francine: judgment day for argentina. the present waits the u.s. market response to yesterday's emergency matters -- measures. leadersusiness, italy's discuss their 2019 spending plans after the deputy prime minister suggest he will push eu rules to the limit. bus carney questioned, the bank governor faces eu leaders today as speculation mounts over his future. really stick around for another

year? he stick around for another year? good morning, everyone. welcome. i am francine lacqua in london. these are your markets. a little bit more volume out there when it comes to the market after the u.s. had a holiday yesterday. stoxx europe 600, pretty much flat. a lot of it has to do with trade and how markets are pricing in the start of september. looking at pound and peso. there is a lot of em story. argentina, turkey, and fed moves and what that could mean for these markets including dollars/peso. vpd shares have fallen the most since march after the ceo signaled he will do what he asked to do to create growth. that stock down some 8%. joussenp, frederich

will join us at 9:30 a.m. u.k. time. let's get straight to the bloomberg first world news in new york city. china's exploiting a merger between two of the nation's three wireless carriers to speed up development. this is amid a race with the u.s. over technology. the top leaders are reviewing a proposal to combine chinese unicom and chinese telecom at a merger may not happen. have a companies combined market value of more than 70 billion u.s. dollars. donald trumpt abruptly canceled an outing yesterday. he was to place calls on trade. this comes as he plans to confront china and canada this week. reporters were summoned but

shortly after trump emerged, the trip was canceled and the press was dismissed. donald trump has renewed his ,riticisms of jeff sessions blaming justice department indictment against two republican lawmakers for endangering their seats in the november elections. good job, jeff, trump said in a tweet followed by another tweet that democrats must love him now. as you were mentioning, the bank of england's governor has a chance to put speculation about his future to rest. he is scheduled to face lawmakers questions about monetary policy. it's what mark carney does next that is making headlines in the u of -- u.k.. down rumors that he may stay past june of next year. oil is trading around $70 a barrel as investors assess the threat to u.s. production from the storm that will threat the

gulf coast and opec crude output. a company has evacuated workers and shut down production at two platforms in the gulf coast as gordon approaches. output from opec companies in august rose to the highest level this year. japan, the typhoon has made landfall in the west of the country. it's the strongest tropical cyclone to come ashore in 25 years and has picked up speed as it bears down on the nation's second-largest population center. been forced to temporarily close their plants and power has been cut to more than 350,000 homes and offs. nike is beginning a new ad campaign featuring the american pro foot tall player closely associated with the kneeling player mostootball

closely associated with the kneeling protest. consumers posted photos and videos of burning nike shoes and other gear. global news 24 hours a day on air and at tictoc on twitter powered by journalists and analysts in more than 120 countries. i'm taylor riggs. they do so much. emerging markets held losses today. -- thank you so much. emerging markets held losses today. the crisis in argentina rolls on. emergency measures were announced following the pesos 20% tumble. to cover what is missing during this transition that has become an emergency, we: those with more capacity to contribute. export in argentina, your contributions are greater. francine: once next and will

contagion spread? peter, i'm looking at argentina and mexican peso. partly it has to do with the fed and partly with domestic issues. where does it go from here? past is any guide, we are in the middle of a full-blown crisis in the em world. -- [indiscernible]

-- the key features of this em crisis unlike previous ones is foreign investors have been looking for bargains. i think the concern about the trade war. the concern that many of these emerging markets will continue to be hammered in the backwash of trump's pronouncements. lotthe consequence are a more serious of a have been in

the past. this is a shift in the em business and the em world perhaps marking the end of a 10 year cycle. francine: are there any good deals? can you pick some of the emerging-market currencies? i've said for years and probably set on this program that india is an emerging market with more upside potential. then't quite understand why markets have taken against it in the way they half. there are times when they make policy mistakes in terms of monetary reform. it has a huge amount of potential. in thee market that longer term will continue to outperform. i think investors are thinking short-term at the moment. they're keeping some powder dry and as a consequence that treating india -- when do you find that the trade war escalates? does the trumpet ministry should believe there tactics are

working? until they start to see some concessions from the likes of the chinese, bigger concessions than already made, china saying, we don't want to continue down this path, then maybe the u.s. will change tactic. but we shouldn't think that will happen anytime soon. what might happen is as trump continues down his path, there will come politics. so much damage is being done that they will step in. in that sense, we will see a decoupling between policy and market news. francine: what is the trade assumption and does that change right before the midterms in the u.s.? it could well change after the midterms but up until the midterms, we are playing under the assumption that the economy will remain under

pressure. it will probably respond. the impact will be relatively small. we are putting our forecast here or there but nowhere significant. after midterms, he will be very significant. if we have a split government with the democrats in control of congress then you are looking at a different scenario because questionable whether trump will push as hard as he has been. francine: thank you so much. peter stays with us for the hour. stay with us, plenty coming up including political leaders discussing italy's 2019 budget today. the yield in germany is coming off a five-year high and will be calm persist? to force canada into signing a nafta deal faces hurdles.

we will talk trade later this hour, this is bloomberg. ♪

francine: economics, finance, politics. i am francine lacqua in london. let's get to taylor riggs with the first word news. a criminal investigation with the dutch prosecutor has been settled. the dutch bank a knowledge

shortcomings in the execution of customer due diligence. this happened from 2010 through 2016. the lender also said his has started to take measures against a number of senior employees including withdrawing bonuses and dissension of duties. abu dhabi commercial bank and union national bank started talks for a three-way merger. in new be says it's talks. it could create the largest bank in the gulf with about $110 billion in assets. european companies aren't alone with their brexit plane. costs will it's reach $100 million. the uk's looming rupture with the eu forces companies to

duplicate record tory efforts. fromr said it's costs stem moving product testing and offices to other countries, changing clinical trial procedures, and other ruminative measurers. societe generale says it will look into sanctions violations conclusions in the coming week. it says the final until he would be in line with its estimates. it is put it -- it has put aside 1.2 billion euros to settle the investigation. that's your bloomberg business flash. thank you so much. it's after labor day and back to school for the markets. in italy, political leaders start discussing the 2019 budget in earnest. investors will look for signs they will -- of how far they were the budget rules. said thate minister

bond yields would fall after investors sees the plan. -- joining us with maurice anna edwards. the conferenceat joined by our guest. great to see you this morning. back from the beaches in italy, keeping us busy with seemingly conflicting messages around the budget deficit. what are you watching for in the budget plan? huw: we're in a situation now where we have two leading populist -- populist parties in the government. they've each made promises to their constituencies towards universal income and lower taxes and so the coalition program, which is the bedrock, i guess, of the budget law currently being formulated is the son of

the two populist agendas. if you mechanically apply the numbers, it leads to an outcome in terms of the deficit and ultimately the debt projections which are quite disturbing. particularly in a context where the ability to maneuver is quite limited. mainly because those conversations remain quite active and there's a prospect for new elections in the new year. our expectation is that we will get new elections sometime in the course of the spring of next year. that new election will lead to a more coherent government. the election is fault on more traditional left of center and right of center grounds, looking beyond the election, we may end up with a budget that focuses more on a choice between either the left populist or the right populist agenda.

