♪ of 2008. echoes emerging markets see their longest route since the financial crisis as jpmorgan and blackrock warned of contagion. president trump tells the test tells "the new york times to unmask the officials behind an op-ed. a chief executive gets grilled by congress on the so-called shadow banning of conservative voices. ♪ good morning, everyone and welcome to "bloomberg surveillance." i'm francine lacqua here in london.

day,toxx 600 having a down nothing huge but they are down 0.2%. a little bit of a fear on the market in general about the emerging markets. pound of course, it is a brexit story. i am bringing that up because we will be speaking to do just tony barrett --ly -- tony blair shortly. fromwe see more contagion venezuela, turkey? we have an exclusive interview with the former u.k. prime minister tony blair. that conversation is coming up at 9:30 a.m. london time. this gets straight to the bloomberg first word news with taylor riggs in new york city. taylor: donald trump has demanded that "the new york identity ofled the a senior official who wrote an anonymous op-ed. the writer, identified only as a senior administration official,

said that he or she and others in the government have about two wart the to th presidents more misguided policy actions. pres. trump: when i won they were forced to apologize to their subscribers. they wrote a letter of apology, the first time anybody has ever done it, because they covered the election and correctly. if the failing new york times has an anonymous editorial, can you believe it? anonymous, meaning gutless. taylor: emerging-market contagion warnings are growing louder as currencies and stocks from argentina to indonesia come under increased pressure. jpmorgan and blackrock are among the big wall street names adding their voices to those cautioning against developing economy assets. is all as emerging-market currencies have reached at their weakest levels since may of

2017, with the turkish lira, argentine in peso among those sinking to record lows. the british and german government have got rid of key brexit immense. accepthad -- is ready to less detailed agreement on london's future economic and trade ties with the eu in a bid to get the divorce done. the uk's side is also willing to settle for a more breaks statement of intent on the future relationship. japan, a powerful earthquake has rocked the country's northernmost main island. the magnitude 6.7 tremor landslides,riggered and nuclear power plants have switched to a backup generator. seven have been confirmed dead with many more feared to have been buried. cryptocurrencies have dropped

sharply for the second time in less than 24 hours, sinking to a nine-month low amid worries that adoption of digital currencies will take longer than initially expected. goldman sachs is reportedly pulling back on near-term plans to set up a crypto trading desk while trading platform shape shift will begin asking users for personal information. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. francine? francine: thank you so much, taylor. emerging markets have seen the longest rout since the 2008 financial crisis. investors are now waiting to see if the u.s. pulls the trigger on tariffs on china. jpmorgan and blackrock have warned of contagion.

joining us now is bloomberg's executive editor for economics, along with our emerging markets reporter. let me just start with you. when you look at some of the indicators on the markets, are we expecting more contagion and things to get worse? >> yes, of course. if this is all about turkey and argentina, once these countries take fiscal measures the selloff should go away, but that is not the case here. the trade war risk and the underlined strengthen the dollar strengthen the dollar is causing people to question the fundamentals in the market. francine: there is a great story which i know we are pushing out on social media, which is basically titled the u.s. of oasis of prosperity is becoming an emerging market single. is now going to be

tested by weather emerging markets and that contagion microworld growth at risk. putbsolutely -- might growth -- world growth at risk. >> absolutely. faces similar headlines, he is seeing argentina, venezuela, turkey, this sense of contagion. the u.s. is doing pretty well now. it might be an oasis of prosperity, yes, this trade war, but there are also tax cuts. growth is powering along at the moment. we haven't tested this week with payrolls on friday. for jerome powell the question is, can you keep pecking? -- hiking? you have this policy paradox. francine: this is a very tom keene question.

should the fed be more of a central bank to the world? >> jerome powell has talked about this several times since he became president. you might want to look at the speech he made in zurich if you months ago. u.s.rgument is that the fed will do what the u.s. fed will do. u.s. unemployment is the lowest in decades, manufacturing this week surging up. it would do what the u.s. needs and the rest of the world, the emerging markets elsewhere should put their houses in order. it is hard when you look at somewhere like turkey and argentina where there are fundamental weaknesses as well as political issues. it is pretty hard to then say to the fed, you are need -- the ones who need to do the work to help out. francine: when will the bleeding stopped? i know -- when will the bleeding stop? i know it is the million-dollar question. >> the fear is so intense right now that people don't want to

make any predictions. when it is pushed to take a call on this, we could say that if mr. trump sits down with anddent -- president xi hammers out a trade deal, that could help the yuan stabilize a bit and help the rest of it emerging markets -- the emerging markets. pending that, the markets can for an amount of time absolved it shocks of the trade war. there are weaker economies like turkey and argentina, but on the other side you have economies stronger,, which are which are among the world's fastest-growing economies, and the coming consumer economies. they will probably drive the way upward, so as of now the best we can hope for is a mini rebound with --rebound, summer spite. respite.d, some

there is a lot of value up there, i would say india. lots of asian currencies are undervalued and now because of the selloff but they are showing some amount of strength in recent times. even the trade war can end up helping some of the smaller economies within asia to take some of the lost business. that could be evening out. turkey and argentina are not fully written out yet. if they put in place the fiscal plan they are talking about, the real yields are so high there that they have a very good case to be made for a return to those markets. francine: things for joining us -- thanks for joining us. stay with "bloomberg surveillance." president trump demands to know what senior official wrote on anonymous opinion piece about him and his administration.

later in the program, a setback for south africa. the country setback -- slips back into recession. this is bloomberg. ♪

♪ francine: economics, finance, politics, this is "bloomberg surveillance." i'm francine lacqua here in london. lashed outrump has at the new york times after it published an opinion piece suggesting key members of his administration are secretly working against him. he is demanding it reveals the identity of the anonymous author. for more, bloomberg's government reporter joins us and our executive editor for economics is also still here. thank you both. how ugly will this get? >> i think this is an

administration that we know from the outside has already had a fair amount of internal turmoil and issues within the ministration that have kind of broken out into the public. this is the most dramatic example of that to date. while the president is really focused on condemning "the new york times" and demand it that they give up the identity of the person who wrote it, i was -- i would suspect that behind the scenes there is a fair amount of them trying to find that out. the next time there is a staff meeting people were trying to be -- people will be trying to be -- will be trying to figure out who wrote it. francine: does this play into the midterm? i don't know if it is the john mccain funeral and the way that president and the administration handled that. >> i think it matters on a

couple of levels. this is yet another example of something that the republicans do not want to be talking about before the midterms. republicans want to be talking about tax cuts that were put in place, they want to be talking about how good the economy is doing on a macro level. they don't want to be talking about whether or not people in the president's administration were discussing whether or not to invoke the 25th amendment to remove him from office. it is not helpful and it is also a distraction. it is on top of the russia probe, on top of issues coming out with trade. thist think it is kind of drip ofp, drip -- drip, news that distracts from what the president wants to be talking about. back toident kept going

these issues, saying this is what i want to be talking about. he keeps creating all of these other issues that are distracting from that. francine: i wanted to talk about central bank independence and the fed and a second -- in a second. if the president is distracted does it have an impact on his foreign policy, trade policy? certainly it would distract electorate. >> i think there is kind of a two-pronged issue when it comes to foreign policy. i think it makes him look weaker --home and it deleverage i deleverages his position and weakens it in talks with other countries. i think he has -- it has a tendency to make him double down on his aggressiveness and his own posture. do we worry about

central bank independence? does that make the fed more likely to be aggressive to show the trump administration that they are not their puppets? >> i think the fed is pretty confident in the structure that is in place. trump'sd offense, -- in defense, the people who he has put onto the fed pretty mainstream economists. the people he has put, it has and bark embarq -- here. the fed it feels that the structure is in place for him to rise above this, to realize that it is kind of part of this twitter universe. it is interesting to me, perhaps not now, but in a years time, if the economy is slowing, does

donald trump double-double on this? does he used jerome powell more as a figure? raise"i told you not to interest rates!" it could be that the fed can rise above the independence debate now, in the future it politicizede of a and more of a target. francine: that is an interesting point. thank you so much. simon kennedy and kathleen hunter stay with us. africanrica's ruling national congress had its first real setback in months on tuesday when data showed that the country had slipped into a recession. the party has been winning back support since the appointment of a president in february.

