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 how they are opening up.

estimates are flat. i remember remember when we were talking about a breakout at 117. it's a stronger dollar story. is that the safe haven? crude is up a whopping 2%, a very different story from the base metals. getiums are starting to baked into crude. david: it's time now for the morning brief. the bank of england governor will testify in front of parliament with the subject being. the senate begins its hearing on the convert -- confirmation of brett cap to the supreme court. google will answer questions about u.s. -- russian interference of election. be tariffs on chinese imports. on friday, we get the jobs

report. now for the first take, we are investmentur coverage. let's start with the tweeting about nafta over the weekend. there is no political necessity to keep candidate in the new nafta deal. candidate will be out. congress should not interfere with these negotiations or i will simply terminate nafta entirely and we will be better off. negotiatingy the posture, one of the things in this situation that's interesting is he is essentially potentially alienating the biggest constituents. there are lawmakers who are close to canada literally. they trade with canada. they have companies and jobs tied to them. the president fired off a tweet

at the afl-cio. he also said he's not sure how this works without canada. unions,ses the labor that's a hit to his negotiating power. david: somerset we are not sure we want 10 in. it's not clear he has the authority to end the treaty. >> let's be clear, this will be dependent on how much congressional support he can get. i don't think we've seen this amalgamation of opposition to a policy position since he's been in office. it's not just the unions and gop members of congress. said of business groups of we want a trilateral deal. ,hat's what we were expecting that's what we want to get done. there is going to have to be a moment among these groups to get him on the same page and get

canada back in the deal. argentina, they shocked markets saying it's a bad tax. they want more exports. it's an emergency and we need your support. to ans in reference export tax for companies. this is a puzzling situation. they are doing everything right. they are handling their fiscal accounts. they continue to get pummeled. >> compared with turkey, he is really trying to do the right thing. he has also lost in a very fine line between how many constraints he can put on domestically without having voters turn against them. he wants to show the imf is serious to get the support he needs. it's a tight rope he is walking. alix: you can see the market reacting.

the higher it goes, the weaker the local currency is. the bond is looking at 10.5%. >> we talk about fundamentals. the issues he is dealing with fundamental. he is taking the right steps, but most say the economy will go into recession no matter what he does. it's going to be hard for him to manage this, even with the help of the imf. avoid thatt going to trap. goes,we see how deep that you will see the same reaction in the fx market and the bond market. they got a little bit of a bounce this morning. there is a lot of risk aversion. story, respectd to currency as well as stocks. what is really happened in the last few months?

emerging markets are really taken a pummeling. look at how difficult this has been for them. >> we had news out this morning that was unexpected with south africa moving into a recession. emerging markets are dealing with two problems. the existence of more tariffs and the rising interest rates we see from the u.s. and central banks in europe. investors areike in a position where they are seeing a contagion has happened. we are getting closer to the point where people are seeing the spread is coming. david: there are some idiosyncrasies and those countries. is there a common theme? the markets loan them a lot of dollars. ,ften short-term dollar debt when the dollar goes up, it's harder to repay the loans. >> when you look at the bottom,

the peso from argentina is doing the worst. , youyou look at the rupee look at all of these currencies, the common denominator is a lot of outstanding foreign debt they have to deal with. don't forget about the pmi numbers we are getting from around the world. you are talking about a manufacturing base that has been shrinking. that is putting pressure on some of these economies as well. alix: we started off with turkey. every other country is ok. argentinadens out to and brazil and south africa. as long as global liquidity as tightening, how can you make the case for buying in? david: they've borrowed a lot of dollars in they have a lot of deficits. alix: they have to hike rates.

peggy: the only thing i hear prices areaying is so high elsewhere. investorsplace where might be able to find bargains. alix: they are not really loving that. thank you guys very much. check out the charts we just use. you can go on to the terminal and browse through the features. common up, we will discuss more in emerging markets with paul richards. this is bloomberg. ♪

emma: this is your bloomberg business flash. nike has a new ad with the football player most closely associate with the protests. colin kaepernick is the face of the just do it and. some angry consumers posted videos of themselves burning nike shoes. as another blow to deutsche bank after years of losses. the largest lender is being dropped from a the u.s. stoxx 50 since the index was created 20 years ago. it is a cross-section of the stocks in the area. with the latest attempt to stay competitive in an era of lower oil prices, three banks will combine into an institution with $110 million in assets. there are almost 50 banks in the united arab emirates.

david: thank you so much. the argentinian president went on tv to announce radical changes, including government ministries and a new tax on exports. this is what he said. we know it goes against what we want to spur. it's an emergency and we need your support. joining us from buenos aires is the argentina reporter. our people understanding so far? this is going to hit farmers particularly. confusion. a lot of the exchange rate is a topic of conversation. there is an understanding that the situation was pushed to the brink and he was running out of options. last onese of the remaining and they have a chance of making a difference.

any will be able to bring in additional $9 billion that will allow argentina to reach out in 2019. they will have a surplus by 2020. these would be huge measures. david: are the markets responding in a way he would like? i am going to put the chart you will be familiar with. the dollar goes up. argentina bonds have been shooting up. are the markets reacting favorably? >> we are still in early trading. they have been performing positively. we do need to know that borrowing costs are near record levels for this administration. it's down 15% on the year. the jury is still out.

the u.s. market had a holiday yesterday. we will continue to watch the open. measuresee if these give a boost to investor sentiment. this could be the type of sharp measures they have been asking for. the question is whether they are coming up too late. david: thank you so much. she is reporting from buenos aires. alix: joining us, it's great to see you paul. this really encapsulates what argentina is dealing with. obviously, both are negative and that's what they are trying to manage. how do you view argentina? is this a real beginning of the emerging market trade from the last 10 years starting to unwind? like greece in

the early days. europeat that time, extend them that lifeline. argentina,saying to it these right now and we will come in and support you. it almost feels uninvestable right now. it feels like a frontier currency. i think they are doing everything right in the market will probably rewards and when the imf rewards them. it's going to be a hard thing for investors to hang onto. this is probably a long-term trade and a good one. you will see a lot of volatility, but in the contagion perspective, this takes argentina out of the problem area. david: does it take it out on respect to the people? he said please be patient. you get civil unrest at some point if you squeeze too hard. paul: that is the issue.