in the intervening. period,e intervening the prospect of difficult negotiations is quite disturbing. in the short term, spreads of theme down and one deputy ministers said the budget will satisfy the law but you are looking slightly further out. huw: from an economic point of view and more fundamental point of view, it is the longer aspect. from a market perspective and despite the people you have quoted, i think there is going to be time early next few months where we transfer through this dividing the budget and the prospect of elections in place. in a microeconomic environment, we saw with pmi in italy, a stalling of the manufacturing sector in italy, economic andpects are quite clouded

develop midcity economy as a whole. there's understandable concern about the fragility of italy both in italy and in broader international markets. if you take this broader view looking into 2019, i think probably the uncertainties we have faced will begin to be resolved. of course, we are navigating through in a fragile environment, that short-term outlook remains a key concern. with this question of italy and fragility, will it away on the ecb as it considers its exit from monetary policy? with it be adjusted at all? huw: i think explicitly, no. it's difficult politically for the ecb to be seen change in an areawide policy under conditions of one country which are driven

by political uncertainties that ecb would see as underwriting unsustainable fiscal choices. implicitly, within the darkened premises, i new ecb think there will be concerned and i think it will give a certain reason for caution. mr. draghi has signaled a quite cautious path in terms of the outlook for interest rates. ishink that cautious path supported by the dance we have been discussing let's also justified by the underlying basis with things below target -- inflation below target and the macro economic data has weakened over the course of the last six or nine months and perhaps that weakening has been more abrupt and rapid than we were expecting and the ecb is expecting. there's a gathering to discuss with the eurozone can withstand higher interest rates. is that premature? huw: particularly on the fiscal

side, those fiscal decisions do have this medium-term aspect. it's not something that's going to be determined in the next six months. it will be determined over the few years. choices made today, they need to for the potential of higher interest rates which are almost inevitable. having said that, is it an immediate issue that we will see higher rates? said,k for reasons i've at least in terms of monetary policy, short-term it's probably not. relative to our forecast which is the first rate hike in the fourth or of next year. the risks will skew towards a later hike. anna: thank you very much. huw pill joining us here. he is the chief european economist at goldman sachs. francine: thanks so much. we will have plenty from anna

throughout the day. donald trump abruptly canceled his labor day plans yesterday as he fights with canada and china over trade. reporters were summoned to the president shall motorcade but shortly after trump emerged from -- height -- white house you white house wearing golf gear, the trip was called off. from facing new hurdles opposition at home to proceeding without the northern neighbor. dixon ande with peter our senior writer. welcome back. found out what happened yesterday, what does it tell you about the level of angst in the white house? >> i think they want to do a deal with canada but trump's rhetoric has ratcheted up the pressure. talks are due to resume this week and it's hard to predict if they will reach a deal.

i think he does face opposition from congress to doing a deal that leaves canada out. i think either he can push on the rhetoric that he wants saying he's willing to go ahead with a mexico only deal but the size of u.s. trade with canada is such that he really needs to reach a comprehensive renegotiation of nafta. francine: how much does he want it? part of this is about shoring up his support from blue-collar workers who are or were a big part of his base. that support has slipped in the past year which is why some of the provisions he has renegotiated with mexico are prolabor. one of the provisions that 40 to -- of cars cars must imported to the u.s. must be made by workers earning a minimum of $16 an hour.

how that will pan out and whether or not that will result in increased wages and whether or not automakers in mexico will merely accept the increased tariff remains to be seen. he wants a deal, he wants a deal that he can trumpet as a victory , particularly for workers in the u.s. as he had into the midterms. francine: is he in a winning dealion if they strike a or is it better to be seen as going in fighting? stephanie: he can spin it either way. the deal he has already done trumpet as ahe can win for u.s. workers going into the midterms. whether or not iraq should play out as a win for u.s. workers is another question altogether. even if he doesn't get a deal with canada, he can say that he's been tough in trade

negotiations and the u.s. has been short changed by canada for years. he can play at both ways. it's not looking great for the proposed end, at least in the house. francine: the impact the midterms can have on foreign policy and trade terms, you figure out by this week whether we will have a deal and what that means for some of the currencies were talking about in emerging markets? peter: i'm not sure if we will but a clear idea of a deal if we do get one, it would take away some of the uncertainty. i think the emerging-market story is a very different one from the nafta debate. the nafta is a north american focused issue. big int replaying that most investors thoughts right now. perhaps if you're in canada or mexico, it's different. here in europe are not worrying too much.

if there's not a deal, we will carry on. francine: thank you both. stephanie baker who has been following the trump demonstration and peter dixon from commerzbank. up next, record temperatures in europe made it difficult for holiday companies. how are they planning for future heat waves? we will speak exclusively to the chief executive of the tribe -- of a travel giant. we have some interviews you don't want to miss. you can also talk about dollar dynamics and foreign-exchange. number bloomberg area -- -- bloomberg. ♪

francine: economics, politics, finance. this is "bloomberg surveillance." i'm francine lacqua here in london. h whatcheck in wit

is happening around the world. colin kaepernick has been tapped as one of the faces of nike's just do it campaign. ing is putting $900 million to settle a money-laundering investigation. executivelace, the jd is back to work in china. in second place, trump cancels is labor day plans as he prepares to confront china and canada over trade. competition over trade managers and china has pushed pay hikes. china is set to be exploring a merger between two of its wireless carriers. bloomberg says the combination with unicom and telecom is set peed -- speed up the development of 5g.

what exactly is behind the merger? as you pointed out, the rationale behind it is 5g. the idea being that if you have fewer players to manage, it is going to speed up the actual development. mean,ne: what does that or how will it be impacted by the trade story? young-sam: could you repeat that question? francine: how would they be impacted by trade? there is a race for the technology and trade tensions. young-sam: the tensions within the u.s. is very much a part of it according to the people we have spoken to.

basically, china is under the feeling that they are in a race with u.s. in terms of supremacy over 5g. the latest tensions that are involved with the u.s. have added urgency to the development of this technology. as a result, this merger plan. francine: thank you so much. our reporter in hong kong. let's get straight to first word news with taylor riggs. presidentgentina's has a tent day ahead of him as u.s. markets reopen after the labor day holiday. this is all when investors will give a thumbs up or thumbs down to the proposal to taksave the economy from crisis -- save the economy from crisis. >> we are seeing the technical details that will be ready in a matter of days. this will allow it to definitely clear up whatever doubts exist regarding our financing and 2019.

united states president donald trump canceled labor day plans. reporters were summoned for the butident's motorcade, shortly after he left the white house, his trip was canceled. he has renewed his criticism of sessions, blaming justice department indictments against a republican lawmakers for endangering their seats in the november election. good job, jeff, trump said in a tweet. following another that said democrats, none of whom voted for him in the elections, must love him now. -- is scheduled to face lawmakers questions later. yesterday, the british government downplayed reports that he may save the bank past june of next year.

japan, one tropical cyclone has come ashore and has become the first to come ashore in 20 years. it has picked up speed as it bears down on the nations second-largest center. companies forced to temporarily close or plants. more than 250 homes and offices. nike is beginning a new ad campaign featuring colin kaepernick. he will star in the sneaker company's iconic just do it ad. that posted a backlash on social media. 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.

francine: thank you so much. it has been a summer to remember for europe. the region enjoyed weeks of record temperatures as a heatwave struct from ireland -- stretched from ireland to russia. last year, a travel giant warned -- the company's stock has dropped. what is it doing about potential warmer weather ahead, and how is a package holiday model faring in the age of airbnb? we are now pleased to welcome the chief executive. thank you so much for joining us. how has traveled changed? i don't know how much or how little late bookings you have had over the summer because of the amazing weather we have had.

amazing weather is not a friend of late bookings. our booking status before the hot weather was already above 80%. late bookings have not been brilliant, but as i, we have been quite resilient. in general terms, talk about our company in the last five years. we have changed our business model quite a bit. we came from a trading business. cruise ships and cruising and hotels. francine: how has our traveling changed in hotspots like turkey? you affected by the turmoil? or is tunisia back? fritz: no. if you do investments, we pay a lot of attention to the investment.