can they capitalize on the opportunity and housed -- how does the african national congress plan to tackle the country's slump? we will have enoch gondongwana -- we have enoch gondongwana joining us. what is the government planning to do in terms of stimulus given the data we got back this week? the party has made a proposal to the government since to light. among other things -- since july. among other things, we have told the government they must consider a stimulus package. francine: is the african national congress worried about a new round of credit ratings downgrade? enoch: obviously that is an

important question -- consideration as well, because a new round of downgrading what have serious implications for our cost of bartering and for the economy in general. --ncine: give me a sense of about the national elections in 2019. is the economy that achilles heel of the african national congress? enoch: about the elections in 2019? francine: do you worry about the economy hurting the african national congress prospects? enoch: we are not worried much about the outcome of the elections. the kind of service at the moment are showing us far ahead butther political parties, obviously would not like to go into elections in the mist of a recession. francine: do you think it will

detract voters, that voters will blame the african national congress for this? enoch: there are a couple of things. most of the voters, the black middle class have a fair appreciation of the challenges the economy is facing. that generally -- they generally have an appreciation of some of those challenges. i don't think they are likely to migrate to other parties as a result of this. francine: we have a lot of viewers writing and who are extremely pleased that you are speaking to the financial community. can you give us more of an idea by what a stimulus package could look like in south africa? look, we are drawing from

the experience of what we know. in the run-up to the 2010 fee world cupcup -- fifa we invested a lot on infrastructure spending and that .ad an impact on our economy we think that would have a similar effect that it had before the 2010 world cup. the second set of issues is that in our national development plan the suggestion is that if we look to do a lot of work on the capital sector, another million jobs could be created. that is another area where we think we could spend more attention to. francine: do you think the debate around land expropriation without compensation is affecting the rand? enoch: not at this stage, not at this stage. one of the poor performers on

the gdp figures released waserday, two days ago, toiculture, that is related the affect of the western cape and other profit drops. other economists agree that if the data around expropriations was -- without compensation has not yet had any part on the transformants of the sector at this stage. francine: why are people opposing this? enoch: opposing what? francine: land expropriation without compensation. enoch: there is general agreement that in certain one istances -- no urging for a general expropriations of land without compensation. i think the expropriations without compensation will be

limited in specific instances. that is what is spelled out in the constitution and the love laweral application -- general application. francine: do you communicate with the trump administration? do you have a liaison? any update? enoch: as far as i'm concerned, at thehan what we had retreat from president trump, which was ill-informed. ill-informed, that comment. other than that our relationship remains the same. francine: what is the government doing to unlock legislation related to mining and the oil industry? enoch: a couple of -- a week ago the minister of general

resources had a meeting with the chamber of mines and the association representing the oil industry. there should be two pieces of legislation, one governing mining, and one governing oil and gas. there is a deal between the sector and a minister in this regard. that has been agreed. francine: when you speak to foreign investors, what do they ask of you? is it the change of transformation, that pace of reform? is it about the oil and energy industry or about the land? enoch: what i have been -- has been a sticking point in the oil and gas industry and the mining proposeds been the

black coal charter in the mining industry. the republic comments, i think the minister is going to engage in the mining industry. the oil and gas --ustry, there has been there has been a good mention that there will be new legislation for that sector. in the meantime, they have also agreed with the minister on transitional mechanisms. francine: if final question. the surprise recession in south africa that we found about this week, how do you think people are taking it in the country? is this an opening for opposition parties when it comes to the election next year? enoch: are worry is lastly the

-- ouron our people major concern is the impact on the unemployment of our people. power stance is that we are not going to take positions because we are worried about other political parties. we are comfortably ahead of everybody else. that is not our worry. francine: enoch gondongwana, thank you so much. we will be back and talk brexit with simon kennedy. this is bloomberg. ♪

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

a company that sells underground bunkers for a million dollars says it sold 72 tech entrepreneurs in the last two years alone. top court has legalized same-sex marriage. our most read stories here on the bloomberg terminal and third-place, germany and the u.k. are set to set brexit demands. bitcoin drops off. we will keep on hitting that throughout the day. up --also a toss that could have invocations for anything from euro level to the tapering.

when you look at the conundrum for the ecb and what markets want to know and what economists are looking at, is it more who replaces mario draghi or what happens with how the ecb will deal with it? i think draghi is a sideshow for next year. they realize it is a political decision. it is all tied up and who becomes the european president and who becomes the head of the supervising, it is all musical chairs and that will play over in the next few years. centristn runner is a between the north and south. away in theslip poll of economists. angela merkel has her eye on other jobs. the question of whether italy and the broader question of

where the ecb goes from here, it is on another path. already seeing some suggestions from italy he might want to rethink that. after that, the question is at what point do they start to reverse that policy? at what point do they start hiking rates? be a weak term in politics, -- francine: where do you director thousands of soldiers looking at the economy in europe, is it more political and the impact that could have on the economy in the trade were between the u.s. and china's impact on germany and cars, or is it french reforms and brexit? simon: we are seeing signs of slowdown in europe. so much within itself that it should be immune to trade wars. last week, we saw donald trump pullback in little bit on this

since of agreement. the euro not quite out of his spotlight. slown sloan naturally -- naturally in the sense that the economy did really well last year and would never maintain that momentum. have we really got to the bottom of why we understand why angela merkel would not want germany at the top of the ecb? is it because she also fears donald trump kind of attacking a german president of the ecb because of his monetary policy? simon: i think it fits into a little bit of all that. i think she feels that the head of the commission is a more political role at this time. it might be a good time for germany to skip the european central bank presidency. if you have -- if the job of the

next president is to ease and money,e euro out of easy if you put someone in there, it could be a jolt to the system. midi want someone of a different nation that will provide the transition, and then try a bid for a next time. francine: most of your stories, the markets are kind of on and at the moment. will it be on policy divergence worldwide? simon: i think policy divergence is going to be a big issue. america first world, not just politically, but economically. the tax cuts, the economy is doing very well. the challenge for jerome powell is to gradually push up interest rates and control the economy. as he does so, the dollar goes up and that has implications around the world. francine: thank you so much.

simon stays with us. coming up, an exclusive interview with the former u.k. prime minister, tony blair. theill ask him about italian prime minister, should he made a few days ago. this is bloomberg. ♪

francine: welcome to our weekly brexit show. this is "bloomberg surveillance." let's talk about the business case for diversity. our next guest has the drive for greater inclusion in the workplace. companies are great the increasing why participation.

how can organizations build a better inclusion strategy? thank you so much for joining us. when you look at adversity, is it now a buzzword to attract younger talent and millennials or do companies take it seriously? >> it's very true that younger workers want to work in companies that reflect the environment they have been in in school, the environment of the global world, but it is certainly not in millennials issue only. most companies we find have employees right across the age, experience and skill spectrum. what the data shows is that companies that have more diverse leadership teams are more successful. the leading companies in our data sets are pursuing diversity because it is a business imperative, and driving real business results. it may be helpful in recruiting and the right thing to do, but

it is a business imperative. francine: we have examples of law firms that are not very diverse. is that the only way of getting people to change the way that they do business? first, you have to believe there is an economic and business argument. genderearch in terms of inclusion and diversity matters is helpful in terms of high profitg companies are more diverse. the difference between the more diverse companies emily stivers -- and if they can't less diverse companies is significant. you have to be able to develop a business case for your situation.

it is very clear that your supply chain as well as many customers and consumers care about this issue, and are raising the issue with companies. we shouldn't have to wait for our customers and consumers to move we should be ahead of it. . it so thatasuring you look at the right set of variables. the one variable that is common is gender. after that, companies have to tailor a set of diverse criteria that fit their business. we can talk about examples of companies that have done that. francine: you have to come back and we have to have a whole hour on this we also have to talk about gdp which has been on a steady decline. the country comes out as one of the worst. mix,brexit thrown into the it is a difficult balance of power.

simon is here to talk about matt carney. why is this productivity puzzle still taking hold? know going into the financial crisis, the uk's productivity was lower than its peers and developed market peers.coming out of the financial crisis, as we look to recovery, we have seen this decline in productivity growth. we wanted to understand why productivity growth was lower and why is the u.k. particularly slow? if you compare it to the period before the crisis, it was 2.0%. coming out of the crisis in 2010-2014, 0.2%. a dramatic fall, and that has got several drivers to it. what we do know is that there are three things we suggest to improve it. first is looking at the investment in human capital and

skills, particularly on managerial skills. we know many managers are not from a year using the best technologies they could. they are not managing and developing the skills of their workforce. that links also to the diversity force -- point. francine: thank you so much. joining us for an exquisite interview is the former u.k. prime minister, tony blair. he really needs no introduction. mr. blair, thank you for joining us. do you think the chance of a no deal brexit is 50-50 or 6040? tony: i think the chance for brexit is pretty low. i don't think europe would want that to happen. i think it is possible there is a no deal brexit, but

unlikely. what is more likely is the gridlock in parliament because i don't think the prime minister's proposition for brexit is likely to command a majority there. francine: what do you think will happen? i know it is a difficult question. what do you think will happen of the next six months? tony: the basic problem you have in the whole negotiation is that you have a choice whether you stay close to europe in order to minimize economic damage, but in which case you will be in some case or other abiding by europe's rules, and therefore people ask what is the point of brexit? or alternatively we go to a much harder brexit the break absolutely with europe. in which case, people will say what is the price because there will be economic damage. that dilemma has run through the course of the negotiation. the statement the prime minister adopted a few weeks back with an attempt to resolve that in favor of the first option, staying close to europe.

