doesn't really seem like it was imperative for them to sell all of their non-core assets. you're talking about the hilton, radisson. we read a story about them selling a stake in an australian airline the other day. they have built up this whole network of companies and businesses that they thought were appealing, and it is now this giant global unwinding. francine: where do we know they want to be and how long will it take them to get there? ruth: our understanding is the chinese government has said they would back from getting out of these, and back them with the banks of the chinese banks as long as they pare down and they go back to being what they started off with, which was an airline company. they have had a lot of headwind. that have these debt levels, all investors know they're looking at selling. maybe the prices they get, even

if they get just market value, it is seen almost as a forced sale. francine: what does it say about other companies like hna an china? companies,f these you are looking at them and thinking the focus seems to be on this china's one world policy. look and they do to benefit the chinese economy? where can they make those acquisitions? if they're looking at real estate and airlines, not so much. francine: thank you so much. we are back with rick. we will talk some of your currencies and brexit. this is bloomberg. ♪

francine: this is bloomberg surveillance. i'm francine lacqua in london. tom keene is off. let's get to first word news. here's kailey leinz. alexander: president trump is --

keleigh: president trump is threatening to terminate nafta over what he calls a decades of abuse. the he said there is no incentive to keep canada in any version of nafta. nafta. trade talks between the u.s. and canada stalled hours before a deadline. president trump is raising doubts about the u.s. reliability as a counterweight in china. the president is skipping major summits in asia. givenec summit would have him an opportunity to meet with the president xi jinping. vice president mike pence will go in his place. in the u.k., prime minister theresa may and opposition leader jeremy corbyn are under fire as parliament returns to work. issaid the brexit deal almost worse than staying in the e.u.. the chief negotiator said he strictly opposes it.

jeremy corbyn has been hounded by accusations he is anti-semitic. benjamin netanyahu says there will not be any cease-fire deal with the gaza strip leaders. until the remains of soldiers are returned. a cease-fire would lead to the lifting of a decades long blockade of the area. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm kailey leinz. this is "bloomberg." francine: thank you so much. italy's finance ministers said his budget will calm investors. that is as the 10 year yield spread trades to -- trace close to a five-year high. off theet could go rails. he is contending with the threat of a downgrade. the outlook has been changed

from negative. joining us is cai-goran alexander stubb. still with us is rick from state street global advisors. do you still worry about the crisis coming back? with italy wanting to get out of the euro? alexander: you have to be on your toes and in italy, we have seen a change because italy used to be pro-european and now you have anti-european forces on the march and on the move. that was basically instigated by the collapse of the lehman brothers which had been linked to the subprime prices and you had events happening. you have to be careful. on the european side, we have created mechanisms to protect us but one never knows. francine: what are the fault

lines for understanding this better? does your need to make a case for why it is good for the citizens and this would have helped with the brexit? i think 2016 was a ge, like 1989 killed communism, one could argue 2016 ored to kill liberalists free trade or international finance and we are in the aftermath of that. political leaders are starting to understand it is not good enough to increase the size of the cake. you need to think about how to make people benefit from it, how to divide the cake. there are people disappointed about globalization and are blaming it and this is something

political leaders need to work on. francine: what do you make of it? if you look at the leaders of the italian coalition, they are on the offensive. they are itching for a fight. rick: they are. unhealthy and has prompted a reaction. what can auld ask, populist government in italy achieve that other governments could not. of that onus immigration, on the fiscal deficit, there's negative news. what could they do that would push italy forward? this feels different than the fights in the past. what is the probability of it turning ugly? rick: the timing is different because we have got global growth. if they're going to do something

structural, now is a better time to do it. maybe the nature of the spending could be different and others could get behind it. francine: should europe come closer to italy? whether it is immigration, infrastructure, is there something the commission and other leaders could give to italy to keep them onside? at the end of the day, it is about sovereignty and trying to find common solutions. the problem in italy is they are trying to counter that. they are trying to talk about national solutions to international problems, whether it is a migration or on the euro. i believe in a rules-based system. that is the premise of trust inside the union. that is why we have rules,tions,