there a double down specification of investing. that means that as long as customers want to travel, and ed faster than gdp in the last 16 years. even when people didn't want to go to turkey, they went to spain. back and isming already on levels precrisis. francine: because we talk about turkish lira, did you see the impact for two or three months with people canceling bookings are not looking ahead? fritz: we had last year. we had in the usual season, 2 million customers for turkey on a book by basis. last year, we were down to one million. this year, we will be back to 2

million. if at all it has a positive impact on tours, for the pound or euro, they can buy more. francine: how is egypt doing? fritz: egypt is also doing fine. it is also a country that has come down after the arab spring, but it is now back on good levels, particularly when it comes to -- francine: can you take advantage china? has difficult is it to do china as a tourist destination because of visas and local requirements? fritz: chinaa -- for us is not so much a destination. you have more affluent classes which behave more like the same age groups, young families investing in societies. we believe that china could be

for southeast asia like the u.s. is for the caribbean. a major local source market which can drive growth. francine: how big of a source market? everything in china is big, nothing is very small. quite big and markets. tourism, it is still group tourism, but also great for the independent traveler. somebody who can go on his own because there is little english. we traditionally see the younger generation behaving like similar generations and the rest of the societies. francine: what is present mean for tui? fritz: brexit is very important.

that leads to relative cost 20%.ases of at the same time, the dollar increased in value because of the interest policies in the u.s.. the interest was raised. the cost, which are denominated in dollars such as fuel or aircraft, they, of course are even more rising right now. therefore, the delusion of the relative buying power is already reflected. we have more british customers than ever. it seems that people are not prepared to sacrifice. francine: where did they seem to go? people arebritish going to spain a lot. spain is now a much higher price. new destinations are developing. island is very

popular. croatia is popular, bulgaria is coming up. it seems there are more cost competitive destinations as spanish prices have been worse. francine: i'm not sure where peter is going. peter: i have also suffered from the exchange rates. interested in some of these southern european bulgarian destinations. i've actually considered that as an option before. francine: that is one of the things they are developing at the moment. how many hotels do you plan to add? fritz: we how we said we would do around 60 hotels in five years. we are also purchasing and advancesg to payment

to develop our properties as well. we have been adding over the last three years the hotels, mainly in the caribbean. in particular, the investments are very attractive because of the amount -- we look at the american market and it is so strong. more and more americans get passports and want to travel out balance. then, of course the caribbean is right out there steps -- at their steps. francine: you have three brands. we sorry a resurgence in popularity, but at the same time, some negative pr. s --z: the crews b business is one of the rising businesses in europe. when you look at the american markets, it is still advanced in terms of penetration. europeanse time, the are generally older, they have more available time and more

available money to spend. these are enormous drivers of adoption, and we believe cost will stay very attractive. at the same time, less and less odds can produce these bigger ships. therefore, there is a limited supply, a lot of demand. that is what we are betting on. 20 come to your point on if it is available or not? all of our ships are modern. they are on average five years. all of them have oil technology in place. most of venues heavy fuel, particularly in areas were heavy fuel is not allowed. francine: overall, what is your biggest concern? geopolitics,about foreign policy, trade tensions, or is it more of the granular fx

change and how the aircraft you buy and i went price? -- at what price? i think globally, globalization has been positive. i believe as long as our isustry, multi-tourism doubling, not so many things go wrong, and there is no reason to assume it will be different in the coming years. francine: thank you so much for joining us today. peter stays with us and we will pound.out the oil companies a vacuum way workers in the gulf of mexico as tropical storm gordon approaches mississippi. we will talk about the risk to crude oil. this is bloomberg. ♪

francine: "bloomberg surveillance." this is "bloomberg surveillance." -- this is "bloomberg surveillance." a storm is forecasted to strike the gulf coast. one company has a vacuum workers as evacuated tropical storm gordon approaches the louisiana and mississippi coastline. this course back to -- this goes back to emerging markets also your inflation forecast. what is the main worry about oil? is there a danger of underinvestment that leads to $100 a barrel? way,: if the u.s. gets its

iran is going to be cut out of the market. the question then is, does that push the price up? there is a lot of uncertainty out there. i would say the market supply looks reasonably good. as a consequence, i think the downside for oil, which ought to mitigate the inflationary in the western world. oil kind of has a momentum of its own. it can go very quickly.francine: what kind of forecast? i would say for brent, we're looking at something around 70ish by the end of the year, maybe slightly lower. francine: what is the impact on do you selloff some of the developing markets that are also exposed to oil? peter: you wouldn't want to go to short with these markets. moment, oil, at the

is playing a minor role in our thinking. low.pan in trade is very i think we are really bottom fishing if he tried to trade. -- you try to trade. francine: there has been question on whether or not opec would be able to fill the vacuum. do you think they would be able to? peter: i think they will struggle, to be honest. on the one hand, you can say opec has been pretty good on courses over the last two or three years. as a consequence, if iran is forced out of the market, i don't know if the rest of opec will want to step into the market. is in their interest for oil prices to go up. also think chinese buyers will probably step in to buy any of the granular forced out of the western world.

on balance, the global market is looking reasonably well supplied. i don't think there is any real danger of the supply glass or demand shortfall at the moment. francine: heater, thank you. -- peter, thank you. according to private bankers, those willing to jump to our arrival are getting increases of 30% or more in hong kong and singapore.how sustainable is a race to the top ? joining us now is the head of greater bloomberg finance.what is driving this hot market ? is supplyimple fact and demand. in asia last year, every day, 2000 new millionaires were created. in hong kong and singapore put together, the two big financial hubs in asia, you have about 10,000 private bankers and wealth managers.

the banks are just trying to ramp up and get as many wealth managers on board as they can to serve these new millionaires. francine: in your story, there is a paragraph saying base salary increases can be from 30% %, by you have different bonuses. of the banks, what is appealing are the assets and management they have. we estimate it is about $340 million per banker. you often see about half of that move from the bank or when they go to a new bank. the existing clients offer products, sort of building up the business there. the renumeration is often pegged to that. francine: thank you so much. let's get some final thoughts from peter. ter the banking

sector. this also validates in some cases the fact that there is a lot of wealth management push for the new asian millionaires, or whether it is more of a consolidation story in europe you are focused on? peter: i think what is interesting is if you look at what is happening in asia today, you look at what is happening in the european markets maybe 20 odd years ago, you can see similarities. asia, clearly has gone through the boom phase. europe has gone through the consolidation phase. bust tends to follow boom. what is happening in asia is a reflection of the finance industries where you start to get off the ground. looking at that story, the premium at which mandarin speakers are paid, which is clearly where the action is and what that tells you is that the

old days of western backers going up and running institutions in asia are probably over. european banks are now increasingly focused on europe. i think many of them are focused on their domestic market. they see change going on and european market -- banking. francine: this also brings us back to the lehman crisis and the fact that regulatory changes have come out of the banks. do you need to track the best talent if you are going to make it as a bank? would you worry about banks that don't pay up? rollinghink the high debt rolls over anyway.it is only question of relative pay . i think what we are seeing now is that there is increasingly a talent. it is not necessarily the best and brightest graduates and finance that people are looking for, it is people with good technical skills. these other guys who are going to shape the banks in the future. the right not paying

guys, you're going to be struggling five or 10 years down the road. francine: do you like the banking sector overall? look at banks generally, they tend to look rather undervalued. basically, they have been hampered by regulations. let's not forget that here in , without the ecb, it is very difficult to make money. i think is quite to be a long haul. francine: eight invested in any or would you consider investing in any of the banks? propertynks which have from their trading businesses, are the ones i would be tending to look at. those which are focused primarily on the domestic business. banks which do well in the trading side, clearly there is a lot of upside there. they also run the risk if and

when markets turn down, they could also be in the. it is a difficult call. francine: what are the lessons learned by the lehman crisis? it is almost impossible. when you think about lehman, you saw signs that it was a classic lending problem. peter: i think in terms of the lessons we have learned, in many ways, we have bolted those. regulation, and effectively preventing banks from doing the things that got them into trouble in the first place. in terms of looking at the next crisis, i think we are seeing it unfolding before us slowly. there was a rollback of globalization, which is impacting small businesses, banks, in particular. the risk is that something like the trump trade war could get out of hand and cause a kind of

competition, economic competition between china and the united states. that will impact the global economy in ways which we don't yet appreciate. francine: peter, thank you as always were coming in. "bloomberg surveillance. continues in the next hour. tom joins me. we are of course looking at a lot of your emerging-market currencies. if you look at the anxiousness out there in the markets, european stocks are pretty much unchanged. a lot of the focus is on trade tensions. bit on theittle megamerger of mobile phones in china. this is bloomberg. ♪

francine: judgment day for argentina.