they have an election next year. this comes at a hard time for them. if he had three years, he could convince the populace. we know what it's like in latin america when it comes to voter unrest. this could be a real issue. these things aren't very cheap levels. you can get political turmoil in 18 months. alix: if you broaden out, you've got result, argentina, turkey, south africa, so many of them are having idiosyncratic issues. with the fed hiking rates, is that enough for the dedicated investors to leave? paul: i think they are really struggling. a lot of gotten out.

not believing the story anymore, the big problem i think e.m. faces apart from the idiosyncratic issues in turkey and argentina, the big issue is trade. if we could get a resolution on , ata, e.m. when take off least the right parts of e.m.. with this uncertainty and the fact that the china trade issue is not going away anytime soon, it's incredibly hard for an investor to get involved. david: one of the common themes is the strength of the dollar. you have the fed raising. it seems like every time trump treats aggressively about trade, the dollar goes up. paul: the dollar is in comparative stability. that could trend into emerging markets. tos not like they are going take off.

we know what their intentions are. sorted and trade markets will feel more comfortable. alix: if we saw a rally take off, what are the good parts in the end? paul: let me put it another way, there is most selling of places like turkey. one of the turkish central bank doesn't raise rates? there currency goes down by 10%. you've got these looming issues. argentina will probably get results. the brazilian election is too tough to call. no one knows what to do. liketart looking at places indonesia. anything related to china feels better in the emerging market space, but you have to get the china result. things can look better for emerging markets.

maybe they are watching. testimony from brett cap not coup will be testifying in front of congress today. he said he is a pro law judge. he is right down the middle. he would strive to be a team player and he praises merrick garland. he was nominated for this position by president obama and the senate refused to confirm him. on merrick been garland's court. the democrats will that i suspect. ford says it's planning an upgrade of one of its european cars. more on that next. this is bloomberg. ♪

david: the automaker will auto -- upgrade car, not kill it. they were suggesting they would halt the model and a relitigate jobs in europe. joining us is greg trudeau. welcome. we had this report saying they were going to kill it. ford said they are not kill it. they've got real issues in europe. craig: part of it is ford's fall. they said they were going to have an investor day this month. they said during the last earnings call that they were going to reschedule.

that caused real frustration with the analyst community. they were not happy with the lack of a plan and the lack of specificity on when they would deliver the plan. there are going to be some significant moves with the product portfolio, including cutting the fusion in the u.s.. in europe and other markets, they will continue to sell that car. there are debt analysts thinking ford might go to junk. movies,he problem with it's not just europe. it south america where they are losing a lot of money. it's china where they are having real challenges. a few years ago, you would've thought anybody could have continued to grow in china because everybody was.

ford has had some problems with their portfolio there. they don't has enough suvs. what they have on the evil ground are too old. david: they also have trade layered on top of that. importe not going to these fusions. craig: they are going to get rid of every passenger car in the lineup for north america with the exception of the mustang. the focus active is a crossover version of the focus. they were going to import that from a china. they were going to move down to mexico. candidate donald trump was not pleased with that. they decided they were going to import vehicles from china. they have scrapped that plan as well. alix: the markets latch onto that. they finally see the effect.

is that actually true? is that a ford specific problem? greg: they said they were going to sell fewer than 50,000 units of that focus active. when they looked at the map, it didn't factor into a 25% tariff. i think maybe they are estimating how many they could have sold in the market. it was going to be a limited volume vehicle and they had to make that decision. david: how much time do they have? he was put into move faster. greg: it's going to come down to build ford. as long as he is happy, you will stay in that job. his predecessor, it changed quickly. not pleased and within a

matter of a few weeks, bill ford decided he wasn't the right guy for the job. david: his name is on the label. alix: thank you very much. question, ifse the you have a company that is struggling on a management level or product level, once you later a headwind on it, that's in the cracks get exposed. david: a little bit like emerging markets. president trump will confront china and canada this week. mexico says they have not accepted any quotas. this is bloomberg. ♪

alix: this is bloomberg daybreak. the real test for the market comes today when argentina opens in 45 minutes. dow jones futures off by 85.

s&p futures down by 2/10 of 1%. european stocks broadly weaker with the exception of italian banks. it seems like we have more conciliatory product -- rhetoric from the government about what the budget is going to be next year. investors are breathing a sigh of relief. i'm enough yet for the currency. euro-dollar is still down. a broadly stronger dollar story when you marry trade with other headlines. that is really putting immense pressure on the south african rand after the country moved into a recession for the first time in six years. the curve in the u.s., 23 basis points, a tiny bit on the margins. crude avoiding any risk off when it comes to the metal. a hurricane hitting landfall today or tomorrow is going to affect the markets. david: time to find out what is

going on outside the business world. emma chandra is here with the "first word news." emma: breck, not -- brett kavanaugh says he is not pro-prosecution or anti-restitution. he is heavily favored to be confirmed. tropical storm gordon will turn into a hurricane over the gulf of mexico before making landfall. the city of new orleans has declared a state of emergency and some oil companies have started evacuating crews from operating rigs. president trump is angry at attorney general jeff sessions, blaming justice department indictment against two republican congressman for blaming their seats -- for threatening their seats in the midterm elections. global news, 24 hours a day, on air and at tick toc on twitter, powered by over 2700 journalists and analysts in more than 120 countries. this is bloomberg. united states and canada

failed to meet washington's friday deadline and will resume talks on wednesday over nafta. we know that a win win win agreement is within reach. that is what we are working towards. with goodwill and flexibility on all sides, i know we can get there. david: with goodwill but then president trump over the weekend slammed canada with a new threat to terminate nafta after those talks stalled. he said there is no political necessity to keep canada in the new nafta deal if it does not make up for what he called decades of abuse. he warned he will simply terminate nafta entirely. we welcome mike mckee, paul richards is still with us. can he terminate nafta all by his lonesome? mike: that is an interesting

debate. a lot of international law experts say he cannot do that. one because there is a question about who actually controls trade. a lot of it has been delegated to the president but congress has the ultimate constitutional authority. there is an agreement for nafta that the president can in theory ,erminate and send a notice up but members of congress say they have to pass legislation that would change the laws for that to happen. it also is six months down the line. what will happen in that six-month period, there may be a new congress. david: if we did not come to terms with canada and the president could withdraw, how much would that affect trade in markets and investment? paul: markets would be hammered. my view is that the you for you around the deal with mexico is over.

canada did a smart thing not doing a deal by friday and extending into this week. the market is going to give this negotiation another five to seven days. if nothing is done, markets are going to get hurt because trump needs to deliver something for the midterms. is not going to get a china deal done between now and november 6 -- he is not going to get a china deal done between now and november 6. he needs to get a commitment for the wall. here, butreaten canada has an equal hand in the negotiation. alix: bloomberg's mike mckee thanks a lot and paul richards a sticking with us. we want to stick with china. deborah lehr, paulson institute's vice chairman is with us. theant to kick it off with tariffs we may see.