regulations, and laws. we cannot get into a system where you start to get gifts anytime there is a problem at home. rules, regulations, and laws. a lot of it has to do with immigration and that is an issue europe needs to grapple with in the coming months. francine: if you look at economic growth, the concern with italy, it has not grown for the last 10 to 15 years. how should europe address that? alexander: i think we should be honest with ourselves and admit we have gone into slow growth. the growth rates we have at the moment from a traditional european perspective since the cold war are abysmal. some are cyclical, others are structural. we need to start coping with this. the problem is the europe allows you to grow. market andinternal it is the nationstate that

divides and gives out the welfare. it seems to be economic growth is not enough. if you look at voters around the western countries, they demand a more and this is something that european leaders need to address. there is one more thing that is more important and that is technological change. it is not immigrants taking jobs. technology changing the way labor markets work and unless we address that, we will see more donald trump's around this world. francine: what does that statement mean for investors? angela merkel will meet with emmanuel macron on friday. will they talk about immigration, will they talk about who'll succeed mario draghi at the ecb? have a moreld

liberal approach when it comes to immigration. think about the immigration dividend that could be achieved. we may need that immigration because we have got the demographic position that is poor but people think they have lost out. questions of inequality, diversity are ones that have been neglected and need to go up the agenda to address those. francine: this is my italy chart. you can see the difference. as i mentioned, investors' patience with governments that want a slow approach to reform has been tested in argentina, not to compare the two directly. when you say you of got a budget that investors are going to like, i hope he is right. francine: what if they do not?

that ishe puts a budget liked by investors, how do we know he stays in power? issue in italyn and without structural reforms that did not happen several years ago, that will continue to be the case. francine: thanks so much. rick and alexander will be staying with us. moec at 6:00.les this is "bloomberg." ♪

keleigh: this is bloomberg surveillance. i'm kailey leinz. let's get the business flash. setting up online

plans to proceed with an initial public offering on the london interchange. month, it had a valuation of about $2 billion. aramco could use an option pioneered on wall street in the 80's to carry out saudis latest effort. it could employ a leveraged buyout using a balance sheet to pay for the deal. that would keep aramco from having to borrow money and reveal its own details. s&p has cut the debt rating of chain casinoy further. casino has been battling muddy waters. we talked to the deputy cfo who says casino has gotten good offers for assets it is selling. aree are committed and we

competent to deliver our $1 billion debt reduction which this andinanced with by our cash flow generation. confidenty we were so in attaining our $1 billion debt reduction by the end of the year. on the ongoingt disposal plan. keleigh: that is the bloomberg business flash. francine: thank you so much. expects opec and its allies to continue curbs on oil production through next year. brent crude has hit record highs. spoke toil minister bloomberg and said its prices -- if prices remain at these levels, output curbs are likely to stay. momentum is leaning toward

that. it worked for us. i think we before -- i think , we've got toodge see how the market plays out. if we find out everything is 70'sng well, prices in the , everybody will leave it as it is. we struggled with that decision in june. dangerously, you are going to see a loosening of volumes. south -- russia is worried about how long this is going to continue. saudi arabia also.

is aong we keep this going balance between how well the prices make up for the loss of volumes. >> what do you expect to see from iranian output as we head towards u.s. sanctions? >> i'm not going to make so many comments on the fact sanctions will impact their ability to meet volumes. iran has been resilient. it has gone through this before. it will probably go through this for quite some time until they work out the relationship with the u.s. the european countries have been more supportive. they should encourage them. >> what are you seeing in terms of venezuela? does it continue to decline? >> i think it will, unfortunately. there are so much fundamentals.

there is a frictional environment. they have technology challenges. price andked about how that is going to determine whether output cuts are extended. what is a comfortable price for brent? >> i like the feel of the mid-70's, 73, 74. i get uncomfortable once it hit 80. momentumits that, the to do something about it increases. at the price of $70 and slightly above, i'm comfortable. above that, i am uncomfortable. below the, $65, i begin to worry. at theou look

environment now, by the end of 2018, where do predict the price will be? >> in the $70 range. francine: that was nigeria's oil minister. --ald trump has planned slammed what he calls decades of abuse by canada and threatened to cut it out of any north america trade deal. let me ask you about trade and whether you believe the tensions between china and the u.s. will get worse? alexander: it does not look good in the problem is trade should be predictable and with the statements from the president, it does not seem predictable. it does not matter whether it is dealing with nafta or the european union, there seems to