i think after the resignations from her, that can't hold in the house of commons. possible ifs very you end up with paralysis in parliament, that is where the obvious course is if the government doesn't want to call a general election. the obvious course is to go back to the people. francine: how likely is that if it doesn't have full support of the labour party, and with the labour party put its full weight behind a second referendum? tony: if you don't have a gridlock, in the proposition gets through parliament, you will not have another referendum. if there is gridlock in parliament, if she goes soft brexit, she has boris johnson and people who will vote against it. if she goes hard brexit, she has the other wing of her party who will vote against that. the labour party could virtually

vote against whatever proposition the government puts forward. if you end up with paralysis in parliament, the choices are pretty narrow. you either crash out without a deal. for all the reasons we know that is a bad idea. or, you have a general election. for the conservative party to have a general election on brexit would be a crazy thing to do. even for people to say we're not going to have another vote, if you do end up with that paralysis, the logical way out is to go back to the people. we have had over two years of negotiation. view ofa much enlarged what this all means and we are able to judge after the negotiation what is the best way forward. francine: do you think there has been a general move in the polls toward remaining in the eu? i think there are some signs that that is happening. i think the more important thing is that i think there is a move for people to say once we know

what this whole thing means, we should have a chance to have a final say on it. the difficulty for the prime entirely understand why she is trying to get a compromise. with honored the mandate of june 2016, but have done it in a way to minimize economic damage. thisay she is proposing leaves us essentially tied to europe's rules, which is a bizarre way of taking back control, the problem is the people who have driven this exit debate -- brexit debate don't think that it's an honor of the mandate of june 2016. the flaw in her approach is that she is not satisfying the people who believe we should change this decision and stay, nor the people who are in the driving seat of the brexit bus. think, even know

people will tie you at the moment it is highly a might be this will happen, when you analyze it, unless she can get a majority for her position in the house of commons, the obvious thing to do, and the thing most in the interest of the conservative party to do is to go back to the people. francine: do you think your integration in the debate is helpful or hurtful in your cause? tony: some people will like what i say and some people want. this is a moment of national crisis for my country. this is going to decide the debt for britain for many generations come. if you feel passionately and strongly about it, you have a right to speak about it. there will be lots of debate about who is the best person to speak and not to speak, that this is an issue which i think it is important that the arguments are made. i intend to carry on making them. francine: do you see a real risk of a return to conflict in northern ireland from brexit? tony: if you end up with a hard

irder in northern ireland, don't know about risk of conflict, but i think you will increase the likelihood of a move toward the united ireland. the government has said it once a frictionless border between the north and south of ireland, but the basic problem is all the way through, they are basically trying to achieve fundamentally incompatible objectives. they say we want frictionless trade between the north and south of ireland, but at the same time, we want out of the customs union and single market. those two things are mutually incompatible. at the same time, they say we want the same system for northern ireland as the rest of the day -- u.k. negotiations have proceeded and people have started to study the detail, and there is a level at which this debate is political, in the

level at which it is debatable about what the rules that are governing them, when you look at the details, the position of the government is very hard to see what the solution is, which is again why i say, we have been over two years trying to negotiate this. we are really not a great deal further on them we were at the beginning. that is why i say in the end, people are going to look at this and say howdy resolve this, unless it is clear -- how do you resolve this, unless it is clear that people want to proceed at any cost, or whether given the experience of the last two years, they want to stay. francine: do you think europe will back down? you could argue that europe works in a certain way where at the 11th hour, germany and france will save theresa may from a no deal. tony: this is very common.

your bloomberg reports about germany and britain considering ways of using details of negotiation. i completely get it and you are right. europe works through 11th hour compromises. here is the compromise europe will not do. they will not say that britain can be part of a single market. they may see that britain -- they may in the end say that you can extinguish goods and services. let's assume they do. they will never agree that britain should be a part of the single market for goods with free access to the single market without abiding by europe's rules, adjudicated by the european court of justice. that, they will not compromise on. in the end, there is going to be an enormous desire to find a compromised way through this. there are certain technical facts that can't be got around. one of those is that the single market is a unique construct in

trading terms with not just an tariffs, but one system of regulation of rules. you cannot have a country say that they want the freedom to divert when they want to. the europeans will not agree to that. says we are going to abide by the rules, they will be substantial numbers of people who voted for brexit who say, what is the point of doing this? we are literally coming out of europe's rule-making body, the political structures, that we are still going to be tied. this is why this thing is complicated. francine: you met with matteo salvini, how did that meeting go? eight concerned that the tie and populism will break europe apart -- italian populism will break

europe apart? tony: it was a positive meeting. the thing driving populism in europe today is immigration. if you believe in keeping europe together, you have to deal with the legitimate grievance and anxiety people have about the immigration question. let me make it clear, i am pro-immigration. i think it brings huge benefits to a country. a country like britain has benefited enormously from immigration, that people want rules and order around the immigration, and they want to know that the people coming into our countries are prepared to integrate and abide by our rules and culture. this is the fundamental challenge of immigration. the sensible thing for europe to do is to listen to that and deal with it. a europe does that, that has knock affect on the brexit debate as well, which i believe was driven in large part by the

anxiety over immigration. francine: one final question. do you think moderate labor and peace should quit in protest of what we heard from jeremy corbyn's position on anti-semitism but also nerve agents attack? that is a whole other subject. i think there is a genuine anxiety and a large part of the labour party today that it is being taken over by people who are not from the normal traditions of the labour party. i think there will be some people who will want to stay and fight, and others who can't to the labour party be taken back for a sensible labor position. to be honest, i'm not sure what will happen, but i think this will be a major question and will run throughout bidders politics -- british politics for

the next year or so. francine: thank you so much for joining us. let's bring back that he and vivian hunt and simon kennedy. if you look at brexit and foreign policy and the level of angst amongst voters, is there a danger that the diversity question gets put on the back foot or does it need to be at the forefront so that everybody feels included? itian: our evidence is that should be at the forefront because businesses that are most successful in getting higher returns on profitability are more diverse. you would ignore the extra parol. -- peril. linked to youre business strategy and your development of people. if you think about that. we have been in most recently in the u.k., one of hyper uncertainty, we had the

uncertainty of the financial crisis. cumulate to that -- he would if to that has been -- cumulative two that has been the brexit uncertainty. first, is focusing on work skills and training. the question for most of our clients and business leaders is what can i do independent of what might happen in the political policy arena that i can't control, what can i control within my business? the first thing is around the skills, flexibility and agility of the workforce. the vast majority of employees will be in the workforce. preparing that workforce to have the skills and agility to respond to the wide range of changes you were just discussing with the former prime minister. the second point i would make is about technology adoption. the u.k. is ahead in some ways , but itology adoption

needs to be applied to more business processes. if you can improve your workforce flexibility and underlying productivity, it gives you a lot of resilience in the context of brexit and changing policy. francine: this is everything matt kearny studies on a daily basis. simon: he has talked a lot about productivity as the secret sauce of an economy. met carney will be zeroing in on that. francine: up next, we continue surveillance with two more on brexit. -- plenty more on brexit. this is bloomberg. ♪

francine: emerging markets see their largest roster since the

crisis.l cro -- how much further does the selloff have to run? -- we are krona live with the governor of the world's largest central bank this morning. this is "bloomberg surveillance." scarlet is in new york in for tom keene. we go to politics in the u.s. to politics in italy. i just wrapped up an interview with the former prime minister, tony blair. we talked about brexit. he is trying to push for a second referendum because he says that is the only way out to get elegantly out of this brexit. scarlet: he has been pushing that second referendum for a while. the president in the u.s. now on

a rampage look for the person who wrote the anonymous op-ed in the new york times. we will see how that all plays out especially has he begins to -- as he begins to campaign for the republicans. francine: let's get the taylor riggs. taylor: president trump calls it a matter of national security. he is demanding that the new york times revealed the identity of a senior official who wrote an anonymous op-ed article of -- arehat members working against him. says he is open to accepting stronger steps to get rid of nuclear weapons, but that is only if the u.s. technology is the measures he is already taken. meanwhile, the two country as hold another summit less than two weeks from now. they will discuss ways to establish peace and ease

military tensions. japan, a powerful earthquake has killed two people and knocked out electricity to almost 3 million buildings. it measures 6.7 and struck the western part of the island. restoring power could take more than a week. the world's's second most populous country has legalized g ay sex. it partially struck down a 158-year-old law from the colonial era. 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. thank you so much. the are what your markets are doing overall. quite a lot going on. i'm looking at yen.