the president awaits the u.s. market response to yesterday's emergency measures. ministerury m meets today. is the bank of england governor appeared before u.k. lawmakers today, will you stick around for another year? this is "bloomberg surveillance." i'm francine lacqua in london. tom keene in new york. when you look at currencies falling and emerging market space, i'm also looking at italy and the spread between spanish yields. tom: wonderful to have george saravelos with us. this screen is wonderful coming up. some 664sh lira, just out 26 71.

that is maybe in the last half hour. francine: it certainly is. this is what i am looking out. it is a little bit of a risk off mood. let's get to straight bloomberg first word news. president trump faces new hurdles in his fight for canada to sign onto a new nafta agreement. the president has threatened to leave canada out of a new trade to with mexico, but without congressional support, he lacks leverage to force canada to make concessions. talks resume tomorrow. warningt trump is the syrian president. the president tweeted that assad's russian and ukraine allies would be making a great mistake. he says hundreds of thousands of people could be killed. it is another blow to deutsche

bank after years of losses. the lender is being dropped from the euro stoxx 50 for the first time since it was created. the strongest-to hit japan in 25 years has, sure. it made landfall in western japan with winds of more than 125 miles per hour. one of thetake country's most populated areas. 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. currencies, front and center. -- futures up.

oil, a bit of a lift there as well. maybe risk on. america lifting that up. what is really interesting is the 30 year bond really moving out. we see this across all of u.s. paper.the everly moved out to a higher risk on field . uisse, and i threw in turkish lira to make you happy. francine: thank you so much. there is quite a lot going on when it comes to emerging-market currencies. european stocks did reverse after a little bit of a lean session in asia. i'm looking at stocks in japan down. court european bonds falling with treasuries. italian 10 year notes bucking the trend, extending yesterday's

advances. tom: let me go over to em. this is the most inflammatory em chart. there are other series that are not as greeim as this. this is the jpmorgan index from the beginning of the year. massive acceleration. you can see the leg over the labor day weekend and the united states. just a new acceleration. we will collect a september depreciation. chart.e: i like that mine is a very simple spread between a tiant and german ten-year yield. -- italian and german ten-year yield. blank meets today for the fiscal targets. exchanges reopened after labor day yesterday in the u.s.

a holiday seen as the unofficial end of summer. earlier, argentina's government announced emergency measures tumble.g the peso's , >> to cover what is missing during the transition it has become an emergency, we will ask those with more capacity to contribute. i'm referring to those who export in argentina, they are contributions are greater. francine: for more on emerging markets, we are joined by george sarvelos. great to have you on the program. how low can these emerging-market currencies go? george: that is really the big question for the rest of the year. seen thisu have weakness. most of the external drivers that were pushing em weaker actually stopped in june and july. data surprises that were

negative, troughed in june and july. eagle u.s. yields have not been moving. the one thing that is consistent are these fund flows. inflows into short-term u.s. government bonds are surging. you are seeing this rebalancing flow.tfolio we need these flows to stabilize before we can feel a bit more comfortable that em has stabilized. francine: i don't know if you want to call it a mini selloff, but in the past, people saw opportunities and would get back in. we haven't really seen at this time.is it the psychology of the market that is different , or the markets just worried about trade? george: we have done a bit of work on the size of outflows we have seen to similar tantrums. the difference this time is the outflows initially being very slow. as the em selloff started,

people were reluctant to reduce positions. as a result, i think there is somewhat of a delayed reaction in em weakness. we are starting to see value in em. people still have these overweight positions, and the adjustment is only just happening over these summer periods. i think eventually, it will be a buying opportunity. tom: i want to talk about the bigger picture back in 1997. this is indonesia at rupiah and the unraveling of 1997. some pretty good stability for em currencies signaled by indonesia. not only is it unraveling, but we have some real convexity here to a weaker rupiah. if you were to write the imf green book now, their financial stability green book, what would it look like for em? how close are we to where inflation, interest rates, foreign-exchange signal and unraveling for their banks?

george: that is a great question. i think if there was one message that markets are sending to economies this year is, don't run current account deficits. the countries that are suffering the most to ones with large funding requirements that require inflows to fund these current account deficits, this extra spending over investments. those other currencies suffering the most unfortunately., the quickest way is to sharply contract the mystic demand, which is what is going on in argentina and turkey at the moment. tom: is the american tariff battle exacerbating that? george: i think it was definitely making aggravating things. it was making things worse in q2. if you look at a number of metrics in market pricing of trade war risk, it has actually

receded from july. the market looks slightly more comfortable with what is going on in trade compared to q2. and yet, e.m. continues to weaken. i think there is something a bit more specific going on than just trade war risk. francine: how difficult is it to pinpoint, we are 10 years on from the lehman anniversary. could this be the next crisis? george: if you look at the pace of the selloff, a lot of these pesos have already hit levels close to tantrums. i'm not sure if you call it a crisis, but you have definitely seen a large selloff. is, when is the right time to go back in? i'm not convinced it is just yet. francine: when the right time comes, what pairing do you buy? george: you look at the cheapest currencies and those that are the most expensive and you attach more weight there. generally speaking, european

currencies looked cheaper. things like central on eastern europe. there i say, turkey is looking extremely cheap on our evaluation markets. area of emerging markets that looks expensive is asia because it is being held together by china. they are obviously defending their currency. value is really outside of asia. the big potential for additional weakness is asia, the chinese authorities. tom: george is with deutsche bank. we will bring it over to the equity markets and basic investment strategy to get your september started. rick has an update and the 8:00 our. stay with us worldwide. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." a mergeronsidering between two of the country's biggest wireless carriers so it can speed up the development of five g mobile services.there is a proposal to merge china unicom and china telecom. both countries are state-owned.

china is in a race with the u.s. over 5g technology. the world's largest advertising company named a new ceo. he has a signaling he will spend more in order to revive growth. replaces martin sorrell who left last month after allegations of misconduct. 784 million dollars to settle a dutch investigation into money laundering. the bank acknowledged what it called serious shortcomings. it also says it is taking action against a number of former senior employees. tom: thank you so much. it is september, which means the conference season is upon us. it is a great time to get together with smart people to reengage and recalibrate.

no one does this better than anna edwards. good morning. anna: good morning to you. wondered into the goldman sachs leverage finance conference here. at back-to-school feel. i'm joined by tatyana who joined us. very warm welcome to you. a lot of talk here today and running up to this conference about a turn in the credit cycle. do you see a turn ahead? turn.on't see a i think it feels more like we have found the level. has widenedh-yield by 150 basis points since the end of last year. that actually looks quite attractive. decent. data looks very we're always trying to say the cycle has been so long and we

have to find a turn. we have to find the ends, but when he just look at the data, it doesn't indicate. suggest that we leave this cruising altitude anytime soon? jana: in terms of visibility, one is the economic outlook. it doesn't look like we. see a decline anytime soon the other is the behavior of corporate. their behavior has been terms ofy modest in how much leverage they are taking and how much risk they are taking, how much earnings growth they are anticipating. that often indicates we are at the end of a cycle. it does indicate we are lateish. multiples they are paying, but not as indicating where at the very end. high-yieldanage euro and bonds.

on the high-yield side, is the direction toward a more spread widening? tatjana: we have seen so much spread widening already. everyone when into 2018 thinking the first half would be widespread. because of qe, political uncertainties, more aggressive behavior by corporate. we have seen the widening already in the first half. we have experienced it earlier than we all had anticipated. actually, that widening has all been dissipated corporates again. widening, because of the volatility in the market, that has been more subdued recently. anna: another topic of conversation is movies raising -- moody raising concerns.