be mixed messages and lately, the wto. free, fair,ble, just trade, i do not think the president is helping. francine: what does it mean for europe and do you worry about china's bigger role in investing in europe? should we try to fence off some of the key sectors? alexander: that has been addressed throughout the past few years with close contact with the chinese. we should not put our head in the sand and say that the chinese are not buying information-technology companies infrastructure. they are. we need to look at how we can be fair and protective about it. what i have argued from the beginning is that if the united states is leading the world -- leaving the world stage on free trade, you create a power vacuum

and europe needs to fill that and i would argue that europe led by jean-claude juncker have done the job in doing that. -- have done an excellent job in doing that. the e.u. is doing free trade agreements, negotiating with india. this is the type of bilateral trade deals that the union needs to do to get a competitive advantage. francine: when you look at the changing landscape for ,oliticians and changing jobs will you intend to run for european commission president? very good question. i do not think anyone has the algorithm that is going to solve the positions up for grab. president of the

european commission, high representative, head of the european central bank and secretary general of nato. nobody has got the algorithm to predict what the gender, the age, the experience is going to be. i do not have that either. francine: are you intending to run? would you like the job? back into i'm getting my politician mode, not answering the question. i have said that i am in reflection and discussing with europeannds in the post-party and i will come to a decision after the holidays. francine: thank you so much, mr. alexander stubb of the european investment bank. we will be back with rick lacaille of state street global. bloomberg users can interact

with charts showing you gtv and we will have more charts and markets, coming up. this is "bloomberg." ♪

francine: this is bloomberg surveillance. september the 15th walmart 10 years since the collapse -- will mark 10 years since the collapse of the lehman brothers. some say the global crisis is with us. we're with rick lacaille. when you look at lehman brothers, does that mean we are not taking enough risk or are we taking too much? rick: i do not think we are taking too much but i think we need to keep learning the lessons. wary aboutbe overconfidence and analytics driving and overconfident level in the belief of markets is dangerous. francine: what is the most common mistake markets are doing? we talked about the credit cycle. that is not a mistake but it is the nature of economics and cycles are entangled.

the point is to budget yourself so you do not get overtaken by events. binary?: is it too is there too much complacency in the market? rick: we have got more markets, morein attention to liquidity and volatility and contagion has been less apparent in the last crises. we need to redouble our guard on .hat and the hubris francine: can you see a crisis coming from somewhere? it is difficult, is there a danger that the next crisis will be something off the cross -- off the charts different from what we saw in 2008? 2008 was not that

different. it was lending money and lending money and houses. grey swans are out there including things like china. risks.re diminished francine: thank you so much for joining us. coming up, in the next hour, william jackson chief emerging-market economist at capital economics. we will talk emerging markets, about markets in general. we are seeing thin volumes because it is a bank holiday. i'm looking at the pound weakening and stocks are mixed. this is "bloomberg." ♪ retail.

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minister said his budget will soothe investors. we are live in rome. turkey's troubles in place. consumer prices as the tension leader pushes up cost. how big is the contagion risk? a new start to all problems as mps return, theresa may comes under fire from her former brexit secretary. good morning. this is bloomberg surveillance. i'm francine lacqua and london. -- in london. meansene is off and that equity markets are shut, treasuries do not trade. we are seeing anxiousness in the markets. european stocks trading sideways after we saw selloff in asia. that has to do with emerging markets dropping and investors trying to assess the outlook for trade and foreign policy. we will get back to markets but first let's get to first word news. here's kailey leinz. keleigh: president trump has a

warning for canada and congress on trade. he says if there is not a fair what he the u.s. after calls decades of abuse, canada will be out of the north american free trade agreement. he said congress should not interfere or he will terminate the current treaty. the leaders of italy's government says they will carry out campaign promises that undercuts the finance minister's attempt to calm investor nerves. the next budget will see the deficit almost double. the government has promised a guaranteed income and a flat tax program. in turkey, the central bank is vowing to use all tools to fight for an inflation. it is promising to reshape its monetary policy at next week's meeting. consumer prices rose at an annual rate of 17.9% in august, the highest in 15 years. the lira is getting the blame. a judge in myanmar has sentenced two journalists to seven years