it is also a lot lower than it was six weeks ago. investors trying to figure out exactly the troubles we are seeing an emerging markets, if they will continue to hurt a lot of investments, and whether that will lead to growth. the yen climbing, the dollar studying. that is definitely my chart of the hour is the spread between italian and german ten-year. we will certainly talk about that further in the program. i am looking at equity centered data here. the emerging market index falling for a seventh day. we are now entering a their market for these em stocks. market for these em stocks. north. has begun inching at the moment, it has come down a little bit. this is in contrast to a very quiet august when it averaged

around 12.5. we are very focused on the dollar. a stronger dollar has been the driver for the weakness in em currencies. a little bit of a reprieve today in that the dollar has weakened just a hair. i wanted to highlight a chart here because i want to continue on that em thread. when you look at what is going on with the different headwinds facing the e.m.'s, especially in china with the trade war talks in china economic slowdown, it would appear that those at the very top of the tier are doing just fine. hong kong has now surpassed new york as the city with the highest population of people worth at least $30 million. this population rising 31% to about 10,000 in 2017. london has fallen behind paris

as the brexit situation ways on the u.k. capital. the credit for all of this goes to benign market conditions in 2017. francine: this is my chart of the hour. this is the italian-german ten-year spread. this is something closely watched by markets because they are anxious. if they break the rules, the italians when they come out with their budget -- weak economic growth and the government's populist program means the budget may need to widen more than previously anticipated. what markets want to know is by how much? with mr.alk levels halpenny later. jpmorgan and blackrock have

joined the chorus of warnings of ongoing risks after assets were dumped across the road from indonesia to argentina. joining us now is derek halpenny, european head of global market research. i don't know what to do with these emerging markets. is the contagion spread? is there a trigger point to stop the bloodbath? irek: if it was to continue, think definitely there are circumstances there to suggest it could definitely spread. our their triggers for this to reverse our come to an end? absolutely. there is an awful lot of events coming up, specifically here but also specific to nafta and china. if they were to turn more favorable, very quickly, he could see some improvements in sentiment. the, we are 20% lower on msci emerging market index.

we have been here before many times. this is the third time since the great financial crisis we have had a move. we have had three other moves of 15% or more. francine: the difference is that people usually come at low levels. i don't know whether or not that means that the contagion will unravel further. derek: not at the moment, but the beginning of this 20% trough was back to the high's precrisis. we're at a much higher level going into this. to trigger points that may bring sentiment back in would be the bigger picture global trade story which i think is definitely a factor. if you look at more timely portfolio flow data, the international institute of finance, which gives bailey estimates of portfolio flows, the flows -- daily estimates of portfolio flows, the flows there

so it is not as bad. one interesting facet in the current em correction is the continued confidence in china, which is quite unusual given one of the big risks is the escalation of trade conflict. in terms of portfolio flow into china, it remains confident. that is quite different to previous episodes of e.m. turmoil. scarlet: that is right where i want to pick up. it has spread to the idiosyncratic stories of turkey and argentina. which specific fx pairs the do you keep your eye on? yuan?e dollar in somestrong recovery of those currencies? i'm looking at a chart here of the correlation.

does that hold the key to whether em currencies can stabilize? dollar wise, it is very important. if you were to break seven, and current circumstances, that would be an additional negative future. the fact that we have stabilized at these levels in the chinese authorities have brought back in the countercyclical factor in calculating its exchange rates, that is perhaps helping sentiment there. the portfolio flows don't actually back it up. that is definitely one proxy. if we just take the month of august. the big event was turkey. we have had a much -- if the consensus was correct in terms of a higher inflation rate in turkey on monday, we have had an indication from the central bank that they are going to act on the 13th, let's see what the

central bank of turkey does. if they were to meet market expectations, that would be another factor that would help to stabilize broader sentiment. halpenny stays with us. coming up next, we will be talking with the ceo of jetblue. from new york and london, this is "bloomberg surveillance." ♪

francine: we will hear from this man very shortly. for those of you on radio london, good morning to you. ves speaking on the policy decision. you can follow that both on tv and radio. speech also follow this if you are a bloomberg terminal customer. you can access that directly. i think he is a speaking not in english. we will get a translation for you as well. the italian finance minister has

suggested that weak economic growth in the government's populist program means it that the budget may need to widen more than previously estimated. the lead one half of the populist coalition running italy is discussing a budget deficit under the eu's limit. doubt, italy is a hotspot. we have no idea if the budget comes in at 2% in terms of the percentage to gdp or 3%. say.: i must this is one of the reasons why the downside for the euro from here versus the dollar is pretty nervous. i think there is a lot priced here in terms of the risk. when you consider we have been treading around to 90, if you go back to the existential risks around italy, the spread

averaged around 360 basis points. that was the worst periods. 300, were to break above and investors are really going to have to start considering the reemergence of these existential risks. whereas today, we are trading up and down on a daily basis on whether or not we will have slightly less than 2% gdp deficit. i get that italy has debt problems, but i think from where we are now in terms of the spread levels, i think the risks are that some of the risk is going to go away and we will see narrative. francine: ecb is still buying. if it weren't buying, where with the spread between italy and germany be? that if he issue decides to fight europe on this, he will go a lot further and make euro sentiment the subject of the next campaign?

derek: the movement is the anticipation of the ecb. i think that is being priced in. actionstells you all are priced well before it actually starts to materialize. i think that is not reflected in the italian spread. i get that there is risk. i just think of 300, where at a very extreme level. there is very little evidence that to suggest five-star is up for creating a very public clash with brussels. they may be strategizing and say let's wait 12 months, which i expect is a very possible scenario. but from a financial markets perspective, if we are not going to get that relatively soon, markets are going to look back and go, in sentiment comes back for chasing yield, given where italy is, there is a trade

there in terms of narrowing. scarlet: are we still in an environment where everyone is chasing yield? have things turned around enough sufficiently that we are no longer searching for yield, but instead looking to preserve principal and avoid losses? derek: it is a good question. when we look at dollar-yen, we asked that question. the yen was the best-performing currency in the month of august versus the u.s. dollar. just the yen and swiss franc with a two that gained. there is some evidence their of ies traditional large currency performing well. it is modest because we still haven't seen compelling evidence of convergence from e.m. to dm. the best chart to show that is the s&p 500 here today. it is up nearly 10% while the msci emerging market index is

down nearly 10%. i'm not convinced that diversions can be sustained. if em gets worse, that is going to start filtering into the u.s. economy. then i would say you get a correction and u.s. markets. if there is evidence filtering into dm, you can see the japanese yen and swiss franc perform even better. francine: derek will be back with us. bloomberg users can interact with a chart. scarlet has some great charts. you can take them, steel then, use them. they are yours. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." bitcoin and other cybersecurity's are falling sharply for the second time in less than 24 hours. bitcoin was down by as much as 10% at one point in hong kong. there is broader concerned that it will take longer than expected. the floundering middle eastern buyout firm has received a bid from a private equity firm for one dollar. raaj's liquidators are also getting offers. it is time to sell assets to settle more than $1 billion in debt. in talks for more partnerships with long-haul

carriers after announcing an agreement with singapore airlines. passengers on the discount carrier can now connect with singlapore with a flight in. milan.hsts in >> we are quite comfortable with the demand going forward. taylor: that is your bloomberg business flash. sticking with airlines, jetblue made airlines when it became the first u.s. airline to increase the fee for your first checked bag to $30. united raised its fee days later. this may become the standard for u.s. carriers to offset higher fuel prices. guy joins us with the jetblue ceo. me. i have robin hayes with

they were just talking about the baggage increase. any pushback on that? robin: we are coming into a period of lower -- it is still $25 if you buy the right fare. the increase of $30 is if you buy the back at the airport. faresll are known for low and demand remains good. guy: you're in a close. right now -- close period right now. how is business? good. business is the revenue environment is strong. yesterday, we updated our guidance. we have seen a good close in bookings as the quarter has progressed. guy: you and i were just on a panel at the aviation conference. one of the things we talked about was jetblue coming to europe and flying to europe.

you was to summarize, sounded quite enthusiastic about the prospect. you.e put the question to when is jetblue going to fly to london? robin: we are very interested in the opportunity. we look at what we did in the u.s. market between the east coast and west coast when we rolled out government product in 2014, which is our premium experience. fares have approximately hl -- halved in that period. with think we can bring lower fares and stimulate a lot of demand. when or if we do that, we just have to balance that with all of the other great things we have going on. guy: is it imminent? is it something i can look forward to? if i am thinking about flying across the atlantic, is a

jetblue experience -- am i going to be able to get unwanted or planes? robin: we haven't made a decision yet. we do think it is a good opportunity. when the time is right for jetblue to take advantage of that, we may well do so. you have a bunch of new engine aircraft. presumably, you would just convert some of those orders. robin: that is correct. we have the ability to upgrade those to the long-range. guy: how much notice do you have to give airbus? robin: that is a secret between us and airbus. it's not two years, it's less than that. guy: what have you learned? robin: norwegian has been a great disruptor.

they have brought price discipline, have brought downward pressure on fares. they are an airline that is faced tremendous challenges. protectionist agenda we saw from the larger airlines. --wegian has really created they have a great product and low fares. when we saw opportunity, we were thinking more opportunity in the premium fair segment -- fare segment. sitting over here and looking at the u.s. markets, one of the big differences in the u.s. market is heavily consolidated. we are nowhere near that on this side of the atlantic. with think that is a good thing. europe's airlines need consolidating. robin: in the u.s., there has been a lot of consolidation.