there.o raising a flag is that something you think it should be on our radar? tatjana: yes. we have been complaining about this for the past few years. they have taken advantage of it, more than they should have probably. to be fair, over the last four or five months, it has been dialed down because the market has been more difficult. i would think that the deals that are expected to come to the market over the next few months, there is a pretty healthy pipeline that they will have to bring some positions or have some confidence. anna: so we have seen a little bit of a shift in the balance of powers. big topics here on bloomberg television. you seem quite sanguine about

the risks coming out of italy. is that still the case? tatjana: i am just thinking a lot of investors see more of a trade. when you ask them, they don't think that italy is going to default. they see it more as a trade and expect more volatility. to me, the levels at which the italians are currently trading, a lot of it is priced in already. we all can see that the politicians are responding to the expectation of a downgrade. there seem to be a little bit of throwing between the finance minister and prime minister. they could be a surprise to the upside that they are more reasonable than the reckitt is currently expecting. at the current levels, there could also be a rally. anna: thank you so much.

tatjana comes to us. there will be plenty more interviews with anna throughout the day. george will be back with us from deutsche bank. coming up on bloomberg daybreak: america, the blackrock global chief investor. this is bloomberg. ♪

francine: this is "bloomberg

surveillance." , and francine from london and new york. -- tom and francine from london and new york. george from deutsche bank is still with us. it is unclear to me. there has always been speculation.for the moment, it doesn't look like he is staying. what is that mean for the british pound? george: i don't get it means much because it is all about brexit. that is going to be the key focus. if he stays or not, it will provide a bit of continuity. it will remove another source of uncertainty for the pound. i think it really all is about brexit at the moment. francine: where do they go from here? george: we are more optimistic than the market in terms of

brexit. i think it is important to separate the two issues. one is the withdrawal agreement, which relates to the payments that i've already been agreed. northern ireland is a big open question. the second is the future arrangement. the key point around that is it has huge potential. and will be a statement that is not legally binding. the end result could actually be that there is plenty of room to find compromise. the withdrawal agreement should be something easy to reach. we think sterling is overdone in terms of losses. we look at an agreement by the end of the year. francine: is a more likely that, is there any chance that they crash out? we talked out the chances of the u.k. crashing out. george: never say never. there is always a chance of anything happening. i think that probability is very low. in my view, the worst-case scenario is, if you can't get an

agreement, what will happen is extension of the parliamentary deadline. tom: george with deutsche bank will continue. we have lots to talk about, particularly with em currencies. a little more fragile than what we saw with the u.s. on friday. as they begin september, we recalibrate with george from deutsche bank. coming up, we are pleased to bring robert feldman from morgan stanley. of course, we will address all on japan. stay with us. this is bloomberg. ♪

tom: much going on. we are looking at emerging markets. the turkish lira, and little bit of strength. all in all, fragile today. francine: i think you are right.

a little bit of strength if you look at a much longer basis. let's check in on what is trending across the bloomberg universe. , has beenernick tapped as one of the faces of 90's just do it campaign -- of nike's just do it campaign. chief executive is back to work in china after this weekend's arrest for allegedly to a misconduct. trump cancels his labor day plans as he plans to confront china on trade. let's get straight to the bloomberg first world news. here is taylor riggs. >> president trump suite is likely to be dominated by trade disputes with canada and china.

he is trying to force canada to sign a new nafta on his terms. it faces growing opposition in congress. the white house is preparing to roll out new tariffs on chinese goods. that could happen soon after public comments end on thursday. trump once again angry at attorney general jeff sessions. indictmentst blames for endangering the seeds of two congressman during the election. he wrote, good job, jeff. presidentgentina, the -- imposing whatis he is causing -- calling a bad tax on exports. forecasters predict tropical

storm gordon will turn into a hurricane before making landfall tomorrow. the city of new orleans has declared a state of emergency. some oil companies have started evacuating crews from offshore rigs. global news, 24 hours a day, on air and on tic-toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine: thank you so much. we are getting breaking news out of south africa. i'm going to try to get the roundup in a second. the economy is unexpectedly entering into a recession for the first time since 2009. it is mainly due to farming. the farming output plunged. south africa is extremely reliant on that. the economy is contracting 0.7% in the. second quarter. . if you look at what that means, it may have an impact on the

president's ascent to power. he was initially listed by investor sentiment saying he is going to reform and be much better at keeping a handle on corruption. now, there are other problems with the economy that may have an impact on his popularity. wonder if you to get to a 16 or 17 level, there it is. let's show it. there is this one little shot here. we are up to new weakness at 15.19. backine: george, let's get to george of deutsche. i remember when president ramapo came to power last december. you had this positive sentiment because he would put an end to the corruption that was under jacob zuma. the optimism seems to be fading

because he failed to implement the structural reforms promised. are we not giving him enough time? >> i think the biggest issue south africa is racing is being swept away with all of the weakness in other emerging markets. south africa is one of the biggest destinations of e.m. funds allocations. the last you months, there were a series of significant they get -- significant negative data surprises. the market has not been as underweight has it has been in other -- as it has been in other markets. top is going to send me back to chart cap because i did not -- chart camp. see a move through 16.

all of that would do is it would be a catch-up of dollar rand against the other risky currencies. this is the key issue for the em. the steps that currencies rely on funding are we getting because capital is being reallocated. francine: let's now focus on italy where political leaders are starting to begin discussing the 2019 budget. investors will be monitoring for how far they will push the european union budget rules. said thate minister bond yields would fall after investors see the plan. is george sera bellows of deutsche bank. on whetheruestions he will remain finance minister for long. can we take this at face value? >> italy is all about one thing.

that is, what is the budget deficit number they are going to publish by september 27 for next year? you have a government that is experienced. there is a lot of noise around what we are expecting. it will boil down to the walk rather than the talk. the number they are going to publish is close to 2%. the market we think should be ok with that. my colleagues have estimated the market is pricing a budget deficit above 2%. if we go down a much more aggressive route around three, that would signal escalation with europe. it is all about this number. francine: at the moment, the signs would suggest it is near 3%. k up the europeans. >> it is a bit too early to tell. there is so much contradictory reporting.

there was a report this morning that he is thinking of a number closer to two. clarity, we do think there is potential for european assets to be priced higher. euro as well.e the ecb market pricing is already extremely dovish. tom: where is fair value on the euro? --we think we are it is going to be very choppy around 15, which has happened over the last five months. medium-term, we are still of the view that the euro should be moving higher. purchasing power -- we expect and overshoot.

the fed it should be signaling that the policy is approaching close to neutral. historically, that has been a big negative for the dollar. there is much more to a risk. we are not starting to dock about the ecb yet. that program will kick in next year. tom: what are the catalysts for weak dollar? a lot of people disagree with that assumption. >> one of the key catalysts is the feds signaling it is a protein -- it is approaching a new policy. if you look at the tightening is doing something similar to greenspan. it is being called a gradual pace. halfway through the cycle, greenspan changed the way he characterized policy. once that happened, that led to a turn in the dollar. the market, down because it was

the -- the market -- they did keep going for a few hikes. it was a material signal for the market. that will be quite important for the dollar. francine: you also mentioned marty draghi leaving next year. what we heard angela merkel saying that maybe she was to put someone in the european commission as president. how much does that move the euro? >> i'm am not entirely convinced it is in the germany -- it is in germany's interest. it is a controversial position. if it is led by someone who is hawkish, it has the potential to cause more volatility. the focus to the european commission presidency makes a lot of sense. i think it is very likely you get someone -- we have two front runners out of

finland. i'm not convinced you have this huge pop this shift. francine: this is a really terrific service. you have the jpmorgan e.m. index. export those to your bloomberg. stay with us. worldwide. this is bloomberg. ♪

tom: good morning, everyone. let's get right to it. robert feldman is with morgan stanley. he is joining francine in our london studio's. robbie feldman on the high ground. also george sera bello's from deutsche bank. robbie, you have a brilliant essay on japan. made for al gdp has better japan. i do not buy it for a minute. is it a better japan five and 10 years on? >> that is a difficult question. in the end, that has to do with the balance between the impact of democrats sitting -- shifting the supply curve and technologies shifting the supply