$50 billion worth of goods is the red line the aligned is where we could be on thursday. -- the yellow line is where we could be on thursday. deborah: it is very likely the tariffs will go into place. does the ms ration use this as a hook to get china back to the negotiating table and pulled out the prospect of these tariffs and move forward immediately with a huge leap in the amount of coverage. alix: say it does happen. what is china's response on thursday? deborah: china is definitely going to retaliate. they have shown consistently they will respond within 24 hours. they will target not just our exports but they are starting to look at approvals for american companies. it is ironic that in the last few months, china has taken quite a few steps to further open its markets. maybe not as broadly as we would like to see but they have. what they have indicated is that

they are going to start granting approvals for japanese, european, latin american companies and not american companies. david: it looks like it is going to get worse before it gets better. what is the endgame from the united states point of view and from china's? deborah: the outlines of the deal are quite clear. you can see that there would be a package of market access for american companies on a much faster timeline than the chinese currently have. significant purchases of u.s. goods to issue the trade deficit that the president is concerned about and there have to be steps on intellectual property. just as the administration is pushing so hard, china's reliance on exports as it relates to the gdp growth has dropped and instead it is domestic consumption that is driving gdp growth. the conditions are very good for a deal to be put together.

isx: the other part we heard the president trump is going to be skipping two major asian summit. what opportunity may give that -- may that give president xi to push forward in the region? deborah: we have seen so bit of -- we have seen clearly that the chinese have stepped up to diversifying their base. they announced they want to do a free trade agreement with the arab league countries. just recently, a number of african countries and the japanese have pledged significant moneys to grow export markets. it is not the same as developing what they have in the united states but over the long-term, the trade patterns are going to change. we have already started to see that happen in agriculture. david: what about the larger strategic vision and let me inject here, 5g.

there are reports that china is going to allow the merger or encourage the merger of two of their three wireless providers to form the second largest wireless provider in the world. president has expressed concern about 5g. emma: there is -- deborah: there is no question we will have conflicts with china over the long-term. part of what we are discussing is was holding this one small aspect of our trade relationship. over the long-term, we're going to be competing across a whole range of markets, big aside security issues. china is merging a lot of their state owned enterprises and they are going to be powerhouses overseas. united states needs to be thinking domestically about how we ensure that our own economy is competitive so that we can continue to compete with china whether it is here in our own market, china or a global basis. alix: when we talk about companies -- when we talk to companies that have global

exposure, this is what they all have to say. completely insulated from a trade war. is that true? deborah: a large number of american companies are very profitable in china and our direct foreign investment is pretty low. some of them use china as a way to export back to the united states. in that case, they are going to be hit but by and large, the united states has stayed away from a number of those companies that use china as an export platform so they are not being hit in the same way by tariffs. david: thank you so much for your time. deborah lehr, paulson institute's vice-chairman. she actually negotiated china coming into the wto. still with us is paul richards of medley global advisors. you are not very optimistic about the chances of this being resolved before the midterms.

what about the longer-term? paul: short-term, we go from $200 billion to $100 billion. in the longer term, these are two big giants who will have to learn to play on the same field together. the question is timing. i am less optimistic about something by midterms and i am more optimistic beyond that. they are too bid -- big to play in the same sandbox. a very targeted retaliation from china and the name will sit down at the table. alix: over the past week, i have been getting downgrade after downgrade by big banks. said they ago, they will come to a deal, they are too huge not to and now the rhetoric is i don't know. we could lose as many as these

jobs. are we being too optimistic? paul: possibly. it is going to boil down to the superpowers deciding what they want to do. unlike nafta, this is a war that the president knows is quite popular within the u.s.. people understand what the reasons are, so he is going to push on and the chinese are acutely aware of this. he has the right individuals doing the negotiations. there is a point where the market and the populist -- in the populace will get disturbed as it goes on. i don't think we would want this issue going into next year which is why i think that in a round of midterms we might see a breakthrough but it will get slightly worse and i don't think the market has the $100 billion price in right now. -- priced in right now. david: paul richards of medley global advisors, thank you so much for being with us. coming up, asia's crazy rich

clients is causing crazy high risk heights -- hikes. this is bloomberg. ♪

emma: this is bloomberg daybreak. hour, up in the next blackrock's global fixed income cio. this is bloomberg. alix: we turn now to wall street be. -- wall street beat. after being found guilty of fraud and sentenced to seven years in prison, -- being extruded from england --

extradited from england. wealth managers in asia getting a big pay hike as new clients walk in the door every day. wall street's quarter life crisis. quarterly earnings of the rhythm -- are the rhythm of life and now that may change. so dramatic. joining us now is jason kelly, bloomberg's new york bureau chief. -- served half of his seven-year term but he is not done yet. jason: he may be heading back to ghana where he is not lived since he was very small. , based based on u.k. law on crimes committed by foreigners in the u.k. makes them subject to deportation. this was an interesting case not only because it it -- in involved a huge amount of money and also led to criminal

prosecution but also the loss of the job of the cb -- of the ceo at ubs and it kicked ubs into this crisis. it is undeniable that this accelerated it. also the personification of excess risk taken. jason: what is interesting about this story in part, it is the most read story on the bloomberg in part because the main principles are in the story and are interviewed in the story. not only him but they ceo who ultimately lost his job over this and said i resigned to say the reputation of the bank. alix: you brought up risk-taking and it was not just ubs, it was other banks and the shift from wealth trading, you have to wonder, are we done?