in prison. they were convicted of violating the secrets act. they had been investigating military atrocities against muslims. reuters says there is evidence the two were set up. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm kailey leinz. this is "bloomberg." francine: thank you so much. this is what we are on the markets. drifting in europe, shares in asia and emerging markets were down, investors trying to figure out what international trade will look like. copper steady after losses, the turkish lira paring losses after the bank was forced to promise it would stem inflation. flagship brexit proposal came under attack. emerging markets, turkish

inflation was boosted last month. bank said its monetary stance will be adjusted in september. we have got what is expected to be another big week following the battering some currencies expected -- experience last week. we are joined by william jackson of capital economics. also by adam cole of rbc your. are we going to see -- rbc your. europe.oing -- rbc are we going to see more domestic troubles? and: it is more the latter the theme running through those emerging markets, seeing their currencies underperform is something that has been with us for some time. it is a theme that we will keep coming back to.

inre are policy issues argentina and turkey which we will see some resolution of in the next couple of weeks. this pressure point is likely to be something that is a theme we keep returning to as we have been doing. francine: how will argentina resolve itself? resolution would be too strong a word but what we have is some hope that it's financing requirements for the next year or two may be taken off the table so there is a possibility of structural reform, a window for the reform needed. whether that is delivered is an open question. that is the best we can hope for in the near term. francine: william, what do you what is happening in argentina and that is more worrying than what is happening

in turkey? william: markets are starting to realize how big the problem is which has underpinned the external vulnerabilities that have stayed president. to improve ther economic situation. he has made progress but the fiscal position remains weak and now markets need to see significant policy to tackle these. in terms of which is more worrying, i think turkey is a larger economy, it has potentially bigger spillovers to the rest of the world although that is likely to be small. francine: adam, where do you see the turkish lira going to from here? adam the risk is to the downside from here. the bigger question for me is how the central bank response to that next week and more important than that, what we see

in the september cpi data when there is another import inflation yet to's -- yet to show appeared there will be plenty to worry about in terms of the spiral of accelerating domestic inflation and a weakening currency. for us, the risk is to the downside. the questionuess is, what will move our emerging markets? how much will be domestic things and how much is it dollar strength and the fed? a next bytill have tatian that the broad theme is dollar strength going forward. expectation that the broad theme is dollar strength going forward. the dollar is more likely to go up then down. on the back of what is a conventional story of policy divergence in the u.s. favor and

that is something we see ,arrying through to next year which markets are not correctly price for at the moment. are rate expectations closer to the fed then they are to the curb at the moment and that gives us -- the curve at the moment. is it the right moment for investors to come back to emerging markets? william: there are a number of headwinds. china's economy seems to be slowing. the trade war continues to be billed despite developments between the u.s. and mexico and it is possible the u.s. might slow its fiscal stimulus. it as a bearish environment for emerging-market assets. francine: thank you both for joining us. we will be back with adam cole and william jackson. coming up tomorrow, george sarah

os.lows -- george saravel we will ask him where he sees the euro and the dollar. this is "bloomberg." ♪

keleigh: this is bloomberg surveillance. i'm kailey leinz. let's get the business flash. thousands of jobs and car models in an attempt to revive its european business. ford may eliminate 24,000 jobs 12% of its workforce. , several models such as the mondeo could be discontinued. ford is said to have lost $73 million in europe in the second quarter. there is a new ceo at the world's largest advertising company. wpp named mark read to succeed longtime chief, martin sorrell,

who resigned over allegations of misconduct. read has been helping to run the company as interim coach chief operating officer. he takes over at a time when consumer giants are reducing ad spending and there is competition from digital rivals. in minnesota, the billionaire founder of jd.com has been released from jail after being arrested for sexual misconduct. richard lewis has been cleared of wrongdoing and has returned to china. police say the investigation is underway. that is the bloomberg business flash. francine: thank you so much. let's get straight to our other big story and that is italy. weighing in, italian leaders brushing off their finance minister's attempts to reassure investors. these leaders insisting that

s must come before the spending constraints imposed by the european union. joining us now is israel's more gilles mo you more -- ec of merrill lynch. how worried are you about italy? : the issue we have is that we do not know who to believe in the italian government. believe mr. salvini dimaio? it is not so much about the figure and the deficit target, it is what content it will take? francine: adam, what does this mean for europe?