curve outward. if japan is successful in pushing technology fast enough, we could have a noninflationary japan that is prosperous. the key thing is for the abe government to move more progressively on some of the reform issues. we can spread the technology faster. feldman always has shots. how big -- shocks. >> japan has done very well with china already. about a quarter of japanese exports go to china. the japanese government thinks this that trade is a global an interactive dense net. if we have a disruption of the he called the

recent trade actions -- if this gets worse, the whole global supply chain that has been important to driving growth will be shrunken significantly. that will be bad for everyone. trade is a very significant issue. i have to give japan and the prime minister credit for pushing on with the tpp 11 that is without the united states since president trump decided to leave. i think there is a great sigh of relief in asia that japan has taken the leadership role and tried to keep global trade structure as in tact as it can be. dynamicsapan with the of the economics, all is centered on with a huge savings rate. is there a generational shift in how japan will save given the oddities of their debt and deficit? >> the savings rate in japan is interesting because you have to separate it into the household savings rate and the corporate

savings rate. the household savings rate has gone way down. household savings was something like 20% when i started. now it is down to a few positive percentage points. the biggest savings are coming from the corporate sector. they are earning an immense amount of money. they are not investing as much as they need to invest for a more prosperous future. they keeping now is to create an environment where japanese companies find it easier to invest in home. that will bring their corporate savings rate down and raise the capital stock and raise productivities labor. then we get a positive spiral going on. francine: it is great to actually meet you in person. let me bring you to our chart. listeners, this is the asset holdings. fundsj has bought so many

, they are almost as big as the country's economy. how much longer can they do this for? >> the bank of japan is adding to its jgb holdings. approximately at 30 trillion a year. this is sustainable for a while. however, if you want to stabilize the ratio of debt to gdp, you have to have a primary balance that is in surplus and it enough to cover costs. -- in surplus enough to cover costs. it needs to be a surplus of 3% of gdp. we have a 6% of gdp necessary. the question i put the japanese investors is how much do you want of that in tax hikes and spending cuts? francine: we have a great story. are set for the

biggest foreign outflow in two years. how long is that sustainable for? >> we will have to see about the foreign sustainability of the foreign asset holdings. is in the view that repatriation flows are critical to the outlook for the yen dollar. he is a yen bowl for the moment -- a yen bull for the moment. if you go back to what happened at the big earthquake, my reaction was i better you know my family. my second reaction was that the yen is going to weaken. that actually weakened the dollar. we have to look at the repatriation issue. francine: where do you see yen? >> we are also bullish.

the dollar could decline through 100. i have a controversial view on japan. viewing it as a big policy success. essentially, they have managed to monetize nearly half of the entire debt stock without generating inflation. pays time the government coupons on jgb's, they get right back via the boj. political stability is quite rare these days. all of these are positive for the yen. francine: thank you so much, robert feldman from morgan stanley. coming up, the investment bank -- we will ask her about deleveraging entry -- and trade.

this is bloomberg. ♪

francine: we are talking female

participation in the workforce. prime minister shinzo all the -- shinzo abe credits the commission for the growth. forfinance officer resigned sexual harassment. robbie feldman of morgan stanley and george of deutsche bank are still with us. do they need to do more? >> there has been a great deal of progress in certain areas. we see female participation rates up significantly. higher than the united states in virtually every age group. that is huge. we need to see glass ceiling issues addressed. there is progress there, but it is slow. the government is trying to address it.

we need to make more progress. one important thing, you mentioned how female participation has been so important and driving growth. -- in driving growth. yes, that is a good contribution, but we need productivity growth to contribute as well. tom: if i go when hundred 42 miles north to the outskirts of tokyo, what is the economy like? a huge body of our listeners know tokyo and the uproar over the hotels. maybe they know a little bit of the history. no one knows what is going on 142 miles northwest of tokyo. >> there is a lot going on. there is good news and bad news. exploded in the last two years. abenomia benefit of the cs program.

we have had this explosion of tourists all over the country. it is middle class and they are traveling. that is a huge benefit. the regions are getting older faster than the cities are. there is a serious aging problem. there is also an infrastructure problem. the water pipes are breaking. . the takes a lot of money to fix -- ifven if they are not there are not a lot of people living out there. there are people were very attached to their homes and do not want to move to the city. we have a mixture of good and bad things. i think the key to get things going is agricultural reform, which will give the country an opportunity to raise the agricultural exports by an immense amount. japan makes very good strawberries. they are a little bit hard to get outside of japan. that is a huge opportunity. much for this so

fine report on strawberries from japan. thank you so much for joining us. we have an important guest on our next hour. is cautionaryhan on economic growth. we will look at the economic cycles of president trump. please they with us. this is bloomberg. ♪ retail.

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strength as select emerging markets confront higher inflation. be?e will economic growth lakshman achuthan on trump and economic cycles. can the attorney general make it through october to the first wednesday and -- wednesday of october and beyond? mark chandler to join us. which em currency are you most focused on? francine: if you speak to a lot of the pros, a lot of them look at the indian currency. they say this is the one emerging-market that could do better. keep an eye on emerging markets. i have not heard anyone saying they are brave enough to go back into the emerging market currency.

tom: chandler not appear if you wanted for shortages -- ported its. trump faces new hurdles and his fight to force canada to sign onto a new north american retrained agreement. members of congress from both parties what canada included. -- what canada included. talks resume tomorrow. warningt trump is syria's president of attacking the last holdout. the president tweeted that the russian and iranian allies would be making a grave humanitarian mistake. he said hundreds of thousands of people could become. it is another blow to deutsche bank after strategic errors. bloomberg has learned that

germany's longest -- largest lender is being dropped from the euro stocks. the index is a cross-section of the biggest and most liquid stock in the euro area. the strongest typhoon to hit japan and 25 years -- in 25 years has made -- has come ashore. it is expected to pick up speed in one of the countries most densely populated areas. hundreds of airline flights have been canceled. nike is beginning a new ad campaign featuring the pro football player colin kaepernick. he will start in the iconic just do it add. that has prompted a backlash on social media. people are posted videos of themselves burning nike gear.

global news, 24 hours a day, on air and on tic-toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. equity bond currencies. let's get through this quite. i just noticed the indian rupee going up to new weakens -- new weakness. fixed income and u.s. equities have next 13.0. turkish lira still trying to find a bid. francine: this is what i am looking at. we have a similar data board. the dollars are advancing. treasury yield is higher. if you look at equity futures, -- they were up and now they are down to 0.5%. automakers are leading the decline in europe.

wpp coming out and saying they will have quite a bit of money for restructuring. with usshman achuthan and much the talk about for economic growth. erth us as well, marc chandl of brown brothers harriman. weekend, i do not know if you sell this, but the head of argentina stepped in with a plan. you no doubt digested this. done?. macri get it >> he is taxing exports to reduce the budget deficit. this tends to not be a winning strategy. they need to make a booster export. it is not a winning position.

tariffs and taxes fold into your economic cycle research/what can you do with a tariff -- economic cycle research? look and you do with a tariff? >> as a one-off, it depends where you are in the cycle. for argentina, this could be a negative. ar the u.s., we are not in recessionary window of vulnerability. we can actually do some of these things. you can have a negative one-off in the face of it. if you get into a window of vulnerability, you do not want to be messing around with this. for some emerging markets, this can be dangerous. francine: how long will the window of vulnerability last? >> until the leading indicators turn up and they have not. leading indicators for the

emerging markets on this down cycle turned down much earlier this year before the whole yields came off in june. they have not turned up. the window of vulnerability is wide open. a lot of things are happening in the fx markets. think that until the market gets the idea that the federal reserve's tightening cycle is near completion, it is hard for me to imagine the emerging markets which are needing to import capital, it is hard for me to imagine how they will be able to compete for the world savings to fund these accounts. i am not looking for the emerging markets cycle to turn. >> we do not have that yet. francine: it feels different. it was like a mini meltdown. you are not seeing a lot of the

investors pick up some of the bargains. what are they afraid of? is it that the trade war -- is it difficult to price? is there something underlying that can get uglier than what we have been seeing? >> i think there are three big negatives. one is u.s. policy. u.s. macro policy. this mix of fiscal -- a fiscal stimulus and monetary tightening. their problems within many of the emerging-market countries. problems in turkey and south africa. uncertainty about brazil's politics. the political blunders by argentina where they think that raising interest rates can compensate for the currency rates. there is no amount of interest rate that it can protect you from a currency depreciating three to 4% overnight. this is the steeplechase they are involved with.