is it going to be different the next time we go around? jason: everyone keeps saying we now know going back what the trigger was. what is the trigger going to be if not for the next crisis but the next reset? david: is it in the banks or the nonbanks? of, in terms of passive flows, that brings us to wealth managers over in asia. if you want to get a nice pay hike, go be a wealth manager in asia and then get a different job in the wealth management world in asia and you will get a huge pay bump. jason: it helps if you speak mandarin. millionaires being minted in asia and china is just breathtaking. chart, howm this disproportionate it is in terms of the millionaires in the very wealthy being. david: almost 2000 and

millionaires minted every day in 2000 newon -- almost millionaires minted every day in that region. there is a limit on how many people can do this work. it is a good deal. alix: i did not know that. jason: it is interesting. they talked to one of their senior executives at credit suisse and he said we want to build long-term relationships and we want people to be here for a long time but that guy is just like the rest of us. no friends in the business. alix: another topic we have. wall street's, no family, no meals, no vacations. what happens if that changes? it does bring up the broader question of a look at quarterly

reports -- by yearly reports rather than quarterly. jason: it does get into the culture of quarterly earnings. you love mike mayo who is like i celebrated my 100 are the -- 100 earnings season by having a cup of hot chocolate. there are certain rhythms and a certain infrastructure that is built in wall street around quarterly earnings. this story was kicked off by the fact that the president has asked the fcc -- the sec to look into the idea of changing reporting to twice a year from quarterly. david: of you had to have any doubts about the significance of this thing, mike mayo says tennis has four grand slam tournaments and wall street has its for quarterly earnings seasons -- four quarterly earnings seasons. alix: you go from four to two,

is that really going to change the short-termism? jason: part of the argument is that companies are still going to be essentially if not reporting, gathering their information quarterly. there is also a fear that this will lead to more insider trading because there will be fewer times that companies are coming out and publicly saying exactly what is going on. that it will not change much. david: the really big news is we ended the hamptons season in a big way with the new ceo of goldman sachs spinning some discs out at earnings -- the earnings -- there he is. jason: there he is spending and a lot of jr. bankers in the ground.

they would go up and ask for a picture and they would be dancing and then tried to feel out, can they get a job? i think he loves it. he gave a nice interview that was definitely worth reading. david: thanks to bloomberg's jason kelly. tune into jason kelly on bloomberg businessweek on bloomberg radio. every single day. coming up, confirmation hearings for supreme court nominee brett kavanaugh begin on capitol hill. more on what ♪ i am watching next. -- more what i am watching next. ♪ g next. ♪

david: this is not going to surprise alix. what i am watching is the confirmation hearings for brett kavanaugh. lenknerus now is travis , managing partner at keller lenkner.

have you with us. a kennedy clerk and a supreme court clerk like yourself but a former clerk to judge kavanaugh, so excited to see the hearings begin today. david: these hearings are going to take a long time. the opening remarks are going to take most of the day. what is the real issue here? does it come down to these documents that the white house is not giving them? travis: there are a mix of political issues that are separated from the judge himself and between the political branches. set of issues we will be hearing about and then there are the issues that relate to the judge and his manner of interpretation of statutes and the constitution. how he approaches the job. who he is as a person. this week will offer a deep dive into both of those issues.

we are not going to get real answers are we? we have seen this play several times before. we already have him saying i am a prologue judge, not pro-prosecution or prodefense. we have him say what we want him to say, i will be a neutral arbiter. travis: we really want two things at the same time as your question suggest. -- suggests. we want judicial nominees to tell us how to rule in every case but we would not want them to already have said how they would rule in every case. the nominees are caught between those things. what is known as the ginsberg , no hints, no previews, predictions of how a nominee would rule in a particular case. you will see that in his answers

throughout the week. i think people get a sense of him generally, of his approach to the job, of his interpretive methods and who he is and character matters for these lifetime appointments and you will get a good sense of that over the course of these long days this week. david: thanks so much. travis lenkner, keller lenkner managing partner. you can join us for live coverage of judge kavanaugh's remarks. we expect to start hearing from him starting at 4:00. alix: coming up, ash chief equity strategist will be joining us. this is bloomberg. ♪ xfinity mobile is a new wireless network

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president trump threatens canada to make a fair deal at the clock ticks towards a new round of tariffs on china. it is judgment day for argentina. the president mauricio macri -- governments try to calm the markets. hikesllout from fed rate looms large. david: that is the capitol dome in washington. welcome to bloomberg daybreak. we are showing the capitol dome because it is starting -- alix: no more golf. david: president trump had to cancel. blame canada. futures reversing any of those gains. futures down by about five points.

the euro-dollar definitely weaker. a stronger dollar story because of any kind of safe haven trade flow conversation. the curve in the u.s. a little steeper at 23 basis points. crude above 70 points, having its highest level since the end of july. david: already coming off of those offshore oil rigs. time for the morning brief. a few minutes from now, the bank of england governor will be testifying in front of the parliament with the possibility of extending his term on the agenda. tomorrow, exited his from google, facebook and twitter will appear before the senate intelligence committee. thursday, president trump have the authority to impose tariffs on chinese imports and than friday, we will get the numbers for u.s. job creation in the month of august.