i do not know if this is an impact on italian-spanish yields spreads. adam: it is a factor at the margin for the euro, the political risk premium is tight and the bias would be for to widen further and that leaves the euro-dollar lower. reinforcedt theme is as we see scope for political risk to widen. what is the biggest risk to italy right now? the bigger risk is you see ongoing tension between the e.u. and europe. -- ifdget issue it self the budget issue is not resolved but that the issue rumbles on and that these tensions continue to pressure spreads.

francine: adam, when leaders say the well-being of italian is there ame first, danger that they do want to take italy out of the euro? adam: i think that is far down the agenda. it is a concern the markets will have. you do not need to be worried italytaly or the risk of leaving the euro about politics as the budget debate is showing, there are other conduits for populist policies being negative for the currency and the budget is one of them, without the risk as something on the agenda at the moment. francine: let's bring in

bloomberg's italy cheap. what do we know about -- italy chief. what do we know about what the populist leaders want? >> that is the thing. we are not sure what they want. we know what they promised and what they promised was expensive. they promised a great deal. we have to figure out, are they going to do it at the same time? we were thinking it was going to be gradual. the cost was not going to be so high. thingshave them saying that give the impression they will try to phase and everything at the same time. we do not know in we do not know because the finance minister is saying things will be fine and the markets will be reassured. everyone is waiting to see what happens when they present economic targets and when we see the budget. how controversial do

you think the budget law will be? this is not the first time you have a government going against some of these budget laws. does this feel different? what one of the problems is the tone. this week, there was no need for saying italy would touch 3%. they can gain money just by going to 2.2%, whatever it is. of, seem to raise the level they are on a campaign trail, they are trying to get more people to vote for them. they say things that are not always logical and this is the problem and this is what gets markets upset. much, e: thank you so alessandra. andill be back with gilles

william. u.s. markets are closed for labor day. for american beers, happy labor day. -- american viewers, happy labor day. shares in asia were down. investors trying to assess the outlook for international trade. the pound down. this is "bloomberg." ♪

francine: we have breaking news. abu dhabi is exploring a merger between three of its banks that would create a lender of with about $110 billion of assets. these would be discussions to combine three groups. we understand there is no decision but that discussions are underway and if successful, the deal could be announced as early as this month. see whether there is any reaction from those banks and whether we have an announcement or not. the merger would create the

fifth biggest bank in the gulf. let's go back to our other top story and that is italy. i have a chart showing the italian spanish ten-year spread. it is at levels we saw during the european debt crisis. oec andback with gilles m william jackson. you are worried about italy. is the anxious level going to be worse than the greek financial crisis? gilles: hopefully not. what we hope for is there is enough to her pressure and market pressure in the next months so that in the end we get a fiscal trajectory which is consistent with stability and there is support in italy and financial support in italy to provide cash. the next months could be volatile because we may need to

go through this phase of market pressure before we can be reassured. francine: what does this mean for the european central bank? will it start hurting the ability of the ecb to buy italian bonds #-- bonds? gilles: ecb is on its way out. it -- it's european bonds are on its way out. it makes it more difficult. italy could have been a candidate. itit is harder to convince other european countries we should do something to help. i do not think it has much of a bearing on the rate strategy. the decision on rates were to be made after we know where italy stands. for now, i do not think we want to talk about it. creatingthink it helps

a sense of can continue him -- a sense of continuity in the eurozone. the situation in italy is not making things easier. francine: i want to ask you about the boe but we did have this report that the bank of england governor was in talks with the treasury about extending his tenure. depart thening to bank of england in june of next year. they're reporting there are discussions underway. we got hold of a government spokesperson saying that governor carney is still expected to step down in 2019. his plan today was june of 2019. i spoke to him and he said he was speaking to that. whether there are ongoing conversations in the background, i will bring that to you. when you look at mark carney and the main concern is that you