it is like the gloomiest of these charts. we have had one leg down. we have a second leg down now. there is a guy on twitter saying they are going to do a shot game over when we mention idiosyncratic. that tells us where the hotspots are. emerging-market is an asset class. how to the emerging-market countries grow? >> to add everything you said, the backdrop is the global industrial slowdown. em is right in them bullseye of that -- is right in the bullseye of the. there is a slowdown that has been going down. em is hyper exposed to the global industrial growth.

when you like all of the is struck -- all of the structural things on top of it, that is why the valuation seems like it is there but is not there yet. tom: this is the marc chandler chart. this is the south african rand. francine did a great job. allies it -- a lot of these are shocks. -- the decades of research you have done, what happens when the chairman he comes the central bank of the world? >> if he is focused on figuring out what the stars are doing -- the fed researchers are saying, you have to hike now. he is saying i am going to go slow and steady but continue hiking because i'm going to go see a unemployment rate at half a century low.

some point, over there comes back here. lag ad very often does bit behind the curve. this could come home to roost. i do not like the idea of tightening into a slowdown. tom: this is going to be chandlers next book, over there comes back over here. francine: i quite like that. , does the fedhan need to think about emerging markets selling off at some point? does that hurt growth to the point where it could derail the expectations? >> i would switch the sequence. there is world growth slowdown, which is at the heart of what is going on at emerging markets. i think the fed is going to have to start thinking about it as a next journal shock coming in. of view,clical point

we think things are starting to slow. in the big picture, you do not want to tap on the brakes when things are slowing in the u.s. tom: we have tons of things to talk about. turkish lira is at 6.70%. about. much more to talk a.m., rick reader will join them with blackrock to get you adjusted and adapted for september. back to school. this is bloomberg. ♪

>> this is bloomberg surveillance. let's get the bloomberg business flash. china is considering a merger for the biggest carriers. bloomberg has learned there is a proposal to merge unicom and telecom. both companies are state-owned. china is in a state -- is in a race with the u.s. for five g technology. the largest advertising company named a new ceo. forecasts the profit margin squeeze for the full year but boosted its revenue outlook.

the netherlands-based bank ing will settle a dutch investigation into money laundering and corrupt practices. the bank technologist what it calls serious shortcomings. that is your bloomberg business flash. tom: it is a sunrise over washington. a beautiful september morning. much going on. the brett kavanaugh testimony going on. kevin cirilli joins us. our chief washington correspondent. abruptly canceled his schedule yesterday. why did he do that and what did he do? >> what we are hearing is that he was supposed to go golfing.

this comes as $200 billion worth of chinese tariffs are expected to go into effect as early as thursday. he was working the phones yesterday reportedly trying to negotiate the deal as the stakes get higher for the president on the issue of trade. a few short hours ago -- in a few short hours, brett kavanaugh is set to begin a very contentious critique. tom: i think the mystery over the weekend and driving into september is the relationship of this president with the republican party under threat. what is the relationship of him with the senate majority leader? him and the speaker a sitting and on and on. >> it depends which republican party you're talking about. in terms of the old guard, the likes of senator john mccain, that party is very much frustrated with how president trump's republican party has

integrated themselves into the republican national committee for example. on the issue of trade, there is a clear divide within both political parties in terms of how the u.s. policy change will move forward. whether it is centrist in both parties were critical of how the president has negotiated a trade deal. on the left, you have elizabeth warren critical of deals like nafta. they are also critical of how the president is renegotiating something like nafta. the politics of populism on the mind in terms of framing the midterms and the election beyond that. francine: when it comes to trade, when do we have a clearer idea if there is some kind of deal with canada? have thursday, you could some type of new developments in regards to trade. tom: thank you so much, kevin.

much the talk about into september. washingtonli, our correspondent. we are going to come back. we are going to have a long section with our two guests, lakshman achuthan and marc chan dler. we will look at trade in canada. stay with us. this is bloomberg. ♪

francine: this is bloomberg surveillance. president trump is facing a fight with canada this week over nafta. we have the chinese duties getting your and your. still with us guess chinese duties -- chinese duties getting nearer and nearer. how much of their -- how much of a discount is there if you get rid of the trade tension risk? >> i think trade tension is a factor weighing on risk appetite. tosense is that listening the present -- or reading the president's tweets is that the president is not in the mood to

negotiate with europe or china. there could be another $200 billion of tariffs implemented if not this week than next week. canada, president trump has made it clear he is not the mood to compromise. this is the nailbiter. things could get worse if they do not get better -- before they get better. if there is some kind of reversal of the u.s. policy, it is good for equities in general. know whethero not thatu need to take a bet trade tensions will escalate? or does it change after midterms? >> on the political side, it is not really what we do. i would say that this administration has benefited from a growth cycle upturn that began around the election.

the presidential election in the fall of 2016. i think that is over. we are cycling down, but i do not think anybody really gets it. if you're thinking about how to negotiate and all of these the bloody things going on, you feel like you are in a strong position. the economy is revving. on that score, we are still going to have a feeling like we have a strong hand from our point of view. tom: you have a brilliant book out on the astronomy of all of this. the political science of what we are living right now. part of that was in trade and the international community and about how we bounce off each other. is there any template or pattern for this mercantile thought of my way or the highway? >> i think what he is articulating is he is the first

closed -- the first post-cold war president. even though the berlin wall fell and the soviet union collapsed, policymakers have been acting e is a dominant division in the world. president trump is saying economic rivalry is true. i is going back to world war when the congress injected wilson's idea of having the league of -- congress rejected wilson's idea of having the league of nations. i think rejecting the multilateral global system, i think a lot of the economic elite reject it. tom: we are going to come back on this. we have a lot to talk about. over to thern bloomberg terminal and look at

the lira at 6.70. we noticed the south african rand move out on their negative gdp. the indian rupee cannot get a bid today. with that risk on and many other places as well. we have much more to talk about. coming up, we will look at the american economy. it is central park. the leaves ever so slightly are changing. ♪

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we have your data checks on emerging markets as well as next week. mark chandler is with us. now, we dive into the work. what do you see right now? you have a recession call. you are right about the vector one point slowing down. you mentioned the election. now what? mark: the vector is down. is reason we say that looking at the coincident data that the finds the economic cycle. it's much broader than gdp.

then together, that defines pace of growth. washigh point in growth last fall. was in the fall of 2017. it has slowly been easing off. that, andkable about that's in line with leading indicators we follow and what going on locally, this fits. it's happening with truly and an fiscal support epic energy boost. we still have this stealth slowdown in the united states. the forward-looking indicators have not turned up. going back to your vector, it's down. tom: to set of the traditional economic analysis, it's interest

rates, nominal and adjusted real rates. how does the study you do change given the negative fed funds real rate. there has to be a big asterisk over traditional work. >> thank you for drawing the distinction. we don't have economic models. we're looking at coincident indicators and the vector of those indicators. there is a very long history, a century long history of patterns we're looking at. you can see the flattening yield spread it, there's a lot of debate about that and what the research says. it's different this time. don templeton would've reminded you those are the most expensive words in the english language. rates are very

consistent with an economic slowdown. which is going to continue tightening. end,you look at the long everyone and their brother anticipated interest rates on the long end by now, we are closer to 3. that is completely consistent with a slowdown. i'm trying to distinction from a recession. we don't have recession risk in the united states. we don't have it in the united states. that sets up an interesting situation where the u.s. is believing we are decoupling from the world in a long-term structural sense. i think it's simply a cycle. francine: let me bring it over to our chart on the yield curve. is this unlike in the past?

invert?hink it will is this different? >> this time is not different. it is consistent with a slowdown. we do not use the yield spread as a leading indicator. and given false signals over time. of economic slowdown including some interest rate indicators have been telling us for quite some time. methodve that slowdown very much. japan.'t opened in this?o you agree with all >> i do agree with us. tom: where is the distinction?