airlines control 80% of market share. that has made it harder for smaller airlines to gain market access. we go into some airports and we had a difficult time getting slots and gates. that is quite do have an impact on competition if these things are not addressed. guy: is legislation going to the hill right now about the issue of some of this. are the regulations wrong in the states? do we need more regulation to allow more competition? since we are 40 years deregulation in the states in 1978. i think most people, including me would argue that has been a good thing in the industry and has promoted competition. we have got to a point where there has been so much consolidation, that you have for

large airlines with very large concentrations of power. we see that manifested in different ways. it is harder to get access to slots and gates. they leverage international flights with corporate deals with customers. they have objected to other middle eastern airlines coming in. has to pass by the end of september. i think reflecting some of the concerns people have about the industry, there is some language that talk that talk to protection of ancillary fees and revenues and other consumer protections and that reflects this in the concern we have. >> how do you get more female pilots flying for jetblue? robin: it is a real industry challenge. we are working hard not just to get more female pilots but to

make sure our pilot group represents the diversity of groups we fly. we have been promoting stem to young children. foundations in place will lead over time to a more diverse pilot three. >> thank you very much, robin hayes,he ceo of -- robin the ceo of jetblue. tomorrow, i will be talking with the president of everett. back to you. francine: thank you so much, guy johnson interviewing the jetblue chief executive. let's check in a what is trending across the bloomberg universe. the superrich of silicon valley has doomed an escape plan. on bloomberg.com, india's top

court has legalized gay sex. it partially strikes down a 158-year-old colonial-year-old law. our most read story on the bloomberg terminal, germany and the u.k. are set to drop key brexit demands, easing the path to a deal. in second place, bitcoin falls analystser cliff and and strategists from jpmorgan the blackrock warned about contagion hitting emerging markets. let's get straight to the "first word news." president trump is demanding the new york times reveal the name of a senior official who wrote an anonymous block oster op-ed in the paper. the officials as a key member of the administration is working against the president. the op-ed said the number of people in government promised to forth the president's quote, more misguided impulses.

supreme court nominee for a common wall promise to disqualify himself if the justices consider a case directly affecting president trump. kavanaugh told a senate confirmation hearing he will not make a commitment as to how he would handle a specific case. an accredited under richard blumenthal said he was troubled in disturbed by that answer. president says the u.s. will find out within days if canada will be part of a new north american trade agreement. he is threatening to exclude canada from a revised nafta and proceed with mexico only. me well, canada's foreign minister says talks with washington main constructive. russia may take the emergency step of buying its own debt if new u.s. sanctions rocked the market. the central bank and the government have the tools to intervene. he says it would be a mistake for the u.s. to impose sanctions on russian banks.

>> -- simple because russia is a very big part of the global hard toand it is very isolate it. taylor: 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'm taylor riggs. this is bloomberg. if history is anything to go by, europe's most volatile region is heading for another precarious period. leaders of serbian -- will discuss a potential land swap at talks in brussels tomorrow and the idea has sparked returning -- has part warnings over the return to conflict. halpenny, us is derek

mufg bank european head of global market research. when you look at what is land swap,a possible it is a region that is not known by a lot of investors. this is the new potential hotspot in europe. >> yugoslavia went through a terrible time 20 years ago and since then, it has been a pretty intense place and now we have the potential for a land swap. great but insounds reality, it is fraught with peril for a number of reasons. it could cause a potential domino effect. is bosnian serb leader agitating to could -- to separate from the rest of bosnia. there is also a question mark over the rest of macedonia. that brings greater instability to a region that germany has

worked very hard to wrench into the west. you can see at drifting back to the east. francine: could it affect unity? d: a good because the serbian ally is very closely allied with russia. what you get is the states moving back out of the west in orbit. it adds to the ethnic soup of the region and comes at a time are many governments grappling with populist headwinds, populist leaders. this is added volatility to the question. scarlet: that was my next question about whether this will affect european unity. when we look at the players, you obviously have on glimmer: who is the stalwart leader of western europe at this point but

putin certainly has something to say about this. what could be a proxy war for these two countries? rosalind: and absolutely could be -- it absolutely could be. the serbian leader is closely allied with vladimir putin. you also have china seeking to protect its investments in the area. under john ballmer indicated they are ok staying out of it at this point in time, it gives russia the floor in the whole exercise and on the love --kel -- and angela merkel they are a long way away from that, but she is going to find it difficult given the u.s. absence from this problem. how much does this appear on investors' radar

screen right now? derek: i don't think it appears at all. it is an interesting development and my sense it is his -- it is not getting much market attention. perhaps in the aftermath of the gathering and maybe then we will start to get some focus. certainly my initial thoughts listening is when you consider what is going on in europe at the moment in terms of italy, in terms of brexit and the immigration issue in the populist governments emerging, this is an additional element of uncertainty that is not particularly timed well from a market perspective. it could certainly add to the .egree of uncertainty it does not become an immediate issue for the markets but they would have to evolve over time. francine: i wanted to ask about the u.s. and what they can do but i also want to talk about

europe. does the euro do from here? it is one of the best performer since the beginning of the year. derek: since trump's election victory, the euro is the best-performing g10 currency versus the u.s. dollar. course -- anf overlapped period of time since the election, we have had six rate hikes and this bread moving by 200 basis points in favor of the united states and we had the fiscal stimulus since the 1980's. it does tell you that there is something underlying that is perhaps negative for the dollar but also there are some supportive features for the euro. particular, it does have

important safe haven characteristics. in euro terms, it is the largest current account service in the world. if we do go into a worse period of tight financial market conditions, the euro is likely to perform well. francine: thank you so much to rosalind mathieson. derek halpenny is staying with us. coming up, stefan ingves, the governor of the swedish national bank. we asked him why he has delayed interest rate hikes. this is bloomberg. ♪

taylor: this is bloomberg surveillance. facebook and twitter are coming under congressional pressure to make their roles on content clear. twitter ceo jack dorsey and facebook's number two sheryl sandberg testified between -- before a senate committee. both companies committed to howg better at explaining they block and sort content. a la is seeing weakness in the price -- will knock says that as much as $.10 a share off their quarter earnings. earlier, slumbered or said potential could be lower than

expected. hong kong has surpassed new york as the home to the most ultrarich. the number of people in hong kong worth at least $30 million increased by about a third last year. almostk is almost -- has 9000. harris be out london for the european title. that is your bloomberg business flash. -- paris beat out london for the european title. that is your bloomberg business flash. scarlet: futures in the green. here is a chart that highlights how more and more firms are starting to sound the alarm on an overpriced u.s. stock market following a nine and a half year long bull market. the bars indicate implied sentiment. the number of stories content -- contain the word bullish versus

the number of stories containing the word bearish on the bloomberg. the s&p 500 in the meantime, going strong, near record highs. little volatility in the month of august. derek halpenny is still with us. he is mufg bank's european head of global market research. sachs, sayingdman that the fed may trigger a bear market in equities if it moves forward with two rate hikes. i wonder how much of this is catching up with the gains that we have seen of late versus an indicator of what is to come. how do you read it? derek: i would agree with the view that we are looking very stretched. performance,date that is one measure. gs up three times, threefold

increase. when you look at certain areas of the markets, you have to conclude that it is looking and from asive cross-border flow perspective, it looks like foreign investors are beginning to think that as well. if you look at the u.s. treasury department's monthly capital flow data, and the first six months of this year, foreign investors have been sellers of u.s. equities. that is the first time since before trump's election victory. it does suggest that on the flows from abroad, foreign investors are becoming more cautious in their exposure to u.s. equities. scarlet: we have seen this to virgins you mentioned between the u.s. and european markets. that kind of continue to widen -- they kind of continue to widen. is it the world index that catches up to the u.s. or is at

the u.s. that comes down to meet the rest of the world? derek: that is an interesting question. i think we are getting into the zone for the federal reserve, where policy has become neutral and indeed we may get a dropping in the description of the policy being accommodative. that would be in a cut -- that would be an indication that the fed is moving into the zone where a pause becomes more plausible. ,f that were to materialize maybe because the global situation worsens further, that some reversals outside the united states. that is a structural story is concerning investors and that spells trouble for the markets at some point as well. if you get any kind of slowdown or downturn with the death profile after trump's fiscal and

tax-cut program, the longer-term structural picture for the u.s. becomes quite bad very quickly on a profile of weaker growth. that is another kind of angst for investors that is the unlikely to go away. francine: what are your currency pairs that you like? what are you buying in the medium-term? medium to longer term, you need to step back and look at valuation. in that context, i think the euro is certainly down a few levels. that would be one of my favorite currency pairs. if we are going into a more pronounced period of risk aversion, i think the japanese yen at these levels would perform very well. that they still have