let's get an update on what is making headlines outside the business world. we have emma chandra with "first word news." emma: supreme court nominee brett kavanaugh says he is not a pro-prosecution or prodefense judge. the white house released excerpts of the conversation. he is heavily favored to be confirmed. 's week is likely to be dumb and it with trade disputes -- dominated by trade disputes with canada and china. his threat to its loop canadians from a new trade deal with mexico faces growing opposition in congress. the white house is preparing to roll back new tariffs on $250 billion in chinese goods. second, direct public comment thursday -- that could come after direct public comment -- after a public comment period

on thursday. global news, 24 hours a day, on air and at tick toc on twitter, powered by over 2700 journalists and analysts in more than 120 countries. i have emma chandra. this is -- i am emma chandra. this is bloomberg. david: the united states and canada failed to reach terms on a new nafta last week. here is what officials have to say about the nafta deal. >> china is ripping us off. japan is ripping us off. mexico is ripping us off. canada is ripping us off. there is nobody that is not ripping us off. >> we will only sign a deal if it is a good deal for canada. no deal is better than a bad deal for canada and canadians and that is exactly what we are remaining firm on. >> we very much are opposed to these tariffs. they are unjustified and they

are illegal. the notion that somehow canadians that canadian steel or aluminum could pose a national -- that somehow canadian steel or aluminum could pose a national security threat is ludicrous. global gdp, it looks on most trade models to be relatively modest. those don't take account of all the second round effects, the impacts on confidence and therefore on investment decisions. i think it is those second and third round effects that could be more damaging. david: during is now is jonathan golub, credit suisse chief u.s. equities are just. -- credit suisse chief u.s. equities strategist. jonathan: if you look at the way the currencies are trading, they are telling you that we are going to have a trade deal.

process. negotiation you don't go in saying don't worry, i am going to cave. at thef you look sectors, which sectors are you watching that you would be worried about and you would rethink your call on if things don't go your way? jonathan: the way we think about this is where do we have most trade? is it in natural resources or things related to autos. we have a full-blown global trade crisis, this is going to be very recessionary. interest rates are going to fall and the banks are the biggest losers because this is a contraction in the overall global economy if things go bad and that is not the way the people playing it are thinking about it. it would be a hit the global success and if you see the market going up the way it is,

the market is saying we are not going to go down that path. david: we just had a full screen up saying your target was 3000 for the year. no.t email saying no, no, jonathan: our 2019 target right now for the s&p is to go to 3350. we had a 3000 target this year. we are quickly moving along toward this 3000 target. i need to move the goalposts and say forget about the next three or four months. if you are investing, what is and wet 12 or 18 months call for it to be something in 1% roughly for the next 12 to 18 months. alix: how do you factor that in when you look at margins and cap x running. how do you factor that in? jonathan: you have to split the

story into how much is going to come from profits and how much is going to come from multiples going up. this year, we had 21% move up in earnings and stock multiples sank by 1.5 multiples. our stocks became a clip -- incredibly cheap. earnings next year are going to be seven and a half to eight which is not a crazy number in the economy we are seeing. david: talking about two different worlds with the u.s. on a tear and much of the world being left behind. does that become unstable at some point? , the u.s.ultimately cannot totally divert forever. if you look at the u.s. stock market, 30% of the u.s. market are tech related companies which is substantially less economically sensitive. if you want to buy a new iphone

or do a google search or go on facebook, you were not going to do that because the economy is a little bit better or worse. if you want to buy a car, that is a different story. the u.s. market is much more resilient if you are seeing a weakening of global conditions. alix: jonathan golub credit suisse is going to be sticking with us -- jonathan golub of credit suisse is going to be sticking with us. coming up, this is bloomberg. ♪

david: the rand is falling after the south african president suffered the same all start as his predecessor did nine years ago. a recession in his first six

months in office. we are joined from johannesburg, south africa. tell us what the reaction down there is. what is the plan to get out of this? >> the reaction has been quite startling. unlock -- a lot of people are wondering where the credit rating company is going to change the outlook they have on the country. at least two credit rating agencies have the country at a junk status. gdp shrank seven point -- 7%. expansion.pect an declining 2.2% against the dollar. that is significant, particularly as we have the reserve bank later this month. we will have to wait and see whether a rate hike may be the

cause. alix: thank you so much. south africa not the only emerging market in pain. argentine president mauricio macri had to take some drastic steps yesterday. he says i -- he says we know it is a really bad tax that goes against what we want to have but it is emergency and we need your support. joining us now is shamaila khan of emerging market debt. expect when argentine markets open? shamaila: the announcement itself is a positive. you are looking for more transparency and the more aggressive fiscal plan and the argentine government has delivered on that. say where the businesses will open. investors are waiting for results from the imf

negotiations which should be coming out in the next few days. strong supportly for argentina and that is something we need to see come out in the details. david: they don't have the cash they need to meet their obligations. do the numbers add up? is this enough? shamaila: the numbers due at up. up.he numbers do add however, there is some uncertainty regarding that and that is what the government was trying to address last week by a new imf program which is more frontloaded. alix: do you buy argentine debt? shamaila: argentine debt is very interesting. there is a lot of concern in the market. a lot of volatility. this is the government trying to

do the right thing and being supported by the imf. david: we've got turkey, south africa, brazil. everywhere you look in gm, there are problems -- in e.m., there are problems. shamaila: next years elections, will his government still be in? turkey has a stable government but is making the wrong policy choices. that needs to be addressed this month. there is a window of opportunity for turkey. if they show a tighter fiscal plan, they have an opportunity this month to stabilize the situation. much of this is a broader liquidity conversation where is the last 11 years of the market is being changed as a fed hike -- as the fed hikes? shamaila: the last few years were not that great for emerging markets.

bubbles being created for the last 11 years. some of it is liquidity related but it is more about differentiating rather than staying away from emerging markets. there are countries that have external vulnerabilities that need to have a higher risk premium. there were also countries that are doing fairly well. david: are those countries outside of asia? in latin america, it looks like a pretty constant theme. shamaila: there are countries we like, select countries in africa and the caribbean that are also doing quite well. the number of indian countries doing well -- has been increasing as well. alix: the developed markets are going through a similar political transition that latin america went through a decade ago and that means it is more stable in some ways. is any of that still true? shamaila: the basic rhetoric is true. a lot will depend on whoever

gets elected and the policies they will pursue. almost all the candidates have spoken out in favor of reform. argentina is making an adjustment that they need to make. they are doing the right things. it is just a matter of continuing and showing consistency in that. the policy framework is not inadequate in latin america. will we need to see is consistency. david: is the going to be a solution to something like argentina without renegotiation of the debt? we have seen that before in latin america and elsewhere. shamaila: if the situation spirals out of control and the currency goes to 60, you cannot exclude the possibility that the are doing their best to stabilize the situation. as long as they are able to look through on the plan, they should be able to stabilize the situation. alix: what short do you like