have the bank of england governor leaving in the middle of discussions with brexit. what would that mean for the pound? gilles: it is probably not great. any additional uncertainty in the situation is not helpful. thatone caveat, which is has not beenstance easy to read. it would add uncertainty of having the change but the bank of england has been hard to decipher. francine: this is because of brexit? gilles: it is an because the bank of england has a problem and how in what to make of brexit from an economic point of view. the hesitation is trying to decide whether this is a shock. you may be forced to hike rates. if it is downside, you may want

to do the opposite. the bank has been oscillating between those options. the issue is i do not think we will be able to decide between those before we see brexit whether it is delivered. we will have to wait until the spring or even further before we can make up our mind. francine: thank you so much. we will be back. in the meantime, if you liked the charts we're showing you, we have the italian-spanish tenure spread and we have something about the -- 10 year spread and we have something about the fed rate premium. just log on. this is "bloomberg." ♪

francine: this is bloomberg surveillance. i'm francine lacqua and london. tom keene is off. wpp has named mark read to succeed martin searle.

he was appointed -- his appointment is effective immediately. joe joins us from our london newsroom. what do we know about mark read? wpp whois a long time joined the company in 1989. he sat on the board. he was one of the top lieutenants for many years. he is seen as a popular insider who has the experience needed to reshape this company which has struggled over the last 18 months, losing one third of its market value. sense to does it make name an insider instead of an outsider? >> some shareholders would argue that wpp need someone who is an insider -- need someone who is an outsider. he does have a sufficiently distant perspective

given that he is only running one of the units. he thinks he does have a sufficient outside view to change the company. the board have decided he is the safest bet. francine: thank you so much. let's get to the bloomberg first word news. here's kailey leinz. keleigh: present trump is threatening to terminate nafta over what he calls decades of abuse by canada. he says there is no necessity to keep canada in any version of nafta. the president warns if there is no fair deal between canada and the u.s., canada will be out. trade talks between the u.s. and canada stalled hours before a deadline. president trump is raising doubts about the u.s. reliability as a counterweight to china in asia. the president is skipping major summits in asia. the apec summit would have given him an opportunity to meet with china's president xi jinping as

the trade war continues. vice president mike pence will go in his place. in the u.k., prime minister theresa may and opposition leader jeremy corbyn are under fire as parliament returns to work. the former brexit secretary says her deal is almost worse than staying in the e.u. the chief negotiator said he strictly opposes it. jeremy corbyn has been hounded by accusations he is anti-semitic. benjamin netanyahu says there will not be any cease-fire deal with the gaza strip leaders until the remains of soldiers are returned. talks are underway to end five months of protests at the border. a cease-fire would lead to the lifting of a decades long blockade of the territory. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm kailey leinz. this is "bloomberg." francine: thank you.

nigeria expects opec and its allies to continue curbs on oil production through next year. brent crude has risen to a high since cartel an independent nations cut output. minister spoke to bloomberg and said if prices remain at these levels, the output curbs are likely to cease. >> it has worked for us. what may beslodge we've got to see how the market plays out. if we find out everything is working well, prices remain in the 70's, what you're going to find is everyone will leave it as it is. we struggled with that decision in june. upcome december, prices go

dangerously, we will expect to see reactions setting in from president trump and his team, you're going to see a loosening of volumes. if prices go south, we open it up. russia is worried about how long this can continue because everybody has their own. saudi arabia also. how long we keep this going is going to be balanced between how well be prices make up -- how well the prices make up for the loss of volumes. what do expect to see from the iranian output as we head toward sanctions? >> i do not want to make comments on the fact that the sanctions will impact volumes. iran has been resilient. it has gone through this before and probably will go through this way for quite some time to

work out the relationship with the u.s. the fact that the european countries are more supportive and are not taking drastic positions should be encouraging. >> what do you think of venezuela in terms of output? does it continue to decline? >> i think it will. fundamentals,uch the morale issue, the environment and they're not controlling their technology challenges. >> you talked about price and will determine whether output cuts are extended. what is a comfortable price for brent? >> i like the feel of the mid-70's. to 77. up i get uncomfortable once it hits 80.