those safe haven characteristics and that is because of the huge income surplus that japan has. about 3.5% of gdp, that is not going to change. in circumstances where there is a drop in broad cross-border flows, the yen is a currency that will do well. francine: derek halpenny of -- scarlet: derek halpenny um a few of g -- derek halpenny of mufg bank is ticking with us. bloomberg daybreak can be heard in washington, d.c., -- in washington, d.c., boston, the bay area and across the world on sirius xm satellite radio. this is bloomberg. ♪

francine: this is bloomberg surveillance. i am francine lacqua in london. scarlet fu in new york. let's talk about the pound. ofs is what derek halpenny an usg looks -- of mufg looks at. -- what does the pound do from here? derek: you have to take a clear view in terms of developments over the next four or five months into march 2019 and our view is that we will get something done and it has been an interesting 48 hours. it is interesting that the pound has held onto a good amount of

the gains from yesterday's story in relation to this shifting between germany and the u.k. to essentially get beyond march 2019. shorter term, it is a positive for the pound. of course you are kicking the can down the road and it might not be particularly good for the , theresa may is pushing on with checkers despite michel barnier's comments. there must be a reason for that. she must be getting positive sands from somewhere. francine: this is the euro pound level. blair whoke to tony said it is not a high chance but a chance of no deal is still there. what is that percentage? derek: it is absolutely still there. 65% in favor of a

deal. i have that bias in terms of the forecast we have what it is a considerable risk for sure. that is why it is difficult for me to tell clients pile in and take advantage of the levels, because it is very binary. if i'm am wrong in terms of the favorable outcome, the levels below 120 on cable are very feasible. those are the extremes you have and we're essentially yet 1.30 in the middle of that and in that sense, we are at risky levels. scarlet: if we get this no deal brexit, aside from euro pound and cable, what other pairs will likely be affected or is it limited to pairs involving the pound? we have seen a little bit of strengthening of correlation

between cable and euro-dollar. that makes sense because yes of course a no deal scenario is worst for the u.k. but the idea that it is insignificant to europe because it is somewhat bigger than the u.k. is nonsense as well and a no deal brexit in particular for germany is pretty bad news and in that context, i think the euro would have implications and we would see the euro suffer as well but beyond that, maybe going back to the risk haven currencies, there is a chance that there would be some initial disruption that could spread to some other markets and in that sense, the yen and the swiss bank could outperform as that is fully priced into the market, but beyond that, the bigger story picture and after those bigger issues with a broader markets. francine: sweden's central bank

in the midst of its group -- biggest financial selloff in three days before an election that could of been the status quo. in the company statement, they pushed back the rate hike forecast to quote, december or february. joining us now, we are very pleased to welcome on surveillance, the bank governor, stefan ingves. we enjoy interviews so thank you for giving us a little bit of your time. you once again delayed the timing of the interest rate increase, driving the rate path lower. you said december or february. which one is more likely? that is too early to tell. i will see want -- stefan: that is too early to tell. on the other hand, we have talked about this for a long time and we are getting closer and that is pretty clear because

our projections from july and our projections this time are pretty similar so in that sense, we wanted to be quite clear compared to what we have said in the past. why is october off the table? stefan: because in the short run, the inflationary pressure is simply not there and given that inflation is running slightly above target, a lot of that comes from energy prices and energy prices could kind of fall back and that means the inflation will all slightly below target for the next six .onths or so thecine: you also signaled race will -- the rate will be a full quarter-point. does that mean a smaller increase is now off the table? stefan: yes.

if you look at what we have done in the past despite the fact that it has been a long time since we have increased the policy rate from last time, normally when we have done so, it has been 25 basis points and we have concluded that doing less than that would not be meaningful. francine: the results are more dissent on the board for this decision. aes that mean keeping open december rate increase is an attempt to placate some who were not happy with the decision this time around? each and every time when the policy changes in the sense that rates go up, when they were not going down earlier, there were a few people dissenting in one way or another because it is hard to figure out what exactly to do this. that is what one would expect, but this time if you look at the various views under dissenters,

they have different views on what to do and what not to do. francine: if the discussion of a increase is now off the table -- smaller increases off the table, to which it said yes because it would not be enough but if you do just small increases, is that not like one bigger one? would that not be a way of moving the markets along? seems to be confusion over whether it is a hawkish or dovish message you are delivering. stefan: we have looked at this and 25 basis points has worked well for us in the past and a -- ay late -- a verily fairly high likelihood it will do that again.

my experience is that wasn't a good exercise at all. whatconomic impact was not one would hope for. francine: do you worried that your message is not clear enough for the markets? it seems it does not really have a bottom. >> when it comes to rate increases, our hope is we are enough, and that is why we were much clearer this time than in the past. we are getting closer to changing the policy rate, which has not then the case for a while. we have a floating exchange rate and you cannot tie individual policy decisions to the exchange rate him a particularly in the short run.

with what has to do is going on in the swedish economy, the global economy, and in other parts of the world, so one should not make a too precise connection between the policy rate and exchange rate. wcrsine: i am looking at on the bloomberg, weaker versus the pound, the frank. the recent depreciation in the kroner, what is causing the year old to strengthen -- euro strengthening in smaller elections. to pass judgment on t.at beard an the kroner is likely to

appreciate because the economy is doing well relative to other parts of the world. in the short run, financial factors domestically and abroad can impact the exchange rates. makeis why it is hard to exchange rate projections in the , over time the country willing well in the kroner appreciate, but that does that mean all sorts of things can happen in the short term. francine: we are approaching the 10 year mark of when lehman brothers collapsed. what do you think about the safeguards put into place to prevent another crisis? is it safer now than it was 10 years ago? >> yes, the global financial system is safer today week as many people have done a lot of work when it comes to improving

the regulatory framework, but having said that, you never really know because we always tend to say this time it is different. we are in a much better position the mess if aout mass were to occur at some point in the future. aboutne: what if we think the mess 10 years ago that we miss the current situation? is the current market a mess? >> when it comes to emerging markets, from a nordic perspective, there is nothing because thosesun countries in trouble have been trouble in the past, and that is very unfortunate. sweden, as an economy, it is far

removed from those countries in trouble, so it might be difficult for the countries in question where you have to engineer a turnaround, but they are not likely to affect us a lot. notfinancial sector is active in those parts the world. tom: what could impact you outside your control? francine: is there a lehman-type moment, a canary in the coal mine, or something else? is thereill affect us is a lot of funding from abroad, and that means if markets freeze elsewhere, that won't immediately affect us. a lehman episode from our perspective was

a perfect storm because we were but really affected by what happened elsewhere. that is what happens when you have free capital flows and are dependent on funding from abroad. if that were to happen again, that would affect us. , we havestically mismanaged our housing market for decades, and that is a risk that needs to be managed, which is out there, and that is one worry we have had domestically for many years. francine: thank you as always for giving us a little bit of your time. this is "bloomberg surveillance" in london and new york. tom keene having the day off. we are focusing on emerging markets. every day is closer to the

midterm election. what we are seeing underpinning that is not only brexit, but the italian budget law and the populace of italy. closer to the midterm elections and voices pushback against the president, we will see if the president does or says something expected regarding trade, north korea, and the u.s.. we are all prepared for anything at this point. francine: we are. let's get straight to bloomberg news. >> president trump calls it a matter of national security. he is demanding the new york times revealed the identity of a senior official that road an anonymous op-ed article that claimed the administration is working against him. the writer indicates he or she is a political appointee. johnson own isim

open to accepting stronger steps to get rid of nuclear weapons, but only if the u.s. acknowledged is measures he has taken. the two koreas will hold a summit in pyongyang. willnd president moon discuss ways to establish peace and ease military tensions. in northern japan, a powerful earthquake has killed two people and knocked out electricity to 3 million buildings. measured 6.7 and struck a western part of the island. restoring power could take more than a week. the supreme court of india delivered a landmark decision that struck down a 150 eight-year-old law from the colonial era. global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg.

francine: thanks so much. seeing a move sideways when it comes to european stocks. i'm looking at emerging markets, a barrel market, and the dollar pulling back. i'm looking at the yields in europe. stocks in europe are pretty much flat. futures clawback earlier losses. lira in the south african rand leading a recovery in emerging-market currencies. european bonds are little bit mixed. we are keeping an eye on em stocks. .25%, a bear market

for em stocks. futures moving into the green. below 14.w the dollar is key to what happens in the e.m. currency world. stronger dollar pain for em currencies. we are seeing a pullback in the u.s. currency. in washington, president trump has hit out at the new york times reported after the paper published an opinion piece suggesting key members of the administration are secretly working against him. he is demanding the paper revealed the identity of the author. joining us now is kevin cirilli. the parlor game in washington is trying to figure out who is behind this anonymous op-ed. kevin: it is the talk of the town. from the administration's perspective, we are trying to

say the deep state exists and this is part of a broader coalition inside the government to make it more difficult for the president to accomplish his goals, and critics are saying, we told you. this is an administration completely at odds with any type of political norms. latestbeen the illustration of how unique this political moment is. francine: can they avert a crisis? will we get a name? there is a lot of pressure in order for there to be a name. the president yesterday went right to microphones. there is a switching in terms of the white house schedule. what was a routine photo opportunity became an opportunity for the president to get in front of the microphone and criticize this.