right now? shamaila: we continue to feel that some of the higher grade countries are not paying enough for emerging markets and that is where the valuations are just not compelling. some countries which are really high-grade in latin america, they have hung in extremely well. if you are concerned about outflows, those are likely the countries getting infected more. alix: shamaila khan, so great to have you with us. still with us is jonathan golub of credit suisse. anyow does that affect rotation from cyclical to defensive? jonathan: what are the kinds of companies that are in these markets. i will switch from e.m. to europe. a substantially bigger bank wait -- bank weight. autos are bigger in markets like europe and japan. sometimes it is not only the

country and the sovereign risk which is the issue in places like turkey and argentina and you also have to say what are you buying? in that case, i think that investors actually differentiate. david: are you concerned about financials in the united states or is it more a european phenomenon? jonathan: i am not sure i am concerned about financials but the footprint of companies -- we talk about investing in emerging markets. you have to -- are you investing in debt or the equities? if you are investing in the equities, you have to ask am i making a play on argentina or is there a company that is doing something innovative or a bank or a cement company that has its own characteristics? techu look in asia, a huge

weight, they are making our iphones and chips. they are not innovating. some are but most aren't. you have to understand and dig a level deeper. you haven emerging-market headlines trickling off, -- like u.s.i happen to large-cap companies because i think that they are doing and will continue to do an absolutely brilliant job of managing in a tough economic environment, specifically i think what you are seeing is the rest of the world is beginning to decelerate. companies that have more cyclical business models, emerging markets and small caps tend to not do well when the growth rolls over a bit. it does not mean the economy is bad but those companies do better when you are we celebrating -- when you are reacts already -- reacc

elerating. alix: the u.k.'s mark carney speaking to parliament. talking about about brexit. he is saying that he has discussed term issues with the chancellor. -- that he might extend his term to 2020. that had not been confirmed and it appears he has discussed his term with the chancellor and will announce it in due course. he also says he wants a true -- a smooth transition to brexit and is willing to do what he can to help. guys.o much i can do, david: he says the government should make an announcement. it is fascinating. coming up, nike picks kaepernick as the face of its iconic just do it campaign. more on that next. ♪

david: time for three company

stories on our radar. first, deutsche bank is back in the news and not in a good way. alix: shocker. david: they maybe dropped out of the euro stoxx 50 index the first time since the index was created. a little bit like ge. you are not big enough anymore. alix: if you are a passive index fund and you own what the index owns and you have to sell deutsche bank, that is a big risk. david: it feeds on itself. though to bank has other problems but this is not good news. alix: i am looking at nike. nike stock is down 2% and you could potentially blame it on their tie up with kaepernick. now theaepernick is face of their just do it campaign. assigned --pernick have signed a new multiyear pact even as he is disputing with the nfl and there is so much drama around that.

they doubled down on him. david: he had a deal with nike. this is serena williams responding to his tweet, saying especially proud to be part of the nike family today. is going to take to trial his dispute with the nfl, saying they got together and refused to give him a job specifically because of his political speech. alix: because of the kneeling during the national anthem. for nike in a world where typically a company wants to avoid being tweeted about by the president. david: wondering who buys nike shoes? where are they going to come down on this issue? alix: excellent point. joining us now is brooke sutherland for our third story. jd.com. brooke: i am looking at the company's alien are founder who was arrested on accusations of

sexual misconduct -- billionaire founder who was arrested on accusations of misconduct -- sexual misconduct. there were a lot of russians around this issue. we're not sure of the details of the complaint. it involved a chinese student at the university of minnesota. a lot of questions but i think what is interesting about this is it is a negative catalyst at a time when there are already businessth jd.com's model and how it will be able to compete with alibaba and at a time when it is expanding in southeast and coming into contact with amazon. david: it is a huge company that has grown a lot. elonis another instance of musk where you have a large company that has grown fast and is centered on a particular

individual? brooke: exactly and he does own a lot of the voting rights and that becomes an issue as you have this sort of sexual misconduct allegations. we don't know how much of a full-blown issue this might be. this is not the first time he has been implicated in a negative scenario. when you have these founders the concentrate so many voting rights at their name, that is an issue you have. alix: good to see you, brooke sutherland of bloomberg opinion. coming up, we discuss with jeff jarvis of cuny. ♪

alix: this is "bloomberg daybreak." as traders return from labor day, dow jones futures off by about 80 points. in europe, italian banks making

a nice killing, although off the highs of the session, up over 1%. it seems we are getting more conciliatory language out of the government concerning budget for next year. in other asset classes, a stronger dollar story. on mostgoing to weigh currencies. nowhave south africa slipping into recession for the first time since 2009, the currency off by over 2%. ,he curve steeper in crude based on hurricane potential, up about 2%. even as we- david: are speaking, there are 'sadlines about mark bernie testimony, the bank of england government. one subject is brexit. they do not have a forecast for a no brexit deal. perhaps more interesting and important, he has discussed his term with the chancellor. he says there are many qualified

-- governor candidates, and he cannot make an announcement for the government. he is not denying he is discussing with the chancellor whether he is staying on longer. alix: why didn't treasury hike if inflation is over your target? he has to justify himself. do you want that job? it is better than being president of argentina at the moment. the headlines i am seeing on the bloomberg, none of them deal with inflation. he will get around to that at some point. for headlines outside the business world, emma chandra is here with first world news. the strongest: i've been to hit japan hit short with winds of more than 100 mph, expected to take aim at one of the most densely populated area. over 350,000 homes and offices have lost power. hundreds of airline flights have

been canceled. in the u.s., president is warning syrian president bashar al-assad against attacking one of the holdouts of rebels in the civil war. the president tweeted that making allies have been a great humanitarian mistake to assault in lip. he said hundreds of thousands -- to assault idlib. he said hundreds of thousands could be injured. a fire devastated latin american treasures. most of the 20 million items in the national museum in rio de janeiro were destroyed. fire extinguishers were not working properly. global news powered by more than 2700 journalists and analysts in more than 120 countries. i am emma chandra. some of silicon valley's most powerful leaders will head to capitol hill to testify before the u.s. senate intelligence committee. they include sheryl sandberg,