once it hits that, the momentum to do something about it increases. at a price of $70 and above, i'm comfortable. above that, i am uncomfortable. below, 65, i worry. we need all the money i can get. >> as you look at the environment now, by the end of 2018, where do you predict the price? >> in the $70 range. francine: that was nigeria's oil minister speaking to tom mackenzie. on two more news on argentina. is said to be continuing to reverse his flagship policy of cutting export taxes as he is trying to calm market fears over the deficit. he told a press briefing this morning. joining us now on the phone is chief.eos aires bureau

what are we expecting the president to say? >> over the weekend, the president spent the weekend with his cabinet members, politicians and they were discussing changes including reducing the amount of , the export taxes they would be putting on to collect revenue. 8:30, and speaking at about one hour here. we are expecting him to give a broader vision of how he wants to balance the budget by next year. one hour later we will hear from his finance minister will give more details. forcine: what will it take international investors to have more faith in argentina?

>> as we have written about, there has been uncertainty about where monetary policy lies in the commitment to fiscal policy and bringing the deficit down to zero by next year. people want to see concrete measures. they want to see the central bank and finance ministry sticking to the plans. we had one surprise announcement where the central bank chief was changed. they changed their inflation targets only for inflation to soar. the world's largest borrowing cost at 60% through a surprise decision last week. ofre is a lot of changing course and people want to see a more steady hand. francine: thank you so much. he is the bureau chief. ec and back with gilles mo

william jackson. look at when you argentina, how much does a weaker peso help? this is undervalued. william: by our measures, it looks bare value. value.o -- it looks fair prior to the escalation, it looked overvalued. this is a country of high inflation rates. the nominal exchange rate is constantly becoming more overvalued and it weakens. francine: what does it mean for the current account balance and for the financing needs? improvingn terms of the current account balance, , coming by narrow weaker demand and weaker imports. exports are agricultural and that is priced in dollars. it is going to come by a painful crunch. francine: when will this happen?

william: in terms of the crunch in domestic, that is underway already. the data suggests it is happening now. it is going to be a painful recession. francine: does argentina infect other markets? it cannot be held by a stronger dollar. william: in terms of impacting other markets, you will see impact on neighbors like brazil in weaker export demand. argentina is a small economy in the grand scheme of things. this is not likely to have significant repercussions for the rest of the world. turkey is the one that stands out. we understand that the argentina president will hold this briefing today. what do you want to hear? the problem we have

seen has been about communications. her colleague alluded to policy and fiscal policy as -- there has been tighter policy ,ut with the targets in the imf they deal with details to be fleshed out. that is what we want to see. francine: do you think he will go hard? he could have fixed it quicker. william: i would agree. say whatficult to measures we might see but significant attempts toward spending constraint. also frontloaded fiscal tightening. there are elections next year. fiscal policy was loose and markets want to see the fiscal deficit coming down before election season kicks in. francine: we talked about argentina, turkey, what is your take on emerging markets?

mexico is different to india. which one has the best opportunities? william: turkey and argentina are isolated cases. you're talking about many countries. there are lots of stories going on. the cyclicalve on recovery of countries like mexico, brazil, and russia. china,t countries and growth is slow and it will be soft over the next couple of years. francine: william jackson of capital economics and gilles moec stay with us. coming up, i have a good pound chart. good morning. you're markets are moving sideways. it is a good week of trying to take stock of what happens in foreign affairs and the trade tensions between the u.s. and china.

we're looking at midterm elections and volumes are low because of the u.s. labor day. this is "bloomberg." ♪

keleigh: this is bloomberg surveillance. i'm kailey leinz. let's get the business flash. the largest online loan provider in the u k is going public. funding circle plans to proceed with an initial public offering on the london interchange. raisempany is hoping to $388 million. last month, it had a valuation of about $2 billion. aramco could use an option pioneered on wall street in the 80's to carry out saudi arabia's biggest deal ever. sabants to buy a stake in

ic. it could employ a leverage sabic's balance sheet to pay for the deal. that would keep aramco from having to borrow money and reveal its own details. s&p has cut the debt rating of french grocery chain casino into junk territory. casino has been battling muddy waters. we talked to the deputy cfo who says casino has gotten good offers for assets it is selling. >> we are committed and we are confident to deliver our $1 billion debt reduction which will be financed with this asset proposal and by our cash flow generation. that is why we were so confident in attaining our $1 billion debt reduction by the end of the year. we are confident on the ongoing disposal plan. that is your business flash.