i was struck about how the president did not refute to this. arah sanders putting out statement saying essentially they are not refuting the legitimacy of this. raise the issue of whether the new york times made it up altogether, but initially they are not saying this is a fake out the ad. thank you very much. ouring us in new york is next guest. we were talking about what is happening in washington and how that is sucking up all the oxygen there. an investor, when the president tens to get cornered, they tend to look for something , distractions, something to focus their energy on. do you expect or anticipate unexpected headlines on trade on could come outt and change the scope of where we

are headed? turmoil is probably a headline you could have applied in 18 months. on november 6. a lot of this is noise. this point isn at the democrats will take the house and the senate is up for grabs. i historically divided government has been good for markets. inside theple administration or other branches modulating the impulses of the executive, that is viewed positively. for people look within the administration and the president himself to make the decisions that would be good for markets and the business environment leading up to the midterms? >> that would be smart of the president. betweenthe president now and election day will appeal to his face. i would expect headlines about trade and immigration. scarlet: resolution on those?

>> i doubts anything gets resolved. are other things going on in washington. yesterday was a bit of a three ring circus. love toy we would resolve the hearings between now and election day. beyond that, i think it is mostly noise. francine: chris, thank you. you stay with us. we will talk to our guest about turkey and brands and recovery in that currency. this is bloomberg. ♪ berg. ♪

>> this is bloomberg. ♪ i am taylor riggs. bitcoin and other currencies followin falling. bitcoin was down 10% in hong kong. there is growing concern adoption of digital assets will take longer than expected.

the abrajjas learned funded unit is said to get a one dollar bid. forjet and talks partnerships with long-haul carriers after an agreement with singapore airlines. passengers can now connect with singapore flights in milan. the easyjet ceo is predicting a strong year. quite comfortable with the demand going forward. >> that issue bloomberg business flash. francine: thank you so much. emerging markets has seen the longest route since the 2008 crisis. morgan and blackrock have

joined the warnings of ongoing risks after assets were dumped across the world. tim, thank you for joining us. it's not ugly, but not pleasant. you did not see anyone coming in to get bargains, so should we worry about emerging markets? >> this time it is very big em country stories. it is challenging automatic. each country is different. no real common theme, but very challenging. francine: what will stem the selloff?

venezuela, a resolution, or the fed? an em expert. countries are doing the right thing. currencies are adjusting. it is brutal, painful. basically currencies are adjusting and that is what they should do. toking's are hiking raites counter inflation. -- rates to counter inflation. there is some resilience. growth is holding up ok, commodity prices are fine. is doing ok.m that message does not come across and a lot of news

headlines. keyword was adjusting. how do you take advantage of some of the weakness in em? it's difficult when you're trying to catch up falling knife. where do you begin? in sectors, for instance? it is about knowing the individual country stories very well, owning those stories. invest, do your homework and understand the challenges of the country. em is looking cheap. it can go cheaper. it would be good if we got news on top-down trade. there was a point when the fed began to focus on em.

that does not seem to be happening at the moment. when everything is going lower and can still go lower. a bottom will be found eventually. andencies will be cheap rates will it just to give you carry. of you sticking with us. coming up next, this is bloomberg. ♪

francine: this is "bloomberg surveillance." bank isian central ready if u.s. sanctions threaten the market. that is according to the deputy minister speaking to bloomberg. slap to and u.k. sanctions on russia following a nerve agent attack in the u.k. the countries have threatened further sanctions. economic minister said these

threats will not bring on a russian recession. it will be impacting the economy in the beginning of that is why we have slower growth for the first half of next year, then the economy will return to growth. francine: our anchored joins us from moscow. over to you. >> thank you. , am joined by mikhail zadornov the chairman of the manager board. wonderful to have you with us. thank you for joining us. when investors look at russia is the sanctions onf more

sovereign debt that could affect russian state banks. if russian state banks sanctionn sovereign are cut from dollar transactions, with the russian banking system survive? >> i think so. a very negative impact on the banking system, do not believe in such a tough scenario. maybe 1-2 banks will be on the final list of sanctions did not 6-7 state banks. negativee a real precedent, not only for russia, but for the global financial system at all. if this scenario, sanctions for 2-3 banks in the final law, of course the bank of russia and the banking system can ship some

, internal payment systems inside russia. onlyen if the sanctions affect 1-2 banks. >> smaller banks. rat affect the spillover , what would be the spillover effect? >> movement from the clients from little banks to other ones. some russian banks had this experience after 2014. again, there are some internal whichisms already at work will be there for this step. >> what should the government

and central-bank do in the event week get the sanctions from the u.s. affecting state banks? >> of course we have a very small influence on political decisions. ?> what would you like what with the russian government and central-bank do? >> they already made some instruments. it is special payment systems between the central bank and the , our ownussian banks astems of payments combined big part of the russian economy. for example, internal processing in russia already done during the last three years. i don't think there are some more steps needed for the

stability of the banking system, , theresia, as you know are resources for nondirect enterprisesbanks or which are under potential sanctions, but my point of view isis that the scenario announced in congress, this scenario is nexthe main way for the two or three months. >> if that hard scenario came to pass, could there be a collapse of the financial system in russia? >> no. nationalizedas

come a followed by two more banks, are you happy with the pace of the rescue? >> yes. it is a very quick way. and we had approximate $100 million net profit after half a year. organized the banking group and insurance and nonstate pension fund in a big financial group. it is a clear balance now and good capital. important, let's say the trustnks and bank. comegives us a good way to a first of all, and the second one or recovery of assets. >> mikhail zadornov, thank you

for joining me. rent seen. francine: great work on the ground in moscow. let's get back to our experts on emerging markets. tim, we had a great interview saying that russia was ready to take emergency steps, buying its own ruble debt if sanctions threatened to hurt that market, according to the deputy prime minister. how much flexibility does russia have? thatat is wishful thinking no sanctions are coming. it is clear the mood music in washington. sanctions are coming.

the u.s. establishment will want to send a clear message to not mess in those midterms. just imagine if the republican party get a kicking and the democrats take over the house and possibly the senate. the feeling in washington is very hawkish towards the russians, so the russians should prepare for something significant. sovereign sanctions deemed a no go area, i don't think you could say that anymore. the comments today by the russian finance minister is preparing for the possibility that sovereign debt will be sanctioned. the number one issue for investors looking at russia is sanctions. it is a massive drag on the investments,ling stagnating because of sanctions. scarlet: for russia, it is sanctions. for turkey, it is monetary policy.

marketslook at emerging , investors have been careful about making sure they don't lump turkey and argentina with the rest of the em's. is china an em at this point? creates its own weather. it has its own dynamic. it is different than turkey, south africa, and argentina. the financial sector is not as developed as the west. it is its own asset class. scarlet: there is also with the issue of the economy slowing down. do not have exposure to china because of that, or because the trade war issues? >> it is a factor. one of our larger areas of investment has been in the aerospace sector. china will be the biggest

customer for those companies. a favorite sector somewhat exempt from the tariff issue. tencent, in china like industries we like based in china and have china as a market. francine: i don't know what to do with china. huge stimulus program they will need to ramp up if the economy slows down. what does that mean for debt? >> china is a good global player, right? francine: is it? >> in terms of difficult to read u.s. come a bit easier to read beijing at the moment. they are a global player. that will help with the u.s. stepping back. the stimulus was helpful. one of the pluses for em is chinese growth has held up well and they have been proactive.

growth, china is systemic to the global economy. that is good news. francine: thank you so much. let's get straight to first word news. president trump is demanding the new york times revealed the senior official who wrote an anonymous op-ed in the paper. the official says key members are working against the president. the author says the number of people in government seek to counter the president's misguided impulses. rhette court nominee kavanaugh won't promise to disqualify himself and adjust is to consider the case affecting president trump. that she told a senate confirmation hearing he would not say how he would handle the case.

senator blumenthal said he was concerned by that answer. trump says the u.s. will find out within days of canada will be part of the new nafta. he is threatening to exclude canada from a revised nafta and proceed with mexico only. minister saidgn the talks in washington remain constructive. doesn't k, tony blair believe a no deal brexit will happen. he spoke to bloomberg in london. i think the chance of a no deal brexit is low. i don't think they u.k. parliament would permit that to happen. i don't think europe would want that to happen. it is possible there is a no deal brexit, but unlikely. what is more likely is gridlock in parliament. i don't think the prime minister is likely to command a majority there. >> global news 24 hours a day on

air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. lawmakers in the u.s. senate have raised the prospect of regulating social media platforms. this came as twitter and facebook testified russia had used their networks to interfere in elections in the u.s. and other countries. here are some of the highlights from the testimony. >> russia use social media as part of an "comprehensive and to sowceted campaign discord, undermined democratic institutions, and interfere in u.s. elections and those of our allies." we were too slow to spot this and too slow to act. >> we believe many people use twitter as a digital public square. they gather from around the world to see what is happening and have a conversation about what they see.