jack dorsey, and we don't know who from google. suppose they were sending their lawyer, and the senate said, we would like someone more senior. golub joined by jonathan of credit suisse and jeff. what are we going to hear from these leaders of tech, and what should they here? is there a difference? going to hear anything of intelligence from our own -- david: now, now. >> last time, they sounded like idiots about the internet. i do not think i have learned much since then. with the ceo's of the tech companies rolling over the legislators with their knowledge of the future, with -- which legislators do not have -- i think this will be a political show and we will not hear much at all. david: will they come together with a plan to deal with russian interference on u.s. elections? we have an election 62 days from now. jeff: it is important to recognize it that, like it or

not, love them or hate them, the platforms are the best ally against russian manipulation. our government is not. witness from the top. and donald trump change the language where he is not just attacking media and journalism that she is also attacking google and facebook. he attacks any source of facts and information, trying to devalue them. i think media and the platforms end up on the same side, in defense of truth, including defense against manipulation. alix: how do you look at that on a market sense? faang and even twitter have outpaced s&p tech. twitter is the yellow. the faang index is the blue. do you have to break in geopolitical risk? jeff: yes and no. it is not that stocks are going up cousin sentiment towards them. their earnings are just unbelievable.

-- look at aon slightly different space. if you look at amazon, it is walmart,.a third of but the trajectory is huge. if you look at the online advertising models of google and facebook, the upside is their market share is enormous from where we are today. that is what people are paying for. it is not making a bet on whether the government is going to allow it. alix: even if advertisers pull ads, like with google and youtube -- but facebook having to hire more people. jonathan: here is the question. are you better off advertising a mattress on a billboard in case somebody goes across a highway, or when you may be making a life decision like moving that would cause you to buy the mattress? the effectiveness of online advertising is so high that i think there might be a public debate.

but the value of these business models, i think, is very clear. david: and the political arena, it is going to happen, whether it should or not. when is the last time you had any industry become this dominant without the industry looking and regulation, like standard oil? do people from capitol hill really care about how they get elected? as a practical matter, aren't they going to take a look at regulation? jeff: i hope not, or i hope they do it as inefficiently as everything else. the regulation in europe is well-meaning, but there is not a record of unintended consequences. there are thousands of publishers in the u.s. who are cut off from europeans. forgotten --be google is in a position of deciding what is to be remembered or not. the ancillary copyright which is coming is going to have a huge copyright on the freedom of everyone's speech. i think it is too soon to regulate the internet, because we do not know what it is yet. david: why isn't there more of a

simple regulation, which is, eliminate anonymity? anyhave powerful as -- in other space, i know who is advertising my mattress. i can hold them to account. in the digital realm, i have no idea. why can we say that? jeff: that is easy to say here, with republican privilege. if you are in the philippines, murder, they need protection for those who are vulnerable. i do think transparency about advertising would be a good policy. jonathan: if you go back to our country's history and the revolution, look at the things that were written under pseudonyms, that people felt they were more empowered to speak up. freedom of assembly, where do we assemble us to mark we used to assemble in the street. now we assemble online, but there are the same underlying issues. the: the broad -- david:

broadsheets, there were so many of them. when you come down to the fangs, it is just facebook and google. jeff: now 2 billion people can speak on facebook here is that is the diversity. .ow the public speaks alix: how we get our news and how the growth has been, and how facebook is dominating the area -- regardless of what the arernment does, companies doing their job, hiring more people, looking at compliance. they are tried to figure out which people should block. how do you value those companies? how do you deal with your margins and earnings, when they have you putting something like that on developing -- jonathan: is it different from 20 years ago when three networks dominated the news flow? puts an enormous amount of resource into making sure, when you put some out, that you think it is correct.

when there were three networks, the fcc was approving everything being done. you had all kinds of regulations. if you go that way, you would have a lot of regulations. jeff: there were three newspapers in new york. you had the new york times, daily news, and new york post. unregulated, thank god, constitutionally, by our government. it is a good point. alix: we have to leave it there, but that was a good debate. is jeff and jonathan. jonathan. great to see you. coming up, hitting the books. we discuss charter schools with rick reader, black bloc ceo of fixed income.

emma: this is "bloomberg daybreak." coming up later, andrea's shiren beck, ceo. now, to your bloomberg business flash. nike is beginning a new advertising campaign featuring the pro football player most associated with the and the mailing protest. colin kaepernick will star in ads.just do it" some angry consumers posted photos and videos of themselves burning nike shoes and other gear. shares of wpp are falling after the largest advertisement company named a new ceo. wpp forecasts a profit margin squeeze for the full year, but boosted its revenue outlook.

martin sorrell left last spring after allegations of misconduct. and it is abu dhabi's least effort to stay competitive in an era of lower oil prices. three state led banks would combine into an institution with $100 billion of assets. almost 50 banks in the united arab emirates, serving 9 million people. that is your bloomberg business flash. alix: this week, we are hitting the books. students across the country had back to school and we are taking a closer look at education across the u.s. according to the program for international student assessment, u.s. ranks 24 in 40 ine and reading and math. we will begin to education and what can be done to improve it. today, we are going to look at charter schools. tomorrow, the big dive into student debt. duncan --ked to arne we will talk to arnie duncan,

and to the ceo of pearson. we are joined by the chairman of the board of north star academy's 13 charter schools in newark, new jersey, and the chair of a public school collaboration project in atlanta. we think of you as mr. fixed income for blackrock, you have a different hat today. rick: it is a more fun hat. david: you are deeply in meshed in education. let's start with the oecd numbers, reminding people how poorly the united states does compared to developed countries around the world. rick: it is ridiculous. you think about how prosperous are country is, what we doing and technology, how the u.s. and maybe china is the global leader in technology. you think about math and science -- it is a travesty. how could that be? the challenge for this country is, how do we lift our education standards to where it should be, at the top of the peak? david: you are involved in a

number of charter schools in newark, and it is dear to your heart. how much of the answer lies in charter schools? rick: i do not think that is the whole answer. there is some criticism of charter schools, because there are underperforming charter schools. it requires tremendous commitment. we have 13 schools serving almost 5000 kids at north star. we were just ranked 12th or 13th in the state of new jersey for high school. this is remarkable, due to the thousands of high schools. if you get curriculum right, professional development, the teachers right, the charter schools, the fraction of the cost of the public schools is extraordinary. it is why you could have the success -- you are seeing it in the kipp schools. we are doing it in north star. unbelievable. the success for newer, including what team academy are doing, is arguably one of the best in the