francine: thank you so much. let's focus on the european central bank. italy could find itself excluded from the heart of the monetary policy. the european central bank president eight year term and's in october, 2019 and his country has no automatic policy to succeed on the executive board after the. .et's go back to gilles moec the trial and on tribulations of europe, the main question is who replaces mario draghi. depending who does, it will have different implications. they need to find someone who is going to be as forceful and dovish as mr. draghi has been. on the choices themselves, if it

gets confirmed that germany is not after the job because it is not in their interest in the sense that by controlling the ecb they will be blamed for everything that goes wrong in europe even more so than so far, you're left with finding someone from another big country, the french probably or we go for a smaller country with a more centrist personality. do know know whether this moves you or not that the germans would rather have a president of the commission instead of the central bank or could they change their mind? gilles: it would make sense for germany not to get anyone at the ecb. if it is someone who becomes president of the ecb, there would be two solutions.

guns and sticks to his he refuses to engage in the forceful moves in which draghi has in gauged and the question to the government, what next? if the ecb does not want to help, what next? do we need to start thinking about the implosion of the zone? it is not an easy position for germany. the other option is someone will do what mr. draghi used to do. exactly what the previous president had done. it creates issues for the german government to have a german national at the european central bank. we are finding some other solution probably more rational. francine: what would be the difference of whether someone in france gets it or someone from a smaller nation? think there will

probably always be a sense that if it is a frenchman, there would be a sense they would be more dovish. i am not too sure because historically france has been fairly orthodox and i'm sure any know how tould make sure germany would become trouble with a new policy. the north,meone from it makes it easier for the big betweens to divide themselves and the other jobs, european commission and the parliament and the imf. thank you so much. he is from the bank of america merrill lynch. he stays with us. coming up tomorrow, we speak with george saravelos at

deutsche bank. this is "bloomberg." ♪

francine: this is bloomberg surveillance. in london.e lacqua tom keene with a day off. september the 15th will mark 10 years since the collapse of lehman brothers. moec.get back to gilles when you look at lehman brothers, do we worry too much about the things that sparked the financial crisis which means we over regulate and we are stuck in what happened or have we forgotten too soon about the dangers? in a bankyone working right now still considers that things have changed and the way we have been operating has completely changed. i do not think it is going away. francine: that is a good thing or a bad thing? gilles: it is good.

the regulatory pressure came up levelse worst and the had to be push, the behavior had to be change. this is positive developments. we have been concentrating on banks for the last 10 years and my guess is regulators are starting to look elsewhere because a lot has been done already. they regulate enough to prevent the next financial crisis? what was the financial crisis, swan?t a gray what does this tells us about the next financial crisis? gilles: it was classic. neglected was the level of interconnectedness. we have had financial crises since the beginning but this was specifically worrisome because of the global nature and the

interconnectedness of the market. to try tois understand a simple thing -- banks were the main provider of funding for the corporate sector in europe before the crisis that had to retreat a bit and that was a good thing. otherave been replaced by lenders and the question is, are we as happy with regulation from nonbank lenders as we are with banks? francine: thank you so much for coming on. a reminder that u.s. markets are closed. happy labor day. this is "bloomberg." ♪ this isn't just any moving day.

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simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. >> it is 7:00 a.m. in new york, 1:00 p.m. in london, and 7:00 p.m. in hong kong. i'm nejra cejic rep. -- i'm nejra cejic. welcome to a special edition of "bloomberg markets."

here are the top stories from the bloomberg and around the world. president trump says he will skip major summits in asia. what could it mean for relations as trade tensions continue? italy's finance minister defends salvini says the budget will touch 3%. bank pledgesral action to curb the highest inflation in 15 years. argentina says it has a plan to save the peso. we hear from the president this hour. u.s. markets closed today because of the labor day holiday. happy labor day if you're in the u.s. or canada. things humming along in europe.