>> the long end of the curve is not affecting the slowdown as much as there is $5 trillion in negative yield overseas. that makes the long end of the curve more attractive given the competitive aspect. i'm not sure the yield curve is a recession sign. i think the fed will continue to raise interest rates until they see the economy slowing down. we had 4.2% in order to. that maybe the peak. it's going to feel worse than it might be in the optics. tom: gentlemen, thank you so much. is -2.5.n yield here is taylor riggs. weekr: president trump's will be dominated by trade disputes with canada and china. he is trying to force chat --

candidate to sign a new nafta on his terms. there is, as -- opposition in congress. they will roll out new tariffs on chinese goods. that could happen after a public on thursday.ends the president is angry at jeff sessions. the president blamed the justice department indictment on to republican congressman for endangering their seats in the november election. he wrote good job, jeff. everything from mommies and dinosaurs were destroyed in a historical treasure. authorities in rio say the 20 million items in the museum were destroyed. hydrants ande fire extinguishers and not work properly. predict aters

hurricane over the gulf of mexico, the city of new orleans has declared a state of emergency and some oil companies have started evacuating crews from offshore rigs. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries, this is bloomberg. i am taylor riggs. francine: thank you so much. the south african president suffered a false start as is predecessor nine years ago. joining us now from johannesburg is our reporter. how concerning is this? it was not really expected. does it mean the south african economy is worse than expected? >> it does seem as though this is bad news for the economy and

also the investment goals the president had to try and boost the economy by bringing in investors and money to create more jobs and boost the economy. was often the second quarter compared to an increase of 2.6% in the first quarter. recession forrst the country since the financial crisis of 2008 and 2009. it comes when the president has been at the helm for about six months. the not going well for plans he has to boost the economy. it seems the fundamental structure is working against economic growth. that still persists. he will work hard to unravel those so he can stimulate economic growth. francine: there are three negatives. there is turmoil in other

emerging markets. there is the trade war. hasn'ts the fact that he implemented the reforms as quickly as investors wanted. what are investors asking today? >> it seems as though they really want some of the crisis adrift. we know there is a commission into what we have dubbed. friends of the former president influenced cabinet positions as well as state-owned companies. they want certainty. though we needas to boost investor sentiment within the country. hopefully that can stimulate some of the growth we have seen the economy struggling with. tom: thank you so much.

the economic cycle research with a sprint i want to go back to what so many people say, we just heard from south africa. it's an economy the size of tennessee. is it costing such angst? part of the challenges that there is a lot of passive investment. because of that, there is a percentage of your portfolio in these emerging markets and they are getting hit at the same time. we diversified our portfolios. emerging markets have become so volatile it has offset other parts of it. seam is different for em, they've got a better equity market. it's not like 1998.

nobody out there believes that. marc: the point is in the past emerging markets have had fixed exchange rates. this time, there is no dam bursting. it's a constant bleeding. tom: there was a brilliant set up of this. this floating world we are in, how do you pull dollar dynamics in the slowing u.s. economy? marc: it's very much about the direction of growth. you can have the structural changes over time such as we've had with fixed and floating exchange rates. what we found is over an extended amount of time, literally over a century, and

across space and very different types of economies, these indicators are robust. if you are in an economy that is activity,by premarket even in china where they are levers, it's of dominated by premarket activity. we can pick up the vector calls. this is very much a directional call. it's kind of binary. right now, it's the downside. francine: thank you both. next, the investment economist,ief china we will be talking trade wars. this is bloomberg. ♪

taylor: let's get the bloomberg business flash. nike is beginning a new ad campaign with the player most decision with the kneeling protests. he will start in the just do it added. that has prompted a backlash on social media. they posted video of themselves burning nike shoes and other gear. they expect to sell u.s. investigations into sanctions violations within the coming weeks. socgen says the penalty will be in line with estimates.

they have set aside billions for fines. the japanese retailer is moving its headquarters out of the u.k. because of brexit. bloomberg has learned the germanyis considering for new european base. that is your bloomberg business flash. francine: thank you so much, taylor. china has stirred up the biggest economy. there are high-yield notes on emerging markets. themore, we're joined by chinese economist. it's great to have you on the program. what do foreign investors misunderstand about china? is it gdp?

>> i think foreign investors looking at china are worried about growth activity at the moment. closely watching very of the outflows. the currency is the most sensitive indicator people are looking at. that's why the central bank has tried to stabilize the currency in recent weeks. francine: do we have any models on how much trade tension escalation could hurt the chinese economy? scenarioe done some analysis. we were looking at various scenarios. nextthe escalation of the $200 billion in tariffs, depending on what the u.s. does with other tariffs, let's assume the other tariffs don't go

ahead. the impact on the chinese economy could exceeded. we are thrilled to have you here. a year landmark research ago. economic andod political intelligence on china now as we confront these tariffs? is it the opaqueness they did years ago? always problems with the data. compared to 10 years ago, there is more data available. you understand the dynamic of the cities? we understand the dynamics of the huge urban experiments. tao: compared to 10 years ago, the cities have grown

tremendously, even compared to back them. the economy has tripled in size. there is a huge difference between different tiers of cities. into tier divide them one, tier two. growinge had prices very rapidly. cities,ee and tier four there could be one million people in some of these cities. they are upgrading their consumption. they can afford to buy cars and travel overseas. it's a huge country and it's very diverse. we will come back. it is september and you need a briefing. you can do that across our digital products.

don't forget bloomberg daybreak. good morning. ♪

tom: we are thrilled you are with us to start off september. how about single best chart? the table.shoe up on shows percentage change? of 1997.e ugliest further ugliest, it's a substantial weakening it. it's not the hotspot people talk about what turkey and argentina. it has record lows against the u.s. dollar now.

it's symptomatically what going on emerging markets. a lot of people loved emerging markets. now they are taking their money out. leaves, it leaves the stock markets falling. is of the catalyst the taking system? is theking system critical story nation to nation. if they spillover, we want our countries to integrate into the world economy of the global capital market. they have to be able to withstand these outflows. francine: when you look at the trade concerns and we were talking about the end of globalization, is it true that there is no truth in that? the asian countries do more trade among themselves.

tao: they do a lot of trade among themselves, but asia is very much in the global supply chain. , chinaend of the day imports from japan, korea, malaysia. that goes to the u.s. and the eu. when the developed economies, especially the u.s. are more protectionist, it hurts a lot of the chinese economy. countries like india are less dependent on trade and will be more insulated. think there isu a chance that china retaliates in these trade tensions to hurt the u.s. before the midterm election? have beenhinese relatively low-key.

after president trump announced ,e would them close 25% tariffs they announced tariffs on another $60 billion in imports. as soon as the tariffs are imposed, china will start retaliation. it is not proportional. thank you very much for joining us. we will drive forward the conversation. good september to you. we will do that on bloomberg radio, we do that next. this is bloomberg. ♪ retail.

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on a new round of tariffs on chinese imports. it's judgment day for argentina. they tried to avoid. andstors trying to grasp governments try to calm markets. fed rate hikesm looms large. welcome to bloomberg daybreak on this tuesday. i am david westin. they've got everything going on, supreme court nominations, tech moguls. alix: no more vacation? we will get back to you on that. we are looking at two months. in the markets, there was liquidity yesterday because markets were closed. a lot of interest in