country. but it does not have to be a big part of it. public schools, we are doing amazing things, getting kids graduating high school and on to college. alix: what is interesting is, this is not totally divorced from your role at blackrock. you make a through line between charter schools and unemployment. can you walk us through why that is relevant for the broader economic growth of the country? rick: i think people are underestimating -- you have a surge of employment happening in the country, dropping unemployment. as you think about what is happening, all of the job since 2010, a hundred percent in the service economy. the economy to a service economy. as you talked about in terms of apple and google, the dynamic around where service is growing -- if we do not have an education that allows us to continue to innovate, to allow us to take it to the next level -- look at our trade deficits with countries like china.

you look at our service surplus. u.s. economy the has become extraordinarily powerful and services. to kids are not educated where they need to be for the next 10, 20 years. artificial intelligence is going to grow exponentially, going forward. our kids have to be trained and have to be taught and operate in that environment. jobs are going to be lost faster than people think, unless we achieve a different level of education in this country. david: you are involved in newark and atlanta. talk about the political will. if you look at most of the studies, it is not that education is getting worse. it is that other countries are moving forward. where do we develop this? hoping you would invite me on tomorrow to talk about student loans. david: you have done work on that, that is right. alix: by the way. [laughter] one: i think the number is

$.3 trillion, the debt load today. that is one of the obstacles in terms of moving forward. there are a series of things as a country -- initiatives you can do. it is not just the education side. it is health care, tutoring, mentoring, creating the kid.onment around a a kid who has a stomach ache is not going to study. there are a series of events with funding, philanthropy. one thing i am a devout believer in is ada. we do it at charter schools. we look at where our kids performing, where are they not. what schools are working and not? we analyze the data, like we would in the bond market, to understand, where is it working? where is it not? from an international level, we need to get better data. where are we succeeding? what schools have succeeded, and why?

how do you emulate that in other schools? the data is not good enough. david: it is not an accident. we are capable of developing the data. there is resistance. arne duncan has a book about that. whether it is local districts or parents, a lot do not want to know how bad it is. rick: there is some choose to that. it is frustrating. a lot of what has happened in newark -- there is a book our directors wrote, driven by data. we have been able to move that into cities around the country. you realize how you can keep up with this success and promote the success. noopen new schools, there is degradation of the quality of the schools, because we are analyzing the data. to scale. it that is what is important. you can do this in scale if you analyze the data right and move your resources effectively. alix: doesn't it boiled down to money on the opposite side?

i am engaged with a charter school on the eastside. they were basically a fund-raising organization that turned into a charter school. they had a whole brand dedicated to that. a school starts off as a charter school and has no ability or knowledge to be able to attract people like you, attractor friends to come and help. how do you solve for that? rick: that is a long question. alix: you have a few seconds. [laughter] rick: it is tricky. you do have to raise money from a charter perspective, to make sure they are effective. often with a charter school, and some of why there is controversy -- people get an idea that sounds great, and there is no follow-through. to do it right, you have to continue to raise money. you have to continue to operate efficiently. that being said, we operate at a smaller budget than many public schools around the country, as we are super efficient about how we are utilizing resources. david: this is a key element. i have a chair in yonkers, the

yonkers department of education. it is not a matter of money. you cannot say whoever spends the most parquet gets the best education. it does not correlate that way. kid gets theer best education. rick: you are right. we have extraordinary teachers and principals who are motivated. if you hire the right staff -- a lot are from teach for america. if your principals and teachers are motivated, that is what builds this culture. i watch when kids walk into a classroom, how a teacher will address them, how they studied. there is a different touch point and a different engagement. either way, i have seen it on the public school side. you can do it on the public school side. the you have got to create a culture around it. i do not think it is just resources. i think you can operate cheaper culture, data,th

and driving that forward. david: terrific that a man of europe, schmitz has that much passion for this. i want to ask you about argentina. that is not why you are here. -- fixed rate peso bonds where are you on argentina? argentina through a rough patch. rick: we reduced a lot. we cut emerging markets exposure, which at the time felt like, why would we do it? i think argentina has the ability to turn the corner. the support from the imf is a big deal. that dynamic is going to take time. they have a physical challenge. they have an election coming up. as long as they get the liquidity and the backing of the imf, the package for the weekend, they do not have to access the public markets that aggressively. it will be a challenge, but as long as the imf is there, they have the ability to do it. alix: so buy? rick: we are cautious, but a

position in hard currency debt makes some sense. we like the front end of the curve. with all of the em today, i think you have to be more cautious than at the beginning of this year. we certainly are. david: great of you to come today. alix: bank of england governor mark carney hints at the future of the end of his term for lawmakers. we are live to westminster for his take on what happens to policy in a no brexit scenario. ♪

alix: what i am watching is the cable rates. mark carney is discussing the august inflation report. i have yet to see a headline about inflation. the news that started to move the markets is the possibility of a no deal brexit as policy gets tighter. you saw the dollar take a bit of a move lower as sterling trying

to recapture some of those games. he said he does see a drop if there is no brexit deal. i like what he is saying. we will do all we can to support the economy. david: they have so far. isx: the idea that if there no brexit, they will have to have policy tighter, because sterling will drop -- that is an interesting dynamic, especially if you factor in, will he be there in 2020? coming up, jonathan ferro. and a global bank credit investor strategist. ♪ xfinity mobile is a new wireless network

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coming up, president trump facing a fresh fight to force canada to sign a new nafta deal. a push to insulate the economy from another crisis. and social media gearing up for tomorrow's day on capitol hill. in the markets, a new trading month of september, with future slightly negative, down four points in the s&p 500 after five months of gains. the fx market, your story a stronger dollar against the euro. it is the same story in emerging markets this morning. under pressure despite measures from turkey and argentina to stem the route. em currencies headed for the lowest close in a year. >> we are far from capitulation. >> vulnerability wide open. >> one