twitter cannot serve as a public square if it is constructed around the personal opinions of its makers. we believe a key driver of a craving -- thriving public square is the right of freedom of opinion and expression. an authentic about accounts, at any time, 3% to 4% of accounts. are subject to falsehoods or manipulation of any sort, we do need to provide them the full context of that. that is an area of improvement and something we will be diligent to fix. i am deeply disappointed that google, one of the most influential regional platforms in the world, chose to not send its top corporate leadership to engage this committee. scarlet: let's bring in bloomberg's sarah frier joining us today from washington. it seems like they are .ommitted to getting better

they all agreed to work harder together. what is the next step in terms of doing something concrete? komen nation of a lot of investigation the senate intelligence committee has done into this issue. one of the more constructive steps, because the senators are now educated looking at this and saying you need to provide more transparency for your users. onn you are talking to a bot twitter, you should know you are talking to a bot. when you are contacted by a campaign, is it run by a foreign agent? you should be able to know that, and not months later. say that will be very difficult to deliver on. twitter said it is difficult to know what the difference between

a bot account and human account is. issues like look on user verification to verify identities. they have to figure out what to do about a lot of the ways the people interact with the service in terms of abuse and harassment in people's reporting of that, which is a very burdensome system for those who are the victims. recent pewere was a survey that found 9% of users have downloaded their personal data from the company. to mewho did come up 47% did the facebook app from their phone. 79% of elected to adjust a privacy sating -- settings. users are making changes once they realize the extent to which facebook has their data. we are seeing that show up in the results. is the company

coming up with new ways to manage this potential accidents? >> facebook is still growing globally. facebook is not just the u.s. market. it is the most lucrative market, but not the company's future. instagram, fors example, which is popular as well. messenger.hatsapp, what is concerning for investors is the company will have to figure out ways to grow beyond its main cash cow, the facebook news feed and advertising there. people are disenchanted with this. it is just so big around the world that there isn't much more room for it to grow. thank you so much for joining us. back the co-cio of

one fund here with me. you look at media companies over all. when you look at facebook and they commit to focusing on cleaning up everything, does that mean more resources spent on profiling, monitoring. first facebook, they have the cash, but for twitter, that is not something they have a lot of. regulated.radio post-world war ii, television regulated. owning a newspaper and broadcast station in the same market, equal time come all these things put in place to limit the voice of any particular station owner. today, we have not caught up with the dominant media, which is social media. there will be some kind of regulation. that't know what form takes, probably in hands been in

privacy and transparency, but that will cost money. we saw some indication of that in the second quarter results where they tried to spend more money. it is a short-term headwind to earnings growth. long-term, it probably in trenches the larger platforms because they have the scale to put these systems in place. >> it is difficult at the moment butee what they would face, what is the worst regulation them?ould be in post on do you see these companies being proactive trying to put something in place that feels better to a consumer before they get slapped with more regulation? they are doing that. interestingly, google did not show up. they have been targeted for other reasons. in terms of what is the worst regulation, one idea has been to social media companies

liable for content on their sites. legal are bringing in the system and unknown cost associated with that into the equation. the tech companies don't have a lot of friends on the republican side of the aisle. they have favored democrats historically. we will see what happens if there is a change in congress. francine: thank you very much. coming up tomorrow, our interview with the emirates airlines president. fuel, consolidation, and trade wars. that interview is tomorrow. this is bloomberg. ♪

francine: this is bloomberg. ♪ in italy, the finance minister economicted that weak growth and the populist program means the budget deficit may need to widen. the comes as one half of coalition running italy is discussing a 2019 budget deficit above the 3.5% european limits. with us now is our guest. thank you for joining us.

it seems you have a great piece where you basically say the italian politicians in the past have not kept to their promises. this time will be no different. , if they do not take care of italians, will they call fresh elections? will they then go hard on europe? >> at the moment, this was one possible plan. a differentg politician from the one we saw at the start of this coalition government. vibranttart, he was a politician going after the eu. now he is moderating his tone. maybe he wants this government to last longer than observers expect. i think it is a smart political calculation. he has hard-core supporters. maybe he wants to attract many

moderates, who are lost at the berlusconi is partner in the center-right, and he is plummeting in the polls. wolf covering him cells in the clothing of a sheep here. up aine: i want to bring quote from your piece which read having ended their flirtation with the exit, they seem to be doing the same with their gargantuan fiscal stimulus." entrepreneurs, and entrepreneurs want a good stock market, so they will never jeopardize the stock market, is that fair? >> that is fair. the base of the northern league is in the north, which is the richest part of italy there is

there was a lot of anxiety about possibly spooking the stock market, and what would happen to government bond yields, which shot to three-year percent for the 10 year bond. this is suggesting some caution. we don't have the final figures yet. there will still be a lot of 2.8% labor deficit target, or if we will see 1.5%. we still don't know where they will land. this is a work in progress. the change in tone to three months ago is remarkable. francine: quite a change. fernando, thank you for joining us. it is time for single best chart. we are joined by our guest again. i pulled up this chart that shows that the sentiment indicator as a way of tracking

sentiment on u.s. stocks. there is morehow bearishness in equities about equities, at least as cited by bloomberg news stories, while the s&p 500 moves higher. citigroup not the only one sounding the alarm over recent gains in the u.s. stocks. if the fed raises rates two more times, it could trigger a bear market. thatdo you make of this people are piling in on this idea that we are at a tipping point? most hated bull market in history, and the second-largest economic expansion on record. i don't see any reason it won't be the longest. june 2019 make it to to be the longest. industrial demand is still reasonably strong, consumer in good shape. we have talked about green

shoots as signs of recovery. now we will talk about brown leaves and some of the things that could tip us into recession and end this bull market, labor market tightening, higher costs, steel, oil, freight. we are seeing some of that. scarlet: where would you put new money to work in the u.s. market? you probably don't want to go into big tech. where do you go for that turning point? autumn of investors. we are company by company. there are companies in the tech category where there is value. we are still finding some bargains. safety,l of marginal m&a is strong. certain sectors have been left behind to a degree, like banking

and some of the consumer staples names. even some the median names are out of favor. the same time, these tax cuts will come to an end. what is the likelihood of recession in the u.s. in the next 18 months? >> the question is what is the timing. again, i don't see anything today that would lead me to believe it will be in the next 18 months, but it will come. francine: not even a trade war? and therade war political situation spinning out of control are the wildcards. happened the old-fashioned way, with the cycle of rate tightening. scarlet: go ahead, francine. francine: will the fed do everything you can not to invert the yield curve? >> i'm not sure it is within their power. they are facing external forces

flattening the yield curve. everyone talks about the predictive power of the yield curve, but certainly the fed is aware of that. scarlet: i'm sorry jumping in on you. how are you position yourself right now. >> we try to be fully invested. we are at the moment. we are looking for good companies trading to this to their intrinsic value. the next two years to three years, a change in regulation, management, industry consolidation. media among them, as well as the consumer names. so we are finding ideas. scarlet: what is the one thing you can do or can't do want to get the midterm elections out of the way. the midtermnoring elections in terms of how we are positioning portfolios.

post-midterms, we will focus on 2020 and see what candidates are getting traction in iowa. the markets will notice if senator warren or senator sanders looks to be the nominee. thank you so much. stay with us. we will continue the conversation on bloomberg surveillance radio. on tv, bloomberg daybreak. u.s. equity futures climbing back earlier losses. turmoil in the emerging markets spreads. that is what is driving the yen higher. this is bloomberg. ♪ loomberg. ♪ this isn't just any moving day.

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simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. designed to save you money. wireless network whether you use your phone to get fit. to find meaningful, thoughtful, slightly-weird gifts. or just to know which way you're facing right now. however you use it, your wireless bill is about to cost a whole lot less. ask how you get xfinity mobile included with your xfinity internet. so you just pay for data -- by the gig or unlimited. saving you hundreds of dollars a year. plus, get $300 back when you buy a new smartphone. xfinity mobile. it's simple. easy. awesome. click, call or visit a store today. alix: bear comes out of hibernation.

new tariffscks to on chinese imports. cities cut back on risk. citigroup warning arise in wages could trigger a selloff. we are working on it. congress they're working on fake news, investors punish the stock. david: welcome to "bloomberg daybreak." there is a lot of turmoil down there. alix: the question is who is in charge of the white house. who is making the decisions? the op-ed leaves that in question. david: the woodward book one day , and this anonymous op-ed the next day. president trump is not pleased. alix: this is not going anywhere good. markets nearing a bear market. some calm